436 P.3d 109
Utah Ct. App.2018Background
- Mike Vander Veur was an at-will sales representative for Groove from 2010; in October 2012 he executed a Sales Representative Compensation Agreement that paid commissions for “Qualifying Sales” once installation was complete and permitted biweekly draws against commissions.
- Groove terminated Vander Veur in June 2013 while he had procured six sales that had not yet been installed; all six were installed within three months after termination and Groove paid him no commissions for them.
- Vander Veur also worked on a large hotel sale that generated a Showtime bonus; he alleges an oral agreement to split the bonus with coworkers, but Groove received the bonus after his termination and did not share it with him.
- Vander Veur sued, alleging breach of the implied covenant of good faith and fair dealing (claiming termination was to avoid paying commissions and the Showtime bonus); Groove counterclaimed for breach of contract and, alternatively, unjust enrichment to recoup commission draws Vander Veur retained.
- The district court granted summary judgment to Groove on all claims and entered judgment for unjust enrichment in the amount of $2,925.04; Vander Veur appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether implied covenant protects an at‑will employee from termination aimed to deprive him of commissions on sales completed after termination | Vander Veur: termination was bad‑faith to deprive him of earned compensation; covenant protects receipt of contract fruits | Groove: covenant cannot be used to rewrite contract terms or override at‑will termination; commissions not earned until installation | Court: implied covenant may, in narrow circumstances, protect justified expectations under a compensation agreement from bad‑faith termination; remanded on commissions claim |
| Whether Groove breached implied covenant re: six commissions (sales procured pre‑termination but installed post‑termination) | Vander Veur: entitled to commissions because termination was to avoid payment for work already performed | Groove: Compensation Agreement unambiguously requires installation before commission; parties’ course and at‑will status preclude post‑termination payment | Court: district court erred in requiring proof that parties "undoubtedly would have agreed" to post‑termination payment; vacated dismissal and remanded for further proceedings |
| Whether Groove breached implied covenant re: Showtime bonus (oral agreement to share bonus) | Vander Veur: bonus agreement created justified expectation; termination intended to deprive him of bonus | Groove: no enforceable contract on post‑termination entitlement; would not have agreed to post‑termination payment | Court: cannot affirm dismissal on implied covenant ground; district court also relied on undeveloped finding of no enforceable contract—vacated and remanded for further development |
| Whether Groove was entitled to unjust enrichment for overdrawn commission draws | Groove: advanced draws > commissions earned; equitable to require repayment; alternatively pleaded contract claim but conceded contract inapplicable for summary judgment purposes | Vander Veur: unjust enrichment barred if legal remedy exists; measurement and equity unresolved because of his pending contract claims and possible offsets | Court: Groove validly sought unjust enrichment in the alternative and conceded contract inapplicability for motion; district court did not err and judgment for unjust enrichment affirmed |
Key Cases Cited
- Cook v. Zions First Nat’l Bank, 919 P.2d 56 (Utah Ct. App. 1996) (implied covenant can protect rights created by an attendant employment contract even for at‑will employees)
- Oakwood Village LLC v. Albertsons, Inc., 104 P.3d 1226 (Utah 2004) (breach of implied covenant gives rise to contract claim; covenant enforces justified expectations)
- Rawlings v. Rawlings, 240 P.3d 754 (Utah 2010) (elements required to prove unjust enrichment)
- Fortune v. Nat’l Cash Register Co., 364 N.E.2d 1251 (Mass. 1977) (employer acts in bad faith when terminating agent to deprive him of commission on an imminent sale)
- Wakefield v. Northern Telecom, Inc., 769 F.2d 109 (2d Cir. 1985) (commission contracts create rights distinct from at‑will employment that may survive termination)
- Caton v. Leach Corp., 896 F.2d 939 (5th Cir. 1990) (implied covenant protects expectations to receive contractual benefits under attendant compensation agreements)