Collecting triple damages under California’s Sales Rep Statute
Case study
A large sales agency in the food sourcing industry contacted us and its CEO, in a somewhat frenzied state, exclaimed:
“We set up our greedy principal with long-term distribution through one of the big-box grocery stores, and these jerks soon after terminated our contract and owe us $750,000 in commissions. I want to sue them for triple damages under California’s law.”
He assured me that the contract was made subject to California law and that he could thus collect triple damages. We assured him that we would assist him and if possible collect triple damages plus attorney fees as we had done before for other sales reps.
However, when he answered my next question I had to tell him that he unfortunately did not have a case under the California statutes. .
The California law’s provisions & prerequisites
The Independent Wholesale Sales Representatives Contractual Relations Act of 1990, the laws to which our client had referred, requires that manufacturers provide written contracts to their sales reps with certain minimum provisions. These statutes also require that the commissions due under a contract be paid when called for by the contract or they will be subject to mandatory tripling.
The statutes also award attorney fees to the winner of the lawsuit, the “prevailing party.”
However, these statutes have several qualifying provisions. The one factor that is sometimes a killer of claims under these statutes is that the plaintiff had to be soliciting or making sales within California for these laws to apply, not just be a California-based sales rep or have a contract subject to California law.
The outcome
Back to the rep who wanted to take his principal to the woodshed for triple damages. Even though his principal was a California “manufacturer” and he was a “wholesale sales representative” under the definitions in these statutes (and a California resident no less) his assigned geographic territory did not include California, only some of the other Western states. Consequently the California statutes simply did not apply.
Most other States don’t have specific language limiting their application to sales within their State, but California does.
However, we were still able to successfully leverage a settlement for this rep, based on the laws of other states at issue.
Contact us for more information on the California statutes, or statutes that protect sales reps in other States.