United States District Court, M.D. Pennsylvania
For Mark Edward Kearney, Plaintiff: Mark E. Kearney, Lexington, KY.
For Varun Sharma, Individually, Defendant: Cory S. Robins, Schwartz Zweben & Robinds, LLP - FL, Hollywood, FL; Jerome P DeSanto, McNees Wallace & Nurick LLC, Harrisburg, PA; Jerry N. Higgins, Law Office of Jerry N. Higgins, PLLC, Floyds Knobs, IN.
For JPC Equestrian Inc., Defendant: Elizabeth A. Maguschak, Jerome P DeSanto, McNees Wallace & Nurick LLC, Harrisburg, PA; Jerry N. Higgins, Law Office of Jerry N. Higgins, PLLC, Floyds Knobs, IN.
Martin C. Carlson, United States Magistrate Judge.
I. INTRODUCTION AND STATEMENT OF THE CASE
This litigation stems from a broken and embittered commercial relationship between an independent salesman and an equine-products company.
The plaintiff, Mark Kearney, has sued JPC Equestrian, Inc. (" JPC") and its President, Varun Sharma, alleging that the defendants breached the terms of a sales representation contract by failing to pay Mr. Kearney sales commissions for products he sold on behalf of JPC. Additionally, Kearney alleges that Sharma tortiously interfered with Kearney's contractual relations by causing another corporate entity that Sharma controlled to engage in sales activity in Mr. Kearney's assigned territories, thereby undercutting the commissions that he would have received from JPC.
After the preliminary disposition of a number of claims, the parties engaged in fact discovery, which has now concluded. Following that discovery, the parties have filed cross motions for summary judgment, which are now ripe for disposition. For the reasons that follow, we conclude that Kearney's contract claims are replete with disputed issues of fact, and that the resolution of these disputes must await trial by a jury. In contrast, we find insufficient evidence to support Kearney's tortious interference claim, and will enter summary judgment in Sharma's favor on this claim alone.
II. FACTUAL BACKGROUND
The background facts relevant to this dispute begin nearly thirteen years ago, and many do not seem to be seriously disputed.
A. JPC's Business and Operations
Varun Sharma is a native of India and, since 1992, has operated two businesses in that country. These businesses manufacture and sell equestrian-related supplies, clothing, and equipment. Sales from these businesses extend worldwide, and are primarily directed as wholesalers, who then sell the products to retailers.
One of the businesses that Sharma has operated in India is a company called JPC (" JPC-India"). JPC-India is a partnership, in which Sharma owns 90% and his son owns the remaining 10%. JPC-India primarily sells its products to wholesalers but sometimes sells to retailers as well. (Doc. 105, Affidavit of Varun Sharma (" Sharma Aff.") ¶ ¶ 1-5.)
In early 2002, Sharma came to the United States to establish a new business known as JPC Equestrian, Inc (" JPC"). On February 4, 2002, JPC was incorporated under the laws of Pennsylvania. JPC is a wholly owned subsidiary of Cotton Naturals India Ltd. Sharma owns 90% of Cotton Naturals, and his son owns the remaining 10%. Sharma is the President of JPC, which has its principal place of business in Drums, Pennsylvania. (Sharma Aff. ¶ ¶ 6-8.)
JPC sells equestrian-related supplies, clothing, and equipment to retailers in the United States. It purchases inventory from JPC-India and then sells the product to retail-store customers. (Sharma Aff. ¶ 9.) Since it was established in the United States in 2002, JPC has used independent sales representatives to make many, but not all, of its sales. These sales representatives are assigned territories in which they are responsible for marketing and selling JPC product. (Sharma Aff. ¶ 21; Deposition of Mark Kearney (" Kearney Dep.") at 37:14-38:1.) In order to market JPC products, sales representatives purchase product samples from JPC and then show those samples to customers. (Doc. 104, Def. Statement of Undisputed Facts (" Def. SMF") ¶ 12.) The sales representatives are all independent contractors, and are paid solely through commissions on sales made to customers. (Id. ¶ 13.)
Although many of JPC's sales are made through sales representatives, some sales are made through the company's customer service department. Customers who purchase products through JPC's customer service department are known as " house accounts." (Id. ¶ 14.) JPC has used house accounts since 2003. House accounts are generally internet-based accounts or customers who have asked to deal directly with JPC's customer service department. (Id. ¶ 15.)
Generally, sales representatives receive 10% sales commissions. However, because sales to house accounts are made through JPC's customer service department, sales representatives do not receive commissions on these sales. They also do not receive commissions on close-out sales or other liquidation sales. (Id. ¶ ¶ 16-17.) Sales representatives also receive reduced commissions for bigger, nation-wide customers who are not house accounts, but who consistently buy large quantities of product at a discount. Commission payments for sales to these larger accounts " generally equals" 5% of the sale price. (Id. ¶ 18.)
B. Kearney's Relationship with JPC and Sharma
As Sharma was preparing to enter the equine-products market in the United States, he consulted with a lawyer in New Hampshire, who provided him with a form document that was entitled " Sales Representation Agreement, " which the lawyer suggested could be exchanged with the independent sales representatives that Sharma intended to use to market and sell products on behalf of JPC in the United States.
In January 2002, Sharma encountered Mark Kearney at a trade show in King of Prussia, Pennsylvania. The two men had some familiarity with each other due to their respective involvement in the equine business, and they met during the convention to discuss the possibility of Kearney representing JPC's product line as a commissioned sales representative. Kearney told Sharma that he would be prepared to begin marketing and selling products for JPC as soon as the company was operational. As it happens, Kearney would become the first of JPC's independent sales representatives in the United States.
To memorialize this new business relationship, on or about January 28, 2002, Sharma sent Kearney a " Sales Representation Agreement, " which purported to outline the parties' relationship. In preparing the Agreement, Sharma took the form that he had been provided by the New Hampshire attorney, and inserted Mark Kearney's name and information.
Pursuant to the terms of the Agreement, Kearney agreed to be engaged as a sales representative for JPC as an independent contractor. The Agreement provided that Kearney would: (1) implement a marketing program to sell JPC's products within a geographic region that consisted of 15 states clustered mostly in the Midwest and the South; (2) meet " reasonable gross sales requirements" that would be assigned but which were not specified in the document itself; (3) introduce product lines with retailers within the assigned geographic territory; and (4) exercise responsibility for " all sales resulting directly or indirectly from the Sales Representative's introduction to, or other initiation of business relationships with the retailers" . (Doc. 112-1, Ex.)
The Agreement also provided, apparently with no exceptions, that Kearney would be paid a 10% commission on the total net payable invoices on sales made by the company and which resulted " from the Sales Representative's Introductions or other interventions." (Id.) The Agreement also provided that Kearney would bear his own expenses, with certain exceptions, and prohibited him from working for competitors while serving as JPC's representative. The Agreement also spelled out the procedures and timing by which either party could terminate the Agreement.
This " Sales Representation Agreement" itself bears the indicia and customary hallmarks of a commercial contract, and Kearney claims that he believed that the Agreement governed his relationship with JPC. Nevertheless, whether the document in fact formed a contract between the parties, and if so whether it was modified, waived, or ultimately breached by JPC's failure to pay Kearney full 10% commissions on all sales he generated for the company, are questions central to this litigation.
The defendants insist that the " Sales Representation Agreement" that Sharma prepared, signed and provided to Kearney does not amount to a contract. To the contrary, the defendants emphasize that the " Agreement" was never negotiated by the parties. They also assert that Kearney failed to sign and return the document (something Kearney now disputes), and they highlight numerous instances where the parties did not faithfully follow each and every provision of the agreement over the course of their eight years of commercial dealings with one another (something Kearney acknowledges, but argues actually supports his claims that the defendants repeatedly breached the parties' agreement).
Despite entirely disclaiming the written document that Sharma tendered to Kearney for his signature, and despite arguing that the parties so disregarded the terms of this document as to render it a nullity, when Sharma notified Kearney that JPC was terminating him as a sales representative in August 2010, his correspondence to Kearney suggested that the termination was based directly on the terms of the " Agreement, " since it referred to the precise notice periods that were established by the Agreement. Thus, Sharma sent Kearney two separate emails, the first invoking a 90-day termination period, which corresponds to the normal notice period called for under the Agreement. In that email, Sharma indicates that the email should be construed as " termination of our independent representative contract, " and provides that the 90-day notice period would be effective from August 10, 2010. (Doc. 112-2, Kearney Aff., Ex., Email from Varun Sharma to Mark Kearney dated August 11, 2010.)
The very next day, Sharma sent Kearney a second email, this time to inform Kearney that because he had been representing the Wellington Collection line, a competitor company, JPC would not give him a 90-day notice period, but " [a]s per the contract, only a 15 days notice period need be given if you are representing a competing line." (Doc. 112-2, Kearney Aff., Ex., Email from Varun Sharma to Mark Kearney dated Aug. 12, 2010.) Kearney submits that Sharma was clearly basing his termination notice on the provisions contained within the Sales Representation Agreement, and argues that this supports his claim that the defendants considered the Agreement to be binding and enforceable. For their part, the defendants suggest that the 90-day and 15-day termination provisions were not necessarily derived from the terms of the Agreement that Sharma had furnished to Kearney in 2002, but they do not offer any alternative explanation for Sharma's use of these notice periods, or the fact that he refers to " the contract" . Kearney argues that this argument is little more than legal sophistry.
Kearney claims that although he was typically paid the 10% commission called for under the Agreement, at numerous times JPC failed to pay Kearney a 10% percent commission on certain accounts, and instead paid him only 5% for these accounts -- something that Sharma has attested was the standard practice for JPC. Later, Kearney claims that JPC converted some large accounts to " house accounts" and thus paid him no commissions at all on sales made to these accounts even if they were within Kearney's sales territory, and even if Kearney was the party responsible for initiating the business relationship with the customer. Kearney also alleges that JPC sold directly to a number of Kearney's customers in order to avoid paying Kearney a commission as required under the Agreement. Finally, Kearney alleges that Sharma tortiously interfered with Kearney's contract with JPC by selling products on ...