Kaupp v. Just Marketing, Inc. et al
Filing
38
OPINION & ORDER granting in all respects re: 21 MOTION to Dismiss the Second Amended Complaint filed by Just Marketing, Inc. (Signed by Judge John F. Keenan on 9/19/2011) (cd)
Case 1:09-md-02013-PAC Document 57
Filed 09/30/10 Page 1 of 45
USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: 9-19-11
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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UNITED STATES DISTRICT COURT
JANE KAUPP,
:
SOUTHERN DISTRICT OF NEW YORK
:
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Plaintiff,
:
In re FANNIE MAE 2008 SECURITIES
:
08 Civ. 7831 (PAC)
:
No. 10 Civ. 7559 (JFK)
LITIGATION
:
09 MD 2013 (PAC)
-against:
:
:
Opinion & Order
:
OPINION & ORDER
JOHN CHURCH and JUST MARKETING,INC.:
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Individually and doing business as :
JUST MARKETING INTERNATIONAL,
:
:
Defendants.
:
HONORABLE PAUL A. CROTTY, United States District Judge:
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APPEARANCES
BACKGROUND1
David A. Brodsky, Greenwald Law Offices, for Plaintiff.
The early years of this decade saw a boom in home financing which was fueled, among
Gary Meyerhoff, SNR Denton LLP, for Defendant.
other things, by low interest rates and lax credit conditions. New lending instruments, such as
JOHN F. KEENAN, United States District Judge:
subprime mortgages (high credit risk loans) and Alt-A mortgages (low-documentation loans)
Before the Court is Defendant Just Marketing
kept the boom going. Borrowers played a role too; they took on unmanageable risks on the
International’s (“JMI” or “Defendant”) motion to dismiss the
assumption that the market would continue to rise and that refinancing options would always be
Second Amended Complaint pursuant to Rule 12(b)(6) of the
available in the future. Lending discipline was lacking in the system. Mortgage originators did
Federal Rules of Civil Procedure in this diversity of
not hold these high-risk mortgage loans. Rather than carry the rising risk on their books, the
citizenship case. For the reasons that follow, the motion to
originators sold their loans into the secondary mortgage market, often as securitized packages
dismiss is granted.
known as mortgage-backed securities (“MBSs”). MBS markets grew almost exponentially.
I. Background
But then the housing bubble burst. In 2006, the demand for housing dropped abruptly
Plaintiff Jane Kaupp (“Kaupp” or “Plaintiff”) asserts that,
and home prices began to fall. In light of the changing housing market, banks modified their
after ending her two-and-a-half year extramarital relationship
lending practices and became unwilling to refinance home mortgages without refinancing.
with Defendant John Church (“Church”) in June 2010, Church
commenced stalking and threatening her through harassing phone
1
Unless otherwise indicated, all references cited as “(¶ _)” or to the “Complaint” are to the Amended Complaint,
dated June 22, 2009. For purposes of this Motion, all allegations in the Amended Complaint are taken as true.
calls, texts and emails. (Am. Compl. ¶¶ 10, 11).
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According to
Kaupp, Church, while employed at JMI, called her hundreds of
times – in one instance, 110 times in one morning – and would
either hang up or leave a threatening message. (Id. ¶ 11).
Additionally, Church reportedly called Kaupp’s ten-year-old son
and other family members, babysitter, and co-workers. (Id.
¶¶ 11, 37).
As a result of the alleged harassment, Kaupp
eventually sought psychiatric counseling for sleeplessness,
nausea, vomiting, and fear. (Id. ¶ 49).
Kaupp maintains that JMI “knowingly and actively
participated, and aided and abetted, in Defendant Church’s
pattern of harassment against Plaintiff and her family . . . .”
(Pl. Mem. at 2).
Some of Church’s contact with Kaupp was
undertaken using JMI facilities:
Church made threatening phone
calls from his JMI office and used his JMI email address to send
harassing emails. (Am. Compl. ¶¶ 25, 42, 43).
Kaupp alleges
that JMI was aware of this conduct and failed to stop it.
Further, Kaupp states that Church enlisted a JMI employee
working in Germany to make “disturbing and threatening” phone
calls to Kaupp and her family. (Id. ¶ 58).
According to Kaupp, JMI knew of Church’s “propensity for
drinking and/or substance abuse, [and] for losing self control
at client events.” (Id. ¶ 89).
Kaupp alleges that JMI had
received complaints that Church was “unstable and bordering on a
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nervous breakdown,” (Id. ¶ 83) and that JMI sought counseling
for Church, “to teach him how to behave properly toward actual
and prospective employees and clients.” (Id. ¶ 91).
Kaupp contends that JMI is liable for:
(1) negligent
hiring, retention, and supervision (referred to as “negligent
retention”); (2) intentional infliction of emotional distress;
and (3) prima facie tort.
She also seeks a permanent injunction
to enjoin JMI from influencing Church’s relationship with Kaupp.
II.
A.
Discussion
Legal Standard on Motion to Dismiss
Although Plaintiff mistakenly cites Conley v. Gibson’s “no
set of facts” standard, in evaluating a Rule 12(b)(6) motion,
the Court follows Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009),
which holds that only a complaint that states a “plausible”
claim for relief will survive a motion to dismiss. Id. at 1950.
In evaluating the plausibility of a claim, the “reviewing court
[must] draw on its judicial experience and common sense.” Id.
A
court must “read the complaint generously, and draw all
inferences in favor of the pleader.” Cosmas v. Hassett, 886 F.2d
8, 11 (2d Cir. 1989).
The issue on a 12(b)(6) motion to dismiss
is not whether the plaintiff will ultimately prevail, but
whether she should be entitled to offer evidence on her behalf.
Instead, the court’s task is to determine “the legal feasibility
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of the complaint, not to assay the weight of the evidence which
might be offered in support thereof.” Geisler v. Petrocelli, 616
F.2d 636, 639 (2d Cir. 1980).
B.
Choice of Law
Plaintiff is a resident of New York, and Defendant JMI is
headquartered in Indiana. (Am. Compl. ¶¶ 1, 2).
Where federal
jurisdiction is premised on diversity of citizenship, the
district court applies the choice of law analysis of the forum
state. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496
(1941); Gilbert v. Seton Hall Univ., 332 F.3d 105, 109 (2d Cir.
2003).
In New York, the forum state, “the first question in
determining whether to undertake a conflict of laws analysis is
whether there is an actual conflict of laws.” Curley v. AMR
Corp., 153 F.3d 5, 12 (2d Cir. 1998) (citing Matter of Allstate
Ins. Co. & Stolarz, 597 N.Y.S.2d 904 (N.Y. Ct. App. 1993)).
If
there is no material conflict, however, the “court is free to
bypass the choice of law analysis and apply New York law.” Simon
v. Philip Morris Inc., 124 F. Supp. 2d 46, 70 (E.D.N.Y. 2000)
(citing Curley, 153 F.3d at 12)(noting that “a material conflict
must have a significant possible effect on the outcome of the
trial to bring into play choice of law rules”).
The parties do not dispute that the substantive laws of New
York and Indiana with respect to intentional infliction of
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emotional distress and prima facie tort are the same.
Regarding
the negligent retention claim, Defendant asserts that the laws
of New York and Indiana diverge, and advocates the application
of Indiana law. (Def. Mem. at 6-7).
Plaintiff does not address
whether a conflict exists, but proffers that New York
substantive law should be applied. (Pl. Mem. at 8-9).
The laws of the two states are as follows:
Indiana has set
forth a three-step inquiry to analyze negligent retention,
derived from the Restatement (Second) of Torts § 317:
“1) a
duty of care owed by an employer to a third person; 2) breach of
that duty; and 3) injury to the third person proximately caused
by the employer’s breach.” Scott v. Retz, 916 N.E.2d 252, 257
(Ind. Ct. App. 2008); see Restatement (Second) of Torts § 317
(noting that the employer is under a duty to control its
employee if it “knows or should know of the necessity and
opportunity for exercising such control”).
In New York, to
establish a cause of action based on negligent retention, it
must be shown that the defendant “knew or should have known” of
its employee's propensity to engage in the conduct that caused
the third person's injuries, and that the alleged negligent
supervision or retention was a proximate cause of those
injuries. Gray v. Schenectady City Sch. Dist., 927 N.Y.S.2d 442
(N.Y. App. Div. 2011).
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While the two states present the laws differently, any
perceived conflict is semantic; application of either law would
render the same effect in this case.
Both states include
“proximate cause” as an element, as discussed above.
The states
also share the “knows or should have known” standard for duty of
care. Compare Beswick v. Bell, 940 N.E.3d 338, 345 (Ind. Ct.
App. 2010) (holding that a hospital’s duty of care to its
patients is breached if it hires a physician “whom the hospital
knows or should have known is unqualified.”) and Gray, 927
N.Y.S.2d at 445.
Additionally, both states have incorporated
the Restatement (Second) of Torts for negligent retention – New
York does so by reference while Indiana adopts it explicitly.
See Kenneth R. v. Roman Catholic Diocese of Brooklyn, 654
N.Y.S.2d 791, 793 (N.Y. App. Div. 1997) (citing the Restatement
(Second) of Torts § 317 to clarify New York’s theory of
negligent retention).
Therefore, the Court will bypass the
choice of law analysis and apply the laws of New York State to
evaluate every claim.
C.
Negligent Retention
As discussed above, the New York standard for negligent
retention requires that JMI knew or should have known of
Church’s alleged propensity for harassment and that retaining
him was the proximate cause of the Plaintiff’s emotional injury.
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Plaintiff alleges that because JMI employed Church
throughout the time in which he excessively contacted Kaupp (and
therefore supplied him with an office and email address), the
company advanced Church’s harassment of Kaupp.
To buttress this
claim, Plaintiff points to an email she received from Church
that included his professional JMI signature.
She further
asserts that because JMI hired a counselor to help Church
“behave properly,” a duty to protect Kaupp arose.
Finally,
Kaupp proffers that JMI knew or should have known of Church’s
propensity for harassing and threatening behavior.
These assertions do not give rise to a negligent retention
claim.
First, Kaupp cannot maintain that Church’s possession of
a JMI email address and telephone is the reason for his
harassment of Kaupp.
Indeed, Church used other mediums to
effect his stalking, such as his personal email and telephone.
Second, hiring a counselor to help Church in his business
relations cannot conceivably trigger a duty for JMI to direct,
counsel, or otherwise interfere with Church’s personal life.
Finally, Kaupp’s allegation that JMI should have known
about Church’s behavior does not satisfy the causation prong of
negligent retention.
Kaupp has not alleged that Church would
not have threatened and harassed her were JMI’s offices not
available to him.
While Church’s employment with JMI
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facilitated his introduction to Kaupp, JMI did not advance
Church’s personal relationship with Kaupp, nor did Church’s
harassment arise out of JMI’s conduct.
Therefore, JMI cannot be
expected to prevent Church’s contact with Kaupp. See Detone v.
Bullit Courier Serv., Inc., 528 N.Y.S.2d 575, 576 (N.Y. Ct. App.
1988) (“The employer’s negligence lies in his having placed the
employee in a position to cause foreseeable harm, harm which
would most probably have been spared the injured party had the
employer taken reasonable care in making decisions respecting
the hiring and retention of his employees.”).
Almost every case where a New York court has recognized a
negligent retention claim involved significant physical injury
to the plaintiff. Brown, 834 F. Supp. at 105 (dismissing
plaintiff’s negligent retention claim on the grounds that
“[p]laintiff does not allege that defendants assaulted her or
caused her personal injury.”).
In this case, Kaupp has not
alleged physical injury, and therefore cannot establish a claim
for negligent retention.
The cases Plaintiff cites in support of her negligent
retention claim are inapposite, and do not change the above
analysis.
Specifically, Plaintiff misplaces her reliance on
Struebel v. Fladd, 905 N.Y.S.2d 732 (N.Y. Ct. App. 2010), for
the proposition that a party in possession of premises must
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control the conduct of third persons on that premises.
Fladd,
however, did not address harassment by a company’s employee, but
rather a guardian’s negligent supervision of a child who was
gravely injured at the guardian’s home. Id.
D.
Intentional Infliction of Emotional Distress
To assert a claim for intentional infliction of emotional
distress, defendant’s conduct must be “so outrageous in
character, and so extreme in degree, as to go beyond all
possible grounds of decency, and to be regarded as atrocious,
and utterly intolerable in a civilized society.”
Fischer v.
Maloney, 402 N.Y.S.2d 991, 992-93 (N.Y. Ct. App. 1973) (quoting
Restatement (Second) of Torts § 46(1)).
New York courts follow
the Restatement (Second) of Torts’ requirements for an
intentional infliction of emotional distress claim: (1) extreme
and outrageous conduct; (2) intent to cause, or disregard of a
substantial probability of causing, severe emotional distress;
(3) a causal connection between the conduct and the injury; and
(4) severe emotional distress. Mohamed v. Marriott Int'l., Inc.,
905 F. Supp. 141, 157 (S.D.N.Y. 1995); Howell v. New York Post
Co., Inc., 596 N.Y.S.2d 350, 353 (N.Y. Ct. App. 1993).
New York courts continually advise that the standard for
intentional infliction of emotional distress is difficult to
satisfy.
According to the New York Court of Appeals, “of the
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intentional infliction of emotional distress claims considered
by this court, every one has failed because the alleged conduct
was not sufficiently outrageous.” Id. at 353.
Here, Defendant’s conduct does not meet the strict standard
required for intentional infliction of emotional distress.
Plaintiff has alleged that JMI knew of Church’s threats and
harassment because the company sought business counseling for
Church to address his erratic behavior at office parties, and
viewed his JMI emails.
Such knowledge does not meet the strict
standard for outrageous conduct.
Moreover, even if JMI’s
actions – including giving Church an office, introducing him to
Kaupp, and providing counseling for Church after learning of his
problems – were sufficiently outrageous, causation is an
insurmountable obstacle for Plaintiff.
As discussed above,
JMI’s conduct has not been alleged as the reason for Church’s
harassment of Kaupp.
E.
Prima Facie Tort
New York State law requirements for a prima facie tort are:
“(1) intentional infliction of harm; (2) resulting in special
damages; (3) without excuse or justification; (4) by an act that
would otherwise be lawful.” Twin Labs., Inc. v. Weider Health &
Fitness, 900 F.2d 566, 571 (2d Cir. 1990).
“The touchstone is
‘disinterested malevolence,’ meaning that the plaintiff cannot
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recover unless the defendant's conduct was not only harmful, but
done with the sole intent to harm.” Id.
Kaupp does not allege or demonstrate that JMI harbored any
intent to injure her.
Because JMI’s conduct does not involve
any intentional harm, as discussed in conjunction with the
intentional infliction of emotional distress claim, above, the
first element of a prima facie tort – intentional infliction of
harm – is not met.
The Court need not go any further in its
inquiry.
F. Permanent Injunction
Permanent injunction is warranted where a party has
succeeded on the merits and can establish: “(1) that it has
suffered an irreparable injury; (2) that remedies available at
law, such as monetary damages, are inadequate to compensate for
that injury; (3) that, considering the balance of hardships
between the plaintiff and the defendant, a remedy in equity is
warranted; and (4) that the public interest would not be
disserved by a permanent injunction.” Salinger v. Colting, 607
F.3d 68, 77 (2d Cir. 2010) (citing Roach v. Morse, 440 F.3d 53,
56 (2d Cir. 2006)).
Plaintiff has not demonstrated any possibility of success
on the merits, for the reasons discussed above.
Therefore, she
is not entitled to a permanent injunction against JMI.
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III. Conclusion
Defendant's motion to dismiss the Second Amended Complaint
is granted in all respects.
SO ORDERED.
Dated:
New York, New York
September 19, 2011
JOHN F. KEENAN
United States District Judge
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