Havtech, LLC v. Tobey-Karg Sales Agency, Inc.

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HAVTECH, LLC, Plaintiff, v. TOBEY-KARG SALES AGENCY, INC., Defendant.

CIVIL No. 1:22-cv-01051-JRR

United States District Court, D. Maryland

July 26, 2024

MEMORANDUM OPINION

Julie R. Rubin, United States District Judge

This matter comes before the court on Plaintiff Havtech, LLC's (“Havtech”) Motion for Summary Judgment and Defendant Tobey-Karg Sales Agency, Inc.'s (“TKSA”) Cross-Motion for Partial Summary Judgment. (ECF Nos. 61 and 62; respectively, “Havtech Motion” and “TKSA Cross-Motion”). The court has reviewed all papers, and no hearing is necessary. Local Rule 105.6 (D. Md. 2023).

I. BACKGROUND

On April 28, 2022, Havtech filed suit against TKSA asserting six breach of contract claims. (ECF No. 1 ¶¶ 16-45.) On June 10, 2022, the court issued a scheduling order. (ECF No 13.) On March 31, 2023, Havtech filed a motion to amend the complaint, seeking to add an alternative theory of liability (unjust enrichment), which the court granted.^[1](ECF Nos. 29, 55 and 56.)

The Amended Complaint sets forth seven counts: Breach of Contract-The Smithsburg High School HVAC Renovations Project (Count I); Breach of Contract-The Morgan State Thurgood Project (Count II); Breach of Contract-The Pepco Takoma Park Project (Count III); Breach of Contract-The DC Prep Project (Count IV); Breach of Contract-The Brunswick Elementary School Project (Count V); Breach of Contract-The Nice Middleton Project (Count VI); and Unjust Enrichment-The Brunswick Elementary School Project (Count VII). (ECF No. 57; the “Amended Complaint.”)

On October 6, 2023, Havtech filed the Havtech Motion seeking summary judgment as to Counts I through VI of the Amended Complaint. (ECF No. 61.) On November 10, 2023, TKSA filed its response in opposition to the Havtech Motion and the TKSA Cross-Motion seeking partial summary judgment as to Counts V and VII of the Amended Complaint. (ECF No. 62.)

II. UNDISPUTED MATERIAL FACTS

Havtech and TKSA market and sell commercial HVAC equipment. (Amended Complaint, ECF No. 57 ¶¶ 1-2; TKSA's Cross-Mot., ECF No. 62-1 at 5.) Havtech and TKSA were authorized sales representatives for the same third party, AAON, Inc. (Amended Complaint, ECF No. 57 ¶ 6; TKSA's Cross-Mot., ECF No. 62-1 at 5.) TKSA remains an AAON sales representative. (TKSA's Cross-Mot., Aff. of Rich Nalevanko, Exhibit D, ECF No. 62-6 ¶ 3); Havtech served as a AAON sales representative until its termination on January 14, 2022. (TKSA's Cross-Mot., Termination Letter, Exhibit E, ECF No. 62-7.)

1. Policy Manual

AAON issued a Policy Manual for Sales Representatives, titled “Policy Defining the Relationship Between the Independent Manufacturers Representative and AAON, Inc.” (“Policy Manual”). (TKSA Cross-Mot., Policy Manual, Exhibit G, ECF No. 62-9.)^[2]AAON and its sale representatives use a type of sales transaction, referred to as a “Buy-Resell,” whereby a sales representative purchases the equipment from AAON and, in turn, sells it to the customer.

(Amended Complaint, ECF No. 57 ¶ 9; Havtech Mot., Larry Manross Dep., Exhibit 7, ECF No. 61-9 at 49:6-18.) In some instances, projects “are specified and/or bid and/or ordered from more than one Representative's territory.” These are known as “Multi-Territorial Orders.” (TKSA Cross-Mot., Policy Manual, Exhibit G, ECF No. 62-9 at 16.).

With regard to Multi-Territorial Orders, the Policy Manual provides:

Multi-Territorial Orders

Projects that are specified and/or bid and/or ordered from more than one Representative's territory must be taken in the company's name with the commission dollars distributed by the company to all reps involved. Buy/Resell is not allowed for multi-territory [unless written consent is provided by all reps to Order Entry at the time the order is placed]. AAON requires a copy of a signed Multi-Territory Agreement form (provided in this document) to be included with an order that has a commission split. If the Multi-Territory form is not provided at the time the order is placed, Order Entry will process the order but will not send the order to Engineering for processing.

All commission split percentages must appear on the order form in the .aef file. All split commission projects require communication between all parties involved, prior to bidding, in order to establish minimum/maximum commission guidelines and other pertinent bidding information. A form is attached for use by the specifying Rep to request commission division for a job in another territory. The form must be sent to both AAON and the Rep bidding the job. AAON accepts no responsibility for initializing communication between either the Rep calling on the specifying engineer or the Rep bidding the job. Failure to communicate this information will increase the possibility of unpaid commissions. It is required that all parties involved sign the agreement portion of the form. The rep must send copies of the signed form to the applicable AAON regional managers. A copy of the signed form must be provided at the time the order is placed. Failure to provide Multi-Territory form at time of order entry may result in forfeiture of commissions. AAON will honor all such agreements and disperse commissions in accordance with the agreement after AAON has been paid in full.

(Policy Manual, ECF No. 62-9 at 16.)

The Policy Manual further provides:

Notification

In order for a Representative to claim Engineer Specification credit or Owner Specification credit, a “Multi-Territory Job Notification Form” must be sent to the Representative in whose territory the job will be bid prior to job bidding, stating the location of the job, the equipment being specified, and the approximate date the job will be bidding. A copy of this form must also be sent to AAON Regional Manager for each affected territory. A preliminary agreement should be made prior to bidding and a final agreement made after completion of the bidding process. This allows for the documentation of the bidding process and any changes that may occur. In the event a Multi-Territory Job Notification Form has not been received by the bidding representative(s), it shall be the responsibility of the bidding representative(s) in the job location territory or other territory to contact the Engineering Representative prior to bidding or quoting the job, by locating the Engineering-Architectural firm to determine where the project originated. In situations where there are Government entities (i.e., the U.S. Army Corps of Engineers), the bidding representative(s) shall inform their local Regional Manager who will then send out an email to the principals in their territories prior to bidding or quoting the job for the purpose of executing the Multi-Territory Job Notification Form.

Id. Further, the Policy Manual provides a template for use in connection with a “Multi-Territory Job Notification and Agreement” (“MTA”). Id. at 19.

2. MTAs

This case arises out of six MTAs between Havtech and TKSA. (Amended Complaint, ECF No. 57 ¶ 14.) Each MTA at issue involves a “Buy-Resell” transaction, where Havtech worked with the project engineer and TKSA worked with the contractor. (Havtech Mot., Larry Manross Dep., Exhibit 7, ECF No. 61-9 at 43:19-44:5.) In Buy-Resell transactions, the manufacturer's representative that works with the contractor (here, TKSA) issues a purchase order “at the cost value to the manufacturer” (here, AAON). Id. at 49:8-11. The manufacturer's representative that works with the contractor receives a purchase order from the contractor at a higher value, “and the delta between the two is the margin on the project.” Id. at 49:11-14. Some of that margin is due to the manufacturer's representative that works with the engineer (here, Havtech), and some of it is due to the manufacturer's representative that works with the contractor (here, TKSA). Id. at 49:14-18. In Buy-Resell transactions, commissions are not paid by AAON; rather, commissions are decided between the representatives on their own and agreed upon through the MTA process. (Manross Dep. 109:15-22.) Typically, an MTA undergoes several iterations. (Manross Dep. 68:21-69:1, 71:5-10.)

As set forth above, six MTAs are at issue in the instant case. The Smithsburg High School HVAC Renovations MTA (“Smithsburg MTA”) provides as follows:

(IMAGE OMITTED)

(Havtech Mot., Smithsburg MTA, Exhibit 1, ECF No. 61-3.)

The Morgan State Thurgood MTA (“Thurgood MTA”) provides as follows:

(IMAGE OMITTED)

(Havtech Mot., Thurgood MTA, Exhibit 2, ECF No. 61-4.)

The Pepco Takoma Park MTA (the “Pepco MTA”) provides as follows:

(IMAGE OMITTED)

(Havtech Mot., Pepco MTA, Exhibit 3, ECF No. 61-5.)

The Nice Middleton MTA provides as follows:

(IMAGE OMITTED)

(Havtech Mot., Nice Middleton MTA, Exhibit 6, ECF No. 61-8.)

The Brunswick Elementary MTA (“Brunswick MTA”) provides as follows:

(IMAGE OMITTED)

(Havtech Mot., Brunswick MTA, Exhibit 5, ECF No. 61-7.)

The DC Prep MTA provides as follows:

(IMAGE OMITTED)

(Havtech Mot., DC Prep MTA, Exhibit 4, ECF No. 61-6.)

III. LEGAL STANDARDS

Federal Rule of Civil Procedure 12(b)(1)

Although TKSA does not reference Rule 12(b)(1), TKSA argues that the Brunswick MTA is not ripe for adjudication. (ECF No. 62-1 at 21-22.) Therefore, the court proceeds through a Rule 12(b)(1) analysis for completeness.

“Rule 12(b)(1) of the Federal Rules of Civil Procedure authorizes dismissal for lack of subject matter jurisdiction.” Barnett v. United States, 193 F.Supp.3d 515, 518 (D. Md. 2016).

Subject matter jurisdiction involves a court's power to hear a case; it may not be forfeited or waived. Arbaugh v. Y & H Corp., 546 U.S. 500, 514 (2006) (citing United States v. Cotton, 535 U.S. 625, 630 (2002)). “Ripeness implicates the court's subject matter jurisdiction, South Carolina v. United States...