Court Opinion

ID: 2744068
Source: CourtListenerOpinion
Date Created: 2014-10-21 15:01:00.080679+00
Date Added: 2024-06-11T09:53:41.161123
License: Public Domain

Case: 14-11118   Date Filed: 10/21/2014   Page: 1 of 13

                                                         [DO NOT PUBLISH]

            IN THE UNITED STATES COURT OF APPEALS

                     FOR THE ELEVENTH CIRCUIT
                       ________________________

                             No. 14-11118
                         Non-Argument Calendar
                       ________________________

                  D.C. Docket No. 1:12-cv-00267-CG-M

ERLEND TANGEN,

                                                               Plaintiff-Appellee,

                                  versus

IDEACOM OF THE GULF COAST, INC.,

                                                          Defendant-Appellant.

                       ________________________

                Appeal from the United States District Court
                   for the Southern District of Alabama
                       ________________________

                            (October 21, 2014)

Before HULL, MARCUS and KRAVITCH, Circuit Judges.

PER CURIAM:
               Case: 14-11118      Date Filed: 10/21/2014   Page: 2 of 13

       Ideacom of the Gulf Coast, Inc. (Ideacom) appeals the district court’s award

of $110,500.70 in damages, plus applicable attorney’s fees and costs, following a

bench trial in Erlend Tangen’s suit seeking payment of sales commissions

stemming from his prior employment with Ideacom. For the reasons that follow,

we affirm in part and reverse and remand in part.

                                            I.

       Tangen started work as a healthcare sales representative with Ideacom in

2002. His compensation included an annual base salary of $33,000 and a 5 percent

commission on individual sales. In late 2008, Ideacom altered the structure of its

commissions program with a one-page written document titled “Sales

Compensation Program” (the Program). Under the Program, commissions were

payable in two installments—a front-half payment of 2.5 percent due when a

customer signed a sales contract, and a back-half payment that was payable when

the customer paid in full and ranged from 0.5 to 3.5 percent depending on a

particular sale’s profitability.

       After Tangen resigned in 2011, Ideacom refused to pay back-half

commissions on multiple sales that Tangen had orchestrated before his departure.

In response, Tangen filed a diversity suit alleging a violation of the Alabama Sales

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Commission Act, Ala. Code § 8-24-1 (the Act), and breach of contract.1

Following a bench trial, the district court entered judgment in favor of Tangen with

an award of $110,500.70, plus attorney’s fees and costs. Specifically, the court

awarded Tangen $106,407.96 on his breach-of-contract claim, and $4,092.74 for

his claim under the Act. After the parties fully briefed the issue of attorney’s fees,

the court awarded Tangen an additional $50,805 in attorney’s fees under the Act

and $3,359.88 in costs. This is Ideacom’s appeal.

                                              II.

       We review factual findings made by a district court after a bench trial for

clear error, which is a highly deferential standard of review. Holton v. City of

Thomasville Sch. Dist., 425 F.3d 1325, 1350 (11th Cir. 2005); Fed.R.Civ.P. 52(a).

We review conclusions of law made by a district judge following a bench trial de

novo. Thornburg v. Gingles, 478 U.S. 30, 79 (1986) (Review for clear error “does

not inhibit an appellate court’s power to correct errors of law, including those that

may infect a so-called mixed finding of law and fact, or a finding of fact that is

predicated on a misunderstanding of the governing rule of law”) (citation omitted).

“This court reviews an award of attorney’s fees for abuse of discretion;

nevertheless, that standard of review still allows us to closely scrutinize questions

1
  Tangen also raised a negligence claim in his amended complaint, but the district court granted
Ideacom’s motion for summary judgment on this count. The court further granted summary
judgment in favor of Ideacom against of all Tangen’s claims under the Act, with the exception of
a single sale to Griffin Electric.
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of law decided by the district court in reaching a fee award.” Villano v. City of

Boynton Beach, 254 F.3d 1302, 1304 (11th Cir. 2001) (citation omitted).

      On appeal, Ideacom raises the following arguments: (1) the district court

erred in holding that it was liable for the payment of commissions to Tangen after

his resignation; (2) the district court erred as a matter of law in holding that the Act

applies to a commission on the sale of supplies to a contractor; (3) there was

insufficient evidence to support the district court’s finding that the Act applies to

Ideacom’s sale to Griffin Electric; and (4) the district court should have restricted

the award of attorney’s fees solely to time Tangen spent on proving his one

successful claim under the Act. We consider each argument in turn.

                                          III.

   A. Post-Resignation Commissions

      The parties agree that Alabama law controls their dispute concerning

Tangen’s eligibility for post-resignation commissions based on the terms of the

Program. See Horowitch v. Diamond Aircraft Indus., Inc., 645 F.3d 1254, 1257

(11th Cir. 2011) (“As a federal court sitting in diversity jurisdiction, we apply the

substantive law of the forum state . . . alongside federal procedural law.”). “The

elements of a breach-of-contract claim under Alabama law are (1) a valid contract

binding the parties; (2) the plaintiffs’ performance under the contract; (3) the

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defendant’s nonperformance; and (4) resulting damages.” Shaffer v. Regions Fin.

Corp., 29 So. 3d 872, 880 (Ala. 2009) (citation omitted).

      Ideacom argues that the district court erred in concluding that Tangen was

entitled to back-end commissions based solely upon the execution of a sales

contract because Tangen resigned before installing the products or ensuring that

the systems were operational and compliant with local code provisions. Tangen

counters that he earned his back-half commissions by securing sales contracts prior

to his resignation, and that the terms of the Program did not explicitly require that

Tangen remain in Ideacom’s employment at the time a customer paid in full in

order to receive his back-half commissions. We first note that the text of the

Program contains no language that expressly conditions payment of back-half

commissions on the performance of post-sale duties or provides for forfeiture of

back-half commissions upon resignation. Thus, an ambiguity clearly exists in the

contract’s terms relating to the payment of commissions after an employee

voluntarily terminates his or her employment.

      Once a court decides that a contract is ambiguous, the determination of its

meaning is for the factfinder, the trial court in this case. Miles College, Inc. v.

Oliver, 382 So. 2d 510, 511 (Ala. 1980). All of the circumstances leading to the

agreement, including the interpretation placed on the language of the parties, are to

be considered in ascertaining the intention of the parties. Hartford Accident v.

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Morgan Cnty. Ass’n, 454 So. 2d 960, 961 (Ala. 1984). “And, where the evidence is

received ore tenus, the findings of fact by the trial court after a determination that

ambiguity exists in the contract are to be accorded a heavy presumption of

correctness, and they will not be disturbed unless palpably wrong.” Creative

Leasing, Inc. v. Canon, 496 So. 2d 79, 81 (Ala. Civ. App. 1986).

      Turning to the instant appeal, there was sufficient evidence from which the

trial court reasonably could have concluded that the parties intended commissions

earned during Tangen’s course of employment to be payable after his resignation.

See Lindy Mfg. Co. v. Twentieth Century Mktg., 706 So. 2d 1169, 1175 (Ala. 1997)

(holding that a sales representative was entitled to commissions on certain sales

that were made after the termination of his employment). At trial, Tangen testified

that he was paid back-half commissions on three of the twelve sales listed on his

final commissions statement, even though there is no dispute that another company

salesman, Ron Schrader, ultimately was responsible for oversight of installation.

In a customer email, Ideacom’s President, John Robb, explained that Tangen’s role

in a sale ended with the presales discussions; other employees were responsible for

the “installation and implementation” of Ideacom’s products. Robb also testified

that the motivation behind implementing the terms of the Program was to

incentivize profitable sales and accurate sales quotes. But Robb made no mention

about compensating his sales representatives for performing post-sale duties.

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Moreover, Doug Tomberlin, an Ideacom salesman also subject to the terms of the

Program, testified that back-half commissions are earned as soon as a job is billed,

and not when a customer pays in full.

       Based on this record, the district court did not err by determining that both

front-end and back-end commissions were paid primarily as an incentive for

pricing out profitable sales, and that a salesperson’s duty to perform post-sales

duties was merely a collateral duty unrelated to the payment scheme. See Creative

Leasing, Inc., 496 So. 2d at 80-81 (noting that evidence of a payment structure that

varied based on the number of sales made rather than customer complaints handled

supported a finding that commissions were earned by making sales, not by

performing “collateral” post-sale duties that were “unrelated to compensation”).

       In its appellate brief, Ideacom argues at length that the district court erred in

holding that evidence related to Tangen’s H-1B employment visa2 was irrelevant

to the contract analysis. Specifically, Ideacom maintains that Tangen was

obligated to perform every job duty listed in his H-1B petition, including “meeting

with nursing and engineering professionals to design a nurse-patient

communication system,” and “supervising the installation, meeting with hospital

personnel and seeing that the system gets programmed.” We disagree. Although

Tangen was expected to fulfill the general duties outlined in his H-1B job

2
 Tangen, a native and citizen of Norway, was granted a “specialty occupation” H-1B
employment visa in 2004 to work for Ideacom as a healthcare sales representative.
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description, there is nothing to indicate that these duties were tied to his

commission payments, either pre- or post-resignation, as opposed to maintaining

his employment status.

      In sum, the district court properly concluded that Tangen was entitled to

back-end commissions on sales he made before he resigned from Ideacom, and we

affirm the court’s award of $106,407.96 on his breach-of-contract claim.

   B. Alabama Sales Commission Act

      Ideacom next argues that the district court erred by holding that the Act

applies to a commission on the sale of supplies to a contractor. Specifically,

Ideacom asserts that the sale of a nurse call system to Griffin Electric for

installation into a nursing home was simply a retail sale, and thus, did not fall

under the provisions of the Act, which is limited to wholesale transactions.

      Alabama is one of 33 states that have enacted laws to protect commissions

earned by sales representatives. See RMC & Assocs., Inc. v. Beasley, 958 So. 2d
879, 882 (Ala. Civ. App. 2006). Section 8-24-3 of the Alabama Code is a penalty

provision dealing with “Sales Representative’s Commission Contracts.” Ala. Code

§ 8-24-3. As relevant to this appeal:

      The [Act] requires that commissions ‘due at the time of termination’
      be paid within 30 days, but it also requires that commissions yet to
      accrue be paid within 30 days of the date on which they become due.
      Clearly, the [Act] contemplates that a sales representative is to be paid
      commissions that accrue on accounts that, because of his or her efforts

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      on behalf of the principal, continue to provide business to the
      principal following termination of the representative.

Lindy Mfg. Co., 706 So. 2d at 1174. The Act further provides that, if a

principal fails to pay a sales representative’s commission when it is due, the

principal “is liable to the sales representative in a civil action for three times

the damages sustained by the sales representative plus reasonable attorney’s

fees and court costs.” Ala. Code § 8-24-3.

      In order for Ideacom to meet the definition of a “principal” under the

Act, the company was, inter alia, required to sell “to customers who

purchase the product or products for resale.” Ala. Code § 8-24-1(2).

Additionally, in order for Tangen to meet the definition of a “sales

representative,” he needed to solicit “orders for the purchase at wholesale of

the product . . . .” Id. § 8-24-1(3). The Alabama Court of Civil Appeals has

defined the term “wholesale,” as applicable to the Act, as follows: “The

plain and ordinary meaning of the word ‘wholesale’ . . . denotes the sale of

a product for resale.” RMC & Assocs. Inc., 958 So. 2d at 883 (citation

omitted). The crux of Ideacom’s argument on appeal is that the Griffin

Electric transaction did not constitute a sale at the wholesale level, and thus

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the district court erred by awarding Tangen treble damages plus attorney’s

fees under the provisions of the Act.3 We agree.

       At trial, the district court relied on the following evidence to support

its finding that the Griffin Electric sale fell within the scope of the Act:

(1) the invoice for the sale indicated that the product was delivered to

Mountain View Nursing Home (Mountain View), the end-user of the

product; (2) Ideacom’s president testified that the system was installed at

Mountain View; (3) on direct examination, Tangen described, without

objection, that he sold the system to Griffin Electric, which in turn “resold”

the item to Mountain View. But there is nothing in the record to show that

Griffin Electric executed a resale of the nurse call system to Mountain View.

See RMC & Assocs., Inc., 958 So. 2d at 884 (noting that because the Act

imposes treble damages and is thus penal in nature, it “must be strictly

construed”). Rather, the sale invoice and testimony from Ideacom’s

President simply illustrate that Griffin Electric purchased the nurse call

system from Ideacom in order to install the equipment into a nursing home.

       In Alabama, the transfer of building materials into completed

structures generally are not considered sales. See, e.g., Ala. Admin. Code r.
3
  Ideacom’s revenue on the Griffin Electric sale amounted to $81,854.82. Based on a 2.5 percent
rate, the district court calculated that Tangen was due a back-end commission of $2,046.37.
Based on the treble-damages provision in § 8-24-3, the amount owed became $6,139.11. The
district court ultimately reduced this award by a third to reflect that $2,046.37 of this amount
already had been included in Tangen’s recovery for breach of contract.
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810-6-1-.27(1) (2013) (noting that “contractors and builders do not sell the

building materials they use and that sales to them are taxable under sales and

use tax laws”). Citing to provisions of the Alabama Tax Code, Ideacom

argues that the sale of the nurse call system to Griffin Electric as part of the

construction of a nursing home constitutes a retail sale of building supplies

to a contractor. See Ala. Code § 40-23-1(a)(1) (“Sales of building materials

to contractors, builders, or landowners for resale or use in the form of real

estate are retail sales in whatever quantity sold.”).

      The record supports Ideacom’s position. At trial, Tangen testified that

the Griffin Electric sale was for “a new construction project” of a nursing

home. Tangen also introduced the Ideacom sales invoice, which listed the

sale price as $81,000 and noted that Griffin Electric paid a ten percent retail

tax on the transaction. The mere fact that Griffin Electric paid a retail tax on

the nurse call system, however, did not automatically render the transaction

a retail sale. Rather, the payment of the retail tax demonstrates that the

transaction complied with the Tax Code. See Ala. Admin. Code r. 810-6-1-

.27. In any event, Tangen failed to present any evidence to show that Griffin

Electric “resold” the nurse call system to Mountain View. He simply

opined, without supporting documentation, that Griffin Electric was “an

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electrical contractor and they sell products to hospitals and other buildings,

other people.”

       The district court labeled the nurse call system at issue in the Griffin

Electric sale as “medical equipment” without further comment. But the

record evidence shows that the system is more akin to a building material.

Tomberlin, an Ideacom employee, testified that the nurse call system

included a patient station that was affixed to the wall, an emergency pull

station installed in the restroom, and cabling infrastructure, which consisted

of a head-end electrical closet, a communications closet, and cabling for all

devices. See Ala. Admin. Code r. 810-6-1.28(1) (2013) (describing

“building materials” as “all tangible personal property, including any device

or appliance vised by builders, contractors, or landowners in making

improvements, additions, alteration or repair to real property in such a way

that such tangible personal property becomes identified with a part of

realty.”).

       Based on this record, we conclude that the Griffin Electric sale

constituted a single sale between Ideacom and Griffin Electric rather than a

wholesale transaction subject to resale. See State v. Algernon Blair Indus.

Contractors, Inc., 362 So. 2d 248, 251 (Ala. Civ. App. 1978) (noting that a

contractor under Alabama law is considered a “user or consumer”). As

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such, we reverse the district court’s order granting Tangen $4,092.74 under

the Act and remand for entry of judgment in favor of Ideacom on this count.

   C. Attorney’s Fees

      Because the Act did not apply to the Griffin Electric sale, we need not

address Ideacom’s argument that the district court abused its discretion by

awarding $50,805 in attorney’s fees based on factoring counsel’s time spent

working on all of Tangen’s claims under the Act, as opposed to restricting

the award to time spent on the Griffin Electric sale. The district court’s

authority to award attorney’s fees originates under the Act. See Ala. Code §

8-24-3. Having reversed the court’s order granting Tangen relief under the

Act, we also reverse the award of attorney’s fees under the Act.

      AFFIRMED in part; REVERSED and REMANDED in part.

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