Freeman v. MH Equipment Company

Filing 29

MEMORANDUM AND ORDER. (See Full Order.) IT IS HEREBY ORDERED that MH Equipment Company's Motion for Partial Summary Judgment 22 is denied. Signed by District Judge Catherine D. Perry on 5/2/2016. (CBL)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
JAMES MATTHEW FREEMAN,
Plaintiff,
v.
MH EQUIPMENT COMPANY,
Defendant.

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No. 4:15CV1473 CDP

MEMORANDUM AND ORDER
James Matthew Freeman was a sales representative for MH Equipment
Company and earned commissions based upon a percentage of gross profit on
equipment sales. When Freeman voluntarily resigned his employment with MH
Equipment on December 2, 2014, MH Equipment owed him commissions and other
compensation, which Freeman alleges continue to be due and owing to him.
Because Missouri law permits the recovery of statutory damages in these
circumstances, Freeman’s claim under the Missouri Commission Sales Act
(MCSA), Mo. Rev. Stat. §§ 407.911, et seq., will be allowed to proceed, and MH
Equipment’s motion for partial summary judgment on this statutory claim will be
denied.
Discussion
The MCSA governs the obligation for and payment of sales commissions in

the State of Missouri, “focus[ing] on the timely payment of sales commissions
earned by a sales representative under contract with a principal.” Lapponese v.
Carts of Colo., Inc., 422 S.W.3d 396, 401 (Mo. Ct. App. 2013).
When the contract between a sales representative and a principal is
terminated, all commissions then due shall be paid within thirty days of
such termination. Any and all commissions which become due after
the date of such termination shall be paid within thirty days of
becoming due.
Mo. Rev. Stat. § 407.912.3.
Any principal who fails to timely pay the sales representative
commissions earned by such sales representative shall be liable to the
sales representative in a civil action for the actual damages sustained by
the sales representative and an additional amount as if the sales
representative were still earning commissions calculated on an
annualized pro rata basis from the date of termination to the date of
payment.
Mo. Rev. Stat. § 407.913.
In McKay v. WilTel Commc’ns Sys., Inc., 87 F.3d 970 (8th Cir. 1996), the
Eighth Circuit observed that the language of § 407.913 “appear[ed] designed to
prevent loss of commissions because of discharge from employment” rather than
from voluntarily resignation. Id. at 975. Because McKay was “paid . . . his
contractual commission and he was never terminated,” the Eighth Circuit
determined that § 407.913 did not apply to his claim for statutory damages. Id.
MH Equipment argues that McKay applies with equal force here given that Freeman
voluntarily resigned his employment and was not discharged by MH Equipment. I
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disagree.
At the time McKay was decided, no Missouri court had addressed the question
of whether a sales representative could recover statutory damages under § 407.913
in circumstances where he voluntarily resigned rather than was terminated by
discharge. In 2013, however, upon identifying the issue as one of first impression
in the Missouri state courts, the Missouri Court of Appeals squarely answered this
question in the affirmative:
that the statutory damages made available by the legislature under
Section 407.913 apply to any termination of the sales
representative-principal relationship, and not only to involuntary
terminations by the principal.
Lapponese, 422 S.W.3d at 404. In reaching this decision, the Lapponese court
acknowledged the Eighth Circuit’s contrary finding in McKay but “declined to
follow its interpretation” of the Missouri statute given its limited analysis. Id. at
403. The Lapponese court explained:
The McKay court appears to adopt what might be considered a
layman’s understanding of ‘termination,’ yet fails to engage in any
substantive discussion to support its conclusion. Our review of the
Eighth Circuit’s opinion that ‘termination’ equals ‘discharge’ reveals
no statutory construction, interpretation, analysis, or citation to case
law. In fact, the Court’s entire discussion of this particular point is
limited to only two sentences.
Id. at 403-04. MH Equipment argues that, regardless of the Missouri Court of
Appeals’ intervening decision, I am nevertheless bound by the Eighth Circuit’s
state-law determination as declared in McKay unless and until the Missouri Supreme
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Court renders a controlling decision on the issue. This is not an accurate statement
of the law.
As a federal court sitting in Missouri, I am bound to apply Missouri state law
as it is articulated by the Missouri Supreme Court. West v. American Tel. & Tel.
Co., 311 U.S. 223, 236 (1940). See also 28 U.S.C. § 1652.
[A]s was intimated in the Erie Railroad case, the highest court of the
state is the final arbiter of what is state law. When it has spoken, its
pronouncement is to be accepted by federal courts as defining state law
unless it has later given clear and persuasive indication that its
pronouncement will be modified, limited or restricted.
West, 311 U.S. at 236 (citation omitted). However,
[a] state is not without law save as its highest court has declared it.
There are many rules of decision commonly accepted and acted upon
by the bar and inferior courts which are nevertheless laws of the state
although the highest court of the state has never passed upon them. In
those circumstances, a federal court is not free to reject the state rule
merely because it has not received the sanction of the highest state
court[.] . . . State law is to be applied in the federal as well as the state
courts and it is the duty of the former in every case to ascertain from all
the available data what the state law is and apply it rather than to
prescribe a different rule, however superior it may appear from the
viewpoint of ‘general law’ and however much the state rule may have
departed from prior decisions of the federal courts.
Id. at 236-37 (emphasis added). Indeed, “if the federal courts were free to choose
their own rules of decision whenever the highest court of the state has not spoken,”
the potential exists for two divergent or conflicting systems of law to exist within the
state – “one to be applied in the state courts, the other to be availed of in the federal
courts, only in case of diversity of citizenship.” Id. at 236. This is to be avoided.
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Id.
Contrary to MH Equipment’s argument, I may not ignore the Missouri Court
of Appeals’ decision in Lapponese merely because the Missouri Supreme Court has
not yet spoken on the issue. Instead, I must consider Lapponese as “a datum for
ascertaining state law” unless I am “convinced by other persuasive data” that the
Missouri Supreme Court would decide the rule of law otherwise. See West, 311
U.S. at 237. Although opinions from intermediate state appellate courts are not
binding on the federal court, “’they are persuasive authority, and we must follow
them when they are the best evidence of what [state] law is.’” Holden Farms, Inc.
v. Hog Slat, Inc., 347 F.3d 1055, 1066 (8th Cir. 2003) (quoting Garnac Grain Co. v.
Blackley, 932 F.2d 1563, 1570 (8th Cir. 1991)) (alteration in Holden Farms). See
also First Tenn. Bank Nat’l Ass’n v. Pathfinder Expl., LLC, 754 F.3d 489, 490-91
(8th Cir. 2014). A prior decision by the Eighth Circuit on an unsettled question of
state law does not bar consideration of an intervening decision by an intermediate
state appellate court. See West, 311 U.S. 237; see also Holden Farms, Inc., 347
F.3d at 1066 (applying intervening decision from state intermediate court of appeals
rather than Eighth Circuit precedent that conflicted with it).
In reaching its decision that § 407.913 applies to any termination of the sales
representative-principal relationship and not just involuntary terminations, the
Lapponese court engaged in a thorough and exhaustive analysis of legislative intent,
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invoking well-established principles of statutory construction and evaluating the
language of § 407.913 in the context of the Missouri Commission Sales Act as a
whole. 422 S.W.3d at 401-04. I can find no other state or federal decision that
engages in such an in-depth analysis of this statutory issue, and MH Equipment cites
to none. Nor has MH Equipment presented any data suggesting that the Missouri
Supreme Court would disagree with the Lapponese holding or its reasoning.
Therefore, to the extent that McKay and Lapponese disagree, I am persuaded that
Lapponese constitutes the best evidence of what Missouri law is on the issue of
whether a sales representative’s voluntary resignation bars a claim for statutory
damages under § 407.913. Following this authority, then, I find that Freeman may
recover statutory damages under § 407.913 for MH Equipment’s alleged failure to
timely pay his earned commissions after he resigned.
Accordingly,
IT IS HEREBY ORDERED that MH Equipment Company’s Motion for
Partial Summary Judgment [22] is denied.

_________________________________
CATHERINE D. PERRY
UNITED STATES DISTRICT JUDGE

Dated this 2nd day of May, 2016.
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