Davis III v. Office Depot, INC., et al

Filing 56

Judge Indira Talwani: ORDER entered. MEMORANDUM AND ORDER DENYING 43 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM (16-cv-11783) and #38 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM (16-cv-11823). See Attached Order. Associated Cases: 1:16-cv-11783-IT, 1:16-cv-11823-IT (DaSilva, Carolina)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
PETER C. DAVIS, III, and
MERRY WHITE,

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Plaintiffs,
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v.
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OFFICE DEPOT, INC. and
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OFFICEMAX INCORPORATED,
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Defendants.
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___________________________________ *
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MICHELLE B. SIGEL,
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Plaintiff,
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v.
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OFFICE DEPOT, INC. and
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OFFICEMAX INCORPORATED,
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Defendants.
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Civil Action No. 16-cv-11783-IT

Civil Action No. 16-cv-11823-IT

MEMORANDUM AND ORDER
February 28, 2017
TALWANI, D.J.
Plaintiff Michelle Sigel brings Civil Action No. 16-cv-11823-IT for claims arising out of
her former employment with Defendants Office Depot, Inc. (“Office Depot”) and OfficeMax
Incorporated (“OfficeMax”). Plaintiffs Peter C. Davis, III, and Merry White bring Civil Action
No. 16-cv-11783-IT for similar claims arising out of their former employment with Defendants.
In both actions, Defendants have moved to dismiss Plaintiffs’ claims of fraud and unjust

enrichment.1 For the following reasons, Defendants’ Motion to Dismiss Counts V and VI of
Plaintiffs’ Second Amended Complaint [#43] in Civil Action No. 16-cv-11783-IT and Motion to
Dismiss Counts IV and V of Plaintiffs’ First Amended Complaint [#38] in Civil Action No.
16-cv-11823-IT are DENIED.
I.

Background
OfficeMax operated as a large office products supplier until November 2013 when it was

acquired by and became a wholly-owned subsidiary of Office Depot, also a large office products
supplier. Plaintiffs, who had been OfficeMax employees, accepted sales positions with Office
Depot after the acquisition. During the course of Plaintiffs’ employment, each company offered
Plaintiffs incentive compensation packages in addition to their base salaries. Davis resigned from
his position in August 2016, and White and Sigel resigned from their positions in September
2016.
The operative complaints allege violation of the Massachusetts Wage Act,2 breach of
contract, unjust enrichment, and fraud. Plaintiffs further seek declaratory judgments that any
restrictive covenants contained in their respective employment contracts are unenforceable.
As grounds for the fraud and unjust enrichment claims, Plaintiffs allege that, during their
tenure with OfficeMax and Office Depot, each defendant intentionally misrepresented the
manner in which it calculated Plaintiffs’ incentive compensation. Specifically, Plaintiffs allege
that Defendants represented to them in writing that their incentive compensation was based in
part on gross profits from Plaintiffs’ respective sales, or in other words, on the difference
between the prices charged to customers and the actual cost to Defendants for the products sold.

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Because the two actions are brought against the same Defendants and the complaints and
motions to dismiss are substantially similar, the court addresses the motions jointly.
2
Mass. Gen. Laws ch. 149, §§ 148, 150.
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According to Plaintiffs, despite these representations, Defendants knowingly inflated the actual
costs incurred when calculating Plaintiffs’ gross profits. Plaintiffs allege that, as a result of these
intentional miscalculations, they did not receive the full amount of incentive compensation to
which they were entitled.
Defendants now move, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure,
to dismiss the fraud and unjust enrichment claims. Plaintiffs oppose Defendants’ motions.3
II.

Discussion
A. Standard
To survive a motion to dismiss brought under Rule 12(b)(6), a complaint must allege

facts sufficient “to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007); accord Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In
resolving these motions, the court must accept all factual allegations in the complaints as true
and draw all reasonable inferences in favor of the plaintiffs. Iqbal, 556 U.S. at 678-79.
B. Fraud
“Under Massachusetts law, ‘fraud is a knowing false representation of a material fact
intended to induce a plaintiff to act in reliance, where the plaintiff did, in fact, rely on the
misrepresentation to his detriment.’” Smith v. Jenkins, 732 F.3d 51, 62 (1st Cir. 2013) (quoting

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While these motions were pending, Plaintiffs also filed Notices of Supplemental Authority
advising the court that the District Court for the Southern District of Florida denied a motion to
dismiss counterclaims of fraud and unjust enrichment brought by another former OfficeMax and
Office Depot employee. See Order Denying Pls.’ Mot. Dismiss, Office Depot, Inc. and
OfficeMax, Inc. v. Arnold, Civ. Action No. 16-81650 (S.D. Fla. Jan. 23, 2017). Pls.’ Notice
Suppl. Auth., Civ. Action No. 16-cv-11783-IT [#49]; Pl.’s Notice Suppl. Auth., Civ. Action No.
16-cv-11823-IT [#44]. Plaintiffs contend that this decision provides “further support” for the
denial of Defendants’ motions to dismiss. Decisions by federal district courts are not treated as
precedent, however, and the aforementioned order provides little analysis for the court to weigh
as persuasive reasoning. Further, despite the common defendants, since the decision is not a final
judgment, collateral estoppel does not apply.
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Fordyce v. Town of Hanover, 929 N.E.2d 929, 936 (Mass. 2010)). Additionally, a claim of fraud
must satisfy the particularity requirements set forth in Rule 9(b). Woods v. Wells Fargo Bank,
N.A., 733 F.3d 349, 358 (1st Cir. 2013) (quoting Juarez v. Select Portfolio Servicing, Inc., 708
F.3d 269, 279-80 (1st Cir.2013)). Under this heightened pleading standard, a plaintiff must
“specify the who, what, where, and when of the allegedly false or fraudulent representation.” Alt.
Sys. Concepts, Inc. v. Synopsys, Inc., 374 F.3d 23, 29 (1st Cir. 2004); see also Fed. R. Civ. P.
9(b) (“In alleging fraud or mistake, a party must state with particularity the circumstances
constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person’s mind
may be alleged generally.”).
Defendants first argue that Plaintiffs have failed to set forth a prima facie case of fraud
because their claims are premised on a failure to disclose a material fact. However, this argument
overlooks Plaintiffs’ allegations that Defendants informed Plaintiffs in writing that their
incentive compensation would be calculated in one manner and then knowingly calculated it
another way. This constitutes an affirmative misrepresentation of material fact, not a failure to
disclose.
Defendants next argue that Plaintiffs failed to allege the requisite fraudulent intent.
Specifically, they posit that Plaintiffs do not allege facts regarding Defendants’ “state of mind.”
However, Plaintiffs allege that Defendants intentionally misrepresented, miscalculated, and
understated their incentive compensation by knowingly inflating the costs used in the calculation
of their gross profits. Since “[m]alice, intent, knowledge, and other conditions of a [defendant]’s
mind may be alleged generally,” Fed. R. Civ. P. 9(b), these allegations are sufficient at the
pleading stage.

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Further, it is of no moment that Plaintiffs do not specify which corporate agent knew of
the misrepresentations. A central purpose behind the particularity requirement is “to place the
defendants on notice and enable them to prepare meaningful responses.” New England Data
Servs., Inc. v. Becher, 829 F.2d 286, 289 (1st Cir. 1987). Here, Plaintiffs have put Defendants on
notice by identifying specific written statements made in Defendants’ compensation plans.
Defendants are not left in the dark.
In sum, Plaintiffs allege that, during the course of their respective employment with
Defendants, Defendants provided them with documents describing their incentive compensation
as partially being based on the prices charged to customers minus the actual costs of products.
Plaintiffs allege that, in spite of these representations, Defendants purposely inflated the costs in
their calculations. Plaintiffs further allege that they reasonably relied upon Defendants’
representations and suffered injury as a result. Consequently, Plaintiffs have presented a prima
facie case of fraud and have satisfied the heightened pleading standard.
C. Unjust Enrichment
“Unjust enrichment is defined as ‘retention of money or property of another against the
fundamental principles of justice or equity and good conscience.’” Santagate v. Tower, 833
N.E.2d 171, 176 (Mass. App. Ct. 2005) (quoting Taylor Woodrow Blitman Constr. Corp. v.
Southfield Gardens Co., 534 F.Supp. 340, 347 (D. Mass. 1982)). To prevail on a claim for unjust
enrichment, a plaintiff must demonstrate: “(1) a benefit conferred upon the defendant by the
plaintiff; (2) an appreciation or knowledge by the defendant of the benefit; and (3) acceptance or
retention by the defendant of the benefit under the circumstances would be inequitable without
payment for its value.” Mass. Eye & Ear Infirmary v. QLT Phototherapeutics Inc., 552 F.3d 47,

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57 (1st Cir. 2009) (quoting 26 Samuel Williston & Richard A. Lord, A Treatise on the Law of
Contracts § 68:5 (4th ed. 1993)).
Defendants contend that Plaintiffs’ unjust enrichment claims must fail because an
alternative remedy exists in the form of the contractual claims they also bring. Although “[a]n
equitable remedy for unjust enrichment is not available to a party with an adequate remedy at
law,” Santagate, 833 N.E.2d at 176, “[a] party may set out [two] or more statements of a claim
. . . alternatively or hypothetically, either in a single count . . . or in separate ones” at the
pleadings stage, Fed. R. Civ. P. 8(d)(2). Consequently, Plaintiffs may “plead alternative and even
inconsistent legal theories, such as breach of contract and unjust enrichment, even if [they] only
can recover under one of these theories.” Lass v. Bank of Am., N.A., 695 F.3d 129, 140 (1st Cir.
2012) (quoting Vieira v. First Am. Title Ins. Co., 668 F.Supp.2d 282, 294-95 (D. Mass. 2009);
see also id. (holding that the mutually exclusive claims of breach of contract and unjust
enrichment could proceed past the pleading stage); Aetna Cas. Sur. Co. v. P & B Autobody, 43
F.3d 1546, 1555 (1st Cir. 1994) (holding that parties “may be allowed to maintain alternative
contentions at least until the evidence is closed”).
Citing Forbes v. Appleyard, 63 N.E. 894 (Mass. 1902), Defendants further contend that a
claim for unjust enrichment cannot survive unless Plaintiffs also allege that they have returned
the monies already paid to them under the incentive compensation plans. Defendants’ reliance on
Forbes is misplaced. In Forbes, the defendant had fully paid the plaintiff under an express
contract for his services through a certain date. Id. at 894. On appeal of a directed verdict, the
Massachusetts Supreme Court found no evidence that the plaintiff had worked any additional
time after the defendant’s breach to support his quantum meruit claim and then considered that
“plaintiff probably wanted to go to the jury for additional compensation for the time for which he

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had been paid, on the ground that the whole matter was set at large by the defendant’s alleged
breach of contract.” Id. at 895. The Court rejected this position, finding that, “ha[ving] not
returned or offered to return what he has received,” the plaintiff “has not put himself in the
position of rescinding the contract from the beginning.” Id. at 895. The Court expressly declined
to consider whether this course was consistent with a quantum meruit claim. Id. at 895. Here,
Plaintiffs make no argument based on rescission of contract, and the failure to allege the
repayment of monies has no bearing on their unjust enrichment claims.
III.

Conclusion
For the foregoing reasons, the Defendants’ Motion to Dismiss Counts V and VI of

Plaintiffs’ Second Amended Complaint [#43] in Civil Action No. 16-cv-11783-IT and Motion to
Dismiss Counts IV and V of Plaintiffs’ First Amended Complaint [#38] in Civil Action No.
16-cv-11823-IT are DENIED.
IT IS SO ORDERED.
Date: February 28, 2017

/s/ Indira Talwani
United States District Judge

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