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distinguishing cases cited by plaintiff as "all involvfing] oral representations confirming express, written representations contained in an employer's employment manuals or personnel handbooks"
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02-CV-4640 (JG)
July 30, 2003
ROBERT H. JAFFE, Robert H. Jaffe Associates, Springfield, New Jersey, Plaintiff
MARK S. MANCHER, JEFFREY W. BRECHER, Jackson Lewis LLP, Woodbury, New York, for Defendant
MEMORANDUM AND ORDER
Dr. Evelyn Dooley was fired a few months after beginning work as the Medical Director at Shorefront Jewish Geriatric Center ("Shorefront"), an affiliate of the Metropolitan Jewish Health System ("MJHS"). She filed suit against Shorefront, MJHS, other related corporate entities, and some of their employees and board members, alleging four causes of action: (1) breach of an implied contract; (2) fraud; (3) civil conspiracy; and (4) negligent hiring. The defendants have moved for judgment on the pleadings pursuant to Fed.R.Civ.P. 12(c), and Dooley has cross-moved for permission to amend her complaint. For the reasons stated below, both motions are granted in part and denied in part.
BACKGROUND
According to the allegations in her amended complaint, which for present purposes are accepted as true, Dr. Evelyn Dooley is a licensed physician in New York and specializes in geriatric care. In 2001, she was working at Brookdale University Hospital and Medical Center ("Brookdale") in Brooklyn, New York, where she served as Medical Director of Long Term Care and Geriatrics. While there, she met Eli Feldman, the President and Chief Operating Officer of MJHS, who on several occasions invited Dooley to leave Brookdale to become Medical Director at one of MJHS's facilities. Dooley did not pursue Feldman's invitations until April 2001, when a headhunter contacted her about applying to fill that position at Shorefront, and Dooley decided to submit her resume.
As part of the application process, Dooley met with various administrators and executives at Shorefront. In her first interview, she spoke with Marilyn Reiter, Shorefront's Administrator, whose responsibilities included overseeing the day-to-day operations and ensuring that the facility complied with the applicable state and federal regulations for such nursing homes. In her second interview, Dooley met with Reiter and Maxine Hochhauser, the Chief Operating Officer at Shorefront. During this interview, Reiter and Hochhauser described the position of Medical Director as requiring Dooley to implement various residential care policies regarding patients at Shorefront Dooley also met with Feldman, who confirmed that, as Medical Director, Dooley would be responsible for providing experienced supervision over the facility. Feldman also promised Dooley that if she accepted the position, she would be able to participate in his "for-profit corporate ventures." Am. Compl. at ¶¶ 35. Shortly after those interviews, Dooley also met Howard Sharfstein, the Chairman of the Board of MJHS, who stated that he understood that she was going to be the new Medical Director at Shorefront and that he would like her to make presentations to MJHS's Board of Trustees regarding the facility. Based on these interactions, Dooley understood that she would have the power to make recommendations to change various policies at Shorefront regarding the standard of care at that facility and to implement those changes.
Dooley was offered the position of Medical Director at Shorefront in May 2001, and she accepted. In a letter dated May 9, 2001, Shorefront summarized the benefits that she was to receive, including $250,000 in annual compensation. The letter also included, as a separate paragraph, the following statement: "In accepting our offer, you agree that this position is for no set term, and that our employment relationship is strictly voluntary and at-will." Defs.' Mem. of Law in Supp. of their Mot. for J. on Pleadings at Ex. A ("Defs.' Mem."). Dooley was confused by this portion of the agreement and discussed the terms of her employment with Erin O'Connor, a Human Resources representative at Shorefront. Dooley specifically asked O'Connor about the meaning of the words "no set term" and "strictly voluntary and at-will." Am. Compl. at ¶ 44. O' Connor explained that they meant that the position was permanent as long as Dooley performed her job satisfactorily, that she could not be terminated except for good cause, and that Dooley was entering into the agreement voluntarily and could resign at any time. Id.
At this meeting, Dooley commented that she had not yet received a written and specific description of her job responsibilities as Medical Director. O'Connor told Dooley that one would be provided. At some point, Dooley was given a detailed job description that stated that she reported to Shorefront's Administrator and that her job responsibilities included ensuring the adequacy and appropriateness of the medical care at Shorefront and assisting in developing policies and procedures for patient care. Dooley also understood that her responsibilities included ensuring that Shorefront complied with the various state and federal regulations for long-term care facilities, including the requirements that Medical Directors review reports of serious injuries and medication use at medical facilities like Shorefront.
Dooley started work at Shorefront in August 2001. She soon discovered various problems at the facility. She found that some of the doctors and nurses were not properly documenting patients' medical charts and that some patients were receiving excessive amounts of medication. She also noted a high level of injuries among the patients and that these injuries had not been reported to the appropriate authorities. Dooley knew that these problems were violations of federal and state regulations and Shorefront's own internal policies. She also noticed that the facility was understaffed, particularly with regard to the nursing staff.
In her first month on the job, Dooley twice met with Reiter and raised these issues in an attempt to remedy them. She also brought up the fact that she was having difficulties with some members of the staff at Shorefront. Reiter promised to get back to Dooley about these problems, but despite Dooley's attempts to arrange regular face-to-face meetings with Reiter and others at Shorefront, she found that she was able to communicate with them only via email and that the problems continued. Dooley decided to approach Hochhauser, Reiter's supervisor, but that effort served only to exacerbate the growing tension between Reiter and Dooley. As these problems continued, other employees at Shorefront, including the Director and Associate Director of Nursing, resigned. Dooley understood that their resignations were also the result of difficulties in working with Reiter and Hochhauser.
In September 2001, Dooley was asked to review Shorefront's budget. As part of that review, she noticed that Shorefront was making substantial payments for consulting services, including psychiatric services, that she thought may have implicated other federal regulations governing Medicaid payments. She tried to raise these concerns, but neither Reiter nor Hochhauser provided her an appropriate explanation for the expenses. In October 2001, Dooley met with a vice president at MJHS regarding computerized medical tracking programs, and she raised her concerns with him, but he suggested that there were serious obstacles to improving the services at Shorefront. Dooley understood those obstacles to be Reiter and Hochhauser.
Shortly after that exchange, Hochhauser asked to meet with Dooley to discuss her role as Medical Director at Shorefront. Dooley postponed the meeting for a few days in order to prepare because she thought it would provide her an opportunity to raise her various concerns about the facility. On October 31, 2001, she met with Hochhauser, O'Connor, and Reiter, at which point she learned that staff physicians at Shorefront had come forward with allegations that Dooley had been involved in five specific incidents of medical malpractice. Dooley understood that Reiter had prompted the staff to bring forward these allegations. Dooley explained that each of the incidents was the product of her own medical judgment in connection with the recommendations of the staff, and she again raised the issues and problems that she had identified while at Shorefront. No one was interested in those problems, and instead they alerted her that Shorefront would proceed with an investigation into her role in the incidents of alleged malpractice. Dooley then stated that she would need legal representation, and the meeting concluded.
After the meeting, Dooley returned to her desk and contacted Sharfstein. She told him what happened at the meeting, and he advised her to make notes of the exchange so that MJHS's board could review them. Shortly thereafter, O'Connor and a security guard came to Dooley's office and announced that she had been fired and that she must leave the office immediately. Dooley collected her personal belongings and was escorted from the building. Later that day, Sharfstein contacted Dooley and informed her that she had not been terminated but instead had been placed on administrative leave with pay.
In November, Dooley had several communications with Shorefront representatives. She met with members of the MJHS board and raised many of the issues that indicated that Shorefront was a substandard medical facility in various areas. She also raised her difficulties in working with Reiter and Hochhauser. Feldman had several exchanges with Dooley and sought to broker a meeting with Reiter, Hochhauser, and other Shorefront representatives. Dooley refused, however, when she learned that the subject of the meeting would be the allegations of medical malpractice and not her observations regarding the standard of care at Shorefront. By letter dated January 11, 2002, Shorefront informed Dooley that her employment had been terminated.
In April 2002, Dooley, a Connecticut resident, filed suit against Shorefront and the other defendants, all New York and New Jersey residents, in federal district court in Connecticut. The case was transferred here in August 2002. The defendants answered Dooley's initial complaint and served a motion for judgment on the pleadings under Fed.R.Civ.P. 12(c) on February 19, 2003. Before Dooley responded to their motion, she was given permission to amend her complaint. The amended complaint was filed in March 2003. As stated above, it alleges four claims: (1) breach of an implied contract; (2) fraudulent inducement; (3) conspiracy to commit fraud; and (4) negligent hiring.
Defendants have moved for judgment on the pleadings on all of Dooley's claims. In her papers in opposition to the motion, Dooley seeks permission to amend her complaint again in order to add unnamed defendants to her conspiracy claim and to add either a claim for tortious interference with contractual relations, or tortious interference with prospective economic advantage, or both. The defendants in reply assert that Dooley's proposed amendments would be futile.
DISCUSSION
A. Standard for Judgment on the Pleadings
Federal Rule of Civil Procedure 12(c) states that "[a]fter the pleadings are closed but within such time as not to delay the trial, any party may move for judgment on the pleadings." The standard applicable to motions for judgment on the pleadings under Fed.R.Civ.P. 12(c) is identical to the standard for evaluating a motion to dismiss under Fed.R.Civ.P. 12(b)(6). King v. Am. Airlines, 294 F.3d 352, 356 (2d Cir. 2002). A court must accept "all the allegations contained in the complaint as true" and draw "all reasonable inferences in favor of the nonmoving party." Id. Only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief may a court grant defendants judgment on the pleadings. Conley v. Gibbs, 355 U.S. 41, 45-46 (1957).
B. Dooley's Claims
1. The Breach of Contract Claim
Under New York law, "where the term of employment is for an indefinite period of time, it is presumed to be a hiring at will that may be freely terminated by either party at any time for any reason or even for no reason." Lobosco v. N.Y. Tel. Co/NYNEX, 96 N.Y.2d 312, 316 (2001). This employment-at-will rule creates a strong yet rebuttable presumption that an employer can terminate an employee for any reasons other than one specifically prescribed by law, such as racial discrimination. See Sabetay v. Sterling, 69 N.Y.2d 329, 333, 336-37 (1987). Distinguishing itself from several other state courts, the New York Court of Appeals has repeatedly turned back attempts to curtail the scope of the employment-at-will rule by, for example, providing for a cause of action for wrongful discharge or for terminations that contradict public policy, even if an employee is terminated for attempting to disclose illegal activities by his employer.See, e.g., Lobosco, 96 N.Y.2d at 316;Sabetay, 69 N.Y.2d at 336-37; Murphy v. American Home Products Corp., 58 N.Y.2d 293 (1983); see also Horn v. N.Y. Times, 100 N.Y.2d 85, 90-94 (2003) (tracing New York Court of Appeals' decisions on the subject). New York's highest court has, however, recognized two key exceptions to this rule and found a valid cause of action for breach of contract where: (1) an employee relies on an express limitation in the employer's own personnel handbook that it would not terminate him without good cause, see Weiner v. McGraw-Hill, Id. 57 N.Y.2d 458 (1982); and (2) a lawyer is fired by his law firm for refusing to comply with an ethical rule requiring lawyers to report professional misconduct by another lawyer. See Wieder v. Skala, 80 N.Y.2d 628 (1992). As the New York Court of Appeals recently explained:
The only exceptions to the employment-at-will rule ever adopted by this Court have involved very specific substitutes for a written contract: in Weiner, the employer's express, unilateral promise on which the employee relied; in Wieder, the parties' mutual undertaking to practice law in compliance with [New York's Code of Professional Conduct Disciplinary Rule] 1-103(A), a rule so fundamental and essential to the parties' shared professional enterprise that its implication as a term in their employment agreement aided and furthered the agreement's central purpose.Horn, 100 N.Y.2d at 96.
Dooley recognizes that the contract establishing her employment relationship with Shorefront specifically characterized the term of her employment as at will. As stated above, the letter that she signed stated: "In accepting our offer, you agree that this position is for no set term, and that our employment relationship is strictly voluntary and at-will." See supra. Dooley nevertheless tries to squeeze within both the Weiner and Wieder exceptions to the employment-at-will rule. She fails in both attempts, and her breach of contract claim is therefore dismissed.
a. The Weiner Exception
Dooley first claims that she has stated a valid claim for breach of contract within the Weiner exception because of the oral representations made to her by O'Connor. Dooley alleges that, after she expressed confusion regarding the nature of her employment relationship with Shorefront and the precise meaning of the terms in her employment contract, O'Connor told her that the Medical Director position was permanent and that Dooley could be removed only for good cause. At the very least, Dooley contends, the language of her employment agreement is sufficiently unclear to warrant my consideration of O'Connor's oral representations as parol evidence and to integrate those statements into the contract. I disagree.
Weiner recognized a cause of action for breach of contract after the plaintiff had successfully overcome the "rebuttable presumption" that his employment had been at will. 57 N.Y.2d at 466. The former McGraw-Hill employee had done so by alleging that: (1) he had been induced to leave his former job by assurances of job security at McGraw-Hill; (2) he had signed a job application that specified that the terms of his employment were subject to the company's employment handbook, which stated that the company would only terminate an employee for cause and after taking steps to solve any problems; (3) he had relied on these assurances and other similar representations in rejecting other job offers without similar security; and (4) he had complied with the company's handbook at the direction of his supervisors when he had to fire co-workers.Id. at 465-66. The Court of Appeals concluded that "these factors combine to present a [breach of contract] question for trial."Id. at 466. Subsequent decisions by that court have confirmed that it was the confluence of these "cumulative factors." Horn. 100 N.Y.2d at 91, and the presence of an "express written policy" that allowed Weiner to proceed to trial on his breach of contract claim.Lobosco, 96 N.Y.2d at 316; see Murphy, 58 N.Y.2d at 305 ("[I]n Weiner . . . we recently held that, on an appropriate evidentiary showing, a limitation on the employer's right to terminate an employment of indefinite duration might be imported from an express provision therefor found in the employer's handbook on personnel polices and procedures.")
Dooley does not claim that there was a confluence of factors or an express written provision in any Shorefront documents exhibiting an intent on its part to curtail its right to terminate Dooley at will. Rather, Dooley relies only on the statements by O' Connor. Oral assurances alone, however, are insufficient to overcome the employment-at-will presumption and create a triable issue regarding any contractual obligations on the part of the employer. See,e.g., Albert v. Loksen, 239 F.3d 256, 264-65 (2d Cir. 2001);Cuchi v. N.Y. City Off Track Betting Corp., 818 F. Supp. 647, 651-53 (S.D.N.Y. 1993) (citing New York cases). The cases that Dooley cites for support all involved oral representations confirming express, written representations contained in an employer's employment manuals or personnel handbooks. See Weiner, 57 N.Y.2d at 465-66;Skelly v. Visting Nurse Ass'n of the Capital Region Inc., 619 N.Y.S.2d 879, 881-82 (3d Dep't 1994); Dicocco v. Capital Area Community Health Plan, Id. 525 N.Y.S.2d 417, 419 (1988). As for Dooley's request that I consider O'Connor's statements as parol evidence, I find the terms of Dooley's employment-at-will contract unambiguous, and thus resort to extrinsic evidence is inappropriate.See Seiden Assocs. Inc. v. ANC Holdings,Id. 959 F.2d 425, 428 (2d Cir. 1992). That Dooley found the contract ambiguous does not alter that result. Breed v. Ins. Co. of N. Am., 46 N.Y.2d 351, 355 (1978): seealso Baron v. Port Authority of N.Y. N.J. 271 F.3d 81, 88 (2001) (express disclaimer of at-will employment obviates need to consider other circumstantial evidence); Lobosco, 96 N.Y.2d at 316-17 (same).
b. The Wieder Exception
Dooley also tries to bring her case within the other exception to New York's employment-at-will rule by alleging an "implied-in-law obligation" in her employment agreement, similar to the one recognized inWieder, 80 N.Y.2d at 628. Wieder, an associate at a law firm, claimed that the firm fired him because he insisted that he and the firm's other lawyers comply with an ethical rule requiring lawyers to report other lawyers' misconduct to the state's disciplinary committees.Id. at 631-32. Acknowledging New York's "firmly established employment-at-will doctrine," id. at 633, the court nevertheless distinguished precedent rejecting any implied contractual obligations of good faith and fair dealing in the employment realm.See id. at 633-35 (distinguishing Sabetay, 69 N.Y.2d at 329, and Murphy, 58 N.Y.2d at 293). Instead, citing a lawyer's independent obligation to the court and to the public to report a colleague's misconduct, and the regulatory framework established to enforce this obligation, the court found that "intrinsic to this [employment] relationship [between Wieder and his law firm] was the unstated but essential compact that in conducting the firm's legal practice both [the lawyer] and the firm would do so in compliance with the prevailing rules of conduct and ethical standards of the profession."Wieder, 80 N.Y.2d at 639. Based on this mutually understood obligation, the court concluded that Wieder had successfully pleaded "a valid claim for breach of contract based on an implied-in-law obligation in his relationship with [the firm]." Id. at 638.
Dooley contends that the Wieder exception applies here because she, like the associate in Wieder, was fired for attempting to comply with similar, implied-in-law obligations created by the ethical and professional duties that she shared with the defendants. The developing New York caselaw has not been kind to Dooley's claim, and as a result she is constrained to rely on a recent decision of the New York Court of Appeals declining to extend Wieder to the medical profession. See Horn, 100 N.Y.2d 85. Horn, a former physician on staff at the New York Times, sued the newspaper, claiming that she had been fired because she refused, on the basis of her professional ethical obligations, to provide non-medical personnel with the confidential medical records of other employees.Id. at 89-90. In ordering the dismissal of Horn's complaint for failing to state a breach of contract claim, the Court of Appeals cautioned against "loosing Wieder from its analytical moorings" by applying it "to hosts of professional employees," and instead cabinedWieder (like it had cabined Weiner, see supra) as the product of the "unique confluence of specific, related factors." Horn, 100 N.Y.2d at 94, 96.
Specifically, the court distinguished Wieder on two grounds: (1) Horn, unlike Wieder, "was applying her professional expertise in furtherance of her responsibilities as a part of corporate management;" and (2) the professional obligation Horn cited was not, like Wieder's, "a self-policing rule critical to professional self-regulation."Id. at 95. Because Horn and the New York Times had not engaged in a "mutual undertaking . . . in compliance with . . . a rule so fundamental and essential to [their] shared professional enterprise that its implication as a term in their employment agreement aided and furthered the agreement's central purpose," Horn could not invoke her ethical responsibilities to create an implied term in her employment agreement and thereby escape the reach of the employment-at-will rule. Id. at 96.
Although Horn rejected a physician's implied breach of contract claim, Dooley claims that its reasoning, and Wieder's holding, support her breach of contract claim here. Dooley claims that because her employer was a medical institution, she and the defendants, like Wieder and his firm and unlike Horn and the New York Times, shared the same ethical and professional responsibilities and that it was reasonable to read these duties into her employment contract. Dooley further claims that, by attempting to raise issues related to the standard of care at Shorefront and to exercise her responsibilities as Medical Director there, she, again like Wieder and unlike Horn, was attempting to comply with a "critical canon of professional conduct." PI's Br. in Opp'n to Mot. For J. on the Pleadings ("Pl.'s Br.") at 14. I reject both of Dooley's arguments and conclude that she has failed to state a breach of contract claim under Wieder,
First, Dooley's attempt to avoid Horn and fall withinWieder misunderstands the relationship between the two cases.Horn is not a narrow exception to Wieder's broad rule.
Rather, Horn reinforces the breadth of the employment-at-will rule and recognizes Wieder's "narrow exception" as the result of a "unique confluence of specific, related factors." Horn, 100 N.Y.2d at 89, 95. In fact, no case has extended Wieder beyond the legal profession, and New York appellate courts have consistently rejected lower court decision that have done so. See,e.g., Id. at 97 (reversing lower court decision extending Wieder to medical profession); Mulder v. Donaldson. Lufkin Jenrette, 623 N.Y.S.2d 560, 563-64 (1st Dep't 1995) (reversing lower court decision extending Wieder to securities broker); see also McConchie v. Wal-Mart Stores, 985 F. Supp. 273, 278 (N.D.N.Y. 1997) (noting with approval commentary stating that the reasoning in Wieder is so qualified as to suggest that its holding could apply only to law firm associates in the exact same predicament as Wieder himself). In the end, Dooley asks me to do what the New York Court of Appeals declined to do inHorn — extend Wieder to the medical profession.See Horn, 100 N.Y.2d at 105 (Smith, J., dissenting) ("No sound reason exists to preclude termination of a lawyer inWieder while leaving without a remedy a doctor whose job it is to protect the physical and mental well-being of individuals."). This I refuse to do. See Baron, 271 F.3d at 87 (invokingErie R.R. Co. v. Tompkins, 304 U.S. 64 (1938) in declining to extend Weiner exception in light of recent decision by New York Court of Appeals); see also Rooney v. Tyson, 127 F.3d 295, 296-98 (2d Cir. 1997) (declining to expandWeiner exception and instead certifying question to New York Court of Appeals).
Even if I were inclined to extend Wieder, Dooley's would not be the case in which to do it. It is true, as Dooley points out, that the New York Court of Appeals framed the issue in Horn as "whether . . . the narrow exception [in Wieder] encompasses a physician employed by a non-medical employer." Horn, 100 N.Y.2d at 89 (emphasis added). But Dooley's duties as Medical Director at Shorefront (perhaps unlike those of a staff physician) were much more akin to Horn's in that Dooley was "performing her professional expertise in furtherance of her responsibilities as part of corporate management." Id. at 95. At the very least, they do not approach Wieder's "performance of professional services for the firm's clients as a duly admitted member of the Bar," services which the court in Wieder found to be "at the very core and, indeed, the only purpose of his association with [his law firm]." 80 N.Y.2d at 635. Furthermore, I cannot conclude that Dooley's status as Medical Director, and that position's relationship with Shorefront, replicates the "distinctive relationship between a law firm and a lawyer hired as an associate" that existed in Wieder.Id.
Nor do the regulations and professional obligations that Dooley cites approach a rule "critical to the unique function of self-regulation" of her profession. Id. at 636; see Horn, 100 N.Y.2d at 95-96. In Horn, the court explicitly acknowledged the importance of "physician-patient confidentiality," but it nonetheless rejected Horn's claim because that principle, important as it was, was not packaged in "a self-policing rule critical to professional self-regulation." Id. at 96. The federal and state regulations that Dooley points to are: (1) general regulatory statements regarding compliance with other state and federal regulations governing facilities like Shorefront, see 42 C.F.R. § 483.75; N.Y. Comp. Codes R. Regs. tit. 10, § 400.4; and (2) a description of the responsibilities of medical directors under New York's administrative code. See id. at § 415.15. Recognizing these deficiencies, Dooley attempts to further rely on a provision of the Principles of Professional Conduct published by the Medical Society of the State of New York, a private body, that states that the "medical profession should safeguard the public and itself by exposing those physicians deficient in moral character or professional competence or who engage in illegal or unethical conduct." See Pi's Br. at Al 5 (emphasis added). Even assuming that Dooley's allegations about the defendants rise to that level, her argument still fails. A major difference between the ethical obligations in Wieder andHorn was that, in Wieder, the New York legislature had "delegated the responsibility for maintaining the standards of ethics and competence" of lawyers to New York courts and a state disciplinary committee, and the affirmative duty cited by Wieder had been promulgated by the courts and was essential to that regulatory scheme.Wieder, 80 N.Y.2d at 636 (citing N.Y. Jud. Law § 90(2); N.Y. Comp. Codes R. Regs. tit. 22, § 603.2). Although New York has delegated similar responsibility over the medical profession to the State Board of Professional Medical Conduct, see N.Y. Educ. Law § 6504, the regulations Dooley points to create no affirmative reporting obligation on physicians, much less one that is critical to the survival of the profession. See Wieder, 80 N.Y.2d at 636.
Dooley's complaint implicitly acknowledges this distinction. She does not claim that she was fired because she was going to comply with an ethical obligation she shared with the defendants requiring them all (or even just Dooley, for that matter) to report any of the problems that she allegedly discovered at Shorefront. She claims only that she was fired for raising them within the corporate management structure. Dooley does not make any claim in her complaint pursuant to N.Y. Lab. Law § 741, a statute enacted in April 2002 to prevent health-care employers from retaliating against employees who raise issues relating to "improper quality of patient care."
Because Dooley cannot avail herself of either the Weiner orWieder exception to New York's employment-at-will rule, her breach of contract claim is hereby dismissed.
2. The Fraudulent Inducement Claim
Dooley also claims that the defendants fraudulently induced her to accept the position as Medical Director at Shorefront. She contends that when she was interviewing for the job, the defendants affirmatively misrepresented the quality of health-care services at the facility, the responsibilities of the Medical Director there, and the business opportunities that would be available to her if she accepted the position. Dooley also bases this claim on the statements made to her by O'Connor regarding the terms of her employment and the statements made to her by Feldman that she would be able to participate in his corporate ventures.
To state a claim for fraudulent inducement, Dooley must allege that: (1) the defendants knowingly misrepresented (or failed to mention) a material fact to her; (2) the misrepresentation or omission was made for the purpose of inducing her to rely on it; (3) she justifiably relied on that misrepresentation or omission; and (4) she was injured.See Lama Holding Co. v. Habros PLC, 88 N.Y.2d 413, 421 (1996). The defendants do not attack the individual elements of this claim but instead contend that this claim should be dismissed because: (1) it merely replicates her breach of contract claim; and (2) she has failed to plead fraud with sufficient particularity.
With regard to the defendant's first contention, it is true that a plaintiff cannot maintain a claim for fraud "when the only fraud charged relates to a breach of contract, or where the fraud claim is duplicative of, or inextricably related to, a breach of contract claim." 60A N.Y. Jur.2d Fraud and Deceit § 7, at 27 (2001). Rather, in situations where a plaintiff raises both a breach of contract and fraud claim, "a plaintiff must either: (i) demonstrate a legal duty separate from the duty to perform under the contract; or (ii) demonstrate a fraudulent misrepresentation collateral or extraneous to the contract; or (iii) seek special damages that are caused by the misrepresentation and unrecoverable as contract damages." Bridgestone/Firestone. Inc. v. Recovery Credit Services, Id. 98 F.3d 13, 20 (2d Cir. 1996) (citations omitted). Dooley's breach of contract claim is based in part on the allegation that Shorefront had expressly limited its ability to fire her at will based on O'Connor's statements. Thus, to the extent Dooley's fraud claim relies on the statements by O'Connor, the defendants' motion is granted because the fraudulent inducement claim is duplicative of the breach of contract claim.
The rest of Dooley's fraud claim, however, is based on several misrepresentations that she claims the defendants made with knowledge of their falsity and with the specific purpose of misleading Dooley into taking the job. These allegations are separate and distinct from the allegations underlying Dooley's breach of contract claims, and I cannot conclude at this early stage that there is no set of facts on which Dooley will be entitled to relief on her fraudulent inducement claim.See Stewart v. Jackson Nash, 976 F.2d 86, 89-90 (2d Cir. 1992); Deerfield Communications Corp. v. Chesebrough-Ponds, Inc., 68 N.Y.2d 954, 956 (1986).
With regard to defendants' second contention, Fed.R.Civ.P. 9(b) requires that "[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." The purpose behind this requirement is to provide defendants fair notice of a plaintiff s fraud claim, to safeguard defendants' reputations against spurious allegations, and to prevent strike suits. See Shields v. Citytrust Bancorp. Id. 25 F.3d 1124, 1128 (2d Cir. 1994). Under the rule, "[m]alice, intent, knowledge, and other condition of mind of a person," however, "may be averred generally." Fed.R.Civ.P. 9(b). The Second Circuit has interpreted Rule 9(b) to require that allegations of fraud must "(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent." Shields v. Citytrust Bancorp. Id. 25 F.3d 1124, 1128 (2d Cir. 1994) (internal quotations and citations omitted). While the pleading requirement for scienter is more relaxed, a plaintiff must still allege sufficient "facts to give rise to a strong inference of fraudulent intent . . . either (a) by alleging facts to show that defendants had both motive and opportunity to commit fraud, or (b) by alleging facts that constitute strong circumstantial evidence of conscious misbehavior or recklessness.Id.
With the exception of her allegations about Feldman's corporate ventures, Dooley has adequately complied with the requirements of Rule 9(b). Her amended complaint sufficiently identifies the alleged misrepresentations, their authors, and the setting. I further conclude that Dooley has alleged facts sufficient to show: (1) the defendants had the motive and opportunity to induce Dooley to leave her position at Brookdale and take over as Medical Director of Shorefront; and (2) deliberate or reckless misconduct on the part of the defendants.Shields, 25 F.3d at 1128-31. To the extent that the defendants' motion is based on Feldman's statements about Dooley's ability to participate in his corporate ventures, however, their motion is granted as failing to meet the requirements of Rule 9(b).
3. The Conspiracy Claim
Dooley also claims that in addition to fraudulently inducing her to accept the position at Shorefront, the defendants conspired to induce Dooley to accept the position at Shorefront. New York defines a civil conspiracy as "an agreement or confederation between two or more persons intentionally participating in the furtherance of a preconceived common plan or purpose to defraud. To constitute an actionable conspiracy, plaintiffs must establish not only the corrupt agreement between two or more persons, but their intentional participation in the furtherance of the plan or purpose, and resulting damage." Kashi v. Gratos, 790 F.2d 1050, 1055 (2d Cir. 1986). As Dooley acknowledges in her opposition papers, New York does not recognize an independent cause of action for conspiracy when the alleged illegal acts underlying the conspiracy are already alleged as an independent tort.See Alexander Alexander of N.Y., Inc. v. Fritzen, 68 N.Y.2d 968, 969 (1986). Dooley's conspiracy claim, however, if proved, can subject a defendant to liability for an alleged fraudulent inducement even if the defendant did not specifically make any misrepresentations to Dooley, so long as he or she engaged in common action to facilitate the fraud. See Kashi, 790 F.2d at 1054-55. For this reason, the defendants' motion to dismiss this claim is denied. I address Dooley's motion to amend this claim below.
4. The Negligent Hiring Claim
Dooley claims that the individual board members of MJHS and Shorefront are liable for placing Reiter, Hochhauser, and Feldman in positions to commit the alleged tortious acts against Dooley and ultimately to harm the patients at Shorefront. On its face, this states a valid claim under New York law, see 53 N.Y. Jur.2d Employment Relations § 325, but the defendants contend that this claim should fail because: (1) the sole underlying tort allegedly committed by Reiter, Hochhauser, and Feldman was the tort of "wrongful termination," a tort that is not recognized under New York law; and (2) Dooley has failed to allege any circumstances that would have put the defendants on notice of facts suggesting that the hiring or continued employment of Reiter, Hochhauser, or Feldman were inconsistent with reasonable hiring practices.See Defs.'s Reply Mem. of Law at 12; Lobosco, 96 N.Y.2d at 316. As it relates to the decision to terminate Dooley, the negligent hiring claim must fail for reasons stated above. However, Dooley has alleged other tortious conduct by Reiter, Hochhauser, and Feldman. I have already concluded that Dooley has sufficiently pleaded claims of fraudulent inducement and civil conspiracy against the defendants. See supra, Am. Compl. at ¶ 130. Defendants also concede that Dooley has alleged that MJHS and Shorefront knew that Reiter had been an administrator at another facility that had been found guilty of fraudulent billing practices and that neither Reiter nor Hochhauser had sufficient clinical backgrounds to adequately oversee Shorefront. See Am. Compl. at ¶¶ 131-135. At this stage, I cannot conclude that there are no set of facts on which Dooley might be entitled to relief on this claim, at least as it relates to the hiring of Reiter and Hochhauser. As for the hiring of Feldman, Dooley has failed to make any allegations regarding Feldman sufficient to place the defendants on notice, and thus the defendants' motion is granted as to that aspect of the negligent hiring claim.
C. The Motion to Amend the Complaint for a Second Time
Dooley filed her initial complaint in April 2002, and defendants answered it in August 2002. In March 2003, Dooley was granted permission to amend her complaint, at which point she added other defendants, included more specific factual allegations about all the defendants, and introduced the conspiracy claim. She now seeks to amend her complaint for a second time in order to add: (1) a claim for tortious interference of contract against Reiter, Hochhauser, and Feldman; and (2) various unnamed defendants to her conspiracy claim. The defendants claim that both amendments would be futile.
Fed.R.Civ.P. 15(a) states that "leave [to amend] shall be freely given when justice so requires." The Second Circuit has observed that because the two important principles behind Rule 15 are that the "pleadings [should] serve the limited role of providing the opposing party with notice of the claim or defense to be litigated" and that "mere technicalities should not prevent cases from being decided on the merits," a court should grant a party leave to amend "absent evidence of undue delay, bad faith or dilatory motive on the part of the movant, undue prejudice to the opposing party, or futility." Monahan v. N.Y.C. Dep't of Corr., 214 F.3d 275, 283 (2d Cir. 2000) (Internal quotations and citations omitted). "[L]eave to amend will be denied as futile only if the proposed new claim cannot withstand a [Fed.R.Civ.P.] 12(b)(6) motion to dismiss for failure to state a claim, i.e. if it appears beyond doubt that the plaintiff can plead no set of facts that would entitle him to relief."Milanese v. Rust-Oleum Corp., 244 F.3d 104, 110 (2d Cir. 2001) (citing Ricciuti v. N.Y.C. Transit Auth., 941 F.2d 119, 123 (2d Cir. 1991)).
Dooley claims that she can properly allege that Reiter, Hochhauser, and Feldman tortiously interfered with her employment relationship with Shorefront by manufacturing false allegations of medical malpractice against her in order to have her fired. The elements of a tortious interference claim under New York law are: "(a) that a valid contract exists; (b) that a `third party' had knowledge of the contract; (c) that the third party intentionally and improperly procured the breach of the contract; and (d) that the breach resulted in damage to the plaintiff."Finley v. Giacobbe, 79 F.3d 1285, 1294 (2d Cir. 1995) (citingIsrael v. Wood Poison Co., 1 N.Y.2d 116, 120 (1956);Kaminski v. United Parcel Serv., 501 N.Y.S.2d 871, 873 (1st Dep't 1986)). The defendants contend that allowing Dooley to add a tortious interference claim to her complaint would be futile because New York does not recognize tortious interference in the context of an at-will employment relationship and that, even if it did, Dooley could not show that Reiter, Hochhauser, or Feldman satisfy the "third party" requirement.
Defendants' first claim is not correct. While the New York Court of Appeals has instructed lower courts not to allow a plaintiff "to evade the employment at-will rule and relationship by recasting [her] cause of action in the garb of a tortious interference with [her] employment,"Ingle v. Glamore Motor Sales. Inc., 73 N.Y.2d 183, 189 (1989), courts applying New York law have nevertheless found that "[a]n at-will employee may maintain a tortious interference claim . . . in `certain limited situations.'"Albert v. Loksen, 239 F.3d 256, 274 (2d Cir. 2001) (quotingFinley v. Giacobbe, 79 F.3d 1285, 1294 (2d Cir. 1995)). One such situation is if the at-will employee alleges "that a `third party used wrongful means to effect the termination such as fraud, misrepresentation, or threats, that the means used violated a duty owed by the defendant to the plaintiff, or that the defendant acted with malice.'" Albert, 239 F.3d at 274 (quoting Cohen v. Davis, 926 F. Supp. 399, 403 (S.D.N.Y. 1996)); see also id. at 403 n. 1 (citing cases and discussing conflict between Ingle and New York Court of Appeals' decision in Guard-Life Corp. v. Parker Hardware Mfg. Corp., 50 N.Y.2d 183 (1980), upon which those cases allowing a tortious interference claim for an at-will employee ultimately rely).
Defendant's second claim, however, has merit. For purposes of a tortious interference claim in the employment context, the Second Circuit has explained that "[i]n order to show that a defendant-employee is a `third-party.' a plaintiff must show that the defendant-employee has exceeded the bounds of his or her authority." Finley, 79 F.3d at 1295 (internal quotations omitted); see also Albert, 239 F.3d at 275 ("[A] plaintiff may maintain an action for tortious interference against a co-employee by showing that the co-employee acted outside the scope of his or her authority.") (internal quotations and alterations omitted). Dooley contends that Reiter, Hochhauser, and Feldman maliciously procured her termination by concocting fraudulent reports that Dooley had committed medical malpractice and using those reports to terminate her. She recognizes, however, that Reiter, Hochhauser, and Feldman were her immediate supervisors within the management structure at Shorefront and were legally empowered, based on Dooley's employment-at-will relationship, to terminate her for any reason or no reason at all. See Finley, 79 F.3d at 1295 (rejecting tortious interference claim against co-employee defendant because the co-employee "had the authority to hire and fire the [plaintiff]").
Allowing Dooley to challenge via a tortious interference claim her supervisors' asserted justification for terminating her would eviscerate the employment at-will rule. Put another way, I understand New York law to properly withhold "third party" status in tortious interference claims like Dooley's where the defendants, as in this case, were authorized to fire the plaintiff. A different rule would create an unattractive incentive for employers: never to explain the bases of their decisions to terminate employees. If an employee could circumvent the at-will doctrine simply by alleging, as Dooley has done here, that the stated reasons for her termination are fabricated, employers would be well served to stay silent if an at-will employee asks why she was fired. Otherwise, the employee — who cannot sue the employer for breach of contract — can allege fraud and force her supervisors into court, not to defend the firing per se. but to defend the bona fides of the reasons for the firing. It would be anomalous, in a setting where an employer may act for no reason at all, or even for a bad (but not invidiously discriminatory) reason, to require an employer to establish its sincere belief in the reason given.
That the defendant in the tortious interference claim happens to be an individual or a collection of individuals, as opposed to the employer, does not alter the conclusion that the claim is an end-run around the at-will doctrine. Where the defendant had authority to terminate, i.e., she was acting within "the bounds of her authority," Finley, 79 F.3d at 1295, the claim will almost always be, in effect, a claim against the employer. See Ingle, 73 N.Y.2d at 188 (refusing to allow at-will employee to substitute tortious interference claim for wrongful discharge claim). I therefore conclude that Dooley's asserted claim of tortious interference against Reiter, Hochhauser, and Feldman would be futile because it fails to state a claim under New York law.
I hasten to emphasize that a proper "third party" can indeed be a co-employee, contrary to the defendants' argument on this motion. Here, Dooley alleged that employees at Shorefront concocted malpractice allegations to help Reiter, Hochhauser, and Feldman justify Dooley's termination. My holding here does not imply that a plaintiff in Dooley's position could never allege a tortious interference claim against employees who engaged in such conduct.
The defendants' only objection to Dooley's request to add the unnamed defendants to this claim is that the claim itself is futile. As I stated above, Dooley's conspiracy claim can proceed. Dooley may therefore amend her complaint to incorporate those unnamed defendants into the conspiracy claim.
CONCLUSION
For the foregoing reasons,
1. Dooley's breach of contract claim is dismissed in its entirety;
2. To the extent that the fraudulent inducement claim is based on statements by O'Connor regarding the terms of Dooley's employment and by Feldman regarding his corporate ventures, defendants' motion is granted and the claim is dismissed; to the extent the claim is based on other allegedly fraudulent representations, the motion is denied;
3. To the extent that the negligent hiring claim is based on the decision to hire and retain Feldman, defendants' motion is granted and the claim is dismissed; however, the remainder of that claim and the conspiracy claim remain and the motion is denied in that respect;
4. The cross-motion to amend the complaint is denied to the extent plaintiff seeks to allege a tortious interference claim against Reiter, Hochhauser, or Feldman; however, the cross-motion is granted to the extent plaintiff seeks to add unnamed defendants to the conspiracy claim.
A second amended complaint shall be filed on or before August 18, 2003. The parties shall schedule an appearance before Magistrate Judge Azrack to proceed with discovery.
So ordered.