Snider & Fischer: Maryland Lawyer, Employment and Labor Law, Employment Discrimination

DALLAS MEDICAL DISTRIBUTORS, LTD.,      )
                                                          )
                                                          )
                              Plaintiff,
                                                          )
                        v.                               )            Case No. JMS-01-2565
                                                          )
AMERICAN MEDICAL, INC.,
                                                          )
                            Defendants,             )

STATEMENT OF POINTS AND AUTHORITIES IN SUPPORT OF
PLAINTIFF’ DALLAS’S, OPPOSITION TO DEFENDANT’S
MOTION TO DISMISS

Plaintiff, DALLAS MEDICAL DISTRIBUTORS, LTD., (“Dallas”) through its undersigned counsel and pursuant to Rule 12 of the Federal Rules of Civil Procedure and Local Rule 105, hereby submits its Statement of Points and Authorities in opposition to Defendant’s motion to dismiss plaintiff’s action.

Defendant’s position rests with the integration clause. Plaintiff does not dispute the existence of the clause, instead Plaintiff disputes Defendant’s interpretation of the clause’s meaning. Plaintiff contends that her actions were entirely consistent with the integration clause and that integration clause provided for plaintiff to continue selling the defendant’s products from November 16, 2000 through December 31, 2000.

The first contract executed between the parties occurred June 2, 1999. That contract outlined the rights and duties of both parties in that Dallas would serve as the defendant’s sales agent. Listed in the contract are the products Dallas was authorized to sell and the territory it was to cover.

According to the affidavit of Jeffrey R. Barch, President of Dallas, on November 6, 2000, the defendant sent a letter to Mr. Barch notifying him of the defendant’s intention to terminate the agreement (the affidavit and exhibits are annexed hereto as exhibit “A”). The letter squarely states: “ We propose, in the interest of a smooth transition, that you instead work through December 31, and we will honor commissions on sales through January 31. This was immediately signed by Mr. Barch and sent back to American Medical.

This arrangement was offered to Dallas as part of a compromise between the parties, since Dallas had challenged the grounds for American Medical’s decision to terminate Dallas. According to Mr. Barch, the defendant did not have legal justification to terminate Dallas.

Dallas understood the arrangement to mean that Dallas would continue actively pursuing sales for the defendant from November 16, 2000 through December 31, 2000. For any sales commitments Dallas obtained during the month of December 2000 that were ordered by January 31, 2001 would be honored by American Medical.

Mr. Barch states in his affidavit, that the system for selling the parties had in place consisted of a Dallas sales agent obtaining a commitment to purchase a product from American Medical. The sales agent or the customer would then phone in the sale to the customer service department at American Medical, whose responsibility it was to record the sale. If American Medical approved of the sale, the medical equipment would be delivered to the customer.

Mr. Barch further explained that in his industry, it is quite usual for customers to commit to buying equipment in December and then phone in the order in January, due to a whole host of accounting and other reasons. In fact, Hans Mullen told him that the 13(c) list containing the specific sales and specific customers should be sent by December 24, 2000, as they would likely record all January sales. This assurance was one of the driving forces behind the arrangement offered to Dallas in his November 6, 2000 correspondence.

On November 29, 2000, the parties executed a release of the prior aforementioned November 6, 1999 agreement. It was at least, Mr. Barch’s intention to incorporate the November 6, 2000 letter into the release.

The language of the release itself acknowledges this arrangement. The agreement states:

A. On or about June, 1999, DALLAS and AM entered into a written Sales Representative Agreement (“Agreement”).

B. On or about November 6, 2000, AM gave DALLAS notice of its intent to partially terminate the agreement.

C. In conjunction therewith, AM and DALLAS entered into discussions regarding the terms and conditions of the termination.

D. In order to prevent a dispute between the parties, and in order to resolve disagreements between the parties regarding their mutual rights, duties and obligations under the agreement and termination of the agreement, it is mutually desired by the parties that the terms and conditions of termination be agreed to without dispute, that the Agreement be terminated in its entirety and that all other rights, duties and obligations between the parties of every kind whatsoever be terminated, except as expressly stated herein, upon the terms and conditions described in this Release.

Recital “A” notes that every time the word “Agreement” is used it is meant to reflect the June 2, 1999 written Sales Representative Agreement. Recital “C” squarely establishes that in spite of that agreement’s termination, additional rights, duties and obligations shall exist between the parties.

The subject paragraph of the release upon which defendant so heavily relies states:

Termination of Agreement
The agreement is terminated in its entirety as to all territories,

This language reflects the assurances provided by Hans Mullen to Mr. Barch. Defendant would have this court believe that this language indicates that DALLAS was completely terminated as of November 16, 2000. However, a careful reading of the termination clause indicates that the language “the agreement is terminated:” refers to the original November 9, 1999 agreement. Not explicitly stated was that for the next six weeks, the parties would be governed by the release. However, the very next sentence permits Dallas to list specific sales that will close on or prior to December 31, 2000. This language corresponds almost exactly with the November 6, 2000 letter proposing that Dallas “work through December 31, 2000.” The final sentence in the termination clause also serves as almost a perfect mirror to the to the terms of the letter. That sentence states that if AM receives and accepts any such order on or before January 31, 2001, Dallas will be entitled to the commission. The letter stated “we will honor commissions on sales through January 31, 2001.“ Mr. Barch understood both to mean that if products were ordered by January 31, 2001, Dallas would be entitled to the commission.

The complaint alleges that the contract provided for Dallas to continue its sales efforts through December 31, 2000[1] and that Dallas continued to make these efforts. Pursuant to the contract, it is entitled to the commissions regarding orders accepted by the defendant on or before January 31, 2001.

The seminal California case pertaining to this litigation is Pacific Gas & E. Co. v. G. W. Thomas Drayage etc. Co., 69 Cal.2d 33, 40 [69 Cal. Rptr. 561, 442 P.2d 641, 40 A.L.R.3d 1373]. (1968). In Pacific Gas, the Supreme Court of the State of California delved into the appropriateness of extrinsic evidence with regard to written contracts. In citing seven prior California cases, the court squarely followed the long standing rule that extrinsic evidence may be used to explain the meaning of a written agreement even if that agreement appears to be clear and unambiguous on its face. Furthermore, the court held that the admissibility of such evidence hinges upon whether such evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible.

Id. at 645, citing, Universal Sales Corp. v. California Press Mfg. Co., supra, 20 Cal.2d 751, 776 (concurring opinion); see also, e.g., Garden State Plaza Corp. v. S.S. Kresge Co. (1963) 78 N.J. Super. 485 [189 A.2d 448, 454]; Hurst v. W.J. Lake & Co. (1932) 141 Ore. 306, 310 [16 P.2d 627, 629, 89 A.L.R. 1222]; 3 Corbin on Contracts (1960 ed) 579,,pp. 412-431; Ogden and Richards, The Meaning of Meaning, op.cit supra 15; Ullmann, The Principles of Semantics, supra, 61; McBaine, The Rule Against Disturbing Plain Meaning of Writings (1943) 31 Cal. L. Rev. 145.

The Court went on to reverse a lower court decision, which barred extrinsic evidence regarding the meaning of an indemnification clause. The plain meaning of the agreement indicated that the Pacific Gas defendant would be liable to indemnify the plaintiff only for third party claims. The California Supreme Court permitted parol evidence to extend the indemnification clause to damage caused to plaintiff’s property.

Furthermore, the California common law has established that the precedent set forth in Pacific Gas should be applied even to an agreement that contains an integration clause. McLain v. Great American Ins. Companies, 208 Cal App 3d 1476 at 1486.

The McLain holding along with another California case Rainer Credit Company v. Western Alliance Corp., 171 Cal. App. 3d 255; 1985 Cal. App. Lexis 2407; 217 Cal. Rptr. 291 (1985) are directly on point and most effectively demonstrate these principles. In McLain, an employment contract stated unequivocally that the plaintiff employee could be terminated with or without cause. The plaintiff employee was terminated without cause. Plaintiff employee brought a breach of contract action contending that he was terminated without cause. Defendant argued that the integration clause barred parole evidence and that the written word permitted termination without cause.

In permitting the extrinsic evidence to establish that the plaintiff employee could not be terminated absent cause, the Court reasoned that such evidence, consisting of assurances contained in a separate employee handbook, as well as assurances by the hiring manager that the plaintiff employee would not terminated without cause after completing ninety days of employment. Consequently, it appears that the Court permitted parol evidence to explain that the language, “terminated with or without cause” are taken to mean, that an employee could be terminated with or without cause for the first ninety days of employment, then only for cause after this period.

The second case, Rainer Credit Co. v. Western Alliance, Supra, emphasizes the same principle. In that case, the parties negotiated a sales contract in which the broker would earn commissions for sales. Throughout the parties oral dealings the term “commissions” were used. However, the final version of the signed agreement exchanged the word “commission” for “compensation for services.” The issue that arose pertained to refunds of sales and specifically whether the sales broker had to return its monies earned for its selling efforts. The sales broker argued that it did not, since it was paid “compensation for services,” rather than “commissions” and as such, any compensation earned was permanently kept. To buttress this argument it claimed the parol evidence rule and as such, it contended an exemption from returning the sales commissions on refunds. However, this argument was rejected by the California Court, ruling that extrinsic evidence was admissible to demonstrate that the parties intended the words “compensation for services” to mean “commissions.”

In the case at bar, it is clear the parties intended different meanings to the release dated November 29, 2000. Plaintiff contends that the agreement reflects an understanding that Dallas would continue selling for the defendant through December 31, 2000 and that the defendant would honor commissions on orders through January 31, 2001. This is indicated by the release; the November 6, 2000 letter; and various assurances given by Hans Mullen to Mr. Jeffrey Barch. The defendant contends that the agreement was completely terminated by November 16, 2000. Plaintiff’s counsel is not aware of the meaning defendant attached to the language, If AM receives and accepts any such order on or before January 31, 2001.”

Most damaging to the defendant’s interpretation of the November 29, 2000 release is that it paid commissions to Dallas for the entire month of November, even after the alleged November 16, 2000 and for part of December 2000

Equally specious, is defendant’s contention that plaintiff did not fulfill Section 13(c) the original agreement that granted Dallas five days to submit a list of potential customers to the defendant, from its termination date. Defendant argues that since the termination date was November 16, 2000, Dallas had until November 21, 2000 to submit this list. The very language of the release contradicts this point by providing Dallas with a December 31, 2000 deadline to submit this list. The plaintiff submitted this list on December 22, 2000.

Finally, on a motion to dismiss, in the interest of justice and assuring that each man gets his day in court, all well-pleaded allegations of material fact are taken as true and construed in a light most favorable to the non-moving party. Nisei v. Clap 4th 1103. In addition, a Rule 12(b)(6) motion to dismiss should not be granted unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim entitling him to relief. Hydranautics v. Filmtec Corp., 70 F. 3d 533, 535-36 (9th Cir. 1996). Notably, all of the defendant’s precedents cited were cases involving summary judgment motions, wherein the plaintiff had a full and fair opportunity to present all of its evidence. In the case at bar, the Plaintiff DALLAS has had no such opportunity.

Point II
Even If The Integration Clause Is
Found To Bar Recovery, Defendant
Waived Its Rights Under The Clause By
Subsequent Inconsistent Conduct

Plaintiff’s causes of action for breach of an implied in fact contract and for unjust enrichment were obviously pled in the alternative. Both the Maryland and California law recognize the legal principle of waiving contractual rights as a basis for given parties to be released from contractual provisions. Specifically, the Maryland Court of Appeals recognizes waiver as the intentional relinquishment of a known right, by action or deed, either expressly or implicitly which conflict and intention to enforce a subject contract provision. Rubenstein v. Jerrerson Nat’l Life, 268 Md. 388, 392, 302 A.2d 49 (1973), citing, Gould v. Transamerican Associates, 224 Md. 285 [167 A. 2d 905 (1961)] ; Food Fair v. Blumberg, 234 Md. 521, 531, 200 A.2d 166 (1964).

The law in California regarding waiver is almost identical to the Maryland common law. Rubin v. Los Angeles Fed. Sav. & Loan Assn. (1984) 159 Cal. App.3d 292, 298 [205 Cal.Rptr. 455]. In Rubin, the Fourth Appellate District for the California Court of Appeals stated the long standing rule that waiver may also result from conduct which is so inconsistent with the intent to enforce the right in question as to induce a reasonable belief that such right has been relinquished. Id. at 298, citing, Medico Dental etc. Co. v. Horton & Converse (1942) 21 Cal.2d 411, 432 [132 Cal.Rptr. 457]; Crest Catering Co. v. Superior Court (1965) 62 Cal.2d 274, 278 [42 Cal.Rptr 110, 398 P.2d 150].

In the case at bar, following the date of the signed release the defendant took at least two actions to indicate to Dallas to continue selling its medical equipment following November 16, 2000. First through its agent Mr. Hans Mullen, it provided assurances to Jeffrey Barch, President of Dallas to continue selling its medical equipment. Second, it provided payment to Dallas for sales that closed after November 16, 2000 and for a portion of the December 2000. Consequently, through these actions the defendant’s conduct was inconsistent with the integration, which according to the defendant’s interpretation barred plaintiff the opportunity to continue selling its products after the alleged termination date.

Therefore, plaintiff has pled in the alternative that an implied in fact contract existed between November 16, 2000 and December 31, 2000 for plaintiff to continue selling its medical equipment for the commission schedule previously used by the parties. A contract consists of an offer and an acceptance. Post v. Gillespie, 149 A.2d 391 (Md. 1959). An offer is any act or expression whose witness or recipient reasonably believes under all prevailing circumstances that a definite bargain has been extended to him and that his invited assent will conclude it. Day v. Amex, Inc., 701 F.2d 1258 (8th Cir 1983). An acceptance is any act or expression, which manifests an intent to ascend to the offer. Gardner Zemke Co. v. Dunham Bush, Inc., 850 P.2d 319 (N.M. 1993). In the case at bar, the defendant’s aforementioned actions demonstrated his willingness to proceed with an arrangement wherein DALLAS would continue selling defendant’s equipment for six weeks and whereby the defendant would compensate plaintiff for same.

Unjust enrichment consists of a benefit conferred by the plaintiff upon the defendant that is appreciated or known by the defendant and which is the defendant accepts or retains and the payment of the benefits value to the defendant is improperly withheld. Mass Transit Admin v. Granite Constr. Co., 57 Md. App. 766, 471 A.2d 1121(1984). The defendant’s aforementioned conduct satisfies all of these elements. It encouraged Mr. Barch and his sales force to continue making sales, “in the interest of a smooth transition.” Additionally, it profited from Dallas’ efforts.

Finally, since plaintiff’s causes of actions for breach of contract and unjust enrichment remain viable, her cause of action under Article 3-604 of the Maryland Code, Labor and Employment Law Section 3-604 and 3-605, which covers failure to pay sales commission also remains.

[1] This is reflected in plaintiff’s amended complaint (annexed hereto as exhibit “B”) which indicates that Plaintiff continued to labor on behalf of the defendant by selling medical supplies and equipment through December 31, 2000 and that Defendant would honor commissions on orders placed through January 31, 2001.