IBM's Motion for Judgment on the Pleadings

Pursuant to Rule 12(c) of the Federal Rules of Civil Procedure, and for the reasons stated herein, defendant International Business Machines Corporation ("IBM") moves this Court for entry of judgment on the pleadings in favor of IBM. The Complaint alleges that IBM breached a contract by refusing to pay plaintiff for suggestions that he submitted to IBM pursuant to IBM's Suggestion Plan. Complaint pars. 22-24. It also alleges as a separate cause of action that IBM negligently misrepresented that it would follow the terms of the Suggestion Plan, when in fact IBM had no present intention to follow those terms. Id. pars. 25-30. All of these allegations rest on the text of the Suggestion Plan, which is found in a brochure attached to and incorporated by reference in the Complaint. Id. pars. 3 & Ex. A. But the plain language of this brochure warned the plaintiff that IBM was not agreeing to pay anything, even for suggestions that it adopted. Ex. A. pars. 1.0, 1.12. The brochure goes on to commit all decisions about awards to the "sole discretion" of IBM management, making IBM's decisions "final, binding and conclusive." Ex. A par. 1.12. As for the second count, plaintiff cannot evade the unambiguous provisions of the Plan by repackaging his claim in tort. He cannot claim misrepresentation because the Plan fully and fairly disclosed that no one could count on receiving a cash payment. Thus, plaintiff's Complaint fails to state either a contract or a tort claim, and IBM is entitled to judgment on the pleadings.

The following facts are taken from the Complaint, including the various documents plaintiff has appended to and incorporated by reference in the Complaint:

During plaintiff's employment at IBM, from 1984 until 1994, the company had in place a Suggestion Plan to handle suggestions by employees. Complaint pars. 2-3. IBM distributed brochures to employees explaining the Plan, and plaintiff received a copy of one such brochure. Id. pars. 3-4. The brochure states:

Ex. A par. 1.0 (emphasis added) (attached as Exhibit A to the Complaint and incorporated into it by reference; see Complaint par. 3).

The brochure goes on to state that "all decisions of IBM concerning employee eligibility shall be final, binding and conclusive and in its sole discretion." Ex. A par. 1.1. In yet another section, the Plan states: "If all eligible conditions are met and your suggestion is adopted for implementation, it can earn you a cash award from $50 to $150,000." Id. par. 1.3 (emphasis added). One subparagraph later, the brochure states that: "The decision of the company shall be in its sole discretion and final, binding, and conclusive in all matters pertaining to awards calculations, including but not limited to the amount and calculations of the award and the time of payment. " Id. par. 1.4. (1) Still further on, another paragraph reads: "No action which IBM takes, including implementation of an identical or similar solution, shall be deemed to constitute an agreement to pay for a suggestion." Id. par. 1.12 (emphasis added).

(1) This and several other sections of the copy of the brochure as submitted by Plaintiff have handwritten highlighting. The Complaint does not identify the person who made the highlighting or explain when the highlighting was added.

Finally, the concluding passage of the brochure states:

Id. (emphases added).

Plaintiff was a salaried employee of IBM from 1984 until 1994. Complaint par. 2. He does not allege that he received anything less than the salary and employee benefits that comparable employees received during that period. Plaintiff submitted dozens of suggestions to IBM pursuant to the Plan. Id. pars. 8, 14, 17. Plaintiff states that he relied upon the terms of the Plan and that he made his suggestions based upon these terms. Id. pars. 23, 26, 29. Plaintiff claims that IBM used these suggestions but refused to pay plaintiff any money for them, and that IBM based its refusals on several provisions of the Plan. Id. pars. 10-13, 151 16, 20.

A. Standard for Judgment on the Pleadings

A motion for judgment on the pleadings is the equivalent of a motion to dismiss for failure to state a claim, except that the former may be filed after an answer. The motion may be granted if, treating all well-pleaded factual allegations as true, the moving party is entitled to judgment. 5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure par. 1368 (2d ed. 1990). Documents attached to the complaint, such as the brochure, are considered part of the complaint for purposes of motions to dismiss and for judgment on the pleadings. See, e.g., Fed. R. Civ. P. 10(c); 2A James W. Moore et al., Moore's Federal Practice par. 10.06, at 10-28 (2d ed. 1995) (also noting: "In case of conflict between the exhibit and the pleading, the exhibit controls-',); Fayetteville Investors v. Commercial Builders, Inc., 936 F.2d 1462, 1465 (4th Cir. 1991) (same, in evaluating motion to dismiss).

B. Case Law on Employee Suggestion Plans

Cases addressing claims based on employee suggestion plans follow two divergent conceptual paths. Some suggestion plan cases focus on permissive or discretionary plan language similar to sections 1.0, 1.3, and 1.12 of the IBM Suggestion Plan. These cases hold that such language is too indefinite to constitute an offer to create an enforceable unilateral

contract, no matter how clear the plaintiff's evidence of performance. Other cases focus on the words "final, binding and conclusive," which are also found in sections 1.0, 1.1, 1.4, and 1.12 of the IBM Plan. These cases hold that, although an enforceable contract was created, the plaintiff must accept as final and binding the decisions of management as to whether an award is appropriate. Both of these divergent paths end at the same place: a judgment for the defendant. The Maryland cases most nearly on point indicate that Maryland courts would likewise follow one or the other conceptual path and reach the same end result.

1. Suggestion Plans Are Not Enforceable Contracts

Some courts hold that suggestion plans phrased in discretionary language do not create binding contracts. In Calkins v. Boeing Co., 506 P-2d 329 (Wash. Ct. App. 1973), an ex-employee sued his former employer for compensation for suggestions made under a suggestion plan. The ex-employee claimed that by using his suggestions and failing-to reward him, the ex-employer was unjustly enriched and had breached its contract. Id. at 330. The plan at issue provided that ",the decision of the Company shall be final and conclusive as to the amount of a cash award, if any, and the person or persons entitled thereto, and all other matters concerning the suggestion."' Id. at 330. The court relied on this language in affirming a judgment for the ex-employer, stating: "The language of the rules, however, makes it clear that even if [his suggestion was] used, his award, if any, was to be the company's final decision.,, Id. (emphasis in original). "The question of payment was left to the unfettered discretion of the recipient of the suggestion." Id. at 331 (emphasis in original). Employees received salaries independent of the Suggestion Plan and could choose not to participate in it; but those who chose to take part had to accept this unfettered discretion. Id. Thus, the court held that the suggestion plan was not an enforceable contract because "its performance was entirely discretionary on the part of the promisor." Id. at 332; see also Davis v. General Foods Corp., 21 F. Supp. 445, 446 (S.D.N.Y. 1937) (finding no enforceable contract where company invited an inventor to submit idea but warned that use of product and possible "compensation, if any . . . are matters resting solely in our discretion.").

California law likewise recognizes that suggestion plans couched in wording similar to the IBM Plan do not create legally enforceable contracts. In one case, a suggestion clan provided that "the decision of the Judges concerning awards is final.,, Lisec v. United Airlines, 149 Cal. Rptr. 847, 849 (Ct. App. 1978). Plaintiffs submitted a suggestion, received a $1000 award, and challenged the amount of the award as a breach of contract. The court rejected the claim, holding that the plan provisions relied on did not create an enforceable contract. Quoting the plan's language, the court stressed that the employer "‘may’ grant such an award if it ‘wishes’ to recognize a contribution." Id. at 853 (citing with approval Calkins v. Boeing). Thus, the plan "does not create a legal obligation of any kind." Id. at 854.

The Restatement (Second) of Contracts takes a similar tack. Section 21 of the Restatement provides: "A manifestation of intention that a promise shall not affect legal relations may prevent the formation of a contract." Restatement (Second) of Contracts par 21 (1981).

Likewise, at least two Maryland cases state the same proposition, albeit in dicta and in other contexts: a document that disclaims any "common intent to affect [the parties'] legal relations", does not create a valid, legally enforceable contract. Post v. Gillespie, 149 A.2d 391, 395 (Md. 1959) (quoting Buffalo Pressed Steel Co. v. Kirwan, 113 A. 628, 630 (Md. 1921)). Moreover, the Maryland Court of Appeals has cited with approval the Restatement (Second) of Contracts. See, e.g., Wolf v. Ford, 644 A.2d 522, 525 (Md. 1994); Chernick v. Chernick, 610 A.2d 770, 774 (Md. 1992). If anything, Maryland courts require an even stronger showing of intent to create a binding contract than does the Restatement. Compare Restatement (Second) of Contracts par. 21 with Post, 149 A.2d at 395, and Buffalo Pressed Steel, 113 A. at 630. These authorities strongly indicate that Maryland courts would follow the reasoning in Calkins, Davis, and Lisec, and Section 21 of the Restatement.

In this case, plaintiff alleges that the IBM Plan constituted an offer for a unilateral contract. Complaint par. 23. The IBM brochure, however, is similar to the plans that Calkins, Lisec, and Davis found to be unenforceable. The brochure offered employees only the possibility that the company in its sole discretion would decide to pay a reward. As in Calkins, the plaintiff received a salary independent of the Suggestion Plan but could also choose to volunteer his suggestions. The Plan repeatedly reserves to IBM the sole and final discretion to administer the Suggestion Plan. A suggestion "can earn you a cash award," just as the plan in Lisec told employees that they "may" receive an award. Ex. A par 1.3 (emphasis added). Even "if the suggestion is published or used, the decisions of the company shall be final, binding and conclusive as to the amount of a cash award, if any, and the person or persons entitled to the award, and all other matters concerning the suggestion and its publication and use." Ex. A par 1.0 (emphasis added). Significantly, the phrase "cash award, if any," is the same phrase that the Calkins court found dispositive. Finally, the brochure expressly contradicts plaintiff's claim that the Plan created an enforceable agreement: "No action which IBM takes, including implementation of an identical or similar solution, shall be deemed to constitute an agreement to pay for a suggestion.,, Id. par. 1.12. Thus, because the brochure states that it does not "constitute an agreement to pay for a solution" and reserves unfettered discretion, it is not an enforceable contract. Ex. A par. 1.12.

2. Company’s Decisions Are Final and Binding

As noted above, there is an alternative conceptual track: even if the wording of a plan creates an enforceable contract, the plan provisions that provide that a company's decisions are final or binding must be enforced as part of that contract. The only case to consider the IBM Suggestion Plan followed this approach, holding that IBM's decisions as to the employee's claims were "final, binding, and conclusive." Stewart v. International Business Mach. Corp., CV-94-052-H-RMH (D. Mont. July 24, 1995) (copy attached as Ex. B). In that case, IBM had adopted the plaintiff's suggestion and given him an $8773 award. The plaintiff, alleging breach of contract, challenged the adequacy of the award. The court granted summary judgment for IBM, because IBM had reserved "unfettered discretion" and had provided that all decisions were "final, binding, and conclusive-,, Slip op. at 12-13. "In short, plaintiff has failed to show facts that indicate defendant promised or agreed to pay plaintiff a certain amount for his suggestion, whether implemented or not. On the contrary, defendant has demonstrated the fact that it reserved in itself sole discretion whether to accept or reject a suggestion, and whether or not to give an award at all." Id at 13 (emphases added). Thus, the court held that plaintiff's claim was precluded by the terms of the Suggestion Plan. Id. at 11.

In another case, the suggestion plan provided that "the decision of the Management o[n] any questions . . will be final and conclusive." Alderton v. Armco, Inc., No. CA84-07-076, 1985 WL 6152, at *3 (Ohio Ct. App. Feb. 19, 1985) (per curiam) (copy attached as Ex. C). The court granted the employer's motion to dismiss because this "clear and unambiguous" provision bound the employee. Id. at *2. By submitting suggestions, the employee had assented to the terms of the plan. Id. at *3. Thus, he could not sue in contract or repackage his claim in terms of quasi-contract to circumvent the restrictions in the plan. Id.

Yet another plan, like the IBM brochure at issue here, granted the employer a nonexclusive, irrevocable, and royalty-free license over all suggestions and made all decisions of the suggestion committee "final and binding." Bolls v. Packard Elec., 918 F. Supp. 173, 175-76 (S.D. Miss. 1995). Plaintiff argued that her submission of a suggestion formed an enforceable contract notwithstanding this provision, but the court disagreed. "Plaintiff cannot have it both ways. If the court construes the Suggestion Plan as the basis of a contract between plaintiff and (employer] , which it does, the court must apply the terms of such." Id. at 178. Thus, the court held that absent proof of "fraud or other undue means," the company's decision under the plan was unreviewable and final. Id.

Still other courts have refused to review management decisions under suggestion plans that provide that the employer's decisions are final or binding. See, e.g., Muncy v. Harrison Radiator, No. 93-3047, 1993 U.S. App. LEXIS 31192 at *12-*13 (6th Cir. Nov. 29, 1993) (per curiam) (copy attached as Ex. ID) (applying Ohio law in refusing to disturb denial of suggestion award, where suggestion plan made employer's decisions "final and binding"); Fish v. Ford Motor Co., 534 N.E.2d 911, 912-13 (Ohio Ct. App. 1987) (enforcing clause that rendered employer's decisions "final and binding"); Milich v. Schenley Indus., Inc., 387 N.Y.S.2d 641, 642 (App. Div. 1976) (noting that employee could not challenge suggestion plan committee's decisions, because the plan stated that those decisions were "final, binding and conclusive"), aff’d mem., 367 N.E.2d 651 (N.Y. 1977). The IBM Suggestion Plan is even clearer than the plan language at issue in most of these cases: IBM's Plan states not just once but repeatedly that all decisions are "final, binding, and conclusive."

Maryland cases have addressed similar issues outside the context of suggestion plans in applying exculpatory clauses, which limit or excuse one party's liability to the other party. Maryland courts hold that exculpatory clauses are valid and enforceable, at least when such clauses are not specifically forbidden by statute. See, e.g., Wolf, 644 A-2d at 525; Winterstein v. Wilcom, 293 A-2d 821, 824 (Md. Ct. Spec. App. 1972) (noting an exception for intentional torts, recklessness, etc.). In other words, Maryland courts allow exculpatory clauses to absolve liability entirely. It follows, a fortiori, that those courts should defer to the decision of a suggestion plan committee when the contract (if indeed it is a contract) expressly provides that the committee's decision on liability is final, binding, and conclusive.

This conclusion is buttressed by the respect accorded under Maryland law to finality provisions in arbitration clauses. Absent fraud, Maryland courts will not review the merits of an arbitrator's decision. See, e.g., Amalgamated Transit Union v. Mass Transit Admin., 504 A.2d 1132, 1136 (Md. 1986); Chillum-Adelphi Volunteer Fire Dept, Inc. v. Button & Goode, Inc., 219 A.2d 801, 806 (Md. 1966) ("A court will not review the findings of law and fact of the arbitrators, but only whether the proceedings were free from fraud, the decision was within the limits of the issues submitted to arbitration, and the arbitration proceedings provided adequate procedural safeguards . . ."). Courts will not second-guess such decisions even when the arbitrator is an employee of one of the parties to the dispute. City of Baltimore v. Allied Contractors, Inc., 204 A.2d 546, 552 (Md. 1964).

Here, the Complaint does not allege fraud, let alone allege it with the particularity required by Rule 9(b). See Fed. R. Civ. P. 9(b); Owen v. Commercial Union Fire Ins. Co., 211 F.2d 488 (4th Cir. 1954) (plaintiff alleging fraud must set forth elements of fraud-in his complaint. Rather, plaintiff merely seeks to challenge IBM's factual determinations and applications or interpretations of the terms of the Plan. See Complaint pars. 12-13. Plaintiff has a difference of opinion with IBM management over the value of his suggestions. These are precisely the kinds of disagreements that are foreclosed from judicial review by the terms of the Plan, and by court decisions enforcing such terms.

3. Plaintiff's Tort Claim Has No Merit

As the Bolls court recognized, plaintiff cannot have it both ways, claiming under the Plan and yet disregarding the disclaimers inherent in the Plan. Nor can plaintiff try to enforce the contract shorn of its limitations by recasting his claims in tort. This is precisely what plaintiff tries to do when he alleges that "Defendant owed a duty of care to the Plaintiff to ensure that Plaintiff was compensated fairly and reasonably per Defendant's own published award methodology for the value of suggestions he made.,' Complaint par. 26. The existence of any such tort duty to compensate fairly or reasonably is flatly negated by the express language of the plan itself. The case law confirms this common-sense conclusion. See, e.g., Stewart, slip op,. at 18-19 (holding that IBM could not be liable in negligence because it had no duty of care under Suggestion Plan); Armco, 1985 WL 6152, at *3 (rejecting unjust enrichment claim); Calkins, 506 P.2d at 331 (same); see also Danann Realty Corp. v. Harris, 157 N.E.2d 597, 600 (N.Y. 1959) (holding that plaintiff cannot sue for fraudulent misrepresentation where the terms of the contract disclaimed any reliance on representations); Abbot v. Stevens, 284 P.2d 159, 161 (Cal. Ct. App. 1955) (same); Billington v. Vest, 268 S.W.2d 705, 707 (Tex. Civ. App.--El Paso, 1954) (same).

Absent a statute to the contrary, Maryland courts recognize and enforce agreements that limit tort liability: "'[Al party to a contract can ordinarily exempt himself from liability for harm caused by his failure to observe the standard of reasonable care imposed by the law of negligence.,,, Wolf, 644 A.2d at 525 (enforcing exculpatory clause signed by investor exonerating stockbroker from liability for negligence) (quoting with approval Restatement (Second) of Contracts par. 195 cmt. a (1981)).

Wolf is on all fours with this case. Here, plaintiff was explicitly warned that IBM retained "sole discretion" and that the Plan was not an agreement to pay for adopted suggestions. These warnings are as much a part of the plan as are the terms plaintiff claims misled him. These warnings prevent any other parts of the plan from being construed as a misrepresentation that IBM was obligating itself to hand out a cash award whenever it used or appeared to use a suggestion. See Calkins, 506 P.2d at 331 (holding that suggestion plan could not "mislead an employee who read [the] austere, distinct and literal wording" of its disclaimers). Because plaintiff's tort claim is inconsistent with other language in the very document on which he bases his misrepresentation claim, the claim must be rejected.

Quite apart from its circumvention of the terms of the Plan, there are two other flaws in the Complaint's tort count. For one, plaintiff claims that IBM made a material misrepresentation in suggesting that it would follow its published Suggestion Plan. Complaint par. 27. Yet nowhere does plaintiff allege that in fact IBM never paid any awards to plaintiff or anyone else. Without such allegations and evidence to back them up, plaintiff cannot prove that IBM intended to pay no one, and that therefore IBM misrepresented its intent by implying that it would pay some suggesters. Nor does plaintiff allege any facts showing any detrimental reliance upon the alleged misrepresentation. His only mention of reliance is a conclusory legal assertion. See Id. pars. 29-30. In short, like the contract claim, plaintiff's tort claim is fatally flawed and must be dismissed.

The IBM Suggestion Plan uses discretionary language and expressly disavows any intent to create a legally binding agreement. Therefore, the Plan neither created a contract nor constituted a binding offer of a unilateral contract. Alternatively, the Plan's express language provides that the company's decisions as to whether or not to pay an award are "final, binding and conclusive." Those terms have to be enforced if there is a binding contract, and enforcement of those terms precludes plaintiff from recovering. Plaintiff's misrepresentation claims have no merit because they too would require the Court to ignore the plain and unequivocal reservations in the Plan itself. For these reasons, IBM respectfully asks this Court to enter judgment on the pleadings in favor of IBM.

Dated: October 23, 1996