Herndon Sales Group, LLC v. Radiator Specialty Company
Filing
24
MEMORANDUM OPINION AND ORDER by Judge John G. Heyburn, II on 10/16/2012. 19 Motion for Summary Judgment SUSTAINED; plaintiff Herndon's claim is DISMISSED WITH PREJUDICE; defendant's counterclaim is DISMISSED as moot; defendant is entitled to attorney's fee and associated costs under Section VIII.C. of the Manufacturer's Representative Agency Agreement. cc:counsel (TLB)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
AT LOUISVILLE
CIVIL ACTION NO. 3:11-CV-00480-H
HERNDON SALES GROUP, LLC
PLAINTIFF
V.
RADIATOR SPECIALITY COMPANY
DEFENDANT
MEMORANDUM OPINION AND ORDER
This case arises from a contractual dispute between Plaintiff Herndon Sales Group, LLC
(“Herndon”) and Defendant Radiator Specialty Company (“RSC”) relating to a binding written
agreement between the parties entitled the Manufacturer’s Representative Agency Agreement
(the “Agreement”). Herndon claims that RSC breached the Agreement by failing to pay a
termination fee when RSC dismissed Herndon as its sale representative. For the reasons set
forth below, the Court will grant RSC’s motion for summary judgment.
I.
Herndon is a sales agency that markets and sells industrial goods on behalf of
manufacturers.
RSC is a North Carolina corporation specializing in the manufacturing of
chemical solutions for the automotive, hardware and appliance industries. On April 1, 2009,
Herndon and RSC entered into the Agreement, appointing Herndon as RSC’s exclusive sales
representative for a line of RSC products. The Agreement contained no fixed period of duration.
Rather the Agreement continued “only so long as [Herdon’s] services are satisfactory to [RSC].”
About two years later, on July 21, 2011, RSC sent a written notice of termination to Herndon.
The letter indicated the termination was pursuant to Section II of the Agreement, which provides
for termination “without cause” upon thirty days advanced written notice.1 The termination was
to be effective October 31, 2011.
At issue is whether Herndon is entitled to a termination fee consistent with the
Agreement. Herndon filed this action seeking specific performance, damages for breach of
contract, attorney’s fees and declaratory relief. Defendant filed a motion for summary judgment
and a counterclaim seeking declaratory relief and attorney’s fees.
II.
Summary judgment is appropriate when “there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A party
moving for summary judgment bears the initial burden “to demonstrate that an essential element
of the nonmoving party’s case is lacking.” Kalamazoo River Study Grp. v. Rockwell Int’l Corp.,
171 F.3d 1065, 1068 (6th Cir. 1999) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-23
(1986)). The burden then shifts to the non-moving party to show a genuine dispute exists as to
that element, defeating the motion. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A
genuine dispute exists when “the evidence is such that a reasonable jury could return a verdict
for the nonmoving party.” Id. The Court reviews evidence in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
1
The July 21 letter offered an extended termination period to Herndon (approximately 90 days). If
Herndon chose not to agree to the extended termination terms by July 27, the terms would be withdrawn and the
letter served as 30-day advance notice of termination. On July 28, 2011, RSC notified counsel for Herndon that the
Agreement would be terminated on August 31, 2011, due to Herndon’s refusal to acquiesce to the extended
termination terms in the July 21 letter.
III.
This case presents a relatively straightforward issue of contract interpretation. Pursuant
to the Agreement’s choice-of-law provision found in Section VIII.G, the Court will construe the
contract according to North Carolina law.
A court’s primary purpose when interpreting a contract is to ascertain the parties’
intention upon entering the contract. Mayo v. N. C. State Univ., 608 S.E. 2d 116, 120 (N.C. Ct.
App. 2005). If a contract’s language is plain and unambiguous, construction of the contract is a
matter of law for the court, and the court may not look beyond the express terms therein to
determine the intentions of the parties. Jim Lorenz, Inc. v. O’Haire, 711 S.E. 2d 820, 823 (N.C.
Ct. App. 2001). On the other hand, when an agreement is ambiguous and the parties’ intention is
unclear, a factual question exists such that the interpretation of the contract is for a jury. Id.
An ambiguity exists if the language of the contract is reasonably susceptible to either of
the constructions proffered by the parties. Mosely v. WAM, 606 S.E. 2d 140, 142 (N.C. Ct. App.
2004).
Even if parties differ as to the interpretation of the contract, it is not necessarily
ambiguous. Robinson, Bradshaw, Hinson, P.A. v. Smith, 532 S.E. 2d 815, 823 (N.C. Ct. App.
2000). A party cannot create an ambiguity by arguing that the express language of the contract
does not truly express the party’s intent. See Mosely, 606 S.E. 2d at 143.
In determining whether a contract is ambiguous, a court gives words their usual and
ordinary meaning and if possible, reconciles all terms of the agreement. Lynn v. Lynn, 689 S.E.
2d 198, 205 (N.C. Ct. App. 2010),
Should the court find the contract to be unambiguous, it
construes and enforces the contract as written. Id. The court may not ignore or delete any of the
terms of the contract but rather interpret the contract so as to give effect to all of its provisions.
See Hodgin v. Brighton, 674 S.E. 2d, 444, 446 (N.C. Ct. App. 2009) (stating a court may not
“under the guise of construing an ambiguous term, rewrite the contract or impose liabilities on
the parties not bargained for” when the language of the contract is clear).
The pertinent termination provisions are as follows:
Section II.A. This Agreement does not constitute an agreement for any definite
period of time and may be terminated without cause by either party giving thirty
(30) days prior written notice of termination to the other party. The Company
may also terminate the Agreement “at will” effective immediately in accordance
with the provisions of section VII below.
Section VII.A. In addition to the method of termination provided in Section II
above, this Agreement may be terminated immediately in the event of a breach of
any of the terms or conditions of the Agreement. Such termination shall be
effective immediately upon the giving of written notice of termination to the party
breaching the Agreement. If for any reason termination attempted to be made
under this Paragraph A is deemed to be ineffective, then notice of termination
under Paragraph A shall be deemed to be notice of termination “at will” under
Section II, and the Agreement shall be terminated thirty (30) says after such
notice is given.
Section VII.B. The Company may also, at its option, elect to terminate this
Agreement “at will” effective immediately by giving Representative written
notice of such termination and by paying Representative a termination fee equal
in amount to fifty percent (50%) of the commissions earned by Representative
during the twelve (12) months immediately preceding the month in which notice
of termination is given, and in such event, no commissions shall be payable on
orders written on or after the date of termination.
Herndon argues summary judgment is inappropriate because the termination provisions
are unclear. Specifically, Herndon argues the Agreement’s inconsistent use of the phrases “at
will” and “without cause” render the contract ambiguous. Additionally, Herndon argues that
having two voluntary termination provisions with only one triggering termination payment is
nonsensical. RSC could simply wait thirty days and avoid payment of a termination fee. Such a
reading, they argue, would render the termination fee provision meaningless. Lastly, Herndon
contends that the parties actually intended to include a termination fee provision in the case of
any voluntary termination as compensation for the corresponding non-compete covenant.
The Agreement clearly delineates three methods of termination: (1) termination for
breach per Section VII.A; (2) termination without cause with 30-day prior written notice per
Section II.A; and (3) termination at will effective immediately under Section VII.B.
Termination at will effectively immediately is the only method that requires payment of a
termination fee. The Court disagrees with Herndon that the voluntary termination methods are
synonymous. The voluntary termination provisions are unequivocally distinct: one requires
advance notice and the other requires payment of a termination fee. See Emmanuel African
Methodist Episcopal Church v. Reynolds Const. Co., 718 S.E. 2d 201, 203 (N.C. Ct. App. 2011)
(noting that an interpretation that gives reasonable meaning to all the terms of the contract will
be preferred over one that leaves a term useless or superfluous). Moreover, Section VII.B is
distinct from Section II.A in two respects: (1) Section II.A makes reference to the termination at
will effective immediately found in Section VII.B, and (2) Section VII.B’s language “[t]he
Company may also, at its option, elect to terminate this Agreement ‘at will’ effective
immediately” indicates an additional, alternative method of termination.
Accordingly, the Court finds the Agreement unambiguous on its face. As such, it must
be interpreted as written. RSC chose to end its agreement with Herndon by invoking Section II’s
advanced notice termination without cause. The July 31 termination notice complies with
Section II of the Agreement by providing the requisite 30-day notice. Nowhere does the letter
indicate that the termination was effective immediately. In fact the July 21 letter expressly
indicated that termination was pursuant to Section II and Herndon was therefore not entitled to a
termination fee. The Agreement clearly provides the termination fee is only triggered in the
event that RSC elects to terminate the Agreement at will effectively immediately without
advance notice. As such, the termination fee provision in Section VII.B does not apply, and
Herndon is not entitled to the termination fee. The Court’s decision merely has held the parties to
the respective terms of the contract upon which they agreed.
Being otherwise sufficiently advised,
IT IS HEREBY ORDERED that Defendant Radiator Specialty Company’s motion for
summary judgment is SUSTAINED and Plaintiff Herndon’s claim is DISMISSED WITH
PREJUDICE. Defendant’s Counterclaim is DISMISSED as moot.
IT IS FURTHER ORDERED that Defendant is entitled to attorney’s fees and associated
costs under Section VIII.C. of the Manufacturer’s Representative Agency Agreement.
October 16, 2012
cc:
Counsel of Record
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?