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Tuesday, May 13, 2008

Ind. Decisions - 7th Circuit issues one Indiana decision today

In Knutson v. USG Corp. and SDRC (SD Ind., Judge Barker), an 8-page opinion, Judge Posner writes:

The plaintiff brought this diversity suit (governed by Indiana law) to recover almost $700,000 in sales commissions that he claims are due from the two defendants, a firm and its successor both of which we refer to as the plaintiff’s “employer.” The district court granted summary judgment for the employer.

The plaintiff seeks commissions on three sales or sets of sales; we shall, again for the sake of brevity, pretend that there were just three sales. The first two the judge held barred by the statute of limitations; the plaintiff contends that the judge applied the wrong one. Indiana has a two-year statute of limitations (the one the judge applied) for “an action relating to the terms, conditions, and privileges of employment except actions based upon a written contract (including, but not limited to, hiring or the failure to hire, suspension, discharge, discipline, promotion, demotion, retirement, wages, or salary).” Ind. Code § 34-11-2-1 (emphasis added). Although the plaintiff did not have a written employment contract, his entitlement to commissions was based on a written compensation plan, and it is a breach (or rather breaches) of that plan, which he characterizes as a written contract, that he charges; and so he argues that the applicable statute of limitations is Indiana’s 10-year statute of limitations for “an action upon contracts in writing.” Ind. Code § 34-11-2-11. If he is right, the claim based on the first two sales are not time-barred (the claims arose in 2001, and the suit was filed in 2005); if the judge is right, they are.

In a literal sense, the plaintiff’s suit is “based upon a written contract,” but the Indiana Court of Appeals has held that “written contract” in the two-year statute of limitations means written employment contract. * * *

The claim based on the third sale is not time-barred. It is based on a provision in the compensation contract entitling the plaintiff to specified commissions on “NX Nastran Software and related PLM CAE Software sales.” The plaintiff argues that the two types of software are “related” and therefore he is entitled to commissions on all sales of PLM CAE software that he assisted in making. The employer argues that the plaintiff is entitled only to commissions on PLM CAE software that was sold simultaneously with NX Nastran. The district judge sided with the employer after ruling that “related” was ambiguous but that the ambiguity was “patent” and that extrinsic evidence may not be admitted to dissolve such an ambiguity.

The judge erred. As explained by Francis Bacon more than 400 years ago, an ambiguity is “patent” when it is recognized as an ambiguity just by reading the document; it is latent when it is not recognized as an ambiguity until you know something outside the contract. * * *

So [for other reasons] the claim has no merit, and the other claims, as we said, are time-barred. The judgment is therefore AFFIRMED.

Posted by Marcia Oddi on May 13, 2008 12:11 PM
Posted to Ind. (7th Cir.) Decisions