Declaratory judgment dismissed where breach already occurred

A declaratory judgment action over whether a former employee was owed commissions was dismissed because the dispute had already ripened into a claim for breach of contract after the company terminated him and refused to pay him  commissions. As such, the declaratory judgment suit served no real purpose.

Background

AvePoint Inc. and AvePoint Public Sector Inc., or APSI, have filed this declaratory judgment action against Robert Knickerbocker, a former employee of APSI. AvePoint seeks a declaration (1) that Knickerbocker’s at-will employment with APSI was properly terminated and (2) that AvePoint has no obligation to pay any additional commissions or other amounts to Knickerbocker. The matter is before the court on Knickerbocker’s motion to dismiss.

Analysis

A declaratory judgment is “unavailable in situations where . . . claims and rights asserted have fully matured, and the alleged wrongs have already been suffered.” In other words, when a breach of contract has already occurred and damages have already accrued, “there is no guidance” that can be offered via a declaratory judgment to steer “conduct away from a breach of contract.”

These settled principles, applied here, point convincingly to the conclusion that AvePoint’s declaratory judgment claim must be dismissed. According to the complaint, AvePoint terminated Knickerbocker’s employment on Aug. 7, 2019. The termination clause in the plan provides that terminated employees are only entitled to commissions that have been invoiced or paid within five business days of an employee’s termination.

The complaint alleges that no invoices were sent out and no payments were received from customers within five business days of Knickerbocker’s termination, and therefore, AvePoint contends that Knickerbocker has been properly compensated pursuant to the terms of the plan. Thus, as the complaint plainly reflects, the alleged breach of contract and damages in this case have already occurred. Knickerbocker has been terminated from his employment at AvePoint since August 2019, and any alleged unpaid commissions are from sales made before Knickerbocker’s termination. It follows that a declaratory judgment is inappropriate and unwarranted in this case because such a declaration would not clarify uncertain legal relations between the parties in an ongoing relationship, nor would it provide the parties with any guidance for future conduct pursuant to the plan executed by Knickerbocker.

AvePoint argues that the exercise of declaratory judgment jurisdiction is appropriate because resolution of this dispute would clarify AvePoint’s relationship with its employees generally. Although that is an understandable business reason for AvePoint to seek a declaratory judgment, it is not an appropriate reason to exercise declaratory judgment jurisdiction. There is no evidence that the plan disputed here is the same agreement executed by other AvePoint employees or that other AvePoint employees dispute the terms of their agreements with AvePoint related to commission payments.

Even assuming that the exercise of declaratory judgment jurisdiction over this dispute were proper (which it is not), AvePoint’s use of procedural fencing tactics in this matter counsels against the exercise of declaratory judgment jurisdiction here. It is clear that AvePoint attempted to “wrest[ ] the choice of forum from the ‘natural’ plaintiff,” which runs directly contrary to the prevailing view, which is “not to give the alleged wrongdoer a choice of forum.” Accordingly, the exercise of declaratory judgment jurisdiction is improper here because Knickerbocker’s filing of a lawsuit against AvePoint was essentially certain when AvePoint filed its declaratory judgment action.

Moreover, Knickerbocker argues that judicial economy weighs in favor of dismissal here. It is abundantly clear that a declaratory judgment here may not dispose of the entire dispute between the parties. Only if AvePoint were to win on the merits and obtain the declaration it seeks would it do so. Indeed, if this action were to be decided against AvePoint on the merits of the declaratory judgment complaint, another court would have to address the breach of contract and damages issues.

Defendant’s motion to dismiss granted.

AvePoint Inc. v. Knickerbocker, Case No. 20-cv-209, July 30, 2020. EDVA at Alexandria (Ellis). VLW 020-3-401. 14 pp.