Court Opinion

ID: 2643612
Source: CourtListenerOpinion
Date Created: 2013-11-22 06:06:00.37618+00
Date Added: 2024-06-11T12:52:07.498840
License: Public Domain

Case: 13-30344      Document: 00512449856         Page: 1    Date Filed: 11/21/2013

           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT
                                                                            United States Court of Appeals
                                                                                     Fifth Circuit

                                      No. 13-30344
                                                                                   FILED
                                                                           November 21, 2013
                                                                              Lyle W. Cayce
SUSAN GIBBENS,                                                                     Clerk

                                                 Plaintiff–Appellant,

v.

CHAMPION INDUSTRIES, INCORPORATED,

                                                 Defendant–Appellee.

                   Appeal from the United States District Court
                      for the Eastern District of Louisiana
                             USDC No. 2:11-CV-868

Before OWEN, SOUTHWICK, and GRAVES, Circuit Judges.
PER CURIAM:*
       Plaintiff–Appellant Susan Gibbens sued Defendant–Appellee Champion
Industries, Incorporated (Champion) for breach of contract based on
Champion’s alleged failure to pay Gibbens sales commissions in accordance
with the formula in Gibbens’s modified employment contract. The district
court granted summary judgment in favor of Champion on the ground that no
valid modification of Gibbens’s employment contract occurred.                         Gibbens

       * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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appeals the district court’s judgment. Because genuine disputes as to material
facts exist, Champion is not entitled to judgment as a matter of law. We
reverse and remand.

                                                I

         The undisputed facts are as follows. Between 1993 and 1995, Gibbens
began working as a salesperson in the New Orleans office of Upton Printing
Company (Upton). She was paid commissions under a “value added” formula,
which amounted to eleven percent of the difference between the print job sales
price and outside expenses, less her salary. 1 Upton was acquired by Champion
by the end of 1995. Gibbens continued to work in New Orleans as a salesperson
for Champion under the same commission formula for at least the next ten
years.
      After Hurricane Katrina in 2005, Champion closed its New Orleans
office and placed its New Orleans operations under the management of Doug
McElwain, the division manager for Bourque Printing (Bourque), a subsidiary
of Champion in Baton Rouge. McElwain informed Gibbens that she would
report to him directly. Gibbens contends that effective sometime in 2006,
McElwain changed her commission structure to conform to that of all the other
salespersons, with the exception of new employees who were on probation. It
is undisputed that all of the Bourque Printing sales representatives, with the
exception noted, were paid on a “50%/36%” basis.
      In November 2006, after receiving a commission check for a lesser
amount than anticipated, Gibbens called McElwain to ask about her
commission. McElwain directed her to contact Champion’s President and
Chief Operating Officer Toney Adkins, who sent Gibbens her commission

      1Internal costs, such as labor and administrative expenses were included in the total
from which the eleven percent commission was calculated.
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reports for the first half of 2006.          Gibbens attempted to reconcile the
commission reports with her own sales reports and e-mailed McElwain to
confirm that under the current formula, her commission was fifty percent of
the net profit on jobs printed in Baton Rouge and forty percent of the net profit
on jobs printed elsewhere. McElwain responded by suggesting that Gibbens
contact Adkins with any questions. Gibbens sent McElwain a second e-mail
explaining that she was simply seeking clarification of an earlier conversation
that she had with McElwain as to whether her commission on jobs printed
elsewhere was thirty-six percent or forty percent. McElwain replied that the
correct figure was thirty-six percent.
      From 2007 through 2010, Gibbens continued to receive commission
checks that she believed were insufficient to fully compensate her under the
“50%/36%” commission formula. During this time, Gibbens repeatedly called
and e-mailed McElwain, Adkins, and Marshall Reynolds, the Chairman of
Champion’s Board of Directors, in order to resolve the issue, but was unable to
receive a satisfactory response.     Gibbens subsequently filed suit against
Champion in April 2011 for breach of contract based on Champion’s failure to
pay her commissions in accordance with the 50%/36% formula to which
McElwain allegedly confirmed in an e-mail would be applied to her.
      Champion moved for summary judgment on the basis that Gibbens could
not establish the elements of consent, cause, or capacity necessary for a valid
contract modification because (1) there was no offer and acceptance in the
November 2006 e-mail exchange, (2) Champion had no reason to modify her
commission formula, and (3) McElwain had neither actual nor apparent
authority to modify Gibbens’s commission formula on behalf of Champion. The
district court denied Champion’s motion. It concluded first that because the e-
mail exchange was just “one piece” of evidence of an earlier modification by
McElwain, it need not comprise an offer and acceptance. Second, it held that
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Gibbens’s ongoing employment could provide cause for the modification.
Lastly, the district court decided that there was a genuine dispute of material
fact concerning McElwain’s authority to modify Gibbens’s commission formula,
notwithstanding McElwain’s deposition testimony to the contrary.
         Following the completion of discovery, Champion again filed a motion for
summary judgment focusing on Gibbens’s failure to establish the elements of
capacity and cause. The motion was supported by affidavits from McElwain,
Adkins, and Reynolds stating that McElwain had no authority to modify
Gibbens’s commission formula; Adkins and Reynolds never conveyed to
Gibbens that McElwain had such authority; prior to the November 2006 e-mail
exchange, Gibbens’s continued employment with Champion was not at issue;
and Champion had no reason to change Gibbens’s commission formula. The
district court granted Champion’s motion for summary judgment based on the
fact that the affidavits of McElwain, Adkins, and Reynolds constituted
“undisputed evidence that McElwain did not have actual or apparent authority
to modify the commission agreement at any time, nor was it ratified by
[Champion].” This appeal followed.

                                                     II

         We review de novo the district court’s grant of summary judgment,
applying the same standard as the district court. 2 “Summary judgment is
appropriate if ‘the pleadings, the discovery and disclosure materials on file,
and any affidavits show that there is no genuine issue as to any material fact

         2   First Am. Bank v. First Am. Transp. Title Ins. Co., 585 F.3d 833, 836-37 (5th Cir.
2009).
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and that the movant is entitled to judgment as a matter of law.’” 3 We draw all
reasonable inferences in favor of the non-moving party. 4

                                                  III

       Under Louisiana law, the formation or modification of a valid contract
requires four elements: (1) capacity; (2) consent; (3) cause; and (4) lawful
object. 5 If any element is missing, the contract is not valid as a matter of law. 6
We consider each element in turn.

                                                  A

       Consent to a contract is established by offer and acceptance. 7 “[W]here
there is no meeting of the minds . . . the contract is void for lack of consent.” 8
Champion presents two arguments that consent was lacking: first, that there
was no mutual understanding between McElwain and Gibbens of the facts
underlying the modification of Gibbens’s commission formula, and second, that
even if McElwain himself consented to such a modification, he lacked authority
to do so on Champion’s behalf and Champion never consented of its own accord
through ratification.
       Champion’s first argument is premised on inconsistencies between the
respective understandings of McElwain and Gibbens as reflected in the
November 2006 e-mail exchange.              However, as the district court noted in
denying Champion’s initial motion for summary judgment, the November 2006
e-mail exchange is but “one piece that indicates that the commission rate was

       3  Id. at 837 (quoting FED. R. CIV. P. 56(c)).
       4  Id.
        5 Ingraffia v. NME Hosps., Inc., 943 F.2d 561, 565 (5th Cir. 1991); J. Caldarera & Co.

v. La. Stadium & Exposition Dist., 99-787, pp. 6-7 (La. App. 5 Cir. 12/15/99); 750 So. 2d 284,
288, writ denied, 2000-0122 (La. 3/17/00); 756 So. 2d 1144.
        6 LA. CIV. CODE ANN. art. 2029 (2008).
        7 Id. art. 1927.
        8 Philips v. Berner, 2000-0103, p. 5 (La. App. 4 Cir. 5/16/01); 789 So. 2d 41, 45.

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modified by McElwain when Gibbens was transferred under his supervision.”
Accordingly, any lack of mutual understanding in the e-mail exchange does not
negate the possibility of consent in the earlier interaction between McElwain
and Gibbens when Gibbens was first placed under McElwain’s supervision.
Gibbens stated in her declaration and in her deposition that McElwain told her
then that she was going to be on the Bourque commission schedule, which she
asserts McElwain told her would be fifty percent on jobs printed in-house and
either forty percent or thirty-six percent on jobs printed by outside vendors.
McElwain stated at his deposition and in his affidavit that he had no intention
of changing Gibbens’s commission formula. However, a court may not make
credibility determinations in ruling on a motion for summary judgment. 9
Drawing all reasonable inferences in favor of Gibbens, we conclude that
Champion cannot establish as a matter of law that McElwain did not consent
to change Gibbens to the 50%/36% commission formula.
       However, it remains to be determined whether consent was lacking
because, as Champion contends, McElwain lacked authority to modify
Gibbens’s commission formula and Champion never ratified such a decision.
In Louisiana, an agent’s authority to enter into or modify a contract on behalf
of a principal consists of his “actual authority, express or implied, together with
the apparent authority which the principal has vested in him by his conduct.” 10
The principal will also be bound by the terms of even an unauthorized
agreement if it ratifies it by consenting to the obligation after the fact. 11 We
have previously held that under Louisiana law, a corporation may ratify the
unauthorized act of its agent “through the knowing acquiescence of those

       9 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
       10 Boulos v. Morrison, 503 So. 2d 1, 3 (La. 1987).
       11 Quilio & Assocs., Inc. v. Plaquemines Parish Gov’t, 2005-0803, p. 10 (La. App. 4 Cir.

5/10/06); 931 So. 2d 1129, 1136; see also LA. CIV. CODE ANN. art. 1843.
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having the authority, so long as the unauthorized act is not violative of the
corporate charter, state law, or public policy.” 12

      Here, the district court found that Champion did not ratify McElwain’s
decision to modify Gibbens’s commission formula because Gibbens was never
paid commissions at the modified rate and “corporate’s inaction only
suggest[ed] that they were ignoring her repeated demands, not that they were
‘ratifying’ McElwain’s unauthorized statement.”                  However, the fact that
Champion never paid Gibbens according to the modified formula shows only
that Champion failed to perform under the allegedly modified agreement, not
that Champion never ratified it in the first place.                     Additionally, while
Champion’s inaction does not necessarily constitute ratification, the acts that
it did take create a genuine dispute of fact as to whether Champion ratified
Gibbens’s modified commission formula.
      When Gibbens discovered that her commission checks for the first three
quarters of 2006 were less than expected and she contacted Adkins to inquire
about them, Adkins responded by sending her commission reports for January
2006 through June 2006, which appear to correspond to the 50%/36% formula
to which Gibbens asserts her commissions were changed.                         The relevant
information from the reports is depicted in the following table.
 Sales Period             Jan.      Feb.      Mar.                  Apr.          May
                          2006      2006      2006                  2006          2006
 Margin on                ($16,053) ($23,747) $6,819                $6,819        $58,747
 Sheet Sales
 Margin on                ($4,708)     $247          ($9,667)       ($9,216)      $1,197
 Rotary Sales
 Margin on                $51,158      $5,968        ($414,376)     $743,047      ($40,098)
 Sublet Sales
 Credit Memos             ($1,084)     ($379)        ($929)         ($760)        ($2,121)
 and Interest

      12   3 A’s Towing Co. v. P & A Well Serv., Inc., 642 F.2d 756, 758 (5th Cir. 1981).
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Salesperson’s  $7,494           ($9,792)     ($151,064)    $265,918   $14,477
Portion Earned

      Under Gibbens’s modified commission formula, she asserts that her
commission amounts to fifty percent of the margin earned on all jobs printed
in-house (sheet and rotary sales) less adjustments (credit memos and interest),
plus thirty-six percent of the margin earned on jobs printed by outside vendors
(sublet sales). Using January 2006 as an example, if we take fifty percent of
the margin earned on sheet sales (-$16,053 × 50% = -$8,026.50) and rotary
sales (-$4,708 × 50% = -$2,354) less adjustments for credit memos and interest
(-$1,084 × 50% = -$542), and add thirty-six percent of the margin earned on
sublet sales ($51,158 × 36% = $18,416.88), we obtain a sum of $7,494.38, which
rounds to the amount listed as the Salesperson’s Portion Earned. Applying the
same calculations to the amounts listed for February 2006 through May 2006
similarly leads to the Salesperson’s Portion Earned for each month. Dean
Cutrer, a former salesman in Champion’s Baton Rouge office who received
commissions on the same 50%/36% basis, confirmed that the commission
reports sent by Adkins to Gibbens were identical to the commission reports
that Cutrer received, with the Total Margin representing the profit on which
commission would be paid. The fact that Adkins, Champion’s President and
Chief Operating Officer, sent Gibbens commission reports corresponding to the
50%/36% formula suggests that Champion knew of and acquiesced in the
modification of Gibbens’s commission rate.
      While this evidence does not unequivocally show that Champion ratified
McElwain’s modification of Gibbens’s commission formula, we cannot say on
this record, drawing all reasonable inferences in favor of Gibbens, that there is
no genuine dispute of fact regarding Champion’s knowledge of and
acquiescence in the modification to Gibbens’s commission formula. Therefore,

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Champion is not entitled to summary judgment on the ground that consent is
lacking.
                                                  B

       Champion may nevertheless prevail if, as a matter of law, either of the
two remaining elements of a valid contract—cause and lawful object—are
lacking.    Champion does not dispute that the modification of Gibbens’s
commission formula is a lawful object. The only element left to consider is
cause.
       Louisiana law defines cause as “the reason why a party obligates
himself.” 13 Unlike common law consideration, “which requires something in
exchange, the civil law concept of ‘cause’ can obligate a person by his will
only.” 14 “[C]ause is a more subjective element that goes to the intentions of the
parties. Therefore, in Louisiana law, a person can be obligated by both a
gratuitous or onerous contract.” 15 Champion asserts that “[t]here is no logical
explanation for why in 2006 Champion suddenly would have obligated itself to
nearly double Gibbens commission income when the relationship had
successfully proceeded under the same commission structure since 1993.” We
disagree.
       Champion places substantial emphasis on the deposition and affidavit of
McElwain and affidavits of Adkins and Reynolds stating that Champion had
no reason to modify Gibbens’s commission formula and that Gibbens had not
threatened to leave her employment with Champion prior to the alleged switch
to the 50%/36% formula. While the fact that Gibbens had not threatened to
leave her employment with Champion addresses the concern the district court

       13 LA. CIV. CODE ANN. art. 1967.
       14 Aaron & Turner, L.L.C. v. Perret, 2007-1701, p. 7 (La. App. 1 Cir. 5/4/09); 22 So. 3d
910, 915, writ denied, 2009-1148 (La. 10/16/09); 19 So. 3d 476.
       15 Id. at p. 8; 22 So. 3d at 915.

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expressed in denying Champion’s initial motion for summary judgment, it
refutes only one possible cause for modifying Gibbens’s commission formula.
It does not establish as a matter of law that no cause existed for modifying the
commission formula. Similarly, the conclusory statements contained in the
affidavits of McElwain, Adkins, and Reynolds, and McElwain’s deposition
testimony that Champion had no reason to modify Gibbens’s commission
formula “offer[] no enlightenment on matters that, in our view, are essential to
a proper disposition of the motion for summary judgment.” 16
      Gibbens argues, and it is wholly plausible that although Gibbens had
not yet threatened to leave her employment, Champion had cause to modify
Gibbens’s commission formula to preempt her from doing so by avoiding the
perceived unfairness of compensating her at a lower rate than all of her
colleagues, except new sales employees on probation.            Alternatively or in
addition,   Champion      may    have    recognized   that    Gibbens    contributed
substantially to sales. She sold more than $13 million of product between 2006
and the second quarter of 2010.      Champion may have sought to switch her to
the 50%/36% formula in order to avoid her leaving.
      In short, we conclude that there are genuine disputes of material fact
that precluded summary judgment based on the present record.

                                     *        *       *

      REVERSED and REMANDED.

      16 Galindo v. Precision Am. Corp., 754 F.2d 1212, 1222 (5th Cir. 1985) (internal
quotation marks omitted).
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