author: FLAUM, Circuit Judge.

text:
    David COHAN and Susan Schardt, Plaintiffs-Appellants, v. MEDLINE INDUSTRIES, INC., and MedCal Sales LLC, Defendants-Appellees.
    No. 16-1850
    United States Court of Appeals, Seventh Circuit.
    Argued November 4, 2016
    Decided December 9, 2016

      Alejandro Caffarelli, Attorney, Caffarelli & Associates LTD, Chicago, IL, for Plaintiffs-Appellants.
    Amy S. Ramsey, Frederick L. Schwartz, Attorneys, Littler Mendelson P.C., Chicago, IL, for Defendants-Appellees.
    Before FLAUM and KANNE, Circuit Judges, and MAGNUS-STINSON, District Judge.

       Of the Southern District of Indiana, sitting by designation.

   FLAUM, Circuit Judge.

Plaintiffs David Cohan and Susan Schardt filed this putative class action suit against their former employers, Medline Industries, Inc., and MedCal Sales LLC (collectively, “Medline”), alleging . violations of the Illinois Wage Payment and Collection Act, 820 Ill. Comp. • Stat. § 115/1 et seq. (“IWPCA”), and other state wage payment statutes, including the New York Labor Law and California Labor Code, on behalf of the class. Cohan and Schardt.claimed that Medline’s practice of accounting for year-to-year sales declines in calculating and paying commissions was impermissible under the terms of their employment agreements and state wage laws. The district court granted Medline’s motion for summary judgment, finding that plaintiffs had not performed enough work in Illinois for the IWPCA to apply and that Medline and the plaintiffs had agreed to Medline’s method of calculating commissions, so there was no violation of state wage laws. Cohan and Schardt appealed the dismissal of their claims under New York and California law. We affirm.

I. Background

Medline Industries, Inc., is a national manufacturer and distributor of healthcare supplies, and MedCal Sales LLC is its subsidiary. Both are headquartered in Mundelein, Illinois. Medline employed Sales Representatives from around the country in their Advanced Wound Care (“AWC”) division. AWC salespeople were assigned their own geographic territory and were responsible for selling AWC products to new or existing clients within that territory.

Cohan, a New York resident, worked as a Sales Representative in the AWC division from 2007 to 2013. (He previously worked in Medline’s General Line Division from. 1992 to 2007.) As an AWC Sales Representative, he sold Medline’s products in a territory primarily consisting of New York accounts. Schardt, a California resident, was a Sales Representative in the AWC division from 2001 to 2014, and her territory largely consisted of California accounts. As AWC salespeople, both Cohan and Schardt received a base salary as well as commissions on sales of AWC products to accounts -within their assigned territory.

Both Cohan and Schardt entered into -written employment agreements with Medline. Cohan’s original Employment Agreement was dated March 25, 1999 (the “1999 Agreement”). When he transferred to the AWC division, Cohan also entered into an Agreement Regarding Continued Employment dated November 26, 2007 (the “2007 Agreement”). The 2007 Agreement amended the 1999 Agreement, such that the latter stayed in effect, as amended. The 1999 Agreement at ¶ 6 provides the following with respect to commissions:

(a) Subject to the provisions hereafter set forth, Medline shall pay to Salesperson commissions with respect to the collections of all sales made by Medline to customers in the territory ... provided the collection date of any such sale is on or after the date Salesperson commences performance of his duties as a salesperson hereunder and is on or before the effective date of termination of this Agreement under any circumstances. Salesperson shall be entitled to a commission on any sale as set forth herein, irrespective of whether Salesperson shall have been responsible for such sale....
(f) [Commissions on sales for which the collections are received by Medline prior to the last day of any fiscal month shall be paid to Salesperson on or about the 15th day of the next calendar month.
(h) Medline may at any time elect to compensate Salesperson on the basis of a monthly salary plus commissions or on the basis of a commission program. After making such election, Medline may periodically vary the amount of salary and/or the rate of commission pursuant to such election.
(k) During the term of the notice period, or any portion thereof, provided for by Paragraph 10(a) of this Agreement, commissions shall be deemed earned by Salesperson only if collected prior to the effective date of termination of this Agreement under any circumstances. All commissions so earned during the term of such notice period shall be paid to Salesperson, provided Medline receives actual payment from the customer prior to termination date.

Cohan’s 2007 Agreement further specified that Cohan would be compensated in part through a “[cjommission plan based on sales growth year over year for assigned territory.”

Schardt worked for Medline pursuant to two Employment Agreements: one dated February 19, 2001, between her and Med-line, and another dated February 10, 2006, between her and MedCal. Schardt’s two Agreements are substantively identical to one another, and to Cohan’s 1999 Agreement, and contained the same provisions as those excerpted above.

In addition, Medline’s AWC division released on an annual basis Compensation Plans describing how commissions would be calculated during that year for its Sales Representatives. The Compensation Plans from 2004 to 2007 explain that “[c]ommis-sions are based on monthly sales growth and profitability,” and specify that growth commissions are to be calculated as follows: (current year monthly sales - prior year monthly sales) x WC Base Profit % x 20% = Commission. They each provide some version of the following example:

January 2004 Sales: $165,000

January 2003 Sales: -$125.000

= $40,000 Monthly Growth:

= $11,400 x WC Base Profit (28.5%):

= $2,280 (commission) x 20%: .

The Compensation Plans for 2010 to 2014 stated that salespeople were entitled to a commission paid on sales growth but did not include any sample calculations. The Compensation Plans were typically explained to AWC Sales Representatives in December or January of each year at the annual AWC kick-off “promo meeting.”

Medline calculated commissions by starting with the salesperson’s invoiced sales for the current month and subtracting their sales from the same month in the prior year. Depending on whether the salesperson sold more or less than in the year prior, that calculation could result in a positive or negative sales growth number. To calculate commission based on sales growth, Medline then multiplied.the salesperson’s growth (or decline) by a commission percentage. In some years, commissions were calculated by multiplying the growth figure for each product category by a specific commission percentage assigned to that category. In other years, the commission percentage was applied to the salesperson’s overall territory sales growth. Regardless, the calculation always included all of the salesperson’s business, including accounts with positive and negative sales growth. If a salesperson had negative net growth, this would result in a negative commission, which was then subtracted from any positive commissions. Medline accounted for such negative commissions even where the reason for the decline in year-over-year growth was outside the Sales Representative’s control (e.g., if accounts reduced purchases due to natural disasters, or had already been in decline before being assigned to a Sales Representative’s territory).

Medline’s Practice:

From 2007 to 2012, the commission calculation also included a “carryover” component, such that an AWC salesperson with a negative overall territory sales growth in one month was required to cover this loss with any positive sales growth in subsequent months. In 2013 and 2014, this practice changed, so that if any AWC Sales Representative had negative overall territory sales growth for the month, it was zeroed out and was no longer carried over into subsequent months.

In addition to the annual Compensation Plans discussed above, AWC Sales Representatives received at least two other reports detailing their sales growth and commissions each month: (1) the Wound Care Commission Summary and Growth Report, and (2) the Commission Summary by Item Detail Report (also referred to as the Detailed Commission Report). AWC salespeople had access to these reports each month through Medline’s intranet.

The Wound Care Commission Summary and Growth Report showed each Sales Representative’s sales for the month compared to the same month in the prior year, broken down by product groupings for the salesperson’s entire territory. It also included a chart titled “Commissions Calculation,” which reported commissions for each product category (whether positive or negative) based on that month’s sales growth. A line labeled “Total Commission” showed the sum of all commissions for the month, adding the positives and negatives together across all product categories.

The Commission Summary by Item Detail Report showed sales growth in additional detail, including by account and by product. This report also included a column labeled “Commissions which listed a positive or negative dollar figure for each account and product. The report correlated the Sales Representative’s (positive or negative) sales growth to (positive or negative) commissions by account and item.

In 2014, after leaving Medline’s employment, Cohan filed this lawsuit on behalf of a putative class of all current and former Medline salespeople nationwide, alleging, after several amendments, that Medline unlawfully deducted wages without written authorization "in violation of the IWPCA and the wage laws of the residence states of all putative class members. Cohan and Schardt contended that under the Employment Agreements and Compensation Plans, when they failed to grow sales year over year, they simply should not have earned commissions (i.e., negative growth should have been zeroed out so that they were paid only on positive growth).

Cohan’s and Schardt’s Position:

As of 2015, Cohan and Schardt were the two named plaintiffs representing the class! The parties filed cross-motions for summary judgment, and the district court stayed proceedings on class certification to resolve the parties’ cross-motions for summary judgment on Cohan’s and Schardt’s individual claims.

The district court granted Medline’s motion for summary judgment in full and denied Cohan’s and Schardt’s motion in full. With respect to the' IWPCA claims, it found that plaintiffs had not performed enough work in Illinois for the Act to apply to them. It also found no indication that commissions were earned by Cohan and Schardt before the calculation of commissions (by subtracting negative growth) was complete. Because there was no agreement by Medline to'pay commissions in the manner understood by Cohan and Schardt, and because plaintiffs had provided no other evidence that they were entitled to a commission calculation that ignored negative sales growth, the district court ruled that Medline’s commission structure did not violate state wage laws. Cohan and Schardt now appeal only the dismissal of their claims under New York and California law.

II. Discussion

We review de novo a district court’s grant of summary judgment, construing all facts and drawing all reasonable inferences in favor of the non-moving party — here, Cohan and Schardt. See C.G. Schmidt, Inc. v. Permasteelisa N. Am., 825 F.3d 801, 805 (7th Cir. 2016) (citation omitted). Summary judgment is appropriate if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); C.G. Schmidt, 825 F.3d at 805.

State wage laws generally protect employees’ earned wages, including commissions, from an employer’s unlawful deductions. See, e.g., N.Y. Labor Law §§ 190(1), 191(l)(c), 193(1); Cal. Labor Code § 221. In both New York and California, whether and when a commission is earned is dependent upon the terms of the agreement providing for such commission. See Gennes v. Yellow Book of N.Y., Inc., 23 A.D.3d 520, 521, 806 N.Y.S.2d 646 (2005); Koehl v. Verio, Inc., 142 Cal.App.4th 1313, 1330, 48 Cal.Rptr.3d 749 (1st Dist. 2006) (“The right of a salesperson or any other person to a commission depends on the terms of the contract for compensation.”) (citations omitted).

The district court found that under the employment agreements and Compensation Plans, plaintiffs’ commissions were not earned until the growth calculation was completed. Any alleged deduction was thus not improper under state wage law, but in accordance with the parties’ agreements.

On appeal, Cohan and Schardt argue that a decline is not part of the ordinary meaning of the term “growth,” and characterize “negative growth” as an oxymoron inconsistent with the plain language of the agreements. They contend that at summary judgment, the district court should have interpreted “growth” in the light most favorable to them (ie., as encompassing only positive growth), such that their commissions were earned as soon as their customers paid Medline, and Medline’s accounting for negative growth constituted improper deductions from earned commissions.

Plaintiffs emphasize that the Employment Agreements contain no reference to “net” growth or “negative commissions,” and point to the below bolded language from paragraph 6 of their employment agreements as evidence that their commissions were fully “earned” upon payment by the customers to Medline (and prior to any subtraction for “negative growth”):

... Medline shall pay to Salesperson commissions with respect to the collections of all sales made by Medline to customers in the territory ... provided the collection date of any such sale is on or after the date Salesperson commences performance of his duties as a salesperson....
[Commissions on sales for which the collections are received by Medline pri- or to the last day of any fiscal month shall be paid to Salesperson on or-about the 15th day of the next calendar month....
.During the term of the notice period, or any portion thereof, provided for by Paragraph 10(a) of this Agreement, commissions shall be deemed earned by Salesperson only if collected prior to the effective date of termination of this Agreement under any circumstances. All commissions so earned during the term of such notice period shall be paid to Salesperson provided Medline receives actual payment from the customer prior to termination date.

However,' these provisions do not explain when commissions are earned; rather, they partially define what commissions are (by explaining what sales count for commissions) and specify when commissions are to be paid (the fifteenth day of the following month). Although the last section arguably has more specific language about commissions “earned” upon collection of payment, it is explicitly limited to termination notice periods.

The employment agreements are silent on the relevant issue, but Medline’s Compensation Plans filled that gap. The parties agree that the Plans are controlling instruments with respect to plaintiffs’ claims. The 2004' to 2007 Compensation Plans clearly and unambiguously explained how commissions were to be calculated: (current year monthly sales - prior year monthly sales) x WC Base Profit % x 20% = Commission. Although plaintiffs emphasize that the examples in the Compensation Plans showed positive monthly growth year over year, resulting in a positive number in commission compensation, it is clear as a matter of basic math that where year-to-year sales declined, the calculation would result in a negative growth number and thus a negative commission. The other Compensation Plans and Cohan’s 2007 agreement likewise tie commissions to growth, which, as clearly established by the 2004 to 2007 Plans, included negative growth.

Cohan and Schardt contend that regardless, “any disagreement between the parties regarding the scope of their written agreements and policies should have precluded ... summary judgment.” However, “[i]f an agreement lends itself to one reasonable interpretation only, it is not ambiguous and can be construed as a matter of law.” Chi. Reg’l Council of Carpenters Pension Fund v. Schal Bovis, Inc., 826 F.3d 397, 406 (7th Cir. 2016) (citing Mazzei v. Rock N Around Trucking, Inc., 246 F.3d. 956, 960 (7th Cir. 2001)). The district court’s finding was not a matter of “construing] the language of the agreements” in -a light unfavorable to the plaintiffs. Rather, it found that the parties’ agreement (comprising the employment agreements and Compensation Plans) clearly and unambiguously provided for negative growth being taken into account when calculating commissions.

Plaintiffs also take issue with the district court’s discussion of their continued employment with Medline after becoming aware of the alleged deductions through the Wound Care Commission Summary and Growth Report, the Commission Summary by Item Detail Report, and discussions with their supervisors and Medline executives. They claim that the court improperly considered this extrinsic evidence, and that their continued employment with Medline is insufficient tó show assent to a “modification” of their compensation agreements. The district court’s opinion does merge discussion of Cohan’s and Schardt’s continued employment at Medline with its analysis of when commissions are “earned,” both to underscore plaintiffs’ failure to show any mutual assent to commissions being paid as they propose, and, with respect to plaintiffs’ IWPCA claims, to note evidence of implied acceptance of Medline’s payment terms under Illinois law. Ultimately,- however, the district court could have reached its conclusion, as we do, based on the plain language of the agreements.

Because Medline’s accounting for negative growth was not' a deduction from earned commissions, but rather the contracted-to means of calculating commissions in the first place, Medline did not violate § 193(1) of New York Labor Law or § 221 of the California Labor Code. Pachter v. Bernard Hodes Grp., Inc., 10 N.Y.3d 609, 861 N.Y.S.2d 246, 891 N.E.2d 279 (2008), and Koehl, 142 Cal.App.4th 1313, 48 Cal.Rptr.3d 749, are instructive:

The plaintiff in Pachter sued her former employer for “subtracting business expenses from her percentage of client billings in arriving at her commission income.” 10 N.Y.3d at 614, 861 N.Y.S.2d 246, 891 N.E.2d 279. The Court of Appeals of New York held that N.Y. Labor Law § 193 does not bar employers from structuring payment arrangements that include “downward adjustments” in calculating commissions. Id. at 617-18, 861 N.Y.S.2d 246, 891 N.E.2d 279. Because there was an implied contract between the parties under which “the final computation of the commissions earned ... depended on first making adjustments for nonpayments by customers and ... work-related expenses,” neither § 193 nor any other provision of New York’s Labor Law prevented the employer’s structuring and application of the commission formula. Id. at 618, 861 N.Y.S.2d 246, 891 N.E.2d 279.

The plaintiffs in Koehl sued their former employer, án Internet service provider, for its use of a “chargeback process” against commissions. 142 Cal.App.4th at 1325-1326, 48 Cal.Rptr.3d 749. When an installation order was cancelled before a customer paid for the first three months, the employer would “charge back” and recover previously advanced sales commissions, essentially undoing the transaction at issue. Id. The California Court of Appeal held that these chargebacks did not violate § 221 of the California Labor Code because the commission plans between the parties provided that although commissions would be paid at booking or installation, they were not in fact earned at that time. Id. at 1334, 48 Cal.Rptr.3d 749 (“Appellants agreed to what they agreed to, and that agreement will be enforced....”); see also id. at 1331, 48 Cal.Rptr.3d 749 ("In sum, cases have long recognized, and enforced, commission plans agreed to between employer and employee, applying fundamental contract principles to determine whether a salesperson has, or has not, earned a commission.”). Like the business expenses in Pachter, and the charge-backs in Koehl, Medline’s accounting for negative growth was part of the calculation of what commission was to be “earned,” per the agreement of the parties.

Plaintiffs also contend .that Med-line’s practice from 2007 to 2012 of carrying over any balance owed for negative commission to offset future positive commissions constitutes an impermissible deduction from wages under both New York and California law. They argue that this concept is not contemplated in the agreements, but cite to no case law in support of their position. As this carryover practice was merely how Medline implemented its calculation of earned commissions, the same logic outlined above applies, and Medline acted in accordance with its agreements. We can similarly dispose of plaintiffs’ argument that prompt and full payment of wages due to an employee is a fundamental public policy in- both New York in California. While that certainly is true, under the parties’ agreements, commissions were not earned or “due!’ until after negative growth was taken into account.

Plaintiffs next argue that even if Med-line’s commission' structure is consistent with the written agreements, it is nevertheless a per se violation of New York and California labor law because it impermissi-bly recoups Medline’s business losses from its Sales Representatives, even when those losses are outside Sales Representatives’ control. Plaintiffs contend that this precise compensation practice was rejected by New York courts in Gennes v. Yellow Book of N.Y., Inc., 3 Misc.3d 519, 776 N.Y.S.2d 758 (2004), aff'd, 23 A.D.3d 520, 521, 806 N.Y.S.2d 646 (2005). The employer in Gen-nes had a written policy providing for a deduction from account executives” commissions for every existing account that they were assigned but failed to renew. The court held that the employer could not “deduct[ ] from employees [sic] paychecks any wages already earned' unless so required by law or for the benefit of the employee,” and noted that otherwise, “employees would suffer negative economic consequences through no fault of their own if. a business did not renew its subscription,”. since subscriptions could lapse due to “economic downturn” or “advertising with another publication.” Id. at 760. Cohan and Schardt highlight that they similarly had negative growth factored into their commissions even when it resulted from events outside their control, such as natural disasters. However, Gennes explicitly dealt with chargebacks against “commissions already earned on advertisements,” id. at 769 (emphasis added), whereas in our case, the agreement between the parties specifies that commissions are earned in the first instance based on sales growth, including negative growth. See Gennes, 28 A.D.3d at 521, 806 N.Y.S.2d 646 (“Whether a commission is earned is dependent upon the terms of the agreement providing for such commission.”).

Plaintiffs’ argument under California case law for a per se violation is somewhat more persuasive. In Hudgins v. Neiman Marcus Grp., Inc., 34 Cal.App.4th 1109, 41 Cal.Rptr.2d 46 (1995), as modified (May 25, 1995), the California appellate court considered whether Neiman Marcus violated California labor law by deducting a pro rata share of commissions previously paid from all sales associates in the section of the store where there were “unidentified returns.” It- held that this unidentified-returns policy caused forfeiture of commissions legitimately earned in order to insure Neiman Marcus against its own- business losses, and explicitly ruled that “Neiman Marcus cannot avoid a finding that its unidentified returns policy is unlawful simply by asserting that the deduction is just a step in its calculation of commission income.” Hudgins, 34 Cal.App.4th at 1123-24, 41 Cal.Rptr.2d 46. In so holding, the court cited to Quillian v. Lion Oil Co., 96 Cal.App.3d 156, 157 Cal.Rptr. 740 (1979), which held that paying gas station .managers an “incentive bonus” based on the amount of gasoline sold, with a deduction for any cash or merchandise shortages, similarly violated § 221 of the California Labor Code. The California Court of Appeal rejected Lion Oil’s argument that § 221 did not apply because accounting for cash and merchandise shortages were merely part of the calculation of the bonus, rather than a deduction from the bonus. Quillian, 96 Cal.App.3d at 163, 157 Cal.Rptr. 740.

Hudgins and Quillian establish that employers cannot shift general business losses onto their employees and avoid liability by dressing up the deduction as part of the commission’s “calculation.” Med-line’s commission policy arguably does insure itself against business declines to some extent. However, in contrast to the Hudgins unidentified returns- policy that merely .prorated unidentified returns across all .sales associates in the department, and- the Quillian bonus policy that accounted for shortages “without regard to the individual station employee or employees responsible therefor,” at Medline, each commission is specifically tied to the territory assigned exclusively to that Sales Representative. This tethering of commissions to growth within each salesperson’s territory thus lessens the concerns about unfairness underlying the reasoning and holdings in Hudgins and Quillian. Med-line’s practice appears more akin to accounting. for identified returns in Hudgins (which was deemed lawful), or the, charge-back system deemed acceptable in Koehl. See Koehl, 142 Cal.App.4th at 1336, 48 Cal.Rptr.3d 749 (“[In Hudgins,] we noted that the store’s practice of recovering commissions on identified returns was acceptable because those chargebacks were specifically tied to the sales in which the associate had been involved and for which the associate had received a direct benefit in the form of a commission. Here, of course, the chargebacks are sales associate by sales associate, order by order.”) (citation omitted).

Moreover, § 6(a) of the Employment Agreements provides that Sales Representatives shall earn commission from sales in their territory “irrespective of whether Salesperson shall have been responsible for such sale.” Although plaintiffs contended at oral argument that it would be “unusual” for sales to occur in a salesperson’s territory without the salesperson’s involvement, this language highlights that Cohan and Schardt could have also benefitted from business gains in their assigned territories for which they were not necessarily responsible (e.g., a client’s growth resulting in additional purchases from Medline).

In sum, unlike the commission schemes in Hudgins and Quillian, Medline’s inclusion of negative growth in its commission calculation was not an unlawful deduction in disguise, but rather' a valid means of incentivizing their salespeople to grow business year over year in their assigned territories. As the parties agreed that Medline could use both the carrot and the stick in promoting growth, the district court correctly granted summary judgment in Medline’s favor.

III. Conclusion

For the foregoing reasons, we Affiem the judgment of the district court.

      . Paragraph 10 dealt with termination, and section (a) stated: "The term of this Agreement shall continue indefinitely, provided however, that either Salesperson or Medline may terminate this Agreement at any time by giving written notice of such termination to the other party, not less than fourteen (14) calendar days prior to the effective date of termination specified in such notice.”

      . For example, subsection 6(f) in Cohan’s 1999 Agreement and Schardt’s 2006 Agreement is substantively identical to subsection 6(e) in Schardt’s 2001 Agreement; and paragraph 6(k) in Cohan's 1999 Agreement and Schardt’s 2006 Agreement is substantively identical to subsection 6(i) in Schardt’s 2001 Agreement.

      . WC presumably stands for Wound Care, and WC Base Profit % (also referred to as WCBP%) is defined in the 2004 Compensation Plan as the profitability over base cost for each item sold. The average WCBP% is 28.5%, but WCBP% varies by territory and month.

      . Neither party references the Compensation Plans for 2008 and 2009. The 2008 Compensation Plan referred to a "Total Goal Achievement Bonus” and explained that "Total Sales Goal = Individual Territory Growth Goal + 2007 Base Sales” and "Bonus Payout = .2% of Territory Base Sales plus 2% of the sales Growth.” The 2009 Compensation Plan noted with respect to the "Total Goal Achievement Bonus” that "If you hit your sales goal you get 7% on the Growth up to your goal amount,” "You will also get paid ½% on your base sales,” and "finally you will get 10% on all sales growth above goal.” Commissions were thus still tied to growth in these Plans.

      . Also in 2015, Medline amended its written Compensation Plans to be consistent with plaintiffs’ position in this lawsuit, such that where “year over year comparison yields a total negative value within a particular category, [sales representatives] will receive no additional component for sales growth in that category.” That is, failure to grow sales simply resulted in zero commission, rather than a negative commission.

      . As the district court-noted below, it is unclear whether there is a private right of action under Cal. Labor Code § 221. Compare Mouchati v. Bonnie Plants, Inc., No. EDCV 14-00037-VAP, 2014 WL 1661245, at *8 (C.D. Cal. Mar. 6, 2014), with Villalpando v. Exel Direct Inc., No. 12-cv-04137 JCS, 2014 WL 1338297, at *18 (N.D. Cal. Mar. 28, 2014). The district court based its decision on the merits of plaintiffs' claims and thus reached no conclusion regarding the existence of a private right of action under § 221. We do the same.

      . The 2004, 2005, and 2006 Compensation Plans similarly provide that “Commissions are based on monthly sales growth and profitability and paid in the 15 th check for previous month’s sales,”

      . These included returns of merchandise for which the original sales associate could not be identified or where the original sales asso-date had not been employed by Neiman Marcus for over six months. Hudgins, 34 Cal. App.4th at 1114, 41 Cal.Rptr.2d 46.

      . Because Medline paid commissions consistent with its agreements with plaintiffs and applicable state wage laws, we need not address plaintiffs’ argument that Medline violated § 223 of the California Labor Code, which provides that, ‘‘[w]here any statute or contract requires an employer to maintain the designated wage scale, it shall be unlawful to secretly pay a lower wage while purporting to pay the wage designated by statute or by contract.”


source: Caselaw Access Project

author: EASTERBROOK, Circuit Judge.

license: Public Domain

text:
    NALCO COMPANY, Plaintiff-Counterdefendant-Appellee, v. David T. CHEN, Defendant-Counterplaintiff-Appellant, v. Nalco Mobotec, Inc., Counterdefendant-Appellee.
    No. 16-2902
    United States Court of Appeals, Seventh Circuit.
    Argued December 5, 2016
    Decided December 9, 2016

      Michael Dockterman, Daniel Raymond, Attorneys, Steptoe & Johnson LLP, Chicago, IL, for Plaintiff-Appellee Nalco Company and Defendant-Appellee Nalco Mo-botec, Inc.
    Casey Fronk, Attorney, Kirkland & Ellis LLP, Chicago, IL, for Defendant-Appellant.
    Before EASTERBROOK and ROVNER, Circuit Judges, and SHADID, District Judge.

       Of the Central District of Illinois, sitting by designation.

   EASTERBROOK, Circuit Judge.

Nalco and David Chen conducted a joint venture to sell environmental equipment in China. Nalco owned 55% of the venture, Chen 40%, and a third party 5%. When the joint venture (Nalco Mobotec Environmental Protection Technology (Shanghai) Co., or NMEPT) encountered business problems, Nalco guaranteed a loan, which NMEPT was unable to cover. Nalco paid the creditor and sued Chen (under the diversity jurisdiction) for his 40% share of the outlay. The district court entered judgment in Nalco’s favor for more than $2 million. 2014 U.S. Dist. LEXIS 76207 (N.D. Ill. June 4, 2014).

Chen filed counterclaims against both Nalco and a subsidiary, Nalco Mobotec, Inc. (NMI), through which Nalco had made its investment in the joint venture. Chen contended that NMI had violated his rights under the agreement by causing the joint venture to borrow $300,000 without his approval, even though the agreement required all investors’ consent for borrowing money. When the joint venture did not repay this loan, the creditor petitioned it into bankruptcy under Chinese law — another violation of the agreement, Chen maintained. As Chen described things, the lender was doing Nalco’s bidding in an effort to get around a clause of the agreement requiring the three investors’ unanimous consent for bankruptcy proceedings. Nalco wanted to wind up the unprofitable venture, but Chen preferred to keep it alive (if dormant) in order to protect its intellectual property. Chen’s counterclaim included 12 counts under the laws of both China and Illinois. The district court granted summary judgment against Chen on 11 of the 12, see 2015 U.S. Dist. Lexis 68095 (N.D. Ill. 2015), and he soon abandoned the twelfth. At this point the suit was over, but no one appealed.

Chen is not reconciled to his loss, however, and filed a new suit, this time in China. He named as the defendant Mobo-tec LLC (Mobotec). Contending that Chen was attempting to relitigate claims already resolved in this nation, Nalco asked, the district court to enjoin him from pursuing the Chinese litigation. The court issued an anti-suit injunction, 2016 Ú.S. Dist. Lexis 75698 (N.D. Ill. June 10, 2016), and this time Chen appealed.

His principal argument is that Mobotec was not a party to the Illinois litigation and therefore cannot benefit from the Illinois judgment. That would be a questionable proposition even if Mobotec were a distinct entity, for federal courts no longer require mutuality in civil litigation. See Parklane Hosiery Co. v. Shore, 439 U.S. 322, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979); Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d 788 (1971). Having raised and lost his claims under the joint venture agreement, Chen is hard pressed to explain why he is entitled to another round of litigation. But then one might ask what skin it is off Nalco’s nose whether Chen seeks and gets relief against Mobotec; why would Nalco or NMI even have standing to protest?

Their answer, seconded by the district court, is that NMI and Mobotec are the same entity. Relying, on documents from Delaware’s Secretary of State, the district judge found that Nalco Mobotec, Inc., first changed its organizational form from a corporation to a limited liability company, becoming Nalco Mobotec LLC, and then changed its name to Mobotec LLC as part of the sale of this business to Power Industrial in July 2013. Nalco retained a contractual right to act for Mobotec in connection with the dispute about the joint venture with Chen, and doubtless a duty to indemnify Power Industrial for any loss, which explains why this litigation proceeded as it did. The district court wrote that, because NMI and Mobotec are just different names for the same thing, Chen cannot avoid the consequences of his loss by changing the entity’s name on legal papers in China.

Chen protests that he was surprised by the district judge’s conclusion. Nalco had filed a lawyer’s declaration analyzing whether the Chinese claims overlapped those in Illinois, and the Delaware documents were attached to this declaration. Chen maintains that, when the district court struck this declaration on the ground that the lawyer had not demonstrated expertise in Chinese law, the judge disabled himself from relying on the attachments and made it unnecessary for Chen to discuss their significance, When the attachments played a role in the district court’s decision, Chen declares, he was bushwhacked.

There are two problems with this line of argument. One is that the judge was free to get the documents from Delaware and to take judicial notice of them, whether or not they had been tossed out along with the declaration to which they were attached. The other is that there would be no point in remanding for further proceedings because, in the months since the district court acted, Chen has not offered any reason to doubt the judge’s understanding of the corporate documents. Chen’s appellate brief does not contend that the judge was wrong in finding that NMI and Mobotec are different names for the same thing, though he has had plenty of time to find any flaws in the judge’s reasoning or its documentary foundation. To the contrary, Chen’s suit in China seeks to hold Mobotec liable for NMI’s acts relating to the joint venture. What could be the basis for that approach, unless the two names denote one continuing business entity?

Still, Chen insists, Nalco is es-topped to deny that Mobotec is a different entity. That’s because during discovery Nalco said that it could not produce certain documents held by Mobotec. Having taken that stance and won (at least, won an order concerning discovery) Nalco cannot reverse course, the argument goes. We need not consider how far judicial estop-pel, as opposed to law of the case, governs proceedings within a single lawsuit. Cf. New Hampshire v. Maine, 532 U.S. 742, 749-51, 121 S.Ct. 1808, 149 L.Ed.2d 968 (2001); Astor Chauffeured Limousine Co. v. Runnfeldt Investment Corp., 910 F.2d 1540, 1547-48 (7th Cir. 1990). For Chen has lifted Nalco’s statement out of context. Recall that NMI was sold to Power Industrial in 2013; Nalco told the district court that it could not get the documents — not because Mobotec was a different entity but because it had a new owner, and Nalco could not rummage through its files at will. Nalco was inviting Chen to serve a third-party discovery request, which he elected not to do, Nalco was not representing that NMI and Mobotec are different businesses. Civil litigants are entitled to take inconsistent positions within a single suit, see Fed. R. Civ. P. 8(d)(3), but Nalco has not been inconsistent in this one.

Chen has a second line of argument against the district court’s injunction. One might have expected Chen to invoke principles of international comity and contend that the Chinese court, applying Chinese law, is the right body to ascertain whether Chen is attempting inappropriate litigation. For all we know, China may not use the law of claim or issue preclusion at all (these are common-law concepts, and China is not a common-law nation) and may rely on awards of attorneys’ fees or some other device to discourage losers from continuing their battles. Or China- may see more difference between Chen’s claims there and his claims .here than a federal judge in this nation perceives.

But comity is not Chen’s theme. His lawyer told us at oral argument that it had been considered but deliberately omitted from the appellate brief. Instead he relies entirely on a doctrine of American law: The difference between permissive and compulsory' counterclaims. The sort of claims advanced in China, Chen asserts, would have been permissive counterclaims under Fed. R. Civ. P. 13(b). And since he was free to omit them from Nalco’s suit, he is equally fi’ee to assert them in China.

This would be a powerful argument if Chen had done nothing but defend against Nalco’s claim for his share of the guaranty. But that’s not what he did. He added NMI as a third-party defendant and asserted 12 counterclaims against both Nalco and NMI. Having elected to take the offensive, Chen was obliged to raise all claims that stem from the same transaction or series of related transactions (what courts sometimes call the “core of operative facts”). See Restatement (Second) of Judgments § 24 (1982) (rule against claim splitting). Chen did not try to raise US counterclaims in the US and Chinese counterclaims in China, a strategy that our nation’s rules of preclusion allow if the reservation is expressed to and accepted by the original court. See Restatement § 26(l)(b). Instead his 12 counterclaims included several resting on Chinese law. Under ordinary rules of claim preclusion, exemplified by Restatement § 24, the claims now pending in China arise from the same set of related transactions as his 12 counterclaims and therefore had to be litigated together with them. As Restatement § 25 puts it, “The rule of § 24 applies to extinguish a claim by the plaintiff against the defendant even though the plaintiff is prepared in the second action (1) To present evidence or grounds or theories of the case not presented in the first action, or (2) To seek remedies or forms of relief not demanded in the first action.” This is known as the doctrine of merger and bar. See also Restatement § 19.

Chen does not contest this understanding of preclusion or dispute the way the district judge applied it. He rests his appeal on the distinction between permissive and compulsory counterclaims, a distinction of no moment given his decision to add NMI as a party and present 12 counterclaims in Nalco’s debt-collection suit. See Restatement § 23 (“Where the defendant interposes a claim as a counterclaim and a valid and final judgment is rendered against him on the counterclaim, the rules of bar are applicable to the judgment.”). The permissive/compulsory distinction is a real one, but it is a red herring for current purposes.

AFFIRMED.


text:
    UNITED STATES of America, Plaintiff-Appellee, v. EGAN MARINE CORPORATION and Dennis Michael Egan, Defendants-Appellants.
    Nos. 15-2477 & 15-2485
    United States Court of Appeals, Seventh Circuit.
    Argued December 5, 2016
    Decided December 12, 2016

      Timothy John Chapman, Attorney, Office of the United States Attorney, Chicago, IL, for Plaintiff-Appellee.
    Rex R. Anderegg, Attorney, Anderegg & Associates, Milwaukee, WI, David R. Anderson, Attorney, Egan Marine Corporation, Lemont, IL, Johanna M. Christian-sen, Attorney, Office of the Federal Public Defender, Peoria, IL, for Defendants-Appellants.
    Before EASTERBROOK and ROVNER, Circuit Judges, and SHADID, District Judge.

       Of the Central District of Illinois, sitting by designation.

   EASTERBROOK, Circuit Judge.

Barge EMC-423 exploded on January 19, 2005, while under way between Joliet and Chicago with a cargo of clarified slurry oil. The blast threw deckhand Alex Oli-va into the water; he did not survive. Contending that Dennis Egan, master of the tug Lisa E that had been pushing the barge, had told Oliva to warm a pump using a propane torch, the United States obtained an indictment charging Egan and the tug’s owner (Egan Marine Corp.) with violating 18 U.S.C. § 1115, which penalizes maritime negligence that results in death, plus other statutes that penalize the negligent discharge of oil into navigable waters.

After a bench trial, Judge Zagel found that the prosecution had established, beyond a reasonable doubt, that Egan gave the order to Oliva, that the torch caused the explosion, that Oliva died as a result, and that the barge released oil as a further result. That such an order, if given, was negligence (or worse) no one doubted; open flames on oil carriers are forbidden by Coast Guard regulations and normal prudence. The court sentenced Egan to six months’ imprisonment, a year’s supervised release, and restitution of almost $6.75 million. Egan Marine was placed on probation for three years and ordered to pay the same restitution, for which it and Egan are jointly and severally liable.

The criminal prosecution was the second trial of these allegations. Two years before the grand jury returned its indictment, the United States had filed a civil suit against Egan Marine seeking damages on the same theory: that Egan directed Oliva to warm the pump using a torch, whose flame caused an explosion, a death, and an oil spill. That case, too, went to a bench trial. And Judge Leinenweber, who heard the evidence, determined that the United States had not proved its claim. 2011 WL 81443932011 at *3, 2011 U.S. Dist. LEXIS 138087 (N.D. Ill. Oct. 13, 2011) at *11 (“the Government did not prove, by a preponderance of the evidence, that Alex Oliva was using a propane torch on the cargo pump of the EMC 423 at the time of the incident”). The United States did not appeal from that adverse decision but instead pressed forward with this criminal prosecution.

Egan and Egan Marine sought the benefit of issue preclusion (collateral es-toppel), arguing that the United States should not be allowed to contend that tliey are guilty beyond a reasonable doubt after Judge Leinenweber found that the proof did not show culpability even by a prepon-deraré of the evidence. But Judge Zagel rejected this contention.

The Supreme Court has said that the outcome of a civil case has preclusive force in a criminal prosecution. See Yates v. United States, 354 U.S. 298, 335-36, 77 S.Ct. 1064, 1 L.Ed.2d 1356 (1957). (Burks v. United States, 437 U.S. 1, 98 S.Ct. 2141, 57 L.Ed.2d 1 (1978), overruled a different portion of Yates relating to double jeopardy; Burks did not question the portion of Yates dealing with preclusion.) If the United States cannot prove a factual claim on the preponderance standard, it .cannot logically show the same tiling beyond a reasonable doubt. The prosecutor maintains that this statement' in Yates was dictum, but we do not think that characterization appropriate. It was integral to the Court’s rationale — for although the Justices proceeded to conclude that the civil suit did not block the Yates prosecution under ordinary principles of preclusion, it would not have undertaken that exercise had the Court believed issue preclusion categorically inapplicable to the civil-criminal sequence.

United States v. Weems, 49 F.3d 528 (9th Cir. 1995), and United States v. Rogers, 960 F.2d 1501 (10th Cir. 1992), both took Yates at face value and held that a criminal prosecution can be blocked by the preclusive effect of a decision in a civil case. No court of appeals has held otherwise. But the United States maintains, and Judge Zagel concluded, that our decision in United States v. Alexander, 743 F.2d 472 (7th Cir. 1984), means that preclusion is unavailable notwithstanding Yates.

Alexander held that the outcome of an administrative proceeding cannot be invoked to block the resolution of a criminal indictment. The .opinion observed that many administrative systems are designed to be informal and expeditious, and that when the agency loses an administrative adjudication it may not be entitled to judicial review. 743 F.2d at 477. Making the administrative process reliable enough to justify preclusive effect in a criminal prosecution might require a substantial investment of prosecutorial resources — if that were even possible under the statute in question. The United States’ alternative might be to forego the administrative proceeding, which could have bad * consequences of its own.

When using these considerations of public policy to decide whether to give preclu-sive effect to administrative adjudications, Alexander drew on Standefer v. United States, 447 U.S. 10, 100 S.Ct. 1999, 64 L.Ed.2d 689 (1980), which had concluded that it would be unwise to apply nonmutual preclusion from one criminal prosecution to, another.. Standefer and Niederberger had been charged with joint criminal activity. Niederberger was tried first and acquitted; Standefer maintained that he was entitled to the benefit of that adjudication, because it takes two to tango. The Court held not, observing (447 U.S. at 21-23, 100 S.Ct. 1999) that nonmutual preclusion (that is, using the result in A’s case to determine the result in B’s) is designed largely to reduce litigation costs in civil suits, while the criminal process has different and more important goals. The Justices added that acquittals in criminal prosecutions are unreasoned and cannot be .reviewed (given the Double Jeopardy Clause); they may reflect compromise or misunderstanding rather than a determination of contested facts. That’s why inconsistent verdicts within a single criminal prosecution do not work in a defendant’s favor. See, e.g., Bravo-Fernandez v. United States, — U.S. —, 137 S.Ct. 352, 196 L.Ed.2d 242 (2016).

Standefer did not cast doubt on Yates. The considerations that led the Court to abjure nonmutual preclusion in the criminal-criminal sequence do not pertain to mutual preclusion in the civil-criminal sequence. Many a civil decision is fully explained (as Judge Leinenweber’s was), and all are reviewable on appeal. The Supreme Court understands mutual preclusion not just as a judicial work-saving device but as a matter of right for the litigants involved. See, e.g., Federated Department Stores, Inc. v. Moitie, 452 U.S. 394, 101 S.Ct. 2424, 69 L.Ed.2d 103 (1981).

This is so even when one of the litigants is the United States. See, e.g., Montana v. United States, 440 U.S. 147, 99 S.Ct. 970, 59 L.Ed.2d 210 (1979); United States v. Stauffer Chemical Co., 464 U.S. 165, 104 S.Ct. 575, 78 L.Ed.2d 388 (1984). The prosecutor’s brief in our case tells us that allowing Judge Leinenweber’s decision to foreclose the criminal charges would cause the United States either to pour extra resources into civil suits, disrupting its litigation strategy, or to forego or postpone such suits pending the outcome of criminal cases. Similar arguments were made by the Solicitor General in Montana and Stauffer Chemical, where the United States maintained that the outcome of a poorly litigated civil case (perhaps pursued by a single Assistant United States Attorney in some remote outpost) should not be allowed to block a new suit that has the Department of Justice’s full attention and may be designed to serve a vital public goal. But the Justices had none of this. They, concluded that ordinary rules of preclusion apply to the United States and that the Department of Justice must navigate around established legal rules, rather than the rules giving way to bureaucratic convenience. (The Court made an exception for offensive nonmutual issue preclusion in United States v. Mendoza, 464 U.S. 154, 104 S.Ct. 568, 78 L.Ed.2d 379 (1984), again reflecting Standefer's conclusion that non-mutual preclusion is a matter of wise policy rather than of litigants’ entitlements.)

There is of course a potential for nonmu-tuality in the civil-criminal sequence — but it is the United States that prefers a situation in which it can win but not lose. The United States filed the civil suit seeking damages and hoped to enjoy the fruits of victory. But it tells us that a loss meant little, because after losing it could pursue the criminal prosecution and ask a different judge or jury to reach a different outcome. The principal stakes in both the civil and criminal cases are money. Six months in prison are not to be sneezed at, but the main contest has been about recompense for Oliva’s death and the oil released from the barge. What would have been labeled “damages” in the civil case is called “restitution” in the criminal case, but the money covers the same losses either way. And had the criminal case gone to- trial first and defendants been acquitted, the United States doubtless would be arguing that it could still pursue civil remedies because of the different burdens of persuasion. See, e.g., One Lot Emerald, Cut Stones v. United States, 409 U.S. 232, 234-35, 93 S.Ct. 489, 34 L.Ed.2d 438 (1972); Helvering v. Mitchell, 303 U.S. 391, 397-98, 58 S.Ct. 630, 82 L.Ed. 917 (1938).

Every litigant would like multiple chances to win; that’s what the United States is claiming, while it contends that for Egan and Egan Marine any one loss would be dispositive (at least for financial issues). And, by bringing the civil case first, the United States received the benefit of civil discovery, which is more extensive than that allowed in criminal prosecutions by Fed. R. Crim. P. 16 — discovery that it could put to use in the criminal case as well as the civil one. We understand why the United States seeks these advantages but do not think it entitled to them, without the detriment of being bound by the civil judgment if it loses. If it fails to show some fact in the civil suit by a preponderance of the evidence, it is precluded from trying to show the same thing beyond a reasonable doubt.

Judge Zagel stated that, even if issue preclusion applies in the civil-criminal sequence (as we have concluded it does), he would exercise discretion not to use that doctrine in this prosecution. He did not say where that discretion comes from or address the significance of decisions such as Federated Department Stores that reject judicial efforts to treat rules of preclusion as dispensable whenever judges prefer another outcome. See 452 U.S. at 399-402, 101 S.Ct. 2424.

Normal rules of preclusion have some flex. For example, “[a] new determination of the issue [may be] warranted by differences in the quality or extensiveness of the procedures followed in the two courts”. Restatement (Second) of Judgments § 28(3). In other words, if the first forum’s procedures do not conduce to sufficiently reliable decisions, the second forum may decide that it is best to determine the issue anew. This is what Alexander said about the difference between administrative adjudication and criminal litigation. But Judge Zagel ■ did not conclude that Judge Leinenweber had conducted the civil trial unreliably or that any of the other exceptions in Restatement § 28 had been established; he simply announced that he would disregard the civil judgment because that course seemed best to him. That’s not an appropriate way to treat the outcome of a properly conducted federal civil trial.

Egan Marine was the only defendant in the civil suit. The United States maintains that Egan therefore cannot receive the benefit of the judgment, which it sees as the sort of nonmutual issue preclusion forbidden by Standefer. (The United States also contends that Egan forfeited his entitlement to the benefit of issue' preclusion, but he preserved his position by telling the district court that he was adopting Egan Marine’s arguments on issue preclusion.)

Standefer used the word “nonmutual” to refer to the use of preclusion across different persons, so that A’s victory over C in one case would imply B’s victory over C in another. But the law of preclusion has long recognized that if A and B are in a contractual relation (“in privity” as judges often say) then they are entitled to the same treatment under normal principles of mutual preclusion. Egan and Egan Marine were in such a relation. Indeed, in the civil suit the United States contended that Egan Marine was - vicariously liable for Egan’s acts precisely because of their employment relation. The civil suit was about Egan’s conduct, which was attributed to his employer, and Judge Leinenweber’s core finding (which we quoted earlier) was that the United States had not shown that Oliva was using a propane torch at all, let alone that in using a torch he was follow-mg Egan’s directive. When a court rejects a claim of vicarious liability based on a worker’s conduct, the worker is as much entitled to the benefit of that judgment as is the employer. Muhammad v. Oliver, 547 F.3d 874 (7th Cir. 2008); Restatement § 51. Cf. Taylor v. Sturgell, 553 U.S. 880, 893-95, 128 S.Ct. 2161, 171 L.Ed.2d 155 (2008) (canvassing situations in which a nonparty gets the benefit of a judgment). Having argued in the civil suit that Egan Marine was liable for Egan’s conduct, the United States cannot now treat Egan and the corporation as strangers to each other.

Another way to see this is to recall that Standefer dealt with considerations unique to nonmutual preclusion in criminal litigation: acquittals are unexplained and unre-viewable on appeal. Judge Leinenweber’s decision, by contrast, was accompanied by an opinion and reviewable in this court— though the United States chose not to appeal. It is much easier to' see why a reviewable civil finding that X has not been shown by a preponderance of the evidence should foreclose a contention that X is true beyond a reasonable doubt than it is to carry one criminal acquittal over to a different case.

Because bpth Egan and Egan Marine are entitled to the benefit of the civil judgment, we need not discuss any of the remaining issues. The convictions are reversed, and the case is remanded for the entry of judgments of acquittal.