Kudos are in order for an Upstate New York rep, his attorney and MANA for their combined efforts to protect reps’ commissions in that state.

Mike Charland, president, Liebel & Merie Sales, Inc.

The scenario in this case began unfolding in 2005 when the prin- cipal’s (a high-end plastic injection molder) ownership put in place new management.

“The new management decided they were going to do things differently,” explains Mike Charland, president, Liebel & Merle Sales, Inc., Rochester, New York. “We had been on board with this company for about 2½ years. From the beginning this company had turned over a little bit of business to us but they did re- serve some house accounts. We accepted those terms although we were looking to become their exclusive rep. The company’s market focus was narrow and we knew there would be challenges; however, we were confi- dent that we could build up the busi- ness for them and ourselves.”

Charland continues that one of the first things the manufacturer’s new management did was to “present us with a new contract that was not at all acceptable. If we had accepted it we knew what would happen next — the principal would simply terminate us. We attempted without success to renegotiate. Shortly thereafter we were terminated.”

He adds that during this process “We continued to perform above and beyond the terms of our origi- nal contract. We continued selling although we received no response on quotes from the principal. In addition, we even contracted with a sub-rep to cover Connecticut for us and the principal issued him business cards.”

Over the course of the next two to three months, on the advice of the rep firm’s attorney, Liebel & Merle fulfilled its contractual obligations. According to Charland, the attorney — who had been recommended by MANA — maintained that our ter- mination was “without cause.” Late in 2005, the agency decided to initi- ate legal action.

Beginning of a Six-Year Journey “We brought a lawsuit in the months that followed and pursued this all the way up from New York State Supreme Court (they hear commercial law matters here in the state),” explains Charland. “We were awarded our commission, but the judge denied double commissions as legislated in the New York State Labor Law’s ‘commission protection act.’ Clearly, I felt that this law applied to our situation. As a result, we filed application to the New York State Appellate Division and a five-judge panel unanimously agreed with my application and overturned the lower court judge’s decision. From there, the principal filed an application to the highest court in New York State — the New York Court of Appeals. That court rejected the application and wouldn’t hear the case. We won, they paid double commission and my legal fees. We also set case law history here in New York, which I’d presume will strengthen the law and help other reps that find themselves in similar situations.”

“If we learned anything during the course of this case,” maintains Charland’s attorney, John Rottaris, Gross Shuman Brizdle & Gilfil- lan P.C., Buffalo, New York, “it is that New York State’s version of the commission protection statute is enforceable. As written the statute calls for double damages on the rep’s commission and coverage of his attorney’s fees. That’s ultimately what occurred here.”

Rottaris adds that an important after-effect of this case was that “Even though the statute has been in existence for a number of years, not many cases have resulted in Appellate Division decisions. The attorney we retained to assist us with expert testimony confirmed that matters such as this are usually settled before they reach the Appellate Court stage. That’s why this case was so important — case law was actually established.”

He continues, “In this case the defendant (the principal) maintained he had terminated the rep (Liebel & Marle) for cause. As a result, he maintained that he was not required to pay any further commissions and therefore not required to pay double commissions under the New York State statute. Ultimately, the court said that was not the case.”
There’s Value in Documentation

Charland and Rottaris both maintain that an interesting aspect of the case involved what occurred during the “discovery process.”
According to Charland, “During discovery the principal maintained that because of a lack of communication on our part, we had not fulfilled our duties in the field. The truth of the matter was we had communicated (via phone and e-mail) with the principal and we were able to produce copies of our communications. We produced volumes of e-mails and phone records indicating we were regularly in touch. Furthermore, we pointed out the communications were all one way with no response from the principal. The principal was unable to provide records of communication back to us.”

Rottaris stresses the importance of the rep having those records: “Despite what a manufacturer might say if the rep has a record of his communication to the principal, it speaks to his performance in the field. Mike was able to produce a long and detailed trail of communication. That was a great help in this case.”
Charland adds: “We certainly learned the value of keeping records of our performance. It’s mandatory that you keep good records. It’s easy in the course of legal proceedings for things to get twisted around. There’s nothing better than printed documentation to set the record straight.
“In our case, the principal’s old management was gone. The new guy really didn’t have any history. On top of that, I’m assuming they had no idea we had as much documentation as we were able to produce.”

Lessons Learned

Over the course of this six-year legal battle, Charland and Rottaris agree that a number of important lessons were learned, not the least of which is that it pays to be prepared and informed — that is to say prepared with the following:

* A rep-savvy attorney — “I can’t help but stress the importance of having a good contract in place and in having a lawyer to review it who is familiar with our type of business. What we’ve gone through has absolutely changed how we negotiate with principals. We’re much more cautious now than ever before and if that agreeable contract doesn’t pass scrutiny from our attorney, we’re not afraid to walk away.”

Rottaris agrees: “It’s critical to have someone (an attorney) review the rep’s agreement with his principal. You’ve got to understand everything that’s there. In the end it’s much easier to deal with changes in the agreement up front rather than litigation after the fact. Once an agreement is signed, you have to live with it.”

* Membership in MANA — Rottaris was quick to express appreciation for the work MANA performs on behalf of its members, and he was especially mindful of the association’s efforts to get commission protection statutes on the books in a number of states. For his part, Charland voiced his thanks to MANA for “getting this law ‘on the books’ in New York State.”

In summation, Charland says that when this disagreement began to evolve between his agency and the principal, “I’ve got to admit that I was thunderstruck. I was surprised how something that appeared in a contract to be so black and white could be dragged through the courts for six years. It wound up being a distraction for me in running the agency. In the end, however, it was not only a win for us personally, but also for the rep profession. In addition, it established case law in New York State.”