Derthick v. Bassett-Walker, Inc.

• Decision Date: 18 May 1995
• Docket Number: Civ. A. No. 94-0026-D,94-0027-D,and 94-0028-D.
• Court: U.S. District Court — Western District of Virginia
• Parties: Richard T. DERTHICK, and Derthick Associates, Inc. Plaintiffs, v. BASSETT-WALKER, INC., and VF Corporation, Defendants. Stanley ROBBINS, and Stan Robbins & Associates, Inc. Plaintiffs, v. BASSETT-WALKER, INC., and VF Corporation, Defendants. SLAYTON ASSOCIATES, INC., Plaintiff, v. BASSETT-WALKER, INC., and VF Corporation, Defendants.

904 F. Supp. 510

Richard T. DERTHICK, and Derthick Associates, Inc. Plaintiffs, v. BASSETT-WALKER, INC., and VF Corporation, Defendants.

Stanley ROBBINS, and Stan Robbins & Associates, Inc. Plaintiffs, v. BASSETT-WALKER, INC., and VF Corporation, Defendants.

SLAYTON ASSOCIATES, INC., Plaintiff, v. BASSETT-WALKER, INC., and VF Corporation, Defendants.

Civ. A. Nos. 94-0026-D, 94-0027-D, and 94-0028-D.

United States District Court, W.D. Virginia, Danville Division.

May 18, 1995.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Stephen Garland Bass, Carter, Craig, Bass, Blair & Kushner, P.C., Danville, VA, Arthur M. Wisehart, New York City, for Derthick Associates, Inc., Richard T. Derthick.

James A.L. Daniel, Daniel, Vaughan, Medley & Smitherman, P.C., Danville, VA, Martha B. Perkowski, James M. Powell, Brian M. Freedman, Haynsworth, Baldwin, Johnson and Greaves, P.A., Greensboro, NC, for Bassett-Walker Inc., VF Corporation.

MEMORANDUM OPINION

KISER, Chief Judge.

Plaintiffs have sued defendants Bassett-Walker and its parent VF Corporation for breach of contract and other claims arising from defendant Bassett-Walker's restructuring and elimination of commissioned sales representatives in 1989. Bassett-Walker is a manufacturer of fleece wear (such as sweat-shirts and jogging pants). Since the fall of 1984 it has been a wholly owned subsidiary of VF Corporation, based in Pennsylvania. Plaintiffs were commissioned sales representatives for Bassett-Walker until their termination. They claim that they were wrongfully terminated based on a contractual arrangement with Bassett-Walker that allegedly provided for termination only for cause. They also claim a right in continuing commissions generated from accounts they developed. In addition, individual plaintiffs in the first two cases claim that defendants violated the Age Discrimination in Employment Act, 29 U.S.C. 621-34, (ADEA) by terminating them. Jurisdiction is proper under that act and under 28 U.S.C. § 1332.

The cases were first filed in 1990 and 1991 in the Southern District of New York. After some delay, they were finally transferred to this Court in April 1994. They are connected cases and have been consolidated for the purposes of discovery and dispositive motions but not for trial. I too will consolidate them for the purposes of this opinion. The parties are now before me on the defendants' motions for summary judgment. The issues have been fully briefed and argued and are now ripe for disposition. For the reasons expressed below, I will grant defendants' motions.

I. Facts

A. Complaints

1. Derthick, filed August 20, 1990¹

Richard Derthick, an Ohio resident (and his company Derthick & Associates, Inc., also a plaintiff), was employed by Bassett-Walker as a commissioned sales representative for retail and wholesale accounts beginning in 1968. He alleges the following causes of action: (1) violation of the ADEA; (2) breach of contract; (3) tortious interference with customers and sales associates; and (4) conversion. Plaintiffs seek reinstatement and compensatory, liquidated and punitive damages as well as damages for pain and suffering, mental anguish and emotional distress.

2. Robbins, filed November 20, 1990

Stan Robbins, a Massachusetts resident (and his company Stan Robbins & Associates, a Massachusetts corporation), was employed as a commissioned salesperson in 1965 by Bassett-Walker. He was terminated as a commission salesman as of December 1, 1989, and was offered a position as a salaried salesman. He accepted the position and learned that he would have to relocate to New York City. He was not ultimately employed by Bassett-Walker. He alleges the following causes of action: (1) violation of the ADEA; (2) breach of contract; (3) tortious interference with business relations; (4) conversion; (5) wrongful termination; and (6) unfair trade practices in violation of Massachusetts law. Plaintiffs seek reinstatement, compensatory and punitive damages.

3. Slayton Associates, Inc., filed June 7, 1991

Plaintiff Slayton Associates, Inc. (and its predecessor Slayton & Associates) was employed by Bassett-Walker as a commissioned sales representative beginning in 1967. Plaintiff was terminated effective December 1, 1989. It states the following causes of action: (1) breach of contract; (2) tortious interference with business relations; (3) conversion; (4) violation of the Illinois Sales Representative Act; and (5) violations of the Illinois Deceptive Trade Practices Act and the Illinois Consumer Fraud and Deceptive Business Practices Act. Plaintiff seeks compensatory and punitive damages.

B. Summary of Facts.

1. Background on Plaintiffs

In 1968, Derthick and an associate, Bob Dykstra (later an employee of Derthick & Associates), agreed to sell Bassett-Walker fleecewear in Michigan for a 2½% commission. Certain Michigan accounts were excluded from his territory as "house" accounts. The parties agreed that Derthick could represent other manufacturers' lines. There was no written agreement. In addition, there was no discussion about the duration of the relationship. Derthick depo. at 67-78. According to Derthick, the parties did not discuss how Bassett-Walker could terminate the relationship, although Derthick understood that he was free to end it at any time. Id. at 80, 92. In 1970, Derthick incorporated Derthick & Associates in Michigan. In 1981, when Bassett-Walker expanded his territory to include Ohio, he reincorporated in Ohio. His territory was later expanded to include western Pennsylvania. Derthick's initial decision to incorporate was based on advice of his personal accountant to gain personal tax advantages. From its incorporation in 1970, Derthick & Associates has deducted and paid payroll taxes for its employees.

Stan Robbins became a salesman in 1957, working first for a sales representative. He met with James Montgomery, Bassett-Walker's Vice President of Sales, in Martinsville, Virginia (Robbins depo. at 17-18, 89). It was agreed that he would represent Bassett-Walker in the six New England states and receive a 2½% commission. Part of the agreement was that he could continue to represent other lines. There was no written agreement. He understood that he would remain employed by Bassett-Walker as long as he performed satisfactorily. In 1977, Robbins incorporated Stan Robbins & Associates in Massachusetts based on advice from his attorney. He is and has always been the president and is treasurer. He is paid a monthly salary by Stan Robbins & Associates as is his wife who works as a bookkeeper.

Around 1953, Wendel Slayton, Jr., formed a partnership with his father and two others, primarily to sell textiles. The business grew and was incorporated in Illinois in 1970. In 1966, he and Jim Stanley, a partner, initiated negotiations with James Montgomery to allow Slayton Associates (t/k/a Slayton & Associates) to represent Bassett-Walker in the midwest. It was originally agreed that they would receive a 2% commission on all orders but Sears and Kresge (K Mart), on which the commission would be 1½%. They agreed that Slayton Associates could continue to represent other manufacturers. Slayton depo. at 23-26. The parties did not discuss the duration of the relationship or how it could be terminated, though Slayton understood that there was no restriction on how Slayton Associates could terminate the relationship. Id. at 27-28. Slayton Associates' territory was expanded in the late 60s and early 70s (part of its territory was also reassigned to Derthick). It developed a Strategic Sales Plan for the years 1987-1992 outlining its efforts to help Bassett-Walker grow in the changing fleece market. Slayton depo. at 162-64; ex. 12. The plan detailed Slayton Associates' efforts to develop accounts, penetrate the sporting goods field, and open two branch offices (in Minneapolis and St. Louis). Bassett-Walker did not require the plan; instead Slayton Associates independently drafted it to demonstrate its commitment to Bassett-Walker. Slayton depo. at 147.

2. Bassett-Walker's Relationship with Derthick and Robbins

Bassett-Walker compensated plaintiffs solely on commission, first in checks made out personally to the individual plaintiffs and then to their business. Bassett-Walker reported this income on a 1099, not a W-2, and did not withhold taxes (it withheld other amounts due). Derthick & Associates maintained its own office space, provided its own supplies, employed its own secretaries, and employed and paid sales people, including Bob Dykstra, Sam Impastato, Michael Denome, John Turner, and Rick Derthick (plaintiff's son). It paid its individual sales people a percentage of their sales, and reported this on a 1099. It also maintained life insurance policies on its salesmen. Its salesmen were responsible for their own sales expenses.

Robbins first worked out of his house and then moved into commercial office space. Stan Robbins & Associates leased the space in its name, provided its own office equipment and paid its own operating expenses and telephone bills. Several salespeople worked as salaried employees over the years, with salaries reported on W-2 forms. They were not paid by Bassett-Walker. Robbins was solely responsible for hiring and firing his employees and did fire several for various reasons. Stan Robbins & Associates reimbursed its salesmen for travel expenses, maintained health insurance and a profit-sharing plan, and deducted and paid payroll taxes.

None of the salespeople or employees of the plaintiffs participated in Bassett-Walker's health insurance plan, dental plan, pension plan, disability plan, or any of the other benefit plans available to employees of Bassett-Walker. Derthick depo. at 140-45; Robbins depo. at 95-96. Bassett-Walker never provided workers' compensation insurance for Derthick, Robbins or any other employee of Derthick & Associates or Stan Robbins & Associates. Derthick depo. at 27. Derthick asserts that...