Court Opinion

ID: 32225
Source: CourtListenerOpinion
Date Created: 2010-04-25 18:51:22+00
Date Added: 2024-06-11T14:56:20.919802
License: Public Domain

United States Court of Appeals
                                                                Fifth Circuit
                                                             F I L E D
              IN THE UNITED STATES COURT OF APPEALS            July 30, 2003
                      FOR THE FIFTH CIRCUIT
                                                         Charles R. Fulbruge III
                                                                 Clerk

                             No. 02-20614

     HILDA S. JOURDAN,

                            Plaintiff-Counter Defendant-Appellant,

          versus

     SCHENKER INTERNATIONAL INC.,

                            Defendant-Counter Claimant-Appellee.

          Appeal from the United States District Court
               for the Southern District of Texas
                         (H-99-CV-4081)

Before GARWOOD and HIGGINBOTHAM, Circuit Judges, and FELDMAN,
District Judge.*

GARWOOD, Circuit Judge:**

     Plaintiff-appellant Hilda S. Jourdan brought suit against her

former employer, defendant-appellee Schenker International, Inc.

     *
      District Judge of the Eastern District of Louisiana,
sitting by designation.
     **
      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this opinion should not be published and is not precedent except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.
(Schenker), for breach of contract arising from Schenker’s refusal

to pay a sales commission under the terms of a sales-incentive

plan.     The district court granted summary judgment for Schenker,

finding that the company’s alleged promise to pay a commission

under     the    incentive    plan    was   illusory,      and     that   there    was,

therefore, no contract as a matter of law.                 We conclude that there

is at least a genuine issue of material fact with respect to the

meaning of the sales-incentive plan in this respect, specifically

whether Jourdan had an accrued right under the plan to commissions

on   sales      that   had   occurred   prior     to   the    termination     of    her

employment with Schenker.            We therefore vacate the judgment of the

district court and remand for further proceedings not inconsistent

herewith.

                                     Background

      Schenker, a freight-forwarding company that provides freight-

delivery services to companies worldwide, employed Jourdan as a

sales representative in its Houston office from 1989, until she was

discharged       in    November   1999.         Although     the    parties   dispute

Jourdan’s right to the sales commission at issue, they are in

agreement on a number of other central facts.                      First, both agree

that Jourdan was an at-will employee eligible to receive a sales

commission on those business accounts that Jourdan managed and that

showed a certain growth in gross profits.1                    Second, the parties

      1
        Schenker introduced its sales-incentive program on May
29, 1998, and made the program retroactive to January 1, 1998.

                                            2
agree that Jourdan was discharged from her position with Schenker

on November 9, 1999, for what Schenker characterized as “lack of

performance” related to her failure to meet certain minimum sales

goals for 1999.

     In 1996, Jourdan was assigned to assist in the preparation of

Schenker’s bid for the shipping business of Bariven S.A., the

shipping agent for Venezuela’s national oil company.           In April of

1998, Bariven accepted Schenker’s bid, and the two companies

entered into a five-year contract under which Schenker agreed to

provide shipping services for Bariven at ceratin agreed rates.

Jourdan was thereafter assigned to a team of Schenker employees

responsible for managing the account and for fulfilling Bariven’s

orders.        Jourdan worked exclusively on the Bariven account until

August 21, 1998, when she was told by her supervisor that she was

being taken off the account and that she should resume making sales

calls     to    obtain   additional   business   from   new   and   current

customers.2

Under the program, Jourdan was entitled to receive a sales
commission on the total growth of her existing and newly acquired
accounts if that growth, measured in gross profits, exceeded
three times her salary and fringe benefits. For any amount of
gross profit growth in excess of three times her salary and
benefits, Jourdan was entitled to a commission of 7%. For growth
in gross profits in excess of four times her salary and fringe
benefits, Jourdan was entitled to a 10% sales commission.
     2
        Schenker points to this date, August 21, 1998, as the
point at which Jourdan was removed from the Bariven account.
Jourdan asserts, however, that although management then removed
her from the diurnal operations of the account, she nevertheless
retained responsibility for the account for purposes of earning a

                                      3
     Until mid-1998, Schenker was losing a substantial amount of

money on the Bariven account.       After August of 1998, however,

Schenker and Bariven renegotiated their contract to establish new

rates for Schenker’s services. Following those renegotiations, the

Bariven account began to show a profit, and by July 1999, Schenker

had earned a gross profit from the account in the amount of

$1,018,510.   The present dispute concerns Jourdan’s claim of a

commission.
     The district court, in addressing this dispute, held that
there was a genuine issue of material fact as to (1) whether
Jourdan was actually ever fully removed from the Bariven account,
and (2) whether, and under what circumstances, Schenker had the
right to remove a sales representative from an assigned account.
Schenker challenges the latter holding on appeal, arguing that
the district court erred in concluding that there was a genuine
issue of fact concerning Schenker’s right to take an account away
from a sales representative. Schenker, however, does not clearly
assign as error the district court’s former, and logically prior
holding, namely that there is a genuine issue of fact as to
whether Jourdan was ever removed from the Bariven account.
Instead, Schenker addresses this holding only in passing, with
only minimal citation to the record, and with no citation to any
authority. See FED. R. APP. P. 28(a)(9)(A) (noting that an
appellee’s brief must contain the appellee’s “contentions and the
reasons for them, with citations to the authorities and parts of
the record on which the [appellee] relies”); see also Randall v.
Chevron U.S.A., Inc., 13 F.3d 888, 911 (5th Cir. 1994) (declining
to reach the merits of an appellant’s argument where the
appellant’s brief failed to provide citations to relevant
authorities and parts of the record), modified on denial of reh’g
Randall v. Chevron, U.S.A., Inc., 22 F.3d 568 (5th Cir. 1994);
United States v. Ballard, 779 F.2d 287, 295 (5th Cir. 1986)
(same). For this reason, we decline to address if, or when,
Jourdan was removed from the Bariven account. And because that
question is the logically prior one, we also decline Schenker’s
invitation to hold that the district court erred in concluding
that there was a genuine issue of fact concerning whether
Schenker had discretion to remove Jourdan from the account, and
we instead leave Schenker to pursue these avenues of argument on
remand.

                                4
right to a commission on that profit.

      Jourdan maintains that the sales-incentive plan constitutes a

binding contract, under which she should have received credit for

the profit growth of the Bariven account in 1999.            Schenker,

however, argues that any promise to pay a commission on the Bariven

account was conditioned on Jourdan’s continued employment with

Schenker at the time that sales commissions were calculated and

paid,3 thereby rendering any promise to pay a sales commission

illusory   and   unenforceable.   The   district   court   agreed   with

Schenker’s interpretation of the plan in this respect, and on that

basis granted summary judgment for Schenker on Jourdan’s breach of

contract claim.    Jourdan now appeals.

                              Discussion

A.   Standard of Review

      We review a district court’s grant of summary judgment de

novo, Young v. Equifax Credit Info. Servs. Inc., 294 F.3d 631,

635 (5th Cir. 2002), applying the same standards as the district

court, and drawing all reasonable inferences from the evidence in

favor of the non-moving party.    Performance Autoplex II Ltd. v.

Mid-Continent Cas. Co., 322 F.3d 847, 853 (5th Cir. 2003); Banks

      3
        Schenker also disputes whether Jourdan was ever assigned
to the Bariven account for purposes of earning a commission under
the sales-incentive plan. The district court, however, did not
resolve this issue, nor is this matter directly before us.
Instead, we assume for present purposes that Jourdan was assigned
to the Bariven account within the meaning of the sales-incentive
plan. Schenker remains free to pursue this issue on remand.

                                  5
v. East Baton Rouge Parish School Bd., 320 F.3d 570, 575 (5th

Cir. 2003).   “Summary judgment is proper if, after adequate

opportunity for discovery, the pleadings, depositions, answers to

interrogatories, and admissions on file, together with any

affidavits filed in support of the motion, 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.”        Young, 294 F.3d at

635.   The movant bears the initial burden, on a motion for

summary judgment, of specifically pointing out wherein there is

no genuine issue of material fact.        See Bazan ex rel. Bazan v.

Hidalgo County, 246 F.3d 481, 489 (5th Cir. 2001).         If the movant

fulfills this burden, the non-movant, to avoid summary judgment,

must come forward with summary judgment evidence sufficient to

warrant a finding in its favor on all issues on which it would

bear the burden of proof at trial.        See Little v. Liquid Air

Corp., 37 F.3d 1069, 1075 (5th Cir. 1998).

B.   Illusory Contracts

       An illusory promise, at common law, “is neither enforceable

against the one making it, nor . . . operative as a consideration

for a return promise.”    2 JOSEPH M. PERILLO & HELEN H. BENDER, CORBIN    ON

CONTRACTS § 5.28 (rev. ed. 1995).       Thus, it has long been held that

where the condition of a promise lies solely within the promisor’s

power, the promisor, not being bound to a course of conduct, cannot

be said to have entered into a contract.        See RESTATEMENT (SECOND)   OF

                                    6
CONTRACTS § 77 cmt. a (1981) (“Words of promise which by their terms

make performance entirely optional with the ‘promisor’ do not

constitute a promise.”).        This tenet of contract law applies with

equal force in the context of employment relations governed by

Texas    law.4    Thus,   the    Texas    Supreme    Court   has    held    that

“[c]onsideration for a promise, by either the employee or the

employer in an at-will employment, cannot be dependant on a period

of continued employment.”        Light v. Centel Cellular Co. of Texas,

883 S.W.2d 642, 645 n.5 (Tex. 1994).         That such a promise would be

illusory follows from the principle that where an employee is

employed    at-will,   any   additional     period    of   employment      rests

exclusively within the control of the employer.               Id. at 644-45

(“Any promise made by either [the] employer or employee that

depends on an additional period of employment is illusory” and

unenforceable).

     Not every promise made in the context of at-will employment,

however,    is   unenforceable.     “That    an     employment     contract   is

terminable at-will . . . . does not mean that an employer can

promise to pay an employee a certain wage and then unilaterally

decide to pay the employee less for work she has already done.”

     4
        Both parties agree that Texas law governs this diversity
suit, and the district court accordingly looked to the law of at-
will employment in Texas to determine that Schenker’s promise to
pay a sales commission was an illusory and unenforceable one.
See, e.g., Exxon Corp. v. Burglin, 42 F.3d 948, 950 (5th Cir.
1995) (“Federal courts apply state substantive law ‘when
adjudicating diversity-jurisdiction claims . . . .’”).

                                      7
Paniagua v. City of Galveston, 995 F.2d 1310, 1313 (5th Cir. 1993)

(citing Winters v. Houston Chronicle Publishing Co., 795 S.W.2d 723

(Tex. 1990), and Pickell v. Brooks, 846 S.W.2d 421 (Tex.App.—Austin

1992, pet. denied)).    Thus, if Jourdan had earned her commission

before she left Schenker in November 1999, Schenker cannot rely

only on Jourdan’s at-will status to deny payment of an earned

commission.

C.   The District Court’s Opinion

      Relying on Light, the district court concluded that Jourdan’s

employment was at-will and that Schenker’s promise to pay a sales

commission was therefore illusory.        We find no error in the

district court’s conclusion that Jourdan’s employment was at-will

and that her continued employment was a condition entirely within

Schenker’s control.    See, e.g., Texas Farm Bureau Mut. Ins. Cos. v.

Sears, 84 S.W.3d 604, 608 (Tex. 2002) (“[A]bsent a contract, the

relationship between an employer and an employee is ‘at will,’

meaning that, except for very limited circumstances . . . either

party may terminate the employment relationship for any reason or

no reason at all.”).       The district court, however, failed to

determine expressly at what point Jourdan had an accrued right to

a sales commission.    That determination, however, is critical to

resolving whether Jourdan is entitled to a commission on at least

a portion of the gross profits earned in 1999 from the Bariven

account.

                                    8
      The sales-incentive plan provides that commissions are to be

paid based on the total growth in gross profit of those accounts

assigned to an individual employee. With respect to the payment of

commissions, the plan merely provides: “Sales incentive will be

paid quarterly.    Payments will be based on all figures from our

accounting system.”     The plan, however, is silent as to when a

right to an incentive payment accrues.

      An examination of the language of the program indicates three

theoretically   possible   points    at   which     a       right   to   a   sales

commission might be said to have accrued.           First, the right to a

commission may accrue under the plan at the point at which an

account begins to show a gross profit.            Second, the right to a

commission may accrue only at the point a commission is calculated

according to the figures of Schenker’s accounting system.                      And

third, the right might be said to accrue only at the point that

each quarterly payment on the commission is to be made.

      If the right to a sales commission under the incentive plan

accrued only at the time that the commission was either calculated

or   actually   paid,   then   the   payment   of       a    commission      would

necessarily be conditioned on continued employment to the point of

calculation or payment, a condition over which Schenker exercised

near-complete control.     Any promise to pay that commission would,

therefore, be illusory, and Schenker would be entitled to summary

judgment on Jourdan’s contract claim.      If, however, the right to a

sales commission accrued under the incentive plan at the time that

                                     9
an account began to show a profit, with only payment delayed until

a future date, then that payment, more akin to a salary, would not

be conditioned on continued employment, and Schenker’s promise to

pay would not be illusory.       The issue before us, therefore, becomes

the existence vel non of an issue of material fact regarding the

point at which an employee’s right to a sales commission accrued

under Schenker’s sales-incentive plan.

D.   The Sales-Incentive Plan

      Having   thus   narrowed    our    inquiry,   we   conclude   that   the

language of the sales-incentive plan at the least raises the

reasonable possibility that Jourdan’s right to a sales commission

accrued, not at the time that the commission was to be calculated,

but at the point at which the Bariven account showed a gross

profit.5

      Schenker, however, maintains that it did not promise to pay

Jourdan a commission at the time that she earned the commission,

      5
        Jourdan also argues in her brief that she is entitled to
a commission on the profit growth of the Bariven account past
November 1999. This argument, however, clearly has no merit.
Jourdan was an at-will employee, and any contractual rights
terminated with the conclusion of her employment. Indeed, both
at oral argument and in her deposition testimony, Jourdan
conceded that only those sales persons who remained employed with
Schenker continued to receive sales commissions over the life of
an account. Thus, although we hold that there is a possibility
that Jourdan has a contractual right to a commission on the
Bariven account, that right extends only up to the point of
Jourdan’s termination, and not to any growth in gross profits
after November 1999.

                                        10
but rather promised to pay the commission if Jourdan continued to

be employed at the end of the calender year, and at each quarter

thereafter on which a payment was due. Schenker, however, cites no

evidence in the record to support the proposition that a right to

a   sales   commission    only   accrues     at   the    point   at   which   the

commission is calculated.        Instead, it relies for support for this

position solely upon the language of the incentive plan quoted

above and upon the fact that commissions were calculated at year

end.

       As discussed above, however, the language of the payment

clause of the incentive plan is at the least ambiguous and sheds no

light on the question of when an employee’s right to a commission

accrues.    The proper construction of an ambiguous contract is a

question of fact.        Matter of Fender, 12 F.3d 480, 485 (5th Cir.

1994).      In   the   absence   of   any   additional    evidence     that   its

employees    had   generally     understood       that   their   rights   to    a

commission only accrued if they remained employed with Schenker at

the end of a given calender year,6 we conclude that the contract

       6
        Schenker maintains that its employees knew that the
commissions for growth realized in one year would not be paid
until the next calender year. Thus Schenker states that “[i]n
1999, Jourdan received commissions paid for work she performed in
1998.” From this statement Schenker argues “[t]hus, Jourdan knew
that, under the same Sales Program, commissions paid for work
performed in 1999 would not be paid unless she was employed at
the time commissions were paid in 2000.” This statement is a non
sequitur, and does not constitute summary judgment evidence
establishing the point of accrual. It does not necessarily
follow from the fact that an employee is paid on one date, or

                                       11
does not unambiguously reflect Schenker’s construction and that

there is at the least a genuine factual dispute on this pivotal

issue.7

                                Conclusion

     Because we find that there is at the least a genuine issue of

material fact concerning the point at which Jourdan’s right to a

commission on the Bariven account accrued under the sales-incentive

plan, we VACATE the district court’s grant of summary judgment to

Schenker   and   REMAND   the   case     for   further   proceedings   not

that the amount of a payment is calculated on a particular date,
that the employee does not have an accrued right to that payment
at an earlier date.
     Moreover, there is some dispute as to when Schenker actually
made commission payments. At oral argument, Jourdan maintained
that commission payments were made quarterly in the year that
they were earned, not in the following year. We note that this
is, at best, a strained reading of the language of the plan.
Given that the commission payments were to be computed annually,
it is difficult to see how quarterly payments could have been
made prior to the computation of the commission. However,
because, aside from this dispute, we conclude that there is a
fact issue concerning when the right to a commission accrued
under the sales-incentive plan, we need not address the parties’
factual dispute concerning the timing of commission payments, a
dispute only clearly raised for the first time at oral argument.
     7
        We also note that it is not clear that Schenker argued
before the district court that its promise was illusory. In
fact, Jourdan states that it was the district court that first
raised this issue on its own motion. Schenker did argue, in its
reply brief in support of its motion for summary judgment, that
no employee could claim a commission if their employment was
terminated before commissions were calculated and paid. It is
not clear, however, that this argument was raised in support of
the claim that its promise was illusory: Schenker did not cite
any Texas cases concerning illusory contracts or at-will
employment. Accordingly, Jourdan cannot be charged with a
failure to produce rebuttal evidence concerning the point at
which a right to a commission accrued under the contract.

                                    12
inconsistent herewith.

                         VACATED and REMANDED.

                                  13