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Auge v. Fairchild Equipment, Inc.

United States District Court, D. Minnesota

June 24, 2019

Todd D. Auge, Plaintiff,
v.
Fairchild Equipment, Inc., Defendant.

          ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT

          WILHELMINA M. WRIGHT UNITED STATES DISTRICT JUDGE

         In this lawsuit alleging breach of an employment contract and failure to pay wages, Plaintiff Todd D. Auge and Defendant Fairchild Equipment, Inc. (Fairchild), cross-move for summary judgment. (Dkts. 40, 46.) For the reasons addressed below, Fairchild's motion is granted and Auge's motion is denied.

         BACKGROUND

         Fairchild, a Wisconsin corporation that operates material-handling equipment dealerships, hired Auge as a “field sales manager” for industrial cleaning equipment at its Burnsville, Minnesota, dealership in April 2013. At the start of his employment, Auge received a written commission plan from Fairchild titled “2013 Pay Program, ” which Auge signed on April 22, 2013. The purpose of the 2013 Pay Program was “to outline the commission and compensation arrangements” between Auge and Fairchild “for as long as [Auge] remains a salesperson of Fairchild Equipment.” Among other things, the 2013 Pay Program addresses vacation time and certain business expenses that Fairchild would reimburse. As relevant here, the 2013 Pay Program also provides that Auge would receive commissions as follows:

• Sale of New Equipment to be paid at 30% of gross profit.
• Sale of Used Equipment to be paid at 6% of sell price.
. . .
• Sale of short term rental will be paid at 6% of the monthly billing of all rentals directly sold by the sales person.
. . .
• Aftermarket commissions will be paid on the Rental, Parts and Service volume at the rate of 3% of the monthly revenue on any new customer for the Calendar year of 2013. The commission rate will drop to 1% on the years after the initial year.
• Sale of JCB products with full involvement 10% of the [gross profit]
• Sale of JCB products with Partial involvement 5% of the [gross profit]
• Sale of JCB products resulting from a lead you generate $100.00

         The 2013 Pay Program does not define when a “sale” occurs.

         Auge received training in or about August 2016 pertaining to the sale of JCB products. Auge contends that he became an authorized JCB sales representative for Fairchild at that time and that his manager orally promised Auge that he would be paid a 30% commission on Fairchild's gross profit from all JCB products that Auge sold. Fairchild and Auge's manager dispute these assertions.

         Several months later, Auge prepared a document titled “JCB Order Form, ” dated February 14, 2017, that pertains to JCB equipment ordered by a Fairchild customer, Birds Eye Foods, for $2, 038, 500. The JCB Order Form states that the equipment would be invoiced to the customer on April 28, 2017, and shipped to the customer on May 26, 2017. Under the terms of the transaction, a third party, JCB Finance, purchased the equipment from Fairchild. JCB Finance, in turn, would lease the equipment to Bird Eye Foods for three years. At the end of the lease term, Birds Eye Foods would have the option to purchase the equipment for $1, 350, 720. As part of this transaction, Fairchild agreed that if Birds Eye Foods does not purchase the equipment at the end of the lease, JCB Finance can sell the equipment to another third party. Under the agreement, if JCB Finance sells the equipment for less than $1, 350, 720, Fairchild will pay JCB Finance the difference up to $115, 503.66 (the Residual Hold). Fairchild told Auge in May 2017 that, although Fairchild would not immediately recognize as profit the Residual Hold amount and an additional “warranty exposure” amount of approximately $41, 000 (the Warranty Reserve), Auge would be eligible for commission on the Residual Hold and Warranty Reserve amounts in three years when Fairchild recognizes this portion of the profit. After these terms of the transaction were finalized, the equipment was shipped to Birds Eye Foods in June 2017.

         Meanwhile, in or about March 2017, Auge received a new written commission plan from Fairchild titled “2017 Pay Program, ” which Auge signed on March 28, 2017. The 2017 Pay Program commenced on April 1, 2017, and provides, in relevant part, that Auge would receive “25% of the gross profit on JCB new equipment sold through December 31st, 2017, ” and that Auge would receive a commission on a rental purchase option (RPO) agreement only in the event that the agreement results in an equipment sale. Under the 2017 Pay Program, “[c]ommissions are considered earned in the month that equipment is actually shipped to customer site and signed off as received by customer.” And the 2017 Pay Program, like the 2013 Pay Program, also delineates vacation time and certain business expenses that Fairchild would reimburse.

         Auge resigned from his employment on July 5, 2017, by sending an email to his supervisor with the subject line “I quit, 7.5.17 Todd Auge” and nothing in the body of the email. That same day, Auge parked his company truck at Fairchild's Burnsville dealership and locked the keys and a resignation letter inside. Approximately three weeks later, Fairchild direct deposited into Auge's bank account a commission payment of $30, 908.13, which included a 25% commission payment for the JCB equipment transaction involving Birds Eye Foods. This payment included a commission on the Residual Hold and Warranty Reserve amounts, contrary to what Fairchild had told Auge would occur. Shortly thereafter, Auge's former manager called Auge and advised him that the direct deposit had been miscalculated and would be corrected. Fairchild reversed the $30, 908.13 direct deposit the next day and reissued a commission payment of $14, 134.16 based on a corrected gross profit amount that excludes the Residual Hold and Warranty Reserve amounts.

         Auge commenced this lawsuit against Fairchild in Minnesota state court on November 16, 2017. Fairchild removed the case to this Court shortly thereafter. Count I of the complaint alleges breach of contract. Count II alleges failure to pay wages, a violation of the Minnesota Payment of Wages Act, Minn. Stat. §§ 181.03, 181.14. In support of these claims, Auge alleges that, because Fairchild owed him a 30% commission on the full amount of the JCB equipment transaction with Birds Eye Foods, Fairchild underpaid him for this transaction by $58, 900.06. Auge also alleges that Fairchild failed to pay him commissions on 10 other equipment transactions, including five RPO transactions, as well as commissions on parts and service sales. And Auge seeks compensation for his unused vacation time that had accrued on the date of his resignation and unreimbursed business expenses of $400. Auge also seeks penalties, attorneys' fees, and costs pursuant to the Minnesota Payment of Wages Act. See Minn. Stat. § 181.171, subd. 3.

         ANALYSIS

         Auge and Fairchild cross-move for summary judgment on both counts of Auge's complaint. Summary judgment is proper when, viewing the evidence in the light most favorable to the nonmoving party and drawing all reasonable inferences in that party's favor, there is “no genuine dispute as to any material fact” and the moving party is “entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Windstream Corp. v. Da Gragnano, 757 F.3d 798, 802-03 (8th Cir. 2014). A genuine dispute as to a material fact exists when “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). To defeat a motion for summary judgment, the opposing party must cite with particularity those aspects of the record that support any assertion that a fact is genuinely disputed. Fed.R.Civ.P. 56(c)(1)(A); accord Krenik v. Cty. of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995). The Court addresses in turn each count of Auge's complaint.

         I. Breach of Contract (Count I)

         Both parties contend that they are entitled to summary judgment on Auge's breach-of-contract claim. It is undisputed that Minnesota law governs this claim. The elements of a breach-of-contract claim under Minnesota law are “(1) formation of a contract, (2) performance by plaintiff of any conditions precedent to the right to demand performance by the defendant, and (3) breach of the contract by defendant.” Toomey v. Dahl, 63 F.Supp.3d 982, 997-98 (D. Minn. 2014) (quoting Park Nicollet Clinic v. Hamann, 808 N.W.2d 828, 833 (Minn. 2011)). To recover, the party alleging breach also must have suffered damages as a result of the breach. See Gen. Mills Operations, LLC v. Five Star Custom Foods, Ltd., 703 F.3d 1104, 1107 (8th Cir. 2013) (applying Minnesota law). When reviewing contractual language, Minnesota courts seek to determine the intent of the parties. Caldas v. Affordable Granite & Stone, Inc., 820 N.W.2d 826, 832 (Minn. 2012).

         Auge alleges that Fairchild breached the 2013 Pay Program and the 2017 Pay Program by failing to pay him the correct commission amounts for the JCB equipment transaction with Birds Eye Foods and several other transactions that occurred in 2016 and 2017, as well as payments for unused accrued vacation time and business expense reimbursements. For the pending motions for summary judgment, Fairchild assumes without conceding that the 2013 Pay Program and the 2017 Pay Program are valid and enforceable contracts, not simply employment policies. But Fairchild argues that it has breached neither the 2013 Pay Program nor the 2017 Pay Program. The Court addresses in turn each alleged breach.

         A. Commission on JCB Equipment Transaction with Birds Eye Foods

         Auge contends that he is entitled to receive a 30% commission on Fairchild's gross profit with respect to the JCB equipment transaction with Birds Eye Foods. According to Ague, Fairchild committed two breaches with respect to this commission payment: first, by paying him a commission of 25% instead of 30%, and second, by excluding the Residual Hold amount of $115, 503 and the Warranty Reserve amount of $41, 000 from its calculation of gross profit on this transaction.

         1. Applicable Commission Rate

         Auge first argues that Fairchild owed him a 30% commission on the JCB equipment transaction with Birds Eye Foods. Fairchild contends that the 25% ...


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