960 F.3d 935
7th Cir.2020Background
- R3 Composites (manufacturer) and G&S Sales (independent rep) signed an NDA in Feb 2011 that included Paragraph 12.2 stating parties would "attempt" to negotiate commission rates (guideline 5%), with precise rates to be negotiated job-by-job; §13 preserved certain obligations post-termination.
- After the NDA, the parties negotiated and implemented job-by-job commission rates (e.g., Aquatic Bath: later agreed 3% over a threshold) and R3 paid commissions for a time; much business and payments occurred under varying monthly rates.
- Mark Glidden simultaneously worked as G&S’s managing partner (disputed) and as R3’s Plant Manager; disputes arise over whether he had authority to bind G&S or R3 when altering commission calculations and reported sales.
- In 2015 R3 terminated the NDA but continued some post-termination commission payments; by Sept 2016 R3 stopped payments and G&S sued (after removal to federal court, G&S counterclaimed for breach, statutory and exemplary damages).
- District court judges initially split rulings: one denied most summary judgment but found Paragraph 12.2 unenforceable standing alone; a later judge granted summary judgment to R3 and denied G&S leave to amend to plead oral/implied contracts.
- Seventh Circuit reversed in part: held that the later job-by-job agreements could be read under the NDA as an ‘‘umbrella’’ making factual disputes for a jury; also found denial of leave to amend improperly relied on timing given the narrowed issues.
Issues
| Issue | Plaintiff's Argument (G&S) | Defendant's Argument (R3) | Held |
|---|---|---|---|
| Enforceability of NDA ¶12.2 (agreement to agree) | ¶12.2 plus subsequent job-by-job agreements created enforceable obligations (NDA as umbrella) | ¶12.2 is an unenforceable agreement to agree; later agreements are separate, independent contracts | Court: ¶12.2 alone is unenforceable, but later job-by-job agreements may be integrated under the NDA umbrella; factual issues preclude summary judgment for R3 |
| Legal effect of later job-by-job commission agreements | They fulfilled the open term in ¶12.2 and should be read with the NDA to fix commissions and post-termination obligations | Each job agreement is discrete and independent of the NDA; no umbrella effect | Court: Reasonable jury could find job-by-job agreements adopted ¶12.2’s terms; summary judgment inappropriate due to disputed facts |
| Reliance on course-of-conduct and parol evidence to form contract | Parol, communications, conduct, and continued payments can combine with NDA to form enforceable contract terms | Parol evidence cannot cure an illusory open term; parties treated each job as separate | Court: Indiana law permits combining writings, oral agreements, and conduct; these issues are fact questions for jury |
| Denial of leave to amend to plead oral/implied contracts and quasi-contract claims | Amendment was timely given the narrowed summary-judgment issues; pleadings and discovery already put R3 on notice of job-by-job agreements | G&S should have pleaded alternative contract theories earlier; late amendment prejudices R3 and violates scheduling order | Court: District court abused discretion in denying G&S the ability to rely on job-by-job theory under the NDA umbrella; reversal and remand (dissent would have affirmed denial as untimely) |
Key Cases Cited
- Wolvos v. Meyer, 668 N.E.2d 671 (Ind. 1996) (agreements to agree are unenforceable absent intent and definiteness)
- Druco Restaurants, Inc. v. Steak N Shake Enters., Inc., 765 F.3d 776 (7th Cir. 2014) (distinguishing unenforceable agreements to agree from enforceable option-like arrangements)
- Mays v. Trump Indiana, Inc., 255 F.3d 351 (7th Cir. 2001) (applying Indiana law on indefiniteness and agreements to agree)
- Citizens Progress Co. v. James O. Held & Co., Inc., 438 N.E.2d 1016 (Ind. Ct. App. 1982) (recognizing that a contract may rest partly in writing and partly in parol)
- Wildwood Indus., Inc. v. Genuine Machine Design, Inc., 587 F. Supp. 2d 1035 (N.D. Ind. 2008) (multiple documents may form a valid written contract when elements of formation exist)
- India Breweries, Inc. v. Miller Brewing Co., 612 F.3d 651 (7th Cir. 2010) (standard of review for summary judgment under federal law)