Frank W. Lynch & Co. v. Flex Technologies, Inc.

• Decision Date: 03 April 2001
• Docket Number: Docket No. 115324.
• Citation: 463 Mich. 578,624 N.W.2d 180
• Parties: FRANK W. LYNCH & CO., Plaintiff-Appellee, v. FLEX TECHNOLOGIES, INC., and Flex Technologies, Ltd., Defendants-Appellants, and Ontario, Inc., Defendant.
• Court: Michigan Supreme Court

624 N.W.2d 180

463 Mich. 578

FRANK W. LYNCH & CO., Plaintiff-Appellee, v. FLEX TECHNOLOGIES, INC., and Flex Technologies, Ltd., Defendants-Appellants, and Ontario, Inc., Defendant.

Docket No. 115324.

Supreme Court of Michigan.

April 3, 2001.

Valentine & Associates, P.C. (by Stephen K. Valentine, Jr., and Victoria A. Valentine), West Bloomfield, for plaintiff-appellee.

Clark Hill, P.L.C. (by J. Thomas Lenga and Mary C. Dirkes) Detroit, for defendants-appellants.

Opinion

YOUNG, Justice.

The sales representatives' commissions act (SRCA), M.C.L. § 600.2961; MSA 27A.2961, provides, among other things, that, in addition to actual damages, a defendant may be liable for up to an additional $100,000 for an intentional failure to pay sales commissions when due. We granted leave to determine whether the SRCA should be applied retroactively.

The Court of Appeals followed its decision in Flynn v. Flint Coatings, Inc., 230 Mich.App. 633, 584 N.W.2d 627 (1998), and held that the SRCA should be applied retroactively. We disagree and hold that the SRCA operates prospectively only. Accordingly, we overrule Flynn, reverse in part the Court of Appeals decision, and remand the case to the trial court for further proceedings.

I. Factual and Procedural Background

In 1990, plaintiff filed this action against defendants alleging breach of contract and unjust enrichment. Plaintiff's claims arise from a 1982 manufacturer's representative agreement with defendants' predecessor, Drut Industries, Ltd., which later became Mechanical Cables, Ltd. The agreement, which was amended in 1982 and 1983, basically provided that plaintiff would solicit sales of various automotive products manufactured by Drut and later Mechanical Cables. Defendants purchased the assets of Mechanical Cables in April 1989 and terminated plaintiff's services effective December 31, 1989.

Throughout the course of this litigation, the focus of the parties' contractual dispute has concerned such issues as whether defendants are bound by the original written agreement (not until fairly late in the proceedings did defendants even acknowledge that they had any responsibility to plaintiff under the agreement), the circumstances under which the agreement could be terminated, and the appropriate rate for calculating commissions owed. In that regard, there have been several trial court rulings and two Court of Appeals decisions pertaining to these issues. However, we have limited the scope of this appeal to the retroactive applicability of the SRCA.

The SRCA became effective on June 29, 1992. In August 1992, plaintiff moved to amend its complaint to include a claim under the act. The SRCA provides, in relevant part:

(4) All commissions that are due at the time of termination of a contract between a sales representative and principal shall be paid within 45 days after the date of termination. Commissions that become due after the termination date shall be paid within 45 days after the date on which the commission became due.

(5) A principal who fails to comply with this section is liable to the sales representative for both of the following:

(a) Actual damages caused by the failure to pay the commissions when due.

(b) If the principal is found to have intentionally failed to pay the commission when due, an amount equal to 2 times the amount of commissions due but not paid as required by this section or $100,000.00, whichever is less.

(6) If a sales representative brings a cause of action pursuant to this section, the court shall award to the prevailing party reasonable attorney fees and court costs.

(7) In an action brought under this section, jurisdiction shall be determined in accordance with chapter 7.

(8) A provision in a contract between a principal and a sales representative purporting to waive any right under this section is void.

(9) This section does not affect the rights of a principal or sales representative that are otherwise provided by law. [MCL 600.2961; MSA 27A.2961.]

The trial court denied plaintiff's motion to amend on the ground that the SRCA "imposes a new duty and provides for a penalty ... and attorney fees." In its first opinion in this case, the Court of Appeals agreed with the trial court that the SRCA should be given prospective application only, but reversed and remanded the case to the trial court for further proceedings on various other issues relating to the parties' original written agreement.¹

While the case was pending in the trial court on remand, the Court of Appeals issued its decision in Flynn. In Flynn, the Court of Appeals held that "[b]ecause the SRCA does not create a new obligation or impose a new duty, and because it simply alters the remedy available to plaintiffs who have been denied their justly earned commissions, it is properly applied retroactively." Id. at 638, 584 N.W.2d 627.

When this case returned to the Court of Appeals a second time, the Court followed its decision in Flynn and held that the SRCA "shall be applied retroactively to this case."² Accordingly, the Court of Appeals remanded the case to the trial court to allow plaintiff to amend its complaint, and directed that the trial court "determine whether defendants intentionally failed to pay commissions due at the time of termination."³ The Court also reversed the trial court's decision to enter a judgment of no cause of action on plaintiff's breach of contract claim, as well as its decision denying plaintiff's request for attorney fees as a sanction for defendants' late decision to admit the existence and enforceability of the original written agreement.

We granted defendants' application for leave to appeal, "limited to the issue whether M.C.L. § 600.2961; MSA 27A.2961 should be retroactively applied to this case." 462 Mich. 919, 617 N.W.2d 332 (2000).

II. Standard of Review

As a general matter, "decisions granting or denying motions to amend pleadings ... are within the sound discretion of the trial court and reversal is only appropriate when the trial court abuses that discretion." Weymers v. Khera, 454 Mich. 639, 654, 563 N.W.2d 647 (1997). In this case, however, the propriety of plaintiff's request to amend its complaint turns on whether the SRCA should be applied retroactively. This is a question of statutory construction that we review de novo.Donajkowski v. Alpena Power Co., 460 Mich. 243, 248, 596 N.W.2d 574 (1999).

III. Analysis

In determining whether a statute should be applied retroactively or prospectively only, "[t]he primary and overriding rule is that legislative intent governs. All other rules of construction and operation are subservient to this principle." Franks v. White Pine Copper Division, 422 Mich. 636, 670, 375 N.W.2d 715 (1985). Moreover, "statutes are presumed to operate prospectively unless the contrary intent is clearly manifested." Id. at 671, 375 N.W.2d 715; see also Hughes v. Judges' Retirement Bd., 407 Mich. 75, 85, 282 N.W.2d 160 (1979). This is especially true if retroactive application of a statute would impair vested rights, create a new obligation and impose a new duty, or attach a disability with respect to past transactions. See Franks, supra at 671-674, 375 N.W.2d 715.

We agree with defendants that there is nothing in the language of the SRCA suggesting a legislative intent that this statute be applied retroactively. To the contrary, there actually are two signals that exactly the opposite was intended. Most instructive is the fact that the Legislature included no express language regarding retroactivity. See, e.g., Chesapeake & Ohio Co. v. Public Service Comm., 382 Mich. 8, 22-23, 167 N.W.2d 438 (1969) (Adams, J.) We note that the Legislature has shown on several occasions that it knows how to make clear its intention that a statute apply retroactively. See, e.g., M.C.L. § 141.1157; MSA 5.3188(257) ("This act shall be applied retroactively..."); MCL 324.21301a; MSA 13A.21301a ("The changes in liability that are provided for in the amendatory act that added this subsection shall be given retroactive application").

Further indicating that the Legislature intended prospective application of the SRCA is the fact that subsection 5 of the SRCA provides for liability if the principal "fails to comply with this section." Because the SRCA did not exist at the time that the instant dispute arose, it would have been impossible for defendants to "comply" with its provisions. Accordingly, this language supports a conclusion that the Legislature intended that the SRCA operate prospectively only.

Plaintiff relies on the so-called "exception" to the general rule of prospective application providing that "statutes which operate in furtherance of a remedy or mode of procedure and which neither create new rights nor destroy, enlarge, or diminish existing rights are generally held to operate retrospectively unless a contrary legislative intent is manifested." Franks, supra at 672, 375 N.W.2d 715; Selk v. Detroit Plastic Products, 419 Mich. 1, 10, 345 N.W.2d 184 (1984). Plaintiff argues that the SRCA is remedial because no new cause of action is created. Instead, according to plaintiffs, the act merely supplements and furthers remedies otherwise available. However, we have rejected the notion that a statute significantly affecting a party's substantive rights should be applied retroactively merely because it can also be characterized in a sense as "remedial." Franks, supra at 673-674, 375 N.W.2d 715. In that regard, we agree with Chief Justice Riley's plurality opinion in White v. General Motors Corp., 431 Mich. 387, 397, 429 N.W.2d 576 (1988), that the term "remedial" in this context should only be employed to describe legislation that does not affect substantive rights. Otherwise, "[t]he mere fact that a statute is characterized as `remedial' ... is of little value in statutory construction." Id., quoting 3 Sands, Sutherland Statutory Construction (4th ed), § 60.02, p. 60. Again, the question is one of legislative intent...