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Discom International, Inc. v. R.G. Ray Corp.

November 10, 2010

DISCOM INTERNATIONAL, INC., PLAINTIFF,
v.
R.G. RAY CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Judge James B. Zagel

MEMORANDUM OPINION AND ORDER

Plaintiff filed a six-count complaint alleging that Defendant breached its oral contract when it unilaterally refused to pay it certain sales commissions. Plaintiff's complaint alleges breach of contract, or in the alternative, unjust enrichment, quantum meruit, or promissory estoppel. Additionally, Plaintiff alleges violations of California, Arizona, and Oregon Sales Representative Acts. Defendant filed a counterclaim for violations to the Illinois Trade Secrets Act, 765 § ILCS 1065/1, et seq. and now move to dismiss Plaintiff's complaint in its entirety. For the following reasons, Defendant's motion is granted in part and denied in part.

I. STATEMENT OF FACTS

Discom International, Inc. ("Discom") acts as an independent sales representative on behalf of manufacturers to market and solicit orders for their products. In return, Discom earns commission payments on sales made. In August 2003, Discom began working for R.G. Ray Corporation ("Ray") as a sales representative. Ray is a custom clamp manufacturer. Discom solicited the sale of Ray products in an exclusive assigned territory that included the states of California, Washington, Nevada, Oregon, and Arizona ("the Territory"). Discom's only compensation was a commission received on each sale of Defendant's clamp products. Discom was solely responsible for expenses it incurred in the marketing of Defendant's products and maintenance of sales. From 2003 to 2008 Discom provided its professional services to Ray. In addition to serving its exclusive assigned territory, Discom also assisted in making sales to customers who were not in its territory at Ray's request. Discom was terminated by Defendant in November, 2008 allegedly due to "financial considerations." The termination became effective January 1, 2009.

Discom and Ray entered into an oral contract in August 2003, whereby Discom agreed to act as Ray's exclusive sales representative in the Territory and to market and sell Defendant's products to other agreed-upon accounts outside of the Territory. Ray agreed to pay Discom 1% commission for all sales in the Territory (or to all agreed-upon customers located outside the Territory) and a 2.5% commission for sales to new customers or to existing customers on their new programs.

Discom and Ray modified their oral contract and increased Discom's commission rate to 1.5% for sales to existing customers, and to 5% for sales made to new customers, or for sales made to existing customers on their new programs. This modification became effective in November 2004. Discom alleges that these modifications were confirmed in a written memorandum. The parties' oral agreement contained no restriction on Discom's entitlement to receive commission payments, nor any limit on the commissions that Discom would receive post-termination for sales secured through its efforts prior to termination. The parties' contract was for an indefinite term, subject to either party's right to terminate.

Beginning on May 2005, Ray stopped paying Discom commissions for sales made to Pentair Pool Products. In June 2006, Ray unilaterally reduced Discom's commission for new programs and sales made to Hayward Pool from 5% to 2.5%. Further, in November 2008, Ray informed Discom that no commission would be made to Discom after December 2008 on sales to PACCAR, its European subsidiary DAF, Daimler Trucks, Honeywell International, or Perkins Engine. Plaintiff now seeks commissions from all sales that were improperly withheld including sales forecasted for the years 2009 through 2014.

II. STANDARD OF REVIEW

A Motion to Dismiss under Rule 12(b)(6) requires that I analyze the legal sufficiency of the complaint, and not the factual merits of the case. Autry v. Northwest Premium Servs., Inc., 144 F.3d 1037, 1039 (7th Cir.1998). I must take all facts alleged in Plaintiffs' complaint as true and draw all reasonable inferences from those facts in favor of Plaintiffs. Caldwell v. City of Elwood, 959 F.2d 670, 671 (7th Cir.1992). Plaintiffs, for their part, must do more than solely recite the elements for a violation; they must plead with sufficient particularity so that their right to relief is more than a mere conjecture. Bell Atl., Corp. v. Twombly, 550 U.S. 544, 555 (2007). Plaintiffs must plead their facts so that, when accepted as true, they show the plausibility of their claim for relief. Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). Plaintiffs must do more than plead facts that are "consistent with Defendants' liability" because that only shows the possibility, not the plausibility, of their entitlement to relief. Id. (internal quotations omitted).

III. DISCUSSION

A. Count I Is Not Precluded By A Written Contract*fn1

Plaintiff asserts a claim for breach of oral contract and seeks the payment of certain sales commissions. Specifically, Plaintiff seeks payment for sales made to Pentair Pool Products, PACCAR, DAF, Daimler Trucks North America, Honeywell, and Perkins Engine. Plaintiff also asserts that it is entitled to a commission of 5% regarding new programs and sales made to Hayward Pool. Finally, Plaintiff alleges that it is owed commissions for sales made to agreed upon customers outside of the Territory.

Defendant moves to dismiss Plaintiff's claim for breach of oral contract on three grounds. First, Defendant argues that count I fails to state claim for breach of oral contract because a written contract, not an oral contract, governed the relationship between the parties. Next, Defendant argues that even if the alleged oral agreement governed the parties, Plaintiff's breach of contract claim must fail because Plaintiff's conduct effectively modified their agreement. Finally, Defendant contends that Plaintiff's breach of oral ...


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