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Baker v. American Horticulture Supply

June 24, 2010

EDWIN BAKER, PLAINTIFF AND APPELLANT,
v.
AMERICAN HORTICULTURE SUPPLY, INC., DEFENDANT AND RESPONDENT.



(Ventura County Super. Ct. No. 244149).Glen M. Reiser, Judge.

The opinion of the court was delivered by: Yegan, Acting P.J.

CERTIFIED FOR PUBLICATION

In this first impression case, we construe the "Independent Wholesale Sales Representatives Contractual Relations Act of 1990" (the Act) to avoid an absurd result. (Civ. Code, § 1738.10 et seq.)*fn1 We resolve this pure question of law to further the express legislative intent to provide "unique protection" to qualifying sales persons. (§ 1738.10.) This case also illustrates the power of the trial court to serve as a "gatekeeper" by exercising its discretion to grant a new trial to prevent what it perceives as a miscarriage of justice.

Edwin Baker worked as an independent wholesale sales representative for American Horticulture Supply, Inc., respondent. He appeals from the judgment entered upon the trial court's order granting respondent's motion for a directed verdict on his third cause of action, alleging a violation of the Act. The jury returned verdicts in appellant's favor on his remaining causes of action for breach of contract, promissory fraud, and quantum meruit. But the trial court ordered a new trial on the grounds of insufficiency of the evidence, excessive damages, and juror misconduct. Appellant also appeals from that order. We affirm the order granting a new trial and reverse the judgment entered upon the order granting a directed verdict.

Appellant's Evidence

Appellant's employment career has always been in the retail or wholesale nursery business. In early 2003 he was delivering plants for Pacific Orchid Express and earning about $13.50 an hour. Sheridan Shimp, who worked for respondent, told appellant that respondent wanted to hire a new salesman. Respondent was a "hard goods distributor in the horticultural" industry. Shimp said that the salesman would receive a 10 percent commission on all sales. She also said that Ramon Hernandez, one of respondent's salesmen, earned about $5,000 per month.

Appellant applied for the job and was interviewed by Mahmood and Omead Jafroodi. Mahmood Jafroodi was respondent's owner and president. Omead Jafroodi was respondent's operations manager. After two interviews the Jafroodis said that they would start him on a salary, but he would eventually earn a commission of 10 percent on his sales. They produced a three-page contract that appellant signed. The contract was signed on respondent's behalf by the Jafroodis and Shimp. Appellant was not given a copy of the contract.

The second page of the contract provided that appellant would receive "10% commission on all sales that are at or above 25% gross profit margin, unless otherwise and specifically agreed upon." The contract mentioned nothing about commission on sales with a gross profit margin of less than 25 percent.

The third page of the contract was entitled: "First Year Compensation Plan Reviewed on a monthly basis and subject to change based on performance." Pursuant to the compensation plan, for the first six months appellant would be paid a "base salary" of $2,250 per month. Thereafter, appellant would be paid $2,250 per month as a "draw against commission." But after the first six months appellant continued to receive the base salary of $2,250 per month because he allegedly "wasn't selling enough to make it on commission."

Starting in January 2005, appellant went on straight commissions. Instead of receiving a monthly draw of $2,250 as provided in the contract, he received a monthly draw of $2,000. On approximately the 10th day of each month after January 2005, respondent paid appellant commissions earned for the preceding month to the extent that the commissions exceeded the $2,000 draw. For example, on February 10, 2005, respondent paid appellant $500 because he had allegedly earned commissions of $2,500 during the preceding January. Respondent never provided appellant with any information as to how his monthly commissions had been calculated.

Appellant gave conflicting testimony concerning the commission he would be entitled to receive on sales with a gross profit margin of less than 25 percent. On the one hand, appellant testified that it was his understanding "from the beginning" that, even if the gross profit margin dropped as low as 10 percent, he would still get his full 10 percent commission unless there was a specific agreement authorizing a commission reduction. No such agreement was ever made. Based on what Shimp and the Jafroodis had told him, appellant expected to earn a 10 percent commission on all sales irrespective of the gross profit margin.

On the other hand, appellant testified that he did not expect to receive a full 10 percent commission on sales with a gross profit margin of less than 25 percent. He "expected to be paid" on these sales, but he "never had any set commission rate in mind." Appellant believed that his commission should be "prorated" so that the "[s]ame percentage off of the 25 percent gross margin should be the same percentage off the 10 percent commission." A few months after appellant had started working for respondent, Shimp told him "that on high-dollar volume sales with low margins, . . . the commission would be adjusted, and . . . Omead [Jafroodi] would pay [him]."

Appellant testified that his total sales for 2005 were $625,000, but for that year he received commissions of only $32,620.33. On February 22, 2006, appellant wrote a letter of resignation stating that he had accepted a sales position with another company at much better pay. Appellant specified three reasons for leaving, one of which was as follows: "I will know how my commissions are calculated."

Prior to his resignation, appellant procured two new clients for respondent: Bell Rock Growers and Watkins Valley Color. Appellant claimed that he was entitled to commissions on sales made by respondent to these two companies after his resignation. This included equipment sales of $110,000 to Watkins Valley Color. Appellant testified that he had "sold the [Watkins Valley Color] program."

Jason Engel, a certified public accountant, calculated appellant's damages and opined as follows: The total commission paid to appellant was $38,497.44. But based on a commission rate of 10 percent on all sales with a gross profit margin of less than 25 percent, appellant was entitled to additional commission of $37,875 for the period from January 1, 2005, through his resignation in February 2006. Engel also applied a 10 percent commission rate to the alleged $110,000 in sales of equipment to Watkins Valley Color. The commission for the equipment sales came to $11,000. Engel then applied a 10 percent commission rate to additional sales to Watkins Valley Color and Bell Rock Growers from March 1, 2006 through October 31, 2007. The commission for these additional sales came to $54,756. Moreover, Engel applied a 10 percent commission rate to estimated sales to Watkins Valley Color and Bell Rock Growers for the 10-month period from November 1, 2007, through August 31, 2008, the approximate date of trial. The commission for this 10-month period was $25,000. Accordingly, through August 31, 2008, Engel opined that the total unpaid commission owed to appellant was $128,631 ($37,875 $11,000 $54,756 25,000 = $128,631).

Engel assumed that respondent's relationship with Watkins Valley Color and Bell Rock Growers would continue for a three-year period from September 1, 2008, through August 31, 2011. He estimated that appellant's 10 percent commission for each of these three years would be $30,000, or $90,000 for the entire period. Engel discounted the $90,000 over three years to a present value of $82,082. Thus, according to Engel's calculations, the unpaid commission owed to appellant totaled $210,713 ($128,631 (historical commission) 82,082 (projected commission) = $210,713). Engel estimated that appellant's incidental expenses would be two percent of the total commission figure, or $1,642. Engel subtracted these incidental expenses and arrived at a "Grand Total" of $209,071 in unpaid commission owed by respondent to appellant.

Respondent's Evidence

Sheridan Shimp worked for respondent as a branch manager. She was present when the sales representative contract between the parties was signed in July 2003. Shimp gave appellant a copy of the contract, but she did not have him sign a receipt acknowledging that he had received a copy. After the first six months of his employment, appellant did not go on straight commission because "[h]e was struggling to make enough sales to . . . pay for his . . . salary." Shimp never told appellant that he would receive a 10 percent commission on all sales. At some time after appellant was hired, she told him that, on sales with a gross profit margin of less than 25 percent, he would get a commission but it would be less than 10 percent.

Omead Jafroodi did not tell appellant that he would get a 10 percent commission on all sales irrespective of the gross profit margin. Jafroodi "told him that . . . he would need to make a 25 percent gross profit margin if he was expecting a 10 percent commission." Appellant never discussed with Jafroodi an ...


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