Opinion ID: 774029
Heading Depth: 2
Heading Rank: 2

Heading: msra

Text: 37 Section 325E.37 of the Minnesota Sales Representative Act governs, inter alia, the termination or nonrenewal of sales representative agreements, express or implied, whether oral or written, Minn. Stat. §325E.37 subd. 1(e), between a manufacturer and a sales representative, i.e., a person who contracts with a principal to solicit wholesale orders and who is compensated, in whole or in part, by commission, id. subd. 1(d), if that person is a resident of or maintains his principal place of business in Minnesota, or his geographical sales territory includes all or part of Minnesota, see id. subd. 6(a). As a substantive matter, that section provides, inter alia, that 38 (a) A manufacturer... may not terminate a sales representative agreement unless the person has good cause and: 39 (1) that person has given written notice setting forth the reason(s) for the termination at least 90 days in advance of termination; and(2) the recipient of the notice fails to correct the reasons stated for termination in the notice within 60 days of receipt of the notice. 40 (b) A notice of termination is effective immediately upon receipt where the alleged grounds for termination are the reasons set forth in subdivision 1, paragraph (b), clauses (1) to (6), hereof. 41 Id. subd. 2. The six clauses referred to provide that good cause includes, but is not limited to, the sales representative's bankruptcy or insolvency; assignment of his assets for the benefit of creditors; voluntary abandonment of the business; conviction of, or a plea of guilty or no-contest to, a charge of violating any law relating to his business; failure to forward customer payments to the manufacturer; and any act that materially impairs the manufacturer's good will. See id. subd. 1(b). The Act similarly prohibits the manufacturer from failing to renew a sales representative agreement on less than 90 days' notice, unless there is good cause for nonrenewal. See id. subd. 3. 42 The Act also provides that if a sales representative agreement is terminated, [p]ayment of commissions due the sales representative shall be paid in accordance with the terms of the sales representative agreement or, if not specified in the agreement, payments of commissions due the sales representative shall be paid in accordance with section 181.145. Id. subd. 4. Section 181.145 of the Minnesota statutes, which deals generally with the employment of persons paid on the basis of commissions for sales, Minn. Stat. §181.145 subd. 1, requires that a commission salesperson who is terminated be paid his earned commissions promptly, generally within three to ten working days, see id. subds. 2(b), (c), (d). Section 181.145 provides that if the manufacturer fails to make payment as promptly as subdivision 2 requires, a monetary penalty will be assessed, see id. subd. 3, and attorneys' fees are to be awarded to the sales representative, see id. subd. 4. 43 MSRA provides that a manufacturer claiming violation of any provision of §325E.37 must do so through arbitration, and that a sales representative seeking resolution of such a dispute has the option of proceeding through either arbitration or court action: 44 The sole remedy for a manufacturer, wholesaler, assembler, or importer who alleges a violation of any provision of this section is to submit the matter to arbitration. A sales representative may also submit a matter to arbitration, or in the alternative, at the sales representative's option prior to the arbitration hearing, the sales representative may bring the sales representative's claims in a court of law, and in that event the claims of all parties must be resolved in that forum.... Each party to a sales representative agreement shall be bound by the arbitration. 45 Minn. Stat. §325E.37 subd. 5(a) (emphasis added). The arbitrator has the power to grant a variety of monetary and equitable relief, see id. subd. 5(b); and subject to a court order of confirmation on motion of any party, [t]he decision of any arbitration hearing under this subdivision is final and binding on the sales representative and the manufacturer, id. subd. 5(c). Thus, MSRA's provisions make it plain that a manufacturer has no right to pursue MSRA claims in court unless the sales representative has chosen the court as a forum, and that the sales representative has the option of insisting on arbitration. 46 We note that this adjudication scheme is consistent with Minnesota's general policy of favoring arbitration of commercial contracts. Eden Land Corp. v. Minn-Kota Excavating, Inc., 302 Minn. 529, 530, 223 N.W.2d 658, 659 (1974) (per curiam) (Minnesota law has consistently looked on arbitration as a proceeding favored in the law (internal quotation marks omitted)); Grover-Dimond Associates v. American Arbitration Association, 297 Minn. 324, 327, 211 N.W.2d 787, 788 (1973) (Clearly, it is the policy of this state...to encourage arbitration as a speedy, informal, and relatively inexpensive procedure for resolving controversies arising out of commercial transactions. (internal quotation marks omitted)). With respect to similar Minnesota statutes, the state's courts have noted that [e]ven though resort to courts is authorized, the basic intent of [such] act[s] is to discourage litigation and to foster voluntary resolution of disputes. Har-Mar Inc. v. Thorsen & Thorshov, Inc., 300 Minn. 149, 154, 218 N.W.2d 751, 754-55 (1974) (internal quotation marks omitted). 47 A State may, of course, distribute the functions of its judicial machinery as it sees fit, Byrd v. Blue Ridge Rural Electrical Cooperative, Inc., 356 U.S. 525, 536 (1958). With respect to sales representative agreements, MSRA explicitly gives the sales representative the right to choose arbitration and provides that arbitration is the manufacturer's sole remedy, unless the sales representative chooses to proceed in court. The district court in the present case stated that [h]ad TKN commenced this action in state court,... GTFM would have had the right to remove the matter to federal court, and that [o]nce in federal court, GTFM would have the right to a jury trial. Opinion at 8 n.6 (emphasis added). Given that MSRA does not purport to prohibit jury trial in a civil action in either federal or state court when the sales representative has elected to bring his claims in court, we agree with that observation. But the district court's factual premise is purely hypothetical; and, given the potentially outcome-affecting differences between arbitration and court adjudication discussed in Bernhardt, the mere fact that the parties are of diverse citizenship does not give the federal court the power to force TKN to proceed in court on a State-created cause of action as to which the State has given TKN the right to insist on arbitration. 48 We note also that GTFM concedes that if both GTFM and TKN were citizens of Minnesota, or if the amount in controversy were less than $75,000, there would be no basis upon which the present action [sic - TKN's claims] could be heard by a federal court[, and that i]n such a case, GTFM would have no right to a jury trial, for the Seventh Amendment would not apply. (GTFM brief on appeal at 9 n.8.) Thus, for the federal court to compel TKN to pursue its claims against GTFM in court rather than through arbitration would confer on GTFM, by reason of its foreign citizenship, a potentially outcome-affecting right that Minnesota citizens do not have. The Supreme Court has expressly stated that such a discrimination is a reason for the federal court, in diversity, to honor, not dishonor, a State's law. Bernhardt, 350 U.S. at 204; Guaranty Trust, 326 U.S. at 112. 49 Finally, we note that the fact that TKN has included a common-law breach-of-contract claim in its Arbitration Complaint provides no basis for either revoking its statutory right to compel arbitration of its MSRA claims or finding a Seventh Amendment violation. The MSRA claims plainly are subject to arbitration. Moreover, it is hardly clear that MSRA does not envision the arbitration of related common-law claims as well. See Minn. Stat. §325E.37 subd. 5(a) (sales representative may also submit a matter to arbitration (emphasis added).) The question of whether MSRA gives the arbitrator jurisdiction over TKN's common-law contract claim is a matter of state law. If the arbitrator has no jurisdiction over such claims, and if they are pursued in court, GTFM will enjoy whatever right of jury trial the forum provides. 50 In sum, the Seventh Amendment, though guaranteeing the right to a jury trial for legal issues in cases tried in federal courts, does not apply to the States. The Minnesota Act gives a sales representative the right to pursue State-created claims against the manufacturer through arbitration. GTFM has no right under the Seventh Amendment to force a sales representative to pursue such claims in court rather than in arbitration.