S. Michael McKay v. Wiltel Communication

Citation: Not availableDocket: 95-2460

Court: Court of Appeals for the Eighth Circuit; June 28, 1996; Federal Appellate Court

Original Court Document: View Document

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Michael McKay sued his former employer, WilTel Communication Systems, Inc., seeking additional commissions from a multi-million dollar phone system sale to Florida State University (FSU). The jury awarded McKay $119,215; he appeals for statutory damages and attorney fees. WilTel cross-appeals, contesting the evidence's sufficiency and various jury instruction rulings. The court affirmed in part and reversed in part. 

McKay began working for WilTel's predecessor in 1977 and served as sales manager for Arkansas until his resignation in 1990. During his tenure, WilTel, a subsidiary of Centel Corporation, was involved in a significant sale where McKay played a crucial role. FSU chose to buy the system from Florida Central, a regulated provider, because it could offer a tariffed payment plan. FSU's contract involved approximately $12 million in total payments over ten years, with Florida Central purchasing $2.5 million worth of equipment from WilTel for resale. 

McKay received a $30,000 commission based solely on the equipment sale price but contended he deserved a commission on the entire FSU transaction. Despite expressing dissatisfaction with the commission amount, he cashed the check. McKay's involvement included multiple visits to FSU and the development of a joint sales strategy due to FSU's financial constraints. Discussions regarding his compensation indicated he would receive his standard commission, even if FSU chose the tariffed option.

McKay felt it unnecessary to define 'normal' during a speculative sale to FSU, believing he had been treated fairly by WilTel. As a tariffed sale became likely, he realized most proceeds would go through Florida Central's accounts, raising concerns about fair compensation. He communicated these concerns in memoranda to WilTel executives in late 1987 and early 1988. After cashing a $30,000 commission check under protest, McKay argued he was entitled to a commission on the entire Florida Central-FSU transaction. This issue remained unresolved when he resigned in 1990. In 1992, McKay sued WilTel in state court for breach of the compensation agreement and unjust enrichment, claiming he was owed commissions on the full FSU transaction and statutory damages under Mo. Rev. Stat. 407.913. WilTel removed the case to federal court, which granted summary judgment in favor of WilTel on claims related to McDonnell Douglas and on the breach of contract claim regarding FSU, determining McKay had received all due commissions and that the compensation plan did not apply to the FSU transaction. McKay later amended his complaint, asserting that the $30,439 he received did not reflect the reasonable value of his services and claimed unjust enrichment, along with the statutory claim. The district court ruled the statute could not be applied retroactively, as the FSU sale occurred over a year before the statute's enactment. The jury found in favor of McKay for $119,215 plus interest and costs. WilTel's post-trial motions were denied, leading to an appeal focusing on the applicability of Mo. Rev. Stat. 407.913. WilTel contended that McKay’s claim arose before the statute’s effective date, thus it could not apply retroactively.

McKay asserts that his right to sue arose upon leaving WilTel in 1990, although he contends the statute could apply retroactively to 1988 since it offers an additional remedy rather than a new cause of action. Under Missouri law, procedural statutes can generally be applied retroactively, while substantive statutes affecting vested rights cannot. The determination of when a cause of action accrues under statute 407.913 or its classification as procedural or substantive is deemed unnecessary due to other inapplicability issues. 

Disputes exist over whether the commissions McKay seeks fall under 407.913, with WilTel arguing that McKay's 1988 commission payment satisfied all contractual obligations. McKay counters that the statute applies to additional commissions from the FSU sale, which were owed when he departed. Legal questions are reviewed de novo, allowing affirmation on any record-supported basis. The statute focuses on timely commission payments earned by sales representatives, with Section 407.913 allowing for actual damages plus additional amounts for delays post-termination. The controlling factor for commission due dates is the contract between the representative and the principal.

McKay admitted to receiving all due commissions under his contract, with claims for quantum meruit arising from extracontractual efforts on the FSU deal, which may not align with the statute's intent. His breach of contract claim was dismissed without appeal, and he voluntarily left WilTel to pursue another opportunity, which the statute aims to protect against commission loss from termination. Since McKay was neither terminated nor owed further commissions, the district court correctly ruled the statute inapplicable.

On cross-appeal, WilTel contests the admission of evidence, jury instructions, and other legal matters, asserting that McKay failed to demonstrate WilTel's direct economic benefit from specific transactions, which is necessary under Missouri's unjust enrichment law. WilTel claims the district court erred by not instructing the jury on this requirement and by denying its motions for judgment or a new trial. The amended complaint argued that the commission paid did not reflect the reasonable value of McKay's services and included a claim of unjust enrichment; however, the relief sought focused on the reasonable value of services rather than the unjust enrichment amount.

The district court classified McKay's claim as quantum meruit, ruling that any economic gain to WilTel was not pertinent. Jury instructions mandated a verdict for McKay if he provided services related to the Florida State University (FSU) transaction that WilTel accepted without full compensation. Jury instructions must be reviewed collectively to ensure they accurately convey the law, and if an objection demonstrates prejudice, a new trial may be warranted. The court's instruction adhered to the pleadings and aligned with Missouri Approved Jury Instruction 4.04 on quantum meruit. Recovery under this theory requires proof of service provision and acceptance by the defendant, not proof of profit. McKay was directed by WilTel to pursue the FSU sale jointly with Florida Central, which he did, leading to a successful sale. The district court correctly denied motions for judgment as a matter of law and a new trial, as well as refused to instruct the jury regarding WilTel's benefit. WilTel contended that McKay did not demonstrate his work differed sufficiently from his compensation agreement to justify equitable damages, but Missouri law allows quantum meruit claims for services outside the contract's scope. McKay's agreement excluded tariff sales arranged by him, supported by WilTel's acknowledgment of unusual sale structures and a commitment to pay McKay a standard commission on tariff sales. Ample evidence indicated that McKay's efforts contributed to the successful sale, validating the jury's finding and the court's denial of the motions. Additionally, the argument that McKay waived his claim by continuing to work for WilTel was countered by evidence of his expressed dissatisfaction, distinguishing his case from precedents where parties accepted contract payments despite breaches.

McKay's acceptance of a commission related to a sale under his compensation agreement does not imply he agreed to WilTel's decision to pay him only a limited amount for the FSU sale. Previous cases do not address claims for additional compensation beyond a written contract, especially under a quantum meruit theory. McKay cashing a check under protest does not constitute accord and satisfaction under Missouri law, as there was no indication from WilTel that acceptance would settle all claims. The court found that McKay's compensation agreement would cap his commission at $100,000 if WilTel had made the sale directly. The jury was instructed that they could consider all evidence regarding the reasonable value of McKay's services, but the court ruled that the compensation plan did not set a maximum value. It was determined that McKay could not have reasonably expected more than the $100,000 commission, making the jury instruction erroneous. McKay had assumed the $100,000 limit would apply during negotiations and litigation. The court erred by not granting WilTel's motion for remittitur, and McKay's damages should be adjusted to a total recovery of $100,000 before interest and costs, deducting previously paid commissions. The court found no need for a new trial, as a clear standard exists to apply this adjustment reliably. WilTel contended that the jury should have been instructed to reduce the value of the transaction to its present value for commission calculations, which Missouri law supports. Although it would have been preferable to instruct the jury on present value, WilTel's closing argument emphasized its importance, and the jury was aware of its relevance, so there was insufficient evidence of prejudice to warrant a new trial.

WilTel contends that the district court should have instructed the jury about a Missouri law presumption that services for an employer are not considered 'extra work' warranting additional compensation. However, evidence indicated that McKay's involvement in the FSU transaction was unusual and not covered by the existing compensation plan. McKay was tasked with facilitating a sale while offering purchase options that would not yield commissions, yet he was promised a normal commission for any resulting sale. The jury's finding that the value of his services exceeded his compensation implies that his work was outside his standard responsibilities. WilTel failed to show prejudice from the lack of instruction on the presumption.

WilTel also disputed the admission of evidence regarding McKay's service value, including testimonies and documents about commissions from Regional Bell Operating Companies. The court allowed this evidence as it was deemed analogous to the FSU transaction, providing useful context for the jury. WilTel did not demonstrate that any potential prejudicial impact outweighed the evidence's relevance. Additionally, it challenged the inclusion of compensation evidence from other unusual transactions involving different representatives, arguing irrelevance; however, the court maintained that these examples were sufficiently similar to assist the jury in assessing McKay's service value.

Ultimately, the court affirmed all issues except for the damage amount, which was reversed, and the case was remanded for further proceedings. Evidence regarding the commission rate was also upheld as relevant to understanding how WilTel valued similar efforts, despite the rate not being nationally adopted until 1993.