Knutson v. G2 Investment Group et al
Filing
142
OPINION: re: 132 MOTION to Dismiss and For Judgment on the Pleading,s filed by FPCG LLC, G2 Capital Markets, LLC, Jonathan Todd Morley, G2 FMV, LLC, Stone Castle Securities, LLC, G2 Investment Group, LLC, John Chihong Ou, Robe rt Christopher Holmen. Plaintiff may disagree with the Second Circuit's reading of the ADA and ADEA statutory language, but it cannot be argued that the Second Circuit's unambiguous view must control here. Accordingly, Plaintiff's Firs t Claim under the ADA and Third Claim under the ADEA are dismissed as against individual Defendants Morley, Holmen, and Ou. For the foregoing reasons, Defendants' motions are granted, and as further set forth in this order. It is so ordered. (Signed by Judge Robert W. Sweet on 1/3/2018) (ap)
I
.
•
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------------x
ROBERT KNUTSON,
14 Civ. 1694
Plaintiff,
(RWS)
I
OPINIOij
-againstG2 FMV, LLC, G2 INVESTMENT GROUP, LLC,
G2 CAPITAL MARKETS, LLC, FPCG LLC d/b/a
FORCES PRIVATE CAPITAL GROUP,
STONE CASTLE SECURITIES, LLC, ROBERT
CHRISTOPHER HOLMEN, JOHN CHIHONG OU,
and JONATHAN TODD MORLEY a/k/a
J. TODD MORLEY,
Defendants.
----------------------------------------x
A P P E A RA N C E S:
Attorneys for Plaintiff
LAWRENCE R. GELBER
34 Plaza Street, Suite 1107
Brooklyn, NY 11238
By:
Lawrence R. Gelber, Esq.
Attorne y s for Defendants
BOND SCHOENECK & KING, PLLC
600 Third Avenue, 22nd Floor
New York, NY 10016
By:
Dennis A. Lalli, Esq.
__
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DOCU1v~ENT
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~.LECTRO!'i:c:\i LY FILPD ,,
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1' C#: _
Sweet, D.J.
Defendants G2
~V,
LLC ("FMV"), G2
Capita~
Markets, LLC
("G2CM"), and J. Todd Morley ("Morley" and, together with FMV
I
and G2CM, the "New Defendants") have moved to dismiss the Second
and Fifth Claims of the First Amended Complain j
("FAC") of
Plaintiff Robert Knutson ("Knutson" or the "Pl J intiff") pursuant
I
to Federal Rule of Civil Procedure 12(b) (6). Defendants G2
Investment Group, LLC ("G2IG"), FPCG LLC d/b/a , Forbes Private
Capital Group ("FPCG"), StoneCastle Securities LLC
("StoneCastle"), Robert Holmen ("Holmen"), and John Ou ("Ou"
and, together with GI2G,
FPCG, StoneCastle, an
1
Holmen, the
"Original Defendants," and, together with the 1 ew Defendants,
the "Defendants") have moved for a judgment on the pleadings on
the Second and Fifth Claims of the FAC pursuan i to Federal Rule
of Civil Procedure 1 2 (c). Lastly, Defendants h j ve moved to
dismiss the First and Third Claims of the FAC i s against Morley,
Holmen, and Ou pursuant to Federal Rule of Civ t l
Procedure
12 (b) (6).
Based on the conclusions set forth below, Defendants'
motions are granted.
1
·
Prior Proceedings
On March 3, 2014, Plaintiff filed his Complaint. Dkt. No.
2. The Complaint alleged six claims for relief
J
(1) a violation
of the Americans with Disabilities Act of 1990 1 42 U.S.C.
§§
12101 et seq.
(the "ADA");
(2)
discriminati ~ n
Discrimination in Employment Act of 1967, 29
~
(the "ADEA'');
under the Age
ujs.c.
§§ 623 et
( 3) discrimination under th i New York State
Human Rights Law, N.Y. Exec. Law § 296 (the "NY HRL");
of contract;
(4) breach
(5) breach of the implied covenan tt of good faith
I
and fair dealing; and (6) intentional and/or negligent
misrepresentation. See generally Dkt. No. 2. s l veral attorney
substitutions and fitful discovery proceedings ensued. See Dkt.
Nos. 7, 39, 43-53, 63, 65, 78.
On July 8, 20 17, Plaintiff moved to amend his Complaint,
which was granted on September 6, 201 7. Dkt. Nos.
92, 10 8.
Plaintiff's FAC added several additional Defenl ants and alleged
five claims for relief:
( 1) violation of the Ai A;
( 2)
fraudulent
I
inducement;
(3) age discrimination under the ADEA;
(4) age
discrimination under the NYHRL; and (5) breach l of contract and
the implied covenant of good faith and fair de k ling.
2
On October 19, 2017, Defendants filed the instant motions,
which were heard and marked fully submitted on November 15,
2017.
Facts
The Complaint sets forth the following al egations, which
are assumed true for the purpose of this motio
Koch v. Christie's Int'l PLC,
to dismiss. See
699 F.3d 141, 145 (2d Cir. 2012).
As useful background, it is worth first outlining the
:::e:::::tb::::::Yt::
~~
subsidiary. FAC
::::~r::: ::::o:::eG:::~Jd::::~Y:::n::s
12, 20. FPCG was G2IG's who l ly-owned
distribution business. FAC ~ 25. FMV and FPCG fere founded by
Morley. FAC
~~
17, 25, 39. StoneCastle is a Fi J ancial Industry
Regulatory Authority ("FINRA") registered brokr r-dealer through
which G2IG and G2CM passed securities transact i ons, as G2 IG and
G2CM were not FINRA registered. FAC
~~
18, 22, 28. Holmen was
StoneCastle's Chief Compliance Officer ("CCO") and Chief
Financial Officer ("CFO"). FAC
~
30. Ou possessed supervisory
capacity at G2IG and was a registered represen l ative of
StoneCastle. FAC
~~
35, 37.
3
Knutson started in the financial services industry as a
broker at Merrill Lynch in 1977. FAC
~
43. OveE decades in the
industry, Knutson developed a successful book J f business and
was regularly engaged by large, financially sot histicated
institutiona l clients. FAC
~
46. Knutson also suffers from
I
several physical ailments, including rheumatoid arthritis and
diverticulitis, and has a pronounced shuffle w1 ich at times
requires use of a cane. FAC
~~
7-8.
By August 201 1, Knutson was a senior vice president at the
Royal Bank of Canada ("RBC") and earned over $300,000 a year.
FAC
~~
I
44, 4 6. Around this time, Knutson was approached by
Holmen, who solicited Knutson to leave RBC to
1
fork
for G2CM.
1
In the FAC, Plaintiff uses the terms FMV, G2IG, and G2CM
interchangeably or under the umbrella term "G2." See, e.g., FAC
~~ 20 , 27 . As the actual employment agreement, !dated September
22, 20 11, is referenced in the FAC and has beem provided, the
actual corporate entities will be noted for the sake of
precision. See Declaration of Robert Holmen dated October 1 8,
~I
2017 ( "Holmen Deel."), Ex. A (the "Employment t greement"), Dkt.
No. 133; Subaru Distribs. Corp. v. Subaru of Arh., Inc., 425 F.3d
119, 122 (2d Cir. 2005) (citing Int'l Audiotex t Network, Inc. v.
AT&T Co., 62 F.3d 69, 72 (2d Cir. 1995) (per d 1riam)) ("In
determining the adequacy of the complaint, the l court may
consider any written instrument attached to th y complaint as an
exhibit or incorporated in the complaint by reference, as well
as documents upon which the complaint relies and which are
integral to the complaint."). As such, while tfe FAC states that
Knutson went to work at G2IG or G2, Knutson's Employment
Agreement is with G2CM, and so for the sake of , clarity, the
corporate Defendant on the Employment Agreement will be used.
See FAC ~~ 56, 59, 64.
I
4
FAC
~
46. As part of the sales pitch, Holmen made the following
"n~xt
representations about G2CM: that it was the
and growing fast,
FAC
~~
Goldman Sachs"
48, 95(a), 95(o); that! it was
"extremely" well-capitalized and had access to substantial
additional capital, FAC
~~
50, 95(b)-(c); that is was well-
organized and well-run and with a large aviati J n-based
portfolio, FAC
~~
95(d), 95(n); that it had a substantial list
of Forbes clients that Knutson could access and that information
was regularly provided, FAC
~~
95(e), 95(i);
t~at
hiring respected and knowledgeable traders, FAJ
~~
~~
that Knutson could keep his sales assistant, FJ c
that Knutson could work for FPCM, have
and continue to speak to the press, FAC
autonom~
~~
G2CM was
95(g),
66'
95(1);
95 (h);
in cross trades,
53, 95(f),
95(m);
that trades would be backed by a subsidiary of Merrill Lynch,
FAC
~
95(j); and that Morley would be availabl j to meet with
major clients to assist in closing transaction ~ and developing
relationships, .FAC
~
74. Based on these
repres ~ ntations,
Knutson
left RBC and started working at G2CM in Septemd er 2011. FAC
~~
59-60, 99.
Holmen's solicitation of Knutson was with Morley's
knowledge. FAC ~~ 58, 98. At the time of Holme J 's
representations to Knutson, Holmen knew that tHe statements were
I
false.
FAC
~~
47,
98. As opposed to $52 millio, , as stated, in
5
fact the company only had net capital amountinq to $1.2 million.
FAC
~
52. Moreover, Holmen did not intend to g t ant Knutson any
autonomy while employed. FAC
~
54.
In October 2011, Holmen informed Knutson that Knutson would
not be permitted to cross corporate bond trade without prior
approval of the company's Corporate Bond Priva1 e Placement
Department, which went against a "trading authorization list"
I
issued by the company that should have allowed Knutson to make
such trades.
2
FAC
~~
61-62. Knutson was also asked to report to
Ou. FAC 1 64. Knutson viewed both as delaying i is trades and
negatively affecting his business. FAC
~
63. I f December 2011,
Holmen terminated Knutson's assistant. FAC
~
66.
Knutson found the environment at G2CM cha j lenging to
conduct business. Ou refused to share informat J on with Knutson
and harassed Knutson, such as using foul langu J ge and calling
Knutson "old man." FAC
~~
67, 72, 77. Morley cancelled meetings
with clients that Knutson would set up, which embarrassed
I
Knutson and affected his business. FAC ~~ h7a5d-7n6 . While working
at G2CM, Knutson learned that the company
1 0 mortgage or
2
The FAC states that Knutson was listed as an authorized
person to make cross corporate bond trades. See FAC ~ 62. The
fact that Knutson alleges that he subsequently complained,
however, suggests this is a misprint. See FAC ~ 63.
I
6
corporate bond inventory. FAC !
68. In contrast to pre-hire
representations, G2CM also delayed Knutson's e J pense
reimbursements and changed Knutson's health insurance policy is
a less favorable option. FAC ! 71.
In February 2012, Knutson was diagnosed with
diverticulitis, which required Knutson to go
t~
the hospital for
several days. FAC ! 72. While at the hospital, Ou harassed
Knutson and demanded to know when Knutson would return.
FAC
!! 79-80. Knutson returned from the hospital, 8 ut continued
stress caused by Ou required Knutson to return to the hospital
for three days. FAC !
80. During that three
da ~
readmission,
Holmen worked with Ou to reassign Knutson's accounts to other
employees. FAC ! 81. Around this time, Knutson filed a complaint
with the Human Resources Department, which had no results. FAC
'
82.
In March 2012, Knutson was diagnosed with Lyme disease.
FAC
!! 72, 83. While at work, Ou took a photograph of Knutson
napping in his chair, a physical consequence of Knutson's Lyme
disease.
FAC ! 83.
In April 2 01 2 , Holmen fired Knutson. FAC ! 84. In August
2 012, Knutson filed a Charge of Discrimination with the Equal
7
I
Employment Opportunity Commission ("EEOC"), which issued a Right
to Sue letter on December 13, 2013. FAC
~~
85- 1 6.
Applicable Standards
On a Rule 12(b) (6) motion to dismiss, all factual
allegations in the complaint are accepted as t l ue and all
inferences are drawn in favor of the pleader. Mills v. Polar
Molecular Corp., 12 F.3d 1170, 1174
(2d Cir. 1993). A complaint
must contain "sufficient factual matter, accepted as true, to
'state a claim to relief that is plausible on l ts face.'"
Ashcroft v.
Iqbal, 556 U.S.
Corp. v. Twombly,
662,
663 (2009)
550 U.S. 544, 555
(q1 oting Bell Atl.
(2007)). A claim is facially
plausible when "the plaintiff pleads factual content that allows
the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged." Iqbal,
(quoting Twombly,
556 U.S. at 663
550 U.S. at 556). In other words
I
,
the factual
allegations must "possess enough heft to show that the pleader
is entitled to relief." Twombly, 550 U.S. at 5 1 7 (internal
quotation marks omitted).
While "a plaintiff may plead facts alleged upon information
and belief 'where the belief is based on factual information
that makes the inference of culpability plausible,'
8
such
allegations must be 'accompanied by a statement of the facts
I
upon which the belief is founded.'" Munoz-Nagel v. Guess,
No. 12 Civ. 1312 (ER), 2013 WL 1809772, at *3
2013)
(quoting Arista Records, LLC v. Doe 3,
l s.D.N.Y. Apr.
I
6~4
(2d Cir. 2010)); Prince v. Madison Square GardJ n,
2d 372, 384
F.3d 110, 120
427 F. Supp.
I
(S.D.N.Y. Mar. 1, 2 012)). The
pleadings, however, "must contain something
~f
30,
(S.D.N.Y. 2006); Williams v. Calde J oni, 11 Civ. 3020
(CM), 2012 WL 691832, at *7
statement
Inc.,
mole than
.
.
. a
facts that merely creates a suspi J ion [of] a
I
legally cognizable right of action." Twombly, , 50 U.S. at 555
(citation and internal quotation omitted).
Motions brought pursuant to Fed . R. Civ. , . 12(c) require
application of the same standard as under a mo ti ion to dismiss
brought pursuant to Fed. R. Civ. P. 12(b) (6). J eller v. Conrail,
331 F. App'x 766, 767-68
(2d Cir. 2009)
(citin J Sheppard v .
Beerman, 18 F.3d 147, 150 (2d Cir. 1994)).
9
Defendants' Motions are Granted
Defendants have moved to dismiss the FAC' ,
Second and Fifth
Claims as against all Defendants and the First and Third Claims
with respect to individual Defendants Morley, Holmen, and Ou.
I
I
Each claim shall be addressed in turn.
1.
I
Plaintiff's Second Claim is Dismisseq
I
Defendants have moved to dismiss the FAC' J Second Claim for
fraudulent inducement. See FAC
~~
I
94-100. Unde I hi· s Second
Claim, Plaintiff has alleged over a dozen alle , edly false
statements that Holmen told Plaintiff to induc ,
G2CM. See FAC
~
him to join
95. Defendants contend that disimissal is
warranted because Plaintiff has failed to
alle~e
plausibly that
he suffered a cognizable injury as a result of the alleged
misrepresentations.
To state a claim of fraudulent inducement under New York
law, "the defendant must have made a misrepresentation of a
material fact,
that was known to be false and intended to be
relied on when made, and that the plaintiff justifiably relied
10
on that misrepresentation to its injury." 3 Amida Capital Mgmt.
II, LLC v. Cerberus Capital Mgmt., L.P.,
444
(S.D.N.Y. 2009)
86, 871 N.Y.S.2d 68
669 F. Supp. 2d 430,
(citing Braddock v. Braddo d k,
60 A.D.3d 84,
(App. Div. 1st Dep't 2009)).
"It is well-settled that to prove injury from fraud under
New York law, a party must show actual
pecuniar~
Eugenia VI Venture Holdings, Ltd. Litig.,
121 (S.D.N.Y. 2008)
loss." In re
649 F. Supp. 2d 105,
(citing Rosen v. Spanierman, 894 F.2d 28,
(2d Cir. 1990) ), aff'd sub nom. Eugenia VI
Vent~re
34
Holdings,
Ltd. v. Glaser, 370 F. App'x 197 (2d Cir. 2010). Damages in
fraud cases are limited by the "out-of-pocket" c ule, which
"provides that plaintiffs in fraud cases may only recover
damages 'for what they lost because of the frau h , not . .
for
I
what they might have gained .
. Under the out-of-pocket
rule, there can be no recovery of profits which would have been
realized in the absence of fraud.'" Pasternak v. Dow Kim,
3
961 F.
Both parties argue only New York law in th~ir briefs and
make no mention of the law of any other forum. Accordingly, New
York law properly applies. See Golden Pac. Bancorp v. F.D.I.C.,
273 F.3d 509, 514 n.4 (2d Cir. 2001) ("The parties' briefs
assume that New York substantive law governs the issues of
contract interpretation and statute of limitations presented
here, and such implied consent is, of course, sufficient to
establish the applicable choice of law."); Corbett v. Firstline
Sec., Inc., 687 F. Supp. 2d 124, 128 (E.D.N.Y. 2 009) (applying
I
New York law where "both parties cite exclusive l y to New York
contract law in their argument").
11
Supp . 2d 593, 596 (S.D.N.Y. 2013)
(quoting Lam9 Holding Co. v.
Smith Barney Inc., 88 N.Y.2d 413, 421, 646 N.Y j S.2d 76 (1996));
see also Hoeffner v. Orrick, Herrington & Sutc i iffe LLP,
I
A.D.3d 614, 615, 878 N.Y.S.2d 717, 718-19 (2009)
61
(holding that
plaintiff's "damages may not include any amount based on
continued employment with the other firm, sinc l the duration and
success of his career with that firm are speculative").
The Second Circuit takes a flexible appro J ch to the out-ofpocket rule, however, permitting compensation nor foregone
I
economic opportunities such as lost career development. See
I
Stewart v. Jackson & Nash,
976 F.2d 86, 88
-
(2d Cir. 1992)
(allowing a claim for fraud to proceed based o J damage to the
plaintiff's career development caused by fraud J lent inducement
to work for a firm with no real work in her pr J ctice area);
I
Doelha v. Wathne Ltd., Inc., No. 98 Civ. 6087
987280, at *7
(S.D.N.Y. July 17, 2000)
(CSH), 2000 WL
("If the proof is there,
a defrauded plaintiff may base a claim for act j al pecuniary loss
upon an economic opportunity that the defendan l
induced him to forego.").
fraudulently
Damages may not be recovered unless
they can be ascertained with reasonable certainty. See Allard v.
Arthur Andersen
&
Co.
(USA),
924 F. Supp. 488
(S.D.N.Y. 1996)
("[P]laintiffs may recover only 'out of pocket' damages that can
be ascertained with reasonable certainty.").
12
Plaintiff's FAC has not properly pleaded an injury for
fraudulent inducement. The only injury stated in the FAC
resulting from the alleged fraudulent misrepresentations is that
Defendant are liable to Plaintiff for "monetary damages in an
amount to be determined at trial." FAC
~
100. The argument made
in Plaintiff's opposition briefing fares no be J ter: the only
injury Plaintiff claims with regard to his
fra ~ dulent
inducement
claim is one "(b]ased on his prior earnings" with damages that
"are not less than $900,000." Pl.'s Opp. Mem. at 9, Dkt. No.
138. This figure is evidently tethered to Plaintiff's former RBC
salary, and injury based on Plaintiff's prior income is the kind
of injury claim barred by the out-of-pocket rule. See Pasternak,
961 F. Supp. 2d at 597
(alterations in original)
("A plaintiff
may only recover "what [he] lost because of the fraud,
not .
what [he] might have gained.").
As to other types of injury at times permitted in the
Second Circuit, none can be gleaned from the FAC as presently
pleaded. It is too speculative to conceive of what, if any,
economic opportunities or career development Plaintiff, an
already established financial broker at the time of his meetings
with Holmen, would have acquired in the absence of the
misrepresentations. Virola v. XO
COmmunication~,
13
Inc., No. 05
Civ. 5056 (JG)
2008)
(RER), 2008 WL 1766601, at *15 (E.D.N.Y. Apr. 15,
(noting that the purpose of a fraudulent inducement claim
was "to put the plaintiff in the position she would have been in
if the fraudulent representations were not made"). The absence
of a cognizable injury renders Plaintiff's fraudulent inducement
claim deficient. See Connaughton v. Chipotle Mexican Grill,
Inc., 29 N.Y.3d 137, 143, 75 N.E.3d 1159 (2017)
(dismissing
plaintiff's fraudulent inducement claim when the "pleading is
fatally deficient because he did not assert compensable damages
resulting from defendants' alleged fraud").
Accordingly, Plaintiff's Second Claim for fraudulent
inducement is dismissed.
2.
Plaintiff's Fifth Claim is Dismissed
Defendants have moved to dismiss the FAC's Fifth Claim for
breach of contract and covenant of good faith and fair dealings.
See FAC
~~
115-24. Under his Fifth Claim, Plaintiff has alleged
that the Employment Agreement: was "premised on the promises
made to induce [Plaintiff] to join G2," which were broken, FAC
~
116; contained no restriction on Plaintiff's ability to engage
in "cross-trades," but from which Plaintiff was restricted,
along with a "measure of autonomy," FAC
14
~
117; stated that
Plaintiff would have "duties commensurate with [the title of
Managing Director], as directed from time to time by the
Company's President, to whom you shall report," so that
Plaintiff was obligated to report "solely" to Holman and could
not be subordinated to Ou, FAC
~~
11 8-20 . Plaintiff has also
alleged that during his employment, Defendants acted in bad
faith towards him by breaking their promises and harassing him.
FAC
~
122. Defendants contend, principally, that Plaintiff's
Emplo yment Agreement contains a merger clause which bars any
prior oral representations varying the written agreement and
that, because the employment was at-will, G2CM was entitled to
change the terms of employment. As a secondary argument,
Defendants contend that Plaintiff's breach of contract claim
should be dismissed against individual defendants who did not
sign the Employment Agreement. Lastly, Defendants argue that the
covenant of good faith and fair dealings claim should be
dismissed as duplicative of the breach of contract claim.
To state a breach of contract claim uhder New York law, a
plaintiff must allege "(l) the existence of an agreement,
adequate performance of the contract by the plaintiff,
breach of contract by the defendant, and (4)
d~mages."
(2)
(3)
Eternity
Glob. Master Fund Ltd. v. Morgan Guar. Tr. Co. of N.Y., 375 F.3d
168, 177
(2d Cir. 2004)
(internal quotation marks omitted)
15
(quoting Harsco Corp. v. Segui,
91 F.3d 337, 348
(2d Cir.
1996)). It is well-established that "[t]he best evidence of what
parties to a written agreement intend is what they say in their
writing." Greenfield v. Philles Records,
Inc.,
569, 750 N.Y.S.2d 565, 780 N.E.2d 166 (2002)
98 N.Y.2d 562,
(citation omitted).
A written agreement that is complete, clear, and unambiguous
must be enforced according to its terms.
Id.
A contract is unambiguous when the contractual language has
a definite and precise meaning about which there is no
reasonable basis for a difference of opinion. Law Debenture
Trust Co. of N.Y. v. Maverick Tube Corp., 595 F.3d 458,
467
(2d
Cir. 2010). Consequently, "when the parties to a contract have
memorialized their agreement in a writing which purports to be a
complete and accurate integration, i.e., which embodies all of
the mutual rights and obligations of the parties, the Court will
exclude evidence of prior or contemporaneous agreements which
would vary the terms of the written instrument." Broyles v. J.P.
Morgan Chase & Co., No. 08 Civ. 3391
*3
(S.D.N.Y. Mar. 8, 2010)
Sons. Inc.,
(WHP), 2010 WL 815123, at
(quoting Lee v. Joseph E. Seagram &
413 F. Supp. 693, 700
(S.D.N.Y. 1976)); see also
Mizuna, Ltd. v. Crossland Fed. Sav. Bank,
(2d Cir. 1996)
90 F.3d 650,
659-61
(rejecting "discrepancies" between alleged prior
16
oral agreements and written contract with a valid merger clause
present).
New York law also recognizes an implied covenant of good
faith and fair dealing in every contract. See M/A Com Security
Corp. v. Galesi, 904 F.2d 134, 136 (2d Cir. 1990). The covenant
"'embraces a pledge that neither party shall do anything which
will have the effect of destroying or injuring the right of the
other party to receive the fruits of the contract.'" Atmosphere
Scis., LLC v. Schneider Advanced Techs., Inc., No. 12 Civ. 3223
(SAS), 2012 WL 4240759, at *5 (S.D.N.Y. Sept. 19, 2012)
(quoting
511 W. 232nd Owners Corp. v . Jennifer Realty Co., 98 N.Y.2d 144,
153, 746 N.Y.S.2d 131 (2002)). "Consequently, a claim that
defendant has breached the duty of good faith can only survive a
motion to dismiss if it is based on allegations that differ from
those underlying an accompanying breach of contract claim."
Cnty. of Orange v. Travelers Indem. Co., No. 13 Civ. 6790 (NSR),
2014 WL 1998240, at *2 (S.D.N.Y. May 14, 2014)
(citation
omitted); see also Hosp. Auth. of Rockdale Cnty. v. GS Capital
Partners V Fund, L.P., No. 09 Civ. 8716 (PAC), 2011 WL 182066,
at *4
(S.D.N.Y. Jan. 20 , 2011)
(holding that a plaintiff "may
bring two breach of contact claims, one based on breach of the
express terms and the other based on breach of the implied duty,
as long as they are supported by factually distinct
17
allegations"); ARI & Co., Inc. v. Regent Int'l Corp., 273 F.
Supp. 2d 518, 523 (S.D.N.Y. 2003)
alternations omitted)
(internal quotation marks and
("A claim for the breach of the implied
covenant of good faith and fair dealing must also be dismissed
where it seeks to recover damages that are intrinsically tied to
the damages allegedly resulting from the breach of contract.").
The Employment Agreement contains two provisions relevant
to Plaintiff's breach of contract claim. First, Plaintiff's
employment was contracted to be "on an at-will basis . " See
Holmen Deel., Ex. A, at 1; see also id., at 4. Second, the
Employment Contract contained an unambiguous merger clause:
"This Letter Agreement, when signed by you, shall, together,
with the FCA [Fair Competition Agreement] and then-current
employee handbook, constitute the entire agreement between the
Company and you relating to your employment." Id., at 3.
Plaintiff's breach of contract claim is, in large part,
predicated on alleged representations made to him prior to the
signing of the Employment Agreement. See FAC
~
116. To the
extent Plaintiff's claim rests on representations prior to the
Employment Agreement itself-such as about what kinds of trades
Plaintiff would be entitled to make, to whom he would report,
what degree of autonomy he would possess, who else G2CM would
18
hire, or any other representations "to vary or add t o the terms
of contract"-they are all barred by the clear merger clause in
the Employment Agreement in the context of Plaintiff's breach of
contract claim. NAB Const. Corp. v. Consol. Edison Co. of N.Y.,
Inc., 222 A.D.2d 381, 381, 636 N.Y.S.2d 37, 38
(App. Div. 1st
Dep' t 1995).
The authorities presented by Plaintiff are inapposite. For
example, Plaintiff cites Tempo Shain Corp. v. Bertek , Inc., 120
F.3d 16 (2d Cir. 1997), for the proposition that "[a] general
merger clause does not preclude parol testimony where a claim is
based on fraud in the inducement." Id. at 21 . This is a correct
statement of law, but Plaintiff has l eft out the immediately
following explanatory portion of the Second Circuit's statement:
that because the "parol evidence rule rests on the rationale
that a later written agreement has supplanted prior negotiations
. the rule does not come into play until the existence of an
enforceable written agreement has been shown." Id.
(citation
omitted). Plaintiff's failure to differentiate the parole
evidence rule's application in the context of breach of contract
claims as opposed to fraud-based claims like fraudulent
inducement permeates other cited authorities too. See Karacostas
v . Cigna Int'l Corp., No. 90 Civ. 5053 (PKL), 1991 WL 8416, at
*4-*5 (S.D .N. Y. Jan. 22 , 1991)
(granting dismissal for
19
plaintiff's breach of contract claim while rejecting "strict
application" of the parole evidence rule for fraud in the
inducement claim); Sabo v. Delman, 3 N.Y.2d 155, 161, 143 N.E.2d
90 6 ( 195 7)
( citations omitted)
("The parol evidence rule forbids
proof of extrinsic evidence to contradict or vary the terms of a
written instrument
. in a breach of contra l t action .
However, the parol evidence rule has no application in a suit
brought to rescind a contract on the ground of fraud.");
Weistrop v . Necchi Sewing Mach. Sales Corp., 11 Misc. 2d 642,
644, 168 N.Y.S.2d 387
(Sup. Ct. 1957)
(citation omitted)
(holding that contract's merger clause was "not conclusive on
the question whether it constitutes the entire contract" and
t hat it did not "preclude the defendants from claiming fraud in
the inducement")
.4
Plaintiff's breach of contract claim does not sound in
fraud,
unlike, for example, Plaintiff's fraudulent inducement
claim. There is no dispute that the Employment Agreement was a
valid contract entered into between the parties, and Plaintiff
is not seeking to rescind the Emplo yment Agreement. As such,
4
Similarly unavailing, but for slightly different reasons,
is Dorset Indus., Inc. v. Unified Grocers, Inc., 893 F. Supp. 2d
395 (E.D.N.Y. 2012), which considered the use of parole evidence
solely for that plaintiff's good faith and fair dealing claim
after dismissing plaintiff's breach of contract claim. See id.
at 406-07.
20
Plaintiff's pre-Employment Agreement discussions, and any
representations Holmen made, cannot apply to Plaintiff's breach
of contract claim.
The remainder of Plaintiff's breach of contract claim,
predicated on changes to Plaintiff's employment while at G2CM,
such as limiting his trading responsibilities, reassigning
Plaintiff to a different supervisor, or resources that would be
available to him at G2CM, fails because of the Employment
Agreement's at-will provision. 5 As an at-will employee, an
emplo y er ma y change "the terms of its emplo y ee's at-will
employment contract and [if] the employee chooses to remain in
the emplo y er's employ after being advised of that change, the
employee is deemed to have acquiesced to the new terms of
employment and cannot later claim compensation based on the
terms of the original contract." Campeggi v. Arche Inc., No. 15
Civ. 1097 (PGG), 2 016 WL 4939539, at *6 (S.D.N.Y. Sept. 14,
2016)
(internal citation and quotation marks omitted)
Arakelian v. Omnicare, Inc., 735 F. Supp. 2d 22,
5
(quoting
32-33 (S.D.N.Y.
To the extent that Plaintiff is alleging a breach of
contract claim based on "delaying expense reimbursements" and
"chang[ing] to a less favorable health insurance policy," FAC
~ 71, it is neither pleaded nor clear which provision of the
Employment Agreement was breached, and no allegations have been
put forward to indicate that any changes made by G2CM towards
Plaintiff were different than "other similarly situated
executives of the Company," Holmen Deel., Ex. A, at 2.
21
2010)); see also Bessemer Trust Co. v. Branin, 618 F.3d 76,
( 2d Cir. 2010)
(first alteration in original)
93
("If [plaintiff]
could be dismissed at will by [the employer], it seems to us,
the lesser action of changing his role at the firm,
subject of
course to his choosing to depart at his option instead, was
permissible too."), certified question accepteq, 15 N.Y.3d 836
(2010), and certified question answered, 16 N.Y.3d 549 (2011).
Here, there is no allegation that Plaintiff was not made
aware of changes to his employment at G2CM in advance. While
Plaintiff might have been unhappy with changes wrought by
Defendants or by alleged abuse he suffered while employed, the
at-will nature of his Employment Agreement allowed him "right to
leave such employment if the new terms [were] unacceptable."
Klein v. Torrey Point Grp., LLC, 979 F. Supp. 2d 417,
432
(S.D.N.Y. 2013). By continuing to remain, any changes to his
employment arraignment were "assented to," barring his instant
breach of contract claim. 6 Bottini v. Lewis & Judge Co., 211
6
The only authority Plaintiff has presented is Izzo v.
Freedom Graphics Sys., Inc., No. 3:15 Civ. 602 (SRU), 2016 WL
5219446 (D. Conn. Sept. 20, 2016), apparently for the
proposition that an "employer can change an at-will employee's
responsibilities without breaching the agreement, even if it
might not be able to change its obligations to the employee."
Id., 2016 WL 5219446, at *1. While not cleanly phrased, this
observation appears to reference the permissible prospective
versus impermissible retroactive changes to an at-will
22
A.D.2d 1006, 1008, 621 N.Y.S.2d 753, 754
(1995)
(citation
omitted).
Plaintiff's good faith and fair dealings claim also fails
for two reasons. First, Plaintiff was an at-will employee. "As
the courts within this district have repeatedly recognized,
well-settled New York law holds that no implied covenant of good
faith and fair dealing attaches to at-will employment
contracts." Nunez v . A-T Fin. Info. Inc.,
( S. D. N. Y. 1997)
957 F. Supp. 438, 443
(collecting cases); see also Campeggi v. Arche
Inc., No. 15 Civ. 1097 (PGG), 2016 WL 4939539, at *6 (S.D.N.Y.
Sept. 14, 2016)
fatal to .
("Plaintiff's at-will employment status .
. is
her claim for breach of the implied covenant of
good faith and fair dealing."). There is no dispute, and the
Employment Agreement plainly states, that Plaintiff was an atwill employee. This alone provides grounds for dismissal. See
Grewal v. Cuneo Gilbert & LaDuca LLP, No. 13 Civ. 6836 (RA),
201 7 WL 1215 7 5 2, at * 10 ( S . D. N. Y. Mar . 31, 201 7 ) . 7
employee's employment that this Court discussed in Lankau v.
Luxoft Holding, Inc., No. 16 Civ. 8690 (RWS), 2017 WL 2954763
(S.D.N.Y. July 10, 2017) , where, to dispel any confusion, this
Court did dismiss breach of contract claims made by an at-will
employee based on prospective employment changes. See id., 2017
WL 2954763, at *10.
7
Plaintiff's authorities are again inapposite. In Wakefield
v . N. Telecom, Inc., 769 F.2d 109 (2d Cir. 1985), the Second
Circuit noted an exception to the general New York rule of no
23
Second, "New York law
. does not recognize a separate
cause of action for breach of the implied covenant of good faith
and fair dealing when a breach of contract claim, based upon the
same facts,
is also pled." Harris v. Provident Life & Acc.
Ins.
Co., 310 F.3d 73, 81 (2d Cir. 2002); see also Kermanshah v.
Kermanshah, 580 F. Supp. 2d 247, 271-72
(S.D.N.Y. 2008)
(internal quotation marks and citation omitted)
("Such a claim
may be brought, if at all, only if it is based on allegations
different than those underlying the accompanying breach of
contract claim."). Plaintiff alleges that the "conduct"
described in his breach of contract claim, outlined above, was
"in manifest bad faith." FAC 'JI 121. Yet the only allegations
made outside the parameters of the Employment Agreement are to
implied good faith in at-will agreement that an employer may not
"terminate an employee for the purpose of avoiding the payment
of commissions which are otherwise owed," which was a benefit
that accrued under the terms of the agreement. Id. at 112. Based
on Wakefield, the court in Rozenzweig v. ClaimFox, Inc., 251 F.
Supp. 3d 449 (E.D.N.Y. 2017), found it "plausible that [the
employer] terminated the Plaintiff to avoid providing her with a
reasonable accommodation, pregnancy leave, or disability
benefits," provisions noted in the Human Resources manual. Id.
at 457, 460. Putting aside whether Wakefield is still good law,
see, e.g., Bravia Capital Partners, Inc. v. Fike, No. 09 Civ.
6375 (JFK), 2010 WL 3359470, at *6 (S.D.N.Y. Aug. 25, 2010)
(noting that "Wakefield's continued validity .
. is unclear"),
here, Plaintiff has not identified any accrued benefits under
the terms of his Employment Agreement that he has not received
and to which he plausibly claims entitlement .
24
"persistent harassment and threats" made in "bad faith" against
Plaintiff by Defendants. FAC
~
122. Even assuming the
allegations are true and such "arbitrary and unreasonable"
insults occurred, Plaintiff has not plausibly pleaded how those
insults prevented him from "receiving the fruits of the
contract" to which he was entitled. Butvin v. DoubleClick, Inc.,
No. 99 Civ. 4727
(JFK), 2001 WL 228121, at *7
2001), aff'd, 22 F. App'x 57
(S . D.N.Y. Mar. 7,
(2d Cir. 2001). Moreover, outside
of that one claim, the gravamen of Plaintiff's good faith and
fair dealings claim is based on alleged breaches of his
Employment Agreement and involve the same facts underlying his
breach of contract claim. As this claim is redundant to
Plaintiff's breach of contract claim, it must be dismissed for
this reason as well. See, e.g., MacPhee v. Verizon Commc'ns
Inc., No. 06 Civ. 7870
(BSJ), 2008 WL 162899, at *6 (S.D.N.Y.
Jan. 15, 2008).
Accordingly, Plaintiff's Fifth Claim for breach of contract
and covenant of good faith and fair dealing is dismissed.
3. Plaintiff's First and Third Claim Are Dismissed Against
Individual Defendants
Defendants have moved to dismiss the FAC's First Claim, for
disability discrimination in violation of the ADA,
25
FAC
~~
87-93,
and FAC's Third Claim, for age discrimination in violation of
the ADEA,
FAC
~~
101-08, as against individual Defendants
Morley, Holmen, and Ou. Defendants argue that individuals are
not subject to liability under these laws.
The law in the Second Circuit on this question is clear.
First, "there is no right of recovery against individual
defendants under the ADA." Corr v. MTA Long Island Bus, 199 F.3d
1321 (2d Cir. 1999)
(citing Tomka v. Seiler Corp.,
66 F.3d 1295,
1314 (2d Cir. 1995)); see also Ivanov v. N.Y.C. Transit Auth.,
No. 13 Civ. 4280
(PKC), 2014 WL 2600230, at *5 ( S.D.N.Y. June 5,
2014). Second, "individual supervisors may not be held
personally liable under the ADEA." Martin v. Chem. Bank, 129
F.3d 114
(2d Cir. 1997); see also Sanders-Peay v. NYC Dep't of
Educ., No. 14 Civ. 4534
(E.D.N.Y. Nov. 18, 2014)
(CBA)
(MDG), 2014 WL 6473507, at *3 n.3
(noting that "the scope of the ADEA
does not extend to claims against non-employers or individuals"
and collecting cases) . s
8
Plaintiff highlights that in Tomka, the Second Circuit
referenced prior cases from within the circuit that held that
employer agents were liable under Title VII. While relevant
insofar as Title VII has informed how courts have interpreted
the ADA and ADEA, see, e.g., Ivanov, 2014 WL 2600230, at *5,
Plaintiff ignores what the Tomka court held just two sentences
later: that "individual defendants with supervisory control over
a plaintiff may not be held personally liable under Title VII."
Tomka, 66 F.3d at 1313.
26
' ••
Plaintiff may disagree with the Second Circuit's reading of
the ADA and ADEA statutory language, but it cannot be argued
that the Second Circuit's unambiguous view must control here.
Accordingly, Plaintiff's First Claim under the ADA and Third
Claim under the ADEA are dismissed as against individual
Defendants Morley, Holmen, and Ou.
27
Conclusion
For the foregoing reasons, Defendants' motions are granted.
It is so ordered.
New York, NY
January ~' 2018
ROBERT W. SWEET
U.S.D.J.
28
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