Robich v. PATENT BUTTON COMPANY OF TENNESSEE, INC., 18665.

• Decision Date: 16 October 1969
• Docket Number: No. 18665.,18665.
• Citation: 417 F.2d 890
• Parties: John M. ROBICH, Plaintiff-Appellee, v. PATENT BUTTON COMPANY OF TENNESSEE, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

417 F.2d 890 (1969)

John M. ROBICH, Plaintiff-Appellee, v. PATENT BUTTON COMPANY OF TENNESSEE, INC., Defendant-Appellant.

No. 18665.

United States Court of Appeals Sixth Circuit.

October 16, 1969.

W. Keith McCord, Knoxville, Tenn., for appellant; Egerton, McAfee, Armistead & Davis, Knoxville, Tenn., of counsel.

Robert L. Crossley, Knoxville, Tenn., for appellee; Baker, Worthington, Barnett & Crossley, Knoxville, Tenn., of counsel.

Before EDWARDS, McCREE and COMBS, Circuit Judges.

McCREE, Circuit Judge.

This is an appeal by a fabricator of molded plastic parts from a judgment in a non-jury case in favor of a manufacturer's representative who sued for commissions under an agency agreement.

Plaintiff-appellee Robich of Louisville, Kentucky represented defendant-appellant Patent Button Company, whose principal office was in Knoxville, Tennessee, in its business relationship with the Appliance Division of General Electric Company in Louisville. The parties signed the contract involved in this litigation in November, 1962. It superseded their first agreement, entered into in January, 1961, and provided, as did the first contract, that Robich would receive a commission of 5 per cent on net sales by Patent Button in his territory. The contract could be terminated by either party on 60 days written notice. In case of termination, the contract provided:

No commissions shall be paid for any sales made by the TSR¹ or the Patent Button Company after termination of the agreement. But, full commissions shall be paid the TSR on all shipments made by the Company on all orders accepted by the Company before final termination of the agreement, even if said shipments occur after termination of the agreement.

Between 1961 and 1964 relations between plaintiff and defendant proceeded without controversy. General Electric would send Patent Button an "open end purchase order" for a particular part. This document prescribed physical specifications, price, and payment terms, but provided that quantity, time of shipment, and destination were to be specified in "material arrival schedules" (also referred to as releases). Patent Button would acknowledge the open end purchase order, and GE would provide tools to manufacture the part. When Patent Button received a material arrival schedule pertaining to a particular part, it would acknowledge the document and produce and ship the parts to GE. Patent Button paid commissions to Robich only after shipments were made.

Appellant's sales to General Electric in 1960 amounted to only $10. During the first year of the agency contract, they increased to $5,000, then to $73,000 the second year, to $154,000 the third year, and to $184,000 the fourth. In a letter dated December 30, 1964, Patent Button terminated the agency, as the contract permitted, effective February 28, 1965. Patent Button's sales to GE amounted to $195,000 in 1965 and $202,000 in 1966.

After termination, appellant paid Robich commissions on parts for which open end purchase orders and material arrival schedules had been sent to, and acknowledged by, Patent Button before termination. The District Court held that, in addition, plaintiff was entitled to commissions on a part (a lamp socket) for which an open end purchase order was sent out and acknowledged before termination, but for which material arrival schedules were sent out and acknowledged after termination of the agency contract.²

The issue on appeal, as stated by the District Court, is "whether plaintiff is entitled to commissions on all shipments upon material arrival schedules which were received by the defendant from GE after termination of plaintiff's contract but pursuant to open end orders procured by the plaintiff prior to his termination."

The critical provision of the contract reads:

But, full commissions shall be paid the TSR on shipments made by the Company on all orders accepted by the Company before final termination of the agreement, even if said shipments occur after termination of this agreement.

Resolution of this issue requires interpretation of the meaning the parties intended to communicate in the phrase "on all orders accepted by the Company before final termination of the agreement."

The District Court focused on the word "order" in disregard of "accepted", the next word in the critical phrase, and concluded that the parties meant that once plaintiff had procured an open end purchase order, he was thereafter entitled to commissions on all parts shipped pursuant thereto, for an indefinite period without regard to the termination of the agency agreement....