Thompson v. Combined Systems, Inc.
Filing
21
DECISION AND ORDER that the Court grants in part and denies in part Plaintiffs motion for an extension of time to file or, in the alternative, for leave to amend [#12], to the extent leave to file an amended complaint is granted, and the first amende d complaint [#10] replaces the original complaint [#1] as the operative complaint. The Court grants Defendant's first motion to dismiss or, in the alternative, for summary judgment [#9]; grants Defendant's second motion to dismiss or, in the alternative for summary judgment [#11]; and dismisses the first amended complaint [#10]. The Clerk of Court is directed to close the case. Signed by Hon. Michael A. Telesca on 6/13/17. (JMC)-CLERK TO FOLLOW UP-
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
DAWN THOMPSON,
Plaintiff,
DECISION and ORDER
No. 6:17-cv-06007(MAT)
-vsCOMBINED SYSTEMS, INC.,
Defendant.
INTRODUCTION
Represented
by
counsel,
Dawn
Thompson
(“Plaintiff”),
a
resident of Florida, instituted this proceeding alleging causes of
action for breach of contract and promissory estoppel against
Combined
New
York
Systems,
Inc.
corporation
(“CSI”
with
a
or
“Defendant”),
principal
place
of
a
registered
business
in
Pennsylvania. The Court has diversity jurisdiction over this matter
pursuant to 28 U.S.C. § 1332.
FACTUAL BACKGROUND
Thompson Handcuffs Corporation (“Thompson Handcuffs” or “THC”)
was founded by Charles Thompson in the 1980s. In July of 2010, CSI,
CSI-Penn Arms, LLC, a wholly-owned subsidiary of CSI; Charles
Thompson; and Plaintiff entered into an Asset Purchase Agreement
(“the Purchase Agreement”), whereby certain assets of Thompson
Handcuffs were sold to CSI. As of the date the Purchase Agreement
was executed, Plaintiff owned all of THC’s issued and outstanding
capital stock, and was responsible for the day-to-day operations of
the business.
The purchase price is reflected in Paragraph 1.3 of the
Purchase Agreement which states in relevant part as follows:
1.3. Purchase Price. The total purchase price (the
“Purchase Price”) which the Buyer shall pay for the
Assets and in consideration of the covenants of the
Sellers contained herein is:
(a) 300,000.00 in cash, of which (x) $200,000.00 is
payable at the Closing (the “Initial Payment”) and
(y) the remainder is payable in installments as
follows:
(i) For each pair of handcuffs sold by the
Buyer after the Closing the Buyer will pay the
Company $0.25 until the aggregate amount of
all such payments as to pairs of handcuffs
sold by the Buyer after the Closing equals
$100,000.00
(each
such
payment,
an
“Installment Payment”), it being recognized
that
(A) in no event shall the total amount of
installment Payments exceed $100,000.00
(the “Installment Cap”) . . . .
Purchase Agreement, ¶ 1.3, Exhibit (“Ex.”) A to First Amended
Complaint (“FAC”) [#10-1]1. CSI paid Thompson Handcuffs the sum of
$200,000 at the closing and continued to make annual Installment
Payments to Thompson Handcuffs. As of January 1, 2017, CSI had paid
Plaintiff a total of $22,892.26 toward the remaining $100,000
Installment Cap.
1
Numerals preceded by “#” in brackets refer to the document number assigned
by CM/ECF on the case docket.
-2-
In the Purchase Agreement’s “Recitals” section, the parties
included
language
regarding
CSI’s
continued
employment
of
Plaintiff. Specifically, one of the “whereas” clauses states that
“the Buyer wishes to employ [Plaintiff] from and after the Closing
(as
hereinafter
defined)
at
CSI’s
facility
in
Jamestown,
Pennsylvania, in a sales and marketing capacity on an at-will
basis[.]” Purchase Agreement, p. 1.
In July of 2010, CSI sent Plaintiff a letter offering her a
position of employment. The letter is referenced in Plaintiff’s
first amended complaint, see FAC, ¶¶ 26-37, and states in pertinent
part as follows:
In order to support the sales efforts of THC into the
future, we are pleased to offer you a position as a Sales
Manager of the THC brand for CSI. . . .
As the Sales Manager of the THC product line, you will be
responsible for the development of sales for the domestic
and international markets, as determined by CSI
management. You will work closely with the other members
of the CSI sales team and you will participate in weekly
sales conference calls and other designated meetings,
reporting on your prospects and sales activities to CSI
senior management.
Plaintiff accepted the employment offer and agreed that she would
be based out of CSI’s headquarters, which required her to relocate
from Illinois to Jamestown, Pennsylvania.
Plaintiff was employed by CSI as the sales manager of the
Thompson Handcuffs brand beginning August 1, 2010. She held this
position until her termination by CSI on or about July 17, 2013.
-3-
PROCEDURAL STATUS OF THIS ACTION
On January 1, 2017, Plaintiff filed the instant complaint [#1]
asserting that CSI breached its obligations under the Purchase
Agreement,
wrongfully
terminated
her
employment
prior
to
the
expiration of their oral employment agreement, and failed to
reimburse
her
for
the
costs
she
incurred
in
relocating
to
Pennsylvania.
On February 14, 2017, CSI filed a pre-answer motion to dismiss
pursuant to Rule2 12(b)(6) or, in the alternative, for summary
judgment pursuant to Rule 56.
On March 8, 2017, Plaintiff filed a first amended complaint
[#10]. CSI then moved to dismiss the first amended complaint or, in
the alternative, for summary judgment [#11]. Plaintiff filed a
motion for extension of time to file an amended complaint or, in
the alternative, for leave to amend [#12]. CSI filed a memorandum
in opposition [#13], and Plaintiff filed a reply brief [#14].
Plaintiff subsequently filed a memorandum of law in opposition
to CSI’s first motion to dismiss or, in the alternative, for
summary judgment [#16], and a memorandum of law in opposition to
CSI’s second motion to dismiss or, in the alternative, for summary
judgment [#17]. CSI filed a reply brief. [#18].
2
Citations to “Rules” refer to the Federal Rules of Civil Procedure, unless
otherwise noted.
-4-
For the reasons discussed below, the Court grants Plaintiff’s
request for leave to amend, and replaces the complaint with the
first amended complaint. The Court grants CSI’s motions to dismiss
or, in the alternative for summary judgment, and dismisses the
first amended complaint.
DISCUSSION
I.
Plaintiff’s Motion for Extension of Time to File Amended
Complaint or, in the Alternative, for Leave to Amend
On March 23, 2017, Plaintiff filed a motion seeking a nunc pro
tunc extension of time to file an amended complaint or, in the
alternative, permission to file an amended complaint [#12]. In her
supporting memorandum of law, Plaintiff also suggests that the
Court
deny
Defendant’s
first
motion
to
dismiss
or,
in
the
alternative, for summary judgment as moot in light of the fact that
she filed an amended complaint. Defendant requests that Plaintiff’s
first amended complaint, filed without leave and while its first
motion to dismiss or, in the alternative, for summary judgment was
pending, be stricken.
Plaintiff’s
motion
is
governed
by
Rule
15(a)(1),
which
provides in relevant part as follows:
A party may amend its pleading once as a matter of course
within:
(A) 21 days after serving it, or
(B) if the pleading is one to which a
responsive pleading is required, 21 days after
service of a responsive pleading or 21 days
-5-
after service of a motion under Rule 12(b),
(e), or (f), whichever is earlier.
FED.
R.
CIV.
P.
15(a)(1).
Here,
the
operative
pleading
is
Plaintiff’s complaint, filed on January 1, 2017. Because it is the
type of pleading which requires a responsive pleading, subsection
(B) applies.
CSI filed its first motion to dismiss, which sought relief
under Rule 12(b)(6), on February 14, 2017 [#9]. Plaintiff did not
file opposition papers to this motion. Instead, on March 8, 2017,
twenty-two (22) days after Defendant’s service of its first motion
to dismiss under Rule 12(b)(6), Plaintiff filed a first amended
complaint. Because the first amended complaint was filed more than
21 days after service of CSI’s Rule 12(b)(6) motion, it was
untimely under Rule 15(a)(1)(B). Accordingly, Defendant requests
that the amended complaint be stricken.
Plaintiff notes that its amended complaint was filed less than
24 hours late and asserts that delay was the result of a “good
faith mistake,” namely an “inadvertent internal calendaring error.”
Plaintiff requests a nunc pro tunc extension of time be granted
pursuant to Rule 6(b)(1)(B) which allows the court, “for good
cause,” to grant extensions of time “on motion made after the time
has expired if the party failed to act because of excusable
neglect.” FED. R. CIV. P. 6(b)(1)(B). Alternatively, Plaintiff
requests permission to amend under Rule 15(a) which provides that
-6-
leave to amend a pleading “shall be freely given when justice so
requires.” FED. R. CIV. P. 15(a).
“The Second Circuit has held that a Rule 15(a) motion [for
leave to amend] ‘should be denied only for such reasons as undue
delay, bad faith, futility of the amendment, and perhaps most
important, the resulting prejudice to the opposing party.’” Aetna
Cas. & Sur. Co. v. Aniero Concrete Co., 404 F.3d 566, 603–04
(2d Cir. 2005) (quoting Richardson Greenshields Securities, Inc. v.
Lau, 825 F.2d 647, 653 n. 6 (2d Cir. 1987); other citation
omitted). Ultimately, it is “within the sound discretion of the
court whether to grant leave to amend.”
John Hancock Mut. Life
Ins. Co. v. Amerford Int’l Corp., 22 F.3d 458, 462 (2d Cir. 1994)
(citation omitted). Here, there is no evidence of undue delay, bad
faith, or dilatory motive on the part of Plaintiff. Nor have there
been repeated failures to cure deficiencies by amendment previously
allowed. Finally, since this matter is still in its nascency, the
Court cannot see any potential for prejudice to Defendant if
amendment is permitted. See Foman v. Davis, 371 U.S. 178, 182
(1962) (reasons for denying leave include “undue delay, bad faith,
or dilatory motive on the part of the movant, repeated failure to
cure deficiencies by amendment previously allowed, undue prejudice
to the opposing party by virtue of allowance of the amendment,
futility of the amendment”). Accordingly, the Court exercises its
discretion to allow Plaintiff to file an amended complaint. The
-7-
original
complaint
is
hereby
replaced
by
the
first
amended
complaint, which is now the operative pleading in this matter.
II.
Defendant’s Motions to Dismiss or, in the Alternative, for
Summary Judgment
A.
Whether to Apply the Rule 12 or Rule 56 Standard
CSI has moved to dismiss the complaint and first amended
complaint under Rule 12(b)(6) for failure to state a claim, or, in
the alternative, for summary judgment dismissing the complaint and
first amended complaint under Rule 56. Plaintiff argues that CSI’s
request for summary judgment is premature since no discovery has
occurred. See, e.g., Hellstrom v. United States Dep’t of Veterans
Affairs, 201 F.3d 94, 97 (2d Cir. 2000) (“Only in the rarest of
cases may summary judgment be granted against a plaintiff who has
not
been
afforded
the
opportunity
to
conduct
discovery.”)
(citations omitted). Although it is true that courts do not often
grant summary judgment prior to discovery, “there is nothing in the
Federal Rules of Civil Procedure precluding summary judgment—in an
appropriate case—prior to discovery.” Emigra Grp., LLC v. Fragomen,
Del Rey, Bernsen & Loewy, LLP, 612 F. Supp.2d 330, 346 (S.D.N.Y.
2009). Indeed, the clear language of Rule 56 allows a defendant to
“move at any time, with or without supporting affidavits, for
summary judgment on all or part of the claim.” FED. R. CIV. P. 56(b)
(emphasis supplied).
-8-
When a non-movant legitimately requires discovery to meet a
motion for summary judgment, Rule 56(d)3 “is the mechanism for
addressing that need.” Emigra Grp., LLC, 612 F. Supp.2d at 346.
Rule 56(d) states that “[i]f a nonmovant shows by affidavit or
declaration that, for specified reasons, it cannot present facts
essential to justify its opposition, the court may: (1) defer
considering the motion or deny it; (2) allow time to obtain
affidavits or declarations or to take discovery; or (3) issue any
other appropriate order.” FED. R. CIV. P. 56(d).
Here, however, Plaintiff did not avail herself of Rule 56(d)
by submitting an affidavit or declaration specifying the reasons4
why she is unable to factually counter Defendant’s motion for
summary judgment. Plaintiff’s reference to the need for additional
discovery in her memorandum of law is not a substitute for a
Rule 56(d) affidavit or declaration, the absence of which is a
3
Following the 2010 Amendments to Rule 56, “[s]ubdivision (d) carries
forward without substantial change the provisions of former subdivision (f).”
FED. R. CIV. P. 56, Advisory Comm. Notes to 2010 Amendments. Former subdivision
(f) provided that “[i]f the non-moving party makes a sufficient showing by
affidavit, a motion for summary judgment will be denied or delayed to permit
discovery that is reasonably expected to create a genuine issue of material
fact.” FED. R. CIV. P. 56(f) (former) (quoted in Emigra Grp., LLC, 612 F. Supp.2d
at 346).
4
The Second Circuit has “established a four-part test for the sufficiency
of an affidavit submitted pursuant to Rule 56([d]). The affidavit must include
the nature of the uncompleted discovery; how the facts sought are reasonably
expected to create a genuine issue of material fact; what efforts the affiant has
made to obtain those facts; and why those efforts were unsuccessful.” Paddington
Partners v. Bouchard, 34 F.3d 1132, 1138 (2d Cir. 1994) (applying former Rule
56(f) in effect prior to 2010 amendments; citations omitted).
-9-
sufficient basis to reject Plaintiff’s assertion that she requires
access to discovery.
See Paddington Partners, 34 F.3d at 1137
(applying former Rule 56(f) in effect prior to 2010 amendments;
stating that “[a] reference to Rule 56([d]) and to the need for
additional discovery in a memorandum of law in opposition to a
motion for summary judgment is not an adequate substitute for a
Rule 56([d]) affidavit, and the failure to file an affidavit under
Rule 56([d]) is itself sufficient grounds to reject a claim that
the opportunity for discovery was inadequate”) (internal and other
citations omitted). The deficiencies in Plaintiff’s submissions,
which were pointed out by Defendant and which Plaintiff has taken
no steps to remedy, leave the Court with no basis for deferring a
ruling
on
Defendant’s
properly
supported
motions
for
summary
judgment.
Nonetheless, in the interest of completeness, the Court has
analyzed the first amended complaint under both Rule 12(b)(6) and
Rule 56(a). Plaintiff’s claims essentially stand or fall based on
the parties’ Purchase Agreement, which Plaintiff has attached as an
exhibit to both her complaints. Accordingly, the Court is entitled
to consider the Purchase Agreement, even under Rule 12(b)(6). Brass
v. American Film Techs., Inc., 987 F.2d 142, 150 (2d Cir. 1993)
(“When determining the sufficiency of plaintiffs’ claim for Rule
12(b)(6)
purposes,
consideration
is
limited
to
the
factual
allegations in plaintiffs’ amended complaint, which are accepted as
-10-
true, to documents attached to the complaint as an exhibit or
incorporated in it by reference, to matters of which judicial
notice
may
be
taken,
or
to
documents
either
in
plaintiffs’
possession or of which plaintiff had knowledge and relied on in
bringing suit.”) (citing Cortec Indus., Inc. v. Sum Holding L.P.,
949 F.2d 42, 47–48 (2d Cir. 1991), cert. denied, 503 U.S. 960
(1992)).
As discussed below, the Court finds that Plaintiff cannot
state plausible claims for relief so as to withstand dismissal
pursuant to Rule 12(b)(6). The Court also finds that Plaintiff’s
causes of action fail as a matter of law, and that there are no
genuinely disputed issues of material fact sufficient to allow this
case to proceed further.
B.
Viability of Plaintiff’s Causes of Action
1.
Breach of Contract (Implied Covenant of Good Faith
and Fair Dealing) Based on Purchase Agreement
Plaintiff’s first cause of action alleges a breach of the
implied covenant of good faith and fair dealing based on CSI’s
alleged failure to fulfill certain obligations under the Purchase
Agreement.
Under New York law, “a duty of good faith and fair dealing is
implied in every contract[.]” United States Fidelity & Guar. Co. v.
Braspeto Oil Servs. Co., 369 F.3d 34, 64 (2d Cir. 2004) (footnote
omitted). “In most circumstances, claims for breach of contract and
the covenant of good faith and fair dealing are duplicative.”
-11-
Echostar DBS Corp. v. Gemstar–TV Guide Int’l, Inc., No. 05–CV–8510,
2007 WL 438088, at *7 (S.D.N.Y. Feb. 8, 2007) (quotation omitted).
Here, however, Plaintiff does not allege a separate breach of
contract claim, and thus her breach of implied covenant claim need
not be dismissed for redundancy.
“‘The elements of a claim for breach of the duty of good faith
and fair dealing are practically identical to the elements of a
negligence claim’: (1) defendant must owe plaintiff a duty to act
in good faith and conduct fair dealing; (2) defendant must breach
that duty; and (3) the breach of duty must proximately cause
plaintiff’s
damages.”
Washington
v.
Kellwood
Co.,
05
Civ.
10034(DAB), 2009 WL 855652 at *6 (S.D.N.Y. Mar. 24, 2009) (quoting
Boyd v. University of Illinois, 96 Civ. 9327(TPG), 2001 WL 246402
at *10 (S.D.N.Y. Mar. 13, 2001)). “For a complaint to state a cause
of action alleging breach of an implied covenant of good faith and
fair dealing, the plaintiff must allege facts which tend to show
that the defendant sought to prevent performance of the contract or
to withhold its benefits from the plaintiff.” Fillmore E. BS Fin.
Subsidiary LLC v. Capmark Bank, 552 F. App’x 13, 16 (2d Cir. 2014)
(unpublished opn.) (quoting Aventine Inv. Mgmt., Inc. v. Canadian
Imperial Bank of Commerce, 265 A.D.2d 513, 514, 697 N.Y.S.2d 128
(2d Dep’t 1999)).
-12-
Plaintiff alleges that under New York law, which governs the
Purchase Agreement,5 the covenant of good faith and fair dealing
obligated CSI “to avoid doing anything which has the effect of
depriving [her] of the right to receive the benefits due to her
under the Purchase Agreement.” FAC, ¶ 64. Plaintiff further alleges
that the Purchase Agreement contained a “royalty agreement” based
on CSI’s exclusive ability to sell the handcuffs, and therefore the
implied covenant of good faith and fair dealing required CSI to
undertake
at
least
“reasonable
efforts”
to
market
and
sell
handcuffs. Id., ¶ 65. According to Plaintiff, “in the course of
negotiating and executing the Purchase Agreement, CSI made a series
of express representations regarding the efforts it would take in
order to grow the sales of Thompson [H]andcuffs[,]” id., ¶ 66, but
ultimately
failed
to
fulfill
those
representations
or
its
contractual obligations, which “resulted in continuously declining
sales of handcuffs, and therefore a reduction in the amount of
royalties received by [Plaintiff].” Id., ¶ 68.
CSI argues that it fully complied with all of its obligations
under the Purchase Agreement. Pointing to the integration clause in
Paragraph 7.66 of the Purchase Agreement, CSI argues that Plaintiff
5
The Purchase Agreement states that it will be construed in accordance with
“the laws of the State of New York; provided, however, that Section 5.6
[No Competition; No Solicitation; No Inducement] shall be governed and construed
in accordance with the laws of the Commonwealth of Pennsylvania.”
6
Paragraph 7.6 provides in relevant part as follows:
-13-
is attempting to impose obligations not contemplated by the parties
at the time of drafting and signing the agreement. CSI is correct
that the implied covenant of good faith and fair dealing “can only
impose an obligation consistent with other mutually agreed upon
terms
in
the
contract.
It
does
not
add
to
the
contract
a
substantive provision not included by the parties.” Broder v.
Cablevision
Sys.
Corp.,
418
F.3d
187, 198–99
(2d
Cir.
2005)
(citation omitted). Nonetheless, courts have stated that “a party
may be in breach of the duty even when it has abided by the express
terms of the contract.” In Touch Concepts, Inc. v. Cellco P’ship,
949 F. Supp.2d 447, 466 (S.D.N.Y. 2013) (citations omitted)). And,
the presence of an integration or merger clause in the parties’
agreement “does not prevent a court from inferring a covenant of
good faith and fair dealing[,]” SNS Bank, N.V. v. Citibank, N.A.,
777 N.Y.S.2d 62, 65, 7 A.D.3d 352, 354–55 (1st Dep’t 2004), “as
long as the implied term is consistent with other terms in the
contract[.]”
Dorset
Indus.,
Inc.,
893
F.
Supp.2d
at
407.
Furthermore, the fact that the Purchase Agreement is “silent on
these issues is not necessarily fatal to the Plaintiff’s claim
This Agreement (including the schedules and exhibits attached
hereto) and the documents and instruments delivered pursuant hereto
constitute the entire agreement and understanding among the Sellers
and the Buyer with respect to the subject matter hereof and
supersede all prior and current understandings and agreements,
whether written or oral, with respect to the subject matter hereof.
This Agreement may be modified or amended only by a written
instrument executed by the Sellers and the Buyer.
Id., ¶ 7.6; italics in original.
-14-
because New York does not require that a breach of the duty of good
faith
and
fair
dealing
be
tied
to
a
specific
contractual
provision.” Dorset Indus., Inc. v. Unified Grocers, Inc., 893
F. Supp. 2d 395, 407 (E.D.N.Y. 2012) (citing Havel v. Kelsey–Hayes
Co., 83 A.D.2d 380, 445 N.Y.S.2d 333 (4th Dep’t 1981) (“[T]hat a
specific promise has not been expressly stated does not always mean
that it was not intended.”); other citation omitted).
CSI contends, however, that the alleged acts and omissions
cited by Plaintiff, “even if true, would create new, substantive,
and burdensome contractual provisions that do not exist in the
Purchase agreement.” CSI’s Reply
[#11-1] at 3. As CSI correctly
points out, “the implied covenant of good faith and fair dealing is
not designed to enlarge or create new substantive rights between
parties.” Ferguson v. Lion Holding, Inc., 478 F. Supp.2d 455, 479
(S.D.N.Y. 2007) (citing Don King Productions, Inc. v. Douglas, 742
F. Supp. 741, 767 (S.D.N.Y. 1990) (“The implied covenant . . .
simply ‘ensures that parties to a contract perform the substantive,
bargained-for terms of their agreement’ and that parties are not
unfairly denied ‘express, explicitly bargained-for benefits.’”)
(quotation and other citation omitted)). Moreover, “[t]he implied
covenant does not ‘undermine a party’s “general right to act on its
own interests in a way that may incidentally lessen”’ the other
party’s expected benefit.” Security Plans, Inc. v. CUNA Mut. Ins.
Soc., 769 F.3d 807, 817 (2d Cir. 2014) (quoting M/A–COM Sec. Corp.
-15-
v. Galesi, 904 F.2d 134, 136 (2d Cir. 1990) (per curiam); further
quotation omitted).
CSI in particular argues that Plaintiff mischaracterizes the
Purchase Agreement as containing a provision for the payment of
“royalties.” The “royalties” mentioned by Plaintiff are a reference
to the manner in which the purchase price was calculated under the
Purchase Agreement. As noted above, the total purchase price was
set at $300,000.00 in cash, of which $200,000.00 was payable to
Plaintiff at the closing date. As per the terms of the Purchase
Agreement, Plaintiff received $200,000.00 in cash at the time of
closing. The remainder of the purchase price was to be made in
installment payments, and calculated as follows: “[f]or each pair
of handcuffs sold by [CSI] after the Closing[,] [CSI] will pay
[Plaintiff] $0.25 until the aggregate amount of all such payments
as to pairs of handcuffs sold by [CSI] after the Closing equals
$100,000.00,”
but
“in
no
event
shall
the
total
amount
of
installment payments [to Plaintiff] exceed $100,000.00.” Plaintiff
does not assert, nor can she, that CSI has failed to make any
required installment payments based on the number of pairs of
handcuffs sold after the closing date. Rather, Plaintiff faults CSI
for not selling enough pairs of handcuffs at a sufficiently brisk
pace.
Plaintiff
complains
that
if
CSI
had
used
“reasonable
marketing efforts,” it “would have—and could have—sold over 400,000
handcuffs in the six years following the sale of THC to CSI.” FAC,
-16-
¶ 51. What CSI could have or should have done is of no moment
because the Purchase Agreement does not establish a deadline for it
to make the remaining installment payments up to the $100,000Installment Cap. Thus, there is no basis in the Purchase Agreement
for finding that Plaintiff bargained for the benefit of having CSI
sell a certain number of handcuffs during a fixed timeframe.
Consequently,
Plaintiff
deprived
“express,
of
cannot
plausibly
explicitly
claim
that
bargained-for
she
was
benefits.”
Metropolitan Life Ins. Co. v. RJR Nabisco, Inc., 716 F. Supp. 1504,
1517 (S.D.N.Y. 1989); see also Ferguson, 478 F. Supp.2d at 479
(rejecting implied covenant claim as a matter of law; plaintiffs
“seem[ed] to be attempting to create new contractual rights that
they did not previously bargain for[,]” since they “never retained
a right to object to intra-company expense reallocations for the
purpose
of
having
those
decisions
excluded
from
the
Earnout
calculation”).7
The alleged acts and omissions attributed to CSI are not
breaches of the Purchase Agreement but merely represent Plaintiff’s
critique of the way CSI ran its newly acquired business8 and
7
CSI indicates that it is continuing to make the required installment
payments under the Purchase Agreement, and Plaintiff does not dispute this.
8
For instance, Plaintiff faults CSI for “[n]ot providing a marketing and
advertising program or budget for THC handcuffs”; “[f]ailing to publicize
Thompson Handcuffs’ selection as a finalist for an Innovation Award from Law
Enforcement Technology Magazine, despite the fact that publicizing the award
could have been done with limited effort and/or expense”; “[f]ailing to
sufficiently identify or discuss THC handcuffs in marketing materials provided
to representatives, distributors, and customers”; “[a]ssigning handcuff sales
-17-
managed her as an employee.9 However, “New York courts generally
will not disturb actions taken pursuant to a party’s business
judgment[.]” Security Plans, Inc. v. CUNA Mut. Ins. Soc., 769 F.3d
807, 819 (2d Cir. 2014) (citing Nikitovich v. O’Neal, 836 N.Y.S.2d
34,
35
(1st
Dep’t
2007)).
Even
assuming
the
correctness
of
Plaintiff’s criticisms about CSI’s business decisions regarding
THC, she “must show substantially more than evidence that [CSI]’s
actions were negligent or inept.” Security Plans, Inc., 769 F.3d at
817 (citations omitted). “The covenant will be breached only in a
narrow range of cases[,]” id., and Plaintiff’s allegations do not
place her case in that range.
II.
Breach of Contract Based on Alleged Employment Agreement
For her second cause of action, Plaintiff alleges that she and
CSI “were parties to a valid Employment Agreement for a definite
term[,]” FAC, ¶ 72, and that CSI “was obligated to refrain from
terminating
[her]
without
just
cause
during
the term
of
the
agreement.” Id., ¶ 73. Plaintiff contends that in July of 2013, CSI
duties to employees lacking the experience to effectively sell handcuffs and the
time and/or ability to adequately sell handcuffs”; “[r]efusing to provide the
training program designed by THC for the THC handcuffs”; “[f]ailing to adequately
educate distributors regarding the THC brand, including, for example, by devoting
little to no time to the handcuffs during a meeting with all distributors in Las
Vegas, Nevada, in September, 2012”; and “[r]efusing to advertise the handcuffs
in trade magazines”.
9
Plaintiff faults CSI for “[r]efusing to permit [Plaintiff] . . . to
communicate with specific handcuff customers”; “[d]emoting [Plaintiff] from her
position as Sales Manager of the THC brand” and giving her “mundane busy work,
such as paper shredding, rather than allowing her to actively work to sell
handcuffs”; and terminating Plaintiff’s employment without cause, in disregard
of her 20-plus years of experience in handcuff sales. See FAC, ¶ 38(a)-(j).
-18-
“breached the Employment Agreement by terminating [her] for reasons
wholly unrelated to her job performance.” Id., ¶ 74.
“The elements of a breach of contract claim under New York law
are ‘(1) the existence of a contract; (2) due performance of the
contract by the plaintiff; (3) breach of contract by the defendant;
and, (4) damages resulting from the breach.’” Marks v. New York
Univ., 61 F. Supp. 2d 81, 88 (S.D.N.Y. 1999) (quoting K. Bell &
Assocs., Inc. v. Lloyd’s Underwriters, 827 F. Supp. 985, 988
(S.D.N.Y.
1993);
citing
Coastal
Aviation,
Inc.
v.
Commander
Aircraft Co., 937 F. Supp. 1051, 1060 (S.D.N.Y. 1996), aff’d, 108
F.3d 1369 (2d Cir. 1997)). In the employment context, “‘[a]bsent an
agreement establishing a fixed duration, an employment relationship
is presumed to be a hiring at will, terminable at any time by
either party.’” Albert v. Loksen, 239 F.3d 256, 264 (2d Cir. 2001)
(quoting Sabetay
v.
Sterling
Drug,
Inc.,
69
N.Y.2d
329, 333
(1987)); see also Bernhardt v. Tradition N. Am., 676 F. Supp.2d
301, 304-05 (S.D.N.Y. 2009) (“Where a term of employment is for an
indefinite period of time, it is presumed to be an employment at
will that is freely terminable by either party at any time for any
reason or even for no reason.”). Pursuant to clear New York State
precedent, “the at-will presumption may be triggered when an
employment
employment,’
agreement
‘fix[
fails
]
to
state
employment
of
a
‘definite
a
definite
period
of
duration,’
‘establish[ ] a fixed duration’ or is otherwise ‘indefinite[.]’”
-19-
Rooney v. Tyson, 91 N.Y.2d 685, 689, 697 N.E.2d 571, 573 (1998)
(collecting cases; quotations omitted; brackets in original).
CSI chiefly argues that there was no employment contract, much
less one for a definite term. Rather, CSI asserts, the Purchase
Agreement signed by Plaintiff in July of 2010 establishes that
Plaintiff was an “at will” employee. As noted above, one of the
“whereas” clauses in the Purchase Agreement states that “[CSI]
wishes to employ [Plaintiff] from and after the Closing . . . at
CSI’s facility in Jamestown, Pennsylvania, in a sales and marketing
capacity on an at-will basis[.]” (Purchase Agreement, p. 1 (FAC,
Ex. A).
In
the
present
case,
the
“at-will
presumption” is
“triggered” because neither the Purchase Agreement nor the July
2010 Offer
Letter
contain
any
mention
of
a
definite
period,
duration, or term of employment. See Campeggi v. Arche Inc., No. 15
CIV. 1097(PGG), 2016 WL 4939539, at *5 (S.D.N.Y. Sept. 14, 2016)
(“With respect to the contract’s second term—‘from January 1, 2007
forward at the discretion and exercisable by [Plaintiff]’–Plaintiff
has not overcome the presumption of at-will employment. Indeed,
such language constitutes an indefinite term as a matter of law.”)
(citing, inter alia, Weiler v. National Multiple Sclerosis Society,
No. 79 Civ. 5856, 1980 WL 104, at *4 (S.D.N.Y. Feb. 27, 1980) (“The
alleged oral employment contract, providing that plaintiff could
work ‘until he chose to retire,’ is without doubt, a contract for
an indefinite period of time. . . .”)). As CSI points out, neither
-20-
the Purchase Agreement nor the July 2010 Offer Letter contains any
mention of a duration, term, or tenure for Plaintiff’s employment
with CSI.
Plaintiff also attempts to allege a definite timeframe, by
asserting in the first amended complaint that her alleged oral
employment agreement10 with CSI would not expire “until, at the
earliest, CSI had sold sufficient handcuffs to satisfy the payment
obligation in Paragraph 1.3 of the Purchase Agreement, which the
parties expected to occur within five years of the sale.” FAC,
¶ 34. However, under New York State law, “[i]t is well settled that
an oral employment agreement for a period of one year to commence
at
a
time
subsequent
to
the
making
of
the
agreement
is
unenforceable against a plea of the Statute of Frauds[.]” Ginsberg
v. Fairfield-Noble Corp., 440 N.Y.S.2d 222, 224 (2d Dep’t 1981)
(citing
N.Y.
GEN.
OBLIGATIONS
L.
§
5–701(a)(1);
Whitehill
v.
Maimonides School, 384 N.Y.S.2d 818; Hanan v. Corning Glass Works,
314 N.Y.S.2d 804)). Accepting the truth of Plaintiff’s allegation
regarding
the
five-year
term
requires
a
conclusion
that
any
purported oral employment agreement is void under the Statute of
Frauds because, “[b]y its terms[,] [it] [was] not to be performed
10
Plaintiff concedes that “the parties did not reduce the Employment
Agreement to writing,” but suggests that “on information and belief, CSI
possesses documents, including, but not limited to, e-mail communications
reflecting the existence of the Employment Agreement, and the precise terms of
the agreement. . . .” FAC, ¶ 37.
-21-
within one year from the making thereof . . . .” N.Y. GEN. OBLIGATIONS
L. § 5–701(a)(1)).
Plaintiff further argues that the statement in the Purchase
Agreement’s “Recitals” section “reflect[s] only CSI’s position”
regarding her employment status, and that CSI’s “wish” to employ
her on an at-will basis does not make it so. This argument deserves
no
weight,
given
that
Plaintiff
herself
signed
the
Purchase
Agreement, which contains a detailed integration clause indicating
that it comprises Plaintiff’s and CSI’s “entire agreement and
understanding,” “supersede[s] all prior and current understandings
and agreements, whether written or oral,” and “may be modified or
amended only by a written instrument executed by” Plaintiff and
CSI.
As additional support for its argument that Plaintiff was an
at-will employee, CSI has submitted a copy of the Non-Disclosure,
Proprietary Rights Assignment, Unfair-Competition, Non-Solicitation
and Non-Disparagement Agreement (“the NDA”), executed by Plaintiff
on September 1, 2011. Section 2 of the NDA, titled “EMPLOYMENT AT
WILL,” provides as follows:
I agree to conform to the rules and regulations of CSI,
and my employment and compensation can be terminated,
with or without cause, and with or without notice, at any
time, at the option of CSI.
I understand that no manager or representative of CSI,
other than the president, has any authority to enter into
any agreement for employment for any specified period of
time, or to make any agreement contrary to the foregoing.
-22-
NDA [#11], § 2; see also NDA, Introduction (“IN CONSIDERATION of,
and as a condition of, [Plaintiff’s] employment at will . . . . ”)
(emphasis supplied). CSI argues that this cements the conclusion
that Plaintiff was an at-will employee, terminable at any time.
Plaintiff contends that the Court should not consider the NDA
because it was not in her possession at the time she brought this
lawsuit, citing the general rule that courts “do not consider
matters outside the pleadings in deciding a motion to dismiss for
failure to state a claim.” Nakahata v. New York-Presbyterian
Healthcare System, Inc., 723 F.3d 192, 202 (2d Cir. 2013) (citing
Global Network Commc’ns, Inc. v. City of N.Y., 458 F.3d 150, 154–55
(2d Cir. 2006)
(“Global”)).
Because
the
Court
has
deemed
it
appropriate to consider Defendant’s motions in light of the Rule 56
summary judgment standard, the Court clearly may include the NDA in
its analysis. The NDA provides additional grounds for refuting
Plaintiff’s assertion that her employment with CSI was anything
other than “at will.”
Even if the Court does not treat the motions under Rule 56,
the Court “may permissibly consider documents other than the
complaint in ruling on a motion under Rule 12(b)(6)[,]” Roth v.
Jennings, 489 F.3d 499, 509 (2d Cir. 2007), such as “[d]ocuments
that are attached to the complaint or incorporated in it by
reference[,]” id. (citation omitted). A “necessary prerequisite for
th[e] exception is that the ‘plaintiff[ ] rel[y] on the terms and
-23-
effect of [the] document in drafting the complaint . . . ; mere
notice or possession is not enough.’” Global, 458 F.3d at 156
(quoting Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir.
2002); alterations, emphasis, and ellipsis in Global).
Plaintiff
argues that she did not rely on the terms of the NDA in framing her
complaint, which is understandable since the NDA undermines her
claim. However, this appears to be the type of situation in which
the exception has been invoked most often, that is, where “the
incorporated
material
is
a
contract
or
other
legal
document
containing obligations upon which the plaintiff’s complaint stands
or falls, but which for some reason—usually because the document,
read in
its
entirety, would
undermine the
legitimacy
of
the
plaintiff’s claim—was not attached to the complaint.” Global, 458
F.3d at 157 (citing Broder v. Cablevision Sys. Corp., 418 F.3d 187,
196–97 (2d Cir. 2005)). Moreover, Plaintiff cannot credibly plead
ignorance of the NDA, given that this document is specifically
referenced in the Purchase Agreement, attached as an exhibit to
Plaintiff’s complaint and first amended complaint. In regards to
the duties of the parties’ at the time of closing, the NDA states
that “[i]n connection with her employment . . . , [Plaintiff] shall
execute and deliver to [CSI] a Non-Disclosure, Proprietary Rights
Assignment, Non-Competition, Non-Solicitation and Non-Disparagement
Agreement
in
a
form
furnished
to
her
by
[CSI][.]”
Purchase
Agreement [#10-1], § 2(b)(x). Thus, one of her obligations under
-24-
the Purchase Agreement was to sign the NDA that CSI provided to
her. In light of these factors, the NDA arguably may be considered
under a Rule 12(b)(6) analysis. But, as discussed above in this
Section, even without considering the NDA, Plaintiff cannot state
a claim for breach of an alleged oral employment agreement because
she cannot plausibly allege that she had a contract of employment
for a definite duration.
3.
Promissory Estoppel
As her third cause of action, Plaintiff proceeds under a
theory of promissory estoppel and seeks reimbursement for “all
relocation and moving expenses.”
“A
cause
of
action
for
promissory estoppel under New York law requires the plaintiff to
prove
2)
three
reasonable
elements:
and
1)
a
clear
foreseeable
and
reliance
unambiguous
on
that
promise;
promise;
and
3) injury to the relying party as a result of the reliance.” Kaye
v. Grossman, 202 F.3d 611, 615 (2d Cir. 2000). In the first amended
complaint, Plaintiff asserts that under the alleged “Employment
Agreement, [she] was also required to locate from Bedford Park,
Illinois, to CSI’s headquarters in Jamestown, Pennsylvania. In
exchange for this consideration, CSI agreed to reimburse [her] for
all relocation and moving expenses, including, but not limited to,
the cost of
packing and
moving
her
personal
belongings
from
Illinois to Pennsylvania and the cost of travelling from Illinois
to Pennsylvania.” FAC, ¶ 33.
-25-
Both the Purchase Agreement and the July 2010 Offer Letter
reference the fact that Plaintiff’s employment with CSI will be
based out of Jamestown, Pennsylvania. Significantly, however, both
documents
are
silent
as
to
any
reimbursement
of
Plaintiff’s
relocation expenses. Indeed, given their failure to reference
relocation expenses at all, neither document can be interpreted as
containing a “clear and unambiguous promise” to reimburse Plaintiff
for such expenses. “A promissory estoppel claim is duplicative of
a breach of contract claim unless the plaintiff alleges that the
defendant had a duty independent from any arising out of the
contract.” Benefitvision Inc. v. Gentiva Health Servs., Inc.,
No. 09–CV–0473, 2014 WL 298406, at *9 (E.D.N.Y. Jan. 28, 2014)
(alteration and internal quotation marks omitted). Plaintiff fails
to allege that CSI had a duty independent of its obligations in
their integrated Purchase Agreement. Accordingly, the Court finds
that Plaintiff has failed to plead a plausible cause of action for
promissory estoppel.
Furthermore, New York law “does not recognize promissory
estoppel in the employment context.” Deutsch v. Kroll Assocs.,
Inc., No. 02 CIV. 2892(JSR), 2003 WL 22203740, at *3 (S.D.N.Y.
Sept. 23, 2003) (citing, inter alia, Graff v. Enodis Corp., No. 02
Civ.
5922,
2003
WL
1702026,
at
*2
(S.D.N.Y.
Mar.
28,
2003)
(employee sought recovery under theory of promissory estoppel based
on employer’s alleged promise that he would receive commissions, in
-26-
accordance with a written schedule, upon his procurement of orders,
regardless of when shipped or invoiced; even assuming that employee
“relied
on
that
promise
in
leaving
his
previous
employ
and
foregoing a change of employment, that would still be insufficient
as a matter of law”); Pancza v. Remco Baby, Inc., 761 F. Supp.
1164,
1172
(D.
N.J.
1991)
(under
New
York
law,
“promises
surrounding an employment relationship are insufficient to state a
cause of action for promissory estoppel”); Dalton v. Union Bank of
Switzerland, 520 N.Y.S.2d 764, 766 (1st Dept. 1987) (“The fact that
defendant promised plaintiff employment at a certain salary with
certain other benefits, which induced him to leave his former job
and forego the possibility of other employment in order to remain
with defendant, does not create a cause of action for promissory
estoppel.”)). Plaintiff’s claim for promissory estoppel fails as a
matter of law on this basis.
CONCLUSION
For
the
foregoing
reasons,
the
Court
grants
Plaintiff’s
request for leave to amend, and replaces the complaint with the
first amended complaint as the operative pleading. The Court
further finds that the first amended complaint fails to state
plausible claims for relief and, in the alternative, that CSI is
entitled to judgment as a matter of law as to all of Plaintiff’s
claims. Accordingly, the Court grants CSI’s motions to dismiss or,
in
the
alternative,
for
summary
-27-
judgment.
The
first
amended
complaint is dismissed. The Clerk of Court is directed to close
this case.
SO ORDERED.
S/Michael A. Telesca
HONORABLE MICHAEL A. TELESCA
United States District Judge
DATED:
June 13, 2017
Rochester, New York
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