Opinion ID: 2978496
Heading Depth: 3
Heading Rank: 1

Heading: SBC’s Discretion for Large Sales

Text: SBC argues that under the terms of the implied-in-fact contract with the plaintiffs it had discretion to set the commission for large sales at a rate different from the commission for smaller 2 In a diversity case, we apply state law—in this case Michigan law—to determine the standard of review for a motion for judgment as a matter of law. Ridgway v. Ford Dealer Computer Servs., Inc., 114 F.3d 94, 97 n.3 (6th Cir. 1997) (noting that Sixth Circuit precedent conflicts with other circuits and some leading treatises which apply federal law for the standard of review). 5 sales. The jury, however, determined otherwise, and its determination was supported by evidence presented at trial. Under Michigan law, the terms of an implied-in-fact contract are “determined by [the parties’] conduct or other pertinent circumstances surrounding the transaction.” Kingsley Assocs., Inc. v. Moll PlastiCrafters, Inc., 65 F.3d 498, 504 (6th Cir. 1995) (citing Erickson v. Goodell Oil Co., 180 N.W.2d 798 (Mich. 1970)). “In deciding whether there was mutual assent to [an implied contract term], [Michigan courts] use an objective test, ‘looking to the expressed words of the parties and their visible acts.’” Rowe v. Montgomery Ward & Co., Inc., 473 N.W.2d 268, 273 (Mich. 1991) (emphasis in original) (citations omitted). In this case, to determine whether there was assent to a term, the jury had to look at how a reasonable person in Anton’s and Snipes’s position would have interpreted SBC’s statements or conduct. Rood v. General Dynamics Corp., 507 N.W.2d 591, 598 (Mich. 1993) (“In deciding whether a party has assented to a contract, we follow the objective theory of assent, focusing on how a reasonable person in the position of the promisee would have interpreted the promisor’s statements or conduct.” (citation omitted)). In this case, the parties’ conduct and the circumstances surrounding the transaction demonstrate that the jury had a reasonable basis to conclude that the implied-in-fact contract did not give SBC discretion over the amount of commissions. In particular, this is established by three pieces of evidence: prior commissions for contracts (i.e., course of dealing evidence), the Plan’s terms themselves, and the statements of SBC management.
Before the CCI Agreement, SBC had paid the plaintiffs’ commissions based on each signed contract’s LCR, including three such contracts with CCI. Anton never had a commission lowered. 6 Thus, it was completely reasonable for her to assume, and a jury to conclude, that her commission for the CCI deal would be calculated exactly as it had been in the past. With respect to Snipes, however, SBC contends that at the very least Snipes understood that not all contracts were paid pursuant to their LCRs’. SBC points out that its Sales Compensation Team reviewed two of Snipes’s “large sales” and, in one case, made a “downward adjustment” to the LCR calculation. SBC’s argument fails because a jury could reasonably conclude that Snipes saw the Sales Compensation Team’s review as merely a means to verify that commissions were calculated correctly for large contracts—not to give SBC discretion over commissions for large contracts. Indeed, in the case where SBC made a downward adjustment, it did so because the LCR was incorrectly calculated, not because it was exercising its discretion to reduce the commission. Laura Pike, Associate Director of Compensation at SBC, testified that SBC lowered that commission because a portion of the signed contract, equipment sales, was not eligible for compensation. Pike further testified that SBC often gave commissions pursuant to LCR even when it reviewed large sales. Thus, it was reasonable for a jury to conclude that Snipes understood that SBC’s review of large sales was to check for errors in the calculations of commissions—not to give SBC discretion to reduce the commissions. SBC cites Dyer v. Michigan Department of State Police, 326 N.W.2d 447 (Mich. Ct. App. 1982), for the proposition that no implied right is created based on custom where there is a conflicting express policy of the employer. In Dyer, the question was whether police officers could use work vehicles for personal use since they had been allowed to in the past even though an express policy prohibited such use. See id. at 449-50. The court found that the previous personal use did 7 not affect the binding nature of the express policy for two reasons: (1) the rights and duties of the parties were “not regulated by implication [but rather] they are controlled by the express terms of the official policy statements” and (2) the consent to use the vehicles for personal use was given by supervisors who went beyond their authority. Id. The instant case is distinguishable. First, no express contract exists. In fact, the parties have stipulated that they have agreed to an implied-in-fact contract. Therefore, unlike in Dyer, the parties here are regulated by implication—not necessarily the express terms of the Plan. Additionally, SBC itself established the custom of calculating sales commissions based on each contract’s LCR. SBC has not argued that there was improper consent to the payment terms of previous contracts. The terms of the policy in Dyer clearly prohibited personal use of the work vehicles, whereas here the terms of SBC’s Plan have two possible interpretations. Thus, the reasoning in Dyer does not support SBC’s position. SBC also cites Jensen v. IBM Corp., 454 F.3d 382 (4thCir. 2006), to support its position that custom should not be a basis for determining the terms of the implied-in-fact contract. Jensen is inapposite since it does not address whether custom could be a basis for construing the terms of an implied-in-fact contract. In short, SBC provides no Michigan law that illustrates why custom or course of dealing evidence should not govern the implied contract at issue here. Thus, the custom and course of dealing evidence introduced in this case supports the jury’s conclusion that SBC did not have discretion over the size of commissions.
8 SBC maintains that all of the previous commissions were consistent with the Plan’s terms and, hence, its terms or, stated more accurately, SBC’s interpretation of the Plan’s terms governed the commissions for the CCI Agreement. SBC fails to demonstrate that a reasonable jury must conclude that the plaintiffs had knowledge of the large sales provision in the Plan. However, even if the plaintiffs were aware of its terms, SBC fails to show that a reasonable jury must conclude that the plaintiffs assented to SBC’s interpretation of the provision. There were ample facts in the record from which the jury could reasonably conclude that Anton was unaware of the large sales provision, and thus, could not have assented to it. SBC argues that Anton should have been aware that she was bound to the Plan’s terms because her June 10, 1999, offer letter refers to it. The letter, in part, states: In addition to your base salary, you will participate in the GBS 1999 Solutions Consultant-Data Compensation Plan (your manager will provide details of the plan administration). Anton requested the Plan from her manager at the time, but there is no evidence that she received the Plan. When she asked for the Plan, her manager told her that her commissions were paid based on LCR. No one told her that large sales would be compensated differently. SBC also claims that Anton accessed the database containing the Plan right before the CCI Agreement was signed and, thus, was aware of its terms. But Anton testified that she only accessed the database to get pricing information and was unaware that the Plan’s compensation terms were also there. Further, SBC points out that it emailed “compensation banners” to sales employees, which contained a link to the Plan. This is the strongest evidence that could show Anton was aware the Plan could be accessed electronically. Still, there was no proof that Anton received these emails. Moreover, SBC did not require the plaintiffs to sign a statement acknowledging receipt of the Plan, 9 as had been the practice in years before their employment and since the CCI Agreement. This fact provides further support that SBC has failed to show that a reasonable jury must find that Anton had knowledge of the Plan’s terms. With respect to Snipes, the evidence showed that she at least had some knowledge of the Plan’s terms and how to access them. Unlike Anton, Snipes acknowledged that she accessed and viewed the Plan on Lotus Notes in March 2000 before the CCI Agreement was signed. She “breezed through the [Plan]” but testified that she did not come across the large sales provision. In addition, unlike Anton, Snipes acknowledged receiving the compensation banner emails that had links to the Plan. Thus, a reasonable jury must conclude that Snipes had at least some knowledge of the Plan and its terms—clearly more than Anton. Nonetheless, given that the Plan’s terms were sufficiently vague and the other evidence in the plaintiffs’ favor, Snipes’ mere knowledge of the Plan’s terms is not enough to overturn the jury’s verdict. SBC responds that the plaintiffs’ subjective interpretations of the Plan are not relevant here since the terms are clear and unambiguous. See L & S Bearing Co. v. Morton Bearing Co., 93 N.W.2d 899, 901 (Mich. 1959) (“In Michigan the law is clear that where a written contract is not ambiguous the intention of the parties as expressed on the face thereof must be followed . . . .”). In other words, SBC argues that knowledge of the terms is enough to bind the plaintiffs since the terms are unambiguous. But the large sales provision3 merely states that sales with an LCR greater than $2 million will be “reviewed by the BCS Sales Compensation Team (SCT) to determine the 3 SBC also cites a clause in the Plan that states that its Sales Compensation Team can “[r]esolve any and all sales credit . . . situations.” Like the large sales provision, this clause is ambiguous. After reading this clause, a reasonable person would not necessarily conclude that SBC had discretion to reduce the plaintiffs’ commissions for large contracts. 10 commission payment.” Even if a reasonable person read this provision, she could come to the conclusion that SBC reviewed large contracts to ensure correct calculations of commissions—not to devise a new commission scheme. Based on Jensen, SBC argues that the parties’ implied-in-fact contract cannot conflict with an express policy of SBC—i.e., the Plan. On the surface, Jensen has similar facts to the case at hand, but the material facts are distinct. Similar to Anton and Snipes, the plaintiff in Jensen felt that he was under-compensated for a large contract that he secured for IBM. 454 F.3d at 385-86. He did not agree with his sales commissions, which were a smaller percentage than what he had previously received and, hence, filed suit against IBM. Id. at 386. Like SBC, IBM alleged that it treated large sales differently. Id. Jensen based his contract claim, in part, on a “glossy brochure” that IBM provided and “his employee quota letter.” Id. at 386. In addition, he pointed out the higher commission rates he had received on smaller contracts. In the instant case, Anton and Snipes have not alleged that the terms of the implied-in-fact contract come from SBC documentation, like the plaintiff in Jensen did. There, the Jensen court stated that the plaintiff could not use only the sections of an employer’s policy that he agreed with and disregard those sections that were not in his favor. Id. at 389-90. To that end, IBM’s policy expressly stated that it was making no offer and incorporated by reference provisions that mentioned its intention to limit commissions for large sales. Id. at 387-89. Here, there is no express contract, 11 but rather a question over the terms of an implied contract.4 The plaintiffs do not argue that the Plan should decide the terms. SBC does. Hence, the facts of Jensen are materially different. Separately, SBC argues, based on Mannix v. County of Monroe, 348 F.3d 526 (6th Cir. 2003), that “reasonable notice” was sufficient to bind Anton and Snipes to its interpretation of the Plan. Specifically, SBC contends that having the Plan on an electronic Lotus Notes database was sufficient to bind Anton and Snipes to its interpretation of the Plan’s terms. Mannix, however, was a legitimate expectation case and, thus, the terms were decided based on an employer’s promises to the workforce in general; the instant case is one of implied-in-fact contract and thus the terms are decided based on what Anton and Snipes reasonably believed them to be in light of SBC’s statements and conduct—not necessarily SBC’s promises to the entire workforce. See Novak v. Nationwide Mut. Ins. Co., 599 N.W.2d 546, 550 (Mich. Ct. App. 1999) (stating that a legitimate expectations claim rests on “the employer's promises to the work force in general-for example, promises contained in a company handbook-rather than on promises made to an individual employee” (citing Nieves v. Bell Indus., Inc., 517 N.W.2d 235 (Mich. Ct. App. 1994); Dolan v. Cont’l Airlines/Cont’l Express, 563 N.W.2d 23 (Mich. 1997))). Thus, Mannix is inapplicable.5 4 SBC believes that Brozo v. Oracle Corp., 324 F.3d 661 (8th Cir. 2003) also assists it in arguing that, when an express policy is in place, an employee cannot, as a matter of law, recover commissions on a theory that is contrary to that policy. The question in Brozo was whether the contract terms were ambiguous. Id. at 665. Brozo is inapposite because it is not clear that an express policy was in place at SBC. The question before the jury here was what terms the plaintiffs reasonably believed they assented to based on SBC’s statements and conduct. Thus, the inquiry here is broader than that in Brozo. Also, unlike the policy in Brozo, the Plan’s large sales provision is ambiguous, as the plaintiffs’ and SBC’s interpretations of the provision are both reasonable. 5 SBC also asserts, based on Grow v. General Products, Inc., 457 N.W.2d 167 (Mich. Ct. App. 1990), that general circulation of the Plan was enough to bind Anton and Snipes to the terms. In Grow, the employer sent a memo around that stated employment was at-will. Id. at 168. While Grow involved a claim for an implied contract for just cause employment, it nevertheless involved a different inquiry than the instant case. For the same reasons that Mannix is inapplicable, Grow is also 12 SBC counters that Mannix is applicable since it cites Rowe, which involved an implied-infact contract claim. But Rowe is distinguishable from the instant case as well. The question in Rowe was “whether an employer's oral statements and written policy statements created an employment contract terminable only for cause.” Rowe, 473 N.W.2d at 269-70. Under Michigan law, there is a presumption that employment is at will. Id. at 271-72. The presumption can be overcome if there is an express contract stating otherwise or if there is proof of a “promise implied in fact” stating otherwise. Id. at 271. The plaintiff in Rowe believed that the employer’s oral statements amounted to a contract to terminate only for just cause. Id. at 272. While the court in Rowe applied the same test the jury did here, see id. at 273, Rowe is distinct for three reasons.6 First, the employee in Rowe had to overcome the presumption of employment at will. Here, there is no presumption that SBC’s interpretation of the Plan should apply. Rather, the parties have agreed that there is an implied-in-fact contract and the terms are in dispute. Second, Anton and Snipes are relying on more than oral statements; they also have course of dealing evidence in their favor. There was no course of dealing evidence in Rowe. Finally, SBC’s attempt to analogize the Plan to the handbooks sent to employees in Rowe fails. Unlike the plaintiff in Rowe, Anton may have not received the Plan. See id. at 276 (mentioning that “the last handbook which plaintiff received clearly set forth an employment-at-will policy”). In addition, the plaintiffs here could have reasonably interpreted the Plan differently than SBC did. As has been discussed, inapplicable. 6 The first two reasons that distinguish Rowe also serve to further distinguish Mannix from the instant case. Specifically, the plaintiff in Mannix similarly had to overcome a presumption of employment at will, and he had no course of dealing evidence to support his claim. In the instant case, there is no similar presumption at issue and the plaintiffs have significant amounts of course of dealing evidence in their favor. 13 the plaintiffs had a reasonable basis for concluding that SBC merely reviewed large contracts to ensure that commissions were calculated correctly—not to reduce or adjust the commissions scheme for the contracts. On the other hand, the handbooks in Rowe clearly stated that employment was at will, so that was the only reasonable interpretation of the handbooks. Id. at 270. Ultimately, Rowe is distinct from the instant case.
The statements of SBC management, before the CCI Agreement was signed, also support the plaintiffs’ interpretation of the contract’s terms. While Anton and Snipes were closing the CCI contract, various members of SBC management implied that Anton and Snipes would be due for a large commission. For example, Snipes’ manager suggested that the contract was worth $200 million to $1 billion. Similar estimates were sent out in internal SBC emails. Likewise, SBC management made comments about the large commissions the plaintiffs were going to get from the CCI Agreement and how “rich” they would be. These statements did not put the plaintiffs on notice that they were going to receive only $12,000 and $24,000, respectively, for a billion dollar contract. Ultimately, these statements further support the conclusion that the jury reached a reasonable verdict.