Toyota-Lift of Minnesota, Inc. v. American Warehouse Systems, LLC, and third party v. Les Nielsen, third party

STATE OF MINNESOTA
IN COURT OF APPEALS
A14-1159

Toyota-Lift of Minnesota, Inc.,
Respondent,

vs.

American Warehouse Systems, LLC, et al.,
defendants and third party plaintiffs,
Appellants,

vs.

Les Nielsen,
third party defendant,
Respondent.

Filed July 13, 2015
Affirmed in part, reversed in part, and remanded
Cleary, Chief Judge

Hennepin County District Court
File No. 27-CV-12-9725

Paul W. Chamberlain, Ryan R. Kuhlmann, Chamberlain Law Firm, Wayzata, Minnesota
(for respondents)

Jeffrey R. Underhill, Ryan R. Dreyer, Stacy L. Kabele, Morrison Sund PLLC,
Minnetonka, Minnesota (for appellants)

Considered and decided by Ross, Presiding Judge; Cleary, Chief Judge; and

Johnson, Judge.

SYLLABUS

To calculate whether the employee “recovers a greater sum than the amount []

tendered [in good faith],” within the meaning of Minn. Stat. § 181.14, subd. 3 (2014), a

court should compare only (1) the amount of wages and commissions that the employer

tendered in good faith and (2) the amount of wages and commissions the court found that

an employee was actually due pursuant to a claim under Minn. Stat. § 181.14, subd. 1

(2014). If the amount due is greater than the amount tendered, then the employer remains

liable for penalties under Minn. Stat. § 181.14, subd. 2 (2014).

OPINION

CLEARY, Chief Judge

Appellants American Warehouse Systems, LLC (AWS), Mark Juelich, Steven

Thoemke, and EMESCO, LLC challenge the district court’s order denying their post-trial

motions to amend findings and conclusions of law. Appellants argue that the district

court erred by (1) using parol evidence to interpret the asset-purchase agreement between

AWS and respondent; (2) failing to award penalties under Minn. Stat. § 181.14, subd. 2

for the late payment of 2009 commissions; and (3) overturning its earlier injunction

against respondent’s use of customer lists. Respondent and cross-appellant Toyota-Lift

of Minnesota, Inc. (TLM) argues that the district court erred by concluding that

(1) appellants Juelich and Thoemke were due additional commission payments; and

(2) TLM did not have a claim for conversion against AWS. While we affirm most of the

district court’s findings and conclusions of law, we conclude that the district court

2

misapplied Minn. Stat. § 181.14, so we affirm in part, reverse in part, and remand for

further proceedings.

FACTS

TLM is a dealership that sells forklifts and allied products. In 2003, TLM hired

appellants Juelich and Thoemke to work in the allied products division of TLM.

Thoemke was hired as a salesman and Juelich was hired as both manager and salesman.

Juelich and Thoemke earned commissions as compensation for their sales. Until

September 2009, Juelich and Thoemke earned a commission of 40% of the gross margin

for each sale.

Because TLM was dissatisfied with the allied products division’s profits, TLM

instituted a new compensation policy in September 2009. Under the new policy,

salespeople earned a base commission rate of 30% of gross margins, but they could

increase their commissions to 40% or 50% of gross margins if the allied products

division’s “bottom line” reached 3% or 4%. The document outlining the new

compensation policy did not explain how the “bottom line” would be calculated.

After TLM’s 2009 fiscal year ended, a preliminary profit-and-loss report showed

the allied products division’s net operating profit as 5%. In July or August 2010,

however, respondent Nielsen, the president of TLM, informed Juelich that he and

Thoemke would not receive additional 2009 commissions because the preliminary profit-

and-loss statement did not reflect several “year-end adjustments.” The final profit-and-

3

loss statement, published in November 2010, showed the allied products division’s net

operating profit as only 1.5%.

On January 11, 2011, Juelich presented Nielsen with a letter of intent to purchase

the allied products division. On April 1, 2011, the parties finalized an asset-purchase

agreement (APA) in which a new entity, AWS, would purchase the assets of TLM’s

allied products division. Several portions of the APA discuss rights to payment. Section

1.1.2 discusses receivables arising from “works in progress.” Section 7.2 of the APA

instructs that “[i]f a Party receives any payment that should have been directed to the

other Party’s [sic] after the Closing they agree to forward such payment to the other Party

as soon as possible.” Section 10.15 states “Any amount owed by a Party to the other

Party . . . may be offset and applied to satisfy any obligation of such Party to the other

Party.” Exhibit 2.5a discusses how net profits on works in progress are to be divided

between TLM and AWS.

From April to June 2011, AWS remitted payments for works in progress to TLM.

In July 2011, counsel for appellants sent a letter to TLM alleging that TLM had breached

the APA. In relevant part, this letter (1) alleged that TLM owed Juelich and Thoemke

additional 2009 commissions; (2) stated that AWS would account for these additional

commissions by exercising its offset rights in section 10.15 of the APA; and (3) alleged

that TLM had breached the APA by failing to purge customer lists from TLM’s computer

system. In August, September, and October 2011, counsel for appellants sent TLM three

more letters regarding the 2009 commissions.

4

In April 2012, TLM filed a complaint against AWS and Juelich. The complaint

alleged breach of contract, conversion, and unjust enrichment, all on the theory that AWS

retained payments that TLM expected to be remitted to TLM. AWS and Juelich

maintained that they had acted within the scope of their rights under the APA. They

made several counterclaims, including claims of breach of contract, a request for

accounting for 2009 commission payments, and requests for injunctive relief. Thoemke

and EMESCO, LLC,1 later joined the suit.

Prior to trial, AWS and Juelich filed a motion in limine to prevent the district court

from considering parol evidence to interpret the APA. The district court concluded,

however, that the APA is ambiguous. The court therefore considered parol evidence to

interpret the APA, concluding that the APA did not transfer all receivables on works in

progress to AWS. Additionally, in relevant part, the district court (1) concluded that

AWS had breached the APA by retaining payments owed to TLM; (2) dismissed TLM’s

conversion claim against AWS because TLM’s claims arose under the APA; (3) found

that TLM owed additional 2009 commissions to Juelich and Thoemke; (4) denied Juelich

and Thoemke penalties under Minn. Stat. § 181.14 for TLM’s late payment of

commissions; and (5) enjoined TLM from marketing to customers on the customer lists

that TLM sold to AWS.

1
EMESCO, LLC, is an entity composed of Juelich and Thoemke, which has an interest
in Juelich and Thoemke’s rights to 2009 commission payments and an 80% controlling
interest in AWS.

5

Appellants and TLM filed post-trial motions, and the district court conducted a

hearing on those motions. In relevant part, the court’s May 2014 order lifted the

customer-list injunction and denied TLM’s motion to find that Juelich and Thoemke were

not entitled to additional 2009 commissions. This appeal followed.

ISSUES

I. Did the district court err by concluding the APA is ambiguous?

II. Did the district court err by concluding TLM did not have a claim for conversion
against AWS?

III. Did the district court abuse its discretion by lifting its injunction against TLM’s
use of customer lists sold to AWS?

IV. Did the district court err by concluding TLM owed Juelich and Thoemke
additional commission payments for 2009?

V. Did the district court err by concluding Juelich and Thoemke were not entitled to
penalty payments under Minn. Stat. § 181.14?

ANALYSIS

I. The district court did not err by concluding the APA was ambiguous.

Appellants argue that the district court should not have considered parol evidence

in interpreting the APA because the APA unambiguously transferred all receivables on

works in progress to AWS. As an initial matter, TLM asserts that this question is not

properly before this court because appellants did not raise it in a post-trial motion for a

new trial. To preserve a procedural issue for appellate review, a party must raise that

issue in a post-trial motion for a new trial. Sauter v. Wasemiller, 389 N.W.2d 200, 201

(Minn. 1986). However, motions for a new trial “are not a prerequisite for appellate

review of substantive questions of law when a genuine issue of law is properly raised and

6

considered at the district court level.” Alpha Real Estate Co. of Rochester v. Delta

Dental Plan of Minn., 664 N.W.2d 303, 311 (Minn. 2003). Whether a contract is

ambiguous is a question of law that we review de novo. Dykes v. Sukup Mfg. Co., 781

N.W.2d 578, 582 (Minn. 2010). Therefore, the question of the APA’s ambiguity is

properly before this court.

Parol evidence may be used to interpret a contract only when the contract is

ambiguous. Bari v. Control Data Corp., 439 N.W.2d 44, 47 (Minn. App. 1989), review

denied (Minn. July 12, 1989). The determination of whether a contract is ambiguous

“depends on the meaning assigned to the words and phrases in accordance with the

apparent purpose of the contract as a whole.” Halla Nursery, Inc. v. City of Chanhassen,

781 N.W.2d 880, 884 (Minn. 2010). A contract is ambiguous if its language is subject to

two or more reasonable interpretations. Dykes, 781 N.W.2d at 582.

Appellants argue that the APA cannot be considered ambiguous because it

contains a merger clause. But whether a contract is fully integrated is not determined

“solely by an inspection of the writing itself.” Bussard v. Coll. of St. Thomas, Inc., 294

Minn. 215, 224, 200 N.W.2d 155, 161 (1972). Instead, the writing “must be read in light

of the situation of the parties, the subject matter and purposes of the transaction, and like

attendant circumstances.” Id. Even when an agreement purports to be the final and

integrated expression of the terms, an ambiguous term may require parol evidence to

determine the intent of the parties. Apple Valley Red-E-Mix, Inc. v. Mills-Winfield Eng’g

7

Sales, Inc., 436 N.W.2d 121, 123 (Minn. App. 1989), review denied (Minn. Apr. 26,

1989).

Among other assets, the APA transferred “Works in Progress” to AWS. Section

1.1.2 of the APA defines “Works in Progress” to mean “‘open projects’ and ‘works in

progress’ as described in Exhibit [2.5a] and the receivables generated by such Work in

Progress divided between Buyer and Seller as described in Exhibit [2.5a].” 2 Exhibit 2.5a

lists several projects and states, “Commission will be deducted from gross profit first.

All COS [costs of sale] will then be calculated to determine net profit. TLM will receive

% of net profit on project.” For each project listed, exhibit 2.5a designates a specific “%

to TLM,” ranging from 20% to 100%.

Here and before the district court, appellants and TLM have interpreted section

1.1.2 and exhibit 2.5a of the APA differently. Appellants interpret the phrase

“receivables generated by such Works in Progress divided between Buyer and Seller as

described in exhibit [2.5a]” to mean that AWS is entitled to all receivables on works in

progress and that the only thing to be “divided between Buyer and Seller” is the net profit

on the works in progress, as described in exhibit 2.5a. TLM interprets that phrase as

meaning that AWS is entitled to keep only the percentage of net profits not assigned to

TLM in exhibit 2.5a. TLM argues that exhibit 2.5a is an incomplete representation of the

parties’ intention regarding the division of receivables, because it does not discuss the

appropriate treatment of the receivables associated with cost of goods. TLM asserts that

2
Section 1.1.2 of the APA mistakenly references “Exhibit 1.1.2.” The parties agree that
they intended section 1.1.2 to refer to exhibit 2.5a, not exhibit 1.1.2.

8

the parties understood that cost-of-goods payments would be remitted to whichever party

had paid those costs, and that TLM would not have continued paying for goods on works

in progress after the APA if it did not expect to receive payment for those expenses. Both

parties’ interpretations of the APA are reasonable.

In holding that the APA is ambiguous as to receivables, the court reasoned that

section 1.1.2 contemplates that exhibit 2.5a would state some method of dividing

receivables on works in progress, but exhibit 2.5a only discusses the division of net

profits. The court emphasized that “[r]eceivables include more than net

profit . . . because net profit is only part of receivables. . . . [N]et profits are determined

after subtracting commissions and other costs of sale from the gross profit.”

That the parties interpreted section 1.1.2 and exhibit 2.5a differently lends support

to the conclusion that the contract language is subject to more than one reasonable

interpretation. Also, the inconsistency of the language between section 1.1.2 and exhibit

2.5a—one referring to “receivables” and the other only dividing “net profits”—further

illustrates that the APA is an incomplete and ambiguous representation of the parties’

intent regarding the right to receivables on works in progress. Similarly, section 1.1.1

and exhibit 1.1.1, referring to contracts acquired by AWS, do not clarify whether or to

what extent AWS acquired the accounts receivable associated with any acquired

contracts. The district court did not err by concluding that the APA is ambiguous as to

the intent of the parties regarding the division of receivables on works in progress.

9

II. The district court did not err by dismissing TLM’s conversion claim.

Because the district court found that the APA did not transfer all accounts

receivable on works in progress to AWS, the court concluded that the APA entitled TLM

to recover portions of the payments that AWS received on works in progress. TLM

requested that the district court amend its order to hold that AWS’s wrongful retention of

payments was not only a breach of contract but also conversion. The district court

declined to do so, reiterating that “the basis for contract and tort liability is the duty or

duties that exist between the parties, with tort liability requiring a duty independent from

any duty imposed by the contract” and “[h]ere, the relationship between the parties is

entirely governed by the APA.” TLM argues here that the court erred as a matter of law

by concluding that the retention of payments did not constitute conversion. This court

reviews de novo the application of law to undisputed facts. See In re Barg, 752 N.W.2d

52, 63 (Minn. 2008).

A plaintiff may pursue “two legal remedies for the same wrongful conduct.”

Wirig v. Kinney Shoe Corp., 461 N.W.2d 374, 379 (Minn. 1990). But ultimately, there is

no double recovery: a plaintiff can recover damages only under one legal theory for a

single instance of wrongful conduct. Id. “[W]hen a plaintiff seeks to recover damages

for an alleged breach of contract he is limited to damages flowing only from such breach

except in exceptional cases where the defendant’s breach of contract constitutes or is

accompanied by an independent tort.” Wild v. Rarig, 302 Minn. 419, 440, 234 N.W.2d

775, 789 (Minn. 1975). An independent tort may accompany a breach of contract when

the defendant has a legal duty to the plaintiff arising separately from any duty imposed in

10

the contract. See id. at 440-41, 234 N.W.2d at 789-90. “A bad-faith breach of contract

does not become a tort.” McNeill & Assocs., Inc. v. ITT Life Ins. Corp., 446 N.W.2d 181,

185 (Minn. App. 1986), review denied (Minn. Dec. 1, 1989).

Here, the record supports the conclusion that the parties intended the APA to

govern their relationship after AWS spun off from TLM. Under the APA, TLM had

contractual rights to the payments retained by AWS, because the APA did not transfer all

accounts receivable on works in progress to AWS and section 7.2 of the APA instructed

the parties to forward any payment that should have been directed to the other party. The

gravamen of TLM’s claims against AWS was in breach of contract. Because TLM can

recover pursuant to its contractual rights against AWS, TLM may not also recover under

a theory of conversion.

III. The district court did not abuse its discretion by lifting the injunction.

The district court’s November 2013 order enjoined TLM from “[s]olicit[ing]

orders from or sell[ing] to any government customer included in the customer lists

generated by the AWS Division before April 1, 2011.” The court’s justification for this

injunction was that the customer lists were sold to AWS as part of the APA and that

AWS “would suffer great and irreparable injury” if TLM continued to use those same

customer lists to generate its own new sales to government customers.

TLM’s post-trial motion requested that the district court either retract the

injunction or modify the injunction to merely prevent TLM from selling allied products

to customers on the disputed customer lists. TLM argued that AWS did not face any

injury from such a modification because there was little overlap between AWS’s business

11

selling allied products and TLM’s business selling primarily forklifts. Therefore, TLM

asserted, the injunction was an unjustified restriction on its business.

In its order on the post-trial motion, the district court found that “the sale of

customer lists pursuant to the APA was not intended by the parties to prevent TLM from

doing business with customers included on those lists.” The district court also found that

“[t]he harm TLM experiences from the court’s injunction regarding the customer lists is

much greater than the harm AWS would face if the court lifted the injunction.”

Appellants challenge the decision to lift the injunction against TLM marketing to

customers on the customer lists.

Whether to grant an injunction is within the discretion of the district court, and this

court reviews that decision for abuse of discretion. Cherne Indus., Inc. v. Grounds &

Assoc., Inc., 278 N.W.2d 81, 91 (Minn. 1979). “A party seeking an injunction must

establish that there is no adequate legal remedy and that an injunction is necessary to

prevent great and irreparable injury.” Jackel v. Brower, 668 N.W.2d 685, 688 (Minn.

App. 2003) (quotations omitted), review denied (Minn. Nov. 25, 2003).

Although the APA transferred ownership of the customer lists, nothing in the APA

purports to prevent TLM from soliciting sales from customers who happen to be on the

customer lists. Furthermore, because TLM and AWS primarily sell different products,

AWS is not in danger of a great and irreparable injury from TLM marketing to the same

customers as AWS. The district court did not abuse its discretion by lifting the

injunction.

12

IV. The district court did not err by concluding that TLM owed Juelich and
Thoemke additional 2009 commission payments.

In its cross-appeal, TLM raises five arguments why the district court erred by

finding that appellants Juelich and Thoemke are entitled to additional commissions for

2009. Based on the following analysis of TLM’s arguments, we agree with the district

court that TLM owes additional 2009 commissions.

A. Failure to Challenge Nielsen’s Statement that TLM Did Not Owe
Commissions

TLM raises three arguments premised upon Juelich and Thoemke’s acceptance

of—and subsequent failure to challenge—Nielsen’s statement in July or August 2010 that

they had not earned additional 2009 commissions. First, TLM invokes the doctrine of

account stated, arguing that Juelich and Thoemke assented to Nielsen’s statement that

they had not earned additional 2009 commissions as an accurate statement of account.

Second, TLM argues that Juelich and Thoemke waived their right to challenge the

amount due by accepting and failing to later challenge Nielsen’s calculations of the 2009

commissions. Third, TLM argues that Juelich and Thoemke admitted that the bonuses

were not yet earned at the time of the APA. The APA includes a provision stating that

TLM would owe additional 2009 commissions if TLM collected additional receivables

generated in 2009. TLM argues that, by accepting this provision, Juelich and Thoemke

waived any claim to 2009 commissions other than as a result of the collection of

additional 2009 receivables.

13

Waiver is the voluntary relinquishment of a known right, which can be inferred

from a party’s conduct. Meagher v. Kavli, 251 Minn. 477, 486, 88 N.W.2d 871, 878-79

(1958). Similarly, under the doctrine of account stated, if one party renders a statement

of account to the other party, and that other party retains the accounting for an

unreasonably long time without objecting to it, then the party is deemed to have assented

to that accounting. Am. Druggists Ins. v. Thompson Lumber Co., 349 N.W.2d 569, 573

(Minn. App. 1984). For the doctrine of account stated to apply, both parties must have

mutually examined each other’s claims and reached a mutual agreement as to the

correctness of the balance. Reese Design, Inc. v. I-94 Highway 61 Eastview Ctr. P’ship,

428 N.W.2d 441, 445 (Minn. App. 1988).

“[W]aiver is ordinarily a question of fact . . . .” Meagher, 251 Minn. at 486, 88

N.W.2d at 878. Likewise, whether to apply the doctrine of account stated is a factual

question. Reese Design, 428 N.W.2d at 444-45. This court reviews the district court’s

factual findings for clear error. Rasmussen v. Two Harbors Fish Co., 832 N.W.2d 790,

797 (Minn. 2013).

The district court did not clearly err by finding that Juelich and Thoemke did not

waive their claims to additional 2009 commissions. As the district court noted, section

2.5 of the APA states, in relevant part, “Seller acknowledges an obligation to pay existing

commissions” to Juelich and Thoemke. The court found that section 2.5 reaffirmed

Juelich and Thoemke’s ongoing right to collect 2009 bonus commissions. Section 2.5

14

belies TLM’s assertion that TLM’s liability for 2009 commissions was a settled matter as

of July 2010.

Additionally, the July 2010 conversation between Nielsen and Juelich does not

constitute an account stated. There is no evidence in the record that Juelich had the

opportunity to examine any calculations of the 2009 commissions at the time of his

conversation with Nielsen. Because the final profit-and-loss statement for fiscal year

2009 was not even completed until November 2010, Nielsen and Juelich could not have

mutually examined or agreed upon the calculation of 2009 commissions in July or

August 2010.

B. Exclusion of Income Taxes

TLM also argues that Juelich and Thoemke are not entitled to additional 2009

commission payments because the calculation of commissions should have included

income taxes as an overhead expense. The district court’s November 2013 order

carefully scrutinized TLM’s calculations of Juelich and Thoemke’s commissions. As a

result, the court made several adjustments to these calculations. One of the adjustments

was to exclude corporate income taxes from the calculations. Under the court’s new

calculations, the court found that Juelich and Thoemke were entitled to a 40%

commission for 2009. If income taxes had been included in the commission calculation,

Juelich and Thoemke would not have met the profitability thresholds that would entitle

them to additional commissions.

15

The provision of the commission agreement referring to the bottom line

benchmarks did not specify whether taxes should be included in calculating the “bottom

line.” Meanwhile, the balance of the commission agreement vacillates between using

“pre-tax” and “after-tax” to refer to and discuss “bottom line” and “net profit.” Thus, the

commission agreement is ambiguous as to whether taxes were included in the “bottom

line,” for purposes of calculating commissions.

The interpretation of an ambiguous contract provision is a question of fact. Bari,

439 N.W.2d at 47. This court reviews findings of fact for clear error. Minn. R. Civ. P.

52.01. A finding is not clearly erroneous if there is reasonable evidence in the record to

support the finding. Rasmussen, 832 N.W.2d at 797.

The record supports the district court’s finding that the parties intended to exclude

taxes from the bottom line for the purpose of calculating commissions. The commission

agreement compared the net profit of the allied products division to other entities under

the header “Net Before Taxes.” This comparison showed that the allied products division

was by far underperforming in comparison to other TLM divisions and other Toyota

dealers. The district court found that the intent of the commission agreement was to

bring the allied products division in line with other divisions. According to the “Net

Before Taxes” column, requiring the allied products division to achieve a pre-tax bottom

line of 2% would achieve that goal. The profit-and-loss statements from 2003 to 2008

also indicate that TLM’s practice was to deduct taxes after determining a division’s

16

profitability. The district court did not clearly err by finding that the parties intended to

exclude income tax from the bottom line for the purpose of calculating commissions.

C. Statute of Limitations

TLM argues that Juelich and Thoemke’s claims for additional 2009 commissions

were not timely asserted. Juelich and Thoemke’s commission claims are governed by a

two-year statute of limitations under Minn. Stat. § 541.07(5) (2014). The statute of

limitations on a claim for unpaid commissions runs from the date that commissions are

due but not paid. Levin v. C.O.M.B. Co., 441 N.W.2d 801, 803-04 (Minn. 1989). If it is

unclear when commissions were due, the due date is a question of fact. Id. at 804. This

court reviews the district court’s findings of fact for clear error. Minn. R. Civ. P. 52.01.

Because the commission agreement did not specify the date when commission

payments were due, the district court found that the bonus commissions were due as of

the date of the final profit-and-loss statement, November 2010. The record shows that

TLM used the calculations in final profit-and-loss statements, rather than preliminary

profit-and-loss statements, to calculate the commission payments due to Juelich and

Thoemke. The district court did not clearly err by finding that the bonus commissions

were due when the final 2009 profit-and-loss statement was complete. Juelich and

Thoemke’s claims for additional commission payments were timely because they were

filed in May and July 2012, within two years of November 2010.

17

V. The district court erred by concluding that Juelich and Thoemke were not
entitled to penalty payments under Minn. Stat. § 181.14.

In their complaint, appellants argued that Juelich and Thoemke were entitled not

only to additional 2009 commissions, but also penalty payments under Minn. Stat.

§ 181.14, subd. 2. Minn. Stat. § 181.14, subd. 1 requires employers to pay all resigning

employees any wages or commissions that were earned but unpaid at the time of

resignation, no later than the first regularly scheduled payday following the employee’s

final day of employment, subject to limited exceptions. Following that period, if such

wages and commissions are not paid within 24 hours of the employee’s demand for

payment, “the employer shall be liable to the employee for a penalty equal to the amount

of the employee’s average daily earnings” for every day that the payment is late, up to

fifteen days. Minn. Stat. § 181.14, subd. 2.

The district court concluded that TLM owed Juelich and Thoemke additional 2009

commission payments and that Juelich and Thoemke made demands for the commissions

in their 2011 letters to TLM. However, the district court applied Minn. Stat. § 181.14,

subd. 3 to preclude Juelich and Thoemke’s claims to penalty payments. This provision

states:

If the employer disputes the amount of wages or
commissions claimed by the employee under the provisions
of this section or section 181.13, and the employer makes a
legal tender of the amount which the employer in good faith
claims to be due, the employer shall not be liable for any sum
greater than the amount so tendered and interest thereon at the
legal rate, unless, in an action brought in a court having
jurisdiction, the employee recovers a greater sum than the
amount so tendered with interest thereon . . . .

18

Stated another way, subdivision 3 exempts employers from penalties incurred during an

ongoing good-faith dispute over the amount of wages or commissions due, but only if the

court finds that the employer does not owe additional wages or commissions beyond

those the employer paid in good faith. However, if the “employee recovers a greater sum

than the amount [tendered in good faith] with interest thereon,” then the employer

remains liable for the penalties imposed in subdivision 2.

The district court found that Juelich and Thoemke had “not recovered a greater

amount than the amount originally tendered.” The court calculated the amount recovered

by subtracting the judgment amount against AWS for breach of contract and unjust

enrichment from the additional 2009 commissions that TLM owed to Juelich and

Thoemke. Appellants assert that the district court may not credit a judgment owed by

AWS against the commissions owed to Juelich and Thoemke for the purposes of

determining whether to award penalties under Minn. Stat. § 181.14, subd. 2. More

broadly stated, the issue before us is whether the statutory phrase “recovers a greater sum

than the amount [] tendered [in good faith]” can incorporate judgment amounts resulting

from claims that are unrelated to the disputed wages or commissions.

TLM again argues that this issue is not properly before this court because

appellants did not raise it in their post-trial motion. See Sauter, 389 N.W.2d at 201

(stating that a post-trial motion raising individual errors allegedly occurring at trial is a

prerequisite to appellate review of those errors). But the Sauter rule does not apply to

“substantive questions of law when a genuine issue of law is properly raised and

19

considered at the district court level.” Alpha Real Estate, 664 N.W.2d at 311. Statutory

construction is a question of law. In re Kleven, 736 N.W.2d 707, 709 (Minn. App. 2007).

The district court fully considered how Minn. Stat. § 181.14, subd. 3 applied to

appellants’ facts, so this issue is properly before this court.

The application of a statute to undisputed facts is reviewed de novo. In re Barg,

752 N.W.2d at 63. “[T]he goal of all statutory interpretation is to ascertain and effectuate

the intention of the legislature. The first step in statutory interpretation is to determine

whether the statute’s language, on its face, is ambiguous.” Christianson v. Henke, 831

N.W.2d 532, 536 (Minn. 2013) (internal quotations and citations omitted). The statute’s

language is ambiguous if the plain and ordinary meaning of a word or phrase is subject to

more than one reasonable interpretation. Id.

Minn. Stat. § 181.14 does not define the phrase at issue or explain how to calculate

the sum recovered. The plain meaning of the phrase does not clarify the application of

subdivision 3 to this appeal. Within the context of a lawsuit, the plain meaning of

“recover” is to obtain by a judgment, to obtain a judgment in one’s favor, to obtain

damages or other relief, or to succeed in a lawsuit or other legal proceeding. Black’s Law

Dictionary 1389 (9th ed. 2009). This definition does not clarify whether the sum

recovered, for the purposes of Minn. Stat. § 181.14, subd. 3, refers only to the judgment

amount related to the unpaid wages or commissions, or if the calculation can also include

amounts owed on claims unrelated to unpaid wages or commissions. Nor have any

Minnesota cases clarified this interpretive issue. In O’Kronglis v. Broberg, this court

20

applied Minn. Stat. § 181.14, subd. 3 and used the word “recovers” to refer to the

additional wages to which an employee is entitled in a dispute over unpaid wages. 456

N.W.2d 468, 470 (Minn. App. 1990). However, O’Kronglis did not involve judgments

on claims unrelated to unpaid commissions. The statute is ambiguous as to whether the

calculation of the sum recovered can include amounts recovered or owed on claims

unrelated to unpaid wages or commissions.

If language in a statute is ambiguous, this court “consider[s] the statute’s language

in the context of the legislative intent of the statute and the factors set forth under Minn.

Stat. § 645.16.” Christianson, 831 N.W.2d at 537. Those factors are:

(1) the occasion and necessity for the law;
(2) the circumstances under which it was enacted;
(3) the mischief to be remedied;
(4) the object to be attained;
(5) the former law, if any, including other laws upon the
same or similar subjects;
(6) the consequences of a particular interpretation;
(7) the contemporaneous legislative history; and
(8) legislative and administrative interpretations of the
statute.

Minn. Stat. § 645.16 (2014).

Minn. Stat. § 181.14 is part of the Payment of Wages Act, the purpose of which is

“to penalize employers that fail to promptly pay their employees’ wages.” Caldas v.

Affordable Granite & Stone, Inc., 820 N.W.2d 826, 836 (Minn. 2012). Minn. Stat.

§ 181.14 specifically protects resigning employees from having their employers withhold

wages and commissions that they have earned but were not yet paid at the time of

resignation. Subdivision 2 provides an extra measure of protection for employees by

21

penalizing employers who do not comply with subdivision 1. Subdivision 3 provides a

narrow exception to protect employers whose non-compliance with subdivision 1 was the

result of an ongoing good-faith dispute over the amount of wages or commissions due.

This exception only applies where the court confirms that the employee’s claim was

meritless by finding that the employee is not due more wages or commissions than the

employer already paid in good faith.

To allow an employer to offset unrelated judgment amounts in its favor against

wages and commissions owed would undermine the protective and punitive purposes of

Minn. Stat. § 181.14, subds. 1-2. That interpretation would allow employers to use

unrelated judgments to avoid paying the penalty for late payment of wages. It would also

greatly expand the exception in subdivision 3, rendering the exception applicable

whenever a lawsuit under Minn. Stat. § 181.14, subd. 1 includes other claims and

judgments against the employee.

Based on the legislative intent of Minn. Stat. § 181.14, subds. 1-3, we conclude

that the phrase “recovers a greater sum” refers only to the total amount of wages and

commissions that the court determines that the employer should have paid to the

employee. To calculate whether the employee “recovers a greater sum than the amount []

tendered [in good faith],” within the meaning of Minn. Stat. § 181.14, subd. 3, a court

should compare only (1) the amount the employer tendered in good faith, and (2) the

amount of wages and commissions the court found that an employee was actually due

pursuant to a claim under Minn. Stat. § 181.14, subd. 1. If the amount due is greater than

22

the amount tendered, then the employer remains liable for penalties under Minn. Stat.

§ 181.14, subd. 2.

DECISION

We conclude that the district court should have awarded Juelich and Thoemke

penalties under Minn. Stat. § 181.14, subd. 2. TLM paid Juelich and Thoemke

commissions for 2009 at the 30% rate, and did not tender any additional commissions

after Juelich and Thoemke demanded payment. The district court concluded that TLM

should have paid them commissions at the 40% rate. Therefore, Juelich and Thoemke

recovered a greater sum than the amount of commissions that TLM tendered, and Minn.

Stat. § 181.14, subd. 3 did not excuse TLM from owing penalties. Because more than 15

days passed after Juelich and Thoemke demanded payment of the additional 2009

commissions, TLM owes the maximum 15-day penalty upon the commissions. We

remand for the district court to determine the proper amount of penalties that TLM owes

under Minn. Stat. § 181.14, subd. 2.

Affirmed in part, reversed in part, and remanded.

23