Application of the Minnesota Termination of Sales Representative Act (“MTSRA” or “Act”), Minn. Stat. Section 325E.37, which protects non-employee sales representatives based in Minnesota or selling in Minnesota from being improperly terminated by the manufacturers who retain their services, recently survived a challenge by a company based in Quebec, Canada. A decision by the U.S. District Court for the District of Minnesota in the case of HEK, LLC d/b/a Kinneberg Management Group v. Akstrom Imports, Inc., No. 20-CV-1881 (NEB/LIB), 2021 WL 679585 (D. Minn. 2021) shows how difficult it can be for manufacturers to avoid this Minnesota statute.
The Canadian Contract
Akstrom, a Canadian company, entered into a contract in March of 2020 with HEK, LLC d/b/a Kinneberg Management Group (“KMG”) to develop and increase sales of Akstrom products to Sam’s Club and Walmart in exchange for a commission of one percent of sales. The contract stated that any disputes arising from the contract were to be governed by the law of Quebec, Canada.
The Termination
KMG, a sales rep firm based in Minnesota, successfully made tens of millions of dollars in sales to Walmart and Sam’s Club but Akstrom refused to pay and instead sent a letter purporting to terminate the agreement. In June of 2020, counsel for KMG sent a demand letter to Akstrom presumably pointing out that the MTSRA requires proper notice of termination and contains an anti-waiver provision which prohibits companies from evading the MTSRA by including any provision that includes an application or choice of law of any other state. Akstrom’s counsel responded by saying he would be out of the office for a couple of weeks but would like to discuss settlement. Instead of discussing settlement, however, Akstrom filed a declaratory judgment action in a Quebec court. KMG then filed an action in the District of Minnesota (“Minnesota Action).
The Motion to Dismiss
Akstrom moved to dismiss the Minnesota Action, arguing (1) lack of personal jurisdiction; (2) international comity and the first-filed rule (based on the fact that it sued first, in Canada); (3) forum non conveniens (improper forum); and (4) failure to state a claim. The Minnesota Federal Court rejected all four arguments and declined to dismiss the case.
First, the Court held that it had personal jurisdiction because Akstrom entered into a contract with a Minnesota company, the actions largely took place in Minnesota, and Akstrom had agreed to pay commissions to a Minnesota bank account, among other reasons. Second, the Court determined that the actions of Akstrom’s counsel appeared to have been taken in “bad faith” because it convinced KMG to hold its suit in abeyance while it filed suit in Quebec and it would be unfair for Akstrom to benefit from its “deception and manipulation.” For this reason, it found an exception to the first-filed rule and the principle of international comity. Third, the court held that most party witnesses and third-party witnesses were located in the U.S., including Minnesota, and that the forum was not improper. Finally, it held that the claim survived dismissal on the law because KMG properly alleged that it was a “sales representative” as defined in the Act; that it contracted with a principal to solicit orders on commissions; and that the claim was otherwise properly pled. (The Court rejected an argument by Akstrom that KMG was not a “sales representative” but merely a “liaison,” which apparently not the same as a sales rep in Quebecois French.)
The Take Away
The Court’s decision in HEK highlights the stubborn lengths that manufacturers will go to escape application of the MTSRA and the stickiness of the Act that results in most of these efforts failing. It also shows the potential consequences for deceptive behavior on the part of counsel, even one from a country otherwise known for its politeness. If you have questions about the Minnesota Termination of Sales Representative Act, contact the attorneys at Trepanier MacGillis Battina P.A.
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About the Author
Trepanier MacGillis Battina is a business litigation law firm located in Minneapolis, Minnesota. Their business litigation law attorneys can be reached at 612.455.0500.