Deutsch Inc. v. The Sherwin-Williams Company

Background

Deutsch Inc., an advertising firm, and The Sherwin-Williams Company entered into an Agency Services Agreement in 2014. The agreement established their overall relationship and provided a process for entering into separate Statements of Work describing specific services and fees.

The parties entered into five Statements of Work between 2014 and 2017. The last one covered January 1, 2017, through December 31, 2017, and provided for a total fee of $9,781,858, paid in 12 monthly installments of $815,154.84. In January 2018, Sherwin-Williams stopped requesting services, stopped paying Deutsch, and declined to negotiate a new Statement of Work. Sherwin-Williams did not use the agreement’s formal termination procedure.

Deutsch alleged that Sherwin-Williams breached the contract by failing to provide 90 days’ written notice and failing to pay the monthly fee during that period. Deutsch sought $2,445,464.52, representing three months of the fee stated in the 2017 Statement of Work. Sherwin-Williams moved to dismiss under Rule 12(b)(6), which allows dismissal when a complaint does not state a legally sufficient claim.

Contract Terms

The agreement defined “Services” as the services described in Statements of Work. It defined the “Fee” as the amount specified in a Statement of Work and the “Monthly Fee” as that fee billed and earned in equal monthly installments.

The agreement allowed either party to terminate the overall agreement for any reason, or no reason, on 90 days’ written notice. During that notice period, the parties’ rights and responsibilities would continue, including the provision of services and payment of the applicable Monthly Fee. The agreement also allowed Sherwin-Williams to terminate an individual Statement of Work on 60 days’ written notice, with payment continuing until the end of that 60-day period.

Court’s Analysis

The court applied Ohio law, under which an unambiguous written contract is enforced according to its plain language. It held that the agreement did not require Sherwin-Williams to continue paying the monthly fee from an expired Statement of Work. The agreement also did not require Sherwin-Williams to enter into a new Statement of Work immediately after the prior one ended.

The court rejected Deutsch’s reliance on the provision stating that the Monthly Fee would continue to be billed and paid until different compensation terms were agreed to in writing. The court read that provision as applying when Statements of Work remained in effect while the parties reviewed compensation, not when the existing Statement of Work had expired and no new one existed.

The court also rejected Deutsch’s argument that Sherwin-Williams had constructively terminated the overall agreement by stopping payments and declining to enter into new Statements of Work. The court explained that the agreement covered more than services and payments, including confidentiality, intellectual property, agency, indemnification, and noncompetition provisions. Therefore, not entering into a new Statement of Work did not necessarily terminate the entire agreement.

The court further stated that, even if Sherwin-Williams’ conduct amounted to constructive termination, the 90-day notice provision required payment only of the applicable Monthly Fee. Because no Statement of Work was in effect, the court found that no Monthly Fee applied during that period. The court also concluded that Deutsch’s interpretation would make the separate 60-day termination provision for individual Statements of Work redundant.

Because the court found the contract unambiguous, it did not consider Deutsch’s argument that outside evidence supported its interpretation.

Disposition

Judge Analisa Torres granted Sherwin-Williams’ motion to dismiss. The clerk was directed to terminate the motion at ECF No. 31 and close the case.