Michigan Supreme Court
Lansing, Michigan 48909
____________________________________________________________________________________________
C hief Justice Justices
Maura D. Cor rigan Michael F. Cavanagh
Opinion
Elizabeth A. Weaver
Marilyn Kelly
Clifford W. Taylor
Robert P. Young, Jr.
Stephen J. Markman
____________________________________________________________________________________________________________________________
FILED APRIL 3, 2001
FRANK W. LYNCH & CO.,
Plaintiff-Appellee,
v No. 115324
FLEX TECHNOLOGIES, INC., and FLEX
TECHNOLOGIES, LTD.,
Defendants-Appellants,
and
ONTARIO, INC.,
Defendant.
____________________________________
BEFORE THE ENTIRE COURT
YOUNG, J.
The sales representatives’ commissions act (SRCA), MCL
600.2961; MSA 27A.2961, provides, among other things, that, in
addition to actual damages, a defendant may be liable for up
to an additional $100,000 for an intentional failure to pay
sales commissions when due. We granted leave to determine
whether the SRCA should be applied retroactively.
The Court of Appeals followed its decision in Flynn v
Flint Coatings, Inc, 230 Mich App 633; 584 NW2d 627 (1998),
and held that the SRCA should be applied retroactively. We
disagree and hold that the SRCA operates prospectively only.
Accordingly, we overrule Flynn, reverse in part the Court of
Appeals decision, and remand the case to the trial court for
further proceedings.
I. Factual and Procedural Background
In 1990, plaintiff filed this action against defendants
alleging breach of contract and unjust enrichment.
Plaintiff’s claims arise from a 1982 manufacturer’s
representative agreement with defendants’ predecessor, Drut
Industries, Ltd., which later became Mechanical Cables, Ltd.
The agreement, which was amended in 1982 and 1983, basically
provided that plaintiff would solicit sales of various
automotive products manufactured by Drut and later Mechanical
Cables. Defendants purchased the assets of Mechanical Cables
in April 1989 and terminated plaintiff’s services effective
December 31, 1989.
Throughout the course of this litigation, the focus of
the parties’ contractual dispute has concerned such issues as
whether defendants are bound by the original written agreement
(not until fairly late in the proceedings did defendants even
acknowledge that they had any responsibility to plaintiff
2
under the agreement), the circumstances under which the
agreement could be terminated, and the appropriate rate for
calculating commissions owed. In that regard, there have been
several trial court rulings and two Court of Appeals decisions
pertaining to these issues. However, we have limited the
scope of this appeal to the retroactive applicability of the
SRCA.
The SRCA became effective on June 29, 1992. In August
1992, plaintiff moved to amend its complaint to include a
claim under the act. The SRCA provides, in relevant part:
(4) All commissions that are due at the time
of termination of a contract between a sales
representative and principal shall be paid within
45 days after the date of termination. Commissions
that become due after the termination date shall be
paid within 45 days after the date on which the
commission became due.
(5) A principal who fails to comply with this
section is liable to the sales representative for
both of the following:
(a) Actual damages caused by the failure to
pay the commissions when due.
(b) If the principal is found to have
intentionally failed to pay the commission when
due, an amount equal to 2 times the amount of
commissions due but not paid as required by this
section or $100,000.00, whichever is less.
(6) If a sales representative brings a cause
of action pursuant to this section, the court shall
award to the prevailing party reasonable attorney
fees and court costs.
(7) In an action brought under this section,
jurisdiction shall be determined in accordance with
3
chapter 7.
(8) A provision in a contract between a
principal and a sales representative purporting to
waive any right under this section is void.
(9) This section does not affect the rights
of a principal or sales representative that are
otherwise provided by law. [MCL 600.2961; MSA
27A.2961.]
The trial court denied plaintiff’s motion to amend on the
ground that the SRCA “imposes a new duty and provides for a
penalty . . . and attorney fees.” In its first opinion in
this case, the Court of Appeals agreed with the trial court
that the SRCA should be given prospective application only,
but reversed and remanded the case to the trial court for
further proceedings on various other issues relating to the
parties’ original written agreement.1
While the case was pending in the trial court on remand,
the Court of Appeals issued its decision in Flynn. In Flynn,
the Court of Appeals held that “[b]ecause the SRCA does not
create a new obligation or impose a new duty, and because it
simply alters the remedy available to plaintiffs who have been
denied their justly earned commissions, it is properly applied
retroactively.” Id. at 638.
1
Unpublished opinion per curiam, issued October 22, 1996
(Docket No. 169747).
4
When this case returned to the Court of Appeals a second
time, the Court followed its decision in Flynn and held that
the SRCA “shall be applied retroactively to this case.”2
Accordingly, the Court of Appeals remanded the case to the
trial court to allow plaintiff to amend its complaint, and
directed that the trial court “determine whether defendants
intentionally failed to pay commissions due at the time of
termination.”3 The Court also reversed the trial court’s
decision to enter a judgment of no cause of action on
plaintiff’s breach of contract claim, as well as its decision
denying plaintiff’s request for attorney fees as a sanction
for defendants’ late decision to admit the existence and
enforceability of the original written agreement.
We granted defendants’ application for leave to appeal,
“limited to the issue whether MCL 600.2961; MSA 27A.2961
should be retroactively applied to this case.” 462 Mich 919
(2000).
II. Standard of Review
As a general matter, “decisions granting or denying
2
While acknowledging its prior decision in this case
holding that the SRCA should be applied prospectively only,
the Court concluded that Flynn was an “intervening change in
the law” allowing it to reach a different conclusion
notwithstanding the law of the case doctrine.
3
Unpublished opinion per curiam, issued May 14, 1999
(Docket No. 203326).
5
motions to amend pleadings . . . are within the sound
discretion of the trial court and reversal is only appropriate
when the trial court abuses that discretion.” Weymers v
Khera, 454 Mich 639, 654; 563 NW2d 647 (1997). In this case,
however, the propriety of plaintiff’s request to amend its
complaint turns on whether the SRCA should be applied
retroactively. This is a question of statutory construction
that we review de novo. Donajkowski v Alpena Power Co, 460
Mich 243, 248; 596 NW2d 574 (1999).
III. Analysis
In determining whether a statute should be applied
retroactively or prospectively only, “[t]he primary and
overriding rule is that legislative intent governs. All other
rules of construction and operation are subservient to this
principle.” Franks v White Pine Copper Division, 422 Mich
636, 670; 375 NW2d 715 (1985). Moreover, “statutes are
presumed to operate prospectively unless the contrary intent
is clearly manifested.” Id. at 671; see also Hughes v Judges’
Retirement Bd, 407 Mich 75, 85; 282 NW2d 160 (1979). This is
especially true if retroactive application of a statute would
impair vested rights, create a new obligation and impose a new
duty, or attach a disability with respect to past
transactions. See Franks, supra at 671-674.
6
We agree with defendants that there is nothing in the
language of the SRCA suggesting a legislative intent that this
statute be applied retroactively. To the contrary, there
actually are two signals that exactly the opposite was
intended. Most instructive is the fact that the Legislature
included no express language regarding retroactivity. See,
e.g., Chesapeake & Ohio Co v Public Service Comm, 382 Mich 8,
22-23; 167 NW2d 438 (1969) (Adams, J.). We note that the
Legislature has shown on several occasions that it knows how
to make clear its intention that a statute apply
retroactively. See, e.g., MCL 141.1157; MSA 5.3188(257)
(“This act shall be applied retroactively . . . ”); MCL
324.21301a; MSA 13A.21301a (“The changes in liability that are
provided for in the amendatory act that added this subsection
shall be given retroactive application”).
Further indicating that the Legislature intended
prospective application of the SRCA is the fact that
subsection 5 of the SRCA provides for liability if the
principal “fails to comply with this section.” Because the
SRCA did not exist at the time that the instant dispute arose,
it would have been impossible for defendants to “comply” with
its provisions. Accordingly, this language supports a
conclusion that the Legislature intended that the SRCA operate
prospectively only.
7
Plaintiff relies on the so-called “exception” to the
general rule of prospective application providing that
“statutes which operate in furtherance of a remedy or mode of
procedure and which neither create new rights nor destroy,
enlarge, or diminish existing rights are generally held to
operate retrospectively unless a contrary legislative intent
is manifested.” Franks, supra at 672; Selk v Detroit Plastic
Products, 419 Mich 1, 10; 345 NW2d 184 (1984). Plaintiff
argues that the SRCA is remedial because no new cause of
action is created. Instead, according to plaintiffs, the act
merely supplements and furthers remedies otherwise available.
However, we have rejected the notion that a statute
significantly affecting a party’s substantive rights should be
applied retroactively merely because it can also be
characterized in a sense as “remedial.” Franks, supra at
673-674. In that regard, we agree with Chief Justice Riley’s
plurality opinion in White v General Motors Corp, 431 Mich
387, 397; 429 NW2d 576 (1988), that the term “remedial” in
this context should only be employed to describe legislation
that does not affect substantive rights. Otherwise, “[t]he
mere fact that a statute is characterized as ‘remedial’ . . .
is of little value in statutory construction.” Id., quoting
3 Sands, Sutherland Statutory Construction (4th ed), § 60.02,
p 60. Again, the question is one of legislative intent.
8
We find the United States Supreme Court’s decision in
Landgraf v USI Film Products, 511 US 244; 114 S Ct 1483; 128
L Ed 229 (1994), to be instructive on this point. In that
case, the Court had to decide whether to apply retroactively
the then newly enacted compensatory damages provision of the
1991 amendments to title VII. Although the Court recognized
that the new provisions did not create a new cause of action
per se because discriminatory conduct had previously been
prohibited, the Court observed that the provisions would
“attach an important new legal burden to that conduct.” Id.
at 283. Therefore, the Court concluded that the damages
remedy at issue was “the kind of provision that does not apply
to events antedating its enactment in the absence of clear
congressional intent.” Id.
Similarly, here, retroactive application of the SRCA
would change significantly the substance of the parties’
agreement and unsettle their expectations. Not only would the
forty-five-day payment provision impose a new burden on
defendants, but it is one that defendants can no longer meet
because they already made the decision to dispute the
commissions claimed by plaintiff before the statute was
enacted. Thus, defendants never had the opportunity to avoid
9
the penalty authorized by the statute.4 Finally, as opposed
to being merely “remedial” in nature, the SRCA clearly serves
a punitive and deterrent purpose. Thus, absent some clear
manifestation, we simply cannot attribute to the Legislature
an intent to give the SRCA retroactive effect.5
4
We have no doubt that the SRCA authorizes a penalty.
Damages awarded in a common-law breach of contract action are
“expectancy” damages designed to make the plaintiff whole. In
Kewin v Massachusetts Mutual Life Ins Co, 409 Mich 401, 414;
295 NW2d 50 (1980), we explained the usual measure of damages
in such an action:
Under the rule of Hadley v Baxendale, 9 Exch
341; 156 Eng Rep 145 (1854), the damages
recoverable for breach of contract are those that
arise naturally from the breach or those that were
in the contemplation of the parties at the time the
contract was made.
Because the SRCA authorizes a measure of damages in addition
to the “actual damages” incurred by a plaintiff, on the basis
of an “intentional failure to pay commissions when due,” MCL
600.2961(5)(b); MSA 27A.2961(5)(b), it is indisputably
punitive, not compensatory, in that respect.
5
Guardian Depositors Corp of Detroit v Brown, 290 Mich
433; 287 NW 798 (1939), provides an example of a case in which
a statute altering the remedy for enforcement of a contract
would properly be applied retroactively.
In Guardian, the Trevethans took out a mortgage on their
property that the plaintiff subsequently acquired. The
defendants bought the Trevethans’ home and expressly assumed
the mortgage under a warranty deed. When the defendants
failed to make payments, the plaintiff brought suit under the
then newly enacted third-party beneficiary statute, 1937 PA
296. This Court held that the statute should be applied
retroactively because it was merely remedial. The Court
emphasized that, even before the statute, the plaintiff “had
a clear and direct right in equity to enforce a duty owed by
defendants and created by their assumption agreement,” and
(continued...)
10
In that regard, we agree with the Landgraf Court that a
requirement that the Legislature make its intention clear
“helps ensure that [the Legislature] itself has determined
that the benefits of retroactivity outweigh the potential for
disruption or unfairness.” Landgraf, supra at 268. This is
especially true when a new statutory provision affects
contractual rights, an area “in which predictability and
stability are of prime importance.” Id. at 271.6
As a final matter, plaintiff asserts two lower federal
court decisions relying on Senate Bill Analysis, SB 717, May
21, 1992, to support the conclusion that the SRCA is
compensatory rather than punitive in nature because it “merely
designates another measure of damages for the same breach of
contract action . . . .” M & C Corp v Erwin Behr GmbH & Co,
87 F 3d 844, 850 (CA 6, 1996); see also Kenneth Henes Special
Projects Procurement v Continental Biomass Ind, Inc, 86 F Supp
2d 721 (ED Mich, 2000). We reject plaintiff’s reliance on M
& C Corp and Henes because neither is persuasive. First, as
5
(...continued)
that the statute merely allowed the defendants to enforce the
same duty at law. Id. at 441-442. The only effect of the
statute was to avoid a multiplicity of suits.
6
As did the dissent in Flynn, supra at 640-641,
defendants allude to potential constitutional “impairment of
contract” concerns that could arise by virtue of a retroactive
application of the SRCA. See Const 1963, art 1, § 10.
Because we can discern no Legislative intent to apply the SRCA
retroactively, we need not address that issue.
11
even plaintiff acknowledges, in Michigan, a legislative
analysis is a feeble indicator of legislative intent and is
therefore a generally unpersuasive tool of statutory
construction.7 Second, even if it were relevant to our
analysis, nothing in the Senate bill analysis leading to the
enactment of the SRCA contradicts our view that the act
authorizes a penalty. Finally, we note that neither federal
decision purported to address an issue concerning
retroactivity.
IV. Conclusion
Retroactive application of the SRCA would substantially
alter the nature of agreements concerning payment of sales
commissions that were entered into before the act’s effective
7
As the Court of Appeals noted in People v Tolbert, 216
Mich App 353, 360, n 5; 549 NW2d 61 (1996):
It has been observed in the federal context
that resort to "legislative history" in the search
for legislative intent is a perilous venture.
Marposs Corp v Troy, 204 Mich App 156, 167-168, n
2; 514 NW2d 202 (1994) (Taylor, P.J., dissenting),
quoting Address by Justice Antonin Scalia before
the Attorney General's Conference on Economic
Liberties (June 14, 1986). This enterprise is
doubly fraught with danger in Michigan which,
unlike Congress, has failed to create an
authoritative legislative record. Id.
The problem with relying on bill analyses is that they do
not necessarily represent the views of even a single
legislator. Rather, they are prepared by House and Senate
staff. Indeed, the analyses themselves note that they do not
constitute an official statement of legislative intent.
12
date. Absent a clear legislative intent that the act be so
applied, we hold that the SRCA must be given prospective
effect only. Accordingly, we overrule Flynn, reverse in part
the Court of Appeals decision, and reemphasize the strong
presumption against the retroactive application of statutes in
the absence of a clear expression by the Legislature that the
act be so applied. The case is remanded for further
proceedings on the remaining issues consistent with the
direction given by the Court of Appeals.
CORRIGAN , C.J., and WEAVER , TAYLOR , and MARKMAN , JJ.,
concurred with YOUNG , J.
13
S T A T E O F M I C H I G A N
SUPREME COURT
FRANK W. LYNCH & CO.,
Plaintiff-Appellee,
v No. 115324
FLEX TECHNOLOGIES, INC.,
and FLEX TECHNOLOGIES, LTD.,
Defendants-Appellants,
and
ONTARIO, INC.,
Defendant.
___________________________________
KELLY, J. (concurring).
I write separately to express my view that, in Michigan,
under certain circumstances, a bill analysis could be a
persuasive tool of statutory construction. Assume, for
example, that the analysis explaining a bill's intent were
consistent with other evidence showing the same intent. Then
that could be, at least, as persuasive as the opinion of a
sitting legislator about the bill's intent.
CAVANAGH , J., concurred with KELLY , J.
Frank W Lynch & Co v. Flex Technologies, Inc
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