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William J. Tuma, Doing Business As, Tuma and Associates v. Eaton Corporation

September 27, 2011

WILLIAM J. TUMA, DOING BUSINESS AS, TUMA AND ASSOCIATES PLAINTIFF,
v.
EATON CORPORATION, DEFENDANT.



The opinion of the court was delivered by: United States District Judge Honorable Barry Ted Moskowitz

FOR RECONSIDERATION AMENDED ORDER RE MOTION

Plaintiff moves for reconsideration of the Court's May 23, 2011 order granting partial summary judgment to Defendant. One of the grounds raised in Plaintiff's motion is that the Court should have granted Plaintiff's request for oral argument. Plaintiff is correct that a party opposing summary judgment is entitled to oral argument, upon request, if the summary judgment motion is granted. Jasinski v. Showboat Operating Co., 644 F.2d 1277, 1280 (9th Cir. 1981). Accordingly, the Court heard oral argument on the motion for reconsideration and reviews the motion for summary judgment de novo. Having conducted a de novo review of the motion papers and the relevant record, the Court REAFFIRMS the May 23, 2011 summary judgment order, but modifies some of the supporting reasoning, as set forth below.

I. DISCUSSION

A. Procuring Cause Doctrine

In the Court's summary judgment order, the Court held that the procuring cause doctrine was inapplicable because the contract to which Plaintiff is a "procuring cause" is a pricing agreement, upon which commissions would not be owed under the operative contract. Order at 6 n.3. At oral argument for the motion for reconsideration, Defendant stated that the first order on the Watkins Agreement was placed one month after it was signed (approximately four and a half months after the effective date of Plaintiff's termination) and that had Plaintiff not been terminated, Plaintiff would have received an apportioned commission on that order pursuant to Section 9(c) of the contract. Under the premise that Plaintiff is seeking commissions on that first order (as well as subsequent ones), as opposed to a commission for the Watkins Agreement, the Court now addresses Plaintiff's procuring cause doctrine arguments.

Plaintiff points to evidence that he contends shows that he worked for four years before finally convincing Watkins to consider switching to Defendant's products and that both Watkins and Defendant recognized the role Plaintiff played in setting up their business arrangement. See Pl. Statement of Facts 22-31, 37, 43. The Court assumes that such evidence is sufficient to demonstrate a disputed factual issue as to whether Plaintiff was the procuring cause, under California law, of the first order placed under the Watkins Agreement. See Rose v. Hunter, 155 Cal. App. 2d 319, 323 (1st Dist. 1957) ("Procuring cause has been defined as the cause originating a series of events that, without break in their continuity, result in the accomplishment of the prime object of the employment.") (quotations and citation omitted).

Nevertheless, the procuring cause doctrine does not provide a basis for Plaintiff to recover commissions in this case. For this theory to apply, the governing contract must either provide that a commission is earned by "procuring" a sale or not contain contrary provisions. See Zinn v. Ex-Cell-O Corp., 149 P.2d 177, 180-181 (1944); Drumm v. Morningstar, Inc., NO. C08-3362 THE, 2009 U.S. Dist. LEXIS 94358, at *2-5 (N.D. Cal. Oct. 8, 2009) (noting lack of support for proposition that "the procuring cause theory may be relied on to circumvent written contractual conditions"); Schuman v. Ikon Office Solutions, Inc., 232 Fed. Appx. 659, 662 (9th Cir. Cal. 2007) (procuring cause doctrine cannot be used "to contradict the express provisions of the Plan").

Here, the parties did not provide for accrual of commissions where Plaintiff is the procuring cause of orders placed after termination. Instead, unambiguous contract language provides that commissions are owed only upon the final acts of sales that occur prior to thirty days after the effective date of termination. Where commissions have not accrued as of the time of a contractual post-termination cut-off date, the procuring cause doctrine cannot be used to effectively rewrite the contract to allow a salesperson to recover post-termination commissions. See Drumm, 2009 U.S. Dist. LEXIS 94358, at *2-5.

B. Prevention/Bad Faith Termination

Plaintiff also asserts that he can recover commissions on the Watkins Agreement under the theories of prevention of performance and the implied covenant of good faith. Plaintiff asserts that because he was not paid a salary or expenses and cost Defendant nothing other than commissions that he had earned, a reasonable jury could conclude that Plaintiff was fired for the purpose of depriving him of commissions on future orders placed by Watkins. The Court assumes that such circumstantial evidence is sufficient to create a disputed factual issue of whether he was terminated in bad faith. Nevertheless, as a matter of law, Plaintiff cannot recover commissions because of the unambiguous terms of his contract.

As an initial matter, contrary to Plaintiff's position, the mere termination of an at-will employee and the denial of commission payments after his termination does not provide Plaintiff with a basis of recovery under either the prevention doctrine or the implied covenant of good faith. See Drumm, 2009 U.S. Dist. LEXIS 94358, at * 9 (quoting Kline v. Johnson, 121 Cal. App. 2d Supp. 851 (Cal. App. Dep't Super. Ct. 1953)) ("[T]he prevention doctrine is inapplicable where 'the preventing action is allowed under the contract.'"); Nein v. HostPro, Inc., 174 Cal. App. 4th 833, 852 (2d Dist. 2009) ("Because the express terms of the agreement thus permitted defendant to deny plaintiff further commissions after his termination, doing so cannot violate the implied covenant."). However, neither of these cases -- nor any other case cited by the parties or uncovered in the Court's research -- squarely addresses whether, under California law, a salesperson, who is terminated in bad faith, may recover commissions on post-termination sales when recovery contradicts the express terms of an employment contract that is neither unconscionable nor illegal.*fn1 Accordingly, it is the Court's task to best predict how the California Supreme Court would resolve this issue. See Giles v. GMAC, 494 F.3d 865, 872 (9th Cir. 2007).

The Ninth Circuit has addressed this issue under the law of another state and, in another case, certified it to the Washington Supreme Court. See Balzer/Wolf Associates, Inc. v. Parlex Corp., 753 F.2d 771, 774-775 (9th Cir. 1985); Willis v. Champlain Cable Corp., 842 F.2d 1139, 1140 (9th Cir. 1988). These decisions denied recovery of commissions, in situations substantially similar to the case at bar.

In Balzer/Wolf, the plaintiff entered into a sales representative agreement that provided for commission payments on sales made pursuant to the contract. Balzer/Wolf Associates, Inc., 753 F.2d at 771-772. The agreement could be terminated without cause and provided that in the event of termination, commissions on orders accepted by the defendant prior to termination but delivered thereafter, would be paid pursuant to a schedule set forth in the contract. Id. at 772. The plaintiff alleged that the agreement was terminated in order to avoid paying commissions on orders placed after termination and sought recovery on this basis. Id.

The Ninth Circuit, interpreting Massachusetts law, did not find the defendant's motivation in terminating the agreement to be material to whether the plaintiff was entitled to extra-contractual ...


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