This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2002).
STATE OF MINNESOTA
IN COURT OF APPEALS
Winthrop Resources Corporation,
Hennepin County District Court
File Nos. 01001674, 01005994
James H. Kaster, Diane M. Odeen, Nichols, Kaster & Anderson, PLLP, 4644 IDS Center, 80 South Eighth Street, Minneapolis, MN 55402 (for appellants)
Michael Berens, Barbara P. Berens, Jennifer M. Waterworth, Kelly & Berens, P.A., 3720 IDS Center, 80 South Eighth Street, Minneapolis, MN 55402 (for respondent)
Considered and decided by Shumaker, Presiding Judge, Wright, Judge, and Huspeni, Judge.*
U N P U B L I S H E D O P I N I O N
Appellants Peter Friedenfeld and Wesley Olsen, both former employees of respondent Winthrop Resources Corporation, filed separate appeals from summary judgment in their actions for recovery of sales commissions from their former employer. This court consolidated the cases. Because appellants do not raise any genuine issues of material of fact and have not shown that they are entitled to the commissions they claim as a matter of law, we affirm.
Respondent Winthrop Resources Corporation (Winthrop) specializes in leasing computer systems and other high-tech equipment to manufacturers. Appellants Peter Friedenfeld and Wesley Olsen were commissioned salespersons for Winthrop. After their resignations, disputes arose as to the amount of commissions the company owed them.
Winthrop hired Olsen in 1989. Although he was initially salaried, Olsen changed to a commission plan in 1990 in which he received 25 percent of the gross margin generated by the sales he made. Winthrop hired Friedenfeld in 1993, and he was also compensated under the 25-percent commission plan. In 1997, Winthrop established a new compensation structure for commissioned salespersons called an account “minimum performance objective.” Under this compensation plan, commissioned employees would either receive a 25-percent commission on their accounts, if they obtained four new accounts per year, or they would receive a 20-percent commission.
Generally, Winthrop paid its salespersons commissions when it received revenue on the lease through either a funding source or monthly cash payments made by the lessee. Consequently, leases generated revenue and commissions for many years after the client initially signed the lease. After a lease ended, the customer could roll it over, generating more lease revenue.
After Olson resigned in June 2000 and Friedenfeld resigned in September 2000, a dispute arose as to the commissions they asserted that Winthrop still owed them. They both contended that even after their employment ended, they were entitled to commissions on revenue the company received from the leases. Further, they claimed that they should have received the 25-percent commission rate, rather than the 20-percent rate, for payments generated on leases sold prior to the imposition of the minimum performance objective in 1997. They also raised individual issues as to other commissions to which they asserted that they were entitled. The district court granted summary judgment in favor of Winthrop, determining that the commission-generating events were the receipt of funds from the leases, and that Olsen and Friedenfeld were not entitled to commissions after their employment ended. Both Olsen and Friedenfeld appealed and this court consolidated the appeals.
D E C I S I O N
In reviewing summary judgment, the appellate court must address whether any genuine issues of material fact exist and whether the district court erred in its application of law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990). These are questions of law, which we review de novo. Star Ctrs., Inc. v. Faegre & Benson, 644 N.W.2d 72, 77 (Minn. 2002). We view the evidence in the light most favorable to the nonmoving party. Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993).
When an employee resigns, the employer must pay wages and commissions “earned and unpaid” at the time of the resignation by the next scheduled payday. Minn. Stat. § 181.14, subd. 1(a) (2000). An employee may sue the employer in district court for violating these provisions and seek statutory penalties. Minn. Stat. § 181.171, subd. 1 (2000). If the court determines that the employer violated these provisions, the employer may also be liable for costs and attorney fees. Id., subd. 3 (2000).
At issue here are the terms of the contract relating to appellants’ commissions. When an employer makes a promise of employment on particular terms in the form of an offer, which the employee accepts, a binding unilateral contract is formed. Pine River State Bank v. Mettille, 333 N.W.2d 622, 626 (Minn. 1983). Such a unilateral contract may be modified or replaced if the employer offers new terms and the employee accepts those terms by remaining on the job. Id. at 627. A memo by the employer providing a new policy may modify the unilateral contract if it contains specific enough language. Brown v. Tonka Corp., 519 N.W.2d 474, 477 n.2 (Minn. App. 1994).
Payment of a commission is a term of employment subject to the provisions of the unilateral contract between the employee and employer. See id. at 477 & n.1 (addressing payment of vacation pay under unilateral contract). “[T]he amount recoverable and the computation of commissions due are dependent on the terms of the contract * * * .” 30 C.J.S. Employer-Employee Relationship § 165 (1992).
We first address the parties’ arguments as to how the at-will nature of the parties’ employment affects resolution of this issue. Citing Lapadat v. Clapp-Thomssen Co., 397 N.W.2d 606, 609 (Minn. App. 1986), the district court determined that, as at-will employees, appellants were not as a matter of law “entitled to be paid commissions that [they] might otherwise be entitled to when such commissions were generated after [their] employment ceased.” In Lapadat, we first addressed the parties’ contract, ruling that under the specific terms of the contract as modified, the employee was not entitled to commissions on sales that closed after she left employment. Id. at 608-09. We went on to state that even if those specific terms did not apply, “[a] party to an agreement terminable at will is not entitled to payment of commissions after the employment is terminated.” Id. at 609 (citation omitted). As in Lapadat, we must first examine the terms of the parties’ agreement to determine whether it resolves the dispute before reaching arguments as to Lapadat’s application to at-will employees. Id. at 608-09.
The district court held that the parties’ contracts, which referred to payment on the gross margin, defined the commission-generating event as payment by the lease client. The appellants earned their commissions only when Winthrop received actual payment. The district court first noted that Friedenfeld’s belief to the contrary was an assumption based on the terms of his previous job, despite the absence of any evidence of such an agreement with Winthrop. Similarly, Olsen cited his understanding that he would be given such payments, but he also offered no evidence of an agreement with Winthrop to this term. Further, while employed by Winthrop, both appellants received commissions on leases that had been sold by departed employees. The district court concluded as a matter of law under the parties’ contracts that a salesperson who leaves Winthrop also “leaves behind the income stream that continues to flow from that lease.” The district court, therefore, concluded that appellants were not entitled to commission payments after their employment with Winthrop ended on leases they had sold while employed.
Appellants agree that the written provisions as to the terms of their commission payments do not address whether they should continue to receive commissions after their employment ended. But they contend that the district court erroneously implied a condition precedent in the contract requiring that they be employed in order to obtain commissions. We disagree. The district court did not imply the term requiring appellants to be employed to obtain commissions. Rather, the district court considered whether the evidence appellants cited created a genuine issue of material fact as to whether the contractual terms provided that the commissions were to be paid after employment ended.
Appellants assert that parol evidence must be considered and argue that because the leases took a number of years to generate a revenue stream, “this implies some kind of right to commissions adhered upon the generation of a new lease.” They also rely on evidence that they were paid residuals on some leases after their resignations. Finally, they claim that other departing sales representatives were paid for various leases following resignation, which specifically included or excluded their post-termination claims for commissions. But to constitute a contractual term providing for payment of commissions after the employment relationship has ended, the employer must have made a definite offer to that effect. See Pine River, 333 N.W.2d at 630 (addressing whether various provisions of employee handbook were sufficiently definite to create offer). Here, appellants cite, at most, the implication that they would receive commissions from leases after their employment ended. There was no promise by Winthrop to pay after employment ended.
Appellants also note several exceptions to the general rule that Winthrop paid commissions when cash was in hand, such as when monthly lease payments were made. But these exceptions do not create a genuine issue of material fact on their claim that the commission-generating event always occurred at the time the lease was signed. Instead, there was some event—usually monthly lease payments or other receipt of funds—upon which the commission was paid. Without Winthrop’s promise to pay appellants’ commissions after their employment ended, we conclude that the district court correctly determined that appellants cannot prevail as a matter of law on their claim that signing the lease was the commission-generating event that allows them to receive commissions after their employment ended.
Appellants, however, assert that they have earned the commissions they seek. Under Minn. Stat. § 181.14, subd. 1(a), an employer is required to pay commissions “earned and unpaid” at the time the employee resigns. Where the statute does not define the meaning of “earned,” the terms of the compensation plan govern. Holman v. CPT Corp., 457 N.W.2d 740, 743 (Minn. App. 1990), review denied (Minn. Sept. 20, 1990). Appellants contend that “earn” is defined as “[t]o merit or deserve, as by labor or service.” Cold Metal Process Co. v. Comm’r of Internal Revenue, 247 F.2d 864, 872 (6th Cir. 1957) (addressing whether certain amounts constituted earned income for tax purposes) (citation omitted). They contend that this court recognized this principle when analyzing the issue of vacation pay due in Brown, 519 N.W.2d at 477. In Brown, we held that the employer was obligated to pay the employee’s vacation pay pursuant to the employee’s contract after having received the benefits of the employee’s efforts. Id. Appellants argue by analogy that the value of the leases began when they were booked, and that following their departure, the employer continued to benefit as a result of their work by receiving payments on leases they originated.
As the district court held, these arguments fail because appellants base their entitlement to such commissions on their unilateral assumption and unilateral understanding that they would receive such payments after their resignation, without presenting evidence that would create a genuine issue of material fact. Appellants’ contract with Winthrop provided that they receive commissions of the gross margin generated by the sales made. We agree with the district court that the commissions under the terms of the contract were not generated until the essential commission-generating event—payment on the lease—has occurred.
We next turn to appellants’ claim of a genuine issue of material fact as to whether they were deprived of compensation they had earned when Winthrop applied the 1997 commission rate of 20 percent to leases already booked. Appellants contend that they were entitled to a 25-percent commission on leases that they had initiated before the commission structure was changed. We disagree.
Terms of commissions may be altered in an at-will relationship without the employee’s consent, just as other terms may be altered. See Beatty v. N. Cent. Cos., 170 F. Supp. 2d 868, 876 (D. Minn. 2001) (holding employer may adjust compensation, including commissions, of at-will employee at anytime without employee’s consent), aff’d, 282 F.3d 602 (8th Cir. 2002). Because the commission-generating event is payment to Winthrop, not the sale of the lease, each payment that results in the payment of a commission is subject to the commission plan that is in place at that time. Although the appellants may have sold the leases prior to the institution of the minimum performance objective, the commission payments were made on the basis of the commission plan in place at the time. Accordingly, the district court did not err in holding that Winthrop did not violate the terms of the parties’ employment agreement.
We next address individual issues that appellants raise relating to particular commissions. Olsen contends he is entitled to judgment as a matter of law on commissions from Winthrop’s lease with B. Dalton Booksellers, Inc. Winthrop and B. Dalton litigated issues relating to this lease, and Winthrop ultimately was awarded lease payments and damages. Winthrop Resources Corp. v. B. Dalton Booksellers, Inc., No. C1-01-1060, 2002 WL 76374 (Minn. App. Jan. 22, 2002), review denied (Minn. Mar. 19, 2002). Olsen contends that now that Winthrop has received the payments, he is entitled to his share of the gross margin of this account.
The dispute between B. Dalton and Winthrop involved various aspects of B. Dalton’s lease, including a purchase option, return of equipment, termination of the lease, damages, and payments due on the lease, that were subject to extensive litigation. Id. During Olsen’s employment, the amount Winthrop would recover on these issues, if any, was in dispute. The commission-generating event of payment on the lease did not occur until after Olsen’s resignation. Because Olsen is not entitled to recover post-resignation commissions, he has again failed to show a genuine issue of material fact on his claim.
We next address Friedenfeld’s claims that there are genuine issues of material fact as to whether Winthrop owes him commissions on the FTD Florists and the McDonald’s accounts pursuant to the company’s WINR Business Credit Operation, a separate leasing unit. Under this plan, a salesperson could earn a commission at the rate of one-half percent for business referred to and closed by WINR. The program ended in December 1997. It is undisputed that Winthrop began paying Friedenfeld commissions for the FTD Florists account in April 1996 and continued to do so until December 1999, some two years after the WINR program was discontinued. While the district court found the “apparent arbitrariness” of Winthrop’s actions in discontinuing payment after two years “troubling,” it agreed that Winthrop had no obligation to continue payments once the program ceased, and, therefore, concluded that Friedenfeld did not raise genuine issues of material fact on the claim.
Friedenfeld contends that he had already performed the work in the FTD Florists account and thus had already earned the commissions for the life of the relationship between WINR and FTD Florists. He argues that any modification of the contract was a breach of Winthrop’s agreement to pay commissions on these accounts under Minn. Stat. § 181.14, asserting that any restrictions or qualifications on payments violate the wage statutes. Dougan v. Niedermaier, Inc., 419 N.W.2d 112, 115 (Minn. App. 1988) (holding under Minn. Stat. § 181.145, concerning salespersons who are independent contractors, that employer’s offer to pay part of the commissions due contingent on release of further claims for commissions does not comply with the law), review denied (Minn. Apr. 15, 1988).
Again, Friedenfeld presented no evidence that Winthrop offered or promised a vested interest in the WINR commissions. Further, because he continued to work for nine months after the commissions stopped, while continuing to receive commission statements that no longer included the commissions on the FTD Florists business, his at-will employment contract was amended to exclude any entitlement to the WINR commissions. See Brown, 519 N.W.2d at 478 n.2 (noting that employees who continue employment under new terms are considered to have accepted new terms providing necessary consideration). Thus, we conclude that Friedenfeld has not shown a genuine issue of material fact as to the FTD Florists commission.
Friedenfeld also contends that he was due commissions on Winthrop’s lease with McDonald’s, because his initial contact, which occurred before the WINR program ended, ultimately led to the lease. It is undisputed, however, that Winthrop’s first meeting with McDonald’s and the lease sales to a McDonald’s franchise occurred after the WINR program was discontinued. As such, Winthrop had altered the terms of Friedenfeld’s employment before any activity took place that might have qualified him for a commission and properly declined to pay him the commission. Again, the district court correctly concluded that Friedenfeld has not shown a genuine issue of material fact.
Next, appellants seek a penalty pursuant to Minn. Stat. § 181.14, subd. 2 (2000), which provides that if the employer fails to pay the commissions upon demand from the former employee, the employer is subject to a penalty. The district court correctly concluded that, because appellants were not entitled to additional commissions, there was no basis for the claim. The district court did not err in granting summary judgment on this issue.
Appellants also argue that Winthrop’s failure to pay their claimed commissions unjustly enriches Winthrop, and that they are entitled to recover in quantum meruit. Appellants contend that, because they put forth significant effort to secure lease contracts and because they shared the risks and costs of the leases, they should share in the profits as well. Appellants assert that an unjust enrichment claim is warranted, because they have shown that the “defendant has knowingly received or obtained something of value for which the defendant ‘in equity and good conscience’ should pay.” Servicemaster of St. Cloud v. Gab Bus. Servs., Inc., 544 N.W.2d 302, 306 (Minn. 1996) (but also stating that term “unjustly” could mean illegally or unlawfully) (citation omitted).
Under Minnesota law, the existence of an express contract precludes recovery for quantum meruit or unjust enrichment. Sharp v. Laubersheimer, 347 N.W.2d 268, 271 (Minn. 1984). The district court properly ruled that these claims failed as a matter of law, because appellants’ commission structure was an express term of their employment contract, and they, therefore, cannot seek relief on a quasi-contract claim. Further, given the parties’ admissions that they merely assumed they would be paid commissions after their employment ended, there was no conduct that can be considered unjust, illegal, or unlawful. Because unjust enrichment requires unjust or illegal conduct and there is no showing of such conduct here, the district court properly granted summary judgment.
Finally, appellants claim promissory estoppel. They contend that it is undisputed that Winthrop made clear and definite promises to compensate them at a given commission rate, upon which they relied. They assert that if the fact finder determines that the terms of the contracts that were created between the parties permit Winthrop to change the commission structure at any time, the contract is illusory and does not bind either party. Arguing that there are disputed issues of material fact, they assert that the district court’s grant of summary judgment should be reversed.
A claim for promissory estoppel requires a clear and definite promise. Ruud v. Great Plains Supply, Inc., 526 N.W.2d 369, 372 (Minn. 1995). Not only did appellants merely assume they would be paid post-employment commissions, they also admitted no such specific promise was ever made. We, therefore, conclude that the district court properly granted summary judgment in favor of Winthrop.
* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.