Court Opinion

ID: 3162778
Source: CourtListenerOpinion
Date Created: 2015-12-15 21:00:37.214789+00
Date Added: 2024-06-11T12:14:22.450337
License: Public Domain

NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT
                               ________________

                                      No. 14-4785
                                   ________________

                                   CARL J. BARTON,

                                        Appellant

                                             v.

                          HEWLETT-PACKARD COMPANY

                                   ________________

                     On Appeal from the United States District Court
                        for the Western District of Pennsylvania
                              (D. C. Civ. No. 2-13-cv-00554
                        District Judge: Honorable Cathy Bissoon
                                   ________________

                       Submitted under Third Circuit LAR 34.1(a)
                                  on October 8, 2015

                Before: FUENTES, SMITH and BARRY, Circuit Judges

                               (Filed: December 15, 2015)

                                   ________________

                                       OPINION*
                                   ________________

*
 This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
FUENTES, Circuit Judge.

       Plaintiff Carl Barton appeals the District Court’s entry of summary judgment in

favor of defendant Hewlett-Packard (“HP”). For the following reasons, we will affirm

the District Court’s judgment.

                                              I.

       Barton was a software salesperson for HP. In April 2012, HP issued Barton a

Sales Letter describing his eligibility for sales commissions in fiscal year 2012. The

letter set Barton’s sales quota (i.e., revenue target) at $1.3 million and his base

commission rate at 6.52%, meaning that Barton would be eligible for a commission of

$84,760 if he met his sales quota. If Barton exceeded his sales quota, he was eligible for

“accelerated” commission rates ranging up to 18.25% for sales exceeding $2.288 million.

       The Sales Letter stated that “HP reserves the right to adjust the terms of the Sales

Plan or to cancel it at any time.” J.A. 169. The letter also incorporated a similar

provision from HP’s Global Compensation Policy: “HP reserves the right to adjust or

cancel the terms of Sales plans, or Sales letters with or without notice at any time,

including but not limited to adjusting accounts, goals/quota, target incentive amount

(TIA) or to address changing or unforeseen business conditions or to correct

administrative errors.” J.A. 176. HP also reserved final authority to resolve any dispute

about commission payments: “In the event of any dispute regarding the application of, or

payment under the terms of this letter and applicable policies and guidelines, Hewlett-

Packard shall decide each such dispute in its sole discretion.” J.A. 169. Finally, the

Sales Letter assigned HP “the right to review and in its sole discretion adjust incentive

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payments associated with large transactions for which the incentive payments are

disproportionate when compared with the employee’s assigned quota or contribution to

toward the transactions.” J.A. 168.

       In March 2012, General Motors Corporation proposed to enter into an unlimited

enterprise licensing agreement for HP’s entire suite of software products, including

Vertica, the software product that Barton sold. Barton was not a member of the HP team

that negotiated the license. Nevertheless, he claims that he developed the pricing model

that the HP team used to negotiate the price of Vertica. General Motors ultimately

entered into a licensing agreement that priced Vertica at $8.28 million. Barton claims

that his pricing model resulted in an additional $6.2 million in revenue for HP that the

negotiators would not otherwise have realized.

       HP decided to compensate its salespersons for the General Motors license

agreement, but did not award accelerated commission rates for the total revenue of the

deal. Barton was paid at his base commission rate of 6.52%, resulting in a payment of

$539,452. Barton claims that his role in the deal warranted payment at an accelerated

rate, resulting in a commission of $1,273,019.

                                             3
         Barton brought this breach-of-contract action to recover $733,477.54 in unpaid

sales commissions. The District Court concluded that the Sales Letter was not an

enforceable contract and granted summary judgment to HP.1

                                              II.

         The parties agree that Barton’s claim is governed by Pennsylvania law.      “Under

Pennsylvania law, contract formation requires: (1) a mutual manifestation of an intention

to be bound, (2) terms sufficiently definite to be enforced, and (3) consideration.”2

         Here, HP clearly manifested its intention not to be bound by the commission rates

set forth in the Sales Letter. HP reserved the right to “adjust the terms of the Sales Plan

or to cancel it any time”; to “adjust or cancel the terms of Sales plans, or Sales letters

with or without notice at any time”; to “change or discontinue” its Global Sales

Compensation Policy “with or without notice at any time”; and to decide any dispute

regarding commission payments “in its sole discretion.” J.A. 169, 176. As other courts

of appeal have recognized, no contract is formed if an employer retains complete

1
 We have jurisdiction over Barton’s appeal pursuant to 28 U.S.C. § 1291, and exercise
plenary review over the District Court’s decision to grant summary judgment. Howley v.
Mellon Fin. Corp., 625 F.3d 788, 792 (3d Cir. 2010). Summary judgment is appropriate
based on the interpretation of a contract where “the contract is so clear that it can be read
only one way.” Allied Erecting & Dismantling Co., Inc. v. USX Corp., 249 F.3d 191, 201
(3d Cir. 2001).
2
    Kirleis v. Dickie, McCamey & Chilcote, P.C., 560 F.3d 156, 160 (3d Cir. 2009).
                                              4
discretion to modify or cancel an employee’s commission.3 This conclusion accords with

hornbook Pennsylvania law.4

       Barton argues that the implied covenant of good faith and fair dealing can

overcome the express disclaimer language in the Sales Letter and convert HP’s illusory

promise into an enforceable obligation. But the duty of good faith and fair dealing only

applies to a party’s performance of an existing contract, and “does not extend to issues of

contract formation.”5 The Pennsylvania cases upon which Barton relies do not suggest

otherwise. Rather, they each concern a party’s good-faith obligation to perform a

discrete, discretionary task under an otherwise enforceable contract.6 None support the

3
  See Geras v. IBM, 638 F.3d 1311, 1317 (10th Cir. 2011) (sales letter was not a contract
because “[a]lthough the letter contained a description of IBM’s present policies,
including its policies for adjusting payments, it reiterated that IBM retained the discretion
to alter or cancel these policies, even after sales had occurred”); Kavitz v. IBM, 458 Fed.
Appx. 18, 20 (2d Cir. 2012) (fact that employer “retained unfettered discretion under the
Plan to adjust its terms or even to cancel the Plan entirely confirms that the document is
not an enforceable contract”).
4
 See Lackner v. Glosser, 892 A.2d 21, 31 (Pa. Super. Ct. 2006) (“If the promise is
entirely optional with the promisor, it is illusory, lacks consideration, and is
unenforceable.” (citing Geisinger Clinic v. Di Cuccio, 414 Pa. Super. 85, 606 A.2d 509,
512 (Pa. Super. Ct. 1992))).
5
  Novinger Group, Inc. v. Hartford Ins., Inc., 514 F. Supp. 2d 662, 671 (M.D. Pa. 2007);
see also Restatement (Second) of Contracts § 205 & cmt. c (rule imposing duty of good
faith and fair dealing in performance and enforcement of contracts “does not deal with
good faith in the formation of a contract”).
6
  See Germantown Mfg. Co. v. Rawlinson, 341 Pa. Super. 42, 60-61 (Pa. Super. Ct. 1985)
(party had good faith obligation to determine amounts actually owed under a judgment
note); Starr v. O-I Brockway Glass, 432 Pa. Super. 255, 259-60 (Pa. Super. Ct. 1994)
(party had good faith obligation to determine whether it was able to purchase property
from a third party); Jamison v. Concepts Plus, Inc., 380 Pa. Super. 431, 432-40 (Pa.
Super. Ct. 1988) (party had good faith obligation to obtain necessary approvals and
permits).

                                              5
proposition that the duty of good faith can create a binding contract where, as here, one

party expressly disclaims any obligation to perform.

         Barton also argues that the Sales Letter has “the look and feel of a contract” and

contains various “indicators” of contractual intent, such as fixed quotas and commission

rates, “mandatory language” concerning the terms of incentive calculations, and

references to “Legal Info” and “Terms & Conditions.” But we determine the parties’

intent by examining the entire writing,7 and HP’s clear, unequivocal, and repeated

reservation of the choice to perform defeats any inference that HP otherwise intended to

be bound. Likewise, the fact that both parties signed the agreement is not controlling

because “[s]ignatures are not dispositive evidence of contractual intent.”8 The plain

language of the Sales Letter unambiguously grants HP the right to perform or not perform

at its own election, and therefore is not an enforceable contract.

                                              III.

         For the foregoing reasons, we affirm the District Court’s December 9, 2014 Order

granting summary judgment to HP.

7
Will. v. Metzler, 132 F.3d 937, 947 (3d Cir. 1997).
8
  Am. Eagle Outfitters v. Lyle & Scott Ltd., 584 F.3d 575, 584 (3d Cir. 2009). Barton also
urges us to certify to the Pennsylvania Supreme Court the question of whether contract
formation is precluded when one party retains discretion to change or cancel the terms of
a deal at any time. We decline to do so, as the answer to this question involves a
straightforward application of ordinary contract-law principles.

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