When sales representatives, brokers, agencies, or other businesses are owed commissions, but are not paid, sometimes they have to retain an attorney to file a lawsuit to recover the unpaid commissions. Our firm, over the years, has represented many commissioned sales representatives in such lawsuits. Many times, not only have we had to prove that the defendant was contractually liable for unpaid commissions, but also, we have had to establish and to prove the amount of the commissions owed.
Defendants which owe commissions often deny that they owe the amount of commissions which they, in fact, owe. Furthermore, they also often do not reveal, at least until they must, the full amount of revenue received or all of the sales on which the commissions are to be based. By doing this, they attempt to reduce the amount of their liability.
Before a lawsuit is filed, which is when discovery procedures can be used to compel parties to produce information on pain of being sanctioned, parties who owe commissions may refuse to produce information to former sales representatives or agents which is needed to determine the exact amount of commissions owed. Once a lawsuit is filed in a Tennessee state or federal court, however, a plaintiff can use the discovery procedures in the Tennessee Rules of Civil Procedure or the Federal Rules of Civil Procedure, as the case may be, to compel a defendant to produce information about sales, revenues, customer accounts, or claimed charge backs or refunds. For all practical purposes for this blog, the federal discovery rules and Tennessee discovery rules are the same. This blog gives an overview of the particular discovery rules that can be employed to determine the amount of commissions owed to a sales representative.
RULE 33: INTERROGATORIES
Rule 33 allows a party to send interrogatories, or questions, to another party. Unless an interrogatory is objectionable, a party must answer it and must do so under oath. Interrogatories are a helpful method of obtaining information about sales, dates of sales, amounts of sales, and the status of customer accounts. They are also helpful in forcing a business to identify the persons with the most knowledge about matters that bear directly on the amount of commissions owed so that those persons may be deposed.
RULE 34: REQUESTS FOR DOCUMENTS
A party may also require another party to produce business records, including financial information, sales information, customer records, invoices, correspondence with accounts and customers, and documents reflecting commissions paid to other sales representatives. While a defendant in a commissions case might object to producing such information, the scope of discovery is very broad, and it is unlikely that a court will uphold any objection to the production of information which relates to revenue and commissions. A very important point about requests for production (and interrogatories for that matter) is that a plaintiff does not have to take a defendant’s word for anything. To put it another way, a defendant cannot avoid producing documents that might prove or disprove what is contained in other documents or in its interrogatory responses. In other words, it cannot refuse to produce information that might disprove the inaccuracy of other information. In fact, cross checking a defendant’s information against other available information is often critical in an unpaid commissions case.
RULE 30: DEPOSITIONS OF DEFENDANT REPRESENTATIVES
Typically, it is best to wait to take depositions of representatives of a defendant until after the defendant has produced all of the documentation requested. In determining what commissions may be owed to a sales representative, it is often necessary to depose an employee or officer of the defendant and to ask specific questions about revenues, sales, claimed refunds or charge backs, particular accounts, record-keeping procedures, or about the calculation of commissions.
RULE 45: SUBPOENAS TO THIRD PARTIES
Rule 45 permits a party to issue subpoenas for the production of documents, for depositions, or for both. Subpoenas are often very effective for verifying the information about sales and revenue provided by the defendant. A subpoena to a third-party customer of the defendant for invoices or for information about amounts paid to the defendant can reveal inaccuracies or intentional misrepresentations in the defendant’s records or interrogatory responses.
If you believe that you are owed commissions, you should speak with an attorney experienced in representing clients in unpaid commissions cases.