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Nicholas L. Zammer v. Herman Miller

October 18, 2011


The opinion of the court was delivered by: Schiller, J.


Nicholas Zammer entered into a contract with his long-term employer Herman Miller, Inc. ("HMI"), which would allow Zammer as a furniture dealer an opportunity to purchase his furniture dealership over a five-year period, if he achieved certain performance goals. HMI terminated Zammer prior to the completion of the five-year period, and Zammer claims that his termination was in breach of their contract. Zammer initiated the instant action against HMI for breach of contract, fraud, promissory estoppel, and for declaratory relief that the arbitration provision and the non-compete provision were unenforceable . This court granted Defendant's Motion to Stay and Compel Arbitration on June 22, 2010. On August 23, 2011, an arbitrator found no cause of action as to the breach of contract, fraud, and promissory estoppel claims. The arbitrator also ruled that the non-compete provision was unenforceable. HMI now seeks to confirm the arbitration award. In response, Zammer has filed a cross-motion to set aside the arbitration award. For the reasons that follow, the Court will confirm the arbitrator's award.


Zammer began working as a salesman for HMI in 1986. He was promoted in 1994 and relocated to Toronto to manage HMI's largest global account. Zammer left HMI in 2001 but returned in 2003 as President of Herman Miller-OP, Spectrum, LLP ("Spectrum"), an authorized HMI contract furniture dealer with a showroom in King of Prussia, Pennsylvania. In 2003, HMI launched the Earn In Program ("EIP"), which allowed dealers running HMI showrooms to purchase the dealership at a preferential price if the dealers met certain performance requirements. In 2006, HMI offered Zammer, as a dealer, the opportunity to participate in EIP, which Zammer accepted through the execution of a Letter of Intent and deposit of $75,132 toward the purchase price of the Spectrum dealership.

Zammer and HMI also entered into a Compensation Agreement, which provided that HMI could terminate the agreement for cause if Zammer failed to meet certain performance goals. If the agreement was terminated for cause, HMI would refund only half of the "bonus funds" that Zammer had on deposit with HMI. The Compensation Agreement provided:

10. Cause of Dealer Principal Discharge. The discharge of Dealer Principal by HMI for any one of the following events will constitute a termination for cause under Section 6(d) and will entitle HMI to pay Dealer Principal a one-half (1/2 ) payment of the bonus funds on deposit with HMI:

a. Dealer for two consecutive years fails either to meet the sales goals assigned by HMI or to achieve 3 percent (3%) adjusted income. . . . (Pl.'s Opp'n to Mot. to Confirm Arb. Award and Mem. in Supp. of Cross-Mot. to Set Aside Arb. Award ["Pl.'s Cross-Mot."] Ex. J-5 [Compensation Agreement] ¶ 10.) Zammer alleges that HMI made representations and assurances to Zammer that orally modified the Compensation Agreement as well as the parties' obligations and performance under the EIP. However, HMI terminated Zammer in 2009 based on his failure to achieve three percent adjusted operating income for two consecutive years and offered to return half of his bonuses which were held in escrow with HMI.

(Am. Compl. Ex. C. [Termination Letter].) Zammer contends that HMI pressured him to increase market share, often at the expense of the required performance goals, such as by offering below-cost customer pricing and by rejecting his plan to reduce operating expenses. Zammer argues that HMI breached its contract and its commitments to him by prematurely terminating the Compensation Agreement.

The Compensation Agreement also included a non-compete provision, which precluded Zammer from competing with HMI for two years after his termination. The non-compete provision stated:

12. Competitive Business. . . .

b. Dealer Principal shall not, directly or indirectly in the Territory during the Non-competition Period [two years after Dealer Principal ceases being employed by HMI], engage, participate, invest, or assist any Competitive Business as an owner, part-owner, stockholder, partner, director, officer, trustee, employee, agent, consultant, or in any other capacity.

c. In addition, Dealer Principal will not, for two (2) years after termination of this Agreement, recruit or solicit, or attempt to recruit of [sic] solicit, any of HMI's employees for employment in any Competitive Business. . . .

d. Dealer principal agrees that any breach of the restriction of 12(b) will cause irreparable harm to HMI and will entitle HMI to an injunction. (Compensation Agreement ¶ 12.) Zammer alleges that due to the non-compete provision, he has been unable to secure employment. (Pl.'s Cross-Mot. at 23.) In nearly two years of unemployment, Zammer alleges that his lost salary, plus benefits, amount to $415,416.00. (Id.)

On March 3, 2010, Zammer sued HMI for breach of contract, promissory estoppel, and fraud. He also sought a declaratory judgment that the arbitration provision in the Compensation Agreement was unilaterally revocable and that the non-compete provision in the ...

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