Mart v. Berkshire Hathaway Inc et al
Filing
105
OPINION AND ORDER: DENYING 27 Motion to Dismiss; GRANTING 29 Motion to Dismiss for Lack of Jurisdiction the Sarbanes-Oxley Act claim; GRANTING 32 Motion to Dismiss for Lack of Jurisdiction as it relates to plaintiff's negligent misrepresentation claim and Sarbanes-Oxley Act claim. Because no claims remain against Berkshire Hathaway it is DISMISSED from the case. Signed by Senior Judge James T Moody on 2/22/12. (jld)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
SOUTH BEND DIVISION
BRAD A. MART,
Plaintiff,
v.
FOREST RIVER, INC.,
PETER J. LIEGL, and
BERKSHIRE HATHAWAY, INC.,
Defendants.
)
)
)
)
)
)
)
)
)
)
)
No. 3:10 CV 118
OPINION AND ORDER
Defendants Forest River and Peter Liegl (“the FR defendants”) have moved to
dismiss several of plaintiff’s claims under FED. R. CIV. P. 12(b)(6) (DE # 27) and FED. R.
CIV. P. 12(b)(1) (DE # 29). Defendant Berkshire Hathaway (“Berkshire”) has also moved
to dismiss plaintiff’s claims against it under FED. R. CIV. P. 12(b)(1), FED. R. CIV. P.
12(b)(2), and FED. R. CIV. P. 12(b)(6). (DE # 32.) In his amended complaint, plaintiff
brought six claims in total. (DE # 5 at 15-21.) Count One is a breach of contract claim
against Forest River. (Id. at 15-16.) Count Two is a Sarbanes-Oxley Act claim against
each of the defendants. (Id. at 16-18.) Count Three is a retaliatory discharge claim
against Forest River. (Id. at 18-19.) Count Four is a negligent misrepresentation claim
against each of the defendants. (Id. at 19-20.) Count Six is a claim against Forest River
alleging violations of the Family Medical Leave Act. (Id. at 20-21.) Finally, Count Seven
is a defamation claim against the FR defendants. (Id. at 21.) The court will address each
of these motions in turn.
FACTUAL BACKGROUND1
Plaintiff Brad Mart sold real estate to defendant Peter Liegl in 2000, and the two
later became friends. (DE # 5 at 5.) At that point Liegl was, and still is, the CEO of
defendant Forest River. (Id. at 1.) In 2005, Mart analyzed defendant Forest River’s
business to develop strategic alternatives for Liegl. (Id. at 5.) During this time, Mart
came to believe that Forest River was the type of company that defendant Berkshire
would find attractive. (Id.) With Liegl’s permission, Mart submitted a business overview
of Forest River to Berkshire CEO Warren Buffet, and in August of 2005, Berkshire
purchased Forest River, making Forest River a wholly owned subsidiary of Berkshire.
(Id.)
After the acquisition, Liegl hired Mart to be the general manager of Forest River
Financial Services, a new business unit at Forest River. (Id. at 6.) In the fall of 2007, Liegl
told Mart that he (Liegl) was planning to retire, and asked Mart to take over as the CEO
of Forest River. (Id. at 7) This move would have required Mart to move his family from
Illinois to Indiana. (Id.) Although Mart was hesitant, Liegl eventually convinced Mart to
take the position, and on October 31, 2007, Mart accepted the position of CEO of Forest
1
For purposes of deciding defendants’ RULE 12(b)(6) motions, the court
accepts plaintiff’s factual allegations as true. Erickson v. Pardus, 551 U.S. 89, 93 (2007).
2
River. (Id.) He entered into a written agreement2 with Liegl and Forest River to become
the CEO of Forest River, effective immediately. (Id.)
2
The text of that written agreement is as follows:
Mart Employment Agreement
CEO, Forest River
October 31, 2007
Timing:
Effective October 31, 2007
Annual Salary:
$175,000 per year
Bonus:
Forest River CEO annual bonus equal to 10% of the amount of
Forest River’s Profits in excess of $90 million.[FN1] For 2008,
bonus guaranteed to be no less than the bonus Mart would
have earned that year as General Manager of Forest River
Financial Services.
[FN1]: The profit calculation will exclude federal and state
income taxes and Berkshire management fees and other
Berkshire allocations or similar charges, if any, as well as
amortization and/or depreciation of any purchase accounting
adjustments recorded in connection with Berkshire’s
acquisition of Forest River, and such calculation shall be made
using accounting principles consistent with past practices.
Relocation:
Forest River to pay real estate agent fees and closing costs
associated with selling the Mart family house in Elmhurst, IL.
Forest River to pay moving expenses associated with moving
the Mart family from Elmhurst, IL to the Elkhart area.
(DE # 5-1 at 1); see also Reger Devel., LLC v. Nat’l City Bank, 592 F.3d 759, 764 (7th Cir.
2010) (“We consider documents attached to the complaint as part of the complaint
itself.”).
3
After accepting the position, Mart bought a house in Granger, Indiana. (Id.) From
November 2007 to February 2008, Mart approached Liegl several times to discuss his
transition to the CEO position, but Liegl refused to discuss the matter. (Id. at 8.) Mart
eventually posed two questions directly to Liegl: (1) “Are you still planning to retire at
the end of 2008?” and (2) “Are you still planning for me to be CEO?” (Id.) Liegl
responded to both questions with “hell yes.” (Id.) After getting this affirmation, Mart
hired a contractor to make significant renovations to the home he had purchased in
Granger, and on July 18, 2008, Mart and his family moved to Granger to live in the
renovated home. (Id.)
During the Fall of 2008, Mart discovered that Forest River, acting through Liegl,
and at least two other “shadow-companies” owned by Liegl, were engaging in unlawful
transactions. (Id. at 9.) Mart realized that Liegl had been siphoning money from Forest
River through a series of unlawful maneuvers. (Id.) Mart began to question this
conduct, and got “pushback” from Liegl. (Id. at 10.) Mart believed some of this conduct
violated federal law. (Id.) He also believed some of this conduct to be in violation of the
Berkshire Hathaway Code of Business Conduct and Ethics (the “Code”) (DE #93-1 at
12), and reported the conduct to Buffet. (DE # 5 at 11.)
In late 2008, Mart reported the violations to Buffet during a series of phone calls.
(DE # 5 at 11.) During one of these phone calls, Buffet told Mart that only he (Buffet)
had the authority to hire and fire the CEO of a Berkshire subsidiary. (DE # 94 at 3.)
Buffet also told Mart that Mart would be made whole as a result of his reliance on the
4
October 31, 2007, agreement. (Id.) Buffet made it clear to Mart that he should discuss
these issues with Liegl, and that Mart and Liegl might have to resolve these issues by
going to Omaha, with either Mart or Liegl likely not working at Forest River after that
meeting. (Id.) During one of these conversations, Mart told Buffet he planned to meet
with Liegl that same day, and Buffet wished him luck. (Id. at 3-4.)
After informing Buffet about the improprieties, Mart confronted Liegl directly.
(DE # 5 at 11.) Liegl responded by verbally abusing Mart, including threatening Mart’s
life. (Id.) After that encounter, Liegl began subjecting Mart to a hostile work
environment. (Id.) Mart would not have approached Liegl if he had not received the
assurance from Buffet that he would be made whole, and his belief that he would be
protected by the Code. (DE # 94 at 4.) After Mart confronted Liegl, Buffet was no longer
willing to discuss these matters with Mart. (DE # 5 at 15; DE # 94 at 4.) Despite these
conversations, Buffet took no action after learning about this conduct. (DE # 5 at 11.)
In October 2008, Liegl made a company-wide announcement that Mart was
taking over as “President” of Forest River. (Id. at 12.) This position did not previously
exist, and Mart had been under the impression that he was sharing the role of CEO with
Liegl until Liegl retired at the end of 2008. (Id.) Mart and Liegl sat down for a meeting
on October 9, 2008, to discuss Mart’s transition into the CEO position. (Id.) However,
the meeting became heated, and Liegl refused to discuss the matter further. (Id.) Finally,
in a letter from Forest River dated November 19, 2008, Mart was informed he was being
terminated. (Id.)
5
LEGAL STANDARD3
Defendants have moved to dismiss plaintiff’s claims under RULE 12(b)(6) of the
FEDERAL RULES OF CIVIL PROCEDURE for failure to state a claim upon which relief may be
granted. RULE 8 of the FEDERAL RULES OF CIVIL PROCEDURE sets forth the pleading
standard for complaints filed in federal court; specifically, that rule requires that a
complaint contain “a short and plain statement of the claim showing that the pleader is
entitled to relief.” FED. R. CIV. P. 8. “The RULE reflects a liberal notice pleading regime,
which is intended to focus litigation on the merits of a claim rather than on
technicalities that might keep plaintiffs out of court.” Brooks v. Ross, 578 F.3d 574, 580
(7th Cir. 2009) (internal quotation marks omitted). “While the federal pleading standard
is quite forgiving . . . ‘the complaint must contain sufficient factual matter, accepted as
true, to state a claim to relief that is plausible on its face.’” Ray v. City of Chicago, 629 F.3d
660, 662-63 (7th Cir. 2011) (quoting Bonte v. U.S. Bank, N.A., 624 F.3d 461, 463 (7th Cir.
2010)); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007).
PLAINTIFF’S STATE LAW CLAIMS
I.
The Forest River Defendants’ Motion to Dismiss
The FR defendants have moved to dismiss plaintiff’s state law claims: breach of
contract, retaliatory discharge, negligent misrepresentation, and defamation. (DE # 27.)
In his response brief, plaintiff agrees to drop his retaliatory discharge and defamation
3
This standard applies to the FR defendants and Berkshire’s motions to
dismiss under RULE 12(b)(6).
6
claims. (DE # 93 at 2.) Therefore, only the breach of contract and negligent
misrepresentation claims remain on this motion to dismiss.
A.
Plaintiff’s Response Brief
As an initial matter, the FR defendants contend that Mart, in his response brief to
the FR defendants’ motion to dismiss, improperly alleges new theories of contractual
liability. (DE # 100 at 5-6.) The FR defendants allege that Mart has essentially amended
his amended complaint through his response brief. (Id.)
“[I]t is axiomatic that the complaint may not be amended by the briefs in
opposition to a motion to dismiss.” Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101,
1107 (7th Cir. 1984); see also Thomason v. Nachtrieb, 888 F.2d 1202, 1205 (7th Cir. 1989) (“It
is a basic principle that the complaint may not be amended by the briefs in opposition
to a motion to dismiss . . . .”) However, plaintiff has not improperly amended his
amended complaint here because he has simply alleged new theories about his breach
of contract claim. Milazzo v. O’Connell, 925 F. Supp. 1331, 1340 (N.D. Ill. 1996).
In Milazzo, the plaintiff brought an action claiming a violation of her procedural
due process rights after she was terminated from her job working at a county circuit
court. Milazzo, 925 F. Supp. at 1336-37. The plaintiff had originally claimed a property
interest in continued employment because her employer’s employee handbook
provided for a hearing prior to the discharge of an employee. Id. at 1337. But in her
response brief to the defendant’s motion to dismiss, the plaintiff changed her property
7
interest theory by claiming that her property interest in continued employment arose
out of an oral promise of continued employment from her supervisor. Id. at 1339.
In Milazzo, similar to the case at hand, the defendants argued the plaintiff should
not be allowed to “assert new facts to bolster her complaint in her response” to the
motion to dismiss. Id. The court allowed the plaintiff to assert these new facts, stating:
We find the words of Judge Easterbrook in Bartholet v. Reishauer A.G.
(Zurich), 953 F.2d 1073, 1078 (7th Cir. 1992), instructive here: “A complaint
under Rule 8 limns the claim; details of both fact and law come later, in other
documents.” We believe this approach harmonizes best with the spirit of the
Federal Rules of Civil Procedure. Milazzo’s complaint adequately describes
her procedural due process claim, and she is not forbidden from alleging
new facts, or even new legal theories about that claim, in her response brief.
Id. at 1340 (emphasis added).
In contrast, the FR defendants cite Cast Group of Companies, Inc. v. Electronic
Theatre Controls, Inc.. No. 08-cv-753-bbc, 2009 WL 2780150, at *3 (W.D. Wis. Aug. 27,
2009). In Cast, the plaintiff asserted claims in its complaint for both negligent and
intentional misrepresentation. Id. In responding to the defendant’s motion for summary
judgment, the plaintiff in Cast did not address the defendant’s argument about the
misrepresentation claim. Id. at *3. Instead, the plaintiff asserted an entirely new claim:
that defendant fraudulently induced plaintiff into entering a contract. Id. The plaintiff in
Cast acknowledged that its complaint did not include the fraudulent inducement claim,
and stated it would eventually seek leave to amend its complaint. Id. at *3. The court
refused to allow plaintiff to do this and granted defendant’s summary judgment motion
8
for the intentional misrepresentation claim, stating: “Plaintiff’s use of the words
‘intentional misrepresentation’ in the complaint does not give plaintiff license to
advance any set of allegations at summary judgment that might fall under that general
concept. Further, it is far too late now for plaintiff to amend its complaint to raise
completely new issues.” Id. at *4.
The FR defendants argue that plaintiff introduces three entirely new theories of
liability in his response brief: promissory estoppel, adequate independent
consideration, and a claim based on Bochnowski v. Peoples Federal Savings & Loan Ass’n,
571 N.E.2d 282 (Ind. 1991).4 (DE # 100 at 5.) Although the FR defendants concede that
plaintiff has pleaded enough facts to state a promissory estoppel claim (Id. at 5 n.2), they
still argue that plaintiff’s adequate independent consideration and Bochnowski claims
are improper. (DE # 100 at 5-6.) As to the adequate independent consideration claim, it
is unnecessary to decide whether plaintiff has improperly alleged this theory, because,
as set forth in more detail later in this opinion, the claim fails on its merits. The court
also believes the Bochnowski claim can proceed.
The Seventh Circuit has stated: “Rule 8(a) of the Federal Rules of Civil Procedure
says that a complaint must identify the basis of jurisdiction and contain ‘a short and
plain statement of the claim showing that the pleader is entitled to relief’” and that the
“complaint need not identify a legal theory, and specifying an incorrect theory is not
4
Although Bochnowski is not mentioned anywhere in plaintiff’s amended
complaint, the Bochnowski argument is a breach of contract claim based on the
Employment Agreement (“the Agreement”). (DE # 93 at 11-13.)
9
fatal.” Bartholet, 953 F.2d at 1077-78. In his amended complaint, plaintiff alleges facts
indicating a breach of contract claim based on the Agreement. (DE # 5 at 15-16.) Unlike
in Cast, this is not an entirely new claim. This is simply a different theory for the breach
of contract claim based on the Agreement. Although plaintiff did not explicitly set out
the Bochnowski argument in his amended complaint, he was not required to do so.
Bartholet, 953 F.2d at 1077-78. Therefore, the court finds that the Bochnowski argument
was not improperly alleged and can proceed on its merits.
B.
Plaintiff’s Status As an At-Will Employee
In their motion to dismiss, the FR defendants first argue that plaintiff’s claim for
breach of contract based on the Agreement was insufficient on its face because it did not
meet the four elements of an employment contract under Indiana law, and because the
Indiana Statute of Frauds prevented parol evidence from supplying the missing
element. (DE # 30 at 4-7.) The FR defendants argue that because the Agreement does
not meet the four-element test, plaintiff was an at-will employee and could be
discharged without just cause.5 (Id. at 5.)
Plaintiff responds by claiming that he was not an at-will employee because of
two exceptions to the at-will employment doctrine under Indiana law. (DE # 93 at 4-9.)
He also contends that the anti-retaliation provision of the Code created a unilateral
contract between Berkshire, Forest River, and plaintiff. (Id. at 5-6.) Finally, plaintiff
5
As discussed later in this opinion, the FR defendants also argue that
plaintiff’s negligent misrepresentation claim cannot survive because he was an at-will
employee. (DE # 30 at 12-13.)
10
argues that his contract was terminable, not terminated, in October 2008, thus making
the at-will doctrine inapplicable to defendants’ breach. (Id. at 11-13.)
The court will begin its analysis of the breach of contract claim by analyzing
whether plaintiff was an at-will employee. Under Indiana law, “[t]he determination of
whether an employee is at-will is a legal determination.” Bee Window, Inc. v. Turman, 716
N.E.2d 498, 500 (Ind. Ct. App. 1999). Plaintiff argues that because two exceptions to the
at-will doctrine apply to his case, adequate independent consideration and promissory
estoppel,6 he was not an at-will employee. (DE # 93 at 4-9.) The FR defendants argue
that none of plaintiff’s legal theories in his response brief change his at-will status.
(DE # 100 at 7-11.)
“When interpreting state law, a federal court’s task is to determine how the
state’s highest court would rule.” Rodas v. Seidlin, 656 F.3d 610, 626 (7th Cir. 2011). It is
also proper for a federal court to defer to state appellate courts, unless there is a
“persuasive indication[ ] that the state supreme court would decide the issue
differently.” Id. (quoting Allstate Ins. Co. v. Tozer, 392 F.3d 950, 952 (7th Cir. 2004)).
Under Indiana law, there are two basic types of employment: “(1) employment
for a definite or ascertainable term; and (2) employment at-will.” Orr v. Westminster Vill.
N., Inc., 689 N.E.2d 712, 717 (Ind. 1997). In Orr, the Indiana Supreme Court stated: “[I]n
Indiana, the presumption of at-will employment is strong . . . .” Id. at 717-18 (citing Wior
6
The FR defendants concede that plaintiff can survive the motion to
dismiss on a claim for promissory estoppel. (DE # 100 at 5 n.2.)
11
v. Anchor Industries, Inc, 669 N.E.2d 172, 177 & n.5, 178 (Ind. 1996)). However, in that
same case, the Indiana Supreme Court summarized three exceptions that can rebut the
presumption of at-will employment in Indiana: adequate independent consideration,
public policy, and promissory estoppel. Id. at 718.
“[I]n order to convert employment at will to employment requiring good cause
for termination, ‘independent consideration supplied by the employee, which results in
detriment to him and a corresponding benefit to the employer, must be given in return
for permanent employment.’” Orem v. Ivy Tech State Coll., 711 N.E.2d 864, 870-71 (Ind.
Ct. App. 1999) (quoting Hamblen v. Danners, Inc., 478 N.E.2d 926, 928 (Ind. Ct. App.
1985)). The Indiana Supreme Court has noted:
[A]n employer cannot arbitrarily fire an employee when (1) the employer
knows the employee had a former job with assured permanency (or assured
non-arbitrary firing policies) and (2) was only accepting the new job upon
receiving assurances the new employer could guarantee similar permanency.
. . . [G]ood cause must be shown in order to terminate such an employee . . . .
Romack v. Pub. Serv. Co. of Ind., 511 N.E.2d 1024, 1025-26 (Ind. 1987) (emphasis in
original) (adopting and incorporating Romack v. Pub. Serv. Co. of Ind., 499 N.E.2d 768,
776-79 (Ind. Ct. App. 1986) (Conover, J., dissenting)). The circumstances in which
Indiana courts have found this exception satisfied have been limited. In Urbanski v. Tech
Data, the court summarized the cases where the exception has been met:
Indiana Courts have identified fact scenarios in which the employee’s act or
forbearance might provide adequate independent consideration sufficient to
support an employment contract terminable only for good cause. See Romack
v. Public Service Co., 511 N.E.2d 1024 (Ind. 1987) (an employee surrendering
12
his own permanent employment with the express understanding that he
would not do so except for assurance from employer of receiving the same
protections in the new job could provide adequate consideration); Ohio Table
Pad. Co. v. Hogan, 424 N.E.2d 144, 146 (Ind. Ct. App. 1981) (an employee
abandoning his own competing business could provide adequate
consideration); Mt. Pleasant Coal Co. v. Watts, 91 Ind. App. 501, 151 N.E. 7
(Ind. Ct. App. 1926) (conveying a valuable coal lease in exchange for
employment could provide adequate consideration); Toni v. Kingan & Co.,
214 Ind. 611, 15 N.E.2d 80 (Ind. 1938) (holding that releasing the employer
from liability on a personal injury claim would constitute adequate
independent consideration.)
No. 3:07cv017, 2008 WL 141574, at *8 (N.D. Ind. Jan. 11, 2008). But simply moving
locations to take another job does not constitute adequate independent consideration.
Ohio Table Pad. Co., 424 N.E.2d at 146 (“[M]oving one’s household to a new location . . .
will not constitute independent consideration to support a contract of permanent
employment so as to impose the requirement of good cause upon the right to terminate
the employee . . . The relinquishment by the employee of an existing job, business, or
profession, without more, will not impose such requirement.”). Additionally, an
employee simply continuing his or her employment will not provide adequate
independent consideration. McCalment v. Eli Lilly & Co, 860 N.E.2d 884, 889 (Ind. Ct.
App. 2007).
It is not entirely clear from plaintiff’s response brief what adequate independent
consideration he gave his employer. All plaintiff states is “[Mart’s reports of illegal or
unethical conduct] not only placed Mart squarely under the protective umbrella of the
Berkshire Code, they also brought into play [the adequate independent consideration
exception to the at-will doctrine].” (DE # 93 at 4-5.) Plaintiff then proceeds to give a
13
general description of the adequate independent consideration exception without
explaining how it applies to his case. (Id. at 5.) Because plaintiff does not clearly put
forth his argument as to why the adequate independent consideration exception
applies, the court assumes from what little it has been given that plaintiff’s argument is
that the reports of alleged unethical and illegal behavior that Mart provided were
enough of a detriment to him and a benefit to his employer that they changed his
employment status from at-will to for cause.
The court finds that Mart did not provide adequate independent consideration
by reporting the alleged violations so as to transform his employment status to for
cause. The few Indiana cases that have found adequate independent consideration
focused on the employee giving up a job with permanent job security or some other
valuable asset. See Speckman v. City of Indianapolis, 540 N.E.2d 1189, 1192 (Ind. 1989)
(release of wrongful discharge claims against employer found to be adequate
independent consideration); Romack, 511 N.E.2d at 1025-26 (adopting and incorporating
Romack v. Pub. Serv. Co., 499 N.E.2d 768, 776-79 (Ind. Ct. App. 1986) (Conover, J.,
dissenting)) (adequate independent consideration found where employee left job with
permanent employment after receiving assurances that new job would have similar
permanent employment); Toni, 15 N.E.2d at 83-86 (adequate independent consideration
found where employee released employer from injury liability claim); Ohio Table Pad
Co., 424 N.E.2d at 146 (suggesting that employee giving up competing business to take
job could constitute adequate independent consideration); Mt. Pleasant Coal, 151 N.E. at
14
11 (conveying coal lease in exchange for employment found to be adequate
independent consideration). What Mart alleges as adequate independent consideration
here, the reporting of alleged violations, simply is not the same type of consideration
that Indiana courts have found sufficient to meet the adequate independent
consideration exception. Mart neither gave up permanent employment on the promise
of similar permanent employment nor gave up some other type of valuable asset.
The language of the Code itself lends plaintiff no support. The court may not
usually consider matters outside of the pleadings on a motion to dismiss. Albany Bank &
Trust Co. v. Exxon Mobil Corp., 310 F.3d 969, 971 ( 7th Cir. 2002). However, the Seventh
Circuit has allowed district courts to analyze documents a defendant attaches to its
motion to dismiss if the documents are referred to in plaintiff’s complaint and are
central to plaintiff’s claim. Id. (citing Venture Assocs. Corp. v. Zenith Data Sys. Corp., 987
F.2d 429, 431 (7th Cir. 1993)). Here, the Code is referred to in plaintiff’s amended
complaint on multiple pages. (DE # 5 at 2, 3, 6, 9, 11, 13, 14, 15, 19.) Additionally, as the
court has allowed plaintiff’s adequate independent consideration claim to proceed to
substantive legal analysis, the Code is also central to that claim. Plaintiff’s response brief
states: “[The reports of alleged illegal behavior] not only placed Mart squarely under
the protective umbrella of the Berkshire Code, they also brought into play a [the
adequate independent consideration exception].” (DE # 93 at 4-5.) He goes on to state:
“The Berkshire Code’s anti-retaliation promise was a job security provision that limited
Forest River’s right to terminate at-will employees. This anti-retaliation provision
15
became part of the agreement between the parties upon the formation of a unilateral
contract between Berkshire, Forest River, and Mart.” (Id. at 5.) The Code is clearly
central to plaintiff’s adequate independent consideration and unilateral contract claims
(discussed infra). Additionally, both plaintiff (DE # 93-1 at 12) and the FR defendants
(brief in support of motion to dismiss for lack of jurisdiction) (DE # 31-3 at 7) have
attached the Code to various briefs. Therefore, the court concludes it is proper to
analyze the language of the Code in relation to plaintiff’s adequate independent
consideration claim.
Although not stated expressly in his response brief,7 the language Mart appears
to rely on from the Code states:
The Company’s directors, CEO, senior financial officers and chief legal
officer shall promptly report any known or suspected violations of this Code
to the Chairman of the Company’s Audit Committee. All other Covered
Parties should talk to supervisors, managers or other appropriate personnel
about known or suspected illegal or unethical behavior.
(DE # 93-1 at 15.) Mart did not provide adequate independent consideration to his
employer by following the procedures described in the Code, thus changing his status
from an at-will employee to a for cause employee. These actions are more in line with
“continued services” than “adequate independent consideration.” As noted above, an
7
As mentioned earlier, this part of Mart’s response brief is not entirely clear
as to his theory of adequate independent consideration. The court assumes his theory is
that by reporting these alleged violations, Mart gave adequate independent
consideration to his employer, thus changing his employment status to for cause.
16
employee simply continuing employment is not sufficient for the adequate independent
consideration exception. McCalment, 860 N.E.2d at 889.
There would be bizarre logical consequences if the court accepted plaintiff’s
position on this matter. If an employee could provide adequate independent
consideration by reporting violations as set out in the Code, it seems that an employee
could provide adequate independent consideration by reporting a potential conflict of
interest or refraining from participating in insider trading. (DE #93-1 at 12-14.) The
court does not believe an Indiana appellate court would find any of these scenarios to
constitute adequate independent consideration. The court cannot find, and plaintiff
does not cite, an Indiana appellate decision that would support plaintiff’s argument that
an Indiana appellate court would recognize an exception to the at-will doctrine in this
case. Additionally, the court is mindful of Indiana’s policy favoring at-will employment,
and the reluctance of Indiana appellate courts to cut back the protections of the at-will
doctrine. As the district court in Woodall v. AES Corp. aptly stated, “we must heed
Indiana appellate courts’ frequent statements that any further exceptions to
employment at will must come from Indiana’s General Assembly and not its appellate
courts (and certainly not a federal court sitting in its district).” No. IP–02–575–C–B/S,
2002 WL 1461718, at *3-4 (S.D. Ind. July 5, 2002) (citing Morgan Drive Away, Inc. v. Brant,
489 N.E.2d 933, 934 (Ind. 1986)).
Plaintiff’s next argument that he was not an at-will employee is based on a
unilateral contract theory. Plaintiff’s theory is that defendants Berkshire and Forest
17
River made an offer via the Code by promising that no retaliatory action would be
taken against anyone reporting illegal behavior, and plaintiff accepted that offer by
reporting the alleged wrongdoing. (DE # 93 at 5-6.) Plaintiff alleges that this unilateral
contract “limited Forest River’s rights as an at-will employer” and created a separate
contract that both Forest River and Berkshire breached. (Id. at 5.)
Indiana courts have been extremely reluctant to allow employee handbooks8 to
form the basis of a unilateral contract. See Orr, 689 N.E.2d at 719-22; Hayes v. Trs. of Ind.
Univ., 902 N.E.2d 303, 312-13 (Ind. Ct. App. 2009); McCalment v. Eli Lilly & Co., 860
N.E.2d 884, 889 (Ind. Ct. App. 2007). The Indiana Court of Appeals has even gone as far
as stating that under Indiana law, employee handbooks do not create “unilateral
contracts of employment.”9 McCalment, 860 N.E.2d at 889; see also City of Indianapolis v.
Byrns, 745 N.E.2d 312, 317 n.3 (Ind. Ct. App. 2001). The Indiana courts’ refusal to
recognize employee handbooks as a basis for unilateral contracts appears to stem from
8
Although the Code is not labeled an employee handbook, plaintiff is
arguing, similar to the employees in the employee handbook cases, that this document,
a non-employment agreement document that sets out general guidelines for the
employment relationship, has an impact on the employer-employee relationship.
Accordingly, the court finds that the Code is legally analogous to an employee
handbook for the purposes of this opinion.
9
The Seventh Circuit has cast doubt on these broad statements by the
Indiana Court of Appeals, noting a “line of Indiana cases that has enforced the terms of
employee handbooks running in favor of employers on the issue of employees’
entitlement to vacation pay upon termination.” Peters v. Gilead Scis., Inc., 533 F.3d 594,
599 n.8 (7th Cir. 2008) (citing Damon Corp. v. Estes, 750 N.E.2d 891, 893 (Ind. Ct. App.
2001); Ind. Heart Assocs., P.C. v. Bahamonde, 714 N.E.2d 309, 312 (Ind. Ct. App. 1999); Die
& Mold, Inc. v. Western, 448 N.E.2d 44, 48 (Ind. Ct. App. 1983)). However, those cases
dealt with vacation pay, not the issue of at-will employment.
18
a desire to keep the at-will employment doctrine in tact. Orr, 689 N.E.2d at 722 (“We
decline plaintiffs’ invitation to construe employee handbooks as unilateral contracts and
to adopt a broad new exception to the at-will doctrine for such handbooks.”).
Although the Indiana Supreme Court has not expressly addressed whether a
unilateral employment contract requires adequate independent consideration or
whether an employee handbook can “ever constitute a unilateral contract serving to
modify [an] otherwise at-will employment relationship[,]” Orr, 689 N.E.2d at 719-20,
there have been many Indiana courts and federal courts applying Indiana law that have
required either a definite term or adequate independent consideration to find an
employee handbook constitutes a contract. See St. John v. Elletsville, 46 F. Supp. 2d 834,
843-44 (S.D. Ind. 1999) (“Since it is undisputed that the employment manual at issue
neither contained a definite term of employment nor was supported by adequate
independent consideration, we GRANT defendants’ motion for summary judgment on
the state law breach of contract claim.”) (emphasis in original); Hostettler v. Pioneer HiBred Int’l., Inc., 624 F. Supp. 169, 172 (S.D. Ind. 1985) (“[I]n the absence of a promise for
employment for a definite period of time, the existence or non-existence of any
provision of the employee handbook is immaterial.”); Wior, 669 N.E.2d at 178 n.6 (“We
also affirm the trial court regarding its conclusion that [defendant’s] Employee
Handbook does not create a claim since [plaintiff] provided no additional independent
consideration.”); Mead Johnson and Co. v. Oppenheimer, 458 N.E.2d 668, 671 (Ind. Ct. App.
19
1984) (“Employee handbooks are immaterial without an enforceable agreement
between the employer and employee of employment for a definite duration.”).
The FR defendants direct the court to Campbell v. Eli Lilly & Co., in which the
plaintiff argued that the provisions of an employee handbook constituted a covenant
that became part of his conditions of employment. 413 N.E.2d 1054, 1062-63 (Ind. Ct.
App. 1980). The court affirmed the trial court in rejecting this claim and quoted:
Even assuming, arguendo, that the handbook relied upon by appellant
constituted a part of the contract, in the absence of a promise on the part of the
employer that the employment should continue for a period of time that is either
definite or capable of determination, the employment relationship is terminable at
the will of the employer. There being no binding promise on the part of the
employee that he would continue in the employment, it must also be
regarded as terminable at his discretion as well. For want of mutuality of
obligation or consideration, such a contract would be unenforcible (sic) in
respect of that which remains executory.
Id. at 1062 (quoting Shaw v. S.S. Kresge Co., 328 N.E.2d 775, 779 (Ind. Ct. App. 1975))
(internal citations omitted and emphasis added).
Given the Indiana Supreme Court’s refusal in Orr to adopt a “broad new
exception to the at-will doctrine,”10 the court does not believe an Indiana appellate court
would be willing to agree with plaintiff that the Code limited Forest River’s rights as an
at will employer. Orr, 689 N.E.2d at 722. Here, the Code does not contain a “promise on
10
The Indiana Supreme Court also stated: “[I]n Indiana, the presumption of
at-will employment is strong, and this Court is disinclined to adopt broad and illdefined exceptions to the employment-at-will doctrine.” Orr, 689 N.E.2d at 717-18
(citing Wior, 669 N.E.2d at 177 & n.5, 178).
20
the part of the employer that the employment should continue for a period of time that
is either definite or capable of determination.”Campbell, 413 N.E.2d at 1062. Plaintiff
does not argue that there is a definite term in the Code. However, it is plaintiff’s
contention that by reporting the alleged wrong-doing, he provided consideration for
what became a unilateral contract. (Id. at 6.) But as discussed above, these actions do not
constitute adequate independent consideration under that exception to the at-will
doctrine.
Plaintiff is asking the court to chip away at the protections provided by the atwill employment doctrine, but has provided no case law to support his argument that
the Code created a unilateral contract limiting defendant Forest River’s rights as an atwill employer. The court’s own research was unable to unearth Indiana case law that
would lead the court to believe that allowing plaintiff’s claim to proceed would be
anything other than a novel exception to Indiana’s at-will employment doctrine.
Because the Indiana Supreme Court has not yet recognized that an employee handbook
can constitute a unilateral contract, the court is unwilling to make any such exception.
Plaintiff also argues that the Code created a “separate contract that Forest River
and Berkshire both breached.” (DE # 93 at 5.) Unfortunately for the plaintiff, he does
not thoroughly develop this argument. Plaintiff essentially explains what a unilateral
contract is and then proceeds to cite the “Carbolic Smoke Ball”11 case in arguing that a
11
In the “Carbolic Smoke Ball” case, a staple in first year law school classes,
the defendant produced a carbolic smoke ball to fight influenza, and in an
advertisement, promised £100 to anyone who contracted influenza or a cold after taking
21
unilateral contract theory is not a novel theory.12 (Id. at 5-6.) But what plaintiff fails to do
is present any Indiana case law that supports his position. The court will not develop
legal arguments for plaintiff. “It is not the obligation of this court to research and
construct the legal arguments open to parties, especially when they are represented by
counsel.” Sanchez v. Miller, 792 F.2d 694, 703 (7th Cir. 1986); see also U.S. v. Dunkel, 927
F.2d 955, 956 (7th Cir. 1991) (“Judges are not like pigs, hunting for truffles buried in
briefs.”).
One case from the Southern District of Indiana, Ward v. Independent Order of
Foresters, which neither party cites, is on point. No. 1:04-CV-00676-SEBVSS, 2006 WL
571874 (S.D. Ind. Mar. 7, 2006). In Ward, the plaintiff argued that the defendant, his exemployer, breached its express covenant of good faith and fair dealing when it
terminated the plaintiff after reporting violations of the company’s Code of Ethics. Id. at
7-8 & n.6. The Code of Ethics stated: “Persons who in good faith report misconduct or
the carbolic smoke balls three times a day for two weeks. Carhill v. Carbolic Smoke Ball
Co., (1893) 1 Q.B. 256, 256-257. The plaintiff, after seeing the advertisement, took the
smoke balls as directed for well over two weeks, but still contracted influenza. Id. The
court found the advertisement constituted an offer that the plaintiff accepted by
following the directions set out in the advertisement. Id. at 261-65.
12
Plaintiff also quotes Ryan v. J. C. Penney Co., Inc., where the Seventh
Circuit stated: “Indiana indeed recognizes that an employment contract may be
enforced as a valid unilateral contract although there is no mutuality of obligation.” 627
F.2d 836, 838 (7th Cir. 1980) (citing Seco Chemicals, Inc. v. Stewart, 349 N.E.2d 733, 738
(Ind. Ct. App. 1976)). However, in the very next sentence, the Seventh Circuit stated:
“Nevertheless, even for a unilateral employment contract, there must be a definite term
or separate executed consideration.” Id. As noted above, neither of these exist in the
case at hand.
22
other breaches under the Code will be protected from all forms of reprisal or retaliatory
actions.” Id. at 8 n.6. The court dismissed the express covenant of good faith and fair
dealing claim, but it also noted:
Count 2 cannot be fairly read to assert that the Code of Ethics’ promise of
whistleblower protection constituted an offer of a unilateral contract by
[defendant] which [plaintiff] accepted by his performance of reporting Code
violations. Even if it can be so read, the Indiana Supreme Court has expressly
refused to recognize “a broad new exception to the at-will doctrine for
employee handbooks.” Orr, 689 N.E.2d at 719.
Id. at *9 n.8. The facts of Ward are extremely similar to the case at hand. Although only
persuasive, the court agrees with the court in Ward, and does not believe that an
Indiana appellate court would find a separate contract here.
Finally, plaintiff argues “[t]he lack of a stated term of employment in Mart’s
employment contract did not mean that Mart and Forest River could not add a job
security clause . . . .” (DE # 93 at 4.) Plaintiff quotes the Indiana Supreme Court in Orr:
“If the parties choose to include a clear job security provision in an employment
contract, the presumption that the employment is at-will may be rebutted.” Orr, 689
N.E.2d at 717. The court will construe plaintiff’s statement as an argument that the antiretaliation section of the Code constituted an enforceable job security provision.
Although this is the extent of plaintiff’s argument on this matter, the court chooses to
address it, and finds that the strong presumption of at-will employment has not been
rebutted. Id. at 717-18 (“In Indiana, the presumption of at-will employment is
strong . . . .”).
23
Indiana case law does not support plaintiff’s argument on this point. “[A]s a rule
of contract construction, the employment at-will doctrine does not prevent job security
provisions from becoming part of an at-will employment contract, so long as the parties
intended them to be part of the employment contract and so long as the contract is
otherwise enforceable.” Bentz Metal Prods. Co., Inc. v. Stephans, 657 N.E.2d 1245, 1249 (Ind.
Ct. App. 1995) (emphasis added) (citing Orr v. Westminster Vill. N., Inc., 651 N.E.2d 795,
798 (Ind. Ct. App. 1995), rev’d on other grounds, 689 N.E.2d 712 (Ind. 1997)). As discussed
above, the Code did not create an enforceable contract.
Additionally, the facts of the case at hand are very different from the sole Indiana
appellate decision the court could find enforcing a job security provision. Eck & Assocs.,
Inc. v. Alusuisse Flexible Packaging, Inc., 700 N.E.2d 1163 (Ind. Ct. App. 1998). In Eck, the
plaintiff argued that his contract with his employer contained a clear job security
provision. Id. at 1166. The court agreed, noting that the plaintiff specifically negotiated
replacing language in the employment contract that said he could be discharged with
sixty days notice “for any reason, with or without cause” with “[t]his agreement may be
terminated by either party for just cause, upon sixty (60) days written notice.” Id. at 116769 (emphasis in original). The facts of Eck are remarkably different from the facts of this
case. Plaintiff did not negotiate with Forest River to put language in his employment
agreement that would have changed his employment status to for cause. Therefore,
Indiana’s presumption of at-will employment has not been rebutted.
24
C.
Breach of Contract
In plaintiff’s amended complaint, plaintiff alleges a breach of contract13 claim
based on the Agreement from October 31, 2007. (DE # 5 at 15.) The FR defendants
responded in their brief in support of their motion to dismiss by arguing this agreement
could not constitute an employment contract under Indiana law because the four
elements set out in Majd Pour v. Basic American Medical, Inc., have not been met. 512
N.E.2d 435, 439 (Ind. Ct. App. 1987); (DE # 30 at 4-5). The four elements of an
employment contract as set out in Majd Pour are “1) it must state the place of
employment; 2) it must state the period of employment; 3) it must state the nature of the
services the employee is to render; and 4) it must state the compensation the employee
was to receive.” Majd Pour, 512 N.E.2d at 439. The FR defendants argue the period of
employment element was missing from the written agreement. (DE # 30 at 5.) In his
13
Plaintiff’s breach of contract claim asserts that even assuming he was an
at-will employee, because the contract was terminable but not yet terminated, the
provisions of the agreement were breached when defendants failed to make plaintiff
CEO and failed to pay him his full compensation. (DE # 5 at 15; DE # 93 at 11-13.) This
argument is based on the Indiana Supreme Court case Bochnowski v. Peoples Federal
Savings & Loan Ass’n. 571 N.E.2d 282 (Ind. 1991). In Bochnowski, the lower court had held
that an at-will employee could not maintain an action for the tort of intentional
interference with a contract. Id. at 284. The Indiana Supreme Court reversed, holding
that “a claim for tortious interference with an employment relationship can be
maintained upon a contract terminable at will.” Id. at 285. Plaintiff argues that
Bochnowski stands for the proposition that even though plaintiff was an at-will
employee, Forest River still had to follow the terms of the Agreement prior to plaintiff’s
termination. (DE # 93 at 11-13.) The FR defendants argue that Bochnowski is not
applicable because plaintiff has conceded the Agreement is not a binding contract, and
Bochnowski does not apply to the facts of this case. (DE # 100 at 10.) However, even if the
FR defendants are correct that Bochnowski does not control here, the principle plaintiff
asserts Bochnowski stands for is still applicable.
25
response brief, plaintiff did not respond to the argument that the Agreement failed to
meet the four elements of Majd Pour, and the FR defendants argue that plaintiff has
therefore waived his breach of contract claim. (DE # 100 at 2-3.)
The court agrees that plaintiff may no longer argue that the Agreement meets the
four elements set out in Majd Pour. The Seventh Circuit’s decision in Bonte v. U.S. Bank,
N.A., is instructive on this issue. In Bonte, the plaintiffs filed a claim against the
defendant under the Truth in Lending Act seeking mortgage rescission. Bonte, 624 F.3d
at 462-63. The plaintiffs failed to respond to the defendant’s argument in a motion to
dismiss that the misstated charges were “material.” Id. The district court concluded this
constituted waiver and dismissed the plaintiffs’ complaint. Id. The plaintiffs again failed
to respond to the defendant’s argument on appeal, and the appellate court affirmed the
district court stating: “Failure to respond to an argument . . . results in waiver.” Id. at
466. However, the court did not find that the plaintiffs had waived their entire claim,
rather, “[plaintiffs’] failure to respond to U.S. Bank’s arguments leads us also to
conclude that they have waived any argument that the allegedly erroneous TILA
disclosures are in fact ‘material.’” Id. The same analysis applies here. Plaintiff has
waived any argument that the Agreement constituted an employment contract under
the four-element test set out in Majd Pour. But that does not mean that plaintiff has
waived his entire breach of contract claim.14
14
In their motion to dismiss, the FR defendants also argued that the Indiana
Statute of Frauds prevented plaintiff from using parol evidence to establish the period
of employment element of Majd Pour. (DE # 30 at 5-7.) Plaintiff did not respond to this
26
Under Indiana law, both employment for a definite term and employment at-will
are considered contractual relationships. Whinery v. Roberson, 819 N.E.2d 465, 472 (Ind.
Ct. App. 2004). Courts have used the four-element test from Majd Pour discussed above
when addressing employment contracts involving definite terms of employment. See,
e.g., Jones v. Gen. Elec. Co., 87 F.3d 209, 213 (7th Cir. 1996); Ritter v. Stanton, 745 N.E.2d
828, 840 (Ind. Ct. App. 2001).
In Majd Pour, the plaintiff brought an action for breach of contract alleging that
the defendant terminated him before the expiration of the contract. Majd Pour, 512
N.E.2d at 437. The Indiana Court of Appeals used the four-element test to determine if
the alleged contract constituted a valid and enforceable employment contract. Id. at 439.
Although the court in Majd Pour did not explicitly discuss the type of contract that
would have been created if the four elements were met, because the breach of contract
claim was for termination prior to the expiration of the contract, it appears that the
court was analyzing a contract for a definite term.
Similarly, in Firestone v. Standard Management Corp, a district court, sitting in the
Southern District of Indiana, used the four-element test in analyzing whether the
alleged contract created an at-will relationship or a relationship that was for a definite
term requiring defendant to pay the plaintiff his salary beyond his discharge date, a
argument in his response brief. In their reply brief, defendants argue that because
plaintiff makes no response to this argument, he has conceded its validity. (DE # 100 at
3.) The court agrees that the plaintiff cannot now try to supply the period of
employment through the use of parol evidence. Bonte, 624 F.3d 466.
27
bonus plaintiff was to receive at the end of his first year of employment, and a
severance payment. No. 1:04-CV-1223-DFH-TAB, 2005 WL 1606955, at *3-6 (S.D. Ind.
July 05, 2005). Finally, in Butts v. Oce-USA, Inc., the district court sitting in the Southern
District of Indiana used the four-element test to determine whether the plaintiff was an
at-will employee or an employee for a definite term who could only be fired for cause. 9
F. Supp. 2d 1007, 1011 (S.D. Ind. 1998).
In cases where a definite term was not part of the employment relationship,
Indiana courts have used the traditional three-part test for determining the existence of
an employment contract: “The elements of an employment contract are established by
‘[Employer’s] (1) offer to pay (2) consideration for the Employee’s services and (3) the
Employee’s acceptance through performance of services.’” Williams, Riverside Cmty.
Corrs. Corp., 846 N.E.2d 738, 745 (Ind. Ct. App. 2006) (quoting Whinery, 819 N.E.2d at
473). Williams, the case that is most factually similar to the case at hand, utilized this
test. In Williams, the plaintiff brought a breach of contract claim against her former
employer alleging improper reduction of her hourly wage rate for her last pay period.
See id. at 745. The plaintiff argued that her hourly wage, $9.25 per hour, was part of her
at-will employment contract, and the court agreed, analyzing the claim under the three
factors mentioned above. Id. at 744-45 (“[Employer’s] (1) offer to pay (2) consideration
for the Employee’s services and (3) the Employee’s acceptance through performance of
services.”). The defendant argued the plaintiff had agreed to the reduction of her hourly
pay rate, but the court disagreed and ordered the trial court to enter summary
28
judgment for the plaintiff. Id. at 745-56. Nothing in Williams indicates that the hourly
wage was set out in a document that would meet the Majd Pour elements, but the court
still held that a term of the employment agreement, the original wage rate, was
enforceable as between an employer and an at-will employee.
In sum, the four-element Majd Pour test is used by Indiana courts to find a
binding and enforceable employment contract for a definite term (creating a
relationship where an employee can only be fired for cause), and the three factor test
discussed in Williams is used to determine when the contractual relationship between
employer and employee is at-will. See also Firestone, 2005 WL 1606955, at *3-6
(explaining distinction).
These principles stand for the proposition that the fact that an employment
contract is not for a definite term does not mean that all of its terms are unenforceable.
Rather, the terms of an at-will employment relationship are enforceable as long as the
at-will employment relationship continues. As a district court sitting in Massachusetts15
aptly summarized:
A contract-at-will . . . may contain binding terms that are effective during the
life of the contract. . . . Indeed, so long as an employment relationship exists,
employer and employee may have strong reasons to define its terms. . . .
While the agreement between them did not bind the defendant to employ
plaintiff for any specified length of time, its terms defined the parties’ rights
so long as plaintiff remained on the job.
15
When there is an absence of authority, relevant cases from other
jurisdictions may be consulted. Amerisure, Inc. v. Wurster Const. Co., Inc., 818 N.E.2d 998,
1004 (Ind. Ct. App. 2004), abrogated on other grounds by Sheehan Constr. Co. v. Cont’l Cas.
Co., 935 N.E.2d 160 (Ind. 2010).
29
Sargent v. Tenaska, 914 F. Supp. 722, 726 (D. Mass. 1996); see also 19 Richard A. Lord,
Williston on Contracts § 54:9 (4th ed. 2011) (“[T]he fact that an express contract is for an
unspecified length of time does not necessarily render it unenforceable, at least to the
extent that the contract continues to define the rights of the parties so long as the
employee remains on the job.”).
Because this is a motion to dismiss, the court must assume the truth of all
allegations set out in plaintiff’s amended complaint. See Hammond v. Kunard, 148 F.3d
692, 695 (7th Cir. 1998). Plaintiff contends that the Agreement (October 31, 2007) made
him CEO effective immediately, with a salary of $175,000 a year and an annual bonus of
10% of defendant Forest River’s profits over $90 million. (DE # 5 at 7; DE # 5-1 at 1.)
Plaintiff also alleges that defendants breached the agreement by failing to make him
CEO and failing to pay him his full compensation.16 (Id. at 15.)
The court finds that an Indiana court would find that the parties entered into an
at-will employment relationship, not an agreement for a definite term of employment,
and therefore would enforce the agreement for as long as the relationship existed. See
Williams, 846 N.E.2d at 744-46; Firestone, 2005 WL 1606955, at *3-6; Sargent, 914 F. Supp.
16
To the extent that plaintiff’s contentions in his amended complaint that
plaintiff “was to be named the CEO of Forest River, would act as CEO of Forest River”
conflict with the employment agreement that indicated Mart was hired as CEO effective
October 31, 2007, the employment agreement would trump the amended complaint. See
N. Ind. Gun & Outdoor Shows Inc. v. City of South Bend, 163 F.3d 449, 454-55 (7th Cir.
1998) (“It is a well-settled rule that when a written instrument contradicts allegations in
the complaint to which it is attached, the exhibit trumps the allegations.”).
30
at 726. Further, the FR defendants did not argue that plaintiff’s complaint fails to
adequately allege the well-established elements of an at-will contract: offer, acceptance,
and consideration. Therefore, the court finds plaintiff has alleged sufficient facts to
survive a motion to dismiss for failure to state a claim on which relief can be granted on
the breach of contract claim for failing to make plaintiff CEO and for failing to pay
plaintiff’s full compensation to the extent that compensation was earned prior to
plaintiff’s termination.17
D.
Negligent Misrepresentation
The FR defendants contend that plaintiff has failed to state a cognizable claim for
negligent misrepresentation. (DE # 30 at 8, DE # 100 at 3-5.) The tort of negligent
misrepresentation is recognized in Indiana in the limited circumstance of the employeremployee relationship.18 See Darst v. Ill. Farmers Ins. Co., 716 N.E.2d 579, 583-84 (Ind. Ct.
17
There is still the possibility that plaintiff can rebut the at-will presumption
with the promissory estoppel exception to the at-will doctrine. (DE # 100 at 5 n.2.)
18
In its motion to dismiss, Berkshire notes that negligent misrepresentation
has also been recognized in the context of professionals giving opinions. (DE # 32-1 at
23.) The Indiana Supreme Court has weighed in on negligent misrepresentation in the
professional context: “A professional may owe a duty to a third party with whom the
professional has no contractual relationship, but the professional must have actual
knowledge that such third person will rely on his professional opinion.” U.S. Bank, N.A.
v. Integrity Land Title Corp., 929 N.E.2d 742, 747 (Ind. 2010) (citing Thomas v. Lewis Eng’g,
Inc., 848 N.E.2d 758, 760 (Ind. Ct. App. 2006)). The Indiana Court of Appeals has noted
that “[the court acknowledges] Indiana decisions that have held brokers, attorneys,
abstractors, and surveyors liable for negligent misrepresentation, but [the defendant has
cited no authority] indicating liability is limited to those professions.” Jeffrey v. Methodist
Hospitals, 956 N.E.2d 151, 156 n.7 (Ind. Ct. App. 2011). Plaintiff has not argued that this
line of cases applies to the case at hand.
31
App. 1999). The seminal case on negligent misrepresentation in Indiana is Eby v. YorkDivision, Borg-Warner. 455 N.E.2d 623 (Ind. Ct. App. 1983). In that case, the Indiana
Court of Appeals set out the elements of the tort of negligent misrepresentation:
The primary elements of the tort of negligent misrepresentation are found in
RESTATEMENT (SECOND) OF TORTS § 552 (1977), which limits
responsibility to the following:
“(1) One who, in the course of his business, profession, or employment, or in any
other transaction in which he has a pecuniary interest, supplies false
information for the guidance of others in their business transactions, is subject to
liability for pecuniary loss caused to them by their justifiable reliance upon the
information, if he fails to exercise reasonable care or competence in obtaining
or communicating the information.
(2) Except as stated in Subsection (3), the liability stated in Subsection (1) is
limited to loss suffered
(a) by the person or one of a limited group of persons for whose benefit and
guidance he intends to supply the information or knows that the recipient
intends to supply it; and (b) through reliance upon it in a transaction that he
intends the information to influence or knows that the recipient so intends
or in a substantially similar transaction.
(3) The liability of one who is under a public duty to give the information
extends to loss suffered by any of the class of persons for whose benefit the
duty is created, in any of the transactions in which it is intended to protect
them.”
Id. at 628-29 (emphasis in original).
In Eby, the plaintiffs brought a claim for negligent misrepresentation after the
defendant’s employee told one of the plaintiffs there was a job waiting for him in
another city. Id. at 625, 628-29. After moving to take the job, the plaintiff reported to
work and found out that the employee who had offered him the job was no longer with
32
the company, and the job was no longer available. Id. at 625. The court recognized the
tort for the plaintiffs’ action and ruled that summary judgment should not have been
entered for the defendant. Id at 629-30.
Since the Eby decision, as the FR defendants point out, the Indiana Court of
Appeals has limited the application of Eby to its own facts. For example, in Darst v.
Illinois Farmers Insurance Co., the Indiana Court of Appeals stated: “[W]e decline to
extend the tort’s application beyond the specific facts of Eby.” Darst, 716 N.E.2d at 584.
Similarly, in Pugh’s IGA, Inc. v. Super Food Services, Inc., the Indiana Court of Appeals
stated: “Eby is limited to its own facts . . . .” 531 N.E.2d 1194, 1199 n.1 (Ind. Ct. App.
1988). However, neither of these cases dealt with the employer-employee relationship.
See Darst, 716 N.E.2d at 580-81 (relationship between insurer and insured); Pugh’s IGA,
Inc., 531 N.E.2d at 1196 (business relationship with one party providing market study to
other party).
Other courts have allowed plaintiffs in the employment context to bring claims
for negligent misrepresentation. For example, in Trytko v. Hubbell, Inc., the plaintiff
brought a claim for negligent misrepresentation against his former employer alleging
negligent advice in regard to exercising certain stock options. 28 F.3d 715, 718-19 (7th
Cir. 1994). The Seventh Circuit went into a thorough analysis of Indiana Courts’
treatment of the tort of negligent misrepresentation, and concluded that the facts in
Trytko were similar enough to Eby to maintain a claim for negligent misrepresentation.
Id. at 720-21. (“As in Eby, the issue in this case is simply whether an employer, through
33
its agent, breached a duty to protect its employee against the employer’s own
negligence by making false representations upon which the employee relied to his
detriment.”).
Similarly, in Abdulrahim v. Gene B. Glick Co., the plaintiff brought an action for
negligent misrepresentation against his former employer. 612 F. Supp. 256, 258 (N.D.
Ind. 1985). The plaintiff had worked for the defendant for several months. Id. at 258-59.
After his employment had ended, the plaintiff applied for two other open positions,
which he did not get. Id. at 259. After that, he spoke with one of the defendant’s
executive managers who told the plaintiff she would make sure he was rehired the
following summer. Id. He was not rehired, and he brought suit for negligent
misrepresentation. Id. On appeal, the defendant argued that negligent
misrepresentation was not a separate cause of action in Indiana. Id. at 263. The court
disagreed, citing to Eby and concluding that the plaintiff’s negligent misrepresentation
claim could survive a motion to dismiss. Id. at 263-64.
Here, similar to the plaintiffs in Eby, Trytko, and Abdulrahim, plaintiff has alleged
he relied on representations by his employer’s employee that plaintiff had a specific job
with defendant Forest River (plaintiff believed he was made CEO on October 31, 2007,
and was sharing the position with defendant Liegl until the end of 2008), and he moved
his family to Indiana in reliance on this representation. (DE # 5 at 7, 12.) The court finds
that an Indiana appellate court would allow a claim for negligent misrepresentation to
34
survive a motion to dismiss under these circumstances. The facts of this case are similar
enough to the facts of Eby, Trytko, and Abdulrahim, to warrant this conclusion.
Plaintiff also alleges that defendants’ violation of the Code by firing him and
therefore retaliating against him for reporting violations of the Code constitutes
negligent misrepresentation. (See id. at 19-20, DE # 93 at 16-17.) The court finds that this
allegation is not factually similar enough to Eby to allow the claim to survive a motion
to dismiss. Neither Eby nor any of the cases applying Eby lead the court to believe that
an Indiana appellate court would find an actionable negligent misrepresentation claim
based on alleged misrepresentations contained in a corporation’s code of ethics.
The FR defendants also contend that plaintiff’s negligent misrepresentation claim
must be dismissed because the alleged misrepresentations dealt with future conduct,
and to be actionable, misrepresentations must deal with past or presently existing facts.
(DE # 30 at 10-11.) The FR defendants point to the language of plaintiff’s amended
complaint in which plaintiff alleges that he was going to be named CEO in the future.
(Id. at 11-12.) Even assuming the FR defendants’ legal argument here is correct, plaintiff,
in the negligent misrepresentation portion of his amended complaint, incorporated all
preceding paragraphs, including the paragraphs that alleged Mart was made CEO on
October 31, 2007, effective immediately, and that Mart believed he was sharing the role
of CEO with Liegl until the end of 2008. (DE # 5 at 7, 12, 19.) With these allegations,
plaintiff sufficiently alleges a presently existing fact.
35
Finally, the FR defendants argue that plaintiff could not have justifiably relied on
defendants’ representations because plaintiff was an at-will employee. (DE # 30 at 1213.) However, in his response brief, plaintiff argues that he was not an at-will employee
because of the promissory estoppel exception to the at-will doctrine set out in Orr. See
Orr, 689 N.E.2d at 717-18; (DE # 93 at 7-9). The FR defendants concede that plaintiff can
survive the motion to dismiss on a claim for promissory estoppel. (DE # 100 at 5 n.2.)
Therefore, the FR defendants cannot succeed on their justifiable reliance argument at
this stage of the litigation.
II.
Defendant Berkshire’s Motion to Dismiss Plaintiff’s Negligent
Misrepresentation Claim19
Defendant Berkshire argues that the tort of negligent misrepresentation does not
apply here because Indiana has only recognized negligent misrepresentation in very
limited circumstances. (DE # 32-1 at 23.)20 In its motion to dismiss, Berkshire argues that
plaintiff has “failed to allege facts sufficient to show that Berkshire made any false
representations to Plaintiff . . . .” (Id. at 24.) As stated in Eby, the tort of negligent
misrepresentation, as set out by the Restatement, includes:
19
Berkshire moved to dismiss plaintiff’s negligent misrepresentation and
SOX claims in the same motion. (DE # 32.) Because Berkshire has moved to dismiss
plaintiff’s negligent misrepresentation claim under FED. R. CIV. P. 12(b)(6) (DE # 32), and
because this part of the motion has both the same relevant facts and legal standard as
the FR defendants’ motion to dismiss plaintiff’s state law claims, the court will analyze
Berkshire’s FED. R. CIV. P. 12(b)(6) argument in this part of the opinion.
20
For this part of Berkshire’s motion, the court accepts plaintiff’s factual
allegations as true. Erickson, 551 U.S. at 93.
36
One who, in the course of his business, profession, or employment, or in any
other transaction in which he has a pecuniary interest, supplies false
information for the guidance of others in their business transactions, is subject to
liability for pecuniary loss caused to them by their justifiable reliance upon the
information, if he fails to exercise reasonable care or competence in obtaining
or communicating the information.
Eby, 455 N.E.2d at 628 (emphasis in original).
In his response brief, plaintiff does not address this argument, but instead directs
the court to his response to the FR defendants’ motion to dismiss. (DE # 94 at 25.) That
document does not make clear what false representations Berkshire made to plaintiff.
(DE # 93 at 13-17.) Plaintiff’s only argument that Berkshire committed negligent
misrepresentation is that by adopting the code it promised not to take any retaliatory
action against anyone submitting reports under the Code.21 (DE # 5 at 19-20; DE # 93 at
16.) As mentioned above, this allegation is not similar enough to Eby and the cases
applying Eby to lead the court to believe that an Indiana appellate court would allow
this claim to proceed. The court will not “adopt a more expansive view of the tort than
that adopted to date in Indiana[,]” and plaintiff’s claim must fail. Trytko, 28 F.3d at 721
(quoting Indus. Dredging & Eng’g v. S. Ind. Gas & Elec. Co., 840 F.2d 523, 526 (7th Cir.
1988)).
21
Although plaintiff does not clearly make this argument in his state law
response brief (DE # 93), to the extent that plaintiff is also attempting to argue that
statements made by Buffet to plaintiff form the basis for a negligent misrepresentation
claim (DE # 94 at 3-4), the court finds that an Indiana appellate court would not allow
this claim to proceed, as it is too dissimilar to Eby and the cases following Eby. See Eby,
455 N.E.2d at 623; see also Trytko, 28 F.3d at 718-19, 721; Abdulrahim, 612 F. Supp. at 25859, 263-64.
37
THE FR DEFENDANTS’ MOTION TO DISMISS PLAINTIFF’S SOX CLAIM
The FR defendants have moved under FED. R. CIV. P. 12(b)(1) arguing that the
court lacks subject matter jurisdiction over plaintiff’s Sarbanes-Oxley Act (“SOX”) claim
because plaintiff did not file a complaint with OSHA22 within 90 days after the date on
which the violation occurred, as required by 18 U.S.C. § 1514A(b)(2)(D).23 (DE # 31 at 13.) The FR defendants’ argument that the court lacks subject matter jurisdiction is based
on several district court cases. See Mann v. Gannett Co., No. 2:06cv888-MHT, 2007 WL
1668835, at *2-3 (M.D. Ala. June 8, 2007); Collins v. Beazer Homes USA, Inc., 334 F. Supp.
2d 1365, 1373 (N.D. Ga. 2004); Murray v. TXU Corp., 279 F. Supp. 2d 799, 802 (N.D. Tex.
2003); see also Trusz v. UBS Realty Investors, Civil No. 3:09cv268, 2010 WL 1287148, at *4
n.2 (D. Conn. Mar. 30, 2010); Malin v. Siemens Med. Solutions Health Servs., 638 F. Supp.
2d 492, 496 (D. Md. 2008); JDS Uniphase Corp. v. Jennings, 473 F. Supp. 2d 705, 710 (E.D.
Va. 2007) (finding § 1514A exhaustion requirements jurisdictional). Plaintiff does not
address this issue in his response brief; instead he argues about the date he received
notice of his termination. (DE # 91 at 6-13.) The court agrees with these district courts in
22
Under § 1514A(b), someone alleging retaliatory discharge under SOX
must first file a claim with the Secretary of labor. The Secretary of Labor has delegated
the authority to handle these complaints to OSHA. Johnson v. Stein Mart, Inc., 440 F.
App’x 795, 799 n.3 (11th Cir. 2011).
23
The 90-day limit was in place when plaintiff filed his claim with OSHA.
As of July 22, 2010, the statute allows 180 days for the filing of a complaint. 18 U.S.C.
§ 1514A(b)(2)(D) (2010).
38
finding that a failure to exhaust administrative remedies with OSHA deprives a district
court of subject matter jurisdiction over a plaintiff’s SOX claim.
Plaintiff correctly asserts that the date of an unlawful employment practice is a
question of fact. (DE # 91 at 7 (citing Flannery v. Recording Indus. Ass’n of Am., 354 F.3d
632, 640 (7th Cir. 2004)).) However, when a court’s subject matter jurisdiction is at issue,
“[e]ven when a jury would be required to make a decision on the merits, it is
unnecessary to summon a jury to determine whether the court possesses jurisdiction[.]”
Pratt Cent. Park Ltd. P’ship v. Dames & Moore, Inc., 60 F.3d 350, 353 (7th Cir. 1995). The
court must therefore make factual determinations to ensure it has subject matter
jurisdiction. See United Phosphorus, Ltd. v. Angus Chem. Co., 322 F.3d 942, 946 (7th Cir.
2003) (en banc). The Seventh Circuit has stated:
[I]f the complaint is formally sufficient but the contention is that there is in
fact no subject matter jurisdiction, the movant may use affidavits and other
material to support the motion. The burden of proof on a 12(b)(1) issue is on
the party asserting jurisdiction. And the court is free to weigh the evidence
to determine whether jurisdiction has been established. Factual findings
rendered during this process are reviewed for clear error.
Id. (emphasis in original) (internal citations omitted); see also LaSalle Nat’l Trust, N.A. v.
ECM Motor Co., 76 F.3d 140, 144 (7th Cir. 1996) (“In the 12(b)(1) case, the district court is
entitled to find jurisdictional facts itself . . . .”); Western Transp. Co. v. Couzens Warehouse
& Distribs., Inc., 695 F.2d 1033, 1038 (7th Cir. 1982) (quoting Mortensen v. First Fed. Sav. &
Loan Ass’n, 549 F.2d 884, 891 (3d Cir. 1977)).
The court may also look at whatever evidence has been submitted in making the
jurisdictional determination. Apex Digital, Inc. v. Sears, Roebuck & Co., 572 F.3d 440, 444
39
(7th Cir. 2009); Roman v. U.S. Postal Serv. 821 F.2d 382, 385 (7th Cir. 1987) (“It is proper
for the district court to look beyond the jurisdictional allegations in the complaint and
to view whatever evidence has been submitted in determining whether subject matter
jurisdiction exists under Rule 12(b)(1).”). In determining whether it has jurisdiction, the
court does not presume the allegations in plaintiff’s complaint are true.24 See Apex
Digital, 572 F.3d at 444 (citing Mortensen, 549 F.2d at 891); Hay v. Ind. State Bd. of Tax
Comm’rs, 312 F.3d 876, 879 (7th Cir. 2002); Bastien v. AT&T Wireless Servs., Inc., 205 F.3d
983, 990 (7th Cir. 2000); Grafon Corp. v. Hauserman, 602 F.2d 781, 783 (7th Cir. 1979);
Couzens Warehouse & Distribs., Inc., 695 F.2d at 1038 (citing Mortensen, 549 F.2d at 891).
24
There seems to be discord in Seventh Circuit precedent as to whether the
court is required to accept the allegations in plaintiff’s complaint as true when
reviewing a 12(b)(1) motion. As noted above, there is substantial Seventh Circuit case
law that holds the court does not have to take the allegations in the complaint as true
when ruling on a 12(b)(1) motion. See e.g., Couzens Warehouse & Distribs., Inc., 695 F.2d at
1038 (citing Mortensen, 549 F.2d at 891). However, there are also a substantial number of
cases that indicate the opposite is true, that the court does have to take all well-pleaded
factual allegations as true. See, e.g., Evers v. Astrue, 536 F.3d 651, 656 (7th Cir. 2008); St.
John’s United Church of Christ v. City of Chi., 502 F.3d 616, 625 (7th Cir. 2007); Long v.
Shorebank Dev. Corp., 182 F.3d 548, 554 (7th Cir. 1999). However, even in some of those
cases, the Seventh Circuit has said that the court may look beyond the complaint to
whatever evidence has been submitted to determine if it has jurisdiction. Long, 182 F.3d
at 554 (quoting Capitol Leasing Co. v. FDIC, 999 F.2d 188, 191 (7th Cir. 1993) (per
curiam)).
Although these cases may seem to contradict each other, as long as the disputed
facts concern whether the court actually has subject matter jurisdiction to hear the case,
the court does not need to accept the factual allegations as true. Int’l Harvester Co. v.
Deere & Co., 623 F.2d 1207, 1210 (7th Cir. 1980) (“Where the defendant raises factual
questions concerning jurisdiction, the court need not accept the allegations of the
complaint as true; the court may look behind the complaint and view the evidence to
determine whether a controversy in fact exists.”).
40
I.
Facts25
Plaintiff met with Jeff Rowe, Forest River’s director of human resources, on
November 3, 2008. (DE # 31 at 5; DE # 91 at 6.) It isn’t clear what was said at that
meeting. However, it is undisputed that plaintiff and Rowe started corresponding
following the November 3, 2008, meeting. The post-meeting exchanges between
plaintiff and Rowe began on November 4, 2008. On November 4, plaintiff emailed
Rowe, stating in part:
As we discussed yesterday, I need to receive an email from you summarizing
our conversation yesterday and clearly indicating that you are asking me not
to report for work at Forest River.
(DE # 91-1 at 31.) Rowe responded with an email the same day. His email stated:
I haven’t had a chance to summarize our conversation yet, but this will
confirm that there is no need to report for work at Forest River. As I stated
yesterday, the decision had been made that you would no longer be
employed by Forest River and it was my objective to discuss how we could,
I believe the term I used was unravel the employment situation. I have also
secured your personal chair, and will make arrangements to get that to you.
(Id. at 30.) Plaintiff responded that same day:
I realize that you have a big assignment here and I appreciate your efforts.
Thanks for at least confirming in writing that you are asking me not to report
to work at Forest River.
(Id.) The next email in this exchange was an email sent from plaintiff to Rowe on
November 13, 2008. In that email, plaintiff wrote:
25
The facts relevant to defendants’ motions to dismiss under FED. R. CIV. P.
12(b)(1) are significantly different from the facts relevant to defendants’ FED. R. CIV. P.
12(b)(6) motions. Thus, this section of the opinion has its own set of facts.
41
It has now been almost two weeks since we met at the hotel conference room
on the morning of November 3rd. In this meeting, we agreed that we would
work toward a relatively quick resolution in your words to “unravel the
employment situation[.]”
Can you please provide me with an update and/or Pete’s thoughts regarding
potential next steps in timing[.]
(Id.) Rowe contacted plaintiff next on November 19, 2008, when Rowe sent plaintiff a
letter.26 The final correspondence between plaintiff and Rowe occurred on January 8,
2009, when Rowe sent plaintiff another letter. In that letter, Rowe stated, in part:
This letter is to formally acknowledge that, as of January 1, 2009, you are no
longer an employee of Forest River, Inc.
(DE # 91-1 at 33.)
II.
Analysis
Plaintiff and the FR defendants agree that plaintiff met with Jeff Rowe, Forest
River’s director of human resources, on November 3, 2008. (DE # 31 at 5; DE # 91 at 6.)
But the parties disagree on the significance of that meeting. Defendants contend Rowe
told plaintiff his employment was terminated at that meeting. (DE # 31 at 5.)
Defendants also argue that if the decision to terminate plaintiff was not clear to plaintiff
on November 3, the email exchange on the between Rowe and plaintiff following day,
November 4, 2008, informed plaintiff unequivocally that he had been terminated. (See
DE # 99 at 4.) The FR defendants contend that the 90-day period began to run, at the
latest, on November 4, 2008. (DE # 99 at 4.)
26
This letter (DE # 92) was filed under seal because it is a privileged and
confidential settlement communication. (DE # 99 at 11 n.4.) Any references to this letter
and its contents have been taken from the parties’ briefs, which have not been sealed.
42
Plaintiff argues that he believed only Warren Buffet had the power to terminate
him. (DE # 91 at 2.) He also argues that the November 4, 2008, email from Rowe was not
clear about whether he had been terminated, but it instead indicated he was not
welcome at the Forest River offices and that his employment situation would be
“unraveled” at some future point. (Id.) Additionally, he argues that he did not believe
that his exchanges with Rowe on November 3 and 4 were the official position of the
company. (Id. at 10.) Mart therefore argues that the earliest trigger date for the 90-day
period was November 19, 2008, the date that Rowe first sent Mart a letter. (Id. at 12-13.)
Plaintiff filed his claim with OSHA on February 17, 2009. (DE # 5 at 17.) Therefore, if the
court finds that the 90-day period to file a claim with OSHA started before November
19, 2008, plaintiff would not have filed his claim within the 90-day window, and the
court would not have subject matter jurisdiction over his claim.
“Under federal discrimination statutes, the time for filing an administrative
charge of employment discrimination begins running when a discrete unlawful practice
takes place.” Rzepiennik v. Archstone-Smith, Inc., 331 F. App’x 584, 588-89 (10th Cir. 2009).
“A discrete adverse action ‘takes place’ when a decision is made and communicated to
the plaintiff, even if the effects of the action do not occur until later.” Id. at 589 (citing
Del. State Coll. v. Ricks, 449 U.S. 250, 258 (1990).
Under Seventh Circuit precedent, two elements must be shown in a
discriminatory discharge case to establish the date of the “unlawful employment
practice.” Flannery, 354 F.3d at 637. First, “there must be a final, ultimate, non-tentative
43
decision to terminate the employee.” Id. Second, “the employer must give the employee
‘unequivocal’ notice of its final termination decision.” Id. At least one other district
court in the Seventh Circuit has applied this two part test to § 1514A. See Haddad v. ITT
Indus., Inc., No. 1:05-CV-370-TLS, 2007 WL 141949, at *5-8 (N.D. Ind. Jan. 12, 2007).
As to the first element of the Flannery test, although Rowe did not use the term
“terminate,” the language he did use clearly indicated that a decision to terminate
plaintiff had been made. Rowe wrote: “As I stated yesterday, the decision had been
made that you would no longer be employed by Forest River . . . .” (DE # 91-1 at 30.)
This is undoubtedly evidence that a final decision had been made. As to the second
element, the language Rowe used was sufficient to unequivocally notify plaintiff of the
decision to terminate his employment. It may have been helpful for Rowe to use the
word “terminate” or “terminated” at some point during this email, but the two-part test
from Flannery does not require any particular language. All that test requires is a final,
non-tentative decision to terminate is unequivocally conveyed to the employee.
Flannery, 354 F.3d at 637. The court finds that both elements of the Flannery two-part test
were met on November 4, 2008. Therefore, the court lacks subject matter jurisdiction
over plaintiff’s SOX claim.
Plaintiff puts forth several arguments to try to avoid this result. Plaintiff first
argues that a specific end date of employment must be given to constitute a notice of
termination. (DE # 91 at 8.) Plaintiff cites to Monnig v. Kennecott Corp. in support of this
argument. 603 F. Supp. 1035, 1038 (D. Conn. 1985). That case cited the Supreme Court’s
44
decision in Chardon v. Fernandez in concluding that notice of termination must include a
specific date of termination. 454 U.S. 6 (1981); Monnig, 603 F. Supp. at 1038. Although
the plaintiffs in Chardon were given specific dates that their employment would end,
nothing in the Supreme Court’s opinion indicates that a specific date is a requirement
for a notice of termination. 454 U.S. at 6-8. Additionally, as defendants point out, the
Seventh Circuit has not held that a specific termination date must be given for a
decision to be final. Flannery, 354 F.3d at 640-41 (“We do not mean to imply that . . . a
definitive termination date must be given, or that the termination decision must be
memorialized in an ‘official’ communication, in order for the employer’s decision to be
‘final.’”).
Plaintiff also argues that in Mull v. ARCO Durethene Plastics, Inc., the Seventh
Circuit recognized the holding from Monnig. 784 F.2d 284, 289 n.7 (7th Cir. 1986). But
the Seventh Circuit did not hold that a specific date of termination was required. The
Seventh Circuit simply discussed Monnig in a footnote, concluding that the plaintiff’s
reliance on that case was “inapposite.” Id.
Plaintiff cites E.E.O.C. v. Westinghouse Electric Corp. in support of his position that
a specific end date is required to constitute notice of termination. 725 F.2d 211 (3d Cir.
1983) disagreed with on other grounds, Pub. Emps. Ret. Sys. of Ohio v. Betts, 492 U.S. 158
(1989). In that case, the EEOC brought suit under the ADEA alleging that a group of
employees were denied Layoff Income and Benefits after their plant closed because of
their age. Id. 213-15. The employer in that case counseled these employees several
45
weeks before the plant closed, informing them that they would not be eligible for the
benefits once the plant closed. Id. at 215. The district court held that the limitations
period began to run when the counseling sessions occurred, but the Third Circuit
reversed, holding that the limitations period only began to run once the employees
were laid off after the plant closed. Id. at 218-220. The Third Circuit distinguished the
Supreme Court’s decision in Delaware State College v. Ricks,27 stating:
[I]n Ricks, there was precise specificity as to the date of termination unlike the
instant matter which is intertwined with uncertainty as to whether the
employees were even informed as to when the layoff would actually take
place. In contrast to Ricks, there is no evidence . . . indicating that
the . . . employees received any notice-oral or written-of the actual date when
the . . . plant would be closed. Nor can we expect these employees to have
had some mystical powers of omniscience whereby they knew the precise
date management was to close the plant. It is conceivable that in February
1977, those employees who were not privy to management’s secrets might
have been under the impression that the . . . plant would not be closed for
months or even years.
27
In Ricks, the plaintiff, a professor at a state college, was denied tenure and
filed a grievance with his employer’s grievance committee. 449 U.S. 250, 252 (1980).
While the grievance was pending, plaintiff was offered and accepted a one-year
“terminable” contract that would end the employment relationship when it expired. Id.
at 252-254. A few days after he had signed the contract, the grievance committee
informed plaintiff that his grievance had been denied. Id. at 254. The plaintiff eventually
brought suit under Title VII and 42 U.S.C. § 1981. Id. However, the district court
dismissed both claims because they were untimely, concluding that the limitations
periods began to run, at the latest, when the plaintiff was offered the one-year
terminable contract. Id. at 254-55. The Third Circuit Court of Appeals reversed, holding
that the limitations periods began to run when plaintiff’s one-year terminal contract
expired. Id. at 256. The Supreme Court reversed, concluding the district court was
justified in using the date the plaintiff was offered the one-year contract as the date the
limitations periods began to run. Id. at 261-262.
46
Id. at 220.
Westinghouse is distinguishable from the case at hand. Here, unlike in
Westinghouse, plaintiff was told that his employment would be coming to an end. In
Westinghouse, all that the employees were told during the counseling session was that
they would not be eligible for these benefits when the plant eventually did close. See id.
They were not laid off or put on administrative leave. Here, by contrast, plaintiff was
told a decision had been made that he would no longer be employed, he was told not to
report to work anymore, and he was told that arrangements would be made for him to
retrieve his personal chair. (DE # 91-1 at 30.) This is a stark contract from Westinghouse,
where the employees could have been under the impression that the plant would not
“be closed for months or even years.” Westinghouse, 725 F.2d at 220. In sum, the court
finds that a termination date is not required for a final notice of termination.
Plaintiff’s next argument is that any notice of termination must indicate that it is
the “official position” of the employer, and Rowe’s November 4 email to plaintiff failed
to indicate that. (DE # 91 at 10-11.) In support of this proposition, plaintiff again cites to
Monnig. 603 F. Supp. at 1035. In Monnig, the court, citing Ricks, held that “[f]or notice of
termination to commence the ADEA filing period, it must articulate the termination as
the ‘official position’ of the employer.” Id. at 1037. Although the letter in Ricks included
the phrase “official position,” nothing in that case indicates that the notice of
termination must include that phrase. See Ricks, 449 U.S. at 259-62. The Seventh Circuit
has also weighed in on this issue, stating: “We do not mean to imply that Ricks . . .
47
necessarily require[s] . . . that the termination decision must be memorialized in an
‘official’ communication, in order for the employer’s decision to be ‘final.’” Flannery, 354
F.3d at 640-41.
Plaintiff argues the November 4 email was not the company’s “official position”
because it was not blessed by Buffet or Liegl, and because the Berkshire Code of
Conduct protected him from retaliation. (DE # 91 at 10-11.) Although not clearly
articulated in this portion of his brief (Id. at 10-11), plaintiff also appears to argue that he
believed Buffet was the only one who could terminate him, thus preventing the
November 4 email from constituting the company’s “official position” (See id. at 5). In
order to determine whether plaintiff’s “official position” arguments have any merit, the
court must determine whether plaintiff’s subjective beliefs about the November 4 email
have any impact on this analysis.
In Ricks, the Supreme Court stated “the pendency of a grievance, or some other
method of collateral review of an employment decision, does not toll the running of the
limitations periods.” Ricks, 449 U.S. at 261. Additionally, in Kuemmerlein v. Board of
Education of Madison Metropolitan School District, the Seventh Circuit held that the statute
of limitations period begins to run when an employee is terminated, even if there is a
good chance that employee will be rehired within the next few months. 894 F.2d 257,
260 (7th Cir. 1990). In that case, the plaintiffs argued that they were not “irrevocably
terminated” when they received their termination notices because their employer, a
school district, had a practice of rehiring more than fifty percent of the teachers it had
48
laid off. Id. The Seventh Circuit rejected that argument, noting the need for bright lines
when dealing with the statute of limitations. Id.
These two cases prompted one Seventh Circuit district court to come to the
conclusion that “any subjective belief that the layoff decision was not final is simply not
relevant.” Libri v. Quinn, No. 06-3167, 2010 WL 2836802, at *5 (C.D. Ill. July 15, 2010),
aff’d sub nom. Draper v. Martin, Nos. 10–2837, 10–3054, 2011 WL 6880357 (7th Cir. Dec.
30, 2011). The court agrees with the Libri court. The fact that plaintiff believed the
November 4 email from Lowe was somehow not final or not an “official position”
because it did not state it was blessed by Buffet28 or Liegl,29 or that the Berkshire Code30
28
Plaintiff believed Buffet was the only person that could terminate his
employment. (DE # 91 at 5.) Plaintiff asserts that Warren Buffet told plaintiff that he
(Buffet) was the only person that could hire or fire a CEO of a Berkshire subsidiary.
(DE # 94 at 3.) However, Buffet never appointed plaintiff to the position of CEO at
Forest River. Plaintiff negotiated with Liegl over the CEO position (DE # 5 at 7), and
plaintiff has not argued that Buffet had anything to do with plaintiff being hired as
CEO. Additionally, plaintiff does not allege that Buffet told him that Liegl lacked
authority to terminate plaintiff (DE # 91 at 3); plaintiff only asserts that Buffet told him
that Buffet had the sole power to hire or fire the CEO of a Berkshire subsidiary. (DE # 94
at 3.)
29
Liegl had in fact made the decision to terminate plaintiff, and he directed
Rowe to inform plaintiff of the decision. (DE # 31-1 at 2.) Additionally, plaintiff never
questioned Rowe’s authority to terminate his employment in any of the emails Rowe
and plaintiff exchanged. (DE # 91-1 at 30-31.)
30
The Seventh Circuit has stated: “[A]n employer who communicates a
willingness to later change a final decision of termination, as through an appeals
process, does not render a decision ‘tentative’ and not final for the purposes of
beginning the limitations period.” Flannery, 354 F.3d at 637 (emphasis in original); see
also Ricks, 449 U.S. at 261 (“[T]he pendency of a grievance, or some other method of
collateral review of an employment decision, does not toll the running of the limitations
periods.”) Plaintiff did not file a complaint via the Code. (DE # 30-3 at 4.) Even if he
49
prevented the decision, is not relevant. Plaintiff had been told in an email from Forest
River’s director of human resources that “the decision had been made that you would
no longer be employed by Forest River.” (DE # 91-1 at 30.) Plaintiff knew, or should
have known, that this meant that a decision was made that he would be terminated.
Clark v. Resistoflex Co., 854 F.2d 762, 765 (5th Cir. 1988) (“Determination of when notice
has been communicated to an employee is based upon an objective standard, focusing
upon when the employee knew, or reasonably should have known, that the adverse
employment decision had been made.”).
Plaintiff also argues that neither the November 3 meeting nor the
November 4 email constituted a final, definitive, or unequivocal notice of plaintiff’s
termination, (DE # 91 at 11.) As noted above, “[d]etermination of when notice has been
communicated to an employee is based upon an objective standard, focusing upon
when the employee knew, or reasonably should have known, that the adverse
employment decision had been made.” Resistoflex Co., 854 F.2d at 765. Additionally,
“the relevant inquiry is not on the subjective state of mind of the plaintiff, but rather, on
the sufficiency of the notice plaintiff received.” Id. at 766.
Several other courts have analyzed when final notice has been given to an
employee. For example, in Economu v. Borg-Warner Corp., the district court dismissed
the plaintiff’s ADEA claim because it was untimely. 829 F.2d 311, 312-14 (2d Cir. 1987).
had, it would not have tolled the limitations period, as it would not have rendered the
termination decision tentative. Flannery, 354 F.3d at 637.
50
The defendant’s31 CEO sent the plaintiff a new organizational chart indicating that the
plaintiff’s duties would be scaled back. Id. at 313-14. The plaintiff met with the CEO a
few days later, directing the CEO to communicate the plaintiff’s position with the
company to the plaintiff’s attorney. Id. at 314. The CEO met with the plaintiff’s attorney
two weeks after that, informing the attorney that the defendant was “no longer
interested in [the plaintiff’s] services.”Id. The Court of Appeals determined that the
discriminatory conduct was made apparent to the plaintiff, at the latest, when the CEO
met with the plaintiff’s attorney and indicated to the attorney that the plaintiff’s
services were no longer required by the defendant. Id. at 315-16.
In contrast, in Clark v. Resistoflex Co., the Fifth Circuit reversed a district court
that had held the plaintiff’s ADEA claim was untimely. Resistoflex Co., 854 F.2d at 76567, 771. The plaintiff in that case had received a call from his immediate supervisor
informing the plaintiff that he was going to fire him. Id. at 764. Immediately after that
conversation, the plaintiff spoke to one of the defendant’s personnel employees, who
told the plaintiff that he would soon receive a letter that would “‘clarify his status’”
with the defendant. Id. He received the letter, which detailed the terms of his
termination, a few days later. Id. The district court held that the plaintiff had received
notice of his termination on the date he had the conversation with his supervisor. Id. at
765. The Fifth Circuit disagreed, noting that the plaintiff did not know whether his
31
The plaintiff actually sued his former employer and his former employer’s
parent company. Economu, 829 F.2d at 312. The CEO worked for the plaintiff’s former
employer. Id. at 313.
51
supervisor was acting under the authority of the defendant, and that immediately after
his conversation with his supervisor, the plaintiff was told by the personnel department
that he would be receiving a letter clarifying his status. Id. at 766.
Similarly, in Trumbull v. Health Care and Retirement Corp. of America, the defendant
argued that a memorandum one of its regional directors issued recounting a visit to the
plaintiff’s job site and informing the plaintiff that his “continued employment . . .
[would] be based upon the findings during [job site visits]” triggered the ADEA
limitations period. 756 F. Supp. 532, 534-35 (M.D. Fla. 1991). The district court rejected
that argument, stating: “[T]he language in the [regional director’s] memo [was]
sufficiently vague as to Plaintiff’s future in the company. The language did not convey
conclusively that a decision had been made to discharge Plaintiff.” Id. at 535-36.
Additionally, at the time the memo was written, no decision had been made to
terminate plaintiff’s employment, and the person who wrote the memo did not have the
authority to terminate plaintiff’s employment by himself. Id. at 536.
The case at hand is significantly different from the Trumball and Resistoflex cases,
where notice was found to be lacking. Here, in contrast with Resistoflex, plaintiff was not
told he was fired by his immediate supervisor. Resistoflex Co., 854 F.2d at 764. Rather, he
was told he was terminated by Jeff Rowe, defendant Forest River’s director of human
resources. (DE # 91-1 at 30.) A termination message from the director of human
resources, a department traditionally associated with hiring and firing decisions, is
much more authoritative than a termination message from a direct supervisor.
52
Although there may be an argument that the “unravel the employment
situation” language from Rowe’s November 4 email to plaintiff is similar to the “clarify
his status” language the plaintiff in Resistoflex got from the personnel department, the
fact remains that the plaintiff in Resistoflex had received mixed signals, and here,
plaintiff did not. Resistoflex Co., 854 F.2d at 764; (DE # 91-1 at 30). The plaintiff in
Resistoflex was told he was fired, and was then told by someone in the personnel
department that he would get a letter clarifying his status with the company. Resistoflex
Co., 854 F.2d at 764. Here, by contrast, plaintiff was told he was fired and was then told
by the same person, the director of human resources, that the parties needed to work to
“unravel the employment situation.” (DE # 91-1 at 30.) The “unravel” language is not
inconsistent with a termination decision, and both the “unravel” language and the
termination decision were communicated to the plaintiff at the same time by the same
person.
Additionally, the language in Rowe’s November 4 email is not vague like the
language in the memo in Trumball. Trumball, 756 F. Supp. at 534-35. The language from
Rowe’s email (“the decision had been made that you would no longer be employed by
Forest River”) leaves nothing to the imagination. (DE # 91-1 at 30.) Plaintiff knew, or
should have known, that this meant that a decision was made that he was terminated.
Resistoflex Co., 854 F.2d at 765. In sum, the facts of this case are more in line with the
Economu than with Trumball and Resistoflex. Economu, 829 F.2d at 312-14.
Plaintiff argues that the policy behind requiring unequivocal notice to trigger the
statute of limitations supports his argument. Plaintiff points to the Flannery court’s
53
statement that: “Requiring employees like [plaintiff] to file EEOC charges on the basis
of ambiguous conversations regarding termination would cause a flood of false charges;
litigants would be forced to file a charge at every hint of termination in order to
preserve their claims.”Flannery, 354 F.3d at 641. However, the concern the Seventh
Circuit expressed in Flannery does not apply to this case. This is not a case where the
plaintiff had to try to interpret vague or mysterious messages about future employment
from his employer. Plaintiff was sent an email from the director of his employer’s
human resources department that stated that a decision had been made that he would
no longer be employed at Forest River. This was not a “hint of termination” and does
not trigger the concerns set forth in Flannery.
Plaintiff’s next arguments come from the November 19, 2008, letter. (DE # 91 at
11.) Plaintiff argues that because a terminated employee has no leave rights, and
because Rowe’s November 19 letter addressed plaintiff’s eligibility for leave, plaintiff
was not terminated on November 3. (DE # 91 at 11.) Plaintiff also argues that the
November 19 letter did not address COBRA rights, “which would be indicative of a
termination of employment.” (DE # 91 at 11.) These arguments have no merit. The
Seventh Circuit has stated: “[T]he significant date for purposes of Ricks and the
limitations period is that date upon which the employee receives notice of termination
and not the date upon which the termination becomes effective.” Mull, 784 F.2d at 290;
see also Ricks, 449 U.S. at 258. It is immaterial that plaintiff’s termination was not
effective on November 3 or 4. He was given notice that the termination decision had
been made on November 4, 2008.
54
Plaintiff’s next argument is that if the November 3 meeting or the November 4
email had been sufficiently clear, there would be no need for the November 19, 2008, or
January 9, 2009, letters. (DE # 91-1 at 11.) Additionally, plaintiff argues there would be
no need to discuss plaintiff’s eligibility for leave or COBRA rights if the meeting or
email had been clear. (Id.) However, neither the January 9 letter nor anything plaintiff
has alleged about the November 19 letter cast any doubt on the clarity of the November
4 email. (DE # 91-1 at 30) (“[T]he decision had been made that you would no longer be
employed by Forest River.”).
Plaintiff further argues that his November 13, 2008, email to Rowe indicates that
the notice of termination he received was not unequivocal.32 (DE # 91-1 at 11-12.) He
cites to Dvorak v. Mostardi Platt Associates, Inc. in support of this argument. 289 F.3d 479
(7th Cir. 2002). In that case, the plaintiff was told by superiors that he should go on
FMLA leave, but he resisted the idea. Id. at 482. However, his superiors made it clear
that this was not optional, and the plaintiff was told he had to leave the building. Id. A
32
The text of that email stated:
It has now been almost two weeks since we met at the hotel conference room
on the morning of November 3rd. In this meeting, we agreed that we would
work toward a relatively quick resolution in your words to “unravel the
employment situation[.]”
Can you please provide me with an update and/or Pete’s thoughts regarding
potential next steps in timing[.]
(DE # 91-1 at 30.)
55
few weeks later, the plaintiff wrote the defendant’s director of human resources
inquiring into whether he had been terminated and into his status with the company. Id.
In determining a date of termination, the Seventh Circuit noted that “[the plaintiff’s]
own request for clarification, likewise, tends to show that any notice he might have
received of his termination was not all that unequivocal.” Id. at 487.
However, the plaintiff in Dvorak had never been told about a termination
decision. He had simply been told he was being placed on medical leave and asked to
leave the building. Id. at 482. Here, plaintiff was told not to report to work and that a
decision had been made that plaintiff would not longer be employed by Forest River.
(DE # 91-1 at 30.) This is a stark contract to Dvorak, and that case lends plaintiff no
support.
Plaintiff’s final argument is that the Tenth Circuit’s analysis in Rzepiennik v.
Archstone-Smith, Inc. makes November 19, 2008, the earliest trigger date for the
limitations period. Rzepiennik, 331 F. App’x at 588-90. In that case, the plaintiff, a former
employee that had uncovered a possible fraud by the defendant, brought a SOX claim
after the defendant offered him a bonus contingent on the plaintiff not disclosing facts
about the alleged fraud and returning all documents relating to the alleged fraud. Id. at
586. The court found that the negotiation of an agreement between the plaintiff and the
defendant could have pushed back the limitations period trigger date if the defendant
had engaged in negotiations, indicating that a final decision had not been made. Id. at
590. However, in Rzepiennik, the plaintiff was not alleging that the unlawful
employment action was his termination; he was alleging that the unlawful employment
56
action was the defendant’s offer to pay him a bonus conditioned on the plaintiff not
disclosing facts concerning the alleged fraud and returning all documents concerning
the alleged fraud. Id. at 589. Here, plaintiff alleges the unlawful employment action is
his termination (DE # 5 at 17), and therefore Rzepiennik lends him no support.
In their motion to dismiss, the FR defendants argue that plaintiff cannot invoke
the doctrine of equitable estoppel to toll the 90-day filing deadline. (DE # 31-1 at 21-24.)
The court need not address that argument, as plaintiff did not respond to it in his
response brief. (DE # 91.) The FR defendants argue (DE # 99 at 11-12), and the court
agrees, that because plaintiff has failed to respond to this argument, plaintiff concedes
the doctrine of equitable estoppel does not apply in this case. Bonte, 624 F.3d at 466.
In sum, because plaintiff had final, unequivocal notice of the termination
decision on November 4, 2008, the claim he filed with OSHA on February 17, 2009, was
not timely, and the court lacks jurisdiction to hear his claim. Because the court lacks
jurisdiction over plaintiff’s SOX claim on account of the 90-day filing period, it will not
address the FR defendants’ argument that Forest River is not covered by SOX § 806.
(DE # 31 at 7.)
BERKSHIRE’S MOTION TO DISMISS PLAINTIFF’S SOX CLAIM
Defendant Berkshire has moved to dismiss plaintiff’s SOX claims against it.
(DE # 32.) The same analysis from the section above applies here with regard to
Berkshire’s motion. The court lacks subject matter jurisdiction over plaintiff’s SOX claim
against Berkshire. Therefore, plaintiff’s SOX claim is dismissed under FED. R. CIV. P.
12(b)(1). Because the court must dismiss this claim for lack of jurisdiction, and because
57
the court is dismissing plaintiff’s negligent misrepresentation claim against Berkshire, it
need not address the remaining arguments in Berkshire’s brief in support of its motion
to dismiss, including Berkshire’s argument that the court lacks personal jurisdiction
over it. (DE # 32-1.)
CONCLUSION
For the foregoing reasons:
1. Forest River and Peter Liegl’s motion to dismiss plaintiff’s state law claims
(DE # 27) as the motion relates to plaintiff’s breach of contract and negligent
misrepresentation claims is DENIED.
2. The portion of Berkshire Hathaway’s motion to dismiss (DE # 32) that relates
to plaintiff’s negligent misrepresentation claim is GRANTED.
3. Forest River and Peter Liegl’s motion to dismiss plaintiff’s Sarbanes-Oxley Act
claim (DE # 29) is GRANTED.
4. The portion Berkshire Hathaway’s motion to dismiss (DE # 32) that relates to
plaintiff’s Sarbanes-Oxley Act claim is GRANTED. Because no claims remain
against Berkshire Hathaway, it is dismissed from the case.
SO ORDERED.
Date: February 22, 2012
s/ James T. Moody _______________
JUDGE JAMES T. MOODY
UNITED STATES DISTRICT COURT
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?