United States District Court, D. Minnesota
C. Moore, Esq. and Watje & Moore, Ltd., counsel for
M. McNeil, Esq. and Bose McKinney & Evans LLP, and Mark
J. Carpenter, Esq. and Carpenter Law Firm PLLC, counsel for
defendant Endress Hauser, Inc.
J. Gleekel, Esq. and Larson King, LLP, counsel for defendant
Miller Mechanical Specialties, Inc.
S. Doty, Judge
matter is before the court upon the partial motion for
summary judgment by plaintiff Engineered Sales Co. (ESC) and
the motions for summary judgment by defendants Endress
Hauser, Inc. (E) and Miller Mechanical Specialties, Inc.
(MMS). Based on a review of the file, record, and proceedings
herein, the court denies plaintiff's motion and grants
business dispute arises out of E's termination of
ESC's sales representative agreement. E is an Indiana
company that manufactures industrial instrumentation,
including flow, level, pressure, temperature, and analytical
products. E Answer ¶ 2. ESC is a manufacturer's
representative and distributor for industrial instrumentation
and controls based in Minnesota. Compl. ¶ 1; Engstrand
Dep. at 27:14-16; Gleekel Decl. Ex. L at 1.
2000, E contacted Dan Engstrand, president of ESC, about
becoming a sales representative for its product line in
Minnesota, North Dakota, South Dakota, and northwest
Wisconsin. Engstrand Dep. at 40:11-41:8, 36:16-37:3. E had
been working with another Minnesota company, Control-Tec, but
wanted more sales coverage in the territory as its business
expanded. Id. at 39:24-40:22. E encouraged ESC to
effectively acquire Control-Tec and take over as the E
representative in the territory. Id. at 40:23-42:3l
54:21-55:11. Over the course of several months, ESC and
Control-Tec negotiated a deal under which ESC paid $100, 000
to acquire Control-Tec. Id. at 51:10-53:25;
54:21-55:6. Engstrand initiated the discussion with
Control-Tec, and E was not involved in the negotiations.
Id. at 45:2-5, 71:20-72:4. ESC did not make any
payment to E relating to its buy out of Control-Tec.
Id. at 56:20-57:6.
January 1, 2001, ESC and E entered into an exclusive
representative agreement (Agreement) under which E
appointed ESC as its “independent sales representative
to sell [E's] specified products” in Minnesota,
North Dakota, South Dakota, and portions of Wisconsin.
Gleekel Decl. Ex. J at 1, 15. The Agreement designates ESC as
an “independent contractor” and provides that
either party may terminate the agreement “with or
without cause” with thirty days' written notice.
Id. §§ 1(b), 13. The Agreement does not
require ESC to pay E a royalty fee for becoming a sales
representative, nor does it require ESC to pay a percentage
of gross or net sales to E. See id.; Engstrand
Dep. at 302:21-304:8.
Agreement prohibits ESC from selling competing products, but
permits ESC to continue selling products for certain
identified industrial process manufacturers, referred to as
“principals.”Gleekel Decl. Ex. J § 4;
id. App'x C. Among those approved principals is
Mine Safety Appliances (MSA). Id. App'x. C. The
parties later modified certain aspects of the Agreement
through several written addenda. See Lucey Decl. Ex.
A. The last modification was in September 2010. Id.
approximately 2013, E began consolidating its
representatives throughout the country. Engstrand Dep. at
80:18-81:3; 140:13-21. Engstrand agreed that consolidation,
particularly in the Midwest, made sense and, in 2014, began
discussions with defendant MMS, an E representative in
Iowa, about the possibility of merging. Id. at
136:2-40:2, 158:14-59:18. Meanwhile, E had growing concerns
about ESC's sales capacity in the Bakken Shale Region in
North Dakota and its flat sales generally. Camin Dep. at
8:22-10:25. E was also concerned that ESC did not have a
succession plan in place. Engstrand Dep. at 202:3-204:10;
Lucey Dep. at 58:22-60:2. Given its concerns and its
preference for consolidated sales representatives, E
favored a merger between MMS and ESC. Camin Dep. at 11:1-8;
Sauers Dep. at 7:14-8:11. E became involved in the
discussions between ESC and MMS, even signing a
non-disclosure agreement (NDA) to maintain the
confidentiality of the information exchanged. Gleekel Decl.
Ex. D. The NDA precludes the distribution, disclosure, or
dissemination of confidential information exchanged under its
terms. Id. § 3(b). Confidential information
any information and data of a confidential nature, including
but not limited to proprietary, developmental, technical,
marketing, sales, operating, performance, cost, know-how,
business and process information, computer programming
techniques, and all record bearing media containing or
disclosing such information and techniques ... disclosed
pursuant to [the NDA].
Id. § 1. Confidential information does not
include information “already in the public
domain” or information “subsequently
independently developed by the receiving party.”
Id. §§ 4(a), (d). Under the NDA, ESC
provided MMS with, among other things, sales data that
included summaries of its business with principals other than
E, including MSA. See P. Miller Dep. Ex. 100 at
5-7, 9. The data shows that two-thirds of ESC's revenue
came from E and that MSA was its third highest revenue
producing principal. See id.
unbeknownst to ESC, E communicated regularly with MMS
throughout its negotiations with ESC. Although E
characterizes its role as one of an “interested
observer, ” the record establishes otherwise. It
appears that E ultimately determined that MMS should
acquire, rather than merge with, ESC and that it directed
negotiations accordingly. See Camin Dep. Exs. 60,
81, 82; Sauers Dep. Exs. 63, 77, 79. Throughout the
negotiations, E told Engstrand that it may simply terminate
the Agreement if ESC could not work out a deal with MMS.
Camin Dep. at 95:7-24, 101:7-23.
5, 2015, after many months of negotiating, MMS offered to
purchase ESC for $1.1 million. See P. Miller Dep.
Ex. 99. On June 15, 2015, Engstrand declined the offer and
countered with a proposed purchase price of $1.62 million
based on undisclosed “independent appraisals.”
Sauers Dep. Ex. 40 at 1, 2. MMS responded that it would keep
its offer open until 12:01 a.m. on June 16, 2015.
Id. at 1. E weighed in the evening of June 15,
indicating that it would terminate ESC if it could not reach
agreement with MMS. Camin Dep. Ex. 84. ESC did not agree to
MMS's terms and, on June 16, 2015, E terminated the
Agreement, effective July 17, 2015. Sauers Dep. Ex. 86. E then
appointed MMS as its sales representative in ESC's former
territory. P. Miller Dep. at 111:11-12:25.
confirmed that, under the Agreement, it would pay ESC full
commissions on outstanding quotes from July 16, 2015, to
August 15, 2015, and fifty-percent commissions on verified
outstanding quotes from August 16, 2015, to September 15,
2015. Engstrand Dep. Ex. 43 at 1, 4. E also confirmed that
ESC would receive no commissions for orders received after
September 16, 2015, or for orders shipped after July 15,
2016. Id. at 4. E requested that ESC provide any
outstanding special project quotes that E did not have
access to so that it could ensure full commission payment.
Id. at 1. On July 16, Engstrand provided a list of
quotes to E and noted that all of those quotes were already
in the E database. Id. Ex. 45 at 1. Later that
month, Engstrand accused E of withholding commissions due
to ESC. Id. Ex. 46 at 2. E denied improperly
withholding commissions and explained that ESC was not
entitled to commissions on expired quotes. Id. at 1.
In his deposition, Engstrand conceded that E paid all
commissions due to ESC under the Agreement and was unable to
identify additional commissions due and owing. Engstrand Dep.
after ESC's termination, MMS contacted MSA and began
discussions about MMS becoming MSA's sales
representative. P. Miller Dep. Ex. 108; P. Miller Dep. at
125:12-22. MMS was aware that MSA was a market leader in the
gas-detection industry and knew that ESC was its current
sales representative. P. Miller Dep. at 125:15-22,
127:10-28:18. Travis Sauers, a regional sales manager for
E, had a friend who worked at MSA and knew that MSA had
been unhappy with ESC for some time. Sauers Dep. at 6:9-15,
39:2-21. ESC was aware that MSA was concerned about ESC's
sales volume. Engstrand Dep. at 327:17-22. ...