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Apex Technology Sales, Inc. v. Leviton Manufacturing, Inc.

United States District Court, D. Minnesota

June 26, 2017

Apex Technology Sales, Inc., a Minnesota corporation, Plaintiff,
Leviton Manufacturing, Inc., a Delaware corporation Defendant.

          J. Michael Dady, John D. Holland, and Serena I. Chiquoine, Dady & Gardner, P.A. counsel for Plaintiff.

          Bradley J. Lindeman and Jennifer Zwilling, Meagher & Geer, P.L.L.P. counsel for Defendant.


          SUSAN RICHARD NELSON United States District Judge

         Before the Court is the Motion for a Temporary Restraining Order [Doc. No. 4] filed by Plaintiff Apex Technology Sales, Inc. (“Apex”). Because Defendant Leviton Manufacturing, Inc. (“Leviton”) received notice and the Motion has been fully briefed, the Court will treat it as a Motion for a Preliminary Injunction pursuant to Fed.R.Civ.P. 65(a). The hearing on the motion was held on June 19, 2017. For the reasons set forth herein, the preliminary injunction is granted.

         I. BACKGROUND

         Plaintiff Apex is a Minnesota corporation with its principal place of business in Minnesota. (Compl. [Doc. No. 1] ¶¶ 6-7.) Defendant Leviton is a company incorporated in Delaware, with its principal place of business in New York. (Id. ¶¶ 8-9.) Leviton “researches, develops, manufactures, and distributes electrical wiring devices, network and data center connectivity solutions, LED lighting and lighting energy management systems, and security and automation applications.” (Leland Decl. ¶ 3 [Doc. No. 11].) To conduct its business, Leviton utilizes an independent sales force. (Id. ¶ 5.) Since July 1998, when Apex and Leviton first entered into a written agreement, Apex has served as Leviton's exclusive sales representative for the designated territory of Minnesota, North Dakota, South Dakota, and Western Wisconsin. (Compl., Ex. A (1998 Agmt.).) In exchange for servicing this sales territory, Leviton agreed to pay Apex commissions on its sales, as set forth in Appendix A of the 1998 Agreement. (Id., Ex. A ¶ 2.1.) The caption for Appendix A indicated that commission rates would be revised annually. (Id., Ex. A, App. A.)

         In September 2002, the parties entered into a new agreement through which Apex again agreed to serve as Leviton's exclusive sales representative for the sale of products identified in Schedule A of the contract, in the territory identified in Schedule B. (Compl., Ex. B ¶ 1 (2002 Agmt.).) The amount of compensation was set forth in Schedule C, (id., Ex. B ¶ 4), which was similar to Appendix A to the 1998 Agreement. Although Schedule C did not expressly state that commission rates would be revised annually, nearly every year from 2002 onward, Leviton provided an amended commission schedule, effective from January 1 through December 31 of a given year, which Apex signed and returned to Leviton. (Compl. ¶¶ 22, 24.) The annual amendments altered the commission percentages and also changed the products to which the commissions applied. (Id. ¶ 25.) For example, while the 2002 Agreement states, “Certain national accounts, house accounts, OEM accounts and/or direct end users will NOT be included in commissionable sales, ” (Compl., Ex. B ¶ 4(e)), the 2015 Commission Schedule C states, “Certain national accounts, OEM accounts, and end users may not be included in commissionable sales at Leviton's discretion.” (Id., Ex. C, note 2) (emphasis added). Also, while the 2002 Agreement provides that commissions will be based on the “final net invoice price for the product, ” (id., Ex. B ¶ 4©), the 2015 Commission Schedule states, “commissions are paid on net sales.” (Id., Ex. C, note 6.) The 2015 Commission Schedule further includes certain commission terms regarding “Copper and Fiber Products” and “Residential (CH) Products, ” (id.), neither of which appeared in the 2002 Agreement.

         Among its other terms, the 2002 Agreement also provides for termination without cause upon 30 days notice and termination for cause upon five days notice. (Compl., Ex. B. ¶ 10.) In addition, the 2002 Agreement states that it is to be construed and enforced according to the laws of New York. (Id. ¶ 13.)

         When Leviton transmitted its commission changes to Apex in the 2015 Schedule C, it also included a document entitled “Expectations of a Rep Firm” (“Expectations Document”). (Compl., Ex. D (2/12/15 Letter).) In its transmittal letter, Leviton noted that while the Expectations Document did not provide quotas or numbers, it was intended to serve as a statement of Leviton's expectations in order “to eliminate any misunderstandings” between Leviton and its sales representatives. (Id., Ex. D at 1.)

         Apex alleges that during the course of its relationship with Leviton, it expended substantial time and energy creating and developing the Leviton market within its territory. (Compl. ¶ 34.) Further, Apex contends that Leviton never indicated that Apex's sales performance was unacceptable. (Id. ¶ 35.) To the contrary, Apex contends that Leviton presented numerous sales awards to Apex. (Id. ¶¶ 36-43.)

         However, Bradford Leland, Leviton's Vice President of Sales, attests that in 2016, Leviton grew concerned with what it perceived to be a high turnover rate among Apex's sales representatives and employees. (Leland Decl. ¶ 14.) Leland contends that Leviton raised these concerns with Mike Pride, a principal and sales representative with Apex, on numerous occasions. (Id. ¶ 15.) In addition, Leland asserts, Leviton asked Apex to create an action plan to address these concerns. (Id. ¶ 16.)

         Apex alleges that on April 30, 2017, Leviton's representative Jim Martin contacted Apex employees, informing them that Apex's future as a Leviton sales representative was uncertain, and making comments along the lines of “it was nice working with you.” (Compl. ¶ 53.) In early May 2017, Apex contends, Martin began surreptitiously contacting Apex customers, encouraging them to bypass Apex altogether and to place their orders directly through Leviton. (Id. ¶ 54; Compl., Ex. G.) Apex's Michael Pride asserts that in addition to one of its best customers, Parsons Technologies, three other Apex customers have informed him that they will now work directly with Jim Martin. (Pride Decl. ¶¶ 20, 22 [Doc. No. 13].)

         At some point in May 2017, Mike Mursat, an Apex sales representative working on the Leviton account, resigned from Apex. (Leland Decl. ¶ 18; Compl., Ex. G (5/3/17 Email).) Leviton's Leland attests that Mursat's resignation prompted Leviton to send Apex a letter on May 12, 2017, announcing its termination of the parties' agreement, effective 30 days from Apex's receipt of the letter. (Leland Decl. ¶¶ 18-19; Compl., Ex. E.) Apex received the termination notice on May 15, 2017. (Compl. ¶ 50.) During the ensuing 30-day period, Apex contends that it attempted to persuade Leviton to withdraw the termination notice while still continuing to fully perform under the terms of the contract. (Id. ¶ 52.) Apex alleges that at the same time, however, Leviton failed to abide by the terms of the parties' contract. (Id.) For instance, Apex asserts that on or around May 15, 2017, Leviton terminated Apex's access to the Salesforce software program used by Leviton's sales representatives to document and update projects. (Id. ¶ 56.) Apex also asserts that for approximately a month and a half before Leviton issued the termination notice, Jim Martin visited Apex's territory directly, seeking no coordination with Apex, contrary to industry practice. (Pride Decl. ¶¶ 20, 23.)

         Leviton, on the other hand, contends that it conducted normal business operations with Apex both before and after the issuance of the termination notice. (Leland Decl. ¶ 21.) It asserts that its standard practice is to deny Salesforce access to sales representatives in these circumstances and it instructed Apex to directly report the Salesforce information to Martin. (Id. ¶ 24; Leland Decl., Ex. 2 (5/15/17 Email).) In addition, Leviton contends that it did not interfere with customers in Apex's territory, (Leland Decl. ¶¶ 22-23), and it continued to pay Apex commissions during the 30-day period. (Id. ¶ 25.)

         It appears that on May 18, 2017, Apex responded to Leviton's termination letter, asserting its position that termination was improper under the Minnesota Termination of Sales Representatives Act (“MTSRA”), Minn. Stat. § 325E.37. (See Leland Decl., Ex. 3 at 1 (5/26/17 Letter) (referencing content of Plaintiff's 5/18/15 letter).) In response, on May 26, 2017, Leviton expressed its disagreement with Apex's recitation of the facts and of the application of the MTSRA to the parties' 2002 Agreement. (Id. at 1-2.) Leviton further stated in the May 26 letter, that even if the MTSRA applies, it alternatively provided notice of non-renewal, pursuant to Minn. Stat. § 325E.37, subd. 3.[1] (Id. at 2.)

         On June 13, 2017, Apex initiated this lawsuit, asserting the following claims against Leviton: (1) violation of the MTSRA (Compl. ¶¶ 59-72); (2) breach of contract and the implied covenant of good faith and fair dealing, (id. ¶¶ 73-80); and (3) tortious interference with contractual relations and prospective economic advantage, (id. ΒΆΒΆ 81 83). It also filed the instant motion for preliminary injunctive relief in which it asks the Court to: 1) enjoin Leviton from terminating the 2002 Agreement, as amended and that the parties continue operations pursuant to the obligations set forth in the contract; 2) to permit Apex the use of software used ...

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