Opinion ID: 198328
Heading Depth: 3
Heading Rank: 1

Heading: Breach of Contract: Michelson's Entitlement to a VIC Award

Text: 19 Michelson's first cause of action alleges that DFS breached an employment contract with Michelson under which Michelson was to receive variable incentive compensation for the years 1994 and 1995. To succeed on his breach of contract action, Michelson must demonstrate: (1) that the parties reached a valid and binding agreement with regard to variable incentive compensation; (2) that DFS breached the terms of the VIC aspect of the agreement; and (3) that Michelson suffered damages from the breach. See Coll v. PB Diagnostic Systems, Inc., 50 F.3d 1115, 1122 (1st Cir.1995). The district court found that Michelson failed to raise a genuine issue with regard to the first element. 20 Michelson makes several arguments that summary judgment was inappropriate against this cause of action. Michelson first claims that DFS did not meet its burden of proof because it failed to submit any evidence to support its allegations that Michelson was not entitled to any commissions and benefits. What this argument ignores is that DFS can carry its summary judgment burden by pointing to an absence of evidence supporting Michelson's claim that he was entitled to those commissions. See Hinchey, 144 F.3d at 140. The district court entered summary judgment against Michelson because it found that Michelson offered no evidentiary support for his claim that he was entitled to VIC awards for 1994 and 1995. Even assuming that DFS did not offer sufficient evidence to show that Michelson was owed no commissions, DFS did not need to do so in order to prevail at the summary judgment stage. 21 The rest of Michelson's arguments regarding this cause of action fit into two categories: (1) arguments that a contract existed that entitled Michelson to participate in the 1994 VIC Plan; and (2) arguments that Michelson satisfied the prerequisites for a VIC award under that contract for the last quarter of 1994. 2 22
Compensation for the Last Quarter of 1994 23 In its December 23, 1997 Memorandum and Order, the district court found that DFS made a preliminary showing that no contract existed that entitled Michelson to receive incentive compensation for the years 1994 or 1995. In its February 27, 1998 Memorandum and Order, the district court found that Michelson failed to raise a genuine issue as to whether he was offered (and subsequently accepted) definite or certain VIC payments as part of his employment contract. Because the formation of a contract with such a term is a legal element of Michelson's breach of contract claim, the district court entered summary judgment against Michelson's claim. Michelson argues that a contract existed that entitled him to receive variable incentive compensation for the last quarter of 1994. 24 Michelson argues that he would never have left his previous position in which he earned more than $225,000 if he had not been assured that he would be earning a great deal more with DFS. This argument fails because, as appellees point out, Michelson admits that he was not guaranteed a higher salary. In fact, the offer letter itself states that Michelson's targeted compensation would be $150,000, which is substantially less than the $225,000 that Michelson made at his previous position. Michelson may well have left his position because he had the opportunity to earn more than this, even without guarantees that he would earn more. In any event, this argument is merely an unsupported inference and does not constitute evidence that Michelson was contractually entitled to VIC compensation. Therefore, this argument does not create a genuine issue that precludes summary judgment. 25 However, our rejection of this argument does not mean that no contract existed that included VIC Plan participation. The August 19, 1994 offer letter from DFS stated that he would be eligible to participate in the variable incentive compensation plan for the remainder of 1994. The letter also stated that Michelson's compensation would consist of a fixed salary, an MBO Bonus Plan, and variable incentive compensation. DFS argues that the letter only indicates that Michelson was eligible to participate in the 1994 VIC Plan, not that any benefits or provisions of the Plan were binding. DFS argues that Michelson has failed to propound any evidence indicating that, in his case, the VIC Plan was a binding contractual provision. 26 The district court agreed with DFS and found that the offer letter could only be reasonably understood to have offered the opportunity to earn VIC compensation. We agree with the district court to the extent that it found that Michelson had to reach a minimum sales threshold before he was entitled to receive VIC awards under the Plan, but we do not agree with the district court to the extent that it found that Michelson's participation in the 1994 VIC Plan was not part of the contract. 27 The offer letter expressly stated that Michelson would be eligible to participate in the 1994 VIC Plan. In that letter, Michelson was offered the position and was informed that his compensation for the remainder of 1994 would consist of three components: (1) a fixed base salary of $85,000; (2) an MBO bonus of $15,000; and (3) participation in the 1994 VIC Plan, with a targeted VIC award of $50,000. Michelson accepted this offer by letter dated August 22, 1994. Once the offer was accepted, Michelson's participation in the 1994 VIC Plan was as much a part of his at-will employment contract as was his base salary. We agree with the district court that Michelson has not demonstrated that the contract bound DFS to make certain payments of VIC to Michelson, in the sense that DFS was bound to pay Michelson a VIC award regardless of whether he met his minimum thresholds. The letter expressly states that Michelson had to reach minimum thresholds to receive VIC compensation. However, the opportunity to reach those thresholds and the right to be compensated with VIC if he reached them were clearly a part of the offer that Michelson accepted. Therefore, we find that Michelson has offered sufficient evidence to raise a genuine issue on the question of whether his employment contract included, as a compensation term, his participation in the VIC Plan for 1994. 3 28
29 Even if Michelson's contract with DFS included a provision for participation in the VIC Plan, Michelson was not entitled to receive a VIC award until he satisfied the Plan's prerequisite of reaching the minimum sales volume threshold for the last quarter of 1994. Michelson first argues that he was entitled to a VIC award for 1994 because he was assured after meetings with Kelley that there was no minimum volume threshold for the 1994 VIC Plan. However, we cannot accept Michelson's argument that no minimum threshold existed. The August 19, 1994 offer letter specifically stated that Michelson would be eligible to participate in the VIC plan for the remainder of 1994 and that his VIC would be $50,000 after reaching minimum volume thresholds. The 1994 VIC Plan itself provides that only the amount of volume over the minimum threshold will qualify for VIC payment. Additionally, Michelson repeatedly admits elsewhere that there was a minimum volume threshold for the Plan. See, e.g., Michelson Deposition, at page 115, lines 6-13 (Q. What was your minimum threshold? A. Ten million to 12 million.... Mike had given me a number of $48 million on an annual basis, and when you divide it by 4[it] comes out to 12 million, but in conversations I had one on one with Mike, he talked about 10 million.); Proposed Special Verdict Questions and Memorandum, at 2 (Kelley agreed with Michelson to a minimum threshold of 10-12 million dollars annually.); Appellant's Brief, at 15 (arguing that Michelson met his minimum volume thresholds); Plaintiff's Memorandum in Opposition to Defendant's Motion For Summary Judgment, at 13 (The offer to Mr. Michelson included a commission or variable incentive component which included ... attainable minimum thresholds....). Thus, Michelson was only entitled to receive a VIC award under the employment contract and the VIC Plan if he surpassed his minimum volume threshold. 30 Michelson next claims that the evidence shows that he was entitled to a VIC award because he met his minimum volume threshold. He states that he was responsible for over $100 million in sales, more than doubling the expected sales. However, he offers no evidence in support of this bald assertion. Also, Michelson's brief states that he initiated this $100 million in sales contracts between January 1, 1995 and March 14, 1995. Thus, even if Michelson's asserted volume is accurate, it would have no impact on the question of whether he earned commissions for 1994. 31 Michelson also argues that because other sales people for whom he was responsible received commissions, he was also entitled to a commission. Michelson argues that if those sales people reached their respective thresholds, then he must have reached his threshold as well, because he was to be credited with their sales. In support of this argument, Michelson offers a table that purports to list the 1994 compensation, including VIC awards and thresholds, of 28 DFS employees. There are several problems with this argument. First, while the table lists the thresholds of 28 employees, neither Michelson nor DFS informs the Court of what Michelson's minimum threshold for the last quarter of 1994 was. A review of the record reveals that Michelson apparently believed that the minimum threshold was approximately $10-12 million. See Michelson Deposition, at page 115, lines 6-13. The 1994 VIC Plan states that the minimum threshold is the booked volume target for the measurement period, but neither party quantifies this value for the last quarter of 1994. Without knowing Michelson's threshold, it is impossible to determine if he must have reached it simply because his subordinates reached their thresholds. 32 Second, Michelson does not name the individuals whose sales he was responsible for or the amounts of their respective sales. Michelson merely submits an unlabeled and undated table indicating that 28 individuals received VIC awards for 1994, meaning that those 28 individuals must have reached their thresholds for that period. Michelson does not inform the Court of which of the listed individuals were on his team and which were not. Our own review of the record reveals that, as part of a special year-end program, Michelson was responsible for eight of the 28 employees listed on the table. See Kelley Deposition, at 36-37. However, neither the table nor Michelson cites any sales figures for those eight individuals. Nor does Michelson offer evidence that his subordinates met their minimum thresholds for the fourth quarter of 1994. At best, the table indicates that the listed individuals met their annual threshold for 1994, but Michelson was only employed for the final quarter of 1994. As a result of all of these deficiencies, this table provides little help to Michelson in proving that he or his subordinates met their sales volume thresholds for the fourth quarter of 1994. 33 Third, Michelson's argument is dependent upon the idea that, in calculating his sales for VIC purposes, DFS must attribute to Michelson the sales of his subordinates. Under a practice called shadowbooking, a supervisor is attributed the sales of his or her subordinates for purposes of determining the supervisor's own sales volume. However, as noted by DFS, Michelson offers no evidence to support the conclusion that he was contractually entitled to avail himself of the shadowbooking practice. The 1994 VIC Plan makes no mention of such a practice and states that the interpretation of the VIC Plan rests entirely with DFS management. In his deposition, Kelley notes that the shadowbooking practice was considered for the year-end program, but that Amsler, consistent with his role in interpreting the VIC Plan, decided that the financial results were insufficient to justify shadowbooking any of the National Account Managers. In Michelson's deposition, he claims that his understanding was that he would be shadowbooked by the sales people for the east territory, but he points to no contract or DFS policy that entitled him to such a practice. Michelson does not even allege that anyone at DFS told him that his sales would be calculated using the shadowbooking procedure. Nor does he offer any evidence or argument that Amsler did not have the authority to exercise the discretion that he did. Therefore, we do not find that Michelson's shadowbooking argument raises a genuine issue of fact regarding whether Michelson was entitled to commissions for the fourth quarter of 1994. 34 Michelson next offers an undated, handwritten letter from Kelley to Amsler in which Kelley allegedly recommended that Michelson receive a commission. However, in the letter, Kelley did not recommend Michelson for a VIC award; he recommended him for an MBO bonus, which has no bearing on the VIC calculations. Moreover, even if Kelley had recommended that Michelson receive a VIC award, Kelley's recommendation would not provide Michelson with any contractual rights. Michelson next argues that Kelley confirmed in the letter that Michelson had participated in $9 million in fundings in one particular program. However, the letter does not limit this number to one particular program; what the letter actually states is that Michelson participated in $9 million worth of fundings for the fourth quarter of 1994. Since the only evidence of the amount of Michelson's threshold is his own testimony that it was $10-$12 million, this statement that Michelson participated in only $9 million does not help him. Michelson claims that this number represents only a portion of his responsibility, but he does not quantify the sales or fundings from any of his other alleged responsibilities. Additionally, if Michelson is correct that this represents only a portion of his responsibilities, the context of the statement in the letter indicates that the portion to which Kelley refers is the supervision of his team of sales people. As noted above, Amsler was not contractually obligated to credit Michelson with sales resulting from his supervision of the team. Thus, this letter offers little assistance to Michelson. 35 In sum, while Michelson has raised a genuine issue regarding whether his contract included participation in the 1994 VIC Plan as part of his compensation, Michelson has not raised a genuine issue regarding whether he had actually satisfied the eligibility prerequisites for any VIC payments under the Plan. Therefore, summary judgment was properly entered against Michelson's breach of contract cause of action claiming that DFS failed to pay him VIC compensation.