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R3 Composites Corp. v. G&S Sales Corp.

United States District Court, N.D. Indiana, Fort Wayne Division

February 28, 2019

R3 COMPOSITES CORPORATION, Plaintiff/Counter-Defendant,
G&S SALES CORP., Defendant/Counter-Plaintiff.



         This matter comes before the Court on Plaintiff R3 Composites Corporation's Motion for Summary Judgment [ECF No. 37], filed on August 24, 2018. The Defendant, G&S Sales Corp., filed a response [ECF No. 45] on September 28, 2018. On October 12, 2018, the Plaintiff filed a reply [ECF No. 50] in further support of its Motion for Summary Judgment. The Defendant also filed a Motion for Hearing [ECF No. 49] regarding the Plaintiff's Motion for Summary Judgment.


         The parties' dispute centers around whether R3 breached an agreement to pay commissions to G&S for business that G&S procured on behalf of R3.

         A. Start of the Business Relationship Between R3 and G&S

          In 2001, Roy Carver founded R3 to custom mold fiberglass parts. Around 2010, R3 purchased property in Grabill, Indiana, which included several hydraulic presses located on the property. Carver bought the property with the intent to use the hydraulic presses to manufacture grain storage bins. Shortly thereafter, Carver reached out to Steven Stefani, an equipment broker, to either sell the hydraulic presses located on the property or to find potential customers for R3 in need of molding work. Stefani and Carver had conversations discussing the potential to have Stefani act as a sales representative for R3 working on commission. Around the same time, Stefani was in communication with a former colleague, Mark Glidden, about joining him to find potential customers for R3's molding business. Glidden agreed to help Stefani procure business for R3.

         Glidden and Stefani first discussed the possibility of incorporating a new company called G&S Sales Corporation.[1] Glidden and Stefani also discussed that any commission payments G&S earned would be split in half between Glidden and Stefani. Glidden ultimately expressed a desire to form his own company that would act as a subcontractor assisting G&S on its work for R3. Subsequently, Stefani's wife, Patricia Stefani, incorporated G&S Sales Corporation as the sole incorporator and as a 50% owner. Steven Stefani owned the remaining 50% of G&S.

         On January 31, 2011, Glidden sent an email to Carver with a proposed written sales representative agreement between R3 and G&S. The language pertaining to the proposed sales commission arrangement stated that R3 would pay G&S a commission fee of 5% for any business G&S brought to R3. The parties did not enter into this proposed agreement.

         B. Written Agreement

         On February 10, 2011, R3 and G&S entered into a Non-Disclosure Agreement (“NDA” or “Agreement”). Glidden signed the Agreement on behalf of G&S as “Managing Partner.” The language pertaining to commissions states:

12. General Business Agreements.
12.1 New Jobs. G&S will assist R3 in starting up new jobs sourced by G&S through the pre-production approval process until such approval is given by the client/customer.
12.2 Commission. If G&S obtains jobs for R3, the parties will attempt to develop an agreement whereby G&S is paid a commission with a guideline being a 5% commission with the precise commission rate to be negotiated on a job-by-job basis. A commission will also be paid for any and all extensions, renewals, subsequent phases or additional terms of any such job obtained by G&S for R3, the amount of which to be determined on a job-by-job basis. Any commissions to be paid to G&S in this Section 12.2 are predicated upon G&S fulfilling all of its obligations under this Agreement, including without limitation, those provisions of Sections 12.3 immediate [sic] following.
12.3 Existing Jobs. During the term of this Agreement and thereafter, G&S agrees not to interfere with any existing R3 jobs by attempting to transfer such work to other molders and this provision shall remain in place throughout the existence of any existing production contract and all extensions, renewals, subsequent phases or additional terms thereof.
13. Termination. Either party may, at any time, terminate this Agreement effective upon written notice to the other party. Notwithstanding such termination, the obligations of each party as set forth in Section[ ] . . . 12 of this Agreement shall survive termination of this Agreement.

(See Def.'s Mem. in Opp. to Mot. for Summ. J., NDA, Ex. 9, §§ 12-13, ECF No. 47-11 (emphasis added).)

         C. Aquatic Bath Business

         Before the Agreement was signed, Stefani raised the possibility of securing Aquatic Bath as a customer for R3's molding business. On June 8, 2011, Aquatic and R3 signed a purchase and sales agreement that required R3 to manufacture and sell certain Aquatic products.

         As R3's Aquatic business was not as profitable as anticipated, G&S agreed to temporarily forgo sales commissions. In February 2012, G&S proposed limiting the Aquatic commission payments to 10% of R3's profit from the Aquatic business until monthly sales reached $600, 000, at which point the commission would be set to 5% of sales. R3 did not accept the offer.

         After several months of back-and-forth, Stefani in June 2012 stated that he was interested in the “long term” and was willing to “figure something out” on the Aquatic business until the Aquatic business became more profitable for R3. A March 22, 2013, email chain between the parties appears to reference an agreement between the parties that G&S would be paid a commission of 3% on the Aquatic business when the monthly sales to Aquatic reached $600, 000. (Def.'s Mem. in Opp. to Mot. for Summ. J., Ex. 18, ECF No. 47-20.)

         D. R3 Hires Glidden as Plant Manager

         At some point during the R3 and Aquatic negotiations, Carver contacted Glidden to offer him a position as a plant manager at ¶ 3's Grabill location. R3 ultimately hired Glidden on June 1, 2011. Although Stefani expressed conflict of interest concerns with Glidden accepting the position while still working for G&S to procure business for R3, he eventually acquiesced to allow Glidden to take the role as a plant manager for R3.

         E. Reductions to ...

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