The latest in the ongoing saga between BI-QEM and its rep company
by ERA Legal Counsels
Gerald M. Newman and Adam Glazer
Gerald M. Newman and Adam J. Glazer are partners in the law firm of Schoenberg Finkel Beederman Bell & Glazer LLC, and they serve as general counsel to ERA. They are also regular contributors to The Representor, and participate in Expert Access, the program that offers telephone consultations to ERA members.
Sharp-eyed readers will recall that BI-QEM, owner and operator of certain manufacturing facilities, was featured in this column in Summer 2020 for the exceptionally “shabby treatment” it directed at Trade Links, its longtime exclusive rep. Back then, it was noted that “in the lengthy annals of sales rep-principal relationships ending badly,” BI-QEM’s conduct “deserves exceedingly prominent mention.”
In the nearly two years of ensuing litigation, things have not improved.
BI-QEM’s first shot was not even close
To recap, back in 1999, the parties entered into a sales representative agreement (SRA) containing an initial three-year term with an automatic annual renewal, provided Trade Links met the minimum sales requirement for the previous year. Although the parties did not discuss or set a minimum sales requirement after 2002, their relationship continued.
In May 2018, BI-QEM wrote to Trade Links terminating the relationship effective at year end. Viewing the termination notice as a violation of its automatic renewal rights, Trade Links filed a demand for arbitration, as the SRA provided.
After trying and failing to halt the arbitration proceedings, and one day after Eliot Essagof of Trade Links testified before the arbitration panel, BI-QEM withdrew its termination letter. During the resulting negotiations, BI-QEM made certain representations that led to a settlement, and Trade Links agreed to dismiss the arbitration case.
The shabby treatment, however, only worsened. BI-QEM soon presented Essagof with a new operations manual enabling it to micro-manage Trade Links’ activities. Essagof then raised the issue of unpaid commissions, leading BI-QEM to threaten to shut down its operations and file for bankruptcy protection “so that you get nothing.”
BI-QEM even told customers to place orders direct, not with its sales rep, and to make no sales information available to Trade Links. When customers placed such orders, no commissions were paid.
In response, Trade Links formally terminated the SRA in March 2019, and brought several claims in the Connecticut federal court, including for: (1) breach of contract, causing it to lose future commissions; (2) breach of the duty of good faith and fair dealing, including at the arbitration; and (3) under the Connecticut sales rep statute for double damages, plus attorney’s fees and costs.
As discussed in the 2020 column, BI-QEM moved to dismiss the complaint, but the judge squarely rejected each of its arguments.
The denial of a motion to dismiss means a case can move forward, and the parties take discovery on their respective claims and defenses. Following discovery in this action, including the taking of depositions of expert witnesses, BI-QEM again sought to prevent this action from reaching a jury by moving for summary judgment.
Summary judgment motions are often filed but rarely granted. Under the law, judges are not to weigh the evidence or to decide factual issues. A judge’s function on summary judgment is simply to decide whether the case should get decided by a jury, which is indicated if a hypothetical “rational juror” could decide in favor of the party opposing the motion.
This low threshold dooms most summary judgment motions in favor of allowing a jury to decide the contested issues. Yet, BI-QEM resurrected most of the arguments from its unsuccessful motion to dismiss. To no surprise, they met with the same chilly reception on summary judgment.
Each of BI-QEM’s arguments, according to the judge, “implicates obvious factual disputes,” and its motion inappropriately “reads like a closing argument premised on BI-QEM’s sometimes myopic view of the evidence.”
Taking aim at Trade Links’ breach of contract claim, BI-QEM misfires
Attacking Trade Links’ claims for lost future commissions, BI-QEM asserted that the annual renewal of the SRA was subject to various conditions, even though renewal was premised only on meeting the minimum sales requirements. Yet, BI-QEM insisted that claiming damages resulting from a breach is necessarily premised on an overly speculative renewal. Taking BI-QEM’s position less than seriously, the court simply noted that “a plaintiff may recover future losses as long as such recovery is limited to a reasonable time and is supported by the evidence.”
Because Trade Links was prepared to show at trial that, had BI-QEM not breached the SRA, the parties’ relationship “may have lasted into the future for some period of time,” based on its expert’s report and the “course of dealing” between its customers and BI-QEM, the court ruled that damages would get decided by the jury. “Whether Trade Links is able to demonstrate that it is entitled to future earnings for fifteen years, fifteen days, or not at all is a factual question for the jury.”
BI-QEM shoots blanks at the breach of the duty of good faith claim
Trade Links alleged various acts of bad faith by BI-QEM, but BI-QEM addressed in its summary judgment motion only the claim that Trade Links was deceived into withdrawing from the arbitration. The court deemed BI-QEM’s arguments to escape this claim “meritless,” noting that even if the claim was limited to BI-QEM’s 2018 arbitration conduct, the knowingly false representations allegedly made are “probative of Trade Link’s assertion that BI-QEM was acting in bad faith in an effort to deprive Trade Links of benefits to which it was entitled under the SRA.”
The allegations that BI-QEM deceived it in order to terminate the arbitration, and that BI-QEM never intended to honor the SRA going forward, despite its assurances, and in fact immediately reneged on its promises, were all supported by Trade Links with ample evidence. Accordingly, if Trade Links shows this bad faith by BI-QEM at trial, the court stated it will be “entitled to the damages which flow from this conduct.”
BI-QEM’s challenge to the sales rep statute gets shot down in flames
Narrowly zeroing in on the claim under the Connecticut sales rep statute for double the commissions based on its May 2018 termination letter, BI-QEM sought summary judgment because it later withdrew this letter, contending the SRA continued until terminated by Trade Links in March 2019. The court quickly repelled this attack, finding it “presupposes facts which are in dispute.”
Whether BI-QEM breached the SRA by improperly seeking to terminate, and thereby damaged the parties’ business relationship, was another fact question for the jury to decide. Actually, if Trade Links showed that BI-QEM repudiated the SRA at any point prior to March 2019, “then Trade Links may be able to recover penalties available under” the Connecticut rep statute.
It’s not (yet) the whole shooting match
At the very beginning of her discussion of BI-QEM’s latest motion, the judge wrote: “This case is going to trial.” With that sentence, she essentially denied BI-QEM the pre-trial escape it sought.
Certainly, BI-QEM has good reason to filed repeated motions and seek to keep this case from ever reaching a jury. The malevolent conduct allegedly directed at Trade Links is so alarming that, if proved, the double damages provision of the Connecticut statute seems well within reach.
For purposes of furnishing material for future sales rep columns, however, it is hoped BI-QEM sticks to its guns and refuses to settle. Should that path get taken, additional chapters of this saga are expected to write themselves based on the results of a trial and, no doubt, appeal(s) of a clearly foreseeable jury award.