Hillary J. Kunda v.  C.r. Bard, Incorporated

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
 HILLARY J. KUNDA,
Plaintiff-Appellant,
v. No. 09-1809 
C.R. BARD, INCORPORATED,
Defendant-Appellee. 
Appeal from the United States District Court
for the District of Maryland, at Baltimore.
Marvin J. Garbis, Senior District Judge.
(1:08-cv-03008-MJG)
Argued: September 20, 2011
Decided: December 23, 2011
Before MOTZ, GREGORY, and DUNCAN, Circuit Judges.
Affirmed by published opinion. Judge Gregory wrote the
opinion, in which Judge Motz and Judge Duncan joined.
COUNSEL
ARGUED: Paul F. Evelius, WRIGHT, CONSTABLE &
SKEEN, LLP, Baltimore, Maryland, for Appellant. William
G. Miossi, WINSTON & STRAWN, LLP, Washington, D.C.,
for Appellee. ON BRIEF: Alia Ornstein, WINSTON &
STRAWN, LLP, Washington, D.C., for Appellee.

-- 1 of 13 --

OPINION
GREGORY, Circuit Judge:
Hillary Kunda brought suit against her former employer,
C.R. Bard, Inc. ("Bard"), alleging that Bard violated Mary-
land law when at the time of her termination, it failed to pay
her for unvested shares earned through the company’s long-
term profit sharing plan. She argued that despite a New Jersey
choice-of-law provision in the plan agreement, Maryland law
applies to the contract because the Maryland Wage Payment
and Collection Law ("MWPCL") constitutes a fundamental
Maryland public policy.
The district court granted Bard’s motion to dismiss for fail-
ure to state a claim on which relief may be granted pursuant
to Federal Rule of Civil Procedure 12(b)(6). The court found
that New Jersey law applies to the contract because the
MWPCL is not a fundamental public policy of Maryland and
that the unvested shares are not wages under New Jersey law.
Furthermore, the court held that even if Maryland law
applied, the unvested shares are not wages under the MWPCL
and thus were never owed to Kunda. As explained below, we
affirm the district court’s decision.
I.
Bard, a New Jersey corporation, hired Kunda, a Maryland
resident, as a sales representative and at-will employee in
2001. When hired, Kunda’s compensation included a $1,500
semi-monthly salary, commissions, and other fringe benefits.
In 2003, Bard implemented the "Bard Optimum Program,"
an "equity based long-term incentive program for top per-
forming sales representatives," in order to recruit and retain
top talent by offering an "opportunity to defer bonus and com-
mission awards on a pre-tax basis." The plan contained a New
Jersey choice-of-law provision.
2 KUNDA v. C.R. BARD, INCORPORATED

-- 2 of 13 --

Participation in the Optimum Program was entirely elec-
tive, with eligibility determined on a yearly basis. To be eligi-
ble, sales representatives had to meet certain criteria,
including ranking among the top 50 percent of the domestic
sales force and maintaining a fully satisfactory performance
rating for the year.
By electing to participate in the Optimum Program, eligible
sales representatives deferred part of their compensation in
return for fully vested Elective Units, which could be
redeemed for a number of restricted shares of Bard’s stock
determined by the stock price on the date of issuance. More-
over, Bard would match each Elective Unit with two, three,
or four unvested Premium Units, also determined by the stock
price on the date of issuance.1 A participant’s right to fully
vested Premium Units depended on continued employment
with Bard for a seven-year vesting period after issuance of the
unvested Premium Units. The Premium Units would not vest
if the employee no longer worked for Bard at the end of the
vesting period except in cases of death, permanent disability,
or retirement.
Kunda participated in the Optimum Program for the calen-
dar years of 2002, 2003, and 2005; she received four Premium
Units per Elective Unit in 2002 and two Premium Units per
Elective Unit in 2003 and 2005. In 2008, Bard terminated
Kunda’s employment without cause. Apart from certain Pre-
mium Units from 2002 that Bard vested in Kunda on an accel-
erated schedule, Kunda’s Premium Units were unvested at the
time of termination, and Bard deemed Kunda’s Premium
Units forfeited.
1The number of Premium Units received depended on the employee’s
performance. Employees in the top 10% of their division would receive
four Premium Units per one Elective Unit; the top 11-25% would receive
three Premium Units per one Elective Unit; and employees in the top 26-
50% would receive two Premium Units per one Elective Unit.
3 KUNDA v. C.R. BARD, INCORPORATED

-- 3 of 13 --

Kunda brought suit against Bard in the United States Dis-
trict Court of Maryland, claiming that she was entitled to the
remaining vested Premium Units not given to her upon termi-
nation. The district court granted Bard’s motion to dismiss
pursuant to Rule 12(b)(6). First, the court held that New Jer-
sey law, and not Maryland law, applied. Second, the court
held that Kunda had failed to state a valid claim under the
New Jersey Wage Payment Law ("NJWPL") or any other
New Jersey law. Third, the court found that even if Maryland
law applied, Kunda had no claim under the MWPCL.
II.
We review Bard’s motion to dismiss under Rule 12(b)(6)
de novo. Robinson v. Am. Honda Motor Co., 551 F.3d 218,
222 (4th Cir. 2009). In doing so, we "must accept as true all
of the factual allegations contained in the complaint." Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 572 (2007). In order to sur-
vive Bard’s motion, Kunda’s complaint must contain suffi-
cient factual allegations, which accepted as true, "state a claim
to relief that is plausible on its face." Id. at 570. Therefore, we
may only grant Bard’s motion where "it appears beyond doubt
[Kunda] can prove no set of facts in support of [her] claim
which would entitle [her] to relief." Conley v. Gibson, 355
U.S. 41, 45-46 (1957).
III.
A.
Kunda first challenges the district court’s finding that New
Jersey law, and not Maryland law, applies. Despite the New
Jersey choice-of-law provision within the Optimum Program
agreement, Kunda argues that the Maryland law should apply
here because the MWPCL is a fundamental Maryland public
policy. We find her argument unpersuasive and agree with the
district court that New Jersey law applies.
4 KUNDA v. C.R. BARD, INCORPORATED

-- 4 of 13 --

Under Maryland law, § 187 of the Second Restatement of
Conflict of Laws governs the determination of whether Mary-
land or New Jersey law applies. See Jackson v. Pasadena
Receivables, Inc., 921 A.2d 799, 803-05 (Md. 2007); see also
Kronovet v. Lipchin, 415 A.2d 1096, 1104-06 (Md. 1980)
(quoting RESTATEMENT (SECOND) CONFLICT OF LAWS § 187
(1971)); Taylor v. Lotus Dev. Corp., 906 F. Supp. 290, 297-98
(D. Md. 1995). "The law of the state chosen by the parties to
govern their contractual rights and duties will be applied"
unless:
(a) the chosen state has no substantial relationship
to the parties or the transaction and there is no
other reasonable basis for the parties’ choice, or
(b) application of the law of the chosen state would
be contrary to a fundamental policy of a state
which has materially greater interest than the
chosen state in the determination of the particu-
lar issue and which [otherwise] would be the
state of applicable law in the absence of an
effective choice of law by the parties.
RESTATEMENT (SECOND) CONFLICT OF LAWS § 187(2)(a),(b)
(1971).
As we have previously stated, "not every statutory provi-
sion constitutes a fundamental policy of a state." Volvo Con-
str. Equip. of N. Amer., Inc. v. CLM Equip. Co., 386 F.3d 581,
607 (4th Cir. 2004). "Merely because Maryland law is dissim-
ilar to the law of another jurisdiction does not render the latter
contrary to Maryland public policy and thus unenforceable in
[Maryland] courts." Bethlehem Steel v. G.C. Varnas & Co.,
498 A.2d 605, 608 (Md. 1985). Moreover, "there is a heavy
burden on [the party] who urges rejection of foreign law on
the ground of public policy." Harford Mut. v. Bruchey, 238
A.2d 115, 117-18 (Md. 1968).
5 KUNDA v. C.R. BARD, INCORPORATED

-- 5 of 13 --

"No Maryland state court has yet evaluated whether the
MWPCL embodies such a strong public policy." Sedghi v.
Patchlink Corp., No. 07-1636, 2010 WL 3895472, at *4 (D.
Md. Sept. 30, 2010). However, Maryland district courts,
including the district court in this case, have thrice held that
"the Wage Law does not appear to represent a fundamental
policy of the state of Maryland" for the purpose of choice of
law analysis. Taylor, 905 F. Supp. at 298; c.f. Sedghi, 2010
WL 2895472, at *4; Yeibo v. E-Park of D.C., Inc., No. 2007-
1919, 2008 WL 182502, at *4 (D. Md. Jan. 18, 2008).
Maryland state courts have struck down contractual provi-
sions contrary to a fundamental public policy in cases where
the related statute contains an express statement that the law
is a fundamental public policy, an anti-waiver provision, or
similar language of clear legislative intent. Thus, in Bethle-
hem Steel, the Maryland Court of Appeals refused to uphold
the provision of a Pennsylvania contract that indemnified for
negligence because doing so would violate a fundamental
Maryland public policy. 498 A.2d at 611. The Maryland Gen-
eral Assembly "specifically addressed [such] clauses in con-
struction contracts . . . and has unequivocally told the
Maryland judiciary that such a clause ‘is void and unenforce-
able.’" Id. at 608. Furthermore, in the language of the statute
governing indemnity agreements, "the General Assembly
expressly stated that such indemnity provision ‘is against pub-
lic policy.’" Id.
Similarly, in National Glass, Inc. v. JC Penny Properties,
Inc., the Maryland Court of Appeals invalidated a Pennsylva-
nia choice-of-law clause that required a subcontractor to
waive its right to a mechanic’s lien, a provision that was legal
in Pennsylvania but explicitly prohibited by Maryland statute.
650 A.2d 246, 247-48, 251 (Md. 1994). The court held that
honoring the contract’s choice of law would violate a funda-
mental Maryland public policy because the relevant Maryland
statute stated that "[a]ny provision of a contract made in vio-
6 KUNDA v. C.R. BARD, INCORPORATED

-- 6 of 13 --

lation of this section is void as against the public policy of
this State." Id. at 250 (emphasis added).
In contrast, the MWPCL contains no express language of
legislative intent that that law is a fundamental Maryland pub-
lic policy. Furthermore, the MWPCL contains no language
indicating that any contractual terms contrary to its provisions
are void and unenforceable, or that any provision of the
MWPCL may not be waived by agreement. Thus, we find that
the MWPCL is not a fundamental Maryland public policy.
Contrary to Kunda’s assertions, the Maryland Court of
Appeals’ decision in Medex v. McCabe fails to show that the
MWPCL is a fundamental Maryland public policy and is eas-
ily distinguishable. 811 A.2d 297 (Md. 2008). In Medex, the
court refused to uphold a provision in an employment contract
between a Maryland company and Maryland resident requir-
ing continued employment to receive already earned incentive
payments. Id. at 300. The court noted that the MWPCL’s
"mandate is clear and complies with [its] public policy,"
which is "to provide a vehicle for employees to collect, and
an incentive for employers to pay, back wages." Id. at 304.
Additionally, the court stressed that "Maryland is one of
forty-two states to enact wage payment laws, and courts
across the country have found such laws to be expressions of
state public policy." Id.
Since the contract was between a Maryland employer and
a Maryland employee, the question of whether the contract
was enforceable in Medex depended upon whether the provi-
sion in question was contrary to Maryland public policy.
Here, with a contract between a Maryland employee and New
Jersey employer, the test is not merely whether enforcement
of the contract violates Maryland public policy, but rather a
fundamental Maryland public policy, requiring a higher stan-
dard of scrutiny. The Medex court neither indicated how
strong the public policy behind the MWPCL is nor attempted
to determine whether the policy was fundamental. Moreover,
7 KUNDA v. C.R. BARD, INCORPORATED

-- 7 of 13 --

the fact that forty-two other states, including New Jersey,
have enacted similar wage payment laws undermines the
notion that the MWPCL is a fundamental public policy. The
availability of comparable, albeit different, legislation in dif-
ferent states demonstrates that protection under the MWPCL
is unnecessary where there is a substitute, as there is here.
Kunda essentially asks us to apply Maryland law here, not
because New Jersey law offers inadequate protection, but
rather because Maryland law is more favorable. We decline
to do so.
Furthermore, Kunda’s contention that Medex effectively
disavowed Taylor, which was decided nearly ten years before
Medex, is unfounded. In Medex, the Maryland Court of
Appeals had the opportunity to declare the MWPCL a funda-
mental Maryland public policy and explicitly overrule the
Maryland district court’s decision in Taylor, of which it was
well aware, and yet it declined to make such a decision.
Moreover, even after Medex, courts have affirmed Taylor and
continued to hold that the MWPCL is not a fundamental
Maryland public policy. See e.g., Sedghi, 2010 WL 2895472,
at *4; Yeibo, 2008 WL 182502, at *5-6.
However, well-established Maryland law does provide that
"parties to a contract may agree to the law which will govern
their transaction, even as to an issue going to the validity of
the contract." Kronovet, 415 A.2d at 1104. The Maryland
Court of Appeals has long recognized "the ability of contract-
ing parties to specify in their contract that the laws of a partic-
ular state will apply in any dispute over the validity,
construction, or enforceability of the contract, and thereby
trump the conflict of law rules that otherwise would be
applied." Jackson, 921 A.2d at 803. Here, Kunda fails to pres-
ent justification substantial to overcome Maryland’s presump-
tion in favor of the freedom to contract.
Because the MWPCL contains no language or legislative
intent indicating that it represents a fundamental public policy
8 KUNDA v. C.R. BARD, INCORPORATED

-- 8 of 13 --

of Maryland and because no Maryland court has ever ruled
that it is, we affirm the district court’s holding that the choice-
of-law provision must be upheld and New Jersey law applies.2
B.
Kunda next argues that even if New Jersey law applies
here, the district court wrongly held that the Optimum Pro-
gram’s forfeiture provisions were triggered when she was
fired without cause. We cannot agree.
The NJWPL requires that "every employer shall pay the
full amount of wages due his employees." N.J. STAT. ANN.
§ 34:11-4.2 (2011). However, the law explicitly excludes "any
form of supplementary incentives and bonuses which are cal-
culated independently of regular wages and paid in addition
thereto." Id. § 34:11-4.1. New Jersey defines wages only as
"the direct monetary compensation for labor or services ren-
dered by an employee, where the amount is determined on a
time, task, piece, or commission basis." Id. Any Premium
Units Kunda might receive through the Optimum Program
were incentives for her to continue her employment at Bard,
and not simply payment for the sales she completed. Accord-
ingly, as the Premium Units are outside New Jersey’s defini-
tion of wages, Kunda has no claim under the NJWPL and
must instead seek a common law remedy.
Relying on the opinion of the New Jersey Superior Court
in Rosen v. Smith Barney, Inc., Kunda argues that the Opti-
mum Program’s forfeiture clause is unreasonable, and thus is
inapplicable and invalid in two ways. 925 A.2d 32 (N.J.
2If Maryland law had applied here, Kunda would have no claim under
the MWPCL. Maryland law defines wages as "any renumeration . . . that
is promised in exchange for the employee’s work." Whiting Turner Con-
tracting Co. v. Fitzpatrick, 783 A.2d 667, 671 (Md. 2001) (citing MD.
CODE ANN., LAB. & EMPL. § 3-501 (2011)). Bard promised Kunda
unvested Premium Units to incentivize her to continue her employment,
not vested Premium Units in exchange for meeting sales criteria.
9 KUNDA v. C.R. BARD, INCORPORATED

-- 9 of 13 --

Super. Ct. App. Div. 2007), aff’d, 950 A.2d 205 (N.J. 2008).
She first contends that the factors present in Rosen which ren-
dered the forfeiture provision reasonable and enforceable are
not present here. Second, Kunda argues that because she was
terminated without cause, the Optimum Program is not rea-
sonably designed to achieve the intended purpose. Given the
highly similar facts to Rosen, we find Kunda’s arguments
unpersuasive.
In Rosen, Smith Barney instituted a Capital Accumulation
Plan ("CAP") in order to attract and retain quality employees
and combat widespread broker turnover. 925 A.2d at 34. Bro-
kers who chose to participate in CAP diverted a portion of
their money to Smith Barney, who then used those funds to
purchase restricted stock in its parent company, Citigroup, at
a substantial discount. Id. However, ownership of the
restricted stock only vested after a two-year period; during
that period, brokers retained an unvested interest in the stock.
Id. at 35. Brokers who resigned voluntarily or were termi-
nated for cause during the vesting period forfeited all
unvested interest. Id.
Emphasizing that "public policy strongly favors freedom to
contract," the court in Rosen held that "enforceability of a for-
feiture provision is judged against the standard of reasonable-
ness, with due regard for the consideration that the court’s
equitable jurisdiction to permit relief from a forfeiture clause
must not ignore the parties’ legal rights to bind themselves to
specific contract terms." 925 A.2d at 41. The court upheld the
CAP forfeiture provision because it was a reasonable means,
when considered against the background circumstances, of
achieving the program’s goal — retaining quality brokers and
combating high turnover. Id. at 42. The court held the forfei-
ture provision was reasonable and enforceable because (1)
"the contract [was] in writing and all terms [were] fully dis-
closed prior to any participant enrolling"; (2) "the risk of for-
feiture [was] unambiguously disclosed"; (3) "the period of
delay for absolute ownership [was] neither onerous nor unrea-
10 KUNDA v. C.R. BARD, INCORPORATED

-- 10 of 13 --

sonable"; and (4) the plaintiffs "freely, willfully, and
knowledgably consented." Id.
Since the Optimum Program also satisfies the same criteria
used by the court in Rosen, we find that the forfeiture clause
is both reasonable and enforceable. Kunda received ample
written documentation relating to the program prior to partici-
pation, including a prospectus. Furthermore, the risk of forfei-
ture was clearly and repeatedly disclosed in all literature sent
to Kunda. The seven-year vesting period is not unreasonable
or onerous, and was in fact accelerated, as evidenced by the
fact that some of Kunda’s Premium Units granted in 2003 had
already vested by the time of her termination in 2008. Thus,
we hold that the forfeiture clause is both enforceable and rea-
sonable, and accordingly find that Kunda has no claim under
New Jersey law.
Kunda unsuccessfully attempts to distinguish Rosen on the
grounds that Bard terminated her without cause rather than
her resigning voluntarily. She argues that where termination
without cause occurs, the forfeiture clause is not reasonably
designed to accomplish its purpose, but actually achieves the
opposite of the stated purpose, and therefore is unreasonable
and unenforceable. We disagree.
The stated purpose of the plan is "to provide an equity-
based, long-term incentive program for top performing sales
representatives" in order to "attract and retain the services of
valuable employees." By allowing exceptional employees to
"defer bonus and commission awards on a pre-tax basis," the
Optimum Program clearly encourages the recruitment and
retention of highly performing employees. Furthermore, the
seven-year forfeiture period incentivizes employees to stay
with Bard to receive vested Premium Units. That Bard chose
to terminate Kunda when it no longer found her useful to the
company demonstrates that the Optimum Program reasonably
accomplishes its purpose. Bard always intended the Optimum
Program would benefit itself, and not the employee, by entic-
11 KUNDA v. C.R. BARD, INCORPORATED

-- 11 of 13 --

ing valuable employees not to exercise their right as an at-will
employee to leave for another opportunity. Therefore, we find
that the forfeiture clause is reasonably designed to accomplish
its purpose, the retention of high-performing Bard employees.
Kunda does correctly assert that forfeiture of unvested Pre-
mium units when an employee is terminated without cause
cancreate a potential for abuse. However, potential alone does
not render the forfeiture clause unreasonable or unenforce-
able.
Typically, New Jersey courts refuse to enforce forfeiture
provisions of employee incentive payments only where forfei-
ture violates public policy or creates inequity. See Mulford v.
Computer Leasing, Inc., 759 A.2d 887, 890 (N.J. Super. Ct.
Law Div. 1999) (invalidating forfeiture of incentives which
employee already earned through past performance); Ellis v.
Lionikis, 310 A.2d 527, 531-33 (N.J. Super. Ct. Law Div.
1977) (refusing to enforce a forfeiture provision violating
public policy and ERISA); Gaines v. Monroe Calculating
Mach. Co., 188 A.2d 179, 185-86 (N.J. Super. Ct. App. Div.
1963) (holding that neither voluntary nor involuntary termina-
tion triggered forfeiture of stock options which employer
promised in exchange for five years of employment and guar-
anteed against cancellation). Kunda cannot show that Bard
terminates employees without cause in order to avoid paying
unvested incentives. Moreover, as the court in Rosen noted,
"[a]lthough the forfeiture clause may be an inhibitive influ-
ence on an employee’s decision whether to accept a new job,"
it is not "unreasonable or invalid." 925 A.2d at 42.
As we find that the Optimum Program’s forfeiture clause
is reasonable and enforceable, Kunda has no viable claim
against Bard under New Jersey law. We therefore affirm the
district court’s grant of Bard’s motion to dismiss.
C.
Finally, Bard’s contention that Kunda’s state law claims are
preempted by ERISA is unfounded, even if the Optimum Pro-
12 KUNDA v. C.R. BARD, INCORPORATED

-- 12 of 13 --

gram is an ERISA covered plan. ERISA’s requirement that
administrative remedies be exhausted is unnecessary if there
is "clear and positive" evidence that the remedies are futile or
useless. E.g., Markar v. Health Care Corp. of the Mid-Atl.,
872 F.2d 80, 83 (4th Cir. 1989). Kunda does not claim she has
been denied a right or benefit under the Optimum Program,
but rather alleges that the Optimum Program’s forfeiture pro-
vision violates both New Jersey and Maryland law. Accord-
ingly, because her "suit is directed to the legality of a plan,
not to a mere interpretation of it, exhaustion of the plan’s
administrative remedies would be futile." Durand v. Hanover
Ins. Co., 560 F.3d 436, 439-40 (6th Cir. 2009).
IV.
We cannot hold, as Kunda advocates, that her unvested Pre-
mium Units are converted into wages in the limited situation
where an employee is terminated without cause. Thus, we
affirm the district court’s grant of Bard’s motion to dismiss.
AFFIRMED
13 KUNDA v. C.R. BARD, INCORPORATED

-- 13 of 13 --