Peak v. Tigergraph, Inc.

Background

Brendon Peak, a sales professional, worked for TigerGraph as a Regional Sales Director. His written employment agreement provided for at-will employment, California governing law, and exclusive personal jurisdiction in federal and state courts located in San Francisco County. Peak also signed sales compensation plans providing that commissions were “Earned” when TigerGraph received full payment from the customer.

Peak alleged that he developed a potentially lucrative client relationship and arranged more than 20 anticipated projects. On May 13, 2020, he forwarded TigerGraph a signed statement of work for the first project. The next day, TigerGraph told him he was being laid off because of the financial impact of the COVID-19 pandemic. Peak alleged that he received no commissions for his work with the client.

Peak’s complaint asserted seven claims: breach of contract and the implied promise of good faith and fair dealing against TigerGraph; intentional interference with contractual relations against Todd Blaschka and Dr. Yu Xu; civil conspiracy against all defendants; and violations of the Massachusetts Wage Act against TigerGraph, Blaschka, and Xu.

Motion-to-dismiss standard and documents

Defendants moved to dismiss the entire complaint under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. The court considered the employment agreement and compensation plans under the incorporation-by-reference doctrine because the complaint relied on those documents, their authenticity was not questioned, and they formed the basis of Peak’s claims.

Choice of law

The court held that the employment agreement’s California choice-of-law provision controlled claims that did not specifically arise under Massachusetts statutes. The court found that California had a substantial relationship to the parties and transaction and a reasonable basis for applying California law, citing TigerGraph’s Redwood City headquarters. The court stated that Peak identified no Massachusetts policy that would be violated by applying California law to the labor-contract dispute.

Contract and implied-covenant claims

The court dismissed Count I. Under the compensation plans, Peak’s commissions were not earned when he developed the opportunity, obtained a signed statement of work, or was close to completing a sale. They became earned only when TigerGraph received full payment from the customer. Peak did not allege that TigerGraph had received payment before his termination.

The court also concluded that TigerGraph’s termination of Peak did not violate the implied promise of good faith and fair dealing. The employment agreement expressly allowed TigerGraph to terminate Peak at any time, with or without cause, and the implied promise could not prohibit conduct the agreement expressly permitted. The court distinguished cases involving compensation that had already been earned before termination. It also rejected Peak’s argument that TigerGraph improperly changed the compensation plans, noting that the written plans showed mutual assent and that Peak signed three of the four agreements, including the most recent operative plan.

Interference and conspiracy claims

The court dismissed Counts II, III, and IV. Applying California law, it held that corporate officers and employees acting for the corporation cannot be liable for inducing the corporation to breach its own contract when they are not strangers to the agreement. The court also stated that a corporation cannot conspire with its own employees when they act in their official capacities for the corporation, and that California does not recognize civil conspiracy as an independent claim. Because Blaschka and Xu acted as TigerGraph officers and were not strangers to the employment and compensation agreements, Peak did not state these claims.

Massachusetts Wage Act claims

The court dismissed Counts V, VI, and VII. It explained that the Massachusetts Wage Act protects commissions that have been definitely determined and become due and payable. Peak’s allegations described presale work and prospective commissions, but did not allege that the commissions had become earned under the compensation plans. Because the plans required full customer payment before a commission was earned, the court concluded that Peak had not stated claims under the Massachusetts Wage Act.

Disposition

The court granted defendants’ motion to dismiss plaintiff’s complaint. It granted Peak leave to amend no later than 28 days after the order. The court stated that no new claims or parties could be added without the court’s permission or the agreement of all parties. The opinion does not expressly state that the dismissal was with or without prejudice.