MARCUS & MILLICHAP INVESTMENT SERVICES OF CHICAGO v. SEKULOVSKI (March 23, 2011)

Marcus & Millichap Real Estate Investment Services (M&M) is a national commercial real estate brokerage firm with subsidiaries operating in several states. The subsidiaries operate independently, as distinct entities, and enter into their own contracts with their salespersons as independent contractors. The subsidiaries are required to incorporate M&M's independent contractor policies into these agreements. Tony Sekulovski worked as a salesperson with M&M’s Ohio subsidiary from 1999 until 2005, when he moved to Chicago and began working with the company's Illinois subsidiary. Contrary to the policy, Sekulovski never entered into a written independent contractor agreement. Salespeople were not paid a salary but were compensated with commissions. Generally, a salesperson and the subsidiary divide project commissions evenly. A salesperson can enjoy up to a 70/30 split, however, as he reaches certain annual sales thresholds. In addition, if more than one salesperson is involved in a deal, they split the salesperson's side of the commission based on an allocation reflecting the contribution each made to the deal. In 2006, Sekulovski and another agent, Mark Luttner, collaborated on many deals. Throughout most of the year, they shared the salespersons' commission equally. Once Sekulovski reached his commissions target, however, they began submitting allocations that attributed a much higher portion of the commission to Sekulovski. M&M claims that he did so in order to increase the salespersons' share of the total commission and that he kicked back an appropriate allocation to Luttner. Smith left M&M Chicago in June 2007. Before he did so, he directed two commissions be paid to him rather than the company. He also later retained commissions for deals that began while he was in Chicago but did not close until later. The company sued Sekulovski for breach of contract, unjust enrichment, conversion, fraud, and tortious interference. Sekulovski counterclaimed for breach of contract, unjust enrichment, unlawful withholding of wages, and tortious interference. At trial, Luttner testified that he and Sekulovski artificially inflated Sekulovski’s allocation in order to maximize the salespersons' commissions. Judge Leinenweber (N.D. Ill.) granted judgment as a matter of law to M&M on Sekulovski’s statutory wage claim and a jury found for M&M and against Sekulovski on all other claims. Sekulovski appeals.

In their opinion, Chief Judge Easterbrook and Judges Bauer and Kanne affirmed. As a preliminary matter, the Court concluded that the parties had an implied contract and that the terms of M&M’s independent contractor policy governed. The Court then addressed Sekulovski’s arguments on appeal, which it placed in four categories: evidentiary rulings, jury instructions, the Illinois Wage Payment and Collections Act, and post-trial motions. The evidentiary objections went principally to the district court's limitation on Sekulovski’s ability to cross-examine Luttner on bias. Although the Court conceded that witness bias is generally admissible for impeachment purposes, it concluded that the district court did not abuse its discretion. The district court found some of it to be of little value, some that would cause confusion, and some that was inadmissible hearsay. The Court added that the jury heard plenty of evidence of Luttner's hostility toward Sekulovski. The only jury instruction objection that Sekulovski preserved was his argument that M&M’s damages should have been calculated based on its loss rather than Sekulovski’s overpayments, arguing that part of the overpayments would have rightfully gone to Luttner. The Court concluded that the appropriate measure of damages was the amount of commissions that Sekulovski received that he would not otherwise have received but for his fraud. With respect to the Wage Payment Act, the Court questioned the district court's finding of fact that Sekulovski was an independent contractor rather than an employee. Notwithstanding its lack of confidence in the district court's rationale, the Court affirmed the dismissal on the basis of the jury's finding that Sekulovski was not due the commissions he claimed were due him under the Act. Finally, the Court found that the district court did not abuse its discretion in denying Sekulovski's post trial motions.