Dinan v. Alpha Networks, Inc.

• Decision Date: 20 August 2014
• Docket Number: No. 13–1976.,13–1976.
• Citation: 764 F.3d 64
• Parties: Michael DINAN, Plaintiff, Appellant, v. ALPHA NETWORKS, INC., Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

764 F.3d 64

Michael DINAN, Plaintiff, Appellant,

v.ALPHA NETWORKS, INC., Defendant, Appellee.

No. 13–1976.

United States Court of Appeals,First Circuit.

Aug. 20, 2014.

Patrick S. Bedard, with whom Bedard & Bobrow, P.C. was on brief, for appellant.

Daniel P. Schwarz, with whom Jackson Lewis, P.C. was on brief, for appellee.

Before LYNCH, Chief Judge, SELYA and KAYATTA, Circuit Judges.

KAYATTA, Circuit Judge.

Michael Dinan, a resident of Maine, began working for California-based Alpha Networks as a salesman in 2005 pursuant to a written employment agreement. In 2010 Dinan ceased working for Alpha because of a dispute over how much he was entitled to be paid in commissions. Litigation followed. A jury ultimately found that the written agreement included no promise to pay Dinan commissions on sales after 2008, but that Dinan was entitled to quasi-contract damages in the amount of $70,331.93 for sales made in 2009 and 2010. The question then remained whether to treble those damages and award attorneys' fees under Maine's wage payment law, or instead to add on to the damage award only liquidated damages of $7,799.97 under California law. Finding the question to be a close one, the district court opted to rely on a choice-of-law provision in the written agreement calling for application of California law in certain disputes. Agreeing that determining the correct choice of law on this unusual record is not straightforward, we nevertheless find that Maine's highest court would most likely deem Dinan entitled to the full array of remedies set forth in Maine's wage payment law. We therefore vacate the award and remand the case so that the district court can treble damages, calculate interest, and entertain a request for attorneys' fees under Maine law.

I. Background

The parties do not dispute the basic facts on appeal. Alpha is a California-based designer and manufacturer of modems, routers, switches, and other computer hardware. Rather than market its products under its own brand, Alpha is a “white-label” manufacturer, selling to other companies who market the devices under their brand names. Dinan's job was to sell Alpha's devices to those brands. When Dinan joined Alpha in 2005, he lived in Portland, Maine. Though he initially thought he might have to move to Boston, Alpha ultimately concluded that he could work from Maine. Prior to commencing work for Alpha, Dinan signed a letter from Alpha specifying the terms of his employment (“the 2005 agreement”) which provided that Alpha would pay him, in part, based on a specified commission structure.

After he joined Alpha, Dinan spent his first week and a half in California learning about Alpha and its products. Thereafter he worked from his home in Portland except when he traveled to meet customers in other states, including Texas, Alabama, and Massachusetts. In 2008, Alpha sent an email to Dinan containing a new commission structure (“the 2008 compensation plan”). Dinan thought that the 2008 compensation plan was likely to compensate him less than the commission structure in the 2005 agreement. He expressed his unhappiness to his bosses and, according to his trial testimony, was promised a new compensation plan for sales in 2009, though he was not promised that it would provide him with better terms than the 2008 compensation plan. No new compensation plan was ever announced.

Dinan left Alpha in March 2010, having received no commissions on his sales in 2009 or 2010 aside from a $4,000 payment that he received in December of 2009. Shortly thereafter, Dinan filed suit in Maine state court. After Alpha removed the case to federal court it proceeded to trial. At trial, the jury was asked to consider, among other things, Dinan's claims for breach of contract and, alternatively, for so-called quasi-contract damages. The jury concluded that Dinan had not “established that Alpha ... and he entered into an employment agreement in which Alpha ... promised to pay him commissions for 2009 and 2010.” It nevertheless also found that Dinan had “established that he [was] entitled to damages under quasi-contract,” that the amount of those damages was $70,331.93, and that he had “established that Alpha ... failed to pay [him] his wages, including commissions.”

After trial the parties disagreed about which state's law governed whether and to what extent the jury's award of damages should be augmented with additional remedies. Under California law, the parties agree, Dinan would be entitled to 30 days' wages (which the jury valued at $7,799.97) as liquidated damages in addition to the $70,331.93 in compensatory quasi-contract damages awarded by the jury. SeeCal. Lab.Code § 203. The parties also agree that, under Maine law, Dinan would be entitled to a liquidated damages award of double his compensatory damages, equaling an additional $140,663.86, as well as attorneys' fees and costs. SeeMe.Rev.Stat. tit. 26, § 626. The district court found that California law applied. Dinan also argued unsuccessfully below that he was entitled to pre-judgment interest on any liquidated damages he was awarded. Id.

II. Standard of Review

This appeal presents exclusively questions of law, not fact or discretion, hence our review is de novo. See, e.g., Robidoux v. Muholland, 642 F.3d 20, 22 (1st Cir.2011). With jurisdiction in the District of Maine resting solely on diversity of citizenship, we answer these substantive questions of law as we expect Maine's highest court, its Law Court, would answer them. See, e.g., Samaan v. St. Joseph Hosp., 670 F.3d 21, 29 (1st Cir.2012).

III. Discussion

A. The Choice of Law Question

Resolving the choice-of-law issue central to this appeal begins with considering the parties' 2005 agreement specifying the original terms of Dinan's employment. That agreement included the following clause:

The terms of this letter shall be governed by and construed and enforced in accordance with the laws of the State of California, without giving effect to any choice or conflict of law provision or rule (whether of the State of California or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of California. Any term or provision of this letter agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.

See Dinan v. Alpha Networks Inc., 957 F.Supp.2d 44, 54 (D.Me.2013). Under Maine law, this choice of law provision would govern a claim for breach of the 2005 agreement unless (1) California had no substantial relationship to the parties or the transaction or (2) applying California law would be contrary to “a fundamental policy of a state which has a materially greater interest” than California as to the “determination” of this particular issue. Schroeder v. Rynel, Ltd., 720 A.2d 1164, 1166 (Me.1998); Restatement (Second) of Conflict of Laws § 187 (1971).

Alpha in fact sought to build its defense at trial on the foundation of the 2005 agreement. It argued that the 2008 compensation plan was a modification of the 2005 employment agreement, that Dinan accepted the modification by continuing to work for Alpha, and that the 2005 agreement, as modified by the 2008 compensation plan, set forth the terms of Alpha's promise to pay commissions for 2009 and 2010. Consistent with this approach, Alpha agreed to a jury instruction as follows:

The parties have presented evidence of a 2005 compensation plan and a 2008 compensation plan. If you determine that an agreement was in force in 2009 and 2010, you must determine the terms of that agreement. Alpha contends that a 2008 compensation plan modified the 2005 employment agreement. An employee who continues to work for his employer after the employer has given notice of changed terms and conditions of employment has accepted the changed terms and conditions. If you find the 2008 plan was in place during 2009 and 2010, you may find that Mr. Dinan is entitled to compensation under that plan.

This was a seemingly solid argument, but the jury rejected it. The jury found that Alpha and Dinan had no agreement that Alpha would pay commissions for 2009 and 2010. In one respect, this meant that Alpha won the breach of contract claim. In another respect, though, the jury's verdict is more clearly read as a finding that the 2005 agreement simply did not govern the terms of the parties' relationship in 2009 and 2010 (i.e., in the words of the district court's instruction, it was not “in force in 2009 and 2010”).

The verdict form, accordingly, required the jury to proceed further and consider an alternative claim of “quasi-contract” if it found that there was no promise in an employment agreement to pay commissions for 2009 and 2010. The jury verdict for Dinan thus rested entirely upon a claim for “breach of a quasi-contract.” The jury instructions, to which Alpha did not object, stated as follows:

Mr. Dinan claims that even if he did not have a valid contract with Alpha that entitled him to bonuses, he is entitled to payment for the services he rendered. This amounts to a claim that he and Alpha had a quasi contract.

To prove a claim of breach—for breach of a quasi contract, Mr. Dinan must prove by a preponderance of the evidence that: One, he rendered services to Alpha; two, the services were rendered with Alpha's knowledge and consent; and, three, the services were rendered under circumstances that make it reasonable for the plaintiff to expect payment.

In finding Alpha liable on this theory alone, the jury found Alpha independently liable not by force of promise, but by virtue of knowingly having accepted services “under circumstances that make it reasonable for [Dinan] to expect payment.”

This brings us back to the choice-of-law clause in Alpha's letter to Dinan...