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Hammond Group, Ltd. v. Spalding & Evenflo Co. Inc.

November 8, 1995

THE HAMMOND GROUP, LTD., AN ILLINOIS CORPORATION,

PLAINTIFF-APPELLANT,

v.

SPALDING & EVENFLO COMPANIES, INC., A DELAWARE CORPORATION,

DEFENDANT-APPELLEE.

THE HAMMOND GROUP, LTD., AN ILLINOIS CORPORATION,

PLAINTIFF-APPELLANT,

v.

AJAY ENTERPRISES CORPORATION, A WISCONSIN CORPORATION,

DEFENDANT-APPELLEE.



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. Nos. 87 C 10098 & 88 C 9954--John A. Nordberg, Judge.

Before CUMMINGS, FLAUM and ROVNER, Circuit Judges.

CUMMINGS, Circuit Judge.

ARGUED SEPTEMBER 14, 1995

DECIDED NOVEMBER 8, 1995

In December 1987 defendant Spalding & Evenflo Companies, Inc. ("Spalding") terminated plaintiff, the Hammond Group, Ltd. ("Hammond"), as a manufacturer's representative for certain Spalding sporting goods. Thereafter, Hammond filed several amended complaints. The second amended corrected complaint alleged seven counts against Spalding. The trial court granted defendant summary judgment on three of the counts: (1) restitution for expenses incurred by Hammond; (2) breach of an implied covenant of good faith and fair dealing; and (3) tortious interference with a Hammond employee. Plaintiff does not contest the ruling on those counts. In December 1988, Hammond also filed a lawsuit against Ajay Enterprises Corporation ("Ajay"), a licensee for certain Spalding products, on the ground that Ajay breached an oral employment contract with the plaintiff and had failed to pay commissions on sales that were procured by plaintiff and completed after termination of the contract.

In March 1993, a jury trial commenced on the remaining four counts against Spalding. Count I alleged that Spalding had breached an oral employment contract for a term of definite duration. Count II alleged that Spalding failed to pay commissions to Hammond for sales that had been procured but were made after Hammond had been terminated. Count III alleged that Spalding breached a promise to pay Hammond commissions (shortfalls) resulting from a modification of Spalding's commission structure, and Count IV alleged that Spalding's failure to pay "procuring cause" commissions violated the Illinois Sales Representative Act (820 ILCS 120/1).

On March 24, 1993, after the close of plaintiff's case, Judge Nordberg granted Spalding's motion for directed verdict because plaintiff failed to present sufficient evidence for a jury to find in its favor. After the district judge directed a verdict for Spalding, Ajay filed a motion for summary judgment on the ground of issue preclusion. On April 30, 1993, the district judge granted that motion. After Hammond's motion for a new trial in the Spalding case was denied, it filed a timely notice of appeal in both the Spalding and Ajay cases. This Court has jurisdiction to hear those appeals pursuant to 28 U.S.C. sec. 1291.

FACTS

Spalding is a Delaware corporation that manufactures and sells sporting goods under the "Spalding" name. Ajay is a Wisconsin corporation and a licensee of Spalding for certain sporting goods. Plaintiff is an Illinois corporation serving as a manufacturer's representative for various companies in the sporting goods and leisure products industry.

In 1982, Spalding and Hammond entered into a written Manufacturer's Representative Agreement under which Hammond would sell Spalding goods in certain Midwest states. Similar written agreements were then entered into in 1983 and 1984, increasing the size of the Hammond territory. Each agreement included the following provision as to the payment of commissions and termination of the agreement:

In the event of termination of this Agreement, SPALDING shall be obligated to pay commissions only with respect to orders which: (1) have been accepted by SPALDING prior to the effective date of termination; (2) which are shipped prior to or within sixty (60) days after the effective date of termination; and (3) otherwise would be payable hereunder.

The written agreements expired by their own terms at the end of each year and contained a provision that they would not be extended unless in writing.

Plaintiff's president, Mr. Hammond, testified that in October 1984 the parties entered into an oral agreement to commence on January 1, 1985 under which plaintiff would continue to serve as a manufacturer's representative for Spalding. According to Mr. Hammond, Spalding vice-president, Jack Lacey, told Hammond that the oral agreements were to continue until plaintiff was informed that it did not have a satisfactory sales performance. In that event, plaintiff would be told that "the following year may be the last year should we not improve our performance." [Tr. v. XV, p.51]. Hammond testified that apart from a minor change the parties continued to operate under the terms of the previous written agreements.

At a national sales committee meeting in the fall of 1984, Spalding announced it was modifying the terms of its commission structure in order to create incentives for manufacturer's representatives to sell to "smaller dealers and the court sport business." [Supp. App. 104]. Hammond initially agreed to those terms, but a year later complained that the new "tiered" commission structure was flawed. Hammond testified that Spalding's National Sales Manager, William McFeeters, stated that the 1984 commission change was not intended to lead to reduced commissions, but that if it did happen Spalding would find ...


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