Ellicott v. American Capital Energy, Inc. , 906 F.3d 164 ( 2018 )

United States Court of Appeals
For the First Circuit
No. 17-1421
STEPHEN ELLICOTT,
Plaintiff, Appellee,
v.
AMERICAN CAPITAL ENERGY, INC.,
THOMAS HUNTON and ARTHUR HENNESSEY,
Defendants, Appellants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. F. Dennis Saylor IV, U.S. District Judge]
Before
Torruella, Selya, and Lynch,
Circuit Judges.
Robert K. Dowd, with whom Robert K. Dowd P.C. was on brief,
for appellants.
Christopher A. Kenney, with whom Anthony L. DeProspo, Jr.,
and Kenney & Sams, P.C. were on brief, for appellee.
October 12, 2018
TORRUELLA, Circuit Judge. This case concerns a contract
dispute between a solar energy company and a former sales employee.
Appellee Stephen Ellicott ("Ellicott") filed suit against
Appellants American Capital Energy, Inc. ("ACE") and its two
principals, Thomas Hunton ("Hunton") and Arthur Hennessey
("Hennessey") (collectively, "Appellants"), claiming violations of
the Massachusetts Wage Act and breach of contract. A jury found
for Ellicott. The district court entered judgment and awarded
Ellicott $2,876,490 in damages, plus reasonable attorney's fees
and costs. Displeased with this result, Appellants challenge a
series of rulings by the district court. Appellants question,
among other things, whether Ellicott's compensation constituted
"wages" under the Wage Act and whether the statute of limitations
for his Wage Act claim was properly tolled. We affirm after
careful review.
I. Background
A. Factual Background
The facts, viewed, as they must be, "in the light most
favorable to the verdict," follow. Sinai v. New England Tel. &
Tel. Co., 3 F.3d 471, 472 (1st Cir. 1993).
Appellants Hunton and Hennessey are co-founders of ACE,
a company that procures, engineers, and installs large-scale solar
energy systems. Hunton is ACE's president and Hennessey its chief
-2-
financial officer. Hunton and Hennessey are principals of the
company.
In 2007, ACE hired Ellicott as Director of Business
Development, tasking him with the sale of large-scale solar
installations to commercial clients, primarily in California.
Ellicott was not a principal or joint-venturer of ACE, but rather
a full-time employee compensated on a commission-draw basis. On
April 23, 2008, ACE executed a written contract that established
Ellicott's compensation plan. Among other provisions, the
compensation plan stated that ACE would pay Ellicott a sales
commission of "40% of profit margin on each sale and installation
to be paid within [thirty] days after the client pays ACE and
installation is complete." The compensation plan also stipulated
that the sales commissions "may be reasonably split with various
sales support personnel by mutual agreement," and that ACE would
pay Ellicott a monthly draw, equal to an annual rate of $120,000,
credited against his commissions.
From 2007 to 2012, Ellicott sold nine solar installation
projects. For each of these projects, the parties stipulated at
trial the (1) contract date; (2) project completion date; (3) final
payment date; (4) project revenue; and (5) direct project costs.
The gross revenue of Ellicott's solar installation projects
exceeded $37 million, with eight of the nine projects generating
-3-
a profit. Seven of the eight profitable installations were paid
for in full more than three years before Ellicott filed suit on
April 2, 2014. Below, the parties disputed whether Ellicott, in
fact, made the "sale" on each of the projects and how the sales
commission, if any was due, should be calculated. During trial,
Ellicott testified that although it continued to pay him the
monthly draw until October 2012, ACE did not pay his earned
commissions from any of the profitable projects.
Beginning in 2010, and again in early 2011, Ellicott
inquired about the payment status of his commissions to both Hunton
and Hennessey. Ellicott had multiple conversations with Hunton,
who assured Ellicott that he would discuss the issue with Hennessey
and that the commission payments would be taken care of.
In October 2011, Ellicott had an in-person meeting with
both Hunton and Hennessey to follow up on the payment status of
his commissions. There, Hunton and Hennessey informed Ellicott
that: (1) he should share his commissions with ACE's support staff;
(2) ACE would deduct 5.6% from his commissions for overhead and
burden costs and 1% for maintenance costs; (3) certain solar
installment projects were actually considered "house accounts" and
therefore not a "sale" by Ellicott for which he was entitled to a
commission; and (4) ACE would apply a 30% commission rate rather
than the 40% established in the 2008 compensation plan. Ellicott
-4-
did not agree to any of these additional compensation conditions,
which were being presented to him for the first time. The meeting
ended without resolution. Before concluding, Hennessey told
Ellicott that ACE "should be able to start getting [him] some of
[his] commissions in December," and that they would provide him
with an updated spreadsheet detailing his earned commissions.
Ellicott, however, never received the updated spreadsheet.
After the October 2011 meeting, Ellicott continued to
work for ACE and received his monthly draw until October 2012,
when ACE ceased making these payments. 1 Ellicott nonetheless
continued working for ACE after October 2012. Then, in June 2013,
Ellicott's health insurance and cell phone coverage -- both
provided by ACE -- were cancelled. Shortly thereafter, Ellicott
stopped working for ACE, but the company never formally terminated
his employment.
B. Procedural Background
Ellicott filed suit against Appellants in Massachusetts
Superior Court seeking compensation for the unpaid sales
commissions on April 2, 2014. His complaint alleged two claims:
1 Upon asking about why his monthly "draw was cut off," Ellicott
was told that ACE was "having difficult[ies] making payroll" and
that the "best thing" he could do in the meantime "would be to try
to bring a new deal" to generate cash for the company. He worked,
without pay, on securing two additional installation projects for
ACE throughout 2013.
-5-
(1) violation of the Wage Act and (2) breach of contract. On
May 16, 2014, Appellants removed the case to the United States
District Court for the District of Massachusetts.
After some extensive motion practice, which included the
district court's denial of the parties' cross-motions for summary
judgment, Ellicott filed a motion in limine on July 22, 2016 to
exclude from trial any extrinsic evidence suggesting that he was
required to split his commissions. The district court allowed the
motion in limine on December 23, 2016, thereby barring Appellants
from introducing "extrinsic evidence to vary the unambiguous
terms" of their 2008 compensation plan with Ellicott.
On December 30, 2016, two weeks before trial was set to
commence, Appellants asked the district court to reconsider its
grant of Ellicott's motion in limine and offered new testimony in
an attempt to prove that Ellicott had agreed to split his sales
commissions. Ellicott opposed reconsideration and moved to
preclude Appellants from introducing testimony offered for the
first time on the eve of trial. In open court, the district court
denied Appellants' motion for reconsideration and granted
Ellicott's request to exclude Appellants' proposed new testimony.
The court excluded the proposed evidence, finding, inter alia,
that it contradicted prior deposition testimony offered pursuant
to Fed. R. Civ. P. 30(b)(6).
-6-
A jury trial was held from January 17 until January 24,
2017. At the close of evidence, Appellants unsuccessfully moved
for directed verdict on Ellicott's Wage Act claim, arguing that
the Wage Act did not apply to Ellicott's sales commissions. On
January 24, 2017, the district court charged the jury.
The jury verdict form listed ACE, Hunton, and Hennessey
separately, and tasked the jury with finding liability and the
amount of damages as to each. The jury found all three defendants
liable under the Wage Act, but allocated $958,830 in damages under
the Wage Act to ACE and $0 to Hunton and Hennessey. The jury also
found ACE liable for breach of contract.
All parties urged the court to ask the jury to reconsider
its answers. After conferring with both sides at sidebar and
finding the verdict to be inconsistent, the district court asked
the jury to reconsider its responses about Hunton's and Hennessey's
liability under the Wage Act. The jury then returned a new verdict
form that again found all defendants liable under the Wage Act,
but this time allocated $758,830 in damages to ACE and $100,000 to
each individual defendant.
Appellants immediately moved for mistrial, a request
that the district court denied. On February 2, 2017, Appellants
moved again for mistrial, contending that the district court erred
in granting Ellicott's motions in limine, and for judgment
-7-
notwithstanding the verdict, arguing that Ellicott's sales
commissions were profit-based and therefore fell outside the Wage
Act's scope. The district court denied both motions.
On February 6, 2017, the district court entered judgment
in favor of Ellicott on both claims, pursuant to the jury's second
verdict form. 2 The final judgment totaled $2,876,490, plus
reasonable attorney's fees and costs.
About a month later, Appellants filed a motion to modify
the award under Fed. R. Civ. P. 59(e). Therein, Appellants argued
that the district court should lower their personal liability to
$2,276,490 because (1) the court had erred in finding them liable
for a greater damages award than the corporate defendant; (2) there
was insufficient evidence to establish tolling as to Ellicott's
Wage Act claim against Hennessey; (3) the court should not have
granted the motion in limine barring evidence as to whether
Ellicott had agreed to split his sales commissions; and (4) the
2 As to the Wage Act, the district court ordered ACE to pay
damages in the amount of $758,830, trebled pursuant to Mass. Gen.
Laws ch. 149, § 150 (for civil actions alleging violation of the
Wage Act filed independently of any enforcement actions by the
attorney general), for a total sum of $2,276,490, plus reasonable
attorney's fees and costs. The district court also ordered each
individual defendant to pay damages in the amount of $100,000,
trebled pursuant to Mass. Gen. Laws ch. 149, § 150, for a total
sum of $300,000, plus joint and several liability for any amount
owed by ACE. With regards to the breach of contract claim, the
district court ordered ACE to pay damages in the amount of
$958,830.
-8-
Wage Act did not apply to Ellicott's sales commissions because the
commissions were profit-based. The district court denied
Appellants' motion on April 3, 2017.
II. Discussion
Appellants' challenge is limited to a series of rulings
by the district court and the sufficiency of the evidence about
whether Ellicott's Wage Act claims were equitably tolled. We
address each of the issues raised by Appellants in turn.
A. Applicability of the Wage Act
Whether Ellicott's sales commissions constituted wages
under the Wage Act was put to the jury, and implicit in the jury's
verdict was the determination that the commissions did constitute
wages. Accordingly, we may only "overturn the verdict when the
evidence leads a reasonable person to one conclusion and one
conclusion only: that the losing party was entitled to win."
Sinai, 3 F.3d at 472-73; see also Segal v. Genitrix, LLC, 87 N.E.3d
560, 575 (Mass. 2017).
The Wage Act imposes liability on employers who fail to
pay wages earned by their employees. See Mass. Gen. Laws ch. 149,
§ 148 (2009). To establish a Wage Act claim, a plaintiff must
show that: (1) he was an employee under the Wage Act; (2) the
compensation constitutes wages pursuant to the Wage Act; (3) the
Wage Act was violated; and (4) any individual defendants were
-9-
corporate officers as defined by the statute. See Stanton v.
Lighthouse Fin. Servs., Inc., 621 F. Supp. 2d 5, 10 (D. Mass. 2009)
(citing Allen v. Intralearn Software Corp., 2006 Mass. App. Div.
71, 72 (Mass. Dist. Ct. 2006)). Our only concern here is whether
Ellicott's compensation represents "wages" under the Wage Act. We
conclude that it does.
Under the Wage Act, "the payment of commissions"
represents wages "when the amount of such commissions, less
allowable or authorized deductions, has been definitely determined
and has become due and payable to such employee." Mass. Gen. Laws
ch. 149, § 148 (2009). Compensation based on commissions has been
"definitely determined" when it is "arithmetically determinable."
Wiedmann v. Bradford Grp., Inc., 831 N.E.2d 304, 312 (Mass. 2005);
see also McAleer v. Prudential Ins. Co. of Am., 928 F. Supp. 2d
280, 287 (D. Mass. 2013); Okerman v. VA Software Corp., 871 N.E.2d
1117, 1124-25 (Mass. App. Ct. 2007). Moreover, a commission is
"due and payable" when dependent contingencies have been met and
it is thus owed to the employee. See McAleer, 928 F. Supp. 2d at
288.
Appellants maintain that Ellicott's compensation scheme
was more like profit-sharing, and therefore not a commission as
defined by the Wage Act. They contend that Ellicott's compensation
was based on future profits and not fixed to the installation price
-10-
at the time of sale. We disagree. Ellicott's compensation meets
the two criteria for a commission to fall squarely within the scope
of the Wage Act: being "definitely determined" and becoming "due
and payable." Okerman, 871 N.E.2d at 1121–22.
First, for Ellicott's sales commissions to be
"definitely determined," they must be "arithmetically
determinable." Wiedmann, 831 N.E.2d at 312. The parties do not
dispute the figures necessary to calculate Ellicott's sales
commissions to the dime. As explained earlier, the parties
stipulated to the contract, project completion, and final payment
dates, along with the project revenue and direct project costs,
for each of the solar installation projects sold by Ellicott. The
compensation plan entitled Ellicott to 40% of the profit margin on
each sale and installation. Thus, because the profit margin for
each sale can be "arithmetically determined" from the stipulated
project revenue and the direct project costs, Ellicott's
commissions are "definitely determined" under the Wage Act.
Second, Ellicott's compensation also satisfies the Wage
Act's "due and payable" requirement. All dependent contingencies
for the payment of Ellicott's commissions were met. See McAleer,
928 F. Supp. 2d at 289; Barthel v. One Cmty., Inc., 233 F. Supp.
2d 125, 127 (D. Mass. 2002). In the ordinary case, a commission
"becomes due and payable when the employee closes the sale, even
-11-
if there is a delay in actual payment on the sale." McAleer, 928
F. Supp. 2d at 289. But, when as here, "a compensation plan
specifically sets out the contingencies an employee must meet to
earn a commission, courts apply the terms of the plan." Id. The
2008 compensation plan between ACE and Ellicott required only that:
(1) the project generate a profit; (2) the client pay ACE; and (3)
installation be complete. As stipulated by the parties, all three
contingencies were met on the eight profitable solar installation
projects for which Ellicott seeks payment of his commissions.
Since Ellicott's compensation is "definitely determined"
and "due and payable," the jury could reasonably conclude that his
commissions are covered under the Wage Act.
B. Equitable Tolling
We now turn our attention to Appellants' contention that
there was insufficient evidence to support a finding that the Wage
Act's three-year statute of limitations had been equitably tolled.
Alternatively, Appellants contend that the equitable tolling
evidence presented against Hennessey was particularly "flimsy,"
and that this court should reverse the Wage Act judgment as to
that individual defendant.
Jury findings of fact as to whether the statute of
limitations has been tolled cannot be set aside unless the evidence
is insufficient to support the verdict. See Santiago Hodge v.
-12-
Parke Davis & Co., 909 F.2d 628, 633 (1st Cir. 1990).
Wage Act claims are subject to a three-year statute of
limitations that attaches separately to each individual violation
of the act. See Mass. Gen. Laws ch. 149, § 150 (2009); Crocker
v. Townsend Oil Co., 979 N.E.2d 1077, 1085-86 (Mass. 2012).
"Massachusetts courts have recognized that it would be unfair to
begin running the statute of limitations before a plaintiff is put
on notice [of] a claim." Cambridge Plating Co. v. Napco, Inc.,
991 F.2d 21, 25 (1st Cir. 1993).
Equitable tolling based on fraudulent concealment is
cognizable with respect to the Wage Act statute of limitations.
See Crocker, 979 N.E.2d at 1083-84. It applies when a plaintiff
is "affirmatively misled" by a defendant. Hall v. FMR Corp., 559
F. Supp. 2d 120, 126 (D. Mass. 2008) (citations omitted). Thus,
"[w]here a 'defendant[] made representations [he] knew or should
have known would induce the plaintiff to put off bringing suit and
. . . the plaintiff did in fact delay in reliance on the
representations,' the statute of limitations is tolled." Mass.
Eye & Ear Infirmary v. QLT Phototherapeutics, Inc., 412 F.3d 215,
242 (1st Cir. 2005) (citations omitted); see also Rakes v. United
States, 442 F.3d 7, 26 (1st Cir. 2006) ("[E]quitable tolling is
based on concealment or other misconduct by the defendant." (citing
Crawford v. United States, 796 F.2d 924, 926 (7th Cir. 1986))).
-13-
Still, a plaintiff "may not generally use the fraudulent
concealment by one defendant as a means to toll the statute of
limitation against other defendants." Passatempo v. McMenimen,
960 N.E.2d 275, 290 (Mass. 2012) (citing Griffin v. McNiff, 744 F.
Supp. 1237, 1256 n.20 (S.D.N.Y. 1990)).
The statute of limitations on Ellicott's Wage Act claims
would have begun to run on the date that payment of his sales
commission was due on each of the solar installation projects he
sold. According to Ellicott's compensation plan, that would be
"[thirty] days after the client pa[id] ACE and installation [was]
complete[d]." Thus, per the parties' stipulated facts about the
final payment and project completion dates for the projects at
issue, all except one of Ellicott's unpaid commission claims would
fall outside of the Wage Act's usual three-year statute of
limitations window.
However, at trial, Ellicott set forth evidence that
Appellants had "affirmatively misled" him before the October 2011
meeting. Hall, 559 F. Supp. 2d at 126. The record shows that both
Hunton and Hennessey perpetuated the narrative that a shrinking
cash flow was the only reason why Ellicott did not receive
commission payments in accordance with his compensation plan, and
such assurances were what stalled Ellicott from taking legal action
at the time. In an ongoing dialogue from 2010 to 2011, Hunton
-14-
repeatedly promised Ellicott that their contract would be honored:
"be patient, we're dealing with cash flow issues, we will pay you,
so hang in there." Later in 2011, responding to increased pressure
from Ellicott, Hunton sent him an email, reiterating that "cash is
tight" but still promising to try to "squeeze something out."
The jury found that Appellants "made representations
[they] knew or should have known would induce [Ellicott] to put
off bringing suit and [he] did in fact delay in reliance on the
representations." Mass. Eye & Ear Infirmary, 412 F.3d at 242
(citations omitted); see also Santiago Hodge, 909 F.2d at 633. We
agree and conclude sufficient evidence supports the jury's finding
that fraudulent concealment warranted the equitable tolling of the
three-year statute of limitations. Ellicott's Wage Act claims
therefore ripened in October 2011, when Hunton and Hennessey first
told Ellicott that ACE would not pay his commissions per the terms
of the 2008 compensation plan. Since Ellicott filed his complaint
on April 2, 2014, his Wage Act claims are well within the three-
year statute of limitations.
While it is true that Ellicott may not "use the
fraudulent concealment by one defendant as a means to toll the
statute of limitation against other defendants," Passatempo, 960
N.E.2d at 290 (citations omitted), the record also contains
sufficient testimonial evidence regarding Hennessey. For instance,
-15-
Hennessey, along with Hunton, reassured Ellicott in an early 2011
meeting that he would be paid his commissions at the 40% rate. On
this record, the jury was entitled to find that Hunton and
Hennessey were joined in their efforts to assure Ellicott that his
promised commissions would be paid. Accordingly, we find that
tolling the statute of limitations so as to allow Ellicott's Wage
Act claims against Hennessey was justified.
C. Jury Verdict Forms
Appellants' next claim is that the district court erred,
first, when it did not accept the initial jury verdict, and later
when, after accepting the second jury verdict form, it assigned
Wage Act damages liability to Hunton and Hennessey that were
internally inconsistent. Below, however, Appellants neither
objected to the district court's rejection of the first jury
verdict, nor did they raise this contention in their multiple post-
verdict motions.3 In fact, Appellants encouraged the district
court to resubmit the first verdict form to the jury for
3 Appellants only complained in two post-verdict motions that the
multiple jury verdict forms confused the jury -- thus calling for
a mistrial. However, that was insufficient to preserve the
arguments Appellants now attempt to raise for the first time on
appeal. See Eldridge v. Gordon Bros. Grp., LLC, 863 F.3d 66, 84
(1st Cir. 2017) ("[A] party is not at liberty to articulate
specific arguments for the first time on appeal simply because the
general issue was before the district court." (citing United States
v. Slade, 980 F.2d 27, 31 (1st Cir. 1992))).
-16-
clarification. Because Appellants did not raise this issue before
the district court, they are foreclosed from raising it now for
the first time. See Bos. Beer Co. Ltd. P'ship v. Slesar Bros.
Brewing Co., 9 F.3d 175, 179 (1st Cir. 1993) ("The law in this
circuit is crystalline: a litigant's failure to explicitly raise
an issue before the district court forecloses that party from
raising the issue for the first time on appeal.").
D. Motions in Limine
Lastly, Appellants ask us to review the district court's
rulings on Ellicott's motions in limine. Appellants contend that
the district court erred when it excluded evidence about whether
Ellicott had agreed to split his sales commissions. We review a
district court's decision to exclude evidence on a motion in limine
for abuse of discretion. See United States v. Guerrier, 428 F.3d
76, 79 (1st Cir. 2005) (citing Blinzler v. Marriott Int'l, 81 F.3d
1148, 1158 (1st Cir. 1996)).
Under Fed. R. Evid. 403, a district court should exclude
evidence "if its probative value is substantially outweighed by
the danger of unfair prejudice, confusion of the issues, or
misleading the jury, or by considerations of undue delay, waste of
time, or needless presentation of cumulative evidence." Ferrara &
DiMercurio v. St. Paul Mercury Ins. Co., 240 F.3d 1, 6 n.3 (1st
Cir. 2001).
-17-
District courts have wide discretion when it comes to
determinations under Rule 403. "This is primarily because 'Rule
403 balancing is a quintessentially fact-sensitive enterprise and
the trial judge is in the best position to make such fact–bound
assessments.'" Id. at 6 (citing Udemba v. Nicoli, 237 F.3d 8, 15-
16 (1st Cir. 2001)). On very rare occasions would this court
"from the vista of a cold appellate record, reverse a district
court's on-the-spot judgment concerning the relative weighing of
probative value and unfair effect." Freeman v. Package Mach. Co.,
865 F.2d 1331, 1340 (1st Cir. 1988). This is not such a case.
The district court, in a well-reasoned and narrowly
tailored Memorandum and Order, properly excluded Appellants'
extrinsic evidence related to the unambiguous terms of Ellicott's
2008 compensation plan on grounds that it could have confused the
issues and misled the jury. Furthermore, the district court
prudently disregarded the eleventh-hour affidavits from
unannounced witnesses that Appellants intended to introduce six
days before trial. Not only were these offered late without a
reasonable excuse for delay, but they also contradicted prior Rule
30(b)(6) deposition testimony from the individual defendants
themselves. See Thibeault v. Square D Co., 960 F.2d 239, 247 (1st
Cir. 1992) ("We think it is beyond dispute that an eleventh-hour
change in a party's theory of the case can be equally harmful,
-18-
perhaps more harmful, from the standpoint of his adversary.").
We, therefore, discern no abuse of discretion from the district
court's grant of Ellicott's motions in limine.
III. Conclusion
With no other issues raised by Appellants, for the
reasons discussed above, we affirm the district court's judgment.
Affirmed.
-19-