HILTON v. PORCH.COM et al

Filing 113

MEMORANDUM OPINION resolving 91 defendant Porch.com's motion in limine. Signed by Judge David S. Cercone on 12/3/20. (mwm)

Case 2:17-cv-00274-DSC Document 113 Filed 12/03/20 Page 1 of 7

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA

ZACHARY HILTON,
Plaintiff,
v.
PORCH.COM and MATTHEW
EHRLICHMAN,
Defendants.

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2:17cv274
Electronic Filing

MEMORANDUM OPINION
Zachary Hilton commenced this action seeking earnings from commission-based sales
allegedly due from his previous employer, Porch.com ("Porch"), under a contract of
employment. Plaintiff's complaint sets forth causes of action for breach of contract and recovery
for that breach under Pennsylvania's Wage Payment and Collection Law, 43 P.S. §§ 260.1 –
260.12. Presently before the court is defendant Porch's motion in limine.1 The motion seeks to
exclude the testimony of plaintiff's damages expert, forensic accountant James Loeffler. After
careful consideration of the parties' submissions in conjunction with the motion, the court has
determined that the trial will be bifurcated into two phases. Phase one will consist of and be
limited to the jury's consideration of the specific interrogatories necessary to establish defendant
Porch's liability to plaintiff in the form of breach of the employment contract's commission
compensation provision; phase two will encompass the damages, if any, that defendant Porch
owes to plaintiff as a result of any breach determined in phase one. Defendant's motion in limine
will be granted to the extent it seeks to preclude plaintiff from proffering James Loeffler as a
witness and/or evidence reflecting the computation of damages. The court will limit defendant's

1

Defendant Ehrlichman was terminated from this lawsuit by a stipulation and order entered on
April 21, 2017.

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presentation of evidence in phase one in the same manner: it will be precluded from proffering
its damages expert, Steve Roberts, and/or evidence reflecting the computation of damages.
Rule 42(b) of the Federal Rules of Civil Procedure states in relevant part:
For convenience, to avoid prejudice, or to expedite and economize, the court may
order a separate trial of one or more separate issues, claims, crossclaims,
counterclaims, or third-party claims.
FED. R. CIV. P. 42(b). The decision to bifurcate under Rule 42(b) is a “matter to be decided on a
case-by-case basis and must be subject to an informed discretion by the trial judge in each
instance.” Robinson v. Nationwide Mut. Ins. Co., 2013 U.S. Dist. LEXIS 25806, *14 (E.D. Pa.
Feb. 26, 2013) (quoting Lis v. Robert Packer Hosp., 579 F.2d 819, 824 (3d Cir.1978)).
In exercising its broad discretion to bifurcate issues for trial under Rule 42(b), a trial
court should consider whether bifurcation will avoid prejudice, conserve judicial resources, and
enhance juror comprehension of the issues presented in the case. Enzo Life Scis., Inc. v. Digene
Corp., 2003 U.S. Dist. LEXIS 10202, *14-*15 (D. Del. June 10, 2003) (citing Union Carbide
Corp. v. Montell N.V., 28 F. Supp. 2d 833, 837 (S.D.N.Y. 1998)). “In deciding whether one trial
or separate trials will best serve [the above factors] … the major consideration is directed toward
the choice most likely to result in a just [and] final disposition of the litigation.” Id. at *15
(quoting In re Innotron Diagnostics, 800 F.2d 1077, 1084 (Fed. Cir. 1986)); see also 9 CHARLES
ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE & PROCEDURE § 2388 (2d ed. 2002).
Here, the parties' dispute is centered around the interpretation of the employment
contract's provision governing plaintiff's ability to earn commissions above his base salary. The
parties concede that this contractual provision is ambiguous and subject to multiple competing
interpretations. Each has submitted its own expert's report addressing whether plaintiff is owed
commission sales earnings as damages. The authors of these reports purport to opine about the

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proper construction and meaning of the commission sales provision, and how under their adopted
construction plaintiff is or is not owed additional compensation earnings.
The parties underlying dispute extends well beyond the objective meaning that is to be
assigned to the words they employed in constructing the compensation provision. When a
contract term is ambiguous, the better approach, and the one that is consistent with the weight of
controlling authority, is to permit the parties to proffer evidence in support of their alternative
interpretations so that the court and/or the finder of fact may properly address the purported
ambiguity.
Pennsylvania law employs the "plain meaning rule" of interpretation of contracts, which
assumes that the intent of the parties to an instrument is "embodied in the writing itself, and
when the words are clear and unambiguous the intent is to be discovered only from the express
language of the agreement." Hullett v. Towers, Perrin, Forster & Crosby, Inc., 38 F.3d 107, (3d
Cir. 1994) (quoting County of Dauphin v. Fidelity & Deposit Co., 770 F. Supp. 248, 251 (M.D.
Pa.) (quotation omitted), aff'd, 937 F.2d 596 (3d Cir. 1991)). "Nevertheless, a determination
whether the language of an agreement is unambiguous may not be possible without examining
the context in which the agreement arose." Id. (citing Steuart v. McChesney, 444 A.2d 659, 662
(Pa. 1982). Thus, a court is not always confined to the four corners of the written document in
determining whether ambiguity exists. Mellon Bank, N.A. v. Aetna Business Credit, Inc., 619
F.2d 1001, 1011 (3d Cir. 1980). Rather, the court must "consider the words of the contract, the
alternative meaning suggested by counsel, and the nature of the objective evidence to be offered
in support of that meaning." Hullett, 38 F.3d at 111 (citing Mellon Bank, 619 F.2d at 1011).
"A contract provision is ambiguous if it is susceptible of two reasonable alternative
interpretations." Id. (citing Mellon, 619 F.2d at 1011). "If the contract is determined to be
ambiguous, then the interpretation of the contract is left to the factfinder, to resolve the
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ambiguity in light of extrinsic evidence." Id.; accord Stendardo v. Federal Nat'l Mortgage Ass'n,
991 F.2d 1089, 1094 (3d Cir 1993) ("If the court determines that a given term in a contract is
ambiguous, then the interpretation of that term is a question of fact."). The intent of the parties
in employing the ambiguous term as part of the contract likewise is a question of fact that is
reserved for the trier of fact. In re Stendardo, 991 F.2d at 1094 (citing Tigg Corp. v. Dow
Corning Corp., 822 F.2d 358, 362 (3d Cir. 1987); accord Community College of Beaver County
v. Community College of Beaver County, Society of the Faculty, 375 A.2d 1267, 1275 (Pa.
1977) ("It has long been accepted in contract law that an ambiguous written instrument presents
a question of fact for resolution by the finder-of-fact, whereas the meaning of an unambiguous
written instrument presents a 'question of law' for resolution by the court."). Where a
contractual provision is ambiguous, the fact finder must resolve the ambiguity pursuant to "the
extrinsic evidence offered by the parties in support of their respective interpretations." Sanford
Inv. Co., inc. v. Ahlstrom Machinery Holdings, Inc., 198 F.3d 415 421 (3d Cir. 1999).
Here, it appears that each party is prepared to offer extrinsic evidence in support of their
respective position on the understanding and objective intent flowing from the formation and use
of the commission sales formula utilized in the employment contract. Plaintiff highlights a
construction that analyzes the impact of each sales transaction under the Sales Management
Incentive Plan ("SMIP") and advances a mathematical formula purportedly supported and
bolstered by the terms of the SMIP, discussions and emails between plaintiff and members of
Porch's staff, Porch's business plan, agreements with Porch's lead buyers and the testimony of
defense witnesses taken in discovery. This construction considers every "lead leg" generated by
Porch regardless of its source as being within the reach of the SMIP; utilizes an approach that
considers separately monetization under conditions 2 and 3 for both the buy-side and sell-side in
calculating the potential compensation pool; treats unique and exclusive leads separately with
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recognition that shared leads or lead legs can qualify for treatment as unique under the formula;
treats unique legs as potentially subject to consideration for further monetization under
conditions 3 and 4 of the formula; and does not utilize Porch's aggregate enterprise revenue as a
limit or cap on earned commissions under the formula. Defendant in turn limits the leads to be
credited to plaintiff to only those generated by plaintiff and the specific sales team under his
supervision; utilizes Porch's historical sales data to support its limited application of unique and
exclusive lead legs under the compensation formula; utilizes the profitability of lead legs sold by
plaintiff and his sales team in calculating the threshold for payout; and employs Porch's
operating costs and profit margins as a whole in identifying the thresholds and limits that apply
to the payout formula and plaintiff's ability to earn commissions on sales.
It is apparent that each party has utilized a construction of the commissions formula that
extends well beyond the objective meaning of the words the parties chose to use in drafting the
formula. As the party seeking to recover for breach of contract, plaintiff has the burden of
producing sufficient evidence and convincing the trier of fact that the parties intended that the
ambiguous formula be understood and applied in the manner that produces the breach plaintiff
has claimed. Only after plaintiff proves by a preponderance of the evidence that the parties had
such an understanding and intent (or some aspects thereof), does an analysis of actual damages
become proper.
It follows that bifurcation of the liability issues surrounding a proper construction of the
ambiguous commissions formula from the damage calculations that flow from the finder of fact's
determinations regarding the same will assist the parties and the court in the efficient and
effective presentation of the evidence and the jury's consideration of the issues of fact it is being
asked to resolve. It will likewise avoid the potential for unnecessary or premature consideration
of evidence and evidentiary issues that would necessarily accompany the presentation of liability
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and damages in an unsegmented proceeding. There does not appear to be any basis to presume
or assume that prejudice will ensue from a bifurcated presentation of the case. Consequently, the
court will enter an order bifurcating the jury's consideration of the liability issues arising from
the ambiguous compensation formula from the damages, if any, that follow the resolution of the
jury's determinations concerning those contract construction issues.
Defendant's position in its motion in limine is wide of the mark to the extent it seeks to
preclude plaintiff from offering extrinsic evidence in support of his position that the SMIP was
understood to apply as he now advocates. While defendant highlights the seemingly subjective
understandings of plaintiff in advancing his formula and application, it has not presented a sound
and convincing basis for concluding as a matter of law that the terms and formulation of the
SMIP could have led to only one clear and unambiguous understanding given the objective
meaning of the language the parties chose to employ. Tellingly, defendant's position on the
meaning of the SMIP and its application to plaintiff takes liberties of an equal degree in
incorporating and/or engrafting concepts and understandings that do not readily and
unequivocally flow from the linguistic formulation. Given this state of affairs, application of the
controlling contract law does not begin and end with identifying the objective meaning of the
terms in the SMIP.2
For the reasons set forth above, the trial of plaintiff's claims will be bifurcated into two
phases as indicated above. Defendant's motion in limine will be granted to the extent it seeks to
preclude plaintiff from proffering James Loeffler as a witness and/or evidence reflecting the
computation of damages. The court will limit defendant's presentation of evidence in phase one

2

Of course, determinations regarding the admissibility of any actual extrinsic evidence either
party might proffer in phase one are beyond the scope of this memorandum opinion.
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in the same manner: it will be precluded from offering its damages expert, Steve Roberts, and/or
introducing evidence reflecting the computation of damages. An appropriate order will follow.
Date: December 3, 2020

s/David Stewart Cercone
David Stewart Cercone
Senior United States District Judge

cc:

James W. Southworth, Esquire
Gregory C. Michaels, Esquire
Eric L. Schnabel, Esquire
Aaron D. Goldstein, Esquire
Jeremy R. Larson, Esquire
Shelly R. Pagac, Esquire
Melissa B. Catello, Esquire
(Via CM/ECF Electronic Mail)

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