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Recycling Equipment, Inc. v. E Recycling Systems, LLC

United States District Court, W.D. North Carolina, Statesville Division

December 9, 2014



RICHARD L. VOORHEES, District Judge.

Before the Court is Defendant E Recycling Systems, LLC's Motion to Dismiss First Amended Complaint and Memorandum in Support, (Docs. 14-15), to which Plaintiff Recycling Equipment, Inc. has filed a Memorandum in Opposition, (Doc. 16). Defendant E Recycling Systems, LLC has filed a reply to Plaintiff Recycling Equipment, Inc.'s Memorandum in Opposition.


For the purposes of this motion, Defendant E Recycling Systems ("ERS") accepts as true all facts pled in the amended complaint. (Doc. 15, at 2). ERS also attached as exhibits two Purchase Contracts entered into between ZLOOP, LLC ("ZLOOP") and ERS as well as a December 30, 2013 letter ("the December Letter") signed and returned by Plaintiff Recycling Equipment, Inc. ("REI"). The Court will consider these documents without converting the motion to summary judgment.[1]

This is a sales commission case. REI brings the following claims

(1) a declaratory judgment action seeking the Court to declare that the December Letter is not a contract due to lack of consideration and fraud;
(2) a breach of a sales commission contract predicated on a finding that the December Letter is not a contract;
(3) a breach of the implied covenant of good faith and fair dealing; and
(4) quantum meruit and unjust enrichment claims involving installation of certain equipment at ZLOOP's facility.

In 2012, ZLOOP was in the process of establishing a wire process and recycling facility for waste electrical and electronic equipment in Hickory, North Carolina. (Doc. 13, at ¶ 13). To aid in the creation of this facility, ZLOOP contacted REI. REI is a corporation that sells, installs, and services various types of waste and recycling equipment. ( Id. at ¶¶ 2, 11). Specifically, ZLOOP wanted information regarding Electronic Waste Processing Systems ("E-Waste Systems") and Wire Processing Systems. ( Id. at ¶ 11). REI engaged ERS to learn about the European technology for these types of systems. ( Id. at ¶ 13). ZLOOP decided to purchase one E-Waste System and one Wire Processing System (collectively, the "Systems") provided by ERS's European contacts. ( Id. at ¶ 14). REI stepped aside and allowed ZLOOP to contract directly with ERS for the purchase of the Systems because REI "did not consider itself to be as familiar as ERS with the Systems." ( Id. at ¶ 15). ERS then agreed to pay REI a fifteen percent (15%) commission on all of the Guidetti and KM equipment sold to ZLOOP (the "First Contract"), which amounts to $468, 000 for the E-Waste System and $167, 550 on the Wire Processing System. ( Id. at ¶ 15). The commission was calculated by ERS after it subtracted what it determined to be non-commissionable items and amounted to approximately 8.6% of the total price of the ERS-ZLOOP purchase contracts. ( Id. at ¶ 15). REI claims that it and ERS understood that the commission would be earned once ZLOOP executed a contract to purchase and that REI would receive a percentage of each payment made under any contract signed. ( Id. at 16).

On November 12, 2012, ZLOOP and ERS entered into the agreements ("Purchase Contracts") attached as Exhibit A to the Motion to Dismiss. ( Id. at ¶ 17). ERS gave performance warranties for all of the Systems. ( Id. at ¶ 18). The Purchase Contracts also provided a schedule for payments and that ERS would supervise installation. ( Id. at ¶ 19).

REI claims ERS failed to supervise the installation and REI had to supervise and perform labor in order to salvage the deal. ( Id. at ¶ 21).

On December 27, 2013, Jim Cunningham, managing partner for ERS, sent REI a letter confirming the $468, 000 commission owed on the E-Waste system and attempted to renegotiate the commission. ERS then sent REI the December Letter on the thirtieth. The December Letter provided that $202, 750 of the remaining $495, 550 owed would be paid immediately and the balance of $292, 800 would be paid as received from the outstanding balance. (Doc. 15-2). The December Letter stated that the outstanding balance of approximately $732, 000 included "the retainage from both projects as well as additional charges for freight, installation labor, exchange rate variances, and additional equipment no [ sic ] included in the contract." ( Id. ) REI signed the December Letter under an "agreed to" caption. ( Id. ). REI claims that that ERS refused to pay any outstanding commission unless REI signed. (Doc. 13, at ¶ 25).

After signing, REI received the $202, 750 and has yet to receive any of the balance of $292, 800. ( Id. at ¶ 24). REI claims that the $732, 000 figure in the outstanding balance portion of the December Letter was a misrepresentation on the basis of the contents of a January 28, 2014 letter from ERS to ZLOOP. ( Id. at ¶ 26). On February 10, 2014, counsel for ZLOOP notified ERS of its material default under the Purchase Contracts due to delivery of damaged and used components and failure to deliver ...

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