Madden et al

Filing 18

Chief Judge F. Dennis Saylor, IV: ORDER entered. MEMORANDUM AND ORDER ON DEFENDANT'S MOTION TO DISMISS (Halley, Taylor)

Case 1:20-cv-10565-FDS Document 18 Filed 01/22/21 Page 1 of 18

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
_____________________________________
)
SANDRA MADDEN,
)
)
Plaintiff,
)
)
v.
)
)
ASCENSUS COLLEGE SAVINGS
)
RECORDKEEPING SERVICES, LLC,
)
)
Defendant.
)
_____________________________________)

Civil Action No.
20-10565-FDS

MEMORANDUM AND ORDER ON
DEFENDANT’S MOTION TO DISMISS
SAYLOR, C.J.
This is an action arising out of an employment termination. From April 2012 until June
2019, plaintiff Sandra Madden was senior vice president and general counsel at defendant
Ascensus College Savings Recordkeeping Services, LLC. In June 2019, she was terminated.
She has filed suit asserting various claims arising out of her employment and termination,
including breach of contract, violation of the Equal Pay Act, and gender discrimination.
Defendant has moved to dismiss three of those claims pursuant to Fed. R. Civ. P. 12(b)(6) for
failure to state claims upon which relief can be granted.
The motion to dismiss does not address the claims for violation of the Equal Pay Act or
for gender discrimination. Instead, defendant seeks to dismiss the claims for breach of contract,
breach of the implied covenant of good faith and fair dealing, and defamation. Unfortunately,
the complaint (and plaintiff’s briefing) is a jumble of inconsistent and contradictory statements
as to the nature of the alleged contract, making analysis of those issues somewhat complicated.

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In any event, and for the reasons set forth below, the motion to dismiss will be granted in
part and denied in part.
I.

Background
A.

Factual Background

The following facts are presented as alleged in the complaint unless otherwise noted.
Sandra Madden is a resident of Massachusetts. (Compl. ¶ 1).
Ascensus College Savings Recordkeeping Services, LLC (“ACS”) is a Delaware limited
liability company. (Id. ¶ 2). ACS is a subsidiary of Ascensus Group, LLC. (Id. ¶ 7). Ascensus
Group has two divisions: Ascensus Government Savings and Ascensus Retirement. (Id. ¶ 10).
Ascensus Government Savings comprises ACS; Ascensus Broker Dealer Services, LLC; and
Ascensus Investment Advisers, LLC. (Id. ¶ 7).
Ascensus Government Savings provides “program management, recordkeeping,
distribution and investment advisory services for various state administrators and business
partners for state sponsored savings programs.” (Id. ¶ 12). It is the “leading service provider in
the 529 college savings account industry” and services “over $100 billion in assets.” (Id.). 1 That
portfolio represents “greater than a third of the 529 industry.” (Id.).
From April 2012 until June 2019, Madden was senior vice president and general counsel
for Ascensus Government Savings. (Id. ¶¶ 6-7). 2 In that role, she oversaw a four- to six-person
legal team. (Id. ¶ 14). That team was responsible for negotiating contracts, monitoring
compliance and regulatory activities, creating disclosure documents, and supporting business and

1

A 529 Plan, named after section 529 of the Internal Revenue Code, is a tax-advantaged college savings

plan.
2

The entities composing Ascensus Government Savings were owned by Sallie Mae until December 2013.
(Compl. ¶¶ 6, 9). That month, Ascensus Group acquired those entities and rebranded them as Ascensus Government
Savings. (Id. ¶ 9).

2

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product development. (Id.). According to the complaint, during Madden’s tenure as general
counsel, she assisted in developing two new lines of business: ABLE programs and statesponsored retirement programs (SSRPs). (Id. ¶ 13). 3 Over the same period, Ascensus
Government Savings doubled the assets of its 529 business. (Id. ¶ 12).
The complaint alleges that Madden is “a leader in the 529/ABLE/SSRP industry.” (Id. ¶
16). She is one of twelve individuals nationwide selected to serve as a member of the Municipal
Securities Rulemaking Board. (Id.). She is also an active member of the Transfer Agent
Advisory Committee of the Investment Company Institute. (Id.). She has participated in the
Legal Regulatory Committee and the Federal Initiatives Committee of the National Association
of State Treasurers and the College Savings Plan Network. (Id.). She has provided testimony to
the Treasury Department and drafted comment letters to regulators concerning the
529/ABLE/SSRP industry. (Id.).
The complaint alleges in general terms that Madden’s “employment with Defendant
constituted a contractual relationship.” (Id. ¶ 56). It does not allege, however, that there was a
written employment contract, or a contract for a particular term. Instead, it appears that Madden
was an at-will employee.
In January 2016, “[i]n recognition of her successful management of business processes
and leadership,” ACS awarded Madden options to purchase common stock of its parent
company. (Id. ¶ 15). The complaint does not indicate whether those options were vested when
they were awarded, were to vest at some future time, or were to vest according to a specific
schedule.
In spring 2018, Ascensus Group was reorganized. (Id. ¶ 17). As part of that

3

An ABLE account is a tax-advantaged account for individuals with disabilities.

3

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reorganization, Madden was instructed to begin reporting to Joseph Dansky, senior vice
president and general counsel of Ascensus Retirement. (Id.). According to the complaint, prior
to that reorganization, Dansky’s responsibilities and experience centered on mergers and
acquisitions; he had “no significant substantive experience working at regulated financial
entities.” (Id. ¶¶ 18-19).
After the reorganization, Madden and her team were responsible for all of the legal work
for Ascensus Group except for that related to mergers and acquisitions. (Id. ¶ 30). According to
the complaint, despite that increased workload, Madden’s staff did not increase in size. (Id. ¶
32). She “questioned the appropriateness of the legal resources and the scope of legal services
being contemplated for her group, in terms of the impact on compliance activities.” (Id. ¶ 31).
She also specifically requested that “she be provided additional staffing to replace an attorney
that was spending greater than 90% of her time on non-[Ascensus Government Services] legal
matters.” (Id. ¶ 34).
Dansky denied that request. (Id.). The complaint alleges that he told Madden that “she
would not get any further resources” and that “she should stop asking” and “stop providing him
with status reports of the legal workload for [Ascensus Government Services].” (Id. ¶ 32).
According to the complaint, Madden also received “numerous complaints” from
Ascensus Group employees concerning the work product and demeanor of an attorney who
reported to Dansky. (Id. ¶ 37). She raised those concerns with Dansky, who told her “numerous
times that he had never received negative feedback” about that attorney. (Id. ¶ 38). He also
allegedly ignored the recommendation of Madden and the president of Ascensus Government
Services concerning the hiring decision for the chief compliance officer for that division. (Id. ¶
35).

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The complaint alleges that Dansky “repeatedly showed little knowledge of or interest in
pertinent securities regulations.” (Id. ¶ 26). For example, he allegedly proposed that ACS ignore
“the securities regulatory requirement to obtain consent from the clients of the investment
management contracts of a company that [ACS] was considering purchasing.” (Id.). Madden
and the chief compliance officer objected to that proposal, “citing the potential risks to the
company for knowingly violating a securities regulation,” but Dansky “ignored their objections.”
(Id. ¶ 27).
Dansky is also alleged to have “erroneously filed certain privacy incidents as breaches
with several state attorney generals” based on an “improper legal analysis.” (Id. ¶ 28). As a
result of those filings, certain ACS employees were terminated, even though “the incidents were
not actually breaches and did not need to be filed with state authorities.” (Id.). When Madden
informed Dansky that the privacy incidents were incorrectly handled, he did not correct the
filings or investigate whether any personnel files included inaccuracies based on them. (Id.
¶ 29).
The complaint alleges that because Madden “repeatedly expressed concerns about
regulatory risk and compliance risk” at ACS, Dansky “engaged in a pattern of retaliation”
against her. (Id. ¶ 40). He informed her that she “would not be getting any additional resources”
and that “he did not view her as a leader.” (Id. ¶ 39).
The complaint further alleges that Madden was “consistently treated less favorably than
her male co-workers.” (Id. ¶ 42). It specifically alleges that she was paid less and received less
generous equity awards than male colleagues. (Id. ¶ 43). She also did not receive additional
resources to handle increased workloads, even though her male colleagues did. (Id. ¶ 44). And
she was not invited to executive meetings and management trainings to which her male

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colleagues were invited. (Id. ¶¶ 45-46).
In March 2019, Madden received her first annual performance review from Dansky. (Id.
¶ 41). That review was her first performance review to include any negative comments. (Id.).
According to the complaint, it contained “false statements” and “criticism of incidents taken out
of context.” (Id.).
On June 19, 2019, Madden was told that “her position was being eliminated
immediately.” (Id. ¶ 47). That same day, her e-mail access was revoked, and she was “walked
out” of ACS (that is, escorted from the building). (Id. ¶ 50). According to the complaint, the
fact that an executive at ACS was walked out upon termination is unusual: there had never been
a senior vice president or vice president at ACS who had been walked out upon termination. (Id.
¶ 51). And two male executives who recently had been terminated were provided several
months’ notice and allowed to seek new positions using their company e-mail addresses while
employed. (Id. ¶ 52).
The method of Madden’s termination “hampered” her ability to seek new employment.
(Id. ¶ 53). Specifically, the complaint alleges that she had difficulty “connecting with business
contacts” and “staying informed of meetings for the various boards of which she is a member.”
(Id.). And since her termination, ACS has “not provided any payment or documentation of the
stock options [Madden] exercised.” (Id. ¶ 54).
B.

Procedural Background

On March 20, 2020, Madden sued ACS. The complaint asserts five claims: breach of
contract (Count 1); violation of the Equal Pay Act, 29 U.S.C. § 203 (Count 2); gender
discrimination in violation of Title VII, 42 U.S.C. § 2000e-2, and Mass. Gen. Laws ch. 151B
(Count 3); breach of the implied covenant of good faith and fair dealing (Count 4); and
defamation (Count 5). ACS has moved to dismiss Count 1, Count 4, and Count 5 pursuant to
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Fed. R. Civ. P. 12(b)(6) for failure to state claims upon which relief can be granted.
II.

Legal Standard
To survive a motion to dismiss, a complaint must state a claim that is plausible on its

face. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). For a claim to be plausible, the
“[f]actual allegations must be enough to raise a right to relief above the speculative level . . . .”
Id. at 555 (internal citations omitted). “The plausibility standard is not akin to a ‘probability
requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 556). In determining
whether a complaint satisfies that standard, a court must assume the truth of all well-pleaded
facts and give the plaintiff the benefit of all reasonable inferences. See Ruiz v. Bally Total
Fitness Holding Corp., 496 F.3d 1, 5 (1st Cir. 2007) (citing Rogan v. Menino, 175 F.3d 75, 77
(1st Cir. 1999)). Dismissal is appropriate if the complaint fails to set forth “factual allegations,
either direct or inferential, respecting each material element necessary to sustain recovery under
some actionable legal theory.” Gagliardi v. Sullivan, 513 F.3d 301, 305 (1st Cir. 2008) (quoting
Centro Medico del Turabo, Inc. v. Feliciano de Melecio, 406 F.3d 1, 6 (1st Cir. 2005)).
III.

Analysis
A.

Count 1: Breach of Contract

Under Massachusetts law, to assert a claim for breach of contract, the complaint must
allege that (1) a valid contract between the parties existed; (2) the plaintiff was ready, willing,
and able to perform; (3) the defendant breached that contract; and (4) the defendant’s breach
caused the plaintiff damage. See Netcracker Tech. Corp. v. Laliberté, 2020 WL 6384312, at *5
(D. Mass. Oct. 30, 2020) (citing Bose Corp. v. Ejaz, 732 F.3d 17, 21 (1st Cir. 2013)). The
elements of a valid contract include an offer, an acceptance, and an exchange of consideration.
See Harbi v. Massachusetts Inst. of Tech., 2017 WL 3841483, at *7 (D. Mass. Sept. 1, 2017)
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(citing Vadnais v. NSK Steering Sys. Am., Inc., 675 F. Supp. 2d 205, 207 (D. Mass. 2009)).
For a breach-of-contract claim to survive a motion to dismiss, the complaint “must do
more than allege, in a conclusory fashion, that the defendant breached the contract.” Hogan v.
Teamsters Local 170, 2020 WL 5821905, at *3 (D. Mass. Sept. 30, 2020) (quoting Alenci v.
Hometown Am. Mgt., LLC, 2020 WL 2515872, at *4 (D. Mass. May 15, 2020)). Instead, it must
allege, with “substantial certainty,” the specific contractual obligation that the defendant
breached. Id. (quoting Alenci, 2020 WL 2515872, at *4); see also Buck v. American Airlines,
Inc., 476 F.3d 29, 38 (1st Cir. 2007) (describing the pleading requirement for breach-of-contract
claims under Massachusetts law). In particular, it must “at least” plead facts that identify “who
did what to whom, when, where, and why,” and explain “what obligations were imposed on each
of the parties by the alleged contract.” Hogan, 2020 WL 5821905, at *3 (quoting Alenci, 2020
WL 2515872, at *4).
The actual alleged contract at issue in this case is a matter of substantial confusion. The
allegations in the complaint as to the existence of a contract, and its breach, are as follows:
56.
Ms. Madden’s employment with Defendant constituted a
contractual relationship.
57.
Ms. Madden met all her obligations to Defendant by performing
her duties diligently and competently.
58.
Defendant breached the contract of employment by terminating
Ms. Madden in retaliation for her raising concerns about the company’s
regulatory compliance.
59.
Defendant breached its contract with Ms. Madden by not providing
any payment or documentation of the stock options Ms. Madden
exercised.
60.
As a direct and proximate result of Defendant’s breach of contract,
Ms. Madden has suffered damages, including lost wages, lost benefits, and
an unpaid bonus for 2019.

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(Compl. ¶¶ 56-60).
1.

Employment Contract Generally

The allegations of the complaint, taken as a whole, suggest that plaintiff is alleging the
existence of an employment contract that has at least two specific provisions: prohibiting
termination in retaliation for certain conduct and requiring payment and documentation upon the
exercise of stock options. But there are no further allegations concerning the existence of such
an employment contract or its terms, such as the date any contract was executed, the parties to
the contract, what obligations it imposed, the length of the contract, and whether it was reduced
to writing. Furthermore, plaintiff has neither quoted the language of any such contract nor
attached it as an exhibit to the complaint.
Instead, the complaint simply alleges that plaintiff’s “employment with [defendant]
constituted a contractual relationship.” (Id. ¶ 56). That conclusory allegation, without more, is
insufficient to allege the existence of an enforceable contract. See Driscoll v. Simsbury Assocs.,
Inc., 2018 WL 2139223, at *5 (D. Mass. May 9, 2018) (“To the extent that Plaintiff is attempting
to argue that a contract existed simply by virtue of her employment, she has cited no legal
authority in support of that proposition.”). Without explaining “what obligations were imposed
on each of the parties by the alleged contract,” the complaint falls far short of the “irreducible
minimum” required to plead a claim for breach of contract. See Buck, 476 F.3d at 38; Hogan,
2020 WL 5821905, at *3 (explaining that the complaint must “at least” identify “what
obligations were imposed on each of the parties by the alleged contract” and describe with
“substantial certainty the specific contractual promise the defendant failed to keep” (internal
quotation marks and citations omitted)). 4

4

In her opposition, plaintiff does not even argue that the complaint alleges an employment contract. (Pl.
Opp. at 5-6). Instead, she contends that the complaint properly pleads a claim for breach of contract because “every

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Accordingly, to the extent that the complaint alleges the existence and breach of an
employment contract, it fails to state a claim upon which relief can be granted. See Higgins v.
Town of Concord, 246 F. Supp. 3d 502, 518 (D. Mass. 2017) (granting motion to dismiss breachof-contract claim where the complaint “fails to identify what ‘contract’ is at issue,” making the
claim “too vague and imprecise to provide meaningful guidance to the defendants”).
2.

Contract Concerning Stock Options

Notwithstanding the allegations in the complaint, plaintiff herself now rejects defendant’s
characterization of the alleged contract as an employment contract, contending instead that it is a
contract concerning stock options and nothing more:
Defendant seeks to have Count 1 dismissed by erroneously claiming that
[plaintiff] failed to establish “the existence of an employment contract or
otherwise demonstrating the provisions of such contract which were purportedly
breached.” However, the focus of the breach of contract claim is that Ascensus
has not provided any payment or documentation of the stock options [plaintiff]
exercised.
(Pl. Opp. at 6 (internal citation omitted) (quoting Def. Mem. at 7)). She likewise contends in her
opposition that the complaint “plainly alleges the existence of a contract between herself and
[defendant] for stock options, which were first offered in 2016.” (Id. (emphasis added)).
It thus appears that plaintiff intended to allege merely the existence and breach of a
contract concerning her stock options. If so, it is unclear whether the other allegations
concerning a “contract of employment” and its breach are mere surplusage and may be
disregarded. Nor is it clear how a failure to provide payment or documentation upon the exercise
of stock options could result, as the complaint alleges, in contractual damages such as lost wages,

contract contains a covenant of good faith and fair dealing, and an employer breaches that covenant when it
dismisses an at-will employee in order to deprive her of compensation fairly earned and legitimately expected for
services rendered.” (Id.). But that argument simply assumes the existence of a contract, which is a disputed issue; a
valid contract is a necessary predicate to a claim for breach of the implied covenant of good faith and fair dealing.

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lost benefits, and an unpaid bonus.
In any event, the question is whether the complaint sets forth sufficiently specific
allegations as to the existence of a contract for stock options. As noted, it alleges that “[i]n
recognition of her successful management of business processes and leadership, in January 2016
[defendant] awarded [plaintiff] 190.51 stock options to purchase common stock” of defendant’s
parent company. (Compl. ¶ 15). It also alleges that defendant “breached its contract with
[plaintiff] by not providing any payment or documentation of the stock options [she] exercised.”
(Id. ¶ 59; see also id. ¶ 54 (“[Defendant] has not provided any payment or documentation of the
stock options [plaintiff] exercised.”)). It thus appears that plaintiff exercised, or attempted to
exercise, some or all of her options, and did not receive any payment or “documentation” as a
result.
There is nothing else in the complaint about the alleged options contract, or the
obligations of either party, including whether the options had vested, in whole or in part, at the
time she exercised (or attempted to exercise) them. It does not allege what, if any, obligations
were created concerning providing “documentation.” It does not allege when the contract was
created, or whether it was oral or written. If there is a written contract, it is not described or
quoted, and it is not attached to the complaint. Nor are there any specifics as to the alleged
breach, such as when she exercised or attempted to exercise the options, and what happened as a
result. The complaint is therefore missing the most basic information as to the terms of the
alleged contract and the nature of the breach. See Buck, 476 F.3d at 38; Hogan, 2020 WL
5821905, at *3.
Her opposition to the motion to dismiss adds a few sketchy details. She argues in her
memorandum that the contract for stock options “included a proposed schedule for when her

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interests would vest and how she could exercise those options,” and that “[t]he obligations
imposed on each party by this contract were unequivocal.” (Pl. Opp. at 6). That, too, is unduly
vague; she never explains what those “unequivocal” obligations actually are, or how they were
breached. Nor does she indicate whether the “proposed” vesting schedule actually created any
contractual rights, and if so, what those rights were. More importantly, those allegations are not
in the complaint, and may not be used to bolster its claims. See Driscoll, 2018 WL 2139223,
at *5 n.3 (explaining that a plaintiff “may not amend her complaint through her opposition
brief”).
Again, a claim for breach of contract must set forth basic information as to the nature and
terms of the alleged contract and the circumstances of the alleged breach. Here, the allegations
in the complaint as to the existence of a contract concerning the exercise of stock options, and
defendant’s breach of that contract, are wholly inadequate to satisfy those requirements. The
motion to dismiss will therefore be granted as to that claim.
*

*

*

The fundamental purpose of a complaint is to “give the defendant fair notice of what the
plaintiff’s claim is and the grounds upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47
(1957). It may be, of course, that plaintiff has a valid factual basis for a claim for breach of
contract. But that does not mean she is not required to provide the defendant with notice of the
basis of that claim. Because she has failed to do so, her claim for breach of contract fails, and
the Court will grant defendant’s motion to dismiss as to Count 1.
B.

Count 4: Breach of the Implied Covenant of Good Faith and Fair Dealing

Under Massachusetts law, a covenant of good faith and fair dealing is implied in every
contract. See UNO Rests., Inc. v. Boston Kenmore Realty Corp., 441 Mass. 376, 385 (2004).
That covenant provides that “neither party shall do anything that will have the effect of
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destroying or injuring the rights of the other party to receive the fruits of the contract.”
Anthony’s Pier Four, Inc. v. HBC Assocs., 411 Mass. 451, 471-72 (1991) (quoting Drucker v.
Roland Wm. Jutras Assocs., 370 Mass. 383, 385 (1976)). By contracting, parties implicitly agree
“to deal honestly and in good faith in both the performance and enforcement of the terms of their
contract.” Hawthorne’s, Inc. v. Warrenton Realty, Inc., 414 Mass. 200, 211 (1993). To establish
a breach of the implied covenant, “a plaintiff must prove that there existed an enforceable
contract between the two parties and that the defendant did something that had the effect of
destroying or injuring the right of [the plaintiff] to receive the fruits of the contract.”
FabriClear, LLC v. Harvest Direct, LLC, 2020 WL 4938340, at *5 (D. Mass. Aug. 24, 2020)
(quoting Blake v. Professional Coin Grading Serv., 898 F. Supp. 2d 365, 388 (D. Mass. 2012)).
Here, the basis for plaintiff’s claim is again unclear. The complaint alleges that
defendant breached the implied covenant when it terminated plaintiff contrary to public policy.
(Compl. ¶¶ 73-76). Specifically, it alleges that defendant terminated plaintiff “to cover up its
potentially illegal conduct” after she “raised concerns of [defendant’s] potential violations of
federal securities regulations in good faith.” (Id. ¶¶ 74-75). And in her opposition
memorandum, plaintiff contends that Count 4 should survive the motion to dismiss by relying on
case law concerning terminations in violation of public policy. (Pl. Opp. at 7-9). At the same
time, elsewhere in her opposition, plaintiff contends that defendant breached the implied
covenant of good faith and fair dealing by terminating plaintiff to deprive her of compensation—
the stock options—that she earned. (Id. at 5-6). She makes that contention, however, only in her
opposition; it is absent from her complaint.
In any event, plaintiff’s claim for breach of the implied covenant fails for the same reason
her claim for breach of contract fails: the complaint does not properly allege the existence of a

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contract. “Under Massachusetts law, a claim of breach of the implied covenant of good faith and
fair dealing can lie only where there exists a binding contract.” Haglund v. Estée Lauder Cos.,
466 F. Supp. 3d 292, 300 (D. Mass. 2020) (citing Eigerman v. Putnam Invs., Inc., 450 Mass.
281, 288 (2007)); see also Driscoll, 2018 WL 2139223, at *5 n.3 (“[T]he claim [for breach of the
implied covenant of good faith and fair dealing] would fail because [the plaintiff] has not
sufficiently alleged the existence of a contract.” (citing Human Res. Dev. Press, Inc. v. Ikon
Office Sols. Co., 2006 WL 149043, at *9 (D. Mass. Jan. 12, 2006))). Because the Court
concluded that the complaint does not sufficiently allege any contract between plaintiff and
defendant, plaintiff may not maintain a claim for breach of the implied covenant. See Haglund,
466 F. Supp. 3d at 300 (“Having concluded that no contract between the parties exists, plaintiff
cannot maintain a derivative claim for violation of the implied covenant of good faith and fair
dealing.”).
The fact that plaintiff may not maintain a claim for breach of the implied covenant of
good faith and fair dealing in the absence of a contract does not mean that defendant’s ability to
terminate plaintiff was unrestrained. It is well-established under Massachusetts law that an
employer may not terminate an employee in violation of “clearly established public policy.”
Limoli v. Delta Air Lines, Inc., 2019 WL 6253269, at *9 (D. Mass. Nov. 22, 2019) (quoting King
v. Driscoll, 418 Mass. 576, 582 (1994)). To the extent that the complaint’s allegations that
plaintiff’s termination violated public policy have merit, they may support a claim for wrongful
termination. But the complaint does not assert such a claim. Instead, it asserts a claim for
breach of the implied covenant, which requires a contract between the parties. See, e.g.,
Haglund, 466 F. Supp. 3d at 300; Driscoll, 2018 WL 2139223, at *5 n.3.
Accordingly, the Court will grant defendant’s motion to dismiss as to Count 4.

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C.

Count 5: Defamation

Under Massachusetts law, to assert a claim for defamation, the complaint must allege that
(1) the defendant made a statement concerning the plaintiff to a third party; (2) the statement was
defamatory such that it could damage the plaintiff’s reputation in the community; (3) the
defendant was at fault in making the statement; and (4) the statement either caused the plaintiff
economic loss or is actionable without proof of economic loss. See Shay v. Walters, 702 F.3d 76,
81 (1st Cir. 2012) (citing Ravnikar v. Bogojavlensky, 438 Mass. 627, 629-30 (2003)). A
statement is “susceptible to defamatory meaning” if it tends “to hold the plaintiff up to scorn,
hatred, ridicule or contempt, in the minds of any considerable and respectable segment in the
community.” Id. (quoting Amtrak Prods., Inc. v. Morton, 410 F.3d 69, 72 (1st Cir. 2005)).
Defamation is not limited to written and oral statements; conduct may be defamatory if “a
reasonable third person observing [the defendant’s] conduct would have understood it to be
defamatory.” Phelan v. May Dep’t Stores Co., 443 Mass. 52, 58 (2004); see also id. at 57
(“[D]efamatory publication may result from the physical actions of a defendant, in the absence of
written or spoken communication.” (emphasis omitted)); Craig v. Merrimack Valley Hosp., 45 F.
Supp. 3d 137, 153 (D. Mass. 2014) (“Defamation by conduct is a recognized cause of action in
Massachusetts.”).
The complaint alleges that defendant’s conduct upon terminating plaintiff was
defamatory. (Compl. ¶¶ 78-81). Specifically, it alleges that defendant’s escorting her out of
ACS in view of her co-workers and suspending her e-mail access constituted defamatory
conduct. (Id. ¶ 78). It further alleges that the conduct was a “false statement” that “suggest[ed]
that [plaintiff] had engaged in criminal activity” and “discredited her in a respectable class of the
community.” (Id. ¶¶ 79-80).
Defendant contends, in substance, that the complaint fails to allege the first two elements
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of defamation—that the defendant made a statement concerning the plaintiff and that the
statement was defamatory. 5 Defendant first contends that the complaint fails to allege that it
made any “statement” because “[i]t is well established that conduct alone is insufficient to
support a defamation claim.” (Def. Mem. at 11-13). But that is incorrect. Under Massachusetts
law, conduct alone may support a defamation claim. See, e.g., Phelan, 443 Mass. at 57-58;
Craig, 45 F. Supp. 3d at 153.
Defendant further contends that the specific conduct the complaint alleges—that
defendant escorted plaintiff from the premises after her termination—is not defamatory as a
matter of law. Defendant reasons that in each of the three decisions on which plaintiff relies,
“the court required more than the mere act of escorting an individual from the premises to
advance a defamation claim.” (Def. Reply at 9-10 (citing Petsch-Schmid v. Boston Edison Co.,
914 F. Supp. 697 (D. Mass. 1996); Phelan, 443 Mass. at 52; Lopez v. Massachusetts Gen. Hosp.,
2017 WL 2562429 (Mass. App. Ct. June 14, 2017) (unpublished))). And defendant notes that a
recent decision by this court “reaffirmed that merely walking someone out of a building, without
doing anything more to convey a defamatory message, as a matter of law is not defamation.”
(Id. at 10 (citing Cloutier v. City of Lowell, 2017 WL 11488633 (D. Mass. July 12, 2017))).
Those decisions, however, do not examine whether claims could survive motions to
dismiss. In Cloutier and Lopez, the courts granted the defendants’ motions for summary
judgment as to defamation claims because the plaintiffs failed to present evidence that third
parties would have understood defendants’ conduct—escorting the plaintiffs out of the

5

The complaint sufficiently alleges the third and fourth elements of defamation, and defendants do not
contend otherwise. It plainly alleges that defendant is at fault. (Compl. ¶¶ 78-80). And not only does the complaint
allege that the statement caused economic loss (id. ¶ 81), but the statement is actionable even without such a loss
because it is a statement that “may prejudice the plaintiff’s profession or business.” Ravnikar, 438 Mass. at 630
(citing Lynch v. Lyons, 303 Mass. 116, 118-19 (1939)).

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premises—to be defamatory. See Cloutier, 2017 WL 11488633, at *32 (“Even viewing the
evidence in the light most favorable to plaintiff, defendants’ conduct—walking out of the library
with plaintiff—is ambiguous and open to various interpretations. Plaintiff’s mere belief that
defendants’ actions damaged her reputation, without more, is insufficient to create a material
issue that defendants’ conduct was defamatory.” (internal quotation marks and citation omitted));
Lopez, 2017 WL 2562429, at *4 (“[Plaintiff] also argues that [defendant’s] actions constituted
defamation by conduct because its security guards escorted her from MGH. [Plaintiff] has not
demonstrated a dispute of material fact on this claim.” (citing Phelan, 443 Mass. at 58-59)).
In Phelan, the SJC affirmed a judgment notwithstanding the verdict in defendant’s favor
for the same reason. See Phelan, 443 Mass. at 58-59 (“To satisfy his burden of proof, [plaintiff]
needed to present testimony from at least one coworker who observed [the employer’s] actions
and interpreted such actions as defamatory. Because he failed to do so, we conclude that he did
not establish the essential elements of defamation.” (internal citation omitted)). As in Cloutier
and Lopez, judgment in favor of the defendant was appropriate because the plaintiff failed to
present evidence that the defendant’s conduct was defamatory.
And in Petsch-Schmid, the court denied the defendant’s motion for summary judgment as
to the plaintiff’s defamation claim. See Petsch-Schmid, 914 F. Supp. at 705-06. That decision
followed the court’s previous decision in the case denying the defendant’s motion for judgment
on the pleadings as to the same claim. See id. at 705. In the decision denying the motion for
judgment on the pleadings, the court explained that “it is possible that the escort may have been
conducted in such a manner as to communicate a defamatory statement to other employees about
the plaintiff.” Id. Even though the court recognized that the plaintiff “may have difficulty in
proving this claim,” it nevertheless permitted the claim to go forward. Id.

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For present purposes, the complaint need only allege a plausible claim that third parties
would have reasonably understood defendant’s conduct to be defamatory. Here, the complaint
includes the following allegations:
•

“In the financial services industry if the general counsel is walked out with no
transition this creates the impression of wrongdoing on the part of the general
counsel.” (Compl. ¶ 50).

•

“Upon information and belief, there has never been a Senior Vice President or Vice
President at [ACS] who has been walked out upon termination.” (Id. ¶ 51).

•

“[Plaintiff’s] termination was in stark contrast to that of two male executives who had
recently been terminated. Both had been given notice months in advance of their
ultimate termination date and had been allowed to openly seek new positions while
still employed, which included access to their company email.” (Id. ¶ 52).

Under the circumstances, the claim for defamation is sufficiently plausible to survive a motion to
dismiss. Whether it will survive summary judgment is a question for another day. Accordingly,
the Court will deny the motion to dismiss as to Count 5.
IV.

Conclusion
For the foregoing reasons, defendant’s motion to dismiss is GRANTED as to Count 1 and

Count 4 and otherwise DENIED.
So Ordered.

Dated: January 22, 2021

/s/ F. Dennis Saylor IV
F. Dennis Saylor IV
Chief Judge, United States District Court

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