Hygienic Pigging Systems Ltd. v. O'Connor et al

Filing 36

ORDER denying 27 Motion for Partial Summary Judgment. Signed by Chief Judge Susan J. Dlott. (wam1)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
Hygienic Pigging Systems Ltd.,
Plaintiff,
v.
O’Connor, et al.,
Defendants.

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Case No. 1:10-CV-139
Chief Judge Susan J. Dlott
ORDER DENYING DEFENDANTS’
MOTION FOR PARTIAL SUMMARY
JUDGMENT

This matter is before the Court on the Motion for Partial Summary Judgment of
Defendants/Counterclaim Plaintiffs Neil J. O’Connor (“O’Connor”) and Process Pigging
Systems, LLC (“PPS”), and Intervenor Defendant/Counterclaim Plaintiff Packaging Machinery
Resources, LLC (“PMR”) (collectively, “Defendants”) (doc. 27). For the reasons that follow,
the motion is DENIED.
I.

BACKGROUND
A.

Factual History

Defendants did not file a Statement of Proposed Undisputed Facts, as required by the
Court’s Standing Order Governing Civil Motions for Summary Judgment (“Standing Order”).1
For purposes of this Order only, the Court gleans the following facts from the Complaint (doc.
1), Defendants’ First Amended Counterclaims (doc. 18) and the parties’ briefing on the pending
motion (docs. 27-29).

1

The Standing Order is available at “Judge Susan J. Dlott-Forms and Procedures,”
http://www.ohsd.uscourts.gov/judges/dlott/Standard%20Order.pdf.
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Hygienic Pigging Systems Ltd. (“HPS”) is a UK company that specializes in the
development, production, installation, and maintenance of pigging systems. (Doc. 1 at 2.)
“Pigging” refers to the process of pushing a silicon projectile (the “pig”) through a pipeline to
reduce product waste from the pipeline’s interior surface. (Id.) HPS is a world leader in
providing pigging solutions for liquid process companies, including General Mills, Nestle, Kraft
Foods, Heinz, Sara Lee, Coca-Cola, Colgate-Palmolive, and Procter & Gamble. (Id.)
O’Connor is a principal of both PPS and PMR. (Doc. 30-1 at 3.) On January 29, 2004,
O’Connor, on behalf of PMR, entered into a Sales & Marketing Agency Agreement (the “2004
Agreement”)2 with HPS. (Doc. 18 at 1.) Pursuant to the 2004 Agreement, PMR agreed to sell
and market HPS’s products and services throughout the United States. (Doc. 27 at 4.) The 2004
Agreement set commission rates as follows:
5.

Commission and Payment

a.

Payment. The Agent’s commission will be obtained from
the Price the Agent negotiates with the buyer of the
Products (the “Buyer”). Principal shall pay the
commissions in U.S. Dollars on or about the fifteenth
(15th) day of each month for payments received by the
tenth (10th) day of that month. Payment received after that
day will be part of the next commission period.

b.

Commissions Paid During the Initial Term. During the
Initial Term and any Renewal Term, the commission rate
will be set at twenty percent (20%) of the Price.

(Id. at 3.) “Price” is defined as “[p]rices and quotations.” (Doc. 28-3 at 3.)
As to the term, the 2004 Agreement states:
15.

Term of Contract

2

A legible copy of the 2004 Agreement is filed at doc. 28-3.
2

Subject to the termination provisions contained in this Agreement,
this Agreement commences on the date of signing and continues
for an initial period of twelve (12) months. If the Agent has in all
material respects observed the terms and conditions and met the
agreed sales targets set forth in Appendix 2, the Principal will
grant automatic renewal under the terms defined with exclusive
rights defined herein for a further term with such modifications as
may be reasonably required to the terms and conditions by the
Principal as a result of its experience during the Initial twelve (12)
month period.
(Doc. 28-3 at 5.) The 2004 Agreement refers to a “Renewal Term” in an earlier provision:
If the sales targets set forth in Appendix 2 are met for the Initial
Term the Principal will offer the Agent a second contract term of
twelve (12) months (the “Renewal Term”).
(Id. at 2.)
In 2005, HPS drafted and presented to O’Connor a Memorandum and a second Sales and
Marketing Agency Agreement. (See Docs. 27-4 and 27-5.) The Memorandum was “written to
provide guidelines for US Agency and Agency representation to [HPS].” (Doc. 27-4 at 3.) The
Memorandum provides: “From January 1st 2005 Neil O’Connor, HPS US,3 will have an
exclusive sales range across all US States for the provision of HPS UK Products and Services.”
(Id.) As to commissions, the Memorandum states:
Commissions
The Commission Structure is as follows:
The normal Agency commission rate will be set at 20% of the UK
Standard Price with exception given Procter & Gamble (US) and
Masterfoods (US), who are key accounts. This commission value
will be added to the UK Standard price then converted to U.S.
Dollars to establish the U.S. sell price.

3

Pursuant to the 2004 Agreement, PMR was given the right to “use the name HPS-US as
a ‘fictitious name’ or ‘dba.’” (Doc. 28-3 at 3.)
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(Id. at 4.) Rates for site commissions, electrical panels, and installation work are also
specifically delineated. (Id. at 4-5.) The Memorandum was not signed by PMR or O’Connor.
(Doc. 27 at 7.)
The second Sales and Marketing Agreement, dated January 1, 2005, also states that
commission rates were to be calculated based on the UK sales prices and lists lower percentage
rates for sales on site commissioning and spare parts. (Doc 27-5 at 16.) As to the term, the
second Sales and Marketing Agreement states that the agreement “continues for a period of
twenty four (24) months.” (Id. at 7.) It also provides that if PMR observed the terms and
conditions of the agreement and met the sales target, HPS would “grant automatic renewal.”
(Id.) The 2005 Agreement was not signed by PMR or O’Connor. (Doc. 27 at 7.)
The parties do not appear to dispute that PMR continued to sell and market HPS’s
products and services until January 13, 2010, when PMR and O’Connor terminated the business
relationship with HPS. Even so, it is unclear whether the parties operated under the 2004
Agreement beyond the initial twelve month term. Defendants allege that the 2004 Agreement
automatically renewed because PMR exceeded its sales targets from 2004 to 2009. (Doc. 27 at
6.) HPS alleges that the 2004 Agreement terminated on or before January 29, 2005, after the
initial twelve month term. (Doc. 28 at12-13.) According to HPS, the 2004 Agreement did not
automatically renew based on sales targets; rather, HPS argues that it had to offer and PMR had
to accept a renewal agreement with modified terms. (Id. at 13.) HPS argues that the 2005
Memorandum and second Sales and Marketing Agreement embodied those modified terms;
however, HPS alleges that the parties could not come to an agreement. (Id. at 16.) HPS appears
to argue that the parties operated under an oral agreement after the 2004 Agreement expired.

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(Doc. 28 at 6-15.)
B.

Procedural History

HPS initiated this action on March 1, 2010 by filing a complaint against O’Connor and
PPS alleging trademark infringement, unfair competition, and cybersquatting in violation of
Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and the Anticybersquatting Consumer
Protection Act, 15 U.S.C. § 1125(d); deceptive trade practices in violation of Chapter 4165 of
the Ohio Revised Code; and trademark infringement and unfair competition in violation of Ohio
law. (Doc. 1.) Specifically, HPS alleges that Defendants O’Connor and PPS used HPS
trademarks without the permission, consent, or authorization of HPS.
On June 8, 2010, PMR intervened in this action as a party-defendant, claiming that the
2004 Agreement granted PMR and O’Connor the right to use HPS trademarks. (Doc. 17 at 1.)
On June 18, 2010, Defendants collectively counterclaimed against HPS for breach of contract,
unjust enrichment, conversion, and tortious interference with business relations.4 (Doc. 18.)
Defendants claim that HPS violated the 2004 Agreement by, among other things, withholding
commissions owed to PMR. On December 28, 2010, Defendants moved for partial summary
judgment on their breach of contract, unjust enrichment, and conversion counterclaims.
II.

STANDARD
Summary judgment is appropriate if “the movant shows that 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). On a motion for summary judgment, the evidence, together with all inferences that can

4

Because this motion was filed before Defendants’ Motion to File Second Amended
Counterclaims (doc. 30), the Court will construe the Motion for Partial Summary Judgment as
embracing only those counterclaims in the First Amended Counterclaims (doc. 18).
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permissibly be drawn therefrom, must be read in the light most favorable to the party opposing
the motion. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 585-87
(1986).
The movant may support a motion for summary judgment with affidavits or other proof
or by exposing the lack of evidence on an issue for which the nonmoving party will bear the
burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322-24 (1986). In responding to
a summary judgment motion, the nonmoving party may not rest upon the pleadings but must go
beyond the pleadings and “present affirmative evidence in order to defeat a properly supported
motion for summary judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986).
The nonmoving party must “set out specific facts showing a genuine issue for trial.” Fed. R.
Civ. P. 56(e)(2). The Court’s task is not “to weigh the evidence and determine the truth of the
matter but to determine whether there is a genuine issue for trial.” Liberty Lobby, 477 U.S. at
249. A genuine issue for trial exists when there is sufficient “evidence on which the jury could
reasonably find for the [nonmoving party].” Id. at 252.
III.

ANALYSIS
A.

Breach of Contract

Defendants claim that HPS withheld commissions owed to PMR in violation of the 2004
Agreement. Defendants argue that there are no material factual disputes as to whether HPS
breached the 2004 Agreement by withholding these payments. To prove a breach of contract
under Ohio law, a plaintiff must establish the existence of a contract, performance by the
plaintiff, breach by the defendant, and damage to the plaintiff. Doner v. Snapp, 98 Ohio App.3d
597, 600 (1994). Defendants first argue that the 2004 Agreement governs the action at issue.

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Defendants argue that the 2004 Agreement automatically renewed each year pursuant to the
provision that provides: “[i]f the Agent has in all material respects observed the terms and
conditions and met the agreed sales targets set . . . the Principal will grant automatic renewal . . .
for a further term with such modifications as may be reasonably required to the terms and
conditions by the Principal.” (Doc. 27-4 at 4.) Because PMR met the agreed sales targets from
2004 to 2009, Defendants argue that the 2004 Agreement remained in effect through January of
2010. Next, Defendants argue that HPS breached the 2004 Agreement by withholding
commission payments from PMR. It is not entirely clear when these payments were withheld,
but the First Amended Counterclaims suggest that it was sometime in 2009. (See Doc. 18 at 5.)
Defendants argue that HPS was required to pay PMR 20% of the U.S. sales price of all HPS
products and services sold. Defendants argue that HPS failed to do so and has withheld “at least
$287,258.60 in commissions.” (Doc. 27 at 8.) Defendants then point to the deposition testimony
of HPS principal Gilbert Murphy, wherein Murphy admits that HPS owes PMR between fifty
and one hundred thousand dollars in commissions. (See Gilbert Dep. at 169.5) Based on this
evidence, Defendants argue that summary judgment is warranted on the breach of contract
counterclaim.
HPS counters that summary judgment is inappropriate because disputed issues of fact
remain as to whether the 2004 Agreement was in force during the relevant time frame. Although
Defendants claim that the 2004 Agreement governed the parties’ relationship through January of
2010, HPS alleges that the 2004 Agreement expired on January 29, 2005. HPS points out that
the 2004 Agreement provides for renewal “with such modifications as may be reasonably

5

Portions of Gilbert Murphy’s deposition are filed at docs. 127-1 and 128-1.
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required to the terms and conditions by the Principal.” (Doc. 27-4 at 4.) HPS alleges that the
parties could not agree on modified terms for a renewal period and, consequently, that the 2004
Agreement expired after the original twelve month term. Alternatively, Defendants argue that
even if the 2004 Agreement automatically renewed, it only renewed for one additional twelve
month term. In support of this argument, HPS points to a provision in the 2004 Agreement
which states that “[i]f the sales targets set forth in Appendix 2 are met for the Initial Term the
Principal will offer the Agent a second contract term of twelve (12) months (the “Renewal
Term”).” (Doc. 28-3 at 2.) In further support of their argument, HPS points to the deposition
testimony of O’Connor, wherein he testified that he is “[n]ot positive” that the 2004 Agreement
remained in place through 2010. (Doc. 28 at 11, citing O’Connor Dep. at 57.6)
HPS also argues that disputed issues of fact remain as to the rate of commission. While
Defendants argue that HPS was required to pay PMR 20% of the U.S. sales price of all HPS
products and services sold, HPS argues that commissions were calculated as 20% of the UK
standard price. HPS points to the deposition testimony of O’Connor, wherein he testified that he
is “still pretty confused” about how the commission rate was calculated. (Doc. 28 at 4, quoting
O’Connor Dep. at 90.) At best, HPS argues, disputed issues of fact remain as to the appropriate
rate of commission. Based on the foregoing, HPS urges the Court to deny Defendants’ motion.
Without expressing an opinion on the merits of this claim, the Court finds that there are
numerous disputed facts which preclude summary judgment. First, the parties dispute which
contract, if any, governs the present action. Defendants argue that the 2004 Agreement is the
only contract existing between the parties. HPS argues that the 2004 Agreement expired in 2005

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Portions of Neil J. O’Connor’s deposition are filed at doc. 28-2.
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and that the parties operated under “a fluid set of terms that reflected the needs and interests of
each side.” (Doc. 28 at 6.) HPS submitted (1) evidence demonstrating that the parties were
actively negotiating a new agreement in 2004 and 2005 and (2) testimony from both Murphy and
O’Connor that raises doubts as to whether the 2004 Agreement remained in force beyond 2005.
(See Murphy Dep. at 196; O’Connor Dep. at 57.) Second, the parties dispute the amount of
commission owed to PMR and, specifically, the method of calculating PMR’s commission rate.
Defendants argue that PMR’s commission rate was set at 20% of the U.S. sales price of all HPS
products and services sold. HPS argues that the commission rate was set at 20% of the UK
standard price, that this amount was then added to the UK standard price and converted to U.S.
dollars “to form the total that the customer would pay.” (Doc. 28 at 5.) Thus, there clearly are
fact issues as to (1) whether the 2004 Agreement remained in effect during the relevant time
frame and (2) how PMR’s commission rate was to be calculated. These issues preclude
summary judgment as a matter of law in Defendants’ favor. The Court DENIES Defendants’
Motion for Partial Summary Judgment on the breach of contract counterclaim (doc. 27).
B.

Unjust Enrichment and Conversion

Because there are genuine issues of material fact as to the breach of contract
counterclaim, there are also genuine issues of material fact as to the unjust enrichment and
conversion counterclaims. The Court DENIES Defendants’ Motion for Partial Summary
Judgment on the unjust enrichment and conversion counterclaims (doc. 27).

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IV.

CONCLUSION
For the reasons stated above, Defendants’ Motion for Partial Summary Judgment (doc.

27) is DENIED.
IT IS SO ORDERED.
___s/Susan J. Dlott___________
Chief Judge Susan J. Dlott
United States District Court

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