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July 1, 1991

INTERMEDICS, INC., a Texas corporation, et al., Defendants

The opinion of the court was delivered by: BUA


 This order concerns plaintiff's and defendants' objections to the report and recommendation submitted by the magistrate judge on March 28, 1991. For the reasons stated herein, the court adopts the report and recommendation in its entirety.


 This litigation presents a dispute over the interpretation of a sales representative agreement. In the 1970s, plaintiff Precision Devices Corporation ("PDC") entered into a sales agreement with defendants Intermedics, Inc. ("Intermedics") and Intermedics Intraocular, Inc. ("Intraocular"). Both defendants are manufacturers of medical equipment. Intermedics manufactures pacemakers and related equipment. Intraocular, a subsidiary of Intermedics, manufactures intraocular lenses used in cataract surgery.

 Defendants authorized PDC to act as their sales representative in several states, including Illinois and Wisconsin. PDC conducted sales in Wisconsin through a subrepresentative named Donald Martiny. For sales made by Martiny, PDC retained approximately 25% of the commissions and paid the rest to Martiny.

 In 1977, the parties began discussions over the renewal of the sales agreement. During this time frame, Martiny approached Intermedics and offered to become its direct sales representative. PDC took this offer as a threat to its relationship with Intermedics, and expressed its desire to replace Martiny as the sales agent in Wisconsin. Fearing that sales would be disrupted if Martiny was terminated, Intermedics urged PDC to retain Martiny. But PDC was no longer interested in working with Martiny. Intermedics proposed a solution. Intermedics offered to pay regular sales commissions to PDC in return for PDC's agreement to waive any claim to Wisconsin as a sales territory. PDC would continue to receive the same commissions it had previously been earning, even though Martiny would become defendants' exclusive sales representative in Wisconsin. PDC agreed to these terms in a contract executed on July 14, 1977 (hereinafter referred to as the "Wisconsin Agreement"). The contract contains the following operative language:

Effective immediately, [Intermedics] and [Intraocular] will pay directly to [PDC], its assignee or successors in interest, five and one-quarter percent - 5.25%, of gross sales as a commission override for all sales in the state of Wisconsin of all products of [Intermedics], [Intraocular], (5%) their affiliates, subsidiaries and successors that exist now or may be created in the future.

 Wisconsin Agreement, para. 1. After this agreement was executed, PDC continued to receive commissions on sales of pacemakers and intraocular lenses.

 PDC received commissions until 1981, when defendants stopped paying commissions altogether. Defendants failure to abide by the terms of the Wisconsin Agreement prompted PDC to take legal action. By way of a consent decree entered in 1984, the parties temporarily resolved their contractual dispute.

 Each defendant subsequently experienced a change in corporate ownership. In 1986, Intraocular was acquired by Pharmacia AB, a Swedish corporation. Pharmacia AB (through its American holding company, Pharmacia, Inc.) incorporated Pharmacia Ophthalmics ("Ophthalmics") to take over the business of Intraocular. Ophthalmics assumed Intraocular's liability for commissions to PDC.

 In 1988, Intermedics was acquired by Sulzer Brothers, Inc., a subsidiary of Sulzer Brothers Limited. Sulzer Brothers Limited is a Swiss company that manufactures various industrial products. Intermedics became a subsidiary of Sulzer Brothers, Inc., though it continued to operate under the name of Intermedics.

 PDC moved for summary judgment in its favor. The court referred that motion to Magistrate Judge Joan H. Lefkow. In a report and recommendation dated June 18, 1990, Magistrate Judge Lefkow recommended that the court deny PDC's motion for summary judgment. The court adopted the report and recommendation on September 6, 1990. PDC filed a motion to reconsider. Two weeks later, defendants filed a joint motion for summary judgment. The court referred both motions to Magistrate Judge Lefkow. The magistrate judge issued her report on March 28, 1991, recommending that PDC's motion to reconsider be granted in part and denied in part, and that defendant's motion for summary judgment be granted in part and denied in part. With respect to PDC's claim that the Wisconsin Agreement covers all products sold by defendants (and not simply pacemakers and lenses), the magistrate recommended that the court grant PDC's motion to reconsider. The magistrate judge recommended denying defendants' motion for summary judgment on this issue. In regard ...

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