Opinion
Civil Action No. 18-cv-03360-PAB-SKC
2020-11-17
Anne LAWSON, Plaintiff, v. HEARTLAND PAYMENT SYSTEMS, LLC, a Delaware limited liability company, Defendant.
Elizabeth Tillotson Hartsel, Lenora B. Plimpton, Christine K. Lamb, Fortis Law Partners LLC, Denver, CO, for Plaintiff. David Charles Gartenberg, Jennifer S. Harpole, Littler Mendelson, PC, Denver, CO, for Defendant.
Elizabeth Tillotson Hartsel, Lenora B. Plimpton, Christine K. Lamb, Fortis Law Partners LLC, Denver, CO, for Plaintiff.
David Charles Gartenberg, Jennifer S. Harpole, Littler Mendelson, PC, Denver, CO, for Defendant.
ORDER
PHILIP A. BRIMMER, Chief United States District Judge
This matter is before the Court on defendant's Motion to Partially Dismiss Under Federal Rule of Civil Procedure 12(b)(6) [Docket No. 59]. The Court has jurisdiction pursuant to 28 U.S.C. § 1331 and § 1367.
The Court assumes that the allegations in plaintiff's second amended complaint are true in considering the motion to dismiss. Brown v. Montoya , 662 F.3d 1152, 1162 (10th Cir. 2011).
Defendant provides "electronic-based payment processing systems, such as debit and credit card payment systems, to merchants like restaurants and hotels." Docket No. 54 at 3, ¶ 13. Plaintiff began working for defendant as a relationship manager on May 26, 2014. Id. at 2-3, ¶¶ 9, 14. When plaintiff secured a new client for defendant, so long as the client contract met certain terms, she was entitled to a "signing bonus" and a "residual commission." Id. at 2-3, ¶ 11.
To meet her production quota, plaintiff focused her efforts on "businesses with large portfolios of merchants instead of reaching out to smaller individual restaurants or hotels." Id. at 5, ¶ 18. One of those potential clients was Sage Hospitality, which has over seventy-five hotels, ten restaurants, and "roughly one billion dollars in sales every year." Id. at 5-6, ¶ 19. Another client was Stanley Marketplace, "a conglomerate of fifty [ ] independently owned businesses in Aurora, Colorado." Id. at 6, ¶ 21. Some of plaintiff's colleagues believed that plaintiff was competing in "their territory," and, "[a]s a result of these complaints," defendant informed plaintiff that her "production was below threshold and that she was being put on a ‘sales activity improvement plan.’ " Id. at 6-7, ¶¶ 22-24. Plaintiff received "verbal commitments" from both Sage Hospitality and Stanley Marketplace "before the end of September" that they would utilize defendant's services. Id. , ¶ 26. Had plaintiff secured contracts with Sage Hospitality and Stanley Marketplace, she "would [have] exceed[ed] her production requirement for the year." Id. , ¶ 25.
However, before these deals could close, defendant terminated plaintiff. Id. at 7-8, ¶ 28. No one informed plaintiff that she had been fired. Id. at 8, ¶ 29. Rather, she discovered her termination "as she was attempting to submit a deal." Id. A week after defendant fired plaintiff, plaintiff discovered that she was terminated "because of production requirements." Id. , ¶ 31. However, Christopher Hill, the Director of Human Sources, told plaintiff that Jake Williams, the person who fired plaintiff, was "searching for cause" to fire her. Id.
After defendant fired plaintiff, her other colleagues took over some of the deals she had been working on. Id. at 9, ¶ 33. One colleague completed the deal with Stanley Marketplace. Id. , ¶ 34. However, Sage Hospitality decided not to work with defendant after learning it had fired plaintiff. Id. , ¶ 35. Before plaintiff's termination, she was "slated to sign" contracts with Blue Spruce Brewing Company, First Inn of Pagosa, Antonio's Pizza, Pasta & Wings, and Assisted Transport ("other deals"). Id. , ¶ 37. Defendant eventually secured those contracts after plaintiff's discharge. Id. Plaintiff's commissions from the Stanley Market Place and the other deals would have been worth roughly $85,000. Id. , ¶¶ 36-37.
On December 31, 2018, plaintiff filed suit. See Docket No. 1. In her second amended complaint, she brings claims for gender discrimination in violation of Title VII, wrongful termination in violation of public policy, withholding of wages pursuant to the Colorado Wage Claim Act, Colo. Rev. Stat. § 8-4-101 et seq. , and breach of contract. Docket No. 54 at 10-13. On November 14, 2019, defendant moved to dismiss plaintiff's claims for wrongful termination, withholding of wages, and breach of contract. See Docket No. 59.
II. LEGAL STANDARD
To survive a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a complaint must allege enough factual matter that, taken as true, makes the plaintiff's "claim to relief ... plausible on its face." Khalik v. United Air Lines , 671 F.3d 1188, 1190 (10th Cir. 2012) (citing Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "The ‘plausibility’ standard requires that relief must plausibly follow from the facts alleged, not that the facts themselves be plausible." RE/MAX, LLC v. Quicken Loans Inc. , 295 F. Supp. 3d 1163, 1168 (D. Colo. 2018) (citing Bryson v. Gonzales , 534 F.3d 1282, 1286 (10th Cir. 2008) ). Generally, "[s]pecific facts are not necessary; the statement need only ‘give the defendant fair notice of what the claim is and the grounds upon which it rests.’ " Erickson v. Pardus , 551 U.S. 89, 93, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (per curiam) (quoting Twombly , 550 U.S. at 555, 127 S.Ct. 1955 ) (alterations omitted). However, a plaintiff still must provide "supporting factual averments" with her allegations. Cory v. Allstate Ins. , 583 F.3d 1240, 1244 (10th Cir. 2009) ("[C]onclusory allegations without supporting factual averments are insufficient to state a claim on which relief can be based." (citation omitted)). Otherwise, the Court need not accept conclusory allegations. Moffett v. Halliburton Energy Servs., Inc. , 291 F.3d 1227, 1232 (10th Cir. 2002). "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged – but it has not shown – that the pleader is entitled to relief." Ashcroft v. Iqbal , 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quotations and alterations omitted); see also Khalik , 671 F.3d at 1190 ("A plaintiff must nudge [his] claims across the line from conceivable to plausible in order to survive a motion to dismiss." (quoting Twombly , 550 U.S. at 570, 127 S.Ct. 1955 )). If a complaint's allegations are "so general that they encompass a wide swath of conduct, much of it innocent," then plaintiff has not stated a plausible claim. Khalik , 671 F.3d at 1191 (quotations omitted). Thus, even though modern rules of pleading are somewhat forgiving, "a complaint still must contain either direct or inferential allegations respecting all the material elements necessary to sustain a recovery under some viable legal theory." Bryson , 534 F.3d at 1286 (alterations omitted).
Defendant relies on two documents outside of the pleadings in moving to dismiss plaintiff's claims. See Docket Nos. 59-2, 59-3. Generally, if a court considers matters outside the pleadings in deciding a Rule 12(b)(6) motion, "the motion must be treated as one for summary judgment under Rule 56." Fed. R. Civ. P 12(d). However, "if a plaintiff does not incorporate by reference or attach a document to its complaint, but the document is referred to in the complaint and is central to the plaintiff's claim, a defendant may submit an indisputably authentic copy to the court to be considered on a motion to dismiss." GFF Corp. v. Associated Wholesale Grocers, Inc. , 130 F.3d 1381, 1384 (10th Cir. 1997). Here, defendant has submitted plaintiff's "Relationship Manager Agreement," which is plaintiff's employment agreement with defendant, Docket No. 59-2, and the HPS Sales Policy, which governs, among other things, how plaintiff was compensated while employed for defendant. Docket No. 59-3. These exhibits are referenced in and central to plaintiff's complaint. See Docket No. 54 at 2-3, 12-13, ¶¶ 10-11, 61-64. Because plaintiff does not dispute their authenticity, see Docket No. 62 at 4-6, 10-11, the Court may consider the exhibits in resolving defendant's motion to dismiss.
III. ANALYSIS
Because the Court exercises supplemental jurisdiction over plaintiff's state law claims, the Court applies the law of the forum state. BancOklahoma Mortg. Corp. v. Cap. Title Co., Inc. , 194 F.3d 1089, 1103 (10th Cir. 1999). As a result, the Court applies Colorado law to plaintiff's claims. See id.
The Court previously denied defendant's motion to transfer venue to the District of New Jersey pursuant to a forum selection clause in the Relationship Manager Agreement. See Docket No. 35. As stated in the Court's order, the Relationship Manager Agreement also contains a choice of law clause, which the Court noted is likely unenforceable under both New Jersey and Colorado law. Id. at 14-15. In its motion to dismiss, defendant does not raise any argument regarding New Jersey law governing plaintiff's claims and, as a result, the Court considers defendant to have waived any argument regarding its enforceability. See Idg, Inc. v. Cont'l Cas. Co. , 275 F.3d 916, 920 (10th Cir. 2001) (citing Mauldin v. Worldcom, Inc. , 263 F.3d 1205, 1212 (10th Cir. 2001) ) (concluding that parties may waive choice of law arguments by failing to brief them). Like the parties, the Court applies Colorado law.
A. Wrongful Termination in Violation of Public Policy
Defendant first moves to dismiss plaintiff's claim for wrongful termination in violation of public policy. Defendant argues that, under Colorado law, a wrongful termination in violation of public policy claim requires that defendant "directed [p]laintiff to perform an illegal act or prohibited her from exercising an important job-related right or privilege." Docket No. 59 at 7. Plaintiff argues that Colorado recognizes a claim for wrongful termination when an employer terminates an employee to avoid payment of wages. Docket No. 62 at 13.
Colorado law generally "presumes that an employment relationship is terminable at will by either party." Mullin v. Hyatt Residential Grp., Inc. , 82 F. Supp. 3d 1248, 1251-52 (D. Colo. 2015) (citation omitted). However, an exception exists for wrongful termination in violation of public policy. A prima facie case for wrongful termination in violation of public policy requires:
[(1)] that the employer directed the employee to perform an illegal act as part of the employee's work related duties or prohibited the employee from performing a public duty or exercising an important job-related right or privilege; [(2)] that the action directed by the employer would violate a specific statute relating to the public health, safety, or welfare, or would undermine a clearly expressed public policy relating to the employee's basic responsibility as a citizen or the employee's right or privilege as a worker; and [(3)] that the employee was terminated as the result of refusing to perform the act directed by the employer.
Martin Marietta Corp. v. Lorenz , 823 P.2d 100, 109 (Colo. 1992). Thus, to state a viable claim for wrongful termination in violation of public policy, an employee must take or not take some action, at the direction of her employer, that violates a clearly expressed public policy. Id. ; see also Brown v. Premier Roofing, LLC , 173 F. Supp. 3d 1181, 1185 (D. Colo. 2016) (noting that one goal of the tort is "to ensure that in order to keep his or her job, an employee is not required to forsake an important public duty" (citation omitted)).
The Court finds that plaintiff has failed to state a claim for wrongful termination in violation of public policy. Plaintiff alleges that defendant terminated her before several in-progress deals closed and that the purpose of the termination was to avoid payment of her commissions resulting from those deals. Docket No. 54 at 11, ¶¶ 49-51. However, wrongful discharge requires that "the employer directed the employee to perform an illegal act ... or prohibited the employee from performing a public duty." Lorenz , 823 P.2d at 109. Moreover, "the action directed by the employer" must "undermine a clearly expressed public policy." Id. Here, plaintiff makes no allegations that defendant directed her to do, or prohibited her from, any such action. Even if Colorado had a clearly expressed policy of preventing termination of employees to avoid payment of wages based on the Colorado Wage Claims Act, which is an open question, see Carskadon v. Diva Int'l, Inc. , No. 12-cv-01886-RM-KMT, 2014 WL 7403237, at *11 (D. Colo. Feb. 26, 2014), the crux of plaintiff's claim is that defendant fired her to avoid paying her commissions, not that defendant asked her to do something illegal or prevented her from performing a public duty or from exercising an important job-related right.
Plaintiff argues that caselaw from other states explicitly recognizes a wrongful discharge claim in this context. See Docket No. 62 at 13. Plaintiff cites to three cases from California in support of her argument. Id. However, wrongful discharge in California is fundamentally different than Colorado's claim for wrongful discharge. In California, "[a] wrongful discharge action will lie whenever the basis of the discharge contravenes a fundamental public policy." McCollum v. XCare.net, Inc. , 212 F. Supp. 2d 1142, 1154 (N.D. Cal. 2002) (citation and quotations omitted); see also Steffens v. Regus Grp., PLC , 485 F. App'x 187, 188 (9th Cir. 2012) (unpublished) ("In California, an employer may be subject to tort liability for wrongful termination if the termination violates a fundamental public policy."). Because prompt payment of wages is a fundamental public policy in California, termination to avoid payment violates such policy. See Gould v. Md. Sound Indus., Inc. , 31 Cal.App.4th 1137, 37 Cal. Rptr. 2d 718, 724 (1995) (holding that discharge to avoid paying commissions violates a "fundamental public policy of this state"). Colorado, however, requires more than discharge in violation of public policy; it also requires an employer to direct an employee to take or not take a particular action that violates public policy. Lorenz , 823 P.2d at 109. Besides these California cases, plaintiff offers no argument that Colorado courts would be willing to expand the exception such that a discharge, without more, is sufficient. The Court concludes that they would not.
Because the Court finds that plaintiff has failed to state a claim for wrongful termination in violation of public policy, the Court does not reach defendant's argument that a wrongful termination claim is barred by the statutory remedy of the Colorado Wage Claims Act. See Docket No. 59 at 8-9.
B. Colorado Wage Claims Act
Defendant seeks to dismiss plaintiff's claim under the Colorado Wage Claims Act ("CWCA"). Defendant argues that, because none of the deals at issue had been signed, plaintiff's commission from those deals is not earned or vested under the CWCA. Docket No. 59 at 10. Plaintiff responds that the Relationship Manager Agreement and the HPS Sales Policy only provide a payment schedule and do not determine when a commission is vested or earned. Docket No. 62 at 10-11.
Plaintiff argues that defendant waived this argument by not raising it in previous motions to dismiss Docket No. 62 at 9. The Court finds plaintiff's waiver argument unpersuasive. See Albers v. Bd. of Cty. Comm'rs , No. 12-cv-03362-WYD-MJW, 2014 WL 128062, at *3 n.3 (D. Colo. Jan. 13, 2014) (finding that Federal Rule of Civil Procedure 12(g) did not bar a new argument in a motion to dismiss for failure to state a claim after the plaintiff filed a third amended complaint).
The CWCA states that, "[w]hen an interruption in the employer-employee relationship by volition of the employer occurs, the wages or compensation for labor or service earned, vested, determinable, and unpaid at the time of such discharge is due and payable immediately." Colo. Rev. Stat. § 8-4-109(1)(a). The CWCA further defines "wages or compensation" as:
(I) All amounts for labor or service performed by employees, whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculating the same or whether the labor or service is performed under contract, subcontract, partnership, subpartnership, station plan, or other agreement for the performance of labor or service if the labor or service to be paid for is performed personally by the person demanding payment. No amount is considered to be wages or compensation until such amount is earned, vested, and determinable, at which time such amount shall be payable to the employee pursuant to this article .
(II) Bonuses or commissions earned for labor or services performed in accordance with the terms of any agreement between an employer and employee .
Colo. Rev. Stat. § 8-4-101 (emphasis added). Furthermore, "[n]othing in [ Colo. Rev. Stat. § 8-4-109(1) ] shall ... require the payment at the time employment is severed of compensation not yet fully earned under the compensation agreement between the employee and employer, whether written or oral." Colo. Rev. Stat. § 8-4-109(2). To demonstrate a CWCA violation, plaintiff must show that the commissions were earned, vested, and determinable under the terms of her contract with defendant at the time she was terminated. See Kirkland v. Robert W. Baird & Co., Inc. , No. 18-cv-02724-MSK-SKC, 2020 WL 1452165, at *8 (D. Colo. Mar. 25, 2020) (collecting cases demonstrating that the terms of an employment agreement determine whether compensation is earned and vested under the CWCA). Plaintiff signed a "Relationship Manager Agreement" ("RM Agreement"), which outlines the terms of her employment with defendant. See Docket No. 59-2 at 1, 8. The RM Agreement states that plaintiff "agrees to adhere to, abide by and follow at all times the sales policies contained in ... [the] HPS Sales Policy." Id. at 1. Additionally, according to the RM Agreement, plaintiff "shall receive compensation in accordance with the provisions of the HPS Sales Policy Manual, as may be amended from time to time." Id.
The Court first addresses the HPS Sales Policy's ("Sales Policy") treatment of signing bonuses. The Sales Policy states that, "following the completion of [an] Eligible Contract approved by HPS, [the relationship manager] may earn a Signing Bonus." Docket No. 59-3 at 10. An "Eligible Contract" is defined as one where the agreement with the client is for more than thirty-six months, the agreement with the client meets certain monetary thresholds, the client is not high risk, and the "Primary Service covered by the Contract is not Gift As You Go." Id. at 3. A "Signing Bonus" is a "commission earned in the 13th month after the Installation of Primary Services." Id. at 7. An installation is defined as "[t]he point in time when an Account begins using HPS Primary Services – or other products or services provided by HPS – after completion of a sale." Id. at 4. The signing bonus is calculated based on a percentage of the "actual Margin generated by the Account during the First Year." Id. at 10. "First Year" is defined as "[t]he first 12 full month period after Installation of An Account." Id. at 3. Finally, "[t]he Signing Bonus shall be considered to have been earned by [the relationship manager] on the 15th day of the month following the First Year, provided that [the relationship manager] is employed by HPS on that date." Id. at 10.
The Court finds that plaintiff's signing bonuses from Stanley Marketplace and the other deals were not earned or vested at the time she was fired. The RM Agreement, in conjunction with the Sales Policy, states that a relationship manager does not earn a signing bonus unless three criteria are met: (1) installation has occurred, id. at 7, (2) at least twelve months have passed since installation, id. at 7, 10, and (3) the relationship manager is still employed by defendant. Id. at 10. The Sales Policy explicitly uses the word "earned" in two places in determining when a relationship manager is entitled to a signing bonus and, in each place, the Sales Policy states that the bonus is not earned until after the "First Year" of installation. Id. at 7, 10. Additionally, the Sales Policy requires that a relationship manager is employed by defendant on the date that the signing bonus is earned. Id. at 10.
Here, plaintiff does not allege that installation has occurred for any contract. Rather, she alleges that she either had "verbal commitments" from clients or that clients were "slated to sign" with defendant. Docket No. 54 at 7, 9, ¶¶ 26, 37. But the Sales Policy requires installation of an eligible contract as one of the preconditions to earning a signing bonus. Docket No. 59-3 at 7. Moreover, even if these verbal commitments could be construed as eligible installed contracts, twelve months had not passed after the verbal commitments. Id. at 7, 10. Finally, given that plaintiff is no longer employed by defendant, she has not satisfied an additional requirement for earning a signing bonus. Id. As a result, plaintiff has failed to state a claim under the CWCA as to any signing bonus. See Kirkland , 2020 WL 1452165, at *8 (stating that the terms of an employment agreement determine when compensation is earned). Plaintiff argues that the Sales Policy "merely provides a condition for the payment of the Signing Bonus Advance" and "not a time when the wage becomes earned or vested." Docket No. 62 at 11. In doing so, plaintiff points to the provision in the Sales Policy that says, "[i]n anticipation of the [relationship manager] earning the Signing Bonus, HPS shall pay the [relationship manager] a Signing Bonus Advance after the Installation of the Account." Docket No. 59-3 at 10. Such an advance "shall be paid on the next regular pay date during the week following Installation." Id.
Plaintiff is correct that these provisions do not state when a signing bonus is earned or vested, but that is because the other provisions the Court already analyzed provide when a signing bonus is earned. The Signing Bonus Advance is simply a "[p]ercentage of the estimated Margin to be generated by an Account during the First Year." Id. at 7. And even then, such a percentage will only be provided after "installation" of the account, which does not occur until a client signs a contract and begins using defendant's services. Id. at 4 (defining installation as "[t]he point in time when an Account begins using HPS Primary Services – or other products or services provided by HPS – after completion of a sale"). Thus, even if the references to advances in the Sales Policy supported plaintiff's interpretation, the Sales Policy still requires the installation of a contract, something which plaintiff does not allege. More importantly, the advance is just that – an estimation of what a relationship manager will earn once installation has occurred and a full year has passed since the installation.
The Signing Bonus Advance argument fails under the CWCA for another reason: the CWCA requires that the compensation be "determinable," Colo. Rev. Stat. § 8-4-101, but a signing bonus is an estimation of the profit earned over the first year. Docket No. 59-3 at 7. Plaintiff has not provided plausible allegations, as opposed to conclusory allegations, that the signing bonus was determinable at the time of her termination. As a result, the advance was not determinable at the time of plaintiff's firing such that it can serve as a basis of a CWCA claim.
Next, the Court addresses the Sale Policy's treatment of residual commissions. A residual commission is a "monthly recurring commission." Docket No. 59-3 at 6. "For Primary Services, Residual Commissions are equal to a percentage ... of the actual Margin generated by an Account each month plus or minus any True-Up Amounts." Id. Furthermore, a residual commission "may be paid ... each month following the Installation of Primary Services for an Account." Id. at 11. Residual commissions "shall be paid to the [relationship manager] on or about the 15th of the month following the month in which the actual Margin was generated by the Account." Id. "Margin is defined as the amount of gross fees collected from an Account for Primary Services by HPS, less all Primary Service Costs." Id. at 4. In other words, the margin is the profit defendant receives from a contract with a client.
The Court finds that plaintiff had not earned a residual commission for Stanley Marketplace or the other deals at the point she was fired. The Sales Policy has two requirements for a residual commission: first, there must be an installation of an account. Id. at 11. Second, there must be an actual margin from which the commission can be calculated. Id. As stated above, installation occurs when "an Account begins using HPS Primary Services – or other products or services provided by HPS – after completion of a sale." Id. at 4. Plaintiff, however, does not allege that installation had occurred for Stanley Marketplace or the other deals. See Docket No. 54 at 7, 9, ¶¶ 26, 37. Second, at the time plaintiff was fired, there was no actual margin to determine what her residual commission would be because there was no contract from which to determine what the profit would be. Additionally, a month had not passed such that a residual commission could be calculated. Unlike the signing bonus, which has an advance provision, there is no advance for residual commissions; residual commissions are specifically calculated from actual margins, which requires both a contract and profit to calculate. Docket No. 59-3 at 11.
Plaintiff argues that the Sales Policy does not definitively determine when her residual commission vests. Docket No. 62 at 10. Rather, the Sales Policy only states when a residual commission will be paid. Id. at 10-11. Even assuming that the Sales Policy only provides a payment schedule and not a vesting or earning schedule, that schedule can only be put in place once there is installation. Docket No. 59-3 at 11. Without installation, which requires a signed contract and the use of defendant's services, there is no basis on which to begin paying a relationship manager a residual commission. When defendant fired plaintiff, Sage Hospitality, Stanley Marketplace, and the other deals were all in the same position, with verbal commitments but no signed agreements. Because there was no contract, no installation, and no actual margin for Stanley Marketplace and the other deals at the time of termination, plaintiff's residual commission was not vested, earned, or determinable.
Plaintiff alleges that she is owed approximately $85,000 in commissions, Docket No. 54 at 12, ¶ 55, which is the sum total from commissions other than from Sage Hospitality. Id. at 9, ¶ 36 (stating Sage Hospitality would be worth $400,000 in commissions). As a result, plaintiff does not appear to be arguing that she is owed anything from the Sage Hospitality deal, even though she had "verbal commitments" from Sage. Id. at 7, ¶ 28.
Plaintiff cites to two cases in support of her argument that the signing bonus and the residual commission were vested and earned. Neither case is on point. In Hallmon v. Advance Auto Parts, Inc. , 921 F. Supp. 2d 1110 (D. Colo. 2013), the defendant corporation provided a document titled "Frequently Asked Questions – 2010 Bonus Plan" that stated that an employee "must be an active Team Member at time of payout" to receive a bonus. Id. at 1120. The court concluded that this document only "provides a condition for the payment of bonuses that otherwise have already vested and are already determinable within the meaning of the CWCA." Id. The employment contract in Kelly v. OneSource Virtual, Inc. , 2017 Colo. Dist. LEXIS 983, at *6-7 (Colo. Dist. April 21, 2017), had similar language, and the court came to the same conclusion as Hallmon .
The language in the contracts at issue in Hallmon and Kelly is different than the language in the Sales Policy. The documents in Hallmon and Kelly required only that the person be employed to receive a bonus. The Sales Policy, however, specifically ties both signing bonuses and residual commissions to the installation of a contract and the existence of profits derived therefrom.
C. Breach of Contract
Finally, defendant seeks to dismiss plaintiff's breach of contract claim, arguing that (1) plaintiff has failed to allege any breach of the RM Agreement or the Sales Policy and (2) a breach of the implied covenant of good faith and fair dealing is not available for employment contracts. Docket No. 59 at 13. Plaintiff responds that she alleges that defendant promised to pay her a commission-only salary, which it failed to do, and that, because she is not an at-will employee "when it comes to the issue of commissions," she can assert a claim for breach of the implied covenant of good faith and fair dealing. Docket No. 62 at 4-6.
To state a claim for breach of contract, plaintiff must allege (1) the existence of a contract, (2) performance by the plaintiff or some justification for nonperformance, (3) failure to perform the contract by the defendant, and (4) damages. PayoutOne v. Coral Mortg. Bankers , 602 F. Supp. 2d 1219, 1224 (D. Colo. 2009) (citing W. Distrib. Co. v. Diodosio , 841 P.2d 1053, 1058 (Colo. 1992) ).
The Court agrees with defendant that plaintiff has failed to state a claim for breach of contract. The relevant allegations are as follows. First, plaintiff signed the RM Agreement, which states that plaintiff shall be paid according to the Sales Policy. Docket No. 54 at 3, ¶ 10. Second, plaintiff received "verbal commitments" from Sage Hospitality and Stanley Marketplace, and the other clients "were slated to sign" with defendant. Id. a 7, 9, ¶¶ 26, 37. Third, defendant fired plaintiff after these verbal commitments were made, but before the commitments were reduced to writing. Id. at 7-8, ¶ 28. Fourth, most of the clients eventually signed contracts with defendant, but Sage Hospitality did not. Id. at 9, ¶¶ 34-37.
The Court first addresses defendant's argument that the Sales Policy cannot form the basis of a breach of contract claim. In Colorado, "an employee may seek to enforce his employer's personnel policies or procedures under a theory of breach of contract or promissory estoppel." Geras v. Int'l Bus. Machines Corp. , 638 F.3d 1311, 1315 (10th Cir. 2011) (citations omitted). "To succeed on a contract theory, the employee must show that the employer's actions manifested an intent to be bound." Id. (citations and quotations omitted). In Geras , the defendant provided the court with an incentive letter that stated that the letter "does not constitute an express or implied contract or a promise by IBM to make any distributions under it." Id. at 1316. The court concluded that the incentive letter made clear the defendant's "intent not to be bound by the policies described therein." Id. It reasoned that "[n]othing in the incentive letter suggested any circumstances in which the payment of incentives could be considered mandatory," and stated that the defendant "retained the discretion to alter or cancel these policies." Id. at 1316-17.
Defendant argues that the Sales Policy is similar to the incentive policy in Geras because defendant could amend the Sales Policy "from time to time." Docket No. 59 at 13. But defendant takes this statement out of context. The RM Agreement states that the "[e]mployee shall receive compensation in accordance with the provisions of the HPS Sales Policy Manual, as may be amended from time to time." Docket No. 59-2 at 1. Noticeably absent is any provision, like that in Geras , which states that the Sales Policy does not constitute "an express or implied contract." See 638 F.3d at 1316. Rather, the RM Agreement specifically ties plaintiff's compensation to the terms of the Sales Policy. See Docket No. 59-2 at 1 ("Employee shall receive compensation in accordance with the provisions of the HPS Sales Policy Manual." (emphasis added)). Thus, plaintiff's employment with defendant was contractually tied to the payment schedule outlined in the Sales Policy. Even if defendant could amend the Sales Policy, it still was required to pay plaintiff according to the terms of the Sales Policy. As a result, the Court finds that defendant's actions "manifest an intent to be bound" by the terms of the Sales Policy. Geras , 638 F.3d at 1316.
Defendant next argues that, even if the Sales Policy can serve as the basis of a breach of contract claim, there was no breach here because neither the RM Agreement nor the Sales Policy "restricts [defendant's] ability" to fire plaintiff before she earned a commission. Docket No. 59 at 14. The Court agrees with defendant that nothing in the RM Agreement or the Sales Policy prevents defendant from taking such action. In Colorado, "there is a presumption than an employee hired for an indefinite period of time is an at-will employee who may be terminated for no cause whatever at any time." Lorenz , 823 P.2d at 105 n.1 (Colo. 1992). "An employee may rebut the presumption of at will employment by proving that an explicit term of the employment contract restricts the employer's right to discharge ... or that an employer's policy statement restricting such right has been properly accepted as part of that contract." Medina v. Werner Enters., Inc. , No. 14-cv-01188-CMA-KMT, 2015 WL 720979, at *7 (D. Colo. Feb. 18, 2015) (quotations and citations omitted). The RM Agreement specifically states that plaintiff is "at-will and [e]mployee accepts at-will employment." Docket No. 59-2 at 1. Furthermore, "[n]othing in this Agreement shall be construed to change or modify the at-will employment relationship." Id.
It is true, as plaintiff argues in regards to the breach of the implied covenant of good faith and fair dealing, Docket No. 62 at 6, that the RM Agreement also lists specific actions that constitute termination for cause. See Docket No. 59-2 at 2 (listing termination for cause factors). However, this provision directly relates to the previous section which states that a "Vested" employee will continue to earn residual commissions on accounts in an employee's portfolio, so long as the employee "was not terminated for cause." Id. Thus, rather than changing the employment relationship from at-will to for cause-only, this section sets out how an employee can continue to earn residual commissions once he or she has been terminated. Plaintiff does not allege that she is a "Vested" employee or that the "verbal commitments" were in her portfolio such that she could "continue," id. at 2, to receive residual commissions from those accounts. Thus, because plaintiff was an at-will employee, and nothing in the RM Agreement or Sales Policy restricts defendant's ability to terminate her, she has failed to state a claim for breach of contract.
Plaintiff could not make an argument that she should continue to receive residual commissions. No residual commissions had begun to be paid since the accounts were not installed and no client had begun utilizing defendant's services.
Next, the Court addresses defendant's argument that plaintiff may not assert a claim for breach of the implied covenant of good faith and fair dealing for at-will employment. Docket No. 59 at 14. Plaintiff does not dispute that such a claim is not available for at-will employment but, instead, argues that, at least in terms of commissions, she was not at-will. Docket No. 62 at 6. Alternatively, she argues that, if such a claim cannot result from the RM Agreement, this is a special case such that the Sales Policy can serve as the basis of a claim for breach of implied covenant and fair dealing. Id. at 7.
The Court agrees with defendant that, in Colorado, there exists no claim for breach of the implied covenant of good faith and fair dealing for at-will employment contracts. See Allred v. Innova Emergency Med. Assocs., P.C. , No. 18-cv-03097-DDD-NRN, 2020 WL 3259249, at * 5 (D. Colo. June 16, 2020) ("Although Colorado law implies a covenant of good faith and fair dealing into commercial contracts, the covenant has not been extended to employment contracts."); Gomez v. Sam's West, Inc. , No. 16-cv-02240-CMA-STV, 2017 WL 3503652, at *4 (D. Colo. Aug. 14, 2017) ("The Colorado Court of Appeals has further declined to recognize the existence of an implied covenant of good faith and fair dealing in the context of otherwise at-will employment contracts."); Marsh v. Delta Air Lines, Inc. , 952 F. Supp. 1458, 1465 (D. Colo. 1997) ("[T]here is no cause of action for breach of an implied covenant of good faith and fair dealing [for employment contracts]."); Farmer v. Cent. Bancorporation, Inc. , 761 P.2d 220, 222 (Colo. App. 1988) ("An implied covenant of good faith and fair dealing found in some commercial contracts does not extend to at-will employment contracts."). Additionally, plaintiff's argument that she is "at-will" at least in terms of commissions is untenable for the reasons stated above: the for-cause provisions only relate to the vesting of residual commissions, not to plaintiff's status as an at-will employee.
Plaintiff argues that, even if the implied covenant of good faith and fair dealing is normally not available for at-will employees, it sometimes is, and cites four cases in support. None of the cases are persuasive. First, plaintiff takes the statement in Beck's Office Furniture and Supplies, Inc. v. Haworth, Inc. , 94 F.3d 655, 1996 WL 466673, at * 4 (10th Cir. 1996) (unpublished table decision), that "the right to terminate the contract at-will does not vitiate a party's expectations while the contract remains in force," out of context. Id. The Court in Haworth held that the implied covenant did not extend to at-will employment contracts, but reasoned that the dispute resolved around the parties’ actions while the contract was in force. Id. The court did not conclude that there could be a breach of the covenant simply because an employee was discharged, which is what plaintiff argues here. Second, plaintiff's citation to Big Horn Coal Co. v. Commonwealth Edison Co. , 852 F.2d 1259, 1267-68 (10th Cir. 1988), fails for the same reason; it dealt with the parties’ course of action while the contract was in place, not with the discharge of an employee.
Additionally, Haworth analyzed Utah law, not Colorado law, and has no bearing on Colorado's treatment of the implied covenant of good faith and fair dealing.
Third, the court in Amato v. Mesa Laboratories, Inc. , No. 14-cv-03228-REB-KMT, 2015 WL 5321446, at *4 (D. Colo. Sept. 14, 2015), concluded that the contract at issue was "not purely an employment agreement" because it was also an "acquisition agreement," and, so, the plaintiff could bring a claim for a breach of the implied covenant. Id. Plaintiff does not explain how the RM Agreement or the Sales Policy is not "purely an employment agreement" and the Court finds no basis for concluding otherwise. Finally, Kaspryzk v. PNC Bank , No. 13-cv-00237-RBJ-KMT, 2013 WL 3895069, at *2 (D. Colo. July 29, 2013), merely describes the general purpose of the "good faith doctrine" and says nothing about its application to the discharge of an at-will employee.
Plaintiff's argument that her situation is a special case lacks support in the caselaw. The Court concludes that plaintiff has failed to state a claim for breach of the implied covenant of good faith and fair dealing.
IV. CONCLUSION
For the foregoing reasons, it is
ORDERED that defendant's Motion to Partially Dismiss Under Federal Rule of Civil Procedure 12(b)(6) [Docket No. 59] is GRANTED . It is further
ORDERED that plaintiff's second, third, and fourth claims are DISMISSED with prejudice.