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Inc. v. Karcher North America, Inc.

United States District Court, N.D. California

July 6, 2016

181 SALES, INC., Plaintiff,



         Before the Court is Defendant Karcher North America, Inc.'s ("Karcher") Motion in Limine Regarding Choice of Law, ECF No. 45, and Plaintiff 181 Sales, Inc.'s ("181 Sales") Motion for Summary Judgment, ECF No. 51. The Court will deny Defendant's Motion in Limine and grant Plaintiff's Motion for Summary Judgment.

         I. BACKGROUND

         A. Undisputed Facts

         Plaintiff 181 Sales is a Nevada corporation with its only place of business in California. The owner and sole employee of 181 Sales, Kathleen Brown, is an independent sales representative who has been a California resident at all times relevant to the motions under consideration. Defendant Karcher is a Delaware corporation with its principal place of business in Colorado. Karcher is a manufacturer and distributor of cleaning equipment, including pressure washers.

         On June 20, 2014, 181 Sales and Karcher entered into a Manufacturer Representative Agreement (the "MRA") with an effective date of June 1, 2014. As part of the MRA, Karcher agreed that 181 Sales would be Karcher's "exclusive sales agent to" two retailers, Menards and Fry's Electronics ("Fry's"). Through two addendums to the MRA, Karcher agreed to pay 181 Sales a 4% commission on the net invoice amounts billed to Menards and Fry's. Karcher further agreed that it would not "otherwise distribute or sell the Products to [Menards or Fry's], except as hereinafter provided."

         The MRA included the following choice of law provision:

12.2 Governing Law - This Agreement shall be made and construed in accordance with the laws of the State of Delaware located in the United States of America.

         The MRA also provided:

12.3 Entire Agreement - This Agreement together with all other documents incorporated by reference shall constitute the entire Agreement between the Company and the Representative with respect to all matters herein . . . . This Agreement shall not be amended, altered or qualified except by memorandum in writing signed by the Company and the Representative and any amendment, alteration or qualification hereof shall be null and void and shall not be binding upon any party who has not given its consent as aforesaid.

         Pursuant to the MRA, Ms. Brown, on behalf of 181 Sales, attempted to solicit sales of Karcher's products from Fry's by, for instance, contacting and giving presentations to representatives of Fry's located at several of its California locations. Ms. Brown was not able to complete any sales with Fry's. However, Ms. Brown was able to secure sales of various Karcher products to Menards totaling $1, 508, 040 in September and October of 2014.[1] These sales were made to various Menards locations in Wisconsin, Illinois, and Iowa.

         After the sales with Menards were secured, Karcher claims that its representative called 181 Sales and "insisted the MRA be modified and that 181 Sales accept the industry standard 1% commission on [the] sale[s]." ECF No. 63 at 6. Karcher asserts that the reduced 1% commission was "industry standard" because the products sold to Menards were part of a so-called "closeout sale" for which the profit margins were substantially smaller than normal sales. Id. at 5-6. Karcher further asserts that "[a]lthough 181 Sales was not initially enthusiastic about the reduced commission, eventually 181 Sales understood and agreed that commissions on closeout sales were atypical and could [ ] be negotiable." Id. at 6.

         181 Sales disputes Karcher's assertions regarding the agreement to reduce the commission to 1%, claiming that "Karcher simply made that up." ECF No. 51 at 12. "To the contrary, " 181 Sales claims that "Ms. Brown objected each time Karcher mentioned the purported reduction, as evidenced by multiple emails in which she informed Karcher that the 4% rate in the MRA would apply to the sales in question." Id.

         B. Procedural History

         On June 5, 2015, 181 Sales filed a complaint against Karcher in Contra Costa County Superior Court, asserting claims for breach of contract and violation of California's "Independent Sales Representative Statutes." ECF No. 1-1. On July 9, 2016, Karcher removed this case to federal court on the basis of diversity jurisdiction. ECF No. 1.

         On March 18, 2016, Karcher filed a Motion in Limine Regarding Choice of Law. ECF No. 45. On April 21, 2016, 181 Sales filed a Motion for Summary Judgment. ECF No. 51. The Court now considers both of these motions.

         C. Jurisdiction

         The Court has jurisdiction pursuant to ...

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