On Aug. 20, 2010, the NAM and the California Manufacturers and Technology Association filed an amicus letter urging the California Supreme Court to review a state appellate decision that subjects manufacturers to treble damages liability for inadvertent violations of a state statute that prescribes various formalities for contracts with sales representatives. The Independent Wholesale Sales Representative Act, Cal. Civ. Code Sec. 1738.13, requires, among other things, that contracts specify the rate and method by which commissions are computed, the precise geographical area covered, and that sales representatives sign a written receipt acknowledging that he or she has received a copy of the contract. "Willful" violations are subject to treble damages, but the statute does not specify the level of damages that are available for non-willful violations. In this case, a California appellate court ruled that this legislative oversight would be corrected by allowing suits for single damages where a party does not act willfully, but it also adopted a loose standard of willfulness that could make most suits by sales representatives subject to treble damages.
Our amicus letter urged the California Supreme Court to review this decision. The lower court's ruling threatens to "open the floodgates of litigation against manufacturers doing business in California who inadvertently run afoul of the Act . . . No matter how innocuous the violation." In addition, by lowering the threshold for recovery of treble damages, the opinion "creates a trap for unwary manufacturers who do not know about technical requirements of the Act." The result is bad for manufacturers doing business in California.
The California court declined to review this appeal.