Jessup v. Lucky's Market Holdings, LLC

Filing 10

ORDER granting in part and denying in part 3 Motion to Dismiss for Failure to State a Claim. IT IS ORDERED that Defendant's motion to dismiss (ECF 3) Count Three is GRANTED. The motion to dismiss Counts One, Two, Four, Five and Six are GRANTED to the extent those claims are based on wrongful termination, but DENIED in all other respects. Signed by Magistrate Judge Carolyn S Ostby on 11/20/2015. (JDR, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
BILLINGS DIVISION
DAN JESSUP,

CV 15-40-BLG-CSO
Plaintiff,

ORDER

vs.
LUCKY’S MARKET HOLDINGS,
LLC, dba LUCKY’S MARKET,
Colorado corporations,
Defendants.

Plaintiff Dan Jessup (“Jessup”) filed a Complaint asserting the
following claims against Defendant Lucky’s Market Holdings, LLC
(“Lucky’s”):
Count One:
Count Two:
Count Three:
Count Four:
Count Five:
Count Six:

Breach of Contractual Promise
Breach of Implied Covenant
Wrongful Discharge
Defamation
Intentional Infliction of Emotional Distress
Negligent Infliction of Emotional Distress

See ECF 1.1

“ECF” refers to the document as numbered in the Court’s
Electronic Case Files. See The Bluebook, A Uniform System of Citation,
§ 10.8.3.
1

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Now pending is Lucky’s Motion to Dismiss (ECF 3). Having
reviewed the parties’ arguments and the applicable law, the Court will
grant the motion in part, as set forth below.
I.

BACKGROUND
The following facts are alleged in Jessup’s Complaint and are, for

considering Lucky’s motion to dismiss, assumed to be true.
In early 2013, Lucky’s began actively recruiting Jessup to work at
one of its new store locations. In discussions, Lucky’s promised Jessup
various benefits, including the promise of a “break-even bonus of
$10,000.00 if achieved within the first 90 days of operations.” ECF at ¶
7. On December 12, 2013, Lucky’s offered Jessup the position of Store
Director at a new store in Billings, Montana. Jessup accepted the offer
and relocated to Montana from Nevada, resigning from a long-term,
highly-compensated, and secure employment relationship in Nevada.
After relocating, Jessup began overseeing the necessary start-up
operations and the opening of the new Billings store.
On May 22, 2014, Lucky’s Human Resources Manager and its
Chief Operations Officer suddenly and unexpectedly advised Jessup
that his employment was being terminated for unspecified “morale
issues.” Id. at ¶ 10. Jessup had received no prior notice or warnings of
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any kind concerning allegations against him. Although he requested
additional information, Lucky’s provided no further explanation and
told Jessup the decision was final. Id. at ¶ 10.
After his discharge, Jessup applied for unemployment benefits
and then learned that Lucky’s had claimed he was discharged for sexual
harassment. Despite the falsity of these accusations, Lucky’s and its
“responsible officers nevertheless continued to assert the same, in a
malicious and bad faith effort, aimed at damaging Plaintiff Jessup’s
professional reputation, as well as to thwart even his attempt to obtain
unemployment.” Id. at ¶ 12. Lucky’s “vigorously, relentlessly and
maliciously continued to implicate that the plaintiff was guilty of this
serious wrongdoing….” Id.
II.

PARTIES’ ARGUMENTS
Lucky’s presents two main arguments in support of its motion to

dismiss. First, it argues that Montana’s Wrongful Discharge from
Employment Act (“WDEA”) preempts Jessup’s tort and contract claims
because the WDEA is the exclusive remedy for a wrongful discharge.
ECF 4. Lucky’s argues all of Jessup’s claims are inextricably
intertwined with the termination and that absent his termination, none
of the claims would exist. Id. at 5.
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Specifically, Lucky’s argues that: (1) Jessup’s first two claims
allege a promise to pay a 90-day bonus, but he did not meet the
requirements because he was terminated before reaching 90 days, id. at
6; (2) Jessup’s tort claims for defamation and for negligent and
intentional infliction of emotional distress all arise from the alleged
wrongful discharge, id.; and (3) Jessup failed to state a claim for
defamation because there “is no colorable claim for defamation under
the law where an employer investigating complaints against an
employee regarding sexual harassment interviews that employee’s
victims,” nor is it defamation to list the reason for his termination on
documents submitted to the unemployment office. Id. at 6–7.
Second, Lucky’s argues that the WDEA claim fails to state a claim
because Jessup had not yet finished his probationary period, obviating
Lucky’s need to demonstrate that Jessup’s termination was for good
cause. Id. at 7–8. It argues that it followed its personnel policies, and
that because there was no good cause requirement, Jessup’s claim for a
violation of the WDEA, based on lack of good cause, fails to state a
claim and should be dismissed. Id.
In response, Jessup argues that he has sufficiently alleged prima
facie claims because: (1) the contractual promise and the breach of
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implied covenant claims concern the break-even bonus earned prior to
his termination, ECF 8 at 11–16; (2) the defamation claim is not based
solely on Lucky’s investigation but instead on statements made to
others “in connection with the termination of his employment, and
thereafter,” id. at 20; and (3) the emotional distress claims include
allegations relating to the company’s attempt to avoid the promised
bonus and arise out of the company’s post-termination actions. Id. at 2.
Jessup also contends that he stated a valid WDEA claim, despite his
probationary status, because the claim is based on a violation of the
employer’s policies. Id. at 16–18.
In reply, Lucky’s argues that the claims based on the break-even
bonus are preempted by the WDEA because Jessup is arguing that his
discharge was an effort to avoid paying the bonus. It argues that if this
was the case, “the claimed bonus would be included in his damages
calculation without need for a separate cause of action.” ECF 9 at 4.
Lucky’s also argues that Jessup is operating under outdated law. It
argues that Jessup ignores the portion of the WDEA added in 2001,
specifying that “during the probationary period an employee may be
terminated ‘for any reason or for no reason.’ ” Id. at 5.

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III. LEGAL STANDARD
Dismissal under Rule 12(b)(6) is proper only when the complaint
either: (1) lacks a cognizable legal theory, or (2) fails to allege sufficient
facts to support a cognizable legal theory. Zixiang Li v. Kerry, 710 F.3d
995, 999 (9th Cir. 2013). The Court’s standard of review under Rule
12(b)(6) is informed by Rule 8(a)(2), which requires that a pleading
contain a “short and plain statement of the claim showing that the
pleader is entitled to relief.” Ashcroft v. Iqbal, 556 U.S. 662, 677–678
(2009) (quoting Fed. R. Civ. P 8(a)).
To survive a motion to dismiss under Rule 12(b)(6), a complaint
must contain sufficient factual matter, accepted as true, to state a claim
for relief that is plausible on its face. A claim has facial plausibility
when the plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the misconduct
alleged. A plausibility determination is context specific, and courts
must draw on judicial experience and common sense in evaluating a
complaint. Levitt v. Yelp! Inc., 765 F.3d 1123, 1135 (9th Cir. 2014).
IV.

ANALYSIS
A.

WDEA Claims (Count Three)

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The Court will first address Jessup’s wrongful discharge claims
asserted in Count Three. The WDEA provides:
(1) A discharge is wrongful only if:
(a) it was in retaliation for the employee's refusal to violate
public policy or for reporting a violation of public policy;
(b) the discharge was not for good cause and the employee
had completed the employer's probationary period of
employment; or
(c) the employer violated the express provisions of its own
written personnel policy.
(2)(a) During a probationary period of employment, the
employment may be terminated at the will of either the employer
or the employee on notice to the other for any reason or for no
reason.
MCA § 39–2–904. Unless otherwise provided, the probationary period
is 6 months from the date of hire. Id.
Jessup asserts two claims for a violation of the WDEA. First, he
asserts that his discharge was not for good cause or for a legitimate
business reason. ECF 1 at 10. Second, he asserts that Lucky’s “violated
provisions of its express personnel policies in discharging him . . .
including those pertaining to his right to corrective disciplinary steps
prior to termination;” to have been adequately apprised or notified of

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the charges against him; afforded the right to defend himself against
the allegations; and to participate in any investigation. Id. at 11.
1.

Good Cause

Regarding Jessup’s claim that he was discharged without good
cause, Jessup does not dispute that he was still in his probationary
period of employment. ECF 8 at 17. In fact, he does not address any of
Lucky’s arguments regarding this claim. Id. at 16–19. Instead, Jessup
only discusses his WDEA claim premised on personal policy violations.
Id.
Based on the allegations in the Complaint, Jessup was provided a
written offer of employment on December 12, 2013. ECF 1 at 5.
Although the Complaint does not indicate the actual start date for
Jessup, his employment was terminated on May 22, 2014. Id. Jessup
does not assert that Lucky’s had established a set probationary period
that would differ from the 6 months created by the WDEA. Based on
these dates, even if Jessup had started at the earliest possible date,
December 12, 2013, he would still be considered a probationary
employee at the time of his termination. Lucky’s did not need good
cause to terminate him during his probationary period. See MCA § 39–

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2–904(2)(a). Thus, the motion to dismiss will be granted as to Jessup’s
first cause under his WDEA claim.
2.

Personnel Policies

Jessup makes a second claim under the WDEA, arguing that
Jessup was terminated in violation of Lucky’s express personnel
policies. ECF 1 at 12. He argues that even a probationary employee is
protected under the WDEA, section 39–2–904(1)(c), for a termination in
violation of the employer’s express personnel policies. He argues that
subsection (1)(a) and (1)(c) do not distinguish between probationary and
non-probationary employees, and therefore a basis exists to state a
claim under those provisions despite probationary status. ECF 8 at 17.
In support of his position, Jessup cites Motarie v. N. Montana Jt.
Refuse Disposal Dist., 907 P.2d 154, 156 (Mont. 1995), in which the
Montana Supreme Court found that a basis for a WDEA claim did exist
for a probationary employee who alleged he was fired in retaliation for
reporting a violation of public policy. The Court explained that the
“statutory prohibition on termination in retaliation for the employee's
refusal to violate public policy does not distinguish between
probationary and non-probationary employees.” Id. But in 2001, six
years after Motarie, the WDEA was amended to add a new subsection,
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specifying that during an employee’s probationary period, the
employment may be terminated for any reason or for no reason. MCA §
39–2–904(2)(a).
In at least one case after the 2001 WDEA amendment, the
Montana Supreme Court declined to address whether probationary
employees can state a claim under subsections (1)(a) and (1)(c), as a
result of the new language. Richie v. Town of Ennis, 86 P.3d 11, 15 n.2
(Mont. 2004). But the Court later found that allowing an employee
discharged during her probationary period to bring a claim under the
WDEA for refusal to violate public policy or for reporting a violation of
public policy would require the Court “to substantially re-write critical
provisions of the Act,” contrary to Montana’s rules of statutory
construction. Blehm v. St. John's Lutheran Hosp., 246 P.3d 1024, 1028
(Mont. 2010). There, the Court found that despite previous
interpretations, the 2001 amendment to the WDEA specifically provides
that employment may be terminated for any reason or for no reason
during a probationary period. Id. at 1027–1028.
Here, Jessup was unquestionably within the probationary period
of his employment. As a result, Lucky’s could terminate him “for any
reason or for no reason at all.” MCA § 39-2-904(2)(a). Similarly to
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Blehm, this limitation prevents a probationary employee from stating a
claim under the WDEA for a wrongful discharge based on an employer’s
violation of express personnel policies. See MCA § 39–2–904(2)(a).
Thus, the motion to dismiss Count Three will be granted.
B.

Claim Preemption under Montana’s WDEA

Montana’s WDEA is “the exclusive remedy for a wrongful
discharge from employment.” MCA § 39–2–902. Except as provided in
the Act, “no claim for discharge may arise from tort or express or
implied contract.” MCA § 39–2–913. But the WDEA does not bar all
tort or contract claims arising in the employment context. It bars only
those claims that “are inextricably intertwined with and based upon”
termination from employment. Kulm v. MT State University-Bozeman,
948 P.2d 243, 255–256 (Mont. 1997) (citing Beasley v. Semitool, Inc.,
853 P.2d 84, 86 (Mont. 1993)); see also Kneeland v. Luzenac Am., Inc.,
961 P.2d 725, 729 (Mont. 1998) (MCA § 39–2–913 “bars only those tort
and contract claims which are ‘for discharge’ ”). Essentially, other
causes of action are precluded unless the plaintiff could bring the claim
regardless of whether he was still employed and it was not contingent
upon termination. Kulm, 948 P.2d at 246; Daniels v. YRC, Inc., 2013
WL 449300, at *1 (D. Mont. Feb. 5, 2013). Thus, the Court must
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address whether Jessup’s remaining tort and contract claims are
inextricably intertwined with and based upon his termination from
employment.
1.

Breach of Contractual Promise (Count One)

Count One alleges that Jessup was promised “that upon the
store’s initial success, which was to be gauged by its breaking even in
terms of operating costs, he would thereupon be entitled to payment” of
a $10,000 bonus. ECF 1 at 7. He alleges he received the promise and
assurance of benefits by Lucky’s, including this “break-even bonus of
$10,000 if achieved within the first 90 days of operations.” Id. at 4.
Jessup alleges that he “satisfactorily performed all of the conditions
required on his part to be performed for the purposes of this aspect of
the contractual arrangement, with the Billings store not only having
met the break-even threshold but, in fact, having exceeded that goal.”
Id. at 6–7.
Based on the allegations contained in the Complaint, the Court
concludes that Jessup has sufficiently pled this claim separately from
his termination. Although Jessup alleges that Lucky’s violated the
bonus agreement “by having suddenly, unexpectedly and unjustifiably
terminated Plaintiff Jessup’s employment relationship, without having
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tendered or paid the earned bonus in question[,]” the claim could have
been filed regardless of his termination because it is premised on an
allegedly earned bonus. At this initial stage of the proceedings, it
appears that this claim is not entirely contingent upon his termination
because the bonus was allegedly earned prior to termination, and
Jessup could have brought the claim regardless of his termination.
Thus, to the extent that it is not based on Jessup’s termination from
employment, the Court finds that Count One’s contractual bonus claim
is not subject to dismissal.
2.

Breach of Implied Covenant (Count Two)

Count Two alleges that Jessup’s “right to earn the abovereferenced bonus contained an implied-in-law covenant of good faith
and fair dealing, which required honesty in fact.” ECF 1 at 9. He
alleges that Lucky’s “breached the covenant of good faith and fair
dealing by abruptly terminating the employment relationship and
although said bonus should, in any event, have been paid, and they
continued to exhibit bad faith conduct through their post-termination
tactics[.]” Id. at 9.
Although Count Two is based in part on the break-even bonus
claim alleged in Count One, portions of Count Two are premised on
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Jessup’s termination. Id. at 8–10. Jessup specifically alleges that
Lucky’s breached the covenant of good faith and fair dealing “by
abruptly terminating” Jessup. Id. at 9. This portion of Count Two is
inextricably intertwined with and based on Jessup’s termination and
therefore cannot be allowed to proceed.
But the remaining portion of the claim, however, is not necessarily
based on Jessup’s termination. Specifically, Jessup alleges the implied
covenant stems from the parties’ agreement about the break-even
bonus. Id. at 8. From this agreement, he argues Lucky’s breached the
covenant because Lucky’s should have paid and Lucky’s further
breached the covenant through its post-termination tactics.
Thus, Lucky’s motion to dismiss Count Two will be denied to the
extent that it is based on Jessup’s bonus claim stated in Count One, but
granted in all other respects.
3.

Defamation (Count Four)

Jessup alleges that “in connection with the termination of his
employment, and thereafter, the defendants knowingly, intentionally,
and/or recklessly, made written and/or verbal statements and
misrepresentations” that were “per se defamatory since they clearly
impugned his good moral character and professional reputation by
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falsely implicating that he was guilty of serious and scandalous
wrongdoing[.]” Id. at 12.
Jessup alleges that, after his termination, he sought to obtain
unemployment benefits and discovered that Lucky’s claimed “that he
purportedly had been guilty of serious misconduct in the form of
alleged, but altogether false and unfounded accusations of ‘sexual
harassment.’ ” Id. at 6. He alleges that Lucky’s,
[V]igorously, relentlessly and maliciously continued to
implicate that the plaintiff was guilty of this serious
wrongdoing, which included their concerted efforts to oppose
his potential entitlement to said benefits, both in connection
with the determination of Plaintiff Jessup’s initial
application, as well as in an appeal of the same.
Id. at 6–7.
Here, the claimed defamatory statements regarding
unemployment benefits are based upon Jessup’s termination. Jessup
would not have been seeking unemployment benefits had he not been
discharged from his job. Thus, this portion of the claim is inextricably
intertwined with, and based on his termination. See Daniels, 2013 WL
at *3.
The defamation claim does, however, include allegations that are
separate from employment termination. Jessup alleges that Lucky’s
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“knowingly, intentionally and/or recklessly, made written and/or verbal
statements and misrepresentations that were published to co-workers,
other food industry employees and third parties” that were per se
defamatory because they “clearly impugned his good moral character
and professional reputation by falsely implicating that he was guilty of
serious and scandalous wrongdoing[.]” Id. at 12. These unspecified
allegations, which are assumed to be true for the purposes of the
instant motion, are pled separately and independently from his
termination. Unlike statements made regarding unemployment
benefits, statements made to co-workers, other food industry employees,
and third parties, depending on the underlying evidence, may not be
based upon Jessup’s termination. Without more information, the Court
must conclude, in considering the motion to dismiss and Lucky’s
arguments in support of the same, that Jessup has stated a plausible
defamation claim that is not inextricably intertwined with his
termination.
Thus, the Court will grant the motion to dismiss Count 4 to the
extent it is based on statements made that are related to the
employment termination, but deny it in all other respects.

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4.

Intentional Infliction of Emotional Distress and
Negligent Infliction of Emotional Distress (Counts
Five and Six)

Jessup alleges a claim for intentional infliction of emotional
distress, stating that Lucky’s,
[I]ntentionally or recklessly, and with malicious motives,
engaged in conduct that was so outrageous in character, and
so extreme in degree, as to go beyond all possible bounds of
decency, so as to be regarded as utterly intolerable in a
civilized society, such that it was likely to, and in fact did,
cause the plaintiff serious emotional distress.
ECF 1 at 14. In his claim for negligent infliction of emotional distress,
Jessup alleges:
In doing all of the things herein alleged, the defendant
company and its responsible officers carelessly and
recklessly engaged in the acts in question, even though they
knew, or reasonably should have known, that such conduct
would cause Plaintiff Jessup to suffer humiliation, mental
anguish and emotional distress.
Id. at 15.
Jessup alleges that both of these claims are premised on Count
Two, breach of implied covenant, and Count Four, defamation. Id. at
14–15. As discussed above, these Counts will be dismissed to the extent
they rely on the allegedly wrongful termination. As a result, Counts 5
and 6 are also precluded to the extent they are based on Jessup’s
termination. But, because some portions of Counts Two and Four will
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survive the motion to dismiss, the motion to dismiss Counts Five and
Six will be denied to the extent these claims are based on the remaining
portions of the breach of implied covenant and defamation claims.
IV.

CONCLUSION
Based on the foregoing, IT IS ORDERED that Defendant’s motion

to dismiss (ECF 3) Count Three is GRANTED. The motion to dismiss
Counts One, Two, Four, Five and Six are GRANTED to the extent those
claims are based on wrongful termination, but DENIED in all other
respects.
DATED this 20th day of November, 2015.
/s/ Carolyn S. Ostby
United States Magistrate Judge

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