IN RE CERTIFIED QUESTION FROM US CT. OF APP.

• Decision Date: 23 April 2003
• Docket Number: Docket No. 120110, Calendar No. 9.
• Citation: 468 Mich. 109,659 N.W.2d 597
• Parties: In re CERTIFIED QUESTION FROM THE UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT. Kenneth Henes Special Projects Procurement, Marketing and Consulting Corporation, Plaintiff, v. Continental Biomass Industries, Inc., Defendant.
• Court: Michigan Supreme Court

659 N.W.2d 597

468 Mich. 109

In re CERTIFIED QUESTION FROM THE UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT.

Kenneth Henes Special Projects Procurement, Marketing and Consulting Corporation, Plaintiff, v. Continental Biomass Industries, Inc., Defendant.

Docket No. 120110, Calendar No. 9.

Supreme Court of Michigan.

Argued November 20, 2002.

Decided April 23, 2003.

Randall J. Gillary, P.C. (by Randall J. Gillary and Kevin P. Albus) Troy, MI, for the plaintiff.

Collins, Einhorn, Farrell & Ulanoff, P.C. (by J. Mark Cooney) Southfield, MI, for the defendant.

YOUNG, J.

Plaintiff filed suit against Continental Biomass Industries, Inc., to recover unpaid sales commissions and penalty damages pursuant to the Michigan sales representative commission act (SRCA), M.C.L. § 600.2961. Pursuant to MCR 7.305(B),¹ the United States Court of Appeals for the Sixth Circuit has certified the following question to this Court:

What standard is appropriate in evaluating the mental state required for double damages under the Michigan Sales Representative Commission Act?

We have accepted the certification and hold 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.

I. FACTS AND PROCEEDINGS

Continental Biomass Industries (CBI) is a New Hampshire corporation that manufactures equipment used in wood waste processing. For several years, Kenneth Henes served as CBI'S sales representative, with an exclusive sales territory that encompassed Michigan, Ohio, Indiana, Illinois, and Wisconsin.

After plaintiff's services were terminated in May 1998, he sought unpaid commissions on four sales. CBI refused to pay because it did not believe that plaintiff was entitled to the commissions under the terms of the contract.

The case was tried before a jury in federal court. 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.

On a special verdict form, the jury found that defendant owed all four commissions and that it intentionally failed to pay three of the four commissions when due.

Defendant filed a postjudgment motion for a new trial and amendment of the judgment. Defendant claimed that the jury instruction given by the trial court was insufficient because it did not define the term "intentionally" for the jury. The trial court denied the motion, stating that the SRCA was intended to be compensatory and not punitive.²

While defendant's appeal was pending in the United States Court of Appeals for the Sixth Circuit, this Court released Frank W Lynch & Co. v. Flex Technologies, Inc., 463 Mich. 578, 624 N.W.2d 180 (2001). In Lynch, which addressed the retroactivity of the SRCA, the opinion stated that "the SRCA clearly serves a punitive and deterrent purpose," id. at 586, 624 N.W.2d 180, and that the act was "indisputably punitive, not compensatory." Id. at n. 4. These statements arguably conflict with the trial court's conclusion regarding the nature of the statute.

The Sixth Circuit heard oral argument in the present case in August 2001. In the certified question request, the panel observed that the Lynch opinion did not indicate "what specific intent standard applies," and that the "appeal turns on what level of intent is needed to invoke the double-damages provision...."

II. THE STATUTE

The relevant statutory language at issue, M.C.L. § 600.2961(5), states:

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 commission 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, whichever is less.

A fundamental principle of statutory construction is that "a clear and unambiguous statute leaves no room for judicial construction or interpretation." Coleman v. Gurwin, 443 Mich. 59, 65, 503 N.W.2d 435 (1993). The statutory language must be read and understood in its grammatical context, unless it is clear that something different was intended. Sun Valley Foods Co. v. Ward, 460 Mich. 230, 596 N.W.2d 119 (1999). When a legislature has unambiguously conveyed its intent in a statute, the statute speaks for itself and there is no need for judicial construction; the proper role of a court is simply to apply the terms of the statute to the circumstances in a particular case. Turner v. Auto Club Ins. Ass'n, 448 Mich. 22, 27, 528 N.W.2d 681 (1995).

The clear language of the statute evinces no textual intent to create a good faith defense to the double-damages provision. Grammatically, the word "intentionally" modifies the phrase "failed to pay." The word "intentionally" is not defined in the statute. Where the Legislature has not expressly defined the common terms used in a statute, this Court may turn to dictionary definitions "to aid our goal of construing those terms in accordance with their ordinary and generally accepted meanings." People v. Morey, 461 Mich. 325, 330, 603 N.W.2d 250 (1999).

Random House Webster's College Dictionary (1991) defines "intentional" as "done with intention or on purpose; intended...." Nothing in the generally accepted meaning of the word leads to the inference that a good faith belief on the part of the principal precludes recovery under M.C.L. § 600.2961(5)(b).³ See, generally, Gillary & Albus, Michigan's sales representative act revisited—again—or, does "intentionally" mean "in bad faith"?, 2001 L R MSU-DCL 965. Therefore, under the clear language of the statute, 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. There is no textual indication that a principal's good faith belief is relevant in making the determination that double damages are payable under the statute.⁴

III. May the Legislative History of the srca trump the statutory language?

Notwithstanding that the language of the statute does not require "bad faith" as a precondition to recovering double damages, defendant asserts that such a construction must be imposed by the courts. Defendant relies upon the legislative history of the statute in support of its position.⁵ In 1991, our Legislature passed Senate Bill 36, which was based on model language drafted by the Bureau of Wholesale Representatives. The language of the bill passed was the same as M.C.L. § 600.2961, except that it did not include the word "intentionally." Governor John Engler vetoed the bill on July 15, 1991. The veto message stated in part: "Second, I oppose the use of exemplary damages in contract actions absent broad public policy considerations and particularly in this case where exemplary damages would be assessed without consideration of the underlying factors resulting in breach of contract."

In response to the Governor's veto, the Legislature added the word "intentionally." With that addition, the Governor signed the bill into law. 1992 PA 125. It does appear that the Governor vetoed the original bill in part out of a concern for the inappropriateness of awarding extracontractual damages on the basis of a mere breach of contract. The fact remains that the final bill enacted and signed into law did not cure the problem the Governor raised in his veto message.

Defendant's argument that the statute should be construed to include a good faith defense must fail because it violates a prime tenet of statutory construction: Michigan courts are bound to apply the unambiguous language actually used in a statute. Danse Corp. v. Madison Hts., 466 Mich. 175, 182, 644 N.W.2d 721 (2002). Because the statute is clear, there is no ambiguity that would permit or justify looking outside the plain words of the statute. "`[W]e do not resort to legislative history to cloud a statutory text that is clear.'" Chmielewski v. Xermac, Inc., 457 Mich. 593, 608, 580 N.W.2d 817 (1998), quoting Gilday v. Mecosta Co., 124 F.3d 760, 767 (C.A.6, 1997), quoting Ratzlaf v. United States, 510 U.S. 135, 147-148, 114 S.Ct. 655, 126 L.Ed.2d 615 (1994). See also Luttrell v. Dep't of Corrections, 421 Mich. 93, 101, 365 N.W.2d 74 (1984).

IV. THE NATURE OF THE SRCA

In Lynch, the opinion stated that "the SRCA clearly serves a punitive and deterrent purpose," 463 Mich. at 586, 624 N.W.2d 180, and that the act was "indisputably punitive, not compensatory," id. at n. 4. These statements were made in response to the plaintiff's argument that the statute was remedial and should be applied retroactively under the "exception" to the general rule of prospective application.

Defendant maintains that under Michigan case law, punitive damages are not available absent a showing of malicious or willful misconduct. In support of this argument, defendant cites Peisner v. Detroit Free Press, 421 Mich. 125, 364 N.W.2d 600 (1984).

In Peisner, the Court considered whether exemplary and punitive damages under the Michigan libel statute, M.C.L. § 600.2911(2)(b), resulted in plaintiff being compensated twice for the same injury.⁶ In resolving this question, the Court stated that "exemplary and punitive damages for libel cannot be awarded in the absence of a finding that the defendant...