Maher Engineering Company v. Screwmatics of South Carolina, Inc.
Filing
23
MEMORANDUM OPINION AND ORDER Signed by the Honorable Amy J. St. Eve on October 6, 2014. Mailed notice(cdh, )
14-3761.141
October 6, 2014
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
MAHER ENGINEERING COMPANY,
)
)
)
)
)
)
)
)
)
)
Plaintiff,
v.
SCREWMATICS OF SOUTH CAROLINA,
INC.,
Defendant.
No. 14 CV 3761
MEMORANDUM OPINION AND ORDER
Before the court is defendant’s motion to deposit funds with
the court pursuant to Federal Rule of Civil Procedure 67.
The
motion is denied for the following reasons.
DISCUSSION
Plaintiff, Maher Engineering Company (“Maher”), originally
filed this action for breach of contract (Count I), violation of
the Illinois Sales Representative Act (Count II), and unjust
enrichment (Count III, pleaded in the alternative) in the Circuit
Court of Cook County.
Defendant, Screwmatics of South Carolina,
Inc. (“Screwmatics”), removed the case to federal court based on
diversity of citizenship.
Maher
alleges
that
it
was
a
sales
representative
for
Screwmatics in Illinois, Wisconsin, and Iowa and that Screwmatics
agreed to pay Maher commissions at a rate of 5 percent for the
sales that Maher procured.
Maher contends that Screwmatics has
failed to pay commissions to Maher as required by the parties’
written agreement.
Screwmatics moves to deposit certain funds with the court.
LEGAL STANDARDS
Federal Rule of Civil Procedure 67, titled “Deposit Into
Court,” provides that “[i]f any part of the relief sought is a
money judgment or the disposition of a sum of money . . . , a
party--on notice to every other party and by leave of court--may
deposit with the court all or part of the money . . . , whether or
not that party claims any of it.”
Fed. R. Civ. P. 67(a).
The
court has discretion when deciding whether to grant such leave.
Cajun Elec. Power Coop., Inc. v. Riley Stoker Corp., 901 F.2d 441,
445 (5th Cir. 1990); Garrick v. Weaver, 888 F.2d 687, 694 (10th
Cir. 1989); Design Benefit Plans, Inc. v. Enright, 940 F. Supp.
200, 207 (N.D. Ill. 1996).
“The purpose of the deposit is to relieve the depositor of
responsibility for a fund in dispute.
It is useful in cases of
interpleader and of tender of an undisputed sum.
Under some
circumstances it may suffice to stop the running of interest.
But
leave to make the deposit will be refused if no purpose would be
served by it.” 12 Charles Alan Wright et al., Federal Practice and
Procedure § 2991, at 59-62 (2d ed. 1997).
Moreover, “[i]t is
well-settled that Rule 67, like all of the Federal Rules of Civil
2
Procedure, ‘shall not abridge, enlarge or modify any substantive
right.’”
1050,
LTV Corp. v. Gulf States Steel, Inc. of Ala., 969 F.2d
1063
(D.C.
Cir.
1992)
(quoting
28
U.S.C.
§
2072(b)).
Therefore, a court cannot use Rule 67 “as a means of altering the
contractual relationships and legal duties of the parties” but
rather as a procedural device to provide a place of safekeeping for
disputed funds.
Id.; Bickford v. Marriner, No. 2:12-CV-00017-JAW,
2012 WL 3260323, at *4 (D. Me. Aug. 8, 2012); Progressive Cas. Ins.
Co. v. Drive Trademark Holdings LP, 680 F. Supp. 2d 639, 641 (D.
Del. 2010).
ANALYSIS
Defendant seeks leave to deposit $144,772.001 with the court
and explains that this figure “is calculated at a 3.5% commission
rate” (versus the 5 percent rate that plaintiff contends is
applicable) and that defendant disputes that it owes plaintiff any
commissions.
(Mot. ¶¶ 4-5.)
The motion fails to explain why
defendant seeks leave to deposit these funds or what purpose the
deposit would serve.
At
the
August
28,
2014
hearing
on
the
instant
motion,
defendant’s counsel explained that the motion is designed to limit
defendant’s exposure to punitive damages, which are recoverable
under the Illinois Sales Representative Act, 820 ILCS 120/0.01 et
1/
In the introduction to its motion, defendant requests leave to deposit
$146,764.87, but in paragraphs 5 and 6 of the motion and in its reply, defendant
requests leave to deposit $144,772.00. The court assumes that the latter figure
is correct.
3
seq.
(the “Act”).
The Act provides that a principal who fails to
pay timely commissions to a sales representative “shall be liable”
for exemplary damages of up to three times the amount of overdue
commissions.
820 ILCS 120/3.
Despite this ostensibly mandatory
language, however, courts have construed the statute as permitting
exemplary damages “only when the sales representative proves that
the principal willfully and wantonly refused to pay.”
Gramercy
Mills, Inc. v. Wolens, 63 F.3d 569, 573 (7th Cir. 1995).
“Illinois
courts caution against awarding exemplary damages under the Sales
Act except to ‘punish and deter intentional or egregious conduct.’”
Id. (quoting Zavell & Assocs., Inc. v. CCA Indus., Inc., 628 N.E.2d
1050, 1052 (Ill. App. Ct. 1993)).
In its reply, defendant contends that “[m]ultiple cases, as
well as Wright & Miller, explain that depositing funds in court to
stop the accrual of interest and penalties is a legitimate use of
Rule 67.”
(Reply at 2.)
statement of the law.
That is not an entirely accurate
It is true that a few courts have allowed
Rule 67 deposits to stop the running of interest under certain
circumstances. See, e.g., Cajun Electric, 901 F.2d at 445 (holding
that the district court did not abuse its discretion in allowing
the defendant, which had lost an arbitration case, to deposit the
amount of the arbitration award into the court registry pending
plaintiff’s potential motion to challenge the award); Lich v.
Cornhusker Cas. Co., 774 F. Supp. 1216, 1223 n.5 (D. Neb. 1991)
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(holding that the defendant’s deposit stopped the running of
prejudgment interest where the defendant had conceded liability on
a bond and deposited the face value of the bond into the court’s
registry). But defendant has failed to cite, and the court has not
found, any authority that supports the use of Rule 67 to avoid or
limit a party’s exposure to punitive damages.
Defendant’s request is problematic because the parties do not
agree on any sum certain that is in dispute.
The amount defendant
seeks to deposit is based on its view that 3.5 percent is the
correct commission rate, not 5 percent, as plaintiff contends.
Thus, it appears that the defendant’s proposed deposit would not be
sufficient to satisfy plaintiff’s entire demand for compensatory
damages.
More importantly, the court is mindful that it should not use
Rule 67 to alter the parties’ legal rights and duties.
has
determined
that
it
is
appropriate
to
“punish
Illinois
and
deter
intentional or egregious conduct” by a principal in failing to pay
commissions to its sales representatives.
at 1052.
See Zavell, 628 N.E.2d
Were a factfinder to determine that defendant engaged in
intentional or egregious conduct in this case, allowing defendant’s
proposed deposit would alter the system Illinois has created to
punish and deter undesirable conduct toward sales representatives.
Cf. Bickford, 2012 WL 3260323, at *4-5 (denying defendant’s motion
for leave to deposit funds with the court pursuant to Rule 67 where
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punitive damages were a possibility and the deposit would alter the
system created under admiralty law that was designed to encourage
vessel owners to make prompt decisions about payments to seamen and
make those payments when obligated to do so).
Accordingly, the
court, in its discretion, denies defendant leave to deposit funds
with the court.
CONCLUSION
For the reasons explained above, the court denies defendant’s
motion to deposit funds with the court [11].
DATE:
October 6, 2014
ENTER:
_________________________________________________
Amy J. St. Eve, United States District Judge
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