• July 12, 2010

An out-of-state computer software company (Aspect, a Massachusetts company, which had purchased Melita, a Georgia company) terminated a Minnesota company (Automated Telemarketing Servs., Inc. (ATS)) with which Melita had had a sales representation agreement, for ATS’s supposed failure to meet a multi-million dollar annual sales quota in 2008.

ATS sued, taking the position that Aspect essentially subverted and manipulated its calculation of ATS’s annual quota to terminate ATC wrongfully under Minnesota law (among other claims).  The ATS/Melita contract provided for application of Georgia law, however.

Aspect (successor to Melita) moved to dismiss the claim under Minnesota law in light of the Georgia choice-of-law clause.  The claim was dismissed.   Like the living dead, however, the claim kept coming back and defendant’s motion for sanctions became increasingly shrill.  Because of the contract calling for the application of Georgia law, U.S. District Court Judge Donovan Frank dismissed ATS’s count under the Minnesota statute concerning termination of sales representatives “without prejudice,” meaning that the Court entered the possibility of ATS amending its complaint to add factual allegations supporting such a claim.

Defendant Aspect characterized the Court’s ruling as, “ATS only should attempt to file an amended Count Three if it could allege ‘facts supporting’ the notion that Georgia law had been selected in bad faith and/or ‘to evade Minnesota law.'”

((1) If one consciously forgoes the choice of Minnesota law in favor of Georgia law, has one selected Georgia law “to evade Minnesota law”?  (2) And what kind of evidence would there be, which any litigant could realistically expect to obtain given the attorney-client privilege, of a company’s “mental state” as to a choice-of-law clause in a contract and in particular “bad faith” (and what would “bad faith” be in this context?)?)

Counsel for Defendant Aspect would clearly answer the parenthetical questions along these lines: (1) No. (2) Don’t know, but one thing’s for sure: Plaintiff has never come close to identifying any evidence…

Such answers underlie Aspect’s motion for sanctions against ATS counsel for ATS’ amended complaint, which still included a claim against Aspect under Minnesota law notwithstanding the contract calling for application of Georgia law.

Judge Frank clearly answered Question No. 1 with a “no,” as well, and, consequently, he dismissed ATS amended complaint in which it tried to address the objections to Count III of its initial complaint.  Still, he “discern[ed] no circumstances warranting an award of sanctions in this case.”

ATS was down, but not out, however.  After a deposition, after the deadline for amending pleadings, ATS took another run at it.  Aspect had taken down the argument twice already, seeking sanctions with the second kill, and, perhaps needless to say, wished to knock out the claim a third time and, again, sanction ATS’s relentless advocacy.

This past week, it became clear that the Court’s tolerance of ATS’s insistence on a claim under Minnesota law has also been exceeded:

While the Court is inclined to award sanctions against Plaintiff in the form of reasonable attorney fees and costs for defending the motion in front of Magistrate Judge Noel and for the attorney fees and costs associated with the appeal before this Court, it will reserve doing so until it evaluates the conduct of the parties in the context of the entire case and the procedural history of the case once it is completed.
It remains to be seen whether ATS counsel’s zealous advocacy will abate when litigating under the Sword of Damocles….

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