Court Opinion

ID: 3146520
Source: CourtListenerOpinion
Date Created: 2015-10-22 18:17:53.046479+00
Date Added: 2024-06-11T12:14:59.769502
License: Public Domain

SIXTH DIVISION
                                                     October 5, 2007

No. 1-05-4070

CLINTON IMPERIAL CHINA, INC., d/b/a     )       Appeal from the
Harris Potteries,                       )       Circuit Court of
                                        )       Cook County
 Plaintiff-Appellant,                   )
                                        )
     v.                                 )
                                        )
LIPPERT MARKETING, LTD. and JEFFREY     )
LIPPERT,                                )
                                        )
 Defendants-Appellees                   )
                                        )
(Lippert Marketing, Ltd.,               )
                                        )
 Counterclaimant and Cross-Appellant;   )
                                        )
Clinton Imperial China, Inc., d/b/a     )
Harris Potteries, and Robert Harris,    )       Honorable
                                        )       Robert E. Gordon,
 Counterdefendants and Cross-Appellees).)       Judge Presiding

     JUSTICE McNULTY delivered the opinion of the court:

     A sales agent helped a manufacturer find a retail

distributor for its products.   The manufacturer agreed to pay the

agent a commission on its sales to the distributor for a period

of five years.   As the distributor preferred to communicate

directly with the manufacturer, the agent did not provide the

customary services of a sales representative.    After paying

commissions for more than a year, the manufacturer sued the agent

to recover commissions paid after the agent stopped providing

services.   The agent countersued for commissions on all products

the distributor agreed to purchase, even those ordered after the

end of the agreed five-year period.   The trial court found that

the failure to provide customary services did not warrant
1-05-4070

forfeiture of commissions.   The court awarded the agent

commissions promised on all products the distributor ordered from

the manufacturer during the agreed five-year period.   We affirm

the judgment entered against the manufacturer for those

commissions.

                             BACKGROUND

     In January 1995, Robert Harris, president of Harris

Potteries (Potteries), met Jeffrey Lippert, president of Lippert

Marketing (Marketing), at a trade show.   Lippert told Harris he

knew of a major distributor who might want to purchase unglazed

stoneware products from Potteries.    A few months later Harris and

Lippert signed an agreement for Marketing to act as sales

representative for Potteries.   The agreement provided that "The

Pampered Chef shall be exclusively assigned to [Marketing] and

may not be reassigned to another sales representative or become a

house account without the express consent of Lippert."     A letter

dated July 14, 1995, established Marketing's commissions at 10%

of Potteries' sales to The Pampered Chef (Chef).

     Chef instituted a policy of direct communication with

manufacturers.   Potteries designated Lippert as the person to

service Chef's account.   Chef's president called Harris and told

him that Chef preferred to communicate directly with

manufacturers.   Harris called Lippert and told him Potteries

would accommodate Chef, so Harris would assume responsibility for

contact with Chef.

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     Partly because of Marketing's reduced role, Potteries

renegotiated its contract with Marketing.    In August 1995

Potteries and Marketing signed a document entitled "SALES

REPRESENTATION AGREEMENT."    The agreement provided:

     "2.    [Potteries] agrees to engage and [Marketing]

     agrees to supply all or some of the consulting

     marketing and sales services of [Marketing] as an

     independent agent as such services, generally available

     to the public, may pertain to ceramic product for sale

     by [Potteries] to The Pampered Chef Ltd. account.

     3.    [Potteries] acknowledges that [Marketing] has been

     the procuring agent of The Pampered Chef, Ltd., account

     *** and agrees to make [Marketing] the exclusive agent

     of said account during the term of this agreement.    A

     copy of the July 5, 1995 AGREEMENT BETWEEN HARRIS

     POTTERIES AND THE PAMPERED CHEF, LTD., of which

     [Marketing] initiated and consulted on [Potteries']

     behalf, is attached hereto and incorporated by

     reference herein. ***

     ***

     5.    For and in consideration of [Marketing's] procuring

     The Pampered Chef, Ltd. account for [Potteries] and

     rendering consulting marketing and sales expertise to

     [Potteries, Potteries] will pay compensation to

     [Marketing] as a percent of [Potteries'] annual

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     collected sales (including sales up to December 31,

     2000 but collected afterwards) to The Pampered Chef,

     Ltd. as follows[:]

                  from January 1, 1996, to December 31, 2000,

                  $0 to $20,000,000 of sales          5%

                  20,000,001 to 30,000,000 of sales   2%

                  over 30,000,000                     1%

     6.    [Marketing] will be paid on paid invoices of all

     orders placed by The Pampered Chef, Ltd.     [Potteries]

     will pay said commissions to [Marketing] by the end of

     the month following the month during which payment is

     received by [Potteries]. ***

                                    * * *

     11.    This agreement shall terminate on December 31,

     2000.    [Potteries] may sell to The Pampered Chef, Ltd.

     after the expiration of this agreement on December 31,

     2000 without any further compensation being paid to

     [Marketing]."

     The July 5 agreement between Potteries and Chef, referenced

in Potteries' agreement with Marketing, provided:

             "[Chef] agrees to buy from [Potteries], and

     [Potteries] agrees to make and sell to [Chef], a

     minimum of 700,000 pieces in total during each of the

     calendar years 1996 through 2000."

     In December 1995 Chef sent Potteries a proposed amendment to

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the July 5 agreement.    According to the proposal, Chef would

purchase a minimum of 3.5 million pieces each year from 1997

through 2000.    In January 1996 Potteries and Marketing amended

their August 1995 agreement by adding a limitation on Marketing's

right to represent competitors of Potteries.    But the amendment

allowed specific relief:

            "If, however, [Potteries] is unable to

     manufactur[e] sufficient quantities to meet at least

     70% of the requirements of The Pampered Chef, Ltd., as

     detailed in the Agreement Between Harris Potteries and

     The Pampered Chef, Ltd. dated 7/5/95 and any addendums

     *** which has to date been amended stating the minimum

     required quantity is 3,500,000 pieces per calendar year

     beginning with 1997, then *** [Marketing] will be

     permitted to seek or solicit, or cause others to seek

     or solicit other vendors or manufacturers to supply

     unglazed stoneware to The Pampered Chef, Ltd."

     In March 1996 Harris signed an amendment to Potteries'

agreements with Chef, but this amendment called for a minimum of

only 2 million pieces of unglazed stoneware per year, rather than

the 3.5 million pieces Chef initially proposed.      In 1997 Chef and

Potteries signed a further amendment in which Chef and Potteries

agreed that, because of decreased demand for Potteries' products,

Chef would decrease its annual purchases, but it would extend the

term of the agreement to reach the same sales total of 8 million

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pieces.   Chef promised to purchase about 1 million pieces per

year, but it would continue purchasing from Potteries at that

rate at least through 2004.

     Potteries paid commissions to Marketing on its sales to Chef

each month.   Despite the reduction in amounts sold, Marketing

never exercised its right to contact manufacturers of products

that competed with Potteries' products.

     In 1995 Lippert secretly recorded a conversation he had with

an officer of Chef.    When Chef found out about the recording, it

sent Lippert a letter informing him that he would "no longer be

allowed on the premises" of Chef.      Marketing then sued Chef for

tortious interference with Marketing's relationship with

Potteries.

     In 1998 Potteries sent Marketing a fax asking Marketing to

recommend a manufacturer for soup tureens Chef sought.     Marketing

responded that it knew a manufacturer and would work with

Potteries on the project if Potteries would sign a new agreement

for Marketing to act as Potteries' sales representative.

Potteries replied that in their contract Marketing promised to

provide ongoing services.   If Marketing refused to provide such

services, Potteries should not have any duty to pay commissions

to Marketing.   Potteries last paid Marketing a commission for

April 1998.

     In July 1998 Potteries sued Marketing for breach of

contract.    Potteries sought to recoup amounts it paid Marketing

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as commissions after Marketing stopped providing customary

services expected from sales representatives.    Marketing

countersued for breach of contract, fraud, and violation of the

Sales Representative Act (820 ILCS 120/0.01 et seq. (West 1998)).

In the fraud count, Marketing alleged that Harris, as an officer

of Potteries, falsely represented that Chef agreed to purchase

3.5 million pieces from Potteries each year.    In reliance on that

misinformation, Marketing signed the amendment dated January

1996, limiting its right to represent Potteries' competitors.

Marketing sought relief both from Potteries and from Harris

individually in the fraud count.   Only the fraud count included

any request for relief from Harris personally.

     The parties moved for summary judgment on both the complaint

and the counterclaim.   Potteries supported its motion with the

deposition of Harris, who swore that since July 1995 he provided

100% of sales representative services to Chef.    Harris described

at length the services he expected from sales representatives and

he swore that Marketing could have provided some of those

services despite Chef's request for direct communication with

Potteries.   Potteries also presented the deposition of Lippert,

who admitted that he did not try to contact any of Potteries'

competitors after he discovered that Potteries would not make 70%

of the 3.5 million pieces promised in the January 1996 agreement.

     The court denied most of the motions, but it granted

Potteries summary judgment on the fraud count of Marketing's

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counterclaim.    For purposes of the motion, the court assumed that

the misrepresentation concerning the quantity of assured sales

induced Marketing to sign the January 1996 amendment restricting

its right to represent Potteries' competitors.    The court found:

     "The January 10, 1996 addendum, however, did not

     guarantee [Marketing] a certain amount of commissions.

     It merely stated that [Potteries] had a current

     agreement with [Chef] for a minimum of 3.5 million

     pieces a year and that if [Potteries] was unable to

     manufacture 70% of that amount *** [Marketing] would be

     free to solicit other vendors.    Jeffrey Lippert

     testified that when he learned that [Potteries] was not

     going to manufacture 70[%] of the 3.5 million he chose

     not to solicit any other vendors. ***

            Any damages sustained by the false statement would

     be business opportunities lost by [Marketing] as a

     result of being induced to enter into the January 10,

     1996 agreement.   [Marketing] has not alleged any such

     damages.   Summary judgment is appropriate."

     At trial the parties agreed on Potteries' total orders from

Chef through December 2000 and through December 2004.    The

parties presented conflicting evidence on the extent of the

services Marketing could provide Potteries for sales to Chef

after Chef expressed its preference for communicating directly

with Potteries.    Potteries contended that it owed no commissions

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after Marketing breached the sales service contract by taping a

conversation with Chef and by suing Chef.    The parties also

presented extensive evidence concerning the negotiations that led

to their contracts.    The court allowed the testimony as parol

evidence concerning the meaning of the several contracts at

issue.

     In its order disposing of the case, the court said:

            "Lippert's wrongful and inappropriate taping

     episode and lawsuit against *** Chef did not affect or

     impair any of [Potteries'] sales to *** Chef; in fact,

     they increased substantially to such an extent that

     [Potteries] had to seek a larger facility and their

     entire manufactured output was purchased by *** Chef.

     ***

                                  * * *

            *** [Potteries] initially entered into the

     contract with [Marketing] in July of 1995 to obtain ***

     Chef as a customer.    ***

            *** [Marketing] was supplying all of the

     consulting, marketing and sales services pertaining to

     the ceramic products for sale to *** Chef.    The benefit

     [Potteries] desired was the business of *** Chef and

     they did not lose that benefit under the August

     agreement.   *** [T]hey executed the August agreement

     with full knowledge that [Marketing] would have little

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    or no involvement with the *** Chef account. ***

            [Potteries] offered no evidence in this case of

    any damages that they sustained as a result of

    [Marketing's] failure to provide the services that they

    claim.    They ask for the return of commissions paid,

    but have shown no evidence of out of pocket or other

    compensatory damages as a result of Lippert's

    inappropriate and wrongful taping of the conversation

    with an employee of *** Chef which caused Lippert to be

    barred from their premises.     ***

            If this court would find that [Marketing's]

    failure to perform services was a material part of the

    contract[, Marketing] would have to forfeit the

    commissions that were owed to [it] and the commissions

    [it] received after [Lippert] was barred from ***

    Chef's premises.    As a result, the party failing to

    perform would suffer a great forfeiture under the facts

    and circumstances of this case.

            *** There is no excuse for [Lippert's] behavior.

    ***

            ***

            *** [Marketing's] breach was a minor breach of the

    contract not a material breach that would discharge

    [Potteries] from paying commissions."

    The court awarded Marketing a 5% commission on all orders

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Potteries received by December 31, 2000, but it denied

Marketing's request for commissions on all 8 million pieces sold

to Chef by December 31, 2004, under the 1997 amendment to the

agreement of July 5, 1995, between Potteries and Chef.      The court

also denied the claim under the Sales Representative Act.     The

court held:

            "[T]here was no evidence of willful/wanton conduct

     on the part of [Potteries].    But more importantly[,]

     *** [Marketing] was not a sales representative for

     [Potteries] on the *** Chef account once *** Chef

     refused to accept [Lippert] as [Potteries']

     representative and barred him from their premises as a

     result of Lippert's wrongful conduct.    *** The

     commissions in this case accrued after [Marketing]

     ceased being a[n] active sales representative."

The court awarded Marketing a judgment against Potteries and

Harris in the amount of $1,290,790.90, as the 5% commission due

on sales from April 1998, when Potteries stopped paying

commissions, through December 2000.

     In a petition for rehearing, Potteries claimed that the

court had analyzed the case improperly, without reference to

Marketing's duties as Potteries' agent.    Marketing also

petitioned for modification of the order.    The trial court held:

     "Lippert's actions *** were not a material violation

     and *** the conduct of Lippert was not deliberate or

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     willful, even though the taping was wrong and illegal.

     *** [T]he law of Agency does not bar recovery upon such

     evidence ***.   *** [T]here was no willful or deliberate

     act by Lippert that would cause harm to the principal."

The court denied the motions for reconsideration and for

modification of the judgment.    Potteries and Harris appeal and

Marketing cross-appeals.

                               ANALYSIS

     Potteries argues first that Marketing breached the August

1995 contract by covertly taping a conversation with an officer

of Chef, by suing Chef, and by failing to provide services

Potteries requested in 1998.    Our supreme court established the

applicable principles:

            "[W]hen one breaches a fiduciary duty to a

     principal the appropriate remedy is within the

     equitable discretion of the court.    While the breach

     may be so egregious as to require the forfeiture of

     compensation by the fiduciary as a matter of public

     policy [citation], such will not always be the case.

     Punitive damages are permissible where a duty based on

     a relationship of trust is violated, the fraud is

     gross, or malice or willfulness is shown; such an award

     is not automatic." (Emphasis in original.) In re

     Marriage of Pagano, 154 Ill. 2d 174, 190 (1992).

When an agent acts in willful or deliberate breach of the

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fiduciary duty of loyalty to the principal, the agent "could not

expect compensation *** for the period of time in which the agent

was disloyal." R.K. Ray Sales, Inc. v. Genova, Inc., 133 Ill.

App. 3d 98, 102 (1985).   In deciding whether the agent has

forfeited its right to compensation, the court may consider "the

seriousness and timing of the violation; the willfulness of the

breach; the potential for, or actual harm to the principal; and

whether the agent completed a divisible portion of his contract

duties before the breach occurred for which compensation can be

determined."   Rockefeller v. Grabow, 136 Idaho 637, 643, 39 P.3d
577, 583 (2001).

     Here, Marketing provided essentially no services after July

1995, largely because Chef wanted no such services, and not due

to disloyalty to Potteries.    Suing Chef and taping the

conversation probably offended Chef, but Chef apparently did not

hold the offense against Potteries, whose sales to Chef rose

sharply after the incidents.    Moreover, no evidence indicates

that Lippert acted from a motive of disloyalty to Potteries when

he recorded the conversation and sued Chef.    The trial court

found that Lippert acted solely to protect his interests as a

sales agent and not in derogation of any interest of Potteries.

Before the breaches, Marketing had already performed the most

essential part of its duties by bringing Potteries and Chef

together.   Under these circumstances the trial court found

insufficient grounds for forfeiture.    We cannot say that the

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trial court abused its discretion.

     Next, Potteries argues that the court misconstrued the

contract and therefore miscalculated the amount due.      Because the

court heard evidence concerning the meaning of the contract

provisions, we will overturn the findings of fact only if they

are contrary to the manifest weight of the evidence. Marathon

Plastics, Inc. v. International Insurance Co., 161 Ill. App. 3d
452, 459-60 (1987).    The court awarded Marketing a 5% commission

on all sales to Chef made between April 1998 and December 2000,

even though the total sales in that period exceeded $25 million.

Potteries argues that the court should have awarded Marketing

only 2% of the sales in excess of $20 million.       Marketing answers

that the court should have awarded it 5% of all sales through

December 2004, because Chef in 1997 agreed to purchase 8 million

units, and it did not complete the purchase until December 2004.

     The contract provides:

     "[Potteries] will pay compensation to [Marketing] as a

     percent of [Potteries'] annual collected sales

     (including sales up to December 31, 2000 but collected

     afterwards) to The Pampered Chef, Ltd. as follows.

            from January 1, 1996, to December 31, 2000,

            $0 to $20,000,000 of sales          5%

            20,000,001 to 30,000,000 of sales   2%

            over 30,000,000                     1%."

We must construe the contract as a whole, giving effect to all

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its terms.   First Bank & Trust Co. of Illinois v. Village of

Orland Hills, 338 Ill. App. 3d 35, 40 (2003).

     The court awarded Marketing 5% of the total sales because

the sales for each calendar year from 1996 through 2000 never

exceeded $20 million.    Marketing argued, and the trial court

held, that commissions would fall to 2% under the contract only

if Potteries sold more than $20 million worth of goods to Chef in

a single calendar year.    We agree with the trial court's

interpretation of the contract.    The contract requires payment of

a 5% commission on "annual collected sales" up to $20 million.

The specification of the contract's duration, from January 1,

1996, through December 31, 2000, simply establishes the five

years for which Potteries must pay the 5% commission.

     Marketing, on the cross-appeal, claims that Potteries owes

it commissions for all of the 8 million pieces eventually sold,

because Chef promised, in the amendment Potteries and Chef signed

in 1997, to purchase the 8 million pieces, and therefore

Marketing qualifies as the procuring cause for the orders for all

8 million pieces.   See Solo Sales, Inc. v. North America OMCG,

Inc., 299 Ill. App. 3d 850, 852 (1998); Technical

Representatives, Inc. v. Richardson-Merrell, Inc., 107 Ill. App.
3d 830, 833 (1982).    However, the rule requiring commission

payment to the procuring cause of a sale does not apply when a

contract expressly governs the terms for payments and the

contract's duration.    See Solo Sales, 299 Ill. App. 3d at 852;

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Technical Representatives, 107 Ill. App. 3d at 833.      The contract

here establishes explicit terms for its termination with payment

for pieces sold by December 31, 2000, even if Potteries collected

payments thereafter.    The court awarded Marketing commissions on

all pieces Chef ordered by December 31, 2000.

     If we accept Marketing's interpretation of the contracts and

find that Potteries sold all 8 million pieces, within the meaning

of its contract with Marketing, at the time it signed the 1997

amendment to its agreement with Chef, then the court should have

counted all of the sales in 1997's annual collected sales, and

therefore it should have awarded only 2% commissions on sales in

excess of $20 million.    That is, Marketing's claim for

commissions on all 8 million pieces conflicts with its own claim

for 5% commissions on all the sales because sales never exceeded

$20 million in any calendar year.

     We agree with the trial court's construction of the

contract.   Potteries sold the pieces, for purposes of

establishing Marketing's right to a commission, only when Chef

ordered the pieces.    Chef had not ordered all 8 million pieces by

December 31, 2000.    Under the explicit terms of the contract,

Potteries owed Marketing commissions only on the pieces ordered

by that date.

     Next Marketing argues that the court should have awarded it

attorneys fees and punitive damages on the claim under the Sales

Representative Act.    That act defines a sales representative as

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"a person who contracts with a principal to solicit orders and

who is compensated *** by commission." 820 ILCS 120/1(4) (West

1998).   Before Marketing entered the August 1995 contract at

issue here, Chef had already informed Potteries that it would

contact Potteries directly, rather than Marketing, for orders and

service.    Thus, at the time of the contract at issue, Marketing

had no responsibility for soliciting orders.     Under the

definition in the Sales Representative Act, Marketing did not

qualify as a sales representative.     The court correctly entered

judgment in favor of Potteries on the claim under the Sales

Representative Act.

     Finally, Marketing asks us to reverse the summary judgment

entered on the fraud count.   We review the issue de novo.

Delaney v. McDonald's Corp., 158 Ill. 2d 465, 467 (1994).      To

establish a cause of action for fraud, Marketing must show that

Potteries intended to induce Marketing to act when Potteries made

a false statement of material fact, and Marketing's reasonable

reliance on the statement caused it to suffer damages.       Connick

v. Suzuki Motor Co., 174 Ill. 2d 482, 496 (1996).      Marketing

presented evidence that Harris falsely told Marketing that

Potteries had a contract with Chef for 3.5 million pieces per

year for four years.   Marketing also presented evidence that

could support a finding that Marketing reasonably relied on that

statement when it signed the document in which it agreed not to

represent Potteries' competitors.      However, the agreement imposed

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no limit at all on Marketing if Potteries failed to sell Chef 70%

of the 3.5 million promised pieces.   Thus, when Potteries failed

to sell that amount, Marketing could freely represent any of

Potteries' competitors without breaching the agreement.

Marketing's decision, independent of the agreement, not to

contact any such competitors cannot create compensable damages.

     Cases in which courts have awarded parties damages measured

by the benefit of the bargain do not conflict with the trial

court's decision here.   See Kleinwort Benson North America, Inc.

v. Quantum Financial Services, Inc., 285 Ill. App. 3d 201 (1996);

Four "S" Alliance, Inc. v. American National Bank & Trust Co. of

Chicago, 104 Ill. App. 3d 636 (1982).   In those cases the

plaintiffs spent substantial sums of money in reliance on the

defendants' false representations.    Because Marketing here gave

up nothing in reliance on the alleged false representation, it

suffered no recoverable damages.   See Geske v. Geske, 343 Ill.

App. 3d 881, 886 (2003).   The trial court correctly granted

Potteries and Harris summary judgment on the fraud count.

     Marketing sought a judgment against Harris personally only

in the fraud count, and the trial court had granted Harris

summary judgment on that count before trial.   Thus, the trial

court faced no claim against Harris personally when it entered

the judgment against Potteries and Harris.   Accordingly, we

reverse the judgment insofar as the court entered it against

Harris personally.   See Hoopingarner v. Peric, 28 Ill. App. 3d

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53, 57 (1975).

     Although Marketing did not fully comply with its promises in

its contract with Potteries, the trial court did not abuse its

discretion when it decided that the breaches did not require

forfeiture of Marketing's commissions.    Because Potteries'

"annual collected sales" never exceeded $20 million, the contract

required payment of a 5% commission on all items Chef ordered

from Potteries by December 31, 2000.    The express terms of the

contract give Marketing no right to commissions on pieces ordered

thereafter.   Marketing no longer acted as a sales representative

to Chef, within the meaning of the Sales Representative Act,

after Chef specified that it would order items directly from

Potteries without Marketing's intervention.    Because Marketing

did not give up anything in reliance on Potteries' alleged

statements, the trial court correctly entered judgment in favor

of Harris and Potteries on the fraud count of Marketing's

counterclaim.    As Marketing did not seek a judgment against

Harris in any other count of the counterclaim, we reverse the

judgment entered against Harris.    In all other respects, we

affirm the judgment of the trial court.

     Affirmed in part and reversed in part.

     O'MALLEY and O'MARA FROSSARD, JJ., concur.

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