Maher Engineering Company v. Screwmatics of South Carolina, Inc.

Filing 32

MEMORANDUM Opinion and Order Signed by the Honorable Amy J. St. Eve on 12/9/2014:Mailed notice(kef, )

14-3761.142

December 9, 2014

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
MAHER ENGINEERING COMPANY,

)
)
)
)
)
)
)
)
)
)

Plaintiff,
v.
SCREWMATICS OF SOUTH CAROLINA,
INC.,
Defendant.

No. 14 CV 3761

MEMORANDUM OPINION AND ORDER
Before the Court is defendant’s motion for leave to file a
counterclaim.

The Court denies the motion for the following

reasons.
DISCUSSION
Plaintiff, Maher Engineering Company (“Maher”), originally
filed this action for breach of contract (Count I), violation of
the Illinois Sales Representative Act (Count II), and unjust
enrichment (Count III, pleaded in the alternative) in the Circuit
Court of Cook County.

Defendant, Screwmatics of South Carolina,

Inc. (“Screwmatics”), removed the case to federal court based on
diversity of citizenship.
Maher

alleges

that

it

was

a

sales

representative

for

Screwmatics in a territory comprising the states of Wisconsin,

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Illinois, and Iowa, and that Screwmatics agreed to pay Maher
commissions at a rate of 5 percent for the sales in that territory.
Maher contends that Screwmatics failed to pay commissions to Maher
as required by the parties’ written Sales Representation Agreement
(the “Agreement”), which is attached to the complaint as Exhibit A.
Screwmatics filed an answer to Maher’s complaint on June 4,
2014.

It now moves for leave to file a counterclaim.
LEGAL STANDARDS

Federal

Rule

of

Civil

Procedure

15(a)(2),

which

governs

defendant’s motion, states that after a responsive pleading is
filed, “a party may amend its pleading only with the opposing
party’s written consent or the court’s leave.”
15(a)(2).

Fed. R. Civ. P.

Although Rule 15(a) instructs that a court should

“freely” give

leave

to

amend

“when

justice

so

requires,”

“a

district court may deny leave for a variety of reasons, including
undue delay and futility.”

McCoy v. Iberdrola Renewables, Inc.,

760 F.3d 674, 684 (7th Cir. 2014); see also Arreola v. Godinez, 546
F.3d 788, 796 (7th Cir. 2008) (“[D]istrict courts have broad
discretion to deny leave to amend where there is undue delay, bad
faith, dilatory motive, repeated failure to cure deficiencies,
undue prejudice to the defendants, or where the amendment would be
futile . . . .”).

An amendment is futile if the amended claim

could

a

not

survive

Rule

12(b)(6)

motion

to

dismiss.

See

Arlin–Golf, LLC v. Village of Arlington Heights, 631 F.3d 818, 823

2

(7th Cir. 2011).

“The decision to grant or deny a motion to file

an amended pleading is a matter purely within the sound discretion
of the district court.”• Aldridge v. Forest River, Inc., 635 F.3d
870, 875 (7th Cir. 2011) (brackets omitted).
ANALYSIS
Screwmatics seeks leave to file a counterclaim asserting that
it is entitled to recover more than $280,000 in commissions that it
allegedly mistakenly paid to Maher during the last five years the
Agreement was in effect.

Screwmatics’s theory is that Maher did

not earn those commissions because they were not related to orders
that Maher “forwarded” to Screwmatics.

Screwmatics states in its

motion that on October 27, 2014, “counsel for Screwmatics took the
deposition of” plaintiff’s representative, who “confirmed that many
orders on which Maher was paid went directly to Screwmatics and
were not forwarded by Maher.”1

(Def.’s Mot. ¶ 2.)

In response, Maher argues that the proposed counterclaim is
futile.

The proposed counterclaim states in pertinent part:

2. Tom Hogge of Screwmatics may have had a copy of the
Agreement after it was signed in April 2001 but his copy
was lost.
3. Until August 2013, Screwmatics was not aware of the
specific terms of the Agreement which only required that
Maher be compensated for “Orders for products solicited
by Representative [Maher which] shall be forwarded to and
subject to acceptance by Principal.”
4.

Because

it

was

not

aware

of

this

provision,

1/
It is unclear why Screwmatics would not have been aware of this fact
prior to Maher’s deposition.

3

Screwmatics paid Maher on hundreds of orders which came
directly to Screwmatics and were not solicited or
forwarded by Maher. Those payments were not earned under
the contract.
5. Maher, which had the contract and knew its terms,
kept the payments made by Screwmatics despite not having
earned those payments under the terms of the contract.
(Def.’s Proposed Countercl. ¶¶ 2-5.)
Plaintiff contends that the proposed counterclaim could not
withstand a motion to dismiss because defendant misconstrues the
language

of

the

Agreement

and

because

the

provision

of

the

Agreement quoted in paragraph 3 of the proposed counterclaim does
not have anything to do with the earning or paying of plaintiff’s
commissions, but rather with defendant’s processing of orders. The
Court agrees.

The relevant portions of the Agreement provide as

follows:
1. Representative: Principal grants to Representative
the exclusive right, except as otherwise agreed to in
writing between the parties, to act as Principal’s sales
representative in the states of Wisconsin, Illinois and
Iowa.
. . .
3.
Orders and Collections:
Orders for products
solicited by Representative shall be forwarded to and
subject to acceptance by Principal or a duly authorized
representative. Decision regarding a customer’s credit
and all matters relating to billing and shipments to
customers shall be made only by Principal.
Principal
reserves the right in it’s [sic] sole discretion to
decline to accept any order solicited or taken by
Representative and to discontinue sale of any of its
products or to allocate such products during periods of
shortages
without
incurring
any
liability
to
Representative for the payment of the commissions
hereunder.
Principal
will
promptly
forward
to
Representative full particulars of all inquiries, orders,
quotation, and relevant correspondence received by
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Principal from companies in the territory of Wisconsin,
Illinois and Iowa.
All invoices in connection with orders shall be rendered
by Principal direct to the customer, and full
responsibility for all collection and bad debts rest
[sic] with Principal with commissions to be deducted for
bad debts. Representative may extend credit for products
purchased, to the limits set by Principal, to persons or
firms whose names are furnished him/her in writing by
Principal as being entitled to credit. Representative
shall be personally responsible for extensions of credit
above authorized credit limit, and for credit sales to
all other persons or firms.
4.
Representative’s Commissions: Commissions in the
amount of 5% unless otherwise mutually agreed to prior to
quoting the customer, of the net selling price shall be
payable by Principal to Representative on orders from
customers in the territory of Wisconsin, Illinois and
Iowa. . . .
(Compl., Ex. A, at 1.)
governing law.
Maher

is

The Agreement identifies Illinois as the

(Id. at 4.)
correct

that

the

portion

of

section

3 of the

Agreement that defendant quotes in its proposed counterclaim, which
requires Maher to forward to Screwmatics orders it solicits, does
not limit Maher’s compensation to forwarded orders only.

Except

with respect to bad debts and orders that Screwmatics declines to
accept, section

3

does

not

address

commissions.

Section

4,

however, which is entitled “Representative’s Commissions,” does.
It plainly states that a 5 percent commission “shall be payable” by
Screwmatics to Maher “on orders from customers in the territory of
Wisconsin, Illinois and Iowa,” and it does not limit commissions to
orders that were forwarded to Screwmatics.

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Defendant’s proposed

counterclaim

mischaracterizes

the

unambiguous

language

of

the

Agreement.
Defendant suggests in its reply brief that the word “orders”
that appears in section 4 of the Agreement is ambiguous and that
Section 3 “establishes what ‘order’ means under the Agreement-orders ‘solicited’ and ‘forwarded’ or ‘solicited and taken’ by
Maher.”

(Def.’s Reply at 9.)

In defendant’s view, “[i]f . . .

Section 4 was meant to undo the limitations imposed by Section 3 on
orders commissionable to Maher, it would have to do so explicitly.”
(Id.) The Court is unpersuaded. Section 3 establishes a procedure
for orders that Maher solicits, but it does not limit Maher’s
commissions

to

those

that

Maher

“forwards”

to

Screwmatics.

Screwmatics reads a limitation into Section 4 that does not exist.
Section 4 is unambiguous. A court must enforce an unambiguous
contract as it is written.

See Highland Supply Corp. v. Ill. Power

Co., 973 N.E.2d 551, 558 (Ill. App. Ct. 2012); In re County
Treasurer, 869 N.E.2d 1065, 1087 (Ill. App. Ct. 2007); J.M. Beals
Enters., Inc. v. Indus. Hard Chrome, Ltd., 551 N.E.2d 340, 342
(Ill. App. Ct. 1990) (“In the absence of ambiguity, a court must
treat the language in a contract as a matter of law and construe
the

contract

according

to

its

language,

not

according

to

constructions which the parties place on this language.”).
Screwmatics

faults

Maher

for

“never

explain[ing]

why

Screwmatics would have agreed to” an arrangement whereby Maher

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would be entitled to commissions on all sales in a given territory
regardless of whether Maher “d[id] anything to procure those
sales.”

(Def.’s Reply at 5.)

But--assuming that this arrangement

did not benefit Screwmatics--it is neither Maher’s nor the Court’s
responsibility to ensure that Screwmatics made a good bargain. See
Goodwine State Bank v. Mullins, 625 N.E.2d 1056, 1079 (Ill. App.
Ct. 1993); see also Abbott v. Amoco Oil Co., 619 N.E.2d 789, 798
(Ill. App. Ct. 1993) (“[Plaintiffs] seek to read more terms into
the leases in order to relieve themselves of the burden of what
they apparently perceive to be bad bargains. This the law does not
allow them to do.”).
Screwmatics also argues in its reply that “there are two
generally

recognized

types

of

‘exclusive

representation

agreements,’” an “exclusive right to sell” agreement and the “more
common”

“exclusive

agency”

agreement.

(Def.’s

Reply

at

6.)

Screwmatics asserts that an “exclusive right to sell” contract
confers on the agent the sole right to sell goods in a given area
or for a given time period and entitles the agent to commissions on
all sales regardless of who makes them.

An “exclusive agency”

contract, on the other hand, precludes the principal from employing
other agents to sell the goods but permits the principal to sell
the goods itself without incurring liability to the agent, as long
as the agent was not the cause of the sale.

Screwmatics contends

that the Agreement with Maher does not say that it confers on Maher

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the “exclusive right to sell,” so it must be an example of the
second type of agreement.
Screwmatics fails to cite any Illinois law that supports its
argument.

It does cite a federal decision applying Michigan law

and noting that “[m]ost jurisdictions distinguish between [these]
two

types

of

exclusive

representation

agreements.”

Roberts

Assocs., Inc. v. Blazer Int’l Corp., 741 F. Supp. 650, 656 (E.D.
Mich. 1990). Screwmatics fails to acknowledge that Illinois is not
one of the jurisdictions that makes this distinction.
Illinois law differs from that of Michigan.
principal

is

liable

for

violating

an

Indeed,

Under Illinois law, a

exclusive

sales

agency

agreement where the agent shows that the principal directly sold
its goods in the agent’s exclusive territory.

Illsley v. Peerless

Motor Car Co., 177 Ill. App. 459, 464-65 (1913); Marshall v.
Canadian Cordage & Mfg. Co., 160 Ill. App. 114, 119 (1911).

These

decisions, albeit old, stand for the proposition that the language
of the contract ultimately controls, not the labels “exclusive
right to sell” and “exclusive agency.”

Cf. TMG Kreations, LLC v.

Seltzer, Nos. 13-3535 & 13-3730, 2014 WL 5904713, at *6 (7th Cir.
Nov. 13, 2014) (recognizing that Marshall is still good law).
The language of the parties’ Agreement provides unambiguously
that Screwmatics must pay Maher 5 percent commissions on “orders
from customers in the territory of Wisconsin, Illinois and Iowa.”
(Compl., Ex. A, at 1.)

It does not limit those commissions to

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orders that Maher “solicits” or “forwards” to Screwmatics.

Courts

will not construe into a contract provisions that do not exist
therein.

Westinghouse Elec. Elevator Co. v. La Salle Monroe Bldg.

Corp., 70 N.E.2d 604, 606 (Ill. 1946); Carrillo v. Jam Prods.,
Ltd., 527 N.E.2d 964, 967-68 (Ill. App. Ct. 1988).
Defendant’s proposed counterclaim could not withstand a Rule
12(b)(6) motion to dismiss and thus is futile.

See Ashcroft v.

Iqbal, 556 U.S. 662, 678 (2009) (to survive a Rule 12(b)(6) motion
to dismiss, “a complaint must contain sufficient factual matter,
accepted as true, to state a claim to relief that is plausible on
its face.”).

Accordingly, the Court, in its discretion, denies

defendant’s motion for leave to file a counterclaim.
CONCLUSION
For the reasons explained above, the Court denies defendant’s
motion for leave to file a counterclaim [25].

DATE:

December 9, 2014

ENTER:

_________________________________________________
Amy J. St. Eve, United States District Judge

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