PSC Indus. v. Yarbrough Tech. Assocs.

Docket NumberCivil Action 3:20-cv-146-DJH-RSE
Decision Date22 August 2022
PartiesPSC INDUSTRIES, INC., Plaintiff/Counter Defendant, v. YARBROUGH TECHNICAL ASSOCIATES, INC., Defendant/Counter Claimant.
CourtU.S. District Court — Western District of Kentucky
MEMORANDUM OPINION AND ORDER
David J. Hale, Judge United States District Court

Plaintiff PSC Industries, Inc., a manufacturer based in Louisville Kentucky, claims that its “long-time outside sales representative,” Defendant Yarbrough Technical Associates, Inc. (YTA), secretly reached an agreement with one of PSC's high-level salespeople, Matthew Parr, to divert potential business away from PSC to YTA's other clients in exchange for commissions and finder's fees. (Docket No. 31, PageID.193; see id., PageID.196-98) PSC alleges that YTA's arrangement with Parr breached a “Manufacturer's Representative Agreement” between PSC and YTA; that this breach discharged any further obligation of PSC to pay commissions to YTA under that contract; that YTA tortiously interfered with Parr's contractual relationship with PSC; and that YTA aided and abetted Parr's breach of his fiduciary duties. (Id. PageID.199-202; see D.N. 1-2, PageID.9-17) YTA asserts in a counterclaim that PSC breached the parties' “Manufacturer's Representative Agreement” by failing to pay commissions to which YTA was entitled. (D.N 32, PageID.215-18; see D.N. 1-2, PageID.70-72) YTA now moves for partial summary judgment on its breach-of-contract counterclaim and summary judgment on all of PSC's claims against it, and PSC cross-moves for summary judgment on its claims against YTA as well as YTA's counterclaim.[1] (D.N. 40; D.N. 41) For the reasons explained below, YTA's motion will be granted in part and denied in part, and PSC's motion will be denied in full.

I.

The following facts come from the “cit[ations] to particular parts of materials in the record,” Fed.R.Civ.P. 56(c)(1)(A), found in the parties' respective summary-judgment motions and responses. (See D.N. 40; D.N. 41; D.N. 42; D.N. 43)

A PSC and YTA's Agreement

PSC is a “service-based fabricator” based in Louisville, Kentucky, that manufactures and distributes parts made out of foam, fiberglass, rubber, and other non-metallic materials for “customers in a multitude of industries.” (D.N. 41, PageID.402; see D.N. 41-2, PageID.438-40; D.N. 41-4, PageID.604, 621-22) YTA is a “manufacturer's representative” based in upstate New York that generates new business for its clients and sells their manufactured products to commercial customers. (D.N. 40, PageID.233-34; see D.N. 40-4, PageID.299) YTA's principal and sole owner is William Yarbrough. (See D.N. 41-8, PageID.696)

In 2001, PSC and YTA entered into a “Manufacturer's Representative Agreement” (the Agreement), under which YTA agreed to “promote the sales of and solicit orders for” PSC's “fabricated seals [and] die cut foams” in an “assigned territory” in exchange for a five-percent commission on all “net sales” that it generated for PSC. (D.N. 40-1, PageID.258-59; D.N. 41-9, PageID.780-81) The Agreement provided that YTA was “an independent contractor and . . . not an employee of [PSC] and that neither party “ha[d] any authority to bind the other in any respect.”

(D.N. 41-9, PageID.780) It further provided that either party could terminate the Agreement thirty days after giving written notice to the other party via registered mail. (Id., PageID.782) Upon termination, PSC was obligated to pay commissions on YTA's pre-termination sales for up to twelve months after the date those orders had been received by PSC. (Id.)

Both parties agreed that they would not, “during the term of th[e] Agreement, or for one year after termination thereof, hire or employ, or contract with in any manner, salespersons, employees or individuals that were under contract or employed . . . by each other's firm unless otherwise agreed to by both [parties] . . . in writing.” (Id., PageID.781) YTA also agreed to “hold [PSC] harmless against any and all claims, demands, damages, suits, actions, jud[gm]ents, decrees, order[s], costs and expenses (including attorney's fees) arising out of or resulting from any willful or negligent act or omission of [YTA], . . . including but not limited to third party actions or claims arising out of [YTA's] activities in connection with th[e] Agreement.”[2] (Id.) PSC terminated the Agreement in August 2019 after discovering the alleged breaches by YTA described below. (D.N. 40, PageID.237; D.N. 41, PageID.413-14; see D.N. 40-7)

B. The 2014 GE-Rampf Referral

PSC claims that YTA first breached the Agreement in 2014 when it allegedly worked with Matthew Parr, who was a PSC salesperson at the time, to divert a business opportunity involving General Electric (GE) away from PSC to Rampf, another YTA client and one of PSC's competitors.[3] (See D.N. 41, PageID.410-11) According to PSC, GE, which was one of Parr's sales clients, approached Parr seeking a “foam-in-place” solution for a refrigerator gasket. (D.N. 41-3, PageID.543-44; see D.N. 40-9, PageID.376) The initial solution that PSC provided failed to meet GE's requirements. (Id., PageID.546) But rather than seeing if PSC could provide another solution or at least refer GE to another manufacturer, Parr “connected” GE with YTA (D.N. 40-9, PageID.376), who then referred GE to one of its other manufacturer-clients, Rampf, thus “cutting PSC out of the supply chain . . . entirely” on a “piece of business” worth at least $400,000 by PSC's estimation. (D.N. 41-4, PageID.602, 627) PSC contends that Parr referred the GE opportunity to YTA in exchange for a pre-arranged commission. (D.N. 41, PageID.410-11; see D.N. 41-3, PageID.546 (Matt Parr had a relationship and an agreement with YTA[,] and he took [the GE opportunity] outside [PSC] and sourced it through Rampf.”)) The record confirms that YTA later paid Parr, at a minimum, roughly $4,000 in “commissions” for the GE-Rampf referral, over a four-year period.[4] (See D.N. 41-18)

YTA does not dispute that Parr referred GE to YTA after PSC's initial solution proved to be inadequate; that YTA then referred GE to Rampf, which began producing GE's requested foamin-place gasket starting in 2016; and that YTA “ultimately paid . . . Parr a total of approximately $3,300 from 2016 through 2018 as a ‘reward' for referring the GE business to YTA.” (D.N. 40, PageID.239-40; see D.N. 40-4, PageID.308-09, 315-20; D.N. 40-9, PageID.374, 376) According to YTA, however, Parr referred GE to YTA because he “wanted to help his customer” and did not expect “any ‘finder's fee' or commission from the referral” in return. (D.N. 40, PageID.240; see D.N. 40-9, PageID.376) YTA further asserts that the “reward” Parr received was simply an unsolicited “express[ion] of William Yarbrough's “gratitude” for Parr “having made the introduction to GE” and was “not based on any agreement” between Parr and YTA. (D.N. 40, PageID.240, 245; see D.N. 40-4, PageID.309-10) And YTA points to deposition testimony from Yarbrough and Parr suggesting that the two “understood” that YTA's reward had been approved by Parr's supervisor at PSC.[5] (D.N. 40, PageID.240; D.N. 40-4, PageID.310-12, 317-18; D.N. 40-9, PageID.374-75)

C. YTA's Alleged Referral-Commission Agreement with Parr

In addition to the 2014 GE-Rampf referral, PSC claims that YTA breached the Agreement when, [s]tarting no later than 2016,” it “contracted” with Parr-who by that point was a “high-level, senior salesperson at PSC” (D.N. 41-4, PageID.612)-“to an arrangement in which YTA would pay Parr a finder's fee in exchange for any customers Parr brought to YTA.”[6] (D.N. 41, PageID.407; see D.N. 41-10) Under this alleged arrangement, YTA would then refer those customers to its other manufacturer-clients, including some who competed directly with PSC. (See D.N. 41, PageID.407) In a January 2016 email exchange, Yarbrough and Parr discussed “the start of a new relationship,” and Yarbrough proposed that Parr receive a ten-percent cut of any commissions that YTA earned as a result of Parr's “customer introduction[s].”[7] (D.N. 41-10, PageID.787) Yarbrough wrote that [t]he real goal would be to build up [Parr's] YTA commissions” and added that [t]his could really be something[,] and we could really build on [Parr's] and my contacts and customer knowledge.” (Id.) Yarbrough subsequently emailed Parr a “boiler plate” “Independent Contractor Agreement” describing Parr's potential role as YTA's [s]ub-[a]gent” and a proposed commission arrangement. (D.N. 41-12, PageID.796, 798; see id., PageID.802-10) But the record does not show that this agreement was ever signed or executed. (See id., PageID.808; see also D.N. 40-4, PageID.321-22)

PSC offers several other pieces of evidence that it believes indicate that Parr and YTA formed some sort of “referral/commission agreement” after 2016. (D.N 41, PageID.416; see id., PageID.407-10) For example, in a January 2016 email to his former supervisor at PSC, Parr shared that he expected a five-percent commission from YTA on [a]ll other business driven directly by him,” which would include both “new customer[s] and “PSC customers” that Parr would “take” to YTA. (D.N. 41-16, PageID.826) In a December 2017 email to Yarbrough, Parr wrote that he was “hoping to be able to review the list of customers [Yarbrough] wanted [him] to take over to ensure [Yarbrough's] ‘busyness' [wa]s reduced.” (D.N. 41-15, PageID.824) A January 23, 2018 email between Parr and Yarbrough included a spreadsheet ostensibly listing Parr's [t]err[i]tory” and his sales [a]ccounts” by industry. (D.N. 41-14, PageID.818-22) An email from January 29, 2018, stated that YTA and Parr would both “get a commission” if YTA was “awarded” a certain job from Lexmark, one of PSC's longtime customers.[8]...

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