Wild Goose Enterprises, Inc. v. Iron Flame Technologies, Inc.

Filing 22

ENTRY AND ORDER DENYING MOTION TO DISMISS FIRST AMENDED COMPLAINT. (ECF 14 ): Because the First Amended Complaint properly alleges that Defendant breached their contract by soliciting employees and because the First Amended Complaint also properly asserts Defendant breached the implied covenant of good faith and fair dealing by demanding performance in Baltimore, Defendant's Motion to Dismiss First Amended Complaint, ECF 14 , is DENIED. Signed by Judge Thomas M. Rose on 4/26/21. (ep)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION AT DAYTON

Wild Goose Enterprises, Inc.,
Plaintiff,
v.

Case No. 3:20-cv-340
Judge Thomas M. Rose

Iron Flame Technologies, Inc.,
Defendant.

ENTRY AND ORDER DENYING MOTION TO DISMISS
FIRST AMENDED COMPLAINT. (ECF 14).

Pending before the Court is Motion to Dismiss First Amended Complaint. ECF 14.
Therein, Defendant Iron Flame Technologies, Inc. asserts that Plaintiff Wild Goose Enterprises,
Inc. has failed to properly allege a claim of breach of contract or a claim of breach of implied
covenant of good faith and fair dealing. Because the claims are properly stated, the motion will be
denied.
I.

Background
Plaintiff Wild Goose is an Ohio corporation with its principal place of business in Vandalia,

Ohio. ECF 13, First Amended Complaint, ¶ 1. Defendant Iron Flame is a Delaware corporation
with its principal place of business in Baltimore, Maryland. Id., ¶ 2. Iron Flame is a prime
contractor with the United States Air Force for its Data Center Consolidation Initiative and related
software functionality. ECF 13, First Amended Complaint, ¶¶ 6-7. Wild Goose was a
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subcontractor on that project, engaged to provide software development, data initiative, and related
services to Iron Flame in connection with performance under the prime contract. Id. The parties
entered a contract on January 12, 2017 (id., ¶ 4) and two "updated" contracts, the most recent one
of which is dated March 19, 2020. Id., ¶¶ 4, 8; ECF 14-1, Exhibit 1 (January 12, 2017 Sub-Contract
Agreement); ECF 9-2, Exhibit A (March 19, 2020 Subcontractor Agreement).1 By agreement, the
Contract is governed by Delaware law. ECF 14-1, Exhibit 1, ¶ 23; ECF 9-2, Exhibit A, ¶ 22.
On May 15, 2019, Iron Flame sent an email to three of Wild Goose's employees. ECF 13,
First Amended Complaint, ¶ 11; ECF 9-3, Exhibit B. Wild Goose alleges that the recipients of Iron
Flame's May 15, 2019 email, Randy Brooks, Mike Kender, and John Covey, subjectively
"understood the emails to be a solicitation of employment." ECF 13, First Amended Complaint,
¶¶ 11-12; see also ECF 9-3, Exhibit B. That same day, Wild Goose responded to Iron Flame,
asserting that its request that Brooks, Kender, and Covey become consultants to Iron Flame
violated the non-solicitation language of their contract. ECF 13, First Amended Complaint, ¶ 13;
ECF 9-3, Exhibit B.
Indeed, Paragraph 14 of the applicable January 12, 2017 Contract states, in part:
Unless otherwise agreed to in writing, the parties hereto agree that
during the term of this Sub-contractor Agreement and for a period
of one (1) year after the expiration or termination of this Subcontractor Agreement, neither party shall solicit for employment
any person employed by the other working under this Agreement.

1

Pursuant to Fed. R. Civ. P. 10(c), an instrument that is an exhibit to a pleading is "a part of the
pleading for all purposes." If a complaint "references or quotes certain documents, … a
defendant may attach those documents to its motion to dismiss, and a court can then consider
them in resolving the Rule 12(b)(6) motion without converting the motion to dismiss into a Rule
56 motion for summary judgment." In re Omnicare, Inc. Sec. Litig., 769 F.3d 455, 466 (6th Cir.
2014); accord, Weiner v. Klais & Co., 108 F.3d 86, 89 (6th Cir. 1997) (holding that defendant
could attach to and rely in its motion to dismiss group health plans referenced in the complaint
because it asserted rights under the plans).
2

ECF 14-1, Exhibit 1 at 3.
Iron Flame replied the same day, clarifying that it had "NO interest" in soliciting Brooks,
Kender, and Covey for employment. ECF 13, First Amended Complaint, ¶ 14; ECF 9-3, Exhibit
B (Emphasis in Original).
The email that allegedly violated the non-solicitation term of the Contract was sent May
15, 2019 at 10:47 a.m. from Iron Flame's Facility Security Officer, Myisha Nasir, who explained
that, because of a "Security Vulnerability Assessment" by the U.S. Air Force, Iron Flame "can no
longer hold [security] clearances for individuals" such a Brooks, Kender, and Covey who are not
Iron Flame employees. ECF 9-3, Exhibit B; ECF 14-2, Exhibit 2. Nasir stated that, while Iron
Flame's senior management thought "the best option" was for Brooks, Kender, and Covey "to
become consultants to Iron Flame" so that it could continue to hold their clearances "while [they
were] "working on the program," she was "still exploring other options." Id. Wild Goose's principal
point of contact with Iron Flame, Walt Schroeder, replied at 11:57 a.m. that day that he was
"amazed" by questions from Brooks, Kender, and Covey about Iron Flame's purported "solicitation
of their services as consultants." Id.
Iron Flame's principal, Tarik Nasir, responded, stating Iron Flame "has not made any such
offer to Wild Goose employees," but instead had informed them that "Iron Flame will [no] longer
be able to hold their clearances unless they became Iron Flame employees or 1099s." Id. Nasir
emphasized, "Iron Flame has NO interest in soliciting [Wild Goose] employees. However, please
note that Iron Flame will be removing all [Wild Goose] employees from our facility due to the
findings in our recent audit." Id.
Iron Flame asserts that the contract establishes a right to direct the manner in which Wild
Goose performs its duties under the Contract:
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3. The Prime Contractor agrees to employ the services for the SubContractor as Consultants to perform tasks related to the above
duties. The Sub Contractor agrees to be subject to the general
supervision of and act pursuant to the orders, advice and direction
of the Prime Contractor.
4. The Sub-Contractor agrees to abide by the Prime Contract's [sic]
rules, regulations, and practices including those concerning work
schedules, deliverables, and communications as they may from time
to time be adopted or modified.
ECF 9-2, PageID 114, Exhibit A at 2.
The Contract does mention the possibility of travel:
6. The Prime Contractor will not reimburse the Sub-Contractor for
expenses incurred by the Sub-Contractor without prior written
consent while traveling pursuant to the Prime Contractors'
directions."
Id. (emphasis in original).
On June 2, 2020, Iron Flame notified Wild Goose that Iron Flame had decided "to have all
roles associated with the … contract be performed at Iron Flame's Baltimore Headquarters," with
the transition to be completed by June 30, 2020. ECF 9-4, Exhibit C at 3. Wild Goose took the
position that Iron Flame's direction was a "request[]" for a "change to our negotiated contract, as
per paragraph 21 of the subcontract." Id. at 1.
On June 12, 2020, Iron Flame issued a "stop work" order, effective the same day, because
Wild Goose would not devote its full-time efforts to the project and for "other professional
considerations." ECF 13, First Amended Complaint, ¶ 21. The same day, Wild Goose "issued a
cure notice … in response to the 'stop work' order." Id., ¶ 22. The Amended Complaint alleges
Iron Flame "materially breached the Contract by failing to respond to Plaintiff's cure notice within
10 days of June 12, 2020," which allegedly is "mandated" and "required per provision 15 in the
Contract." Id., ¶¶ 23, 29.
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Paragraph 15 of the Contract provides, in part:
15. Either party may terminate if (i) the other party fails to perform
a material obligation of the Agreement and such failure remains
uncured for a period of 10 days after receipt of notice from the nonbreaching party specifying such failure; ….
ECF 9-2, PageID 116, Exhibit A at 4.
On June 29, 2020, Plaintiff Wild Goose Enterprises, Inc. ("Wild Goose") filed a Complaint
against Iron Flame in the Court of Common Pleas, Montgomery County, Ohio. On August 11,
2020, Iron Flame removed the action to this Court. Wild Goose’s Amended Complaint asserts one
count of breach of contract (1) by attempting to solicit consulting services from Plaintiff’s
employees; (2) by unilaterally imposing scope and location changes to Plaintiff’s operations
culminating with a “stop work” order; and (3) by failing to respond to Plaintiff’s cure notice. ECF
13, PageID 173, ¶¶ 27, 28, 29. A second count asserts breach of implied covenant of good faith
and fair dealing “by engaging in oppressive, underhanded tactics designed to frustrate the ability
of Plaintiff to perform,” by “undermined Plaintiff’s business operations, beginning with its heavyhanded negotiations to amend the agreement between the parties and reduce the compensation that
was to be paid to Defendant, followed by it attempting to appropriate Plaintiff’s key personnel in
violation of the agreement, and culminating in Defendant’s unilateral, unreasonable, and
unnecessary demand to move the location of Plaintiff’s business operations out-of-state,” and
“Defendant’s attempts to impose scope and location changes upon Plaintiff’s business operations,
along with its attempts to procure Plaintiff’s employees as “consultants,” were a conscious artifice
by Defendant calculated to impair Plaintiff’s ability to perform its duties under the contract. These
actions were employed by Defendant to attempt to force Plaintiff into breaching the parties’
contract.” ECF 13, PageID 173-74, ¶¶ 32, 33, 34.

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Wild Goose maintains that Iron Flame breached the Contract "as a result of its attempt to
unilaterally impose scope and location changes to Plaintiff's operations." ECF 13, First Amended
Complaint, ¶ 28. Iron Flame counters with a claim that Wild Goose is "subject to" and "agrees to
abide by" Iron Flame's supervision, orders, direction, rules, regulations, and practices, including
those relating to work schedules, deliverables, and communications, "as they may from time to
time be adopted or modified," ECF 9-2, PageID 114, Exhibit A at 2, even to the extent of ordering
the contract to be fulfilled in Baltimore.
II.

Standard
“The purpose of a Rule 12(b)(6) motion to dismiss is to allow a defendant to test whether,

as a matter of law, the plaintiff is entitled to legal relief even if everything alleged in the
complaint is true.” Bihn v. Fifth Third Mortg. Co., 980 F. Supp. 2d 892, 897 (S.D. Ohio 2013)
(citing Mayer v. Mylod, 988 F. 2d 635, 638 (6th Cir. 1993)). Moreover, the purpose of the
motion is to test the formal sufficiency of the statement of the claim for relief. Id. “[F]or the
purposes of a motion to dismiss, the complaint must be construed in the light most favorable to
the plaintiff and its allegations taken as true.” Id. (citing Scheuer v. Rhodes, 416 U.S. 232
(1974)).
To survive a 12(b)(6) motion to dismiss, a plaintiff must provide more than labels and
conclusions; a formulaic recitation of the elements of a cause of action is not enough. Bell
Atlantic v. Twombly, 550 U.S. 544 (2007). Further, the factual allegations must be enough to
raise a right to relief above the speculative level and must also do something more than merely
create a suspicion of a legally cognizable right. Id. However, the Court is not bound to accept as
true a legal conclusion couched as factual allegation or unwarranted factual inferences. Id. at
555; Morgan v. Church’s Fried Chicken, 829 F. 2d 10, 12 (6th Cir. 1987); See also Ashcroft v.
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Iqbal, 556 U.S. 662 (2009). Moreover, only well-pleaded facts are construed liberally in favor of
the party opposing the motion to dismiss. Lillard v. Shelby County Bd. Of Educ., 76 F. 3d 716,
726 (6th Cir. 1996).
III.

Analysis
Wild Goose asserts Iron Flame breached the Contract in three ways: "as a result of its

attempt to solicit consulting services from Plaintiff's employees on May 15, 2019"; "as a result of
its attempt to unilaterally impose scope and location changes to Plaintiff's operations, beginning
on June 1, 2020"; and "by failing to respond to Plaintiffs' cure notice within 10 days of June 12,
2020." ECF 13, First Amended Complaint, ¶¶ 27-29. Defendant asserts none of Iron Flame's
alleged conduct supports a plausible claim under these theories.
Under Delaware law, the elements of a breach of contract claim are: (1) a contractual
obligation; (2) a breach of that obligation by the defendant; and (3) resulting damage to the
plaintiffs. Greenstar, LLC v. Heller, 814 F. Supp. 2d 444, 450 (D. Del. 2011) (citing WaveDivision
Holdings, LLC v. Millennium Digital Media Systems, L.L.C., Civ. No. 2993–VCS, 2010 WL
3706624, *13 (Del.Ch.2010) and H–M Wexford LLC v. Encorp, Inc., 832 A.2d 129, 140
(Del.Ch.2003)). The essential elements of a claim for breach of the implied covenant of good faith
and fair dealing in Delaware are “arbitrary or unreasonable conduct which has the effect of
preventing the other party to the contract from receiving the fruits of the contract.” Cantor
Fitzgerald, L.P. v. Cantor, No. 16297, 2000 WL 307370, at *15 n. 51 (Del.Ch. March 17, 2000)
ACE & Co. v. Balfour Beatty PLC, 148 F. Supp. 2d 418, 426 (D. Del. 2001)
In addressing issues of contract interpretation, the court must “give effect to the plainmeaning of [a] contract's terms and provisions.” LCY Chemical Corp. v. Kraton Performance
Polymers, Inc., No. 14-1279 (GMS), 2015 WL 4486783, at *2 (D. Del. July 23, 2015) (quoting
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Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159-60) (Del. 2010). If contractual language “is
plain and clear on its face, i.e., it[ ] ... conveys an unmistakable meaning, the writing itself is the
sole source for gaining an understanding of intent.” Choupak v. Rivkin, No. 7000 VCL, 2015 WL
1589610, at *18 (Del. Ch. Apr. 6, 2015) (citing City Investing Co. Liquid. Tr. v. Cont'l Cas. Co.,
624 A.2d 1191, 1198 (Del. 1993)). If, however, the terms are ambiguous, extrinsic evidence may
be considered to determine the parties’ intentions. See AT&T Corp. v. Lillis, 953 A.2d 241, 253
(Del. 2008).
Ambiguity exists “when the provisions in controversy are reasonably or fairly susceptible
of different interpretations or may have two or more different meanings.” Markow v. Synageva
Biopharma Corp., No. N15C–06–152 WCC, 2016 WL 1613419, at *5 (Del. Super. Ct. Mar. 3,
2016) (internal quotations omitted). At the motion to dismiss stage, the Court “cannot choose
between two differing reasonable interpretations of ambiguous provisions.” Id. (quoting VLIW
Technology, 840 A.2d at 615). “Dismissal is proper only if the defendant's] interpretation is the
only reasonable construction as a matter of law.” Id. (quoting Vanderbilt Income & Growth
Assocs., L.L.C. v. Arvida/JMB Managers, Inc., 691 A.2d 609, 613 (Del. 1996)). “When parties
present differing – but reasonable – interpretations of a contract term, the Court turns to extrinsic
evidence to understand the parties’ agreement. Such an inquiry cannot proceed on a motion to
dismiss.” Id. (quoting Remo Grp., Inc. v. MacAndrews AMG Hldgs., LLC, No. 7668 VCN, 2015
WL 394011, at *5 (Del. Ch. Jan. 29, 2015)). See also Novel Drug Sols., LLC v. Imprimis Pharms.,
Inc., No. CV 18-539 (MN), 2018 WL 4795627, at *3 (D. Del. Sept. 26, 2018).
While Defendant asserts Wild Goose's "solicit[ing] consulting services" allegation is
disproved by its own Complaint, the Complaint is not evidence. Discovery may show an attempt
by Defendant to poach employees. The Complaint alleges Nasir directly solicitated Wild Goose
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employees to “become consultants for Iron Flame.” What damages defendant might have from
this are not known, but Plaintiff’s allegations in the Complaint concerning the May 15, 2019
communication raises a reasonable inference Defendant is liable for the misconduct alleged, i.e.,
breach of Paragraph 14 of the parties’ agreement.
As regards location of performance, Plaintiff alleges Defendant “attempt[ed] to unilaterally
impose scope and location changes to Plaintiff's operations, beginning on June 1, 2020.” ECF 61, PageID 50. The contract appears silent on location of performance, leaving open to discovery
whether there was any meeting of the minds concerning where the contract would be performed.
At this stage, the Court does not find the plain meaning of the contract to give Defendant the
authority to demand that Plaintiff relocate from Dayton to Baltimore. This assertion is a strained
reading of: “4. The Sub-Contractor agrees to abide by the Prime Contract’s rules, regulations, and
practices, including those concerning work schedules, deliverables, and communications as they
may from time to time be adopted or modified.” ECF 6-1, PageID 51.
Indeed, the Contract also contains a provision concerning modifications:
Any amendment or modification of this Agreement or additional
obligation assumed by either party in connection with this
Agreement will only be binding if evidenced in writing signed by
each party or an authorized representative of each party.
ECF 6-1, PageID 54. Notably, the Court does not see an integration clause in the contract, leaving
the meaning of these provisions open to interpretation by means of extrinsic evidence to resolve
ambiguities. Had the parties intended to contract the place of performance, the Court would expect
a more explicit provision. See, e.g., In re Glob. Computer Enterprises, Inc., No. 14-13290-BFK,
2017 WL 3580171, at *2 (Bankr. E.D. Va. Aug. 15, 2017).
IV.

Conclusion

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Because the First Amended Complaint properly alleges that Defendant breached their
contract by soliciting employees and because the First Amended Complaint also properly asserts
Defendant breached the implied covenant of good faith and fair dealing by demanding
performance in Baltimore, Defendant’s Motion to Dismiss First Amended Complaint, ECF 14, is
DENIED.
DONE and ORDERED in Dayton, Ohio, this Monday, April 26, 2021.

s/Thomas M. Rose
________________________________
THOMAS M. ROSE
UNITED STATES DISTRICT JUDGE

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