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H.L. MILLER MACH. TOOLS, INC. v. ACROLOC

February 25, 1988

H.L. MILLER MACHINE TOOLS, INC., PLAINTIFF,
v.
ACROLOC INCORPORATED AND BAYER INDUSTRIES, INCORPORATED, DEFENDANTS.



The opinion of the court was delivered by: Mihm, District Judge.

ORDER

Presently before this Court is the Defendants', Acroloc, Inc. (hereafter Acroloc) and Bayer Industries, Inc.'s (hereafter Bayer) Motion to Dismiss and Strike. Acroloc's and Bayer's Motion to Dismiss is fundamentally based upon the allegation that the contract which is the subject of the Plaintiff, H.L. Miller Machine Tool, Inc.'s (hereafter Miller) Complaint was a contract terminable at will, and therefore, Counts I and II of Miller's Complaint cannot be sustained.

Count I of Miller's Complaint is a diversity action for breach of contract against Bayer, a manufacturer of machine tools, and Acroloc, the distributor of Bayer's machines and tools. Count II of the Complaint seeks compensatory and punitive damages for Bayer's and Acroloc's attempt to interfere with Miller's right to receive a commission on a completed sale of machine tools and its' wrongful withholding of payment of an outstanding commission due Miller. There is no dispute between the parties that Illinois law governs this diversity action.

The contract entered into by Miller and Acroloc, which was acting as the agent of Bayer, is critical to the resolution of this pending Motion to Dismiss. Miller alleges that the contract provided that Miller was to act as the "exclusive distributor" for Acroloc products within the entire State of Illinois, the central and eastern portions of the State of Wisconsin, and the northeastern portion of the State of Indiana.

In its Complaint, Miller alleges that the agreement provided that Miller was to undertake his or its best effort to contract with potential customers, promote Acroloc products, and complete sales to ultimate users of the product. Further, Acroloc was obligated to compensate Miller for its efforts with a 15% commission on the sale of each Acroloc machine during the inception period of the contract. In return, Acroloc would provide both training and customer assistance to Miller's employees and potential customers. Additionally, the contract provided a commission increase to 23% per machine at such time when the training and customer services to potential customers were completed, and Miller was completing sales of Acroloc machines at an average of two per month.

Miller alleges that this contract was confirmed in writing on June 19, 1986, by a letter from Patrick Sullivan, an employee of Acroloc, acting in the scope of actual and apparent authority for Acroloc and within the scope of Acroloc's actual and implied authority for Bayer.

Miller alleges that pursuant to the contract, it undertook substantial effort from June of 1986 through November of 1986 to promote Acroloc machines and product line. Miller asserts that these efforts included: (1) preparation of mass mailings to potential customers; (2) preparation of a number of quotations of price to potential users; (3) incurrence of travel expenses in the amount of $1,249.88, for a former Acroloc employee promoting the Acroloc product line; and (4) the payment of salary for a former Acroloc employee, in the amount of $19,261.94. Miller alleges that it fully performed all conditions and obligations pursuant to the contract. Further, Miller asserts that there was an implied obligation upon each party to act in good faith.

In November of 1986, without notice to Miller and allegedly without cause, Acroloc, acting within its scope of actual or apparent agency, terminated the contract. This termination was confirmed on November 24, 1986.

At the hearing held on October 16, 1987, Miller orally requested the Court to consider Sullivan's June 12, 1986 letter, which discussed the compensation agreement between Miller and the Defendants. The Court granted this Motion and has considered it in reaching its decision in this case.

Acroloc's and Bayer's Motion to Dismiss and Strike presents four contentions: (1) the contract entered into between the parties was terminable at will, and therefore, no claim for breach of contract can be sustained; (2) punitive damages are not recoverable in a breach of contract action; therefore, if this Court determines that Count II of Miller's Complaint is requesting punitive damages for breach of contract, it must be dismissed for failure to state a claim upon which relief can be granted; (3) no fiduciary relationship existed between Miller and either Defendant; therefore, to the extent that Count II is requesting compensatory and punitive damages for breach of fiduciary relationship, it must also be dismissed for failure to state a claim upon which relief can be granted; and (4) to the extent that Count II contains references to an offer of compromise, it must be stricken as irrelevant, immaterial, and prejudicial.

None of the parties dispute the fact that the agreement into which they entered is silent as to the specific duration of the agreement. However, this fact gives rise to the point of contention.

Bayer and Acroloc assert that absent an express time of duration for this contract, the contract must be deemed terminable at will. In contrast, Miller asserts that the objective intent of the parties was that the agreement would be of "long standing duration," and that this intent was confirmed by the Sullivan letter. Miller asserts that at the very least, the intention of the parties was that the contract would be enforced for a three year period.

The first and critical issue before this Court is whether the agreement entered into between the parties, which is admittedly silent as to duration, is a contract terminable at will. As a general proposition of law, under Illinois law, contracting parties may terminate at will if their contract contains no specific term of duration. First Commodity Traders v. Heinold Commodities, 766 F.2d 1007, 1012 (7th Cir. 1986). A duration term need not specify a date or period of time; it can identify some event which will signal termination, even if it is not clear, ex ante, when that event will take place. First Commodity Traders v. Heinold Commodities, 591 F. Supp. 812, 815-16 (1984).

In First Commodity Traders v. Heinold Commodities (hereafter FCT), the defendant contended that the contract between the parties did not contain a duration term. However, the plaintiff contended that the agreement did contain a term, and that the term was set forth in language of the contract which stated: "The parties agreed that the relationship would continue so long as it remained profitable . . . and otherwise could be terminated only for cause;" "Heinold shall pay compensation to [FCT] ...


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