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Controlled Kinematics, Inc. v. Novanta Corp.

United States District Court, D. Massachusetts

November 29, 2017

CONTROLLED KINEMATICS, INC., Plaintiff,
v.
NOVANTA CORP., Defendant.

          MEMORANDUM AND ORDER DENYING MOTION TO DISMISS

          ALLISON D. BURROUGHS U.S. DISTRICT JUDGE

         On June 2, 2017, Plaintiff Controlled Kinematics, Inc. filed suit against Defendant Novanta Corp. seeking recovery of unpaid sales commissions for services rendered. [ECF No. 1] (“Compl.”). Plaintiff asserts several claims, including breach of contract and a violation of Mass. Gen. Laws Chapter 93A. Presently pending before the Court is Defendant's Motion to Dismiss Plaintiff's Chapter 93A claim. [ECF No. 9]. For the reasons set forth below, the Court DENIES Defendant's motion.

         I. FACTS ALLEGED IN THE COMPLAINT

         Plaintiff, an independent sales representative for manufacturers of precision motion control solutions, is based in California. Compl. ¶¶ 1, 11. Defendant, a manufacturer of photonics and motion control components, is a Michigan corporation with its principal place of business in Massachusetts. Id. ¶ 1.

         In 2000, MicroE Systems, Inc. (“MicroE”), a Massachusetts-based company that designs and manufactures precision motion control components, hired Plaintiff to serve as its independent sales agent in California. Id. ¶¶ 14-15. In 2002, Plaintiff and MicroE entered into a written sales contract, under which Plaintiff would be paid a 10 percent commission on sales. Id. ¶ 16. Later, Defendant acquired MicroE. Id. ¶ 22.[1] Following the acquisition, Defendant continued to employ Plaintiff as an independent sales representative for Defendant's line of MicroE products pursuant to the 2002 sales contract. Id. ¶ 18. During the 12-year period from June 2002 until December 2014, Defendant repeatedly reduced the commission rate it paid Plaintiff for its services with regard to MicroE products, but without executing another written agreement with Plaintiff. Id. ¶ 23. The parties entered into negotiations in 2014 and executed a new written sales agreement in December 2014. Id. ¶¶ 25-26.

         In 2001, Applimotion, Inc., a California-based company that manufactures precision motors and motion control technology, also hired Plaintiff to serve as its independent sales representative in California. Id. ¶ 20. Although Plaintiff and Applimotion did not enter into a written sales contract, Applimotion paid Plaintiff commissions on a monthly basis pursuant to an agreed-upon commission rate of 10 percent. Id. ¶ 34. Defendant acquired Applimotion in February 2015. Id. After the acquisition, Defendant continued to use Plaintiff as a sales agent for Applimotion products, and continued to pay the 10 percent commission as previously agreed by Applimotion and Plaintiff. Id. ¶ 35.

         In the summer of 2015, Defendant rebranded MicroE and Applimotion products under the “Celera Motion Group” name, and informed Plaintiff that it wished to renegotiate the December 2014 agreement and lower the commission rate it paid Plaintiff on products formerly sold under the MicroE and Applimotion brands. Id. ¶ 36. In February 2016, the parties began to discuss Defendant's proposed commission rates, which Plaintiff believed were too low. Id. ¶¶ 39-40.

         In March 2016, Celera Motion's Global Sales Director, Hitesh Shah, based in Bedford, Massachusetts [ECF No. 11 at 4], stated in an email to Plaintiff that Defendant would not pay Plaintiff its commissions for the first quarter of 2016 unless Plaintiff signed a new sales representation agreement with reduced commission rates. Compl. ¶ 41. After back-and-forth communications in May 2016 between Plaintiff in California and Shah in Massachusetts [ECF No. 11 at 4-5], Defendant paid the first quarter of 2016 commissions for Plaintiff's sales of MicroE products, but withheld the first quarter of 2016 commissions for sales of Applimotion products. Compl. ¶ 50.

         On May 17, 2016, Shah wrote in a letter to Plaintiff that no sales agreement existed between Defendant and Plaintiff with respect to Applimotion products. Id. ¶ 51. Shah added that when “an acceptable sales agreement” between the parties was reached, Defendant would pay Plaintiff the commissions for the first quarter of 2016 retroactively, based on the newly-negotiated agreement. Id. ¶ 52. Shah also asserted that Plaintiff was not performing a number of administrative requirements pursuant to the parties' December 2014 agreement concerning MicroE products. Id. ¶ 53.

         On June 3, 2016, Defendant sent Plaintiff two notices of termination, one for MicroE products and another for Applimotion products, each of which stated that Defendant was terminating Plaintiff as an independent sales representative “without cause” effective October 1, 2016. Id. ¶¶ 57-58. Both notices were signed by the President and General Manager of Celera Motion, Leane Sinicki, id. ¶ 57, who was based in Bedford, Massachusetts [ECF No. 11 at 5]. The MicroE termination notice indicated that the December 2014 Sales Agreement pertained to only MicroE products.[2] [ECF No. 1 ¶ 59]. The termination notice for Applimotion products stated that no written sales contract ever existed regarding Applimotion products and that Defendant would send Plaintiff “undisputed sales commissions” on Applimotion products “consistent with the parties' past course of dealings” until the termination date, but not thereafter. Id. ¶¶ 60-62; [ECF No. 11 at 6].

         Defendant allegedly did not pay Plaintiff commissions on sales of MicroE products prior to the October 1, 2016 termination date or on sales that Defendant accepted during the 12 months following the termination date, in violation of the December 2014 Agreement. Compl. ¶¶ 65-66. Additionally, Defendant did not pay Plaintiff commissions on sales of Applimotion products prior to the October 1, 2016 termination date or on sales Defendant accepted during the 12 months following the termination date. Id. ¶ 67.

         In January 2017, Plaintiff contacted Defendant regarding its unpaid commissions for MicroE and Applimotion products. Id. ¶ 69. In response, on February 1, 2017, Shah asserted in an email that Defendant did not owe Plaintiff any commissions for sales of MicroE products pursuant to the December 2014 Agreement because Plaintiff had not given Defendant any Purchase Orders for the products for “likely years, ” and because Plaintiff did not “devote[] resources required by the Agreement to develop new business.” Id. ¶¶ 71, 73. Additionally, Shah stated that Defendant did not owe Plaintiff any commissions for sales of Applimotion products because there was no written agreement concerning the sale of those products. Id. ¶ 77.

         On February 10, 2017, Sinicki emailed Plaintiff and reiterated Shah's positions regarding the unpaid commissions. Id. ¶¶ 82-85. On February 16, 2017, Sinicki sent another email in which she repeated the assertion that Plaintiff was not entitled to any commissions. Id. ¶ 87.

         On June 2, 2017, Plaintiff brought this diversity action alleging Defendant's violation of the California Independent Wholesale Sales Representative Contractual Relations Act of 1990, Cal. Civil Code § 1738 (Count I); violation of Mass. Gen. Laws c. 104 §§ 7-9 (Count II); breach of contract (Count III); unjust enrichment (Count IV); and violation of Chapter 93A (Count V). [ECF No. 1]. Plaintiff asserts that Defendant engaged in “an ongoing practice to withhold commissions, ” and that this practice “was developed by senior Novanta ...


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