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Sapery v. Atlantic Plastics Inc.

decided: August 20, 1958.

STANLEY SAPERY, DOING BUSINESS AS STANLEY SAPERY COMPANY, PLAINTIFF-APPELLEE,
v.
ATLANTIC PLASTICS, INC., DEFENDANT-APPELLANT.



Author: Moore

Before WATERMAN and MOORE, Circuit Judges, and GALSTON, District Judge.

MOORE, Circuit Judge.

The plaintiff, Stanley Sapery, doing business as Stanley Sapery Company, brought this action for an accounting and damages based upon an alleged breach of contract to pay commissions. Plaintiff claims that commencing in 1949 and continuing until August 17, 1954, he acted as a manufacturers' sales representative for defendant under a series of contracts in which defendant promised to compensate plaintiff by paying him commissions on certain specified orders and re-orders. The contracts were by letter addressed to plaintiff by defendant and accepted by plaintiff's endorsement thereon. There were twelve such contracts (Exhs. A through L). In substance they provided for the rate of commission for the particular order and re-orders "so long as you are ready, willing and able to adequately service the [named] account."

The critical paragraph insofar as this litigation is concerned reads as follows:

"2. Your commission is to continue on all re-orders for the same item, with the following provisions:

"b. In the event that you are unable to continue servicing the [S. M. Frank] account, whether for business or personal reasons, Atlantic undertakes to pay you or your representatives, or heirs, 30% of the commission rate in force at the time you cease servicing the account, such commissions to continue for a period not to exceed five years from the date on which you become inoperative."

At the time these contracts were made defendant was a manufacturer of plastic products. Plaintiff was not a manufacturer. He acted solely as a manufacturers' sales agent, selling defendant's products and those of certain other manufacturers in the plastics industry.

In July 1954 plaintiff advised defendant that he had formed his own manufacturing corporation, Augusta Plastics, which would compete with defendant. Plaintiff owned all the stock of Augusta Plastics which was to manufacture injection molded products - the same process used by defendant. Because of this changed relationship in which plaintiff had become a competing manufacturer, plaintiff told defendant that he would continue to service old items and re-orders but that on any new business he would consider himself (Augusta Plastics) first and would prefer his company for new business. Plaintiff also reserved for himself the prerogative of defining new business as "new items, not repeat orders on all old items - any item that is different" (25a). Furthermore plaintiff would thereafter "compete for any new business in that same company," i.e., the very company from which he had theretofore been soliciting orders for defendant (30a).

Faced with this situation defendant, on August 17, 1954, notified plaintiff in writing that:

"Your entry into the injection molding field places you in a position of divided loyalty which makes it impossible for you to continue to adequately service our accounts. In this connection, it should be added that we are mindful of the fact that while you have been representing us, you have also represented other injection molders with the understanding, however, that Atlantic Plastics would receive primary consideration. We believe that your entry into the injection molding field will make it impossible for you to give us this primary consideration because you will be in a position of favoring your own company in preference to ours."

Looking "toward concluding our relationship amicably" defendant offered:

"1. To consider your active representation of our company at an end on September 30, 1954;

"2. To pay you full normal commissions on all orders secured for us by your organization and remaining unfilled at September 30, 1954;

"3. To pay you on succeeding reorders for items now on our books during a period of six months beginning October 1, 1954 and ending March 31, 1955, in accordance with paragraph 2b of our several agreements, namely, 30% of the ...


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