IBM Appellate Brief

Whether the district court properly held that the "crystal clear, unequivocal and unambiguous" terms of the "explicit disclaimer" language in IBM's Suggestion Plan foreclosed appellant's claims of breach of contract, quantum meruit, unjust enrichment and negligent misrepresentation based on IBM's decision not to compensate appellant for his suggestions.

On July 22, 1996, appellant Keith Gibby, a former employee of International Business Machines Corporation ("IBM"), filed a complaint in Maryland state court relying on IBM's Suggestion Plan and alleging that by not paying him for suggestions he made to the company, IBM was in breach of contract and had engaged in negligent misrepresentation. After removing the case to federal court, IBM moved on October 23 for judgment on the pleadings. Shortly thereafter, Mr. Gibby moved to amend the complaint to add claims of unjust enrichment and quantum meruit. IBM opposed Mr. Gibby's motion.

On July 16, 1997, the district court issued a seven-page memorandum opinion and an order granting IBM's motion for judgment on the pleadings and denying Mr. Gibby's motion to amend his complaint. The court "construed [the facts] in the light most favorable to the Plaintiff - - - [and found] beyond a doubt that the Plaintiff could prove no set of facts which would entitle him to relief.,' Slip op. at 2-3 (J.A. at 253-54) (citation omitted).

The district court's decision rests on the "crystal clear, unequivocal and unambiguous" language of IBM's Suggestion Plan. Slip op. At 5 (J.A. at 256). The court below held that Mr. Gibby could have no claim for breach of contract because "[t]here can be no other reading of the Plan but that IBM explicitly retained the right to use any suggestion . . . without paying anything at all for it and that IBM would be the sole and final arbiter of whether it would pay for a suggestion." Id. (emphasis added).

The district court also held that this "explicit disclaimer" language defeated Mr. Gibby's claims of unjust enrichment, quantum meruit and negligent misrepresentation. As for unjust enrichment, the court held that "[i]t is impossible to show" that it was unjust for IBM to retain any benefit from using Mr. Gibby's suggestion "given IBM's clear statement to its employees." Id. at 6 (J.A. at 257). Similarly, the court ruled that the plain disclaimer language in IBM's Suggestion Plan prevented Mr. Gibby from showing that "he had a reasonable expectation of being paid for every suggestion of his which IBM adopted-" Id. (citation omitted). Thus, the court decided that Mr. Gibby failed to state a claim under the theory of quantum meruit and that "the claim for negligent misrepresentation is fatuous." Id.

During Mr. Gibby's employment at IBM, from 1984 until 1994, the company had in place a Suggestion Plan. Compl. pars. 2 - 3 (J.A. at 6-7) ; Am. Compl pars. 2-3 (J.A. at 189). IBM distributed brochures to employees setting forth the terms of the Plan, and Mr. Gibby received a copy. Compl. pars. 3-4 (J.A. at 6 7); Am. Compl. pars. 3-4 (J.A. at 189).

The Plan is replete with statements that the decision whether to compensate an employee for a suggestion rests solely with IBM. Section 1.0 states:

(J.A. at 200) (emphasis added).

Section 1.1 states that "[a]ll decisions of IBM concerning employee eligibility shall be final, binding and conclusive and in its sole discretion." (J.A. at 201) (emphasis added). The Plan further states in Section 1.3: "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.-I (J.A. at 201) (emphasis added). One subparagraph later, the Plan again states that "[t]he 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." (J.A. at 202) (emphasis added). The Plan further makes clear in Section 1.12, "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.,, (J.A. at 209).

Finally, the concluding passage of the Plan explicitly disclaims once more any promise that IBM will pay employees for suggestions: "Any decision of the concerning the terms or administration of the Plan, including the eligibility of suggestions and suggesters, and the amount of any awards made sha2.1 be final, binding and conclusive, and is within its sole discretion." (J.A. at 210) (emphasis added). (1/)

(1/) The Plan also provides:

(J.A. at 210).

Construing the complaint in the light most favorable to Mr. Gibby, he has nonetheless failed to allege facts that would entitle him to relief. Each of Mr. Gibby's alternative grounds for relief--breach of contract, unjust enrichment, quantum meruit, and negligent misrepresentation--fails to overcome the Suggestion Plan's clear, unequivocal and unambiguous statements of disclaimer.

The Suggestion Plan unmistakably and repeatedly states that the decisions of IBM concerning payments for suggestions are "final, binding and conclusive," In addition, the Suggestion Plan expressly disclaims any "agreement" to pay for a suggestion. IBM thus made plain to its employees that 1.t would not promise any payments for a suggestion, even if the suggestion was used by the company. In view of the Plan's numerous express disclaimers, the district court properly held that Mr. Gibby's claim based on an enforceable contract must fail under Maryland law. Likewise, the court correctly decided that the Plan's explicit and unequivocal disclaimer language prevents Mr. Gibby from recovery under the rubrics of unjust enrichment, quantum meruit or negligent misrepresentation.

A district court should grant a motion for judgment on the pleadings if, considering only the pleadings and construing the facts in the light most favorable to the plaintiff, the pleadings fail to state a claim for relief. See H7'shon v. King & Spa7d7'ng, 4-67 U.S. 69, 73 (1984); Bruce v. Riddlle, 631 F-2d 272, 273-74 (4th Cir. 1980). (2/)

(2/) Documents attached to the complaint -- such as the Suggestion Plan -- 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); 2 James W. Moore et al - , Moore' s Federal Practice par. 10.05[5], at 10-35 (3d ed. 1997). "[I]n the case of conflict between the exhibit and the pleading, the exhibit controls." Moore's Federal Practice par. 10.06, at 10-28; see also Fayetteville Investors V. Commercial Builders, Inc., 936 F.2d 1462, 1465 (4th Cir. 1991).

On appeal, the court reviews de nova a district court's grant of a motion under Fed. R. Civ. P. 12(c) for judgment on the Pleadings. Bishop v. Federal Intermediate Credit Bank, 908 F.2d 658, 663 (10th Cir. 1990); Thomason v. Nachtrieb, 888 F.2d 1202, 1204 (7th Cir. 1989). Morgan v. Church's Fried Chicken, 829 F.2d 10, 11 (6th Cir. 1987). The court of appeals a-]-so reviews de nova a district court's decision not to permit a plaintiff to amend his complaint because the proposed amendment would he futile. Johnson v. Oroweat Foods Co., 785 F.2d 503, 510 (4th Cir. 1986).

A. Mr. Gibby Has No Contract Claim.

The district court rightly held that the disclaimer language in !BM's Suggestion Plan prevented the formation of an enforceable contract. The court recognized that the "language of the Plan is crystal clear, unequivocal and unambiguous.,, Slip op. at 5 (J.A. at 256). "There can be no other reading of the Plan but that IBM explicitly retained the right to use any suggestion submitted under the plan without paying anything at all for it and that IBM would be the sole and final arbiter of whether it would pay for a suggestion." promise, made to each employee, of a definite and specific benefit.(3/)

(3/) 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. See, e.g., Calkins v. Boeing Co., 506 P.2d 329, 330 (Wash. Ct. App - 1973) ; Lisec v. United Airlines, Inc. , 14 9 Cal. Rptr. 847, 849 (Cal. Ct. A-pp. 1978). 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 Suggestion 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. See, e.g., Stewart: v. International Business Machines Corp., CV-94-052-H-RMH (D. Mont. July 24, 1995) (Attached as A); 13olls v. Packard Elec., 918 F. Supp. 173, 175-76 (S.D. Miss. 1995). Both of these divergent paths end at the same place -- judgment for IBM.

In Castiglione, the Maryland court of special appeals decided that an employee could not rely on an employee handbook as the basis for other than an at-will contract where the handbook contained an express disclaimer stating that "it does not constitute an express or implied agreement." 69 Md. App. 325, 517 A.2d at 788- There could be no contract, the court held, because "contractual intent has been expressly disclaimed.,, id. at 794; see also Bagwell v. Peninsula Reg'l Med. Ctr., 106 Md. App. 470, 665 A.2d 297, 308-09 (1995), cert. denied, 341 Md. 172, 669 A.2d 1360 (1996) (affirming entry of summary judgment),- Fournier v. USF&G, 82 Md. App. 31, 569 A.2d 1299, 1304 (1990).

Similarly, in Haselrig, to decide whether an employee handbook provided a basis for an enforceable contract, the court "review[ed] the provisions to determine whether they are clear an unequivocal or ambiguous and equivocal." 86 Md. App. 116, 585 A.2d at 300-01. (4/)

(4/) Mr. Gibby's reliance on the holding in Haselrig is misdirected. The court refused to grant summary judgment because it found two disclaimers in an employment manual to be unclear. The first disclaimer said that the employment relationship was "predicated' on an at-will basis" rather than that it was at will or shall be at will. The second disclaimer in Haselrig was unclear because it was placed in the probationary section of the manual, implying that it was applicable only to probationary employees. 86 Md. App. 1161 585 A.2d at 301. In contrast, the IBM brochure has explicit and unambiguous disclaimers at the beginning and end of the brochure, as well as at several points in between. See J.A. at 201, 202, and 210.

Mr. Gibby's reliance on Lone Star Steel Co. v. Scott, 759 S.W.2d 144, 152 (Tex. App. 1988, writ denied) is also misplaced. There, the court held that suggestion plans that expressly make performance optional or express an intent not to be bound do not give rise to binding contracts. The suggestion plan language in that case gave the employer final discretion over the plan's terms and administration, and thus did not create a binding contract. Id. at 151. Subsequent to publishing the plan, however, the company ran a newspaper advertisement stating that "[Clash awards will be r)aid for all suggestions adopted." Id. at 152 (emphasis added by court) Based on this new and unqualified advertisement, the court found that there was an enforceable contract. Id. Likewise misplaced is Mr. Gibby's reliance on Raybestos-Manhattan, Inc. v. Rowland, 460 F.2d 697 (4th Cir. 1972), since the "suggestion system" at issue did not include disclaimers.

The one other court to consider the IBM Suggestion Plan reached precisely the same conclusion as the district court here. Stewart v. IBM, supra. In Stewart, IBM had adopted the plaintiff's suggestion and given him an $8,773 award. Alleging breach of contract, the plaintiff challenged the adequacy of the award. The court held that, in the Suggestion Plan, IBM had reserved "unfettered discretion and had provided that all decisions were "final, binding, and conclusive.,, Slip op. at 12-13. The court found that the "plaintiff . . . failed to show facts that indicate [IBM] promised or agreed to pay plaintiff a certain amount for his suggestion, whether implemented or not." Because IBM "demonstrated . . . that it reserved in itself sole discretion whether to accept or reject a suggestion, and whether or not to give an award at all," the court granted IBM's motion for summary judgment. Id. at 13. (5/)

(5/) Mr. Gibby urges that IBM's disclaimer of contractual intent was ineffectual because the company acted in bad faith. But, as a matter of law, where there is no enforceable contract, there can be no implied covenant of good faith. See Suburban Hosp., Inc. v. Dwiggrins, 324 Md. 294, S96 A.2d 1069, 1077 (1991) (directing entry of judgment in favor of employer); Hrehororovich v. Harbor Hosp. Ctr., Inc., 93 Md App. 772, 614 A.2d 10211 1033 (1992) (affirming dismissal of complaint). See also Elliott v. Board of Trustees, 104 Md. App. 93, 655 A.2d 46, 54 ("Only in instances when the employer's policy promises a good faith application [and the employer acts in bad faith] would such an issue result in a triable action."!), cert. denied, 339 Md. 354, 663 A-2d 72 (1995); Stewart v. IBM, slip op. at 16-18 (granting summary judgment because the plain language of IBM's Suggestion Plan disclaimed any implied contractual duty of good faith).

Indeed, the cases are legion in which courts have dismissed breach of contract claims resting on suggestion plan language nearly identical to that at issue here. See Calkins, 506 P.2d at 330 (no claim for breach of contract or unjust enrichment where the plan provides that "'the decision of the Company shall be final and conclusive as to the amount of cash award, if any, and the person or persons entitled thereto, and all other matters concerning the suggestion."'); Lisec, 149 Cal. Rptr. at 849 (no breach of contract claim where Suggestion Plan provides that "[t]he decision of the judges concerning awards is final"'); Alderton v. Armco, Inc., No. CA84-07-076, 1985 WL 6152, at *3 (Ohio Ct. App6 Feb. 19, 1985) (granting motion to dismiss contract and quantum meruit claims where suggestion plan provided that "'the decision of the Management o[n] any questions . . . will he final and conclusive"') (Attached as B); Bolls, 918 F. Supp. at 175-76 (dismissing breach of contract claim where suggestion plan made all decisions of the suggestion committee "final and binding."). (6/)

(6/) See also Muncy v. Harrison Radiator, No. 93-3047, 1993 U.S. App. LEXIS 31192, at *12-*13 (6th Cir. Nov. 29, 1993) (per curium) (applying Ohio law in refusing to disturb denial of suggestion award, where suggestion plan made employer's decisions "final and binding") (Attached as C); 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 N.Y. (App. Div. 1976) (noting that employee could not challenge suggestion plan committees decisions, because the plan states that those decisions were "final, binding and conclusive"), aff'd mem., 367 N.E.2d 651 (N.Y. 1977).

Nor can there be any doubt that the Plan's disclaimer language is, as the district court found, "crystal clear, unequivocal and unambiguous-" Slip op. at 5 (J.A. at 256). In no fewer that four sections, the Plan states in no uncertain terms that IBM retains "complete discretion" and that "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 suggestions and its publication and use." Section 1.0 (J.A. at 200) (emphasis added) . See also Section 1.1 (J.A. at 201) ("All decisions of IBM concerning employee eligibility shall be final,, binding and conclusive and in its sole discretion.,,) (emphasis added) ; Section 1. 4 (J.A. at 202) ("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.,,) (emphasis added). J.A. at 210 ("Any decision of the company concerning the terms or administration of the Plan, including the eligibility of suggestions and suggesters, and the amount of any awards made shall be final, binding and conclusive, and is within its sole discretion.,,) (emphasis added). If all that were not clear enough, the Plan language provides in Section 1. 12 that " [n] o action which IBM takes, including implementation of an identical or similar solution, shall be deemed to constitute an agreement to pay for a suggestion." (J.A. at 209).

In the face of this abundantly plain language, Mr. Gibby nonetheless contends that there is an enforceable contract, pointing "most importantly" to Section 1.9 of the Plan, which states that "if all eligibility criteria have been met and the suggestion is to be implemented, an award is calculated.,, (Appellant's Br. at 21) (emphasis added in Appellant's Br.). But two sentences earlier, Section 1.9 makes clear that "[a]n employees eligibility is determined by IBM management." (J.A. at 207). Further, the Plan states that "[a]ny decision of the company concerning the terms or administration of the Plan, including the eligibility of suggestions and suggesters, and the amount of any awards made shall be final, binding and conclusive, and is within its sole discretion.,, (J.A. at 210) (emphasis added).

In short, IBM has more than "sufficiently disclaimed contractual intent." Accordingly, the district court properly dismissed Mr. Gibby's breach of contract claim.

Mr. Gibby's claim for unjust enrichment fares no better. To establish a claim for unjust enrichment, a plaintiff must show not only that the defendant realized a benefit, but also that it did so unjustly. Bennett Heating & Air Conditioning, v. NationsBank, 103 Md. App. 749, 654 A. 2d 949, 956-57 (199S) , aff'd in relevant part, rev'd in part on other grounds, remar2ded, 342 Md. 169, 674 A.2d 534, 540 (1996). See also Appellant's Br. at 11-12 (acknowledging that a "necessary" element of an unjust enrichment claim is a showing of "circumstances mak[ing] it inequitable . . . to retain the benefit without payment of its value") (citing Yost v. Early, 87 Md. App. 364, 589 A.2d 1291 (1991) - Mass Transit Admin. v. Granite Constr. Co., 57 Md. App. 766, 471 A.2d 1121 (1984); Everhart v. Miles, 47 Md. App. 131, 422 A.2d 28 (1980).

As the district held, however, "[i]t is impossible to show such circumstances in this case, given IBM's clear statement to its employees.,, Slip op. at 6 (J.A. at 257). See also Alderton, 1985 WL 6152, at *3 (affirming grant of summary judgment); Calkins, 506 P.2d at 332 (same); Lisec, 149 Cal. Rptr. at 8S3-54 (directing entry of judgment notwithstanding verdict); Osborn v. Boeing Airplane Co., 309 F.2d 99, 102 (9th Cir. 1962) (where the suggestion plan reserves absolute discretion for the company, "there could be no recovery . . on quasi-contractual principles"). (7/)

(7/) None of the unjust enrichment cases involving suggestion plans or unsolicited inventions cited by Mr. Gibby involved a disclaimer of a promise. For example, Matarese v. Moore-McCormack Lines, Inc., lS8 F.2d 631, 632-33 (2d Cir. 1946), involved an express promise to pay one-third of an invention's value, a promise that was unenforceable solely because there was no proof that the agent-promisor had authority to bind his principal. The court used unjust enrichment to cure this technical defect in the proof, rather than stitching together a new contract out of whole cloth.

One of the Maryland cases cited by Mr. Gibby undercuts his argument altogether. In Mass Transit, 57 Md. App. 766, 471 A.2d at 1121, the MTA solicited bids to build a rail station. one of the bidders, Granite, relied on the oral statement of an MTA employee that Granite would not be responsible for relocating a nearby gas line, and lowered its bid accordingly. However, the bid contract stated: "'Oral explanations or instructions . . . will not he binding."' Id. at 1127. When Granite was required to move the gas line, it sued for unjust enrichment to recoup the cost of that work. The court held that, given the disclaimers, Granite had no right to rely on the oral explanation and directed the lower court to enter judgment in favor of MTA. Id. at 1127-29.

Mr. Gibby's quantum meruit claim is also fatally flawed. As the district court recognized, "to recover under quantum meruit, Mr. Gibby must be able [to] prove that he had a reasonable expectation of being paid for every suggestion of his which IBM adopted." Slip op. at 6 (J.A. at 257) (emphasis added) (citing Prince Georges County v. Chillum-Adelphi Volunteer Fire Dept., 275 Md. 374, 389-90, 340 A.2d 265 (1975)). See also Waco Scaffold & Shoring Co. v. 425 Eye St-. Assocs., 355 A.2d 780, 783 (D.C. 1976) (same). But as the court held, any such reasonable expectation is impossible "in light of the explicit disclaimer.,, Slip op. at 6 (J.A. at 257). There simply can be no recovery in quantum meruit where "the question of payment was left to the unfettered discretion of the recipient." Osborn, 309 F.2d at 102. (8/)

(8/) The cases cited by Mr. Gibby do not support a holding that he could have possessed a legitimate basis for expecting payment, a basis that would put IBM on notice. For example, Skeens v. Miller, 331 Md. 331, 628 A. 2d 185, 191 (1993) 1 merely addressed when a quantum meruit action accrues after a client terminates an attorney's contingent-fee contract. Waco Scaffold & Shoring Co. affirmed a judgment for a defendant, finding that the circumstances did not put the defendant on notice of the contractor's expectations. 355 A.2d at 783 (noting that "there was no showing of an understanding between the parties") . A third, Y-ass Transit, as noted above, stated that as a matter of law, claims for unjust enrichment and quantum meruit will not lie when the parties have already allocated their risks in a contract. Mass Transit, 57 Md. AOTD. 766, 471 A.2d at 1126.

The district court also properly held that plaintiff's "claim for negligent misrepresentation is fatuous." Slip op. at 6 (J.A. at 257). Mr. Gibby cannot show that IBM made a false statement, that he justifiably relied on a statement in IBM's Suggestion Plan, or any of the other elements of such a claim. See Ward Dev. Co. v. Ingrao, 63 Md. App. 645, 493 A.2d 421, 426-27 (1985). As the district court concluded, "Clearly, in light of the explicit disclaimer in this case, none of those elements can exist here.,, Slip op. at 6 (J.A. at 257). (9/) IBM's Suggestion Plan could not possibly "mislead an employee,', such as Mr. Gibby, "who read [the] austere, distinct and literal wording" of its repeated disclaimers. Calkins, S06 P.2d at 331.

(9/) See also Stewart v. I.2M, slip op. at 18-19 (holding that IBM could not be liable in negligence because it had no duty of care under the Suggestion Plan); Dai2ann 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 1591 161 (Cal. Ct. App. 1955) (same); Rill7'ngton v. Vest, 268 S.W.2d 70S, 707 (Tex. Civ. App. 1954, no writ) (same)

Accordingly, the Court should affirm the decisions of the district court's granting IBM's motion for judgment on the pleadings and denying appellant's motion for leave to amend the complaint.

Respectfully submitted,