Powers v. Duff & Phelps, LLC
Filing
41
ORDER GRANTING IN PART AND DENYING IN PART 26 Defendant's Motion for Summary Judgment. Signed by Judge David A. Ezra. (td)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
PIKE POWERS,
§
§
Plaintiff,
§
§
vs.
§
§
DUFF & PHELPS, LLC,
§
§
Defendant.
§
________________________________ §
CV. NO. 1:13-CV-768
ORDER GRANTING IN PART AND DENYING IN PART
MOTION FOR SUMMARY JUDGMENT
Before the Court is the Motion for Summary Judgment filed by
Defendant Duff & Phelps (“Defendant” or “Duff”) (Dkt. # 26). The Court held a
hearing on the Motion on April 22, 2015. At the hearing, Thomas A. Nesbitt, Esq.,
represented Plaintiff Pike Powers (“Plaintiff” or “Powers”); Richard W. Espey,
Esq., represented Defendant. Upon careful consideration of the arguments asserted
in the supporting and opposing memoranda, as well as the arguments presented at
the hearing, the Court GRANTS IN PART and DENIES IN PART Defendant’s
Motion for Summary Judgment.
BACKGROUND
On September 4, 2013, Plaintiff filed a complaint against Defendant,
alleging breach of contract and quantum meruit claims. (“Compl.,” Dkt. # 1 at
1
5–6; “Am. Compl.,” Dkt. # 16 at 10–11.) According to Plaintiff, Defendant
recruited Plaintiff in 2010 to join its firm in a business development role. (Am.
Compl. at 3.) On September 3, 2010, Plaintiff and Defendant entered into an
employment agreement (the “Agreement”), officially naming Plaintiff as a
Business Development Director in the Property Tax practice. (“Mot.,” Dkt. # 26,
Ex. A.) The Agreement provided for a base salary of $120,000 per year, 1
supplemented with commissions for “qualified engagements” that were developed
either through Plaintiff’s direct marketing efforts or a lead generated elsewhere and
passed along to him. (Id. at 6.) On fixed fee engagements, the Agreement
provided commissions at the rate of 20% for Property Tax engagements, 10% for
other tax engagements, and up to 10% for all other engagements. (Id.) On
contingent fee engagements, the Agreement provided commissions on Property
Tax engagements in amounts decreasing annually for the duration of those
engagements. (Id. at 7.) The Agreement expressly provided that to receive “credit
in calculating a commission payment, the qualifying engagement must be closed
and all fees collected.” (Id. at 2.) The Agreement provided that Plaintiff’s right to
commissions extended only during the term of his employment, unless he was
terminated without cause, in which case he was entitled to “commissions on
1
In operation, the $120,000 was deducted from Plaintiff’s commission, such that
Plaintiff would not receive a commission or would receive a reduced commission
until the $120,000 had been paid out. (Mot., Ex. A at 6.)
2
transactions which are closed and fees collected during the term of [his]
employment and for a period of 24 months thereafter.” (Id. at 6.)
In 2010, Fulbright & Jaworksi (“Fulbright”) was retained to represent
Duke Energy in a group of cases that were pending in the Western District of
Texas’s Austin division (“Duke Energy litigation”). (Mot., Ex. B; “Resp.,” Dkt.
# 39, Ex. 2 at 49:24–50:4.) On November 4, 2010, Berry Spears (“Spears”) at
Fulbright 2 sent a mass email to various contacts, seeking suggestions for names of
real estate experts who could testify in bankruptcy court for the Duke Energy
litigation. (Mot., Ex. B; Resp., Dep. Ex. 19.) Upon receiving the email, Plaintiff,
unable to connect with Spears on the telephone, reached out to a Fulbright partner,
who emailed Spears to recommend that Spears contact Plaintiff about hiring
Defendant for the engagement. (Resp., Dep. Ex. 19.) The following day, Andrew
Capitman from Defendant’s New York office contacted Plaintiff to find out if he
could make an introduction to Spears. (Id.) After Plaintiff arranged a phone
introduction and meeting, Plaintiff followed up with Spears several times from
November to December 2010 to emphasize Defendant’s interest in handling the
matter and to act as a liaison to supply additional information that Spears required
to make the decision. (Id.; Resp., Ex. 4 at 4–5.) Ultimately, Alan Pfeiffer
2
Plaintiff was partner-in-charge of Austin’s Fulbright office until 2004, when he
became “of counsel” to the firm. (Am. Compl. ¶ 6.) In 2010, as a retiree, he
maintained a physical office in Fulbright’s Austin office. (Resp., Ex. 4 at 4.)
3
(“Pfeiffer”) became Defendant’s internal lead on preparing the engagement
proposal, qualification packet, and presentation, which Pfeiffer circulated to
several of Defendant’s employees for review, including Plaintiff. (Resp., Ex. 2 at
15:9–16:12; Resp., Dep. Ex. 5.) Pfeiffer pitched the final proposal at a December
6, 2010 teleconference, and Defendant ultimately won the engagement. (Am.
Compl. at 6–7.)
Ultimately, Plaintiff and Defendant severed their employment
relationship on October 15, 2011, resulting in Plaintiff’s termination without cause.
(Mot., Ex. E.) Pursuant to the termination agreement, Plaintiff and Defendant
agreed to “negotiate in good faith with respect to any transactions closed which
remain eligible for commission under Powers’ offer letter.” (Id.) Throughout
2012 and 2013, Plaintiff, on his own and through his counsel, attempted to collect
the commission that he believed he was owed for his role in securing the Duke
Energy litigation. (Resp., Ex. 4 at 5–6.)
On September 4, 2013, Plaintiff filed suit against Defendant in this
Court. (Dkt. # 1.) Plaintiff alleges breach of contract and quantum meruit claims
against Defendant for failing to pay Plaintiff commission on the Duke Energy
litigation. (Am. Compl. at 10–11.) Plaintiff seeks actual damages, punitive
damages, attorney’s fees, and costs. (Id. at 11.)
4
On January 16, 2015, Defendant filed the instant Motion for Summary
Judgment (Dkt. # 26). Plaintiff filed his Response on February 9, 2015 (Dkt. # 32,
Ex. 1), 3 and Defendant filed its Reply on February 23, 2015 (Dkt. # 36).
LEGAL STANDARD
A movant is entitled to summary judgment upon showing that “there
is no genuine dispute as to any material fact.” Fed. R. Civ. P. 56(a); see also
Meadaa v. K.A.P. Enters., L.L.C., 756 F.3d 875, 880 (5th Cir. 2014). A dispute is
only genuine “if the evidence is such that a reasonable jury could return a verdict
for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986).
The moving party bears the initial burden of demonstrating the
absence of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S.
317, 323 (1986). If the moving party meets this burden, the nonmoving party must
come forward with specific facts that establish the existence of a genuine issue for
trial. Distribuidora Mari Jose, S.A. de C.V. v. Transmaritime, Inc., 738 F.3d 703,
706 (5th Cir. 2013) (quoting Allen v. Rapides Parish Sch. Bd., 204 F.3d 619, 621
(5th Cir. 2000)). “Where the record taken as a whole could not lead a rational trier
of fact to find for the non-moving party, there is no ‘genuine issue for trial.’”
3
Pursuant to this Court’s April 17, 2015 order denying Plaintiff’s motion to file his
response under seal (Dkt. # 38), Plaintiff refiled the response for the public record
in accordance with the Court’s order on April 20, 2015 (Dkt. # 39).
5
Hillman v. Loga, 697 F.3d 299, 302 (5th Cir. 2012) (quoting Matsushita Elec.
Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)).
In deciding whether a fact issue has been created, the court must draw
all reasonable inferences in favor of the nonmoving party, and it “may not make
credibility determinations or weigh the evidence.” Tiblier v. Dlabal, 743 F.3d
1004, 1007 (5th Cir. 2014) (quoting Reeves v. Sanderson Plumbing Prods., Inc.,
530 U.S. 133, 150 (2000)). However, “[u]nsubstantiated assertions, improbable
inferences, and unsupported speculation are not sufficient to defeat a motion for
summary judgment.” United States v. Renda Marine, Inc., 667 F.3d 651, 655 (5th
Cir. 2012) (quoting Brown v. City of Hous., 337 F.3d 539, 541 (5th Cir. 2003)).
DISCUSSION
In its Motion for Summary Judgment, Defendant argues that the
evidence demonstrates that the failure to pay the Duke Energy litigation
commission did not breach the Agreement because Plaintiff’s right to commission
never vested. (Mot. at 7–9.) Additionally, Defendant contends that Plaintiff’s
breach of contract claims for (1) failure to negotiate in good faith, (2) failure to
issue and submit to Duff’s finance department a report stating that the Duke
Energy funds have been collected, and (3) failure to issue and submit to Duff’s
finance department copies of documents cannot succeed because Plaintiff cannot
demonstrate that he has suffered any damages as a result of the alleged breaches.
6
(Id. at 9.) Finally, Defendant argues that Plaintiff cannot recover in quantum
meruit because there is a contract governing the subject matter. (Id. at 10.)
Separately, Defendant challenges evidence presented in support of Plaintiff’s claim
as inadmissible parol evidence and evidence of settlement negotiations. (“Reply,”
Dkt. # 36 at 1–2.)
I.
Breach of Contract Claims
In his papers, Plaintiff concedes that the Duke Energy litigation falls
outside of the scope of the Agreement and therefore abandons the bulk of his
breach of contract claims. (Resp. at 15.) However, Plaintiff maintains that his
breach of contract claim based on failure to negotiate remains and that Defendant
breached its duty to negotiate with Plaintiff in good faith, pursuant to the October
4, 2011 addendum to the Agreement promising “to negotiate in good faith with
respect to any transactions closed which remain eligible for commission under
Powers’ offer letter in accordance with that offer letter.” (Resp. at 19–20.)
Defendant counters that the terms of that promise only required Defendant to
negotiate in good faith as to commissions due under the Agreement, and since
Plaintiff has conceded that Defendant did not breach the Agreement in failing to
7
pay Plaintiff commission on the Duke Energy litigation, there was no breach of a
duty to negotiate in good faith.4 (Reply at 6–7.)
The Court agrees with Defendant. Plaintiff’s concession that there
was no breach of contract with respect to the Duke Energy litigation means that the
failure to pay out that commission did not breach any duty to negotiate as promised
in the October 4, 2011 addendum. Accordingly, the Court GRANTS Defendant’s
Motion for Summary Judgment on the breach of contract claims.
II.
Quantum Meruit Claim
Defendant argues that Plaintiff’s quantum meruit claim fails because,
under New York law, 5 (1) a party cannot recover in quantum meruit when the
4
In its Reply, Defendant also challenges Exhibit 16 as inadmissible evidence of
settlement negotiations. (Reply at 2.) Federal Rule of Evidence 408 prohibits the
admission of statements made in the course of settlement negotiations to prove the
validity or amount of a disputed claim. Fed. R. Evid. 408(a)(2); see also Versai
Mgmt. Corp. v. Clarendon Am. Ins. Co., 597 F.3d 729, 737 (5th Cir. 2010)
(reminding that the Federal Rules of Evidence generally apply in diversity cases).
Defendant challenges the admissibility of Deposition Exhibit 16, which is an email
memorializing Matteson’s $50,000 offer to settle the Duke Energy litigation
commission with Plaintiff. (Reply at 2.) To the extent that Plaintiff relies on this
document to prove the validity of the commission owed him, the evidence is
inadmissible as violative of Federal Rule of Evidence 408(a)(2), and the Court
SUSTAINS the objection.
5
Defendant contends that New York law applies because the Agreement states,
“This Offer Letter, and your resulting employment, shall be governed by and
construed in accordance with the internal laws of the state of New York.” (Mot.,
Ex. A at 4.) Plaintiff states in a footnote, “Duff moved for summary judgment
claiming New York law applies. Powers does not stipulate that New York Law
governs this question but contends that summary judgment is inappropriate under
8
parties have entered into a contract that governs the subject matter, which
Defendant contends they have, and (2) Plaintiff cannot argue both breach of
contract and quantum meruit recovery theories because there is no bona fide
dispute as to the scope of that agreement. (Mot. at 10.) Plaintiff counters that
(1) the contract does not cover the Duke Energy litigation, and (2) the quantum
meruit claims are not precluded by the breach of contract claims because there is a
bona fide dispute as to the scope of the Agreement. (Resp. at 16.)
A.
Applicable Law
To succeed on a quantum meruit claim under New York law, the
plaintiff must show “(1) the performance of services in good faith, (2) the
acceptance of the services by the person to whom they are rendered, (3) an
expectation of compensation therefor, and (4) the reasonable value of the services.”
Mid-Hudson Catskill Rural Migrant Ministry, Inc. v. Fine Host Corp., 418 F.3d
168, 175 (2d Cir. 2005) (internal quotation marks omitted) (citing Revson v.
Cinque & Cinque, P.C., 221 F.3d 59, 69 (2d Cir. 2000)). “New York law does not
permit recovery in quantum meruit, however, if the parties have a valid
enforceable contract that governs the same subject matter as the quantum meruit
claim.” Id.
either New York or Texas law.” (Resp. at 17 n.8.) But for these two sentences,
Plaintiff does not make any argument about why Texas law would apply, nor does
Plaintiff make any argument regarding or include any citation to Texas law.
Accordingly, the Court only addresses the claims under New York law.
9
B.
Whether the Commission is Within the Scope of the Agreement
Plaintiff maintains that his commission from the Duke Energy
litigation is outside the scope of the Agreement, since commissions for
engagements outside of the Property Tax and Other Tax service lines are carved
out of the Agreement and because the Agreement only applies to fixed fee
engagements, which it argues the Duke Litigation was not. (Mot. at 18–19.)
Defendant counters that the Agreement specifically outlines the terms and
conditions under which Plaintiff would receive commission and that his base salary
provides the compensation for services provided outside of the Property Tax
service line. (Reply at 3–4.)
The seminal case on the “same subject matter” issue is
Clark-Fitzpatrick, Inc. v. Long Island R.R. Co., 70 N.Y.2d 382 (1987), which
involved construction claims between a construction company and a rail road
company. According to the plaintiff, the contract’s detailed engineering
specifications were flawed and the plaintiff had to undertake significant design
changes. Id. at 389. The plaintiff sought to recoup the damages that it incurred in
implementing these changes through a quasi-contract claim. Id. However, the
court rejected the plaintiff’s argument for quasi-contract recovery, reasoning that
the “relationship between the parties was defined by a written contract, fully
detailing all applicable terms and conditions, and specifically providing for project
10
design changes with adjustments in compensation contemplated in light of those
changes.” Id. at 389. Accordingly, the court dismissed the quasi-contract claim
because the scope of the work performed for which the plaintiff sought damages
was clearly within the terms of the contract. Id.
“Decisions interpreting Clark-Fitzpatrick have made clear that the
predicate for dismissing quasi-contract claims is that the contract at issue ‘clearly
covers the dispute between the parties.’” Union Bank, N.A. v. CBS Corp., No. 08
CIV. 08362 (PGG), 2009 WL 1675087, at *7 (S.D.N.Y. June 10, 2009).
Defendant, cites, for example, to Aledia v. HSH Nordbank AG, No. 08 CIV. 4342,
2009 WL 855951 (S.D.N.Y. Mar. 25, 2009), where the court found that the
plaintiff’s quantum meruit claim was barred because the applicable contract
provision unambiguously covered the subject matter of the dispute. Id. at *3.
There, the plaintiff sought commission payments that were not paid as promised.
Id. at *1. The court reasoned that, although the plaintiff’s employment agreement
was unclear as to when commissions would vest, the agreement unambiguously
“addresse[d] the award, vesting, and payment of incentive compensation to
Plaintiff.” Id. at *3. Accordingly, the court found quantum meruit recovery
unwarranted. Similarly, in Bader v. Wells Fargo Home Mortgage Inc., 773 F.
Supp. 2d 397, 414 (S.D.N.Y. 2011), the plaintiffs sought bonus compensation for
business they generated prior to their termination. Id. After determining that
11
written contracts clearly governed the claims at issue, the court concluded that the
plaintiffs’ quantum meruit claims could not succeed. Id.
However, courts have come to opposite conclusions when the contract
is silent as to the disputed issue. For example, in Joseph Sternberg, Inc. v. Walber
36th Street Assocs., 594 N.Y.S.2d 144 (N.Y. App. Div. 1993), the court found that
the quantum meruit claim made by the plaintiff, a real estate brokerage, should
proceed to jury trial because there was a bona fide dispute as to whether the
plaintiff’s commission was covered in the scope of the contract. Id. There, the
plaintiff made an agreement to negotiate the purchase of a real estate property for
$11.5 million, for which he would receive a $450,000 commission payable upon
closing. Id. Ultimately, the transaction closed at $10.6 million and the plaintiff
was not paid a commission. Id. The court reasoned that the quantum meruit claim
could proceed, distinguishing the facts from those in Clark-Fitzgerald, and finding
that “the contract at issue here is silent as to plaintiff’s entitlement to a commission
in the event a sale of the building occurred for a lesser price.” 6 Id. Likewise, in In
re Coudert Brothers, 487 B.R. 375 (Bankr. S.D.N.Y. 2013), the court concluded
that the plaintiff law firm’s quantum meruit claim for lobbying services was not
6
Defendant’s claim that this case is inapplicable because “the dispute was in
regards to a real estate broker’s contract, not an employee agreement” is
misplaced. (See Reply at 3.) The standards governing the feasibility of a quantum
meruit claim do not change based on the type of agreement the parties have entered
into; the applicable inquiry is whether the subject matter of the dispute was within
the scope of the original agreement.
12
barred by its contract with its client-defendant. Id. at 397. The court reasoned that
because the scope of the agreement was litigation, and because the contract was
silent as to compensation for lobbying services and the client requested the
plaintiff’s lobbying services, the lobbying services “unambiguously f[e]ll outside
the scope of the [a]greement” and quantum meruit recovery was available. Id.; see
also AHA Sales, Inc. v. Creative Bath Prods., Inc., 867 N.Y.S.2d 169 (N.Y. App.
Div. 2008) (permitting the quantum meruit claim where the parties’ agreements
only covered specific accounts and the claims for recovery related to accounts
outside of those enumerated in the agreements).
Here, the Agreement sets out the following terms regarding Plaintiff’s
compensation: (1) Plaintiff was employed full-time to “perform such services,
duties and tasks for the Company as shall be reasonably requested by the
Company”; (2) Plaintiff was entitled to commissions on all qualifying
engagements, which the Agreement defined as engagements that are “closed and
all related fees collected, and . . . developed from either: (a) [Plaintiff’s] direct
marketing efforts, or (b) a lead generated elsewhere and passed to [Plaintiff]”;
(3) commissions were to be provided for fixed fee engagements in the amount of
20% for the Property Tax service line, 10% for all other Tax service lines, and up
to 10% for all other services lines and for contingent fee engagements in declining
annual amounts for the Property Tax service line; and (4) the right to receive
13
commissions ends upon termination, unless that termination was not for cause, in
which case Plaintiff was entitled to commissions “on transactions which are closed
and fees collected during the term of [his] employment and for a period of 24
months thereafter.” (Mot., Ex. A.)
The evidence is undisputed that the Duke Energy litigation was
business developed for the dispute and legal management consulting (“DLMC”)
service line, which is distinct from the Property Tax and other tax service lines.
(See Weaver Dep. at 96:11–13.) The contract clearly provides Plaintiff’s
commission compensation scheme for that service line when the engagement is a
fixed fee engagement: commissions are at the discretion of the service line
leadership, in an amount up to 10%. (Mot., Ex. at 6.) Accordingly, if the
engagement was a fixed fee engagement, the commission is unambiguously within
the scope of the agreement. See, e.g., Aledia, 2009 WL 855951, at *3.
However, Plaintiff and Defendant agree that the Duke Energy
Litigation was not a fixed fee engagement. 7 The contract is silent as to whether
7
In its Response, Plaintiff states: “There is no evidence, and Duff does not allege,
that the Duke engagement was for a fixed fee. In fact, the summary judgment
evidence shows that the Duke engagement involved variable, not fixed, fees.”
(Resp. at 19.) In support, Plaintiff cites to generalized testimony from Higgins
regarding the Duke Energy litigation invoices, as well as two financial statements
on the Duke Energy litigation which show that Fulbright was invoiced different
amounts on different dates. At the hearing, Defendant stated that the Duke Energy
litigation was not a fixed fee engagement and instead had a “variable” fee
arrangement.
14
Plaintiff receives any compensation for contingency fee engagements outside the
Property Tax service line, and the contract is unclear as to whether that silence is
because—as Defendant argues—the work came within Plaintiff’s general
employment obligations as a salaried employee, or because—as Plaintiff argues—
the work was outside the scope of the Agreement. Accordingly, the contract’s
silence is sufficient to create a bona fide dispute 8 as to whether a contingency fee
engagement for the DLMC service line is within the scope of the Agreement. See,
e.g., Joseph Sternberg, 594 N.Y.S.2d 144.9
8
Because the contract is ambiguous on this issue, the parol evidence rule does not
bar the admission of extrinsic evidence to explain the meaning of the contract.
“The parol evidence rule generally prohibits the admission of extrinsic evidence of
prior or contemporaneous oral agreements to explain the meaning of a contract that
the parties have reduced to an unambiguous integrated writing.” Gualandi v.
Adams, 385 F.3d 236, 241 (2d Cir. 2004). Because the Agreement is ambiguous
as to whether non-Property Tax service line contingency fee engagements are
included, the parol evidence rule does not bar evidence to clarify that issue.
Therefore, to the extent that Defendant’s evidentiary objection challenges intent
evidence on the contingency fee section of the contract, that objection is
OVERRULED. To the extent that the objection challenges intent evidence on
other sections of the contract, Defendant’s objection is SUSTAINED.
9
Defendant’s reading of Aledia and Bader is overbroad. Defendant contends that
these two cases show that because the Agreement addresses commissions in
general, all issues related to commissions are within the scope of the Agreement.
The overbreadth of such argument is evidenced by reading AHA Sales, where the
court found that the compensation claims were outside the scope of the agreement
where the agreement addressed compensation for specific accounts, but the
quantum meruit claim sought recovery on compensation owed for accounts not
specifically enumerated therein. 867 N.Y.S.2d 169. There, the mere fact that the
agreement addressed compensation did not bar any quantum meruit claim for
compensation, since the agreement was silent on the disputed issue. See id.
15
Because there is a genuine dispute of material fact as to whether
Plaintiff’s commission for the Duke Energy litigation was within the scope of the
Agreement, Defendant’s motion for summary judgment on the quantum meruit
claim is DENIED.
CONCLUSION
For the aforementioned reasons, the GRANTS IN PART and
DENIES IN PART Defendant’s Motion for Summary Judgment (Dkt. # 26).
Accordingly, only Plaintiff’s quantum meruit claim remains.
IT IS SO ORDERED.
DATED: Austin, Texas, April 28, 2015.
_____________________________________
David Alan Ezra
Senior United States Distict Judge
Similarly, here, the mere fact at the Agreement addresses commissions does not
necessarily bar a quantum meruit claim, where the Agreement distinguishes fixed
and contingent fee engagements and Plaintiff may seek to recover a commission on
a contingent fee engagement in a service line that is not enumerated in the contract.
16
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?