80 F.4th 1
1st Cir.2023Background
- Plaintiff Brian Klauber was a VMware sales employee (2012–2019) paid base salary plus commissions governed by an individualized commission plan and uniform terms and conditions (periodically executed).
- The terms required three contingencies before commissions were "earned": acceptance of the plan, quota achievement, and completion of "Plan Reconciliation," which reviewed and could adjust commissions for defined "Exception Transactions."
- Two large transactions at issue: a >$130M DXC deal (plaintiff claimed ~$32k) and a $40–50M Barclays deal (plaintiff claimed ~$429k, adjusted to ~$209k); both were designated Exception Transactions and commissions were reduced based on limited plaintiff involvement.
- Plaintiff did not exhaust internal dispute process, resigned, and sued in Massachusetts state court for Wage Act violations, breach of contract, unjust enrichment, and quantum meruit; defendant removed the case and moved for summary judgment.
- District court struck certain settlement-related statements under Fed. R. Evid. 408 (in part), concluded the terms and conditions were enforceable, held the disputed commissions were not "wages" because not due and payable until Plan Reconciliation, and entered summary judgment for VMware; this Court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Admissibility of prior settlement evidence (Rule 408) | Klauber sought to admit prior settlement materials to show his state of mind and Company knowledge about unenforceability of terms | VMware moved to strike settlement-related materials as barred by Rule 408 | Court affirmed: district court did not abuse discretion; admitted limited evidence to show plaintiff's state of mind but struck materials offered to prove the current claim; any error harmless |
| Whether contested commissions are "wages" under the Massachusetts Wage Act | Klauber: commissions were due upon completing work/meeting quotas and thus are wages protected by the Act | VMware: parties agreed commissions on Exception Transactions were contingent on Plan Reconciliation, so not due and payable (thus not wages) | Court held the Plan Reconciliation contingency is enforceable; commissions on Exception Transactions were not "earned" until reconciliation, so not wages under the Act; summary judgment for VMware |
| Applicability of the Wage Act's "special contract" prohibition | Klauber: the agreement cannot exempt wages and thus terms requiring post‑sale reconciliation are unenforceable | VMware: special‑contract rule only applies if the compensation actually constitutes wages; here commissions were not wages until due | Court held special-contract argument inapplicable because the disputed payments were not wages under the Act |
| Breach of contract and quasi‑contract remedies (unjust enrichment/quantum meruit) | Klauber: VMware breached the commission plan and alternatively is liable in equity | VMware: terms expressly authorized adjustments for Exception Transactions; a valid contract governs so quasi‑contract claims unavailable | Court held terms were enforceable, no breach shown; unjust enrichment/quantum meruit barred by the valid contract; summary judgment for VMware |
Key Cases Cited
- Parker v. EnerNOC, Inc., 139 N.E.3d 328 (Mass. 2020) (framework for when commissions qualify as "wages")
- Ellicott v. Am. Cap. Energy, Inc., 906 F.3d 164 (1st Cir. 2018) (commissions "due and payable" rule and enforcing agreed contingencies)
- Okerman v. VA Software Corp., 871 N.E.2d 1117 (Mass. App. Ct. 2007) (when commission is "arithmetically determinable")
- McAleer v. Prudential Ins. Co. of Am., 928 F. Supp. 2d 280 (D. Mass. 2013) (scope of employer discretion in commission plans)
- Vonachen v. Comput. Assocs. Int'l, 524 F. Supp. 2d 129 (D. Mass. 2007) (enforcing plan provisions granting employer discretion for large deals)
- Rodriguez-Garcia v. Mun. of Caguas, 495 F.3d 1 (1st Cir. 2007) (limits on using settlement negotiations under Fed. R. Evid. 408)
- McInnis v. A.M.F., Inc., 765 F.2d 240 (1st Cir. 1985) (policy favoring settlement evidence protection)
- Greene v. Ablon, 794 F.3d 133 (1st Cir. 2015) (contract formation requires objective intent)
- Crocker v. Townsend Oil Co., 979 N.E.2d 1077 (Mass. 2012) (special contract provision and enforceability of releases)
- Metro. Life Ins. Co. v. Cotter, 984 N.E.2d 835 (Mass. 2013) (unjust enrichment unavailable where a valid contract governs)