Nichols v. Enterasys Networks, Inc.

• Decision Date: 02 August 2007
• Docket Number: No. 06-20493.,06-20493.
• Citation: 495 F.3d 185
• Parties: Scott NICHOLS, Plaintiff-Appellant, v. ENTERASYS NETWORKS, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

495 F.3d 185

Scott NICHOLS, Plaintiff-Appellant, v. ENTERASYS NETWORKS, INC., Defendant-Appellee.

No. 06-20493.

United States Court of Appeals, Fifth Circuit.

August 2, 2007.

Steve C. Dollinger (argued), The Preston Law Firm LLP, James Howard Hutchinson, III, Houston, TX, for Nichols.

David Jude Comeaux (argued), James R. Staley, Ogletree, Deakins, Nash, Smoak & Stewart, Houston, TX, for Defendant-Appellee.

Appeal from the United States District Court for the Southern District of Texas.

Before DAVIS, DENNIS and PRADO, Circuit Judges.

DENNIS, Circuit Judge:

Scott Nichols sued Enterasys claiming that the company breached an alleged contractual agreement to pay him additional sales commissions for fiscal year ("FY") 2001, based on the terms of a sales plan governing FY2000, on the grounds that the terms of the FY2000 plan were impliedly renewed to cover FY2001. Enterasys removed the case to federal court. The district court granted the company's motion for summary judgment on the grounds that even assuming the FY2000 terms applied, Nichols could not show that Enterasys had breached the contract. After review of the record and the parties' arguments, we agree. The judgment of the district court is therefore AFFIRMED.

I.

Nichols worked as a regional sales manager for Cabletron Systems, Inc.; that company merged with defendant Enterasys in August 2001. The present appeal arises out of events occurring while Nichols worked for Cabletron.

During fiscal years (FY) 2000 and 2001, Cabletron paid its regional sales managers according to a Regional Sales Manager Plan ("the Plan"). Under the Plan, employees received a base salary plus a "commission incentive." The commission incentive operated as a reward component and was based on a commission rate "tied to sales performance relative to annual sales objectives." For all sales above a salesperson's yearly quota, the Plan allowed for an "accelerator," which paid double commission. The Plan also, however, contains the following language allocating management substantial control over compensation:

Territory/Quota/Account Alignment

Territories will be established and quotas determined based on company objectives, sales history, territory potential, competitiveness, and other relevant factors. Sales management reserves the right to establish or adjust quotas and geographic/account assignments at any time to provide equitable opportunities for all participants.

Windfalls

. . . . To insure fair and equitable treatment of both the Company and the Participant, sales management will review any sales substantially in excess of annual quota or objective. For substantial sales adjustments (positive/negative) management reserves the right to review the impact on the Plan.

Management reserves the right to make final and binding decisions regarding the amount of compensation earned and paid to any Plan Participant.

Unusual Arrangements

. . . . Any undocumented agreement of any kind concerning compensation will not be honored. Any arrangement different from those provided for in this Plan must be in writing, signed by the Participant, and approved [by] Sales Management and Human Resources. No agreements will be effective until all approvals have been secured.

Each regional sales manager also received an individual goal sheet that reflected that individual's commission rate, quota, and assignments. In FY2000, Nichol's goal sheet set his commission rate at 1.8%, set his quota at $4.5 million, and assigned him, among other customers, Compaq Computer Corp. Although Nichols's total target compensation was $180,000; he actually earned $897,415 in FY2000.

Two months into FY2001, Enterasys presented Mr. Nichols with his proposed goal sheet under the Plan; the goal sheet called for a lower sales commission rate (1.54%), a higher quota, and a different set of assignments that did not include Compaq, UT Brownsville, or Metricom. The new plan, by its terms, applied retroactively to the beginning of FY2001. Nichols refused to sign the new plan. He consulted with his supervisor, who told him to continue operating under the FY2000 terms while negotiating with management. In the end, Enterasys paid — and Nichols accepted — partial commissions on his FY2001 Compaq sales; Mr. Nichols's total compensation for FY2001 came to $278,900.55. In 2002, Nichols left Enterasys.

In March 2005, Nichols filed suit in Texas state court, claiming that Enterasys breached an alleged contractual agreement to pay him additional sales commissions for FY2001, based on the terms of the FY2000 Plan. He sought economic damages equal to the difference between what Enterasys paid him and what he would have earned under the FY2000 plan, as well as "reasonable attorney's fees." Enterasys removed the case to district court on diversity grounds.

Enterasys moved for summary judgment on Nichols's breach of contract claim. The district court granted the motion on May 2, 2006, determining that although sufficient evidence existed to "support the case being submitted to a jury for a determination of whether the parties extended the [FY]2000 plan" to cover Nichols's sales in FY2001, the case should not be submitted to the jury because the plan "unambiguously [gave] management the right" and discretion to adjust Nichols's compensation. Because "[t]he decision to lower Nichols's commission rate, raise his quota, and reassign some of his clients" fell under the provisions of the Plan quoted above, the district court reasoned, "Enterasys [was] entitled to judgment as a matter of law on Nichols's claim of breach of contract."

II.

We review the district court's summary judgment ruling de novo. Hanks v. Transcon. Gas Pipe Line Corp., 953 F.2d 996, 997 (5th Cir.1992). Summary judgment is appropriate where the record shows "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Facts and inferences reasonably drawn from those facts should be taken in the light most favorable to the non-moving party. Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 456, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992); Huckabay v. Moore, 142 F.3d 233, 238 (5th Cir.1998). Where the nonmoving party fails to establish "the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial," no genuine issue of material fact can exist. Celotex, 477 U.S. at 322-23, 106 S.Ct. 2548.

A.

Mr. Nichols's primary argument is that the terms of the FY2000 regional sales plan and his personal goal sheet created an enforceable, implied contract in FY2001, which Enterasys breached by failing to pay him according to the FY2000 terms. According to Mr. Nichols, the contract was impliedly renewed because 1) he refused to execute the proposed, FY2001 plan and 2) his immediate supervisor instructed him to operate under that plan while he negotiated new terms with management. The district court determined that although "a jury could conclude that the fiscal year 2000 plan applied to the work Nichols performed during 2001[;] . . . the terms of the 2000 plan allowed Enterasys to adjust Nichols's compensation." We need not decide the question today because even assuming, arguendo, that the FY2000 Plan applies, Mr. Nichols cannot show that Enterasys breached the terms of the FY2000 plan.

B.

As the district court observed, and as the language above reflects, the FY2000 regional sales plan clearly and unambiguously permits Enterasys "to establish or adjust quotas and . . . account assignments, as well as make final and binding decisions regarding the amount of compensation earned and paid." Furthermore, the plan clearly states that "[a]ny undocumented agreement of any kind concerning compensation" — such as that purportedly established by Mr. Nichols's conversation with his supervisor — "will not be honored." Finally, in FY2001, Enterasys paid Mr Nichols a 1.54% commission on his sales. As a result, applying the presumption that Mr. Nichols's employment "is continued on the terms of the original contract, and provisions and restrictions forming essential parts of the contract . . . continue in force," the principle hurdle Mr. Nichols faces is that the provisions and restrictions in his FY2000 contract include the very terms giving Enterasys discretion to adjust his commission,...