William J. Kelly v. Allied Corporation and Bunker Ramo-Eltra Corporation

755 F.2d 184, 1985 U.S. App. LEXIS 29484
CourtCourt of Appeals for the First Circuit
DecidedFebruary 25, 1985
Docket84-1727
StatusPublished

This text of 755 F.2d 184 (William J. Kelly v. Allied Corporation and Bunker Ramo-Eltra Corporation) is published on Counsel Stack Legal Research, covering Court of Appeals for the First Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
William J. Kelly v. Allied Corporation and Bunker Ramo-Eltra Corporation, 755 F.2d 184, 1985 U.S. App. LEXIS 29484 (1st Cir. 1985).

Opinion

COFFIN, Circuit Judge.

This case arises from a conflict over what was and was not said in a contract for commissions on the sale of computer equipment. Appellant, William J. Kelly, claims that the appellees, Mergenthaler Linotype Co. and its parent companies (“Mergenthaler”), owe him a $24,000 commission on the sale of a $1.6 million computer system even though Kelly quit his job at Mergenthaler before the computer system was shipped to the customer. A jury returned a verdict for Kelly, but the District Court for the District of Massachusetts granted the companies’ motion for a judgment notwithstanding the verdict. We reverse.

The circumstances leading to this conflict began when Kelly was assigned to a new position at Mergenthaler in early 1982. Until that time, Kelly had served as National Sales Manager, Systems, a position in which he was responsible for eight or nine sales people who sold two types of computer systems, the System 325 and the M.C. 2000. Kelly earned a commission when a computer system sold by one of his sales force was shipped to the customer. The rules governing commissions applicable to both Kelly and his sales people, which were detailed on a separate page attached to their 1982 incentive compensation plans, 1 specified that commissions due upon shipment of merchandise would not be paid if the employee left the company before the shipment.

Apparently against his wishes, Kelly was switched to his new job as National Accounts Manager for System 5500 in March 1982. System 5500 is a large, complex computer system designed for individual customers, in this case newspapers, according to their specifications. Before Kelly assumed responsibility for the 5500, Mer-genthaler had sold only two such systems in the United States. In contrast, about 35 to 50 System 325’s were sold between June 1980 and December 1981.

At the time of his job change, Kelly received a memorandum entitled “System 5500 Incentive Compensation Plan” from Mergenthaler’s vice-president in charge of sales which stated in its entirety:

“Effective March 22, 1982, a System 5500 Incentive Compensation Plan is in effect for your position. It’s [sic] purpose is to encourage discussion of, stimulate sales activity on, and identify viable prospects for a System 5500.
The resultant sale of a System 5500 within the scope of your area of responsibility must have had your involvement in order to qualify for the Incentive Compensation Plan. This involvement MUST be verified by supporting written documentation attesting to your activity.
Upon the successful completion of a sale and subsequent shipment, you will be compensated as follows:
1.5% of the net value of the order.”

During the spring of 1982, Kelly worked on the sale of a System 5500 to the Santa Ana Register, a newspaper in California, and his efforts contributed to the signing of a contract by early May. In June, Kelly left Mergenthaler to take a job at Itek Corp. In early 1983, he learned that the Santa Ana system had been shipped and contacted Mergenthaler to ask for his commission. The company refused to pay him, and Kelly commenced this suit.

*186 Mergenthaler has argued that the memorandum Kelly received on the System 5500 Incentive Compensation Plan means that Kelly earned his commission on the sale of a System 5500 not when a sales contract was signed but only when the system was shipped. It supported that view by arguing that significant work remained to be done on a sale even after the contract signing. The company further argued that the rules that had governed Kelly and his employees in his former position — specifically the rule precluding commissions if the employee left before shipment — still applied to Kelly in his new job. Kelly argued that he was in a new position with new rules, and that the memorandum quoted above was the entire agreement between him and the company regarding his commission on the sale of System 5500s. He argued that his commission vested when a contract for sale was signed, although he was not to be paid the commission until after shipment. And he argued that termination would have no effect on his entitlement to the commission because this agreement failed to extend to his new position the rule which covered his old one.

After a UA-day trial, a jury found in Kelly’s favor. The district court, however, granted Mergenthaler a judgment notwithstanding the verdict because it found that the absence of language on the effect of termination in Kelly’s new compensation plan could not be interpreted contrary to the company’s past practice of withholding commissions when an employee left the company before shipment of the merchandise. It also found that “[t]he only reasonable construction of the agreement is that both ongoing ‘involvement’ and ‘subsequent shipment’ were conditions of the obligation of paying the 1.5% commission.”

In granting a judgment notwithstanding the verdict, a court must determine “that the evidence could lead reasonable men to but one conclusion.” Hubbard v. Faros Fisheries, Inc., 626 F.2d 196, 199 (1st Cir. 1980). We do not believe this is such a case. Under New York law, which the parties agree is the applicable law in this case, “absent a clear agreement to the contrary, the right to ... commissions vests at the time of booking.” Diaz v. Indian Head, Inc., 686 F.2d 558, 567 (7th Cir.1982) (applying New York law); Grattan v. Societa per Azzioni Cotonificio Cantoni, 2 Misc.2d 861, 151 N.Y.S.2d 875, 884 (1956); Dibble v. Dimick, 143 N.Y. 549, 38 N.E. 724 (1894). Mergenthaler correctly argued that New York law also provides that “where an employee resigns voluntarily, he is not entitled to receive commissions on sales made by him where the contract provides that such commissions shall be due and payable to the salesman when the shipments are made”, Maloney v. Jarco Metal Products Corp., Sup., 144 N.Y.S.2d 128, 131 (1955). But that is not the end of it. Maloney also specifies circumstances in which this general rule does not apply: “Where the major consideration in the earning of commissions is procurement of orders for the defendant, the employee is entitled to commissions on the sale he obtained during the period of his employment,” id. at 132, citing Krause, Inc. v. Gardner, Sup., 99 N.Y.S.2d 592 (1950).

A key question for the factfinder, then, was whether the language in Kelly’s compensation plan linking commissions to the time of shipment evidenced an intention that Kelly’s right to commissions would not vest until that time or whether it was evidence only of an intention that shipping would be a condition precedent to payment of the commission. The second important question was whether, regardless of the commission’s time of vesting, Kelly was subject to a rule that termination cut off any rights to outstanding commissions.

We acknowledge that certain evidence pointed to the district court’s conclusion that Kelly was not entitled to the commission.

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Related

Harry Grayson v. Pride Golf Tee Company
433 F.2d 572 (First Circuit, 1970)
Albert J. Diaz v. Indian Head, Inc., a Corporation
686 F.2d 558 (Seventh Circuit, 1982)
Dibble v. . Dimick
38 N.E. 724 (New York Court of Appeals, 1894)
Grattan v. Societa Per Azzioni Cotonficio Cantoni
2 Misc. 2d 861 (New York Supreme Court, 1956)

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Bluebook (online)
755 F.2d 184, 1985 U.S. App. LEXIS 29484, Counsel Stack Legal Research, https://law.counselstack.com/opinion/william-j-kelly-v-allied-corporation-and-bunker-ramo-eltra-corporation-ca1-1985.