America's Choice, Inc. v. Bienvenu ( 2010 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
)
AMERICA’S CHOICE, INC., )
)
Plaintiff, )
) Civil Action No. 07-428(EGS)
v. )
)
SANDRA BUSH BIENVENU, )
)
Defendant. )
)
MEMORANDUM OPINION
Plaintiff America’s Choice, Inc. (“ACI” or “plaintiff”) is a
for profit corporation in the education consulting industry.
Plaintiff seeks a declaratory judgment that it does not owe
defendant Sandra Bush Bienvenu (“defendant” or “Bienvenu”) a
commission on a sales contract. Bienvenu counterclaims for the
commission. Defendant filed a motion for partial summary
judgment and plaintiff cross-moved for summary judgment. Upon
careful consideration of the motions, responses and replies
thereto, the applicable law, the entire record herein, and for
the reasons stated below, the Court GRANTS IN PART AND DENIES IN
PART defendant’s motion for summary judgment, and DENIES
plaintiff’s motion for summary judgment.
I. BACKGROUND
A. The Parties and the Education Consulting Industry
ACI is a Delaware corporation headquartered in the District
of Columbia. Defendant’s Statement of Uncontested Material Facts
(“Def.’s SOF”) ¶ 2.1 Its business involves providing curriculum
materials and professional development training to struggling
public schools nationwide. Def.’s SOF ¶ 2. ACI is a for-profit
subsidiary of the National Center on Education and the Economy, a
not-for-profit corporation. Def.’s SOF ¶ 3. ACI operates on a
fiscal year (“FY”) running from July 1 to June 30. Def.’s SOF ¶
4.
In late 2004, ACI hired Nicholas Solinger as its Vice-
President of Sales and Marketing. Def.’s SOF ¶ 13. Solinger
developed the Compensation Policy for the commissions at the
heart of this dispute. Def.’s SOF ¶ 13. Solinger hired several
Business Development Managers responsible for regions around the
country. Def.’s SOF ¶¶ 13-14. One of those Business Development
Managers was Bienvenu, who had responsibility for the Southeast
Region including Arkansas, Florida, Texas, Louisiana,
Mississippi, Alabama, and Oklahoma. Def.’s SOF ¶ 24. Bienvenu
in turn hired Cecil Harris, a salesman with connections to the
1
The parties each submitted statements of material facts
not in dispute with their moving briefs pursuant to Local Civil
Rule 7(h). In its response to defendant’s motion, plaintiff
filed objections to defendant’s statement of material facts not
in dispute. In her response, defendant did not file a separate
objection to plaintiff’s statement of facts and instead noted
that she was incorporating by reference her previous statement of
facts. Unless otherwise noted, citations to the respective
statements of material fact refer to facts that were not disputed
by either party.
2
Arkansas education establishment.2 Def.’s SOF ¶ 25.
B. Contract With Arkansas Department of Education
Through prior contacts at the Arkansas Department of
Education (“ADE”), Harris discovered that the state had certain
Title I federal education funds that he believed needed to be
committed by May 20, 2006 (i.e., in FY 2006) in order for
Arkansas to receive the federal funds. Def.’s SOF ¶¶ 28-29. The
prospect of a multi-million dollar contract led to marketing by
Harris, Bienvenu, and other ACI representatives in early 2006.
Def.’s SOF ¶ 30. On March 30, 2006, the ADE issued a Request for
Proposals (“RFP”) seeking bids to provide comprehensive school
reform in low-performing Arkansas public schools. Def.’s SOF ¶
32; see also Def.’s Ex. L, RFP. The RFP provided for a
“Professional Services Contract”3 between ADE and the successful
offeror. Def.’s Ex. L, §1.01. The RFP also significantly
provides that, under state law, the awarded contract was
2
Harris is a plaintiff with the same claims in the Middle
District of Louisiana. Summary judgment was denied in that case,
see Harris v. America’s Choice, Inc. No. 07-195-JVP-SCR, 2009 WL
411698 (M.D. La. Feb. 18, 2009), and the parties later settled.
See Harris v. America’s Choice, Inc., No. 07-195-JVP-SCR Docket
Nos. 77 and 78, Mot. to Dismiss and Order granting Mot. to
Dismiss. Consolidation of all cases in one venue was not
appropriate.
3
The “Professional/Consultant Services Contract” is the
form contract document that Arkansas requires for procurement of
state contracts with a value in excess of $25,000. Def.’s Ex. J,
Dep. of Dr. Bobbie Davis, ADE’s Assistant Commissioner for Fiscal
and Administrative Services (“Davis Dep.”) at 43:2-9.
3
contingent upon review and approval by the Arkansas Department of
Finance and Administrative Office of State Procurement and the
Arkansas Legislative Council. Def.’s Ex. L, §1.01.
On April 12, 2006, ACI submitted its sixty-plus page
proposal for a comprehensive school improvement model for low-
performing public school districts in Arkansas, which outlined
its proposed programs at a projected cost of $6,095,000. Def.’s
Ex. R, Proposal to State of Arkansas Department of Education
(“Proposal”). The Proposal breaks down the costs of each program
for 46 schools in the state, specifies the programs for each
grade level, notes the materials for each program, provides for a
term to begin on May 30, 2006 and end on June 30, 2007 (over two
fiscal years), and is signed by Jason Dougal, ACI’s Vice-
President of Legal and Business Affairs. See generally Proposal.
In other words, there are clear and detailed price, service, and
time terms.
On April 17, 2006, ADE accepted ACI’s proposal and the ADE
Commissioner and Dougal signed a “Professional/Consultant
Services Contract,” (“hereinafter “April Contract”). The April
Contract set forth terms from the Proposal including that ACI
would provide services for 46 Arkansas schools at a cost of
$6,095,000 from May 30, 2006 through June 30, 2007. See Pl.’s
Ex. 17 at §§ 2,3,6. The April Contract also contained the
following statement regarding payment: “The method(s) of
4
rendering compensation will be delivered in accordance with a
schedule developed by the contractor and ADE.” Pl.’s Ex. 17 at §
5. Pursuant to state law, the contract still had to go through
the contingencies of review and approval by procurement
officials. Davis Dep. at 20:1-21:15. The contract was reviewed
and approved by: 1) internal ADE officials; 2) the State Director
of Finance; 3) the state legislature; and 4) again by the State
Director of Finance, who marked the contract as finally approved
on June 2, 2006. Pl.’s Ex. G, Dep. of Estelle Mathis at 17:13-
18:25; see also Def.’s Ex. M at 5.4
On July 20, 2006, ADE and ACI executed a document entitled
“America’s Choice, Inc. Agreement with State of Arkansas,
Department of Education,” (hereinafter “July Agreement”) which
refined certain provisions in the April Contract. Def.’s SOF ¶
56; Pl.’s SOF ¶ 37. Specifically, the July Agreement listed
which schools would receive the different programs, developed
more precise budgeting, and came up with a total contract amount
4
Before this final approval date, but after the Arkansas
legislature approved the $6 million in funds, Bienvenu testifies
that ACI had meetings with state-wide school superintendents to
inform them of the services ACI would be providing. Pl.’s Ex. H,
Bienvenu October 30, 2008 Dep. at 15:20-23. ACI calls these
“marketing” meetings, but does not contest that the subject of
discussion was the services it would provide under the contract.
Pl.’s Mem. in Opp’n to Def./Counter Pl.’s Mot. for Partial Summ.
J. and in Supp. of Pl./Counter Def.’s Cross Mot. for Summ. J.
(“Pl.’s Mot.”) at 28-29. Regardless of the nature or purpose of
these meetings, however, the Court concludes that they are
irrelevant to the determination of when a binding contract was
formed.
5
– still $6,095,000, though there was discussion of reducing that
total to $5,848,000. Pl.’s SOF ¶¶ 37-38. The July Agreement
also included an integration clause, which states that the July
Agreement “supercedes” any prior agreements. Pl.’s SOF ¶ 39.
The July Agreement, however, was not processed through the state
contract ratification process. Def.’s Ex. I, Dep. of Dr. Diana
Julian, ADE’s Assistant Commissioner at 45:13-46:15. ACI began
providing services to ADE in July 2006, with ACI invoicing ADE
for the first time on July 20, 2006 for half the total, or
$3,047,500. Pl.’s SOF ¶¶ 40-41. ADE paid this invoice on August
10, 2006. Pl.’s SOF ¶ 42.
C. ACI’s Compensation Policy
On May 9, 2005, ACI and Bienvenu entered into an employment
agreement. Def.’s SOF ¶ 18. The agreement provided that
Bienvenu would work from her home in Florida, and would be
responsible for developing sales in the Southeastern Region noted
above. Def.’s SOF ¶¶ 18-19. Bienvenu’s annual salary was
$150,000 a year, but significant commissions were possible if she
reached her sales quota. Def.’s SOF ¶ 19. Her sales quota for
FY 2006 was $2.5 million. Def.’s SOF ¶ 23. Attached to her
Employment Agreement was a commission grid specifying potential
payouts, but this grid did not include any explanation of quota
accrual rules. Def.’s SOF ¶ 19. Both parties agree that ACI
could modify the Compensation Plan, even during the fiscal year,
6
with approval from ACI’s Board of Directors. Def.’s SOF ¶ 20;
Pl.’s SOF ¶¶ 5-6. Indeed, Bienvenue was given a new FY 2006
compensation plan in the fall of 2005. Def.’s SOF ¶ 23; Pl.’s
SOF ¶ 9.
II. ANALYSIS
A. Standard of Review
Pursuant to Federal Rule of Civil Procedure 56, summary
judgment should be granted if the moving party has shown that
there are no genuine issues of material fact and that the moving
party is entitled to judgment as a matter of law. See Fed. R.
Civ. P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986);
Waterhouse v. District of Columbia, 298 F.3d 989, 991 (D.C. Cir.
2002). In determining whether a genuine issue of material fact
exists, the court must view all facts in the light most favorable
to the non-moving party. See Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 587 (1986). Likewise, in
ruling on cross-motions for summary judgment, the court shall
grant summary judgment only if one of the moving parties is
entitled to judgment as a matter of law upon material facts that
are not genuinely disputed. See Rhoads v. McFerran, 517 F.2d 66,
67 (2d Cir. 1975).
There are two straightforward legal issues ripe for
adjudication. The first is whether there was an enforceable
contract between ACI and ADE as of June 2, 2006. The second is
7
whether under ACI’s Compensation Policy, Bienvenu earned her
commission in connection with the contract between ACI and ADE in
FY 2006 or 2007.
B. The Contract Between ADE and ACI.
1. Choice of Law
The parties agree that Arkansas law governs the issue of
whether and when there was a contract between ADE and ACI. There
is also a venue provision in the contract identifying Arkansas
law as governing any disputes. District of Columbia courts give
effect to contractual choice of law provisions “as long as there
is some reasonable relationship with the state specified.”
Elemary v. Philipp Holzmann A.G., 533 F. Supp. 2d 144, 155 n.3
(D.D.C. 2008)(quotation omitted).
The Court concludes that a reasonable relationship exists
and will therefore apply Arkansas law. Arkansas law, following
general contract principles, provides that the essential elements
of a contract are: 1) competent parties; 2) subject matter; 3)
legal consideration; 4) mutual agreement; and 5) mutual
obligations. See Foundation Telecommc’ns., Inc. v. Moe Studio,
Inc., 16 S.W.3d 531, 538 (Ark. 2000); Hunt v. McIlroy Bank &
Trust, 616 S.W.2d 759, 761 (Ark. Ct. App. 1981).
2. ADE-ACI Contract
The parties agree that there was a contract between ADE and
ACI to perform education consulting services; the only dispute is
8
when this contract became effective.5 On April 17, 2006 ACI and
ADE signed the April Contract. Bienvenu argues that, despite
being further refined by the July Agreement, the April Contract
was complete and became enforceable on June 2, 2006 when the
Director of Finance gave his final stamp of approval. ACI’s
argument, however, is that the April Contract was a mere “form”
document that was only a starting point in the “contracting
process” and lacked specificity regarding the scope and details
of the programs to be implemented. For the following reasons,
the Court finds that a binding contract existed as of June 2,
2006.
First, with regards to ACI’s form contract argument, the
Court finds that the April Contract includes extensive detail
about ACI’s obligations, the costs to ADE, and the time-length of
the agreement. The subject matter of the contract is also
specified; it is a consulting contract, the nature of which
includes ACI’s delivery of its comprehensive school improvement
model to Arkansas public schools through development, training,
and on-site technical assistance.
The Court is also persuaded that the April Contract contains
clear and mutual obligations and agreements: i.e., ACI must
5
Neither party disputes that Dougal and the ADE
Commissioner were competent parties to sign the contract. See
Def.’s Mem. Supp. of Mot. for Partial Summ. J. (“Def.’s Mot.”) at
13; Pl.’s Mot. at 24.
9
provide education consulting services and ADE must pay ACI for
those services. Under Arkansas law, mutual promises are adequate
consideration to uphold a contract. See Youree v. Eshaghoff, 256
S.W.3d 551, 555 (Ark. Ct. App. 2007); see also Tyson Foods, Inc.
v. Archer, 147 S.W.3d 681, 684 (Ark. 2004) (“[M]utuality of
contract means that an obligation must rest on each party to do
or permit to be done something in consideration of the act or
promise of the other.”); Showmethemoney Check Cashers, Inc. v.
Williams, 27 S.W.3d 361, 366 (Ark. 2000). The Court finds that
the April Contract contemplated such mutual promises and mutual
obligations and is unpersuaded that ACI was “swimming in a sea of
uncertainty” until the July Agreement was signed. See Pl.’s Mot.
at 25.
ACI also argues that because the April Contract left the
method of rendering compensation to a future determination, see
Pl.’s Ex. 17 at § 5 (“The method(s) of rendering compensation
will be delivered in accordance with a schedule developed by the
contractor and ADE.”), the contract was not valid. Along similar
lines, ACI argues that the greater specificity in the July
Agreement (i.e., which of the schools would receive the services
and how payments would be scheduled) demonstrates that the April
Contract was not enforceable. The Court finds that the
refinements in the July Agreement did not change the overall
objectives and scope of the April Contract and do not make the
10
April Contract void. Parties may refine terms in a contract to
supplement prior agreements, but that does not mean the prior
agreement was never valid. See Foundation Telecommc’ns, 341 Ark.
at 242 (affirming trial court’s decision that a contract was
formed where the price terms were later revised because
“agreements may be supplemented by subsequent acts, agreements,
or declarations”).6
Finally, the Court is persuaded that the April Contract is
the only contract that went through the procurement process
required under Arkansas law. Arkansas State contract procurement
protocol requires that a Professional Services Contract such as
the April Contract progress through a multi-step approval
process. Ark. Code Ann. §§ 19-11-1006-1007. These steps were
each completed in turn and the Director of Finance gave final
approval to the April Contract on June 2, 2006. Def.’s Ex. M at
5. In contrast, the July Agreement was not submitted for this
approval process and did not contain the necessary components or
approvals to be a contract under Arkansas law.
For these reasons, the Court finds that the April Contract
became enforceable on June 2, 2006. Plaintiff’s commission,
therefore, depends on the compensation policy in place during
6
ACI further asserts that the July Agreement contains an
integration clause, which states that it supercedes any prior
agreements. While true, this does not negate the fact of a prior
enforceable contract; it only means that the July Agreement now
controls as between ADE and ACI.
11
ACI’s FY 2006.
B. ACI’s FY 2006 Compensation Policy
1. Choice of Law
In diversity cases, the District of Columbia’s choice of law
principles call for a two-step analysis: 1) first, whether there
is any conflict among the potentially applicable legal standards;
and 2) if there is a conflict, the court must determine which
jurisdiction has a “more substantial interest” in the governing
issues. See YWCA v. Allstate Ins. Co., 275 F.3d 1145, 1150 (D.C.
Cir. 2002). Bienvenu argues that Florida law applies to
determining the terms of ACI’s FY 2006 compensation policy
because that is where she worked and signed the contract. ACI
persuasively responds, however, that District of Columbia law
applies because Bienvenu has shown no conflict between District
of Columbia law and Florida law. Under either jurisdiction’s law
on employment contracts, the compensation policy controls whether
Bienvenu is entitled to a sales commission. Compare Parkway
Motor Co. v. Charles, 39 F.2d 292 (D.C. Cir. 1930) (whether
employee is entitled to commission for sales is dependent upon
terms of employment contract) with Comerford v. Sunshine Network,
710 So. 2d 197, 198 (Fla. Dist. Ct. App. 1998) (terms of
employment agreement control whether employee is entitled to
sales commission). Given the lack of conflict, the Court will
apply the District of Columbia’s laws; however, the analysis
12
would be the same under Florida law, where the Court would
similarly look to the terms of the Compensation Policy.7
2. FY 2006 Compensation Policy
Because the Court finds that there was an enforceable
contract as of June 2, 2006, the resolution of the parties’
dispute depends on the terms of ACI’s FY 2006 Compensation
Policy. The parties’ interpretations of those terms are at
complete odds with each other. Bienvenu argues: 1) that her
Employment Agreement did not contain an express provision as to
the accrual of commission credit; and 2) that ACI Vice-President
Solinger, the person who created the Compensation Policy, told
her that commission credit would be earned when a contract was
signed, and she would receive payment once ACI was paid by the
client. Def.’s Mot. at 4-5, 21. She argues that this practice -
commission upon signing of a contract - is consistent with
industry custom and practice and further asserts that in the fall
of 2005, ACI’s CEO, Judy Codding (“Codding”), told her “[d]on’t
worry; we’ll take of you” in response to her concerns about the
7
ACI concedes that Bienvenu’s counter-claim for attorney’s
fees, which follows directly from her claim of unpaid sales
commissions, should be analyzed under Florida law. The two
issues are related: if Bienvenu is entitled to her sales
commissions (the equivalent of unpaid wages in Florida), then she
will be entitled to attorney’s fees. See Fla. Stat. § 448.08
(2009). Because the Court finds that there are material issues
of fact regarding whether Bienvenu is entitled to her sales
commission, the Court need not address the attorney’s fee issue
at this time.
13
Compensation Policy. Def.’s Mot. at 5; see also Def.’s Ex. G.
Bienvenu June 25, 2008 Dep. at 221:15-19; Pl.’s Ex. B, Solinger
Dep. (“Solinger Dep.”) at 32:1-16. Bienvenu also contends that,
despite being aware that ACI could alter her quota and commission
structure for FY 2006, at no point in time between when she was
hired in May 2005 and the summer of 2006 was she informed that
ACI intended to impose a quota credit that depended on factors
other than the execution of a binding contract. Def.’s Mot. at
6.
ACI, by contrast, argues that the signing of a contract is
insufficient to entitle Bienvenu to commission credit because its
FY 2006 Compensation Policy required that a contract be “booked”
and invoiced in the same fiscal year in order for the sales
person to receive commission credit. Pl.’s Mot. at 4-5; Solinger
Dep. at 72:6-18. The rationale behind this policy, ACI asserts,
is that in the education consulting industry, schools have often
signed contracts for services subject to future expenditures, but
then either did not receive funds or did not want to expend funds
a later time. Thus, before awarding commission credit, ACI wants
“contractual certainty” that it will receive payment for its
service, evidenced by such factors as a payment schedule and/or
invoices – events that did not occur until July 2006 (i.e., FY
2007). ACI notes that this “contractual certainty” policy was
presented to and approved by its Board of Directors in September
14
2005. Pl.’s Mot. at 5. ACI asserts that, following the adoption
of this policy, Codding held a training attended by all sales
personnel where they were given an “abbreviated version” of the
presentation regarding the compensation policy. Pl.’s Mot. at 5.
In ACI’s view, Bienvenu was thus entitled to commission credit in
FY 2007, but because she had a higher sales quota to reach in
that fiscal year, she is not entitled to any commission.
The key testimony on this point is that of Solinger because
he created the FY 2006 Compensation Policy. Solinger, in his
deposition, testified that the general policy was to pay
commissions in the fiscal year in which the contract was signed
and the services were performed. But, crucially, he also
testified that there were “exceptions” to this policy. For
instance, he testified that if a service was provided over two
fiscal years, the sales person would be entitled to a sales
commission in the first fiscal year. In Solinger’s words (cited
by both parties):
I worked hard to find a way to represent this
notion of the school district being at risk
financially to America’s Choice and America’s
Choice having certainty that a contract would
produce the revenue described. And so I looked
at, you know, if there’s a contractual
commitment, an invoice, a commitment to a payment
schedule, payments received, things like that to
try to address this notion of school districts
being able to wantonly cancel contracts and not
pay under them. But at the same point, a desire
to compensate sales people at the time based on
the contract date and trying to find something
which captured the notion.
15
Jt. Exh. B, Solinger Dep. at 73:6-19. ACI, of course, highlights
the words “invoice” and “payments received,” while Bienvenu
focuses on “a desire to compensate people at the time based on
the contract date.” Resolution of this issue is further
complicated by the fact that the commission policy was not
written down, and apparently was still developing over FY 2006.
Moreover, Solinger also testified that he had not fully
considered the situation in which contract funds were
appropriated in one fiscal year, but services were not provided
until the following fiscal year – the exact situation here.
Viewing these facts in the light most favorable to the non-
moving parties, there are genuine issues of material fact in
regard to: 1) the exact terms of the FY 2006 Compensation Policy
and whether they were ever modified; 2) what Solinger or other
ACI managers told Bienvenu the policy was, and when she was told;
3) if there was a general policy to apply commission credit after
services were invoiced, what the exceptions to that Policy were,
who decided whether the exceptions would apply, and whether the
ADE-ACI contract (with funding appropriated in one fiscal year
for services in the next fiscal year) falls into an exception;
and 4) what ACI meant by “contractual certainty.”8 Accordingly,
8
The court presiding over the related case in Louisiana,
involving Cecil Harris (Bienvenu’s sales person in regard to the
ADE-ACI contract), similarly denied summary judgment, finding
that there were disputed issues of fact regarding the terms and
implications of the compensation policy. See Harris v. America’s
16
both parties’ motions for summary judgment on this issue are
DENIED.
III. CONCLUSION
Accordingly, for the reasons stated, the Court GRANTS IN
PART AND DENIES IN PART defendant’s motion for summary judgment,
and DENIES plaintiff’s motion for summary judgment. An
appropriate Order accompanies this Memorandum Opinion.
SO ORDERED.
Signed: Emmet G. Sullivan
United States District Judge
March 26, 2010
Choice, Inc. No. 07-195-JVP-SCR, 2009 WL 411698 (M.D. La. Feb.
18, 2009).
17