Opinion
No. 1 CA-CV 19-0479
06-23-2020
THOMAS GERARD, Plaintiff/Appellant, v. KIEWIT CORPORATION, et al., Defendants/Appellees.
APPEARANCES Thomas Gerard, Phoenix Plaintiff/Appellant Kutak Rock, L.L.P., Scottsdale By Jonathan S. Schultz, Michael W. Sillyman Counsel for Defendants/Appellees
.NOTICE: NOT FOR OFFICIAL PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE. Appeal from the Superior Court in Maricopa County
No. CV 2018-052703
The Honorable Bruce R. Cohen, Judge
AFFIRMED
APPEARANCES Thomas Gerard, Phoenix
Plaintiff/Appellant Kutak Rock, L.L.P., Scottsdale
By Jonathan S. Schultz, Michael W. Sillyman
Counsel for Defendants/Appellees
MEMORANDUM DECISION
Judge Jennifer B. Campbell delivered the decision of the Court, in which Presiding Judge Michael J. Brown and Judge D. Steven Williams joined. CAMPBELL, Judge:
Judge Jennifer B. Campbell replaces the Honorable Kenton D. Jones, who was originally assigned to this panel. Judge Campbell has read the briefs and reviewed the record.
¶1 Thomas Gerard appeals the dismissal of his complaint against Kiewit Corporation and InEight, Inc. (collectively, InEight). Because his claims are either barred by the Arizona's Employment Protection Act ("AEPA"), or because he failed to state a claim on which relief could be granted, we affirm.
BACKGROUND
¶2 Gerard filed a complaint alleging he accepted employment with InEight based upon misrepresentations and material omissions. He asserts that InEight overstated the efficacy and viability of its products, set unattainable sales goals, and allowed employees to engage in falsification of work reporting. Gerard claims this situation resulted in his not receiving the expected commissions and bonuses. Gerard alleged he was forced to resign eight months after being "strung along, lied to, pressured to falsify his results and otherwise mistreated until he literally couldn't take it anymore." He claims to have suffered emotional distress, and "lost thousands of dollars in bonus pay and commissions." Gerard sought to recover general, special, and punitive damages arising from claims for fraudulent misrepresentation, negligent hiring, negligent supervision and retention, and intentional infliction of emotional distress ("IIED").
¶3 InEight moved to dismiss, arguing Gerard's claims were precluded by the AEPA, A.R.S. §§ 23-1501 to -1502. The superior court agreed, finding both the fraud and negligence claims were subject to the AEPA and dismissed the remaining claims. But, the court found the IIED claim was too indistinct to analyze and granted Gerard leave to file a more detailed amended complaint.
Absent material changes from the relevant date, we cite the current version of rules and statutes.
¶4 Gerard moved unsuccessfully for reconsideration. He then filed an amended complaint containing additional facts about InEight's promises inducing him to accept employment and describing a "bizarre outburst" from Gerard's superior chastising him for inappropriate workplace attire. After "scouring" the pleading for evidence of extreme and outrageous conduct, the superior court dismissed the remaining IIED claim. Gerard timely appealed.
DISCUSSION
¶5 Gerard argues the superior court erred by dismissing his complaint. We review a dismissal for failure to state a claim de novo and will affirm if we find the complainant "would not, as a matter of law, be entitled to the relief requested 'under any interpretation of the facts susceptible to proof.'" Levine v. Haralson, Miller, Pitt, Feldman & McAnally, P.L.C., 244 Ariz. 234, 237, ¶ 7 (App. 2018) (quoting Coleman v. City of Mesa, 230 Ariz. 352, 355-56, ¶¶ 7-8 (2012)). In analyzing Gerard's claims, we assume the truth of the well-pleaded facts in the complaint. Dignity Health v. Farmers Ins. Co. of Ariz., 247 Ariz. 39, 41, ¶ 1 n.1 (App. 2019) (citing Fid. Sec. Life Ins. v. State, 191 Ariz. 222, 224, ¶ 4 (1998)).
I. The Arizona Employment Protection Act
¶6 The AEPA codifies Arizona's public policy favoring at-will employment; absent a written employment contract, "[t]he employment relationship is severable at the pleasure of either the employee or the employer." A.R.S. § 23-1501(A)(2); see also White v. AKDHC, L.L.C., 664 F. Supp. 2d 1054, 1062 (D. Ariz. 2009). The AEPA also contains an explanation of the circumstances that may form the basis of an employee's claim for wrongful termination or constructive discharge. See A.R.S. §§ 23-1501(A)(3), -1502(A)-(B). Because Gerard resigned, his claims would be governed by the AEPA only to the extent he alleges constructive discharge. See A.R.S. § 23-1502(A)(1) (premising constructive discharge on "[e]vidence of objectively difficult or unpleasant working conditions to the extent that a reasonable employee would feel compelled to resign"); Peterson v. City of Surprise, 244 Ariz. 247, 250, ¶ 9 (App. 2018) (explaining a "constructive discharge may transform a resignation into a discharge" if the employee is compelled to resign under the conditions outlined in A.R.S. § 23-1502).
¶7 Under the AEPA, a constructive discharge claim may only be maintained if, prior to the resignation, the employee:
1. Notif[ies] an appropriate representative of the employer, in writing, that a working condition exists that the employee believes is objectively so difficult or unpleasant that the employee feels compelled to resign or intends to resign[; and]A.R.S. § 23-1502(B). Gerard does not assert he complied with the preconditions. Therefore, if the AEPA applies, his claims are barred.
2. Allow[s] the employer fifteen calendar days to respond in writing to the matters presented in the employee's written communication . . . .
The notice provisions are not required in situations involving "outrageous conduct by the employer or a managing agent of the employer, including sexual assault, threats of violence directed at the employee, [and] a continuous pattern of discriminatory harassment." A.R.S. § 23-1502(A)(2), (F).
II. Constitutionality
¶8 Gerard first argues the superior court erred by finding his claims barred by the AEPA because, to do so, would violate the anti-abrogation clause of the Arizona Constitution. We review constitutional issues and those involving statutory interpretation de novo. Cave Creek Unified Sch. Dist. v. Ducey, 231 Ariz. 342, 347, ¶ 8 (App. 2013) (citation omitted).
¶9 While the Arizona Constitution prohibits the State from abrogating tort claims that existed at common law, Ariz. Const. art. 18, § 6; Cronin v. Sheldon, 195 Ariz. 531, 538-39, ¶¶ 35, 39 (1999), the legislature is nonetheless "entitled to regulate common law tort actions," State Farm Ins. Cos. v. Premier Manufactured Sys., Inc., 217 Ariz. 222, 229, ¶ 32 (2007) (citing Duncan v. Scottsdale Med. Imaging, Ltd., 205 Ariz. 306, 314, ¶ 33 (2003)) (emphasis added). "We differentiate between abrogation and regulation by determining whether a purported legislative regulation leaves those claiming injury a reasonable possibility of obtaining legal redress." Id. (quoting Boswell v. Phx. Newspapers, Inc., 152 Ariz. 9, 18 (1986)). "[L]egislative action is regulatory 'so long as it leaves a claimant reasonable alternatives or choices which will enable him or her to bring the action.'" Boswell, 152 Ariz. at 18 (quoting Barrio v. San Manuel Div. Hosp. for Magma Copper Co., 143 Ariz. 101, 106 (1984)).
¶10 The AEPA does not deprive an employee of his right to bring an action or to obtain a judgment for the full amount of his damages. To the contrary, A.R.S. § 23-1502(A), codifying the AEPA, specifically acknowledges the employee's opportunity to bring an action "under the statutes of this state or under common law." Nor do the requirements, that the employee provide the employer notice, and an opportunity to cure unsatisfactory working conditions before pursuing legal action, pose an unreasonable obstacle to litigation. The AEPA is a permissible legislative edict requiring an aggrieved employee to satisfy prelitigation grievance procedures before filing a lawsuit. It does not abrogate tort claims that existed at common law, but simply requires steps be taken to rectify a grievance prior to initiating litigation. The additional pre-litigation requirements do violate our state constitutional protections.
III. Sufficiency of the Complaint
A. Fraudulent Misrepresentation
¶11 Gerard argues the superior court incorrectly determined his fraudulent misrepresentation claim fell within the AEPA. To resolve this issue, we consider the substance of the allegations, rather than the labels attached. See Thomas v. Goudreault, 163 Ariz. 159, 163-64 (App. 1989) (citing McClure v. Johnson, 50 Ariz. 76, 86 (1937)); see also White, 664 F. Supp. 2d at 1061 (rejecting the plaintiff's "transparent attempt to avoid complying with the strict statutory requirements of the [A]EPA" by characterizing his claim as one for breach of contract rather than arising from the termination of his employment).
¶12 The gist of Gerard's fraudulent misrepresentation claim is that InEight knowingly made false statements about the product Gerard was to sell and the likelihood he could generate commissions and bonuses. Gerard asserts he relied on these statements in choosing to accept and continue his employment. Gerard posits that, in actuality, InEight's product was unsaleable, and its sales quota requirements doomed him to failure. He resigned from his position after being "strung along, lied to, pressured to falsify his results and otherwise mistreated until he literally couldn't take it anymore." To the extent Gerard seeks damages arising from his 'forced resignation,' his claims fall squarely within the AEPA. His failure to engage in a prelitigation grievance process and afford his employer the opportunity to cure unsatisfactory working conditions bars his recovery under the AEPA. See supra ¶¶ 6-7.
¶13 Gerard declares that, "had [he] known the truth about the initial . . . false or fraudulent misrepresentations and omissions made to him[,] he would have not accepted the position in the first place." Gerard's assertion—that he would not have accepted employment with InEight if he received accurate information regarding InEight's product and sales scheme—adequately states a claim for fraudulent misrepresentation in the inducement. This claim could exist independently from the AEPA. See Wisehart v. Meganck, 66 P.3d 124, 130 (Colo. App. 2002) (collecting cases approving a claim of fraudulent inducement of at-will employment). The superior court erred in dismissing the claim on that basis.
¶14 Our inquiry does not end there. InEight argues that even if the claim for fraudulent misrepresentation/fraudulent inducement survives the AEPA, Gerard failed to adequately plead the claim.
Gerard argues the appellate court lacks jurisdiction to consider this argument because InEight did not file a cross-appeal. He is incorrect. In the course of our de novo review, this Court may affirm the dismissal of a complaint "on any basis supported by the record." Leflet v. Redwood Fire & Cas. Ins., 226 Ariz. 297, 300, ¶ 12 (App. 2011) (citing Solimeno v. Yonan, 224 Ariz. 74, 82 (App. 2010)).
¶15 Most civil claims are pleaded via a "short and plain statement" of the facts. Ariz. R. Civ. P. 8. However, fraud must be pleaded with particularity, Ariz. R. Civ. P. 9(b); "[t]he mere averment that something is 'fraudulent' is not sufficient," Brazee v. Morris, 65 Ariz. 291, 293 (1947). Thus, to adequately plead fraud, a complainant must allege particular facts that would establish:
(1) a representation; (2) its falsity; (3) its materiality; (4) the speaker's knowledge of its falsity or ignorance of its truth; (5) the speaker's intent that it be acted upon by the recipient in the manner reasonably contemplated; (6) the hearer's ignorance of its falsity; (7) the listener's reliance on its truth; (8) the right to rely on it; and (9) his consequent and proximate injury.Wells Fargo Credit Corp. v. Smith, 166 Ariz. 489, 494 (App. 1990) (citation omitted). The failure to properly plead any one of these elements is fatal to a fraud claim. See id.
¶16 Gerard did not plead any facts suggesting he lost any opportunity or incurred any out-of-pocket costs as a result of his decision to accept InEight's offer of employment. Necessarily, he failed to assert he suffered consequent and proximate injury based on his acceptance of employment. Rather, Gerard claims he became frustrated, suffered emotional distress that manifested in physical injury, and failed to earn bonus pay he would have earned if InEight's representations were true. The injuries he identifies all stem not from his inducement to take a job with InEight, but rather, his ongoing decision to continue with his at-will employment when it became clear that it was not satisfying his needs. See Demasse v. ITT Corp., 194 Ariz. 500, 504-05 (1999) (explaining that the terms of an at-will employment relationship may be unilaterally amended by either party, with the amended conditions accepted through the employer's decision to retain the employee and the employee's decision to continue to work); see also Johnson v. Associated Milk Producers, Inc., 886 N.W.2d 384, 391 (Iowa 2016) ("[A]n employment contract terminable at will is subject to modification at any time by either party as a condition of its continuance. The employee's only alternative is to accept the new conditions or quit.").
For this same reason, we reject any suggestion that Gerard's claim that "had he known the truth about the . . . ongoing and repeated false or fraudulent misrepresentations and omissions made to him[,] he . . . would have resigned earlier" states any actionable claim of fraud.
¶17 Gerard's complaint does not identify any injury proximately caused by his decision to work for InEight, but only that his employment with InEight failed to meet his expectations. See Salica v. Tucson Heart Hosp.-Carondelet, L.L.C., 224 Ariz. 414, 418, ¶ 13 (App. 2010) (defining proximate cause as "that which, in a natural and continuous sequence, unbroken by any efficient intervening cause, produces an injury, and without which the injury would not have occurred") (citing Robertson v. Sixpence Inns of Am., Inc., 163 Ariz. 539, 546 (1990)). Accordingly, his fraudulent misrepresentation claim fails.
B. Negligence
¶18 Gerard's negligence claims are premised upon InEight's hiring, supervision, and retention of its vice president. Gerard asserts InEight knew or should have known he was "unfit or unqualified to perform [and continue performing] the work for which he was hired." Gerard alleges the vice president's incompetence caused the intolerable working conditions that eventually forced him to resign. This claim also falls squarely within the AEPA and is barred by Gerard's failure to comply with the AEPA's notice provisions. See supra ¶¶ 6-7.
C. Intentional Infliction of Emotional Distress (IIED)
¶19 Gerard argues the superior court erred by concluding he failed to plead circumstances sufficiently outrageous to state a claim for IIED. He asserts that fraud, by definition, involves a willful act of deception that is, in all instances, beyond all possible bounds of decency. This is not the law.
¶20 To state a claim for IIED, the complainant must allege conduct "so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community in which an average member of the community would exclaim, 'Outrageous!'" Ford v. Revlon, Inc., 153 Ariz. 38, 43 (1987) (quoting Restatement (Second) of Torts § 46 cmt. d). The conduct necessary to support such a claim "falls at the very extreme edge of the spectrum of possible conduct." Watts v. Golden Age Nursing Home, 127 Ariz. 255, 258 (1980). Moreover, the superior court is empowered to "make a preliminary determination whether the conduct may be considered so outrageous and extreme so as to permit recovery." Nelson v. Phx. Resort Corp., 181 Ariz. 188, 199 (App. 1994) (citation omitted).
¶21 Gerard alleges InEight intentionally denied him the tools he needed to succeed in his position, subjected him to an environment where his peers falsified their successes, and reprimanded him for improper work attire. If proved, the conduct may be unfortunate, but it does not rise to the level necessary to fall within the quite narrow range of "extreme and outrageous" conduct necessary to establish a claim of IIED. See, e.g., Watts, 127 Ariz. at 258 (concluding an unjustifiable delay in notifying a wife of her husband's terminal illness was not outrageous); Shepherd v. Costco Wholesale Corp., 246 Ariz. 470, 475, ¶ 20 (App. 2019) (concluding jokes about the complainant's need for erectile disfunction medication "may have been in poor taste, [but] they do not approach the level of outrageousness needed to prove [IIED]"); Mintz v. Bell Atl. Sys. Leasing Int'l, Inc., 183 Ariz. 550, 554 (App. 1995) (concluding the "failure to promote [the complainant] does not 'go beyond all possible bounds of decency,' even if [the decision] was motivated by sex discrimination or retaliation"); Wallace v. Casa Grande Union High Sch. Dist. No. 82 Bd. of Gov'rs, 184 Ariz. 419, 428 (App. 1995) (concluding the demotion of the complainant amid statements that "nobody likes you" and "you piss people off" was not extreme or outrageous). The superior court properly dismissed the claim for IIED.
IV. Motion for Reconsideration
¶22 Gerard argues the superior court erred in denying his motion to reconsider the dismissal of his complaint. Having concluded the court correctly dismissed Gerard's claims, we cannot say the court abused its discretion in declining Gerard's request to reconsider those rulings.
CONCLUSION
¶23 The superior court's orders dismissing Gerard's complaint are affirmed.