Opinion
No. C6-97-1386.
Filed January 27, 1998.
Appeal from the District Court, Hennepin County, File No. C966565.
Elliot S. Kaplan, Thomas J. Undlin, Robins, Kaplan, Miller Ciresi, (for appellant)
D. Clay Taylor, D. Clay Taylor, (for respondent)
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (1996).
UNPUBLISHED OPINION
This is an appeal from a district court's confirmation of an arbitrator's award that also held the Minnesota Sales Representatives Act (MSRA), Minn. Stat. § 325E.37 (1996), constitutional against a Commerce Clause challenge. Because the arbitrator acted within his authority in ordering monetary damages and the MSRA does not violate the Commerce Clause of the federal constitution, we affirm.
FACTS
Bredeson, a Minnesota corporation, was the upper Midwest sales representative for Calvin Klein, a New York corporation. Under the sales representative agreement, Bredeson was designated the exclusive agent for Calvin Klein in six states including Minnesota. Bredeson agreed to solicit purchases by retail stores of clothing manufactured by Calvin Klein.
In August 1995 Calvin Klein terminated its agency agreement with Bredeson. Bredeson petitioned for arbitration of unpaid commissions allegedly owed him by Calvin Klein. Before an arbitration hearing was held, Bredeson amended his petition to include damages claimed as a result of Calvin Klein's taking certain accounts "in-house" approximately one year before Bredeson's agency was terminated. After the arbitration hearing, the arbitrator awarded Bredeson $795,282. The district court confirmed the award and held that the MSRA did not violate the Commerce Clause.
DECISION
Calvin Klein raises two issues in this appeal: (1) Did the arbitrator exceed his authority by awarding damages to Bredeson for past-due commissions not earned during the statutory termination period? (2) Is the MSRA unconstitutional because it violates the federal Commerce Clause?
I
The party seeking to vacate an arbitration award has the burden of proving the invalidity of the award. National Indem. Co. v. Farm Bureau Mut. Ins. Co. , 348 N.W.2d 748, 750 (Minn. 1984). Proof of invalidity is limited to grounds listed in the Minnesota Arbitration Act, Minn. Stat. § 572.19 (1996). Included among the statutory grounds is that the arbitrator exceeded his powers. Id. , subd. 1(3). Every reasonable presumption is exercised in favor of the finality and validity of the award. National Indem. , 348 N.W.2d at 750. An award will not be set aside merely because the court thinks the arbitrator erred in determining the law or the facts. Cournoyer v. American Television Radio Co., 249 Minn. 577, 580, 83 N.W.2d 409, 411 (1957).
Although an appellate court has a very narrow scope of review in examining an arbitrator's award, whether a dispute is arbitrable is a question of law that receives de novo review. MedCenters Health Care, Inc. v. Park Nicollet Med. Center , 430 N.W.2d 668, 672 (Minn.App. 1988), review denied (Minn. Apr. 26, 1989). The arbitrability of the dispute between Bredeson and Calvin Klein and the scope of the arbitration — which damages may be arbitrated — are both governed by the provisions of Minn. Stat. § 325E.37. Statutory interpretation also presents a question of law requiring de novo review. MedCenters, 430 N.W.2d at 672.
Calvin Klein argues that the arbitrator exceeded his authority by awarding Bredeson damages for a breach of contract claim because the MSRA only provides for arbitration of disputes arising from termination of sales representative agreements, not disputes over the terms of the agreement. It argues essentially that an arbitrator may only award back commissions if a sales representative earned the commissions within the 180-day winding-up period established by the act.
Section 325E.37, subdivisions 4 and 5, grant an arbitrator power to require the payment of commissions pursuant to the provisions of the sales representative agreement and to impose other remedies. The specific remedies include: "(2) reinstatement of the sales representative agreement, or damages; (3) payment of commissions due under subdivision 4." Id ., subd. 5(b). Subdivision 4 provides that upon termination "the sales representative is entitled to be paid for all sales as to which the representative would have been entitled to commissions pursuant to the provisions of the sales representative agreement," and that payment of commissions due shall be "in accordance with the terms of the sales representative agreement * * *." Id. , subd. 4 (emphasis added).
The statute plainly authorizes the payment of commissions that are due, as well as damages for breach of the sales representative agreement. Nothing in the language of the statute limits commissions due a sales representative under an agreement to those earned within the 180-day winding-up period. See State v. Corbin , 343 N.W.2d 874, 876 (Minn.App. 1984) (courts, through statutory construction, may not supply language that the legislature has not provided).
Calvin Klein also argues the arbitrator exceeded his authority because the amount of damages awarded to Bredeson failed to take into account retail discounts and other considerations that would have reduced the amount of the commissions. This claim amounts to a request for appellate review of alleged errors of fact or law made by the arbitrator. The deferential standard we are required to apply to an arbitrator's decision does not allow reversal on this basis. Cournoyer, 249 Minn. at 580, 83 N.W.2d at 411. It is immaterial whether we agree with the arbitrator's computation of damages. "[C]ourts will not overturn an award merely because they may disagree with the arbitrators decision on the merits." City of Bloomington v. Local 2828 of Am. Fed. of State, County and Mun. Employees, 290 N.W.2d 598, 602 (Minn. 1980) (quoting Children's Hosp. v. Minnesota Nurses Ass'n , 265 N.W.2d 649, 652 (Minn. 1978)). According the required deference to the arbitrator's decision, we affirm the district court's confirmation of damages.
II
Statutes are presumed constitutional and should be declared unconstitutional only when absolutely necessary. Guilliams v. Commissioner of Revenue , 299 N.W.2d 138, 142 (Minn. 1980). Under this standard, a statute must be sustained unless it is unconstitutional beyond a reasonable doubt. State v. International Harvester Co. , 241 Minn. 367, 373, 63 N.W.2d 547, 552 (1954). We have previously upheld the MSRA against constitutional challenges not involving the Commerce Clause. Midwest Sports Mktg., Inc. v. Hillerich Bradsby of Canada, Ltd ., 552 N.W.2d 254 (Minn.App. 1996), review denied (Minn. Sept. 20, 1996); New Creative Enter., Inc. v. Dick Hume Assoc., Inc ., 494 N.W.2d 508 (Minn.App. 1993), review denied (Minn. Mar. 16, 1993).
It is well settled that the Commerce Clause allows states to incidentally regulate aspects of interstate commerce when Congress has chosen not to legislate. Great Atlantic Pacific Tea Co., Inc. v. Cottrell , 424 U.S. 366, 371, 96 S.Ct. 923, 928 (1976). The challenged regulation, however, must evenhandedly effectuate a legitimate governmental interest. Edgar v. MITE Corp. , 457 U.S. 624, 640, 102 S.Ct. 2629, 2639 (1982). A statute will violate the Commerce Clause if it discriminates against interstate commerce or imposes a burden on interstate commerce that is clearly excessive in relation to the local benefit it confers. Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456, 471, 101 S.Ct. 715, 727-28 (1981) (quoting Pike v. Bruce Church, Inc. , 397 U.S. 137, 142, 90 S.Ct. 844, 847 (1970)).
The MSRA treats in-state and out-of-state manufacturers the same with respect to termination of covered agreements with sales representatives. Minn. Stat. § 325E.37, subd. 6(a)(1), (2). Thus, the MSRA does not impermissibly discriminate against interstate commerce. The second part of the Commerce Clause test evaluates whether the challenged statute excessively burdens interstate commerce in relation to the local benefits it confers. Clover Leaf Creamery , 449 U.S. at 471, 101 S.Ct. at 727-28. The MSRA regulates the termination of covered agreements, but not the free flow of interstate goods. Neither does it impose any tax or fee on the interstate movement of goods or regulate the means by which goods may be transported interstate. The district court record provides no empirical information or other evidence to support the notion that the MSRA burdens interstate commerce.
The MSRA by its own terms regulates only agreements with sales representatives who are Minnesota residents, have their principal place of business in Minnesota, or whose sales territory includes part or all of the state. Minn. Stat. § 325E.37, subd. 6(a)(1), (2). By regulating only corporations contracting with Minnesota residents or those with significant state contacts, the MSRA is substantially different from the regulations analyzed in two cases cited by Calvin Klein to demonstrate the statute's unconstitutionality, Edgar , 475 U.S. at 640, 102 S.Ct. at 2639, and Marigold Foods, Inc. v. Redalen , 834 F. Supp. 1163 (D.Minn. 1993). The regulation in Edgar was applied to a transaction that occurred outside Illinois and neither party was an Illinois resident. 457 U.S. at 642, 102 S.Ct. at 2640. Similarly, Marigold Foods involved the out-of-state processing of milk by out-of-state processors. 834 F. Supp. at 1164-65.
Calvin Klein's last constitutional argument is that the MSRA excessively burdens interstate commerce because it creates a danger of inconsistent regulation. The Supreme Court has held statutes violative of the Commerce Clause when they caused a risk of inconsistent state regulation of interstate commerce. Edgar, 457 U.S. at 640, 102 S.Ct. at 2639 (striking down statute regulating interstate sale of securities as violative of Commerce Clause when neither party is a state resident). According to this argument, sales representative agreements could be subject to the laws of several different states any time a representative has a multi-state territory.
This same argument, challenging a similar termination provision in the Wisconsin Fair Dealership Law, Wis. Stat. § 135.02 (1996), has been rejected by several federal courts. See, e.g., Kealey Pharmacy Home Care Services, Inc. v. Walgreen Co ., 761 F.2d 345, 351 (7th Cir. 1985); Boatland, Inc. v. Brunswick Corp. , 558 F.2d 818, 824 (6th Cir. 1977); C.A. May Marine Supply Co. v. Brunswick Corp., 557 F.2d 1163, 1167 (5th Cir. 1977). Examining the Wisconsin statute, the fifth circuit concluded that the statute did not violate the Commerce Clause when applied to dealerships outside Wisconsin because any extraterritorial application of the statute would occur only if a manufacturer chose to execute a sales representative agreement granting an in-state representative an agency over sales outside the state. Marine Supply , 557 F.2d at 1167.
We agree with the reasoning of the fifth circuit and other federal jurisdictions that a sales agreement termination provision does not excessively burden interstate commerce. Any burden caused by the statute as a result of the danger of inconsistent regulation will occur only by the consent of the contracting parties to extend an agency outside Minnesota to an in-state agent. The local benefit conferred by the statute is significant because the MSRA serves to protect sales representatives with a significant nexus to the state from manufacturers with greater bargaining power.
The act does not excessively burden interstate commerce or discriminate against interstate commerce. The MSRA does not violate the federal Commerce Clause.
III
Relying on the Minnesota arbitration statute, Minn. Stat. § 181.145, and the MSRA, Bredeson has requested attorneys' fees on appeal. The MSRA provides that the arbitrator " may " award attorneys' fees to a sales representative prevailing in a claim under the act. Minn. Stat. § 325E.37, subd. 5(b)(4). Section 181.145 provides that if a manufacturer is found to have failed to pay commissions due promptly, "the employer shall pay reasonable attorney's fees incurred by the salesperson." Minn. Stat. § 181.145, subd. 3(b) (emphasis added). Both the arbitrator and the district court awarded Bredeson attorneys' fees. Neither of the applicable statutes limits its effect to fees incurred in arbitration or in the trial court. Therefore Bredeson is entitled to appellate attorneys' fees, subject to a specific request, supported by proper documentation.