Opinion ID: 2813115
Heading Depth: 3
Heading Rank: 2

Heading: Pursuit of JPMorgan Chase; the Sun Acquisition

Text: Lawson started pursuing JPMorgan Chase as a customer in 2004, and by 2005 he was dedicating a significant amount of time to closing a deal. In June 2005 JPMorgan Chase solicited a bid from StorageTek for computer maintenance services. Although the parties had a preexisting contractual relationship to service StorageTek products, the June 2005 Request for Proposal involved computer maintenance services for non-StorageTek products, so this was new business unrelated to the prior contract. In other words, in StorageTek’s sales taxonomy, JPMorgan Chase’s Request for Proposal sought “Enterprise Support Services.” Lawson spearheaded StorageTek’s response. Importantly, however, a large percentage of the new services contained within the Request for Proposal involved servicing Sun’s products. Prior to Sun’s acquisition of StorageTek in August 2005, IBM had subcontracted with Sun to provide JPMorgan Chase with global support for Sun products. This agreement, called a “Statement of Work,” originally covered the period between February 1, 2003, and January 31, 2006. Sun and IBM extended the arrangement through December 31, 2009, pursuant to an amendment to the Statement of Work executed on March 15, 2005. Despite this extension, in June 2005 JPMorgan Chase issued a separate Nos. 13-1502 & 13-1503 7 Request for Proposal inviting Sun to bid directly (not through IBM) for the business covered by the Statement of Work. Jim Whaley, a Sun sales executive, took the lead in coordinating the response and submitted a bid on Sun’s behalf. On June 2, 2005, Sun announced that it was acquiring StorageTek. This announcement prompted Lawson to e-mail his supervisor, Paul Heidkamp, to ask how the acquisition would affect his commission on the JPMorgan Chase deal. Heidkamp responded that he needed more information and would get back to him. On August 31 Sun acquired StorageTek. After the acquisition JPMorgan Chase asked Sun to combine the StorageTek and Sun bids. From the standpoint of Lawson’s commission, the takeover dramatically changed the significance of the deal. As we’ve noted, a substantial portion of the JPMorgan Chase work involved maintaining Sun products—business that would have been new to StorageTek. After the acquisition, however, it was classified as renewal business because Sun was already providing the services under the IBM Statement of Work. Sun’s revised merged bid contained three components. First, Sun offered to combine and continue services it was already providing under the IBM Statement of Work and StorageTek’s prior contract with JPMorgan Chase. Second, Sun offered to partner with UNISYS to service products made by other computer manufacturers, such as Hewlett Packard, Compaq, Dell, and IBM; this work would be new business for Sun. Third, Sun offered to provide maintenance services for JPMorgan Chase’s mainframe computer systems. 8 Nos. 13-1502 & 13-1503 Whaley (from Sun) and Lawson (from StorageTek) spearheaded the joint proposal, which Sun submitted to JPMorgan Chase on October 11, 2005. Whaley died shortly thereafter, and Martina Caldara, who had worked on Sun’s pre-merger bid, filled his position. In addition to changing the significance of the JPMorgan Chase deal, Sun’s takeover of StorageTek altered the terms of Lawson’s incentive plan. On September 1, 2005, Sun amended the plan to specifically address the effect of the acquisition. Whereas StorageTek used the calendar year as its fiscal year, Sun’s fiscal year began on June 26. The September 1 amendment explained that StorageTek would convert to Sun’s fiscal year, with the transition to take place on December 25, the end of Sun’s second fiscal quarter. To effectuate the conversion, the amendment specifically stated that “the current incentive plan year for StorageTek will end December 25, 2005.” Sun continued to pursue the JPMorgan Chase deal through the fall of 2005, and Lawson again tried to ascertain how the acquisition would affect his incentive compensation. In November 2005 he e-mailed Woody Wall, a Sun manager, asking about the split between his commission and Whaley’s. Wall assured Lawson that the company would “do the right thing for this transaction” and asked him to explain his concerns. The day after this exchange, Peter Orr, who had been Whaley’s supervisor, e-mailed Tom Kelley, Sun’s Vice President of North American sales, explaining that Lawson’s situation was “unique” and attempting to determine how his commission on the JPMorgan Chase deal should be treated. Nos. 13-1502 & 13-1503 9 Lawson received a copy of the e-mail but does not recall receiving any response. On December 8 Lawson again e-mailed Heidkamp asking whether the 2005 compensation plan would extend beyond the new year or if a new plan would be forthcoming. Heidkamp responded that the “comp plan should stay the same.” Heidkamp also e-mailed Phil Auble, Sun’s Incentive Plan Administrator, asking for a special “exception” for Lawson’s commission on the JPMorgan Chase sale. Additional exchanges between Lawson, Heidkamp, and other Sun supervisors throughout the month of December did not reach a consensus on how Lawson would be compensated for his work on the deal. Sun’s second fiscal quarter ended on December 25. The next day Sun sent Lawson a letter informing him that “[a]s of December 26, 2005, you will transition to [Sun’s] Data Management Group Global Storage Sales Compensation Plan.” The December 26 letter stated that Lawson would receive a copy of the plan and an individual goal sheet “[o]n or about January 15, 2006.” The letter also assigned Lawson a new title: “Sales Specialist 1, DMG Sales.” Lawson countersigned the letter, indicating that he received and understood it. Sun did not send him a copy of the new incentive plan until March 17, 2006. In the meantime, the JPMorgan Chase deal remained in limbo. JPMorgan Chase continued to study Sun’s October 11 bid and asked for a $7 million price reduction for the Sun/IBM component. On December 15, 2005, Lawson sent a detailed 10 Nos. 13-1502 & 13-1503 e-mail to Sun management proposing a strategy for persuading JPMorgan Chase to accept the deal. JPMorgan Chase ultimately accepted only the first part of Sun’s October 11 bid—the component consisting of the joint Sun/IBM proposal and continuation of the services StorageTek had previously provided. JPMorgan Chase and IBM executed a “Letter of Authorization”—essentially an agreement to negotiate in good faith toward a final agreement or amendment of the Statement of Work by January 30, 2006. The final amendment wasn’t issued until September 29, 2006, but in the interim the parties issued several letters of intent in which IBM agreed to continue to work under the amendment to the Statement of Work. Because JPMorgan Chase only accepted the first component of the bid, the deal did not result in new business to Sun or StorageTek. On March 16, 2006, Sun internally recorded the sale as final, and on March 23, 2006, issued the first invoices for the work.