Dan Galbraith, et al., Respondents, vs. U.S. Premise Networking Services, Inc., d/b/a Black Box Network Services MN, and Black Box Corporation, Appellants.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2002).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A03-1154

 

Dan Galbraith, et al.,

Respondents,

 

vs.

 

U.S. Premise Networking Services, Inc.,

d/b/a Black Box Network Services MN,

and Black Box Corporation,

Appellants.

 

Filed May 11, 2004

Affirmed

Randall, Judge

 

Hennepin County District Court

File No. 01-15262

 

James T. Martin, Gislason, Martin & Varpness, P.A., 7600 Parklawn Avenue South, Suite 444, Edina, MN  55435 (for respondents)

 

John J. Steffenhagen, Daniel J. Ballintine, Larkin Hoffman Daly & Lindgren Ltd., 1500 Wells Fargo Plaza, 7900 Xerxes Avenue South, Minneapolis, MN  55431-1194 (for appellants)

 

            Considered and decided by Harten, Presiding Judge, Randall, Judge, and Klaphake, Judge.

U N P U B L I S H E D   O P I N I O N

RANDALL, Judge

            This is an action for breach of contract and for violation of Minn. Stat. § 181.13(a) (2002) brought by terminated employees seeking unpaid commissions, accrued-but-unused vacation time, and unreimbursed expenses.  The jury returned a verdict in favor of respondents, finding that appellant U.S. Premise Networking Services, Inc., d/b/a Black Box Network Services MN, had breached respondents' employment contracts, and awarding damages totaling $586,167.33.  The district court denied appellants' motion for JNOV or a new trial and awarded penalties and attorney fees to respondents.  Appellants filed a notice of appeal and respondents filed a notice of review.  We affirm.

FACTS

            In late 1999, appellant Black Box Corporation, a publicly traded company, bought appellant U.S. Premise Networking Services, Inc., a Minnesota company.  The latter began doing business as Black Box Network Services MN (Black Box-MN).  Less than a year later, Black Box Corporation acquired Sterling Electric, also a Minnesota company, which was then merged with Black Box-MN.  Black Box-MN sells and installs cable and related equipment for computer and telephone systems.

            Respondents Dan Galbraith, Christine Morton, and John Mirviss began their sales careers at U.S. Premise Networking Services, Inc. in 1994-95.  Galbraith was the top producer of the sales staff, Mirviss was the second highest, and Morton was also very productive.  Black Box-MN executives acknowledged that all three were excellent, hardworking, and extremely competent employees.  There was no claim by Black Box-MN that these employees were subject to a noncompete agreement.

            Prior to August 1, 2001, commissions were calculated as a percentage of revenues on projects sold, without being tied into profits.  On August 1, the method of calculating commissions changed and they were calculated as a percentage of actual gross profit.  Under the latter plan, respondents would receive less compensation.

            After the new method of calculating commissions was unveiled, Stu Gilbert, the president of Black Box-MN, met with Galbraith, Mirviss, and Morton.  Gilbert testified that all three respondents refused to go along with the new plan, and he fired them immediately.  Galbraith testified that he had been willing to go along with the new plan prospectively, as long as it would not be applied retroactively to commissions already earned.  Similarly, Mirviss and Morton objected to the retroactive application of the new formula.

            In mid August, respondents demanded compensation due pursuant to Minn. Stat. § 181.13(a) (2002).  Their claims for commissions were in four categories:  (1) commissions earned on amounts collected by Black Box in July 2001 and which should have been paid on the second Friday of August; (2) commissions earned on accounts receivable as of August 2, 2001; (3) commissions earned on work contracted but not invoiced; and (4) commissions earned on a handful of proposed projects not yet contracted.  In addition, Galbraith claimed $1,500 and Mirviss claimed $2,637.50 for accrued-but-unused vacation pay.  Galbraith sought $1,413.35 and Morton sought $682.64 for unreimbursed expenses.

Except for a partial payment to Mirviss, Black Box-MN did not pay the amounts claimed.  This lawsuit followed.  After a trial, the jury determined that Black Box-MN breached the contracts it had with respondents and awarded damages.  The district court denied Black Box-MN's motion for JNOV or a new trial and granted respondents' motion for attorney fees pursuant to Minn. Stat. § 181.171, subd. 3 (2002).  Appellants filed a notice of appeal and respondents filed a notice of review.

D E C I S I O N

I.  Contract

            Black Box-MN first argues that because respondents failed to offer evidence to prove the required elements of a contract for post-termination commissions, the district court erred in denying its motions for summary judgment and judgment notwithstanding the verdict; that it erred in granting a partial directed verdict on the issue of whether a contract existed; and that its jury instructions were incomplete.  We address each argument in turn.

            In reviewing denial of summary judgment, this court will examine whether there are any genuine issues of material fact and whether the district court erred as a matter of law.  Am. States Ins. Co. v. Ankrum, 651 N.W.2d 513, 522 (Minn. App. 2002).  This court will also review the denial of a motion for JNOV as a question of law.  Pouliot v. Fitzsimmons, 582 N.W.2d 221, 224 (Minn. 1998).  Black Box, in its argument, focuses on the argument that the evidence did not support the verdict, so we do the same.

            The standard for reviewing the denial of JNOV "is whether any competent evidence exists that reasonably tends to sustain the verdict."  Canada by Landy v. McCarthy, 567 N.W.2d 496, 503-04 (Minn. 1997).  After considering the evidence in the light most favorable to the verdict, this court will affirm "unless the evidence is practically conclusive against the verdict, or reasonable minds could reach but one conclusion which is against the verdict."  Id. at 504.

            Black Box-MN argues that it was entitled to JNOV as a matter of law because respondents failed to establish the elements of offer, acceptance, and consideration for contracts for post-termination commissions.  We do not understand Black Box's argument.  There is no issue as to "post-termination contract formation."  Black Box repeatedly talks about the need to discuss the basic elements of a contract in connection with "post-termination," but all the employment contracts in question concern a claim by respondents that appellant failed to pay commissions already earned at the time of their discharge.  No one has ever claimed that following their discharge, the parties met again and negotiated brand new post-termination contracts.

            The district court, in addressing the motion for JNOV, stated that Minnesota courts have held that "when a commissioned salesperson has been the procuring cause of a sale, the employer cannot avoid paying the commission that was earned by opportunistically terminating the employee or preventing the employee from doing whatever else might be required to perfect his or her right to the commission."  See, e.g., Gunderson v. N. Am. Life & Cas. Co., 248 Minn. 114, 119-20, 78 N.W.2d 328, 332 (1956).  That is still good law.  The district court ruled that the jury had sufficient evidence to reasonably support its finding that the terms of the employment contracts had been breached.  We agree.  Neither Lapadat v. Clapp-Thomssen Co., 397 N.W.2d 606 (Minn. App. 1986), nor the unpublished case that Black Box-MN cites extensively, gives Black Box-MN free rein to refuse to compensate employees that it fires for commissions already earned.  The jury had evidence that Black Box treated a commission as earned at the time of sale and payable after the company received the money.  There was also testimony that when a contract had not been completed at the time a salesperson entitled to the commission left, the salesperson received the commission based on the percentage of the completion of the project.  There was evidence to support the jury verdict as to breach.  The district court did not err in denying the motion for JNOV.

            Black Box-MN also argues that the district court erred when it directed a partial verdict against Black Box and held that an employment contract existed as a matter of law.  "A district court may grant a motion for a directed verdict when, as a matter of law, the evidence is insufficient to present a question of fact to the jury."  Wall v. Fairview Hosp., 584 N.W.2d 395, 405 (Minn. 1998).  In reviewing a directed verdict, the appellate court "must independently determine whether an issue of fact exists when the evidence is viewed in a light most favorable to the nonmoving party."  Id. at 406 (quotation omitted).

            Black Box here challenges the partial directed verdict, contending that the question was not whether a contract existed between the parties, but whether the parties' contracts included a term obligating Black Box-MN to pay post-termination commissions.  It asserts that the directed verdict did not address the key issues of the case and diverted the jury from the critical issues of contract formation.  First, as Black Box acknowledges, there is no dispute that there was an employment contract between the parties.  There is a dispute as to the amount of dollars earned before they were terminated.  The district court properly granted a directed verdict on the existence of an employment contract as a matter of law.

            Continuing with the same theme, Black Box challenges the district court's failure to instruct the jury that the elements of a contract are offer, acceptance, and consideration.  "District courts are allowed considerable latitude in selecting language used in the jury charge and determining the propriety of a specific instruction."  Morlock v. St. Paul Guardian Ins. Co., 650 N.W.2d 154, 159 (Minn. 2002).  "A party is entitled to a jury instruction that sets forth his or her theory of the case if evidence supports it and if it is consistent with the applicable law."  Kirsebom v. Connelly, 486 N.W.2d 172, 174 (Minn. App. 1992).  Jury instructions "must be construed as a whole."  Lindstrom v. Yellow Taxi Co. of Minneapolis, 298 Minn. 224, 229, 214 N.W.2d 672, 676 (1974).   "As a general rule, a new trial will not be granted because of refusal of a proffered instruction if the general charge fairly and correctly states the applicable law."  Gleeman v. Triplett, 301 Minn. 504, 506, 222 N.W.2d 787, 788 (Minn. 1974).

            Black Box continues to argue that the district court exacerbated its error in directing a partial verdict by failing to instruct the jury as to the issues of offer, acceptance, and consideration.  Here, the district court properly instructed the jury on contract law and breach, and Black Box-MN has not shown prejudicial error.

            Black Box briefly argues that the above-alleged errors were further compounded by the court's prejudicial submission of an instruction patterned on Minn. Stat. § 181.13(a) (2002).  Black Box argues that this statute does not define when a commission is earned.  Holman v. CPT Corp., 457 N.W.2d 740, 743 (Minn. App. 1990), review denied (Minn. Sept. 20, 1990).  Consequently, it argues that the statute was irrelevant to the jury's determination as to contract-formation issues and should not have been given.  Further, it contends that by focusing on the timing of the payment rather than the pivotal issues of contract formation, it predisposed the jury to find liability merely because the payment had not been made in the time specified.

            We can only note that as the district court held, respondents brought a claim under Minn. Stat. § 181.13(a).  It was entirely appropriate for the district court to instruct the jury on the statute.  We conclude the district court "had to."  The district court's reasoning is correct.

II.  Post-Termination Conduct

            Next, Black Box argues that the district court inappropriately excluded evidence of respondents' alleged post-termination misconduct.  The district court's evidentiary rulings are reviewed under an abuse-of-discretion standard.  Jensen v. Touche Ross & Co., 335 N.W.2d 720, 725 (Minn. 1983).

            Black Box-MN argues that this evidence was critical to the issue of damages, asserting that respondents were seeking commissions for the accounts that Black Box-MN contends that they unlawfully diverted to their new employer after being fired.  It relies on Stiff v. Associated Sewing Supply Co., 436 N.W.2d 777, 778 (Minn. 1989), where the court held that employees who had embezzled company funds forfeited their claims to unpaid commissions.  Black Box-MN also asserts the alleged misconduct was relevant to various other aspects of its case.  Black Box-MN contends the district court did not address all of its arguments in the order denying the motion for a new trial, but we note that the court referred to its earlier rulings on the issue in which it did address all of the arguments.

            The district court rejected Black Box-MN's arguments and denied its motion for a new trial based on claimed erroneous evidentiary rulings, determining that the evidence was irrelevant because the commissions had been earned during the employment, and the alleged misconduct by respondents occurred after employment.  Second, it noted that respondents did not have noncompete clauses in their contracts.  Further, Black Box-MN brought a separate lawsuit against respondents and respondents' new employers on these grounds, and can collect any damages that it can prove in this unrelated second action.  The district court noted that Black Box's counsel apparently wished to use this case as a discovery tool for the second case.  For all of its reasons, the district court did not abuse its discretion in excluding this evidence.

III.  Damages

            Next, Black Box challenges the jury's determination of damages, contending that the award was based on hearsay and speculation.

            An appellate court "will not interfere with the jury's award of damages unless its failure to do so would be shocking or would result in plain injustice."  Hughes v. Sinclair Mktg., Inc., 389 N.W.2d 194, 199 (Minn. 1986).  When a party challenges the sufficiency of the evidence, the reviewing court will view "the evidence in the light most favorable to the prevailing party.  The verdict will not be reversed if the evidence reasonably or fairly tends to sustain it."  Lesmeister v. Dilly, 330 N.W.2d 95, 100 (Minn. 1983).  "Damages do not have to be proved with mathematical certainty.  The evidence need only reasonably support the verdict for damages to be sustained."  Imdieke v. Blenda-Life, Inc., 363 N.W.2d 121, 125 (Minn. App. 1985), review denied (Minn. Apr. 26, 1985).  "There is no general test for speculative or conjectural damages; such matters should usually be left to the judgment of the trial court."  Henning Nelson Constr. Co. v. Fireman's Fund Am. Life Ins. Co., 383 N.W.2d 645, 653 (Minn. 1986).

            As the parties agree, respondents' claim for commissions fell into four broad categories:  (1) commissions earned on amounts collected by Black Box-MN; (2) commissions earned on accounts receivable as of August 2, 2001; (3) commissions contracted but not invoiced prior to respondents' termination; and (4) commissions for a handful of proposed projects not yet contracted.

            Respondents submitted exhibits and presented extensive testimony describing the commissions they claimed were due in all four categories.  As to the first category, Black Box does not dispute the amount of the commissions that fall within this category.  As to the second, third, and fourth categories, Black Box contends that these were based on hearsay, speculation, and guess, and argue that respondents did not produce any third-party evidence, depositions, or issue a subpoena duces tecum to any relevant customer to support their claims.  We find the jury was presented with extensive evidence and made a credibility determination as to the commissions to which it determined respondents were entitled.  The district court, which heard all the evidence, determined that there was sufficient evidence in the record to support the award for damages for unpaid commissions.  Black Box has failed to show that the jury's award of damages should be reversed.

IV.  Attorney Fees

            Finally, Black Box challenges the award of attorney fees.  Respondents filed a notice of review, seeking an upward adjustment of attorney fees.

            In an action for a violation of Minn. Stat. § 181.13, the district court "shall order an employer who is found to have committed a violation to pay the aggrieved party reasonable costs, disbursements, witness fees, and attorney fees."  Minn. Stat. § 181.171, subd. 3 (2002).  A trial court's determination of the reasonableness and amount of attorney fees is a question of fact and should not be reversed unless clearly erroneous.  Amerman v. Lakeland Dev. Corp., 295 Minn. 536, 537, 203 N.W.2d 400, 400-01 (1973).

            Black Box-MN first argues that the parties stipulated that no attorney fees should be awarded for claims that respondents originally brought against its parent corporation, Black Box Corporation.  The district court rejected this interpretation of the stipulation.  We conclude the district court was correct.  By way of background, respondents originally brought their lawsuit against U.S. Premise Networking Services, Inc., a Minnesota corporation, d/b/a Black Box Network Services Minnesota (Black Box-MN) and Black Box Corporation of Pennsylvania, a Delaware corporation.  Through discovery, respondents learned that the correct parent corporation was Black Box Corporation.  Because appellants did not respond to respondents' request to serve an amended complaint, respondents moved the district court prior to trial for permission to amend the caption.  It also moved to amend the complaint.  Originally, respondents sued the parent company for tortious interference with the employment contracts respondents had with the Minnesota entity.  Respondents then learned of evidence that the parent company treated the Minnesota entity as a mere alter ego, providing a basis for respondeat superior or vicarious liability.

            Before the district court ruled, the parties reached an agreement.  In return for respondents' agreement to withdraw claims of tortious interference with contract, alter-ego liability, or agency liability, Black Box Corporation promised to pay the amount of the final judgment against Black Box-MN, if Black Box-MN did not pay it first.  Black Box's counsel then stated:

                                    This is a confidential settlement agreement.  There will be no admission of liability.  There will be a stipulation of dismissal of Black Box Corporation with prejudice of these claims but without costs and disbursements or fees.  . . .  Puts the plaintiffs in no better position than had they proceeded against Black Box Corporation, meaning that it is pending the outcome of any posttrial motions, any bond that may be posted with respect to the appeal.

 

            To the district court, appellants argued, as they now argue on appeal, that based upon that stipulation, all legal fees relating to Minn. Stat. § 181.13 claims against Black Box Corporation, and including the corporate-veil and tortious-interference claims, must be excised from the award.

            The district court found that appellants "never made it clear that they intended a bar against attorney fees for work done on claims against Black Box Corporation" when they settled those claims on the morning of trial.  The district court did not interpret the stipulation to specifically exclude an award of Minn. Stat. § 181.13, subd. 3, attorney fees relative to claims against Black Box Corporation.  We find the district court's interpretation was not erroneous.

            Respondents vigorously contend that they never intended to compromise any portion of their entitlement to attorney fees, and the district court in effect made a finding of fact that there was never such an agreement.  Respondents also contend that the stipulation does not permit the conclusion that any of their claims against Black Box-MN were being compromised to include whatever attorney fees had been incurred in prosecuting the entire action.

            It is not exactly clear whether Black Box Corporation is seeking to avoid liability for all attorney fees or just the attorney fees for the portion attributable to respondents' claims against Black Box Corporation.  In any event, the district court made a finding against Black Box's interpretation of the stipulation and it is not clearly erroneous.

            Black Box-MN contends that respondents should not be awarded attorney fees for common-law claims that the court dismissed.  The district court found that respondents' counsel expended 4.5 hours exclusively on unsuccessful claims and ruled that counsel was not entitled to attorney fees for these 4.5 hours.  Because the district court ruled in Black Box-MN's favor, this argument is moot.

            Next, Black Box-MN contends that respondent Mirviss is not a prevailing party under Minn. Stat. § 181.13(a) and therefore no attorney fees can be awarded as to his claims.  Minn. Stat. § 181.13(a) states that "wages or commissions actually earned and unpaid at the time of discharge" must be paid within 24 hours of the discharged employee's demand.  Black Box-MN argues that it mailed a check in the amount of $18,083.40 to Mirviss before his demand, that it met the 24-hour rule with respect to the commissions paid to Mirviss subsequent to his discharge, and that he therefore is not a prevailing party under the statute.

            The district court rejected this claim because the jury verdict established that Black Box-MN breached its employment contract with Mirviss and the jury awarded him $135,372.51 in compensation.  The district court properly ruled that Mirviss was a prevailing party and entitled to an award of attorney fees under Minn. Stat. § 181.171, subd. 3.

            Black Box-MN next challenges the billing rate of $300 per hour for calculating respondents' attorney fees.  Respondents' counsel acknowledged that he performs a significant amount of insurance-defense work for $150 per hour, but sought a reasonable hourly fee for this case in the amount of $300 per hour, providing affidavits in support of the claim.

            In determining the proper amount of attorney fees, the court should first determine the lodestar figure by multiplying the number of hours reasonably expended by an hourly rate.  Musicland Group, Inc. v. Ceridian Corp., 508 N.W.2d 524, 535 (Minn. App. 1993), review denied (Minn. Jan. 27, 1994); see Johns v. Harborage I, Ltd., 585 N.W.2d 853, 863 (Minn. App. 1998).  Next, the court should also consider an adjustment based on the difficulty of the case, results obtained, contingent nature of the results, and quality of representation.  Musicland, 508 N.W.2d at 535.  The award will be reviewed under an abuse-of-discretion standard.  Id.

            The district court considered all of the relevant factors in reaching its decision.  The district court found that $150 per hour was respondents' counsel's customary fee for his insurance company clients, based on the volume of work those clients are able to offer him, but that it was not his customary fee for cases such as the present one.  It specifically found that $300 per hour was a reasonable fee based on a variety of factors.  In light of the district court's reasoning, it did not abuse its discretion.

            In their notice of review, respondents ask this court to adjust their attorney-fees award upward by an additional $7,980.  The district court awarded attorney fees in the amount of $113,835 to respondents, and now respondents contend that through an oversight, the district court neglected to award it an additional sum of $7,980 for legal services furnished on posttrial issues.  We have to conclude that the district court treated respondents fairly and took note of all their hard work when it awarded them $113,835.  We find no abuse of discretion in any way in the district court's calculation of respondents' award of attorney fees.

            Finally, Black Box-MN submitted a short letter brief to this court after oral argument, and respondents submitted a short reply opposing consideration of the letter brief.  A review of the correspondence indicates the letters were, in large part, an extension of oral argument.  These postargument submissions do not comply with Minn. R. Civ. App. P. 128.05.  Both sides are advised that these submissions do not affect the analysis.

            Affirmed.