Kingsley Associates, Inc. v. Moll PlastiCrafters, Inc.

Decision Date15 September 1995
Docket NumberNo. 94-1633,94-1633
Citation65 F.3d 498
PartiesKINGSLEY ASSOCIATES, INC., Plaintiff-Appellant, v. MOLL PLASTICRAFTERS, INC., Moll PlastiCrafters, Inc. (DEL), and Moll PlastiCrafters Limited, Defendants-Appellees.
CourtU.S. Court of Appeals — Sixth Circuit

Rodger D. Young (argued and briefed), Young & Associates, Southfield, MI, for Kingsley Associates, Inc.

Marjory G. Basile (argued), Frederick A. Acomb (briefed), Miller, Canfield, Paddock & Stone, Detroit, MI, for Moll PlastiCrafters, Inc.

Before: NELSON and RYAN, Circuit Judges; ECHOLS, District Judge. *

ECHOLS, District Judge.

This case is on appeal from the United States District Court for the Eastern District of Michigan. Plaintiff, Kingsley Associates, Inc. ("Kingsley"), initially filed this action against Defendant, Moll PlastiCrafters, 1 contending that Moll PlastiCrafters breached a contract entered into between Kingsley and National Lock Corporation's PlastiCrafters Division ("National Lock") and later allegedly ratified by Moll PlastiCrafters. Alternatively, Kingsley has brought a claim seeking damages under a theory of unjust enrichment. Kingsley later amended its Complaint to add a claim under the Michigan Revised Judicature Act of 1961, Mich. Comp. Laws Secs. 600.101-600.9947, which provides that an aggrieved party may recover treble damages for intentional failure to pay commission.

Moll PlastiCrafters subsequently filed a Motion for Partial Summary Judgment, arguing that the Michigan statute under which Kingsley sought treble damages violated the title-object clause of the Michigan Constitution. After initially denying Moll PlastiCrafters' motion, the district court reversed its previous decision, agreeing that the statute violated the title-object clause of the Michigan Constitution.

A jury trial was held from November 15, 1993 to November 18, 1993. Three issues were presented to the jury: (1) whether Moll PlastiCrafters had ratified the contract between Kingsley and National Lock, thereby obligating Moll PlastiCrafters to pay post-termination commissions to Kingsley; (2) if not, whether Moll PlastiCrafters had been unjustly enriched by retaining the benefit of Kingsley's efforts without compensation; and (3) whether Moll PlastiCrafters' failure to pay Kingsley commission was intentional. 2 The jury returned a verdict for Kingsley on its breach of contract claim, and thus, did not address Kingsley's claim of unjust enrichment. The jury further found Moll PlastiCrafters' failure to pay commission to be intentional. Accordingly, the district court entered judgment for Kingsley.

After the trial, Moll PlastiCrafters renewed its Motion for Judgment as a Matter of Law and, in the Alternative, for a New Trial, arguing that Kingsley had not produced sufficient evidence upon which a reasonable jury could find that Moll PlastiCrafters could be charged with knowledge of a post-termination commission provision in the contract between Kingsley and National Lock or had agreed to pay such commissions. Moll PlastiCrafters also disputed the submission to the jury of Kingsley's claim of unjust enrichment and intentional failure to pay commission. On February 1, 1994, the district court entered an order in which it: (1) granted in part Moll PlastiCrafters' Motion for Judgment as a Matter of Law, finding no evidence upon which a jury could reasonably conclude that Moll PlastiCrafters ratified the contract between Kingsley and National Lock; (2) conditionally granted Moll PlastiCrafters' Motion for a New Trial on Kingsley's breach of contract claim in the event that its holding is reversed on appeal; (3) struck the jury's finding of "intentionality"; and (4) ordered a new trial on Kingsley's unjust enrichment claim.

On March 22, 1994, Moll PlastiCrafters filed a Motion for Summary Judgment on Kingsley's remaining claim of unjust enrichment, arguing, among other things, that Moll PlastiCrafters had an implied-in-fact contract with Kingsley which barred a claim of unjust enrichment. On May 3, 1994, the district court found for Moll PlastiCrafters on that ground and granted its motion, entering final judgment for Moll PlastiCrafters. Kingsley timely appealed to this Court.

I.

Kingsley is an independent sales representative that specializes in promoting and selling manufacturers' component parts to the automobile industry. In 1968, John O'Neill ("O'Neill"), the founder and then president of Kingsley, 3 orally agreed with Norman Yetterberg ("Yetterberg") of National Lock to represent National Lock and sell its plastic components to automobile manufacturers. For these services, Kingsley would receive a five percent (5%) commission 4 on all sales it procured for the "life of the part." Both Yetterberg and O'Neill testified that they understood the "life of the part" provision to mean that after Kingsley made an initial sale of a component part to an automobile company, it would receive commissions on all future sales of that part to that company, even if Kingsley was terminated as sales representative. 5

In 1989, George Votis ("Votis") and Richard Fackler ("Fackler") 6 acquired the assets of National Lock's PlastiCrafters Division from National Lock's owner, Keystone Consolidated Industries ("Keystone"). Before purchasing the assets, Votis conducted a due diligence search in which he learned that Kingsley was National Lock's sales representative but stated that he learned nothing of an agreement between Kingsley and National Lock or any "life of the part" contract. At the time of the purchase, Kingsley was responsible for seventy-five percent (75%) of the sales of National Lock. The Asset Purchase and Sales Agreement between the parties provided that Votis and Fackler would assume the obligations and liabilities of National Lock's PlastiCrafters Division. In addition, Section 2.05 of the agreement provided:

Schedule 2.05 is a complete and accurate list and compilation of all:

(i) contracts (written or unwritten) relating to the Businesses with respect to which the Seller has any liability or obligation involving more than $25,000, contingent or otherwise, or which may otherwise have any continuing effect after the date of this Agreement, or which place any material limitation on the method of conducting or scope of the Businesses.

Schedule 2.05 did not identify a contract with Kingsley.

The Bill of Sale, Assignment and Assumption Agreement, another one of the closing documents of the sale, however, stated that Votis and Fackler assumed not only those contracts listed in Schedule 2.05 but also all contracts with National Lock's suppliers that were outstanding as of closing. Specifically, it provides that the purchaser agrees to perform and discharge in accordance with the terms thereof:

(i) all purchase orders and contracts with the Divisions' suppliers and customers that relate to the Businesses and are outstanding as of the Closing (as each such term is defined in the Purchase Agreement) and all obligations of Seller for further performance under all contracts that are outstanding as of the Closing and listed in Schedule 2.05 to the Purchase Agreement ...

(emphasis added).

After the acquisition, Votis and Fackler retained several of National Lock's top management employees. Among these was Steven Erickson ("Erickson"), whose job as Sales Manager required that he oversee independent sales representatives. In that capacity, he discussed the terms of the contract between Kingsley and National Lock with James O'Neill. At trial, Erickson testified that he was aware of the "life of the part" contract National Lock had with Kingsley and the fact that Kingsley would continue to receive sales commissions on the parts sold even if the contract was terminated. He also stated that Kingsley was paid in the same manner before and after the acquisition. In other words, Moll PlastiCrafters continued to pay Kingsley commissions for parts reordered after the acquisition, even though the initial sale of the parts had been made prior to the acquisition. Erickson resigned from Moll PlastiCrafters before Moll PlastiCrafters terminated Kingsley as its sales representative.

Prior to the acquisition by Moll PlastiCrafters, David Hauser ("Hauser") served as Engineering Manager for National Lock. After the acquisition, he was retained by the new buyers and given the position of General Manager. He served in this position for four months. Although there is some dispute as to the scope of his duties as General Manager of the plant, Hauser stated that he was never in a position to hire or fire outside sales representatives. Fackler testified that he gave him authority to "run the floor, work with sales reps." James O'Neill stated that he discussed the terms of Kingsley's contract with National Lock with Hauser. Hauser stated that he understood Kingsley's contract to be a "life of the part" contract, which required Moll PlastiCrafters to pay Kingsley commission as long as the part was sold.

Allen Payson ("Payson") was Kingsley's sales representative who handled the account with National Lock and, after the acquisition, with Moll PlastiCrafters. He testified that shortly before Moll PlastiCrafters terminated Kingsley as its sales representative, he had a conversation with Moll PlastiCrafters' General Manager Carl Dines ("Dines") and Sales Manager Larry Jones ("Jones"), in which they questioned what would happen if an independent sales representative were terminated. Payson testified that he told Dines and Jones that the sales representative would continue to receive commissions after the termination for the life of the part and that he assumed Kingsley had such a contract with Moll PlastiCrafters because Kingsley included this provision in all of its sales representative contracts. Jones denied having such a conversation with Payson.

As owners of Moll PlastiCrafters, Votis primarily handled the negotiations of the acquisition of...

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