Schwam v. XO Communications

• Court: Court of Appeals for the Fourth Circuit
• Decided: March 24, 2006
• Docket: 05-1060
• Status: Unpublished

Opinion

UNPUBLISHED

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

No. 05-1060

JAYSON HARRIS SCHWAM,

Plaintiff - Appellant,

versus

XO COMMUNICATIONS, INCORPORATED,

Defendant - Appellee.

Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. Gerald Bruce Lee, District Judge. (CA-04-351-1)

Argued: February 2, 2006 Decided: March 24, 2006

Before WILKINS, Chief Judge, and NIEMEYER and WILLIAMS, Circuit Judges.

Affirmed by unpublished per curiam opinion.

ARGUED: Robert J. McManus, KILE, GOEKJIAN, REED & MCMANUS, Washington, D.C., for Appellant. Daniel Paul Westman, MORRISON & FOERSTER, L.L.P., McLean, Virginia, for Appellee. ON BRIEF: Scott W. Houtteman, KILE, GOEKJIAN, REED & MCMANUS, Washington, D.C., for Appellant.

Unpublished opinions are not binding precedent in this circuit. See Local Rule 36(c). PER CURIAM:

Jayson Schwam appeals the grant of summary judgment to XO

Communications, Inc. in his suit to recover post-termination

commissions. For the following reasons, we affirm.

I.

In April 2001, XO Communications, a nationwide provider

of telecommunications services located in Virginia, hired Schwam,

a Maryland resident, as a salesperson. Schwam remained with XO from

April 2001 until he was terminated on January 16, 2004. Schwam, an

at-will employee, was paid a base salary plus commissions generated

from his sales. During his employment with XO, Schwam signed the

Acknowledgment Form accompanying XO’s Sales Incentive Plan (SIP),

which governed how his commissions were calculated and paid. In

the SIP, XO reserved the right to “amend, modify, interpret, or

terminate the [SIP] at any time.” (J.A. at 122.) The SIP also

stated that “nothing in this Plan nor anything in it is intended to

create or shall be construed to create or imply the existence of an

employment contract, employment for a specific term, or a guarantee

of employment or job classification between XO Communications and

[Schwam].” (J.A. at 137.) The SIP further stated that “[u]pon any

termination of employment . . . compensation will be based upon the

employee’s last day of work. A terminated employee will be

considered terminated, for the purposes of calculating sales

2 incentive compensation, on the last day worked . . . .” (J.A. at

134.)

In November 2001, XO assigned Schwam to their Federal Group

hoping that Schwam could boost sales to the federal government. Two

years later Schwam assumed a business development role in the

Federal Group. As a result of Schwam’s participation in the

Federal Group, XO secured contracts with the U.S. Department of

Transportation (DOT), the Transportation Security Administration

(TSA), and the Environmental Protection Agency (EPA). In 2003, XO

was also approved by the GSA to provide telecommunications services

to the federal sector.

Sometime in late 2003 or early 2004, XO decided to eliminate

the Federal Group and it terminated Schwam’s employment on January

16, 2004. XO offered Schwam a severance package, which Schwam

rejected. Schwam then initiated the present action seeking the

recovery of post-termination commissions generated by the contracts

he procured with the federal government. Schwam presented claims

for breach of written contract for the failure to pay him

$17,003.00 for the TSA contract, breach of an oral contract to pay

additional commissions of $17,109.55, and breach of an oral

contract to pay other commissions of $71,400.00. Schwam also set

forth a claim for unjust enrichment.1

1 Schwam also alleged a claim of promissory estoppel, but he withdrew this claim.

3 Following a hearing, the district court granted XO’s motion

for summary judgment on the unjust enrichment claim and the first

and third breach of contract claims. The district court then

dismissed Schwam’s second breach of contract claim for lack of

subject matter jurisdiction because Schwam only sought $17,109.55

under that claim. On appeal, Schwam contends only that the

district court erred in granting summary judgment to XO on the

unjust enrichment claim and on the third breach of contract claim.2

We have jurisdiction to review this diversity case under 28

U.S.C.A. §§ 1332 and 1291 (West 1993 & Supp. 2005).

II.

We review de novo “an award of summary judgment, viewing the

facts and inferences drawn therefrom in the light most favorable to

the non-moving party.” EEOC v. Navy Fed. Credit Union, 424 F.3d

397, 405 (4th Cir. 2005). “Such an award is appropriate only if

2 In the concluding paragraph of Schwam’s opening brief, he requests that we vacate the dismissal of the second breach of contract claim. Appellant Br. at 30 (“For the foregoing reasons, it is respectfully requested that this Court: . . . vacate the District Court’s dismissal of Count II for want of subject matter jurisdiction. . . .”). Federal Rule of Appellate Procedure 28(a)(9) requires that an appellate brief contain the “contentions and the reasons for them with citations to the authorities and parts of the record on which the appellant relies.” Fed. R. App. P. 28(a)(9). Because Schwam failed to develop any argument or to cite any cases in support of vacating the award as required by Rule 28, we deem this issue abandoned and do not address it. 11126 Baltimore Boulevard, Inc. v. Prince George’s County, 58 F.3d 988, 993 n.7 (4th Cir. 1995).

4 the pleadings, depositions, answers to interrogatories, and

admissions on file, together with the affidavits, show that there

is no genuine issue of material fact and that the moving party is

entitled to a judgment as a matter of law.” Id. (internal

quotation marks omitted).

A.

The district court granted summary judgment to XO on Schwam’s

unjust enrichment claim because it concluded that the SIP

constituted a valid contract and, under Virginia law, an unjust

enrichment claim will not lie when an express contract exists

between the parties. Thus, to obtain a reversal, Schwam must

demonstrate that the SIP contract is unenforceable. Schwam makes

three arguments why the SIP is unenforceable: (1) the SIP is a

contract of adhesion, (2) XO expressly stated the SIP was not a

contract, and (3) lack of mutuality. We find Schwam’s arguments

unpersuasive.

Under Virginia law, “[a] contract of adhesion is a standard

form contract, prepared by one party and presented to a weaker

party -- usually, a consumer -- who has no bargaining power and

little or no choice about the terms.” Philyaw v. Platinum Enters.,

Inc., 54 Va. Cir. 364 (2001); see also Black’s Law Dictionary 342

(8th ed. 2004)(defining contract of adhesion as the same). As the

district court noted, Schwam admitted that he had employment

5 options other than XO and was under no obligation to work for XO.

Schwam also admitted that XO offered him a sales management

position, but he chose the business development position instead.

Schwam’s admission that he had the freedom to take a different job

with XO or to leave XO altogether for a different company indicates

that the SIP Schwam agreed to was not a contract of adhesion under

Virginia law.

Schwam’s next argument, that the SIP is not an enforceable

contract because it states that it is not a contract, is also

without merit. The SIP plainly states that the employee

“acknowledges that this Plan does not affect [his] status as an

employee-at-will of XO” and that it “is not intended in any way to

create and does not create a term of employment or an employment

contract, express or implied, between XO and [the employee].”

(J.A. at 139 (emphasis added).). This statement means only that

the SIP does not create an “employment contract,” but the document

does constitute the compensation contract for the parties. The SIP

provides the entire sales incentive compensation agreement between

XO and its salespersons. Because Schwam is contesting his

compensation -- not his termination -- the SIP, as the express

compensation contract between XO and Schwam, controls this suit.

Finally, Schwam urges us to hold the SIP unenforceable because

it lacks mutuality of obligation. The Acknowledgment Form states

that XO maintains the authority to “amend, supersede, or terminate

6 this Plan at any time and at XO’s sole discretion.” (J.A. at 139.)

Schwam contends that this language renders any consideration given

by XO illusory because XO can modify or terminate the plan at its

discretion, and that makes the SIP unenforceable.

Under Virginia law, “[b]oth parties [to a contract] must be

bound, or neither is bound . . . [and] where the consideration for

the promise of one party is the promise of the other party, there

must be absolute mutuality of engagement, so that each party has

the right to hold the other to a positive agreement.” Am. Agri.

Chem. Co. v. Kennedy & Crawford, 48 S.E. 868, 870 (Va. 1904). At

first blush, this rule seems to suggest that we should hold the SIP

unenforceable because XO retained the right to “amend, supersede,

or terminate” the contract at any time, thus making its promise

illusory. A closer examination, however, indicates otherwise. In

American Agricultural Chemical v. Kennedy & Crawford, 48 S.E.2d 868

(Va. 1904), the court refused to enforce a contract for the sale of

fertilizer because the contract stated that the seller “reserve[d]

the right to cancel t[he] contract at any time . . . .” Id. at

870. The court reasoned that “[i]n this case the plaintiff made a

proposition to sell, which the defendants accepted, but the

plaintiff’s offer left it optional with it whether or not it would

sell. It did not bind itself to sell.” Id. at 871. “The

plaintiff after that time never did any act or made any promise

which bound it to complete the contract. . . . In the absence of

7 such obligation on the part of the plaintiff, and of such a right

on the part of the defendants, there never was a binding engagement

between the parties which a court of law would enforce.” Id.

Here, Schwam and XO performed numerous acts indicating their

intent to be bound by the SIP. Prior to terminating Schwam in

January 2004, XO paid Schwam pursuant to the provisions of the SIP

and Schwam accepted the compensation and continued to work. XO’s

consistent performance and compliance with the SIP removes the

illusory nature of its promise leaving the SIP enforceable. Unlike

the plaintiff in American Agricultural Chemical, XO performed acts

“which bound it to complete the contract.” American Agricultural

Chemical, 48 S.E. at 871. This interpretation is also consistent

with the prevailing rule that “[t]he test of mutuality of

obligation of a contract is to be applied not as of the time when

the promises are made but as of the time when the contract is

sought to be enforced.” 17A Am. Jur. 2d Contracts § 22 (2005); see

also Asberry v. Mitchell, 93 S.E. 638, 640 (Va. 1917)(testing

mutuality of obligation at the time a party sought to enforce the

contract). By examining the mutuality of obligation to the SIP at

this time when XO seeks to enforce the SIP over Schwam’s challenge

to it, there can be no doubt that XO’s post-formation acts

sufficiently bound it to the SIP.

In summary, we affirm the district court’s grant of summary

judgment to XO on the unjust enrichment claim because the SIP is

8 not a contract of adhesion, it is the compensation contract

governing this dispute, and it is not invalid for lack of

mutuality.

B.

Next, Schwam contends that the district court erred in

granting summary judgment to XO on his third breach of contract

claim. Schwam argues that summary judgment was inappropriate

because (1) an XO supervisor orally modified the terms of the SIP

and (2) the breach of contract claim seeks the recovery of

commissions that were earned prior to termination. We first

address Schwam’s oral modification argument.

In support of this argument, Schwam points to the fact that

Ortega, Schwam’s supervisor, told Schwam that “XO would take care

of him next year, and he would get a part of the commissions based

on the amount of business that he brought to the table.” (J.A. at

59.) Schwam also notes that Ortega further stated that this

statement meant XO would compensate Schwam “fairly.” (J.A. at 60.)

Virginia allows for the modification of written contracts if

evidenced by express mutual assent. Stanley’s Cafeteria, Inc. v.

Abramson, 306 S.E.2d 870, 872 (Va. 1983). Assuming that the SIP

could be modified by oral agreement, Ortega’s statements do not

constitute an enforceable oral modification because the statements

are too indefinite. The SIP provides 23 pages of detailed

9 information regarding the calculation and payment of commissions.

It is hardly plausible that Ortega’s statements that XO would “take

care of” Schwam and that Schwam “would get a part of the

commissions” could effectively modify such detailed provisions. In

fact, at the summary judgment hearing, Schwam’s attorney admitted

that Ortega did not specify the percentage of revenues Schwam would

receive and that Ortega’s statements were “indefinite” as to when

the commissions would be paid. (J.A. at 327-328.) Schwam also

admitted in his deposition that he did not know what percentage of

revenue XO had orally promised to pay. Without knowing when and

how much money XO allegedly orally promised Schwam, it is near

impossible to enforce such a vague “contract.” There is also no

evidence that Ortega or any other officer of XO, expressly stated

that Schwam’s compensation would no longer be governed by the SIP.

Thus, in the absence of clear evidence that XO intended to modify

or supplement the SIP, we are constrained to enforce the SIP’s

detailed terms. See Stanley’s Cafeteria, 306 S.E.2d at 873

(holding that “mutual intent” to modify a contract “must be shown

by clear, unequivocal and convincing evidence” (internal quotation

marks omitted)).

Finally, we address Schwam’s argument that he is due the post-

termination commissions because the commissions constitute

compensation for previously rendered services. Again, we look to

the language of the SIP to determine whether Schwam is entitled to

10 a percentage of the revenues generated from the contracts he

secured prior to his termination. The SIP does not provide for

post-termination commissions, as evidenced by the statement that a

salesperson is deemed terminated on the last day of work for

purposes of calculating commissions. The SIP also gives XO the

authority to deny commissions or to remove a salesperson’s

eligibility for commissions. Moreover, Schwam admitted in his

deposition that telecommunications companies do not usually pay

employees commissions for income received by the company after the

employee is terminated. We therefore agree with the district court

that the SIP does not provide for the payment of post-termination

commissions.

III.

For the reasons given, we affirm the district court’s grant of

summary judgment to XO.

AFFIRMED