Opinion
CIVIL NO. 3:02-CV-10145
November 3, 2003
ORDER
The Court has before it defendants Borden Chemical, Inc.'s, HA-International, Inc.'s, and Richard Parker's motions to dismiss, filed separately on August 12, 2003. Plaintiff resisted the motions on October 3, 2003. Defendant Borden Chemical, Inc. filed a reply on October 29, 2003. Defendants HA-International, Inc. and Richard Parker jointly filed a reply on October 29, 2003. The motions are now considered fully submitted.
I. BACKGROUND
The following facts are presented in the light most favorable to plaintiff. At all times material to the litigation, plaintiff was an employee of defendant HA-International, LLC ("HAT"), a producer and supplier of foundry resins. Shortly after a 2001 merger between defendant HAI and defendant Borden Chemical, Inc., plaintiff and other employees were assembled in a meeting with senior management of the company. Senior management told the employees that they were the "best of the best" in their industry, that the entire group was a key part of the business, and that they would not need to worry for years to come about a job. At around the same time, plaintiff was informed of his new compensation arrangement that included a bonus tied to performance. Plaintiff was also required to sign a noncompetition agreement ("NCA"). Plaintiff alleges that shortly after signing the NCA, he was informed by senior management that he was not to solicit business away from Ashland, Inc., the only other viable competitor in the market.
In April 2002, plaintiff was advised that a price change for the product he sold was about to be made. While internal discussions were taking place about the change, John Collias, a national accounts manager for defendant HAI, called Williams and instructed him to forward a copy of the impending price change to Ashland.
Over the course of the summer, plaintiff was involved in submitting competitive bids to several of Ashland's customers in spite of instructions not to compete with Ashland. Plaintiff ultimately succeeded in winning a contract that transferred business from Ashland to defendant HAI.
In August 2002, defendant HAI retained attorneys to conduct an internal investigation into plaintiff's role in possible antitrust violations related to defendant HAI and Ashland. On August 8, 2002, plaintiff and his attorney met with the investigators and plaintiff told the investigators about the letter that plaintiff had sent to Ashland. Shortly thereafter, in September 2002, plaintiff was terminated for violating company policy by providing Ashland with an advanced copy of a proposed HAI price increase announcement.
In response, plaintiff filed a claim in state court alleging a series of contract and tort claims arising out of his discharge by defendant HAI. On November 22, 2002, plaintiff filed a complaint before the Department of Labor under the whistle blower provisions of the Sarbanes-Oxley Act, 18 U.S.C. § 1514A. After the 180-day statutory period for exclusive consideration of plaintiff's claim by the Department of Labor expired, plaintiff refilled it in this court, and amended the complaint to add the common law claims contained in plaintiff's original state court petition.
Count I of plaintiff's complaint states a claim for breach of an alleged oral agreement to employ plaintiff indefinitely. Count II requests declaratory relief voiding the NCA. Count III alleges negligent and fraudulent misrepresentation. Count IV alleges defendant HAI wrongfully discharged plaintiff in violation of public policy. Count V sets forth claims for defamation, intentional infliction of emotional distress, and tortious interference. Count VI claims defendant HAI's conduct violated the Sarbanes-Oxley Act's whistle blower provision.
II. APPLICABLE LAW AND DISCUSSION
A. Whether Plaintiff has Standing to Bring Claims Against Borden Chemical
Defendant Borden Chemical initially moves to dismiss plaintiff's complaint for lack of subject matter jurisdiction, alleging that plaintiff lacks standing to bring any of the employment related claims because defendant Borden Chemical was not plaintiff's employer. See Federal Rule of Civil Procedure 12(b)(1). To have standing plaintiff must show (1) an injury in fact, (2) a causal connection between the injury and the conduct complained of, and (3) that it is likely the injury will be redressed by a favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). At the pleading stage, however, "general factual allegations of injury resulting from the defendant's conduct may suffice, for on a motion to dismiss we `presum[e] that general allegations embrace those specific facts that are necessary to support the claim.'" Id. at 561 ( quoting Lujan v. National Wildlife Federation, 497 U.S. 871 (1990)). Reviewing plaintiff's complaint under the applicable standard, the Court finds that the complaint sufficiently establishes plaintiff's standing to bring claims against defendant Borden Chemical.
B. Rule 12(b)(6) Motion to Dismiss Standard
This Court cannot dismiss plaintiff's complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) unless it appears beyond doubt plaintiff can prove no set of facts in support of his claim which would entitle him to relief. Rosenberg v. Crandell, 56 F.3d 35, 37 (8th Cir. 1995) ( quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). "`The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims . . .'" Rosenberg v. Crandell, 56 F.3d at 37 ( quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)). In determining whether to grant a motion to dismiss, a court should examine the complaint in the light most favorable to the nonmoving party, and should construe all allegations contained in the complaint as true. Kohl v. Casson, 5 F.3d 1141, 1148 (8th Cir. 1993). A court should grant a motion to dismiss "`as a practical matter . . . only in the unusual case in which a plaintiff includes allegations that show on the face of the complaint that there is some insuperable bar to relief.'" Frey v. City of Herculaneum, 44 F.3d 667, 671 (8th Cir. 1995) ( quoting Alexander v. Peffer, 993 F.2d 1348, 1349 (8th Cir. 1993)).
C. Breach of Contract Claim
In Count I of the complaint, plaintiff alleges that defendants HAI and Borden breached an oral agreement created when senior management of defendant HAI told a group of employees, including plaintiff, that they were the "best of the best" in their industry, that the entire group was a key part of the business, and that they would not need to worry for years to come about a job. Plaintiff's Complaint ¶¶ 31, 56. Plaintiff contends that signing the NCA shortly after defendant HAI's promise of indefinite employment, represented consideration for the supposed change in his employment status.
Plaintiff does not dispute, however, that the NCA explicitly stated that plaintiff was an at-will employee. The NCA contains a choice of law provision that designates the contract be reviewed under Ohio law. Under Ohio law, an at-will employee may be terminated at any time, with or without cause. See Wiles v. Medina Auto Parts, 773 N.E.2d 526, 529 (Ohio 2002). Moreover, the NCA contains a "complete integration" clause indicating the document represents the entire agreement between plaintiff and defendant HAI, thereby negating any previous promises by defendant HAL See Defendant HAI's Motion to Dismiss, Attachment B at ¶ 16. Accordingly, the Court finds that any oral representations made by defendant HAI prior to plaintiff signing the NCA were extinguished.
"This Agreement shall be governed by the laws of the State of Ohio applicable to agreements made and to be performed entirely within such State, without giving effect to the principles of conflicts of law thereof." Defendant HAI's Motion to Dismiss, Attachment B at ¶ 14.
Plaintiff also alleges that representations made to him after signing the NCA modify the agreement. To prove a new oral contract or to modify an existing agreement, the terms must be sufficiently definite for the court to be able to determine with reasonable certainty the duties of each party. See Allied Erecting Dismantling Co. v. Uneco Realty Co., 765 N.E.2d 420 (Ohio App.Ct. 2001); Gallagher, Langlas Gallagher v. Burco, 587 N.W.2d 615 (Iowa Ct.App. 1998). In the present case, however, plaintiff failed to indicate any statements by defendant HAI that were definite enough to allow modification of the NCA. The only statement disclosed by plaintiff, that senior management of defendant HAI told a group of employees that they need not worry about jobs for years to come, is vague and, thus, does not sufficiently define the terms or duration of plaintiff's employment. Plaintiff's Complaint ¶ 31. Moreover, because this statement was allegedly made prior to plaintiff signing the NCA, it cannot modify the agreement. The Court finds that plaintiff has failed to sufficiently allege the existence of an oral modification of his previous at-will employment agreement with defendant HAI.
Plaintiff contends that the alleged oral modification is governed by Ohio law. Defendant HAI cites Iowa cases. Because the relevant law is the same in both states, the Court need not resolve this conflict.
Plaintiff also included defendant Borden Chemical in his breach of contract claim. Because the Court finds that Count I of the complaint failed to state a cause of action against defendant HAI, the claim is also dismissed with regard to defendant Borden Chemical. Accordingly, defendants' motions to dismiss Count I are granted.
D. Declaratory Judgment of Non-Competition Agreement
In Count II of the complaint, plaintiff seeks a declaratory judgment that the NCA is unenforceable. First, plaintiff argues that he is not bound by the NCA because defendant HAI never returned a signed copy to plaintiff, and therefore never accepted the agreement. Under Ohio law, however, a contract signed by only one party is enforceable against that party, even if the other party did not signed the agreement. See Brumm v. McDonald Co. Securities, Inc., 603 N.E.2d 1141, 1146 n. 7 (Ohio App.Ct. 1992) ("By analogy, we would further note that even those contracts required by the Ohio Statute of Frauds to be in writing will be enforceable so long as there is some memorandum or writing `signed by the party to be charged therewith'. R.C. 1335.05. Thus, it is not required that the party seeking to enforce the contract also has signed the contract. The argument that a memorandum signed by only one party lacks mutual assent and that the contract should not be enforceable against either party unless both sign the memorandum has been consistently rejected as contrary to Ohio law.").
See footnote 1.
Plaintiff also argues that defendants HAI and Borden Chemical fraudulently induced plaintiff to sign the NCA. As explained below in the Court's analysis of Count III, the Court finds plaintiff failed to meet the pleading requirements of Federal Rule of Civil Procedure 9(b).
Plaintiff further alleges that the NCA is invalid because it violates public policy. As a general rule, courts will enforce non-competition agreements that are reasonable. See Raimonde v. Van Vlerah, 325 N.E.2d 554, 547 (Ohio 1975); see also Iowa Glass Depot, Inc., v. Jinrich, 338 N.W.2d 376, 381 (Iowa 1983). Plaintiff, however, fails to provide any explanation in either his complaint or his brief as to how the NCA is unreasonably, and thus violates public policy. Plaintiff's mere conclusory statements that the NCA violates public policy, without more, are insufficient to survive defendants HAI's and Borden Chemical's motions to dismiss.
The Court finds that the NCA is not void for lack of mutual assent and plaintiff has not shown that it violates public policy. Accordingly, defendants' motion is granted insofar as it seeks to dismiss plaintiff's complaint for lack of mutual assent and violation to public policy. The Court will, however, as explained below, grant plaintiff leave to amend Count II to attempt to comply with Federal Rule of Civil Procedure 9(b) with respect to plaintiff's allegations of fraud.
E. Negligent and/or Fraudulent Misrepresentation Claim
In Count III, plaintiff asserts that defendants HAI and Borden Chemical made negligent and/or fraudulent statements to induce plaintiff to accept a job with defendant HAL More specifically, plaintiff alleges that defendant HAI induced him to accept the job based on assurances that he would have secure employment with the company, and without informing him of illegal antitrust practices.
First, to state a claim for negligent misrepresentation under Iowa law, plaintiff must show that defendants HAI and Borden Chemical owed him a duty to supply accurate information about his employment with the company. Iowa courts have refused to recognize such a duty in the employment context "[w]here the defendant is not in the business of supplying information, and the parties deal at arm's length in a commercial transaction." Fry v. Mount, 554 N.W.2d 263, 265 (Iowa 1996). In the present case, plaintiff has presented no allegations to suggest that the relationship between plaintiff and defendants HAI and Borden was such that they were not dealing at arm's length with respect to the terms of employment.
Several of plaintiff's claims were brought under state law, requiring the Court to determine which state law applies. A district court sitting in diversity must apply the choice of law rules of the state in which it sits. Penney v. Praxair, Inc., 116 F.3d 330, 333 n. 4 (8th Cir. 1997); Simpson v. Liberty Mutual Ins. Co., 28 F.3d 763, 764 (8th Cir. 1994). In tort actions, such as the present case, Iowa has adopted the most significant relationship test set forth in § 145 of the Restatement (Second) of Conflicts. Drinkall v. Used Car Rentals, Inc., 32 F.3d 329, 331 (8th Cir. 1994) ( citing Cameron v. Hardisty, 407 N.W.2d 595, 597 (Iowa 1987)). "`The basic premise of the most significant relationships theory is that the court of the forum should apply the policy of the state with the most interest in the litigants and the outcome of the litigation.'" Id. ( quoting Fuerste v. Bemis, 156 N.W.2d 831, 834 (Iowa 1968)). In the absence of a conflict between the laws of different states with respect to the issues at hand, the law of Iowa, the forum state, prevails. See Phillips v. Marist Society of Washington Province, 80 F.3d 274, 276 (8th Cir. 1996). Additionally, the Court notes that plaintiff may appear to be pleading fraud in the inducement. Such a claim involves the NCA, which may implicate Ohio law under the agreement's choice of law provision. As previously mentioned, the relevant law is the same in both Iowa and Ohio. No conflict is apparent and the parties seem to agree that Iowa law applies in this area. Accordingly, the Court will analyze plaintiff's state law claims under Iowa substantive law.
Secondly, a claim for fraudulent misrepresentation requires plaintiff to prove (1) defendant made a misrepresentation to plaintiff, (2) the representation was false, (3) the representation was material, (4) defendant knew the representation was false, (5) defendant intended to deceive plaintiff, (6) plaintiff acted in reliance on the truth of the representation and was justified in relying on the representation, (7) the representation was a proximate cause of plaintiff's damages, and (8) the amount of damages. Gibson v. ITT Hartford Ins. Co., 621 N.W.2d 388, 400 (Iowa 2001). Defendants HAI and Borden Chemical argue plaintiff failed to plead fraud with particularity, as required under Federal Rule of Civil Procedure 9(b). The law governing motions to dismiss fraud claims under Rule 9(b) was summarized by the Eighth Circuit in Commercial Property Investments, Inc. v. Quality Inns International Inc., 61 F.3d 639, 644 (8th Cir. 1995)):
Rule 9(b) requires that "[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." "`Circumstances' include such matters as the time, place and contents of false representations, as well as the identity of the person making the misrepresentation and what was obtained or given up thereby." Bennett v. Berg, 685 F.2d 1053, 1062 (8th Cir. 1982), adhered to on reh'g, 710 F.2d 1361 (8th Cir.) (en banc), cert. denied, 464 U.S. 1008 (1983). Because one of the main purposes of the rule is to facilitate a defendant's ability to respond and to prepare a defense to charges of fraud, Greenwood v. Dittmer, 776 F.2d 785, 789 (8th Cir. 1985), conclusory allegations that a defendant's conduct was fraudulent and deceptive are not sufficient to satisfy the rule. In re Flight Tramp. Corp. Sec. Litig., 593 F. Supp. 612, 620 (D. Minn. 1984).
Defendants HAI argues the allegations set forth the complaint fail to identify the person(s) who made the alleged misrepresentations, the person(s) to whom they were made, the date, time and place or contents of the alleged misrepresentations.
The Court agrees with defendants HAI and Borden that plaintiff's complaint is conclusory in this regard, and lacks the necessary identifying characteristics. Without additional information, it is unreasonable to expect defendants HAI and Borden to file a responsive pleading to Count III. The appropriate remedy is not dismissal, however. Rather, the Court will allow plaintiff the opportunity to amend their complaint to comply with Rule 9(b). See Nagel v. Merrill Lynch, Pierce, Fenner Smith, 790 F. Supp. 203, 210 (S.D. Iowa 1992)
In summary with regard to Count III, the Court finds that defendant HAI's statements to plaintiff, as discussed above, are not actionable under Iowa law insofar as they related to negligent misrepresentation. To the extent that plaintiff claims fraudulent misrepresentation and/or fraudulent inducement, the Court grants plaintiff leave to amend Count III to attempt to comply with Federal Rule of Civil Procedure 9(b).
F. State Wrongful Discharge Claim
In Court IV of the complaint, plaintiff alleges that he was terminated for reporting an alleged antitrust violation aimed at eliminating competition, and that his termination violated state public policy. Initially, the Court notes that plaintiff was an at-will employee. Under Iowa law, an employer generally may discharge an at-will employee at any time for any reason. Huegerich v. IBP, Inc., 547 N.W.2d 216, 219 (Iowa 1996); Borschel v. City of Perry, 512 N.W.2d 565, 566 (Iowa 1994). The Iowa Supreme Court has recognized two exceptions to this rule: (1) if the discharge violates a "well-recognized and defined public policy of the state": and (2) if a contract has been created by an employee handbook or manual, and the contract is somehow breached. Borschel, 512 N.W.2d at 566 ( quoting Springer v. Weeks and Leo Co., 429 N.W.2d 558, 560 (Iowa 1988)). The public policy exception is at issue in the present case.
The Court finds that Iowa law applies. See footnote 3.
Although it does not dispute that plaintiffs claim falls within the scope of the public policy exception to the employment at-will doctrine, defendants HAI and Borden Chemical nevertheless contend that plaintiff has failed to allege facts sufficient to withstand a motion to dismiss on the issue. To recover damages under the public policy exception to the employment at-will doctrine, "a plaintiff must establish (1) engagement in a protected activity, (2) adverse employment action, and (3) a causal connection between the two." Teachout v. Forest City Community School Dist., 584 N.W. 296, 299 (Iowa 1998). In the present case, plaintiff contends that he provided information to investigators which he reasonably believed constituted a violation of federal anti-trust law. The parties do not dispute that if plaintiff s allegations are true, such actions would constitute a protected activity. Moreover, plaintiff has sufficiently alleged that supplying this information was a contributing factor in his subsequent termination. There is no dispute plaintiff suffered an adverse employment action — in this case, termination. Consequently, plaintiff has sufficiently alleged that he was engaged a protected activity, and claimed a casual connection between the protected activity and his termination by defendants HAI and Borden Chemical. Defendants HAI's and Borden Chemical's motions to dismiss are denied with regard to Count IV.
G. Defamation, Intentional Infliction of Emotion Distress, and Tortious Interference Claim
In Count V of the complaint, plaintiff claims that defendants HAI, Borden Chemical and Richard Parker, plaintiff's former supervisor at HAI, made defamatory statements in an attempt to "blackball" plaintiff in the foundry resins industry, acted outrageously and intentionally to cause plaintiff severe and extreme emotion distress, and tortiously interfered with his contractual and prospective business relationships.
In his defamation claim, plaintiff alleges only that defendants "made false and malicious statements about [plaintiff], knowingly, intentionally, and for the express purpose and design of `blackballing' him in the industry." Plaintiff's Complaint, ¶ 72. Defendant Parker correctly notes that even under liberal federal pleading standards, plaintiff must at least allege the substance of the defamatory statements, when they were made and to whom they were made. See Freeman v. Bechtel Construction Co., 87 F.3d 1029, 1031 (8th Cir. 1996). Plaintiff's complaint failed to comply with even the liberal federal pleading standards, and thus, plaintiff failed to establish his prima facie case of defamation.
Defendants also contend that plaintiff has not sufficiently established his claim for intentional infliction of emotional distress. Again plaintiff merely alleges that "the acts of Defendant and Parker were outrageous, were done intentionally to cause severe and extreme emotional distress, and have caused [plaintiff] to suffer severe emotional distress," without identifying which acts by defendants caused plaintiff's alleged emotional distress, who committed them, or when they were committed. Even assuming the Court were to consider all allegations made by plaintiff under other Counts in the complaint, there is an insufficient basis to sustain a claim for intentional infliction of emotional distress under Iowa law. See, e.g., Northrup v. Farmland Industry, Inc., 372 N.W.2d 193 (Iowa 1985); Vinson v. Linn-Mar Community School Dist., 360 N.W.2d 108 (Iowa 1984).
See footnote 3.
Plaintiff also appears to include a claim for tortious interference in Count V of his complaint. Plaintiff, however, failed to allege anything other than "[t]he acts of Defendants and Parker establish claims for defamation, intentional infliction of emotional distress, and tortious interference with [plaintiff's] contractual and prospective business relationships. . . ." Plaintiff's Complaint, ¶ 74 (emphasis added). The Court finds this clearly insufficient to establish a prima facie case of tortious interference.
The Court agrees with defendants that plaintiff has not sufficiently established the claims alleged in Count V. The Court grants plaintiff leave to amend his claims for defamation, intentional infliction of emotional distress or tortious interference to include the substance of the alleged statements in question, when they were made and to whom they were made.
H. Claim Under the Sarbanes-Oxley Act
In Count VI, plaintiff contends that he was wrongfully discharged in violation of the Sarbanes-Oxley Act's whistle blower provision. Defendants HAI and Borden Chemical move to dismiss Court VI of plaintiff's complaint for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1). Court VI alleges that defendants HAI and Borden Chemical violated 18 U.S.C. § 1514A. Defendants HAI contends that it is not subject to § 1514A because it has no shares or other securities that are publically traded. Defendant Borden Chemical, on the other hand, does not dispute that it is subject to § 1514A; instead contending that it is not liable because it is not plaintiff's employer. Plaintiff counters that § 1514A applies to defendant HAI, because its majority owner, defendant Borden Chemical, is a company subject to the statute.
"In order to properly dismiss for lack of subject matter jurisdiction under Rule 12(b)(1), the complaint must be successfully challenged on its face or on the factual truthfulness of its averments." Titus v. Sullivan, 4 F.3d 590, 593 (8th Cir. 1993) ( citing Osborn v. United States, 918 F.2d 724, 729 n. 6 (8th Cir. 1990)) (additional internal citations omitted). If, as in the present case, the defendant makes a factual attack on the jurisdictional allegations, plaintiff's factual allegations are not presumed true. Osborn, 918 F.2d at 729 n. 6 (internal citation omitted); see also Godfrey v. Pulitzer Publishing Co., 161 F.3d 1137, 1140 (8th Cir. 1998) ("In Osborn, we held that a district court has power to decide issues of disputed fact when ruling on a Rule 12(b)(1) motion to dismiss for lack of jurisdiction."). In fact, it is the burden of the plaintiff, or non-moving party, to prove that subject matter jurisdiction exists by a preponderance of the evidence. Id. at 729-31. To make this determination, the district court may consider matters outside of the pleadings, including affidavits, and deposition testimony. Titus, 4 F.3d at 593 ( citing Land v. Dollar, 330 U.S. 731, 735 n. 4 (1947)).
Because of the inadequacy of the record before the Court, the Court will not make a ruling at this time. Accordingly, all parties are given an opportunity to conduct further limited discovery, and submit briefings in support of their respective positions on the Count VI jurisdictional issue. Briefs should be submitted within 60 days of the date of this order.
III. CONCLUSION
For the reasons outlined above, the motions to dismiss Count I are GRANTED. The motions to dismiss Counts II and III are GRANTED in part and DENIED in part. The motions to dismiss Count IV are DENIED. Plaintiff is granted leave to amend Count V. The Court will defer ruling on the motions to dismiss Count VI until the parties have submitted their additional briefs.
Plaintiff is granted leave to amend the complaint with respect to Counts II and III fraud claims, and Count V claims for defamation, intentional infliction of emotional distress, and tortious interference. Plaintiff's amended complaint should be submitted within 60 days of the date of this order. Plaintiff is strongly cautioned, however, to only amend the complaint with respect to claims that are supported by a factual basis. Failure to do so may result in sanctions under Federal Rule of Civil Procedure 11.
IT IS ORDERED.