The theme of this ERA SoCal roundtable forum was “Strengthening Your Hand,” and featured Eric’s presentation on ways that business owners can improve their contracts, business relations and collection rates. The focus was on avoiding disputes that can lead to litigation, and being prepared to present a strong hand if a dispute does arise.
The open forum included many thoughtful questions and comments by business owners, who shared their industry experiences and challenges they have faced. In addition to outlining important terms that should be included in written contracts, discussion also concerned the application of the Independent Wholesale Sales Representatives Contractual Relations Act, California Civil Code §§ 1738.10 et seq., a “pro-representative” law in California that requires manufacturers to have a signed written contract with sales reps, and provide written accountings with every payment of commissions. When a manufacturer willfully fails to comply with requirements of the Act, the sales rep agency is entitled to “treble damages” – three times the unpaid commissions – plus attorney fees.
Eric has handled commission matters for many years, and was lead trial attorney in Reilly v. Inquest Technology. The Reilly case was the first precedent in California that enforced the full remedy of treble damages under the Act, resulting in $2.1 million jury verdict becoming a judgment for $6.2 million, plus attorney fees and interest. ERA and its partner organization, Manufacturers’ Agents National Association (MANA), were important sponsors of the Act and similar legislation enacted in about 36 other states to protect the rights of independent wholesale sales representatives. CK&E is proud to be able to help sales representatives create contracts that protect their rights to be paid for their services, and to help them enforce their rights when disputes arise.
The article was written by Conkle, Kremer & Engel attorney Eric S. Engel and CK&E’s summer law clerk Ryan Fisher, a student at University of California, Irvine Law School. CK&E is proud to be a member of ERASoCal, which is a trade association of independent manufacturers sales representative firms in Southern California’s vibrant electronics industry. Eric has significant experience in sales commission claims, and he was lead trial counsel in the case that resulted in the first published decision in California applying the special protections of Civil Code Section 1738.10 et seq., including treble damages and attorney fees for unpaid sales commissions: Reilly v Inquest Court of Appeal Decision, Case No. G046291 (July 31, 2013)
Eric has been recognized as a “Rep Savvy Attorney” by the Manufacturers & Agents National Association (MANA). Rep Savvy Attorneys are acknowledged for their acumen in handling disputes involving principals and agents concerning independent commissioned sales relationships. In that role, Eric is pleased to offer his legal insight through legal articles published in MANA’s monthly magazine, Agency Sales, which receives national distribution. Most recently, Eric wrote an article on preserving evidence to support your claims and defenses when a dispute arises: Prove It! Why Reps and Principals Need to Keep the Evidence, Agency Sales Magazine, May 2015
The Prove It! article focuses on the need to document the significant events that arise in parties’ commercial relationships, starting with a signed written contract that correctly states the terms of the parties’ agreement in a straightforward manner. Then, events during performance, such as exceptions to the contractual terms and issues in obtaining performance by the other party, should be documented in plain and clear English by email or even by good old letters or faxes. Documents that were created during the relationship should be carefully saved – a document that once existed but cannot be located can be as bad or worse than a document that never existed in the first place, as it raises the potential for spoliation of evidence penalties that can be very serious. The Prove It! article is written for agents and principals, but the information contained in the article can be applied to almost any commercial situation.
CK&E attorneys are well versed in commercial disputes of all types and are ready to help you document your position and maintain good records of what you documented, so that you can position yourself as strongly as possible if a dispute arises.
This year’s Attorney Forum covered a wide range of topics including conflicts of interest for sales representatives who represent competing lines, aspects of international law that impact sales representative relationships, successor companies and liability, valuation of rep firms, differences in manufacturers’ representative laws among states, ownership of customer lists and the recent amendment to the Minnesota Commission Protection Act.
CK&E regularly represents manufacturers’ representatives with respect to disputes relating to commissions, including a 2011 victory on behalf of its sales representative client that resulted in the published decision Reilly v. Inquest Technology, in which the Court of Appeal affirmed a $6.2 million judgment in favor of the sales representative under special California laws protecting sales representatives. CK&E is proud to be a member of MANA and is honored to be recognized by the leading association of manufacturers and agents as specialists in the area of rep law.
In Rennick v. O.P.T.I.O.N. Care, the Ninth Circuit Court of Appeal considered a party’s contention that a deal was struck when, after months of discussion and a 4-hour negotiating session, the parties “got up and circulated around the room and shook hands with each other on having made the deal.” The Rennick case observed that a jury could reasonably find that “the handshake was confirmation of a contract, or that it was an expression of friendship and the absence of ill will after a day of hard bargaining.” So, given the uncertainty of its meaning, should we stop shaking hands when discussing business? Of course not. Indeed, the Court noted that, “By custom, it is a rude insult to reject an outstretched hand in most circumstances, and to do so at the end of a long business meeting would likely prevent a future deal.”
The issue of the parties’ intent upon shaking hands is not a small one. In August 2014, Charles Wang, the owner of the New York Islanders was sued by a hedge fund manager who claimed that the parties had shaken hands on a deal to buy the NHA hockey team for $420 million, and that Wang had breached their agreement by demanding more money. The frustrated purchaser sued to either enforce an apparently unsigned 70-page agreement to conclude the sale of the team, or recover a $10 million break up fee that he claims was among the terms agreed upon with a handshake.
Courts struggle with this kind of issue, with or without handshakes. In contract disputes, courts try to enforce the parties’ expressed intentions. For example, where the parties clearly express that they do not intend to be bound until they sign a formal written contract, courts will try to honor that intention by finding that no contract exists unless a written agreement was fully signed. Indeed, negotiating parties usually can express almost any manner of requirement before an agreement becomes enforceable. Quentin Tarantino’s civil war era film Django Unchained featured a climactic scene in which the odious character Calvin Candie extorted Dr. King Schultz into signing an outrageous contract, and then insisted that the signed contract was meaningless unless Dr. Schultz also shook his hand. As a general point of law that was a doubtful proposition even in Mississippi in 1858, but if the parties had been careful to express that intention in their written agreement it probably would have been an enforceable prerequisite to the validity of the contract.
In reality, too often there is no such clear delineation. If the parties do not eliminate such possibilities by an express statement of their intentions, oral expressions or an exchange of emails or text messages might create an enforceable agreement. That is because, when the parties aren’t careful about expressing their intentions, courts are left to divine whether the parties intended an agreement with or without signatures on paper. Courts consider testimony about what was said and evidence of what was written and the activities that took place before, during and after the time of the purported agreement to draw conclusions about what the parties’ intentions really were. Often, the parties’ contemporaneous correspondence is the most important evidence of whether the parties intended to have a binding agreement immediately, or whether the parties intended only to express their good will or intention to negotiate further.
To avoid unnecessary disputes, a cautious businessperson should make a point to express clearly his or her intentions. The best approach is to plan ahead and be as clear as possible in a written expression as to when the deal is considered enforceable. The Conkle law firm counsels and represents businesses in negotiations to achieve those ends, or in disputes that can arise when the businesses handled negotiations themselves and come to Conkle, Kremer & Engel attorneys only after things did not turn out as intended.
What do you do when someone else has taken your trademark and used it in an Internet domain name? Just accept it, even if they’re offering competing products and services? Do you have to go to court and file a trademark infringement lawsuit? Fortunately, these questions all have the same answer: No. You don’t have to accept it, and there are faster and less expensive ways to force the cybersquatter to give up the infringing domain name.
CK&E recently demonstrated this by helping its client, the Manufacturers’ Agents National Association (commonly known as MANA) defeat a cybersquatter and force the squatter to transfer the “manaonline.com” domain name to MANA.
All domains ending in a generic Top Level Domain (gTLD) – such as .com, .org or .net – are automatically subject to ICANN’s Uniform Domain Name Dispute Resolution Policy, an streamlined arbitration process referred to as UDRP. UDRP provides an efficient method for a trademark owner to resolve its rights to a domain name that uses a substantial part of the trademark or is otherwise confusingly similar to the trademark. Instead of going to court to sue for trademark infringement, the business owner can file a complaint online with one of several authorized arbitration providers, such as the National Arbitration Forum (NAF) or the Arbitration and Mediation Center of the World Intellectual Property Organization (WIPO). Through a process that is conducted entirely online, these arbitration providers are empowered to force a domain name registrar to transfer a domain to its rightful owner. This is especially useful if the cybersquatter is in some remote offshore location and cannot be reached by regular legal process, because the domain name registrars are always available and can be directed to transfer the domain name.
To force the transfer of a domain through UDRP, the business owner must show: (1) the domain name is confusingly similar to a trademark owned by the business; (2) the current registrant has no rights or legitimate interests in the domain name; and (3) the domain name has been registered and is being used in bad faith.
In the case in which CK&E helped MANA, another company called “Dvlpmnt Marketing” based out of Saint Kitts and Nevis, in the Caribbean, had registered the “manaonline.com” domain name – which was essentially identical to MANA’s “manaonline.org” Dvlpmnt had used the domain name to park a webpage featuring “pay-per-click” links to other websites offering services competing with those offered by MANA. Dvlpmnt owns tens of thousands of domains, and has been the subject of several NAF and WIPO proceedings in the past.
CK&E attorney Zachary Page initiated a Complaint with NAF on behalf of MANA, charging Dvlpmnt with cybersquatting by registering and maintaining in bad faith, and with no legitimate rights, the manaonline.com domain name that was confusingly similar to MANA, whose genuine website is found at manaonline.org. The different gTLD extensions, .com and .org, are legally insignificant in the UDRP process – effectively, the domain names were regarded as identical. After the UDRP hearing, the NAF Panel held:
“Considering the totality of the circumstances present here—including the similarity between the disputed domain name and Complainant’s domain name, and the content of the website to which the disputed domain name resolves—the Panel infers that Respondent was aware of Complainant when it registered the domain name and that Respondent is using the domain name in a manner intended to exploit confusion with Complainant’s website and service mark. These inferences are indicative of bad faith.”
A successful UDRP claimant generally has a choice to have the domain registration cancelled or to have the domain name transferred to the claimant. It is almost always better to have the domain name transferred, so that it cannot be taken by another cybersquatter in the future. CK&E is proud to have helped its client, MANA, successfully force the cybersquatter to transfer the manaonline.com domain name to MANA.
The article profiles Plaintiff Peter Reilly, a sales representative who was denied his commissions. Author Jack Foster chronicles how CK&E lawyers Eric S. Engel and H. Kim Sim marshaled the facts and developed the law of the California’s Independent Wholesale Sales Representatives Contractual Relations Act to win a treble damages judgment for Mr. Reilly.
The Independent Wholesale Sales Representatives Contractual Relations Act is a little-known statute that requires a signed written contract containing specific terms in some commission agreements between manufacturers and sales representatives. A willful failure to have a written contract that complies with the Act, or to account for and pay commissions as required by the written contract, can result in an award to the sales rep of three times the amount proved at trial, in addition to attorney fees. In the Reilly v. Inquest case, the jury awarded the sales representative $2.1 million for unpaid commissions, which was trebled by the Court to more than $6.2 million.
The California Court of Appeal affirmed the award in full. The Reilly v. Inquest Technology decision was unprecedented, because it is the first published decision to endorse the full scope of remedies available under the Independent Wholesale Sales Representatives Contractual Relations Act.
The Agency Sales Magazine article follows an article about Reilly v Inquest that appeared in the Los Angeles Daily Journal.
CK&E’s lawyers are well versed in issues affecting manufacturers and sales representatives. CK&E lawyers litigate and resolve disputes over sales commissions and terminations, and use that knowledge to help manufacturers and sales representatives draft more effective contracts. CK&E is a member of MANA and the Electronics Representatives Association (ERA).
The ERA roundtable forum included lively and thoughtful questions and comments by business owners and managers, directed toward improving their ability to collect commissions owed for their sales representatives’ work promoting sales for manufacturers. In addition to outlining important terms that should be included in written contracts, much of the discussion concerned the application of the Independent Wholesale Sales Representatives Contractual Relations Act, California Civil Code §§ 1738.10 et seq. Under the Act, a manufacturer must have a signed written contract with the sales rep containing particular terms required by the Act, and the manufacturer must provide a written accounting with every payment of commissions. When a manufacturer willfully fails to comply with the requirements of the Act, the sales rep is entitled to three times his or her unpaid commissions and other damages, plus attorney fees.
Eric Engel and Kim Sim were the trial attorneys in Reilly v. Inquest Technology, the first precedent in California that enforced the full remedy of treble damages under the Act. In Reilly, application of the Act led to a $2.1 million jury verdict becoming a judgment for $6.2 million, plus attorney fees and interest. ERA and its partner organization, Manufacturers’ Agents National Association (MANA), were important sponsors of the Act and similar legislation enacted in about 36 other states to protect the rights of independent wholesale sales representatives. CK&E is proud to be able to help sales representatives create contracts that protect their rights to be paid for their services, and to help them enforce their rights when disputes arise.
The proceeds from this event benefited Operation Homefront, California. Through generous and widespread public support, and a collaborative team of exceptional staff and volunteers, Operation Homefront aspires to be the provider of choice for emergency financial aid, support and other assistance to the families of our service members and wounded warriors. For more information, and to help support to this very worthwhile cause, visit Operation Homefront California.
The Golf Tournament was a great day and fantastic event benefiting an important cause. It also gave CK&E an opportunity to connect with our friends in the Electronics sales community.
ERA is a trade association of professional manufacturers’ representative firms serving the high tech industry. Members include independent businesses selling products for multiple manufacturers, with several hundred sales engineers from more than one hundred sales offices throughout Southern California. CK&E is an ERA-SoCal Chapter associate member. For more information visit ERA-SoCal.
We look forward to future events and participation with both ERA-SoCal and Operation Homefront.