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Company Must Pay Double Damages in Sales Case
In a certified question
from the Sixth Circuit Court of Appeals, the Michigan Supreme Court ruled
that even though a manufacturing company claimed it had a good faith belief
that one of its independent sales representatives was not entitled to
four disputed commissions under the terms of the contract, it was still
liable for double damages when it refused to pay those commissions.
After being terminated
in 1998, the plaintiff sales representative sought unpaid commissions
on four sales. However, the defendant company refused to pay them
under the belief that the commissions were not owed under the terms of
the contract between the sales representative and the company.
The sales representative
then sued in federal court to recover the unpaid commissions under the
Michigan Sales Representative Commission Act (SRCA). The matter
went before a federal jury, which found for plaintiff.
The defendant company
appealed to the Sixth Circuit arguing that an insufficient jury instruction
was given because the trial judge did not define "intentionally"
for the jury. The defendant requested a jury instruction regarding
the level of intent required for the double-damages provision contained
in the act. Specifically, defendant wanted the jury to be instructed that
“[i]ntentional failure to pay means that defendant knew a commission
was due the plaintiff and chose not to pay it.”
The trial court
refused to give the requested jury instruction. Instead, the trial court
followed the language of the statute, instructing the jury that if it
found that a commission was owed, it must then decide if defendant intentionally
failed to pay the commission when due.
The Sixth Circuit
asked the Michigan Supreme Court to resolve the question of what the appropriate
standard was in evaluating the mental state required for double damages
under the SRCA.
The Michigan Supreme
Court held that the plain language of the statute requires only that the
principal purposefully fail to pay a commission when due. The statute
does not require evidence of bad faith before double damages, as provided
in the statute, may be imposed.
Under the Michigan
Supreme Court's holding, even if a principal deliberately fails to pay
a commission when due, it is liable for double damages under the statute,
even if the principal did not believe, reasonably or otherwise, that the
commission was owed. The principal’s good faith belief is irrelevant
in making the determination that double damages are payable under the
SRCA. In the Court's opinion, the only palpable defense to double-damages,
drawn from how the statute reads, is inadvertence or oversight leading
to a failure to pay commissions due.
The full opinion
can be found at
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