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Menard v. Bestway (USA), Inc.

United States District Court, D. Minnesota

September 15, 2017

MATTHEW MENARD and MATADOR LLC d/b/a VAUGHN ASSOCIATES MN, Plaintiffs,
v.
BESTWAY (USA), INC., and BESTWAY INFLATABLES AND MATERIALS CORP., Defendants.

          Michael W. Weaver and Kaitlin P. Sheehan, McDermott Will & Emery, and Laura A. Pfeiffer, Winthrop & Weinstine, appeared for Defendants Bestway (USA), Inc., and Bestway Inflatables and Materials Corp.

          Daniel L. Scott, Stinson Leonard Street LLP, appeared for Plaintiffs Matthew Menard and Matador LLC d/b/a Vaughn Associates MN.

          MEMORANDUM

          JOAN N. ERICKSEN UNITED STATES DISTRICT JUDGE

         Plaintiffs Matthew Menard and Matador LLC d/b/a Vaughn Associates MN (“Vaughn MN”), bring this action for breach of contract and violation of two Minnesota statutes relating to sales representatives, Minn. Stat. §§ 325E.37 and 181.145. See Compl., Dkt. No. 1. Defendants Bestway (USA), Inc. (“Bestway USA”), and Bestway Inflatables and Materials Corp. (“Bestway China”) move for summary judgment on all claims [Dkt. No. 49]. For the reasons set forth below, the Court denies the motion.

         I. LEGAL STANDARD

         Summary judgment is proper if “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). To support an assertion that a fact cannot be or is genuinely disputed, a party must cite “to particular parts of materials in the record, ” show “that the materials cited do not establish the absence or presence of a genuine dispute, ” or show “that an adverse party cannot produce admissible evidence to support the fact.” Fed.R.Civ.P. 56(c)(1)(A)-(B). “The court need consider only the cited materials, but it may consider other materials in the record.” Fed.R.Civ.P. 56(c)(3). In determining whether summary judgment is appropriate, a court must view genuinely disputed facts in the light most favorable to the nonmovant, Ricci v. DeStefano, 557 U.S. 557, 586 (2009), and draw all justifiable inferences from the evidence in the nonmovant's favor, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).

         II. DISCUSSION

         This case concerns whether Plaintiffs were fully compensated for their work in helping Defendants sell airbed products into the retailer Target Corp. (“Target”).

         A. Summary of the Claims

         Reviewing the allegations provides helpful context to Defendants' motion for summary judgment on each of the Complaint's claims. Plaintiffs allege that in 2011, they entered into a “Joint Marketing Agreement” with Vaughn Associates, Inc. (“Vaughn, Inc.”), a separate organization from Vaughn MN. Plaintiffs and Vaughn Inc. agreed to work together to represent manufacturers, including Defendants, in the sale of their products to retailers in Minnesota and other states. In 2012, Defendants “engaged Vaughn and Plaintiffs to act as sales representatives in order to sell airbeds” to Target. Compl. ¶ 12. That same year, Plaintiffs secured an agreement for Target to buy a year's worth of airbeds from Defendants in 2012 through 2013. “In connection with [the] sale of Defendants' products to Target, Plaintiffs were entitled to receive 2% of all airbed sales as a sales commission.” Compl. ¶ 13. In July 2013, Plaintiffs secured a second agreement for Target to buy two years' worth of airbeds and pumps from Defendants in 2014 through 2016. “In connection with this deal, Plaintiffs were entitled [to] receive 2% of all 2014 shipments and 3% of all 2015 shipments of Defendants' products to Target.” Compl. ¶ 15. “Thus, Plaintiffs entered into a sales representative agreement with Defendants to receive commissions in the amount of 2% of all of Defendants' 2013 shipments to Target, 2% of Defendants' 2014 shipments to Target, and 3% of all of Defendants' 2015 shipments to Target.” Compl. ¶ 16. In December 2013, Defendants “purported to terminate Plaintiffs' sales representative agreement.” Compl. ¶ 18. Defendants paid Plaintiffs approximately $130, 000 in sales commissions for 2014 sales, which Plaintiffs allege was insufficient. Defendants failed to pay any commissions for Defendants' 2015 sales to Target.

         Plaintiffs' claims are threefold. In Count I, they allege that “Plaintiffs and Defendants entered into a ‘sales representative agreement, ' as that term is defined within Minn. Stat. § 325E.37, under which Plaintiffs were granted the right to represent, sell, and offer for sale Defendants' products to customers, including Target, and under which Plaintiffs were and are to receive commissions on all sales of Defendants' products to the same.” Compl. ¶ 24. Plaintiffs allege that Defendants never properly terminated the agreement, but rather “purported to terminate the parties' sales representative agreement without notice.” Compl. ¶ 27. In Count II, Plaintiffs allege that they are parties to a contract with Defendants “which requires Defendants to pay Plaintiffs commissions at the rate of 2% for all of Defendants' 2014 shipments to Target, and 3% for all of Defendants' 2015 shipments to Target.” Compl. ¶ 33. They allege that Defendants breached the contract by failing “to pay Plaintiffs' commissions for all of Defendants' 2014 and 2015 Target shipments.” Compl. ¶ 34. In Count III, Plaintiffs allege that they are “commission salespersons as defined under Minn. Stat. § 181.145” and that they have not been paid the commissions earned before Defendants terminated them. Compl. ¶¶ 37-39.

         B. Summary of Undisputed Facts and Preview of Dispute

         In November 2011, Plaintiffs and Vaughn, Inc., entered into a Joint Marketing Agreement. See Sheehan Decl. Ex. P, Dkt. No. 66. The agreement states that the Minnesota-based Plaintiffs and the Illinois-based Vaughn, Inc., would work together in the business of representing manufacturers, “shar[ing] certain product lines and the compensation generated therefrom in accordance with the provisions hereof so as to appear, for marketing purposes, as though they are a single entity.” Id. at ‘757. It states that Vaughn, Inc., and Vaughn MN “shall enter into separate agreements with all of the Vaughn Factories, it being the understanding and agreement of the parties hereto that each shall have independent relationships with” the identified manufacturers. Id. at ‘757-758. “Best Way” was identified as a “potential new” manufacturer “in Minnesota” for Vaughn, Inc. Id. at ‘764. Vaughn, Inc., had a preexisting sales representative relationship with Defendants, but Defendants had never successfully sold into Minnesota-based Target.

         In January 2012, at the introduction of Vaughn, Inc.'s president Tom Strauss, Menard met with the then-head of Bestway USA, Danny Kwok, in Hong Kong. The parties' accounts diverge significantly at this point. According to Menard, he told Kwok that his company Vaughn MN was separate from Vaughn, Inc., and that he would need a separate contract and should be paid directly. See Menard Dep. 22:4-22:17, Sheehan Decl. Ex. C, Dkt. No. 56. Kwok hired him on the spot as sales representative to Target based on an oral agreement that Bestway[1]would pay Vaughn MN a three percent commission on all shipments by Bestway to Target. Menard Dep. 22:18-22:25, 34:9-34:11. According to Defendants, they were never informed that Menard operated a separate company. Rather, they understood Menard to be a Minnesota-based employee of Vaughn, Inc., and proceeded accordingly, without entering into any agreement with Menard or Vaughn MN. See Defs.' Br. 3-4, 7-8, Dkt. No. 52.

         After Menard's January meeting with Kwok, he began to promote Bestway's products to Target. See Defs.' Br. 4; Pls.' Br. 10, Dkt. No. 72. On July 20, 2012, Target informed the parties that it was committing to purchase a year's worth of airbeds from Defendants. Defs.' Br. 4; Pls.' Br. 10.

         Shortly after receiving the news from Target, on July 23, Menard emailed Kwok the following message: “Now that we for sure have business, we should get a contract signed by both of us. Attached is the standard contract I use with my vendors, please review and let me know if ok.” Sheehan Decl. Ex. D, at ‘111, Dkt. No. 57. The draft contract provided for commissions at the rate of three percent. See Sheehan Decl. Ex. T, at ‘704, Dkt. No. 68; Defs.' Br. 22. Kwok replied,

We don't utilize rep agreement[s] with any of our reps, all of our agreements with Tom [Strauss] and Vaughn Associates since the beginning of this cooperation are ...

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