Jourdan v. Schenker International Inc. , 71 F. App'x 308 ( 2003 )

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this opinion should not be published and is not precedent except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