Opinion
CV146025736S
07-12-2016
John Sexton v. NetDimensions, Inc
UNPUBLISHED OPINION
MEMORANDUM OF DECISION
Lois Tanzer, Judge Trial Referee.
PROCEDURAL HISTORY
The plaintiff, John Sexton (sometimes " Sexton"), brings this action against his former employer, NetDimensions, Inc. (sometimes " NetD"), in four counts claiming unpaid commissions in violation of General Statutes § § 31-71a and 31-72, breach of contract, unjust enrichment and promissory estoppel. In its response, the defendant denies the allegations and asserts as special defenses, inter alia, that the plaintiff has been paid and that the plaintiff's compensation and sole remedy is under the contract between the parties. The matter was tried to the court. Sexton testified. The defendant called three witnesses, Matthew Chaloner, NetD's chief financial officer (CFO) and Jay Shaw, NetD's chief executive officer (CEO), both of whom testified by videotape deposition, and Tiffany Wilcox, the defendant's Sales Operations Coordinator.
General Statutes § 31-72 provides in relevant part as follows: " When any employer fails to pay an employee wages in accordance with the provisions of sections 31-71a to 31-71i, inclusive . . . such employee . . . may recover, in a civil action, twice the full amount of such wages, with costs and such reasonable attorneys fees as may be allowed by the court . . ." Section 31-71a defines wages as to include compensation determined on a commission calculation.
FACTS
The court has weighed all the evidence, assessed the testimony and credibility of the witnesses and finds as follows:
On December 15, 2011, the plaintiff signed an offer of employment letter (" offer letter") with the defendant. Thereafter, he resigned from his then current employment. On December 17 and December 28, respectively, the plaintiff signed an employee handbook and an " at will" employment agreement. On January 2, 2012, Sexton began his employment as a sales representative for the defendant, responsible for selling hosted services, software licenses and professional services to clients. Pursuant to the offer letter, Sexton's compensation included a base annual salary of $95,000 plus a structured commission. His assigned sales territory was the west coast, where he resided, and the state of Georgia. The Georgia assignment was important to the plaintiff because he had worked in the Atlanta area for many years and had business contacts there.
The plaintiff complained to his manager and others that the commission policy was unfair. The policy was intended to incentivize salespeople with high commission rates to bring in new business. The policy was uniformly applied to all salespeople, including Sexton. Commissions were paid on new sales and upsells. New sales occur when a NetD client buys a product or service that NetD had not previously sold to that client. An upsell occurs when an existing client agrees to pay a higher price for a product it already uses or adds to the amount of user licenses. With a few exceptions, commissions are not paid for renewals of an existing contract or related upsells. The renewal process is purely administrative, and salespeople have little or no involvement in renewal transactions after the initial new sale. There are three categories of renewals: (1) committed renewals, (2) automatic renewals and (3) standard renewals. Committed renewals occur when new customers contract for multi-year agreements. The first year of the contract is considered a new sale and is commissionable. Subsequent years to which the customer is committed are not considered new business and, therefore, do not provide for sales commissions. Automatic renewals occur when an existing noncommitted customer does not actively terminate service with the defendant before the end of the service year, at which point, the contract renews at the same price and quantity. The third category is the standard renewal or when a renewal does not fit into the previous two categories. An example of a standard renewal that is considered new business and commissionable is a direct renewal with NetD by a customer that had previously contracted with a third-party reseller. During a contract term, customers may renegotiate the contract and an upsell may occur. Upsells are commissionable only on the portion of an existing contract that increases (such as additional services or the number of licenses). No sales representatives were paid commissions on invoiced sales to customers after year one or on renewals.
In early 2013, the Georgia territory was reassigned when a third sales representative was hired. The plaintiff complained about the loss of sales leads in Georgia and he was told he could identify, as his, twenty Georgia companies for leads.
In August of 2013, Sexton complained that he had not received a payment for a commission earned from a sale to HireRight, an existing customer. The total sale made by Sexton to HireRight in 2012 was $7,600. In 2013 the total sale was $24,750, of which $17,150 was an upsell and $7,600 was a renewal. Sexton requested and accepted a commission on the upsell only, assuring the defendant at the time that he had received everything he was due.
In late 2013, the plaintiff learned the defendant was revising its compensation plan for 2014 to include a reduction in the base salary and an overhaul of the commission structure. On January 31, 2014, the plaintiff terminated his employment with the defendant, in large part at least, because of the impending change in the compensation plan. He has been paid commissions due him on all invoiced new sales and pro-rated upsells.
During the course of Sexton's employment and thereafter, the defendant acted to correct errors in commission payments to the plaintiff when brought to its attention. At no time did the defendant engage in conduct that exhibited bad faith, arbitrariness or unreasonableness.
CLAIMS
The plaintiff seeks to recover $58,107.74 in unpaid commissions. He contends, based on the offer letter, he was entitled to a commission whenever an invoice was issued on an account assigned to him, including renewals and full year upsells. The defendant denies the plaintiff is owed any commissions and asserts he was paid commissions on all new customer sales and upsells pursuant to the offer letter.
The plaintiff also seeks to recover $59,587.50 in commissions lost as a result the reassignment of Georgia to another sales representative in early 2013. The defendant asserts the Georgia assignment was not permanent and it was entitled to change assignments pursuant to the employment agreement and employee handbook.
Sexton seeks double damages and attorneys fees pursuant to General Statutes § 31-72.
DISCUSSION
Unpaid Commissions
It is undisputed that the claim for unpaid commissions is governed by the terms of the offer letter that provides in pertinent part as follows:
Commissions will be based on invoiced sales on a quarterly basis, at $26,250 payable upon meeting first new business sales milestone of $200,000. Commissionable sales number includes new platform sales and related professional services. After the first $200,000 milestone is reached, commissions are paid pro-rata per quarter. (example: $200,000 sales in Q1=$26,250 in commission, $100,000 sales in Q2=$13,125 in commission). This reflects an effective rate of 13.125%. If you are assigned to an existing customer, you are still commissionable on any upsell but it does not count towards the $800,000 new business quote . . . Any sale after attaining the quota of $800,000 is payable at the rate of 15%.
" When interpreting a contract, we construe the contract as a whole and all relevant provisions are considered when determining the intent of the parties." Shawmut Bank Connecticut, N.A. v. Connecticut Limousine Service, Inc., 40 Conn.App. 268, 272, 670 A.2d 880, cert. denied, 236 Conn. 915, 673 A.2d 1143 (1996). " [T]he intent of the parties is to be ascertained by a fair and reasonable construction of the written words and the language used must be accorded its common, natural, and ordinary meaning and usage where it can be sensibly applied to the subject matter of the contract." (Internal quotation marks omitted.) Barnard v. Barnard, 214 Conn. 99, 110, 570 A.2d 690 (1990). " A contract should be construed so as to give full meaning and effect to all of its provisions . . ." (Internal quotation marks omitted.) FCM Group, Inc. v. Miller, 300 Conn. 774, 811, 17 A.3d 40 (2011). All relevant terms of the contract must be considered as a whole and a fair operative effect must be given to each such term in order to achieve a reasonable overall result. Taylor v. Mucci, 288 Conn. 379, 384-85, 952 A.2d 776 (2008); Schultz v. Hartford Fire Ins. Co., 213 Conn. 696, 706, 569 A.2d 1131 (1990). No word or clause should be eliminated as meaningless or disregarded as inoperative whenever possible. See A.M. Larson Co. v. Lawlor Ins. Agency, Inc., 153 Conn. 618, 622, 220 A.2d 32 (1966). " The interpretation of a contract must be made in accordance with the terms employed in the instrument and a court cannot by that means disregard the words used by the parties or revise, add to, or create a new agreement . . . The court cannot add to a contract a new term not previously considered by the parties, even though on later review of the contract by one of them it appears desirable to do so, and in all probability it could have been originally inserted." (Citation omitted; internal quotation marks omitted.) Slifkin v. Condec Corp., 13 Conn.App. 538, 545, 538 A.2d 231 (1988).
Sexton claims, pursuant to the terms of the offer letter, that he is due commissions whenever an invoice is issued to one of his assigned clients, including renewals of existing contracts and on related upsells. Sexton's argument focuses on 1) the words in the first sentence of the compensation provision that " [c]ommissions will be based on invoiced sales" and 2) the absence of the word " renewal" and of language excluding commissions on renewals. This argument is unpersuasive. It is contrary to plaintiff's prior acceptance of and satisfaction with a commission only on the HireRight upsell and not on the renewal in August 2013. The argument ignores the terms " new business sales milestone, " " new platform sales, " " new business quota" and " upsell" and renders them superfluous and meaningless. The court cannot " disregard the words used by the parties or revise, add to, or create a new agreement."
" The burden of proof rests on the plaintiff in a claim for breach of a written contract to prove the terms of the alleged written agreement between the parties." Howard v. Paprocki, Superior Court, judicial district of New Haven, Docket No. CV-09-5029255-S, (January 28, 2011, Zemetis, J.); see also Vigorito v. Allard, 143 Conn. 70, 71, 118 A.2d 906 (1955) (" [w]here the exact terms of a contract sued upon are put in issue by a denial, the burden is upon the plaintiff to prove what those terms are"); Lucier v. Norfolk, 99 Conn. 686, 699, 122 A. 711 (1923) (" [t]he plaintiff ha[s] the burden of establishing his construction of the claimed contract"). He has not sustained the burden to show the terms of the offer letter entitle him to commissions on renewals and full year upsells. With one exception, the Seneca claim, discussed below, the evidence shows that the plaintiff has been paid the commissions to which he is entitled, pursuant to the offer letter--all invoiced new sales and upsells.
The Seneca claim involves an invoice dated June 28, 2013 for $78,000. Sexton's position is that he is entitled to a commission on the Seneca sale because an invoice was issued and he has not been paid. A second invoice, dated September 10, 2013, was issued for " -$78,000." The first invoice was credited by the second because the sale between NetD and Seneca was cancelled. The offer letter is silent as to commissions on invoiced but cancelled new sales. Wilcox credibly testified that NetD does not pay commissions on cancelled sales or where there is no invoice. The plaintiff offered no evidence to suggest otherwise. The plaintiff failed to sustain his burden to prove he was entitled to a commission on the invoiced but cancelled sale.
The Territorial Assignment
The plaintiff asserts he was given the sales territory of the west coast and the state of Georgia in the offer letter signed by him on December 15, 2011. The offer letter states, " Territory and Account Responsibility: Assigned geographic territory will be West Coast and the state of Georgia." The offer letter does not indicate that the Georgia assignment is exclusive or permanent. On the other hand, as NetD contends and Sexton concedes, the employment agreement and employee handbook provide for potential territory reassignment. The evidence is insufficient to support a finding that the plaintiff was entitled to an exclusive, permanent assignment to the Georgia territory.
CONCLUSIONS
FIRST COUNT--GENERAL STATUTES § § 31-71A AND 31-72
It is undisputed that the statute applies to Sexton and his claim for commissions. However, for the reasons set forth above, the plaintiff has failed to sustain his burden to prove his entitlement to any of the commissions he alleges are due to him.
Judgment shall enter for the defendant on the first count.
SECOND COUNT--BREACH OF CONTRACT
For the reasons set forth above, the plaintiff has failed to sustain his burden to prove any of the commissions he alleges are due him. Likewise, the plaintiff has failed to sustain his burden to prove he was entitled to an exclusive, permanent assignment of the state of Georgia during his employment. Further, the plaintiff's claim he sustained damages in the form of lost sales opportunities and commissions in Georgia are based on possibility, estimates and speculation. The law requires more. See Meadowbrook Center, Inc. v Buchman, 149 Conn.App. 177, 191, 90 A.3d 219 (2014) (" while damages need not be ascertainable with absolute exactness or mathematical precision . . . recovery for speculative damages is precluded" [internal quotation marks omitted]).
Judgment shall enter for the defendant on the second count.
THIRD COUNT--UNJUST ENRICHMENT
" The lack of a remedy under a contract is a precondition to recovery based on unjust enrichment or quantum meruit." United Coastal Industries, Inc. v. Clearheart Construction Co., 71 Conn.App. 506, 513, 802 A.2d 901 (2002). Neither party disputes that Sexton's claim for unpaid commissions is based on and governed by the terms of the offer letter. In other words, there is a contract pursuant to which the plaintiff seeks a remedy for nonpayment of commissions. Hence, a precondition to recovery based on unjust enrichment has not been met.
Judgment shall enter for the defendant on the third count.
FOURTH COUNT--PROMISSORY ESTOPPEL
The promise alleged by the plaintiff is a " clear and definite promise of compensation." Specifically, he alleges, " NetDimensions promised to pay Mr. Sexton a salary of $95,000 per year, plus commissions of approximately 13.125% based on invoiced sales." He further alleges that he reasonably " relied on this clear and definite promise by foregoing other opportunities and performing services on behalf of NetD to his detriment." For the following reasons, he cannot prevail on this claim.
First, the plaintiff has not alleged any promise by the defendant independent of that made as part of his entering into the employment agreement. As a result, the defendant is entitled to rely on the agreement as the final integration of his rights and duties with respect to that promise. See Meadowbrook Center, Inc. v. Buchman, supra, 149 Conn.App. 194.
Second, " it is well settled that breach of contract and promissory estoppel are inconsistent theories of recovery, as promissory estoppel is appropriate only when there is an absence of consideration to support a contract." Id. In this case, the parties entered into a written employment contract, the terms of which, as set forth in the offer letter, the parties agree govern their dispute.
Finally, " [p]roof of detrimental reliance necessarily entails evidence of injury to a plaintiff." Id., 195; see also Stewart v. Cendant Mobility Services Corp., 267 Conn. 96, 113, 837 A.2d 736 (2003); W. v. W., 256 Conn. 657, 661, 779 A.2d 716 (2001); Curcio v. Hartford Financial Services Group, 472 F.Supp.2d 239, 245 (D.Conn. 2007). The plaintiff has not alleged--other than to state " foregoing other opportunities" and the loss of " leads" in Georgia and has not presented evidence to support a finding of a detrimental reliance injury.
Judgment may enter for the defendant on the fourth count.
JUDGMENT FOR THE DEFENDANT ON ALL COUNTS PLUS COSTS.