Reilly v. Inquest Technology, Inc.
218 Cal. App. 4th 536
| Cal. Ct. App. | 2013Background
- Reilly sued Inquest for commissions under the Independent Wholesale Sales Representatives Act (Civ. Code §1738.10 et seq.).
- Reilly drafted a September 2003 document outlining a 50/50 profits/commission structure; the parties did not execute a formal written contract, but the jury found the terms were accepted.
- Act requires written contracts and documentation; the trial court treble damages for willful violations; Inquest challenged application of the Act.
- Court held Reilly a wholesale sales representative and Inquest a manufacturer under the Act; the Act’s broad scope applies to Inquest’s sale of components for wholesale orders.
- Court interpreted the term “manufacturer” to include importers/ suppliers whose products are intended for resale or use by California consumers, rejecting a narrow reading that would exclude components; contract terms were interpreted to provide commissions for profits resulting from Reilly’s activities through 2015, not perpetual commissions.
- The judgment awarded damages to Reilly (approximately $2 million) and treble damages for willful violations; Inquest’s bankruptcy affected execution.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Reilly qualifies as a wholesale sales representative under the Act | Reilly contracted to solicit wholesale orders and was compensated by commission | Inquest disputes status and scope of the Act | Yes; Reilly is a wholesale sales representative and Inquest is a manufacturer for Act purposes |
| Whether the Act applies to Inquest as a manufacturer under Civ. Code §1738.12(a) | The Act broadly covers manufacturers producing/importing products intended for resale/use in California | Act should be limited to finished consumer products | Applied; Act covers Inquest’s sale of components intended for eventual resale/use by California consumers |
| Whether the contract provides perpetual commissions or limits to profits from Reilly’s activities | Terms support ongoing commissions tied to Reilly’s activities | Agreement does not create perpetual commissions | Commission right limited to profits resulting from Reilly’s activities; not perpetual; interpretation supported by contract language |
| Whether Inquest waived its challenge to application of the Act | Waiver not asserted; trial strategy acknowledged | Waiver due to adopting Act-based strategy at trial | Waived; Invited error doctrine bars reversal based on Act not applying |
Key Cases Cited
- Founding Members of the Newport Beach Country Club v. Newport Beach Country Club, Inc., 109 Cal.App.4th 944 (Cal. App. 2003) (contract interpretation; objective intent governs; extrinsic evidence when needed)
- Baker v. American Horticulture Supply, Inc., 186 Cal.App.4th 1059 (Cal. App. 2010) (statutory interpretation; avoid absurd results; broad protection of wholesale reps)
- Wilcox v. Birtwhistle, 21 Cal.4th 973 (Cal. 1999) (principles of statutory construction; avoid absurd consequences)
- Pacific Gas & Electric Co. v. G.W. Thomas Drayage etc. Co., 69 Cal.2d 33 (Cal. 1968) (extrinsic evidence when contract language is ambiguous)
- Intel Corp. v. Hamidi, 30 Cal.4th 1342 (Cal. 2003) (de novo review where legal questions are involved)