Jesse v. Sphinx Systemhouse, Inc. et al

Filing 24

MEMORANDUM Opinion Signed by the Honorable John F. Grady on 11/17/2011. Mailed notice(cdh, )

10-8037.111-JCD

November 17, 2011

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
LEONARD JESSE,
Plaintiff,
v.
SPHINX SYSTEMHOUSE, INC.;
SUBBU ALURI; J.R. RAMMOHAN;
SUDAKAR VALLURU; and SAYED
KHALEEL,
Defendants.

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No. 10 C 8037

MEMORANDUM OPINION
Before the court is the motion of defendant Subbu Aluri to
dismiss the First Amended Complaint.

For the following reasons,

the motion is granted in part and denied in part.
BACKGROUND
Leonard Jesse brings this action against Sphinx Systemhouse,
Inc. (“Sphinx”) and certain of its principals1 for breach of an
employment agreement, violation of the Illinois Wage Payment and
Collection Act, and violation of the Pennsylvania Wage Payment and
Collection Law.

Jesse alleges that he was hired by defendants in

July 2007 pursuant to an Employment Agreement.

He claims that on

March 13, 2008, defendants terminated his employment without giving
1/

The four individual defendants and their alleged positions with Sphinx
are Subbu Aluri, a director; J.R. Rammohan, Chief Executive Officer; Sudakar
Valluru, an owner and director; and Sayed Khaleel, Senior Manager of Business
Development. (First Am. Compl. ¶¶ 4-7.)

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him the written notice and compensation that is provided for in the
Agreement.
this

It is also alleged that defendants’ failure to pay him

compensation

violated

the

wage

laws

of

Illinois

and

Pennsylvania.
The only defendant who has been served in this action is Subbu
Aluri.

He moves for dismissal of the complaint.
DISCUSSION

Under federal notice-pleading standards, a complaint need not
contain “detailed factual allegations,” but it must have more than
mere “labels and conclusions.”
U.S. 544, 555 (2007).

Bell Atl. Corp. v. Twombly, 550

The complaint must contain sufficient facts

to raise a plaintiff’s right to relief above a “speculative” level,
id. at 555, and the claim must be “plausible on its face,” id. at
570.

“A claim has facial plausibility when the plaintiff pleads

factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, --- U.S. ----, ----, 129 S. Ct. 1937, 1949, 173
L. Ed. 2d 868 (2009).
A.

Count I (Breach of Contract)
In Count I of the complaint, plaintiff states that “[o]n July

25, 2007 Plaintiff and Defendants Sphinx and Aluri signed the
Employment Agreement.”

(First Am. Compl. ¶ 15.)

A copy of an

unsigned Employment Agreement is attached as Exhibit A to the
complaint.

Plaintiff

alleges

that

the

Agreement

obligated

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“[d]efendants” to pay plaintiff certain compensation and that
“[d]efendants”

have

“breached

their

agreement

to

pay

the

compensation and give the notice described in the Employment
Agreement.”

(First Am. Compl. ¶¶ 16, 25.)

Aluri contends that plaintiff fails to state a breach of
contract claim against him because the Employment Agreement does
not indicate that Aluri is a party to it and because no facts are
alleged that suggest he manifested an intent to be personally bound
by it.

Plaintiff responds that he has sufficiently alleged that

Aluri was a party to the agreement.

He adds that the agreement

“does not directly contradict” his allegations and is “ambiguous as
to whether Defendant Aluri signed the agreement as an agent of
Sphinx” or as a party.
The

first

(Pl.’s Resp. at 5-6.)

sentence

of

the

Employment

Agreement

states:

“Agreement made, effective as of 25th July, 2007 by and between
Sphinx Systemhouse, with its principal office located at 1202,
Harbour Ridge Lane, Downingtown, PA, USA, referred to in this
agreement as Employer, and Leonard Jesse . . . .”

(First Am.

Compl., Ex. A, at 1 (underscoring and italics omitted).)2

The

remaining paragraphs of the contract repeatedly refer to the rights

2/

The Agreement that is attached to the complaint actually appears to be
a draft. It is unsigned. In the first paragraph, instead of listing plaintiff’s
address, the agreement states “<Please mention the detailed address>.” On the
last page, underneath the space for plaintiff’s signature, instead of listing his
social security number and address, it states “SS# -” and “<Street ADDRESS>,”
“<CITY>,” “<STATE>,” and “<ZIP>.” Plaintiff does allege in paragraph 15 of the
complaint that he and Aluri signed the agreement.

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and obligations of only “Sphinx” and “Employee”--for example:
“Employee is willing to be employed by Sphinx, and Sphinx is
willing to employ employee”; “Sphinx employs, engages, and hires
employee”; “Sphinx shall pay employee, and employee shall accept
from

Sphinx”;

attention,

and

“Employee

knowledge,

and

interest of Sphinx.”

shall

skills

devote

solely

to

all

of

the

(Employment Agreement at 1-3.)

his

time,

business

and

In addition,

other language makes clear that there are only two parties to the
agreement; the phrases “either party” and “the other” are used, as
well as “both parties.”

(Employment Agreement at 5-6.)

Aluri is

mentioned nowhere in the agreement except on the last page, where
his name appears below the signature line.

He is identified as a

“Director” of Sphinx, so he would have signed the agreement in his
capacity as Sphinx’s agent.

Given the plain language of the

agreement, the mere appearance of Aluri’s name does not create any
ambiguity regarding whether he was personally a party to it.

The

agreement directly contradicts plaintiff’s allegations that Aluri,
individually, was a party to the agreement.

Where the allegations

of a complaint are contradicted by attached exhibits, the exhibits
trump the allegations. Chicago Dist. Council of Carpenters Welfare
Fund v. Caremark, Inc., 474 F.3d 463, 466 (7th Cir. 2007).

None of

the provisions in the Employment Agreement indicates that Aluri was
a party, and plaintiff fails to plead any facts suggesting that
Aluri

otherwise

assumed

personal

liability

for

Sphinx’s

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performance.

Accordingly, Count I will be dismissed without

prejudice.
B.

Count II (Violation of Illinois Wage Act)
Count II of the complaint alleges that defendants’ failure to

pay plaintiff the compensation due to him under the Employment
Agreement violated the Illinois Wage Payment and Collection Act,
820 ILCS 115/1 et seq. (the “Illinois Wage Act”).

Aluri argues

that officers or agents of employers are deemed to be employers and
therefore

liable under

the

Illinois

Wage

Act

only

when

they

“knowingly permit” the employer to violate the provisions of the
Act, 820 ILCS 115/13, and that plaintiff has failed to allege that
Aluri knew about and permitted Sphinx’s violation.

In Aluri’s

view, the allegations that Aluri was a “director and/or officer[]”
of

Sphinx

and

“authorized

and

controlled

Sphinx’s

pay,

compensation, and vacation pay practices,” First Am. Compl. ¶ 21,
are insufficient.
In response, plaintiff relies on his allegations that Aluri
signed the agreement and therefore knew of it and that he was a
director of Sphinx with supervisory authority over compensation
practices. Plaintiff asserts that these allegations are sufficient
to state a Illinois Wage Act claim, citing Gross v. Security
Associates International, Inc., No. 09 CV 3095, 2009 WL 3837435, at
*8 (N.D. Ill. Nov. 17, 2009) (Zagel, J).

In Gross, Judge Zagel

held that the plaintiff’s allegation that the individual defendants

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were

directors

of

the

corporate

defendant

allowed

for

the

reasonable inference that they knew of the agreement at issue and
knowingly permitted the corporation to violate the statute.

Aluri

attempts to distinguish Gross by arguing that the plaintiff had
also alleged that the individual defendants “personally directed
that the amounts owed plaintiffs not be paid,” 2009 WL 3837435 at
*6, but that was true only as to one of the defendants, Rodriguez,
who was discussed separately.

As to the other two defendants,

Frohman and Howe, the plaintiff had simply alleged that they were
directors of the corporate defendant, and Judge Zagel denied the
motion to dismiss the Illinois Wage Act claims against those
defendants.
Here, plaintiff alleges more than the mere fact that Aluri was
a director, the allegation that was found to be sufficient in
Gross; he also alleges that Aluri signed the agreement and thus
knew about it and that he had supervisory authority over Sphinx’s
day-to-day

affairs.

These

allegations

allow

us

to

draw the

reasonable inference that Aluri knowingly permitted Sphinx to
violate the Illinois Wage Act. The motion to dismiss the complaint
will therefore be denied as to Count II.
C.

Count III (Violation of Pennsylvania Wage Law)
In Count III of the complaint, plaintiff brings a similar

claim against all defendants for violation of the Pennsylvania Wage
Payment and Collection Law, 43 Pa. Stat. Ann. § 260.1 et seq. (the

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“Pennsylvania Wage Law”).

Count III quotes from the choice-of-law

provision in the Employment Agreement, which states that “in any
action . . . that may be brought arising out of, in connection
with, or by reason of this agreement, the laws of the State of PA,
USA shall be applicable and shall govern to the exclusion of the
law of any other forum, without regard to the jurisdiction in which
any action or special proceeding may be instituted.” (Employment
Agreement at 6.)
Aluri argues that the Pennsylvania Wage Law provides a remedy
only for

employees

who

are

“based”

in

Pennsylvania

and that

plaintiff, who is an Illinois resident, fails to plead that he was
based in Pennsylvania so as to give him standing to sue under the
statute.

Aluri cites a single case in support of his argument,

Killian v. McCulloch, 873 F. Supp. 938, 941-42 (E.D. Pa. 1995), in
which the federal district court granted defendants’ motion for
summary judgment on Wage Law claims where the plaintiffs neither
resided nor were based in Pennsylvania.
cites

to

three

post-Killian

Plaintiff, in response,

decisions,

including

one

of

a

Pennsylvania state court, that either rejected or distinguished
Killian and allowed non-resident employees to maintain Wage Law
claims where the employer was located in Pennsylvania and/or the
employment

agreement

was

governed

by

Pennsylvania

law.

See

Synesiou v. DesignToMarket, Inc., No. 01-5358, 2002 WL 501494, at
*2-3 (E.D. Pa. Apr. 3, 2002); Crites v. Hoogovens Technical Servs.,

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Inc., 43 Pa. D. & C. 4th 449, 452-58 (Pa. Com. Pl. 2000); Eastland
v. Du Pont, No. CIV. A. 96-2312, 1996 WL 421940, at *4-5 (E.D. Pa.
July 23, 1996).
The cases cited by plaintiff are well-reasoned and we are
inclined to follow them, but in any event the Employment Agreement
suggests that plaintiff may have been based in Pennsylvania.

The

Agreement states that plaintiff would “render” his employment
duties “at 1202[] Harbor Ridge Lane, Downingtown, PA, USA and at
such other place or places as Sphinx shall in good faith require or
as the interest, needs, business, or opportunity of Sphinx shall
require.”
was

at

(Employment Agreement at 2.)

least

contemplated

that

Thus, it appears that it

plaintiff

would

be

based

in

Pennsylvania, and we believe this is sufficient to sustain the
claim.

Aluri

contends

that

plaintiff

was

not

based

in

Pennsylvania, but this is an assertion of fact that does not appear
in the complaint, so we cannot consider it.

As in Eastland, we do

not have all the facts regarding plaintiff’s employment in the
current procedural posture of the case.

If it turns out that

plaintiff was not based in Pennsylvania and that Sphinx was not a
Pennsylvania employer,3 the issue can be revisited in a summaryjudgment motion.

3/
Plaintiff argues in his response brief that “[d]efendants’ principal
place of business is in Downingto[w]n, Pennsylvania.”
(Pl.’s Resp. at 10.)
Although this statement appears to be consistent with the Employment Agreement,
which states on the first page that Sphinx’s “principal office” is in
Downingtown, PA, it contradicts the allegation in the complaint that its
principal place of business is in New Jersey, First Am. Compl. ¶ 3.

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CONCLUSION
For the foregoing reasons, the motion of defendant Subbu Aluri
to dismiss the First Amended Complaint [13] is granted as to Count
I and denied as to Counts II and III.

Count I of the First Amended

Complaint is dismissed without prejudice.

A status hearing is set

for December 7, 2011 at 11:00 a.m.

DATE:

November 17, 2011

ENTER:

_____________________________________________
John F. Grady, United States District Judge