Pickle v. Universal Cable Holdings, Inc.

534 F.Supp.3d 663

Michael R. PICKLE, et al., Plaintiffs,

v.UNIVERSAL CABLE HOLDINGS, INC. d/b/a SuddenLink Communications, Defendant.

No. 1:19-CV-147-H

United States District Court, N.D. Texas, Abilene Division.

Signed April 16, 2021

Kerry Vincent O'Brien, O'Brien Law Firm PC, Austin, TX, Fernando M. Bustos, Bustos Law Firm PC, Lubbock, TX, for Plaintiffs.

Talley Ray Parker, Ethan J. Davis, Jackson Lewis LLP, Dallas, TX, for Defendant.

MEMORANDUM OPINION AND ORDER

JAMES WESLEY HENDRIX, UNITED STATES DISTRICT JUDGE

Like many companies, SuddenLink compensates its sales team with commissions that are contingent on the employees’ sales. Before the Court are the parties’ cross-motions for summary judgment on Michael R. Pickle's and Michele Kirkland's breach-of-contract claims for SuddenLink's 75% reduction of plaintiffs’ commission over a year after they closed a historically large deal for the company. SuddenLink contends that the commission plan was merely an incentive and did not form a contract, but even if it did, SuddenLink asserts that it possessed the unilateral authority to reduce the commission retroactively. Conversely, plaintiffs argue that SuddenLink's commission plan was a unilateral offer, which they accepted by closing the commission-earning deal, and thus formed a valid contract.

After reviewing the motions, the parties briefing, and the relevant law, the Court finds that, as a matter of law, the parties formed a valid and enforceable contract. But there is a genuine issue of material fact as to whether circumstances warranted commission reduction—and thus whether SuddenLink breached the contract. Accordingly, the Court grants plaintiffs’ motion in part and denies SuddenLink's.

1. Factual Background

A. Plaintiffs’ Employment Relationship with SuddenLink

Plaintiff Michael R. Pickle was employed by SuddenLink between August 2011 and September 2019, Dkt. No. 27-2 at 3. SuddenLink¹ is a high-speed data provider that provides commercial and residential service in 15 states. Dkt. No. 31 at 5. During this time, Pickle worked as an Account Executive and later as a Regional Sales Manager. Dkt. No. 27-2 at 3–4. SuddenLink hired plaintiff Michele Kirkland as an Account Executive in 2013, and she remains employed by SuddenLink. Dkt. No. 27-3 at 3.

SuddenLink compensates executive employees, including account executives and regional sales managers, with both salary and commissions earned from sales of SuddenLink's services and goods. See Dkt. No. 27-4 at 7. SuddenLink promulgates commission plans that govern the earning and payment of commissions. Id.

B. The SuddenLink 2017 Commission Plan and Notable Provisions

In 2017, both plaintiffs were eligible for commission payments, which were governed by SuddenLink's 2017 Commission Plan. Aside from different commission percentages, the plaintiffs’ plans were identical.² See Dkt. Nos. 27-8, 27-9. The terms of the 2017 Plan allowed participants to receive commission advances before they were earned. See Dkt. No. 27-8 at 5.

But before a commission could be advanced, several conditions must have been satisfied: (1) an agreement must be signed by the customer; (2) the contracted installation must be complete; and (3) the customer's order must be entered into SuddenLink's billing system. Id. at 5–6. The 2017 Plan expressly provided that an advancement on commission does not constitute earned wages until the commission is no longer subject to "chargebacks." Id. at 5. Chargebacks occur when a customer cancels or modifies the contracted service prior to the expiration of a specified period.³ Once these conditions were met—and the sale could no longer be rescinded—the commission is earned under the 2017 Plan.

The 2017 Plan provided that plaintiffs would receive commission on non-recurring charges (NRC). Id. at 4. NRCs include installation charges, construction fees, equipment fees, and other non-recurring charges. Id. at 3. The 2017 Plan also included several important provisions that allowed SuddenLink to make changes to the plan and commission calculations:

Plan/Quota Modification: Minimum performance standards are set by management based on New NRC per month. Management retains the exclusive right and discretion to review and prospectively modify the Plan and/or any quota upon reasonable notice to Employee. Management further retains the right to modify any commission calculations where circumstances warrant.

....

Company Discretion: In accordance with applicable law, the Company reserves the right to amend this Plan at any time; provided that any amendment shall apply prospectively.

Dkt. No. 27-8 at 5, 7.

C. The West Texas Telecommunications Consortium Contract

Plaintiffs were members of the sales team that secured a bid and eventual contract with the West Texas Telecommunications Consortium (WTTC) to provide a wide array of equipment and services to school districts in West Texas. Dkt. No. 32 at 226, 229. This contract provided for approximately $17.6 million in construction costs alone. Dkt. No. 27-4 at 13. The WTTC contract was a substantial deal that far exceeded SuddenLink's typical contracts.⁴ Based on the scale of the WTTC project, construction was ongoing throughout 2018 and 2019. Dkt. No. 32 at 227. As a result, the plaintiffs were not eligible for a commission advance under any commission plan until October 2018, following the completion of the first installation. Id.

D. SuddenLink's Modification of the WTTC Commission Calculation

When the WTTC deal closed in May 2017, the plaintiffs’ commission was governed by the then-active 2017 Plan. See generally Dkt. No. 27-8. The 2018 Plan superseded the 2017 Plan the following year before any of the commission was earned—as defined by both the 2017 and 2018 Plans. See id. ; Dkt. No. 32 at 29. In October 2018, SuddenLink notified the plaintiffs that it intended to modify their WTTC deal commission. Id. at 223. In November 2018, SuddenLink instituted an exception-plan amendment solely applicable to the WTTC deal, which reduced plaintiffs’ commissions by over 75%. Dkt. No. 32 at 140-41.

2. Procedural History

Pickle filed his Original Petition in the 42nd Judicial District Court of Taylor County, Texas. Dkt. No. 1-1 at 8. SuddenLink removed the case to this Court. Dkt. No. 1. Kirkland was added as a plaintiff after the case was removed. Dkt. No. 12. SuddenLink filed a motion for summary judgment on all claims (Dkt. No. 25), and plaintiffs filed a motion for partial summary judgment (Dkt. No. 30). In their response to SuddenLink's motion, Pickle expressly waived the second breach-of-contract claim that is unrelated to the WTTC commission. Dkt. No. 36 at 29. Therefore, there is only one remaining breach-of-contract claim to resolve. Both motions have been fully briefed and are ripe for review.

3. Applicable Law and Legal Standards

A. Texas substantive law governs this case.

"A federal court sitting in diversity follows the choice of law rules of the state in which it sits." Crawford Prof'l Drugs, Inc. v. CVS Caremark Corp. , 748 F.3d 249, 258 (5th Cir. 2014). Under Texas choice-of-law rules, courts look to the Restatement (Second) of Conflicts of Laws. Sonat Expl. Co. v. Cudd Pressure Control, Inc. , 271 S.W.3d 228, 231 (Tex. 2008). The Texas Supreme Court has recognized that contractual choice-of-law provisions should generally be enforced but has also stated that the contracting parties’ freedom to choose what law will apply is not unlimited. Int'l Interests, L.P. v. Hardy , 448 F.3d 303, 306–07 (5th Cir. 2006) (quoting Desantis v. Wackenhut Corp. , 793 S.W.2d 670, 677 (Tex. 1990) ). That freedom is limited by Section 187 of the Restatement. Id.

Before engaging in a choice-of-law analysis under the Restatement, a Texas court must first determine whether Texas law is, in fact, inconsistent with other potentially applicable law. See Duncan v. Cessna Aircraft Co. , 665 S.W.2d 414, 419 (Tex. 1984), superseded by Tex. Civ. Prac. & Rem. Code §§ 33.001 –.004. If the laws are consistent, a court need not undertake a choice-of-law analysis, and Texas law will govern the dispute. See Sonat Expl. , 271 S.W.3d at 231 ; Fraud-Tech, Inc. v. Choicepoint, Inc. , 102 S.W.3d 366, 377–78 (Tex. App.—Fort Worth 2003, pet. denied). The party seeking application of the laws of a state other than Texas bears the burden of demonstrating that Texas law conflicts with the other state's law. Playboy Enters., v. Sanchez-Campuzano , 519 F. App'x 219, 225 (5th Cir. 2013). Texas courts assume that the other states’ laws are the same as its own. Id.

Here, the 2017 Plan contains a Missouri choice-of-law provision. However, the parties agree that the outcome of the case is the same regardless of whether the Court applies Texas or Missouri law. Neither party demonstrates an inconsistency between the laws. As a result, the Court need not further address the choice-of-law issue here and will apply Texas law in this case.

B. Federal standards for summary judgment apply.

Summary judgment is appropriate when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The precise standard for summary judgment depends on whether the movant bears the burden of proof on the claim for which summary judgment is sought. When "the movant bears the burden of proof on an issue, either because [it] is the plaintiff or as a defendant [it] is asserting an affirmative defense, [it] must establish beyond peradventure all of the essential elements of the claim or defense to warrant judgment in his favor." Fontenot v. Upjohn Co. , 780 F.2d 1190, 1194 (5th Cir. 1986) (emphasis in original). "Once the movant does so, the burden shifts to the nonmovant to establish an issue of fact that warrants trial." Smith v. Reg'l Transit Auth. , 827 F.3d 412, 420 n.4 (5th Cir. 2016).

Movants must cite to particular parts of the record to show the absence of a genuine dispute or explain why the cited materials do not create...