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JCB, Inc. v. The Horsburgh & Scott Co.

Supreme Court of Texas

June 7, 2019

JCB, Incorporated, d/b/a Conveying & Power Transmission Solutions, Appellant,
v.
The Horsburgh & Scott Company, Appellee

          Argued March 13, 2019

          On Certified Questions From the United States Court of Appeals for the Fifth Circuit

          OPINION

          James D. Blacklock Justice

         This opinion addresses two questions of Texas law certified from the United States Court of Appeals for the Fifth Circuit.[1] Our jurisdiction to answer these questions comes from article V, section 3-c of the Texas Constitution. The questions concern the damages and attorney's fees available under chapter 54 of the Business and Commerce Code, also known as the Texas Sales Representative Act. Tex. Bus. & Com. Code §§ 54.001-.006. We accepted the questions[2] and answer them below.

         I. Factual, Legal, and Procedural Background

         The disputed portion of the statute provides:

§ 54.004. Damages
A principal who fails to comply with a provision of a contract under Section 54.002 relating to payment of a commission or who fails to pay a commission as required by Section 54.003 is liable to the sales representative in a civil action for:
(1) three times the unpaid commission due the sales representative; and
(2) reasonable attorney's fees and costs.

         Tex. Bus. & Com. Code § 54.004.

         The Fifth Circuit sets out the following undisputed facts, which we supplement with undisputed facts provided by the parties and district court. Plaintiff JCB, Inc., d/b/a Conveying & Power Transmission Solutions ("JCB"), was a commissioned sales representative for Defendant Horsburgh & Scott Company ("Horsburgh"), a manufacturer of gears and gearboxes. Under a written agreement, JCB's commissions were due "on approximately the 10th of each month following the payment of a commissionable order by the customer to [Horsburgh]." The parties later terminated that agreement but separately agreed that Horsburgh would pay commissions on orders received up to May 24, 2015. JCB claims Horsburgh owed approximately $280, 000 in commissions under these agreements. JCB claims all these commissions were paid late, while Horsburgh says only some were paid late.

         In March 2016, Horsburgh told JCB it could either accept further delays in payment or accept reduced commissions. JCB rejected these options and sued Horsburgh for treble damages and attorney's fees under section 54.004. Prior to the suit, Horsburgh made some commission payments. When suit was filed, Horsburgh still owed commissions totaling $77, 000-$90, 000. The case was removed to federal court. While the case was pending, Horsburgh paid all remaining commissions plus approximately five percent interest. Horsburgh then moved for summary judgment.

         The federal district court granted summary judgment for Horsburgh. The court's opinion briefly addressed the applicability of section 54.004. The court found persuasive Horsburgh's argument that "the Act does not apply because it only applies to unpaid commissions, and all of the commissions owed [to JCB] have been paid." JCB, Inc. v. Horsburgh & Scott Co., No. 6:16-CV-146-RP, 2017 WL 6805045, at *4 (W.D. Tex. Oct. 25, 2017).

         The Fifth Circuit certified the following questions to this Court:

(1) What timing standard should courts use to determine the existence and amount of any "unpaid commissions due" under the treble damages provision of Tex. Bus. & Com. Code § 54.004(1)?
(2) May a plaintiff recover reasonable attorney's fees and costs under Tex. Bus. & Com. Code § 54.004(2), if the plaintiff does not receive a treble damages award under Tex. Bus. & Com. Code § 54.004(1), and under what conditions?

JCB, Inc. v. Horsburgh & Scott Co., 912 F.3d 238, 241 (5th Cir. 2018). Writing for the panel, Judge Ho authored an opinion certifying these questions. As that opinion explained the treble-damages question, there is no dispute that the parties had "a contract under Section 54.002 relating to payment of a commission" and that Horsburgh "fail[ed] to comply with a provision of [that] contract." Tex. Bus & Com. Code § 54.004. The dispute is over the date as of which the "unpaid commission due" should be calculated. If the amount of "unpaid commission due" should be calculated as of the date the commissions were originally due under the contract, Horsburgh may face treble damages of three times the $280, 000 it initially failed to pay. If the correct date is the date suit was filed, Horsburgh may face treble damages of three times the amount it still owed at the time of filing. If the correct date is the time of trial or judgment, the district court was right. There was no "unpaid commission" due by that time, so there was nothing left to treble. JCB, Inc., 912 F.3d at 240. The panel also asked this Court to determine whether JCB can recover attorney's fees under section 54.004(2) even if it does not recover treble damages under section 54.004(1). Id. at 241.

         In addition to the panel's opinion, Judges Duncan and Ho authored concurring opinions touching on the merits of the certified questions. Under Judge Duncan's reading of section 54004, JCB can recover treble damages on the full amount it claims because the amount of "unpaid commission due" should be calculated as of the time the parties' contract made the commissions due Id. at 244-46 (Duncan, J, concurring). According to Judge Duncan, section 54.004 incorporates section 54.003 when there is no written contract and section 54.002 when there is a written contract. Id. at 245. Section 54.003 provides a thirty-day deadline to pay the commission, and under section 54.002, the written contract provides the due date. In either case, in Judge Duncan's view, the amount of "unpaid commission due" for trebling purposes must be calculated as of the date the commission was initially due. Id. at 245-46. Under this reasoning, because Horsburgh and JCB had a written contract with a ten-day deadline, all commissions paid after that deadline are "unpaid commission due" under section 54.004 even though they have later been paid. Id. at 245.

         Judge Duncan also addressed the second certified question. In his view, the correct answer is an easy "yes." "Section 54.004 contains no indication that it makes recovering attorney's fees dependent on recovering treble damages. Rather, the text makes recovering fees contingent only on the principal's breach of a contractual provision relating to commission payments under Section 54.002, or on ...


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