PAUL LEONE V MIKA SYSTEMS INC
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STATE OF MICHIGAN
COURT OF APPEALS
PAUL LEONE and HARRY ORRELL,
UNPUBLISHED
November 23, 2004
Plaintiffs-Appellees,
v
No. 249963
Oakland Circuit Court
LC No. 2002-045645-CB
MIKA SYSTEMS, INC.,
Defendant-Appellant.
Before: Cavanagh, P.J., and Kelly and H Hood*, JJ.
PER CURIAM.
Defendant, Mika Systems, Inc., appeals by leave granted from the trial court’s order
granting in part and denying in part defendant’s motion for summary disposition. We affirm in
part and vacate in part.
Defendant formerly employed plaintiffs, Paul Leone and Harry Orrell, as account
managers. According to defendant, plaintiffs were at-will employees, employed to “solicit and
procure business” by selling defendant’s informational technology services. Plaintiffs assert that
defendant’s business also involved the sale of computer software and hardware. While
employed by defendant, plaintiff Orrell signed a “Receipt of Employee Handbook and
Acknowledgement of Employment Terms” in February 2001, which, in part, provided for a 180day limitation period to bring an action. The “Receipt” and “Acknowledgement” also contained
an agreement to arbitrate any employment disputes. Specifically, the “Receipt” and
“Acknowledgement” provided in pertinent part:
9. I understand and agree that in the event that a dispute arises concerning
my employment with and/or termination from the Company, which dispute would
be resolved by judicial or administrative proceeding, I hereby agree to arbitrate
any and all such disputes arising out of my employment or termination from the
Company or in any way relating to any alleged wrongful acts on the part of the
Company relating to my employment, whether such disputes are based on alleged
statutory violations or otherwise, through the procedures and policies of the
American Arbitration Association, unless other procedures are agreed upon in
writing between myself and the Company. . . .
* Former Court of Appeals judge, sitting on the Court of Appeals by assignment.
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10. I agree that any arbitration or judicial proceeding arising out of a
dispute relative to my employment with the Company shall not be brought unless
the same is commenced within one hundred and eighty (180) days following the
incident giving rise to such dispute. My failure to commence such proceeding
within the one hundred and eighty (180) day period shall result in the
extinguishment of any rights I may have had to prosecute such claims or actions. .
..
Plaintiff Leone never signed any “Receipt” or “Acknowledgment.”
After plaintiffs were terminated from their employment, they commenced this action
against defendant, alleging that they were entitled to four percent commissions, which defendant
refused to pay. Plaintiffs also sought double the amount of unpaid commissions pursuant to the
Michigan sales representative commission act (SRCA), MCL 600.2961(5)(b). Defendant moved
for summary disposition, arguing that plaintiff Orrell’s action was barred because an arbitration
agreement existed. Defendant further argued that the SRCA was not applicable because there
was no genuine issue of material fact about whether it was a “principal” within the meaning of
the SRCA, and further, plaintiffs were not employed for the solicitation of orders for the sales of
goods, only services. The trial court granted defendant’s motion with respect to plaintiff Orrell,
finding that he had agreed to submit all employment-related disputes to arbitration. The court
went on to hold that the contractual 180-day limitation period was invalid as a matter of law.
Regarding the applicability of the SRCA, the trial court denied defendant’s motion with respect
to plaintiff Leone, concluding that, although the essential character of the relationship between
defendant and plaintiff Leone involved the sale of defendant’s services, there was some sale of
goods involved. The court therefore held that the SRCA was applicable to this action.
Defendant argues that the trial court erred when it concluded that, although the arbitration
agreement with plaintiff Orrell was valid, the 180-day contractual limitation period was invalid
under the SRCA. We review de novo a trial court’s decision on a motion for summary
disposition. McDowell v Detroit, ___ Mich App ___; ___ NW2d ___ (Docket No. 246294,
issued November 9, 2004), slip op, p 10. Statutory construction is a question of law that we also
review de novo. County of Wayne v Hathcock, 471 Mich 445, 455; 684 NW2d 765 (2004).
The trial court erred in addressing the applicability of the contractual 180-day limitation
period and in concluding that it was void as a matter of law. Michigan has a strong policy
favoring arbitration and, as a general rule, arbitrators, rather than courts, should decide the
application of a potential defense to arbitration, such as a contractual limitation period. Amtower
v William C. Roney & Co (On Remand), 232 Mich App 226, 233; 590 NW2d 580 (1998).
“[P]arties may contract for a period of limitation shorter than the applicable statute of limitation
provided that the abbreviated period remains reasonable.” Timko v Oakwood Custom Coating,
Inc, 244 Mich App 234, 239; 625 NW2d 101 (2001). “[T]he determination whether the issue of
timeliness must be decided by the arbitrator or a court inexorably becomes a question of contract
interpretation.” Amtower, supra at 234. “[A]ny ambiguity concerning whether a specific issue
falls within the scope of arbitration, such as whether a claim is timely, must be resolved in favor
of submitting the question to the arbitrator for resolution.” Id.
As noted previously, the trial court determined that plaintiff Orrell had a valid arbitration
agreement with defendant, and plaintiff Orrell does not challenge this determination. Plaintiff
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Orrell agreed to arbitrate employment disputes that were based on alleged statutory violations,
and agreed to the 180-day limitation period. As previously indicated, parties are permitted to
contract for a shortened limitation period as long as it is reasonable. Timko, supra at 239.1 Thus,
the unambiguous language of the parties’ agreement reserved the initial consideration of the
validity of the contractual limitation period, as a term of employment, for the arbitrator.
Further, in determining that the contractual 180-day limitation period was invalid as a
matter of law, the trial court relied on MCL 600.2961(8), which provides that a “provision in a
contract between a principal and a sales representative purporting to waive any right under this
section is void.” However, nothing in the SRCA provides for a specific limitation period.
Where statutory language is not ambiguous, a court must enforce the statute as written and may
not go beyond the words of the statute to determine the Legislature’s intent. Shinholster v
Annapolis Hosp, 471 Mich 540, 549; 685 NW2d 275 (2004). Because the SRCA does not
prescribe any limitation period, the trial court erred in concluding that the contractual limitation
period affected a right under the SRCA that could not be waived by agreement of the parties.
Additionally, an agreement to resolve conflicts in arbitration rather than a trial court is not a
waiver of statutory rights. Rembert v Ryan’s Family Steak Houses, Inc, 235 Mich App 118, 138;
596 NW2d 208 (1999).
For these reasons, we affirm the trial court’s grant of summary disposition in favor of
defendant with respect to plaintiff Orrell’s action, but vacate the portion of the trial court’s order
holding that the 180-day contractual limitation period is invalid as a matter of law.
Defendant also contends that the trial court erred in denying its motion for summary
disposition with respect to the applicability of the SRCA, and in affirmatively determining that
the SRCA applied in this case.
As an initial matter, because plaintiff Orrell’s action is subject to arbitration, it is apparent
that the trial court’s ruling with regard to this issue must be limited to plaintiff Leone. The
applicability of the SRCA to plaintiff Orrell’s claims is to be resolved through arbitration.
The SRCA provides for double damages when a principal purposefully fails to pay a
commission to a sales representative when due. MCL 600.2961(5)(b); In re Certified Question,
468 Mich 109, 110-111; 659 NW2d 597 (2003). Plaintiff Leone’s allegations in his complaint
that he was employed by defendant as a sales representative, that defendant failed to pay him
promised commissions on sales for which he was the procuring cause, and that he was therefore
entitled to damages under MCL 600.2961, were sufficient to state a claim for recovery under the
SRCA. Therefore, the trial court properly denied defendant’s motion for summary disposition
pursuant MCR 2.116(C)(8). Adair v State, 470 Mich 105, 119; 680 NW2d 386 (2004).
1
In Timko v Oakwood Custom Coating, Inc, 244 Mich App 234, 242; 625 NW2d 101 (2001),
this Court held that, in the context of other employment legislation, there is “no inherent
unreasonableness” in a six-month period of limitation.
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Defendant additionally contends, however, that there is no genuine issue of material fact
about whether it was a principal and that plaintiff Leone was not a sales representative within the
meaning of the SRCA and, therefore, it was entitled to summary disposition under MCR
2.116(C)(10). Rose v Nat’l Auction Group, Inc, 466 Mich 453, 461; 646 NW2d 455 (2002).
The SRCA defines a “sales representative” as “a person who contracts with or is
employed by a principal for the solicitation of orders or sale of goods and is paid, in whole or in
part, by commission. . . .” MCL 600.2961(1)(e) (emphasis added). A “principal” is defined as a
person who “[m]anufactures, produces, imports, sells, or distributes a product in this state” or
“contracts with a sales representative to solicit orders for or sell a product in this state.” MCL
600.2961(1)(d)(i) and (ii) (emphasis added).
Defendant’s president submitted an affidavit averring that defendant does not
manufacture, produce, import, or distribute a “product,” but acknowledging that it does
occasionally sell goods. Although defendant maintained that it did not employ plaintiff Leone to
sell products, plaintiff Leone submitted an affidavit in which he alleged that he sold software and
hardware products for defendant and received a commission. Plaintiff Leone also submitted a
copy of defendant’s 2002 compensation plan, which provides that transactions involving the sale
of hardware and “certain strategic products” may be eligible for commission, subject to certain
conditions. This compensation plan does not alone establish plaintiff’s entitlement to a
commission for goods sold, inasmuch as plaintiff admittedly did not sign it. The 2002
compensation plan does, however, lend support to plaintiff’s claim that his relationship with
defendant was not limited to the solicitation of services, but also included the sale of some goods
for which he was eligible to receive a commission. In light of the parties’ conflicting claims and
evidence, we conclude that there was a genuine issue of material fact regarding whether plaintiff
Leone’s employment included the solicitation of orders or sale of goods for which he was
entitled to be paid by commission. Therefore, the trial court properly denied defendant’s motion
for summary disposition of plaintiff Leone’s SRCA claim. To the extent the trial court’s order
may be read as affirmatively holding that the SRCA applies, however, it is vacated.
Affirmed in part and vacated in part.
/s/ Mark J. Cavanagh
/s/ Kirsten Frank Kelly
/s/ Harold Hood
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