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Inc. v. Yell Steel Enterprise Co., Inc.

United States District Court, W.D. Arkansas, Fayetteville Division

May 29, 2018

4M DESIGN RESOURCES, INC. PLAINTIFF
v.
YELL STEEL ENTERPRISE CO., INC. DEFENDANT

          MEMORANDUM OPINION AND ORDER

          Timothy L. Brooks Judge.

         Currently before the Court are Defendant and Counterclaimant Yell Steel Enterprise Co., Inc.'s ("Yell Steel") Motion to Transfer (Doc. 21) and Brief In Support (Doc. 22), Plaintiff 4M Design Resources, Inc.'s ("4M") Response in Opposition (Doc. 25), and Yell Steel's Reply (Doc. 29). The Court held a hearing on the Motion on March 26, 2018, and the parties presented oral argument. Now having considered the argument and briefing, the Court GRANTS the Motion to Transfer (Doc. 21) for the reasons set forth in the following Opinion.

         I. BACKGROUND

         4M is an Arkansas corporation with a principal place of business in Bentonville, Arkansas. Terri Miller is the sole shareholder and employee of 4M. Yell Steel is a California corporation that produces athletic apparel and related items and maintains a principal place of business in Irvine, California, and an office in Bentonville, Arkansas. In September of 2008, Yell Steel entered into a contract with Ms. Miller, through her company 4M, and engaged her to solicit sales of Yell Steel's merchandise to Wal-Mart Stores, Inc. ("Walmart") and Walmart's subsidiaries and affiliates. The parties agree that Ms. Miller was Yell Steel's sales representative and was paid for her services through a commission-based payment schedule.

         The parties' 2008 Agreement (Doc. 13-2) was intended to last for a period of two years, with a provision that the term would be automatically renewed every two years for another two-year term, provided that the parties did not otherwise terminate the Agreement. Yell Steel agreed to advance 4M $5, 000 per month, which would serve as a draw against any commission earned during that month. Yell Steel also agreed to pay 4M a 1.25% commission on "all sales and subsequent shipments made in any calendar year, " provided that 4M procured over $13, 000, 000 in sales. Id. at 2. This additional commission was conditioned on 4M "securing a minimum of thirteen million dollars ($13, 000, 000US) for parent company, Taiwan based Yell Steel Group (YSG)." Id. The parties immediately began performing under the terms of the 2008 Agreement, even though they never signed the Agreement.

         On January 1, 2011, the parties entered into a new contract that was much the same as the old one, with the exception being that the 2011 Agreement increased 4M's draw to $8, 000 per month and lowered 4M's commission rate to 0.85% "on all sales and subsequent shipments made in any calendar year." (Doc. 13-3, p. 2). In addition, the 2011 Agreement no longer provided for automatic renewal, but instead contemplated that the contract would be "re-negotiated" every two years. Id. at 1. The 2011 Agreement was also unsigned, but the parties began performing under its terms immediately.

         On August 6, 2013, the president of Yell Steel, Stuart Solkow, sent an email to Ms. Miller at 4M, with the subject line: "2014/15 Budgets and Compensation." (Doc. 13-4, pp. 1). The body of the email read: "Here you go. Please call to discuss." The email attached a one-page spreadsheet listing a revised compensation/commission plan for 4M based on projected sales, and a projected budget for expenses related to Yell Steel's Bentonville office and staff, which Ms. Miller managed. See Id. at 2. The parties continued performing under the terms of their 2011 Agreement, though the compensation structure had changed.

         4M asserts that at some point Yell Steel stopped paying 4M its due commissions. Then, in March of 2015, 4M unilaterally terminated the parties' business relationship. On November 9, 2017, 4M filed the instant lawsuit to recover allegedly unpaid commissions from 2015 and 2016. On February 16, 2018, Yell Steel filed its Answer to 4M's Amended Complaint, along with a Counterclaim for breach of contract, fraud, and tortious interference, and a Motion to Transfer the case to the Central District of California pursuant to a forum-selection clause from the 2011 Agreement. The forum-selection clause states the following:

The parties agree that in connection with any claims or contests relating to this Agreement, such claims or contests shall be brought in the Federal District Court of the United States in the State of California, County of Los Angeles.

(Doc. 13-3, p. 3).

         Although 4M admits that the 2008 and 2011 Agreements contained the same forum-selection clause, 4M believes that the 2011 Agreement technically expired in December of 2012, and that Mr. Solkow's August 2013 email created a brand new contract between the parties that failed to reference and incorporate any of the terms from the 2011 Agreement-including the forum-selection clause. In the alternative, 4M argues that if the Court determines that the forum-selection clause is legally valid, the Arkansas Sales Representative Commission Act ("ASRCA") applies to the claims at issue in this case, and the strong public policy supporting the ASRCA favors laying venue for all ASRCA disputes in Arkansas and voiding forum-selection clauses that purport to lay venue elsewhere.

         For its part, Yell Steel believes that Mr. Solkow's email only modified the compensation/commission plan for 4M in 2013 and did not affect the other provisions of the 2011 Agreement, including the forum-selection clause that remained in effect by virtue of the parties' continued performance. As for the ASRCA, Yell Steel points out that the statute only covers sales-commission agreements between those defined as "sales representatives" and those defined as "principals." Yell Steel contends that it does not qualify as a principal under the plain language of the ASRCA, since a principal is defined as one who "[d]oes not have a permanent or fixed place of business" in Arkansas, Ark. Code Ann. § 4-70-301 (2)(A) (emphasis added), and the parties do not dispute the fact that Yell Steel staffs a physical office space located in Bentonville, Arkansas.

         In the following discussion, the Court will first consider whether the forum-selection clause is legally valid. Next, the Court will consider whether the forum-selection clause is enforceable here, in light of the ASRCA's strong public policy in favor of litigating certain sales-commission disputes in Arkansas.[1]

         II. ...


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