Court Opinion

ID: 9495941
Source: CourtListenerOpinion
Date Created: 2023-08-05 16:13:48.06908+00
Date Added: 2024-06-11T17:57:16.639356
License: Public Domain

LAY, Circuit Judge,
dissenting.
I dissent to point out the blatant error in the majority’s interpretation of the contract. The test of whether a contract is ambiguous, thus allowing extrinsic evidence to be admitted before a jury as the trial court did here, or whether the contract is unambiguous as the majority finds, turns on whether reasonable minds might differ as to the meaning of the terms of the contract. In the present case, the district court was privy to all of the evi-*669denee and heard the arguments of both sides whether the contract was ambiguous. To urge that the district court acted unreasonably ignores the express language of the entire contract as well as the district court’s comments and findings. In interpreting the contract, the majority has substituted a twisted version of what the contract means without considering the plain wording embodied within the contract. Although the majority gives lip service to the fact that the contract expressly provides that only bonuses may be capped, it gives little meaning to this significant language. There is no language in the contract that says a commission, after it has been earned, may be capped. The fact that the contract provides only for bonuses to be capped and not commissions is given little or no weight by the majority. This in itself is significant error. The majority has found a way to cap Brozo’s commission by taking language in the contract completely out of context.
There are other legal concerns surrounding the construction of the contract by the majority. First, the majority failed to take into consideration all of the facts and circumstances, including the conduct of the parties, surrounding the contract and the rebanee that the parties have placed upon it. See Restatement Second of Contracts § 202; see also 11 Richard A. Lord, Williston on Contracts § 32:2, at 402 (4th ed.2000). Second, the majority has failed to give a coherent and consistent meaning to all terms in the contract. See Lord, supra, at § 32:3, at 408. Third, the majority overlooks that the ultimate interpretation of the contract should be reasonable and not arbitrary or capricious and should reflect a just result. See id. at § 32:11 (stating “interpretations which render the contract fair and reasonable are preferred to those which render the contract harsh or unreasonable to one party”). In the present case, the majority has ignored these principles. The majority’s opinion states that an employer can change an employee’s compensation after the employee’s work is completed and the compensation is earned. I challenge the majority to find any contract that has ever been interpreted in such a nonsensical way. As the district court observed, Oracle’s interpretation of the contract now adopted by the majority makes “no sense.” Even if we assume the contract is not ambiguous, the 'majority overlooks that when Brozo was hired, he was presented a copy of a Standard Individual Compensation Plan which reflected a cap on bonuses but not on commissions. The majority ignores the terms of compensation within the contract as to when an employee earns a commission; the contract provides that Brozo’s compensation expressly depended upon the credits that were earned and there is a specific provision of the contract that states the credits are earned upon “booking” or “revenue recognition.” The majority overlooks Section IV of the contract which provides that certain revenues, such as license revenues, would be earned 100 percent upon “revenue recognition” and when this occurred, Oracle’s revenue recognition department “recognized” the revenue as a guaranteed receivable. The contract provides in terms, completely ignored by the majority, that other credits for education, renewals, or consulting were earned 100 percent upon “booking of the sale.” Notwithstanding this express language, the majority approves the capping of Brozo’s commission after the sale, even though the commission had already been earned. Thus, the majority ignores the express language of the contract and fashions a result which completely contradicts the express terms of the contract.
The majority relies upon language of paragraphs A and B of Section II of the contract which provides as follows:
*670A. The Company shall make the final and binding determination of any amount payable under the Plan and reserves the right to change the Plan at any time, during or after the close of the fiscal year. Changes may be to salaries, bonuses, commissions, commission rates, quotas, territories or any other terms and conditions. Changes to the Plan are valid only if approved at the Vice President level or higher in accordance with Sales Planning practices. Entitlement to commissions and bonuses does not vest until the Company makes any and all final changes as authorized by the Plan.
B. For any single transaction that generates Quota Credit equal to or greater than the salesperson’s annual quota, management at the Vice President level or higher will review the transaction and determine the appropriate treatment of the transaction under the Plan.
Add. 19 (emphasis added).
By singling out one sentence in the above contract, the majority contradicts the other express terms of the contract which guarantee a commission once earned. In doing so, the majority slights the principle that the meaning of words in a contract depends upon the words around it. Lord, supra, at § 32:6, at 432-34; see also Jarecki v. G.D. Searle & Co., 367 U.S. 303, 307, 81 S.Ct. 1579, 6 L.Ed.2d 859 (1961) (stating a contract term is “known by the company it keeps”). Oracle uses this language, as does the majority, to mean that a commission can be retroactively capped notwithstanding the simplicity of the contract which says only bonuses can be capped,2 and that the commission is deemed earned upon the sale.
The extrinsic evidence heard by the jury demonstrates the absurdity of the majority’s interpretation of the contract. In June of 1999, prior to Oracle’s unauthorized capping of the commission, Oracle attempted to amend the Individual Compensation Plan and submitted it to Brozo for his signature capping his commission at 200 percent. Brozo refused to sign the amended Plan. Oracle officials conceded that the employee’s signature to amend the Plan was required for a retroactive adjustment.3
I respectfully submit that the learned district court accurately refuted Oracle’s argument by the following statement:
[Oracle’s] construction [of the Plan] would convert what is clearly an employment contract into nothing more than a “we’ll pay you whatever we want” and “we’ll let you know our decision whenever we want to-even at the end of the fiscal year when you-the employee-have performed up to expectations” arrangement.
Add. 2.
One of the cardinal principles of contract construction is that every contract should *671be interpreted to provide a lawful and legal meaning. Lord, supra, at § 32:11, at 453. If Oracle is correct in its argument, which the majority has sanctioned, they have turned this agreement into an illusory contract meaning that there is no contract at all. In other words, if Brozo is committed to a performance Plan, to say that his employer may act within its sole discretion to do whatever it wants to do, renders the contract illusory. See Family Snacks of North Carolina, Inc. v. Prepared Products Co., Inc., 295 F.3d 864, 867-68 (8th Cir.2002) (restating the common law contract principle that both parties must be obligated to perform under a contract); Heuser v. Kephart, 215 F.3d 1186, 1191 (10th Cir.2000) (holding a contract illusory because city officials had unfettered discretion to accept or reject a settlement offer); Gray v. American Express Co., 743 F.2d 10, 19 (D.C.Cir.1984) (holding that a contract between a credit card company and card holder did not allow the credit card company to revoke the credit card after charges had already accrued because such a contract would be illusory); 3 Lord, supra, at § 7:7, at 88-89 (stating a promise which allows one party to escape performance of anything detrimental to himself or beneficial to the promisee is illusory).
Another reasonable interpretation of Section II which Oracle relies upon demonstrates that it is susceptible to other meanings. The majority overlooked the fact that Section II, which says changes may be made to commissions, etc., is predicated upon Oracle’s power and right to change the Plan. There is nothing within the plain meaning of Section II.A which gives the employer the right to retroactively alter a single earned commission.4 Oracle changed the Plan for fiscal year 2000, specifically capping salespersons’ quotas at 200 percent. Oracle, however, did nothing to “change the Plan” prior to its attempt to retroactively cap Brozo’s commissions. None of the documents were amended or altered. Instead, Oracle simply attempted to change a single commission on a retroactive basis. Clearly the contract does not provide for such unilateral conduct. As Brozo points out, such an interpretation would render every other part of the Plan meaningless.
The majority also overlooks another basic standard governing the construction of a contract: the court must construe the agreement against the drafter. 11 Lord, supra, at § 32:12, at 472. Oracle respectfully submitted the majority’s twisted version of the contract complied with the general principle of contract interpretation, as well as the evidence of the record. A contract should not be construed so strictly as to lead to a harsh or absurd result. Employers Mut. Liab. Ins. Co. of Wis. v. Eagles Lodge of Hallock, Minn., 282 Minn. 477, 479-80, 165 N.W.2d 554, 556 (1969).
It is also clear that the conduct of the parties contradicted Oracle’s interpretation of the Plan. As the district court pointed out, if Oracle so clearly had the right to “cap” Brozo’s earned commission, they never would have prepared a new agreement for Brozo to sigh to add capping language to the Plan for fiscal year 2000.5 *672In the present ease, the Plan provides that commissions are earned “upon booking” or “upon revenue recognition.” I set forth this proviso at the beginning of this dissent. These terms are completely ignored by the majority. In addition, the majority ignores Section II of the contract which states that Oracle must act “as authorized by the Plan” and determine appropriate treatment “under the Plan.” Add. 19 (emphasis added).
I strongly endorse the district court’s reasonable interpretation of the contract where it correctly noted “[t]he present case is not ... one in which the contract terms leave to the ‘discretion of one party’ the how, when and under what circumstances to pay an employee for performance.” Add. 3.
In conclusion, I once again assert that there is no reported case of which I am aware that provides an employer has unrestricted discretion to retroactively change a commission once earned when there is no express provision in the contract providing for it. Any employee would be a fool to enter into such a contract. This not only points out a total absence of reasonableness in the majority’s interpretation, but also singles out how unjust and nonsensical its interpretation appears to be.
This case troubles me as much as any case that I have sat on in over thirty-seven years on this court. In the present case, the law is clear. There can be little doubt that the district court exercised a reasonable interpretation to the contract and correctly submitted the case to the jury. In writing this dissent, I recognize that it is a strong one; however, as I have indicated, to deny a party a commission properly earned under the express terms of a contract in the manner the majority has attempted to do in this case, requires strong words and a strong objection. I accordingly strongly dissent.

. The jury heard testimony that Brozo's supervisor, Reed Olson, decided to punish Bro-zo and reduce his commission on the Finger Hut deal because Brozo had played a practical joke on him on a fishing trip. Thus, Brozo’s earned commission of $630,000 was capped at $183,589.

. The majority overlooks Minnesota law which controls an interpretation of the contract. Under Minnesota law, the legislature has provided: "When an employer employing labor within this state discharges an employee, the wages or commissions actually earned and unpaid at the time of the discharge are immediately due and payable upon the demand of the employee.'' Minn. Stat. § 181.13. To urge as the majority does, that the contract between Brozo and Oracle provides Oracle the discretion to retroactively reduce the compensation, borders upon the ridiculous.

. This contract had never been interpreted by Oracle in the manner that the majority asserts at any time during its existence.

. The majority relies upon the case of Vigoro Indus., Inc. v. Crisp, 82 F.3d 785 (8th Cir. 1996). In doing so, it takes language out of context in holding that Vigoro stands for the proposition that “[wjhen a contract term leaves a decision to the discretion of one party, that decision is virtually unreviewable.” Vigoro, 82 F.3d at 791. Vigoro, of course, is clearly distinguishable. The employee’s bonus could be reduced by the expressive terms of the contract if management deemed it “ap*672propriate as a penalty for mismanagement.” Id.