Swartz v. Ariba, Inc. et al

Filing 13

Memorandum Opinion and Order: Mr. Swartz's Motion to Amend Complaint is granted only as to the remaining defendant, Oracle, and the Motions to Dismiss filed by Oracle (Doc. No. 7, Case 1) and Ariba (Doc. No. 7 , Case 2) are granted. Bot h cases are dismissed and all claims against Ariba are dismissed without prejudice, based on a lack of personal jurisdiction. The Court certifies, pursuant to 28 U.S.C. Section 1915(a)(3), that an appeal from this decision could not be taken in good faith. Judge Sara Lioi on 4/12/2011. (P,J)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION

JESSE F. SWARTZ, V

PLAINTIFF,
vs.

ORACLE CORPORATION, et al.,

DEFENDANTS.
JESSE F. SWARTZ, V

PLAINTIFF,
vs.

ARIBA, INC., et al.,

DEFENDANTS.

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CASE NO. 5:11 CV 0168(“Case 1”)
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JUDGE SARA LIOI
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CASE NO. 5:11 CV 0221(“Case 2”)
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JUDGE SARA LIOI
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MEMORANDUM OPINION AND ORDER

By Order dated February 9, 2010, all defendants in Cases 1 and 2 were dismissed
without prejudice except Oracle Corporation and Ariba, Inc. (See Doc. Nos. 16 and 9, in Cases 1
and 2, respectively.) At that time, both Oracle and Ariba had pending Motions to Dismiss. (Doc.
No. 7 in both cases.) These motions have been fully briefed and are ripe for determination.1
1

Plaintiff filed an “Amended Reply” to Ariba’s Motion to Dismiss in Case 2. This was filed without leave and adds

Background
On December 15, 2010, Mr. Swartz sued defendant Oracle in the Summit County
Court of Common Pleas. Swartz v. Oracle Corp., Case No. 2010-12-8241 (Summ. Cty. Ct.
Comm. Pls.)(Judge Lynn S. Callahan). He alleged breach of fiduciary duty, unpaid compensation
and a violation of the Family Medical Leave Act (“FMLA”). On December 20, 2010, Judge
Callahan issued an Order to transfer the case to the Cuyahoga County Court of Common Pleas.
Before the transfer took effect, Mr. Swartz filed three separate Amended Complaints to add
additional parties, including defendant Ariba, Inc.2 The amended complaint against Ariba alleged
breach of contract, failure to disclose organizational change, wage discrimination and
harassment/hostile work environment.
On January 19, 2011, the matter was transferred to and filed in the Cuyahoga
County Court of Common Pleas. See Swartz v. Oracle, Case No. CV-11-746240 (Judge Hollie L.
Gallagher). A Notice was filed by Oracle on January 25, 2011 to remove the matter to the United
States District Court for the Northern District of Ohio. See Swartz v. Oracle, et al., No.
5:11cv0168 (N.D. Ohio) (Case 1). Defendant asserted this Court’s original jurisdiction pursuant
to 28 U.S.C. § 1331 based on Mr. Swartz’s FMLA claim. Thus, it claimed removal was proper
for this civil action under to 28 U.S.C. § 11441(a) and 1441(b). Oracle averred its Notice of
Removal was within 30 days from the date it was served with a summons and complaint.
Twelve days after Oracle removed Mr. Swartz’s complaint to this Court, Ariba

nothing to the discussion. Therefore, Doc. No. 12 in Case 2 is STRICKEN.
2

Judge Callahan construed the amended pleading as a motion for reconsideration of her decision to transfer the case

2

also filed a Notice of Removal in this Court on January 31, 2011. See Swartz v. Ariba, et al., No.
5:11cv0221 (N.D. Ohio) (Case 2). Ariba asserted federal diversity jurisdiction pursuant to 28
U.S.C. § 1332(a) based on Plaintiff’s residency in Ohio, Ariba’s incorporation in Delaware and
Mr. Swartz’s demand for $8,000,000.00. The corporation also averred it timely filed its Notice
pursuant to 28 U.S.C. § 1446. Mr. Swartz did not oppose either Notice of Removal.
Before reaching the merits of a case, the Court is obliged to ensure it has subject
matter jurisdiction to hear the matter. See Sinochem Intern. Co. Ltd. v. Malaysia Intern. Shipping
Corp., 549 U.S. 422, 430-31 (2007); Sault Ste. Marie Tribe of Chippewa Indians v. U.S., No. 992444, 2001 WL 549409, at *3 (6th Cir. May 16, 2001) (federal courts should no longer follow
the practice of assuming jurisdiction in order to proceed on the merits). Plaintiff’s failure to
object to jurisdiction does not relieve defendants of their burden to support federal subject matter
jurisdiction. Simon v. Wal-Mart Stores, Inc., 193 F.3d 848, 851 (5th Cir. 1999). Where it appears
that a court lacks subject matter jurisdiction over a removed case, the court shall remand it to
state court. 28 U.S.C. § 1447(c).

Amended Complaint
Mr. Swartz filed a fifth Amended Complaint on January 31, 2011. (Doc. No. 6,
Case 1.) Oracle has moved to dismiss this amended pleading based on plaintiff’s failure to file
without leave of court. For the reasons set forth below, the Court will grant plaintiff leave to file
the amended complaint, nunc pro tunc.
A party may amend its pleading once as a matter of course within “21 days after

to Cuyahoga County. The Motion was denied and the court issued an Order on December 29, 2010 to transfer the

3

serving it.” FED. R. CIV. P. 15(a)(1)(A). Beyond that period, “a party may amend its pleading
only with the opposing party’s written consent or the court's leave.” Rule 15(a)(2). Mr. Swartz
filed and served his original complaint on December 15, 2010. The 21-day grace period expired
during the first week of January 2011. After that point, he was required to seek leave of court or
the written concurrence of the defendants before filing an amended pleading. As such, the Court
will construe the Amended Complaint, filed on January 31, 2011, as a Motion for Leave to
Amend.
Courts are encouraged to freely grant leave to amend “when justice so requires.”
Rule 15(a)(2). A motion to amend should be denied, however, “if the amendment is brought in
bad faith, for dilatory purposes, results in undue delay or prejudice to the opposing party, or
would be futile.” Crawford v. Roane, 53 F.3d 750, 753 (6th Cir. 1995). Here, Mr. Swartz’s
Amended Complaint of January 31, 2011 includes all of the defendants named in this action at
that time, but amplifies the facts that support his original claims. Even Oracle concedes in its
Motion to Dismiss that the facts in the amended pleading do not materially alter the basis upon
which it moves this Court to dismiss Mr. Swartz’s claims.
Accordingly, this Court GRANTS Mr. Swartz’s Motion for Leave to Amend
(Doc. No. 6, Case 1), but only as it pertains to Oracle, the remaining defendant in the case.3 Mr.
Swartz’s fifth amended complaint supersedes the original and is the “legally operative
complaint” in this matter. Scuba v. Wilkinson, No. 1:06CV160, 2006 WL 2794939, at *2
(S.D.Ohio Sept. 27, 2006) (citing Parry v. Mohawk Motors of Mich., Inc., 236 F.3d 299, 306 (6th
Cir. 2000), cert. denied, 533 U.S. 951 (2001)).

case to Cuyahoga County.

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Subject Matter Jurisdiction
Federal Question
A federal court is conferred with “original jurisdiction of all civil actions arising
under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. “The presence
or absence of federal-question jurisdiction is governed by the ‘well-pleaded complaint rule,’
which provides that federal jurisdiction exists only when a federal question is presented on the
face of the plaintiff’s properly pleaded complaint.” Caterpillar, Inc. v. Williams, 482 U.S. 386,
392 (1987). “[A] suit arises under the Constitution and laws of the United States only when the
plaintiff’s statement of his own cause of action shows that it is based upon those laws or that
Constitution.” Louisville & Nashville R. Co. v. Mottley, 211 U.S. 149, 152 (1908).
Where the plaintiff has attempted to characterize a federal claim as a state law
claim, removal is not prohibited when the plaintiff has no state claim at all. This doctrine of
“artful pleading” does not convert legitimate state claims into federal ones, but uncloaks the
suit’s federal character. See Franchise Tax Bd. of State of Cal. v. Construction Laborers
Vacation Trust for Southern California, 463 U.S. 1, 24 (1983) (announcing that this exception to
the well-pleaded complaint rule “stands for the proposition that if a federal cause of action
completely preempts a state cause of action any complaint that comes within the scope of the
federal cause of action necessarily ‘arises under’ federal law”). If the relief requested by plaintiff
is available only under federal law, then it is clear that a federal right is an essential element of
his cause of action, and he is not proceeding “on the exclusive basis of state law.” Medina v.
Ramsey Steel Co., Inc., 238 F.3d 674, 680 (5th Cir.2001).
3

By order filed February 9, 2011 (Doc. No. 16), the Court dismissed all defendants, except Oracle.

5

The face of Mr. Swartz’s pleadings clearly asserts Oracle violated federal law.
Mr. Swartz claims he took a Leave of Absence (LOA) from Oracle under the the FMLA (“the
Act”), 29 U.S.C. § 2601, et seq., in June 2007. Citing the language of the Act, he claims Oracle
violated the Act when it placed him in a demoted position after returning from his LOA. In his
Brief in Opposition to Oracle’s Motion to Dismiss, Mr. Swartz’s continued to assert he was
entitled to relief because he had a serious illness for which he believed he was on leave under the
Act. Therefore, this Court may exercise subject matter jurisdiction over this federal question
complaint against Oracle.

Diversity
Ariba has also removed the case to this Court under 28 U.S.C. § 1441(a), which
allows removal of civil actions “of which the district courts of the United States have original
jurisdiction.” However, Ariba has invoked this Court’s diversity jurisdiction, which provides
original jurisdiction over “all civil actions where the matter in controversy exceeds the sum or
value of $75,000, exclusive of interest and costs, and is between– (1) citizens of different States;
(2) citizens of a State and citizens or subjects of a foreign state [...].” 28 U.S.C. § 1332(a).
The relevant facts supporting jurisdiction are not disputed. Mr. Swartz is an Ohio
citizen, defendant Ariba is a Delaware corporation with its principal place of business in
California, and Mr. Swartz seeks damages in excess of $8 million. Thus, the Court possesses
original jurisdiction over this action pursuant to section 1332(a), and Ariba properly removed the
case pursuant to 28 U.S.C. § 1441(a). The Court will now turn to the two pending Motions to
Dismiss.
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Standard of Review
Upon review of a motion to dismiss for failure to state a claim, all factual
allegations in the complaint must be presumed to be true, and reasonable inferences must be
made in favor of the non-moving party. Great Lakes Steel v. Deggendorf, 716 F.2d 1101, 1105
(6th Cir. 1983); 2 MOORE’S FEDERAL PRACTICE § 12.34[1][b] (Matthew Bender 3d ed. 2003). It
is still necessary, however, that the complaint contain more than bare assertions or legal
conclusions. In re DeLorean Motor Co., 991 F.2d 1236, 1240 (6th Cir. 1993) (citing Scheid v.
Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir. 1988)). The Court need not,
however, accept unwarranted factual inferences. Morgan v. Church’s Fried Chicken, 829 F.2d
10, 12 (6th Cir. 1987). To survive a motion to dismiss, the complaint must present “enough facts
to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 547 (2007).

Oracle’s Motion to Dismiss
“The FMLA entitles qualifying employees to up to twelve weeks of unpaid leave
each year if, among other things, an employee has a ‘serious health condition that makes the
employee unable to perform the functions of the position of such employee.’” Walton v. Ford
Motor Co., 424 F.3d 481, 485 (6th Cir. 2005) (quoting 29 U.S.C. § 2612(a)(1)(D)). The FMLA
recognizes two theories of civil liability: that an employer interferes with an employee’s exercise
of his or her FMLA rights, and that an employer retaliates against an employee for exercising his
or her FMLA rights. Daugherty v. Sajar Plastics, Inc., 544 F.3d 696, 707 (6th Cir. 2008).
Mr. Swartz does not state under what theory the defendant allegedly violated his
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FMLA rights. He states, simply, that he was “functionally demoted” upon return from his LOA,
placed under strain by working outside of Chicago, put in an inappropriate assignment and that
the LOA was incorrectly characterized as a “disability.” These facts do not allege Oracle
interfered with his attempt to exercise his rights under the Act. At best, the claim may be
construed as “retaliation” against Mr. Swartz for exercising his FMLA rights. Claims of
retaliation under the FMLA, however, involve a showing that (1) he availed himself of a
protected right under the FMLA by properly notifying Defendant of his intent to take leave, (2)
suffered an adverse employment action, and (3) a casual connection between the exercise of his
rights under the FMLA and the adverse employment action. Edgar v. JAC Prods., Inc., 443 F.3d
501, 508 (6th Cir. 2006) (citations omitted).
Mr. Swartz never alleges he notified Oracle of his intent to take leave under the
FMLA. Instead, he takes issue with the “way in which the Leave of Absence began (via the
aforementioned ‘wrongful incarceration’ by Plaintiff’s father and mother) as well as the resultant
‘short term disability’ designation that occurred.” (Pl.’s Op. Mot. Dism., at 5.) Further, he
believes the “entire Leave of Absence seems to have been initiated to humiliate Plaintiff, as
opposed to a reward (time off) for a 12-month project delivered in 6 months.” Id. These facts
suggest Oracle imposed an involuntary LOA on Mr. Swartz. There is no allegation or suggestion
Mr. Swartz notified Oracle that he needed to take leave under the FMLA, or that he was even
approved for leave under the FMLA.
Even if Mr. Swartz notified Oracle of his intention to take leave under the FMLA,
the claim cannot proceed because it is time-barred. The statute provides that “an action may be
brought under this section not later than 2 years after the date of the last event constituting the
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alleged violation for which the action is brought.” 29 U.S.C. § 2617(c)(1). Because Mr. Swartz
alleges that it was his functional demotion in June 2007 that triggered an FMLA violation, he
needed to file his FMLA claim on or before June 2009. Mr. Swartz did not file his FMLA
complaint against Oracle until December 2010. A careful review of Mr. Swartz’s Opposition to
the Motion to Dismiss does not offer any excusable neglect for waiting 18 months beyond the
statute of limitations before he filed his FMLA claim. Accordingly, any FMLA action Mr.
Swartz may have had is time-barred.
The remainder of Mr. Swartz’s claims against Oracle fail to state a claim for
relief Although FED. R. CIV. P. 8 does not constitute a “hyper-technical, code-pleading regime,”
it “does not unlock the doors of discovery for a plaintiff armed with nothing more than
conclusions.” Ashcroft v. Iqbal, --- U.S. ---, 129 S.Ct. 1937, 1950 (2009). A complaint does not
“suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’” Id. at 1949
(quoting Twombly, 550 U.S. at 557). While at the pleading stage, “general factual allegations of
injury resulting from the defendant’s conduct may suffice,” Lujan v. Defenders of Wildlife, 504
U.S. 555, 561 (1992), it is still necessary to include some “well-pleaded factual allegations” to
support the claim. Iqbal, 129 S.Ct. at 1950.
Mr. Swartz’s remaining claims allege (1) Oracle breached a fiduciary duty it
owed him when it placed him on a Performance Plan “indicating a nebulous performance issue
with Plaintiff.” (Am. Compl. at 5, Section H, ¶ 1); and, (2) failed to provide compensation for
graduate classes in which he enrolled in April 2008 (id, ¶ 2). Oracle argues that, as his employer,
it owed no fiduciary duty to Mr. Swartz as an employee and he had no contractual right to
educational reimbursement.
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In some cases, an employee may have a fiduciary relationship with his or her
employer, but “[n]ot all employees are fiduciaries.” Laurel Valley Oil Co. v. 76 Lubricants Co.,
154 Ohio App.3d 512, 520 (Ohio App. 5 2003). The Supreme Court of Ohio defined a fiduciary
relationship as one in which “special confidence and trust is reposed in the integrity and fidelity
of another and there is a resulting position of superiority or influence acquired by virtue of this
special trust.” Stone v. Davis, 66 Ohio St.2d 74, 78 (1981). Ultimately, a fiduciary relationship
requires “‘more than the ordinary relationship of employer and employee.’” State ex rel.
Charlton v. Corrigan, 36 Ohio St.3d 68, 71 (1988) (quoting In re Termination of Employment,
40 Ohio St.2d at 114).
Mr. Swartz claims a fiduciary duty existed to “treat him fairly.” This does not
marginally support an allegation that he enjoyed a fiduciary relationship with Oracle,
characterized by some special competence and trust which Oracle betrayed. The Supreme Court
of Ohio has recently explained:
In determining whether a fiduciary relationship exists between an employee and
employer, “emphasis should be placed upon whether the assigned job duties
require, as essential qualifications over and above technical competency
requirements, a high degree of trust, confidence, reliance, integrity and fidelity.”
Charlton [v. Corrigan, 36 Ohio St.3d 68, 521 N.E.2d 804 (1988)] at syllabus. Job
duties that require a great degree of discretion support the existence of a fiduciary
relationship, whereas assigned duties of a routine character do not involve the
degree of discretion or trust necessary to be considered a fiduciary. Id. at 71-73,
521 N.E.2d 804. A further consideration involves whether the employee’s
responsibility includes “daily discretionary decisions” affecting persons served by
the employer that require the employee to be “of higher than normal reliability.”
Id. at 73, 521 N.E.2d 804.
State v. Massien, 125 Ohio St.3d 204, 214 (2010). While Mr. Swartz begins one paragraph
claiming that “based purely on business measures, his performance was exceptional[,]” he

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concludes the same paragraph conceding “some serious adjustments to behavior related to
exercise, stress management, and nutrition were needed.” (Am. Compl. at 5, Section H, ¶ 1 a. ii.)
These facts do not suggest Oracle and Mr. Swartz actively worked to develop a relationship
based on a heightened level of trust. Contrary to his allegations, Mr. Swartz is not a fiduciary
simply because he was employed by Oracle.
In Mr. Swartz’s final claim against Oracle, he states the corporation wrongfully
denied his request for reimbursement on April 1, 2008 for graduate classes he completed at the
University of Chicago. Titling his claim, “Unpaid Compensation,” he alleges Oracle violated its
“reimbursement policy.” Oracle has countered that its reimbursement policy does not obligate it
to pay for Mr. Swartz’s classes. To fully address its position, Oracle asks the Court to consider
its written Educational Reimbursement policy. Because the Sixth Circuit has determined that a
district court may consider a document referred to in the pleadings and which is integral to the
claims, without converting a motion to dismiss into one for summary judgment, this Court will
consider Oracle’s reimbursement policy. Weiner v. Klais and Co., Inc., 108 F.3d 86, 89 (6th Cir.
1997).
Oracle’s Educational Reimbursement policy (“the Policy”) is set forth in the
company’s Employee Handbook. Therefore, to the extent Mr. Swartz asserts a contractual
obligation exists under the terms in handbook, the claim fails. “In the absence of mutual assent,
a[n] [employee] handbook is simply a unilateral statement of rules and policies that creates no
obligations or rights.” McIntosh v. Roadway Express, Inc., 94 Ohio App.3d 195, 201 (Ohio App.
12 1994) (citing Tohline v. Cent. Trust Co., 48 Ohio App.3d 280, 282 (Ohio App. 1 1988)). Mr.
Swartz does not allege any “mutual assent” with Oracle to provide tuition reimbursement.
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Oracle argues that its Policy states “in no fewer than half dozen places” that
reimbursement is completely within the discretion of Oracle. Further, employees cannot be
reimbursed for courses for which they have not received prior management approval. Mr.
Swartz does not allege he ever sought management approval before enrolling in the classes for
which he seeks reimbursement. Instead he simply reiterates that Oracle owed him a duty to
reimburse him for work related courses. Without satisfying a prerequisite for employer
reimbursement available at the discretion of his employer, Mr. Swartz cannot viably argue he is
entitled to reimbursement under any legal theory. Accordingly, Mr. Swartz has failed to state a
claim for relief based on his breach of fiduciary and “unpaid compensation” claims.

Ariba’s Motion to Dismiss
Ariba has filed its motion to dismiss pursuant to Rule 12(b)(2) (Doc. No. 7, Case
2) based, in part, on lack of personal jurisdiction. It is the plaintiff’s burden to prove that
personal jurisdiction exists. Brunner v. Hampson, 441 F.3d 457, 462 (6th Cir. 2006). Mr. Swartz
had the opportunity to fully oppose Ariba’s Motion. As this Court did not hold an evidentiary
hearing regarding whether Ariba is subject to personal jurisdiction in Ohio, the pleadings and
affidavits must be considered in a light most favorable to the plaintiff. CompuServe, Inc. v.
Patterson, 89 F.3d 1257, 1261-62 (6th Cir. 1996).
The Sixth Circuit has established a three-part test to determine whether a
defendant is subject to specific personal jurisdiction in Ohio. That three-part test is: (1) whether
the defendant purposefully availed itself of the privilege of acting in Ohio; (2) whether the cause
of action arises out of the defendant’s activities in Ohio; and (3) whether the exercise of
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jurisdiction over the defendant is reasonable. See Youn v. Track, Inc., 324 F.3d 409, 417 (6th
Cir.2003); Mid-West Materials, Inc. v. Tougher Industries, Inc., 484 F.Supp.2d 726, 730
(N.D.Ohio 2007).
Mr. Swartz has failed to make the requisite prima facie showing that this Court
has personal jurisdiction over Ariba. On the question of personal jurisdiction, this Court is left to
consider Ariba’s averment that none of Mr. Swartz’s claims has any connection to Ohio. The
defendant states Mr. Swartz lived in Chicago, Illinois when he was employed by Ariba.
Moreover, the allegations leveled against Ariba have no relationship with Ohio. Finally, Ariba
notes, “[w]hile it appears that Mr.Swartz has since moved to Ohio, that does not establish a basis
for personal jurisdiction over Ariba in Ohio.” (Mot. Dism. at 3.) The Court agrees.
Ohio’s long-arm statute, O.R.C. § 2307.382, does not confer personal jurisdiction
over Ariba in Ohio. There is no claim Ariba transacted business or directed any activity in the
State of Ohio. There is no allegation that the corporation maintained any offices or employees in
Ohio or made deliveries to the state. See O.R.C. § 2307.382.
Accordingly, Ariba’s Motion to Dismiss for lack of personal jurisdiction is
GRANTED. Without personal jurisdiction over Ariba, all remaining claims against Ariba are
dismissed without prejudice.

Conclusion
For the foregoing reasons, Mr. Swartz’s Motion to Amend Complaint is
GRANTED only as to the remaining defendant, Oracle, and the Motions to Dismiss filed by
Oracle (Doc. No. 7, Case 1) and Ariba (Doc. No. 7, Case 2) are GRANTED. Both cases are
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DISMISSED and all claims against Ariba are dismissed without prejudice, based on a lack of
personal jurisdiction. The Court certifies, pursuant to 28 U.S.C. § 1915(a)(3), that an appeal from
this decision could not be taken in good faith.4

IT IS SO ORDERED.

Dated: April 12, 2011
HONORABLE SARA LIOI
UNITED STATES DISTRICT JUDGE

4

While the Court had the instant motions to dismiss under consideration, plaintiff filed three additional motions in
Case 1: (1) Motion for Case Management Conference and for Electronic Access (Doc. No. 18); (2) Motion to
Include Exhibits (Doc. No. 19); and (3) Motion for Summary Judgment (Doc. No. 20). All of these motions are
DENIED. In particular, the Court notes that denial of the motion for summary judgment is based on the fact that
such motion is particularly deficient when weighed in light of Fed. R. Civ. P. 56.

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