Opinion ID: 2972779
Heading Depth: 2
Heading Rank: 4

Heading: Post-Termination Commissions

Text: Plaintiffs assert that when a contract is silent on whether an agent is entitled to receive post-termination commissions, the agent is entitled to receive such commissions where the agent was the “procuring cause” of the sale. See Reed v. Kurdziel, 352 Mich. 287, 89 N.W.2d 479 (1958). They argue that the district court’s reliance on Fernandez v. Powerquest Boats, Inc., 798 F.Supp. 458 (W.D. Mich. 1992) to bar Mr. Chase’s posttermination commissions is misplaced. Plaintiffs emphasize that in Fernandez, the parties’ contract was oral and required the agent to continue to service the account to be eligible 10 Nos. 04-1613/1671 Chase, et al. v. Matsu Mfg., Inc., et al. for commissions; in the instant case, plaintiffs note Mr. Chase was not obligated to service the GM contracts. However, as noted by defendants, the agreement before the Court is not silent on the issue of post-termination commissions; rather, it expressly provides that plaintiffs’ rights to commissions ceased once Mr. Chase was no longer acting as defendants’ sales agent or in management. Thus, the district court properly determined that Michigan’s “procuring cause” doctrine was inapplicable under the facts of this case.6
Plaintiffs argue that it is an industry custom to pay commissions for “the life of a part” and that it was Mr. Chase’s understanding of the contract that even if defendants terminated him, he would still receive such commissions. He indicates that when he was fired, numerous contracts with GM were still in effect, providing business to defendants. On the contrary, defendants contend the agreement expressly carved out only one narrow exception in which commissions were payable for the “life of the part,” which was in the event that Mr. Chase was unable to perform sales activities because of his incapacity or death. 6 An agent who participates in the negotiation and secures the agreement of a given contract of sale is the “procuring cause.” See Roberts Associates, Inc. v. Blazer Int’l Corp., 741 F.Supp. 650, 653 (E.D. Mich. 1990). 11 Nos. 04-1613/1671 Chase, et al. v. Matsu Mfg., Inc., et al. Generally, “oral evidence of prior or contemporaneous understandings is inadmissible to vary or contradict an unambiguous writing which is intended to memorialize the complete agreement between the parties.” Roberts Associates, Inc. v. Blazer Int’l Corp., 741 F.Supp. 650, 654 (E.D. Mich. 1990). Under Michigan law, the integration language of the written agreement conclusively establishes the finality and completeness of the written agreement. See Cook v. Little Caesar Enterprises, Inc., 210 F.3d 653, 656 (6th Cir. 2000). This Court has previously held that “Michigan’s parol evidence rule bars the use of extrinsic evidence to contradict the terms of a written contract intended to be the final and complete expression of the contracting parties’ agreement.” Wonderland Shopping Center Venture Limited Partnership v. CDC Mortgage Capital, Inc., 274 F.3d 1085 (6th Cir. 2001)(applying Michigan law). The district court therefore correctly held that Mr. Chase’s subjective understanding of the agreement “cannot be relied upon to determine the parties’ intent because the words of the agreement are clear and unambiguous, and have a definite meaning that does not support Chase’s interpretation.” Accordingly, the district court properly interpreted the written agreement to conclude that plaintiffs are not entitled to “life of the part” commissions.
The agreement between the parties noted that if Mr. Chase became inactive, “his commissions on new business will cease to be paid.” While we have found that the district court correctly determined that plaintiffs are not entitled to any post-termination 12 Nos. 04-1613/1671 Chase, et al. v. Matsu Mfg., Inc., et al. commissions, the Court notes that if the “new business” clause was construed as plaintiffs contend, it would be surplusage, as the agreement entitles plaintiffs to commissions only on business associated with Mr. Chase’s sales activities. See Union Inv. Co. v. Fid. & Deposit Co. of Md., 549 F.2d 1107, 1110 (6th Cir. 1977) (“A contract will not be construed so as to reject any words as surplusage if they reasonably can be given meaning”) (citing Vary v. Shea, 36 Mich. 388, 398 (1877)). Thus, the only reasonable meaning the phrase “new business” could have is continuing revenues on parts programs that Mr. Chase sold while he was an active agent, not new sales of parts made after he stopped being an active sales representative for defendants. The only commissions that conceivably could have been due to Mr. Chase were commissions on sales for which he would be entitled to commissions, i.e., business in the form of sales that plaintiff was actually involved in making when he was acting as defendants’ agent. Thus, plaintiffs’ assertion that the phrase “new business” refers to parts sold after Mr. Chase becomes inactive (as opposed to continued revenue from parts that he previously sold) cannot be supported by the language of the agreement. See Associated Truck Lines, Inc. v. Baer, 346 Mich. 106, 77 N.W.2d 384 (1956).