JCB, Inc. v. Horsburgh & Scott Co., 18-1099

CourtSupreme Court of Texas
Citation597 S.W.3d 481
Docket NumberNo. 18-1099,18-1099
Parties JCB, INCORPORATED, d/b/a Conveying & Power Transmission Solutions, Appellant, v. The HORSBURGH & SCOTT COMPANY, Appellee
Decision Date07 June 2019

597 S.W.3d 481

JCB, INCORPORATED, d/b/a Conveying & Power Transmission Solutions, Appellant,
v.
The HORSBURGH & SCOTT COMPANY, Appellee

No. 18-1099

Supreme Court of Texas.

Argued March 13, 2019
OPINION DELIVERED: June 7, 2019


Matthew B. Ploeger, Law Office of Matthew Ploeger, Austin TX, for Amicus Curiae.

Lisa B. Hobbs, Kuhn Hobbs PLLC, Austin TX, Adam J. Glazer, Richard M. Goldwasser, Schoenberg, Finkel, Newman & Rosenberg, L.L.C., Chicago IL, Daniel Nesbitt MacLemore IV, Beard, Kultgen, Brophy, Bostwick, and Dickson, PLLC, Waco TX, for Appellant.

Benjamin C. Yelverton, Tyler B. Talbert, Scanes & Routh, LLP, Waco TX, for Appellee.

Justice Blacklock delivered the opinion of the Court.

This opinion addresses two questions of Texas law certified from the United States Court of Appeals for the Fifth Circuit.1 Our jurisdiction to answer these questions comes from article V, section 3-c of the Texas Constitution. The questions concern the damages and attorney's fees available under chapter 54 of the Business and Commerce Code, also known as the Texas Sales Representative Act. TEX. BUS. & COM. CODE §§ 54.001 –.006. We accepted the questions2 and answer them below.

I. Factual, Legal, and Procedural Background

The disputed portion of the statute provides:

§ 54.004. Damages

A principal who fails to comply with a provision of a contract under Section 54.002 relating to payment of a commission or who fails to pay a commission as
597 S.W.3d 483
required by Section 54.003 is liable to the sales representative in a civil action for:

(1) three times the unpaid commission due the sales representative; and

(2) reasonable attorney's fees and costs.

TEX. BUS. & COM. CODE § 54.004.

The Fifth Circuit sets out the following undisputed facts, which we supplement with undisputed facts provided by the parties and district court. Plaintiff JCB, Inc., d/b/a Conveying & Power Transmission Solutions ("JCB"), was a commissioned sales representative for Defendant Horsburgh & Scott Company ("Horsburgh"), a manufacturer of gears and gearboxes. Under a written agreement, JCB's commissions were due "on approximately the 10th of each month following the payment of a commissionable order by the customer to [Horsburgh]." The parties later terminated that agreement but separately agreed that Horsburgh would pay commissions on orders received up to May 24, 2015. JCB claims Horsburgh owed approximately $ 280,000 in commissions under these agreements. JCB claims all these commissions were paid late, while Horsburgh says only some were paid late.

In March 2016, Horsburgh told JCB it could either accept further delays in payment or accept reduced commissions. JCB rejected these options and sued Horsburgh for treble damages and attorney's fees under section 54.004. Prior to the suit, Horsburgh made some commission payments. When suit was filed, Horsburgh still owed commissions totaling $ 77,000–$ 90,000. The case was removed to federal court. While the case was pending, Horsburgh paid all remaining commissions plus approximately five percent interest. Horsburgh then moved for summary judgment.

The federal district court granted summary judgment for Horsburgh. The court's opinion briefly addressed the applicability of section 54.004. The court found persuasive Horsburgh's argument that "the Act does not apply because it only applies to unpaid commissions, and all of the commissions owed [to JCB] have been paid." JCB, Inc. v. Horsburgh & Scott Co. , No. 6:16-CV-146-RP, 2017 WL 6805045, at *4 (W.D. Tex. Oct. 25, 2017).

The Fifth Circuit certified the following questions to this Court:

(1) What timing standard should courts use to determine the existence and amount of any "unpaid commissions due" under the treble damages provision of TEX. BUS. & COM. CODE § 54.004(1) ?

(2) May a plaintiff recover reasonable attorney's fees and costs under TEX. BUS. & COM. CODE § 54.004(2), if the plaintiff does not receive a treble damages award under TEX. BUS. & COM. CODE § 54.004(1), and under what conditions?

JCB, Inc. v. Horsburgh & Scott Co. , 912 F.3d 238, 241 (5th Cir. 2018). Writing for the panel, Judge Ho authored an opinion certifying these questions. As that opinion explained the treble-damages question, there is no dispute that the parties had "a contract under Section 54.002 relating to payment of a commission" and that Horsburgh "fail[ed] to comply with a provision of [that] contract." TEX. BUS & COM. CODE § 54.004. The dispute is over the date as of which the "unpaid commission due" should be calculated. If the amount of "unpaid commission due" should be calculated as of the date the commissions were originally due under the contract, Horsburgh may face treble damages of three times the $ 280,000 it initially failed to pay. If the correct date is the date suit was filed, Horsburgh may face treble damages of three times the amount it still owed at the

597 S.W.3d 484

time of filing. If the correct date is the time of trial or judgment, the district court was right. There was no "unpaid commission" due by that time, so there was nothing left to treble. JCB, Inc. , 912 F.3d at 240. The panel also asked this Court to determine whether JCB can recover attorney's fees under section 54.004(2) even if it does not recover treble damages under section 54.004(1). Id. at 241.

In addition to the panel's opinion, Judges Duncan and Ho authored concurring opinions touching on the merits of the certified questions. Under Judge Duncan's reading of section 54.004, JCB can recover treble damages on the full amount it claims because the amount of "unpaid commission due" should be calculated as of the time the parties' contract made the commissions due. Id. at 244–46 (Duncan, J., concurring). According to Judge Duncan, section 54.004 incorporates section 54.003 when there is no written contract and section 54.002 when there is a written contract. Id. at 245. Section 54.003 provides a thirty-day deadline to pay the commission, and under section 54.002, the written contract provides the due date. In either case, in Judge Duncan's view, the amount of "unpaid commission due" for trebling purposes must be calculated as of the date the commission was initially due. Id. at 245–46. Under this reasoning, because Horsburgh and JCB had a written contract with a ten-day deadline, all commissions paid after that deadline are "unpaid commission due" under section 54.004 even though they have later been paid. Id. at 245.

Judge Duncan also addressed the second certified question. In his view, the correct answer is an easy "yes." " Section 54.004 contains no indication that it makes recovering attorney's fees dependent on recovering treble damages. Rather, the text makes recovering fees contingent only on the principal's breach of a contractual provision relating to commission payments under Section 54.002, or on the principal's failure to pay a commission as required by Section 54.003." Id. at 246 n.3.

Unlike Judge Duncan, Judge Ho found the statute unclear on the date to be used to calculate "unpaid commission due." Id. at 242 (Ho, J., concurring). Judge Ho observed that the statute could have specified, for example, treble damages for unpaid commission due "at the time the civil action is filed" or some other specified time, but the statute does not so specify. Id. Although he did not disagree with Judge Duncan's view of the statute, he noted its tension with the general common-law principle that contract damages are not set in stone at the time of breach but may be reduced or mitigated by the parties' later actions. Id. at 243. Judge Ho also noted the possible effect of TEX. CIV. PRAC. & REM. CODE § 41.004(a), which states that "exemplary damages may be awarded only if damages other than nominal damages are awarded." Id.

With these concurring opinions as helpful resources, we consider de novo the two statutory interpretation questions certified from the Fifth Circuit. See City of San Antonio v. City of Boerne , 111 S.W.3d 22, 25 (Tex. 2003) ("We review matters of statutory construction de novo .").

II. Discussion

A. The Timing Standard for "Unpaid Commission Due"

The first certified question asks: "What timing standard should courts use to determine the existence and amount of any ‘unpaid commissions due’ under the treble damages provision of TEX. BUS. & COM. CODE § 54.004(1) ?"

JCB argues that section 54.004 provides the time for determining the "unpaid commission due" by referencing section 54.002.

597 S.W.3d 485

Section 54.002 contains requirements for a "contract between a principal and a sales representative under which the sales representative is to solicit wholesale orders within this state." TEX. BUS. & COM. CODE § 54.002(a). The parties do not dispute that they had a "contract under Section 54.002" which specified that commissions were due on the tenth of each month following Horsburgh's receipt of payment from its customer. According to JCB, the only relevant date for calculating "unpaid commission due" is the date the commissions were actually due under the contract. Nearly $...

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