INTERNATIONAL INDUSTRIAL DEVELOPMENT ASSOCIATES INC. v. MICHAEL WALES [Note 1]

KARSTETTER, J. Plaintiff International Industrial Development Associates Inc. ("IIDA") sued Michael Wales, doing business as The Grill Daddy Brush Company ("Wales"), for, among other claims, a violation of the Massachusetts Sales Representative Act, G.L. c. 104, § 9, which provides for an award of actual damages plus an award of up to three times the amount of actual damages suffered and attorney's fees. IIDA claims error in the amount awarded after default of the defendant. We affirm.

Facts. Because judgment entered after default of the defendant, we look to the plaintiff's complaint for the facts. [Note 2]

The complaint established that Wales was the "manufacturer and/or distributor of grill brushes and other products." IIDA was engaged by Wales as his agent to sell his products to retail stores and, in particular, to Lowe's. IIDA and Wales entered into a Vendor Agreement, which provided that Wales would pay IIDA a sales commission of five percent of the net sale proceeds within fifteen days of Wales having been paid. During 2017, IIDA sold Wales's products to Lowe's and earned sales commissions, some of which remained unpaid. IIDA brought suit for breach of contract, quantum meruit, and a violation of the Massachusetts Sales Representative Act, the claim at issue in this appeal.

Specifically, IIDA alleged that Wales "willfully and knowingly failed to comply with the terms of its contract with IIDA relating to the prompt payment of sales commissions to IIDA," and owed IIDA for unpaid commissions. IIDA also alleged that Wales had violated G.L. c. 104, §§ 7, 8, and 9.

Procedural history. The docket indicates that IIDA filed its complaint in March,

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2018. The defendant was properly served and failed to answer. In mid-April, 2018, IIDA applied for a default against Wales pursuant to Mass. R. Civ. P. 55(a) and then, in May, 2018, moved for a default judgment and to assess damages pursuant to Mass. R. Civ. P. 55(b). It did so again in early July, 2018 after a settlement had been reported, a thirty-day order of dismissal entered, and its motion to vacate the settlement order was allowed.

IIDA's motion for entry of default judgment and to assess damages pursuant to Mass. R. Civ. P. 55(b) referenced one attachment -- an "Exhibit A," which was the affidavit of IIDA's chief financial officer ("CFO"). The CFO's affidavit referenced two attachments, specifically, the parties' contract and the commission statement. Neither the motion nor its attachments referenced an amount of attorney's fees, nor was there mention of an affidavit of attorney's fees in the docket. [Note 3]

A hearing on IIDA's motion was conducted on July 25, 2018. [Note 4] The judge endorsed the motion, "Allowed - Damages are awarded as follows: $6,612.50 Attorneys' fee $3,000 Plus costs [of] Court 7/27[/2018]." The $6,612.50 in damages awarded represented the full amount of unpaid commissions then owed less a payment that had been made in mid-June, 2018, as set forth in the CFO's affidavit. The judgment did not include a multiple of those single damages, and it is unclear from the record whether the judge awarded attorney's fees pursuant to the provisions of the parties' Vendor Agreement or pursuant to G.L. c. 104, § 9 or on what evidence the award of attorney's fees was based. IIDA properly sought to amend the findings and judgment pursuant to Mass. R. Civ. P. 52(d) and that motion was denied.

Analysis. The Massachusetts Sales Representative Act, G.L. c. 104, § 9, provides that a "principal who wilfully or knowingly fails to comply with provisions relating to the prompt payment of commissions . . . shall be liable to the sales representative in a civil action for the principal amount of the commissions owed and for an additional sum up to three times the amount of commissions and for reasonable attorney's fees and court costs." Because Wales entered into a Vendor Agreement with IIDA to sell what he was alleged to "manufacture and/or distribute," he was a "principal" as that term is defined in G.L. c. 104, § 7. Established by pleading as the sales representative, IIDA alleged that Wales "willfully and knowingly failed" to pay promptly. The statute requires that where a wilful or knowing failure to pay is established, the principal shall be liable to the sales representative for not just the amount owed, but "an additional sum up to three times the amount of commissions." IIDA claimed error in the court's failure to award an additional sum.

The fact that the pleadings include an allegation of a wilful and knowing failure to pay, however, is insufficient for purposes of determining damages. "The issue of damages . . . remains open after a default, and on the questions relating to damages, the judge's findings, if not clearly erroneous, control" (citations omitted). Marshall v. Stratus Pharms., Inc., 51 Mass. App. Ct. 667, 670 (2001). Cases involving claims filed pursuant to G.L. c. 93A (which also provides for an award of multiple damages and

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attorney's fees where the violation is wilful or knowing) are instructive. For claims filed under c. 93A, the "entitlement . . . to [multiple] damages because of the wilfulness of a defendant is treated [upon the defendant's default] as a question relating to damages." Id. at 677. Because wilfulness in this context is a question of damages, it is not precluded by a default. Id. Such a determination requires a hearing at which evidence to support an award of multiple damages may be adduced. [Note 5] "[P]unitive damages cannot be fixed without an evidentiary hearing to determine how egregious was the conduct of the defendant." Bissanti Design/Build Group v. McClay, 32 Mass. App. Ct. 469, 471 (1992), citing Flaks v. Koegel, 504 F.2d 702, 707 (2d Cir. 1974).

By declining to award multiple damages to IIDA, the judge implicitly found that there was no wilful or knowing violation (or perhaps that there was insufficient actual evidence of same). IIDA failed to provide a transcript of the hearing, and, without it, we cannot conclude that the finding was clearly erroneous. See O'Meara v. Doherty, 53 Mass. App. Ct. 599, 605-606 (2002).

Judgment affirmed.

So ordered.