Melaleuca, Inc v. Foeller
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In 1999, Rick and Natalie Foeller entered into an agreement with Melaleuca of Canada, Inc., under which the Foellers would serve as independent marketing executives in exchange for monthly commission payments. In 2008, the Foellers breached this agreement but Melaleuca continued to pay them commissions because it was unaware of the breach. Upon learning of the breach, Melaleuca sued to recover the payments it had made to the Foellers after they breached. The district court granted Melaleuca’s motion for summary judgment, finding that under the forfeiture clause of its agreement with the Foellers, Melaleuca was simply excused from performing once the Foellers breached and ordered the Foellers to refund Melaleuca the commissions they received after their breach. The Foellers appealed, arguing that the district court erred because the forfeiture clause was an illegal penalty and Melaleuca was required to prove damages. Agreeing with the Foellers, the Supreme Court vacated the district court’s judgment and remanded the case for further proceedings.
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