Court resolves dispute involving complicated agency relationship and "unclean hands."
Tooling Manufacturing & Technologies Association and TMTA Insurance Agency sued Mark Tyler and Team Marketing Group, operating under two additional dbas, for breach of contract. The plaintiff attempted to set up a subsidiary to market insurance to its members and then capture the commissions to support its other programs. To that end, it hired an existing insurance agent, Tyler, to fill that role.
Tyler's employment arrangement called for an $8500.00 per month base salary plus a commission on new sales and renewals. From 2002 through 2006, the plaintiff paid Tyler more than $250,000.00 per year. In the interim, Tyler made his alter ego, Team Marketing, rather than himself or the Plaintiff, the agent for Assurant Insurance and pocketed an additional $568,000.00 in premiums from 2002 through 2007. A sales manager at Assurant disputed Tyler's characterization of his relationship with Assurant and confirmed that these commissions should have been paid to the plaintiff.In 2005, Tyler began agitating to "buy" the captive insurance agency from the plaintiff by taking over its business and handing back to the plaintiff 17% of future earned commissions. When this proposal was met with disbelief, apparently, Tyler offered to pay back 30% of future earned commissions. These proposals were rejected with suggestion that Tyler was "attempting 'to steal our agency.' "
In 2006, Tyler moved the life insurance and disability contracts from Assurant to Reliance and captured more than $100,000.00 in commissions for Team Marketing. As the trust between the parties deteriorated, Tyler heard that someone was interviewing for his job and began making plans to "move on." His plans included sending letters on the Plaintiff's letterhead making him, rather than the plaintiff the "agent of record" and thus transferring the right to receive insurance commissions from the Plaintiff to Tyler, himself.
Tyler ultimately announced that he was leaving and taking the insurance agency business with him, and apparently made plans to physically move those files. The plaintiff sue him for misappropriation of trade secrets, unfair competition, conversion, fraud, unjust enrichment, breach of fiduciary duty and tortious interference with a business relationship. After a bench trial, the court awarded the plaintiff Association $738,441.65 in commissions. It agreed with Tyler that this award should be reduced by $23,000.00 in unpaid commissions for his last month of work.
Tyler appealed, arguing that the lower court applied the "unclean hands" doctrine to take away commissions he had earned. The Court of Appeals noted that he had engaged in serious misconduct by diverting commissions that belonged to his employer. Therefore, under Michigan law, he had forfeited his right to earned bonuses. The Court also upheld the lower court's decision to hold Tyler and Associates and Team Marketing accountable for Tyler's commission obligation: as the sole shareholder of these entities to whom commissions were wrongfully diverted, Tyler could not complain about the Court "piercing the corporate veil."