Davis v. Siemens Medical Solutions Usa, Inc.

• Decision Date: 08 November 2005
• Docket Number: No. Civ. A. 304CV195H.,Civ. A. 304CV195H.
• Citation: 399 F.Supp.2d 785
• Parties: Jerry W. DAVIS, Plaintiff, v. SIEMENS MEDICAL SOLUTIONS USA, INC., Defendant.
• Court: U.S. District Court — Western District of Kentucky

399 F.Supp.2d 785

Jerry W. DAVIS, Plaintiff, v. SIEMENS MEDICAL SOLUTIONS USA, INC., Defendant.

No. Civ. A. 304CV195H.

United States District Court, W.D. Kentucky, at Louisville.

November 8, 2005.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Jennifer Leigh McCarty, Robert W. Bishop, Bishop & Associates, PSC, Louisville, KY, for Plaintiff.

Dana R. Rust, Michele L. Settle, Robert F. Holland, McGuire Woods LLP, Richmond, VA, Mitzi Denise Wyrick, Wyatt, Tarrant & Combs LLP, Louisville, KY, for Defendant.

MEMORANDUM OPINION

HEYBURN, Chief Judge.

Plaintiff, Jerry Davis ("Davis"), has brought this action for additional compensation arising from his employment relationship with Siemens Medical Solutions USA, Inc. ("Siemens"). Davis says that both the written compensation agreement and the contemporaneous oral promises entitle him to $1.8 million in additional compensation and reimbursable business expenses. He asserts state law claims for breach of contract, conversion, promissory estoppel, misrepresentation, breach of a fiduciary duty, unpaid wages and intentional infliction of emotional distress. Both sides have moved for summary judgment.

These motions raise particularly interesting questions about Kentucky's treatment of the parol evidence rule and the doctrine of promissory estoppel as applied to an oral promise made prior to the execution of a written agreement on the same subject matter. The Court concludes that under Kentucky law the evidence supports only Davis's claim of fraudulent misrepresentation.

I.

Siemens designs and sells health care information technology. Davis began working for Siemens in March, 1992. He has always been employed on an at-will basis and has held a variety of well-paying sales and non-sales jobs. In February of 2001, Davis assumed the role of Division Marketing Specialist III at an annual salary of $85,000.

In the fall of 2002 Siemens created several new positions identified as Product Sales Executives ("PSE"). These positions focused on various governmental accounts. Siemens offered Davis one of these positions and confirmed the offer by a writing dated November 11, 2002. The offer stated that Davis would receive a base compensation of $65,000 per year as well as a one year guaranteed rider in the amount of $35,000. The offer expressly incorporated a document called the "Guarantee Rider" which, in turn, incorporated the Product Sales Executive Compensation and Commission Plan (the "Compensation Plan"). The Compensation Plan set forth the eligibility for commissions for all employees, including Davis. On November 14, 2002, Davis confirmed acceptance of the offer letter, the Guarantee Rider and the Compensation Plan.

The Guarantee Rider explained the purpose of the "rider," the role of the commission payments and the application of the Compensation Plan:

This rider is made a part of the Product Sales Executive Compensation and Commission Plan, which is to be used as the basic instrument for policy and procedure. The Guarantee Rider is made available to assure a newly appointed Product Sales Executive a guaranteed minimum level of income for a limited defined period of time. It is expected that at the end of this period, commissions for new orders generated during the period of this period will replace the requirement for guaranteed income. . . . All commissions which would be credited and/or payable during the defined period under the standard Product Sales Executive Compensation and Commission Plan will be applied toward the total guarantee payable. . . . The Product Sales Executive shall retain all excess guarantee commission payments received during the defined period or, if applicable, until the date of transfer or termination. . . . In the event the total of credited and/or payable commissions applied exceed the total guaranteed commissions payable during the defined period of the Guarantee Rider, the Product Sales Executive shall be entitled to full payment of such excess in accordance with the "when paid" provisions of the standard Compensation and Commission Plan.

The Compensation Plan sets forth the basis for entitlement to calculating commissions for all sales executives. Thus, by its terms, its provisions would apply to the newly created PSE's. It contains the following pertinent provisions.

7. To whom commission is credited and/or payable

(a) Commission is credited or payable to a Sales Executive who is assigned to the territory in which the equipment is to be installed. It is necessary, to be entitled to commission, that the Sales Executive be personally and directly responsible, and have assigned such responsibility for such sale.

(c) National and Group Accounts, as identified in the District Office manual or other relevant announcements are Government Agencies, Companies, Associations, Chains, etc., with national buying agreements for our products, established in direct negotiation with SMS Headquarters. In most instances, commissions on orders for these accounts are paid in accordance with the procedures stated above. However, from time to time, such negotiations will provide a pricing agreement in the best interest of the Company which will necessitate a change in the basis of the compensation payment. Details of such agreements and the commission structure will be distributed by Headquarters to field offices as they may occur.

VII. Territory

The territory or accounts assigned to the Sales Executive shall be clearly defined in a letter signed by the National Sales Executive. A copy of this letter must be forwarded to the responsible Senior Field Executive. Sales Executives may be transferred from one territory to another, and the territory assigned to a Sales Executive may be expanded or reduced at the discretion of the responsible National Sales Executive. Territorial changes must be defined in a letter signed by the responsible National Sales Executive and a copy must be forwarded to the responsible Senior Field Executive.

Both parties agree that the Compensation Plan comprises the entire written agreement concerning Davis's entitlement to commissions. However, Davis says that two specific verbal exchanges between himself and Siemens officials and other extrinsic evidence are relevant to his claim for additional compensation.

Two months prior to acceptance of the written agreement, Davis says that he spoke with Douglas Spotts ("Spotts"), the National Sales Manager in the Image Management ("IM") Division, about the new position. During their meeting, which took place in September of 2002 in the Breakfast Room of the Sheraton hotel in Woodbridge, New Jersey, Davis and Spotts allegedly discussed the terms of employment, the salary and the benefits that would accompany the job. Spotts told Davis that he would be eligible to receive commissions for sales credited to national and government accounts. Because Davis knew that he would be unable to visit each and every hospital in the United States to make individual sales, he asked Spotts whether he would be forced to split commissions with the regional salesmen. Spotts allegedly promised Davis that Siemens would pay a separate, dual commission on every sale credited to national and government accounts even though he may have no direct involvement in the sales.

Sometime after he entered into his new job, Davis realized that he was not being credited with commissions for major national sales. He learned that his name had not been entered into the commission tracking system. He says that he asked Thomas Riesenberg ("Riesenberg"), the IM Division Vice President, what could be done to remedy the problem. In response, Riesenberg allegedly told him that his commissions would be calculated and paid at the end of the year out of funds reserved for payment of bonuses.

Davis says that Siemens never paid the commissions due. He now seeks to recover $1.8 million in commissions and benefits over and above his salary for the one year term of his PSE assignment.

II.

Before addressing the merits of Davis's claims, the court must first determine whether Kentucky or New Jersey law applies to the dispute. Both parties appear to assume that Kentucky law applies. While the Court ultimately agrees, this is not a foregone conclusion.

A federal court sitting in a diversity action must apply the choice of law rules of the forum state. See Wallace Hardware Co., Inc. v. Abrams, 223 F.3d 382, 391 (6th Cir.2000). Although the Compensation Plan contains a New Jersey choice of law provision, this is not necessarily determinative of the issue. Id. at 392 (noting that Kentucky courts do not always honor choice of law provisions). The Sixth Circuit has held that "in a standard breach-of-contract case . . . the Kentucky courts would choose to adopt § 187 of the Restatement (Second) of Conflict of Law (1971) as their analytical framework for addressing a contractual choice-of-law clause." Id. at 397. Section 187(2) of the Restatement provides that a choice of law provision will be enforced unless either:

(a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice or

(b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the law of § 188, would be state of the applicable law in absence of an effective choice of law by the parties.

Restatement (Second) of Conflict of Law § 187(2).

Here, New Jersey does not have a substantial relationship to the parties or the transaction between them. Siemens, a Delaware corporation, has its principal place of business in Pennsylvania. It conducts business across the country and seems to have no particular point of interest in New Jersey. Davis is a resident of Kentucky and his employment was focused there. The only facts...