McKay v. WilTel Communication Systems, Inc.

• Decision Date: 02 August 1996
• Docket Number: 95-2462,Nos. 95-2460,s. 95-2460
• Citation: 87 F.3d 970
• Parties: 44 Fed. R. Evid. Serv. 1386 S. Michael McKAY, Appellant/Cross-Appellee, v. WILTEL COMMUNICATION SYSTEMS, INC., a Delaware corporation, Appellee/Cross-Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 970

87 F.3d 970

44 Fed. R. Evid. Serv. 1386

S. Michael McKAY, Appellant/Cross-Appellee, v. WILTEL COMMUNICATION SYSTEMS, INC., a Delaware corporation,

Appellee/Cross-Appellant.

Nos. 95-2460, 95-2462.

United States Court of Appeals,

Eighth Circuit.

Submitted Feb. 12, 1996.

Decided June 28, 1996.

Rehearing Denied Aug. 2, 1996.

John Sandberg, St. Louis, MO, argued (James R. Flores-Quilty, on the brief), for appellant.

William J. Travis, St. Louis, MO, argued (Angela B. Desloge, on the brief), for appellee/cross-appellant.

Before MAGILL, HEANEY, and MURPHY, Circuit Judges.

MURPHY, Circuit Judge.

Michael McKay sued his former employer, WilTel Communication Systems, Inc. (WilTel), to collect additional commissions on a large phone system sold by an affiliated company. The jury awarded McKay $119,215. McKay appeals from the judgment entered by the district court in his favor, arguing he should have also received statutory damages and attorney fees. WilTel cross-appeals to challenge the sufficiency of the evidence and several rulings by the district court on jury instructions and evidence. We affirm in part and reverse in part.

I.

McKay joined a predecessor of WilTel as a salesperson in 1977 and soon became its sales manager for Arkansas. Except for a brief period in 1980-81, McKay continued to work for WilTel through 1990, when he resigned. WilTel is an unregulated vendor of telecommunications equipment. During the relevant period, it was a subsidiary of Centel Corporation headquartered in Chicago. Centel was also the parent company of Central Telephone Company of Florida (Florida Central), which is a regulated provider of telephone service with its headquarters in Tallahassee.

The dispute here revolves around a sale in which McKay helped sell a multi-million dollar phone system, including both equipment and service, to Florida State University (FSU). The university considered a proposal to buy the system from WilTel, but decided to purchase from Florida Central because the latter could offer a purchase agreement using periodic tariff payments.

FSU agreed to pay Florida Central roughly $6 million during the five year contract term and $6 million more if it exercised its option to extend for another five years. Florida Central purchased equipment valued at about $2.5 million from WilTel and then resold it to FSU as part of the sales and service package. WilTel added a hypothetical profit to the price it charged Florida Central and paid McKay approximately $30,000 ¹ as a commission based on the equipment sale. McKay argued he should receive a commission on the entire value of the FSU transaction because of his role in it, but he cashed the commission check after informing WilTel management that he was protesting the amount.

The Florida Central sale took two years to complete, and McKay's role was significant. He had been assigned the account in late 1985 when a senior WilTel manager learned of FSU's plan to replace its existing system. McKay visited FSU some fifteen times, and the evidence suggests that he was the employee from the Centel entities most significantly and consistently involved in the sale efforts.

It became clear in 1986 that FSU's financial situation would not allow a cash sale, so McKay devised a joint approach for the Centel entities, including WilTel and Florida Central. Because Florida Central was regulated, it could offer a tariffed sale proposal while WilTel could not. Ultimately Centel presented three options to FSU in one proposal on Centel letterhead. Centel prevailed over several competitors, and FSU selected an option involving both WilTel and Florida Central. Equipment from WilTel would allow FSU to run its own switching facility and provide service directly to students. It would also provide the advanced technology necessary for FSU's expanding computer operations. The package apparently also included local service from Florida Central. All payments were to be made to Florida Central according to the tariffed rate over five or ten years. Florida Central then purchased the equipment from WilTel for resale to FSU.

McKay discussed his compensation with his superiors several times during the process. In early 1987, he asked his immediate manager, Lynn McKee, how his commission would be computed. After McKee checked with more senior executives, he told McKay he would receive his normal commission even if the tariff option were chosen. McKay testified that he felt it unnecessary to obtain a precise definition of "normal" at that point because the sale was still speculative, a cash sale to FSU was still a possibility, and he had always been treated fairly by the company. As a tariffed sale became more likely, however, it became clear that the vast majority of the proceeds from the sale would pass through Florida Central accounts rather than WilTel's. McKay was concerned that he would not be compensated fairly and wrote a series of memoranda to McKee and other WilTel executives in late 1987 and early 1988.

After WilTel paid McKay the $30,000 commission check cashed under protest, he argued in another series of memoranda that he was entitled to a commission on the entire transaction between Florida Central and FSU, not just the transfer between the two subsidiaries. The commission issue was still not resolved when McKay resigned in 1990 to accept another position.

McKay brought suit in state court in 1992, alleging that WilTel had breached the compensation agreement and had been unjustly enriched by not paying him a commission on the full value of the FSU transaction. McKay also alleged he was entitled to statutory damages under R.M. § 407.913, which provides for additional payment if commissions are not paid as due when a salesperson is terminated. The first complaint also contained breach of contract and unjust enrichment claims against WilTel based on a sale to McDonnell Douglas, Inc. WilTel removed the case to federal court based on diversity of citizenship.

The district court granted summary judgment in favor of WilTel on both counts relating to McDonnell Douglas and on the breach of contract claim regarding FSU. The court concluded that McKay had received all commissions due him on the McDonnell Douglas sale and that the compensation plan was inapplicable to the FSU transaction because WilTel had not made a sale to FSU.

McKay then was granted leave to file an amended complaint in which he alleged that "the sum of $30,439 does not represent the reasonable value of the services performed by plaintiff" in the FSU transaction and that WilTel was unjustly enriched. He again included the statutory claim under Mo.Rev.Stat. § 407.913, but the district court ruled before the case was submitted to the jury that the statute could not be applied. The jury returned a verdict after trial in favor of McKay for $119,215, plus interest and costs. WilTel's motions for judgment as a matter of law, for remittitur, and for a new trial were denied, and this appeal and cross-appeal followed.

II.

McKay raises only one issue on appeal: that the district court erred by concluding that Mo.Rev.Stat. § 407.913 could not be applied in this case. The district court concluded that use of the statute would be an unconstitutional retroactive application because the FSU sale had occurred more than a year before the statute's enactment. Mo.Rev.Stat. Const. Art. I, § 13. ²

Section 407.913 was enacted in 1989 and reads:

Any principal who fails to timely pay the sales representative commissions earned by such sales representative shall be liable to the sales representative in a civil action for the actual damages sustained by the sales representative, an additional amount as if the sales representative were still earning commissions calculated on an annualized pro rata basis from the date of termination to the date of payment. In addition the court may award reasonable attorney's fees and costs to the prevailing party.

McKay claimed throughout this litigation that he is entitled to both the statutory damages, which he computed to be some $300 per day, and attorney fees.

WilTel responds first that the statute does not apply because McKay's cause of action regarding any additional commissions accrued before the effective date of the statute and it cannot be applied retroactively. WilTel's position is that the right to sue accrued in the spring of 1988, more than a year before the statute's enactment (July 1989) and its effective date (no earlier than October 1989). McKay argues that his right to sue accrued when he left the company in 1990, but that the statute could be applied retroactively even if the correct date were 1988 because it only creates an additional remedy, not a new cause of action. Under Missouri law procedural statutes may be applied retroactively, but substantive ones, often defined as those affecting vested rights, may not. See, e.g., Doe v. Roman Catholic Diocese of Jefferson City, 862 S.W.2d 338, 340-42 (Mo.1993) (en banc). We do not need to decide when a cause of action accrues under § 407.913 or whether the statute is procedural or substantive because the section is inapplicable for other reasons. ³

The parties also disagree whether the commissions McKay seeks are covered by § 407.913. WilTel argues that they are not because McKay received all commissions due under his contract when it paid him the $30,000 in 1988. McKay argues that the statute applies because he seeks additional commissions on the FSU sale which were due and owing when he left WilTel. Our review of legal questions is de novo, and we may affirm on any basis supported by the record. Monterey Development Corp. v. Lawyer's Title Insurance Corp., 4 F.3d 605, 608 (8th Cir.1993).

The statute, and the other sections enacted with it, focus on the timely payment of sales commissions earned by a sales representative under contract with a principal. See Mo.Rev.Stat. §§ 407.911-.915. Section 407.913 provides for actual...