Court Opinion

ID: 1021355
Source: CourtListenerOpinion
Date Created: 2013-07-04 23:05:08.475508+00
Date Added: 2024-06-11T15:27:52.844655
License: Public Domain

UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT

                               No. 05-2395

KURT RAHRIG,

                                              Plaintiff - Appellant,

           versus

ALCATEL USA MARKETING, INCORPORATED,

                                               Defendant - Appellee,

           and

ALCATEL USA, INCORPORATED; NEWBRIDGE NETWORKS,
INCORPORATED; ALCATEL NETWORKS CORPORATION;
ALCATEL GOVERNMENT SOLUTIONS, INCORPORATED;
ALCATEL DATA NETWORKS; ALCATEL CARRIER DATA
DIVISION; CARRIER INTERNETWORKING DIVISION;
ALCATEL, a Republic of France corporation;
ALCATEL USA, CORPORATION,

                                                           Defendants.

Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. Gerald Bruce Lee, District
Judge. (CA-04-1545-1)

Argued:   September 20, 2006             Decided:    December 18, 2006

Before MICHAEL, Circuit Judge, N. Carlton TILLEY, Jr., United
States District Judge for the Middle District of North Carolina,
sitting by designation, and Thomas E. JOHNSTON, United States
District Judge for the Southern District of West Virginia, sitting
by designation.
Affirmed by unpublished opinion. Judge Johnston wrote the opinion,
in which Judge Michael and Judge Tilley joined.

ARGUED: Jay Joseph Levit, Glen Allen, Virginia, for Appellant. M.
Roy Goldberg, SHEPPARD, MULLIN, RICHTER & HAMPTON, L.L.P.,
Washington, D.C., for Appellee.       ON BRIEF:    Christopher M.
Loveland, SHEPPARD, MULLIN, RICHTER & HAMPTON, L.L.P., Washington,
D.C., for Appellee.

Unpublished opinions are not binding precedent in this circuit.

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JOHNSTON, District Judge:

     Appellant Kurt Rahrig filed the instant case in November 2004

in the Circuit Court of Fairfax County, Virginia. Appellee Alcatel

USA Marketing, Inc. (“Alcatel”) removed the case to the United

States District Court for the Eastern District of Virginia on

December 23, 2004.           Mr. Rahrig thereafter filed a seven-count

amended    complaint    on     February       4,   2005.      The   district   court

dismissed five of the amended complaint’s seven counts on April 15,

2005.    By order dated November 9, 2005, the district court granted

Alcatel’s motion for summary judgment and entered judgment against

Mr. Rahrig.1     In this appeal, Mr. Rahrig seeks review of the

district   court’s     entry    of   summary       judgment    on   his   breach   of

contract count.        We affirm the district court’s finding that

Alcatel did not breach its contract with Mr. Rahrig.

                                          I.

     The relevant facts in this appeal are undisputed.                    In 1999, a

company later acquired by Alcatel, Newbridge Networks, Inc.,2 was

     1
      Following the district court’s April 15, 2005 Order,                         Mr.
Rahrig’s counts for breach of contract (Count One)                                 and
unconscionability (Count Four) remained. It is unclear from                        the
record how Mr. Rahrig’s unconscionability claim was resolved,                      but
he does not address this claim on appeal.
     2
      In this opinion, we refer only to Newbridge Network, Inc.’s
successor, Alcatel.

                                          3
a data networking manufacturer which designed and developed data

networking products for high speed connectivity to the internet.

     In    July   1999,   Alcatel   hired   Mr.   Rahrig   as   a    regional

salesperson for the northwestern United States. In connection with

his hiring, Alcatel required Mr. Rahrig to sign a contract titled

“U.S. Sales Compensation Plan Fiscal Year 2000” (hereinafter “the

Plan”), which dictated certain terms of his employment.                 (J.A.

106.)     Pursuant to the Plan, Mr. Rahrig was to be paid a $75,000

base salary, plus commissions for sales which exceeded his annual

sales quota.      Mr. Rahrig’s sales quota for Alcatel’s 2000 fiscal

year was $2.925 million.

     During the 2000 fiscal year, Alcatel made approximately $125

million in sales to New Edge Networks (“New Edge”), an internet

supply company.      Mr. Rahrig was given “sales credit” for those

sales.    (J.A. 126-27.)   Rather than pay Mr. Rahrig commissions for

the full $125 million in sales above his $2.925 million quota,

Alcatel reduced his commissions by raising his quota.               The sales

quota adjustment term of the Plan provided, in relevant part, that:

     Incentive compensation is designed to reward individual
     effort and performance. This plan is designed to reward
     outstanding individual contributions. At the same time,
     it must be consistent with the company’s obligations to
     its   shareholders   to   control   expenses,   maximize
     profitability, invest in research and development and
     make capital expenditures in order to remain competitive
     in the future. It must also address the Company’s need
     to motivate all employees. . . . [T]his Plan must also
     ensure that sales credit incentive payments are not
     disproportionately large so as to unreasonably impair
     corporate profit.

                                     4
     . . .

     In the event that a windfall situation occurs in which
     effort   expended   or   involvement    of   the   sales
     representative is not proportional to revenue that would
     be derived at current quota or commission rates from an
     exceptionally large opportunity relative to quota,
     regional management reserves the right to adjust quota,
     or sales credit allocation for that transaction and
     thereafter.

(J.A. 110.) (hereinafter “the Windfall Clause.”)

     The Plan also provided that “on 30 days notice, [Alcatel may]

. . . adjust and modify this Plan, including individual [sales]

quotas . . . as it deems necessary or appropriate.”              (J.A.

106.)(emphasis added)(hereinafter “the 30 Days Notice Provision.”)

     By letter dated November 22, 1999, Alcatel notified Mr. Rahrig

that:

     [T]he sales credit that you derived from sales to New
     Edge Networks is deemed a windfall as defined [by the
     Plan]. Accordingly, we intend to exercise the Company’s
     right to adjust your quota for the current fiscal year.
     In order to arrive at a sound business decision on this
     quota adjustment, we also need to consider your forecast
     of another large transaction for this customer.
     Consequently, the setting of your new quota will not
     happen immediately and will require some further
     management action in the near term.

     Nevertheless, we want to recognize your substantial
     success from last quarter promptly. Therefore, [Alcatel]
     will make a substantial commission payment to you in the
     gross amount of $200,000.00 USD on the commission run due
     11/26/99 (or as soon thereafter as possible), provided
     you agree to the following terms. This payment will be
     a sales credit payment as defined by and subject to all
     terms and conditions in the [Plan].       Any additional
     payments or necessary adjustments will be made after a
     new quota is negotiated and agreed upon.

                                5
(J.A. 126.) (hereinafter “the November Letter.”) Mr. Rahrig signed

and   “accepted”   the   November    Letter   and     was   thereafter   paid

$200,000.   Id.

      On February 28, 2000, Alcatel sent Mr. Rahrig a second letter

stating that:

      [T]he sales credit that you derived this quarter is
      primarily from sales to New Edge Networks and is deemed
      a windfall as defined by [the Plan]. Accordingly, the
      Company intends to exercise its right to adjust your
      quota for the current fiscal year.      To appropriately
      reflect the sales opportunity in your territory, your
      Fiscal Year 2000 quota will be adjusted to $44,093,333.00
      USD, as provided by the Plan.

      Nevertheless, in recognition of your efforts and success
      in the last quarter, the Company, in accordance with the
      windfall provision, will make a substantial commission
      payment to you in the gross amount of $200,000.00 USD on
      the commission run due March 3, 2000 (or as soon as
      thereafter as possible), provided you agree to the terms
      in this letter.    This payment will be a sales credit
      payment as defined by and subject to all the terms and
      conditions in the [Plan].

(J.A. 127.) (hereinafter “the February Letter.”)            Mr. Rahrig also

signed and “accepted” the February Letter and was thereafter paid

an additional $200,000.     Id.

      Mr. Rahrig did not contest Alcatel’s application of the

Windfall Clause to his sales quota after receiving either the

November or February Letters.       Mr. Rahrig voluntarily left Alcatel

in January 2003.   He now seeks recovery of all “unpaid earned sales

commissions” due under the Plan.         (J.A. 20.)

      During discovery, Edward Mamon, an Alcatel employee during the

relevant period in this action, testified that he “believed” there

                                     6
was an unpublished “cap” on sales commissions “somewhere around

$500,000."   (J.A. 676, 701, 703.)         Mr. Mamon’s belief was based on

“the [Alcatel] rumor mill.”     (J.A. 701.)

     Mr.   Rahrig   testified   that       although   he   was   aware    of   the

Windfall Clause, Alcatel told him “[t]hat there were no ceilings”

on compensation.    (J.A. 390.)   Thus, when Mr. Rahrig accepted the

November and February Letters, he had no knowledge that Alcatel was

“attempt[ing] to match up [his commissions] with the targeted and

predetermined unpublished ceiling of $500,000.”             (J.A. 1068.)

                                   II.

     “We review the district court’s grant of summary judgment de

novo, applying the same legal standards as the district court and

reviewing the facts and inferences drawn from the facts in the

light most favorable to . . . the nonmoving party.”                      Evans v.

Techns. Applications & Serv. Co., 80 F.3d 954, 958 (4th Cir. 1996).

Summary judgment is proper “if the pleadings, depositions, answers

to interrogatories, and admissions on file, together with the

affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to judgment as

a matter of law.”   Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett,

477 U.S. 317, 322-23 (1986).

     “In deciding whether there is a genuine issue of material

fact, the evidence of the nonmoving party is to be believed and all

                                       7
justifiable inferences must be drawn in its favor.”                         Am. Legion

Post v. City of Durham, 239 F.3d 601, 605 (4th Cir. 2001).                      A mere

scintilla of proof, however, will not suffice to prevent summary

judgment; the question is “not whether there is literally no

evidence, but whether there is any upon which a jury could properly

proceed    to    find   a    verdict   for       the     party”   resisting    summary

judgment.        Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251

(1986).     “[A] complete failure of proof concerning an essential

element of the nonmoving party’s case necessarily renders all other

facts immaterial.”          Celetex Corp., 477 U.S. at 323.

     The moving party bears the burden to show that there is no

genuine issue of material fact, and the court “must assess the

evidence as forecast in the documentary materials . . . in the

light     most    favorable     to     the       party     opposing   the     motion.”

Charbonnages de Fr. v. Smith, 597 F.2d 406, 414 (4th Cir. 1979).

                                        III.

     In this appeal, Mr. Rahrig contends that Alcatel violated the

terms of the Plan by (1) adjusting his sales quota prior to 30 days

notice and (2) using a cap to limit his commissions.

                                         a.

     As noted above, the Plan required “30 days notice” prior to

Alcatel’s       adjustment     or    modification         of   “individual     [sales]

quotas.”    (J.A. 106.)       Mr. Rahrig argues that Alcatel violated the

                                             8
Plan in failing to give him 30 days notice prior to exercising the

Windfall Clause.      That is, Mr. Rahrig contends the 30 Days Notice

Provision prohibited Alcatel from adjusting his individual sales

quota until 30 days after his receipt of the November Letter, i.e.,

December 22, 1999.3

     The   district    court   rejected   this   argument,   finding   that

Alcatel’s exercise of the Windfall Clause was simply an execution

of a term of the agreement and not an “adjustment or modification

of the entire [Plan].”     (J.A. 1191.)   Thus, the district court held

that the 30 Day Notice Provision did not apply to Alcatel’s use of

the Windfall Clause for the New Edge sales.

     This Court notes that Mr. Rahrig has not appealed the district

court’s finding that Alcatel “properly applied the Windfall Clause

on a retroactive basis.”       (J.A. 1190.)      The district court based

its finding on the plain language of the Plan, which stated that

Alcatel “reserves the right to adjust [individual sales] quota . .

. for that transaction and thereafter.” (J.A. 1191.) Mr. Rahrig’s

failure to challenge this finding is dispositive of his argument

that Alcatel violated the 30 Day Notice Provision.

     The Plan is to be “interpreted accordance with” Virginia law.

(J.A. 124.)   In Virginia, if “the terms of an agreement are clear

and unambiguous, the language used will be taken in its ordinary

     3
      Mr. Rahrig also contends that his sales commissions would
have been much greater if his original sales quota had remained in
effect until December 22, 1999.

                                    9
signification, and the plain meaning will be ascribed to it.”   See

Marriott Corp. v. Combined Props. Ltd. P’ship, 391 S.E.2d 313, 316

(Va. 1990).    A plain reading of the Plan reveals that Alcatel had

the discretion to identify windfall situations that had already

occurred, and then retroactively apply the Windfall Clause.   Thus,

even assuming 30 days notice was required before an adjustment

could be made to Mr. Rahrig’s individual sales quota, because the

adjustment could be applied retroactively, Alcatel’s application of

the adjustment to sales which occurred prior to December 22, 1999,

was proper.

                                  b.

     Mr. Rahrig also argues that Alcatel breached the Plan by

maintaining a secret, extra-contractual $500,000 cap on sales

commissions.    Specifically, Mr. Rahrig believes that Alcatel’s use

of a cap on his commissions violated the Windfall Clause because it

failed to consider his “effort expended or involvement” in the New

Edge sales.    (J.A. 110.)

     The district court did not address Mr. Rahrig’s argument

regarding an alleged cap on sales commissions in its written

opinion.      During the hearing on Alcatel’s motion for summary

judgment, however, the district court specifically rejected this

argument because: (1) the undisputed evidence showed that Mr.

Rahrig received significantly more than $500,000 in commissions

                                  10
from the New Edge sales, and (2) Alcatel nevertheless properly

invoked the Windfall Clause according to its terms.

     As noted above, Mr. Mamon’s testimony about the existence of

a $500,000 cap was based only on office rumors.   Such testimony is

inadmissible hearsay and was properly not considered material

evidence to deny Alcatel’s motion for summary judgment. Greensboro

Prof’l Fire Fighters Ass’n v. City of Greensboro, 64 F.3d 962, 967

(4th Cir. 1995) (proffered evidence of un-attributed rumors is

inadmissible hearsay; such evidence is neither admissible at trial

nor supportive of an opposition to a motion for summary judgment).

     We also note that Mr. Rahrig’s fiscal year 2000 commissions

greatly exceeded $500,000.4   Thus, any evidence that Alcatel had an

unpublished $500,000 cap on commissions is contradicted by Mr.

Rahrig’s own testimony.

                                 c.

     Finally, Alcatel argues that even assuming it violated the

Plan’s 30 Day Notice Provision or improperly capped commissions at

$500,000, Mr. Rahrig waived his right to additional commissions by

“accepting” the November and February Letters.       (J.A. 126-27.)

Under Virginia law, a waiver “is an intentional relinquishment of

a known right.” Va. Polytechnic Inst. & State Univ. v. Interactive

Return Serv., Inc., 595 S.E.2d 1, 6 (Va. 2004).   “Two elements are

     4
      According to Mr. Rahrig, he ultimately received        “total
commissions . . . in FY2000 of $758,810." (J.A. 1043.)

                                 11
necessary to establish waiver: knowledge of the facts basic to the

exercise of the right and the intent to relinquish that right.”

Id.   The district court found that “Mr. Rahrig waived his right to

challenge the application of the Windfall Clause because he signed

the [November and February L]etters, accepted payments tendered in

connection therewith, and ‘agree[d] to the terms’ in each letter.”

(J.A. 1192.)

      We agree with the district court that Mr. Rahrig waived his

right to challenge Alcatel’s adjustment of his sales quota by

executing the November and February Letters.   Mr. Rahrig knew his

sales commissions would be reduced by executing the November and

February Letters, thus waiving his ability to bring his instant

claim for breach of contract.

                                IV.

      Accordingly, we affirm the judgment of the district court.

                                                          AFFIRMED

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