Flynn v. Flint Coatings, Inc., Docket No. 200742

• Decision Date: 10 July 1998
• Docket Number: Docket No. 200742
• Citation: 230 Mich.App. 633,584 N.W.2d 627
• Parties: James FLYNN and Flynn & Associates, Plaintiff-Appellant, v. FLINT COATINGS, INC., Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

Page 627

584 N.W.2d 627

230 Mich.App. 633

James FLYNN and Flynn & Associates, Plaintiff-Appellant, v. FLINT COATINGS, INC., Defendant-Appellee.

Docket No. 200742.

Court of Appeals of Michigan.

Submitted April 14, 1998, at Detroit.

Decided July 10, 1998, at 9:20 a.m.

Released for Publication Oct. 7, 1998.

Cross Wrock, P.C. (by John C. Louisell and Russ E. Boltz), Detroit, for Plaintiffs-Appellants.

Loyst Fletcher, Jr., Flint, for Defendant-Appellee.

Before SAWYER, P.J., and BANDSTRA and J.B. SULLIVAN ^*, JJ.

J.B. SULLIVAN, Judge, sitting by assignment.

In this interlocutory appeal, plaintiffs appeal by leave granted from an order granting partial summary disposition for defendant. The trial court held that the provisions of the sales representatives' commissions act (SRCA), M.C.L. § 600.2961; M.S.A. § 27A.2961, were not available to plaintiffs because the act took effect after plaintiffs' cause of action had accrued. We reverse.

The underlying facts are not at issue here and can be briefly summarized as follows. Plaintiff James Flynn is a manufacturer's representative in the automotive industry and the owner of plaintiff Flynn & Associates, Inc., a manufacturers' representative agency. Plaintiffs engage in direct representation of suppliers to the automotive industry. Apparently, defendant hired plaintiffs in 1987 and agreed to pay them five percent of all sales they generated. This arrangement continued until August of 1990, when defendant terminated its relationship with plaintiffs. In August of 1991, plaintiffs filed the current suit, alleging that they are owed commissions on sales that took place after their termination.

The only question before us on appeal is whether the SRCA should be applied retroactively. The relevant portions of the act provide:

(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. [M.C.L. § 600.2961; M.S.A. § 27A.2961.]

The SRCA was passed and became immediately effective on June 29, 1992. Thus, at the time the SRCA became effective, plaintiffs' claim had already accrued ¹ and this suit had already been filed.

The Michigan Supreme Court has outlined four rules regarding the retroactive application of statutes. The Court summarized the rules as follows:

First, is there specific language in the new act which states that it should be given retrospective or prospective application. See headnote no. 1, Hansen-Snyder Co. v. General Motors Corp., 371 Mich. 480, 124 N.W.2d 286 (1963). Second, "[a] statute is not regarded as operating retrospectively [solely] because it relates to an antecedent event". Hughes v. Judges' Retirement Board, 407 Mich. 75, 86, 282 N.W.2d 160 (1979). Third, "[a] retrospective law is one which takes away or impairs vested rights acquired under existing laws or creates a new obligation and imposes a new duty, or attaches a new disability with respect to transactions or considerations already past". Hughes, supra, p. 85, ; Ballog v. Knight Newspapers, Inc., 381 Mich. 527, 533-534, 164 N.W.2d 19 (1969). Fourth, a remedial or procedural act which does not destroy a vested right will be given effect where the injury or claim is antecedent to the enactment of the statute. Rookledge v. Garwood, 340 Mich. 444, 65 N.W.2d 785 (1954). [Karl v. Bryant Air Conditioning Co., 416 Mich. 558, 570-571, 331 N.W.2d 456 (1982).]

Here, there is no specific language in the SRCA regarding whether it should be applied retroactively. In addition, it is clear that the second rule does not apply. See id. at 571, 331 N.W.2d 456. Thus, the question in this case is whether the SRCA is a rule three or a rule four case. If it "creates a new obligation and imposes a new duty," it is a rule three case, and it may not be applied retroactively. Id. at 572, 331 N.W.2d 456. On the other hand, under rule four, "[s]tatutes related to remedies or modes of procedure which do not create new or take away vested rights, but only operate in furtherance of a remedy or confirmation of rights already existing will ... be held to operate retrospectively and apply to all actions accrued, pending or future...." Id., quoting headnote I of Hansen-Snyder, supra.

We do not believe that the SRCA creates any new duty on the part of employers. Under the SRCA, as under the common law, an employer is obligated to pay sales commissions when they are due. M.C.L. § 600.2961(4); M.S.A. § 27A.2961(4); Sorenson v. Charlevoix Rock Product Co., 191 Mich. 86, 157 N.W. 349 (1916). Thus, an employer who was not liable under the common law is not liable under the SRCA. Clearly, then, although the SRCA changes the remedy for failure to pay sales commissions, it does not create a new obligation or impose a new duty. This leads us to the conclusion that this is a rule four case and that the SRCA is properly applied retroactively. See In re Certified Questions, supra at 577-578, 331 N.W.2d 456.

Defendant argues for affirmance on the ground that the SRCA creates a new cause of action. Defendant cites two differences between the SRCA and the common law. First, defendant notes that a cause of action under the SRCA does not accrue until forty-five days after termination, or until forty-five days after the commission becomes due, M.C.L. § 600.2961(4); M.S.A. § 27A.2961(4), while a common-law cause of action accrues immediately after payment is due. However, we conclude that this difference is procedural and does not bar retroactive application of the statute. See Hansen-Snyder, supra at 485, 124 N.W.2d 286.

In further support of its argument that the SRCA creates a new cause of action, defendant cites the fact that the SRCA increases an employer's liability for a prior transaction. Defendant's argument is essentially that parties have vested rights in the particular remedy authorized by law when a cause of action accrues. ² Thus, defendant argues, the treble damages provision of the SRCA may not be applied retroactively. This argument has been rejected by our Supreme Court. As the Court noted in In re Certified Questions, supra at 575-576, 331 N.W.2d 456 (citing Rookledge, supra ): "[T]he fact that the new statute changes the legal consequences of a prior act does not prevent a retrospective application of that statute, since that statute is remedial in nature." ³ Indeed, our Supreme Court has left no doubt that a statute that increases or decreases the damages available to a plaintiff may still be applied retroactively. See In re Certified Questions, supra; Rookledge, supra; Ballog, supra.

Because 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. Thus, the trial court erred in holding that the provisions of the SRCA were not available to plaintiffs in this case.

Reversed.

SAWYER, P.J., concurred.

BANDSTRA, Judge(dissenting).

I respectfully dissent.

Plaintiffs allege that, in early 1987, the parties entered into a contract under which defendant would pay five percent commissions on sales procured by plaintiffs. Plaintiffs procured sales for defendant resulting in commission payments averaging $125,000 a year for the next three years. In August of 1990, defendant terminated the agreement and discontinued making commission payments. About a year later, plaintiffs filed this lawsuit alleging that, notwithstanding the termination of the agreement, defendant was still obligated to pay commissions on later sales. Defendant took the position that sales after the termination were not subject to the commission agreement.

After this lawsuit was commenced and long after defendant discontinued making commission payments, the sales representatives' commissions act (SRCA), M.C.L. § 600.29611; M.S.A. § 27A.2961, was passed by the Legislature in the summer of 1992. It became effective on June 29, 1992. On that date, according to the majority, defendant became potentially liable to pay up to an additional $100,000, beyond normal damages allowable under contract law principles, because of its alleged intentional failure to pay commissions within forty-five days of their becoming due. ¹ Clearly, neither side contemplated that potential liability when they entered into their agreement in 1987. It is also clear that defendant could not have contemplated this potential liability when it first failed to make a commission payment to plaintiffs following termination of the agreement in 1990. Plaintiffs argue that, nonetheless, defendant's failure to make commission payments was sufficient to impose the new liability created by the Legislature two years later. The majority agrees.

I find this to be fundamentally unfair to defendant. I also conclude that this result is not required or authorized by the precedents cited by the majority.

None of the cases the majority relies on considered a statute that, applied retrospectively, would substantially change the rights established by parties through a contract. In re Certified Questions (Karl v. Bryant Air Conditioning Co.), 416 Mich. 558, 331 N.W.2d 456 (1982) (question was whether the...