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McDonald v. Cetis, Inc.

Superior Court of Maine, Cumberland

November 24, 2014

JOHN E. MCDONALD, JR. Plaintiff,
v.
CETIS, INC Defendant.

FINDINGS AND ORDER FOR ENTRY OF JUDGMENT

I, INTRODUCTION

This matter came on for trial without a jury on August 5, 2014. The parties filed post-trial submissions, the last of which was received by the Court on October 14, 2014. The Court has reviewed the evidence admitted at trial and received pursuant to the Court's Order RE: Post-Trial Proceedings dated August 7, 2014. The Court has considered the parties' written arguments, and issues the following findings and Order for entry of Judgment.

II. PROCEDURAL BACKGROUND

The parties have referred to the two legal disputes between the parties as "McDonald I" and "McDonald II." The Court will do the same. McDonald I involved a claim brought by John E. McDonald against Scitec, Inc. (Cetis' former name) in March of 2010. It initially involved a claim that Scitec owed Mr. McDonald commissions involving Teledex, a company that had been acquired by Scitec. All claims regarding Teledex were resolved in favor of Scitec before trial. Claims brought in an Amended Complaint included an allegation that Scitec owed Mr. McDonald commissions for sales made by Scitec to Avaya. The claim arose when Scitec, upon being sued regarding Teledex, terminated its commission agreement with Mr. McDonald regarding Avaya sales. That claim went to a jury trial before the Business and Consumer Court, with a jury finding in Settee's favor. The Business Court deferred ruling on other issues until after the jury trial, and the verdict and other rulings were appealed.

In May of 2013, the Maine Supreme Court vacated the jury verdict and held that the commission agreement between the parties required Scitec to pay commissions regarding Avaya sales even after the commission agreement was terminated. Cetis conceded in its Post-Trial Brief that the Law Court's opinion "decided Mr. McDonald's breach of contract claim." (Br. of Cetis 2.) However, on June 20, 2013 the Law Court issued an amended decision, as it had not addressed Mr. McDonald's claim that he was entitled to relief under the Illinois Sales Representative Act ("ISRA"), including an award of exemplary damages and counsel fees. The Law Court sent the case back to the Business and Consumer Court to determine those issues, and on September 20, 2013 Justice Nivison held that ISRA did apply to Mr. McDonald's claims against Scitec in that he was a "sales representative" within the meaning of that statute. After further briefing, on January 7, 2014, the court awarded counsel fees, but declined to award exemplary damages.[1] In this decision, Justice Nivison noted that courts who have interpreted ISRA have concluded that "(n)o automatic award of exemplary damages is granted for every violation of the Act." Installco Inc. v. Whiting Corp., 784 N.E.2d 312, 320 (Ill.App.Ct. 2002) (citing Maker & Assocs,, Inc. v. Quality Cabinets; 640 N.E.2d 1000 ( Ill. App. Ct.1994)). The court found that the standard required "willful or wanton conduct or vexatious refusal to pay" (Zavell & Assoc, Inc. v. CCA Indus,, Inc. 628 N.E, 2d 1050, 1052), or a "finding of culpability that exceeds bad faith.'* Maker, 640 N.Ed.2d at 1008. The court ruled it was not able to make such a finding about Scitec's conduct towards Mi-. McDonald.

McDonald II began with the filing of a two-count Complaint alleging that Cetis breached its commission agreement with Mr. McDonald for failing to pay post-trial commissions from December 5, 2011 forward. In addition, the Complaint brought a claim for exemplary damages and counsel fees under ISRA. McDonald II was filed on October 24, 2013, approximately three months before Justice Nivison issued the now-final order regarding exemplary damages and counsel fees in McDonald I, and a day before the post-trial and post-Law Court decision commissions were paid.[2]

III. FINDINGS AND CONCLUSIONS

Count I of the Complaint alleges breach of contract. The claim is that Cetis' failure to pay post-trial commissions immediately after the Law Court's decision in May of 2013 constituted a breach of the commission agreement, The agreement is clearly a contract, and as Cetis has conceded in its post-trial argument, the Law Court's decision in McDonald I resolved the breach of contract claim in that case. That decision also settled the issue of Cetis' ongoing obligation to pay commissions on Avaya sales. Therefore, if Cetis did not make these payments, it was in breach of its contract to Mr. McDonald. The evidence is clear that Cetis has acknowledged its obligation to pay the commissions as of the date of the Law Court's decision, and it is also clear that Cetis did not come current with its obligation until months after the Law Court's decision became final, and just one day before the current lawsuit was filed.

Count II, however, is the heart of Mr. McDonald's claim, as ISRA imposes time requirements for when commissions must be paid after termination of a commission agreement, and it and provides for certain remedies (attorneys fees, costs, and under certain circumstances, exemplary damages) when the time requirements are not met, Under ISRA any commissions due at the time a commissions contract is terminated must be paid within thirteen (13) days of the date on which commissions come due under the agreement.[3] The Court will deal first with the issue of exemplary damages, followed by a consideration of Plaintiff s demand for an award of counsel fees.

a. Exemplary Damages

It has been noted that ISRA "as written, requires an award of exemplary damages in all instances where a principal fails to pay commissions due within 13 days of termination of the representation agreement." Leonard A. Nelson, Punitive Damages Under the Illinois Sales Representative Act, 86 Ill. B. J. 622 (1998). However, courts in Illinois and in other jurisdictions (including this Court) (hat have had occasion to apply ISRA have required much more than a simple violation of the statute's lime requirements in order to award exemplary damages.

Mr. McDonald argues that Cetis had no justification in delaying payment of the post-trial commissions once the Law Court determined that Cetis' obligation to pay commissions on Avaya sales survived the termination of their agreement. Cetis asserts that it had no obligation to pay any commissions until January 28, 2014 at the earliest, which was when the McDonald I judgment became final, [4] Cetis further argues that Mr, McDonald could have, but did not, obtain entry of a final judgment with respect to fewer claims pursuant to Rule 54(b)(1) and therefore by the time the judgment was final on the issue of the applicability of ISRA, Cetis had already paid the commissions.

Mr. McDonald also argues that Cetis' alternative defense -that the patties were working on a global settlement - is not supported by the trial evidence, and that Cetis' delay in payment was actually motivated by animus or ill will toward Mr. McDonald such that an order for exemplary damages is required under ISRA.

Justice Nivison in Iris January 2014 order denying Mr. McDonald's demand for exemplary damages stated that the parties' dispute in that case was "a legitimate legal dispute over the duration of a contract, which dispute was ultimately resolved by the Law Court." At the time the court came to that conclusion, McDonald II had already been filed, and the post-trial commissions owed under McDonald II had been paid. In addition, it is important to note that it was not until September 20, 2013 that the court found that Mi-. McDonald was a "sales representative" within the meaning of ISRA such that he could prevail on a claim for exemplary damages in either McDonald I or McDonald II - depending on what he could prove about Cetis' conduct. The Plaintiff does not seem to be arguing here that Cetis did anything constituting bad faith by making its argument to the court that ISRA did not apply. Rather, he seems ...


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