Breached Sign Sales Deal Brings Return of 1L Contracts

Advance Sign had deals with foodservice customers. Optec had electronic signs. Advance agreed to sell Optec signs exclusively and Optec agreed not to sell directly to Advance’s foodservice customers.

Simple enough, right?

After a pilot program with Sonic Restaurants showed increased sales, Optec negotiated directly with Sonic to sell signs, cutting Advance out of the deal. After lengthy negotiations, the parties agreed to a 12 percent commission on all sales resulting from the Advance-Optec relationship, including Sonic. Advance memorialized the terms in a letter, sent it to Optec, and received only minor non-substantive edits in response, which it corrected and sent back.

Optec never signed the letter, nor did they later uphold their end of the bargain.

The parties again tried to come to a deal, but couldn't agree on terms. When Optec continued to hold out on commissions, Advance sent them a warning letter. A few days later, Optec sent an email to Sonic blaming Advance for installation problems, leading to assignment of the installation contracts to Optec alone.

Advance sued for breach of the original "exclusivity" contract, the commission contract, and tortious interference with the installation deal. The jury found in their favor on all counts, and awarded $3.44 million in damages for the breach of the commission contract and $1.03 million on the tortious interference claim.

Optec moved for judgment as a matter or law, for a new trial, and for remittur. All were denied. They now appeal.

The name of the game, on appeal, is deference. As you might expect, the court is going to defer to the jury's factual determinations, its verdict, and its damage calculations, absent glaring error.

The rest of the opinion is basic contract law.

Meeting of the Minds

There is a ton of evidence to support the jury's finding here. The parties negotiated for months. There was testimony about the oral agreement over the phone. There were also copies of the letters, which were never objected to, and indeed, only minor changes were made to the initial draft. Advance also proceeded to perform, by introducing Optec to a number of its foodservice clients.

Statute of Frauds

The Ohio Statue of Frauds makes an agreement unenforceable if it cannot be performed within one year and it is not in writing and signed by the party against whom it will be enforced.

The commission agreement wasn't signed, but it could have been completed within one year. At the time of the agreement, it was unknown how many signs would be purchased. Theoretically, they could have purchased one or none, which could have been done within one year.

Plus, an Ohio Supreme Court case held that when an agreement provides for a contingency (Sonic buying signs) that may or may not happen within one year, the Statute of Frauds is not implicated.

Tortious Interference

The main issue here was whether Optec acted with a purpose to interfere and whether there was justification for their action. There is evidence to support both findings, as the interfering email was sent days after Advance warned Optec about their noncompliance with the commission deal. As for justification, the only reported issues with installations were from Optec themselves, a fishiness sufficient to support the jury's verdict.

Damage Awards

Both verdicts were based off of the 1,400 signs installed and the expected revenue from the sale and installation. It was also reasonable for the jury to find that both deals would have been completed absent interference by Optec.

Related Resources:

• Advance Sign v. Optec Displays (Sixth Circuit Court of Appeals)
• Shady Lawyer Beats Shady MD, JD in Contingency Fee Dispute (FindLaw's Sixth Circuit Blog)
• Thomas Kinkade Arbitration 'Model of How Not to Conduct One' (FindLaw's Sixth Circuit Blog)