Sadler et al v. General Electric Company
Filing
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MEMORANDUM OPINION AND ORDER by Senior Judge Thomas B. Russell granting in part and denying in part 6 Defendant's Motion to Dismiss for Failure to State a Claim. cc: Counsel(JAC)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
AT LOUISVILLE
CIVIL ACTION NO. 3:17-CV-328-TBR
KEVIN SADLER,
JUDE EDELEN, AND
MICHAEL KRIMM
PLAINTIFFS
v.
GENERAL ELECTRIC CO.,
DEFENDANT
MEMORANDUM OPINION AND ORDER
This matter comes before the Court on Defendant General Electric Company’s
(“Defendant” or “General Electric”) Motion to Dismiss the claims against it, pursuant to Federal
Rule of Civil Procedure 12(b)(6). [DN 6.] Plaintiffs Kevin Sadler, Jude Edelen, and Michael
Krimm, (collectively, “Plaintiffs”), have responded, [DN 10], and Defendant has replied. [DN
12.] This matter is now ripe for adjudication. For the following reasons, Defendant’s Motion is
GRANTED in part and DENIED in part.
I. BACKGROUND
Kevin Sadler, Jude Edelen, and Michael Krimm were all employees at General Electric
when General Electric sold its Appliances division to Haier on June 6, 2016, [DN 1-2, at 3], a
Chinese electronics and appliances company. Plaintiffs were all engineering technicians who had
worked at General Electric for more than 24 years. [Id.] According to Plaintiffs, General
Electric’s “common practice” is to permit “employees the opportunity to look for employment
through relocation to another [General Electric] plant.” [Id.] However, Plaintiffs aver that they
were afforded no such opportunity when the company’s Appliances division was acquired by
Haier. [Id.] Specifically, Plaintiffs allege that Human Resources manager, Susan LaCoe, as well
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as Managers Rob Byron and Bridget Blocker, all told Plaintiffs “that the option to relocate was
not available.” [Id.] As a result of Plaintiffs’ alleged inability to transfer to another General
Electric plant, they were thereafter considered Haier employees, a distinction that Plaintiffs
contend resulted in their losing “numerous benefits” and General Electric “no longer funding
their pension.” [Id. at 4-5.] Additionally, Plaintiffs aver that they “have lost significant financial
contributions to their pensions for the remaining number of years the employees would have
retained their employment with General Electric until retirement.” [Id. at 5.]
In Plaintiffs’ Complaint, while it is argued that they were informed by LaCoe, Byron, and
Blocker that they would not be able to transfer to another plant, and that Plaintiffs were sent a
separate email indicating this inability to transfer, it is also stated that “two days before the sale
of General Electric to Haier, Plaintiffs were then told by Susan LaCoe that they did in fact have
the opportunity to transfer to another General Electric location.” [Id. at 4.] Plaintiffs contend that
the short notice given to them regarding their ability to transfer did not allow them sufficient
time to do so, and that, as a result, they have suffered economic detriment. [Id. at 4-5.] Plaintiffs
initially filed this lawsuit in Jefferson County Circuit Court, but General Electric removed it to
this Court. There are three claims at issue in this case: (1) Promissory Estoppel; (2) Breach of
Implied in Fact Contract; and (3) Fraudulent Inducement/Misrepresentation. General Electric has
filed a Motion to Dismiss all three claims against it. [DN 6.]
II. LEGAL STANDARD
Federal Rule of Civil Procedure 8(a)(2) requires that a plaintiff’s complaint include “a
short and plain statement of the claim showing that the pleader is entitled to relief.” “Rule
12(b)(6) provides that a complaint may be dismissed for failure to state a claim upon which relief
can be granted.” Bloch v. Ribar, 156 F.3d 673, 677 (6th Cir. 1998). Importantly, “[w]hen
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considering a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil
Procedure, the district court must accept all of the allegations in the complaint as true, and
construe the complaint liberally in favor of the plaintiff.” Lawrence v. Chancery Court of
Tennessee, 188 F.3d 687, 691 (6th Cir. 1999). Thus, “unless it can be established beyond a doubt
that the plaintiff can prove no set of facts in support of his claim which would entitle him to
relief,” the motion should be denied. Achterhof v. Selvaggio, 886 F.2d 826, 831 (6th Cir. 1989).
“However, the Court need not accept as true legal conclusions or unwarranted factual
inferences.” Blakely v. United States, 276 F.3d 853, 863 (6th Cir. 2002). A “complaint must
contain either direct or inferential allegations respecting all the material elements to sustain a
recovery under some viable legal theory.” Andrews v. Ohio, 104 F.3d 803, 806 (6th Cir. 1997).
Even though a “complaint attacked by a Rule 12(b)(6) motion to dismiss does not need
detailed factual allegations, a plaintiff’s obligation to provide the grounds of his entitlement to
relief requires more than labels and conclusions, and a formulaic recitation of the elements of a
cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). This means
that the plaintiff’s “[f]actual allegations must be enough to raise a right to relief above the
speculative level on the assumption that all the allegations in the complaint are true (even if
doubtful in fact).” Id. The concept of “plausibility” denotes that a complaint should contain
sufficient facts “to state a claim to relief that is plausible on its face.” Id. at 570. The element of
plausibility is met “when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal,
129 S. Ct. 1937, 1949 (2009). But where the court is unable to “infer more than the mere
possibility of misconduct, the complaint has alleged—but has not show[n]—that the pleader is
entitled to relief.” Id. at 1950 (internal quotation marks omitted).
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III. DISCUSSION
A. Promissory Estoppel Claim
The doctrine of promissory estoppel is an equitable one, “which is only applicable if a
fraud or some other injustice would result.” Lynch v. Sease, 244 F. App’x 736, 739 (6th Cir.
2007). Under Kentucky law, a successful claim of promissory estoppel necessitates the
satisfaction of four separate elements: (1) there must be a promise; (2) this promise must be one
“which the promisor should reasonably expect to induce action or forbearance on the part of the
promisee[s] or a third person;” (3) the promise must actually “induce such action or
forbearance;” and (4) “injustice can be avoided only by enforcement of the promise.” LichtefeldMassaro, Inc. v. R.J. Manteuffel Co., 806 S.W.2d 42, 44 (Ky. App. 1991). Additionally, the
reliance must be justified. FS Invs., Inc. v. Asset Guar. Ins. Co., 196 F. Supp. 2d 491, 507 (E.D.
Ky. 2002).
Defendant’s principal argument in support of its Motion to Dismiss the promissory
estoppel claim is that there was no “specific promise of job security” made by Defendant to
Plaintiffs. See Harris v. Burger King Corp., 993 F. Supp.2d 677, 691 (W.D. Ky. 2014) (“An atwill employee can claim promissory estoppel only if she can show a specific promise of job
security.”). Rather, in Defendant’s view, Plaintiffs only point to the “standard practice” between
Defendant and other employees, leaving the Complaint facially insufficient. However, the Court
is satisfied that Plaintiffs have met their burden of pleading sufficient facts “suggest[ing] a ‘right
to relief above a speculative level.’” Estate of Smith v. United States, 509 F. App’x 436, 439 (6th
Cir. 2012) (quoting Twombly, 550 U.S. at 555-56).
Specifically, in their Complaint, Plaintiffs lay out facts that, when construed as true, tend
to show that Plaintiffs were told directly that they would not have an opportunity to transfer and
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that they relied to their detriment on that promise, foregoing any attempts to relocate to a
different General Electric plant location. Plaintiffs further allege in their Complaint that, as a
result of this detrimental reliance on Defendant’s promise that they would not be allowed to
transfer, Plaintiffs suffered economic harm “in the form of lost wages, benefits, and pain and
suffering….” [DN 1-2, at 6.] Defendant argues that, even if a promise was made, the fact that
Plaintiffs were eventually told they could transfer renders any promissory estoppel claim legally
insufficient. Even so, the Court finds that the incredibly small window Plaintiffs were given
during which they were purportedly allowed to seek transfer to a different plant may not render
Plaintiffs’ promissory estoppel claim untenable. Under the Rule 12(b)(6) standard, Plaintiffs
have pled sufficient facts to withstand a Motion to Dismiss. Accordingly, Defendant’s Motion to
Dismiss this claim is denied at this time. However, the Court believes this to be a close call and
discovery may shed some light on this issue.
B. Breach of Implied in Fact Contract Claim
Plaintiffs’ second claim alleges that Defendant breached an implied in fact contract
relating to Plaintiffs’ understanding that they would, consistent with “common practice” at
General Electric, be permitted to transfer to another of the company’s plants. [Id. at 3.] Plaintiffs
claim that they were not permitted sufficient opportunity to do so and have suffered damages as a
result. [See id.] In “a contract implied in fact, the evidence must disclose an actual agreement or
meeting of the minds although not expressed and such is implied or presumed from the acts or
circumstances which according to the ordinary course of dealing and the common
understanding…shows a mutual intent to contract.” Rider v. Combs, 256 S.W.2d 749, 749 (Ky.
1953).
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In their Complaint, Plaintiffs do not allege that there was any meeting of the minds,
mutual manifestation of assent, or any other variation of an actual agreement that would lead this
Court to conclude that there was an implied in fact contract present in this case. In stating their
claim, Plaintiffs refer to “the ordinary course of dealing and common understanding that
employees [would have] the opportunity to relocate to another General Electric location” if, for
some reason, the plant was taken over, as it was here by Haier. [DN 1-2, at 6.] However,
Plaintiffs are describing the ordinary course of dealing and common understanding with respect
to other employees and not themselves. Indeed, Paragraph 49 of the Complaint specifically refers
to the fact that Defendant, “in the past has allowed employees to transfer to another facility in the
event of a facility sale or closing.” [Id. (emphasis added).]
Absent from Plaintiffs’ Complaint are facts alleging that General Electric reached some
mutual manifestation of assent with Plaintiffs regarding Plaintiffs’ ability to transfer to a
different plant or plants. Instead, Plaintiffs rely on Defendant’s past conduct, a fact which does
not indicate the presence of an implied in fact contract. The Court assumes as true the claim by
Plaintiffs that it has been a common practice of Defendant in the past to allow such plant
transfers to occur. However, it is quite a leap to assume that, because other employees of
Defendant have reached agreements with Defendant, that this alone would result in the creation
of an implied in fact contract with them. Further, Plaintiffs specifically state in their Facts section
that, whatever common practice Defendant may have had with respect to employee transfers, all
three Plaintiffs were told on multiple occasions that they would not have such an opportunity.
[Id. at 3.] This directly contravenes the foundational requirement of contract formation, namely,
that the parties must have an agreement. It cannot be that the basis for the formation of the
alleged implied in fact contract between Plaintiffs and Defendant stems from the common
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practice of allowing employees to transfer when the Plaintiffs, by their own Complaint, indicate
unequivocally that they were told that this option would not be available to them. Plaintiffs have
not pled sufficient facts regarding their implied in fact contract claim and, as such, Defendant’s
Motion to Dismiss this claim is granted.
C. Fraudulent Inducement/Misrepresentation Claim
Under Kentucky common law, a party alleging fraud in the inducement is required to
satisfy six elements by clear and convincing evidence. Bear, Inc. v. Smith, 303 S.W.3d 137, 142
(Ky. App. 2010). These elements are: (1) a material representation; (2) that representation is
false; (3) the person who makes the representation knows it is false, or made the representation
with recklessness as to its falsity; (4) the representation is “made with inducement to be acted
upon;” (5) the person to whom the representation is made acts in reliance on that representation;
and (6) injury is caused to that person. Id. Additionally, “a misrepresentation to support an
allegation of fraud must be made concerning a present or pre-existing fact, and not in respect to a
promise to perform in the future.” Filbeck v. Coomer, 182 S.W.2d 641, 643 (Ky. 1944).
While the normal pleading standards of Federal Rule of Civil Procedure 8, outlined above
in Section II, apply to most claims, the heightened pleading standard of Rule 9(b) applies to
claims of fraud. Rule 9(b) imposes a heightened pleading standard for plaintiffs, which is
“designed to prevent ‘fishing expeditions,’ to protect defendants’ reputations from allegations of
fraud, and to narrow potentially wide-ranging discovery to relevant matters.” Chestbrough v.
VPA, P.C., 655 F.3d 461, 466 (6th Cir. 2011). This means that “[g]eneralized and conclusory
allegations that the Defendants’ conduct was fraudulent do not satisfy Rule 9(b).” Bovee v.
Coopers & Lybrand C.P.A., 272 F.3d 356, 361 (6th Cir. 2001). Rather, the fraud claim must set
out facts relating to the “time place, and content of the alleged misrepresentation on which he or
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she relied; the fraudulent scheme; the fraudulent intent of the defendants; and the injury resulting
from the fraud.” Coffey v. Foamex L.P., 2 F.3d 157, 161-62 (6th Cir. 1993) (internal quotation
marks omitted). Finally, “[t]he threshold test is whether the complaint places the defendant on
sufficient notice of the misrepresentation, allowing the defendants to answer, addressing in an
informed way plaintiffs [sic] claim of fraud.” Id. (internal quotation marks omitted).
The Court finds that Plaintiffs have pled sufficient facts to withstand dismissal at this
time. Specifically, Plaintiffs have laid out facts that, when construed as true, meet the Rule 9(b)
standard: they have laid out a chronology regarding Defendant’s past practices with respect to
allowing other employees transfer in similar situations; Plaintiffs note that, contrary to company
policy, they were later told that they could not transfer, statements which were ultimately
followed by another change in position immediately before Haier’s acquisition. Further,
Plaintiffs allege that Defendant was aware of the falsity of its statements to Plaintiffs concerning
their ability to transfer, or was at least reckless in making such representations, and that it
intended to, and in fact did, induce Plaintiffs’ reliance thereon. Plaintiffs have also alleged
damages as a result of their detrimental reliance.
Defendants argue forcefully that Plaintiffs’ Complaint lays out allegations concerning
fraud in the inducement/misrepresentation at a level of generality too high to withstand the
Motion to Dismiss, and that “Plaintiffs have not articulated any facts to indicate the substance of
any alleged fraudulent statement or misrepresentation, when the alleged statement was made, or
what was false about the alleged statement.” [DN 6, at 10.] The Court disagrees with
Defendant’s interpretation, although it is close. As noted above, Plaintiffs laid out in their Facts
section, as well as the section concerning the Fraud/Misrepresentation claim, allegations that,
taken as true, provide a timeline of representations made to Plaintiffs concerning their ability, or
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inability, to transfer plants; name specific individuals employed by Defendant who made these
representations to Plaintiffs; the medium in which they were made (orally, in person, and through
email); and how those representations harmed Plaintiffs. It is axiomatic that Rule 12(b)(6) does
not “require Plaintiffs to prove their case on the pleadings,” In re The Goodyear Tire & Rubber
Co. ERISA Litig., 438 F. Supp. 2d 783, 794 (N.D. Ohio 2006), and the Court is satisfied that
Plaintiffs have met the heightened standard of Rule 9(b). Defendant’s Motion to Dismiss this
claim is denied at this time.
IV. CONCLUSION
For the foregoing reasons, IT IS HEREBY ORDERED that Defendant’s Motion to
Dismiss for failure to state a claim under Rule 12(b)(6), [DN 6], is GRANTED IN PART and
DENIED IN PART.
IT IS SO ORDERED.
cc:
Counsel of Record
September 19, 2017
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