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February 11, 1993


The opinion of the court was delivered by: CAROL E. HECKMAN


 This case was referred to the undersigned by the Hon. Richard J. Arcara pursuant to 28 U.S.C. ┬ž 636(b)(1)(B) to hear and report on Defendant's motion to dismiss and/or for summary judgment.

 For the reasons set forth below, the District Court should grant Defendant's motion and in part and deny it in part.


 This case was filed in state court on January 11, 1989, and was removed by Defendant on February 1, 1989 based on diversity jurisdiction. The complaint sets forth ten causes of action stemming from two suggestions submitted by Plaintiff in June and October of 1984 under the "Employee Suggestion Plan" implemented by Defendant General Motors Corporation. The first suggestion, No. H0353, involved increasing the headstock speed on axle shaft grinders by changing the drive belts on internal pulleys in the grinding machine, thereby reducing surface burn on the grinders and soft bearings on the axle shafts (see Item 44, Exh. A). The second suggestion, No. H0538, involved substituting regular drill points with radial-tipped "Racon" drill points so as to eliminate "burrs" or hinged metal fragments (also called "flying saucers") from the drill holes in axle shaft tubes.

 The first five claims relate to Plaintiff's suggestion No. H0353. The first claim is for breach of contract and seeks damages of $ 15,270.99 plus interest. The second claim seeks the same damages based on the reasonable value of Plaintiff's suggestion and sounds in quantum meruit. The third claim generally alleges that Defendant's "offer and representations were false at the time they were made and were known by the Defendant to be false" (P 22). The fourth claim alleges that Defendant negligently and/or recklessly miscalculated the value of Plaintiff's suggestion No. H0353. The fifth claim generally alleges "intentional, willful and/or malicious miscalculation."

 Claims six through ten are parallel to one through five, except they relate to the second suggestion, No. H0538, and seek damages of $ 3,454.96 plus interest. Plaintiff also claims that, in addition to actual damages, he is entitled to punitive damages of $ 10,000,000.00 plus costs and attorneys fees.

 Under the "Rules of the General Motors Suggestion Plan" (set forth on the back of the "Employee Suggestion Form," submitted as Exh. C to Item 25), where the benefits resulting from an employee's suggestion are measurable or capable of estimate, the employee is entitled to an award in the amount of one-fifth of the total net savings, up to a maximum of $ 20,000.00, resulting from the implementation of the employee's suggestion (see Item 1, PP 4-5). The rules also provide:

ALL DECISIONS FINAL--Decisions by the Suggestion Committee are final. However, if at any time an employee wishes to reopen a suggestion and presents new or additional information, the Suggestion Committee, at its discretion, will review its decision.

 Item 25, Exh. C. The rules are implemented by the "General Motors Suggestion Plan Operating Manual" (Item 44, Exh. D).

 According to the complaint, Plaintiff's suggestion No. H0353 was accepted by Defendant on June 15, 1984, and resulted in savings of over $ 167,000.00 during the 12 months following implementation. Plaintiff claims that he was eligible for the maximum award of $ 20,000.00, but was only paid $ 4,729.01.

 The complaint also alleges that suggestion No. H0538 was submitted jointly with another employee and was implemented shortly thereafter. Plaintiff claims that Defendant realized net savings of over $ 128,000.00 during the 12 months following implementation of suggestion No. H0538, and that he is entitled to his $ 10,000.00 share of the full compensation for this suggestion, but has only received $ 6,545.04 (id., PP 40-47).


 It is well-established that the processing of a suggestion pursuant to an employee suggestion plan creates a contractual relationship between the employee and the employer under the rules of the plan. See Milich v. Schenley Industries, Inc., 54 A.D.2d 659, 387 N.Y.S.2d 641 (1st Dept. 1976), aff'd, 42 N.Y.2d 952, 398 N.Y.S.2d 145, 367 N.E.2d 651 (1977)(cited in Sterling v. General Motors Corp., No. 419213, slip op. at 7 (Conn. Super. Ct. 1987)(copy attached as Exh. A to Item 27)); see also Carlini v. United States Rubber Co., 8 Mich. App. 501, 154 N.W.2d 595 (Mich. Ct. App. 1967).

 Defendant nevertheless contends that this court lacks subject matter jurisdiction over Plaintiff's complaint since the Suggestion Plan contains an explicit "finality" provision stating that the Suggestion Committee's decisions are final. It is also well-established that where, as here, the employee suggestion plan contains a provision stating that all decisions of the suggestion committee are final, the employee is bound by the suggestion committee's decision. The only exceptions are if (1) the decision was not made within the framework of the rules governing the suggestion plan, (2) the suggestion committee acted fraudulently or in bad faith, or, (3) the decision was based on gross mistake. Sterling v. General Motors Corp., supra, slip op. at 7-8; Carlini v. United States Rubber Co., supra, 154 N.W.2d at 597; Quate v. Hydra-Matic, No. IP 87-1277-C, slip op. at 7 (S.D.Ind. 1990)(copy attached as Exh. B to Item 27).

 Defendant cites Davis v. General Foods Corp., 21 F. Supp. 445 (S.D.N.Y. 1937), for the proposition that an employee proceeding under the rules of a suggestion plan is bound by those rules, and cannot recover in court what is not awarded under the plan. Davis involved an exchange of letters between the plaintiff and the defendant in which the defendant agreed to consider plaintiff's recipe for fruit flavors with the understanding that the use of the recipe, and compensation to be paid to plaintiff for such use, were "matters resting solely in [the defendant's] discretion." 21 F. Supp. at 446. According to the court, this agreement constituted ...

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