Vander Veur v. Groove Entertainment Technologies

2018 UT App 148THE UTAH COURT OF APPEALS
MIKE VANDER VEUR,
Appellant,
v.
GROOVE ENTERTAINMENT TECHNOLOGIES,
Appellee.
Opinion
No. 20160153-CA
Filed August 9, 2018
Third District Court, Salt Lake Department
The Honorable Vernice S. Trease
No. 130908551
Nan T. Bassett and S. Shane Stroud, Attorneys
for Appellant
Cheylynn Hayman, Attorney for Appellee
JUDGE JILL M. POHLMAN authored this Opinion, in which
JUDGES DAVID N. MORTENSEN and RYAN M. HARRIS concurred.
POHLMAN, Judge:
¶1 Mike Vander Veur appeals the district court’s grant of
summary judgment to Groove Entertainment Technologies.
Groove terminated Vander Veur’s employment in June 2013.
Vander Veur argues that the district court incorrectly granted
summary judgment to Groove on his claims for breach of the
implied covenant of good faith and fair dealing regarding certain
commissions and a bonus to which he claims entitlement. He
also argues that the district court erred in granting summary
judgment in Groove’s favor on its unjust enrichment claim,
which was based on Vander Veur’s retention of certain
commission draws following his termination. We affirm in part,
vacate in part, and remand for further proceedings.
Vander Veur v. Groove Entertainment Technologies
BACKGROUND 1
¶2 Around September 2010, Groove, a company that sells
television services to customers, such as hotels, hired Vander
Veur as a sales representative. Vander Veur’s duties included,
among other things, producing leads and generating new
business by signing new customers for television services.
¶3 In October 2012, Vander Veur and Groove entered into a
Sales Representative Compensation Agreement (the
Compensation Agreement). Among its relevant provisions, the
Compensation Agreement provided that it would be effective as
of October 15, 2012, and that it would “remain in effect as long
as [Vander Veur] is employed by Groove.” The agreement
further provided that “Groove [would] pay [Vander Veur] a
commission for each Qualifying Sale deemed commissionable as
defined in this Agreement.” The Compensation Agreement
defined “Qualifying Sale” as “a commissionable sale where the
minimum margin requirements are met and the installation is
complete.” It also explained that Vander Veur was entitled to
biweekly draws against his earned commissions and that these
draws would be deducted from his earned commissions.
¶4 Vander Veur also signed an Employee Handbook
Acknowledgement on three separate occasions—in December
2010, December 2011, and April 2013. Each acknowledgement
explained that, notwithstanding the policies and procedures
detailed in the handbook, Vander Veur’s employment was at
will; both Groove and Vander Veur had the right to terminate
1. “In reviewing a district court’s grant of summary judgment,
we view the facts and all reasonable inferences drawn therefrom
in the light most favorable to the nonmoving party and recite the
facts accordingly.” Ockey v. Club Jam, 2014 UT App 126, ¶ 2 n.2,
328 P.3d 880 (quotation simplified).
20160153-CA 2 2018 UT App 148Vander Veur v. Groove Entertainment Technologies
their employment relationship at any time, with or without
notice or cause.
¶5 Groove terminated Vander Veur’s employment in June
2013. At the time of termination, Vander Veur was in the process
of procuring six commissionable sales. While Vander Veur had
apparently obtained either written sales contracts or verbal
commitments for each sale, it is undisputed that at the time of
his termination none of those sales had been installed. The first
of the six installations took place in July 2013, approximately one
month after Vander Veur’s termination, and all six sales were
installed within three months of his termination. Groove did not
pay Vander Veur any commission for the six sales.
¶6 In addition, before his termination, Vander Veur was
working with Groove’s lead sales representative and another
Groove employee to complete a large sale to provide satellite
services to a hotel. In connection with this sale, Groove stood to
be paid a sizeable bonus from Showtime (the Showtime bonus).
Groove’s president, Vander Veur, and the lead sales
representative apparently agreed that, after paying $1,000 to the
other Groove employee who had assisted with the sale, they
would split the Showtime bonus evenly between them. 2 Groove
did not receive the bonus from Showtime until nearly one month
after Vander Veur’s termination, and Groove did not share any
portion of it with Vander Veur.
¶7 After his termination, Vander Veur filed suit against
Groove. Among other things, he alleged that Groove had
breached the implied covenant of good faith and fair dealing in
the compensation and bonus agreements by terminating him for
the express purpose of avoiding paying him the six commissions
2. Vander Veur contends that he discussed this arrangement
with the lead sales representative; he did not discuss it directly
with Groove’s president.
20160153-CA 3 2018 UT App 148Vander Veur v. Groove Entertainment Technologies
and the Showtime bonus. 3 Groove counterclaimed, asserting
breach of contract and unjust enrichment claims against Vander
Veur on the basis that Vander Veur had retained certain draw
monies that exceeded the commissions he had earned prior to
his termination. Groove’s breach of contract claim was based
upon a 2013 Sales Representative Agreement (the 2013
Agreement) that Vander Veur had not signed, and it pleaded its
unjust enrichment claim in the alternative.
¶8 Groove moved for summary judgment on Vander Veur’s
claims as well as its unjust enrichment counterclaim. As to the
six commissions, Groove argued that Vander Veur could not rely
on the implied covenant of good faith and fair dealing to claim
entitlement to the commissions in light of “the parties’ course of
dealing and [Vander Veur’s] at-will employment status.” Groove
pointed to the plain language of the Compensation Agreement,
asserting that the agreement unambiguously stated that
commissions were not earned until installation. Groove also
characterized Vander Veur’s breach of the implied covenant
claim as an improper attempt to have the court “retroactively
re-craft more favorable payment terms” than those to which
Vander Veur agreed, asserting that it undoubtedly never would
have agreed to pay Vander Veur commissions for
post-termination installations had it considered and addressed
the issue in the Compensation Agreement. Indeed, Groove
claimed that it had “never paid commissions to sales
representatives for installations that were completed after the
3. Vander Veur also asserted claims for breach of contract and
wrongful termination in violation of public policy, but he
voluntarily dismissed those claims during the summary
judgment proceedings. Likewise, on appeal, Vander Veur
initially alleged that Groove had breached the implied covenant
of good faith and fair dealing by terminating his employment to
avoid paying him another bonus apart from the Showtime
bonus, but he abandoned this claim in his reply brief.
20160153-CA 4 2018 UT App 148Vander Veur v. Groove Entertainment Technologies
termination of employment.” Groove further argued that Vander
Veur could not “use the covenant to pencil in a ‘good cause’
termination restriction” in light of the “numerous
acknowledgements he signed in which he expressly recognized
that his employment was at-will.”
¶9 Regarding the Showtime bonus, Groove similarly argued
that Vander Veur’s claim for breach of the implied covenant was
unavailing where Groove “never would have agreed to pay
Vander Veur” that bonus “after the termination of his
employment.” In its summary judgment reply memorandum,
Groove also contended that the claim should be dismissed for
the alternative and independent reason that there was “no
enforceable contract” as to the Showtime bonus, because there
was no meeting of the minds on whether Vander Veur would
have been entitled to the bonus post-termination.
¶10 Finally, Groove argued that it was entitled to judgment as
a matter of law on its unjust enrichment claim. Groove accepted
for purposes of summary judgment that, as Vander Veur
claimed in his answer, the 2013 Agreement was “inapplicable to
him,” and Groove argued that it met the three requirements to
establish unjust enrichment. See generally Rawlings v. Rawlings,
2010 UT 52, ¶ 29, 240 P.3d 754 (listing the “three elements”
required to prove “[a] claim for unjust enrichment in Utah”).
¶11 In response, Vander Veur argued that summary judgment
was inappropriate on his breach of the implied covenant claims
because “[a] rational jury could determine based on the facts”
that Groove’s claimed reason for terminating him was mere
pretext and that his termination, “executed on the eve of him
becoming eligible for significant commission and bonus
payments,” was instead done “to deprive him of the
commissions and bonuses he was to receive once the jobs he had
sold were installed.” Regarding Groove’s counterclaims, Vander
Veur argued that Groove was not entitled to judgment on its
unjust enrichment claim for two reasons. First, he argued that
20160153-CA 5 2018 UT App 148Vander Veur v. Groove Entertainment Technologies
because an unjust enrichment claim is cognizable only if no
contract controls, Groove could not prevail simply by
“ignor[ing],” for purposes of summary judgment, the 2013
Agreement on which its breach of contract counterclaim was
based. Rather, Vander Veur contended that Groove should have
to “withdraw its breach of contract claim,” or, at the very least,
be required to explain “why it has no legal remedy under its
breach of contract cause of action prior to proceeding with its
unjust enrichment claim.” Second, he argued that Groove had
failed to prove its unjust enrichment claim primarily because the
existence of his own claims made the calculation of the benefit
conferred to him and his liability for it “impossible,” where he
could be entitled to offset as well as pre- and postjudgment
interest, should he prevail.
¶12 The district court granted summary judgment to Groove
on all issues, dismissing Vander Veur’s claims with prejudice. It
also entered judgment in Groove’s favor for unjust enrichment
in the amount of $2,925.04, plus prejudgment interest. Vander
Veur appeals.
ISSUES AND STANDARD OF REVIEW
¶13 Vander Veur argues that the district court improperly
granted summary judgment in favor of Groove on his claims for
breach of the implied covenant of good faith and fair dealing as
well as Groove’s unjust enrichment claim. Summary judgment is
appropriate “if the moving party shows that there is no genuine
dispute as to any material fact and the moving party is entitled
to judgment as a matter of law.” Utah R. Civ. P. 56(a). “An
appellate court reviews a district court’s legal conclusions and
ultimate grant or denial of summary judgment for correctness
and views the facts and all reasonable inferences drawn
therefrom in the light most favorable to the nonmoving party.”
ZB, N.A. v. Crapo, 2017 UT 12, ¶ 11, 394 P.3d 338 (quotation
simplified).
20160153-CA 6 2018 UT App 148Vander Veur v. Groove Entertainment Technologies
ANALYSIS
I. Breach of the Implied Covenant of Good Faith and Fair
Dealing
¶14 Vander Veur argues that the district court incorrectly
granted Groove summary judgment on his claims for breach of
the implied covenant of good faith and fair dealing. Although he
acknowledges the at-will nature of his employment with
Groove, he nevertheless asserts that terminating his employment
for the express intention of depriving him of the fruits of certain
compensation agreements goes to the core of the covenant that
the Utah Supreme Court identified in Young Living Essential Oils,
LC v. Marin, 2011 UT 64, 266 P.3d 814, and is on that basis
impermissible. See id. ¶ 9 (explaining that the covenant’s “core
function” is requiring that a party to a contract “refrain from
actions that will intentionally destroy or injure the other party’s
right to receive the fruits of the contract” (quotation simplified)).
¶15 Groove disagrees, arguing that Vander Veur seeks to
circumvent the terms of the agreements at issue and the at-will
nature of his employment by using the covenant to create a new
term or obligation to which it clearly did not, and never would
have, agreed—that is, paying Vander Veur commissions and
bonuses for sales he generated but that were completed
post-termination. Because Vander Veur has not established that
Groove would have “undoubtedly . . . agreed to the
post-termination payment arrangement” that he seeks, Groove
asserts that Vander Veur “has not satisfied his substantial
threshold burden” to survive summary judgment below or
prevail on appeal.
¶16 The parties therefore disagree about the applicability of
the covenant in the circumstances present here, particularly
given the at-will nature of Vander Veur’s employment. To
determine whether the district court erred in granting summary
judgment on Vander Veur’s claims for breach of the implied
20160153-CA 7 2018 UT App 148Vander Veur v. Groove Entertainment Technologies
covenant, we therefore must decide the extent to which the
covenant may be applied in this case, where an at-will employee
is seeking compensation for commissions to which he claims he
would have been entitled pursuant to a compensation agreement
had his employment not been terminated for the purpose of
depriving him of those commissions.
¶17 Despite Vander Veur’s contention to the contrary, this
appears to be a matter of first impression for our courts. As we
explain below, see infra ¶¶ 19–30, Utah’s appellate courts have
recognized the applicability of the implied covenant of good
faith and fair dealing to at-will employment relationships, but
have not yet determined whether the implied covenant is
available to provide relief in these circumstances.
¶18 We therefore begin by discussing the function of the
covenant, and we ultimately conclude that the covenant may be
employed in limited circumstances to protect an at-will
employee’s right to receive compensation for work performed
pursuant to a compensation agreement attendant to the at-will
employment relationship. We then apply this principle to
determine whether dismissal of Vander Veur’s implied covenant
claims regarding entitlement to the six sales commissions and
the Showtime bonus was proper. We ultimately conclude that it
was improper to dismiss Vander Veur’s claims as to the six
commissions and the Showtime bonus.
A. At-Will Employment and the Implied Covenant of Good
Faith and Fair Dealing
¶19 Vander Veur asserts that his termination violated the
implied covenant of good faith and fair dealing, because it was
carried out for the specific purpose of depriving him of his right
to the compensation he was to receive under the Compensation
Agreement and the Showtime bonus oral contract. This case
therefore involves the intersection of an at-will employment
relationship, where the employee may be terminated with or
20160153-CA 8 2018 UT App 148Vander Veur v. Groove Entertainment Technologies
without cause, and the applicability of the implied covenant to
obligations inherent in separate agreements attendant to an at-
will employment relationship.
¶20 It is well-settled that the implied covenant of good faith
and fair dealing inheres in every contract, see Nelson v. Target
Corp., 2014 UT App 205, ¶ 28, 334 P.3d 1010, even contracts
associated with employment, see Cook v. Zions First Nat’l Bank,
919 P.2d 56, 60–61 (Utah Ct. App. 1996); Dubois v. Grand Central,
872 P.2d 1073, 1078–79 (Utah Ct. App. 1994). The violation of this
covenant “gives rise to a claim for breach of contract.” Oakwood
Village LLC v. Albertsons, Inc., 2004 UT 101, ¶ 43, 104 P.3d 1226.
¶21 That said, the covenant has a limited role in contractual
disputes. See Young Living Essential Oils, LC v. Marin, 2011 UT 64,
¶ 9, 266 P.3d 814. Its “core function” is to impose on parties the
duty to perform in good faith the obligations arising from and
created under the contract and to “refrain from actions that will
intentionally destroy or injure the other party’s right to receive
the fruits of the contract.” Id. (quotation simplified); see id. ¶¶ 8–
9 (stating that the covenant’s “significance lies in its function of
inferring as a term of every contract a duty to perform in the
good faith manner that the parties surely would have agreed to
if they had foreseen and addressed the circumstance giving rise
to their dispute,” and explaining that this duty “advances the
core function of the covenant, as no one would reasonably
accede to a contract that left him vulnerable to another’s
opportunistic interference with the contract’s fulfillment”). The
covenant may not be used to “create new, independent rights or
duties not agreed upon by the parties,” see Cook, 919 P.2d at 60(quotation simplified), or to create obligations that would be
“inconsistent with express contractual terms,” Young Living, 2011
UT 64, ¶ 10 (quotation simplified); see also id. (further explaining
that “[w]here the parties themselves have agreed to terms that
address the circumstance that gave rise to their dispute, . . . the
court has no business injecting its own sense of what amounts to
‘fair dealing’”). Rather, the covenant may be used to allow
20160153-CA 9 2018 UT App 148Vander Veur v. Groove Entertainment Technologies
recovery under a contract only for actions taken that are
inconsistent “with the agreed common purpose and the justified
expectations of the other party.” See Oakwood Village, 2004 UT
101, ¶ 43 (quotation simplified).
¶22 However, Vander Veur was an at-will employee. At-will
employment relationships are those “entered into for an
indefinite period of time,” Cabaness v. Thomas, 2010 UT 23, ¶ 78,
232 P.3d 486 (quotation simplified), where there is no
expectation between the parties that the employment will
continue for a “specified term of duration,” see Cook, 919 P.2d at
60. In such relationships, both the employer and the employee
have the right to “terminate the employment for any reason (or
no reason) except where prohibited by law.” See Cabaness, 2010
UT 23, ¶ 78 (quotation simplified); see also Nelson, 2014 UT App
205, ¶¶ 17, 28. As relevant here, “any reason” includes an
employer’s right to terminate an employment relationship to
relieve itself of the obligation to continue paying compensation
and benefits to an employee for the employee’s continued
performance. See generally Caton v. Leach Corp., 896 F.2d 939, 947
(5th Cir. 1990) (explaining that a benefits agreement attendant to
an at-will employment relationship does “not restrict the parties’
contractual right to at-will termination”); Wakefield v. Northern
Telecom, Inc., 769 F.2d 109, 112 (2d Cir. 1985) (describing the at-
will employment relationship as one in which “performance and
the distribution of benefits occur simultaneously, and neither
party is left high and dry by the termination”). In this regard, we
have explained that the implied covenant cannot be used to
“inject a term of years into [an at-will employment] contract
when the parties expressly agreed to an at-will relationship
terminable at any time.” Anderson v. Larry H. Miller Commc’ns
Corp., 2012 UT App 196, ¶ 18, 284 P.3d 674.
¶23 Utah has recognized the availability of breach of the
implied covenant of good faith and fair dealing as a cause of
action to protect justified expectations arising from agreements
attendant to an at-will employment relationship. See Cook, 919
20160153-CA 10 2018 UT App 148Vander Veur v. Groove Entertainment Technologies
P.2d at 60–61. For example, in Cook, an at-will employee sued her
employer, alleging that the employer breached the implied
covenant when it refused to permit her to use her sick leave. See
id. at 58–59. Although the trial court granted summary judgment
in favor of Cook’s employer, see id., this court determined that
the trial court had erred in dismissing her implied covenant
claim on summary judgment, see id. at 60–61. We first
determined that the parties had “an express contract” as to sick
leave. Id. at 59. We then determined that Cook could assert a
breach of the implied covenant claim under those circumstances,
where, rather than using the implied covenant to attempt to
create new duties or rights to which the parties had not agreed,
Cook’s allegations centered on whether her employer had
unreasonably and intentionally impaired her “right to receive
the fruits of the [existing sick leave] contract” when it refused to
permit her to use her accrued sick leave. See id. at 60. In other
words, we concluded her allegations implicated the “core
function” of the implied covenant—ensuring the parties
performed the obligations under their contract in good faith.
Compare id. at 60, with Young Living, 2011 UT 64, ¶ 9 (describing
the “core function” of the implied covenant). On this basis, we
determined that breach of the implied covenant was available to
Cook as a cause of action.
¶24 We are persuaded that the reasoning in Cook should be
extended to the narrow circumstances present here. Like the
appellant in Cook, Vander Veur and Groove entered into
agreements attendant to Vander Veur’s at-will employment—
compensation agreements—that created and described distinct
rights and obligations related to the payment of certain benefits,
apart from the general at-will relationship. See Cook, 919 P.2d at
60 (“That Cook was an at-will employee does not negate the
existence of the sick leave contract between her and [the
employer].”); see also Arbeeny v. Kennedy Exec. Search, Inc., 893
N.Y.S.2d 39, 44 (App. Div. 2010) (observing that “an employee’s
contract for payment of commissions creates rights distinct from
the employment relation, and obligations derived from the
20160153-CA 11 2018 UT App 148Vander Veur v. Groove Entertainment Technologies
covenant of good faith implicit in the commission contract may
survive the termination of the employment relationship”
(quotation simplified)). Also like in Cook, Vander Veur’s
argument below and on appeal is that Groove, in bad faith, took
specific action to impair his ability to “receive the fruits” of the
Compensation Agreement and the Showtime bonus agreement.
(Quotation simplified.) In this regard, Vander Veur’s arguments,
like Cook’s, rest on and implicate the “core function” of the
implied covenant; he asserts a right to good faith performance of
purportedly already existing contractual obligations under the
compensation and bonus agreements, not a right to add new
terms or create new obligations seemingly inconsistent with the
agreements or the at-will nature of his employment. See Young
Living, 2011 UT 64, ¶¶ 8–10; Cook, 919 P.2d at 60.
¶25 In extending the reasoning in Cook, we emphasize that
this extension, and the window for recovery under it, is narrow.
The implied covenant may not be used as an avenue to avoid
termination of the at-will employment relationship itself. While
an at-will employee may have a right to certain benefits arising
under an attendant compensation agreement, the employee has
no right to continued tenure under an at-will employment
relationship. See Wakefield, 769 F.2d at 112 (stating that the
covenant of good faith “should not be implied as a modification
of an employer’s right to terminate an at-will employee because
even a whimsical termination does not deprive the employee of
benefits expected in return for the employee’s performance”); see
also Caton, 896 F.2d at 946 (stating that “the implied good faith
covenant may not obliterate rights, such as at-will termination”).
The implied covenant therefore does not affect or alter the
employer’s right to terminate its relationship with an at-will
employee for any reason or no reason at all. See Nelson v. Target
Corp., 2014 UT App 205, ¶ 28, 334 P.3d 1010.
¶26 Instead, we decide today only that breach of the implied
covenant of good faith and fair dealing may be asserted for the
limited purpose of protecting from opportunistic interference an
20160153-CA 12 2018 UT App 148Vander Veur v. Groove Entertainment Technologies
employee’s justified expectations in receiving the fruits of a
compensation agreement attendant to the at-will employment
relationship after that relationship has been terminated. See Cook
v. Zions First Nat’l Bank, 919 P.2d 56, 60 (Utah Ct. App. 1996)
(“Under the covenant of good faith and fair dealing, the parties
constructively promised that they would not intentionally do
anything to impair the other party’s right to receive the fruits of
the contract. Compliance with this covenant depends upon the
justified expectations of the parties.” (quotation simplified)); see
also Oakwood Village LLC v. Albertsons, Inc., 2004 UT 101, ¶ 43, 104
P.3d 1226. This means that the employee must demonstrate that
(1) his or her employment was terminated in bad faith to deprive
him or her of benefits under a compensation agreement and
(2) he or she does, in fact, have a justified expectation for
receiving the benefits to which entitlement is claimed. Of the
latter, the employee will typically be required to demonstrate
that, but for the bad faith termination, he or she would have
received the benefits under the terms of his or her compensation
agreement because of his or her past, related work. In this
regard, we are persuaded by the reasoning of other jurisdictions
that have recognized a similarly limited role for the implied
covenant of good faith and fair dealing to protect the rights
created in agreements attendant to an at-will employment
relationship.
¶27 For example, in Fortune v. National Cash Register Co., 364
N.E.2d 1251 (Mass. 1977), an at-will salesman received a
termination notice immediately following a large sale to which
the salesman otherwise would have received sizeable “bonus
credits” under a compensation contract attendant to the
salesman’s employment. Id. at 1253–54 (quotation simplified).
On appeal, the employer challenged the submission of the issue
of a bad faith termination to the jury. Id. at 1255. The
Massachusetts Supreme Judicial Court held that a written
contract regarding compensation in an at-will employment
relationship “contains an implied covenant of good faith and fair
dealing.” Id. at 1255–56. In this regard, the court determined that
20160153-CA 13 2018 UT App 148Vander Veur v. Groove Entertainment Technologies
an employer acts in bad faith when it “seeks to deprive the agent
of all compensation by terminating the contractual relationship
when the agent is on the brink of successfully completing the
sale,” or when the employer attempts through a termination to
“deprive the agent of any portion of a commission due the
agent.” See id. at 1256–58. Either example of bad faith
termination constitutes a breach of the implied covenant,
affording the employee a monetary remedy on the express
contract. See id.; see also Cataldo v. Zuckerman, 482 N.E.2d 849,
854–56 (Mass. App. Ct. 1985) (interpreting Fortune, and
concluding that the Fortune principle applies to protect an at-will
employee from a bad faith discharge aimed at depriving the
employee of an “identifiable, future benefit reflective of past
services,” such as a promised equity interest in future projects
that constituted a “continuing inducement” and “part of the
compensation” for an employee’s day-to-day work (quotation
simplified)).
¶28 Similarly, in Wakefield v. Northern Telecom, Inc., 769 F.2d
109 (2d Cir. 1985), 4 an employee claimed that his employer
4. There is some disagreement about whether Wakefield is still
good law in New York. Following Wakefield’s issuance, the New
York Court of Appeals issued Gallagher v. Lambert, 549 N.E.2d
136 (N.Y. 1989), which involved a claim for breach of fiduciary
duty of good faith and fair dealing based on a stock buy-back
agreement and the employer’s alleged act of terminating the
employee to buy back the employee’s stock at a lower price. Id.at 136–37. The majority in Gallagher ignored Wakefield altogether.
Id. at 137–38. Since then, there has been disagreement regarding
the applicability of Wakefield. See, e.g., Knudsen v. Quebecor
Printing (U.S.A.) Inc., 792 F. Supp. 234, 239 (S.D.N.Y. 1992)
(discussing the disagreement about the applicability of
Wakefield). Nevertheless, courts have continued to rely upon
Wakefield, at least so long as it can be distinguished from
Gallagher. See id. at 239–40; see also Arbeeny v. Kennedy Exec.
(continued…)
20160153-CA 14 2018 UT App 148Vander Veur v. Groove Entertainment Technologies
terminated his employment in contravention of the implied
covenant of good faith and fair dealing “to avoid paying him
commissions on sales that were completed but for formalities.”
Id. at 111–12. Although the employer claimed that the
employee’s at-will status effectively resolved this issue, id. at 112,
the Second Circuit Court of Appeals disagreed. Instead, the
court reasoned that while the employee could not “recover for
his termination per se,” “the contract for payment of
commissions create[d] rights distinct from the employment
relation” that could “survive the termination of the employment
relationship.” Id. (quotation simplified). The court observed that
while the covenant could not be employed to modify the
employer’s right to terminate the employee, it could protect the
employee from a termination done “for the purpose of avoiding
the payment of commissions which are otherwise owed [under a
compensation agreement],” because “an unfettered right to
avoid payment of earned commissions in the . . . employer
creates incentives counterproductive to the purpose of the
contract itself.” Id. at 112–13. 5
(…continued)
Search, Inc., 893 N.Y.S.2d 39, 44–45 (App. Div. 2010). In any
event, we find Wakefield’s reasoning persuasive.
5. See also Caton v. Leach Corp., 896 F.2d 939, 946–47 (5th Cir. 1990)
(observing that the implied covenant of good faith “protects the
parties’ expectations to receive the contractual benefits” created
in agreements apart from the at-will employment relationship,
and concluding that, should the compensation agreement create
“rights or benefits for a sales representative upon the
performance of specified services, then [the employee] may be
able to recover damages” for his performance of those services);
Suzuki v. Abiomed, Inc., 253 F. Supp. 3d 342, 347–51 (D. Mass.
2017) (characterizing earned compensation as including “an
identifiable, future benefit reflective of past services,” such as a
(continued…)
20160153-CA 15 2018 UT App 148Vander Veur v. Groove Entertainment Technologies
¶29 In the foregoing cases, while the employee did not have a
right to continued employment to earn commissions or benefits,
the employee did have (or could have had) the right under the
attendant compensation agreements not to be terminated for the
bad faith purpose of depriving the employee of commissions the
employee would have received. The courts reasoned that the
(…continued)
promised “interest in future projects [as] a continuing
inducement to work” for an employer, and concluding that an
employer “may be accountable to [an employee] for unpaid
compensation if it turns out [the employee] was terminated in
bad faith and the compensation is connected to work already
performed” (quotation simplified)); Geysen v. Securitas Sec.
Services USA, Inc., 142 A.3d 227, 241–42 (Conn. 2016)
(recognizing the availability of a breach of the implied covenant
of good faith and fair dealing claim “when the termination of an
[at-will] employee was done with the intent to avoid the
payment of commissions,” and concluding that the plaintiff had
“stated a legally sufficient claim for breach of the implied
covenant” where he asserted that the defendant violated the
implied covenant “by failing to comply with the plaintiff’s
reasonable expectation that the defendant would pay
commissions earned by the plaintiff” under the commission
contract attendant to the at-will employment relationship
(quotation simplified)); Arbeeny, 893 N.Y.S.2d at 44 (stating that
“the at-will doctrine should not preclude [a] plaintiff from
raising a breach of contract claim for earned commissions”
under the implied covenant and that “while an at-will employee
cannot recover for termination per se, an employee’s contract for
payment of commissions creates rights distinct from the
employment relation, and obligations derived from the covenant
of good faith implicit in the commission contract may survive
the termination of the employment relationship” (quotation
simplified)).
20160153-CA 16 2018 UT App 148Vander Veur v. Groove Entertainment Technologies
implied covenant appropriately protected an employee’s
justified expectations under attendant compensation agreements
from an employer’s bad faith attempt—often through
terminating the employment relationship—to avoid paying
compensation to the employee for work performed. In our view,
this reasoning comports both with the nature of at-will
employment relationships and the reasoning we expressed in
Cook. See Cook, 919 P.2d at 60; see also Young Living Essential Oils,
LC v. Marin, 2011 UT 64, ¶ 9, 266 P.3d 814 (explaining that the
duty to perform contractual obligations in good faith under the
covenant is not offensive, “as no one would reasonably accede to
a contract that left him vulnerable to another’s opportunistic
interference with the contract’s fulfillment”). Thus, while an
employer may terminate the at-will employment relationship at
any time and for any reason, the employer may not deprive an
employee of commissions or benefits he or she would have
received under the terms of the compensation agreement for
work already performed by terminating the employee in bad
faith to avoid paying those commissions or benefits.
¶30 Having decided that the implied covenant of good faith
and fair dealing may be applicable in the limited circumstances
present here, we therefore proceed to address each agreement at
issue—the six commissions under the Compensation Agreement
and the compensation under the Showtime bonus oral
agreement.
B. The Six Commissions and the Compensation Agreement
¶31 Vander Veur argues that the district court incorrectly
granted summary judgment against him on his claim that
Groove breached the implied covenant of good faith and fair
dealing by terminating his employment to avoid paying him
commissions on the six sales he had procured, but which had not
yet been installed, before his termination. The district court
dismissed this claim. The court reasoned that Vander Veur had
to “establish that the parties undoubtedly would have agreed” to
20160153-CA 17 2018 UT App 148Vander Veur v. Groove Entertainment Technologies
pay Vander Veur for the six commissions post-termination had
they “considered and addressed it at the outset,” and it
determined that “[t]his requirement is fatal to Vander Veur’s
claim.” The court then concluded that the undisputed facts
demonstrated that Groove would not have agreed to such a
covenant and that “[t]o hold that Groove might have an
obligation to pay commission payments to Vander Veur would
impose a new affirmative obligation on Groove that is outside
the [Compensation] Agreement and unsupported by the course
of conduct between the parties.”
¶32 We concluded above that an at-will employee may assert
a claim under the implied covenant to recover compensation he
or she would have received under the terms of his or her
compensation agreement but for the employer’s bad faith
termination of the at-will relationship for the purpose of
depriving the employee of that compensation. See generally Cook
v. Zions First Nat’l Bank, 919 P.2d 56, 60 (Utah Ct. App. 1996). In
this regard, the implied covenant protects the at-will employee
from an employer using an at-will termination to specifically
avoid its obligations under an attendant compensation
agreement. Vander Veur claims that Groove sought to deprive
him of the commissions he would have received through his
work securing the sales agreements, and to which he claims
entitlement under the Compensation Agreement, by terminating
his employment for the specific purpose of avoiding paying him
the commissions before the triggering event for payment of the
commissions—installation—occurred. As we explained, this is
the type of claim that implicates the core of the implied covenant
and of which the covenant is singularly designed to protect. On
that basis, no agreement between the parties about the implied
covenant’s applicability in these circumstances was required,
and the district court erred by determining that the success of
Vander Veur’s implied covenant claim turned on whether
Groove would have agreed to pay Vander Veur the commissions
post-termination.
20160153-CA 18 2018 UT App 148Vander Veur v. Groove Entertainment Technologies
¶33 We therefore vacate the district court’s dismissal of the
implied covenant claim for the six commissions and remand for
further proceedings. To be sure, we express no opinion on
whether Vander Veur might be ultimately successful in proving
his claim in the district court, should the case proceed to trial.
But for purposes of this appeal, it is enough that the court erred
in its application of the implied covenant to the circumstances of
this case.
C. The Showtime Bonus
¶34 Vander Veur also argues that the district court erred
when it dismissed his breach of the implied covenant claim as to
the Showtime bonus. The district court provided two
alternatives for its dismissal of this claim. First, the court
determined that it was “undisputed that Groove and Vander
Veur would not have agreed to a covenant that provided for
payment of the Showtime bonus after Vander Veur was
terminated from Groove,” and that to conclude that Groove
“might have an obligation to pay a post-termination Showtime
bonus payment to Vander Veur would impose a new affirmative
obligation on Groove” that was unsupported by the parties’
course of conduct. In the alternative, the court concluded that
“there was no enforceable contract as to the Showtime bonus,”
because “there was never a meeting of the minds regarding [the]
material contract term” of whether Vander Veur would have
forfeited the Showtime bonus “if his employment were
terminated prior to Groove’s receipt of the Showtime funds.”
¶35 Given our conclusion above, supra ¶¶ 19–30, we cannot
sustain the district court’s dismissal based on its analysis of the
implied covenant; Vander Veur’s claim does not create a “new
affirmative obligation” for Groove but instead only seeks to
assert entitlement to the bonus money based upon purported
rights and obligations created by the bonus agreement itself.
20160153-CA 19 2018 UT App 148Vander Veur v. Groove Entertainment Technologies
¶36 Likewise, we are unable to sustain the district court’s
dismissal on the basis that there was no enforceable contract
between Vander Veur and Groove regarding the Showtime
bonus. Groove did not move to dismiss the Showtime bonus
claim for lack of an enforceable contract. Rather, the only ground
Groove asserted for dismissal of this claim was Vander Veur’s
failure to demonstrate entitlement to relief under the implied
covenant—a proposition necessarily dependent on the Showtime
bonus agreement being an enforceable contract. See Tomlinson v.
NCR Corp., 2014 UT 55, ¶ 32, 345 P.3d 523 (explaining that our
courts “have consistently rejected the notion of a free-standing
implied covenant of good faith and fair dealing in the absence of
a contract”). Indeed, Groove’s contention that the court could
reject the bonus claim on the alternative basis that there was not
an enforceable contract appeared only as an aside in its
summary judgment reply memorandum, underdeveloped and
without any meaningful analysis of the relevant facts, pertinent
contract principles, and whether the term at issue—agreement
regarding post-termination payment—was, in fact, a material
term whose absence would be sufficient to render the entire
agreement unenforceable. The district court’s adoption of the
contractual basis as an alternate ground for dismissal closely
tracked Groove’s limited argument on the point and,
accordingly, suffered from similar underdevelopment. Like
Groove, the court did not discuss the relevant facts and
articulate its reasoning or explain its determination in light of
contract law principles.
¶37 As a result, we are unable to discern the legal or the
factual basis for the district court’s dismissal on this ground. See
Gabriel v. Salt Lake City Corp., 2001 UT App 277, ¶¶ 9–19, 34 P.3d
234 (reversing a trial court’s summary judgment decision where
the trial court’s failure to adequately explain the basis of its
decision rendered this court unable to determine the decision’s
correctness); see also Maak v. IHC Health Services, Inc., 2016 UT
App 73, ¶¶ 1, 45–46, 372 P.3d 64 (remanding a district court’s
ruling where this court was “unable to discern the basis for the
20160153-CA 20 2018 UT App 148Vander Veur v. Groove Entertainment Technologies
district court’s conclusion” on a counterclaim issue because there
was a lack of “development of the factual record and
appropriate legal analysis”); Tillotson v. Meerkerk, 2015 UT App
142, ¶ 14, 353 P.3d 165 (vacating a trial court’s denial of a motion
to intervene where this court was “unable to ascertain the basis
of the trial court’s decision” and was thereby “prevented from
effectively reviewing the trial court’s decision” (quotation
simplified)). We are also reluctant to affirm dismissal on this
ground when it was not a ground on which Groove moved for
summary judgment. Cf. Stevens v. LaVerkin City, 2008 UT App
129, ¶¶ 29–32, 183 P.3d 1059 (declining to reach an issue raised
on appeal because the appellant did not raise it below until his
reply to the appellee’s memorandum in opposition to his motion
to set aside and was therefore not properly before the district
court). Thus, while we express no opinion on whether the
Showtime bonus agreement was an enforceable contract, we
nevertheless vacate the court’s dismissal on this ground and
remand for further proceedings.
II. Unjust Enrichment
¶38 Vander Veur also argues that the district court incorrectly
granted summary judgment in favor of Groove on the unjust
enrichment counterclaim. He asserts that the district court’s
resolution of the counterclaim was improper for two reasons:
(1) Groove had a legal remedy available, as it asserted that a
contract governed the resolution of the claim; and (2) even if no
contractual remedy was available, Groove failed to prove its
entitlement to its unjust enrichment claim. “Claims based on
equitable doctrines are mixed questions of fact and law.
Accordingly, we defer to a trial court’s factual findings unless
there is clear error but review its legal conclusions for
correctness.” Cottonwood Improvement District v. Qwest Corp., 2013
UT App 24, ¶ 2, 296 P.3d 754 (quotations simplified). “However,
because of the fact-intensive nature of equitable doctrines, we
grant the trial court broader discretion in applying the law to the
facts.” Id. (quotation simplified).
20160153-CA 21 2018 UT App 148Vander Veur v. Groove Entertainment Technologies
¶39 First, as Vander Veur asserts, because unjust enrichment
is an equitable remedy, a party may not recover under unjust
enrichment if there is a legal remedy available. See Helf v.
Chevron U.S.A. Inc, 2015 UT 81, ¶ 69, 361 P.3d 63; E & M Sales
West, Inc. v. Diversified Metal Products, Inc., 2009 UT App 299, ¶ 8,
221 P.3d 838; Davies v. Olson, 746 P.2d 264, 268 (Utah Ct. App.
1987). Vander Veur contends that, because Groove asserted a
breach of contract cause of action to recover the commission
draws and has otherwise “failed to assert why its breach of
contract cause of action did not bear on the trial court’s
consideration” of summary judgment or withdraw the breach of
contract claim altogether, it is barred from recovery under unjust
enrichment.
¶40 But Groove’s assertion that there was a legal remedy
governing the repayment of the draws was disputed between
the parties. In its counterclaim, Groove contended that it was
entitled to recover these draws under the 2013 Agreement to
which Vander Veur never formally agreed in writing. That
agreement contained an express provision related to repayment
of draws against commissions. In his answer, Vander Veur
disputed that he was subject to the 2013 Agreement. Thus, in its
summary judgment motion, Groove accepted for purposes of the
motion Vander Veur’s contention that the 2013 Agreement did
not apply to him, and it argued entitlement to judgment as a
matter of law solely under the theory of unjust enrichment.
¶41 We have previously observed that concessions made for
these limited purposes are acceptable in circumstances involving
claims pleaded in the alternative. See Govert Copier Painting v.
Van Leeuwen, 801 P.2d 163, 167 (Utah Ct. App. 1990) (stating that
a party may concede “certain disputed factual issues merely to
expedite the resolution of a legal issue” in the summary
judgment context). And our supreme court has explained, in the
context of election of remedies, that our liberal pleading rules
“permit litigants to plead inconsistent theories of recovery in the
alternative,” that “a court may not require a plaintiff to elect
20160153-CA 22 2018 UT App 148Vander Veur v. Groove Entertainment Technologies
between inconsistent claims prior to trial,” and that it is only
once “the fact-finder and the judge have resolved all factual and
legal disputes related to the inconsistent theories of liability
[that] the plaintiff is then entitled to the one remedy (if any) that
is supported by the final determination of the law and the facts.”
Helf, 2015 UT 81, ¶¶ 74–76. Thus, Groove had no obligation to
abandon its breach of contract claim before moving for summary
judgment, and it was entitled to accept, for purposes of its
motion, Vander Veur’s contention that the 2013 Agreement did
not apply to him. 6
¶42 Of course, having received judgment on its unjust
enrichment claim, Groove may not obtain double recovery by
pursuing an alternative claim for breach of contract. “When a
final disposition of a case is entered by a district court, any
unresolved motions inconsistent with that disposition are
deemed resolved by implication.” State v. Mullins, 2005 UT 43,
¶ 8, 116 P.3d 374; accord State v. Norris, 2002 UT App 305, ¶ 8, 57
P.3d 238; see also Keystone Copper Mining Co. v. Miller, 164 P.2d
603, 609 (Ariz. 1945) (stating that a final judgment settling the
issues raised is one that, even absent express language, disposes
of the issues raised “by necessary implication”). Applying this
6. Vander Veur cites Davies v. Olson, 746 P.2d 264 (Utah Ct. App.
1987), and E & M Sales West, Inc. v. Diversified Metal Products, Inc.,
2009 UT App 299, 221 P.3d 838, to support his contentions that
Groove “should have withdrawn its breach of contract claim
prior to pursuing its unjust enrichment claim” and that Groove
“should be required to prove why it has no legal remedy under
its breach of contract cause of action prior to proceeding with its
unjust enrichment claim.” But neither case held either that a
party must affirmatively withdraw an alternative claim before
proceeding with another or that the party asserting inconsistent
alternative theories of recovery must affirmatively prove that it
has no legal remedy under the one before proceeding with the
other. As a result, his reliance on those cases is misplaced.
20160153-CA 23 2018 UT App 148Vander Veur v. Groove Entertainment Technologies
principle to the present case, the court’s summary judgment
order regarding the unjust enrichment claim was the court’s
final order resolving all the parties’ claims. Therefore, even
though Groove originally claimed entitlement to the overdrawn
commissions on the alternative theories of breach of contract and
unjust enrichment, in winning summary judgment on the unjust
enrichment claim in the exact amount sought on its contract
claim, Groove’s alternative breach of contract claim was
necessarily resolved by implication through the court’s final
summary judgment order. See Mullins, 2005 UT 43, ¶ 8.
¶43 Second, Vander Veur contends that Groove has failed to
prove its unjust enrichment claim on the merits. “Unjust
enrichment is an equitable remedy that can be brought to bear
where one person confers a benefit on another under
circumstances where it would be inequitable for the other to
retain the benefit without paying for it.” Simons v. Park City RV
Resort, LLC, 2015 UT App 168, ¶ 15, 354 P.3d 215. To recover for
unjust enrichment, the claimant must prove three elements:
“(1) a benefit conferred on one person by another; (2) an
appreciation or knowledge by the conferee of the benefit; and
(3) the acceptance or retention by the conferee of the benefit
under such circumstances as to make it inequitable for the
conferee to retain the benefit without payment of its value.”
Rawlings v. Rawlings, 2010 UT 52, ¶ 29, 240 P.3d 754 (quotation
simplified).
¶44 The district court determined that Groove had “satisfied
its burden of demonstrating each of [the three] elements as a
matter of law.” In particular, it determined that Groove
“conferred a benefit on Vander Veur by advancing to him
$2,925.04 more than he earned in commissions”; that Vander
Veur admitted that “he received these advance draws from
Groove” and understood that it was “‘borrowed money’”; and
that “Vander Veur’s retention of draws he admits he did not
earn would be inequitable” because Groove “would not have
advanced draws to Vander Veur without his acknowledgement
20160153-CA 24 2018 UT App 148Vander Veur v. Groove Entertainment Technologies
that he would repay Groove any amounts he did not earn in
commissions.” Further, at oral argument before this court,
Vander Veur conceded that he was overdrawn on his
commissions and that he did not dispute Groove’s accounting of
the overdrawn commissions.
¶45 Nonetheless, Vander Veur argues that the district court’s
determinations were improper because he may be entitled to an
offset if he prevails on his implied covenant claims below. He
contends that the measurement of the benefit conferred is not
possible in light of his pending breach of the implied covenant
claims, asserting that whether Groove is equitably entitled to the
draws “may only be determined upon resolution of [his]
contractual claims.” He also contends that Groove cannot prove
that the draws he retained belong to Groove as a matter of
equity where his entire case surrounded Groove’s failure to deal
with him in good faith.
¶46 But the district court dismissed each of Vander Veur’s
breach claims, with the result that the only remaining question
before the court was whether Vander Veur would be unjustly
enriched by keeping commissions to which he had no
entitlement and for which, absent prevailing on appeal, there
would be no offset. In these circumstances, the court did not err
when it concluded that the undisputed facts demonstrated that
Groove was entitled to summary judgment on its claim for
unjust enrichment. And Vander Veur has not directed us to any
authority establishing that it is impossible for a counterclaimant
to prove entitlement—either in measurement or in equity—to its
unjust enrichment claim until the plaintiff’s claims have been
fully resolved on appeal. On this basis, we therefore affirm
Groove’s unjust enrichment award.
CONCLUSION
¶47 For the reasons discussed above, we affirm the district
court’s order granting Groove summary judgment on its unjust
20160153-CA 25 2018 UT App 148Vander Veur v. Groove Entertainment Technologies
enrichment claim. However, we vacate the district court’s grant
of summary judgment in favor of Groove on Vander Veur’s
claims for breach of the implied covenant of good faith and fair
dealing as to the six commissions and the Showtime bonus. We
therefore remand for further proceedings.
20160153-CA 26 2018 UT App 148