TESLER v. MILLER HOWARD INVESTMENTS, INC
Filing
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ENTRY ON DEFENDANT'S MOTION TO DISMISS PLAINTIFF'S SECOND AMENDED OMPLAINT - 41 Motion to Dismiss for Failure to State a Claim is GRANTED in part and DENIED in part, as follows: Miller/Howard's Motion to Dismiss Tesler's Indi ana's Wage Claims Act violation (Counts I), Indiana's Wage Payment Act violation (Count II), conversion (Count IV), and fraud (Count VII) claims is GRANTED, and these claims are DISMISSED WITH PREJUDICE. Miller/Howard's Motion to Dismiss Tesler's claims for unjust enrichment (Count III), negligence (Count V), breach of fiduciary duty (Count VI), and breach of contract (Count VIII) is DENIED. See Entry for details. Signed by Judge Tanya Walton Pratt on 7/3/2017. (LBT)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
ERIC S. TESLER,
Plaintiff,
v.
MILLER/HOWARD INVESTMENTS, INC.,
a Delaware Corporation,
Defendant.
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Case No. 1:16-cv-00640-TWP-MPB
ENTRY ON DEFENDANT’S MOTION TO DISMISS
PLAINTIFF’S SECOND AMENDED COMPLAINT
This matter is before the Court on Defendant Miller/Howard Investment Inc.’s
(“Miller/Howard”) Motion to Dismiss Plaintiff Eric Tesler’s (“Tesler”) Second Amended
Complaint. (Filing No. 42.) Tesler, a former employee of Miller/Howard raises multiple claims
against Miller/Howard concerning unpaid compensation. (Filing No. 35.) Specifically, Tesler is
asserting claims of violation of Indiana’s Wage Claim Statute, Ind. Code § 22-2-9 et seq. (Count
I); violation of Indiana’s Wage Payment Act, Ind. Code § 22-2-5 et seq. (Count II); unjust
enrichment (Count III); conversion, Ind. Code § 35-43-4-1 (Count IV); negligence (Count V);
breach of fiduciary duty (Count VI), fraud (Count VII) and for breach of contract (Count VIII).
For the reasons that follow, the Court grants in part and denies in part the Motion to Dismiss.
I. BACKGROUND
The following facts are not necessarily objectively true. But as required when reviewing a
motion to dismiss, the Court accepts as true all factual allegations in the Second Amended
Complaint and draws all reasonable inferences in favor of Tesler as the nonmoving party. See
Bielanski v. County of Kane, 550 F.3d 632, 633 (7th Cir. 2008).
Miller/Howard is a financial investment management corporation that sells securities. On
October 27, 2010, Tesler accepted Miller/Howard’s offer of employment as a Regional Sales
Director, which involved selling management investment portfolios in his assigned geographic
area, the “Middle United States.” (Filing No. 35 at 3.) Tesler’s compensation package included,
among other terms: (1) a commission of “25%-10-%-5%-3% ongoing” for each non-institutional
account (“SMA”) originally opened by Tesler; (2) a commission of “15%-10%-5%” for each
institutional account (“UMA”) serviced by Tesler; and (3) a 3% “ongoing” trail commission for
current accounts “to service existing business in territory.” (Filing No. 1-1 at 3.) According to its
written Employee Policies, Miller/Howard would pay employees for all earned, accrued, and
unused vacation time upon separation of employment. (Filing No. 35 at 4.)
Tesler opened numerous SMA accounts and managed numerous UMA accounts during the
course of his employment, which yielded substantial and lucrative management fees for
Miller/Howard. (Filing No. 35 at 4.) However, by April 2012, he became concerned that the
commission amounts being paid to him were not accurate or consistent with the Terms of
Compensation. (Filing No. 35 at 5.) Miller/Howard never explained how Tesler’s commission
payments were calculated, and Miller/Howard refused his repeated requests for an accounting
which would allow him to verify the payments. (Filing No. 35 at 5.) Miller/Howard never
provided Tesler with any type of accounting of the fees generated from these accounts, and thereby
concealed their true values. (Filing No. 35 at 4-5.)
On March 7, 2014, Tesler’s employment was terminated. (Filing No. 35 at 3.) He alleges
that Miller/Howard failed to pay him for his unused vacation time, outstanding reimbursable
expenses, commissions that were due to him for UMA and SMA accounts, and his ongoing 3%
commission. (Filing No. 35 at 6.)
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On or about April 14, 2014, Miller/Howard’s auditor notified Tesler that due to an
“accounting error,” he was underpaid for commissions in the third quarter of 2013 in the amount
of $2,096.28. (Filing No. 35 at 6.) On or about July 18, 2014, Miller/Howard notified him of
another “error” in his commission payments, resulting in an underpayment of $12,389.00 for 2013
and the first quarter of 2014. (Filing No. 35 at 7.) And on July 29, 2014, Miller/Howard provided
an amended accounting. (Filing No. 35 at 7.) Tesler alleges that this accounting shows that he
was underpaid in the amount of $39,365.25. (Filing No. 35 at 7.) Miller/Howard has refused to
pay any of these amounts. (Filing No. 35 at 7-8.)
Miller/Howard continues to refuse to provide Tesler with a complete and accurate
accounting of all the management fees earned from SMA or UMA accounts for the fourth quarter
of 2010, and for 2011 and 2012. (Filing No. 35 at 8.) Due to Miller/Howard’s conduct, Tesler
has lost past, present, and future income, vacation benefits, and reimbursement for expenses
incurred during his employment; he has suffered damage to his career; and he has incurred
additional financial losses, including the costs associated with claiming his unpaid wages. (Filing
No. 35 at 8.)
Tesler filed an initial Complaint in this Court on March 21, 2016 1 (Filing No. 1), and the
operative Second Amended Complaint on October 19, 2016, (Filing No. 35), alleging eight causes
of action: violation of Indiana Code Section 22-2-9, the Indiana Wage Claims Act (“IWCA”),
violation of Indiana Code Section 22-2-5, the Indiana Wage Payment Act (“IWPA”), unjust
enrichment, conversion, negligence, breach of fiduciary duty, fraud, and breach of contract.
(Filing No. 35 at 9-14.) Miller/Howard filed a Motion to Dismiss, (Filing No. 41), raising
1
Tesler identifies this date as March 14, 2016 in his briefing, but the case’s docket indicates that the Complaint was
filed on March 21, 2016. Absent any allegation the docket entry is in error, the Court adopts the date indicated on the
docket.
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challenges to each of Tesler’s eight causes of action. The Court will address each argument in
turn. 2
II.
LEGAL STANDARD
Federal Rule of Civil Procedure 12(b)(6) allows a defendant to move to dismiss a complaint
that has failed to “state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). When
deciding a motion to dismiss under Rule 12(b)(6), the Court accepts as true all factual allegations
in the complaint and draws all reasonable inferences in favor of the plaintiff. Bielanski v. County
of Kane, 550 F.3d at 633 (7th Cir. 2008). However, courts “are not obliged to accept as true legal
conclusions or unsupported conclusions of fact.” Hickey v. O’Bannon, 287 F.3d 656, 658 (7th Cir.
2002).
The complaint must contain a “short and plain statement of the claim showing that the
pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). In Bell Atlantic Corp. v. Twombly, the
Supreme Court explained that the complaint must allege facts that are “enough to raise a right to
relief above the speculative level.” 550 U.S. 544, 555 (2007).
Although “detailed factual
allegations” are not required, mere “labels,” “conclusions,” or “formulaic recitation[s] of the
elements of a cause of action” are insufficient. Id.; see also Bissessur v. Ind. Univ. Bd. of Trs.,
581 F.3d 599, 603 (7th Cir. 2009) (“it is not enough to give a threadbare recitation of the elements
of a claim without factual support”). The allegations must “give the defendant fair notice of what
the . . . claim is and the grounds upon which it rests.” Twombly, 550 U.S. at 555. Stated differently,
the complaint must include “enough facts to state a claim to relief that is plausible on its face.”
Hecker v. Deere & Co., 556 F.3d 575, 580 (7th Cir. 2009) (citation and quotation marks omitted).
To be facially plausible, the complaint must allow “the court to draw the reasonable inference that
2
The parties agree that Tesler’s IWPA (Ind. Code § 22-2-5) claim should be dismissed, (Filing No. 42 at 8; Filing
No. 49 at 1), so the Court grants this dismissal without discussion.
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the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(citing Twombly, 550 U.S. at 556).
III.
A.
DISCUSSION
Indiana Wage Claim Act
Indiana Code § 22-2-9-4 requires an employee who has a claim under the IWCA to exhaust
his administrative remedies with the Indiana Department of Labor before filing a lawsuit. Quimby
v. Becovic Mgmt. Grp. Inc., 962 N.E.2d 1199, 1200 (Ind. 2012) (the exhaustion “requirement is
‘well-settled.’”); see also, St. Vincent Hosp. & Health Care Ctr., Inc. v. Steele, 766 N.E.2d 699,
705 (Ind. 2002) (“Claimants who proceed under [the IWCA] may not file a complaint with the
trial court. Rather, the wage claim is submitted to the Indiana Department of Labor.”).
Miller/Howard moves to dismiss Tesler’s IWCA claim, arguing that he failed to exhaust
his administrative remedies as required by Indiana law. (Filing No. 42 at 6.) Tesler responds that
he is not required to avail himself of state administrative remedies because exhaustion is not
required when doing so would be futile. (Filing No. 49 at 7-8.) Tesler argues that because the
amount he is claiming exceeds the $6,000.00 cap imposed by the Department of Labor, any attempt
to exhaust his administrative remedies would be futile, because his claim will not be processed.
(Filing No. 49 at 8-9.)
This Court has already concluded in similar circumstances that exhaustion is required,
despite the fact that the claim exceeded $6,000.00. See Grass v. Damar Services, Inc., 2014 WL
2773027, at *43 (S.D. Ind. 2014) (holding that plaintiff was required exhaust administrative
remedies, despite having a claim in excess of $6,000.00, and granting summary judgment to
defendant). Tesler has not demonstrated that his circumstances differ from those in Grass, and the
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Court concludes that Tesler was required to exhaust his administrative remedies. Accordingly, the
Court grants Miller/Howard’s Motion to Dismiss Tesler’s IWCA claim.
B.
Unjust Enrichment, Negligence, and Breach of Fiduciary Duty
Under Indiana law, “an action relating to the terms, conditions, and privileges of
employment except actions based upon a written contract (including, but not limited to, hiring or
the failure to hire, suspension, discharge, discipline, promotion, demotion, retirement, wages, or
salary) must be brought within two (2) years of the date of the act or omission complained of.”
Ind. Code § 34-11-2-1; see Peake v. International Harvester Co., 489 N.E.2d 102, 105-06 (Ind.
Ct. App. 1986) (concluding that unjust enrichment claims based on unpaid wages were subject to
the two-year statute of limitations because “substance prevails over form”); see also Knutson v.
UGS, 2007 WL 2122192, at *17 (S.D. Ind. 2007) (concluding that plaintiff’s unjust enrichment
claim was subject to a two-year statute of limitations under Indiana Code § 34-11-2-1); Veerkamp
v. U.S. Security Associates, 2006 WL 2850020, at *20 (S.D. Ind. 2006) (applying a two-year statute
of limitations to plaintiff’s claims for wages under different theories because they all related to
“the terms, conditions, and privileges of employment”). Tesler does not dispute that a two-year
statute of limitations applies to these claims.
Miller/Howard argues that because Tesler was terminated on March 7, 2014 and did not
file his initial complaint until March 21, 2016, his claims for unpaid wages are time-barred by the
two-year statute of limitations. (Filing No. 42 at 2.) Tesler responds that his Complaint was timely
because under Indiana law, his cause of action could not have accrued until, at the earliest, he
received his final paycheck. (Filing No. 49 at 4.) According to Tesler, that paycheck would have
been paid on March 21, 2014, within a two-year time period. (Filing No. 49 at 4-5.)
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The Court begins by noting that generally, consideration of a statute of limitations at the
motion to dismiss stage is inappropriate. A statute of limitations represents an affirmative defense.
Because a plaintiff need not anticipate or allege facts that would defeat affirmative defenses, a
court typically cannot dismiss a complaint for failure to satisfy a statute of limitations until
summary judgment. Barry Aviation, Inc. v. Land O’Lakes Mun. Airport Comm’n, 377 F.3d 682,
688 (7th Cir. 2004). However, a court may properly rule on an affirmative defense where the
complaint includes all the information necessary to do so. Id. Therefore, where “the relevant dates
are set forth unambiguously in the complaint,” a court may reach a statute of limitations argument
on a motion to dismiss. Brooks v. Ross, 578 F.3d 574, 579 (7th Cir. 2009).
Here, the Complaint does not allege sufficient facts for the Court to determine when
Tesler’s claim accrued, and therefore when the statute of limitations began to run. First, Tesler
alleges that Miller/Howard calculated the amounts of his commissions, and that it refused to
provide him with information about how those amounts were calculated. So it is not apparent that
Tesler could have been expected to know or notice from any given paycheck that his commission
payments were somehow deficient. It is therefore not clear when Tesler was or should have been
on notice that he was owed unpaid commission wages.
Second, even assuming that the statute of limitations began to run on the date that Tesler
received his last paycheck, his Amended Complaint does not state the date on which that occurred.
Third, and regardless of when Tesler received his final paycheck, it is not clear to the Court from
the cases cited that Tesler’s claim would have accrued on the date of his last paycheck. While
Miller/Howard argues that a separate claim accrues at each pay period in which a person is owed
unpaid wages, (and therefore that Tesler’s only viable claim would be for wages owed for his last
pay period), the only case it cites in support of this proposition involves an IWCA claim—not
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claims arising under any common law causes of action. (Filing No. 52 at 6.) Miller/Howard does
not establish that this accrual rule applies in contexts outside of the IWCA. Tesler also alleges that
he was notified by Miller/Howard on at least two, and perhaps on three separate occasions
following his termination that he was owed unpaid compensation. Miller/Howard does not address
how those notifications affect the accrual of Tesler’s claims.
The Court concludes, therefore, that the statute of limitations issue is a fact-dependent
inquiry in this case, and the facts alleged do not enable the Court to make a determination as to the
application of the statute of limitations. The Court denies Miller/Howard’s motion to dismiss as
to these claims.
C.
Conversion
Under Indiana Code § 35-43-4-3(a), “a person who knowingly or intentionally exerts
unauthorized control over property of another person commits criminal conversion.” I.C. § 3543-4-3(a). In order for money to be the subject of a conversion action, “it must be capable of being
identified as a special chattel,” meaning that “the money must be a determinate sum with which
the defendant was entrusted to apply to a certain purpose.” Stevens v. Butler, 639 N.E.2d 662, 666
(Ind. Ct. App. 1994). No action for conversion lies “where there is simply the refusal to pay a
debt.” National Fleet Supply, Inc. v. Fairchild, 450 N.E.2d 1015, 1019 (Ind. Ct. App. 1983).
Miller/Howard argues that under Indiana law, Tesler’s claim for unpaid wages does not
constitute conversion. (Filing No. 42 at 10-11.) The Court addresses this issue succinctly, because
Indiana law is clear on this point. In Puma v. Hall, this Court held that the defendants’ nonpayment
of wages did not constitute conversion. 2009 WL 5068629, at *4 (S.D. Ind. 2009) (granting
defendants’ motion to dismiss because “the failure to pay an indebted sum of money does not
constitute conversion”) (citing Tobin v. Ruman, 819 N.E.2d 78, 89 (Ind. Ct. App. 2004)
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(concluding that the wrongful withholding of retained earnings is, at most, a failure to pay a debt,
which does not constitute conversion as a matter of law)). Tesler asserts a conversion claim for
unpaid wages only, (Filing No. 35 at 11), and presents no allegations that the monies at issue
constitute a determinate sum that Miller/Howard was entrusted to apply to a certain purpose.
Miller/Howard’s Motion to Dismiss Tesler’s conversion claim is therefore granted.
D.
Breach of Contract
Miller/Howard moves to dismiss Tesler’s breach of contract claim, arguing that the Terms
of Compensation document does not constitute an enforceable contract from which a breach of
contract claim can be brought. (Filing No. 42 at 12-17.) Tesler argues that the Terms of
Compensation document is a valid contract under Indiana law and that partial performance by
Miller/Howard proves that a meeting of the minds occurred. (Filing No. 49 at 12-15.)
Tesler has attached a copy of the Terms of Compensation to his Complaint, and both parties
refer to it in their briefing regarding the Motion to Dismiss. The Seventh Circuit has taken “a
relatively expansive view of the documents that a district court properly may consider in disposing
of a motion to dismiss.” Williamson v. Curran, 714 F.3d 432, 443 (7th Cir. 2013). “A motion
under Rule 12(b)(6) can be based only on the complaint itself, documents attached to the
complaint, documents that are critical to the complaint and referred to in it, and information that
is subject to proper judicial notice.” Geinosky v. City of Chicago, 675 F.3d 743, 745 n. 1 (7th Cir.
2012). The Court therefore considers the attached Terms of Compensation in deciding this
Motion.
For a contract to be enforceable, it “must be complete in its essential and material terms,
and capable of being enforced without adding to its terms.” Wolvos v. Meyer, 668 N.E.2d 671,
678 (Ind. 1996); see also, Firestone v. Std. Mgmt. Corp., 2005 WL 1606955, at *12 (S.D. Ind.
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2005) (“it is a fundamental tenet of contract law that ‘a contract is unenforceable if it is so indefinite
and vague that the material provisions cannot be ascertained’”) (quoting Ewing v. Board of
Trustees of Pulaski Memorial Hospital, 486 N.E.2d 1094, 1098 (Ind. Ct. App. 1985)).
Miller/Howard points out that the alleged contract at issue here is short, written in bullet point
form, and does not include some terms that Miller/Howard argues are material. However, it
contains at least eight material terms regarding Tesler’s compensation, including his base salary
and the percentages of his commissions. The document includes lines for the signatures of both a
Miller/Howard executive and Tesler. A contract need not be written in lengthy prose to be
enforceable, and at the motion to dismiss stage, the Court cannot conclude as a matter of law that
the attached document cannot constitute a contract.
The Court therefore denies Miller/Howard’s Motion to Dismiss Tesler’s breach of contract
claim.
E.
Fraud
To maintain a claim of fraud, a plaintiff must allege a material misrepresentation of past or
existing facts which: (1) was false; (2) was made with knowledge or reckless ignorance of its
falsity; (3) was relied upon by the complaining party; and (4) proximately caused the complaining
party’s injury. Dunlap v. Switchboard Apparatus, Inc., 2012 WL 1712554, at *22-23 (S.D. Ind.
2012) (citing Rice v. Strunk, 670 N.E.2d 1280, 1289 (Ind. 1996)). Indiana law is well-settled that
actual fraud “may not be based on representations regarding future conduct, or on broken promises,
unfulfilled predictions or statements of existing intent which are not executed.” Biberstine v. New
York Blower Co., 625 N.E.2d 1308, 1315 (Ind. Ct. App. 1993) (citations omitted) (rejecting fraud
claim based on representations that plaintiff could keep his stock in the event his employment was
terminated because that representation necessarily pertained to a future event); Heyser v. Noble
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Roman’s, Inc., 933 N.E.2d 16, 19 (Ind. Ct. App. 2010) (“Actual fraud may not be predicated upon
representations of future conduct.”). This is even true when, at the time the promise was made,
the defendant had “no intention of fulfilling the promise.” Sachs v. Blewett, 206 Ind. 151, 185 N.E.
856, 858 (Ind. 1933) (citations omitted).
Miller/Howard argues that Tesler’s fraud claim should be dismissed because his claim is
based only on promises regarding future conduct. (Filing No. 42 at 11-12.) The Court agrees. All
of Tesler’s claims relate to Miller/Howard’s promises to, in the future, compensate Tesler at
specified rates. Moreover, Tesler has not alleged how his fraud claim is materially different from
his breach of contract claim. They are essentially premised on the same core conduct, resulting in
the same injury. Under Indiana law, this fact is fatal to Tesler’s claim. See Dean Kruse Found.,
Inc. v. Gates, 932 N.E.2d 763, 768 (Ind. Ct. App. 2010) (“To prevail on a fraud claim, a plaintiff
claiming both breach of contract and fraud must prove that the breaching party committed the
separate and independent tort of fraud and that such fraud resulted in injury distinct from that
resulting from the breach of contract.”) (Emphasis added.)
The Court therefore grants Miller/Howard’s motion to dismiss the fraud claim.
IV.
CONCLUSION
For the foregoing reasons, Miller/Howard’s Motion to Dismiss (Filing No. 41) is
GRANTED in part and DENIED in part, as follows:
•
Miller/Howard’s Motion to Dismiss Tesler’s Indiana’s Wage Claims Act violation
(Counts I), Indiana’s Wage Payment Act violation (Count II), conversion (Count IV),
and fraud (Count VII) claims is GRANTED, and these claims are DISMISSED WITH
PREJUDICE.
•
Miller/Howard’s Motion to Dismiss Tesler’s claims for unjust enrichment (Count III),
negligence (Count V), breach of fiduciary duty (Count VI), and breach of contract
(Count VIII) is DENIED.
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SO ORDERED.
Date: 7/3/2017
DISTRIBUTION:
Jeremy N. Gayed
BARRETT & MCNAGNY LLP
jng@barrettlaw.com
Michael H. Michmerhuizen
BARRETT & MCNAGNY LLP
mhm@barrettlaw.com
Michael A. Clements
CLEMENTS LEGAL GROUP LLC
MAC@CScounsel.com
Melissa K. Taft
JACKSON LEWIS P.C. - Indianapolis
melissa.taft@jacksonlewis.com
Michael W. Padgett
JACKSON LEWIS P.C. - Indianapolis
padgettm@jacksonlewis.com
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