Rahrig v. Alcatel USA Marketing, Inc. , 217 F. App'x 189 ( 2006 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 05-2395
KURT RAHRIG,
Plaintiff - Appellant,
versus
ALCATEL USA MARKETING, INCORPORATED,
Defendant - Appellee,
and
ALCATEL USA, INCORPORATED; NEWBRIDGE NETWORKS,
INCORPORATED; ALCATEL NETWORKS CORPORATION;
ALCATEL GOVERNMENT SOLUTIONS, INCORPORATED;
ALCATEL DATA NETWORKS; ALCATEL CARRIER DATA
DIVISION; CARRIER INTERNETWORKING DIVISION;
ALCATEL, a Republic of France corporation;
ALCATEL USA, CORPORATION,
Defendants.
Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. Gerald Bruce Lee, District
Judge. (CA-04-1545-1)
Argued: September 20, 2006 Decided: December 18, 2006
Before MICHAEL, Circuit Judge, N. Carlton TILLEY, Jr., United
States District Judge for the Middle District of North Carolina,
sitting by designation, and Thomas E. JOHNSTON, United States
District Judge for the Southern District of West Virginia, sitting
by designation.
Affirmed by unpublished opinion. Judge Johnston wrote the opinion,
in which Judge Michael and Judge Tilley joined.
ARGUED: Jay Joseph Levit, Glen Allen, Virginia, for Appellant. M.
Roy Goldberg, SHEPPARD, MULLIN, RICHTER & HAMPTON, L.L.P.,
Washington, D.C., for Appellee. ON BRIEF: Christopher M.
Loveland, SHEPPARD, MULLIN, RICHTER & HAMPTON, L.L.P., Washington,
D.C., for Appellee.
Unpublished opinions are not binding precedent in this circuit.
2
JOHNSTON, District Judge:
Appellant Kurt Rahrig filed the instant case in November 2004
in the Circuit Court of Fairfax County, Virginia. Appellee Alcatel
USA Marketing, Inc. (“Alcatel”) removed the case to the United
States District Court for the Eastern District of Virginia on
December 23, 2004. Mr. Rahrig thereafter filed a seven-count
amended complaint on February 4, 2005. The district court
dismissed five of the amended complaint’s seven counts on April 15,
2005. By order dated November 9, 2005, the district court granted
Alcatel’s motion for summary judgment and entered judgment against
Mr. Rahrig.1 In this appeal, Mr. Rahrig seeks review of the
district court’s entry of summary judgment on his breach of
contract count. We affirm the district court’s finding that
Alcatel did not breach its contract with Mr. Rahrig.
I.
The relevant facts in this appeal are undisputed. In 1999, a
company later acquired by Alcatel, Newbridge Networks, Inc.,2 was
1
Following the district court’s April 15, 2005 Order, Mr.
Rahrig’s counts for breach of contract (Count One) and
unconscionability (Count Four) remained. It is unclear from the
record how Mr. Rahrig’s unconscionability claim was resolved, but
he does not address this claim on appeal.
2
In this opinion, we refer only to Newbridge Network, Inc.’s
successor, Alcatel.
3
a data networking manufacturer which designed and developed data
networking products for high speed connectivity to the internet.
In July 1999, Alcatel hired Mr. Rahrig as a regional
salesperson for the northwestern United States. In connection with
his hiring, Alcatel required Mr. Rahrig to sign a contract titled
“U.S. Sales Compensation Plan Fiscal Year 2000” (hereinafter “the
Plan”), which dictated certain terms of his employment. (J.A.
106.) Pursuant to the Plan, Mr. Rahrig was to be paid a $75,000
base salary, plus commissions for sales which exceeded his annual
sales quota. Mr. Rahrig’s sales quota for Alcatel’s 2000 fiscal
year was $2.925 million.
During the 2000 fiscal year, Alcatel made approximately $125
million in sales to New Edge Networks (“New Edge”), an internet
supply company. Mr. Rahrig was given “sales credit” for those
sales. (J.A. 126-27.) Rather than pay Mr. Rahrig commissions for
the full $125 million in sales above his $2.925 million quota,
Alcatel reduced his commissions by raising his quota. The sales
quota adjustment term of the Plan provided, in relevant part, that:
Incentive compensation is designed to reward individual
effort and performance. This plan is designed to reward
outstanding individual contributions. At the same time,
it must be consistent with the company’s obligations to
its shareholders to control expenses, maximize
profitability, invest in research and development and
make capital expenditures in order to remain competitive
in the future. It must also address the Company’s need
to motivate all employees. . . . [T]his Plan must also
ensure that sales credit incentive payments are not
disproportionately large so as to unreasonably impair
corporate profit.
4
. . .
In the event that a windfall situation occurs in which
effort expended or involvement of the sales
representative is not proportional to revenue that would
be derived at current quota or commission rates from an
exceptionally large opportunity relative to quota,
regional management reserves the right to adjust quota,
or sales credit allocation for that transaction and
thereafter.
(J.A. 110.) (hereinafter “the Windfall Clause.”)
The Plan also provided that “on 30 days notice, [Alcatel may]
. . . adjust and modify this Plan, including individual [sales]
quotas . . . as it deems necessary or appropriate.” (J.A.
106.)(emphasis added)(hereinafter “the 30 Days Notice Provision.”)
By letter dated November 22, 1999, Alcatel notified Mr. Rahrig
that:
[T]he sales credit that you derived from sales to New
Edge Networks is deemed a windfall as defined [by the
Plan]. Accordingly, we intend to exercise the Company’s
right to adjust your quota for the current fiscal year.
In order to arrive at a sound business decision on this
quota adjustment, we also need to consider your forecast
of another large transaction for this customer.
Consequently, the setting of your new quota will not
happen immediately and will require some further
management action in the near term.
Nevertheless, we want to recognize your substantial
success from last quarter promptly. Therefore, [Alcatel]
will make a substantial commission payment to you in the
gross amount of $200,000.00 USD on the commission run due
11/26/99 (or as soon thereafter as possible), provided
you agree to the following terms. This payment will be
a sales credit payment as defined by and subject to all
terms and conditions in the [Plan]. Any additional
payments or necessary adjustments will be made after a
new quota is negotiated and agreed upon.
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(J.A. 126.) (hereinafter “the November Letter.”) Mr. Rahrig signed
and “accepted” the November Letter and was thereafter paid
$200,000. Id.
On February 28, 2000, Alcatel sent Mr. Rahrig a second letter
stating that:
[T]he sales credit that you derived this quarter is
primarily from sales to New Edge Networks and is deemed
a windfall as defined by [the Plan]. Accordingly, the
Company intends to exercise its right to adjust your
quota for the current fiscal year. To appropriately
reflect the sales opportunity in your territory, your
Fiscal Year 2000 quota will be adjusted to $44,093,333.00
USD, as provided by the Plan.
Nevertheless, in recognition of your efforts and success
in the last quarter, the Company, in accordance with the
windfall provision, will make a substantial commission
payment to you in the gross amount of $200,000.00 USD on
the commission run due March 3, 2000 (or as soon as
thereafter as possible), provided you agree to the terms
in this letter. This payment will be a sales credit
payment as defined by and subject to all the terms and
conditions in the [Plan].
(J.A. 127.) (hereinafter “the February Letter.”) Mr. Rahrig also
signed and “accepted” the February Letter and was thereafter paid
an additional $200,000. Id.
Mr. Rahrig did not contest Alcatel’s application of the
Windfall Clause to his sales quota after receiving either the
November or February Letters. Mr. Rahrig voluntarily left Alcatel
in January 2003. He now seeks recovery of all “unpaid earned sales
commissions” due under the Plan. (J.A. 20.)
During discovery, Edward Mamon, an Alcatel employee during the
relevant period in this action, testified that he “believed” there
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was an unpublished “cap” on sales commissions “somewhere around
$500,000." (J.A. 676, 701, 703.) Mr. Mamon’s belief was based on
“the [Alcatel] rumor mill.” (J.A. 701.)
Mr. Rahrig testified that although he was aware of the
Windfall Clause, Alcatel told him “[t]hat there were no ceilings”
on compensation. (J.A. 390.) Thus, when Mr. Rahrig accepted the
November and February Letters, he had no knowledge that Alcatel was
“attempt[ing] to match up [his commissions] with the targeted and
predetermined unpublished ceiling of $500,000.” (J.A. 1068.)
II.
“We review the district court’s grant of summary judgment de
novo, applying the same legal standards as the district court and
reviewing the facts and inferences drawn from the facts in the
light most favorable to . . . the nonmoving party.” Evans v.
Techns. Applications & Serv. Co., 80 F.3d 954, 958 (4th Cir. 1996).
Summary judgment is proper “if the pleadings, depositions, answers
to interrogatories, and admissions on file, together with the
affidavits, if any, 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.” Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett,
477 U.S. 317, 322-23 (1986).
“In deciding whether there is a genuine issue of material
fact, the evidence of the nonmoving party is to be believed and all
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justifiable inferences must be drawn in its favor.” Am. Legion
Post v. City of Durham, 239 F.3d 601, 605 (4th Cir. 2001). A mere
scintilla of proof, however, will not suffice to prevent summary
judgment; the question is “not whether there is literally no
evidence, but whether there is any upon which a jury could properly
proceed to find a verdict for the party” resisting summary
judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251
(1986). “[A] complete failure of proof concerning an essential
element of the nonmoving party’s case necessarily renders all other
facts immaterial.” Celetex Corp., 477 U.S. at 323.
The moving party bears the burden to show that there is no
genuine issue of material fact, and the court “must assess the
evidence as forecast in the documentary materials . . . in the
light most favorable to the party opposing the motion.”
Charbonnages de Fr. v. Smith, 597 F.2d 406, 414 (4th Cir. 1979).
III.
In this appeal, Mr. Rahrig contends that Alcatel violated the
terms of the Plan by (1) adjusting his sales quota prior to 30 days
notice and (2) using a cap to limit his commissions.
a.
As noted above, the Plan required “30 days notice” prior to
Alcatel’s adjustment or modification of “individual [sales]
quotas.” (J.A. 106.) Mr. Rahrig argues that Alcatel violated the
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Plan in failing to give him 30 days notice prior to exercising the
Windfall Clause. That is, Mr. Rahrig contends the 30 Days Notice
Provision prohibited Alcatel from adjusting his individual sales
quota until 30 days after his receipt of the November Letter, i.e.,
December 22, 1999.3
The district court rejected this argument, finding that
Alcatel’s exercise of the Windfall Clause was simply an execution
of a term of the agreement and not an “adjustment or modification
of the entire [Plan].” (J.A. 1191.) Thus, the district court held
that the 30 Day Notice Provision did not apply to Alcatel’s use of
the Windfall Clause for the New Edge sales.
This Court notes that Mr. Rahrig has not appealed the district
court’s finding that Alcatel “properly applied the Windfall Clause
on a retroactive basis.” (J.A. 1190.) The district court based
its finding on the plain language of the Plan, which stated that
Alcatel “reserves the right to adjust [individual sales] quota . .
. for that transaction and thereafter.” (J.A. 1191.) Mr. Rahrig’s
failure to challenge this finding is dispositive of his argument
that Alcatel violated the 30 Day Notice Provision.
The Plan is to be “interpreted accordance with” Virginia law.
(J.A. 124.) In Virginia, if “the terms of an agreement are clear
and unambiguous, the language used will be taken in its ordinary
3
Mr. Rahrig also contends that his sales commissions would
have been much greater if his original sales quota had remained in
effect until December 22, 1999.
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signification, and the plain meaning will be ascribed to it.” See
Marriott Corp. v. Combined Props. Ltd. P’ship, 391 S.E.2d 313, 316
(Va. 1990). A plain reading of the Plan reveals that Alcatel had
the discretion to identify windfall situations that had already
occurred, and then retroactively apply the Windfall Clause. Thus,
even assuming 30 days notice was required before an adjustment
could be made to Mr. Rahrig’s individual sales quota, because the
adjustment could be applied retroactively, Alcatel’s application of
the adjustment to sales which occurred prior to December 22, 1999,
was proper.
b.
Mr. Rahrig also argues that Alcatel breached the Plan by
maintaining a secret, extra-contractual $500,000 cap on sales
commissions. Specifically, Mr. Rahrig believes that Alcatel’s use
of a cap on his commissions violated the Windfall Clause because it
failed to consider his “effort expended or involvement” in the New
Edge sales. (J.A. 110.)
The district court did not address Mr. Rahrig’s argument
regarding an alleged cap on sales commissions in its written
opinion. During the hearing on Alcatel’s motion for summary
judgment, however, the district court specifically rejected this
argument because: (1) the undisputed evidence showed that Mr.
Rahrig received significantly more than $500,000 in commissions
10
from the New Edge sales, and (2) Alcatel nevertheless properly
invoked the Windfall Clause according to its terms.
As noted above, Mr. Mamon’s testimony about the existence of
a $500,000 cap was based only on office rumors. Such testimony is
inadmissible hearsay and was properly not considered material
evidence to deny Alcatel’s motion for summary judgment. Greensboro
Prof’l Fire Fighters Ass’n v. City of Greensboro, 64 F.3d 962, 967
(4th Cir. 1995) (proffered evidence of un-attributed rumors is
inadmissible hearsay; such evidence is neither admissible at trial
nor supportive of an opposition to a motion for summary judgment).
We also note that Mr. Rahrig’s fiscal year 2000 commissions
greatly exceeded $500,000.4 Thus, any evidence that Alcatel had an
unpublished $500,000 cap on commissions is contradicted by Mr.
Rahrig’s own testimony.
c.
Finally, Alcatel argues that even assuming it violated the
Plan’s 30 Day Notice Provision or improperly capped commissions at
$500,000, Mr. Rahrig waived his right to additional commissions by
“accepting” the November and February Letters. (J.A. 126-27.)
Under Virginia law, a waiver “is an intentional relinquishment of
a known right.” Va. Polytechnic Inst. & State Univ. v. Interactive
Return Serv., Inc., 595 S.E.2d 1, 6 (Va. 2004). “Two elements are
4
According to Mr. Rahrig, he ultimately received “total
commissions . . . in FY2000 of $758,810." (J.A. 1043.)
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necessary to establish waiver: knowledge of the facts basic to the
exercise of the right and the intent to relinquish that right.”
Id. The district court found that “Mr. Rahrig waived his right to
challenge the application of the Windfall Clause because he signed
the [November and February L]etters, accepted payments tendered in
connection therewith, and ‘agree[d] to the terms’ in each letter.”
(J.A. 1192.)
We agree with the district court that Mr. Rahrig waived his
right to challenge Alcatel’s adjustment of his sales quota by
executing the November and February Letters. Mr. Rahrig knew his
sales commissions would be reduced by executing the November and
February Letters, thus waiving his ability to bring his instant
claim for breach of contract.
IV.
Accordingly, we affirm the judgment of the district court.
AFFIRMED
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