Dumas v. Auto Club Ins. Ass'n

• Decision Date: 07 July 1988
• Docket Number: Docket No. 96212
• Citation: 425 N.W.2d 480,168 Mich.App. 619
• Parties: Richard DUMAS, Lynne McBride, Eugene Pasko, et al., Plaintiffs-Appellants, v. AUTO CLUB INSURANCE ASSOCIATION, a Michigan Corporation, Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

Page 480

425 N.W.2d 480

168 Mich.App. 619

Richard DUMAS, Lynne McBride, Eugene Pasko, et al Plaintiffs-Appellants, v. AUTO CLUB INSURANCE ASSOCIATION, a Michigan Corporation Defendant-Appellee.

Docket No. 96212.

Court of Appeals of Michigan.

Submitted March 8, 1988.

Decided May 17, 1988.

Released for Publication July 7, 1988.

Lopatin, Miller, Freedman, Bluestone, Erlich, Rosen & Bartnick by Richard E. Shaw, Detroit, for plaintiffs-appellants.

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

Before DOCTOROFF, P.J., and CYNAR and HOUK, ^* JJ.

PER CURIAM.

Plaintiffs appeal as of right from the October 3, 1986, order entered in Wayne Circuit Court granting defendant's motion for partial summary disposition.

Plaintiffs (some 180) are present and former commissioned sales representatives employed by defendant. Plaintiffs are challenging defendant's 1978 modification from a percentage-based commission system to a unit-based commission system. When plaintiffs were hired by defendant, they were informed that they would be paid a 7 or 7 1/2 percent commission (depending on whether in metropolitan Detroit or not) for each automobile insurance policy sold and for each subsequent renewal of the policy by the insured. Plaintiffs were also allegedly told that their employment would only be terminated for good cause.

On December 2, 1977, defendant issued a memorandum to all sales representatives announcing that, effective July 1, 1978, the sales representatives would be paid under a new unit-based commission system. Under the unit plan, sales representatives continued to be paid a commission for all sales and renewals, but the commission would be calculated as a specified dollar amount rather than a percentage of the insurance premium. The deposition testimony of Eugene Kuthy, who audited defendant, explained the reason for the change. He stated that the commissioned sales representatives' compensation percentage increases were "significantly higher" than the compensation percentage increases of others employed by defendant. The commissions were directly related to general premium rate increases, but not to productivity. A committee, comprised of mid-level executives and Kuthy, changed the compensation system to a unit-based commission system because a unit system is more related to productivity.

In 1980, defendant allegedly began enforcing minimum production quotas which, previously, were merely goals for which plaintiffs could strive.

On February 7, 1978, the Michigan AAA Sales Association (union) was certified as the exclusive representative of defendant's sales force in the tri-county Detroit metropolitan area. The union filed a complaint with the National Labor Relations Board, alleging, among other things, that defendant unilaterally changed the commission system without having first negotiated with the union. Administrative Law Judge Morton D. Friedman determined that defendant adopted the unit system prior to the "advent" of the union and its certification and, thus, defendant was not obligated to negotiate with the union regarding the unit-based commission system. The union was decertified in October, 1982.

On May 26, 1983, plaintiffs filed the instant complaint based upon the change in the commission system, alleging, among other things, breach of contract. Defendant moved for accelerated judgment or, in the alternative, summary judgment under GCR 1963, 116 and 117 (now MCR 2.116). With respect to plaintiff's breach of contract claim, the trial court, on January 10, 1984, entered an order as follows:

"1. Count I--Breach of Contract:

"a) Plaintiffs' Count I claim, insofar as it involves a challenge to Defendant's implementation of minimum production standards is preempted by the National Labor Relations Act, and thereby dismissed;

"b) Plaintiffs' Count I claim, insofar as it involves a challenge to Defendant's change in its commission system with respect to insurance policies sold after that change, and renewals thereof, is also dismissed; and

"c) Plaintiffs' Count I claim, insofar as it involves a challenge to Defendant's change in its commission system with respect to the renewal of insurance policies originally sold prior to that change is not dismissed, and Defendant's Motion ti [sic] denied without prejudice to its right to renew that Motion after the completion of discovery."

Plaintiffs filed a motion for rehearing which was denied in a February 29, 1984, order.

Discovery continued and the case progressed until April 30, 1986. At that time, defendant filed a motion for partial summary disposition. On this date, plaintiffs filed an eighth amended complaint. For purposes of analyzing defendant's motion, we will refer to plaintiffs' eighth amended complaint. ¹ In response to defendant's motion, plaintiffs filed a motion for partial summary disposition or, alternatively, a motion to strike defendant's affirmative defenses.

A hearing was held on August 19, 1986. Ultimately, the trial court granted defendant's motion for partial summary disposition and dismissed all of plaintiffs' claims except the breach of contract claims of three plaintiffs. As to plaintiffs' breach of contract claims, the trial court divided plaintiffs into three groups based on an uncontroverted affidavit filed by defendant, which summarized the depositions of almost all of the plaintiffs.

The first group (139 plaintiffs) were told upon being hired that they would receive a seven percent commission, although defendant made no representations as to the duration of that commission. Based on the lack of a duration term, the court concluded that defendant was entitled to change the compensation "at will." Thus, there was no breach of contract when defendant changed the method of compensation.

The second group (twenty plaintiffs) claimed that, when they were hired, they were informed that the seven percent commission would be paid "forever" or words to that effect. However, because most of these sales representatives could not receive any renewal commissions until after their first year of employment, the trial court found that these contracts were incapable of being performed within one year, and, hence, their breach of contract claims were barred by the statute of frauds. ²

Finally, the third group (twenty plaintiffs) claimed that after being hired, they were advised that the receipt of a seven percent commission would be "forever." The trial court found that these contracts were unenforceable because plaintiffs provided no additional consideration for receipt of the promise of payment of a seven percent commission forever.

With respect to all of the plaintiffs' claims of fraud and misrepresentation, unjust enrichment, and promissory estoppel, the court granted defendant's motion because elements of these claims were lacking and because res judicata barred these claims since they had been litigated before the NLRB. The plaintiffs' age discrimination claims were barred by the statute of limitations and res judicata due to the prior NLRB decision.

Finally, the claims of four plaintiffs were dismissed because two had failed to comply with discovery orders and the other two had filed separate and independent actions.

Subsequently, plaintiffs moved for reconsideration, which was denied. The instant appeal followed.

Plaintiffs raise four issues on appeal. First, they allege that the trial court erred by granting summary disposition in favor of defendant as to their breach of contract claims. For purposes of clarity, we will address this claim for each group separately. From our review of the lower court records, we determine that the trial court granted defendant's motion pursuant to MCR 2.116(C)(10). A motion for summary disposition under MCR 2.116(C)(10) tests whether there is factual support for a claim. When passing on such a motion, the court must consider the pleadings, affidavits, depositions, admissions and other documentary evidence available to it. The party opposing summary disposition has the burden of showing that a genuine issue of disputed fact exists. Giving the benefit of reasonable doubt to the nonmoving party, the court must determine whether the kind of record which might be developed will leave open an issue upon which reasonable minds might differ. The appellate court is liberal in finding a genuine issue of material fact. Ritchie v. Michigan Consolidated Gas Co., 163 Mich.App. 358, 367, 413 N.W.2d 796 (1987).

The First Group

As to these plaintiffs, the trial court found that defendant was entitled to change plaintiffs' compensation "at will" because defendant made no representations as to the duration of the receipt of the seven percent commission. Plaintiffs argued below that defendant's subsequent change from a commission-based system to a unit-based system breached their employment contracts.

In analyzing this group of plaintiffs' claims, two cases of this Court are instructive: Bullock v. Automobile Club of Michigan, 146 Mich.App. 711, 381 N.W.2d 793 (1985), lv. gtd. 425 Mich. 872 (1986), and Farrell v. Auto Club of Michigan, 155 Mich.App. 378, 399 N.W.2d 531 (1986). ³

In Bullock, the plaintiff alleged that, when he was hired in 1968, defendant made certain promises and representations to him, including: (1) a promise of a lifetime job as long as he did not steal; (2) a promise of a sales representative position earning a seven percent commission for his sales; and (3) the indication that, if he worked hard to build up his "book of business" which consists of accumulated policies and memberships that a commissioned salesperson builds up over the years, he could enjoy his later working years by realizing those commissions. Id., 146 Mich.App. at p. 715, 381 N.W.2d 793. In 1982, Bullock was demoted from a commissioned salesperson to a salaried member advisor. He alleged...