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Home / Firm Blog / Business Law / KBD & Associates v Great Lakes Foam Technologies – Post-termination commissions not earned if the contract required additional work

KBD & Associates v Great Lakes Foam Technologies – Post-termination commissions not earned if the contract required additional work

In KBD & Associates v Great Lakes Foam Technologies, a published opinion, the Michigan Court of Appeals affirmed the decision of the Jackson County Circuit Court in favor of defendant Great Lakes Foam Technologies, owned by MacReady, against KBD & Associates, on behalf of Lyons.

Lyons received commissions for any sales he arranged between MacReady's manufacturing companies and purchasers and for the managing of those accounts. Isringhausen was one of those purchasers. Four years into the transactions with Isringhausen, the manager of Isringhausen contacted the manager at Great Lakes Foam Technologies and said that they wanted nothing to do with Lyons anymore at all, or they would find another manufacturer. MacReady terminated the contract with Lyons and transacted $1.4 million in sales to Isringhuasen after Lyons' termination before that relationship ultimately stopped. Lyons sued to get his 5% commission on the sales. MacReady said that Lyons breached his employment agreemend because he could not manage the account because the purchaser banned him, so was not entitled to the commissions.

After trial, the lower court found that account management was a significant part of Lyons' job, and that when Lyons was banned from performing that service by the purchaser, Lyons materially breached the commission agreement.

"The law in Michigan is that sales agents are entitled to post-termination commissions for sales they procured during their time at the former employer." Stubl v T A Sys, Inc, 984 F Supp 1075, 1095 (ED Mich, 1997). The procuring cause doctrine applies when the parties have a contract governing the payment of sales commissions, but the contract is silent regarding the payment of post-termination commissions. Michigan courts have stated that if subsequent purchase orders are submitted by a customer that involve no additional servicing or negotiation, then the salesman securing the original account is entitled to commissions on those sales. It is unfair to allow a principal to terminate an agent and avoid paying commissions on sales that the agent procured. However, subsequent orders often require some further customer services, and under those circumstances the agent securing the previous order has no claim for additional commissions. It is a question of fact for the jury whether subsequent purchases required additional customer services or were made solely on the force of the original sales.

Author; Pat Gallagher Categories: Employment Law, Business Law

About the Author

Pat Gallagher

Pat Gallagher

Attorney Pat Gallagher is founder of The Gallagher Law Firm overseeing its day-to-day operations, as well as the long-term strategic planning of the firm. He focuses his law practice on the needs of businesses and specializes in a wide variety of transactional matters, litigation and mediation. He received his J.D. legal degree from the Washington University School of Law in St. Louis, Missouri. Mr. Gallagher has litigated cases throughout Michigan before the American Arbitration Association, State and Federal Courts, Michigan Court of Appeals, Michigan Supreme Court and the United States Court of Appeals.