Case Title: FRANK W LYNCH & CO V FLEX TECHNOLOGIES INC

Citation: 

Docket Number: 115324

State: michigan

Court: Michigan Supreme Court

Date: 2001-04-03T00:00:00Z

Document:
____________________________________________________________________________________________ 
____________________________________________________________________________________________________________________________ 
____________________________________ 
Michigan Supreme Court 
Lansing, Michigan 48909 
C hief Justice 
Justices 
Maura D. Corrigan  
Michael F. Cavanagh 
Elizabeth A. Weaver 
Marilyn Kelly 
Clifford W. Taylor 
Robert P. Young, Jr. 
Opinion 
Stephen J. Markman 
FILED APRIL 3, 2001  
FRANK W. LYNCH & CO.,  
Plaintiff-Appellee,  
v  
No. 115324  
FLEX TECHNOLOGIES, INC., and FLEX 
TECHNOLOGIES, LTD.,  
Defendants-Appellants,  
and  
ONTARIO, INC.,  
Defendant.  
BEFORE THE ENTIRE COURT  
YOUNG, J.  
The sales representatives’ commissions act (SRCA), MCL  
600.2961; 
MSA 
27A.2961, provides, among other things, that, in  
addition to actual damages, a defendant may be liable for up  
to an additional $100,000 for an intentional failure to pay  
sales commissions when due.  We granted leave to determine  
whether the SRCA should be applied retroactively.  
The Court of Appeals followed its decision in Flynn v  
Flint Coatings, Inc, 230 Mich App 633; 584 NW2d 627 (1998),  
and held that the SRCA should be applied retroactively.  We  
disagree and hold that the SRCA operates prospectively only.  
Accordingly, we overrule Flynn, reverse in part the Court of  
Appeals decision, and remand the case to the trial court for  
further proceedings.  
I. Factual and Procedural Background  
In 1990, plaintiff filed this action against defendants  
alleging 
breach 
of 
contract 
and 
unjust 
enrichment.  
Plaintiff’s 
claims 
arise 
from 
a 
1982 
manufacturer’s  
representative agreement with defendants’ predecessor, Drut  
Industries, Ltd., which later became Mechanical Cables, Ltd.  
The agreement, which was amended in 1982 and 1983, basically  
provided that plaintiff would solicit sales of various  
automotive products manufactured by Drut and later Mechanical  
Cables.  Defendants purchased the assets of Mechanical Cables  
in April 1989 and terminated plaintiff’s services effective  
December 31, 1989.  
Throughout the course of this litigation, the focus of  
the parties’ contractual dispute has concerned such issues as  
whether 
defendants 
are bound by the original written agreement  
(not until fairly late in the proceedings did defendants even  
acknowledge that they had any responsibility to plaintiff  
2  
under the agreement), the circumstances under which the  
agreement could be terminated, and the appropriate rate for  
calculating commissions owed.  In that regard, there have been  
several trial court rulings and two Court of Appeals decisions  
pertaining to these issues.  However, we have limited the  
scope of this appeal to the retroactive applicability of the  
SRCA.  
The SRCA became effective on June 29, 1992.  In August  
1992, plaintiff moved to amend its complaint to include a  
claim under the act. The SRCA provides, in relevant part:  
(4) All commissions that are due at the time  
of termination of a contract between a sales  
representative and principal shall be paid within 
45 days after the date of termination.  Commissions  
that become due after the termination date shall be  
paid within 45 days after the date on which the 
commission became due.  
(5) A principal who fails to comply with this 
section is liable to the sales representative for 
both of the following:  
(a) Actual damages caused by the failure to 
pay the commissions when due.  
(b) If the principal is found to have  
intentionally failed to pay the commission when 
due, an amount equal to 2 times the amount of 
commissions due but not paid as required by this 
section or $100,000.00, whichever is less.  
(6) If a sales representative brings a cause 
of action pursuant to this section, the court shall 
award to the prevailing party reasonable attorney 
fees and court costs.  
(7) In an action brought under this section, 
jurisdiction shall be determined in accordance with  
3  
 
 
 
chapter 7.  
(8) A provision in a contract between a 
principal and a sales representative purporting to 
waive any right under this section is void.  
(9) This section does not affect the rights 
of a principal or sales representative that are 
otherwise provided by law.  [MCL 600.2961; MSA  
27A.2961.]  
The trial court denied plaintiff’s motion to amend on the  
ground that the SRCA “imposes a new duty and provides for a  
penalty . . . and attorney fees.”  In its first opinion in  
this case, the Court of Appeals agreed with the trial court  
that the SRCA should be given prospective application only,  
but reversed and remanded the case to the trial court for  
further proceedings on various other issues relating to the  
parties’ original written agreement.1  
While the case was pending in the trial court on remand,  
the Court of Appeals issued its decision in Flynn.  In Flynn,  
the Court of Appeals held that “[b]ecause the SRCA does not  
create a new obligation or impose a new duty, and because it  
simply alters the remedy available to plaintiffs who have been  
denied 
their 
justly 
earned commissions, it is properly applied  
retroactively.” Id. at 638.  
1Unpublished opinion per curiam, issued October 22, 1996 
(Docket No. 169747).  
4  
When this case returned to the Court of Appeals a second  
time, the Court followed its decision in Flynn and held that  
the SRCA “shall be applied retroactively to this case.”2  
Accordingly, the Court of Appeals remanded the case to the  
trial court to allow plaintiff to amend its complaint, and  
directed that the trial court “determine whether defendants  
intentionally failed to pay commissions due at the time of  
termination.”3  The Court also reversed the trial court’s  
decision to enter a judgment of no cause of action on  
plaintiff’s breach of contract claim, as well as its decision  
denying plaintiff’s request for attorney fees as a sanction  
for defendants’ late decision to admit the existence and  
enforceability of the original written agreement.  
We granted defendants’ application for leave to appeal,  
“limited to the issue whether MCL 600.2961; MSA 27A.2961  
should be retroactively applied to this case.” 462 Mich 919  
(2000).  
II. Standard of Review  
As a general matter, “decisions granting or denying  
2While acknowledging its prior decision in this case 
holding that the SRCA should be applied prospectively only, 
the Court concluded that Flynn was an “intervening change in 
the law” allowing it to reach a different conclusion  
notwithstanding the law of the case doctrine.  
3Unpublished opinion per curiam, issued May 14, 1999 
(Docket No. 203326).  
5  
  
  
motions to amend pleadings . . . are within the sound  
discretion of the trial court and reversal is only appropriate  
when the trial court abuses that discretion.”  Weymers v  
Khera, 454 Mich 639, 654; 563 NW2d 647 (1997).  In this case,  
however, the propriety of plaintiff’s request to amend its  
complaint turns on whether the SRCA should be applied  
retroactively. This is a question of statutory construction  
that we review de novo.  Donajkowski v Alpena Power Co, 460  
Mich 243, 248; 596 NW2d 574 (1999).  
III. Analysis  
In determining whether a statute should be applied  
retroactively or prospectively only, “[t]he primary and  
overriding rule is that legislative intent governs.  All other  
rules of construction and operation are subservient to this  
principle.” 
Franks v White Pine Copper Division, 422 Mich  
636, 670; 375 NW2d 715 (1985).  Moreover, “statutes are  
presumed to operate prospectively unless the contrary intent  
is clearly manifested.” Id. at 671; see also Hughes v Judges’  
Retirement Bd, 407 Mich 75, 85; 282 NW2d 160 (1979). This is  
especially true if retroactive application of a statute would  
impair vested rights, create a new obligation and impose a new  
duty, 
or 
attach 
a 
disability 
with 
respect 
to 
past  
transactions. See Franks, supra at 671-674.  
6  
 
We agree with defendants that there is nothing in the  
language of the SRCA suggesting a legislative intent that this  
statute be applied retroactively.  To the contrary, there  
actually are two signals that exactly the opposite was  
intended. Most instructive is the fact that the Legislature  
included no express language regarding retroactivity.  See,  
e.g., Chesapeake & Ohio Co v Public Service Comm, 382 Mich 8,  
22-23; 167 NW2d 438 (1969) (Adams, J.).  We note that the  
Legislature has shown on several occasions that it knows how  
to 
make 
clear 
its 
intention 
that 
a 
statute 
apply  
retroactively.
 See, e.g., MCL 141.1157; MSA 5.3188(257)  
(“This act shall be applied retroactively . . . ”); MCL  
324.21301a; 
MSA 
13A.21301a (“The changes in liability that are  
provided for in the amendatory act that added this subsection  
shall be given retroactive application”).  
Further 
indicating 
that 
the 
Legislature 
intended  
prospective application of the SRCA is the fact that  
subsection 5 of the SRCA provides for liability if the  
principal “fails to comply with this section.”  Because the  
SRCA did not exist at the time that the instant dispute arose,  
it would have been impossible for defendants to “comply” with  
its provisions.  Accordingly, this language supports a  
conclusion 
that 
the 
Legislature intended that the SRCA operate  
prospectively only.  
7  
Plaintiff relies on the so-called “exception” to the  
general rule of prospective application providing that  
“statutes which operate in furtherance of a remedy or mode of  
procedure and which neither create new rights nor destroy,  
enlarge, or diminish existing rights are generally held to  
operate retrospectively unless a contrary legislative intent  
is manifested.”  Franks, supra at 672; Selk v Detroit Plastic  
Products, 419 Mich 1, 10; 345 NW2d 184 (1984).  Plaintiff  
argues that the SRCA is remedial because no new cause of  
action is created.  Instead, according to plaintiffs, the act  
merely supplements and furthers remedies otherwise available.  
However, we have rejected the notion that a statute  
significantly 
affecting 
a 
party’s 
substantive 
rights 
should 
be  
applied retroactively merely because it can also be  
characterized in a sense as “remedial.”   Franks, supra at  
673-674.  In that regard, we agree with Chief Justice Riley’s  
plurality opinion in White v General Motors Corp, 431 Mich  
387, 397; 429 NW2d 576 (1988), that the term “remedial” in  
this context should only be employed to describe legislation  
that does not affect substantive rights.  Otherwise, “[t]he  
mere fact that a statute is characterized as ‘remedial’ . . .  
is of little value in statutory construction.” Id., quoting  
3 Sands, Sutherland Statutory Construction (4th ed), § 60.02,  
p 60. Again, the question is one of legislative intent.  
8  
We find the United States Supreme Court’s decision in  
Landgraf v USI Film Products, 511 US 244; 114 S Ct 1483; 128  
L Ed 229 (1994), to be instructive on this point.  In that  
case, the Court had to decide whether to apply retroactively  
the then newly enacted compensatory damages provision of the  
1991 amendments to title VII. Although the Court recognized  
that the new provisions did not create a new cause of action  
per se because discriminatory conduct had previously been  
prohibited, the Court observed that the provisions would  
“attach an important new legal burden to that conduct.” Id.  
at 283.  Therefore, the Court concluded that the damages  
remedy at issue was “the kind of provision that does not apply  
to events antedating its enactment in the absence of clear  
congressional intent.” Id.  
Similarly, here, retroactive application of the SRCA  
would change significantly the substance of the parties’  
agreement and unsettle their expectations.  Not only would the  
forty-five-day payment provision impose a new burden on  
defendants, but it is one that defendants can no longer meet  
because they already made the decision to dispute the  
commissions claimed by plaintiff before the statute was  
enacted.  Thus, defendants never had the opportunity to avoid  
9  
 
the penalty authorized by the statute.4  Finally, as opposed  
to being merely “remedial” in nature, the SRCA clearly serves  
a punitive and deterrent purpose.  Thus, absent some clear  
manifestation, we simply cannot attribute to the Legislature  
an intent to give the SRCA retroactive effect.5  
4We have no doubt that the SRCA authorizes a penalty. 
Damages awarded in a common-law breach of contract action are 
“expectancy” damages designed to make the plaintiff whole.  In  
Kewin v Massachusetts Mutual Life Ins Co, 409 Mich 401, 414; 
295 NW2d 50 (1980), we explained the usual measure of damages 
in such an action:  
Under the rule of Hadley v Baxendale, 9 Exch 
341; 
156 
Eng 
Rep 
145 
(1854), 
the 
damages 
recoverable for breach of contract are those that  
arise naturally from the breach or those that were 
in the contemplation of the parties at the time the 
contract was made.  
Because the SRCA authorizes a measure of damages in addition 
to the “actual damages” incurred by a plaintiff, on the basis 
of an “intentional failure to pay commissions when due,” MCL 
600.2961(5)(b); MSA 27A.2961(5)(b), it is indisputably 
punitive, not compensatory, in that respect.  
5Guardian Depositors Corp of Detroit v Brown, 290 Mich 
433; 287 NW 798 (1939), provides an example of a case in which 
a statute altering the remedy for enforcement of a contract 
would properly be applied retroactively.  
In Guardian, the Trevethans took out a mortgage on their 
property that the plaintiff subsequently acquired.  The  
defendants bought the Trevethans’ home and expressly assumed 
the mortgage under a warranty deed.  When the defendants  
failed to make payments, the plaintiff brought suit under the 
then newly enacted third-party beneficiary statute, 1937 PA 
296.
 This Court held that the statute should be applied 
retroactively because it was merely remedial.  The Court  
emphasized that, even before the statute, the plaintiff “had 
a clear and direct right in equity to enforce a duty owed by 
defendants and created by their assumption agreement,” and 
(continued...)  
10  
In that regard, we agree with the Landgraf Court that a  
requirement that the Legislature make its intention clear  
“helps ensure that [the Legislature] itself has determined  
that the benefits of retroactivity outweigh the potential for  
disruption or unfairness.” Landgraf, supra at 268. This is  
especially true when a new statutory provision affects  
contractual rights, an area “in which predictability and  
stability are of prime importance.” Id. at 271.6  
As a final matter, plaintiff asserts two lower federal  
court decisions relying on Senate Bill Analysis, SB 717, May  
21, 1992, to support the conclusion that the SRCA is  
compensatory 
rather 
than punitive in nature because it “merely  
designates another measure of damages for the same breach of  
contract action . . . .” M & C Corp v Erwin Behr GmbH & Co,  
87 F 3d 844, 850 (CA 6, 1996); see also Kenneth Henes Special  
Projects Procurement v Continental Biomass Ind, Inc, 86 F Supp  
2d 721 (ED Mich, 2000). We reject plaintiff’s reliance on M  
& C Corp and Henes because neither is persuasive. First, as  
5(...continued) 
that the statute merely allowed the defendants to enforce the 
same duty at law.  Id. at 441-442.  The only effect of the 
statute was to avoid a multiplicity of suits.  
6As did the dissent in Flynn, supra at 640-641, 
defendants allude to potential constitutional “impairment of 
contract” concerns that could arise by virtue of a retroactive 
application of the SRCA.  See Const 1963, art 1, § 10. 
Because we can discern no Legislative intent to apply the SRCA 
retroactively, we need not address that issue.  
11  
even plaintiff acknowledges, in Michigan, a legislative  
analysis is a feeble indicator of legislative intent and is  
therefore 
a 
generally 
unpersuasive 
tool 
of 
statutory  
construction.7
 Second, even if it were relevant to our  
analysis, nothing in the Senate bill analysis leading to the  
enactment of the SRCA contradicts our view that the act  
authorizes a penalty. Finally, we note that neither federal  
decision 
purported 
to 
address 
an 
issue 
concerning 
retroactivity. 
IV. Conclusion 
Retroactive application of the SRCA would substantially  
alter the nature of agreements concerning payment of sales  
commissions that were entered into before the act’s effective  
7As the Court of Appeals noted in People v Tolbert, 216 
Mich App 353, 360, n 5; 549 NW2d 61 (1996):  
It has been observed in the federal context  
that resort to "legislative history" in the search 
for legislative intent is a perilous venture. 
Marposs Corp v Troy, 204 Mich App 156, 167-168, n 
2; 514 NW2d 202 (1994) (Taylor, P.J., dissenting), 
quoting Address by Justice Antonin Scalia before 
the Attorney General's Conference on Economic  
Liberties (June 14, 1986).  This enterprise is 
doubly fraught with danger in Michigan which, 
unlike 
Congress, 
has 
failed 
to 
create 
an  
authoritative legislative record. Id.  
The problem with relying on bill analyses is that they do  
not necessarily represent the views of even a single 
legislator.  Rather, they are prepared by House and Senate 
staff.  Indeed, the analyses themselves note that they do not 
constitute an official statement of legislative intent.  
12  
 
date.  Absent a clear legislative intent that the act be so  
applied, we hold that the SRCA must be given prospective  
effect only.  Accordingly, we overrule Flynn, reverse in part  
the Court of Appeals decision, and reemphasize the strong  
presumption 
against 
the 
retroactive 
application 
of 
statutes 
in  
the absence of a clear expression by the Legislature that the  
act be so applied. 
The case is remanded for further  
proceedings on the remaining issues consistent with the  
direction given by the Court of Appeals.  
CORRIGAN, C.J., and WEAVER, TAYLOR, and MARKMAN, JJ.,  
concurred with YOUNG, J.  
13  
___________________________________ 
 
v 
S T A T E O F M I C H I G A N  
SUPREME COURT  
FRANK W. LYNCH & CO.,  
Plaintiff-Appellee,  
No. 115324  
FLEX TECHNOLOGIES, INC., 
and FLEX TECHNOLOGIES, LTD.,  
Defendants-Appellants,  
and  
ONTARIO, INC.,  
Defendant.  
KELLY, J. (concurring).  
I write separately to express my view that, in Michigan,  
under certain circumstances, a bill analysis could be a  
persuasive tool of statutory construction.  Assume, for  
example, that the analysis explaining a bill's intent were  
consistent with other evidence showing the same intent. Then  
that could be, at least, as persuasive as the opinion of a  
sitting legislator about the bill's intent.  
CAVANAGH, J., concurred with KELLY, J.