Tangen v. Ideacom of the Gulf Coast, Inc.
Order on Bench Trial, the court finds that judgment is due to be entered in Tangen's favor in the total amount of $110,500.70, plus reasonable attorney's fees and costs. Itemized list of attorney's fees plaintiff is claiming due 11/14/2013. Ideacom's reply due 11/21/2013. Signed by Judge Callie V. S. Granade on 10/31/2013. (mab)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
IDEACOM OF THE GULF COAST,
Civil Action No. 12-0267-CG-M
ORDER ON BENCH TRIAL
Plaintiff Erlend Tangen worked for Defendant Ideacom of the Gulf
Coast, Inc., for almost ten years. He started in 2002 as a sales representative
(or in Ideacom’s parlance, a Healthcare Representative), earning a salary of
$33,000 a year. On top of that salary, Tangen earned a 5% commission on
sales. At that time, commissions were payable in two equal installments—a
front-half payment of 2.5% which was paid when a customer signed a sales
contract, and a back-half payment due when the customer paid in full.1
In late 2008, Ideacom changed the structure of Tangen’s commissions
with a one-page written document labeled “Sales Compensation Program.”
(Pl.’s Trial Ex. 15.) (Because that program was effective for all jobs started
The parties dispute what form that agreement took. Tangen says he signed
a written contract with Ideacom’s president, while Ideacom insists that that
contract is a forgery. It is undisputed, however, that Ideacom agreed to pay
Tangen commissions as set out above beginning in 2002.
after January 2009, the parties have taken to calling this the “2009
program.” The court will follow suit.) Though the 2009 program changed the
way commissions were calculated, it did not affect the mode of payment.
Tangen still received commissions in front-half, back-half installments. The
most significant change was that the back-half payment was no longer fixed
at 2.5%; instead, it varied from .5% to 3.5% based on a sale’s profitability.
In May 2011, Tangen decided to leave Ideacom for another job. He
broke the news of his resignation in a phone call to Ideacom’s president, John
Robb. At some point during the conversation, the topic of unpaid commissions
came up. Robb said that Tangen would lose “a lot of money” in the form of
unpaid commissions if he resigned. (Trial Tr. (Doc. 127) 196:12.) When
Tangen replied that he had spoken with a lawyer who thought otherwise,
Robb “said F. U.” and hung up the phone. (Trial Tr. 122:12–13.)
After Tangen left, Ideacom refused to pay back-half commissions on
twelve sales that Tangen made before his resignation. Tangen filed this
lawsuit to recover those commissions. Although the court granted summary
judgment on some of Tangen’s claims (see Doc. 101), one of his claims under
the Alabama Sales Commission Act, Ala. Code § 8-24-1–5, and all of his
claims for breach of contract proceeded to a bench trial held September 10–
11, 2013. Since then, the parties have filed post-trial briefs (Docs. 128, 129,
130, 131), and the matter is ripe for decision.
Breach of contract
Tangen’s claims for breach of contract require proof of four elements:
(1) a valid contract binding the parties; (2) the plaintiff’s performance under
the contract; (3) the defendant’s nonperformance; and (4) resulting damages.
Jones v. Alfa Mut. Ins. Co., 875 So.2d 1189, 1195 (Ala. 2003).
Alhough certain phrases in Ideacom’s post-trial brief suggest otherwise
(e.g., the heading “No Evidence of An Agreement” (Doc. 129 at 8)), there is
really no question that the 2009 program was a valid contract binding on the
parties; Ideacom readily admits that it was bound by the 2009 program to
pay Tangen front-half and back-half commissions if he performed his duties.
Instead of denying the existence of the 2009 program as a valid, binding
agreement, Ideacom denies only that Tangen performed his obligations under
that agreement. Thus, the question is really one of performance.2
Though the parties agree that the 2009 program existed and that it
provided for back-half commission payments when certain conditions were
met, they disagree on what those conditions were. According to Tangen, he
earned back-half commissions by securing sales contracts. Ideacom thinks
Based on evidence presented at trial, the court finds that the 2009
agreement modified or superseded whatever arrangement the parties had
before then. Accordingly, the terms of the 2002 commission arrangement do
not affect the outcome of this case.
otherwise, arguing that the 2009 program only provided for back-half
commissions to sales representatives who performed certain post-sale duties
like overseeing installations and handling customer complaints.
The written language of the 2009 program supports Tangen’s
interpretation. To begin with, that document’s title—“Sales Compensation
Program”—suggests that the program was intended to compensate Tangen
for, well, making sales. Equally revealing are the terms that are not in the
contract. Although Ideacom insists the 2009 program required sales
representatives to oversee installations, the program’s language does not
mention any such duties. Instead, commissions are a simple function of a
job’s profitability—sales with higher markups yield higher commissions no
matter how much or how little time a sales representative spends on postsale duties. And unlike the agreements at issue in Ideacom’s citations to
authority, the 2009 program contains no language that expressly conditions
back-half commissions on the performance of post-sale duties3 or provides for
the forfeiture of back-half commissions upon resignation.4
Beyond the 2009 program’s written terms, the course of dealings
See, e.g., Chretian v. Donald L. Bren Co., 151 Cal. App. 3d 385, 388 (Cal. Ct.
App. 1984) (interpreting a contract in which back-half commissions were
earned by “servicing the sale transaction through successful close of escrow”
(emphasis in original)).
See, e.g., Am. Software, Inc. v. Ali, 46 Cal. App. 4th 1386, 1389 (Cal. Ct.
App. 1996) (interpreting a contract that expressly provided that “all
commissions which would normally be due and payable are forfeited” after
termination or resignation).
between Tangen and Ideacom also supports Tangen’s interpretation. Tangen
testified that for three of the sales listed on his final commissions statement,
he was not responsible for oversight and troubleshooting of the installation;
that was Ron Schrader’s job. (Trial Tr. 313:6–316:7.) Nonetheless, it is
undisputed that Tangen earned back-half commissions on those jobs. And in
an email to a customer, John Robb said Tangen’s role in a sale ended with the
presales discussions; other employees were responsible for the “installation
and implementation” of Ideacom’s products.5 (Pl.’s Trial Ex. 8.)
Finally, there’s the testimony of John Robb himself. When he was
asked why he implemented the 2009 program, he did not say anything about
compensating his sales representatives for performing their post-sale duties.
No, the purpose of the 2009 program was to incentivize profitable sales and
Q: . . . And so don’t let me put words in your mouth. You tell us
why is it that you decided to implement that 2009 program.
A: I lost money in 2008 for the first time since I started business
in 1991 and it came to me that some of the jobs seemed to be
underquoted. And let’s say it was a $50,000 job. They got their 5
percent whether I made money or not. So I did some checking
around in the industry and found that this is a common practice,
that the salesperson had, as you said earlier, some skin in the
Q: So the 2009 program was your answer to the problems that
you were perceiving that you had been losing money on jobs
The court gives little weight to Robb’s self-serving testimony that he was
lying to the customer in that email (see Trial Tr. 109:6–7 (“Q: You lied to her?
A: Absolutely.”), which reveals little else than Robb’s willingness to lie when
he stands to lose money.
after you were able to do a back-end cost analysis and determine
the profitability of the job; is that fair to say? . . .
A: I guess, yeah.
Q: But in any case, this was your way—let’s say your words—to
make sure the salesman had skin in the game?
A: That’s correct.
Q: Meaning that the salesmen really would have less incentive
to go in and price a job if he or she knew that the total amount of
commission paid was going to be affected by his or her
underestimating the job?
(Tr. at 111:16–112:20.) Thus, Robb’s testimony confirms what the other
evidence suggests: the 2009 program was meant to compensate sales
representatives for making profitable sales, not for performing post-sale
Nevertheless, Ideacom insists that the back-half commission was
based purely on post-sale duties. But that interpretation is inconsistent with
the 2009 program’s payment structure. If the front-half commission was
really intended to be the sales representative’s full compensation for making
a sale, then it doesn’t make sense that the front-half commission was fixed at
2.5% no matter how profitable the sale turned out to be. And if the back-half
commission was intended to compensate sales representatives for performing
post-sale duties, it is unclear why post-sale duties are not a factor in the
calculation for back-half commissions. Faced with a similar payment
structure, the Alabama Court of Civil Appeals found that commissions were
earned by making sales, not performing post-sales duties.6 This court reaches
the same conclusion here.
Nor does the testimony of Doug Tomberlin, who was also subject to the
2009 program, support Ideacom’s interpretation. Though Ideacom insists that
back-half commissions are earned by staying on the Ideacom team until a
customer pays in full, Tomberlin said that back-half commissions are earned
as soon as a job is billed. The difference is significant because Tangen claims
he is owed commissions on several jobs that were billed but not paid in full at
the time he resigned.
And finally, Ideacom’s least persuasive argument is that the job
description it wrote in Tangen’s visa renewals somehow formed a term of the
2009 program. Even assuming that Tangen continued to be responsible for
every job duty listed in those applications over the course of his career at
Ideacom, that wouldn’t mean that all those duties were tied to his
commission payments. Tangen earned a salary of nearly $1,000 a week.
(Def.’s Trial Ex. 22.) Ideacom presented no evidence that persuades the court
that the post-sale duties listed in Tangen’s visa renewals were tied to his
commission payments rather than to his salary.
Cumulatively, the 2009 program’s written language, the course of
See Creative Leasing, Inc. v. Cannon, 496 So. 2d 79, 80–81 (Ala. Civ. App.
1986) (finding 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”).
dealings between Tangen and Ideacom, and the testimony given at trial leave
the court with little doubt that the 2009 program was intended to compensate
Tangen for making sales. Accordingly, the court finds that Tangen earned his
commissions—both front- and back-half—by making sales.
With that question settled, the issue of performance becomes simple.
Ideacom admits that Tangen made the sales he wants back-half commission
on,7 and the parties have stipulated that the customers on those sales have
all paid in full. Thus, Tangen earned back-half commissions on those sales
under the 2009 program, and the court finds that he has proved the
performance element of his claims for breach of contract.
It is undisputed that Ideacom never paid Tangen the back-half
commissions he is due on the sales at issue in this lawsuit. Accordingly,
Tangen has proved Ideacom’s nonperformance.
All that is left is to calculate damages, which is a simple matter of
calculating the final markup on each job at issue and awarding Tangen backhalf commissions in accordance with the 2009 program’s terms. With respect
to six of the commissions at issue, Tangen has done the math and the results
Because Tangen made those sales before he resigned, there is no need to
discuss the law on post-resignation commissions, which deals with
commissions due on sales made after a sales representative’s resignation.
See, e.g., 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 a sales contract).
With respect to the remaining six commissions, however, Tangen says
it was “impossible . . . to calculate his second-half commissions” because
Ideacom did not keep accurate records of its costs on those jobs. (See Doc. 128
at 10.) But the “impossible” calculations Tangen shied away from attempting
are simple enough. According to the 2009 agreement, Tangen is entitled to
back-half commissions of 3.5% on all sales with a markup “[a]bove 2”—i.e.,
sales with a markup greater than 200% of the job’s cost. (Pl.’s Trial Ex. 15).
On the six jobs for which Ideacom refused to put on any evidence of cost,9 the
court has no choice but to find that Ideacom incurred no costs. Thus, at least
so far as the evidence shows, the revenue on those jobs far exceeded 200% of
their costs, so Tangen is entitled to 3.5% back-half commissions on those jobs.
Accordingly, the court finds that Tangen has proved damages on his
breach-of-contract claims in the total amount of $106,407.96. (See Doc. 128-1
Tangen used Ideacom’s own records (Pl.’s Trial Exs. 12A–D) to calculate the
commissions due to him on the jobs at DCH/CSICU, Mt. View, Cross Bdg,
and Lakeland Psych. And at trial, Ideacom admitted that Tangen earned the
amounts he is claiming on the jobs at Noland and DCH Laundry. (See Doc.
129 at 11–12.)
Although Ideacom put on some evidence of its costs on some of those jobs
(e.g., John Robb’s testimony that Ideacom spent “I don’t know . . . . a couple of
thousand dollars” obtaining a technical certification required for one job
(Trial. Tr. 124:20)), there was no evidence of any costs in a sum certain that
the court can factor into the markup equation.
calculating damages based on assumptions consistent with the court’s
Sales Commission Act
Tangen’s only claim under the Alabama Sales Commission Act, Ala.
Code § 8-24-1–5, involves the sale he made to Griffin Electric. For the reasons
discussed above, the court has already found that Ideacom failed to pay
Tangen the back-half commission he is due on that sale. But his claim under
the Sales Commission Act also requires proof that that sale was made at the
wholesale level. See Ala. Code § 8-24-1(3).
Tangen has met that burden. The invoice for the Griffin Electric sale
shows that the products Tangen sold were delivered to “Mt. View Nursing
Home and Rehab CRT” in Birmingham. (Pl.’s Trial Ex. 2(f).) There was
testimony from Ideacom’s president that shows the products were installed at
Mountain View and suggests that Mountain View was “the customer” in that
job. (Trial Tr. 105:14–106:21.) On direct examination, Tangen explained that
he sold the product to Griffin Electric, who in turn sold the product to
Mountain View, the end user. (Trial Tr. 190:3–2111.) And even without any of
that testimony, the invoice itself supports the obvious inference that
Mountain View, a nursing home, was the end user of the medical equipment
Ideacom did not object to the accuracy of these calculations.
To the extent this testimony might have relied on hearsay rather than
Tangen’s first-hand knowledge, Ideacom failed to timely object.
Tangen sold, not Griffin Electric, an electric company.
Accordingly, the court finds that Tangen’s claim under the Sales
Commission Act involved a wholesale transaction, which means he is entitled
to damages in the amount of $4,092.74.12 By statute, he is also entitled to
reasonable attorney’s fees and costs. Ala. Code 8-24-3.
Accordingly, the court finds that judgment is due to be entered in
Tangen’s favor in the total amount of $110,500.70, plus reasonable attorney’s
fees and costs, as follows:
On Count I in the amount of $106,407.96; and
On Count II in the amount of $4,092.74, plus reasonable
attorney’s fees and court costs.
It is further ORDERED that Tangen shall submit an itemized list of
the attorney’s fees he is claiming, along with supporting documentation, on or
before November 14, 2013. Ideacom may file a reply on or before November
DONE and ORDERED this 31st day of October, 2013.
/s/ Callie V. S. Granade
UNITED STATES DISTRICT JUDGE
According to Tangen’s math, Ideacom’s revenue on the products sold to
Mountain View was $81,854.82. (Doc. #128.) At a 2.5% commission rate
(which is based on Ideacom’s markup calculation), Tangen was due a
commission of $2,046.37 for the products he sold on that job. At the Sales
Commissions Act’s treble-damages rate, that means Tangen is due $6,139.11,
which the court reduces by a third to reflect the $2,046.37 of that amount
included in Tangen’s recovery for breach of contract.
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