Carroll v. Stryker Corp.

Court of Appeals for the Seventh Circuit
658 F.3d 675 (2011)

ELI5:

Rule of Law:

Under Wisconsin law, an employee may not recover unpaid compensation under the equitable doctrines of quantum meruit or unjust enrichment when an express contract, such as a detailed compensation plan, governs the terms of payment.

Facts:

Stryker Corporation hired Matthew Carroll as a marketing associate, and he acknowledged in writing that his employment was at-will.
In 2005, Stryker promoted Carroll to a commissioned sales representative and provided him with a written compensation plan each year detailing the commission structure.
In 2008, Stryker placed Carroll on a performance improvement plan requiring him to meet quarterly sales quotas or face termination.
On March 31, 2008, the last day of the first quarter, Carroll submitted a large purchase order from Aurora Health Care in an attempt to meet his quota.
Stryker did not accept the order because Aurora proposed substantial modifications to payment terms that were unacceptable to Stryker, including demanding 120 days to pay instead of 30 and refusing to sign a required financing agreement.
On April 2, 2008, Stryker terminated Carroll's employment for failing to meet his sales quota.
Later in April 2008, Stryker negotiated different terms with Aurora, accepted the purchase order, and credited the commission to Carroll's replacement.

Procedural Posture:

Matthew Carroll sued Stryker Corporation in Wisconsin state court, asserting claims for unpaid wages under a state statute, quantum meruit, and unjust enrichment.
Stryker removed the case to the U.S. District Court for the Eastern District of Wisconsin, asserting federal diversity jurisdiction.
Stryker filed a motion for summary judgment, arguing the statutory claim was invalid and the equitable claims were barred by an express contract.
In response, Carroll voluntarily dismissed his statutory claim and filed a motion for leave to amend his complaint to add a breach of contract claim.
The district court (a magistrate judge presiding by consent) granted summary judgment for Stryker on the equitable claims and denied Carroll's motion for leave to amend.
Carroll, as appellant, appealed the judgment to the U.S. Court of Appeals for the Seventh Circuit, with Stryker as the appellee.

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Issue:

Under Wisconsin law, may an employee recover unpaid commissions under the equitable doctrines of quantum meruit and unjust enrichment when an express compensation plan governs the terms of their payment?

Opinions:

Majority - Sykes

No. An employee may not recover under the equitable doctrines of quantum meruit and unjust enrichment because the existence of an express contract governing compensation precludes such quasi-contractual relief. The Wisconsin Supreme Court has established that these equitable claims are available only in the absence of an enforceable contract. Here, the 2008 compensation plan constituted an express contract governing Carroll's pay, even though his overall employment was at-will. The plan met the three requirements for a contract: offer (the detailed plan), acceptance (Carroll's continued performance of his duties after receiving the plan), and consideration (the exchange of services for payment). The fact that Carroll did not sign the plan and that Stryker reserved the right to modify it does not render the contract invalid or illusory, as Stryker was obligated to pay according to the plan's terms while it was in effect. Therefore, Carroll's only proper claim would be for breach of contract, not for equitable remedies.

Analysis:

This decision reinforces the legal principle that quasi-contractual remedies are not a fallback option when a party is dissatisfied with the outcome of an express contract. It clarifies that for at-will employees, specific documents like compensation plans can constitute enforceable contracts for their subject matter, distinct from an overall employment contract. The case limits the ability of commissioned employees to claim 'unfairness' outside the terms of their governing payment plans, compelling them to litigate disputes as breach of contract claims and prove a violation of the plan's explicit terms.

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