J Squared, Inc. v. Herndon, 49A04-0407-CV-394.

• Decision Date: 18 February 2005
• Docket Number: No. 49A04-0407-CV-394.,49A04-0407-CV-394.
• Parties: J SQUARED, INC. d/b/a University Loft Co. and as University Loft Company, Appellant, v. Daniel HERNDON, Appellee.
• Court: Indiana Appellate Court

822 N.E.2d 633

J SQUARED, INC. d/b/a University Loft Co. and as University Loft Company, Appellant, v. Daniel HERNDON, Appellee.

No. 49A04-0407-CV-394.

Court of Appeals of Indiana.

February 18, 2005.

Thomas R. Devoe, Sommer Barnard, Indianapolis, IN, Attorney for Appellant.

Robert S. Rifkin, Maurer Rifkin & Hill, Carmel, IN, Attorney for Appellee.

OPINION

NAJAM, Judge.

STATEMENT OF THE CASE

J Squared, Inc. d/b/a University Loft Company ("ULC") appeals from the trial court's judgment in favor of Daniel Herndon on his complaint seeking payment of commissions following the termination of his employment with ULC. The trial court awarded Herndon compensatory and liquidated damages and attorney's fees. ULC presents the following issues for our review:

1. Whether the trial court erred when it concluded that Herndon was entitled to the disputed commissions.

2. Whether the trial court erred when it concluded that Herndon was entitled to liquidated damages and attorney's fees under the Indiana Wage Claims Statute.

We affirm.

FACTS AND PROCEDURAL HISTORY

ULC is an Indiana corporation in the business of importing, manufacturing, and selling furniture, mostly to universities for use in dormitory rooms. Herndon began working as a salesman for ULC in 2000. Herndon's compensation was to be paid as follows:

Sales persons receive 2% commission on every order that has shipped, installed, and is paid in full. Exceptions to this policy include misquoted orders (pricing or product).

Payment of Guarantee (Draw) — A guarantee/draw is defined as an amount advanced by University Loft Company (ULC) to the sales person on a bi-weekly or otherwise agreed interval to assure consistent income for the person until such time as the sales person's earned commissions equal or exceed the draw. In the event the employee leaves the employment of ULC, the obligation to repay the amounts received by said sales person from ULC survives. ULC may withhold any wages or salaries due the employee at the termination of employment for repayment of the guarantee amounts previously paid. ULC may in its sole discretion wa[i]ve the repayment of draws. Sales staff will be advised every month of actual earned commissions versus draw. Management reserves the right to adjust (increase or decrease) a sales person's draw on a quarterly basis. Additional commissions owed by ULC will be paid in full at the end of the year.

Plaintiff's Exhibit 7. In sum, Herndon was paid a draw biweekly, and he was paid a commission on his sales after the customer paid ULC. In the usual course of business, months would elapse between the time a sale was made and the time the customer received and paid for the order.

In June 2002, Herndon expressed his dissatisfaction with his job to ULC's vice-president, Jeff Carlson, and he told Carlson that he was thinking about leaving ULC in August or September 2002. Carlson told ULC's owner, James Jannetides, about Herndon's intentions, and Jannetides told Carlson to tell Herndon that if he was planning to leave in a few months' time, then he should just leave immediately. When Herndon again expressed that he would not make a long-term commitment to ULC, Jannetides fired him.¹ At that time, Herndon had more than $1 million in approved sales that had not yet been shipped or paid for, so he had not yet received his commissions on those sales.

On July 19, 2002, approximately three weeks after Herndon left ULC, Susan Winter, ULC's human resources director, sent Herndon a letter and enclosed two checks. The letter read in relevant part as follows:

As discussed on the telephone today, I have included with this letter your final 2 checks from University Loft Company (ULC). Check # 3630 is for your final commissions/incentives owed (this check includes all commissions due to you), and Check # 3629 is severance pay. By signing these checks, you are releasing University Loft Company from all future wage claims.

Plaintiff's Exhibit 9. Herndon sent Winter the following letter in response:

On July 19, 2002, you sent me two checks. Check # 3630 in the amount of $206.13 was a commission check. Check # 3629 in the amount of $1,874.98 was a proposal for severance pay.

I am returning both of these checks to you because I do not want to release University Loft Company from possible future wage claims.

In your letter of July 19, 2002, you said that if I cashed the checks, I would be releasing the company from all future wage claims. I believe I am entitled to commissions on all sales I made while employed by the company, and I believe my total commissions will substantially exceed the amount I have received as a draw.

I expect the company to pay me my commissions as orders are shipped and customers pay for the merchandise.

I would still like to be paid for the commissions represented by check # 3630, but no strings should be attached. If you are willing to pay me the $206.13 with no strings attached, you can send me another check to replace check # 3630.

I will expect you to pay me the rest of my commissions as time goes on.

Plaintiff's Exhibit 10 (emphases added).

Herndon did not receive any response to his letter, and he sent a second letter to Winter on November 4, 2002, which read as follows:

Back on July 29, 2002, I wrote a letter to you asking University Loft to pay me my commissions as my sales orders were shipped and customers paid for merchandise. I have received no additional commissions, and yet it is my understanding that most, if not all, of my sales orders have been shipped and paid for.

According to my calculations, I have earned at least $41,240.00 in commissions this year and I have only been paid $31,384.70 to date. If my calculations are correct, the company still owes me $9,855.30.

I will expect the company to write me a check for $9,855.30 plus interest or, at a minimum, provide me with an accounting of my sales and commissions earned and a check for any commissions not disputed by the company. (If the company's accounting differs from my calculation of commissions due and owing, then I may need additional information from the company in an attempt to resolve the discrepancy.)

If any of my orders are still outstanding (the product has not shipped, or the customer has not paid for the product) then the company should simply pay me for commissions earned to date and we can settle up on the remaining commissions as orders are later shipped and paid for.

I would like to be paid promptly, as I have not received any commission payments from the company since July. It should not take the company more than a day or two to prepare an accounting of my sales and commissions; accordingly, I will expect full payment of my commissions due and owing no later than Thursday, November 14, 2002.

Plaintiff's Exhibit 23 (emphasis added).

When Herndon still had not received any response from ULC five months after his November 2002 letter, he contacted an attorney. On April 17, 2003, Herndon filed a complaint against ULC alleging its failure to pay him commissions due and owing. In addition to compensatory damages, Herndon sought liquidated damages and attorney's fees under the Indiana Wage Claims Statute. Following a bench trial, the trial court entered judgment in favor of Herndon. The court found and concluded as follows:

Introduction

Plaintiff, Daniel Herndon, ("Herndon") seeks sales commissions after employment termination, as well as double damages and attorney's fees under Indiana's Wage Claim Statute. Defendants J Squared, Inc., d/b/a University Loft Co. ("ULC") argues the parties' conduct precludes post-termination commissions, and [that] the Wage Claim Statute does not apply. The Court finds Herndon is entitled to commissions in the amount of $14,629.53. The Court further finds the Wage Claim Statute applies, and also enters judgment for the additional liquidated damages amount of $29,259.06 plus attorney's fees.

Facts

ULC makes furniture for colleges and does direct sales.

Herndon became employed at ULC in 1998 as an hourly intern. By February 26, 2000 he was a salesman working on draws and 2% commissions. In early 2002, Herndon became unhappy with his employment at ULC. The parties attempted to negotiate a voluntary end to Herndon's employment. When they could not agree, ULC involuntarily terminated Herndon on June 24, 2002.

ULC communicated a policy that sales commissions are "earned" when the merchandise is shipped, installed, and paid. Herndon understood this policy and accepted it. The parties stipulate [that during his tenure as a salesman] Herndon made sales that were shipped, installed, and paid which totaled $6,459,000.00, 2% of which is $129,180.00.

There is evidence that ULC intended to adopt a policy that sales commissions could only be paid during the time a person was employed, and not after termination. But it was not adopted nor fully communicated. Furthermore, the evidence shows it was not accepted or agreed [to] by Herndon, other salespersons, or other key sales managers. All of Herndon's pending sales eventually paid after he was terminated, but ULC refuses to pay them. He was only paid draws and commissions totaling $114,550.47.

Law

Under I.C. 22-2-9-2 ("Wage Claim Statute"):

Whenever an employer separates any employee from the payroll, the unpaid wages or compensation of such employee shall become due and payable at regular payday for a pay period in which separation occurred....

Sales commissions are "wages" for purposes of the Wage Claim Statute. Licocci v. Cardinal Associates [492 N.E.2d 48 (Ind.Ct.App.1986)]. When an employer fails to make payment of such wages, liquidated damages are double the amount of wages due plus reasonable attorney's fees. I.C. 22-2-5-2.

As a general rule, a person employed on a sales commissions basis is entitled to commissions when the order is accepted even if the employee is terminated before payment is made. Vector v. Peuquet [431 N.E.2d 503 (Ind.Ct.App.1982)]; Robinson v.

...