Maher and Associates, Inc. v. Quality Cabinets

• Decision Date: 29 September 1994
• Docket Number: No. 2-93-0700,2-93-0700
• Citation: 267 Ill.App.3d 69,640 N.E.2d 1000,203 Ill.Dec. 850
• Parties: , 203 Ill.Dec. 850 MAHER AND ASSOCIATES, INC., Plaintiff-Appellee, v. QUALITY CABINETS, a Division of Texwood Industries, Inc., Defendant-Appellant.
• Court: United States Appellate Court of Illinois

Page 1000

640 N.E.2d 1000

267 Ill.App.3d 69, 203 Ill.Dec. 850

MAHER AND ASSOCIATES, INC., Plaintiff-Appellee, v. QUALITY CABINETS, a Division of Texwood Industries, Inc. Defendant-Appellant.

No. 2-93-0700.

Appellate Court of Illinois Second District.

Sept. 29, 1994.

Rehearing Denied Nov. 2, 1994.

John J. Mustes, Eric P. Loukas, Anthony J. Bruozas (argued), Mustes & Bridgman, Chicago, for Quality Cabinets.

Carl F. J. Henninger, David E. Zajicek, Jacqueline W. Vlaming (argued), Douglas A. Slansky, Shari L. Friedman, Keck, Mahin & Cate, Oakbrook Terrace, for Maher & Associates, Inc.

Justice McLAREN delivered the opinion of the court:

The defendant, Quality Cabinets (Quality), appeals from the grant of summary judgment for the plaintiff, Maher & Associates, Inc. (Maher), in which the circuit court awarded Maher $69,514.52 in a contract dispute. The judgment included exemplary damages and attorney fees assessed pursuant to the Illinois Sales Representative Act (Sales Act). (Ill.Rev.Stat.1991, ch. 48, par. 2250 et seq. (now 820 ILCS 120/0.01 et seq. (West 1992)).) We reverse and remand for further proceedings.

Maher, a Minnesota corporation whose principal place of business is Wheaton, Illinois, entered into a marketing agency agreement (the agreement) on September 14, 1988 with Quality, a Texas corporation that manufactures cabinets and has its principal place of business in Duncanville, Texas. Under the agreement, Maher was granted the exclusive right to sell Quality's line of cabinets in North Dakota, South Dakota, Minnesota, Wisconsin, and northern Illinois. Maher agreed not to represent any products that compete directly with Quality's.

Paragraph one of the agreement defines a "directly competing" line as "one which is stock (not made-to-order), of similar construction, and priced within 10% of Quality at F.O.B. destination prices." Paragraph one also provides that the failure by Maher to adhere to this restriction would terminate the agreement immediately, and Quality would be required to pay commissions earned for 30 days following such termination.

Paragraph seven of the agreement permits termination by mutual agreement or by written notice from either party to the other. Paragraph seven provides for payment of commissions to Maher for 60 days following a "no fault" termination.

Paragraph nine provides that any claim or cause of action arising out of the agreement must be brought in Dallas County, Texas, and that Texas law governs the contract.

On November 15, 1989, Quality issued a memorandum to Maher and its other sales representatives advising them not to represent products from Republic Cabinets, which Quality determined was a direct competitor. Maher disagreed that Republic was a directly competing line and represented Republic as well as Quality.

On May 4, 1990, Quality notified Maher that it was terminating the agreement. On June 18, 1990, Quality sent Maher a letter offering to tender a check for $2,782.57 for commissions that it calculated were due Maher under the 30-day provision of paragraph one. Maher rejected the offer and demanded payment of commissions for 60 days pursuant to paragraph seven.

On May 1, 1991, Maher filed a verified two-count complaint against Quality alleging breach of contract for Quality's failure to pay commissions for 60 days after termination of the agreement and violation of section 2 of the Sales Act for failure to pay those commissions within 13 days of when they became due following termination. (820 ILCS 120/2 (West 1992).) Quality filed a motion to dismiss based on the agreement's choice-of-forum clause.

The circuit court of Du Page County denied Quality's motion to dismiss and ordered it to file an answer. Quality next filed a motion to certify the matter for appeal pursuant to Supreme Court Rule 304(a) (134 Ill.2d R. 304(a)), which was denied. Quality then filed an answer that again raised the choice-of-law issue as an affirmative defense. Quality also claimed that Maher breached the agreement by representing a direct competitor and therefore was entitled to commissions for only 30 days after termination.

On February 24, 1992, Maher filed a motion for summary judgment, alleging that there were no genuine issues of material fact and that, based upon the pleadings and affidavits it attached, it was entitled to judgment as a matter of law. Maher asked for a judgment of $19,076.67, plus interest of $1,589.75. Maher also sought exemplary or punitive damages of $57,229.98 and attorney fees of $10,917, plus court costs, pursuant to section 3 of the Sales Act (820 ILCS 120/3 (West 1992)).

In support of its motion, Maher provided the affidavit of its manager, Lynette Maher, who declared that she was "familiar with the pricing of both the Quality products and Republic products" and that the Republic cabinets were between 18% and 39% less expensive than the Quality products. As such, the Republic cabinets were not direct competitors of Quality, and, therefore, Maher's representation of Republic did not violate the agreement. The affidavit further claimed that, because Maher did not breach the noncompetition provision of paragraph one, the firm was entitled to commissions for 60 days following termination. Maher calculated that Quality owed it $19,076.67 in commissions. Maher also offered the affidavit of one of its attorneys, Carl F.J. Henninger, who estimated that Maher reasonably incurred attorney expenses of $10,917.

Quality responded to the motion for summary judgment by denying that it breached the agreement or the terms of the Sales Act, and it challenged the amount of commissions that Maher claimed it was due. Further, Quality contended that it owed Maher commissions for 30, not 60, days.

In support of its response to the motion for summary judgment, Quality offered the affidavit of Bobby C. Ladd, the chief executive officer of Texwood Industries, the parent company of Quality Cabinets. Ladd declared that his firm sent a memorandum to Maher and other sales representatives informing them that it would not allow dual representation of Quality and Republic Cabinets. Ladd stated that, when Quality discovered that Maher was representing Republic, it terminated the agreement. He declared that his firm determined the amount of commissions it owed Maher and tendered that amount, but Maher declined the offer.

Ladd also claimed that, during the negotiations which followed termination, Quality determined that Maher was not entitled to a portion of the commissions it claimed because one of the customers that Maher had developed for Quality made payment under a promissory note. Ladd said that it has always been the position of Quality that commissions are earned solely on cash receipts and that commissions are earned only when an installment payment on a note is actually received by Quality. Ladd said that Maher was aware of this policy prior to the time their agreement was terminated.

On April 22, 1992, the circuit court granted "partial" summary judgment, finding that Quality was liable for an undetermined sum as commissions for 60 days following termination of the agreement. The court also found that Maher did not violate the noncompetition clause of paragraph one because Republic was not a direct competitor of Quality. The court scheduled a hearing on damages and ordered Quality to produce information on all compensation from any source for a period of 60 days after the agreement was terminated.

On January 14, 1993, the trial court determined that Maher was entitled to $19,076.67 in commissions, plus punitive damages pursuant to section 3 of the Sales Act (820 ILCS 120/3 (West 1992)), which permits exemplary damages of up to three times an amount due. The trial court imposed double the commissions that Maher was due, plus attorney fees and costs. The total judgment was $69,514.52, plus court costs.

Quality filed a motion for rehearing or modification or vacation of judgment on February 26, 1993, which was denied following a hearing on May 11, 1993. The trial court awarded Maher additional attorney fees of $6,367.45 for expenses incurred in the motion for rehearing. Quality filed a timely notice of appeal on June 4, 1993.

On appeal, Quality claims that the trial court committed reversible error when it (1) refused to enforce the agreement's plainly worded choice-of-forum and choice-of-law provision; (2) granted summary judgment when a genuine issue of material fact existed; (3) improperly awarded Maher commissions based on all outstanding invoices with Quality rather than on cash receipts; and (4) imposed exemplary damages and attorney fees without a specific finding of bad faith by Quality. Quality also claims that the Sales Act, as applied to it, is an unconstitutional burden on interstate commerce.

Initially we note that, because this case comes to us via summary judgment, we have de novo review on appeal. Olympic Restaurant Corp. v. Bank of Wheaton (1993), 251 Ill.App.3d 594, 598, 190 Ill.Dec. 874, 622 N.E.2d 904.

Quality first argues that this suit must be dismissed because the agreement plainly states in paragraph nine that Texas law governs the contract and "[a]ny claim or cause of action arising out of, in connection with, by virtue of the relationship created by this agreement, shall be brought and filed in Dallas County, Texas."

A forum-selection clause in a contract is prima facie valid and should be enforced unless the opposing party shows that enforcement would contravene the strong public policy of the State in which the case is brought or that the chosen forum would be seriously inconvenient for trial. (Calanca v. D & S Manufacturing Co. (1987), 157 Ill.App.3d 85, 88, 109 Ill.Dec. 400, 510 N.E.2d 21.) If both parties freely enter an agreement contemplating such inconvenience should there be a dispute, one party cannot successfully argue inconvenience as the reason for voiding the forum clause. (Calanca, 157 Ill.App.3d...