STEPHENSON v. INTERNATIONAL BUSINESS MACHINES CORPORATION

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

WILLIAM STEPHENSON, )

)

Plaintiff, )

)

v. ) 17cv1141

)

INTERNATIONAL BUSINESS )

MACHINES CORPORATION, )

)

Defendant. )

MEMORANDUM OPINION AND ORDER

THOMAS D. SCHROEDER, Chief District Judge.

Plaintiff William Stephenson alleges that Defendant

International Business Machines Corporation (“IBM”) failed to pay

sales commissions due him. Following this court’s partial grant

of IBM’s earlier motion to dismiss, Stephenson seeks damages under

four remaining causes of action: (1) fraudulent misrepresentation,

(2) negligent misrepresentation, (3) unjust enrichment, and (4)

quantum meruit.1 Before the court is IBM’s motion for summary

judgment on all causes of action. (Doc. 45.) Following full

briefing, the court held oral argument on the motion. For the

reasons set forth below, the motion will be denied.

I. BACKGROUND

The facts, viewed in the light most favorable to Stephenson,

1 Because the motion to dismiss was pending when IBM filed the present

motion for summary judgment, briefing that addressed claims that are now

dismissed will be regarded as moot.

as the non-moving party, are as follows:

Stephenson –- an experienced information technology

professional –- began working for IBM in 2011 as a sales

representative selling “z” software to its corporate customers.

(Doc. 51-2 at 26:5–27:2; 28:8–11.)2 Stephenson’s compensation

consisted of a base salary and commissions. (Id. at 28:16–29:10.)

IBM distributed its commission payment policy –- also known as an

“Incentive Plan” -- biannually to its sales representatives,

Stephenson among them, via an Incentive Plan Letter (“IPL”) and a

website, which also contained a PowerPoint slide presentation

about the Incentive Plan. (Doc. 51-6.) Together, the IPL and

Incentive Plan information, including the PowerPoint, were known

as the “Plan.” (Id. at 3.)

The IPL at issue here, covering January 1 to June 30, 2015,

provided employees with their Incentive Plans, which gave more

specific details and included an intranet web address for employees

to find more information about their Incentive Plan. (Id.) A

section at the end of the IPL styled “OTHER IMPORTANT INFORMATION”

provided the following:

Right to Modify or Cancel: The Plan does not

constitute an express or implied contract or a promise

by IBM to make any distributions under it. IBM reserves

the right to adjust the Plan terms, including, but not

limited to, changes to sales performance objectives

(including management-assessment objectives), changes

to assigned customers, territories, or account

2 All deposition citations are to the transcript, not docket, page.

opportunities, or changes to applicable incentive

payment rates or quotas, target incentives or similar

earnings opportunities, or to modify or cancel the Plan,

for any individual or group of individuals, at any time

during the Plan period up until any related payments

have been earned under the Plan terms. . . .3

* * *

Full-Plan Earnings: Regardless of your start date,

your incentive payments are earned under the Plan terms,

and are no longer considered Plan-to-Date advance

payments, only after the measurement of complete

business results following the end of the full-Plan

period or (if applicable) after the measurement of

complete business results after the date you left the

Incentive Plan early. Incentive payments will be

considered earned only if you have met all payment

requirements, including: (1) you have complied with the

Incentive Plan, the Business Conduct Guidelines and all

other applicable IBM employment policies and practices;

(2) you have not engaged in any fraud, misrepresentation

or other inappropriate conduct relating to any of your

business transactions or incentives; (3) and the

customer has paid the billing for the sales or services

transaction related to your incentive achievement.

* * *

Significant Transactions: IBM reserves the right to

review and, in its sole discretion, adjust incentive

achievement and/or related payments associated with a

transaction which (1) is disproportionate when compared

with the territory opportunity anticipated during

account planning and used for the setting of any sales

objectives; or for which (2) the incentive payments are

disproportionate when compared with your performance

contribution towards the transaction.

3 The clause further provided: “Managers below the highest levels of

management do not know whether IBM will or will not change or adopt any

particular compensation plan; they do not have the ability to change the

Plan terms for any employee; nor are they in a position to advise any

employee on, or speculate about, future plans. Employees should make

no assumptions about the impact potential Plan changes may have on their

personal situations unless and until any such changes are formally

announced by IBM.” (Doc. 51-6 at 4.)

(Id. at 3–6.)

Stephenson accepted the terms of the pertinent IPL

electronically in early 2015. (Doc. 51-6; Doc. 51-2 at 47:22–

48:3.) Before and after he agreed to its terms, he also viewed

the IBM PowerPoint presentation for sales representatives that

provided details regarding the Incentive Plan. (Doc. 51-2 at

53:15–54:5.) The PowerPoint was titled, “Our Purpose, Values &

Practices, Your 2015 Incentive Plan, Individual Quota Plan (IQP)

–- Employees.” (Doc. 51-7.) IBM used the PowerPoint to give its

sales representatives important information to understand how

their compensation worked under the Incentive Plan. (Doc. 51-5 at

29:12–30:3.) The PowerPoint generally represented IBM’s

understanding of the Incentive Plan and, as applicable to

salespeople like Stephenson, contained statements about sales

commissions that “[e]arnings opportunity remains uncapped” and

that “payments” were “uncapped.” (Doc. 51-7; Doc. 51-5 at 22:5–

23:7; Doc. 51-1 at 53:8–54:13; Doc. 51-3 at 53:5–14.)

As part of his work at IBM, Stephenson was assigned accounts

with Branch Banking and Trust (“BB&T”) and Laboratory Corporation

of America (“LabCorp”).4 (Doc. 51-2 at 94:18–24.) At IBM’s behest,

Stephenson was successful in closing a large deal with each by

June 30, 2015. (Doc. 51-1 at 85:18-87:11; Doc. 51-2 at 164:19–

4 Stephenson’s allegations as to reductions in commissions on a third

deal have been abandoned. (Doc. 50 at 5 n.6.)

165:3.) The commission payments he would receive from these two

deals were governed by the IPL. Stephenson had been working on

both deals since 2013. (Doc. 51-1 at 81:12-23.) The BB&T contract

had a value of $92,000,000, with Stephenson’s team’s contribution

of “z” software comprising $13,500,000. (Doc. 51-15.) The LabCorp

contract was valued at $43,000,000, with “z” software contributing

a value of $9,300,000. (Id.)

Because of the size of these two deals, IBM began a formal

review of commission payments to all employees who participated in

them on July 10, 2015. (Doc. 51-4 at 118:25–119:19; Doc. 51-5 at

177:5-17.) Randolph Moorer, IBM’s Vice President of Software for

the company’s IBM’s Mid-Atlantic Region, took the lead. He

determined that Stephenson’s anticipated commission payments

required reconsideration. (Doc. 51-4 at 50:5–24.) In one email

to Cleo Clarke, one of Stephenson’s supervisors, Moorer stated

that IBM “will need to take a very hard look at [Stephenson’s

commissions] and determine the appropriate payment commensurate

with [his] effort and contribution.” (Doc. 51-16.) In a follow-

up email, he told Clarke that “we have a serious problem in that

the commissions payout for these two deals exceed the maximum and

all high achievers including [Stephenson] must be reviewed.” (Id.)

Stephenson’s commissions stood out to IBM because he was

expected to receive 23% of all commissions paid out on the BB&T

deal and 24% of all commissions paid out on the LabCorp deal.

(Doc. 46-7 ¶¶ 5, 6.) To help make determinations about how much

commissions ought to be paid to employees, IBM used an Expense-

to-Revenue ratio (“E/R Ratio”), which referred to the ratio of

commissions to be paid on a deal to the revenue the deal would

generate. (Doc. 51-4 at 72:1–7.) Moorer testified that generally,

whenever a deal’s E/R ratio exceeded 10% -- that is, whenever more

than 10% of a deal’s incoming revenue was to be spent on

commissions –- IBM would review the deal and commission payouts to

ensure everything was “appropriate.” (Id. at 72:10–12.) According

to Moorer, the 10% E/R ratio is not a ceiling but a general target

that IBM seeks to meet. (Id. at 80:7–22.) Before IBM reduced

Stephenson’s commissions, the BB&T deal had an E/R Ratio of 13.34%

and the LabCorp deal had an E/R Ratio of 16.89%. (Id. at 139:13–

17; 99:21–25; Doc. 51-25; Doc. 51-27.)

After receiving feedback from Stephenson’s managers, Moorer

discussed with Phil Weintraub,5 IBM’s Vice President of the “z”

systems Stephenson sold, how to evaluate Stephenson’s commission

payments and how to reduce the E/R Ratios in both deals to get

closer to 10%. (Doc. 51-4 at 86:23–87:13; 138:24–139:3; 50:19–

51:5.) Moorer testified that when he conducts a “performance

contribution” analysis under the Significant Transactions clause

in the IPL, he does not have a specific set of guidelines or

5 Weintraub was not deposed.

criteria but makes decisions based on a “gut feel” or “judgment

call.” (Id. at 96:1–4.) He was not able to recall, however, how

he arrived at certain figures regarding Stephenson’s relative

contribution to the BB&T and LabCorp deals. (Id. at 96:3–4.) He

did not regard his changes to commission payments as final

decisions, but only as recommendations he forwarded to Richard

Martinotti –- IBM’s Finance Manager for Software -- for approval.

(Id. at 128:11–15.) Martinotti insisted at his deposition that he

did not alter or recommend any changes to the reductions in

commissions on either deal. When asked why Stephenson’s

commissions were reduced, Martinotti deferred to Moorer, noting

that he only passed Moorer’s recommendations on to other members

of upper management for approval and, once approved, implemented

them. (Doc. 51-5 at 187:12–24; 188:23–190:1; 190:19–23; 192:14–

193:11.) A July 10, 2015 email from Martinotti to Moorer, however,

reminded Moorer that “[a]s has always been the case, the process

in not intended to cap, but rather ensure that payments are

commensurate with the contribution of the rep and that there are

no anomalies in quota or territory that could have caused an

inappropriate payment, and/or result in recoveries after the

fact.” (Doc. 51-28 at 2.)

Moorer’s recommendations were eventually adopted, and the E/R

Ratio on the BB&T deal fell from 13.34% to 10% (Doc. 51-28), while

the E/R Ratio on the LabCorp deal was reduced from 16.89% to 14.28%

(Doc. 51-27). This caused Stephenson’s total commissions to be

reduced by approximately $598,000. (Doc. 51-17.)

Once Stephenson’s final commissions were paid, Moorer

contacted Clarke to update her. (Id.) Clarke expressed concern

that Stephenson, who had already determined his expected

commission payments through a calculation system IBM provided its

employees, would be upset by such a significant reduction in his

commissions. (Id.) When Stephenson approached his managers for

an explanation about his reduced commissions, Moorer explained

that the company “need[ed] to ensure [it] maintain[ed] an

affordable expense posture on each transaction and commissions

should account for about 10% of the total deal value.” (Doc. 51-

18.) Stephenson was told that “there was not sufficient budget to

allow a full payout, so reductions had to be made.” (Id.)

Dissatisfied with this explanation (Doc. 51-19), he voluntarily

left IBM a year later (Doc. 51-2 at 21:11–16).

Stephenson filed the present action in December 2017 alleging

six claims for relief: (1) breach of oral and/or implied contract

(Doc. 1 ¶¶ 42–45); (2) in the alternative, quantum meruit (id.

¶¶ 46–51); (3) in the alternative, unjust enrichment (id. ¶¶ 52–

59); (4) fraudulent misrepresentation (id. ¶¶ 60–65); (5) in the

alternative, negligent misrepresentation (id. ¶¶ 66–75); and (6)

punitive damages (id. ¶¶ 76–79). All claims stem from IBM’s

statements that it would not “cap” his commissions, which were

contained in the PowerPoint he viewed between January 1 and June

30, 2015, that detailed his compensation plan, as well as alleged

oral statements by IBM managers. IBM moved for partial judgment

on the pleadings (Doc. 38) based on this court’s decision in a

similar case, Vinson v. Int’l Bus. Machs. Corp., No. 1:17-cv-

00798, 2018 WL 4608250 (M.D.N.C. Sept. 25, 2018), in which this

court dismissed some of the claims of the IBM employee. Over

Stephenson’s opposition, this court granted IBM’s motion and

dismissed Stephenson’s claims alleging breach of contract,

fraudulent and negligent representations (to the extent they were

based on statements of IBM executives, but not as to the claims

based on the statements in the PowerPoint), and punitive damages

(to the extent pleaded as a separate claim, but not as to the

prayer for relief). (Doc. 48.) IBM’s current motion for summary

judgment is directed toward all remaining claims.

A hearing was held on IBM’s summary judgment motion on October

29, 2019. A month later, the court stayed this case pending the

Fourth Circuit’s decision in a similar case, Fessler v. Int’l Bus.

Machs. Corp., which was decided on May 14, 2020. 959 F.3d 146

(4th Cir. 2020). The parties each filed briefs addressing the

impact of the Fourth Circuit’s decision (Docs. 67, 68) and the

motion is ready for decision.

II. ANALYSIS

Summary judgment is appropriate “if the movant shows that

there is no genuine dispute as to any material fact and the movant

is entitled to judgment as a matter of law.” Fed. R. Civ. P.

56(a). “A genuine issue of material fact exists ‘if the evidence

is such that a reasonable jury could return a verdict for the

nonmoving party.’” Basnight v. Diamond Developers, Inc., 146 F.

Supp. 2d 754, 760 (M.D.N.C. 2001) (quoting Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 248 (1986)). In determining a motion

for summary judgment, the court views the “evidence in the light

most favorable to the non-moving party, according that party the

benefit of all reasonable inferences.” Id. Summary judgment

should be denied “unless the entire record shows a right to

judgment with such clarity as to leave no room for controversy and

establishes affirmatively that the adverse party cannot prevail

under any circumstances.” Guessford v. Pa. Nat’l Mut. Cas. Ins.

Co., 983 F. Supp. 2d 652, 659 (M.D.N.C. 2013) (quoting Campbell v.

Hewitt, Coleman & Assocs., Inc., 21 F.3d 52, 55 (4th Cir. 1994)).

With this standard in mind, the court will address IBM’s motion as

to each of the remaining claims.

A. Fraudulent Misrepresentation

A fraudulent misrepresentation claim under North Carolina law

requires a showing of “(1) [a] [f]alse representation or

concealment of a material fact, (2) reasonably calculated to

deceive, (3) made with intent to deceive, (4) which does in fact

deceive, (5) resulting in damage to the injured party.” Forbis v.

Neal, 649 S.E.2d 382, 387 (N.C. 2007). Further, “any reliance on

the allegedly false representations must be reasonable.” Id. IBM

argues that Stephenson has failed to show a false statement, intent

to deceive, and reasonable reliance. Stephenson contends that he

has established a genuine dispute as to whether IBM’s PowerPoint

presentation intentionally misled him to believe that his

commissions would not be capped, and that IBM improperly and

arbitrarily capped his commissions in disregard of the terms of

the IPL. Each element of the claim will be addressed in turn.

As to the first element, IBM contends that its statements in

the PowerPoint that “[e]arnings opportunity remains uncapped” and

commission “payments” were “uncapped” were not false. IBM argues

that, by reading the IPL and PowerPoint together, it is apparent

that because the IPL grants IBM discretion to reduce commissions

on significant transactions, the capping language in the

PowerPoint necessarily refers to a salesperson’s “overall

commissions or earnings” and thus does not limit the number of

deals a sales representative can conduct. According to IBM, “an

adjustment to commissions on a specific deal is not a cap on a

sales representative’s overall ability to earn commissions.”

(Doc. 46 at 22.) It points to the fact that in the first half of

2015, IBM did not reduce Stephenson’s commissions on other deals,

and he made more than he ever made in his 30-year career.

Stephenson contends that IBM’s construction of the Plan is not

apparent from the IPL or the PowerPoint, and the disclaimers in

the IPL are at best ambiguous.

The representations that “earnings opportunity” and

commission “payments” were “uncapped” do not unambiguously suggest

that the limitation applies only to aggregate commissions, as IBM

urges. Stephenson’s construction of the representations conflicts

with the IPL to the extent the IPL clearly states IBM’s discretion

to alter or amend the Plan or commissions. Consequently,

Stephenson can claim falsity only if he can demonstrate that IBM

reduced his commissions outside its discretion provided by the

IPL.

IBM contends that it reduced Stephenson’s commissions by

exercising its discretion under the Significant Transactions

clause in the IPL.6 In its briefing, IBM relies on the second

prong of the Significant Transactions clause that permitted it to

determine whether “the incentive payments are disproportionate

when compared with [the employee’s] performance contribution

towards the transaction.” (Doc. 46 at 29.) Stephenson contends

that the record demonstrates a genuine question whether IBM in

fact applied this prong and that, if a jury found it did not, there

is sufficient evidence that IBM instead arbitrarily and

6 As noted infra, the parties dispute whether Stephenson’s commissions

were “earned” under the IPL. Because IBM relies on the Significant

Transactions clause here, whether or not the commissions were “earned”

is not dispositive to the analysis.

impermissibly reduced his commissions after having led him to

believe it would not do so.

Stephenson is correct. The relative contribution prong of

the Significant Transactions clause gave IBM the discretion to

adjust commission payments that “are disproportionate when

compared with [Stephenson’s] performance contribution towards the

transaction.” (Doc. 51-6.) IBM’s witnesses described using a

“relative contribution” analysis to determine what a salesperson

was “personally responsible for” in a given deal. (Doc. 51-3 at

101:23–102:2; Doc. 51-5 at 180:15–22.) Or, as Randolph Moorer

testified, what a salesperson contributed “compared to everyone

else in the transaction.” (Doc. 51-4 at 87:14–24; 95:19–23.) But

Stephenson has presented sufficient conflicting evidence as to

whether IBM actually performed the relative contribution analysis

represented in the Significant Transactions clause.

Moorer testified that IBM generally tries to keep commission

payments to an E/R Ratio of 10%, meaning that aggregate commission

payments should not exceed 10% of a given deal. IBM usually

examined commission payments “anytime” the E/R Ratio on a deal

exceeded 10%. (Id. at 72:10–12.) Martinotti, the company’s Rule

30(b)(6) witness7 and Moorer’s boss, also testified that IBM used

7 Federal Rule of Civil Procedure 30(b)(6) provides: “In its notice or

subpoena, a party may name as the deponent a public or private

corporation . . . and must describe with reasonable particularity the

matters for examination. The named organization must then designate one

the E/R Ratio as a guidepost on all IBM deals. (Doc. 51-5 at

177:20–179:9.) According to Moorer, the need to reduce the top

earners’ commissions, such as Stephenson’s, was “probably” based

on a need to reduce total commissions by $650,000. (Doc. 51-4 at

97:7–13.) Consistent with that, Stephenson was told that “there

was not sufficient budget to allow a full payout, so reductions

had to be made.” (Doc. 51-18; Doc. 51-3 at 105:3–13.) Both of

Stephenson’s managers also indicated that they understood IBM had

reduced his commissions because of budgetary reasons. (Doc. 51-1

at 142:10–25; Doc. 51-3 at 104:13–16.)

Moreover, IBM did not redistribute commission payments it

reduced, as might be expected in a comparative analysis, but

instead retained the money it cut from Stephenson’s original

commission payout. (Doc. 51-4 at 105:7–23; 140:24-141:9.) Indeed,

Moorer characterized the commission payments that were not paid to

Stephenson as an “expense not incurred” by IBM. (Id. at 141:9.)

This stands in contrast to Martinotti’s email to Moorer that “the

process is not intended to cap” (Doc. 51-28 at 2) and his testimony

that IBM does not have a budget for commission payments and does

not reduce commissions pursuant to budgetary concerns. In fact,

if commissions were changed to stay on budget, he noted, such a

or more officers, directors, or managing agents, or designate other

persons who consent to testify on its behalf; and it may set out the

matters on which each person designated will testify. . . .”

reduction would be “questionable.” (Doc. 51-5 at 191:19–192:17).8

These reasons –- arbitrarily reducing commissions to adhere to a

budget –- are inconsistent with the terms of the Significant

Transactions clause. Thus, a dispute of material fact exists as

to whether IBM made false statements in its PowerPoint with the

representations that commissions and payments would be “uncapped”

if the company reduced Stephenson’s commissions on a basis not

authorized by the IPL.

IBM next argues that there is no evidence it intended to

deceive Stephenson into believing that his commissions would not

be capped. To show intent in a fraud claim, Stephenson must

demonstrate that IBM had “both knowledge and an intent to deceive,

manipulate, or defraud” at the time it made the alleged

misrepresentation. RD & J Props. V. Lauralea-Dilton Enters., LLC,

600 S.E.2d 492, 498 (N.C. Ct. App. 2004). Under North Carolina

law, a “litigant’s state of mind” is often a fact question

established by circumstantial, not direct, evidence to be decided

by a jury. Johnson v. Phoenix Mut. Life Ins. Co., 266 S.E.2d 610,

619 (N.C. 1980), overruled on other grounds by Myers & Chapman,

Inc. v. Thomas G. Evans, Inc., 374 S.E.2d 385, 392 (N.C. 1988).

IBM offers the same arguments as to intent that it offered as to

8 Martinotti ultimately did not know what precise process was used to

reduce Stephenson’s commissions and thus deferred to Moorer who, as

noted, relied on the E/R Ratio. (Doc. 51-5 at 187:12–24.)

falsity, contending that the IPL and related materials provided

“clear disclaimers.” (Doc. 46 at 23.) But for the reasons noted

above, if a jury were to conclude that IBM did not apply the

Significant Transaction clause to Stephenson’s commissions at

issue, there is evidence from which it could also reasonably

conclude that IBM intended all along to limit the size of

commissions based on an arbitrary E/R Ratio rather than on

Stephenson’s relative contribution toward the deals. As both

Moorer and Martinotti testified, whenever the E/R Ratio exceeded

10%, IBM would examine the commission payments in an effort to

reduce the ratio closer to 10%. In other words, the overall size

of the commissions would be capped. There is also evidence from

which a jury could conclude that IBM employed this practice at the

time Stephenson received the PowerPoint and IPL. (Doc. 51-5 at

177:20–179:9.) Thus, IBM has failed to demonstrate the absence of

a genuine issue of material fact as to its intent on Stephenson’s

fraudulent misrepresentation claim.

Finally, IBM argues that Stephenson cannot show that his

reliance on IBM’s allegedly false statements in the PowerPoint was

reasonable. IBM contends that Stephenson’s offer letter and the

IPL’s Right to Modify or Cancel clause “reserved the right to

modify or cancel Plaintiff’s Sales Incentive Plan at any time,”

and it points to the IPL’s Significant Transaction clause, which

it contends “informed Plaintiff of the possibility that his

commissions might be reduced on large deals.” (Doc. 46 at 24-25.)

These provisions, IBM contends, would have rendered any alleged

reliance on the “capping” language unreasonable as a matter of

law. (Id.) Stephenson contends that the Right to Modify or Cancel

clause is not applicable to his BB&T and LabCorp commissions, which

he contends were already “earned,” and, for the reasons already

noted, he argues that he has created a genuine issue whether IBM

followed the Significant Transactions clause in the fashion it

claims.

Under North Carolina law, when a plaintiff “must have known

the truth” because he had an “alternative source of information”

that would dispel the alleged misrepresentation, his fraud claim

fails. See Broussard v. Meineke Disc. Muffler Shops, Inc., 155

F.3d 331, 341 (4th Cir. 1998). “The reasonableness of a party’s

reliance is a question for the jury, unless the facts are so clear

that they support only one conclusion.” State Props., LLC v. Ray,

574 S.E.2d 180, 186 (N.C. Ct. App. 2002); see also Forbis, 649

S.E.2d at 387.

As to IBM’s first contention -- the alleged indefinite right

to modify or cancel -- the court disagrees. Stephenson’s offer

letter, dated some three and one-half years earlier (July 27,

2011), states that “[a]ny payments made under IBM Sales Incentive

Plan are subject to the terms and conditions of the specific

Incentive Plan assigned and the Incentive Plan Letter (IPL)” and

that “IBM reserves the right to modify or cancel this program at

any time.” (Doc. 46-2 at 60.) The letter expressly relies on the

terms of the Plan, which is said to control. The letter’s

remoteness in time renders it subject to modification by subsequent

Plans. It appears that other iterations of IBM’s Right to Modify

or Cancel clause mirrored this disclaimer, and IBM naturally relies

on myriad cases finding such language an adequate disclaimer to

render any reliance on contrary statements (such as those as to

“capping” in the PowerPoint) unreasonable.9

But as Stephenson notes, his IPL for the first half of 2015

grants IBM discretion to modify or cancel “at any time during the

Plan period up until any related payments have been earned under

the Plan terms.” (Doc. 51-6 at 3–4 (emphasis added).) This

additional language altered the previous disclaimer and

represented to Stephenson that IBM would not alter or cancel his

9 See, e.g., Wilson v. Int’l Bus. Machs. Corp., 610 F. App’x 886 (11th

Cir. 2015) (per curiam); Kavitz v. Int’l Bus. Machs. Corp., 458 F. App’x

18 (2d Cir. 2012); Geras v. Int’l Bus. Machs. Corp., 638 F.3d 1311 (10th

Cir. 2011); Jensen v. Int’l Bus. Machs. Corp., 454 F.3d 382 (4th Cir.

2006); Snyder v. Int’l Bus. Machs. Corp., No. 1:16-cv-03596-WMR, 2019

U.S. Dist. LEXIS 66583 (N.D. Ga. Mar. 18, 2019); Morris v. Int’l Bus.

Machs. Corp., 1:18-cv-0042-LY, 2018 WL 7291382 (W.D. Tex. Nov. 29, 2018);

Rapier v. Int’l Bus. Machs. Corp., No. 1-17-cv-4740-MHC, 2018 U.S. Dist.

LEXIS 117504 (N.D. Ga. Apr. 12, 2018); Pfeister v. Int’l Bus. Machs.

Corp., No. 17-cv-03573-DMR, 2017 WL 4642436 (N.D. Cal. Oct. 16, 2017);

Choplin v. Int’l Bus. Machs. Corp., No. 1:16CV1412, 2017 WL 3822044

(M.D.N.C. Aug. 30, 2017); Kemp v. Int’l Bus. Machs. Corp., No. 3:09-cv-

03682, 2010 U.S. Dist. LEXIS 118801 (N.D. Cal. Nov. 4, 2010); Schwarzkopf

v. Int’l Bus. Machs. Corp., No. C 08-2715 JF, 2010 WL 1929625 (N.D. Cal.

May 12, 2010); Gilmour v. Int’l Bus. Machs. Corp., No. CV 09-04155 SJO,

2009 WL 8712153 (C.D. Cal. Dec. 16, 2009); Rudolph v. Int’l Bus. Machs.

Corp., No. 09 C 428, 2009 WL 2632195 (N.D. Ill. Aug. 21, 2009).

Plan after his Plan period and once he “earned” his commissions.

Cf. Jensen v. Int’l Bus. Machs. Corp., 454 F.3d 382, 388 (4th Cir.

2006) (holding that a different iteration of an IBM IPL that gave

IBM complete discretion to modify the terms of the IPL “at any

time” before the commissions were paid was not a binding contract).

There is no dispute that IBM’s reductions occurred after the

end of the Plan period, June 30, 2015. The question is whether

Stephenson had “earned” the commissions within the meaning of the

IPL. The IPL’s Full-Plan Earnings clause provides that “incentive

payments are earned under the Plan terms, and are no longer

considered Plan-to-Date advance payments, only after the

measurement of complete business results following the end of the

full-Plan period . . . .” (Doc. 51-6 at 4.) Further, it provides,

“[i]ncentive payments will be considered earned only if you have

met all payment requirements . . . and the customer has paid the

billing for the sales or services transaction related to your

incentive achievement.”10 (Id. at 4-5.) IBM contends that

“measurement of complete business results” includes consideration

of the Significant Transaction review, and therefore Stephenson’s

commissions had yet to be “earned.” Stephenson disagrees,

contending that the IPL does not support that construction, and,

10 IBM does not contend that any other aspect of the clause, which relates

to contingencies such as early termination or employee misconduct,

applies here.

in any event, IBM’s witnesses testified differently. For example,

IBM conceded that “complete business results” was the same as

“achievement results,” which are simply the amounts the

salesperson sold. (Doc. 51-5 at 94:12-96:9, 133:15-135:7, 146:12–

147:5, 209:7–9.) And while company witnesses considered

commissions “earned” when the work was invoiced (Doc. 51-5 at 30:4-

33:1) -- which differs from the terms of the IPL -- IBM invoiced

BB&T on June 30, 2015, and the invoice was paid July 29, 2015,

almost three weeks before Stephenson’s commissions were capped.

(Docs. 51-5 at 138:7-139:12; 51-29; 51-32.) LabCorp signed its

contract June 30, 2015, although no invoice was produced despite

Stephenson’s request. (Docs. 51-5 at 139:13–140:13; 51-33.) At

a minimum, the standard of “measurement of complete business

results” for determining whether commissions were “earned” under

the IPL is ambiguous and subject to a factfinder determination.

Moreover, IBM has not demonstrated that it had not yet been paid

by both clients when it reduced Stephenson’s commissions. Because

an issue of material fact exists, the court therefore cannot

conclude as a matter of law that IBM had the discretion to modify

or withdraw the IPL as to the commissions at issue.

In contrast to the Right to Modify or Cancel clause, which

addresses IBM’s right to modify or cancel the IPL before a payment

is “earned,” the Significant Transactions clause gives IBM

discretion to adjust commission payments on “significant

transactions” at any time, regardless of whether the commissions

are “earned.” See Schwarzkopf v. Int’l Bus. Machs. Corp., No. C.

08-2715 JF, 2010 WL 1929625, at *9 (N.D. Cal. May 12, 2010) (“The

more restrictive language . . . may prevent IBM from modifying the

terms of the incentive plan once a salesperson ‘earns’ commission

by completing a sale . . . . At the same time, the Significant

Transaction clause appears to allow incentive payments that are

disproportionate . . . to be reviewed and adjusted at any point,

including after the commission is ‘earned’ by completion of the

sale.”); cf. Vinson, 2018 WL 4608250, at *7. The Significant

Transaction clause has been the focus of IBM’s defense at this

stage. Whether the clause renders any reliance on the “capping”

representations unreasonable depends on whether IBM in fact

properly followed the terms of the clause in Stephenson’s case.

If so, IBM is correct that Stephenson could not have reasonably

relied upon the statements in the PowerPoint, since the Significant

Transactions clause allows for the reduction of commissions.

However, for the reasons already set forth, the court has

found that whether IBM properly followed the terms of the clause

is a disputed issue. If a jury were to conclude that IBM did not

apply the relative contribution test of the Significant

Transactions clause but rather applied an arbitrary E/R ratio to

Stephenson’s commissions, it could also reasonably conclude that

Stephenson, in pursuing the BB&T and LabCorp deals to fruition,

reasonably relied on the “uncapped” representations in the

PowerPoint.

At the hearing on the present motion, IBM changed tack and

argued for the first time that its reduction of Stephenson’s

commissions was justified under the first prong of the Significant

Transaction clause, which grants IBM discretion to reduce a

commission it determines is “disproportionate when compared with

the territory opportunity anticipated during account planning and

used for the setting of any sales objectives.” (Doc. 51-6 at 5.)

According to IBM, the phrase “territory opportunity,” which is not

defined in the IPL, means “quota.” Thus construed, IBM argued,

the IPL put Stephenson on notice that the company could reduce his

commissions when it determined they were larger than it anticipated

when his quota was set. According to IBM, the BB&T and LabCorp

deals greatly exceeded Stephenson’s quota and he should have known

his commissions were subject to reduction under this prong.

IBM’s new argument faces two significant difficulties.

First, it is procedurally improper, as it was not raised in the

briefs, thus depriving Stephenson of a fair opportunity to address

it. For this reason alone, it should not be considered at this

time. N.C. All. for Transp. Reform, Inc. v. U.S. Dep’t of Transp.,

713 F. Supp. 2d 491, 510 (M.D.N.C. 2010) (“Raising such new

arguments for the first time at oral argument undermines the

purpose of orderly briefing and risks subjecting an opponent to an

unfair disadvantage.”).

Second, even if the court were to consider the argument, the

record is simply not developed on the question of whether IBM

invoked the first prong when reducing Stephenson’s commissions.

To the extent they relied on the IPL, IBM’s own witness testified

that the second prong, and not the first prong, formed the basis

for their reduction. (Doc. 51-5 at 183:3–7.)

Moreover, notwithstanding IBM’s urging and as Stephenson

contends, the phrase “territory opportunity” is neither defined in

the IPL nor readily apparent as meaning “quota.”11 Under North

Carolina law, “the purport of a written instrument is to be

gathered from its four corners, and the four corners are to be

ascertained from the language used in the instrument.” Lynn v.

Lynn, 689 S.E.2d 198, 205 (N.C. Ct. App. 2010) (quoting Carolina

Power & Light Co. v. Bowman, 51 S.E.2d 191, 199 (1949) (Stacy,

C.J., dissenting)). When the terms within a document are clear

and unambiguous, the court must enforce the terms as they are

written. State v. Phillip Morris USA Inc., 685 S.E.2d 85, 90–91

(N.C. 2009). An ambiguity exists, however, when the meaning of

words is either uncertain or capable of several reasonable

interpretations. Schenkel & Shultz, Inc. v. Hermon F. Fox &

11 “Quota” refers to a dollar amount in sales that an IBM salesperson is

responsible for making before starting to earn commissions. (Doc. 51-1

at 43:7–44:10.)

Assocs., P.C., 658 S.E.2d 918, 921 (N.C. 2008) (quoting Register

v. White, 599 S.E.2d 549, 553 (N.C. 2004)).12

IBM has presented no evidence that the parties understood

“territory opportunity” to mean “quota.” The IPL defines the

phrase “territory detail” as “a summary of [Stephenson’s]

territory as provided by [his] manager,” and further states that

“[m]easurement of your territory achievement is based on the

territory measurement codes in the ‘territory details’ section.”

(Doc. 51-6.) Additionally, the term “territory description” in

the IPL apparently refers to different “quotas” for the “Carolina’s

accounts.” (Id.) It is unclear from the face of the document if

these terms –- “territory detail,” “territory achievement,” and

“territory description” -- are synonymous with, or distinct from,

“territory opportunity.” Even then, it is unclear if the term

refers to a geographic territory, such as the Mid-Atlantic sales

region, or a quota as IBM argues, or the products Stephenson was

expected to sell.

For all these reasons, the court is constrained from

concluding that Stephenson should have known his commissions were

subject to arbitrary reduction under the first prong of the

Significant Transaction clause. Because issues of material fact

12 Although these cited cases involve contract interpretation and here

the parties agree the IPL is not a contract, the cases are relevant

because the terms of a written instrument are interpreted under the same

standard. See Howland v. Stitzer, 84 S.E.2d 167, 172 (N.C. 1954).

preclude the court from finding that IBM is entitled to judgment

as a matter of law on Stephenson’s fraudulent misrepresentation

claim, IBM’s motion as to that claim will be denied.

B. Negligent Misrepresentation

Under North Carolina law, a negligent misrepresentation claim

requires a showing that a plaintiff (1) justifiably relied (2) to

his detriment (3) on “information prepared without reasonable

care” (4) by the defendant who owed the plaintiff a duty of care.

Simms v. Prudential Life Ins. Co. of Am., 537 S.E.2d 237, 240 (N.C.

Ct. App. 2000).

IBM argues that (1) Stephenson did not justifiably rely on

the “uncapped” representations in the PowerPoint and (2) that he

was not denied the opportunity to exercise reasonable diligence to

fully inspect the information available to him regarding

commission payments.

The justifiable reliance prong of a negligent

misrepresentation claim is analogous to the reasonable reliance

prong in a fraudulent misrepresentation analysis. Dallaire v.

Bank of Am., N.A., 760 S.E. 2d 263, 267 (N.C. 2014). Thus, the

court’s analysis as to the fraud claim applies equally here. For

the reasons noted as to the prior discussion of reasonable

reliance, the court finds that an issue of material fact exists

whether Stephenson justifiably relied on IBM’s alleged negligent

representations.

IBM’s argument that Stephenson was not denied the opportunity

to fully inspect the documents addressing his commission payments

is unavailing. Stephenson has presented evidence that IBM did not

apply the second prong of the Significant Transactions clause but

rather applied an arbitrary reduction in his BB&T and LabCorp

commissions. And, as to the first prong, it is not properly before

the court. Thus construed, IBM has not demonstrated that a full

inspection of the relevant documents would have helped Stephenson

because he has presented evidence that IBM did not follow the terms

of those very documents.

For these reasons, IBM’s motion for summary judgment as to

Stephenson’s negligent misrepresentation claim will be denied.

C. Unjust Enrichment/Quantum Meruit

To this point, the parties have treated Stephenson’s unjust

enrichment and quantum meruit claims as subject to the same

standard of proof.13 To be sure, some courts in North Carolina

have comingled the two theories. See, e.g., TSC Research, LLC v.

Bayer Chems. Corp., 552 F. Supp. 2d 534, 540 (M.D.N.C. 2008)

(noting that unjust enrichment and quantum meruit are identical

claims). Other courts have found them to be distinct causes of

action. See, e.g., Elite Outsourcing Grp., Inc. v. Healthsouth

Corp., 1:05CV00051, 2006 WL 1666739, at *1-2 (M.D.N.C. June 9,

13 This court did the same in Vinson, upon the parties’ concession.

Vinson, 2018 WL 4608250, at *6 n.6.

2006) (stating that a claim for unjust enrichment is “similar” to

but distinct from a claim for quantum meruit). Under this latter

view, a claim for quantum meruit requires proof that the services

were (1) rendered to the defendant; (2) knowingly and voluntarily

accepted; and (3) not given gratuitously. Id. (quoting Volumetrics

Med. Imaging, Inc. v. ATL Ultrasound, Inc., 243 F. Supp. 2d 386,

412 (M.D.N.C. 2003)). And a claim for unjust enrichment requires

proof that “property or benefits were conferred on a defendant

under circumstances which give rise to a legal or equitable

obligation on the part of the defendant to account for the benefits

received.” Id. at *2 (internal quotations omitted). What seems

to confuse the matter is that other courts have defined unjust

enrichment to require proof that a plaintiff (1) conferred a

benefit on another, (2) the other party consciously accepted the

benefit, and (3) the benefit was not conferred gratuitously,

Madison River Mgmt. Co. v. Bus. Mgmt. Software Corp., 351 F. Supp.

2d 436, 446 (M.D.N.C. 2005) (citing Se. Shelter Corp. v. BTU, Inc.,

572 S.E.2d 200, 206 (N.C. Ct. App. 2002)), which mirrors the

quantum meruit claim.

The Supreme Court of North Carolina has recently stated that

“[t]he general rule of unjust enrichment is that where services

are rendered and expenditures made by one party to or for the

benefit of another, without an express contract to pay, the law

will imply a promise to pay a fair compensation therefor.” Kraweic

v. Manly, 811 S.E.2d 542, 551-52 (N.C. 2018) (citations omitted).

The claim sounds neither in tort nor in contract. Id. “[T]he

measure of damages for unjust enrichment is the reasonable value

of the goods and services to the defendant.” Booe v. Shadrick,

369 S.E.2d 554, 556 (N.C. 1988). This description hews closely

with what the court said 20 years ago, when it said that “[q]uantum

meruit is a measure of recovery for the reasonable value of

services rendered in order to prevent unjust enrichment.”

Whitfield v. Gilchrist, 497 S.E.2d 412, 414-15 (N.C. 1998). This

court has read North Carolina law to treat unjust enrichment as a

cause of action, with quantum meruit as a measure of recovery.

See Sullivan v. Lab. Corp. of Am. Holdings, 1:17cv193, 2018 WL

1586471, at *7 (M.D.N.C. Mar. 28, 2018). In any event, where

parties have sought relief under a cause of action labeled quantum

meruit, the Supreme Court of North Carolina has allowed the claim

but treated it as a remedy or measure of recovery. See Ron Medlin

Constr. v. Harris, 704 S.E.2d 486, 489 (N.C. 2010); Potter v.

Homestead Pres. Ass’n, 412 S.E.2d 1, 7 (N.C. 1992).

Whether Stephenson’s claim is most properly one for unjust

enrichment, with quantum meruit functioning as the equitable

remedial measure, need not be resolved now. That is because IBM

has not founded its motion for summary judgment on any distinction

between the two theories.14 It suffices at this stage that the

court finds that IBM has failed to demonstrate the absence of a

genuine issue of material fact as to either.

Here, the court has found that the IPL is not a contract, as

it contains an explicit disclaimer that “[t]he Plan does not

constitute an express or implied contract . . . .” (Doc. 51-6.)

IBM argues that in North Carolina, a defendant is not unjustly

enriched when a plaintiff performs a job for which he receives a

base salary separate from incentive payments. IBM relies on a

line of cases, such as McCabe v. Abbott Laboratories, Incorporated,

47 F. Supp. 3d 339, 349 (E.D.N.C. 2014), that reject unjust

enrichment claims where an employee is salaried and the employer

retains discretion over any bonus compensation. Because

Stephenson was paid a base salary separate from his commission

payment plan, IBM argues, his salary constituted a reasonable value

for the services he rendered unto IBM. Stephenson argues that

such cases do not apply where the employer’s discretion to pay

commissions is constrained.

The court agrees with Stephenson. While Stephenson received

a salary, that fact alone is insufficient to preclude a claim for

14 In Fessler, the Fourth Circuit noted that, despite the parties’

concession to treat both claims alike, recent Virginia law in fact

treated them differently. Fessler, 959 F.3d at 156-57 (noting that

Virginia law applied quantum meruit where there was a request for

services but no compensation discussed, whereas unjust enrichment

applied in the absence of a request and limited the remedy to the benefit

received).

unjust enrichment, as he argues he had a hybrid compensation system

of salary and commissions. Fessler, 959 F.3d at 159 n.14.

Moreover, IBM has not demonstrated that its discretion to adjust

his commissions was unlimited or, more precisely, that IBM acted

within its discretion in reducing the commissions. The court has

found that if IBM applied the Significant Transactions clause, the

company retained discretion to reduce Stephenson’s commission, and

IBM would be correct that Stephenson could not have had any

expectation of payment. But, as the court has also found, there

is a dispute of material fact whether IBM applied that clause in

reducing Stephenson’s commissions. Because IBM represented to

Stephenson that its discretion to reduce commissions was limited

by the terms of the Significant Transaction clause, and because

Stephenson has produced evidence that IBM did not comply with those

terms, Stephenson has demonstrated an issue of material fact

whether IBM’s representations as to how his commissions would be

calculated, including the representations in the PowerPoint that

the “payments” and “earnings opportunity” were “uncapped,” created

a reasonable expectation of payment (i.e., that the benefit was

not given gratuitously).

The cases cited by IBM are not on point. In them, the

defendant either retained total discretion not to pay commissions,

or correctly determined that the plaintiff had failed to qualify

for commission payments. See, e.g., McCabe, 47 F. Supp. 3d at 349

(finding that employer retained absolute discretion not to pay

commissions); Dulaney v. Inmar, Inc., 725 S.E.2d 473, 2012 WL

1514746, at *4 (N.C. Ct. App. May 1, 2012) (finding that employee

was not employed at the time commissions were paid, as required).

As this court has previously found, when “an employer pays an

employee a base salary with the possibility of commissions, but

does not retain absolute discretion as to whether to pay the

commission, an employee who has not been paid the full amount of

commissions can state a claim for unjust enrichment” if the facts

support an expectation of payment. Vinson, 2018 WL 4608250, at

*7; see also Kornegay v. Aspen Asset Grp., LLC, No. 04-cvs-22242,

2006 WL 2787897, at *10 (N.C. Super. Ct. Sept. 26, 2006).

IBM directs the court’s attention to other cases in which

courts dismissed unjust enrichment claims by IBM salespeople and

urges this court to adopt their reasoning to find that Stephenson

could not have had a reasonable expectation of additional

commissions. Two of these cases determined that state law

precluded the plaintiffs’ reliance since, under state law, the

presence of disclaimers in the IPL rendered reliance unreasonable.

See Middleton v. Int’l Bus. Machs. Corp., 1:18-cv-3724-LMM, 2019

U.S. Dist. LEXIS 61308, at *12, *15–16 (N.D. Ga. Jan. 2, 2019),

aff’d 787 F. App’x 619 (11th Cir. 2019) (per curiam); see also

Snyder v. Int’l Bus. Machs. Corp., No. 1:16-cv-03596-WMR, 2019

U.S. Dist. LEXIS 66583, at *14–16 (N.D. Ga. Mar. 18, 2019) (citing

Middleton’s reliance on Georgia law in dismissing Plaintiff’s

unjust enrichment claim).

Middleton also did not squarely address the application of

the Significant Transactions clause, as IBM did not exclusively

rely on that clause in that case. Middleton, 2019 U.S. Dist. LEXIS

61308, at *12 n.3 (“[T]he significant transactions provision may

be at issue in the present case.”) (emphasis added). Snyder

likewise held that the entirety of the IPL granted IBM complete

discretion regarding commission payments, whereas here IBM has

maintained that only the Significant Transactions clause formed

the basis for its reduction of Stephenson’s commissions. See

Snyder, 2019 U.S. Dist. LEXIS 66583, at *13-16. Morris v. Int’l

Bus. Machs. Corp., 1:18-cv-0042-LY, 2018 WL 7291382 (W.D. Tex.

Nov. 29, 2018) is distinguishable because, under Texas law, a

quantum meruit claim cannot apply to services covered by an

agreement that provided for the plaintiff’s salary. Id. at *3-4.

Because the IPL in that case provided for the plaintiff’s salary,

his quantum meruit claim failed. As described above, however,

this is not the law in North Carolina -- an employee may still

bring an unjust enrichment claim when receiving a salary for

services, provided that the employer does not retain full

discretion to pay out commissions. The last case IBM cites found

that IBM retained complete discretion to pay (or not to pay)

plaintiff commissions at all. Fessler v. Int’l Bus. Machs. Corp.,

No. 1:18-cv-798, 2018 WL 6220209, at *5 (E.D. Va. Nov. 28, 2018).

However, the district court’s decision has since been vacated on

this point and is therefore unavailing. See Fessler, 959 F.3d at

158-59. Thus, the cases cited by IBM are distinguishable and do

not persuade the court to change its reasoning. IBM’s motion for

summary judgment as to Stephenson’s unjust enrichment/quantum

meruit claim will therefore be denied.

III. CONCLUSION

For the reasons stated, Stephenson has demonstrated that

genuine issues of material fact exist as to his remaining claims.

IT IS THEREFORE ORDERED that IBM’s motion for summary judgment

(Doc. 45) is DENIED.

/s/ Thomas D. Schroeder

United States District Judge

July 13, 2020