Sky Systems v . Sentech Archit. CV-12-37-PB 8/27/12
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
Sky Systems of Plymouth, NH, LLC
v. Case N o . 12-cv-37-PB
Opinion N o . 2012 DNH 145
Sentech Architectural Systems, LLC
MEMORANDUM AND ORDER
Beginning in 2007, Sky Systems of Plymouth, N H , LLC (“Sky”)
served as an independent sales representative for the Texas-
based Sentech Architectural Systems, LLC (“Sentech”), and was
responsible for a sales territory encompassing various
Northeastern states. In January 2012, Sentech terminated its
arrangement with Sky. Claiming that it has not received all of
the commissions to which it is entitled, Sky now brings suit
against Sentech. In addition to contract damages, Sky seeks
treble damages and attorneys’ fees based on Sentech’s alleged
violations of the Texas Sales Representative Act and its New
Hampshire cognate. Sky moves for summary judgment, and, for the
reasons below, I deny its motion.
I. BACKGROUND
Sky is a limited liability company based in New Hampshire.
The company has no employees, and its president and sole member
is Ernest Coupe. Sentech is a limited liability company whose
principal place of business is Austin, Texas. Sentech designs
structural glass systems, which have been incorporated into
buildings such as the Freedom Tower in downtown Manhattan and
the Newark International Airport.
In 2007, pursuant to an oral agreement, Sentech engaged Sky
as an independent sales representative. Sky solicited orders
for Sentech products and was compensated by Sentech through the
payment of commissions. On August 1 6 , 2010, Sky and Sentech
formalized their arrangement by entering into a written Sales
Representation Agreement (“Agreement”). Doc. N o . 1-1. By the
terms of the Agreement, Sky was granted the exclusive right to
sell Sentech’s products in a defined territory encompassing New
England and northern New York State.
Clauses 5 and 6 of the Agreement address commissions and
commission payments, specifying that commissions
shall be computed on the gross amount of the invoice
(including change orders) rendered by the Company and
paid for by the Purchaser. In no event shall the
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commission be computed on an amount in excess of the
amount received by the Company . . . . The
Representative’s commission shall be reduced a pro
rata amount[] when final settlement is made with a
Purchaser on other than a full payment basis . . . .
Id. ¶ 5 . As to timing, the Agreement specifies that commission
payments “shall be made only after the Products are paid for by
the Purchaser,” id. ¶ 5, and “[a]ll payments of commissions
shall be made within thirty days of receipt of payment by the
Company,” id. ¶ 6.
Termination is addressed by clauses 2 and 1 5 . Under the
former, either party may terminate the Agreement “at any time
without cause . . . upon 15 days’ advance written notice to the
other party[.]” Id. ¶ 2 . Clause 1 5 , whose meaning is disputed
by the parties, is titled “Rights Upon Termination of This
Agreement,” and reads, in its entirety:
Upon termination of this Agreement, the Company shall
pay the Representative commissions for orders and
contracts accepted by the Company prior to the
effective date of such termination, regardless of when
shipments are made or invoices tendered. Upon
termination of this Agreement, all trade names,
patents, designs, drawings, engineering or other data,
photographs, samples, literature, and sales data of
every kinds [sic], shall remain the property of the
Company, and the Representative shall return all such
property in its possession with reasonable promptness
along with copies of any confidential information
which it may have other than the regular exchange of
business correspondence.
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Id. ¶ 15 (emphasis added).
On January 1 0 , 2012, Sentech notified Sky that it would be
terminating the Agreement. After receiving the notice, Sky
demanded that Sentech make full payment of all outstanding
commissions within fifteen days. Pointing to the most recent
“Commission Statement” that had been supplied by Sentech, which
listed nine projects for which commissions remained payable, Sky
requested $73,968.60. That amount represents the sum total of
the figures listed for each project under the “Remaining
Commission Payable” heading of the Commission Statement.1
Sentech rejected Sky’s demand. Instead, it continued to
pay Sky commissions on a rolling basis as it received payment
from its customers. Where projects listed on the Commission
Statement were cancelled or where purchasers where unable to
make payment, the commissions paid to Sky were withheld or
reduced accordingly. Sky asserts that as of May 3 0 , 2012,
ongoing commission payments had reduced the outstanding balance
owed from $73,968.60 to $65,031.29.
Invoking this court’s diversity jurisdiction, Sky brought
1
Sentech notes that to avoid any confusion going forward, it has
changed its Commission Statements by inserting the word
“Anticipated” into the “Total Commission Payable” and “Remaining
Commission Payable” headings. Brown Aff. ¶ 5 , Doc. N o . 32-3.
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suit on February 1 , alleging that Sentech’s failure to pay the
full $73,968.60 by January 25 constituted a breach of the
Agreement. Sky’s complaint (Doc. N o . 43) contains nine counts,
including a contract claim; two quasi-contract claims for unjust
enrichment and quantum meruit; an unfair trade practice claim
under New Hampshire law; and five claims arising out of the
statutes governing sales representatives and commissions in
Texas, New Hampshire, Massachusetts, New York, and Connecticut.
Sky now moves for summary judgment, but only addresses the
contract claim and the claims under the New Hampshire and Texas
Sales Representative Acts.
II. STANDARD OF REVIEW
A summary judgment motion should be granted when the record
reveals “no genuine dispute as to any material fact and that the
movant is entitled to judgment as a matter of law.” Fed. R.
Civ. P. 56(a). The evidence submitted in support of the motion
must be considered in the light most favorable to the nonmoving
party, drawing all reasonable inferences in its favor. See
Navarro v . Pfizer Corp., 261 F.3d 9 0 , 94 (1st Cir. 2001).
A party seeking summary judgment must first identify the
absence of any genuine issue of material fact. Celotex Corp. v .
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Catrett, 477 U.S. 3 1 7 , 323 (1986). The burden then shifts to
the nonmoving party to “produce evidence on which a reasonable
finder of fact, under the appropriate proof burden, could base a
verdict for i t ; if that party cannot produce such evidence, the
motion must be granted.” Ayala-Gerena v . Bristol Myers-Squibb
Co.,
95 F.3d 8 6 , 94 (1st Cir. 1996); see Celotex,
477 U.S. at
323.
III. ANALYSIS
A. Sales Representative Statute Claims
Sentech challenges the applicability of the Texas Sales
Representative Act (“TSRA”), Tex. Bus. & Com. §§ 54.001-54.006,
and the corresponding New Hampshire statute, N.H. Rev. Stat.
Ann. § 339-E:1-6, on a number of grounds. Among other things,
Sentech argues that the statutes only cover arrangements where a
wholesaler sells a product to a retailer for resale, and that
neither its products nor its business model fit such a scheme.
I need not engage in that fairly complex and fact-intensive
inquiry, however, because the statutes cannot cover the
arrangement between Sentech and Sky for very simple reasons.
The TSRA applies only when a sales representative is
engaged to solicit orders within the state of Texas. PennWell
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Corp. v . Ken Assoc., Inc., 123 S.W.3d 756, 769-70 (Tex. App.
2003) (holding that “[b]y the express terms of this provision
[now § 54.002], the TSRA has no application to the sales
representative relationship between Ken and PennWell because . .
. . Ken was not authorized t o , and did not, solicit orders
within the state of Texas”); see Tex. Bus. & Com. § 54.002(a)
(“A contract between a principal and a sales representative
under which the sales representative is to solicit wholesale
orders within this state must . . . .” (emphasis added)). Sky’s
sales territory did not include Texas, and therefore, Sentech
cannot be liable under the Texas statute. Though Sky cursorily
argues that the choice-of-law clause in the Agreement --
specifying that Texas law governs the Agreement’s construction –
- bears on the issue, that contract clause is irrelevant to
whether a cause of action exists under the TSRA.
Nor does the relevant New Hampshire statute apply to Sky
and Sentech’s relationship in light of the New Hampshire Supreme
Court’s holding that it only covers sales representatives who
are natural persons. Addressing the legislature’s use of the
term “individual” to define a “sales representative,” in
contrast to its use of the traditionally broader term “person”
to define a “principal,” the court held that the legislature
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intended to “limit[] ‘sales representatives’ to natural
persons.” John A . Cookson C o . v . N.H. Ball Bearings, Inc., 147
N.H. 3 5 2 , 357-58 (2001). Sky is a limited liability
corporation, not a natural person, and so it cannot claim the
protection of the New Hampshire statute. Sky’s attempts to
factually distinguish its case from the underlying facts of
Cookson are unavailing because the decision unambiguously sets
out a generally applicable rule that is based on the court’s
construction of the statute.
B. Contract Claim
The contract claim presents a somewhat more difficult
question. The parties agree that the Agreement is to be
interpreted according to Texas law in light of its choice-of-law
clause. Doc. N o . 1-1 at 4 . Accordingly, I first set out the
relevant principles of Texas contract law.
“The primary concern of a court in construing a written
contract is to ascertain the true intent of the parties as
expressed in the instrument.” Nat’l Union Fire Ins. C o . of
Pittsburgh, P a . v . CBI Indust., Inc., 907 S.W.2d 5 1 7 , 520 (Tex.
1995). “To achieve this objective, [a court] must examine and
consider the entire writing in an effort to harmonize and give
effect to all the provisions of the contract so that none will
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be rendered meaningless.” J.M. Davidson, Inc. v . Webster, 128
S.W.3d 223, 229 (Tex. 2003). “No single provision taken alone
will be given controlling effect; rather, all the provisions
must be considered in reference to the whole instrument.”
Id.
If a contract is “so worded that it can be given a certain
or definite legal meaning or interpretation, then it is not
ambiguous and the court will construe the contract as a matter
of law.” Coker v . Coker, 650 S.W.2d 3 9 1 , 393 (Tex. 1983). If,
however, there are “two or more reasonable interpretations after
applying the pertinent rules of construction, the contract is
ambiguous, which creates a fact issue on the parties’ intent.”
Columbia Gas Transmission Corp. v . New Ulm Gas, Ltd.,
940 S.W.2d
587, 589 (Tex. 1996). “For an ambiguity to exist, both
interpretations must be reasonable.”
Id. (emphasis in
original).
The disputed language in the Agreement is the first
sentence of clause 1 5 , which reads: “Upon termination of this
Agreement, the Company shall pay the Representative commissions
for orders and contracts accepted by the Company prior to the
effective date of such termination, regardless of when shipments
are made or invoices tendered.” Doc. N o . 1-1 ¶ 1 5 . I begin my
analysis by setting out each party’s position on the meaning of
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that sentence.
Sky contends that this sentence governs the timing of
commission payments, and that Sentech was obligated, “upon
termination of the agreement,” id., to make a final payment to
Sky in the amount of the outstanding commissions due. Under
this reading, clause 15 serves as an exception to the general
timing rule. That general rule, set out in clauses 5 and 6, is
that commission payments must be made within 30 days of the
purchaser’s payment and “shall be made only after the Products
are paid for by the Purchaser.”
Id. ¶¶ 5 , 6. In the event of
termination, however, Sky urges that clause 15 becomes effective
and accelerates commission payments such that Sentech would
immediately owe Sky commissions on all of its accepted contracts
and orders, regardless of whether the purchaser of the order had
yet made payment.
Reading the contract in this manner, the amount payable to
Sky upon termination would be calculated by applying the
appropriate commission multiplier (5% of sales under $1 million
and 4.5% of sales over $1 million) not to the amount paid by the
purchaser on the project, but to the anticipated total sales
figure for each project. See id. ¶ 5 , ex. § III. The amount
would be independent of whether the project was subsequently
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cancelled, whether the sales figure accurately represented the
final sum a customer paid to Sentech, and even whether Sentech
was ever paid at all for its work.
Sentech counters by arguing that clause 15 is not an
exception to the general rule governing timing of payments, but
acts only to establish that termination of the Agreement does
not divest Sky of its entitlement to commission payments for
orders and contracts accepted by Sentech prior to the
termination. Sentech reasons that because clause 15 uses the
term “commission,” it must incorporate the meaning of that term
as set out in clause 5 : “Commissions shall be computed on the
gross amount of the invoice . . . paid for by the Purchaser. In
no event shall the commission be computed on an amount in excess
of the amount received by the company.” Id. ¶ 5 . Because
commissions cannot be computed prior to a customer’s payment,
there simply is no commission due where the customer has yet to
pay Sentech. Under Sentech’s reading, the benefit conferred on
Sky by clause 15 is the right to commissions that accrue in the
future, no matter if the date of shipment or the date an invoice
is tendered is subsequent to the date of Sky’s termination.
I conclude that Sentech’s interpretation is the correct
one. Although clause 1 5 , when viewed in isolation, might be
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understood to govern the timing of commission payments due upon
termination, when the clause is viewed in light of the entire
Agreement, Sentech’s interpretation is the only reasonable
construction.
Clause 15 states that “the Company shall pay the
representative commissions,” but the clause itself does not
define what constitute “commissions.” Therefore, to understand
exactly what it is that shall be paid under clause 1 5 , one must
look to other provisions of the contract. Clause 5 , in
conjunction with the commission schedule attached to the
Agreement, define commissions and explain how they are computed.
Clause 5 explicitly defines a commission as a percentage of the
amount paid to Sentech by a purchaser; indeed, the clause twice
states that a commission only exists in relation to purchaser
payments. It first states that a commission is based on the
“gross amount . . . paid for by the purchaser,” and then
reaffirms that “[i]n no event shall the commission be computed
on an amount in excess of the amount received by the Company.”
Doc. N o . 1-1, ¶ 5 .
With the definition of “commission” so fixed by clause 5 ,
it would be nonsensical to read clause 15 in the manner
suggested by Sky. That interpretation would require that
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Sentech, immediately upon termination of the Agreement, make
commission payments to Sky for those sales for which it has not
yet received customer payment. Under the clear language of
clause 5 , however, commissions can be calculated only as a
function of purchaser payment. Sentech cannot then pay Sky
commissions based on customer payments not yet made, whether
immediately upon termination or at any other time, because those
commissions are not yet susceptible to calculation.2
The meaning of clause 15 urged by Sentech –- that in the
event the Agreement is terminated, Sky maintains its right to
receive commissions that accrue in the future –- must therefore
be the correct interpretation.3 It is the only plausible
interpretation of the provision that that can be harmonized with
the explicit denotation of what constitutes a “commission” in
2
Another way to look at it would be to say that where a
purchaser has not yet rendered payment, the purchaser has paid
$ 0 . Where a purchaser has paid $ 0 , the commission due Sky is
$0.
3
Sky argues that Sentech’s construction is inconsistent with
standard canons of contract interpretation because it renders
clause 15 meaningless. Because the Agreement does not elsewhere
indicate whether Sky retains the right to receive commissions
when shipments are made or invoices are tendered after its
termination, the argument is without merit.
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clause 5. 4 See J.M. Davidson, 128 S.W.3d at 229 (explaining the
need to harmonize all of a contract’s provisions).
In sum, the Agreement, when looked at as a whole, cannot
support Sky’s interpretation. I conclude that the Agreement is
unambiguous5 insofar as it does not require that Sentech,
immediately upon termination, pay to Sky the maximum possible
commission that might accrue based on contracts and orders
accepted by the termination date.
4
Furthermore, this interpretation avoids certain absurd results
that would have been possible if Sky terminated the Agreement.
For example, if Sky solicited a particularly large sale on a
project that it knew a purchaser was unlikely to be able to make
full payment o n , it could protect its anticipated commission by
terminating the Agreement. Because the Agreement does not
distinguish between a termination initiated by Sky and a
termination initiated by Sentech, Doc. N o . 1-1 ¶¶ 2 , 1 5 , under
Sky’s reading of clause 1 5 , termination would be a means to
immediately receive the entirety of a commission that might
otherwise never materialize.
5
Because the Agreement is not ambiguous, I need not consult
extrinsic evidence to discern its true meaning. I would note,
however, that neither party asserts that the Agreement is
ambiguous, and neither party references the existence of any
parol evidence that would bear on the meaning of the disputed
provision in the event I was to find ambiguity. Additionally,
although there is an ongoing discovery dispute, neither party
contends that resolution of the discovery issues would in any
way bear on the question of contract interpretation addressed by
this order.
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IV. CONCLUSION
The only reasonable interpretation of the disputed
provision is the one urged by Sentech. Sky’s motion for
judgment (Doc. N o . 25) is denied.
SO ORDERED.
/s/Paul Barbadoro
Paul Barbadoro
United States District Judge
August 2 7 , 2012
cc: Seth W . Brewster, Esq.
A . Robert Ruesch, Esq.
James C . Wheat, Esq.
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