Dumas v. Auto Club Ins. Ass'n

• Decision Date: 17 September 1991
• Docket Number: Docket No. 83982
• Citation: 473 N.W.2d 652,437 Mich. 521
• Parties: Richard DUMAS, Lynn McBride, and Eugene Pasko, et al., Plaintiffs-Appellees, Cross-Appellants, v. AUTO CLUB INSURANCE ASSOCIATION, a Michigan corporation, Defendant-Appellant, Cross-Appellee. 437 Mich. 521, 473 N.W.2d 652, 60 U.S.L.W. 2208, 6 Indiv.Empl.Rts.Cas. (BNA) 1249
• Court: Michigan Supreme Court

Page 652

473 N.W.2d 652

Richard DUMAS, Lynn McBride, and Eugene Pasko, et al Plaintiffs-Appellees, Cross-Appellants, v. AUTO CLUB INSURANCE ASSOCIATION, a Michigan corporation Defendant-Appellant, Cross-Appellee.

Docket No. 83982.

437 Mich. 521, 473 N.W.2d 652, 60 U.S.L.W. 2208,

6 Indiv.Empl.Rts.Cas. (BNA) 1249

Supreme Court of Michigan.

Argued Oct. 2, 1990.

Decided July 31, 1991.

Dissenting Opinion of Justice Levin Aug. 2, 1991.

Rehearing Denied Sept. 17, 1991.

Lopatin, Miller, Freedman, Bluestone, Erlich, Rosen & Bartnick by Richard E. Shaw and Sheldon L. Miller, Detroit, for plaintiffs-appellees, cross-appellants.

Fox & Grove, Chartered by Kalvin M. Grove, Steven L. Gillman, and Allison C. Blakley, Chicago, and Finkel, Whitefield & Selik by Robert J. Finkel, Southfield, for defendant-appellant, cross-appellee.

Amici Curiae:

Conboy, Fell, Stack, Lieder & Hanson by Lloyd C. Fell, Cheboygan, for amicus curiae General Motors Corp.

Clark, Klein & Beaumont by Dwight H. Vincent, J. Walker Henry, Rachelle G. Silberberg, Detroit, for amicus curiae Mich. Mfrs. Ass'n.

Miller, Canfield, Paddock & Stone by Diane M. Soubly, Detroit, for amici curiae American Soc. of Employers, Motor Vehicle Mfrs. Ass'n of U.S., Inc., Greater Detroit Chamber of Commerce, and Mich. State Chamber of Commerce.

Mark Granzotto, Detroit, Monica Farris Linkner, Berkley, and Charles P. Burbach, Southfield, for amicus curiae Mich. Trial Lawyers Ass'n.

OPINION

RILEY, Justice.

Two questions are presented in this appeal. First, whether plaintiffs have actions for breach of contract on the basis that they were informed of a particular compensation system upon entering defendant's work force, and the system was subsequently changed. A subissue is whether those plaintiffs who were promised the policy would remain in force "forever" have actions for breach of contract. The second question is whether plaintiffs can maintain claims for unjust enrichment against defendant.

We hold that the Court of Appeals improperly determined that plaintiffs could maintain actions against defendant for breach of contract and unjust enrichment. Therefore, we reverse the decision of the Court of Appeals. 168 Mich.App. 619, 425 N.W.2d 480.

I. FACTS AND PROCEEDINGS

In the instant case, approximately 180 plaintiffs are suing the Auto Club Insurance Association. Plaintiffs are current and past members of defendant's insurance sales force.

Upon commencing employment, all plaintiffs were informed that they would be paid under the "Accrued Commission Plan." Under the commission plan, they would receive seven-percent ¹ commissions on insurance policies sold and upon policy renewals. The commission amounts were tied to policy premiums. Also, for the first year of employment, new salespersons received a base salary to supplant renewal commissions which were unavailable during the first year. All sales employees were on the same compensation system with regard to the seven-percent commissions.

Early in 1977, defendant realized a substantial drop in its cash reserves and decided to address the problem. In the wake of analyses by defendant's outside accounting firm, defendant concluded that the payment system for the commissioned sales force was a major contributor to its cash reserve problem.

On December 2, 1977, defendant notified its sales force in writing of its intent to change the compensation plan. Instead of commissions based on a percentage of the premiums, salespersons would be paid a flat rate for each policy sold. Though the new plan was implemented by January 1, 1978, during the period from January to July, defendant adjusted compensation so that no employees would experience a reduction in income unless their volume of business fell. The new "unit commission plan" became fully effective July 1, 1978.

On February 8, 1978, a union was certified to represent defendant's sales force. The union filed a complaint with the National Labor Relations Board in May of 1978, alleging unfair labor practices by defendant in unilaterally changing the commission system and refusing to bargain with the union. In August, 1979, the board ruled in favor of defendant, finding that the plan was instituted before the union was certified.

On May 26, 1983, plaintiffs filed a complaint in the Wayne Circuit Court, alleging breach of contract, violations of the Civil Rights Act, fraud and misrepresentation, unjust enrichment, and promissory estoppel.

On January 10, 1984, pursuant to a motion for summary disposition filed by defendant in July of 1983, the circuit court dismissed claims based on new policies, or renewals based on those policies, purchased after the date of the change in payment plans.

On January 18, 1984, plaintiffs filed a motion for rehearing which was denied on February 29, 1984. Subsequently, plaintiffs' application for interlocutory appeal was denied by the Court of Appeals.

On August 19, 1986, the trial court ruled on motions for partial summary disposition filed by defendant and plaintiffs respectively. For the purpose of clarity, the court divided plaintiffs into three groups:

Group A consisted of 139 plaintiffs who were informed of the seven-percent commission system upon being hired. This group was not promised that the payment system would be in place for any particular duration.

Group B consisted of twenty plaintiffs who were told by defendant prior to or at the time of hiring that the seven-percent commission plan would last "forever."

Group C consisted of twenty plaintiffs. Group C began employment with the same understanding as Group A, but after they began work they were told by defendant that the seven-percent plan would last "forever."

With regard to Group A, the court determined that no claim for breach of contract existed and granted summary disposition for defendant. The court reasoned that defendant did not foreclose its right to change its compensation plan.

With regard to Group B, the trial court decided a factual issue existed regarding whether the word "forever" created an enforceable promise not to change the payment plan. However, the court dismissed the claims on the basis of the statute of frauds.

With regard to Group C, the court granted summary disposition for defendant because the oral promise subsequent to hiring lacked consideration.

The court also dismissed plaintiffs' claims of fraud, misrepresentation, promissory estoppel, age discrimination, and unjust enrichment. ²

On October 3, 1986, the trial court entered the final order regarding summary disposition. Plaintiffs appealed, and the Court of Appeals reversed the trial court's grant of summary disposition regarding the breach of contract and unjust enrichment claims. Dumas v. Auto Club Ins. Ass'n, 168 Mich.App. 619, 425 N.W.2d 480 (1988).

Defendant appealed, and this Court held Dumas in abeyance pending decisions in In re Certified Question, 432 Mich. 438, 443 N.W.2d 112 (1989), and Bullock v. Automobile Club of Michigan, 432 Mich. 472, 444 N.W.2d 114 (1989). On May 4, 1990, subsequent to the issuance of opinions in those cases, this Court granted leave to appeal. 434 Mich. 911, 462 N.W.2d 751 (1990).

II.

The first question to be addressed is whether plaintiffs can maintain claims for breach of contract where defendant unilaterally altered the terms upon which plaintiffs were compensated. Plaintiffs do not challenge the new system with regard to new policies purchased after the date of the change. Plaintiffs only challenge the system as it applies to renewals of old policies purchased before the change in compensation plan.

A. GROUP A

Group A was informed of the seven-percent commission at the time of hiring, but defendant made no explicit promises to plaintiffs regarding the duration of the policy. In framing the breach of contract action with regard to Group A, it is important to note that because no express promises of permanency were made to plaintiffs, any contractual rights to that effect had to spring from the "legitimate expectations" leg of Toussaint v. Blue Cross & Blue Shield of Michigan, 408 Mich. 579, 598, 292 N.W.2d 880 (1980). ³ Thus, the threshold inquiry for Group A should be whether to extend the "legitimate expectations" leg of Toussaint beyond wrongful discharge disputes to cover an employer's compensation policy. ⁴ We choose not to extend the "legitimate expectations" cause of action to this case.

In Toussaint, this Court held that a company's written policy statements providing for dismissal for just cause may create contractual obligations if the statements give rise in the employee to legitimate expectations of dismissal for just cause. In Toussaint, this Court found that the plaintiff's wrongful discharge claim based on written policy statements and express oral statements could be submitted to a jury.

While Toussaint created a "legitimate expectations" claim in the wrongful-discharge setting, earlier cases held that written policy statements could give rise to contractual obligations outside the discharge context. ⁵ Although some of the cases dealt with compensation policies, those policies created contract rights with regard to deferred compensation. As Justice Ryan stated in his dissent in Toussaint, supra, p. 648, 292 N.W.2d 880:

"In each of the cases cited, policy statements by the employer announced the existence of bonus, profit-sharing or pension benefits and the employer or the claimant-employee satisfied the burden of proof that work already performed was in consideration of the announced benefit and that what was sought was merely deferred compensation." (Emphasis added.)

In other words, a change in a compensation policy which affects vested rights already accrued may give rise to a cause of action in contract. In re Certified Question, supra, 432 Mich. p. 457, n. 17, 443 N.W.2d 112. However, in the instant case, there were no representations made to plaintiffs with regard to deferred compensation. The right to...