Lemire Assocs. v. Howmet Aerospace, Inc.

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LEMIRE ASSOCIATES, Plaintiff, v. HOWMET AEROSPACE, INC. and RTI REMMELE ENGINEERING, INC., Defendants.

CIVIL No. 23-cv-1345 (RMB/EAP)

United States District Court, D. New Jersey

June 17, 2024

OPINION

RENEE MARIE BUMB, CHIEF UNITED STATES DISTRICT JUDGE

Words matter. When parties set down words in an agreement, and those words are clear and unambiguous, courts will enforce those written words because they embody the parties' intent. But conduct matters too. Conduct can change the meaning of those written words, and in some cases, render them meaningless.

The motions before the Court turn on the parties' words and conduct. Plaintiff Lemire Associates (Lemire) sues Howmet Aerospace, Inc. and RTI Remmele Engineering, Inc. (collectively, Howmet) over unpaid sales commissions based on their written agreement. Howmet moves to dismiss Lemire's lawsuit based on the words of that agreement. When Lemire filed this lawsuit, Lemire never mentioned their agreement's arbitration provision until this Court questioned the parties about it. With the Court's permission, Lemire moves to enforce the agreement's arbitration provision and asks this Court to compel arbitration. Howmet resists arbitration, asserting Lemire waived its right to enforce their agreement's arbitration provision through its conduct.

For the below reasons, the Court DENIES Lemire's Motion to Compel Arbitration finding Lemire waived its contractual right to arbitrate through its conduct. The Court GRANTS Howmet's Motion to Dismiss based on the words of the parties' agreement and for other reasons. The Court DISMISSES Lemire's Complaint WITHOUT PREJUDICE, and grants Lemire leave to file an amended complaint.

I. BACKGROUND

A. The Contract

In April 2017, the parties contracted whereby Lemire agreed to be a sales representative for Howmet.^[1][Decl. of Tamar S. Wise, Esq ¶ 3, Ex. A (the Contract) (Docket No. 16-3).] By the Contract, Lemire agreed to, among other things, promote and sell Howmet's products, perform marketing services, provide information on Howmet's products to Howmet's customers, and assist with account receivables. [Contract § 4.] Lemire's only form of compensation under the Contract was a sales commission-about 2% for orders on new and old products. [Id. § 10(a), Ex. B.] The Contract provides that Lemire earned a commission only when Howmet receives full and final payment from its customer. [Id. § 10(b).] That is, “Commissions are earned as and when [Howmet] receives full, final, and complete payment for the Products sold with respect to each invoice.” [Id.] Under the Contract, Howmet had to pay Lemire “commissions earned . . . no later than the last day of the month following the month in which payment from the customer is received by [Howmet].” [Id.]

The parties agreed the Contract would expire after three years, but they could agree to extend it in writing. [Id. § 22(a).] Under the Contract, Howmet could terminate the agreement with or without cause provided it gave Lemire 180-days written notice. [Id.] Howmet's termination of the Contract would not affect the parties' rights or obligations that accrued before the agreement's termination. [Id. § 22(b).] This included Lemire's right to receive commissions on sales that Lemire made before the Contract's termination. [Id.] But Lemire's right to receive commissions in the event of a termination must be “in accordance with the provisions of this Agreement and subject to any claim or set off of [Howmet].” [Id.]

On top of those terms, the parties agreed to submit any dispute about the Contract to arbitration. [Id. § 26.] Indeed, the parties agreed to submit “[a]ny dispute arising out of or relating to this Agreement, including its validity, interpretation, application, scope, enforceability, performance, breach or termination” to arbitration. [Id.] The parties also agreed New York law governs their contractual relationship. [Id. § 27.]

B. The Contract's Termination

For years, Lemire performed its contractual obligations. [Notice of Removal ¶ 3, Ex. A, ¶ 23 (Complaint) (Docket No. 1).] According to Lemire, the Contract expired in April 2020 based on the agreement's three-year term. [Compl. ¶¶ 23-24.] The Contract's original termination coincided with the global COVID-19 pandemic. [Id. ¶ 24.] As a result, the parties focused on “keeping the business afloat and keeping orders coming in,” and continued their relationship as if the Contract was “in full force and effect.” [Id. ¶¶ 24-25.] Lemire claims no one knew the Contract had expired. [Id. ¶ 26.]

But in August 2022, Howmet's Vice President notified Lemire the company intended to terminate the Contract because it had expired years earlier. [Id. ¶ 29.] About a week later, Howmet notified Lemire it was cancelling the Contract “effective immediately” regardless of the agreement's 180-day termination provision. [Id. ¶¶ 31-32.] At that time, Howmet had pending sales orders worth millions that Lemire had procured. [Id. ¶¶ 43-46.] Lemire claims Howmet owes it over $1.1 million in commissions for sales it secured before Howmet terminated the Contract. [Id.] Lemire lumps its commissions into two categories: (1) “commission owed on sales that were already consummated or purchase orders received” before Howmet terminated the Contract; and (2) “commissions owed for purchase orders that were very likely to be consummated” within the Contract's 180-day termination period. [Id. ¶ 42.] According to Lemire, the parties agreed to the Contract's 180-day termination period “to ensure that [Howmet] could not terminate the [Contract] before Lemire was entitled to receive significant commissions.” [Id. ¶ 53.]

Following the termination, Lemire tried to resolve the dispute on the timing of the termination and commissions Howmet owed it. [Id. ¶ 37.] According to Lemire, Howmet asserted the Contract was ineffective because it had expired, no additional commissions were owed, and the Contract's 180-day termination provision “was not enforceable.” [Id. ¶ 39.] Despite this position, Howmet paid Lemire certain commissions after it terminated the Contract. [Id. ¶¶ 40, 51.] Howmet and Lemire could not resolve their dispute because Howmet asserted the Contract was unenforceable because it had expired. [Id. ¶ 55.]

C. Lemire's Demand for Arbitration

Lemire eventually invoked the Contract's arbitration provision and sent an arbitration demand to Howmet naming potential arbitrators. [Lemire's Suppl. Sur. Reply Br. Ex. A (Docket No. 27-1) (Email exchanges between Lemire's and Howmet's counsel).] Howmet refused Lemire's arbitration demand, stating “that the term of the contract with [Lemire] has long expired, and therefore the [Contract's] arbitration provision is not operative.” [Id.] Howmet then suggested mediation “to resolve this dispute.” [Id.] Lemire's counsel responded, asserting he “was actually wondering what [Howmet's] position would be on the arbitration clause and [he was] not necessarily upset with the fact that [Howmet declared] it not ‘operative.'” [Id.] According to Lemire's counsel, he “prefer[s] litigating in Court as opposed to arbitration anyway.” [Id.] Lemire's counsel added he is “always amendable to mediation” and suggested Howmet's counsel propose some mediators. [Id.]

D. Lemire's Lawsuit and the Pending Motions

When its attempts to resolve the dispute failed, Lemire sued Howmet in New Jersey state court claiming Howmet breached the Contract by improperly terminating the agreement and refusing to pay it commissions on sales pending at the time of the termination. [Compl. ¶ 55.] Lemire raises contract and quasi-contract claims against Howmet, and seeks a declaration that the Contract was effective when Howmet terminated it, and the Contract's 180-day termination provision was effective in August 2022. [Id. ¶¶ 58-92.] In its state court filing, Lemire certified under New Jersey Court Rule 4:5-1(b)(2) that “the matter in controversy is not the subject . . . of a pending arbitration proceeding, and no such . . . arbitration proceeding is contemplated.” [Compl. R. 4:5-1 Certif.]

Howmet then removed this action, and moved to dismiss Lemire's lawsuit. [Docket Nos. 1, 16.] After receiving the parties' briefing, the Court held oral argument on Howmet's motion to dismiss. [Docket Nos. 20-22.] At oral argument, the Court, sua sponte, raised the Contract's arbitration provision and questioned the parties on whether this Court was the proper forum to address Lemire's lawsuit.^[2] The Court ordered the parties to submit supplemental briefing on the Contract's arbitration provision and “whether arbitration is the proper forum to adjudicate [Lemire's] claims.” [Docket No. 21.]

In its supplemental briefing, Lemire argues the Contract's arbitration provision applies and “arbitration is the appropriate forum to adjudicate this action.” [Lemire's Suppl. Br. at 1 (Docket No. 23).] Lemire explains that it faced a “‘Hobson's Choice' as to where to commence this action because Howmet “had taken the position, prelitigation, that the [Contract] was no longer in force-having expired in 2020.” [Id. at 2.] Recognizing that arbitration is the right forum, Lemire asks the Court to enforce the Contract and compel arbitration. [Id.]

Howmet pushes back, arguing the Court cannot sua sponte compel arbitration because the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq., only allows courts to compel arbitration if a party moves to compel it. [Howmet's Suppl. Br. at 2 (citing 9 U.S.C. § 3) (Docket No. 24).] Howmet asserts Lemire never requested arbitration before this Court's inquiry, and points out that Lemire certified in its state court complaint that “no . . . arbitration proceeding is contemplated.” [Id. at 8.] Howmet also argues Lemire waived its contractual right to...