Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_10-cv-02040/USCOURTS-casd-3_10-cv-02040-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Petition for Removal

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

RICHARD B. MELBYE, also known as

Brent Melbye,

Plaintiff,

CASE NO. 10cv2040 – IEG (JMA)

ORDER GRANTING IN PART AND

DENYING IN PART MOTION FOR

SUMMARY JUDGMENT

[Doc. No. 35]

vs.

ACCELERATED PAYMENT

TECHNOLOGIES, INC., a Delaware

corporation; and DOES 1-10, inclusive,

Defendants.

This is an employment action alleging breach of contract for failure to pay post-termination

wage commissions. Currently before the Court is Defendant Accelerated Payment Technologies,

Inc. (“APT”)’s motion for summary judgment. Having considered the parties’ arguments, and for

the reasons set forth below, the Court GRANTS IN PART and DENIES IN PART the motion.

BACKGROUND

This suit arises from Plaintiff Richard B. Melbye’s employment by Defendant’s

predecessor, CAM Data Systems (later renamed CAM Commerce Solutions, and hereinafter

referred to as “CAM Commerce”). CAM Commerce was formed by Melbye’s college friend,

Geoffrey Knapp. After he graduated college, Melbye joined CAM Commerce as a salesman. At

that time, CAM Commerce sold “point of sale” (“POS”) hardware and software for small retailers. 

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According to Knapp, Melbye quickly became a good salesman and, within a short time, was a top

performer. (Knapp Depo. 116:19-23 (Pl. Opp., Ex. 6).) By 2000, Melbye had been earning more

than $200,000 a year in commissions for sales of POS systems. (Knapp Depo. 12:9-11 (Pl. Opp.,

Ex. 7).) Knapp called Melbye a “big part of the success of the company early on and later.” 

(Knapp Depo. 11:1-4 (Pl. Opp., Ex. 8).)

Around 2001, CAM Commerce developed “X-Charge,” a software program that allowed

retailers to process credit cards directly from their computerized cash registers, without the need to

buy a separate card reader. X-Charge amplified and speeded up the payment process. CAM

Commerce’s approach was to identify specialty software developers in certain retail industries,

such as dry cleaners, salons, tire stores, dentists, and veterinarians, and convince them to integrate

X-Charge into their respective software for managing those businesses. CAM Commerce would

give away X-Charge software for free, in exchange for the oppourtnity to sell payment processing

services to the reseller’s customers. (Knapp Depo. 13:22-14:22 (Pl. Opp., Ex. 11).)

Knapp asked Melbye to be the one to go out, find resellers, and make these “sales.” After

the “sale” was made, it could take years before it would result in any revenue to CAM Commerce. 

As such, Knapp convinced Melbye to trade his current income for a new plan that offered residual

commissions. (Knapp Depo. 12:9-19 (Pl. Opp., Ex. 13).) Knapp told Melbye that “this is going to

be better for you in the long run.” (Id.) He promised Melbye that Melbye would be able to build a

“long-term residual income” that would allow him to share in the success of the business, similar

to stock options or continuing profits on insurance renewals. (Knapp Depo. 15:15-21, 16:1-23 (Pl.

Opp., Ex. 14).) As long as the company kept earning money from that customer, Melbye wold get

his small percentage, graduating down to one percent and staying there. (Id. at 16:1-23.) The

company benefitted by keeping the remaining revenue. (Melbye Decl. ¶ 8 [Doc. No. 45-1].)

Knapp believed that other companies took advantage of their employees, and therefore his

philosophy as the CEO of CAM Commerce was that his company would be different, to attract

and keep good sales talent. (Knapp Depo. 42:1-43:6 (Pl. Opp., Ex. 15).) Knapp realized that after

the employees had amassed sizable commissions, it might seem that they are “worth more dead

than alive” to the company. (Knapp Depo. 43:7-22 (Pl. Opp., Ex. 16).) Therefore, he was very

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clear in telling his employees, including Melbye, that the company was not going to fire them just

to take their commissions away. (Id.) At his deposition, Knapp indicated that it was his intention

that if an employee was fired without cause, the employee would get to keep collecting the

commissions. (Id.) Similarly, according to Melbye, the agreement between him and the company

was that: (a) his commissions are still his if he is terminated without cause, and (b) the company

wasn’t going to fire him to take his money away. (Melbye Decl. ¶ 9.)

Because there would be a long lag between recruiting a reseller and collecting revenue,

Knapp set up an initial commission schedule for his employees that paid a higher percentage from

the first several years. Knapp explained this declining scale in his May 19, 2003 email to Melbye

and others:

When a reseller brings in a new account the sales rep will get 6% of the first

years [sic] processing from that account, 5% for the 2nd year, 4% for the 3rd year,

3% for 4th year and 2% for the 5th year and 1% thereafter. If the rep makes quota

(to be determined), the percentage will jump up to 1% for all years for all accounts

signed up during that year.

(Pl. Opp., Ex. 20; see also Knapp Depo. 38:1-40:24 (Pl. Opp., Ex. 17); Melbye Decl. ¶ 10.)

The May 19, 2003 email contained the following language regarding termination: “You

must be employed by the company to continue receiving the commissions, i.e. if you quit or are

fired for “cause (stealing, etc.) you don’t get to keep collecting the commissions.” (Pl. Opp., Ex.

20.) In their depositions, Knapp and Melbye indicated that they understood this language to mean

that if Melbye was terminated without cause, he had a right to continued residual commissions. 

(See Melbye Depo. 194:4-195:19 (Pl. Opp., Ex. 18); Knapp Depo. 43:7-22 (Pl. Opp., Ex. 18); see

also Melbye Decl. ¶¶ 11, 12.) In other words, Melbye’s right to receive commission would

terminate only if he (a) quit, or (b) was fired for cause. (See Melbye Depo. 194:4-195:19 (Pl.

Opp., Ex. 18).) Knapp reiterated these “contractual commitments” to Melbye on a number of

occasions.1

 (See Melbye Decl. ¶ 13; see also Knapp. Depo. 44:4-24, 47:14-23 (Pl. Opp., Ex. 22).)

On April 26, 2006, Melbye signed a form acknowledging that he was an at-will employee

1

 In 2007, the commission percentages changed, but the overall plan remained the same. As

of April 2007, rather than have a six-tiered commission structure starting at 6% and dropping 1% per

year, the commission would be 3% for five years, and then 1% thereafter. This change only affected

new accounts signed on or after April 2007.

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and that he received the company’s Employee Handbook:

I agree that I am employed by CAM on an at-will basis, and that my

employment can be terminated at any time with or without cause or advance notice,

either by CAM or me. This agreement supersedes all prior agreements, promises,

or understandings concerning termination of my employment.

I also acknowledge that I have received a copy of the Employee Handbook

and have read and understood all of its provisions. This includes reading and

understanding CAM Commerce Solutions’ Code of Business Conduct & Ethics and

CAM’s Compliance Program.

I acknowledge that CAM retains the right and sole discretion to modify,

delete, or add to any of the policies set forth in the Handbook, except for the

agreement that my employment can be terminated at will, which can only be

changed in a formal written contract signed by me and the Chief Executive Officer

of CAM. I understand that no supervisor has the authority to modify, delete, or add

to the policies in the Handbook, and that in the event of a conflict between the

terms of the Handbook and anything told to me by a supervisor or co-employee, the

terms of the Handbook shall control.

(Awrey Dcl., Ex. C [Doc. No. 35-1].) In the section on “Sales Commission Policy,” the Employee

Handbook provided as follows: 

Some employees will be eligible for commissions. Commissions will be

earned when products are shipped and payment is received from the client. 

Commissions will be paid on the paycheck following CAM’s receipt of payment

from the client. Commissions for products shipped prior to termination of

employment will be forwarded once payment is received from the client. If the

contract has been signed, but the order has not yet shipped prior to the last day of

employment, the commission will be split 50/50 with the Sales Representative who

takes over the account.

Eligibility for any commission ends on the last day of employment. 

Therefore, commission will not be paid for credit card processing revenue for any

dates following the end of your employment.

(Awrey Decl., Ex. D.) According to Melbye, he was required to acknowledge receipt of the

Employee Handbook if he wanted to keep his job. (Melbye Decl. ¶ 15; see also Knapp Depo.

62:15-63:12 (Pl. Opp., Ex. 25).) Nonetheless, he was reassured by Knapp that this did not change

their agreement because Melbye was not on the kind of plan referred to in the Handbook. (Melbye

Decl. ¶ 15; see also Knapp Depo. 47:4-23 (Pl. Opp., Ex. 26).)

Some time before January 30, 2007, Melbye asked Knapp for a document that would

protect him in the event Knapp was “hit by a bus” and the future CEO decided not to honor

Knapp’s promises. (Knapp Depo. 31:1-22 (Pl. Opp., Ex. 27).) On January 30, 2007, Melbye and

CAM Commerce entered into a Change of Control Agreement (“COC Agreement”), which

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provided that Melbye would be paid a lump sum if he was terminated without cause. (COC

Agreement ¶ 7.4.1(ii) (Awrey Decl., Ex. E).) However, according to Melbye and Knapp, due to a

drafting error, and in contravention of the agreement’s specific purpose, the COC Agreement

indicated in § 6 that it could be canceled or terminated unilaterally by the company after a change

of control. (Melbye Decl. ¶ 17; Knapp Depo. 176:4-18, 177:5-178:19 (Pl. Opp., Ex. 29).) 

According to Melbye, the provision in § 6 contradicted the provision in § 12.1, which provided

that the COC Agreement “may be modified only by a written instrument duly executed by the

Executive and the Board.” (See Melbye Decl. ¶ 18.) At his deposition, Knapp indicated that he

might not have reviewed Melbye’s agreement closely, and therefore was unaware of the unilateral

termination provision. (Knapp Depo. 179:19-23 (Pl. Opp., Ex. 30); Knapp Depo. 177:5-178:19,

181:14-25 (Pl. Opp., Ex. 31).) Melbye indicates that he would not have signed the COC

Agreement if § 6 would have been brought to his attention. (Melbye Decl. ¶ 18.)

Great Hill Equity Partners purchased CAM Commerce in 2008. On June 1, 2008, during

the due diligence leading up to the sale, Knapp told Great Hill Partners that CAM Commerce had

required its employees to sign new employment contracts setting forth that “commissions are only

earned on revenue that is obtained while they are employed.” (Awrey Decl., Ex. F.) According to

Knapp, this was designed “in part to address any long term exposure to paying out commissions on

continuing revenue from accounts signed up by reps who have departed (for whatever reason).” 

(Id.) At the same time, Knapp specifically indicated that Melbye “ha[d] a separate employment

agreement that addresses a pay out,” which he saw as “a worst case scenario.” (Id.)

Knapp indicated that he also made it “crystal clear” to Great Hill Partners that the deal

depended on them keeping the company as is and not trying to terminate any of the employees. 

(Knapp Depo. 55:14-57:4 (Pl. Opp., Ex. 32).) According to Knapp, he specifically mentioned

Melbye and indicated that the agreement with him was that he would continue earning

commissions even after termination. (Knapp Depo. 222:3-223:16 (Awrey Decl., Ex. K).)

On December 10, 2008, shortly before leaving the company, Knapp sent a letter to Robyn

Thompson, Vice President of Human Resources at CAM Commerce, addressing his concerns

regarding salesperson compensation after his departure as the CEO. Notably, Knapp wrote to

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express his concern that the new management might “take away what the sales people had worked

so hard for in the form of future commissions.” (Awrey Decl., Ex. G.) He discussed how he built

a culture at CAM Commerce that “encouraged sales people to take a lower salary than they might

otherwise be able to get” because the company “gave them the opportunity to build a residual

income.” (Id.) He indicated that his belief was that the company was obligated to pay posttermination commissions to its employees. (Id.) He reiterated that the only reason the company

was so successful and would continue to be successful was because the employees took lower

salaries at the beginning, with the idea of receiving a continuous stream of commissions:

We built a sales culture at CAM with X-Charge that encouraged sales

people to take a lower salary than they might otherwise be able to get in the market

because we gave them the opportunity to build a residual income. . . . An employee

who leaves would actually have lots of sales they were paid nothing on depending

on when they were approved, installed and went live. This is obviously unfair. 

And we didn’t give the employee a choice in signing the new agreement. If they

wanted to work at CAM, they needed to sign it. . . .

. . . .

It is my passionate belief that we made a commitment to each and every

sales person that if they worked hard and paid their dues, they could build up an

income stream at CAM, and thus that this income stream belongs to them even if

they leave the company (especially if they are terminated) because the commissions

represent sales they have already made that have not been fully paid out yet. It isn’t

like if they leave CAM the company has to give the commission to another rep. 

The company just pockets the money. . . .

If it were me I would change the employment agreement to at least state that

if they are terminated for any reason other than cause that they will continue to

receive their commission payments on their sales. This would create a lot of

goodwill and most important it is the right thing to do. Given that the employee

would likely win a challenge, why not do it? And if I am ever asked to opine on

what the commitment was to the employees you know what that opinion would be,

regardless of the employment contract we make them sign (that they really don’t

understand or have any say in).

(Id.)

Also, just before Knapp left the company, the company posted a document entitled “CAM

Commerce Solutions Incentive Programs” (“Incentives Document”), setting forth the

compensation plans for all salespeople, including Melbye. As to Melbye, the document provided:

X-Charge Business Development Plans

The Business Development Team of three works to bring Resellers to the

Company. Their plans vary by individual.

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. . . .

Richard “Brent” Melbye has two different plans based upon when the account

became active. For reseller accounts that were active prior to 4/1/2007, he is paid

residual commission based upon the following tiers:

- Active date less than one year, commission rate is 6%

- Active date less than two years, commission rate is 5%

- Active date less than three years, commission rate is 4%

- Active date less than four years, commission rate is 3%

- Active date less than five years, commission rate is 2%

- Active date more than five years and beyond, commission rate is 1%

For reseller accounts that are active after April 1, 2007 Brent’s commission rate is

3% each month for the first 5 years, then 1% thereafter. In addition, Brent is paid

10% on the system accounts that he signed up when he was System Sales Rep.

. . . .

Payment following termination: Business Development Reps will stop earning

commission upon their last date worked. We will prorate their final month’s

commission amount based upon the number of days worked during that

month. For example, if a Business Development Rep leaves on the 15th of

April, they will be paid 50% of their normal commission amount for that

month on the May 31 payroll.

(Awrey Decl., Ex. B (emphasis in original).) Melbye indicates that this document was posted in

the data room during the due diligence period, that he never saw it, and that it was only meant to

protect the new company moving forward. (Melbye Decl. ¶ 20.)

On December 22, 2008, Roy Banks, the new CEO of CAM Commerce, sent a letter to

Melbye terminating the COC Agreement pursuant to § 6 thereof. (Awrey Decl., Ex. H.) Although

the company offered Melbye a new contract, Melbye ultimately rejected it. On March 31, 2010,

the company (which, by that time, has changed its name to APT) terminated Melbye’s

employment, paying him only his salary through March 31, 2010 and his commissions from the

revenue received through March 2010. (Awrey Decl., Ex. I.)

Melbye filed his complaint on September 2, 2010 in the Superior Court for the County of

San Diego, alleging nine causes of action: (1) breach of contract, (2) unconscionable contract; (3)

prevention of performance; (4) breach of the implied covenant of good faith and fair dealing; (5)

unjust enrichment; (6) unfair competition; (7) failure to pay wages when due; (8) labor code

penalties; and (9) declaratory relief. Defendant APT filed an answer and then removed the suit to

this Court. Defendant filed this motion for summary judgment on November 18, 2011. On

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December 22, 2011, the Court denied Melbye’s motion for leave to amend the complaint. Melbye

then filed an opposition to the current motion, and Defendant APT replied.2

 The Court heard oral

argument on the motion on January 9, 2012.

LEGAL STANDARD

Summary judgment is proper where the pleadings and materials demonstrate “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); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A material

issue of fact is a question that a trier of fact must answer to determine the rights of the parties

under the applicable substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 

A dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the

nonmoving party.” Id.

The moving party bears “the initial responsibility of informing the district court of the basis

for its motion.” Celotex, 477 U.S. at 323. To satisfy this burden, the movant must demonstrate

that no genuine issue of material fact exists for trial. Id. at 322. Where the moving party does not

have the ultimate burden of persuasion at trial, it may carry its initial burden of production in one

of two ways: “The moving party may produce evidence negating an essential element of the

nonmoving party’s case, or, after suitable discovery, the moving party may show that the

nonmoving party does not have enough evidence of an essential element of its claim or defense to

carry its ultimate burden of persuasion at trial.” Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210

F.3d 1099, 1106 (9th Cir. 2000). To withstand a motion for summary judgment, the non-movant

must then show that there are genuine factual issues which can only be resolved by the trier of

fact. Reese v. Jefferson Sch. Dist. No. 14J, 208 F.3d 736, 738 (9th Cir. 2000). A party asserting

that a fact cannot be or is genuinely disputed cannot rely solely on its pleadings, but must support

that assertion with affidavits, depositions, or answers to interrogatories. Fed. R. Civ. P. 56(c)(1);

see also Celotex, 477 U.S. at 324.

The court must review the record as a whole and draw all reasonable inferences in favor of

2

 In conjunction with its reply, Defendant filed evidentiary objections to Melbye’s Declaration

and a motion to strike Melbye’s Declaration. [Doc. No. 46-1.] Having considered the evidentiary

objections, the Court hereby OVERRULES them and DENIES the motion to strike. 

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the non-moving party. Hernandez v. Spacelabs Med. Inc., 343 F.3d 1107, 1112 (9th Cir. 2003). 

To avoid summary judgment, the non-moving party need not produce evidence in a form that

would necessarily be admissible at trial. Celotex, 477 U.S. at 324. However, unsupported

conjecture or conclusory statements are insufficient to defeat summary judgment. See Surrell v.

Cal. Water Serv. Co., 518 F.3d 1097, 1103 (9th Cir. 2008); Hernandez, 343 F.3d at 1112.

DISCUSSION

Melbye’s first cause of action alleges that Defendant APT breached an oral agreement by

refusing to pay him post-termination commissions. Melbye’s second cause of action alleges that

to the extent he had to remain employed to continue receiving his commissions, such provision in

a contract is unconscionable. His third cause of action alleges that to the extent he had to remain

employed to continue receiving his commissions, Defendant prevented his performance by

terminating his employment. Melbye’s fourth cause of action alleges that Defendant breached the

covenant of good faith and fair dealing by terminating him for the sole purpose of avoiding the

obligation to pay him commissions. His fifth cause of action alleges that Defendant has been

unjustly enriched by receiving substantial revenue from third parties under the reseller contracts

that Melbye sold while employed by CAM Commerce. Melbye’s sixth cause of action alleges that

Defendant’s termination of his employment solely to avoid paying the commissions violated

California’s unfair competition law (“UCL”), Cal. Bus. & Prof. § 17200 et seq. His seventh cause

of action alleges that Defendant violated the California Labor Code by failing to pay him posttermination commissions, which amount to “wages” under the Labor Code. Melbye’s eighth cause

of action seeks Labor Code penalties for failure to pay the commissions. His ninth cause of action

seeks declaratory relief as to his right to receive post-termination commissions.

I. Breach of contract

Defendant seeks summary judgment on the first cause of action by arguing that Melbye is

not entitled to post-termination commissions because: (a) his employment was at-will and no

written contract governed his employment; (b) the only written documents governing Melbye’s

employment, the Employee Handbook and the Incentives Document, explicitly state that he is not

entitled to post-termination commissions; and (c) there was no oral contract between Melbye and

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APT. In opposition, Melbye contends that summary judgment should be denied because there are

genuine issues of material fact as to the following issues: (a) the existence of an oral agreement

between him and CAM Commerce, which pre-dated the written policy documents; and (b) the

applicability to him of the Employee Handbook and the Incentives Document.

A. Existence of an oral or implied-in-fact agreement

It appears that there are genuine issues of material fact in this case as to the existence of an

oral or implied-in-fact agreement, and therefore summary judgment is not appropriate at this time. 

In Foley v. Interactive Data Corporation, 47 Cal. 3d 654 (1988), the California Supreme Court

considered whether, despite the presumption that employment in California is “at-will” and in the

absence of an express written or oral contract term concerning termination of employment, the

plaintiff could nonetheless show that there existed an agreement that he would only be terminated

for good cause. The California Supreme Court indicated that the presumption of at-will

employment could be overcome by evidence of contrary intent:

Generally, courts seek to enforce the actual understanding of the parties to a

contract, and in so doing may inquire into the parties’ conduct to determine if it

demonstrates an implied contract. “It must be determined, as a question of fact,

whether the parties acted in such a manner as to provide the necessary foundation

for an implied contract, and evidence may be introduced to rebut the inferences and

show that there is another explanation for the conduct.”

Id. at 677 (citations omitted). According to the California Supreme Court, “[s]uch implied-in-fact

contract terms ordinarily stand on equal footing with express terms.” Id. at 677-78.

In Foley, the California Supreme Court delineated a number of factors a court could

consider in determining whether an implied-in-fact agreement exists:

In the employment context, factors apart from consideration and express

terms may be used to ascertain the existence and content of an employment

agreement, including “the personnel policies or practices of the employer, the

employee's longevity of service, actions or communications by the employer

reflecting assurances of continued employment, and the practices of the industry in

which the employee is engaged.”

Id. at 680 (citation omitted). Analyzing the “totality of the circumstances” in Foley, the California

Supreme Court concluded that the plaintiff adequately alleged the existence of an implied-in-fact

agreement where he alleged “repeated oral assurances of job security and consistent promotions,

salary increases and bonuses during the term of his employment contributing to his reasonable

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expectation that he would not be discharged except for good cause.” Id. at 681.

In this case, Melbye has presented sufficient evidence to establish a triable fact as to the

existence of an oral or an implied-in-fact agreement. Unlike Foley, Melbye affirmatively states in

his declaration that there was an express oral contract in this case providing that he will be paid

post-termination commissions, unless he quit or was terminated for cause. (See Melbye Decl. ¶ 9.) 

Moreover, looking at the totality of the circumstances, it appears there is at least a genuine issue of

material fact as to the “understanding of the parties to a contract.” See Foley, 47 Ca. 3d at 677,

680-81. Just like in Foley, Melbye has presented evidence of “repeated oral assurances” that he

would not lose his commissions upon termination, unless he is terminated for good cause, which

would have given rise to “reasonable expectation” that he is entitled to post-termination

commissions. See id. at 681. For example, Knapp convinced Melbye to take a lower salary in

2001, with the expectation that Melbye would build a “long-term residual income.” (See Knapp

Depo. 12:9-19, 15:15-21, 16:1-23.) In his deposition, Knapp indicated that the understanding was

that the company would not fire its employees to take away their commissions and that even if

fired, the employees would be entitled to post-termination commissions, unless fired for good

cause. (See Knapp Depo. 43:7-22.) Knapp allegedly memorialized this understanding in his May

19, 2003 email to the employees. (See Pl. Opp., Ex. 20; see also Knapp Depo. 38:1-40:24, 43:7-

22.) According to both Knapp and Melbye, Knapp reiterated these contractual commitments to

Melbye on a number of occasions. (See Melbye Decl. ¶ 13; Knapp Depo. 44:4-24, 47:14-23.)

Defendant’s arguments to the contrary are not persuasive. For example, Defendant points

to a sentence from Melbye’s deposition, where Melbye supposedly states that he does not recall if

he had a specific conversation with Knapp or anyone else about receiving post-termination

commissions. (See Melbye Depo. 188:19-189:3.) However, at most, this raises a disputed issue of

material fact, which is inappropriate for the Court to resolve at the summary judgment stage. See

Anderson, 477 U.S. at 249-50. Similarly, purporting to cite to Knapp’s deposition, Defendant

argues that it is clear that there was no oral agreement to pay Melbye post-termination

commissions and that, even if there was, Knapp never told Great Hill Partners about it. (See

Knapp Depo. 222:17-223:16, 227:22-228:4.) Even if this is the correct reading of those portions

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of Knapp’s deposition, they are at the very least in conflict with other portions of Knapp’s

deposition, where he resolutely states that there was an agreement with Melbye, that it was his

belief that the company should keep to that agreement, and that he clearly told Great Hill Partners

about the agreement. (See Knapp Depo. 43:7-22, 55:14-57:4, 222:3-223:16.) The portions of

Knapp’s deposition cited by Defendant are also in conflict with Knapp’s December 10, 2008 letter,

discussing the employees’ right to post-termination commissions. (See Awrey Decl., Ex. G.)

Accordingly, Melbye has sufficiently demonstrated that there are at least genuine issues of

material fact going to the existence of an oral or an implied-in-fact agreement in this case.

B. Company’s written policies

There are also genuine issues of material fact as to whether the Employee Handbook and

the Incentives Document defeat Melbye’s breach of contract cause of action. “When an employer

promulgates formal personnel policies and procedures in handbooks, manuals, and memoranda

disseminated to employees, a strong inference may arise that the employer intended workers to

rely on these policies as terms and conditions of their employment, and that employees did

reasonably so rely.” Guz v. Bechtel Nat’l Inc., 24 Cal. 4th 317, 344 (2000). Each case, however,

must “turn[] on its own facts.” Id. at 337. Thus, according to the California Supreme Court:

Where there is no express agreement, the issue is whether other evidence of the

parties’ conduct has a “tendency in reason” to demonstrate the existence of an

actual mutual understanding on particular terms and conditions of employment. If

such evidence logically permits conflicting inferences, a question of fact is

presented. But where the undisputed facts negate the existence or the breach of the

contract claimed, summary judgment is proper.

Id. (internal citations omitted). On the one hand, written policies and provisions, such as in

personnel handbooks, manuals, or memoranda, “do not bar, or necessarily overcome, other

evidence of the employer’s contrary intent.” Id. at 339 (citations omitted). “The reasoning,

express or implied, is that parol evidence is admissible to explain, supplement, or even contradict

the terms of an unintegrated agreement, and that handbook disclaimers should not permit an

employer, at its whim, to repudiate promises it has otherwise made in its own self-interest, and on

which it intended an employee to rely.” Id. On the other hand, provisions “in an express written

agreement, signed by the employee, cannot be overcome by proof of an implied contrary

understanding.” Id. at 340 n.10 (emphasis in original).

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In this case, there is no express written agreement governing Melbye’s entitlement to posttermination commissions.3

 Rather, there is only an alleged oral agreement (supported by the May

19, 2003 email and the December 10, 2008 letter) promising post-termination commissions and

several written policies to the contrary. In Guz, the California Supreme Court noted that while the

disclaimer language in an employee handbook or policy manual could not be ignored, it does not

necessarily mean that it creates a binding contract. Id. at 340. Rather, the Court considered a

number of factors, including: (1) whether the plaintiff understood the policy to apply to him; (2)

whether he received individual promises or representations that he will not be fired except for

good cause, and (3) whether there was a practice in the company’s industry to provide secure

employment. See id. at 339-43. Applying these factors in this case, there are at least genuine

issues of material fact as to whether the written policies applied to Melbye. First, Melbye

indicates that he was reassured by Knapp that the Employee Handbook did not apply to him. (See

Melbye Decl. ¶ 15; see also Knapp Depo. 47:4-23.) As for the Incentives Document, Melbye

indicates that he was not aware of it until this lawsuit. (See Melbye Decl. ¶ 20.) Second, Melbye

declares that he did receive individual promises and representations from Knapp, and Knapp has

acknowledged that he made and re-affirmed those promises to Melbye on numerous occasions. 

(See Melbye Decl. ¶ 13; Knapp Depo. 44:4-24, 47:14-23.) Third, according to Knapp, there was a

practice at CAM Commerce of employees agreeing to lower salaries and being promised longterm commissions. (See Knapp Depo. 42:1-43:22; see also Awrey Decl., Ex. G.)

Defendant’s reliance on California Court of Appeal’s decision in Nein v. HostPro, Inc.,

174 Cal. App. 4th 833 (2009), is inapposite. In Nein, the Court of Appeal affirmed summary

3

 Neither party appears to contend that the COC Agreement controls this case. Melbye argues

that the COC Agreement was unconscionable to the extent it allowed the new CEO to unilaterally

terminate the agreement. Moreover, he contends the existence of the unilateral termination provision

amounted to a mutual mistake of fact, thereby presumably voiding the agreement. Defendant, for its

part, does not rely on the agreement because it itself terminated the agreement before terminating

Melbye. In any event, even if the COC Agreement controlled, the Court notes that the agreement

specifically provides that it does not prevent or limit Melbye’s participation in “any benefit, bonus,

incentive or other plan or program provided by the Corporation or any of its affiliated companies and

for which [Melbye] may qualify.” (COC Agreement § 8.) The COC Agreement further provides that

“amounts which are vested benefits or which [Melbye] is otherwise entitled to receive under any plan

or program of the Corporation or any of its affiliated companies at or subsequent to the Date of

Termination shall be payable in accordance with such plan or program.” (Id.) This presumably leaves

intact any prior agreement (or lack thereof) for post-termination commissions.

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judgment for the employer where there was an express written employment agreement providing

that the plaintiff would not receive commission after termination. Id. at 850. In this case,

however, there is no express written employment agreement governing Melbye’s entitlement to

post-termination commissions. Rather, there are only written policies which, accepting Melbye’s

representations as true, are not applicable to him.4 See Guz, 24 Cal. 4th at 339-40.

Overall, the conflicting evidence in this case raises genuine issues of material fact as to the

“actual mutual understanding [of the parties] on particular terms and conditions of employment.” 

See id. at 337. Specifically, viewing the facts in the light most favorable to Melbye, such evidence

“logically permits conflicting inferences,” see id., thereby making summary judgment improper.

For the foregoing reasons, the Court concludes that despite the written policies in place,

there are genuine issues of material fact as to whether there was a valid oral or implied-in-fact

agreement between CAM Commerce and Melbye, and whether the company breached it. As such,

the Court DENIES Defendant’s motion for summary judgment as to the first cause of action.

II. Unconscionable contract

Melbye’s second cause of action alleges that a contract requiring continued employment

for receipt of commissions is unconscionable. California cases analyze unconscionability as

having two separate elements: “procedural” and “substantive.” See, e.g., Vance v. Villa Park

Mobilehome Estates, 36 Cal. App. 4th 698, 709 (1995); Shaffer v. Super. Ct., 33 Cal. App. 4th 993,

1000 (1995). “Procedural” unconscionability involves “(1) ‘oppression,’ which refers to an

inequality of bargaining power giving no meaningful choice to the weaker party or (2) the

‘surprise’ of a contractual term hidden in a printed or complex document.” Shaffer, 33 Cal. App.

4th at 1000 (citation omitted). “Substantive” unconscionability, on the other hand, refers to an

“overly harsh allocation of risks or costs which is not justified by the circumstances under which

the contract was made.” Id. (citation and internal quotation marks omitted). A showing of both

4

 For the same reason, both Wal-Noon Corporation v. Hill, 45 Cal. App. 3d 605, 613 (1975)

(“There cannot be a valid, express contract and an implied contract, each embracing the same subject

matter, existing at the same time.”), and Lance Camper Manufacturing Corporation v. Republic

Indemnity Company of America, 44 Cal. App. 4th 194, 203 (1996) (“[I]t is well settled that an action

based on an implied-in-fact or quasi-contract cannot lie where there exists between the parties a valid

express contract covering the same subject matter.”), are inapposite due to the genuine issues of

material fact as to the existence and applicability of any express written contract to Melbye.

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“procedural” and “substantive” unconscionability at the time the contract was made is usually

required, see A & M Produce Co. v. FMC Corp., 135 Cal. App. 3d 473, 487 (1982), although

California courts have at times applied a sliding scale instead. See Am. Software, Inc. v. Ali, 46

Cal. App. 4th 1386, 1390-91 (1996) (citing cases).

Melbye has not filed an opposition to this part of Defendant’s motion for summary

judgment. In any event, Defendant is entitled to summary judgment on this issue. There is no

indication that the inequality in bargaining power and oppression in this case were so strong as to

“shock the conscience.” See Cal. Grocers Ass’n v. Bank of Am., 22 Cal. App. 4th 205, 214 (1994). 

Moreover, there is no indication that requiring continued employment to receive commissions

amounts to an “overly harsh allocation of risks or costs which is not justified by the circumstances

under which the contract was made.” See Shaffer, 33 Cal. App. 4th at 1000 (citation and internal

quotation marks omitted); see also Am. Software, 46 Cal. App. 4th at 1393-94 (concluding that a

provision in plaintiff’s employment contract which terminated her right to receive commissions on

payments received on her accounts 30 days after termination was not unconscionable). Thus, the

Court GRANTS Defendant’s motion for summary judgment as to the second cause of action.

III. Prevention of performance

Melbye’s third cause of action alleges prevention of performance. Melbye has not filed an

opposition to this part of Defendant’s motion. Moreover, as indicated earlier, Melbye was an atwill employee, and therefore Defendant’s termination of him was not, as a matter of law, improper

prevention of performance. Accordingly, the Court GRANTS Defendant’s motion for summary

judgment as to the third cause of action.

IV. Good faith and fair dealing

The fourth cause of action alleges breach of the covenant of good faith and fair dealing. 

The implied covenant of good faith and fair dealing is “designed to effectuate the intentions and

reasonable expectations of parties reflected by mutual promises within the contract.” Silvinsky v.

Watkins-Johnson Co., 221 Cal. App. 3d 799, 806 (1990) (citing Foley, 47 Cal. 3d at 68-84). 

Defendant’s sole argument why summary judgment should be granted on this cause of action is

based on Nein, 174 Cal. App. 4th at 852, which dismissed a similar claim where “the express terms

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of the agreement . . . permitted defendant to deny plaintiff further commissions after his

termination.” In this case, however, the Court already concluded that there are genuine issues of

material fact as to whether Defendant could deny Melbye post-termination commissions. 

Accordingly, summary judgment on Melbye’s fourth cause of action is inappropriate at this time,

and the Court DENIES the motion in this regard.

V. Unjust enrichment

Melbye’s fifth cause of action alleges unjust enrichment. However, “there is no cause of

action in California for unjust enrichment.” Melchior v. New Line Prods., Inc., 106 Cal. App. 4th

779, 793 (2003); accord McKell v. Wash. Mut., Inc., 142 Cal. App. 4th 1457, 1490 (2006). Rather,

unjust enrichment is “synonymous with restitution.” Melchior, 106 Cal. App. 4th at 793.

Melbye attempts to save this cause of action by arguing that it is sufficient to allege a

common count for assumpsit (services rendered) or quantum meruit (reasonable value of services

rendered). However, because Melbye has not alleged either of these claims in his complaint, the

Court GRANTS Defendant’s motion for summary judgment as to the fifth cause of action. See id.

VI. Unfair competition

The sixth cause of action alleges a violation of California’s UCL. California courts have

held that “where the employer’s policy or practice is forbidden by or found to violate the Labor

Code, it may also be held to constitute an ‘unlawful business practice’ subject to redress” under

Section 17200 of the California Business and Professions Code. See Application Group, Inc. v.

Hunter Group, Inc., 61 Cal. App. 4th 881, 908 (1998) (citing cases). In this case, Defendant’s only

argument is that this claim is duplicative of Melbye’s other claims for post-termination

commissions, and therefore fails because he is not entitled to those commissions as a matter of

law. Because there are genuine issues of material fact as to whether Melbye is entitled to posttermination commissions, summary judgment is also inappropriate as to this cause of action. 

Accordingly, the Court DENIES Defendant’s motion as to the sixth cause of action.

VII. Failure to pay “wages” under the Labor Code and Labor Code penalties

Melbye’s seventh cause of action alleges that Defendant failed to pay “wages” under the

California Labor Code. His eighth cause of action seeks penalties under the Labor Code. 

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Defendant’s only argument is that these causes of action rely on Melbye’s argument that he is

entitled to post-termination commissions. Because Melbye has raised genuine issues of material

fact as to his entitlement to post-termination commissions, summary judgment is not proper as to

these causes of action at this time. Accordingly, the Court DENIES Defendant’s motion for

summary judgment as to the seventh and eighth causes of action.

VIII. Declaratory relief

The Court also DENIES Defendant’s motion for summary judgment as to the ninth cause

of action seeking declaratory relief because it hinges on the same grounds as Melbye’s first cause

of action and Defendant does not make any separate argument for summary judgment.

CONCLUSION

For the foregoing reasons, the Court GRANTS IN PART and DENIES IN PART

Defendant’s motion for summary judgment. Specifically, because Melbye has sufficiently

demonstrated genuine issues of material fact as to his entitlement to post-termination commissions,

the Court DENIES Defendant’s motion as to the first, fourth, sixth, seventh, eighth, and ninth

causes of action. On the other hand, for the reasons set forth above, the Court GRANTS

Defendant’s motion as to the second, third, and fifth causes of action.

IT IS SO ORDERED.

Date: January 11, 2012 ________________________________

IRMA E. GONZALEZ, Chief Judge

United States District Court

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