United States District Court, E.D. Michigan, Southern Division
OPINION AND ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
MARIANNE O. BATTANI, District Judge.
This matter is before the Court on Defendant VCE Company, LLC's, Motion for Summary Judgment. (Doc. 17.) Plaintiff Michael Dybowski, a former regional sales manager at VCE, has brought the present action alleging that VCE failed to compensate him adequately for his involvement in a particular sale, in breach of the contractual commission plan. Accordingly, he has stated claims of breach of contract and violation of Michigan's Sales Representative Commission Act. In its motion for summary judgment, VCE maintains that the contract reserved its right to unilaterally modify the amount of a sales representative's commission in the event of a windfall. Dybowski disputes this interpretation of the contract and maintains that he was entitled to the full amount of the sales commission. (Doc. 21.) For the following reasons, the Court GRANTS VCE's Motion for Summary Judgment.
II. STATEMENT OF FACTS
VCE, founded in 2009 by EMC, Cisco, and VMware, delivers customized cloud-computing systems through its "vBlock Systems." VCE manufactures a product called vBlock, which is an integrated computer network infrastructure system that may be customized to VCE client specifications. In June 2013, VCE hired Dybowski into the Enterprise Sales Group as a regional sales manager to sell vBlock Systems to client prospects in the assigned territory of Michigan. VCE provided Dybowski a list of client prospects on which he was to focus his sales efforts and additionally assigned him to assist with finalizing a deal with OnStar (the "OnStar Deal") that had been in progress for approximately a year. Dybowski reported directly to Joseph Vranicar and was expected to log his sales activities for Vranicar's review in order to provide a "forecasting" of potential future sales.
A. The Commission Plan and Sales Compensation Terms and Conditions
According to Dybowski's offer letter, his compensation would be comprised of an annual base salary of $135, 000 and target "incentive compensation" (viz., sales commissions) of $135, 000, prorated to $78, 750 because Dybowski began working mid-year. (Doc. 17, Ex. 4.) A Goal Acknowledgement Form ("GAF") set his 2013 sales quota at $10, 000, 000 but likewise prorated it to $7, 240, 000. (Doc. 17, Ex. 10.) The Commission Plan (the "Plan") established the terms and conditions under which Dybowski would earn commissions, including the amount of sales dollars that could be credited toward the sales quota (referred to as "quota credit"). The Plan provides that commission rates are to be determined by dividing the revenue-based commission target by the sales quota. (Doc. 17, Ex. 11, Part 1 - § 4.4.) Therefore, given Dybowski's commission target of $78, 750 and sales quota of $7, 240, 000, his base commission rate was calculated at 0.01087707. The parties agree that this calculation is correct. When Dybowski, for example, made a sale to Beaumont Hospital in the amount of $487, 004, his sales quota was credited in this amount, and he received $5, 297.17 in commission. Likewise, his sales quota was credited for a sale to General Motors worth $259, 069, on which he received $2, 817.91 in commission.
For representatives in the Enterprise Sales Group, commission is paid monthly, and "100% of the commission is advanced and associated Quota credit allocated upon booking." "Booking" occurs upon the receipt of a valid order from a customer. (Id. at Part 2 - § 3.1.) According to the Plan, a sales representative "earns" commission "only upon collection of the full invoiced amount of the associated order(s)" - any commission paid out prior to collection is an advance subject to adjustments or chargebacks. (Id. at Part 1 - § 4.2.) The Plan further specifies, "You must be an active VCE employee and actively working in a sales position by the Terms and Conditions to earn incentive compensation. You are not eligible to earn commission or bonuses after your Last Active Date' of employment." (Id. at Part 1 - § 1.5.)
B. The Windfall Clause
Part 1, § 6.0 of the Plan, entitled "Special Circumstances, " is referred to as the "windfall clause." This provision enables the CEO, Senior Vice President, or Vice President of the company, under special circumstances, to:
[A]uthorize adjustment of or reduction of commissions or the assignment of non-standard commission rates and/or Quota credit. Such circumstances include, but are not limited to, when the total value of a deal (may include multiple sales orders or transactions) represents more than 50% of your assigned annual Quota (as set forth in your GAF), deals at zero field margin or below or any deal that exceeds values established by your sales group. Other special circumstances may include deals that require unusual or significant management or corporate involvement, deals that are unexpected (including but not limited to deals that aren't properly forecasted) and/or are not included in your assigned Quota and deals where you had limited involvement or effort.
(Doc. 17, Ex. 11.) The windfall provision therefore addresses circumstances where a sales representative's quota was set too low, where the representative "walks into" very large sales already in progress, or where a sale was originated or led by one of VCE's parent companies such that the VCE representative played a limited role. Without adjustments in these situations, a sales representative might receive a commission disproportionate to his or her contribution. Moreover, under Part 3, § 6.0 of the Plan, VCE reserves the right to "reduce, modify, [or] withhold Plan payments... based on a participant's performance, the reversal of previously booked revenue or VCE determination of special circumstances, with or without prior notice, and either retroactively or prospectively." (Id. (emphasis added).)
Adjustments to commissions under the windfall clause are reviewed and authorized by Tim Page, VCE's Global Vice President of Sales. VCE's finance department automatically flags transactions for Page's review if the value of a sale is greater than 50% of the assigned representative's quota. When considering sales quota and commission ...