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Curt Hedding v. Pneu Fast Co.

United States District Court, D. Minnesota

January 2, 2019

CURT HEDDING, o/b/o HEDDING SALES & SERVICE, Plaintiff,
v.
THE PNEU FAST COMPANY, Defendant.

          Daniel P. Brees, GASKINS, BENNETT & BIRRELL, LLP, for plaintiff.

          Benjamin Kinney, LAW OFFICES OF THOMAS SHIAH, and Michael S. Poncin, MOSS & BARNETT, PA, for defendant.

          MEMORANDUM OPINION & ORDER

          JOHN R. TUNHEIM CHIEF JUDGE

         Plaintiff Curt Hedding (“Hedding”) brings this action against Defendant The Pneu Fast Company (“Pneu Fast”), alleging a violation of the Minnesota Termination of Sales Representative Act (“MTSRA”). Presently before the Court is Pneu Fast's Motion to Dismiss for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6) and lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1). Because Hedding has alleged facts sufficient to show a violation of the MTSRA and has claimed damages in excess of $75, 000, the Court will deny the motion.

         BACKGROUND

         I. FACTS

         Hedding is a Minnesota citizen and the owner of Hedding Sales & Services (“Hedding Sales”), a Minnesota sole proprietorship. (Am. Compl. (“Compl.”) ¶¶ 1-2, June 19, 2018, Docket No. 21.) Hedding Sales represents manufacturers in the sale and distribution of goods. (Id. ¶ 3.) In 2006, Hedding Sales entered into a Representative Agreement (the “Agreement”) with Pneu Fast, an Illinois corporation specializing in the production of nails and staples used in certain power tools. (Id. ¶¶ 4-5, 11). The Agreement established that Hedding Sales would represent Pneu Fast in the sale and distribution of its products across nine states, including Minnesota and Ohio. (Id. ¶ 11 & Ex. A (“Agreement”) at 7.) It was to be effective indefinitely and, according to its terms, would be governed by the laws of the State of Ohio. (Id. at 5; Compl. ¶¶ 11, 12.)

         In relevant part, the Agreement also contained the following terms: (1) Pneu Fast would pay Hedding Sales a 10% commission for one year on new accounts, and 5% thereafter (Agreement at 8); (2) either party could terminate the Agreement with or without cause (id. at 4); (3) in the event of termination, Pneu Fast would not be liable to Hedding Sales for any damages whatsoever (id.); and (4) any amendment to the Agreement would not be effective unless in writing signed by both parties, except that product prices, product categories, geographic territory, and the commission schedule could be “amended at any time by giving written notice thereof to [Hedding Sales], ” (id. at 5).

         In 2008, Hedding Sales established a new account for Pneu Fast with Menards, a large home improvement chain. (Compl. ¶ 15). Despite agreeing that Hedding Sales would receive a 10% commission on new accounts for the first year and 5% thereafter, Pneu Fast never paid Hedding Sales more than 4% in commissions on the Menards account. (Id. ¶¶ 16-20). Nevertheless, Hedding Sales continued to work on the Menards account through 2018. (Id. ¶ 36.) Because of its efforts, the account expanded into new states throughout the U.S., including expansions in 2015 and 2016 into Kansas, Missouri, and Wyoming. (Id. ¶¶ 24, 26.)

         In March 2018, Pneu Fast's President and COO, Reno Joseph, sent a letter to Hedding Sales (the “Termination Letter”) terminating the Agreement. (Id. ¶ 36.) The Termination Letter stated that the termination would be effective immediately. (Id. ¶ 37.) It also denied Hedding Sales any outstanding commissions until Hedding returned all product samples to Pneu Fast. (Id. ¶ 39.) The Termination Letter did not include a statement of reasons for the termination, nor did it give Hedding an opportunity to address any such reasons. (Id. ¶ 40.)

         Hedding now brings a single claim against Pneu Fast, alleging wrongful termination in violation of the Minnesota Termination of Sales Representatives Act (“MTSRA”), Minn. Stat. § 325E.37 (2018). (Compl. ¶¶ 45-55-.) Pneu Fast seeks to dismiss the Amended Complaint for failure to state a claim upon which relief can be granted pursuant to Fed.R.Civ.P. 12(b)(6) and lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1). (Mot. to Dismiss, June 4, 2018, Docket No. 23.)

         II. MINNESOTA TERMINATION OF SALES REPRESENTATIVES ACT

         The purpose of the MTSRA “is to afford some protection to sales representatives by limiting the circumstances under which their agreements may be terminated.” Cooperman v. R.G. Barry Corp., No. 4-91-663, 1992 WL 699500, at *8 (D. Minn. Jan. 10, 1992). The MTSRA's protections extend to sales representatives who are residents of or maintain their principal place of business in Minnesota or whose sales territory includes all or part of Minnesota. Minn. Stat. § 325E.37, Subd. 6. The MTSRA defines “sales representative” as “a person who contracts with a principal to solicit wholesale orders and who is compensated, in whole or in part, by commission.” Id. at Subd. 1(d).

         Under the MTSRA, a manufacturer may terminate a sales agreement upon good cause, provided the manufacturer gives the sales representative (1) notice of its intent to terminate at least 90 days before the expiration of the agreement, and (2) 60 days in which to correct the reasons stated for termination. Id. at Subd. 2. If a manufacturer does not have good cause to terminate, it must renew the sales agreement or give written notice of its intent not to renew at least 90 days before the expiration of the agreement. Id. at Subd. 3. A sales ...


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