Title: IN RE CERTIFIED QUESTION - KENNETH HENES SPECIAL PROJECTS

State: michigan

Issuer: Michigan Supreme Court

Document:

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Michigan Supreme Court 
Lansing, Michigan 48909 
Chie f 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 23, 2003  
In re CERTIFIED QUESTION FROM 
THE UNITED STATES COURT OF APPEALS  
FOR THE SIXTH CIRCUIT  
KENNETH HENES SPECIAL PROJECTS  
PROCUREMENT, MARKETING AND 
CONSULTING CORPORATION,  
Plaintiff,  
v 
No. 120110  
CONTINENTAL BIOMASS INDUSTRIES, INC.  
Defendant.  
BEFORE THE ENTIRE BENCH  
YOUNG, J.  
Plaintiff 
filed 
suit 
against 
Continental 
Biomass  
Industries, Inc., to recover unpaid sales commissions and  
penalty damages pursuant to the Michigan sales representative  
commission act (SRCA), MCL 600.2961. 
Pursuant to MCR  
7.305(B),1 the United States Court of Appeals for the Sixth  
1 MCR 7.305(B)(1) provides: ”When a federal court . . . 
considers a question that Michigan law may resolve and that is 
(continued...)  
Circuit has certified the following question to this Court:  
What standard is appropriate in evaluating the 
mental state required for double damages under the 
Michigan Sales Representative Commission Act?  
We have accepted the certification and hold that the plain  
language of the statute requires only that the principal  
purposefully fail to pay a commission when due. The statute  
does not require evidence of bad faith before double damages,  
as provided in the statute, may be imposed.  
I. FACTS AND PROCEEDINGS  
Continental Biomass Industries (CBI) is a New Hampshire  
corporation that manufactures equipment used in wood waste  
processing.  For several years, Kenneth Henes served as CBI’s  
sales representative, with an exclusive sales territory that  
encompassed Michigan, Ohio, Indiana, Illinois, and Wisconsin.  
After plaintiff’s services were terminated in May 1998,  
he sought unpaid commissions on four sales.  CBI refused to  
pay because it did not believe that plaintiff was entitled to  
the commissions under the terms of the contract.  
The case was tried before a jury in federal court. The  
defendant requested a jury instruction regarding the level of  
intent required for the double-damages provision contained in  
the act.  Specifically, defendant wanted the jury to be  
instructed that “[i]ntentional failure to pay means that  
defendant knew a commission was due the plaintiff and chose  
not to pay it.”  
1(...continued) 
not controlled by Michigan Supreme Court precedent, the court 
may on its own initiative or that of an interested party 
certify the question to the Michigan Supreme Court.”  
2  
 
The trial court refused to give the requested jury  
instruction. Instead, the trial court followed the language  
of the statute, instructing the jury that if it found that a  
commission was owed, it must then decide if defendant  
intentionally failed to pay the commission when due.  
On a special verdict form, the jury found that defendant  
owed all four commissions and that it intentionally failed to  
pay three of the four commissions when due.  
Defendant filed a postjudgment motion for a new trial and  
amendment of the judgment.  Defendant claimed that the jury  
instruction given by the trial court was insufficient because  
it did not define the term “intentionally” for the jury.  The  
trial court denied the motion, stating that the SRCA was  
intended to be compensatory and not punitive.2  
While defendant’s appeal was 
pending 
in 
the 
United States  
Court of Appeals for the Sixth Circuit, this Court released  
Frank W Lynch & Co v Flex Technologies, Inc, 463 Mich 578; 624  
NW2d 180 (2001). In Lynch, which addressed the retroactivity  
of the SRCA, the opinion stated that “the SRCA clearly serves  
a punitive and deterrent purpose,” id. at 586, and that the  
act was “indisputably punitive, not compensatory.” Id. at n  
4. These statements arguably conflict with the trial court’s  
conclusion regarding the nature of the statute.  
The Sixth Circuit heard oral argument in the present case  
in August 2001.  In the certified question request, the panel  
observed that the Lynch opinion did not indicate “what  
2 In making this ruling, the trial court relied on M & C  
Corp v Erwin Behr GmbH & Co, KG, 87 F3d 844 (CA 6, 1996).  
3  
 
specific intent standard applies,” and that the “appeal turns  
on what level of intent is needed to invoke the double-damages  
provision . . . .”  
II. THE STATUTE  
The 
relevant 
statutory 
language 
at 
issue, 
MCL  
600.2961(5), states:  
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 commission 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, whichever is less.  
A 
fundamental 
principle 
of 
statutory 
construction 
is 
that  
"a clear and unambiguous statute leaves no room for judicial  
construction or interpretation." Coleman v Gurwin, 443 Mich  
59, 65; 503 NW2d 435 (1993). The statutory language must be  
read and understood in its grammatical context, unless it is  
clear that something different was intended.  Sun Valley Foods  
Co v Ward, 460 Mich 230; 596 NW2d 119 (1999). 
When a  
legislature has unambiguously conveyed its intent in a  
statute, the statute speaks for itself and there is no need  
for judicial construction; the proper role of a court is  
simply to apply the terms of the statute to the circumstances  
in a particular case.  Turner v Auto Club Ins Ass’n, 448 Mich  
22, 27; 528 NW2d 621 (1995).  
The clear language of the statute evinces no textual  
intent to create a good faith defense to the double-damages  
4  
 
provision. Grammatically, the word “intentionally” modifies  
the phrase “failed to pay.” The word “intentionally” is not  
defined in the statute. Where the Legislature has not  
expressly defined the common terms used in a statute, this  
Court may turn to dictionary definitions "to aid our goal of  
construing those terms in accordance with their ordinary and  
generally accepted meanings." People v Morey, 461 Mich 325,  
330; 603 NW2d 250 (1999).  
Random House Webster's College Dictionary (1991) defines  
"intentional" as "done with intention or on purpose; intended  
. . . ."  Nothing in the generally accepted meaning of the  
word leads to the inference that a good faith belief on the  
part 
of 
the 
principal 
precludes 
recovery 
under 
MCL  
600.2961(5)(b).3  See, generally, Gillary & Albus, Michigan's  
sales 
representative 
act 
revisited—again—or, 
does  
"intentionally" mean "in bad faith"?, 2001 L R MSU-DCL 965.  
Therefore, under the clear language of the statute, if a  
principal deliberately fails to pay a commission when due, it  
is liable for double damages under the statute, even if the  
principal did not believe, reasonably or otherwise, that the  
commission was owed.  There is no textual indication that a  
principal’s good faith belief is relevant in making the  
determination that double damages are payable under the  
3 Defendant claims that the word “intentional” is a legal  
term of art, and not susceptible to the use of a lay 
dictionary.  As used in the statute under consideration, we 
disagree. However, we note that the legal definition of 
“intentionally” provides defendant no relief. Black's Law 
Dictionary (6th ed) defines "intentionally" as “[t]o do 
something purposefully, and not accidentally."  
5  
 
 
 
 
 
statute.4  
III. May the Legislative History of the srca  
trump the statutory language?  
Notwithstanding 
that 
the 
language of the statute does 
not  
require “bad faith” as a precondition to recovering double  
damages, defendant asserts that such a construction must be  
imposed by the courts. Defendant relies upon the legislative  
history of the statute in support of its position.5  
4Some states that have passed similar acts have required 
a higher level of 
intentionality 
before 
additional 
damages are 
assessed.  See Cal Civil Code 1738.15 (“willfully fails to 
pay commissions”); Ind Code 24-4-7-5(b) (“in bad faith fails 
to comply”); Mass Gen Laws Ann ch 104, § 9 (“wilfully or 
knowingly fails to comply”); Pa Consol Stat tit 43, § 1475(a) 
(“willfully fails to comply”); Tenn Code Ann 47-50-114(d) 
(“acting in bad faith, fails to comply”).  
5 
This Court has recognized the benefit of using 
legislative history when a 
statute is ambiguous and  
construction of an ambiguous provision becomes necessary. 
Stajos v City of Lansing, 221 Mich App 223; 561 NW2d 116  
(1997); People v Hall, 391 Mich 175; 215 NW2d 166 (1974); 
Liquor Control Comm v Fraternal Order of Eagles, Aerie No 629, 
286 Mich 32; 281 NW 427 (1938).  However, we take this 
opportunity to emphasize that not all legislative history is 
of equal value, a fact that results in varying degrees of 
quality and utility of legislative history.  
Clearly of the highest quality is legislative history 
that relates to an action of the Legislature from which a 
court may draw reasonable inferences about the Legislature's 
intent with respect to an ambiguous statutory provision. 
Examples of legitimate legislative history include actions of 
the 
Legislature 
intended 
to 
repudiate 
the 
judicial 
construction of a statute, see, e.g., Detroit v Walker, 445 
Mich 682, 697; 520 NW2d 135 (1994), or actions of the 
Legislature 
in 
considering 
various 
alternatives 
in 
language 
in 
statutory provisions before settling on the language actually 
enacted. See, e.g., Miles ex rel Kamferbeek v Fortney, 223 
Mich 552, 558; 194 NW 605 (1923).  From the former, a court  
may be able to draw reasonable inferences about the  
Legislature's intent, even when the Legislature has failed to 
unambiguously express that intent.  From the latter, by 
(continued...)  
6  
 
In 1991, our Legislature passed Senate Bill 36, which was  
based on model language drafted by the Bureau of Wholesale  
Representatives.  The language of the bill passed was the same  
as MCL 600.2961, except that it did not include the word  
“intentionally.”  Governor John Engler vetoed the bill on  
July 15, 1991.  The veto message stated in part: “Second, I  
oppose the use of exemplary damages in contract actions absent  
broad public policy considerations and particularly in this  
case where exemplary damages would be assessed without  
consideration 
of 
the 
underlying factors resulting in breach 
of  
(...continued) 
comparing alternative legislative drafts, a court may be able 
to discern the intended meaning for the language actually 
enacted.  
Of 
considerably 
diminished 
quality 
as 
legislative 
history 
are forms that do not involve an act of the Legislature. 
“Legislative analyses” created within the legislative branch 
have occasionally been utilized by Michigan courts.  These  
staff analyses are entitled to little judicial consideration 
in resolving ambiguous statutory provisions because: (1) such 
analyses are not an official form of legislative record in 
Michigan, (2) such analyses do not purport to represent the 
views 
of 
legislators, 
individually 
or 
collectively, 
but 
merely 
to set forth the views of professional staff offices situated 
within the legislative branch, and (3) such analyses are 
produced outside the boundaries of the legislative process as 
defined in the Michigan Constitution, and which is a  
prerequisite for the enactment of a law. Const 1963, art 4, 
§§ 26 & 33. In no way can a “legislative analysis” be said to 
officially summarize the intentions of those who have been 
designated by the Constitution to be participants in this 
legislative process, the members of the House and the Senate 
and 
the 
Governor. 
For 
that reason, legislative analyses should 
be accorded very 
little 
significance 
by 
courts when construing 
a statute.  
Finally, it bears repeating that resort to legislative 
history of any form is proper only where a genuine ambiguity 
exists in the statute. Legislative history cannot be used to 
create an ambiguity where one does not otherwise exist.  
7  
  
 
 
 
 
contract.”  
In 
response 
to 
the Governor’s veto, the Legislature 
added  
the word “intentionally.”  With that addition, the Governor  
signed the bill into law. 1992 PA 125.  It does appear that  
the Governor vetoed the original bill in part out of a concern  
for 
the 
inappropriateness 
of 
awarding 
extracontractual 
damages  
on the basis of a mere breach of contract. The fact remains  
that the final bill enacted and signed into law did not cure  
the problem the Governor raised in his veto message.  
Defendant’s 
argument 
that 
the 
statute 
should 
be 
construed  
to include a good faith defense must fail because it violates  
a prime tenet of statutory construction: Michigan courts are  
bound to apply the unambiguous language actually used in a  
statute. 
Danse Corp v Madison Hts, 466 Mich 175, 182; 644  
NW2d 721 (2002).  Because the statute is clear, there is no  
ambiguity that would permit or justify looking outside the  
plain words of the statute. 
“‘[W]e do not resort to  
legislative history to cloud a statutory text that is clear.’”  
Chmielewski v Xermac, Inc, 457 Mich 593, 608; 580 NW2d 817  
(1998), quoting Gilday v Mecosta Co, 124 F3d 760, 767 (CA 6,  
1997), quoting Ratzlaf v United States, 510 US 135, 147-148;  
114 S Ct 655; 126 L Ed 2d 615 (1994).  See also Luttrell v  
Dep't of Corrections, 421 Mich 93, 101; 365 NW2d 74 (1984).  
IV. THE NATURE OF THE SRCA  
In Lynch, 
the 
opinion 
stated that “the 
SRCA clearly serves  
a punitive and deterrent purpose,” 463 Mich 586, and that the  
act was “indisputably punitive, not compensatory,” id. at n 4.  
These statements  were made in response to the plaintiff’s  
8  
 
 
argument that the statute was remedial and should be applied  
retroactively under the “exception” to the general rule of  
prospective application.  
Defendant maintains that under Michigan case law,  
punitive damages are not available absent a showing of  
malicious or willful misconduct.  In support of this argument,  
defendant cites Peisner v Detroit Free Press, 421 Mich 125;  
364 NW2d 600 (1984).  
In Peisner, the Court considered whether exemplary and  
punitive damages under the Michigan libel statute, MCL  
600.2911(2)(b), resulted in plaintiff being compensated twice  
for the same injury.6  In resolving this question, the Court  
stated that “exemplary and punitive damages for libel cannot  
be awarded in the absence of a finding that the defendant  
acted with common-law malice—in the sense of ill will or bad  
faith—in publishing the libel.” Id. at 136.  
There are distinct differences between the language of  
6 The statutory language at the time provided:  
(b) Exemplary and punitive damages shall not  
be recovered in actions for libel unless the  
plaintiff, before instituting his action, gives 
notice to the defendant to publish a retraction and 
allows a reasonable time to do so, and proof of the 
publication or correction shall be admissible in 
evidence under a denial on the question of the good 
faith of the defendant, and in mitigation and 
reduction of exemplary or punitive damages.  The  
retraction shall be published in the same size  
type, in the same editions and as far as  
practicable, in substantially the same position as 
the original libel.  
9  
 
 
 
 
the libel statute and that of the SRCA. The libel statute does  
not 
identify 
any 
particular mental state surrounding the 
libel  
before liability for exemplary or punitive damages attaches,  
whereas the 
SRCA 
expressly predicates liability on an  
intentional failure to pay.  In addition, the libel statute  
explicitly permits the consideration of the “good faith of the  
defendant,” 
MCL 
600.2911(2)(b), 
whereas 
the 
SRCA 
is  
conspicuously silent on the subject.7  The textual difference  
between the statutes militates against the application of the  
Peisner holding to the facts of this case.  
The double-damages provision of the SRCA is irrefutably  
punitive rather than compensatory in the sense that it  
provides for an award of damages above and beyond that  
necessary to make plaintiff whole under the contract.  
However, that conclusion is not controlling or even relevant  
to the proper construction of this unambiguous statute. The  
clear and unambiguous language of the statute penalizes  
intentional failure to pay, without regard to the motivation  
of the principal. Under the language of the statute, it  
appears that the only cognizable defense to a double-damages  
claim is if the failure to pay the commission were based on  
7 The Peisner Court also relied on the now disfavored  
doctrine 
of 
legislative 
acquiescence 
in 
holding 
that  
“exemplary and punitive” damages are compensatory in nature 
for purposes of the libel statute.  421 Mich 133.  See Hanson  
v Mecosta Co Rd Comm'rs, 465 Mich 492; 638 NW2d 396 (2002); 
Donajkowski v Alpena Power Co, 460 Mich 243; 596 NW2d 574 
(1999); People v Borchard-Ruhland, 460 Mich 278; 597 NW2d 1 
(1999).  
10  
inadvertence or oversight.  The Legislature is certainly  
within its power to award “punitive-type” damages for such  
actions if it chooses to do so.  The imposition of a contrary  
judicial gloss is inappropriate where the Legislature has  
clearly expressed its intentions in the words of the statute.  
Nawrocki v Macomb Co Road Comm, 463 Mich 143, 150; 615 NW2d  
702 (2000); Chmielewski, supra at 606; People v Gilbert  414  
Mich 191; 324 NW2d 834 (1982).  
V. CONCLUSION  
For the foregoing reasons, we conclude that the plain  
language of the double-damages provision of the statute  
requires only that the principal purposefully fail to pay a  
commission when the commission becomes due. Having answered  
the certified question, we return the matter to the United  
States Court of Appeals for the Sixth Circuit for further  
proceedings as deemed appropriate.  
Robert P. Young, Jr. 
Maura D. Corrigan 
Clifford W. Taylor 
Stephen J. Markman  
11  
__________________________________ 
___________________________________ 
 
v 
S T A T E O F M I C H I G A N  
SUPREME COURT  
In re CERTIFIED QUESTION FROM 
THE UNITED STATES COURT OF APPEALS  
FOR THE SIXTH CIRCUIT,  
KENNETH HENES SPECIAL PROJECTS  
PROCUREMENT, MARKETING AND 
CONSULTING CORPORATION,  
Plaintiff,  
No. 120110  
CONTINENTAL BIOMASS INDUSTRIES, INC,  
Defendant.  
CAVANAGH, J. (concurring).  
The majority holds that the plain language of the  
Michigan sales representative commission act (SRCA), MCL  
600.2961, requires only that the principal purposefully fail  
to pay the commission when due before liability for an  
intentional failure to pay would arise.  Although I agree with  
its result, I write separately to express my concern with the  
majority’s 
narrow 
textualist 
approach 
to 
statutory 
interpretation. 
LEGISLATIVE HISTORY 
Though I agree that nothing need be gleaned from the  
 
 
history in this case, I disagree with the majority’s assertion  
that legislative history is wholly irrelevant when a statute  
lacks “ambiguity.” Of course, statutory interpretation must  
always begin with the text.  However, statutes subject to  
different reasonable interpretations are often held to be  
clear and unambiguous on the basis of definitions selected by  
this Court and provided by Webster’s Dictionary.  Contrary to  
the perspective of some of my colleagues, that type of  
analysis can, at times, prove unhelpful. Instead, it is often  
useful to consider legislative history because even those  
statutes lacking clearly contradictory language are often  
subject 
to 
different—yet 
reasonable—interpretations.1  
In 
this  
case, for example, the United States Court of Appeals for the  
Sixth 
Circuit 
found 
the term sufficiently ambiguous to 
warrant  
certification to this Court.  Because a majority of this Court  
rarely finds a statute ambiguous, legislative history is  
seldom utilized, though many times it would be useful.  
PURPOSE  
In addition, I am troubled by the majority’s failure to  
clarify that any other interpretation of the statute would  
render the punitive measure almost meaningless and clearly  
1 “Reading the legislative history puts the judge better 
in touch with the values, vocabulary, and policy choices of 
the authors of the statute—just as The Federalist does for the 
framers of the Constitution.” 
Eskridge, Textualism, The  
unknown ideal? 96 Mich L R 1509 (1998).  
2  
  
 
contrary to the statute’s purpose.  “[T]he Court may depart  
from strict construction principles when a literal reading of  
the statute will produce absurd or illogical results, and this  
Court should attempt to give effect to all relevant statutory  
provisions.” 
DiBenedetto v West Shore Hosp, 461 Mich 394,  
408; 605 NW2d 300 (2000) (Cavanagh, J., dissenting); see also  
1 Blackstone, Commentaries 61 (“[T]he most universal and  
effectual way of discovering the true meaning of a law, when  
the words are dubious, is by considering the reason and spirit  
of it . . . for when this reason ceases, the law itself ought  
likewise to cease with it.").  I understand that some members  
of the majority disapprove of this doctrine, but it is most  
applicable.  If an insurance company were exempt from punitive  
damages simply because it asserted a “reasonable” argument  
concerning a disputed commission, the statute would create no  
incentive to pay commissions owed to insurance sales agents.  
For these reasons, I concur in the result only.  
Michael F. Cavanagh 
Marilyn Kelly  
3  
________________________________________ 
________________________________________ 
S T A T E O F M I C H I G A N  
SUPREME COURT  
In re CERTIFIED QUESTION FROM  
THE UNITED STATES COURT OF APPEALS  
FOR THE SIXTH CIRCUIT  
KENNETH HENES SPECIAL PROJECTS  
PROCUREMENT, MARKETING AND  
CONSULTING CORPORATION,  
Plaintiff,  
v 
No. 120110  
CONTINENTAL BIOMASS INDUSTRIES, INC.  
Defendant.  
WEAVER, J. (concurring).  
I concur with the result reached by the majority.  I  
write separately to state as I did in my dissent to the  
proposed amendment of MCR 7.305 that this Court lacks the  
constitutional authority to hear questions certified from  
federal courts 
and 
that, 
therefore, 
MCR 7.305(B) represents an  
unconstitutional expansion of judicial power. 462 Mich 1208  
(2000), see also In re Certified Question (Wayne Co v Philip  
Morris, Inc), 622 NW2d 518 (2001).  
Elizabeth A. Weaver  
2