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Gochros v. Alarmax Distributors, Inc.

United States District Court, D. Connecticut

February 8, 2018



          Michael P. Shea, U.S.D.J.

         Plaintiff Stephen Lee Gochros filed this action against Defendant AlarMax Distributors Inc. (“AlarMax” or “Defendant”), alleging that AlarMax failed to pay him agreed upon commissions for his work performed as a branch manager at its Milford, Connecticut distribution center. Gochros filed a one-count complaint alleging that AlarMax's failure to pay him over $130, 000 in earned commissions violated the Connecticut Minimum Wage Act (“CMWA”), Connecticut General Statutes (“Conn. Gen. Stat.”) § 31-58 et seq. Gochros sought his unpaid commissions and penalty damages available under the CMWA, among other relief. On June 30, 2017, AlarMax filed a motion for summary judgment, asserting that Gochros was not entitled to the commissions he seeks under the plain language of his employment agreement. (ECF No. 40.)

         For the reasons set forth below, AlarMax's motion for summary judgment is DENIED, as the employment agreement is ambiguous as to key aspects of Gochros's compensation, and there is conflicting extrinsic evidence in the record about the parties' intent. Therefore, genuine issues of material fact exist as to whether AlarMax improperly withheld Gochros's earned commissions.

         I. Factual Background

         The following facts, which are taken from the parties' Local Rule 56(a) Statements and the exhibits, are undisputed unless otherwise indicated.

         A. Gochros Seeks Employment with AlarMax

         AlarMax is a wholesale distributor of electronic security, alarm, and video equipment. (ECF No. 40-1 at 3.) Gochros, who has worked in the security sales business since 1980, was employed as a branch manager at AlarMax's former Milford, Connecticut office. (ECF No. 40-4 at 3, 7-8.)

         In May 2010, while he was working as a branch manager at another security sales company, Alarm Warehouse, Gochros sought employment with AlarMax by calling Roger Graf, president of AlarMax. (ECF No. 40-2 ¶¶ 3-6.) Gochros had been working at Alarm Warehouse for approximately five years, during which he was the sole employee at that company's Milford branch. (ECF No. 45-3 at 10.) Gochros received a $75, 000 annual salary while at Alarm Warehouse; he did not recall the commission percentage he received, but recalled that his total take-home pay exceeded $110, 000 annually for two of the last three years he worked there. (ECF No. 45-3 at 11-12.)

         Gochros and Graf had as many as five phone calls before Gochros accepted employment with AlarMax. (ECF No. 45-3 at 20; see also ECF No. 45-4 at 7 (Graf's testimony that they had “a series of short interchanges over a period of a week or so.”).) Gochros testified that during those calls, he and Graf discussed his “numbers in Connecticut, ” including that “the business averaged . . . [a]nywhere from 100, 000 [dollars] ¶ 140, 000 [dollars] a month.” (ECF No. 45-3 at 21.) Gochros testified that they also discussed his compensation at the time and “what [he would] need to make.” (ECF No. 45-3 at 22.)

         Graf also testified that the two discussed Gochros's compensation before he sent Gochros an offer of employment, though he remembered the conversations differently. (ECF No. 45-4 at 17.) Graf did not recall learning what Gochros's compensation had been at Alarm Warehouse before Gochros accepted employment, but recalled that they discussed “the details of what [Graf] proposed to him as memorialized in [the offer letter].” (Id. at 18.) Graf did not recall discussing the sales Gochros had generated while at Alarm Warehouse, as Graf “generally [does not] let people tell [him] anything about their current employers.” (Id. at 10.) Graf testified, however, that he may have learned information about Alarm Warehouse's performance in Connecticut between Gochros's first call to Graf and his acceptance of employment. (Id. at 12.)

         B. Gochros's Employment Agreement with AlarMax

         Within a month of Gochros's first call to Graf, AlarMax offered Gochros at-will employment as the branch manager of its new branch in Milford, Connecticut. (ECF No. 40-2 ¶ 6.) The terms of Gochros's employment were set forth in a May 19, 2010 letter (“the Letter”) written and signed by Graf. (Id. ¶¶ 6, 8; ECF No. 45-4 at 18.)[1]

         The first two paragraphs of the Letter stated:

This letter is to confirm our earlier conversation where I offered you the position of Branch Manager for the new distribution center of AlarMax Distributors, Inc. to be opened in Connecticut. You will be paid a bi-weekly salary and monthly commission totaling sixteen percent (16%) of the gross profit from your branch.
During your ramp-up period, you will be paid a bi-weekly salary of $3, 000.00 and a commission equal to two percent (2%) of the gross profit on your sales. Gross profit equals sales, less cost of goods, less freight and will be adjusted for any amounts that become non-collectable.

(ECF No. 40-6 at 2.) The Letter did not define the “ramp-up period.” (ECF No. 40-2 ¶ 21.) Gochros began working for AlarMax shortly thereafter. (Id. ¶ 7.)

         C. Gochros's and Graf's Interpretations of the Letter

         After Gochros received the Letter, Gochros and Graf had another phone conversation, in which Gochros asked, in substance, what a “ramp-up” period was, and when he would be considered “ramped-up, ” or, “[i]n short form, when the 2 percent [would] become 16 percent.” (ECF No. 45-3 at 29; see also ECF No. 45-4 at 25.) Gochros testified that Graf answered, “when your office is fully staffed and operational, ” but Graf denies this. (ECF No. 45-3 at 29; ECF No. 45-4 at 60-61.) Gochros and Graf did not discuss what “fully staffed” or “operational” meant. (ECF No. 40-4 at 34; ECF No. 45-4 at 59.)

         Graf testified that his understanding was that the ramp-up period would end when “on a monthly basis 16 percent of gross profits exceed[ed] the [bi]weekly salary, plus 2 percent of the gross profit.” (ECF No. 40-7 at 5-6.) According to Graf, at that point, Gochros would be paid a biweekly salary and a commission, which together would amount to 16 percent of the branch's gross profits. (ECF No. 40-7 at 3 (“What I meant in the first paragraph is you would be paid 16 percent of the gross profit. I explained that rather than paid once a month [sic], every two weeks you would get a check for $3, 000, and that and the commission together would total 16 percent of the gross profit.”); id. at 21 (“The salary and commission would total 16 percent.”).) Graf testified that both formulas-the one set forth in the first paragraph of the Letter and the one set forth in the second-would be calculated on a monthly basis, and that “whichever way [Gochros] would make more money is how he would be paid during that period.” (ECF No. 40-7 at 8.) Graf testified that the compensation formula under the first paragraph did not include a figure for the biweekly salary because at that point Gochros would “work straight commission for 16 percent of the gross profit, ” but that AlarMax would pay out the commission every two weeks, with the “balance” paid out at end of the month. (ECF No. 40-7 at 20.) Graf testified that he told Gochros his understanding of the compensation structure in a phone call after Gochros received the Letter.[2]

         Graf testified that he did not have a particular reason for offering Gochros 16 percent of gross profits, and “didn't run any specific numbers” to get to that figure. (ECF No. 45-4 at 23.) Rather, he had a “ballpark opinion” about the store's prospects for sales and gross profits, and thought that the store could make “[s]omewhere in the area of three and a half million dollars in sales and seven hundred thousand dollars in gross profit.” (ECF No. 45-4 at 28-29.) Graf recalled that, at the time, other AlarMax locations were reaching $3.5 million in sales. (ECF No. 45-4 at 30.) Graf and Gochros discussed “from the beginning” Gochros's “wish to add additional staff” and “grow the business with the assistance [of] other personnel.” (ECF No. 45-4 at 35.)

         D. Gochros Asks For Increased Compensation

         During the entirety of his employment with AlarMax, Gochros was paid $3, 000 biweekly, in addition to a commission of 2 percent of the gross profit at the Milford office. (ECF No. 40-4 at 40; ECF No. 40-10.) AlarMax asserts that it paid Gochros under the compensation formula set out in the second paragraph of the Letter for the duration of his employment because branch sales never reached “the cross-over point” at which it would begin to pay Gochros under the formula set out in the first paragraph.

         In May 2011, Gochros broke his leg and was unable to work at the distribution center, but continued to work from home. (ECF No. 45-3 at 38.) During that time, AlarMax hired a salesperson, Derek Buzbee, who staffed the distribution center and assisted Gochros. (ECF No. 45-3 at 46-47.) Graf testified that Buzbee “did not have a [compensation] plan like” Gochros's. (ECF No. 45-4 at 39.) In September 2012, AlarMax hired Gochros's daughter Camila to work at the branch, at which point Gochros considered his branch “fully staffed, ” as Steve Heier, AlarMax's manager of operations (ECF No. 45-4 at 14), authorized the hire and told Gochros that no other hires could be made. (ECF No. 45-3 at 47, 58-59.) Graf did not issue a hire letter to Camila and did not know whether she had a commission plan in place. (ECF No. 45-4 at 41.)

         On November 4, 2013, Gochros emailed Graf to ask that AlarMax adjust his commission, writing, in relevant part:

When I was hired back in May of 2010, every effort was made on both our parts to make my compensation similar to what I was being paid at Alarm Warehouse. Salary and automotive expenses were pretty much dead on. The big difference, at the start, was commission payments. The percent I would be making on profit on gross sales at the start (2%) was to ...

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