Beard v. International Business Machines Corporation

Background

Jerome Beard worked as an IBM software sales representative and was paid a salary plus commissions. His written Incentive Plan Letter for the second half of 2017 set a sales quota and stated that IBM could modify or cancel the plan and review and adjust payments for specific transactions. The plan also said it was not an express or implied contract or a promise by IBM to make payments.

Materials linked from the plan repeatedly described IBM’s commission payments or earning opportunities as “uncapped.” Beard said he understood that IBM would not impose an artificial limit on his earnings. He helped close two HCL America transactions in 2017. IBM reduced the commissionable revenue attributed to him on both deals, reducing his expected commission on the third-quarter deal from approximately $1.46 million to $232,458 and paying him $324,441 on the fourth-quarter deal instead of approximately $1.5 million.

Beard also alleged that IBM treated two white sales representatives more favorably because IBM paid their commissions in full on other deals. After an internal complaint and investigation, he filed this action asserting California wage-law, unfair-competition, misrepresentation, unjust-enrichment, race-discrimination, and equal-pay claims.

Summary judgment standard

Summary judgment is a decision without a trial when the evidence shows no genuine dispute about a fact that could affect the result and the moving party is legally entitled to win. The court viewed the evidence in the light most favorable to Beard, the party opposing IBM’s motion.

Misrepresentation and unjust enrichment

The court denied summary judgment on Beard’s fraudulent-misrepresentation claim. It found genuine factual disputes about whether IBM’s repeated statements that commissions were “uncapped” were false when IBM later reduced commissions on particular transactions. The court also found a factual dispute about whether Beard reasonably relied on those statements despite the disclosures in the Incentive Plan Letter. A jury could decide whether the plan materials and IBM’s conduct were inconsistent.

The court likewise denied summary judgment on negligent misrepresentation because the same factual disputes concerned the alleged misrepresentations and the reasonableness of Beard’s reliance. It denied summary judgment on unjust enrichment because, under the plan’s own terms, the Incentive Plan Letter was not a binding contract, and factual disputes remained about whether IBM unfairly retained a benefit after reducing Beard’s commissions.

Unfair-competition claim

The court denied summary judgment on the unfair and fraudulent parts of Beard’s California Unfair Competition Law claim because those parts relied on his surviving misrepresentation and unjust-enrichment theories.

The court granted summary judgment on the unlawful part of the claim to the extent it was based on California Labor Code sections 200, 201, 202, 204, and 221, section 223, and the Industrial Welfare Commission wage orders. For sections 221 and 223, the court reasoned that the Incentive Plan Letter was not a contract and did not designate a wage, so Beard could not establish the required basis for those theories.

The court denied summary judgment on the unlawful part of the Unfair Competition Law claim based on Labor Code section 2751. That section requires a written contract explaining how commissions will be calculated and paid when an employee’s compensation involves commissions. The court held that the Incentive Plan Letter was not a contract and therefore could not satisfy the statute, but it rejected IBM’s argument that Beard lacked standing because the record did not rule out every form of economic injury.

Race discrimination

The court denied summary judgment on Beard’s claim under California’s Fair Employment and Housing Act. It held that Beard presented enough evidence for a jury to find that Nick Donato was similarly situated: Donato was also an ESA sales representative, had the same second- and third-line managers, had a similar commission plan, and had a large 2017 deal approved by some of the same managers. IBM paid Donato’s commission in full while reducing Beard’s commission.

The court also held that Beard presented specific and substantial evidence from which a jury could find IBM’s stated reasons— that the HCL deals were unique and that Beard’s payment should match his contribution—were not credible. Among other evidence, IBM reduced Beard’s commission but not other employees’ commissions on the HCL deals, and the fourth-quarter reduction was decided before Beard completed his work on that deal. The court therefore found a triable dispute about whether IBM’s reasons were a pretext for race discrimination.

Equal-pay claim

The court granted summary judgment on Beard’s claim under California Labor Code section 1197.5. Beard relied on Donato and Bill Beroza as comparators, but he did not provide enough evidence about the skill, effort, responsibility, and working conditions involved in their deals. He acknowledged that he lacked personal knowledge about the complexity, post-closing work, hours, and travel associated with those transactions.

Disposition

IBM’s motion for summary judgment was granted in part and denied in part. The court denied the motion on fraudulent misrepresentation, negligent misrepresentation, unjust enrichment, the unfair and fraudulent parts of the Unfair Competition Law claim, the section 2751-based unlawful Unfair Competition Law claim, and the Fair Employment and Housing Act race-discrimination claim. It granted the motion on the equal-pay claim and on the specified unlawful Unfair Competition Law theories based on Labor Code sections 200, 201, 202, 204, 221, and 223 and the wage orders.