Oracle Corp. v. Wilson

• Decision Date: 22 August 2017
• Docket Number: 17 Civ. 554 (ER)
• Citation: 276 F.Supp.3d 22
• Parties: ORACLE CORPORATION, Petitioner, v. Felicia WILSON, Respondent.
• Court: U.S. District Court — Southern District of New York

276 F.Supp.3d 22

ORACLE CORPORATION, Petitioner,

v.Felicia WILSON, Respondent.

17 Civ. 554 (ER)

United States District Court, S.D. New York.

Signed August 22, 2017

Christopher John Collins, Sheppard, Mullin, Richter & Hampton, New York, NY, for Petitioner.

Alan M. Goldston, Goldston Law Offices, Scarsdale, NY, for Respondent.

OPINION AND ORDER

Edgardo Ramos, U.S.D.J.

Oracle Corporation ("Oracle" or "Petitioner") petitions this Court, pursuant to Section 9 of the Federal Arbitration Act ("FAA"), to vacate an arbitration award against it and in favor of Felicia Wilson ("Wilson" or "Respondent"). Oracle alleges that the Arbitrator, Betty Weinberg Ellerin, refused to hear pertinent and material evidence and disregarded a dispositive contractual provision. In Wilson's opposition, she asks the Court to modify the rate of interest applied.

For the following reasons, Oracle's motion to vacate the arbitration award and Wilson's request to modify the rate of interest are DENIED.

I. BACKGROUND

A. Factual Background

At all relevant times, Wilson was employed by Oracle as a salesperson. Pet. Vacate Arb. Award ¶ 9. She sold Oracle's software products and services to its business customers and was paid a commission on those sales. Id. ; Mot. Vacate Arb. Award at 2. As relevant to this petition, the amount of her commission was governed by two documents: (1) a fiscal year Incentive Compensation Terms and Conditions, which set forth the compensation terms applicable to Oracle salespersons generally ("Terms and Conditions"); and (2) a fiscal year Individualized Compensation Plan ("ICP"), which set forth her individualized commission rates. Collins Decl. Ex. 6 ("Final Award") at 1; Collins Decl. Ex. 3 ("Mot. to Dismiss") at 2.

The ICP provides, inter alia, that "Commission for any sales credit from a single customer in excess of 250% of quota in the given fiscal year will be calculated at 0.2x of the tier 1 rate" (the "Single Customer Provision"). Collins Decl. Ex. 3 Ex. 1 ("ICP") at 1. It also establishes the "Applications (EPM) Sales Target"¹ at $2,969,480. Id. The Terms and Conditions allow for such reductions on commissions in a section entitled "Commissions that Exceed Maximum Commission or Deal Threshold." Terms and Conditions at 5–6. That section states, "Cumulative Sales Credit that exceeds 250% of the acceleration target for Plans that include multi-tier rate schedules may be subject to a modified Commission Rate as detailed in the Employee's Individualized Compensation Plan." Id. It further explains that the reduced commission rates "have been established to ensure reasonable compensation is paid, especially in the case of unplanned windfalls and unexpected gains and that earnings reflect a reasonable valuation of the Employee's contribution toward a transaction." Id. at 5. In other words, the apparent purpose of the foregoing provisions is to ensure that genuine effort on the part of salespersons is adequately rewarded while at the same time preventing excessive commissions for relatively modest efforts.

In the fiscal year ending in May 31, 2014, Wilson's commissionable sales totaled $10,456,055.14. Final Award at 1. The entirety of that amount was to a single customer,² Pearson, Inc. ("Pearson"), an education publication and services company. Id. ; Mot. to Dismiss at 4. Wilson had been working on the Pearson sale for 30 months, and avers that she attended 324 formal calendared engagements, and reviewed, authored or participated in nearly 14,000 emails and other documents for the sale. Opp. Pet. Vacate at 1–2. Wilson claims that her supervisors assured her multiple times that the Single Customer Provision would not apply to the Pearson sale. Wilson Aff. ¶ 5. In July 2014, her commission on the Pearson sale was calculated at $873,638.10. Opp. Pet. Vacate at 6. However, on August 11, 2014, Oracle advised Wilson in an email that it would be deducting $257,355.79 from that amount pursuant to the Single Customer Provision. Wilson Aff. at ¶ 2. Wilson states that her supervisors urged her to initiate an internal Compensation Review ("CERT") to appeal this decision. Id. at ¶ 5.

On August 20, 2014, Wilson filed a CERT application online. Opp. Mot. to Dismiss at 9, Ex. B. The application was recommended for approval throughout seven levels of review, but it was ultimately rejected by the highest level of management. Id.

B. Procedural History

In or around December 2015, Wilson filed an arbitration claim against Oracle pursuant to the Employment Agreement & Mutual Agreement to Arbitrate ("Arbitration Agreement") that requires her to submit all "claims arising out of or related to [her] Oracle employment" to arbitration. Pet. Vacate Arb. Award ¶¶ 10, 12. The Arbitration Agreement further requires all arbitration proceedings to be conducted pursuant to the FAA, and the Judicial Arbitration & Mediation Services ("JAMS") Employment Arbitration Rules and Procedures ("JAMS Rules"). Id. at ¶ 11.

On or around April 18, 2016, Wilson submitted a Statement of Claim in the arbitration proceeding, alleging breach of contract and breach of the covenant of good faith and fair dealing in processing Wilson's CERT. Id. at ¶ 12; Collins Decl. Ex. 2 at 3. On May 20, 2016, Oracle filed a Motion to Dismiss Based on Express Contractual Terms ("Motion to Dismiss") pursuant to JAMS Rule 18, which permits a party to request summary disposition of a claim or issue upon notice to the other interested parties.³ Pet. Vacate Arb. Award at ¶ 13. In its Motion to Dismiss, Oracle contended that Wilson's commission on the Pearson sale was subject to the Single Customer Provision and that her compensation was properly calculated in accordance with that provision. See generally Mot. to Dismiss. On or around June 11, 2016, Wilson filed her Opposition to the Motion to Dismiss, arguing that the Single Customer Provision did not apply because (1) Pearson was not a single customer, (2) there was no agreed upon "quota" under the Single Customer Provision, and (3) the term "tier 1 rate" in the provision at issue is ambiguous at best. Opp. Mot. to Dismiss at 3. Importantly, she also made a cross-motion for a summary award, requesting that the Arbitrator rule in her favor based on the undisputed facts. Id. at 1, 9.

On August 30, 2016, the Arbitrator held oral argument on the Motion to Dismiss ("Oral Argument"). Pet. Vacate Arb. Award ¶ 16. Counsel for both sides attended the Oral Argument, as well as Wilson, and Matt Feiner ("Feiner"), an Oracle in-house counsel. Goldston Decl. ¶ 3(a); Collins Supp. Decl. ¶ 4. Several days prior to the Oral Argument, the Arbitrator denied Wilson's request to present witness testimony. Pet. Vacate Arb. Award ¶ 16. The Arbitrator stated that she would only hear attorney arguments, but allegedly noted that if she denied the motion, she would schedule an evidentiary hearing. Id. However, during the Oral Argument⁴ , the Arbitrator asked Wilson questions, and Wilson answered, providing what Oracle refers to as unsworn testimony.⁵ Id. at ¶ 17. Oracle claims that it did not receive any notice that the Arbitrator was going to hear such unsworn testimony. Id. However, Oracle did not object to the questioning or cross-examine Wilson. Id. ; Goldston Decl. Ex. 1.

After the Oral Argument, by letter dated September 12, 2016, Oracle wrote to the Arbitrator, stating that the case should be decided on the contractual language in the ICP, and that any evaluation of the underlying business purpose behind the Single Customer Provision is irrelevant given the express contractual terms. Collins Supp. Decl. Ex. 1. Nevertheless, it offered to present witness testimony on the business purpose behind the Single Customer Provision if the Arbitrator thought it necessary since it had not provided any fact witnesses at Oral Argument. Id.

On September 15, 2016, the Arbitrator conducted a conference call ("Conference Call"), in which counsel for both parties participated. Goldston Decl. Ex. 1. Notes of the call taken by a JAMS administrator who was also on the call shows that the Arbitrator "asked each side to raise any objections to issue a decision based on [Wilson]'s in person testimony at the August 30^th in-person hearing and the papers submitted to the Arbitrator." Id. Counsel for Wilson did not object. Id. He stated that the Arbitrator should decide on the submitted papers if she finds the papers to be sufficient, and that the Arbitrator should conduct an evidentiary hearing if she determined that the contract was ambiguous. Id. The notes of the Conference Call further state that "[Oracle]'s counsel waived the opportunity to cross examine." Id. The Arbitrator stated that she would issue her decision 60 days from August 30, 2016. Id.

On November 1, 2016, JAMS issued the Final Award, denying Oracle's Motion to Dismiss and granting Wilson's cross-motion for a summary award, awarding Wilson the remaining balance of her commission prior to the application of the Single Customer Provision—$257,335.79—plus interest at 3% per annum "in light of prevailing money market conditions." Pet. Vacate Arb. Award at ¶ 18; Final Award at 4. In granting the award, the Arbitrator refused to apply the Single Customer Provision to the Pearson sale. Id. As the award makes clear, the Arbitrator did not interpret the Single Customer Provision in isolation, but read it in conjunction with the Terms and Conditions, which provided that commission modifications have been "established to ensure reasonable compensation is paid, ... and that earnings reflect a reasonable valuation of the Employee's contribution toward a transaction." Terms and Conditions at 5; see Final Award at 2–3. Based on the "voluminous uncontradicted documentary evidence [that] overwhelmingly demonstrates that [Wilson's] work on [the Pearson sale] was extraordinary," the Arbitrator determined that the full pre-modified commission on the Pearson sale would not have given Wilson an "unplanned windfall" as that term is contemplated in the Terms...