Global Executive Management Solutions, Inc. v. International Business Machines Corporation
Filing
92
OPINION & ORDER: Defendant's motion for summary judgment 71 is granted as to the breach of express contract claim, the implied covenant of good faith and fair dealing claim, and the promissory estoppel claim. The motion is denied as t o the quantum meruit and fraud claims. Plaintiff's motion for partial summary judgment 76 is granted as to the waiver affirmative defense. The motion is denied as to the express contract and estoppel affirmative defenses and is denied as moot as to the unclean hands affirmative defense. Based on the parties' representations in the briefing, Plaintiff's accounting claim and Defendant's unclean hands affirmative defense are dismissed. Signed on 5/18/2017 by Judge Marco A. Hernandez. (jp)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
GLOBAL EXECUTIVE MANAGEMENT
SOLUTIONS, INC., an Oregon corporation,
No. 3:16-cv-00370-HZ
Plaintiff,
v.
INTERNATIONAL BUSINESS MACHINES
CORPORATION, a New York corporation,
Defendant.
Richard S. Yugler
Thane W. Tienson
LANDYE BENNETT BLUMSTEIN LLP
1300 S.W. Fifth Avenue, Suite 3600
Portland, Oregon 97201
Attorneys for Plaintiff
Clifford S. Davidson
Kristen G. Hilton
SUSSMAN SHANK LLP
1000 S.W. Broadway, Suite 1400
Portland, Oregon 97205-3089
1 - OPINION & ORDER
OPINION & ORDER
Richard I. Werder
Rachel E. Epstein
Donald J. Reinhard, II
QUINN EMANUEL URQUHART & SULLIVAN
51 Madison Avenue, 22nd Floor
New York, New York 10010
Attorneys for Defendant
HERNANDEZ, District Judge:
Plaintiff Global Executive Management Solutions, Inc., (Plaintiff or GEM), brings this
contract-based action against Defendant International Business Machines Corp., (Defendant or
IBM), seeking payment for work performed by Richard Clyne, one of GEM's owners. Plaintiff
brings claims of breach of express contract, breach of the implied duty of good faith and fair
dealing, quantum meruit, promissory estoppel, accounting1, and fraud. Defendant moves for
summary judgment on Plaintiff's remaining claims.
Plaintiff moves for partial summary judgment on three of Defendant's affirmative
defenses.2 I grant Defendant's motion as to the breach of contract claim, the implied of good
faith and fair dealing claim, and the promissory estoppel claim. I deny Defendant's motion on the
quantum meruit and fraud claims. I grant Plaintiff's motion on the waiver affirmative defense
and deny it on the estoppel and express contract affirmative defenses.
1
Based on representations made in the summary judgment briefing, Plaintiff seeks
dismissal of the accounting claim.
2
Plaintiff moves against the affirmative defenses of "estoppel/waiver" (pleaded as a
single affirmative defense), unclean hands, and express contract. In conferring about the
motions, Plaintiff confirmed it pursues only legal claims and seeks no equitable relief. As a
result, Defendant agrees that its unclean hands affirmative defense is moot, which in turn moots
Plaintiff's motion. Plaintiff agrees. I deny Plaintiff's motion directed to the unclean hands
affirmative defense as moot.
2 - OPINION & ORDER
BACKGROUND
In addition to the named parties, this cases involves two other entities and various
contractual relationships among the parties and those entities. I have set forth the factual
background in a way that helps make sense of who the players are and how they are related.
I. Clyne & Plaintiff
Clyne worked for Defendant for thirty years, from 1970 to 2000. Epstein Feb. 10, 2017
Decl. ("Epstein First Decl.") Ex. E ("Clyne Dep.") 44:18-45:13; 45:21-25, 52:6-16, ECF 72.3
Clyne and his wife incorporated Plaintiff in approximately 2001. Stewart Feb. 10, 2017 Decl.
("Stewart First Decl.") Ex. E ("Clyne Dep.") 53:12-18, ECF 77; Cline Dep./Epstein First Decl. at
58:19-23. Clyne considers himself a specialist in negotiating complicated, interesting matters.
Cline Dep./Epstein First Decl. at 163:24-164:10; see also id. at 48:2-16 (noting his management
skill strengths while at IBM and that he purposefully sought out things that were "messed up"
and he would "step forward"). Through GEM, Clyne provides contract negotiating services as a
consultant.
II. Defendant's GTS Division & Its Relationship with BMC
Defendant provides IT services to clients. Epstein First Decl. Ex. B ("Stafford Dep.")
28:5-6. Global Technology Services (GTS) is a division of IBM which takes over and runs IT
3
Deposition excerpts for several individuals are submitted by both parties as attachments
to declarations. In my first cite to a deposition excerpt, I note the page and line for the specific
reference and include a full cite to the declaration exhibit to which the deposition excerpt is
attached, along with the declaration's ECF docket number. Subsequent references are to Id. or
are abbreviated as "Clyne Dep./Epstein First Decl." or "Clyne Dep./First Stewart Decl.," as the
case may be, followed by the page and line number. There are also multiple declarations by the
same individual. Initially, I identify a particular declaration by date filed and give the ECF
docket number. Subsequent references are to "first," "second," etc. as indicated.
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operations for customers. Id. at 7:24-8:1; Epstein First Decl. Ex. A ("Calo Dep.") 14:13-25.
BMC Software, Inc., (BMC), provides software that Defendant's GTS Division uses to
provide IT services to its clients. Stafford Dep./Epstein First Decl. 28:5-16. BMC has done so
for about twenty years. Epstein First Decl. Ex. C ("Jones Dep.") 9:14-17.
III. BMC Contracts with IBM
IBM spends roughly $90 to $100 million per year with BMC, Jones Dep./Epstein First
Decl. 135:25-136:3, and is one of the largest third-party suppliers IBM works with. Stafford
Dep./Epstein First Decl. 28:15-16. In 2008, BMC and IBM entered into a Master Licensing
Agreement (MLA) and an Outsourcing Attachment (OA) thereto ("the 2008 OA").
In 2012 or 2013, IBM and BMC began to renegotiate the 2008 OA. During those
negotiations, BMC alleged that IBM had not complied with certain provisions of the 2008 OA
and claimed that IBM's total exposure as a result was roughly $1.2 billion. Id. at 136:8-17;
Epstein First Decl. Ex. AA at 9. Nonetheless, IBM and BMC executed a new OA in 2013 ("the
2013 OA"), which had a "[t]otal deal value [of] approximately [$]102 million." Id. at 137:15-21;
Epstein First Decl. Ex. BB.
In 2014, IBM and BMC started the "BMC Negotiations" which, according to Defendant,
were "commercial discussions" regarding IBM's desire for certain additional rights. Def. S.J.
Mem. 9, ECF 71. As part of these negotiations, BMC again alleged that IBM had significant
exposure, this time for alleged noncompliance with the 2013 OA. See Stewart First Decl. Exs.
50, 51, 52. The total estimated exposure for IBM was $1,097,846,099. Id., Ex. 50 at 16; Stewart
First Decl. Ex. D ("Jones Dep.") 21:3-4. In February-March 2015, and as discussed in more
detail below, IBM brought Clyne in to help with the BMC Negotiations which concluded with a
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new 2015 OA executed on September 30, 2015. This lawsuit is about Plaintiff's compensation
for the time Clyne spent on the BMC Negotiations.
IV. IBM's and Plaintiff's Contracts with APC
A. IBM's Relationship with APC
For consultants such as Plaintiff, IBM frequently uses a third-party staffing company
named Alliance of Professionals & Consultants (APC) to hire and manage the consultant.
Epstein First Decl. Ex. F ("McGauvran Dep.") 133:6-9. At the time relevant to this lawsuit, IBM
and APC were parties to a "Non Technical Services Agreement," effective November 19, 2012.
Epstein First Decl. Ex. I. Under that agreement, APC provides "deliverables and services" as
described in "Statements of Work" and/or "Work Authorizations" to IBM. Id. at 1. The
agreement defines the relevant terms, including "deliverables," "statement of work," "services,"
and "work authorization." Id. at , ¶ 1.
Simultaneous with the execution of the Non Technical Services Agreement, IBM and
APC also executed a "Business Services Master Statement of Work To the Non-Technical
Services Agreement" (hereinafter "Master SOW"). Epstein First Decl. Ex. H. In contrast to the
Non Technical Services Agreement which lacked an expiration date, the Master SOW expressly
expired two years after its execution, on November 19, 2014. Id. at 1. The Master SOW
incorporates the terms and conditions of the Non Technical Services Agreement. The Scope of
Work section establishes that the services or deliverables required to be provided either on IBM's
or IBM's Customers' premises as specified in a work authorization, are "Business Services." Id.
at 1, ¶ 1. "Accordingly, APC or APC's Subtiers" were obligated to provide personnel to IBM in
several service areas, including custom market research, database marketing, IT consulting,
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marketing consulting, operations consulting, research, strategy consulting, and more. Id. The
Master SOW defines relevant terms such as "subtier," "personnel," "recruited personnel," and
"non-recruited personnel." Id. at 1, ¶ 2. Under the "Summary Description of Services," APC
agreed to provide either recruited or non-recruited personnel or to align with subtiers as specified
in individual work authorizations issued by IBM. Id. at 2, ¶ 3.
B. Plaintiff's & APC's Relationship
Clyne, through Plaintiff GEM, worked for American Express for a few years from
October 2010 to the end of 2013. Clyne Dep./Epstein First Decl. 29:11-22, 31:7-11. Sometime
in the fourth quarter of 2013, IBM's Andrew Cohen reached out to Clyne for assistance with
negotiating the "BMC Midrange contract." Id. at 103:19-25. At the time, Cohen was IBM's
software manager for its American Express service account. Id. at 83:7-11; see also Epstein First
Decl. Ex. K at 2 (email from Cohen bearing title Delivery Project Executive, American Express
Account Integrated Technology Delivery). Cohen asked Clyne for a fee quote which Clyne
provided in a November 25, 2013 email. Id. at 104:2-4, 9-11; Epstein First Decl. Ex. J. Cohen
responded via email in early December, telling Clyne he needed to go through an approved
staffing firm, several of which he listed in the email. Id. Ex. K. In his deposition, Clyne testified
that Cohen later clarified through email or telephone that APC was the correct contracting
vendor. Clyne Dep./Epstein First Decl. 117:9-14.
On January 15, 2014, IBM's Les Bengough, who worked as the Business Services Team
Lead for IBM's General Procurement office, emailed Lori Colmenero, Client Coordinator at
APC, regarding the contract for Plaintiff. Stewart First Decl. Ex. 126. Bengough cc'd Clyne and
IBM's Cohen. Id. Bengough told Colmenero that contact details and the statement of work for
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the "subject contractor," identified as Clyne, were attached, a "cart" would follow, and to please
align with APC. Id. GEM's previous quote to Cohen was attached. Id. APC's Matthew
McGauvran explained that typically IBM Procurement introduces APC to an individual or
company IBM wants for a specific project and then has that individual or company "align" with
APC for that project. Stewart First Decl. Ex. A ("McGauvran Dep.") 12:19-21. "Alignment"
means APC's hiring of the company by signing all of the documents and "all of the legal
requirements to do business with APC, and therefore, IBM." Id. at 13:2-5.
On January 28, 2014, Clyne executed a "Master Supplier Agreement" (MSA) with APC,
identifying GEM as the "Supplier." Stewart First Decl. Ex. 3. Under the MSA, APC may
contact the Supplier if an opportunity arises that APC believes may require the Supplier's
services. Id. Another introductory paragraph makes clear that the MSA comprises a number of
documents in addition to the MSA, including any statement of work referring to the MSA and
accepted by the supplier and any work authorization or change order for a statement of work
issued by APC. Id. "Collectively, these documents govern the relationship between Supplier and
APC for any Services Supplier provides to APC or its Clients." Id. The MSA had a two-year
term, with automatic renewal for successive one-year terms. Id. at 3, ¶ 5.1.
A non-compete provision in the MSA states as follows:
If APC introduced Supplier to the Client, Supplier agrees not to establish or
attempt to establish a sales relationship or provide Services, directly or indirectly,
to the Client except through APC during the Term of the Master Supplier
Agreement and for a period of one (1) year, thereafter. APC will be deemed to
have introduced Supplier to the Client unless Supplier can demonstrate that
Supplier provided services to the Client, directly or indirectly, during the twelve
months before the date Supplier first submitted candidates to the Client through
APC. If You provide, directly, or indirectly, any Services in violation of the
Master Supplier Agreement to the Client, Supplier must pay to APC a "Finder's
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Fee" equal to thirty percent (30%) of all billings for Services or thirty percent
(30%) of the annual salary for personnel provided as a permanent placement.
Id. at 3, ¶ 3.4. A separate section addresses "Confidentiality Obligations." Id. at 6, ¶ 9.
Also on January 28, 2014, Clyne signed a "Statement of Work Master Supplier
Agreement" (hereinafter "the GEM SOW"). Epstein First Decl. Ex. M. It begins by stating that
the GEM SOW "describes the specifics of the work assignment for the Client Engagement
referenced below." Id. "APC's Purchase Order is your authorization that the Client has accepted
the Professional listed below and Your authorization for Your Personnel to begin work and
invoice APC." Id. GEM is identified as the Supplier with Clyne identified as the Account
Manager. Id. "IBM (Business Services)" is identified as the Client. Id. Clyne's title is
"Negotiator" and he had a $220 per hour billing rate. Id. The estimated start date is February 3,
2014. Id. Under "Additional Engagement Information," a description of the work is provided:
"Negotiating BMC Midrange servers renewal. Includes prep, due diligence, internal support
meetings, vendor negotiations, & travel." Id. at 2.
The next day, January 29, 2014, Clyne signed a "Confidentiality, Non-Solicitation and
Non-Compete Agreement for Supplier Professional" ("January 2014 Confidentiality/NonCompete Agreement"). Epstein First Decl. Ex. N. This agreement requires GEM to keep
confidential any Client information provided during GEM's engagement with APC. Id. at 1, ¶
1.3. It also includes another non-compete provision in which Clyne agreed that during the term
of employment with APC and for six months thereafter, he would not directly or indirectly solicit
or accept a contractual or consulting engagement or employment on a full or part-time basis for
similar services with any APC Client. Id. at 3, ¶ 3.1.
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On January 30, 2014, APC Account Manager McGauvran emailed Bengough with IBM
Procurement to tell him that GEM was now aligned with APC as a Business Services supplier
and that Clyne would provide the services which were identified in the GEM SOW. Stewart
First Decl. Ex. 126. McGauvran said the start date was "ASAP," expenses were "[a]ctual and
"[r]easonable," and APC could "provide these services at a bill rate of $226.60 per hour." Id.
Troy Roberts is APC's President. Stewart First Decl. Ex. B ("Roberts Dep.") 6:13-14. He
explained that typically at the beginning of an APC engagement, there is a Statement of Work
stating what is going to be provided for a given role. Id. at 34:7-9. When IBM has specific
services it wants to procure from the resource it wants to engage, IBM Procurement works out
"the deal" and then contacts APC and asks APC to engage that supplier. Id. at 35:14-36:8.
Roberts explained that while the Statement of Work specifies what the person is going to do, a
purchase order is the actual work authorization to perform the work. Id. at 74:7-14. Usually
IBM issues a purchase order to APC and then APC issues a purchase order to its supplier. Id. at
113:7-11.
On February 3, 2014, IBM issued a Purchase Order to APC for Clyne's services. Stewart
First Decl. Ex. 12. The next day, APC's McGauvran sent Clyne an email telling him "your PO
arrived this morning" and further, that it was created with 900 hours of funding and an additional
100 hours of overtime funding at the same rate. Epstein First Decl. Ex. 0; see also Stewart First
Decl. Ex. 13 at 2 (APC Purchase Order dated Feb. 18, 2014 showing GEM as the vendor, the
start date as February 5, 2014, the total number of hours as 1000 (900 "ST" and 100 "OT"), at a
unit price of $220 for a total of $220,001, with the extra single dollar allowed to "Exp"). In
response to McGauvran's request that Clyne confirm his start date, Clyne responded that he was
9 - OPINION & ORDER
going to start work that day. Id.
Operating under these particular agreements (the MSA, the GEM SOW, the January 2014
Confidentiality/Non-Compete Agreement, the Purchase Order from IBM to APC, and the
Purchase Order from APC to GEM), Clyne performed work for IBM. He negotiated the
American Express BMC midrange server contract. Clyne Dep./Epstein First Decl. 145:8-21;
Epstein First Decl. Ex. Q at 1-5 (showing hours spent by Clyne between February 5, 2014 and
April 4, 2014 on BMC Midrange Agreement).
He also worked on projects called "IBI Due Diligence"/"IBI Renewal Negotiations,"
"BMC PCP Compliance Issue," and "BMC MF Renewal"/"BMC mainframe renewal." Epstein
First Decl. Ex. Q at 5-34. The bulk of this work was performed in 2014 with some hours
performed into May 2015. Id. As Clyne testified in deposition, after the success of the midrange
server contract, Cohen was "absolutely delighted" and asked him to negotiate the IBI renewal.
Clyne Dep./Epstein First Decl. at 146:12-17. These were different negotiations than the BMC
midrange negotiation but Clyne still submitted his time through APC because the work was still
related to American Express. Id. at 146:18-25. Clyne explained that even though this next
project was not BMC, because the arrangement with Cohen was for American Express only and
IBI was the next such contract, he had no problem continuing to negotiate under the documents
he had with APC. Id. at 147:3-24. Cohen and Nancy Bakarich, whom Clyne stated were both
with IBM's software team/American Express, also asked him work on the BMC PCP Compliance
Issue. Id. at 150:13-18. The GEM SOW was not amended to reflect the BMC PCP Compliance
Issue project and Clyne does not recall getting a new statement of work for the IBI project. Id. at
149:8-12; 150:19-23.
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V. Clyne/GEM's Efforts to Secure Additional IBM Work
In a July 2014 email exchange with APC's McGauvran, Clyne told McGauvran that his
"PO isn't half consumed for this year and it looks as if a major negotiation will be required to be
completed before the end of the year (possibly consuming the remaining 500+ hours in this year's
PO by IBM)." Epstein First Decl. Ex. R. There's also subsequent years which I will be talking to
Andrew [Cohen] about . . . re: if IBM has interest in a multi-year contract or not." Id.
Shortly thereafter, Clyne discussed the status of "this year's PO" with Cohen and his need
to engage senior executives about a multi-year contract for negotiating large or difficult
contracts. Epstein First Decl. Ex. S. Clyne also mentioned that he expected to raise his hourly
rate for "AMEX (and now IBM)" to his new "discounted" rate of $280 per hour. He added that
this new proposed rate was negotiable if IBM was wiling to commit to a multi-year contract
which guaranteed at least 1,800 hours annually. Id.
In August 2014, Clyne also contacted APC's McGauvran to inquire about other client
opportunities through APC. Epstein First Decl. Ex. G. He also told McGauvran that he was
making calls elsewhere in IBM to see if there was interest in picking up the PO and to issue a
2015 PO. Id. In deposition, Clyne was asked to explain the statement that he was making calls
elsewhere in IBM to see if there was an "interest in picking up this PO and issue a 2015 PO."
Clyne Dep./Epstein First Decl. 168:3-6. Clyne testified that he meant "[j]ust what it said." Id.
168:7. He then went on:
The PO is an American Express PO, and since I had been informed there would
be no additional work forthcoming that there may be somebody that wanted to use
the hours that were on the PO or whatnot.
It would take a transfer. It's a very involved process, I'm told, but again, it
was exactly the same vein. It's if somebody has another account, if somebody had
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another account, it may be – again, I'm not familiar with procurement's procedures
in this whole process, but it's possible that it just may be easier for somebody that
has negotiating skills to just call up Andrew Cohen and say reassign the PO to me.
Id. at 168:7-22.
In early September 2014, Clyne emailed Cohen to mention again that he was going to
raise his rates for the following year but still offering "various rates and payment options, in
different contractual constructs, for IBM to consider and decide upon this fall for extending
services beyond the end of the year." Epstein First Decl. Ex. T at 4. He asked Cohen if Cohen
had any interest in receiving proposals for his services beyond the fourth quarter of 2015. Id.
Cohen responded by confirming interest in retaining Clyne to help negotiate some of our
"key, large SW contracts with 2015/16 expiration dates," but noted the "intense focus" by IBM
on expenses and stated it could be difficult to get approval for an increased rate. Id. at 3.
Nonetheless, Cohen asked Clyne to forward any proposals for engagement beyond 2014. Id.
Clyne followed up with an October 1, 2014 email to Cohen with three proposals, one of
which, "Option 3," suggested a payment structure where Clyne would receive 3.75% of all
savings/cost avoids achieved. Id. at 1. This option would require minimum vendor contract
values or claims of at least $100,000,000 per year before negotiations for each of two years. Id.
Under Option 3, Clyne would pay all travel expenses. Id. In deposition, Clyne testified that
Cohen responded to Option 3's contingency arrangement by indicating that it might be something
to consider some day, but "given the climate now . . . we could never accept that now." Clyne
Dep./Epstein First Decl. 82:14-83:6 (noting that this was the "gist" of Cohen's response).
In December 2014, Clyne emailed Cohen to state that APC had confirmed that Clyne's
PO had been extended by IBM in October and that 1,200 additional labor hours were added.
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Epstein First Decl. Ex. V. As a result, there were approximately 1,350 hours remaining to be
"consumed on the current PO[.]" Id.; see also Clyne Dep./Epstein First Decl. 190:8-9 (Clyne
stating in deposition that did not know why he wrote 1,350 hours instead of 1,297 hours). He
also committed to not raising his IBM hourly rate for 2015 after all. Epstein First Decl. Ex. V.
VI. Clyne's February - March 2015 Conversations with Patterson and Calo
Continuing his quest for additional work, in February 2015, Clyne emailed Richard
Patterson, a former IBM colleague. Epstein First Decl. Ex. X. Patterson is the General Manager
for GTS Infrastructure Services for IBM's GTS Division. See Stewart First Decl. Ex. 217. Clyne
hired Patterson thirty years earlier but had not spoken to him for about twenty years. Clyne
Dep./Epstein First Decl. 195:3-11.
In the email, Clyne told Patterson that he had negotiated software contracts at "GTS'
American Express Account for 11 years now." Epstein First Decl. Ex. X at 1 (noting this
occurred for IBM from 2004 to 2010, for American Express from 2010 to 2014, and then again
for IBM from February 2014 to the present). He suggested that GTS was not "achieving
anywhere near what it could if it skillfully negotiated and effectively managed the negotiating
process, for software agreements, at its SO accounts." Id. Clyne opined there were "profound"
possibilities for dramatically reducing overall delivery costs. Id. He noted that he had an open
PO with IBM at the American Express account today, but it was limited in hours and "further
restricted in its use due to the cost reduction measures currently applicable to contractors." Id.
He told Patterson that Cohen was his assigned IBM manager. Id. Clyne summarized his
achievements for IBM in the prior year and offered to discuss an approach that would be,
"considering the above," of no risk to IBM. Id. He asked Patterson to meet him in person at
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Patterson's convenience to discuss. Id. In a post-script, he added that he did not believe it best
for Patterson to share the email with IBM Procurement until after the two had met. Id. at 2.
Patterson understood Clyne's email as "reach[ing] out regarding work he was doing at
American Express, and an opportunity . . . to apply what he had done at American Express more
broadly for GTS." Stewart First Decl. Ex. I ("Patterson Dep.") 16:25-17:5. Patterson wrote back
to Clyne, stating he would be glad to have a conversation and further, that he knew that the "GTS
team at AMEX saw value in the role you played." Stewart First Decl. Ex. 212. He suggested
talking on the phone. Id.
Patterson and Clyne spoke on February 18, 2015. Clyne Dep./Epstein First Decl. 209:25210:5; Stewart First Decl. Ex. 219 at 2. Clyne told Patterson that GTS was "leaving money on
the table" in negotiating with software vendors like BMC. Id. at 207:5-10; see also Epstein First
Decl. Ex. D ("Patterson Dep.") 19:14-18. Clyne told Patterson he had "hours left on his PO."
Patterson Dep./Epstein First Decl. 19:17-28. They talked about the opportunity to "apply" Clyne
to a "broader set of software discussions" and not just "to Amex." Id. at 19:19-21. They
discussed "how to . . . work with [Clyne] on the software negotiations." Id. at 20:14-17.
Clyne and Patterson also spoke about whether there were alternate ways to pay or
"compensate around negotiating software contracts." Id. at 20:21-25. This included the
possibility of a contingency arrangement. Clyne Dep./Epstein First Decl. 210:24-25. According
to Clyne, Patterson inquired if Clyne would be willing to perform his services under a "bounty
agreement." Id. at 210:17-20. Clyne clarified whether Patterson meant a contingency agreement.
Id. at 201:21-25; see also id. at 211:2-25. Clyne indicated that he was "heading that way anyway,
which I was, with the no risk[.]" Id. at 212:2-4. Patterson recalled a conversation about a
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contingency fee, but said it was not specific and was part of a "brainstorming set of
conversations." Patterson Dep./Stewart First Decl. 21:20-25. Because the GTS Division was
looking at alternative ways to save money on non-labor, the timing was right. Id. at 22:10-23:2.
They discussed "a percentage fee or something around how to pay for this particular part of
negotiating." Id. at 21:5-8. Patterson did not recall using the word "bounty fee" but remembered
that a contingency fee was part of the conversation. Id. at 29:4-11.
Patterson told Clyne that negotiations for software contracts were not in his area anymore
but he agreed to introduce him to Yvonne Calo because this was her responsibility. Id. at 19:2320:2. Calo is IBM's Vice-President of Resiliency and Infrastructure Delivery within the GTS
Division. Calo Dep./Epstein First Decl. 6:24-7:2; 15:2-7. Software and hardware as non-laborrelated costs were part of her responsibilities. Patterson Dep./Stewart First Decl. at 20:6-8.
Patterson told Clyne that he was confident Clyne could help out, there were some people he
wanted to talk to, and that he would get back to Clyne within a week. Clyne Dep./Epstein First
Decl. at 209:7-13; 211:8-11.
Patterson introduced Clyne and Calo during a February 25, 2015 phone call. Clyne
Dep./Epstein First Decl. 213:3-15. Patterson told Calo and Clyne during the call that Clyne had
had success with American Express and Patterson thought there was a "potential opportunity to
leverage Rick more broadly in negotiating, . . . similar contracts for the broader IBM." Patterson
Dep./Stewart First Decl. 65:3-16. After Patterson said that BMC was "particularly problematic,"
Patterson left the call which Calo continued. Clyne Dep./Epstein First Decl. at 213:3-25.
Calo remembers learning nothing from Patterson before the call other than that the call
was with someone who might help with software negotiations. Stewart First Decl. Ex. H ("Calo
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Dep.") 21:7-10; 22:4-9. Calo felt that she needed to introduce Clyne to Joe Dzaluk who "owned
all software negotiations at the time, not just BMC." Id. at 27:18-24. In a March 6, 2015 email,
Calo wrote to Clyne that she and Dzaluk wanted to look at current contracts and agreements like
BMC to determine if there were any opportunities to negotiate savings, and further, that she and
Dzaluk would like to take Clyne through the current agreement and issues with BMC and get
Clyne's perspective. Stewart First Decl. Ex. 183 at 2. She asked Dzaluk to forward material to
Clyne to review in advance of a meeting. Id. at 3; see also Calo Dep./Stewart First Decl. 34:1920 (Calo stating that in March 2015 she asked Dzaluk to brief Clyne on the BMC work). At that
point, Clyne started work on the project. Id. at 35:5-16; see also Stewart First Decl. Ex. 48 at 2
(time sheet by Clyne showing start date of March 10, 2015 on "BMC w/Yvonne Calo, Joe
Dzaluk, John Stafford").
VII. Compensation and Terms of Employment
Calo was unable to recall specifics about the discussions among Patterson, Dzaluk,
herself, and others, regarding bringing Clyne on to assist with the BMC Negotiations and thus,
there is no testimony from her about discussions regarding Clyne's compensation at the start of
his work on the BMC Negotiations. Calo Depo./Stewart First Decl. 28-35. From the earlier
electronic meeting notice she received from Patterson, Calo knew that Clyne was "already in
IBM with access and an ID" which meant to her that he was "through IBM, a contract and on our
books." Id. at 36:7-18. She does not remember discussing Clyne's existing status with Patterson
or anyone else. Id. at 36:19-37:6. She does not remember asking Clyne about his status. Id. at
37:7-10. It was not until after the BMC Negotiations had concluded and a new BMC agreement
signed on September 30, 2015 that she inquired of Clyne about what contract he had. Id. at
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37:16-22. She did not ask previously because he was "already on the books, available with hours
and excess time to provide counsel and help on another project, and so he was assigned
accordingly." Id. at 37:21-38:3. Although she could not remember who had told her that Clyne
was available with "extra cycles to help with our software negotiations," she assumed it was
Patterson. Id. at 38:4-15. She made no inquiry about Clyne's number of available hours between
the day of the call with Patterson in February 2015 and September 30, 2015; she did nothing to
increase the hours for the project; she did not inquire if Clyne was adding his hours or submitting
his hours. Id. at 39:16-40:5. She believed these issues were the responsibility of Clyne's firstline manager who was Cohen and then Jeromy Smith.4 Id. at 40:7-11.
Calo described the usual process of hiring a contractor as receiving resumes and
candidates from IBM Procurement with IBM Procurement "on-board[ing]" the selected candidate
to make sure everything is in place. Id. at 44:2-15. Calo did not go through the usual process in
bringing Clyne on because he was "already on the books." Id. To her, because Clyne had an ID,
he "[t]herefore had a contract." Id. at 44:16-17. She did not know if Clyne's current contract
applied to the work he would perform for her. Id. at 44:18-45:6. She knew he was assigned to
American Express which uses BMC so she knew he had knowledge of BMC and that he had
done BMC work specific to the American Express account. Id. at 45:12-14.
On March 6, 2015, John Stafford, the GTS Division employee in charge of the software
spending component of the services provided by the GTS Division, emailed Clyne to introduce
4
A first-line manager at IBM apparently oversees a consultant's logistics. E.g., Calo
Dep./Epstein Decl. 40:7-9 (approving expenses is responsibility of first-line manager); 52:8-14
(first-line manager "owns" the purchase order and the budget for a contractor). From February
2014 to March 2015, Clyne's first-line manager was Cohen who was then replaced by Smith.
Clyne Dep./Epstein Decl. 83:7-21; Epstein Decl. Ex. UU at 2.
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himself as being on Dzaluk's team, inquired if Clyne needed information in advance of the
meeting, and offered to discuss the status of the current dispute and BMC's overall contract
structure. Epstein First Decl. Ex. Y; Stafford Dep./Epstein First Decl. 7:14-17, 7:24-8:7, 10:1215. Clyne responded by identifying what he needed and then raised the issue of a non-disclosure
agreement (NDA) by stating that he already had a signed NDA "regarding all matters having to
do with IBM" and so would treat IBM documents appropriately as to their high confidentiality
restrictions. Id. A few days later, Stafford emailed IBM's in-house counsel Thom Hagen and
Anthony Gargano to tell them about bringing Clyne on to "take a more active role in leading the
business aspects of any negotiation/settlement" and to inquire whether, because Clyne was a
contractor, there was anything special that needed consideration. Epstein First Decl. Ex. JJ at 2.
He noted Clyne's statement that Clyne already had a NDA in place. Id.
Hagen responded that it was "probably fine" but he wanted to see the NDA. Id. Clyne
then asked McGauvran for a "soft copy of the IBM NDA" that he signed "during the onboarding
process last February[.]" Epstein First Decl. Ex. KK at 2. McGauvran responded by asking
Clyne what was going on and if there was anything "we" should be aware of. Id. McGauvran
attached a copy of the MSA Clyne executed in January 2014 which included non-disclosure
language. Id. Clyne responded that there was an "expanded assignment with IBM" which
needed a "full IBM NDA" which Clyne was certain he had completed, meaning a stand-alone
NDA for IBM. Id. He wondered whether the existence of the document "here" (presumably
referring to the MSA McGauvran attached to his email), which referenced a separate NDA,
meant that "APC had no such document on hand (executed by me)?" Id. McGauvran responded
that he was glad to hear that a project was in the works. Id. McGauvran attached something that
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is not named in the email but which Defendant identifies as the January 2014
Confidentiality/Non-Compete Agreement. Id.; Def. S.J. Mem. 12. McGauvran stated that he did
not have a stand-alone document. Id. If the client was requesting one, he wrote, it could be
added to Clyne's documents in APC's system. Id. Clyne thanked McGauvran, suggested that the
agreement McGauvran provided was the document he was remembering, and asked if it was
alright to send it on to IBM legal. Epstein First Decl. Ex. DDD. McGauvran responded that it
was fine to send it. Id.
On March 12, 2015, Clyne forwarded the agreement to Hagen. Epstein First Decl. Ex.
LL at 2. Hagen responded by noting that this was fine "as to your confidentiality commitment to
APC," but he still asked for the "APC-IBM agreement for this engagement" so that Hagen could
confirm the confidentiality terms between IBM and APC. Id. at 1. He noted that because Clyne
had been engaged as a consultant for some time and APC and IBM had a longstanding
relationship, then this was likely already in place, but he wanted to make sure given the "highly
confidential and sensitive nature of this particular engagement." Id. Clyne responded that he
would follow up with APC. Id.
On March 17, 2015, Clyne forwarded Hagen an email containing substantive information
on the current IBM/BMC contract issues and adding a post-script to tell Hagen that Clyne had
not yet heard back from APC regarding additional documents to support the NDA. Epstein First
Decl. Ex. MM at 1. Clyne believed that what he had, which contained specifics regarding
restrictions handling "APC's client's (IBM) materials" and other confidential data in the
engagement, was sufficient to "cover all necessary bases required[.]" Id. He asked Hagen if it
would be easier to sign a "vintage, off the shelf, all encompassing IBM NDA" and satisfy the
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requirement that way. Id.
The next day, March 18, 2015, Hagen wrote Clyne, stating there should be no need to
sign anything new. Epstein First Decl. Ex. EEE. Hagen stated that he did not want to "disrupt
your status as a contractor by having you start signing docs" with IBM directly. Id. Thus, he
asked Clyne to "circle back" to APC. Id. He thought it would be easy for APC to send over its
signed NDA with IBM so "we can close the loop." Id. Clyne responded that he thought IBM's
American Express office took care of it last year and that he would check with them and get back
to Hagen. Id.
On April 21, 2015, Stafford emailed Clyne to follow-up about obtaining the APC-IBM
NDA for "this engagement." Stewart First Decl. Ex. 54 at 4. Clyne wrote back to Stafford, with
a cc to Gargano, and stated: "At this point, it's very possible that this particular engagement will
not go through my 'pass through' vendor, APC. I think it's just simpler, as I suggested to Thom
[Hagen], that I just execute a new NDA directly with IBM." Id. He then asked Gargano if
Gargano could provide one. Id.
Gargano responded with an email asking Clyne why he believed "that's the case?" Id. at
3. Gargano then wrote: "As I'm sure you are aware, we need to engage your services through
IBM procurement." Id. Clyne then wrote back to Gargano with a cc to Stafford:
I will contact APC once again, since they are my vendor/employer of record as I
speak, and have them call you directly regarding the NDA I signed with them in
February 2014, which is supposed to have covered all confidentiality requirements
re: IBM IP required protections while I worked for IBM. (If, in the future, that
situation should change re: APC, I'll alert you immediately to the change and the
need to sign a new NDA.). Since APC is unaware of this possibility, I would
appreciate it if you limit your conversation with them to satisfying IBM's
immediate requirements regarding the current NDA of record that APC had me
sign specifically for IBM and why it was not sufficient to meet IBM's
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requirements, despite APC being an IBM procurement approved supplier for IBM,
and presumably well versed on required NDA's for their "on boarding process."
Id. at 2. Clyne asked Gargano to let him know if any issues remained after Gargano talked to
APC. Id. Gargano responded by noting that IBM had Clyne's NDA with APC which Hagen
reviewed and they did not need another one. Id. However, he wanted to see APC's agreement
with IBM which he assumed Clyne would not have. Id. He asked Clyne who in IBM engaged
his services so "we," referring to IBM, could "chase this down via IBM procurement?" Id. Clyne
responded with the name "Lisa M. Fawcett" and included her IBM email address. Id. at 1. He
stated that she was the one responsible for ensuring that all "on boarding documents necessary to
work for IBM were provided by APC." Id.
Although Gargano had communicated with Clyne regarding the NDA, he and Clyne did
not discuss Clyne's compensation. Stewart First Decl. Ex. G ("Gargano Dep.") 24:24-25:14.
Gargano was unaware of any issues pertaining to Clyne's compensation until October 2015. Id.
at 25:22-26:11. Gargano did not know if a new "scope of work" was provided to Clyne for the
BMC Negotiations, even though commonly, an individual in IBM Procurement or the employee
who actually requested services would prepare such a scope or statement of work. Id. at 154:21156:17. He never asked APC to prepare a statement of work for Clyne's BMC Negotiations
work. Id. at 156:18-21. He never asked someone else to ask APC to prepare such a statement of
work. Id. at 156:22-25.
On April 20, 2015, the day before this April 21, 2015 email exchange started by Stafford
and continuing between Gargano and Clyne, Clyne had emailed Calo with the subject line of
"BMC IBM Attorney-Client Privileged," (hereinafter "the April 20, 2015 email"). Stewart First
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Decl. Ex. 121. This email was cc'd to Patterson. Id. at 1. Clyne wrote:
We should probably have a 30 minute call either Wednesday late afternoon or
Thursday, your time, to checkpoint on a few things, as your schedule permits.
While I assume that Joe [Dzaluk] has kept you up-to-date re: goings on with
BMC, it is safe to say that the "rubber's going to hit the road" in the next 5-6
weeks (re: resumed negotiations - see below) as to whether or not an "amicable"
resolution with BMC can be reached to end all their claims while significantly
improving on the onerous terms of IBM contained in the current OA re: our
business going forward. [the "see below" refers to the forward of an email sent to
Dzaluk, Stafford, and Gargano appearing below the text to Calo]; [remainder of
paragraph deleted because refers only to substance of negotiations not relevant to
the summary judgment motions].
Also, in my initial email to, and subsequent discussion with, Rich [Patterson], I
committed to a "zero risk" compensation arrangement for IBM if I should be
tasked beyond the [American Express] account. We talked about a "bounty" or
"success fee" payment approach, which I embraced totally (and was moving to
anyway). I was to get back to Rich with some possibilities, but I have been totally
consumed with this project since I engaged - and, not until now have I given
consideration to what hopefully would be viewed by IBM as a very attractive
rate/no risk payment arrangement.
[paragraph deleted because concerns information about what others charge and
customary industry fees].
Having said all that, as you know, BMC's $ demands for all issues, pending
renewals and purchases, based on the current MLA pricing and their noncompliance contentions, is beyond profound. By the end of this week, IBM will
need to set the total maximum payment(s), plus any conditions, terms and other
modifications it seeks (i.e. the minimum acceptable settlement parameters) for me
to negotiate, resuming next week. What I propose is the following:
If at least the minimum combination of acceptable aggregate payments,
compliance fees, terms, conditions and other modifications to the existing contract
is achieved, then my "success fee" is 1.20% of the difference (i.e. reduction) from
BMC's total price demand for all issues, in aggregate and the final total price
negotiated - again, as long as it is at or below the target established as acceptable
by IBM management. There would be no other fees (e.g. travel) involved.
Regardless of the reduction amount achieved, this would ensure more than an 80
to 1 return on my cost vs. the actual $ reductions realized. Payment terms helpful
to IBM can be discussed as well.
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If, on the other hand, the targeted payment limits, terms, conditions, other
modifications are not achieved, then there is no fee whatsoever. (Not for the over
300 hours already worked, not for the travel already completed (and to be taken
each week) or any other expenses going forward. $0. charge. (Obviously I haven't
invoiced anything).
The only stipulation, as with all negotiations, is that we identify which among the
various objectives are "must haves" and which are viewed as "nice to haves".
Also, where appropriate, I assume there will be a few acceptable "must have"
alternatives. Success = achieving all "must haves."
When we talk, you can let me know your thoughts, or an email beforehand would
be welcome. We should close on something before next week. A verbal
agreement is fine with me for now (Rich said he'd trust you with his bank account
- :-) ... that's all I need, then. (re: verbal).
If you could have your [administrative assistant] send me an invite for a time that
works for you, I'd appreciate it.
Id. at 1-2.
Calo believes she received the email the next day, April 21, 2015, in New York. Calo
Dep./Stewart First Decl. 89:4-13. She does not recall being surprised by the email or having any
reaction to the email. Id. at 89:15-22. She admits she may have skimmed it rather than studied
it. Id. at 90:8. Patterson testified he did not read the email. Patterson Dep./Stewart First Decl.
73:13-25; 78:4-5.
Calo and Clyne then spoke on April 27, 2015. Calo Dep./Epstein First Decl. 119:19-23.
At one point in her deposition, Calo said she did not remember anything she said in this
conversation. Calo Dep./Stewart First Decl. 83:16-24. Calo characterizes the April 27, 2015
phone call as "a discussion" with no agreement made. Calo Dep./Epstein First Decl. 127:16-17.
She explained in deposition that any alternative method of payment would have needed
documentation and review through the vendor, as well as by IBM Procurement, legal, and
23 - OPINION & ORDER
finance. Id. at 127:20-23. She admits that at some point before this email there was a proposal
that there would be a fee, but there were no specific discussions about the logistics of how that
would work or any terms or conditions that were reviewed in detail. Id. at 78:8-12. She
confirmed at deposition that "[a]t no time [were] detailed terms and conditions brought to me in
writing or in a detailed conversation that would trigger a process to engage procurement, legal
and finance." Id. at 83:6-10. When asked if she usually expects to be bound to a "verbal
agreement," she responded that when she represents IBM, "there are no verbal agreements." Id.
at 115:17-21. "There are contracts and a detailed process for any agreement of exchange of
services and funds." Id. at 115:21-23.
Calo never told Clyne that there was a need to go through IBM Procurement, then legal
and finance, if he was going to be engaged under some new arrangement. Calo Dep./Stewart
First Decl. 84:22-85:15. She thought that if he were looking for a different term or condition, he
had the responsibility to "work[] that through procurement." Id. at 85:22-86:8. She did not know
if he had ever dealt directly with IBM Procurement pertaining to the terms and conditions of his
employment while working as a consultant for IBM. Id. at 86:9-16. Calo remembers no followup to the conversation. Id. at 83:25-84:3.
Clyne has a better memory of the phone call. Clyne testified that he and Calo spent
fifteen minutes of the thirty-minute phone call talking about the contingency fee agreement. Calo
Dep./Stewart First Decl. 268:13-17. They did not discuss the details of the "must haves," "nice
to haves" or "must have alternatives." Id. at 266:25-267:11. Clyne testified that he and Calo
discussed two items that were not in the April 20, 2015 email. Id. at 69:12-15. One was if the
BMC Negotiations were concluded by June 30, 2015 without Clyne having to "work ridiculous
24 - OPINION & ORDER
hours" such as 100 hours per week, he would consider lowering the percentage. Id. at 70:2-7; see
also id. at 70:8-13 (stating it another way of if the agreement with BMC was reached by June 30
without any real problems, the maximum Clyne would charge, "since Ms. Calo had agreed to the
1.2 percent," would be 1.2%). The second item discussed was the "flip side of that[,]" meaning if
negotiations required much more work than anticipated with unanticipated complexity, then the
minimum percentage would be 1.2%. Id. at 70:14-20. Clyne described Calo as being "fine with
that." Id. at 70:20.
Without his notes of the conversation, Clyne was able to explain in deposition that he
believed Calo was "fine with that" because they discussed these possibilities and she recognized
how "low that contingency fee was in either scenario and she - - and she readily accepted it." Id.
at 70:24-25, 71:7-9. He recalled that towards the end of the conversation, he was struck by how
focused she was on the notion that IBM would not have to pay anything if no agreement was
reached with BMC. Id. at 71:15-18. He also recalled that she was "particularly focused" on not
having to pay for any travel. Id. at 71:19-20.
Clyne recalled asking Calo if "we were good to go on this?" and also telling her that he
"heard her," that he was trying to "make it as absolutely appealing as I can," and asking if it was
acceptable to her. Id. at 72:6-19. Clyne testified that as they were talking, Calo repeatedly said
"okay" throughout the call, creating the impression for Clyne that she was agreeing to the items
as they went through them and accepting what was being proposed. Id. at 79:5-14. Clyne told
Calo that he believed there was only a ten-percent chance he was going to be able to get all of the
issues between IBM and BMC resolved. Id. at 74:23-75:5. Later in his deposition he explained
that at the time, he believed with ninety-five percent certainty he could negotiate the "must
25 - OPINION & ORDER
haves" favorably to IBM, but nonetheless, there was only a ten-percent chance an agreement
would be signed because of Peter Lynt who "owned" the deal for IBM. Id. at 91:15-92:6. At the
end of the conversation, according to Clyne, Calo told him she accepted his proposal. Id. at
75:13-20.
It is unclear if IBM and BMC reached an agreement before June 30, 2015. Compare
Clyne Dep./Stewart First Decl. 291:12-13 ("the agreement was reached prior to June 30th"); with
Clyne Dep./Epstein First. Decl. 272:3-273:12 (stating that there was an agreement on May 29,
2015 but then IBM's "Bill Bailey and Ellen Pace blew up the agreement" and indicating
negotiations took seven months, meaning until September, to complete). But, even if an
agreement was reached in some form earlier, it was not signed until September 30, 2015.
Stafford Dep./Stewart First Decl. 90:16-17.
On July 10, 2015, Clyne emailed Calo expressing frustration with the progress of the
negotiations. Stewart First Decl. Ex. 187 at 1-2. In this email, Clyne also referred to a
contingency fee, writing: "On a personal note, I really have no idea how I'm going to get paid a
contingency fee earned, with the sentiments that I have heard expressed on calls during the last
few weeks[.]" Id. at 2. In deposition, Calo was unable to recall if Clyne ever complained to her
with concerns about whether he was going to get paid his contingency fee. Calo Dep./Stewart
First Decl. 129:6-9. She did not recall discussing Clyne's concern as expressed in the July 10,
2015 email. Id. at 133:17-25. She testified she did not know what Clyne was referring to when
he wondered how he was going to get paid "a contingency fee" and does not recall thinking about
it. Id. at 134:2-12. She further testified that at the time, she did not understand Clyne to be
referring to anything that "we had come to a conclusion on" as opposed to a proposed idea or
26 - OPINION & ORDER
method. Id. at 134:22-135:6. When asked specifically if she thought that this statement referred
to a contingency as a proposed idea, she testified that she did not "recall specifically in July what
I thought." Id. at 135:7-10.
Calo could not remember if she followed up on this statement in the July 10, 2015 email
with a response of "what contingency," or "no contingency," or "you're an hourly fee consultant."
Id. at 135:25-136:9. She sent Clyne a responsive email two days later that simply said: "I am
studying all you sent" followed by a "smiley face" and then "lets [sic] talk Monday." Stewart
First Decl. Ex. 187. At deposition, she could not remember why she put a smiley face in her
response. Calo Dep./Stewart First Decl. at 136:20-21. In discussing the following Monday's
phone call during her deposition, Calo testified that she could not recall what was said about the
contingency fee. Id. at 137:10-14. She could not recall if she said something to Clyne such as "I
got this email . . . and you are referring to a contingency fee that we don't have" or "your email
says contingency fee and you're an hourly vendor." Id. at 137:15-23. She could not recall why
she did not correct Clyne about the contingency arrangement after receiving the July 10, 2015
email. Id. at 137:14-138:4.
VIII. Post-September 30, 2015 Events
A. First Week of October 2015
The BMC Negotiations culminated with a new agreement, referred to as the 2015 OA,
which was executed on September 30, 2015. Stafford Dep./Stewart First Decl. 90:16-17. On
October 1, 2015, the day after the 2015 OA was signed, Calo emailed Clyne asking him to help
her "articulate the value of what we got." Stewart First Decl. Ex. 124 at 2. She noted that "now
that it is signed [I] have heard on a number of fronts this is much better then [sic] prior
27 - OPINION & ORDER
agreement etc. . . . so I want to make sure we are clear on that in communications going
forward." Id. (ellipsis in original). In deposition, Calo explained her request as generated by the
need to update executives on the final results and then to "communicate to the field the Global
agreement and how they would benefit from it." Calo Dep./Epstein First Decl. 148:8-14. Clyne
was "in position to document the results of the team's work." Id. at 148:20-21.
In response, Clyne offered to prepare a "high level summary" in the next few days.
Stewart First Decl. Ex. 124 at 1. Then, he said, starting the following week, he was planning on
putting together the detailed summary of the negotiated "total wins, vis-a-vis BMC's Best and
Final submitted to Joe [Dzaluk] and his team in February and just before I engaged to negotiate
the agreement." Id. Clyne estimated this would take a "good three weeks to complete[.]" Id.
He then wrote this:
This summary and comparison will be needed in order for me to get paid the
contingency fee that is due (acknowledge that we left open agreement on the
actual final percentage for the contingency fee[)], (although what I offered was
small fraction of that charged by industry (professional negotiating) standards for
such negotiations[)]. So we'll need to close on it (%) after you receive the
completed package from me to review.
Id. He closed the email with a question of how soon Calo needed a high level summary showing
everything that was gained in the 2015 OA. Id.
In response, still on October 1, 2015, Calo told Clyne in an email that she wanted an
"exec summary - something for the package/education on what we agreed to etc and the value . . .
I know we are talking tomorrow can you give me a ball park on what I can expect :-)." Stewart
First Decl. Ex. 188 at 1. Clyne sought clarification on the "ball park on what you can expect"
statement by Calo, wondering if she was referring to the timeline to produce the executive
28 - OPINION & ORDER
summary, the estimated total value of the agreement to IBM, or something else. Id.
In her deposition, Calo said her use of "we" in the phrase "for the package/education on
what we agreed to," meant IBM and BMC, not herself and Clyne. Calo Dep./Stewart First Decl.
155:10-13. And, she testified that the use of the "ballpark on what I can expect" phrase referred
to the package and agreement between IBM and BMC, not the contingency fee. Id. at 156:3-14.
She agreed in deposition that she had the opportunity in her response email to tell Clyne that
there was no contingency and that he was an hourly vendor. Id. at 156:22-157:8.
On October 2, 2015 Clyne forwarded Calo the April 20, 2015 email in anticipation of a
phone call shortly thereafter. Stewart First Decl. Ex. 189 at 1-2 (email noting the call was in
fifteen minutes). He referred to the "attached" as only for her "pocket" reference. Id. at 1. He
stated that
given the environment at IBM, it will definitely be best, all around, given the final
determined contingency fee based on the attached [parenthetical discussion
regarding unanticipated level of complexity omitted] but a percent I will still
honor nevertheless, that I complete all supporting documentation for the fee first.
To talk about the actual fee due, before having the entire picture in front of you
(and for others to follow in order to get it paid) will not be the best approach
based on my observations over the last seven months. Kindly let me put all
supporting documentation together, and overnight it to you only . . . and then we
can close on the final payment to be made.
Id. at 1.
According to Clyne, during the call which followed this email, Calo told him she knew he
did not want to "give [her] - - but she said, I need to know what I'm dealing with here, give me
your best guess." Clyne Dep./Epstein First Decl. 296:10-12. Clyne responded by stating that he
was reluctant to give the information at that point, but he believed he was owed a contingency fee
of at least $10 million. Id. at 296:13-15; see also Epstein First Decl. Ex GGG 11 (Pl. Interrog.
29 - OPINION & ORDER
Resp. No. 6); Calo Dep./Stewart First Decl. 165:7-13. Calo testified she was surprised and
shocked at the dollar amount. Calo Dep./Stewart First Decl. 165:23-24; Calo Dep./Epstein First
Decl. 143:8 ("I responded in shock").
According to Clyne, after he told Calo the $10 million figure, he began listing items and
after he got past the first, Calo said "I got it, I got it." Clyne Dep./Epstein First Decl. 296:15-17.
As Clyne puts it, Calo told him she did not have the money to pay him. Id. at 296:18-19. Clyne
asked her if she needed "to go to the business" to which she responded that Patterson had just had
a $4 million project canceled and if "they haven't taken the money away from him yet, maybe
that's $4 million." Id. at 296:20-24. Calo said something about there being no money or
"nothing documented to $10 million." Calo Dep./Stewart First Decl. 167:3-7. Calo recalled
telling Clyne that there was "no budget for anything" or something similar like "there was no
agreement," but she testified that in her opinion, "for sure there was no budget, nothing set aside,
which you would do if you had an agreement." Id. at 143:9-14. She could not remember
specifics about whether she told Clyne she was going to talk to someone else, maybe Patterson,
about money being available in another person's budget. Id. at 167:10-14; see also id. at 167:15168:2 (she could not recall if she said something creating the impression that she needed to talk
to someone else to see if there was money in another budget).
At another point in her deposition, Calo was asked about her memory of what she and
Clyne discussed after September 30, 2015. Id. at 140:12-14. She responded by stating that "[a]t
some point, I asked Mr. Clyne what his expectation was related to the contingency fee." Id. at
140:16-18. "To better understand what he was proposing," she asked for an "estimated dollar
amount he had in mind[.]" Id. at 140:20-24. She was "quite surprised" when he quoted her a
30 - OPINION & ORDER
number in the millions. Id. at 140:22-24. She believed that Clyne brought up the contingency
fee and in response, she asked him about the amount. Id. at 141:9019. She did not tell him that
he was an hourly contractor and cannot recall why she did not tell him that. Id. at 142:10-20.
Calo states that Clyne's October 2, 2015 email was an "eye opener" as to Clyne's belief
that there was a detailed agreement in place. Calo Dep./Epstein First Decl. 159:23-160:3. In her
opinion, they had "not closed on it." Id. at 160:3. They had "[n]ot closed on the percentage, not
closed on the starting and ending agreements, not closed on the must haves." Id. at 160:3-6.
Hearing the $10 million figure, she realized there was a "huge disconnect." Id. at 167:7-9.
B. Involvement of IBM Procurement and Legal
At some point, Calo "engaged procurement and legal" to determine what Clyne was
entitled to be paid for his services. Id. at 170:2-7. She sought purchase order details from IBM
Procurement and learned that Clyne's last invoice for hourly services was dated May 2015. Calo
Dep./Stewart First Decl. 182:22-184:15. On October 8, 2015, Calo forwarded Clyne's October 2,
2015 to Gargano, in IBM's legal department. Id. at 169:5-11. After that date, all
communications between Calo and Clyne were vetted through IBM's legal department. Id. at
196:15-19.
On October 9, 2015, Clyne emailed Calo and stated that the previous $10 million figure
was correct and that regardless of the actual negotiation results and the corresponding payment
due, he would cap his fee at that number. Epstein First Decl. Ex. TT at 1. On October 15, 2015,
Calo emailed Clyne asking him to submit to APC "an accounting" of the hours worked and
expenses and travel related to the "BMC matter" by October 23, 2015. Epstein First Decl. Ex.
VV at 4. Calo explained that APC needed the information so they could invoice IBM under the
31 - OPINION & ORDER
purchase order that IBM had open with APC for Clyne's services. Id. She told him to work with
Bengough at IBM Procurement if he had questions. Id.
Clyne responded within hours stating that he did not understand her email. Id. at 3. He
wrote that the hours he worked on the BMC Negotiations had nothing to do with the APC
purchase order which was issued for negotiating services at IBM for the American Express
account. Id. Compensation for the BMC Negotiations was to be "entirely on a continency
basis." Id. Hours and travel were to be absorbed by Clyne as part of the arrangement. Id. He
expressed extreme concern as to why her email was sent. Id.
In response to this, Calo wrote that "[w]e never reached an agreement on a contingency
approach." Id. at 3. She continued:
The only agreement we have for your services is as a contractor through your
relationship with APC. You seemed to have agreed with this as you were using
your APC NDA throughout the BMC negotiations. Also your use of IBM
facilities and systems, etc. was provided under the APC agreement. I also had the
team take a look at your NDA with APC and it contains provisions that prevent
you from engaging in a relationship with us other than through them.
Id. She then repeated her request that he submit his hours and expenses to APC for invoicing to
IBM. Id. She requested that he direct further communications on billings for the BMC
Negotiations to Bengough in IBM Procurement. Id.
Clyne never submitted any hours to APC. Instead, on December 30, 2015, he emailed
Ginni Rometty, IBM's CEO, with exhibits attached, seeking a contingent payment of
$13,388,402. Epstein First Decl. Ex. YY & at 25. The matter was passed off to Bill Barnett, a
vice president in IBM's GTS Division who agreed to review the issue and eventually told Clyne
that IBM's position was unchanged and that he should submit his hours to APC, his "employer"
32 - OPINION & ORDER
so that APC could invoice IBM and Clyne could get paid. Epstein First Decl. Exs. ZZ, AAA
(rejecting a $7 million proposal made by Clyne at some point to Barnett).
This lawsuit followed.
STANDARDS
Summary judgment is appropriate if there is no genuine dispute as to any material fact
and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The
moving party bears the initial responsibility of informing the court of the basis of its motion, and
identifying those portions of "'the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence
of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quoting
former Fed. R. Civ. P. 56(c)).
Once the moving party meets its initial burden of demonstrating the absence of a genuine
issue of material fact, the burden then shifts to the nonmoving party to present "specific facts"
showing a "genuine issue for trial." Fed. Trade Comm'n v. Stefanchik, 559 F.3d 924, 927-28 (9th
Cir. 2009) (internal quotation marks omitted). The nonmoving party must go beyond the
pleadings and designate facts showing an issue for trial. Bias v. Moynihan, 508 F.3d 1212, 1218
(9th Cir. 2007) (citing Celotex, 477 U.S. at 324).
The substantive law governing a claim determines whether a fact is material. Suever v.
Connell, 579 F.3d 1047, 1056 (9th Cir. 2009). The court draws inferences from the facts in the
light most favorable to the nonmoving party. Earl v. Nielsen Media Research, Inc., 658 F.3d
1108, 1112 (9th Cir. 2011).
If the factual context makes the nonmoving party's claim as to the existence of a material
33 - OPINION & ORDER
issue of fact implausible, that party must come forward with more persuasive evidence to support
his claim than would otherwise be necessary. Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 587 (1986).
DISCUSSION
I separately address the motions as to each claim and the affirmative defenses, with one
exception. Because Defendant's motion against the quantum meruit claim and Plaintiff's motion
against Defendant's express contract affirmative defense are intertwined, I discuss those together.
I. Breach of Express Contract
Defendant's motion raises contract formation issues and whether Clyne and Calo agreed
on enough essential terms to form a binding contingency fee agreement based on the April 20,
2015 email and relevant conduct thereafter. Defendant argues that Clyne's April 20, 2015 email
lacked specific enough essential terms to form an enforceable contract. Defendant further argues
that because Clyne knew his work for Defendant had to be through a third party and had to go
through IBM Procurement, his discussions with Calo were at best only preliminary negotiations
which gave him at most only an agreement to further agree without the mutual assent necessary
to form a contract.
Plaintiff argues there are issues of fact regarding Clyne's and Calo's intent, that they
agreed on essential terms, and the fact that some items needed further clarification does not
defeat their April 2015 intent to reach an agreement. Plaintiff further argues that Calo's
acceptance of Clyne's proposal evidences her manifestation of intent to form a contract, and that
Calo's acceptance was not a preliminary negotiation requiring later approval by IBM
Procurement.
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A. Contract Formation Standards
A party claiming breach of contract has the burden of establishing the contract's
existence. Tinn v. EMM Labs, Inc., No. 07-963-AC, 2009 WL 507096, at *6 (D. Or. Feb. 27,
2009) (citing Holdner v. Holdner, 176 Or. App. 111, 120, 29 P.3d 1199, 1203 (2001)). When the
facts are not in dispute, the determination of whether a contract exists is a question of law. Id.
(citing Key West Retaining Sys., Inc. v. Holm II, Inc., 185 Or. App. 182, 188, 59 P.3d 1280, 1283
(2002)); see also Roeder v. Pacificorp Fin. Servs., Inc., No. CV-05-1578-ST, 2006 WL 3085619,
at *14 (D. Or. Oct. 27, 2006) ("Oregon contract formation is a question of law") (citing Key
West, 185 Or. App. at 188, 59 P.3d at 1283).
Oregon subscribes to the objective theory of contracts. Kabil Devs. Corp. v. Mignot, 279
Or. 151, 155–57, 566 P.2d 505, 507-8 (1977) ("objective" theory of contracts operates in
Oregon); Wieck v. Hostetter, 274 Or. App. 457, 471, 362 P.3d 254, 262 (2015) ("In assessing
whether a contract was formed, Oregon applies an objective theory of contracts."). Under this
approach, in "determining whether a contract exists and what its terms are, we examine the
parties' objective manifestations of intent, as evidenced by their communications and acts." Ken
Hood Constr. Co. v. Pac. Coast Constr., Inc., 201 Or. App. 568, 578, 120 P.3d 6, 11 (2005),
modified on reconsideration, 203 Or. App. 768, 126 P.3d 1254 (2006); see also Wooton v. Viking
Distr. Co., Inc., 136 Or. App. 56, 59, 899 P.2d 1219, 1222 (1995) ("we examine the parties'
objective manifestations of intent, measured by whether a reasonable person would construe a
promise from the words and acts of the other."). Formation of a contract requires "'a bargain in
which there is a manifestation of mutual assent to the exchange and a consideration.'" Id.
(quoting Restatement (Second) of Contracts § 17(1) (1981)). "'The manifestation of mutual
35 - OPINION & ORDER
assent to an exchange ordinarily takes the form of an offer or proposal by one party followed by
an acceptance by the other party or parties.'" Id. (quoting id. at § 22(1)).
In the objective theory, the manifestation of acceptance made to an offeror results in a
contract, regardless of the intent of the party that manifests acceptance. The Erection Co. v.
W&W Steel, LLC, No. CV 11-805-JE, 2011 WL 5008325, at *8 (D. Or. Oct. 20, 2011) (citing
Ken Hood Constr., 201 Or. App. at 578, 120 P.3d at 12), aff'd, 513 F. App'x 664 (9th Cir. 2013).
Contract law is "not concerned with the parties' undisclosed intents and ideas"; instead, only the
parties' "communications and overt acts" are relevant. Kitzke v. Turnidge, 209 Or. 563, 573, 307
P.2d 522, 527 (1957); see also DCIPA, LLC v. Lucile Slater Packard Children's Hosp. at
Stanford, 868 F. Supp. 2d 1042, 1053 (D. Or. 2011) ("whether the parties entered into a contract
does not depend on their uncommunicated subjective understanding; rather it depends on
whether the parties manifest assent to the same express terms") (internal quotation marks
omitted).
Mutual assent can be inferred from the parties' conduct. Bennett v. Farmers Ins. Co. of
Or., 332 Or. 138, 153, 26 P.3d 785, 795 (2001) (law requires evidence of "mutual assent"
whether "expressed through an offer and acceptance" or "manifested by conduct"); see also The
Erection Co., 2008 WL 5008325, at *8 ("'Mutual assent may be inferred from the conduct of the
parties'") (quoting Ken Hood Constr., 201 Or. App. at 579, 120 P.3d at 12). Whether a particular
statement or act is a manifestation of assent is a question of fact. Bennett, 332 Or. at 148, 26
P.3d at 792.
In addition, for "an agreement to constitute an enforceable contract, the parties must agree
on the terms of the agreement." Tinn, 2009 WL 507096, at *6. The parties need not agree on all
36 - OPINION & ORDER
terms, but there must be agreement on those that are essential to the agreement. Id. (citing Hand
v. Starr-Wood Cardiac Group of Corvallis, No. 99-1091-JO, 2001 U.S. Dist. LEXIS, at *7 (D.
Or. Feb. 15, 2001) (citing Pacificorp v. Laekview Power Co., 131 O.r App. 301, 307, 884 P.2d
897, 901 (1994)). "'A term is 'material' to an enforceable agreement when it goes to the
substance of the contract and, if breached, defeats the object of the parties in entering into the
agreement.'" Id. (quoting Johnstone v. Zimmer, 191 Or. App. 26, 34, 81 P.3d 92, 97 (2003)).
B. Contract Formation Discussion
When viewing the record in a light most favorable to Plaintiff, the non-moving party, the
evidence shows that the parties made an agreement based on Clyne's proposal in the April 20,
2015 email which, according to Clyne, Calo accepted in the April 27, 2015 follow-up
conversation. Although Clyne had been working on the BMC Negotiations for several weeks at
this point, when the evidence is construed in his favor it is possible for a reasonable juror to
conclude that Clyne's work on the BMC Negotiations was not under the APC contracts because
those contracts were limited to American Express-related work, or at least to work being
assigned to Clyne by Cohen who was Defendant's software manager for its American Express
service account.
The April 21, 2015 communications between Clyne and Gargano about the NDA do not
unequivocally establish that Clyne's work on the BMC Negotiations was under his APC
contracts. Clyne believed that he had an independent or stand-alone NDA with APC governing
the protection of confidential information for any APC Client and thus, governing the protection
of confidential information provided by IBM for the BMC Negotiations. Epstein First Decl. Ex.
N (January 2014 Confidentiality/Non-Compete Agreement regarding any APC Client which is
37 - OPINION & ORDER
not specific to IBM or to a particular IBM assignment); Stewart First Decl. Ex. 54 at 2 (Gargano
April 21, 2015 email to Clyne stating that IBM had Clyne's NDA with APC and they did not
need another one). The issue then became what protections were in an agreement between IBM
and APC. Gargano told Clyne that he did not believe Clyne would have a copy of that document.
Stewart First Decl. Ex. 54 a 2. He also asked Clyne who in IBM Procurement had initially
engaged his services and indicated that IBM would "chase this down." Id. With that, a
reasonable juror could conclude that the ball was in IBM's court to obtain a copy of whatever
Gargano was looking for. From Clyne's perspective, there was nothing more for him to do. This
is especially true given how Clyne was hired in 2014 for the American Express work. When
Clyne was brought on by Cohen in 2014, Clyne provided a proposal to Cohen and from there,
Clyne was presented with documents from APC which incorporated the terms of his proposal.
As far as the summary judgment record shows, Clyne did not initiate the contact with IBM
Procurement or initiate the APC contracts for that engagement. This is also supported by
Roberts's testimony that when IBM has a specific service it wants to engage from a particular
resource, IBM works out "the deal" and then contacts APC and asks APC to engage that supplier.
Gargano's statement to Clyne that IBM needed to engage Clyne's services through IBM
Procurement and Clyne's statement that APC was his current "vendor/employer" of record also
do not alter the conclusion that the APC contracts did not necessarily govern Clyne's work on the
BMC Negotiations. First, Gargano's statement did not establish any terms of any agreement and
made no reference to Clyne's current APC contracts which arguably were for American
Express/Cohen-assigned projects. Simply stating that IBM needed to go through IBM
Procurement does not establish the existence of a current contract governing all of Clyne's
38 - OPINION & ORDER
services. Second, given how things were handled the prior year for the work he did under
Cohen's supervision where Cohen contacted him, asked for a quote, and then formalized the
arrangement with Clyne's quoted rate, Clyne could have reasonably understood that going
through IBM Procurement was only to formalize an agreement he otherwise reached directly
with IBM.
Third, Clyne's statement that APC was his current vendor/employer also does not
establish that his work on the BMC Negotiations was under a specific APC contract. When
Clyne's email is read in its entirety and in context, a reasonable interpretation of that email is that
Clyne was speaking solely about the NDA he previously signed. He stated:
I will contact APC once again, since they are my vendor/employer of record as I
speak, and have them call you directly regarding the NDA I signed with them in
February 2014, which is supposed to have covered all confidentiality requirements
re: IBM IP required protections while I worked for IBM. (If, in the future, that
situation should change re: APC, I'll alert you immediately to the change and the
need to sign a new NDA.). Since APC is unaware of this possibility, I would
appreciate it if you limit your conversation with them to satisfying IBM's
immediate requirements regarding the current NDA of record that APC had me
sign specifically for IBM and why it was not sufficient to meet IBM's
requirements, despite APC being an IBM procurement approved supplier for IBM,
and presumably well versed on required NDA's for their "on boarding process."
Stewart First Decl. Ex. 54 at 2.
Defendant makes much of the parenthetical comment about the situation changing at
APC. But, when understood in a light most favorable to Plaintiff, this email concerns only the
NDA Clyne signed with APC, his expressed frustration that the NDA he signed specifically for
IBM was not a stand-alone document that should meet IBM's needs, and his obvious desire to
have the work on the BMC Negotiations be performed outside of his current APC contract.
Clyne's parenthetical comment is ambiguous as to whether he meant a change in his
39 - OPINION & ORDER
employer/vendor relationship with APC or a change as to whether the January 2014
Confidentiality/Non-Compete Agreement applied to all the work he did for IBM.
Moreover, Clyne may have worked at IBM for a long time but there is no evidence that he
was familiar with contractor-hiring procedures or had any experience with IBM Procurement
during his employment. When viewing the evidence in Plaintiff's favor, while it seems clear that
Clyne was trying to keep APC from learning about his contingency agreement for the BMC
Negotiations, the evidence nonetheless suggests that Clyne could have assumed that the process
was to work out an agreement with an IBM GTS employee (Cohen, then Calo), at which point
the logistics of getting that agreement through IBM Procurement were a formality and were
IBM's responsibility.
Additionally, Plaintiff explains, Clyne's statements were true. APC remained unaware of
the "possibility" of work on the BMC Negotiations until after the September 30, 2015 execution
of the 2015 OA. Because Clyne continued to work through the APC contracts on the American
Express projects, nothing in regard to Clyne's relationship with APC changed. Additionally,
Plaintiff explains that Clyne's comment that APC was his "vendor/employer as we speak" was a
true statement and not inconsistent with his position that his APC contracts did not cover the
work on the BMC Negotiations because when Clyne wrote that statement, he was in fact still
working for IBM on its American Express account through the APC contracts and did so until
May 2015.
Clyne's April 20, 2015 email is a written offer as clearly demonstrated by his use of the
words "I propose," which were preceded by his discussion of a "zero risk compensation
arrangement" or a "success fee payment approach" for his work. Stewart First Decl. Ex. 121 at 1.
40 - OPINION & ORDER
This was followed by suggested terms, including: (1) achievement of a "minimum combination
of acceptable aggregate payments, compliance fees, terms, conditions and other modifications to
the existing [BMC] contract"; (2) no other fees, such as travel, or expenses to be paid to Clyne;
(3) no fee if targeted "payment limits, terms, conditions, other modifications" are not achieved;
(4) defining success as achieving all "must haves"; (5) a "stipulation" that "must haves," "nice to
haves," and "must have alternatives" be identified; and (6) a "success fee" of "1.20% of the
difference (i.e. reduction)" between "BMC's total price demand for all issues, in aggregate and
the final total price negotiated" as long as it is at or below the target established by IBM
management. Id.
Clyne's testimony, which is credited when analyzing Defendant's motion for summary
judgment, establishes that Calo accepted his proposal during their April 27, 2015 telephone
conversation. Calo's subjective understanding of the proposal or the conversation is not relevant
to determining whether there was mutual assent because under the objective theory of contract
formation, it is the manifestation of that assent by words and actions that is determinative. Calo
admits she did not tell Clyne that there was no agreement or that their discussion was
preliminary. She did not tell Clyne that he had to go through IBM Procurement, legal, and
finance. She did not tell him he already had a contract, ask why he was not going to do the BMC
Negotiation work under that contract, or tell him that IBM would not do a contingency
agreement. There is no evidence that she objected to the proposal at the time.
Clyne testified that while discussing the April 20, 2015 email on the phone on April 27,
2015, Calo repeatedly said "okay" throughout the call. While this could have meant "okay I hear
you" or "okay I agree and accept," both are reasonable interpretations of Calo's statements and
41 - OPINION & ORDER
thus, when viewing them in Plaintiff's favor, they show that Clyne reasonably could have
understood her agreeing with the proposed items. Clyne also testified that he and Calo clarified
the 1.2% success fee to mean that if negotiations were concluded promptly before June 30, 2015
and without "ridiculous hours," Clyne would consider lowering his fee, but if negotiations
required much more work than anticipated and with great complexity, the 1.2% would be a
minimum. Clyne testified that Calo was "fine with that." Finally, Clyne testified that at the end
of the conversation Calo told him she accepted his proposal.
The proposal as accepted contained terms of (1) the work to be performed because it was
obvious the April 20, 2015 email and the April 27, 2015 phone call addressed Clyne's work on
the BMC Negotiations; (2) compensation terms of no charge for expenses and the payment of a
1.2% commission; and (3) some indication of how a commission was to be earned by stating that
success was achieving "must haves" and delineating that this meant the "minimum combination
of acceptable aggregate payments, compliance fees, terms, conditions and other modifications to
the existing [BMC] contract" for IBM. The evidence supports a conclusion that the parties
manifested assent to these terms and thus, initially formed an agreement.
C. Indefinite Terms
Even if an oral agreement is otherwise established by mutual assent, the terms may still
be sufficiently uncertain as to prevent enforcement. Brazil v. FedEx Ground Pkg. Sys., Inc., No.
Civ. 03-6287-TC, 2004 WL 2457776, at *3 (D. Or. Nov. 1, 2004); see also Padilla v. RRA, Inc.,
124 N.M. 111, 114, 946 P.2d 1122, 1125 (1997) (indefiniteness can defeat a contract claim in
two ways: (a) by indicating the parties failed to reach an agreement, or (b) by preventing
enforcement because the terms are not reasonably certain).
42 - OPINION & ORDER
"'The terms of a contract are reasonably certain if they provide a basis for determining the
existence of a breach and for giving an appropriate remedy.'" Padilla, 124 N.M. at 114, 946 P.2d
at 1125 (quoting Restatement (Second) of Contracts § 33(2)); see also Brazil, 2004 WL 2457776,
at *3 (an "'offer must be so certain that upon an unqualified acceptance the nature and extent of
the obligations of each party are fixed and may be determined with reasonable certainty'")
(quoting Kliemek v. Perisich, 231 Or. 71, 78-79, 371 P.2d 956, 960 (1962)). Here, concerns
about enforcement of the parties' agreement are created by the variable percentage contingent fee
Calo and Clyne discussed in the April 27, 2015 phone call and the lack of any precise definition
of the "must haves" and other terms which Clyne needed to achieve to be considered successful
and thus receive payment.
1. Variable Percentage Rate
The variable percentage rate does not render the agreement unenforceable. Cases support
the court imposing a reasonable fee in certain circumstances. In Padilla, the court explained that
when two parties have bargained for one of them to provide personal services to the other but
have left the payment term open to later negotiations, a court may determine that the parties have
reached an enforceable contract to provide the services for a "reasonable" payment. Id. at 115,
946 P.2d at 1126. Because the plaintiff could concede that he was entitled to the lowest possible
agreed-upon rate, the Padilla court held that the plaintiff's testimony, if believed, could sustain a
verdict that the defendants breached an enforceable contract to pay the plaintiff a one-percent
commission. Id. at 116, 946 P.2d at 1127.
In a case from Maine, the defendant argued that a purported oral contract with the
plaintiff was too indefinite to determine the rights of the parties because it failed to set the
43 - OPINION & ORDER
amount of a commission. Fitzgerald v. Hutchins, No. PEN-09-139, 2009 ME 115, ¶ 17, 983
A.2d 382, 388 (Me. Dec. 3, 2009). The court rejected the argument, noting that if a contract
"leaves open a key term, the law invokes the standard of reasonableness, and courts will supply
the needed term." Id. (internal quotation marks omitted). There, the "lack of a stated percentage
for commission" did not render the contract unenforceable because the plaintiff had a history of
selling power plants for the defendant's company and the law allowed indefiniteness to be "'given
precision by usage of trade or course of dealing between the parties.'" Id. (quoting Restatement
(Second) of Contracts § 33 cmt. a ). As a result, summary judgment for the defendant was
unwarranted. Id.
Here, the April 20, 2015 email set out a definite percentage of 1.2%. Although
discussions on April 27, 2015 allowed for the possible variability of that percentage, the rate was
clearly based on the 1.2% initially proposed. Given that the 2015 OA was not executed until
September 30, 2015, indicating that the BMC Negotiations did not conclude before the June 30,
2015 date which would have triggered a lower percentage, a reasonable rate is a minimum of
1.2%. As for a possible increase in the rate, under Padilla, an enforceable contract may be found
by determining that the commission rate is 1.2%, the lowest rate Calo allegedly agreed to pay
should the BMC Negotiations continue past the June 30, 2015 date. With the percentage
grounded in Clyne's initial 1.2% proposal, the Court can determine that 1.2% is a reasonable rate
and the contract is not made unenforceable by Calo's April 27, 2015 acceptance of an agreement
with a percentage rate that could have gone lower or higher than that rate.
2. BMC Total Price Demand & "Must Haves," Etc.
The other potentially indefinite terms are "must haves" and related terms which were the
44 - OPINION & ORDER
basis of Clyne's compensation. Clyne proposed that he be paid 1.2% of the difference between
(1) BMC's "total price demand for all issues" and (2) the "final total price negotiated[,]" as long
as the "final total price" negotiated met IBM's minimum threshold for "acceptable aggregate
payments, compliance fees, terms, conditions, and other modifications" to the existing contract
and included IBM's "must haves." Stewart First Decl. Ex. 121 (the April 20, 2015 email).
Defendant argues that because terms such as "BMC's total price demand" and "must haves" are
not defined by the agreement, the agreement is unenforceable. E.g., Phillips v. Johnson, 266 Or.
544, 555, 514 P.2d 1337, 1343 (1973) (must be a "meeting of the minds" on all terms with
nothing left open for future negotiation).
Clyne's compensation, assuming a definite 1.2% commission, is based on "BMC's total
price demand" as well as IBM's minimum threshold and "must haves." Plaintiff suggests that
these terms, particularly the "must haves" terms, are not terms of compensation but are his own
conditions. However, when Clyne's entire email is read, it is clear that these terms provide for
Clyne's compensation. The relevant language in the April 20, 2015 email is found in the
following paragraphs:
Having said all that, as you know, BMC's $ demands for all issues, pending
renewals and purchases, based on the current MLA pricing and their noncompliance contentions, is beyond profound. By the end of this week, IBM will
need to set the total maximum payment(s), plus any conditions, terms and other
modifications it seeks (i.e. the minimum acceptable settlement parameters) for me
to negotiate, resuming next week. What I propose is the following:
If at least the minimum combination of acceptable aggregate payments,
compliance fees, terms, conditions and other modifications to the existing contract
is achieved, then my "success fee" is 1.20% of the difference (i.e. reduction) from
BMC's total price demand for all issues, in aggregate and the final total price
negotiated - again, as long as it is at or below the target established as acceptable
by IBM management. There would be no other fees (e.g. travel) involved.
Regardless of the reduction amount achieved, this would ensure more than an 80
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to 1 return on my cost vs. the actual $ reductions realized. Payment terms helpful
to IBM can be discussed as well.
If, on the other hand, the targeted payment limits, terms, conditions, other
modifications are not achieved, then there is no fee whatsoever. (Not for the over
300 hours already worked, not for the travel already completed (and to be taken
each week) or any other expenses going forward. $0. charge. (Obviously I haven't
invoiced anything).
The only stipulation, as with all negotiations, is that we identify which among the
various objectives are "must haves" and which are viewed as "nice to haves".
Also, where appropriate, I assume there will be a few acceptable "must have"
alternatives. Success = achieving all "must haves."
Stewart Decl. Ex. 121.
Clyne initially refers to the need for IBM, "[b]y the end of this week[,]" to set the
maximum it is willing to pay as well as the minimum terms it will need to achieve settlement.
He notes that his fee will be triggered if the minimum terms in certain areas in the aggregate are
achieved. The areas, but not the minimum terms, are spelled out. As a corollary to that, he states
that if the "targeted" limits are not achieved, he receives nothing. It is clear that the word
"targeted" refers to those minimum conditions that IBM still needed to establish. Then, he ends
with the phrase that the "only stipulation" is that "we identify which among the various
objectives," (which again contextually is a reference to the minimum conditions), "are 'must
haves,'" nice to haves, or must have alternatives. Success is defined as achieving all of the must
haves. Thus, this means that the parties needed to stipulate as to which of the minimum
conditions were must haves, and so forth. Clyne was to be paid only if he achieved the minimum
conditions identified as must haves.
The proposal by Clyne is capable of only one reasonable construction: he had to settle
the contract and had to achieve all "must haves" before he was entitled to payment. If the "must
46 - OPINION & ORDER
haves" were "not achieved," there was "no fee whatsoever." Thus, the "must haves" were not just
a basis for computing the amount of a contingency fee. Instead, obtaining the "must haves" was
required for success in the first place which entitled Clyne to compensation at all.
These are properly understood as compensation terms. They are essential because Clyne's
compensation "goes to the substance of the contract." Romtec v. Oldcastle Precast, Inc., No. 0806297-HO, 2011 WL 690633, at *4 (D. Or. Feb. 16, 2011) ("A term is material to an enforceable
agreement when it goes to the substance of the contract"). Ordinarily, whether a term is material
to a contract is a question of fact. Id. However, no reasonable juror could conclude that the basis
for determining a right to compensation is anything other than an essential contract term. Id.
("Whether a contract term is material is a question for the fact finder unless the uncontroverted
evidence leads to only one conclusion.").
The first of these compensation terms is "BMC's total price demand." Plaintiff contends
that this term was contained in February submissions made to IBM by BMC. See Clyne
Dep./Stewart First Decl. 267:14-19 (Clyne considered BMC's total price demand to be the
February options that BMC had put on the table "[a]s a base[.]"); Stewart First Decl. Exs. 50-52.
Also, in the April 20, 2015 email, Clyne indicates that Calo already knew what BMC's price
demands were. Stewart First Decl. Ex 121 at 1 ("as you know, BMC's $ demand for all issues,
pending renewals and purchases, based on the current MLA pricing and their non-compliance
contentions, is beyond profound.").
In DCIPA, the parties disagreed about the rate to be paid by the plaintiff for certain health
care services that the defendant provided to one of the plaintiff's members. 868 F. Supp. 2d at
1052. The plaintiff argued that the defendant's conduct, which included obtaining the plaintiff's
47 - OPINION & ORDER
authorization form referring to "DMAP rates," established a contract for payment of DMAP
rates. Id. The defendant argued that because it interpreted the term "DMAP rates" to refer to a
separate DMAP rate in a different contract to which it was a party, no contract with the plaintiff
was formed because there was no "meeting of the minds" on a key term.
Judge Aiken found that the "parties' communications and overt actions clearly manifested
an objective intent that defendant would provide the relevant services and plaintiff would pay for
them at 'DMAP rates.'" Id. at 1053. She explained that the fact that the parties "may have
subjectively attributed different meanings to the term 'DMAP rates' is immaterial in regard to
whether an enforceable contract was formed." Id. Because the parties expressed their mutual
assent through conduct, an enforceable contract was formed. The fact that each had a different
subjective interpretation of the term "DMAP rates" did not preclude the formation or
enforcement of a contract. Id.
As DCIPA illustrates, disputes over the interpretation of a term are distinguishable from
the question of whether a term is so uncertain as to preclude enforcement. Given the reference in
the April 20, 2015 email to Calo's preexisting knowledge of the then-existing BMC total price
demand as well as Clyne's deposition testimony that the reference was to the earlier submissions
by BMC to IBM in February 2015, the reference in the April 20, 2015 email to "BMC total price
demand" was not so indefinite or uncertain as to preclude enforcement. Construing the evidence
in Plaintiff's favor establishes that both Clyne and Calo knew the reference and the amount at the
time. While there may be subjective disagreement about what the phrase meant, it is a
disagreement as to the interpretation of an agreed-upon term, just like what occurred in DCIPA.
As to the other compensation terms, Plaintiff agrees that Clyne did not define the "must
48 - OPINION & ORDER
haves," etc. in his April 20, 2015 email. Clyne Dep./Epstein First. Decl. 265:13-266:20. Clyne
states that he and Calo did not discuss the "must haves," etc. in their April 27, 2015 telephone
conversation. Id. at 266:21-267:7. Although he and Calo "came to an agreement," they "didn't
discuss what the criteria for achieving success under that agreement would be." Id. at 267:8-11.
Plaintiff argues that the contingency agreement is enforceable because it was up to
Clyne's "bosses" at IBM to identify the "must haves," etc., id. at 265:13-19 (stating that it was up
to IBM to define the must haves and nice to haves), which they did during the course of
negotiations. In support of its position that the must haves, etc. were clearly identified by IBM,
and thus, the argument goes, did not need further definition in the April 20, 2015 email, Plaintiff
cites to approximately twenty exhibits without any further explanation of what they show or
exactly what they support. Pl. Resp. 9, ECF 79 (citing to Exs. 160-180). Defendant notes that
each of the exhibits is dated after the April 20, 2015 email and Calo's alleged April 27, 2015
acceptance and therefore, these exhibits cannot provide a definition of the must haves, etc. at the
time any agreement was formed. Plaintiff also cites to some of Clyne's deposition testimony
which does establish that the must haves were ever actually clearly defined. Id. (citing Clyne
Dep./Stewart Second Decl. 265:4-266:20 (stating that none of the must haves or nice to haves
were defined in the April 20, 2015 email and that it was up to IBM to tell Clyne what they
were)); Id. (citing Clyne Dep./Stewart Second Decl. 273:24-277:24 (explaining that the must
haves, etc. were defined by some unspecified point because the parties had an agreement by May
29, 20155 and discussing conduct in May and July 2015)). Plaintiff additionally cites to
deposition testimony of Gargano to support his assertion that his bosses clearly defined the must
5
In the testimony, Clyne initially says March 29 but then clarifies that it was May 29.
49 - OPINION & ORDER
haves. But, his cite is to fifty-six continuous pages of Gargano's deposition testimony with no
citations to a particular page or line within that testimony or any other clarification of what is
relevant in those pages. Pl. Resp. 9 (citing to Gargano Dep. 197:21-254:23). Because it is not
the Court's burden to search through the record, see Carmen v. S.F. Unified Sch. Dist., 237 F.3d
1026, 1029 (9th Cir. 2001) (a district court is not required to comb the record to find some reason
to deny a motion for summary judgment); Local Rule 56-1(a) ("A party's factual positions must
be supported by citations, by page and line as appropriate, to the particular parts of materials in
the record") (emphasis added), this is insufficient to establish that IBM identified the must haves.
Regardless of the lack of evidentiary support, however, the point of Plaintiff's argument,
as I understand it, is that when an agreement is reached, by definition the must haves have been
identified and achieved. As a result, the fact that the April 20, 2015 email and the April 27, 2015
conversation did not result in a specific delineation of "must haves" at that time does not prevent
enforcement. That is, the resolution of the BMC Negotiations is enough to establish success and
the exact monetary value of that success is a damages issue that can resolved later as it is not at
issue in these motions.
I disagree with Plaintiff. The essential terms of the agreement must be reached at the
formation of the contract in order to have an enforceable agreement. If the compensation terms
had been for a set fee or an hourly fee, the "must haves" would be divorced from the right to
compensation and would not be an essential term. Thus, they could be defined as negotiations
progressed. But here, Clyne's offer which Calo allegedly accepted, set forth a compensation
arrangement based on success which was achieving minimum targets and "must haves." There
was no right to compensation without the must haves. Thus, Plaintiff's argument that IBM's
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later-supplied "definitions" of must haves supply a basis for enforcement, is unavailing.
Finally, Clyne's argument that terms such as "must haves" did not require further
definition because they "are not misunderstood in negotiations" suggests a "custom and usage"
argument. Industry custom and usage may be used "to establish the meaning that the parties
intended or a particular contractual term." VTech Comm'ns, Inc. v. Robert Half, Inc., 190 Or.
App. 81, 87-88, 77 P.3d 1154, 1158 (2003)). But, the "custom and usage evidence would have to
show that the parties bargained with reference to that standard[.]" Id. at 88, 77 P.3d at 1158
(explaining further that this means each party had the custom and usage in mind when using the
relevant term). Here, the only evidence is that Clyne believed it was up to IBM to define the
"must haves." Further, the April 20, 2015 email indicating that IBM still needed to establish its
minimum settlement terms and Clyne's statement that the must haves, etc. still needed to be
identified, indicates, even considering the evidence in a light most favorable to Plaintiff, that the
parties were not "bargaining" the must have terms with custom and usage in mind. Additionally,
the summary judgment record contains no evidence whatsoever as to what industry custom and
usage in this particular context would be.
Considering the evidence in a light most favorable to Plaintiff, there was mutual assent to
certain terms and thus, an agreement was initially formed by Clyne's April 20, 2015 email and
Calo's acceptance of his proposal in the phone call of April 27, 2015. However, the
compensation terms were not sufficiently defined to be enforceable. This defeats Clyne's breach
of express contract claim.6
II. Breach of the Implied Duty of Good Faith & Fair Dealing
6
Given my conclusion, I decline to address Defendant's "agreement to agree" argument.
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Plaintiff alleges that Defendant breached the covenant of good faith and fair dealing by
"depriving GEM of the benefits of the parties' bargain in an amount to be proven at trial . . . ."
Compl. ¶ 32. Defendant moves against this claim for two reasons. First, because the existence
of a valid contract is required to support a claim for breach of the implied covenant of good faith
and fair dealing, and because, according to Defendant, there is no contingency contract between
the parties, this claim must be dismissed. Defendant is correct. If no contract exists, "the duty of
good faith and fair dealing is not implicated." Brazil, 2004 WL 2457776, at *4; Saucedo v. Bank
of Am., N.A., No. 3:11-cv-00813-MO, 2011 WL 6014008, at *3 (D. Or. Dec. 1, 2011) ("In order
to allege a claim for breach of the duty of good faith and fair dealing, there must exist a valid
contract to which the duty attaches."). Because Plaintiff's breach of express contract claim fails,
this claim is dismissed.
Alternatively, even assuming the existence of a valid contingency agreement, Defendant
argues that this claim should be dismissed because the alleged "implied" terms and damages are
duplicative of those asserted to be part of the express agreement. In that situation, the actual
contract terms of the alleged contingency agreement would control, not any implied term.
Defendant is correct again.
While the implied duty of good faith and fair dealing is meant to "facilitate performance
and enforcement of the contract where it is consistent with and in furtherance of the agreed-upon
terms of the contract or where it effectuates the reasonable contractual expectations of the
parties[,]" it "cannot expand the parties' substantive duties under a contract; rather, it relates to
the performance of the contract.'" Robinson v. Charter Practices Int'l LLC, No.
3:14-cv-1736-PK, 2015 WL 1799833, at *13–14 (D. Or. Apr. 16, 2015) (internal quotation
52 - OPINION & ORDER
marks omitted); see also Zygar v. Johnson, 169 Or. App. 638, 645, 10 P.3d 326, 330 (2000) (a
party's duty of good faith in the performance of a contract cannot contradict an express
contractual term or "otherwise provide a remedy for an unpleasantly motivated act that is
expressly permitted by the contract"). As a result, "the duty of good faith and fair dealing . . .
may be implied as to a disputed issue only if the parties have not agreed to an express term that
governs that issue[.]" Id. (internal quotation marks omitted).
Plaintiff argues that Defendant's challenge to Clyne's asserted right to a contingency fee
after the 2015 OA was executed on September 30, 2015, sought to deprive Clyne of the benefits
of the bargain after he fully performed the services required of him. However, while this may or
may not be so, it does not change the nature of the claim which is based on a theory that
Defendant violated the contingency fee agreement by denying Plaintiff payment under that
agreement. Plaintiff fails to identify anything other than an express term of the contract that
Defendant allegedly breached. Defendant's conduct is nothing more than "unpleasantly
motivated" conduct opposing Plaintiff's position that he was owed a contingency fee under an
express contract. Therefore, independent of the validity of the breach of express contract claim,
the implied duty of good faith and fair dealing claim is dismissed.
III. Quantum Meruit Claim
Defendant seeks summary judgment on Plaintiff's quantum meruit claim based on two
arguments: (1) that the work Clyne did was governed by express contracts between GEM, APC,
and IBM; and (2) that independent of the GEM-APC-IBM contractual relationship, Plaintiff
cannot establish that IBM unjustly retained a $13.3 million benefit. Plaintiff seeks summary
judgment on the express contract affirmative defense because the quantum meruit claim is an
53 - OPINION & ORDER
alternative to an express contract claim and there is no evidence that the parties' agreements with
APC provided the exclusive basis for an agreement between GEM and IBM or that the
agreements between GEM and APC controlled Clyne's work on the BMC Negotiations.
A. Legal Standards
Quantum meruit is a "quasi-contractual obligation created by law without regard to the
intention of the parties in situations in which one person is accountable to another on the grounds
that otherwise he would unjustly benefit or the other would unjustly suffer loss." U.S. ex rel. Nw.
Cascade Inc. v. Colamette Constr. Co., No. 3:13-cv-01498-AA, 2014 WL 5092253, at *5 (D. Or.
Oct. 8, 2014) (internal quotation marks omitted). The elements of a quantum meruit claim are "a
benefit conferred, awareness by the recipient that a benefit has been received, and judicial
recognition that, under the circumstances, it would be unjust to allow retention of the benefit
without requiring the recipient to pay for it[.]" Oracle Am., Inc. v. Or. Health Ins. Exch. Corp.,
80 F. Supp. 3d 1168, 1176 (D. Or. 2015) (internal quotation marks omitted).
A quantum meruit claim and a breach of express contract claim are mutually exclusive.
Phelps v. 3PD, Inc., 261 F.R.D. 548, 563 (D. Or. 2009); see also Ken Hood Constr., 203 Or.
App. at 772, 126 P.3d at 1256 ("if the parties have a valid contract, any remedies for breach flow
from that contract, and a party cannot recover in quantum meruit for matters covered by the
contract."). Nonetheless, "a plaintiff may plead alternatively on an express contract and in
quantum meruit," and not be required to elect upon which theory plaintiff will rely. Kashmir
Corp. v. Patterson, 289 Or. 589, 592, 616 P.2d 468, 469 (1980). As Justice Tongue explained in
his concurring opinion in Kashmir Corp., "when any doubt exists regarding the existence or
enforceability of an express contract, or when the express contract fails to provide the basis for
54 - OPINION & ORDER
payments to be made under the contract, a plaintiff may plead alternatively on an express contract
and in quantum meruit without being required to elect." Id. at 594, 616 P.2d at 471.
B. APC-IBM-GEM Agreements
Defendant argues that the MSA between APC and GEM and the GEM SOW governed
the remuneration for Clyne's work on the BMC Negotiations and as a result, regardless of the
merits of the breach of express contract claim, Plaintiff cannot prevail on the quantum meruit
claim. To succeed, Defendant must establish that no reasonable juror could conclude that Clyne
could work on the BMC Negotiations independent of the APC-related contracts.
Defendant is correct that the MSA contains a non-compete provision prohibiting the
Supplier (GEM) from establishing a sales relationship or from providing services to "the Client"
(IBM in this instance), except through APC during the term of the MSA and for one year
thereafter. And, because the MSA was executed in late January 2014 and had a two-year term, it
was still effective in 2015 when Clyne sent his April 20, 2015 email to Calo regarding a
contingency agreement. Defendant is also correct that Clyne relied on the separate January 2014
Confidentiality/Non-Compete Agreement to govern the protection of IBM's information during
the BMC Negotiations. And, Defendant is correct that before Clyne began work on the BMC
Negotiations, he worked on four different projects under his APC contracts.
Because the January 2014 Confidentiality/Non-Compete Agreement was not particular to
any APC client or any particular project, a reasonable juror, when viewing the evidence in a light
most favorable to Plaintiff, could conclude that Clyne reasonably believed that this was a standalone NDA allowing him to work on the BMC Negotiations for IBM without committing to
performing the work through APC. And, when he was told that IBM needed an IBM-APC
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confidentiality agreement, he was also told that IBM would locate that agreement because IBM
did not believe Clyne would have a copy of it. Although the evidence can be construed to
suggest that by virtue of the January 2014 Confidentiality/Non-Compete Agreement being an
APC-GEM document, it should have suggested to Clyne that his work on the BMC Negotiations
would be under APC's auspices, that is not the only reasonable conclusion to be drawn. Given
that IBM remained an APC client and that the January 2014 Confidentiality/Non-Compete
Agreement was not project specific, a reasonable person could have understood that the NDA
provisions could apply to work done for IBM without APC contracts governing payment.
As to the MSA, that Plaintiff might be in violation of a non-compete agreement with
APC does not mean that Clyne's belief about making an independent agreement with IBM was
unreasonable. First, there is evidence that the non-compete provision is inapplicable given that
IBM introduced Plaintiff to APC and not the other way around. See Roberts Dep./Stewart First
Decl. 90-92 (APC's Roberts testified in deposition that the "Finder's Fee" penalty in the noncompete provision in the MSA would not apply because APC did not introduce GEM to IBM).
Second, even if that provision did apply, Clyne may have viewed the possibility of a
thirty-percent Finder's Fee as a cost of doing business with IBM on what Clyne believed could be
a very lucrative payout. His "Finder's Fee" would be either zero or thirty-percent of several
million dollars. While the Finder's Fee is not insignificant, it does not by itself compel a
conclusion that the APC contracts governed Clyne's work on the BMC Negotiations.
Defendant also again relies on Clyne's April 21, 2015 statement in his email to Gargano
about APC being his "vendor/employer of record" and Hagen's statements that IBM did not want
to disrupt Clyne's contractor status and further, that any arrangement he had with IBM needed to
56 - OPINION & ORDER
go through IBM Procurement. For the reasons previously explained, these statements do not
establish as a matter of law that the APC contracts governed Clyne's work on the BMC
Negotiations.
Defendant argues that there is no support in the relevant documents for Plaintiff's
argument that the APC contracts were limited to IBM's American Express account. But, that
overlooks Clyne's testimony that his continued work for Cohen was for American Express and
thus, he kept working on projects in addition to the BMC Midrange negotiations under the APC
contracts. Because the BMC Negotiations he undertook at Calo's direction were not related to
American Express, the argument then is whether it was reasonable for Clyne to believe he could
negotiate a different contract with IBM but using the January 2014 Confidentiality/Non-Compete
Agreement which he viewed as a stand alone document, independent of the MSA and GEM
SOW. For all of the reasons discussed, when the evidence is viewed in Plaintiff's favor, it is
possible for a reasonable juror to agree with Plaintiff.
To succeed on its motion for summary judgment against the express contract affirmative
defense, Plaintiff must establish that as a matter of law, the APC contracts did not govern Clyne's
compensation for his work on the BMC Negotiations. But, just as there are reasonable inferences
supporting Plaintiff's theory, there are reasonable inferences supporting Defendant's theory. The
facts regarding the relationship of the IBM-APC-GEM contracts to the BMC Negotiations are
capable of competing, reasonable inferences. As a result, Plaintiff's motion is denied.
B. Unjust Benefit
As noted above, the crux of a quantum meruit claim is the injustice resulting from the
defendant receiving a benefit without paying for it. Injustice may be found in one of three
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circumstances: "'(1) the plaintiff had a reasonable expectation of payment; (2) the defendant
should reasonably have expected to pay; or (3) society's reasonable expectations of security of
person and property would be defeated by non-payment.'" F.D.S. Marine, LLC v. Shaver Transp.
Co., No. 00-1245-ST, 2001 WL 34045718, at *16 (D. Or. May 25, 2001) (quoting Yanney v.
Koehler, 147 Or. App. 269, 279, 935 P.2d 1235, 1241 (1997)).
All of Defendant's arguments are based on its view of the facts. Defendant argues that the
first circumstance is not established here because there is no reasonable expectation on the part of
Plaintiff, Defendant, or society of a $13.3 million contingency fee. In support, Defendant cites to
the same evidence it relies on to contend that Clyne knew any contract with IBM needed to go
through IBM Procurement and that his non-compete with APC prohibited him from doing
independent work for IBM. But, this ignores that the competing view, as previously discussed, is
a reasonable conclusion based upon the facts and thus, Defendant cannot defeat this claim at
summary judgment. Defendant also argues that the failure to define key terms defeats any
reasonable expectation by Plaintiff that it would be paid based on a contingency method. But,
this ignores that quantum meruit is an alternative to the breach of express contract claim and
thus, the fact that the "must haves" may not have been sufficiently defined to enforce the
agreement does not defeat a reasonable expectation that Plaintiff would be paid based on a
percentage of savings achieved through Clyne's negotiation work.
Defendant also relies on the hourly rate that Plaintiff was paid under the APC contracts.
In Defendant's view, that evidence conclusively establishes that the $13.3 million sought by
Plaintiff is not the reasonable value of Clyne's services. Instead, the value is approximately
$660,000 based on his hourly rate multiplied by the number of hours. But, when the evidence is
58 - OPINION & ORDER
viewed in Plaintiff's favor, there is no dispute that the BMC Negotiations concerned a contract
with millions of dollars, if not more, at stake. If the factfinder determined that the parties had
indeed agreed to a contingency payment, the reasonable value of Clyne's services could be higher
than the $660,000 Defendant contends is the reasonable value based on a $220 hourly rate.
Finally, Defendant argues that because it has been willing to pay the $220 hourly rate
since October 2015, a jury could not conclude that IBM has retained any "unjust gains." I reject
this argument because once again, when viewing the evidence in Plaintiff's favor, a jury could
conclude that the reasonable value of Clyne's services is somewhere between the $660,000
offered by Defendant and the $13.3 million sought by Plaintiff.
Defendant's motion directed to the quantum meruit claim is denied.
IV. Promissory Estoppel
In its Fourth Claim for Relief, Plaintiff alleges that Defendant represented that it would
pay Plaintiff based on 1.2% of the savings and avoided costs that IBM realized from Clyne's
successful efforts in resolving the dispute between IBM and BMC, and that Defendant intended
that Plaintiff rely upon Defendant's representations. Compl. ¶ 39. Plaintiff also alleges it acted
in reliance upon Defendant's representations to Plaintiff's economic damage in an amount of at
least $13,388,402. Id. ¶ 40.
Promissory estoppel is not a separate cause of action, even though a party may plead it
separately as Plaintiff has done here. Kraft v. Arden, No. CV 07-487-PK, 2008 WL 4866182, at
*10 & n.4 (D. Or. Nov. 7, 2008). Instead it "'is a subset of and a theory of recovery in breach of
contract actions.'" Id. (quoting Neiss v. Ehlers, 135 Or. App. 218, 227-28, 899 P.2d 700, 706
(1995)). While a theory of recovery in such claims, "[p]romissory estoppel does not apply when a
59 - OPINION & ORDER
valid contract exists." Id..
In Oregon, courts "use the term promissory estoppel to refer to two similar but distinct
concepts." Lash v. PNC Bank, N.A., No. 3:14-cv-01791-SI, 2015 WL 1319321, at *3 (D. Or.
Mar.24, 2015). In the first, "'actions taken in reliance on a definite promise may serve as a
substitute for consideration[.]'" Id. (quoting Staley v. Taylor, 165 Or. App. 256, 261 n.5, 994
P.2d 1220, 1223 n.5 (2000)). In the second application of the theory, "a party acts in reliance on
an indefinite promise to create a binding obligation." Id. In this situation, only reliance damages
are allowed. Id.
Plaintiff's Complaint does not clearly assert which concept of promissory estoppel it
relies on. In its response to Defendant's motion, however, Plaintiff relies on cases supporting the
second concept of promissory estoppel allowing recovery for "promises that are indefinite or
incomplete[.]" Neiss, 135 Or. App. at 228, 229, 899 P.2d at 707 ("[t]he fact that a promise is
indefinite, incomplete or even incapable of enforcement according to its own terms, does not
mean that no redress should be possible for the damage that directly flows from the promisee's
reliance on the promise"). Thus, I construe Plaintiff's claim to assert only that type of promissory
estoppel.
A promise is enforceable under a promissory estoppel theory if there is "'(1) a promise;
(2) which the promisor could reasonably foresee would induce conduct of the kind that occurred;
(3) actual reliance on the promise; and (4) a substantial change in position by the party seeking to
enforce the promise."" Lash, 2015 WL 1319321, at *3 (quoting Natkin & Co. v. H.D. Fowler
Co., 128 Or. App. 311, 314, 876 P.2d 319, 321(1994)). In other words, "promissory estoppel
derives from a promise that induces reasonably foreseeable, detrimental reliance[.]" Barnes v.
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Yahoo!, Inc., 570 F.3d 1096, 1108 (9th Cir.), as amended (Sept. 28, 2009).
Defendant argues that this claim requires dismissal because there is no evidence of
reasonably foreseeable inducement, no actual reliance, and no substantial change in position. I
reject Defendant's position that the promise in this case is too indefinite to support the element of
reasonably foreseeable inducement. Kraft, 2008 WL 4866182, at *11 ("'the facts of specific
cases may be such that the promise is not only too indefinite for enforcement as a contract, but is
so illusory that it could not have been acted on or foreseen as an inducement to action.'") (quoting
Neiss, 135 Or. App. at 229, 899 P.2d at 707). Although the agreement was too indefinite
regarding the "must haves," etc., to support its enforcement as a contract, it still supports a
promissory estoppel theory because when viewing the evidence in Plaintiff's favor, the parties
agreed on the fundamental principles of a 1.2% commission payment based on a settled contract
with BMC that was favorable to IBM with a measurable monetary value.
Whether Defendant could reasonably foresee that its promise would induce Plaintiff to
continue performing work on the BMC Negotiations and whether Plaintiff actually relied on that
promise in doing that work are closer questions. As Defendant notes, Clyne began work on the
BMC Negotiations six weeks before the April 20, 2015 email and the April 27, 2015 phone call
in which the contingency agreement was allegedly formed. Clyne himself sought out the work.
There is no indication in Clyne's April 20, 2015 email that he would stop work if an agreement
were not reached. Given that Clyne was already performing the work, his position that IBM
reasonably foresaw that he would rely on its promise to pay him the contingency rate is tenuous.
Nonetheless, for the purposes of this Opinion, I assume that there are issues of fact as to the
reasonably foreseeable inducement element of the promissory estoppel element.
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As to actual reliance, the cases Plaintiff cites in its briefing for the proposition that
continued employment supports the reliance element, are distinguishable or inapposite. Moro v.
Oregon, 357 Or. 167, 198, 351 P.3d 1, 21-22 (2015) (challenge by Oregon PERS members to
legislation reducing retirement benefits; no promissory estoppel claim or theory made or
discussed), petition for cert. filed, (U.S. Apr. 10, 2017) (No. 16-1209); Spitznass v. First Nat'l
Bank, 269 Or. 676, 688, 525 P.3d 1318, 1324 (1974) (retirement benefits case stating in dicta
that in certain circumstances, continued employment might provide consideration for an implied
promise to pay a pension; by discussing consideration, court appears to be discussing the
"consideration" theory of promissory estoppel, not the indefinite promise theory), Neiss, 135 Or.
App. at 229, 900 P.2d at 707 (the plaintiff gave up an optical practice in Portland and moved to
Ashland in reliance on the defendant's promise regarding a future ownership opportunity; no
discussion of whether continuing employment supports the reliance element of the claim).
However, in Kraft, Judge Papak discussed several cases and remarked that "the courts
found employees foreseeably relied on their employers's promises by taking or remaining on the
job." Kraft, 2008 WL 4866182, at *12. Although one of the cases he discussed was Neiss,
which is distinguishable, and others had to do with retirement plans, I accept that Plaintiff can
show actual reliance by the fact that he continued working on the BMC Negotiations after April
2015.
Nonetheless, I grant Defendant's motion because there is no evidence that Plaintiff made
any change in position as a result of Defendant's promise. In Kim v. Prudential Financial, Inc.,
No. 3:15-cv-02029-HZ, 2016 WL 6803082, at *5 (D. Or. Nov. 14, 2016), I explained that
"[g]eneral forbearance from seeking job opportunities is not sufficient to show detrimental
62 - OPINION & ORDER
reliance[.]" Id. In Kim, I also discussed Houston v. Yoncalla School Dist. No. 32, No.
6:13-cv-01318-AA, 2014 WL 3514984 (D. Or. July 11, 2014), where the plaintiff worked as a
substitute teacher in reliance on a promise that the work would lead to a teaching contract. Id.
When the defendant offered the teacher a contract for a substantially lower salary than the teacher
had been led to believe would be offered, the teacher brought a promissory estoppel claim.
Houston, 2014 WL 3514984, at *1. Judge Aiken dismissed the plaintiff's claim because the
plaintiff, among other things, failed to allege that he rejected other salaried teaching positions or
that he lost employment opportunities when he served as a substitute and thus failed to allege a
sufficient change in position. Id. at *12.
Plaintiff here provides no evidence to support the detrimental reliance/substantial change
in position element. The undisputed evidence is that Clyne had no other work and had begun
performing work on the BMC Negotiations before Defendant promised the 1.2% contingency
compensation. There is no evidence that Clyne or Plaintiff rejected other jobs or otherwise lost
employment opportunities during the time he was working on the BMC Negotiations. Without
any evidence of a substantial change in position made in reliance on Defendant's promise, the
only reasonable inference is that Clyne was committed to working on the BMC Negotiations
regardless of the promise. As a result, he does not create an issue of fact on the promissory
estoppel claim and it is dismissed.
V. Fraud Claim
Plaintiff alleges that the representation made by Defendant that "it would compensate
GEM on a 'bounty system' based upon a percentage of all savings and avoided costs that it
obtained from a negotiation resolving IBM's dispute with BMC was knowingly false at the time
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it was made, or was made with reckless disregard for its truth or falsity." Compl. ¶ 46. Plaintiff
further alleges that at all material times, Plaintiff was ignorant of the falsity of the representation.
Id. ¶ 47. Plaintiff asserts that IBM's representation was material and IBM intended for Plaintiff
to rely on its truth when it made the representation. Id. ¶ 48. According to Plaintiff, Plaintiff not
only had the right to rely on the truth of the representation, but actually relied on it and to its
detriment, all to its economic damage in the amount of $13,388,402. Id. ¶ 49.
Defendant moves for summary judgment on the fraud claim based on two arguments.
First, it contends that it did not promise to compensate Plaintiff on a contingent basis. Second, it
contends that even if it had made that promise, there is no evidence that at the time the alleged
promise was made, Calo lacked the intent that IBM would perform, or stated conversely, there is
no evidence that Calo intended that IBM not perform. Defendant also argues that there is no
evidence that any promise was made with reckless disregard as to whether IBM could or could
not in fact perform. Defendant adds that for the reasons explained in connection with the
promissory estoppel claim, Plaintiff cannot carry its burden to show justifiable reliance.
Under Oregon law, the elements of a fraud claim are: "(1) a representation; (2) its falsity;
(3) its materiality; (4) the speaker's knowledge of its falsity or ignorance of its truth; (5) his intent
that it should be acted on by the person and in the manner reasonably contemplated; (6) the
hearer's ignorance of its falsity; (7) his reliance on its truth; (8) his right to rely thereon; and (9)
his consequent and proximate injury." Webb v. Clark, 274 Or. 387, 391, 546 P.2d 1078, 1080
(1976) (internal quotation marks omitted). A plaintiff must establish each element of fraud by
clear and convincing evidence. Id. Intent to defraud may be established by circumstantial
evidence. Lane Cnty. Escrow Serv., Inc. v. Smith, 277 Or. 273, 280, 560 P.2d 608, 612 (1977).
64 - OPINION & ORDER
Additionally, Plaintiff may establish fraud by showing that "at the time of the making of the
promise, there was no present intention of performance or, alternatively, that the promise was
made with reckless disregard as to whether the promissor could or could not perform." Webb,
274 Or. 387, 393 n. 2, 546 P.2d at 1080 n.2 (emphasis added).
Plaintiff argues that on summary judgment, when viewing the evidence in its favor, a
reasonable juror could conclude that Calo accepted Clyne's April 20, 2015 proposal but secretly
intended not to be bound until further steps were taken by legal, finance, and IBM Procurement
which she then failed to initiate. Alternatively, Plaintiff argues that the evidence supports an
inference that Calo was reckless about whether IBM could be bound absent approval by those
departments. In support, Plaintiff notes that Calo never contacted anyone in any of those
departments, did not communicate with APC, and never told Clyne that further steps were
required for the agreement to be enforceable. Further, Plaintiff notes that in response to Clyne's
July 10, 2015 email discussing the negotiations and expressing his concern about how he was
going to get paid his "contingency fee" given the status of the negotiations, Calo responded with
an email stating that she was "studying all you sent" and said nothing about the contingency
agreement, thus lulling Plaintiff into believing an agreement was in place.
Plaintiff also notes that Calo did not affirmatively deny the existence of a contingency
agreement even in the face of Plaintiff submitting no hours for payment or no travel
reimbursement requests. Plaintiff additionally suggests that the evidence shows Calo was
motivated to be "strategically ambitious" and to stay silent about the lack of an agreement
because she lacked a budget to pay for Clyne and by allowing Clyne to operate under the
assumption that he had a contingency agreement, she had zero risk of payment if negotiations
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failed. Based on all of these facts, Plaintiff argues that a factfinder could determine that Calo
never intended to pay on a contingency arrangement at the time she entered into the agreement
with Clyne, or that at a minimum, she made the promise to pay him a contingency with reckless
disregard as to whether IBM would or would not perform as promised.
Defendant again argues, as it has in regard to other claims, that the evidence establishes
that Clyne knew of the legal, finance, and IBM Procurement requirements and further, that
because Calo knew that Clyne had worked as an IBM contractor previously, she reasonably
concluded that Clyne was aware of IBM's "onboarding" and contracting requirements. This,
Defendant contends, undermines any inference of fraudulent intent. Further, Calo's failure to
follow up with any of the internal IBM departments is because she never believed she and Clyne
had an agreement. Defendant also notes that the July 10, 2015 email was multiple pages and
contained only one sentence regarding the contingency agreement. Moreover, because it was not
Calo's responsibility to receive submitted hours by Clyne if he were working through APC, the
lack of such submission does not allow for a reasonable inference of fraudulent intent.
I agree with Plaintiff that when the facts are construed in Plaintiff's favor, a reasonable
factfinder could conclude that Calo acted with fraudulent intent or in reckless disregard of the
truth. As explained previously, the evidence does not conclusively establish that Clyne knew of
the legal, finance, and IBM Procurement "onboarding" requirements. The July 10, 2015 email
was not "multiple pages" long as Defendant suggests. It did have multiple paragraphs and the
reference to the contingency agreement was only one sentence. But, that sentence began a new
paragraph and it is not hidden or buried in other text as Defendant implies. Additionally, the
reasonableness of Calo's belief about Clyne's knowledge of "onboarding" procedures and the
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reasonableness of her belief about whether there was or was not an agreement are issues reserved
for the factfinder.
Calo's silence in the face of Clyne's April 20, 2015 proposal and in the face of the
reference to the contingency fee agreement in the July 10, 2015 email could reasonably suggest
that she never intended to pay Clyne as promised. Her failure to contact IBM Procurement, legal,
or finance herself, knowing as she herself states that approval by these departments would be
required, is capable of creating that same inference. While Defendant's alternative interpretation
of the evidence is also reasonable, it is not the only one and thus, on summary judgment, because
a reasonable factfinder could conclude that Calo agreed to pay Clyne 1.2% on a contingency
basis without the intent to do so, or that her promise was made in reckless disregard of whether
IBM could or could not pay Clyne, Plaintiff has created an issue of fact on the issue of fraudulent
intent.
Defendant next argues that Plaintiff fails to establish justifiable reliance. In a 2015
decision, the Oregon Court of Appeals explained that
[t]he requirement that a plaintiff's reliance be justified serves as a balance
between, on the one hand, the policy that a person who intentionally deceives
another should not be allowed to profit from the deception and, on the other hand,
the recognition that the person deceived, as an autonomous individual, should be
responsible for protecting his or her own interests when making a decision.
Vukanovich v. Kine, 268 Or. App. 623, 634, 342 P.3d 1075, 1083 (internal quotation marks
omitted), opinion adhered to as modified on reconsideration, 271 Or. App. 133, 349 P.3d 567
(2015). The Vukanovich court continued:
Whether reliance on an alleged misrepresentation is justifiable turns on the totality
of the parties' circumstances and conduct. Among other things, for reliance to be
justifiable, the party claiming reliance must have taken reasonable precautions to
safeguard [his or her] own interests under the particular circumstances of the case.
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What precautions a person must take to protect his or her own interests turns on
the nature of the person's relationship with the person making the alleged
misrepresentation, and that person's experience and sophistication with the type of
transaction at issue, as well as with the subject matter of the misrepresentation.
Id. at 634-35, 342 P.3d at 1083 (citations and internal quotation marks omitted). In another
decision, the Oregon Court of Appeals explained that
[r]easonableness is measured in the totality of the parties' circumstances and
conduct. For example, if there is a naive and unsophisticated plaintiff on one side
of the equation and an unscrupulous defendant who made active
misrepresentations of fact on the other, a court might well conclude that, although
a more sophisticated party would not have taken at face value the false
representations of the defendant, that particular plaintiff was justified in doing so.
Merten v. Portland Gen. Elec. Co., 234 Or. App. 407, 417, 228 P.3d 623, 629 (2010) (internal
quotation marks omitted).
For the reasons previously explained, when the evidence is considered in a light most
favorable to Plaintiff, it does not establish as a matter of law that Clyne actually knew that his
work on the BMC Negotiations was subject to the APC contracts, that he knew a contingency fee
agreement had to go through IBM Procurement or that the agreement he reached with Calo
would not go through IBM Procurement, or that he knew how the hiring of contractors worked.
It is possible to construe the evidence that way, but it is not the only reasonable conclusion.
Moreover, both parties are sophisticated negotiators and Clyne had allegedly been told by
Patterson that he could trust Calo to the point of accepting an oral agreement. Given that the
standard is reasonableness and is determined based on the totality of both parties' conduct, this
issue is reserved for the factfinder because reasonable but competing inferences may be drawn.
VI. Estoppel/Waiver Affirmative Defenses
Having resolved Defendant's motion and Plaintiff's motion as to the express contract
68 - OPINION & ORDER
affirmative defense, I turn to Plaintiff's motion against the estoppel and waiver affirmative
defenses. In its Answer, Defendant raises "estoppel/waiver" as a single affirmative defense even
though they are distinct concepts. Defendant generally asserts that at the time Clyne began
working on the BMC Negotiations, Clyne knew that he had a preexisting contractual relationship
with IBM through APC and that any different arrangement would have to be negotiated and
approved by IBM Procurement. Answer ¶ 57. Defendant then specifically cites to Clyne's
emails to Gargano stating that it was possible the "engagement" will not go through APC and
further that APC was his vendor/employer of record and if that should change, he would notify
Gargano immediately. Id. Defendant alleges that neither Clyne nor Plaintiff alerted Defendant
to any change regarding their relationship with APC and they did not attempt to negotiate an
alternative arrangement with IBM Procurement. Id. at ¶ 59. IBM asserts that in reliance on
Clyne's statements and conduct, it allowed Plaintiff to continue to perform work on the BMC
Negotiations. Id. at ¶ 60. As a result, IBM contends that Plaintiff and Clyne are estopped from
recovering compensation pursuant to any contract other than the APC contracts. Id. at ¶ 61.7
A. Estoppel
A party may rely on the doctrine of estoppel to preclude the other party from asserting a
right to recovery that the second party would have otherwise had if (1) the second party, through
conduct or statements, made a false representation; (2) the party making the representation had
7
Other than the heading, the affirmative defense makes no mention of waiver. However,
in its response to the motion, Defendant more specifically asserts that Clyne, both expressly and
by implication, waived two rights: (1) any right to contract directly with IBM; and (2) any right
to a change order or amendment to the GEM SOW. Def. Resp. 7-8, ECF 81. Later in its
Response, Defendant restates the second alleged waiver this way: Plaintiff "waived any right to
assert that because GEM did not receive a change order to the SOW for the BMC Negotiations[,]
it was not obligated under the APC contracts to perform the work." Id. at 14.
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knowledge of the true facts; (3) the other party is ignorant of the true facts; (4) the party making
the representation intended for the other party to rely on it; and (5) the other party was induced to
act upon the false representations. Day v. Advanced M & D Sales, Inc., 336 Or. 511, 518-19, 86
P.3d 678, 682 (2004). Applying the elements to this case, Defendant may estop Plaintiff from
payment based on a contingency agreement if (1) Plaintiff, through conduct or statements, made
a false representation that his work on the BMC Negotiations was under the APC contracts; (2)
Plaintiff knew the true facts (that he was not working under the APC contracts); (3) Defendant
was unaware of the true facts; (4) Plaintiff, in making the false representation, intended for
Defendant to rely on it; and (5) Defendant was induced to act upon the false representation by
continuing to have Plaintiff perform work on the BMC Negotiations.
In support of its motion, Plaintiff argues that the GEM-APC contracts did not prohibit
Plaintiff from directly contracting with IBM, prior approval by IBM Procurement was not a
precondition for Plaintiff's contingent fee services, and Defendant's acquiescence and failure to
timely object to Plaintiff's contingent fee proposal ratified that contingent fee agreement. In
response, Defendant argues that when viewing the evidence in a light most favorable to it, there
are at least issues of fact regarding the parties' contractual relationship with APC and thus,
summary judgment is inappropriate.
I agree with Defendant. As discussed, the facts are capable of supporting Plaintiff's
theory of the case regarding the relationship of the APC contracts to Clyne's work on the BMC
Negotiations. But, the same facts are just as capable of supporting Defendant's theory of the case
when drawing the inferences in Defendant's favor in analyzing Plaintiff's motion. A factfinder
could reasonably conclude that the APC contracts did control Clyne's work on the BMC
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Negotiations.
Additionally, to support a ratification by acquiescence argument, Plaintiff would need to
establish that Calo's silence about approval from IBM Procurement, legal, or finance was made
with knowledge that such approval was required which in this case would be triggered by
knowledge that a contingency agreement was formed. See Summit Props., Inc. v. New Tech.
Elec. Contractors, Inc., No. CV-03-748-ST, 2004 WL 1490327, at *16 (D. Or. July 2, 2004)
(under Oregon law, "[s]ilent acquiescence with full knowledge of the material facts may amount
to [an implied] ratification if continued for an unreasonable length of time[.]") (emphasis added;
internal quotation marks omitted), adopted by J. Haggerty, 2004 WL 2642345 (D. Or. Nov. 19,
2004). Because, when crediting Calo's testimony as true, which must be done in analyzing
Plaintiff's motion, she had no understanding from Clyne's April 20, 2015 email and her April 27,
2015 conversation with Clyne that they had agreed to anything, Plaintiff cannot rely on a
ratification theory in support of its summary judgment motion.
Plaintiff raises an interesting argument in its Reply. The evidence is undisputed that Calo
and Gargano did not discuss Clyne's status as an APC contractor or his compensation on a
contingency agreement in connection with the work on the BMC Negotiations until after
September 30, 2015. Gargano and Clyne discussed the work and the NDA issues directly. Calo
and Clyne discussed the work and Calo received the April 20, 2015 email regarding the
contingency agreement and discussed it with Clyne the next week. But, Gargano and Calo did
not communicate about Clyne's NDA, his compensation generally or specifically for the BMC
Negotiations, or his work for IBM being through APC. Calo had no knowledge of Clyne's
communications with Gargano which are the foundation for Defendant's estoppel defense.
71 - OPINION & ORDER
Plaintiff argues that based on these undisputed facts, Defendant cannot show that Calo actually
relied on Clyne's allegedly false statements that his work on the BMC Negotiations was under the
APC contracts. As a result, Defendant cannot establish that the allegedly false statements
induced Calo into allowing Plaintiff to continue to work on the BMC Negotiations.
This argument was raised for the first time in Plaintiff's Reply and was not sufficiently
briefed by both parties to allow the Court to fully analyze it. I agree with Plaintiff that its
argument makes intuitive sense. But, I deny the summary motion as to the estoppel affirmative
defense at this time. Plaintiff may renew the argument later with additional authority and when
Defendant has an opportunity to respond.
B. Waiver
"Waiver is the intentional relinquishment or abandonment of a known right." Ionian
Corp. v. Country Mut. Ins. Corp., 88 F. Supp. 3d 1187, 1199 (D. Or. 2015). "Waiver may be
implied by conduct, but there must be clear, decisive and unequivocal conduct which indicates a
purpose to waive the legal rights involved." Id. (internal quotation marks omitted).
In its response to Plaintiff's motion, Defendant raises two waiver arguments. Defendant
first contends that the APC contracts with Plaintiff or Clyne constitute an effective waiver of
Plaintiff's right to payment under a contingency agreement because those contracts prohibited
Plaintiff from directly contracting with IBM for work.
Defendant makes a second waiver argument which is less clear. As I understand it,
Defendant contends that Plaintiff has waived its right to argue that the work on the BMC
Negotiations was not under the APC contracts because there was no new statement of work
(SOW) or a change order to a SOW. That is, according to Defendant, Plaintiff waived its right to
72 - OPINION & ORDER
contend that without a new or amended SOW or change order to the SOW, the APC contracts did
not govern and Clyne was free to perform the BMC Negotiations work under a contingency
agreement. The conduct allegedly constituting this waiver is (1) Plaintiff's failure to initiate a
new SOW or change order itself which Defendant contends Plaintiff was obligated to do under
the APC contracts, and (2) before the BMC Negotiations, Plaintiff submitted hours for four
different projects under Plaintiff's APC contracts and the existing SOW without requesting a
change order or an amended SOW.
As to the first waiver argument, I need not spend much time detailing the non-compete
provisions in either the MSA or the January 2014 Confidentiality/Non-Compete Agreement.
Assuming both of the non-compete provisions applied to Plaintiff at the time Clyne started work
on the BMC Negotiations, it cannot be disputed that these were agreements between APC and
Plaintiff/Clyne. IBM was not a party to either agreement. Plaintiff argues that because IBM was
not a third-party beneficiary to these agreements, it cannot enforce them against Plaintiff. As a
result, Defendant cannot rely on these agreements to contend that Plaintiff voluntarily
relinquished a known right that it had vis-à-vis Defendant. Defendant dismisses this argument by
explaining that it is not trying to enforce these agreements against Plaintiff but rather, the very
fact that Plaintiff signed agreements pledging it would not compete with APC for an APC client's
business is a waiver of Plaintiff's right to contract directly with IBM.
I disagree with Defendant. Even if Defendant is not actually seeking to enforce the noncompete provisions against Plaintiff, Defendant cannot show that by signing non-compete
agreements with APC, Plaintiff intentionally relinquished a right to contract directly with IBM.
The non-compete provisions exist to protect APC, not IBM. Although waiver may be implied by
73 - OPINION & ORDER
conduct, the conduct must clearly, decisively, and unequivocally show that Plaintiff intended to
waive a right to make an independent payment agreement with IBM. As a matter of law, signing
agreements with one party is not clear, decisive, and unequivocal conduct of an intent to
relinquish a right against another party. As a result, Defendant cannot prevail on this part of its
waiver defense.
Defendant's second waiver argument is based on Defendant's reading of provisions in the
MSA which essentially state that (1) an APC Supplier, meaning Plaintiff, is not obligated to
provide services unless it accepts a SOW and APC authorizes the work under a Work
Authorization; (2) APC will issue a SOW which the Supplier/Plaintiff is under no obligation to
accept; (3) modifications to SOWs may occur when the Client/IBM or APC request a change to
the terms or scope of a particular engagement which may impact a particular SOW and Work
Authorization; and (4) if this occurs, the Supplier/Plaintiff must promptly review the requested
change and notify APC of the impact of the changes. Stewart First Decl. Ex. 3 at 1, 2, ¶¶ 2.2,
2.3.
Defendant argues that read together, these MSA provisions establish that "the onus was
on GEM, as the Supplier, to timely inform APC if GEM believed that a request for work by IBM
was outside the terms or scope of the engagement in a way that might impact GEM's SOW or
Work Authorization." Def. Resp. 12-13. This construction is inconsistent with the plain
language of the provisions. Section 2.3 of the MSA unambiguously states that the "Client [IBM]
or APC may request a change to terms of an Engagement which may impact a particular
Statement of Work and Work Authorization." Stewart First Decl. Ex. 3 at 2, ¶ 2.3. Only then
does the Supplier have an obligation to review the changes and discuss any impacts with APC.
74 - OPINION & ORDER
The record here is devoid of any evidence that IBM or APC requested a change to the terms of
Plaintiff's "Engagement" and thus, Plaintiff was under no obligation to notify APC of any change
or impact of such change. Therefore, Plaintiff's failure to initiate a new SOW or change order
does not constitute a waiver of its right to argue that a new SOW or change order was required
for the BMC Negotiations work to be governed by the APC contracts.
Defendant next argues that Clyne's work on four different projects under his existing
SOW without requesting a change order or amended SOW establishes Plaintiff's voluntary
relinquishment of the right to argue that a change order or amendment to the SOW was required
for the BMC Negotiations work to be governed by the APC contracts. This argument fails for
the same reason as the previous argument: the MSA does not require Plaintiff to initiate a
change order or an amendment to the SOW. Therefore, Plaintiff's acceptance of new
assignments directed by Cohen without requesting a change order does not waive its right to
receive a new SOW or change order in the future. Because the contract language does not put the
burden on Plaintiff, IBM cannot show that Plaintiff's work under the APC contracts without a
change order constitutes an intentional relinquishment of a right to receive a change order or
SOW amendment in the future.
Finally, Defendant suggests that because Clyne worked for six weeks on the BMC
Negotiations before sending his April 20, 2015 email to Calo, he was therefore working under
the APC contracts during that time, and as a result Plaintiff waived its right to argue that a
change order or new SOW was required for the BMC Negotiations work to be governed by the
APC contracts. However, the undisputed evidence is that Clyne talked to Patterson about a
contingency fee agreement before he began work on the BMC Negotiations. With that, his initial
75 - OPINION & ORDER
six weeks of work on the BMC Negotiations is not clear, decisive, and unequivocal conduct
capable of establishing an intentional relinquishment of a right to negotiate a contingency
agreement with IBM for the work he performed on the project. Plaintiff's motion for summary
judgment on the waiver affirmative defense is granted.
CONCLUSION
Defendant's motion for summary judgment [71] is granted as to the breach of express
contract claim, the implied covenant of good faith and fair dealing claim, and the promissory
estoppel claim. The motion is denied as to the quantum meruit and fraud claims. Plaintiff's
motion for partial summary judgment [76] is granted as to the waiver affirmative defense. The
motion is denied as to the express contract and estoppel affirmative defenses and is denied as
moot as to the unclean hands affirmative defense. Based on the parties' representations in the
briefing, Plaintiff's accounting claim and Defendant's unclean hands affirmative defense are
dismissed.
IT IS SO ORDERED.
Dated this
day of
Marco A. Hernandez
United States District Judge
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, 2017
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