Rosenfeld v. Lu

• Decision Date: 06 June 1991
• Docket Number: No. 89-0120-CIV.,89-0120-CIV.
• Citation: 766 F. Supp. 1131
• Parties: Ira ROSENFELD, Yoram Leidner, a/k/a Jerry Leidner, Shirley Rosenfeld, Jack Stromfeld, and Andrew Chamow and Robert Chamow d/b/a Garfield Sales Company, Plaintiffs, v. Steven Yueh Houg LU, Phillip Lu, James Lu and Carryland Company, Defendants.
• Court: U.S. District Court — Southern District of Florida

766 F. Supp. 1131

Ira ROSENFELD, Yoram Leidner, a/k/a Jerry Leidner, Shirley Rosenfeld, Jack Stromfeld, and Andrew Chamow and Robert Chamow d/b/a Garfield Sales Company, Plaintiffs, v. Steven Yueh Houg LU, Phillip Lu, James Lu and Carryland Company, Defendants.

No. 89-0120-CIV.

United States District Court, S.D. Florida.

June 6, 1991.

Stephen J. Goldstein of Adorno & Zeder, Miami, Fla., for plaintiffs.

Kevin J. Murray of Kenny, Nachwalter Seymour & Arnold, Miami, Fla., for defendants.

MEMORANDUM ORDER

RYSKAMP, District Judge.

THIS CAUSE is before the court on Defendants' Motion to Dismiss Plaintiffs' Claims under Florida Statute § 686.201 on the grounds that the statute is unconstitutional under both the Commerce Clause, U.S. Const. art. 1, § 8, cl. 3, and the Privileges and Immunities Clause, U.S. Const. art. IV, § 2, of the United States Constitution. After careful consideration of the record and having held a hearing on this matter, the court now issues the following order.

I. BACKGROUND

This matter arises out of a dispute between Florida sales representatives and Carryland, an out-of-state corporation, regarding the payment of sales commissions. Carryland is a general partnership whose principal place of business is in Los Angeles County, California. The company does not have a fixed or permanent place of business in the state of Florida. The Lu Brothers, who have been named as individual defendants in this lawsuit, are partners in Carryland. Carryland is engaged in the business of importing ladies' handbags and selling them to retailers throughout the United States. The corporation's principal means of selling is through sales representatives located in various regions of the country.

There are five plaintiffs in this action.¹ Four of the plaintiffs worked under plaintiff Ira Rosenfeld as members of his selling group, and they are identified in the Amended Complaint as sub-representatives of Rosenfeld. As a Florida sales representative for Carryland from mid-1985 to October 1988, Rosenfeld was paid on a commission basis. He did not have a written contract with Carryland. Following his termination, Rosenfeld and his sub-representatives allegedly failed to receive the commissions they had earned, and consequently this action was instituted.

II. FLORIDA STATUTE § 686.201

In Count I of their Amended Complaint, plaintiffs seek damages against defendants under Florida Statute § 686.201. In essence, the statute provides that upon the termination of a sales representative who does not have a written contract with his or her principal, the sales representative is entitled to be paid commissions due at the time of termination within thirty days of that termination. Fla.Stat. § 686.201 (1987). If the commissions are not paid within thirty days of termination, the sales representative has a cause of action for double the amount found to be due. Fla. Stat. § 686.201(3)(b). Florida Statute § 686.201(1)(b) defines a principal as follows:

"Principal" means a person who does not have a permanent or fixed place of business in this state and who

1. Manufactures, produces, imports, or distributes a product for wholesale, except for fresh commodities;

2. Contracts with a sales representative to solicit orders for the product; and

3. Compensates the sales representative, in whole or in part, by commission.

(Emphasis added).

Arguing that the statute, on its face, affirmatively discriminates against out-of-state manufacturers and importers, defendants claim that Florida Statute § 686.201 violates the Commerce Clause. Defendants further contend that the statute offends the Privileges and Immunities Clause on the basis that non-residents do not have the privilege of engaging in business activities on substantially equal terms with residents, and there is no legitimate reason for the disparity in treatment between Florida residents and out-of-state persons.

Pursuant to 28 U.S.C.A. § 2403(b) (West 1978), this court certified to the Attorney General of the State of Florida that the constitutionality of § 686.201 of the Florida Statutes has been drawn into question. Attorney General Robert A. Butterworth filed a notice of acknowledgement with the court on August 20, 1990. The notice of acknowledgment states that the Attorney General does not wish to appear as a party in defense of the statute but reserves the right to be heard in the future and to take an appeal if necessary.

III. THE COMMERCE CLAUSE

The court will begin its analysis with a review of the general principles of dormant Commerce Clause jurisprudence. The Commerce Clause of the United States Constitution provides that "the Congress shall have Power ... to regulate Commerce ... among the several States." U.S. Const. art I, § 8, cl. 3. Although the Commerce Clause only refers to Congress' power over commerce, "the Court long has recognized that it also limits the power of the States to erect barriers against interstate trade." Lewis v. BT Investment Managers, Inc., 447 U.S. 27, 35, 100 S.Ct. 2009, 2015, 64 L.Ed.2d 702, 711 (1980). The Supreme Court has noted that the Commerce Clause prohibits "regulatory measures designed to benefit in-state economic interests by burdening out-of-state competitors." New Energy Co. of Indiana v. Limbach, 486 U.S. 269, 273, 108 S.Ct. 1803, 1807, 100 L.Ed.2d 302, 308 (1988). In its most recent Commerce Clause decision, the Supreme Court stated that the Commerce Clause is regarded as "`a self-executing limitation on the power of the States to enact laws imposing substantial burdens on such commerce.'" Dennis v. Higgins, ___ U.S. ___, 111 S.Ct. 865, 870, 112 L.Ed.2d 969, 978 (1991) (citing South-Central Timber Development, Inc. v. Wunnicke, 467 U.S. 82, 87, 104 S.Ct. 2237, 2240, 81 L.Ed.2d 71, 76 (1984).

The limitation on state regulatory power imposed by the Commerce Clause is, however, not absolute. As the court in Lewis v. BT Investment Managers, Inc., 447 U.S. 27, 100 S.Ct. 2009, 64 L.Ed.2d 702, explained: "... the States retain authority under their general police powers to regulate matters of `legitimate local concern,' even though interstate commerce may be affected." Id., 447 U.S. at 36, 100 S.Ct. at 2015, 64 L.Ed.2d at 711.

To determine whether a state statute violates the Commerce Clause, the Supreme Court has adopted a two-tiered approach. In Brown-Forman Distillers v. N.Y. State Liquor Authority, 476 U.S. 573, 106 S.Ct. 2080, 90 L.Ed.2d 552 (1986), the Supreme Court stated:

When a state statute directly regulates or discriminates against interstate commerce, or when its effect is to favor in-state economic interests over out-of-state interests, we have generally struck down the statute without further inquiry. See e.g. Philadelphia v. New Jersey, 437 U.S. 617, 57 L.Ed.2d 475, 98 S.Ct. 2531 (1978). When, however, a statute has only indirect effects on interstate commerce and regulates evenhandedly, we have examined whether the State's interest is legitimate and whether the burden on interstate commerce clearly exceeds the local benefits. Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 25 L.Ed.2d 174, 90 S.Ct. 844 847 (1970).

Brown-Forman, 476 U.S at 579, 106 S.Ct. at 2084, 90 L.Ed.2d at 559-60 (citations omitted).

A state statute which affirmatively discriminates, either on its face or in its practical effect, against transactions in interstate commerce is subject to heightened scrutiny. Maine v. Taylor, 477 U.S. 131, 138, 106 S.Ct. 2440, 2447, 91 L.Ed.2d 110, 121 (1986). See Hughes v. Oklahoma, 441 U.S. 322, 337, 99 S.Ct. 1727, 1737, 60 L.Ed.2d 250, 262 (1979) ("Facial discrimination by itself may be a fatal defect" and "at a minimum ... invokes the strictest scrutiny ..."). Under the strict scrutiny test, the statute will be upheld only if it "`serves a legitimate local purpose'" and "this purpose could not be served as well by available nondiscriminatory means." Maine v. Taylor, 477 U.S. 131, 138, 106 S.Ct. 2440, 2447, 91 L.Ed.2d. 110, 121 (citing Hughes v. Oklahoma, 441 U.S. 322, 336, 99 S.Ct. 1727, 1736, 60 L.Ed.2d 250, 262). While the party challenging the validity of a state statute generally bears the burden of demonstrating discrimination, where a statute discriminates against interstate commerce on its face, the burden shifts to the state to justify the validity of the statute. Maine v. Taylor, 477 U.S. 131, 138, 106 S.Ct. 2440, 2447, 91 L.Ed.2d 110, 121; Hughes v. Oklahoma, 441 U.S. 322, 336, 99 S.Ct. 1727, 1736, 60 L.Ed.2d 250, 262.

Alternatively, a narrowly drawn state statute that is neutral in its effect upon local and interstate commerce and advances a legitimate state interest is valid if it survives scrutiny under the Pike v. Bruce Church, Inc., 397 U.S. 137, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970), balancing test. If the state statute regulates evenhandedly but incidentally burdens interstate commerce, the statute will be upheld unless the burden it imposes on interstate commerce is "`clearly excessive in relation to the putative local benefits.'" Maine v. Taylor, 477 U.S. 131, 138, 106 S.Ct. 2440, 2447, 91 L.Ed.2d 110, 120 (quoting Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S.Ct. 844, 847, 25 L.Ed.2d 174, 178).

Relying on Maine v. Taylor, 477 U.S. 131, 106 S.Ct. 2440, 91 L.Ed.2d 110, defendants contend that the Florida statute at issue is subject to heightened scrutiny because it affirmatively discriminates against interstate commerce. Plaintiffs, however, argue that the court must consider the overall effect of the statute on interstate commerce, and weigh the burden imposed on interstate commerce in relation to the putative local benefits. Plaintiffs cite Brown-Forman Distillers v. N.Y. State Liquor Authority, 476 U.S. 573, 106 S.Ct. 2080, 90 L.Ed.2d 552, and the Eleventh Circuit decision, Continental Illinois Corp. v. Lewis, 827 F.2d 1517 (11th Cir. 1987), vacated as moot, Lewis v. Continental Bank Corp., 494 U.S. 472, 110 S.Ct. 1249, 108 L.Ed.2d 400 (1990),² in support of their...