Hull v. ConvergeOne, Inc.
| Decision Date | 08 November 2021 |
| Docket Number | 20-cv-984 (SRN/KMM) |
| Parties | Samuel Hull, Plaintiff, v. ConvergeOne, Inc., Defendant. |
| Court | U.S. District Court — District of Minnesota |
Sonia Miller-Van Oort and Demetria Laparis Dyer, Sapientia Law Group, Ellie Vilendrer, Vilendrer Law, PC, for Plaintiff.
Raphael Coburn and Andrew Murphy, Faegre Drinker Biddle & Reath, LLP, for Defendant.
ORDER ON DEFENDANT'S MOTION TO DISMISS
This matter is before the Court on the Second Motion to Dismiss the Second Amended Complaint [Doc. No. 60] filed by Defendant ConvergeOne, Inc. (“ConvergeOne”). In this lawsuit, Plaintiff Samuel Hull asserts claims against his employer, ConvergeOne, for violations of Minnesota and Utah wage statutes, breach of contract, negligent misrepresentation, promissory estoppel, and unjust enrichment. (Second Am. Compl. [Doc. No. 37] ¶¶ 228-320.) Defendant moves to dismiss these claims pursuant to Federal Rule of Civil Procedure 12(b)(6). Based on a review of the files, submissions, and proceedings herein, and for the reasons below, the Court grants the motion in part and denies it in part.
In August 2016, ConvergeOne, a global IT and managed services provider based in Minnesota, hired Hull, a Utah resident, as a National Account Manager (“NAM”). (Id. ¶¶ 2-3, 9.) ConvergeOne had recruited Hull, in part, due to his existing business relationship with Westlake Services, LLC (“Westlake”), a financial services company. (Id. ¶ 9.)
Shortly after Hull began working for ConvergeOne, the company required him to attend a three-day training session at the company's Minnesota headquarters. (Id. ¶ 10.) ConvergeOne paid for Hull's travel expenses, and, while in Minnesota, provided Hull with training and social opportunities and required him to execute several new-hire employment documents. (Id. ¶¶ 11-14.) Although Hull resides in Utah, he primarily interacts with personnel in Minnesota through WebEx and Zoom day-to-day meetings and quarterly corporate conference calls. (Id. ¶¶ 16-19.) Hull has also attended ongoing training events via virtual seminars, of which approximately 17 were hosted in Minnesota during a 12-month period. (Id. ¶ 23.) Hull receives his paycheck, payroll emails, and corporate announcements from Minnesota, and participates in ConvergeOne's medical benefit plan offered by Blue Cross and Blue Shield of Minnesota. (Id. ¶¶ 20-21, 24-25.)
In December 2016, Hull brokered a large “cloud deal” on ConvergeOne's behalf with Westlake (“the Westlake Private Cloud Contract”) which garnered ConvergeOne approximately $7.7 million in revenue. (Id. ¶¶ 27-29.) In recognition of his work on the contract, Hull received the “New Logo Deal of the Year Award” at ConvergeOne's annual sales conference. (Id. ¶¶ 27-30.) Hull was one of ConvergeOne's top salespeople in 2017, 2018, and 2019, and the company commended him for his work annually from 2016 through 2019. (Id. ¶¶ 31-32.)
Hull worked to expand the Westlake Client Cloud Contract, and in December 2018, Westlake verbally accepted a new deal, the “Westlake Expansion & Extension Deal.” (Id. ¶¶ 37-41.) Although Westlake had hoped to finalize the deal in March 2019, internal delays at ConvergeOne held up the closing until May 2019. (Id. ¶¶ 43-45.) ConvergeOne earned $17 million in sales revenue from the Westlake Expansion & Extension Deal. (Id. ¶¶ 45-46.)
Between January 2017 and mid-May 2019, Hull's compensation was governed by the 2017 Variable Compensation Plan (the “2017 Plan”). (Id. ¶ 48; Murphy Decl. [Doc. No. 63], Ex. 1 (2017 Plan).) The 2017 Plan was a commission-based compensation plan for NAMs such as Hull. (Murphy Decl., Ex. 1 (2017 Plan) at 1.) It set forth the method by which ConvergeOne calculated commissions, stating, (Id. at 2.) Under the 2017 Plan, Hull earned commissions of 22% of the gross profit margin realized on the managed services that he sold to Westlake. (Second Am. Compl. ¶ 57.) Hull alleges the compensation structure of the 2017 Plan motivated him to craft the Westlake Expansion & Extension Deal with Westlake. (Id. ¶ 59.)
However, Hull contends that ConvergeOne has demonstrated a pattern of bad faith in its commission calculations. (Id. ¶ 227.) In fact, in December 2018, Hull sued ConvergeOne for its alleged failure to pay him earned commissions, as determined by the terms of the 2017 Plan, for his work on the Westlake Private Cloud Contract. (Id. ¶ 60.)
In early 2019, ConvergeOne announced a new compensation plan applicable to NAMs. (Id. ¶¶ 62, 67.) The company intended to implement it on July 1, 2019 and would disperse the first commissions under the plan on or about July 31, 2019. (Id.) At a February 2019 presentation regarding the new plan, ConvergeOne leadership stated that the changes in the new plan were “not a cost-cutting measure, ” and that NAMs would have the option to receive either “salary plus a % on [gross profit]” or “pay on paid [gross profit].” (Id. ¶ 64.) In addition, ConvergeOne leadership informed NAMs that the company would provide training on the new compensation plan between May and June 2019, prior to its implementation. (Id. ¶ 66.) Hull alleges that he relied on ConvergeOne's representations about the effective date of the new plan and worked diligently with Westlake to close the pending Expansion & Extension Deal so the 2017 Plan would apply to his commission. (Id. ¶ 68.)
In April 2019, Hull asked his sales director, Anthony Scialabba, for clarification about the new plan, including whether it would be more lucrative for a NAM to close a deal under it, versus the 2017 Plan. (Id. ¶ 69.) Responding via email, Scialabba told Hull that he would be paid “normally” under the current plan if he were to close on a deal prior to July 1, but would “be made whole back to dollar 1 once Escalators are accomplished.”
(Id. ¶ 73.) When Scialabba made these representations, Hull alleges, he knew that Hull was close to closing the Westlake Expansion & Extension Deal. (Id. ¶ 74.)
On April 17, 2019, Scialabba sent Hull a new, nine-page compensation and commission plan, along with the request that he sign and return it by May 1, 2019. (Id. ¶ 75.) Although ConvergeOne had previously stated that the new plan would go into effect in July 2019, the effective date of the new plan that Scialabba sent Hull was April 1, 2019 (the “April Plan.”). (Id. ¶ 76.) Among its provisions, the April Plan stated that NAMs would be “eligible to earn a commission of 10% paid monthly on gross profit collected during the previous month on ConvergeOne products and services sold by you.” (Murphy Decl., Ex. 2 (April Plan) at 1.) In addition, the April Plan contained several tables and stated that ConvergeOne would pay commissions “based on the tables below generated by you each month, as measured by invoices on accounts in which you were actively engaged as a direct sales person or sales manager within your designated sales territory.” (Id.) Hull contends that ConvergeOne and Scialabba knew he reasonably believed the company would base commissions under the April Plan on actual margins, just as it had under the 2017 Plan. (Second Am. Compl. ¶¶ 93-94.)
Hull further alleges that despite Converge One's earlier representations about providing training regarding the new plan, it failed to do so, and no one at the company responded to a number of his questions, including how the new plan would affect commissions related to the Westlake Expansion & Extension Deal. (Id. ¶¶ 92, 95-96.) Instead, when Hull was close to closing the deal, he alleges that ConvergeOne induced him to sign the April Plan by leading him to believe that commissions under the April Plan would be based on actual margins. (Id. ¶¶ 97, 99.) Prior to signing, Hull approached Scialabba about the possibility of changing some of the language in the April Plan to clarify its impact on the Westlake Expansion & Extension Deal, but ConvergeOne refused to make any such changes. (Id. ¶¶ 100-01.) After several subsequent communications between Hull and Scialabba, Hull felt reassured that his commission on the Westlake Expansion & Extension Deal would not be disadvantaged if he signed the April Plan. (Id. ¶¶ 102-07.) Also based on those communications, Hull believed that ConvergeOne was acting in good faith, and that the timing and application of the April Plan would be uniform for all NAMs. (Id. ¶ 107.) In light of these reassurances, along with the earlier representation that the new plan was not a cost-cutting measure, Hull understood that his commission under the April Plan would be more profitable than under the 2017 Plan. (Id.) Consequently, he signed the April Plan on April 30, 2019. (Id.)
In May 2019, however, after hearing rumors that ConvergeOne did not intend to base NAMs' commissions on gross profit margins as set forth in the April Plan, Hull followed up with employees in ConvergeOne's finance department. (Id. ¶ 121.) The finance staff were unaware of the April Plan and believed the 2017 Plan governed Hull's compensation. (Id. ¶¶ 131-32.) In any event, ConvergeOne did not pay Hull the full first commission payment related to the Westlake Expansion & Extension Deal that he believed was due in June 2019. (Id. ¶ 133.) Adding to the confusion about which plan was in effect, during a July 2019 conference call, ConvergeOne President John Lyons announced that the company would roll out “the new commission plan” in 2020, rather than on ...
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