Edmondson v. Thrifty Payless, Inc.

Filing 52

ORDER: Granting 46 Motion to Dismiss for Failure to State a Claim. Signed on 9/19/2018 by Judge Michael J. McShane. (cp)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON

MICHAEL S. EDMONDSON,
Plaintiff,
v.

Case. No. 6:17-cv-1090-MC
OPINION AND ORDER

THRIFTY PAYLESS, INC., a foreign
Corporation dba RITE AID,
Defendant;
MICHAEL S. EDMONDSON,
Plaintiff,
v.
EDWARD P. FITCH, ATTORNEY,
Defendant;
THRIFTY PAYLESS, INC., a foreign
Corporation dba RITE AID,
Third-Party Plaintiff,
v.
LISA D. EDMONDSON, and REDMOND
PHARMACY, LLC, an Oregon Limited
Liability Company,
Third-Party Defendants.
_____________________________

1—Opinion and Order

Plaintiff Michael S. Edmondson brings this action for breach of contract, fraudulent
misrepresentation, and negligent misrepresentation against Thrifty Payless, Inc., dba Rite Aid.
Rite Aid moves under Federal Rule of Civil Procedure 12(b)(6) to dismiss Edmondson’s
fraudulent and negligent misrepresentation claims. The Court scheduled oral argument by
telephone on the motion and mailed instructions to Edmondson. Edmondson did not appear.
Under Edmondson’s alleged facts, there can be no cognizable claim of fraudulent
misrepresentation because: (1) Edmondson was not ignorant of the falsity of Rite Aid’s alleged
statement; (2) Edmondson could not reasonably rely on Rite Aid’s alleged statement; and (3)
Edmondson had no right to rely on the truth of Rite Aid’s alleged statement. There can be no
cognizable claim of negligent misrepresentation because there was no special relationship
between Edmondson and Rite Aid; each party acted at arm’s length in its own economic bestinterests. Rite Aid’s motion to dismiss is GRANTED, and Edmondson’s fraudulent and negligent
misrepresentation claims are dismissed with prejudice.
BACKGROUND
Michael and Lisa Edmondson owned Redmond Pharmacy & Compounding Center
(RPCC), a pharmacy in Redmond, Oregon that they sold to Rite Aid on either October 20 or
October 30, 2015.1 SAC ¶¶ 10, 13. After previous preliminary negotiations between Rite Aid and
the Edmondsons did not progress, Rite Aid expressed renewed interest in purchasing RPCC on
June 15, 2015. SAC ¶¶ 6-7. The broker provided Rite Aid a self-audit of RPCC “indicating there
was a current investigation into RPCC and Plaintiff by the [OBOP].” SAC ¶ 7. On June 26,
“Rory Lambert, an employee of Thrifty conducted an in-person audit of RPCC. These
discussions included information about the OBOP investigation of the plaintiff.” SAC ¶ 8. On

1

Paragraph 10 of Edmondson’s Second Amended Complaint (SAC) states that RPCC was sold on October 20, 2015,
but paragraph 13 states that the pharmacy was sold on October 30, 2015.

2—Opinion and Order

August 24, 2015, Edmondson completed an application for employment with Rite Aid. SAC ¶
22. “On this application plaintiff indicated that there was an investigation pending on his
professional license.” SAC ¶ 22. Michael Edmondson was under investigation by the Oregon
Board of Pharmacy (OBOP) throughout the sale and employment negotiations. SAC ¶¶ 7-8, 1113, 15, 18, 20, 22, 27, 29-30, 33, 38, 48-50, 59, 64.
On September 7, 2015, Rite Aid offered Edmondson a job as a pharmacist. SAC ¶ 23. On
October 30, 2015, the Edmondsons and Rite Aid signed the RPCC purchase and sale agreement.
SAC ¶ 13. On November 2, 2015, Lambert asked Edmondson to submit to a second background
check. On November 16, 2015, Lambert told Edmondson the hire could proceed as Edmondson
cleared the background check. SAC ¶ 32. On November 18, 2015, Edmondson’s official
employment as a pharmacist with Rite Aid began. SAC ¶ 16. Edmondson’s employment with
Rite Aid did not last long; Right Aid suspended Edmondson without pay on December 17, 2015,
after “Lambert claimed that Rite Aid and he had no knowledge of the details of the OBOP
investigation.” SAC ¶ 18. On December 21, 2015, Rite Aid terminated Edmondson. SAC ¶ 19.
STANDARD OF REVIEW
To survive a motion to dismiss under rule 12(b)(6), a complaint must contain sufficient
factual matter that “state[s] a claim to relief that is plausible on its face.” Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007). A claim is plausible on its face when the factual allegations
allow the court to infer the defendant’s liability based on the alleged conduct. Ashcroft v.
Iqbal, 556 U.S. 662, 663 (2009). The factual allegations must present more than “the mere
possibility of misconduct.” Id. at 678.
While considering a motion to dismiss, the court must accept all allegations of material
fact as true and construe them in the light most favorable to the non-movant. Burget v. Lokelani

3—Opinion and Order

Bernice Pauahi Bishop Trust, 200 F.3d 661, 663 (9th Cir. 2000). But the court is “not bound to
accept as true a legal conclusion couched as a factual allegation.” Twombly, 550 U.S. at 555. If
the complaint is dismissed, leave to amend should be granted unless the court “determines that
the pleading could not possibly be cured by the allegation of other facts.” Doe v. United States,
58 F.3d 494, 497 (9th Cir. 1995).
DISCUSSION
Edmondson’s fraudulent and negligent misrepresentation claims are predicated on Rite
Aid’s statement to Edmondson that his background was clear. Edmondson argues that he was
harmed when he detrimentally relied on the statement that his background was clear. Edmondson
claims that Rite Aid’s statement induced him to: (1) sell RPCC to Rite Aid without consideration
of other possible buyers, and (2) seek employment only with Rite Aid to the exclusion of other
possible job opportunities. Because the alleged facts in Edmondson’s complaint viewed in the
light most favorable to him do not support a fraudulent misrepresentation or negligent
misrepresentation claim, Rite Aid’s motion to dismiss is granted. I discuss each claim in turn.
1. Fraudulent Misrepresentation
Rule 9(b) of the Federal Rules of Civil Procedure requires a party alleging fraud to “state
with particularity the circumstances constituting fraud.” Rite Aid argues that Edmondson does
not allege the particular facts necessary for a fraudulent misrepresentation claim in his Second
Amended Complaint. I agree.
Edmondson’s pleadings, as a pro se litigant, should be construed liberally and given the
benefit of the doubt. King v. Atiyeh, 814 F.2d 565, 567 (9th Cir. 1987); Erickson v. Pardus, 551
U.S. 89, 94 (2007). However, the court cannot make out of whole cloth the facts necessary to
support a claim when they are not pleaded and cannot be inferred from facts pled. See Gibson v.

4—Opinion and Order

United States, 781 F.2d 1334, 1340 (9th Cir. 1986) (quoting Ivey v. Board of Regents, 673 F. 2d
266, 268 (9th Cir. 1982) (Explaining that the court “may not supply essential elements of the
claim that were not initially pled.’”)). Edmondson’s admission in his Second Amended
Complaint that he was aware that his license was under investigation by the OBOP prior to his
hire date with Rite Aid is fatal to his fraudulent misrepresentation claim. SAC ¶ 12.
In Oregon, a claim of fraudulent misrepresentation requires the plaintiff to “plead and
prove” nine elements:
(1) a representation; (2) its falsity; (3) its materiality; (4) the defendant’s
knowledge of its falsity or ignorance of its truth; (5) the defendant’s intent that the
representation should be acted on by the plaintiff and in the manner reasonably
contemplated; (6) the plaintiff’s ignorance of its falsity; (7) the plaintiff’s reliance
on its truth; (8) the plaintiff’s right to rely on the representation; (9) and the
plaintiff’s resulting injury.
Travis v. Knappenberger, 204 F.R.D. 652, 659 (D. Or. 2001) (quoting Smallwood v. Fisk, 934
P.2d 557, 559 (1997)).
Edmondson failed to expressly plead element 6, that he was ignorant of the falsity of Rite
Aid’s statement that his background was clear before he was hired. This Court cannot infer that
Edmondson was ignorant of the falsity of Rite Aid’s alleged statement because he admitted in his
Second Amended Complaint that he knew that his background was not clear. See, e.g., SAC ¶ 12
(describing Edmondson’s October 26, 2015 proposed settlement with the OBOP and noting it
required Edmondson’s pharmacy license be placed on probation and prevented Edmondson from
being employed as a pharmacist-in-charge or pharmacy manager). Even if Rite Aid made a
knowing misrepresentation to Edmondson that his background was clear when it was not,
Edmondson’s admitted prior knowledge of the falsity of Rite Aid’s alleged statement is fatal to
his claim. Reliance requires ignorance of the falsity of a statement. Briscoe v. Pittman, 268 Or.
604, 610 (1974) (overruled on other grounds by Halford v. Simpson, 276 Or. 107 (1976)).
5—Opinion and Order

When a plaintiff admits knowledge of the falsity of a statement, he cannot properly plead
reliance on that statement. Edmondson had no right to rely on the truth of a statement regarding
the status of his background that he knew to be false.
An “at will” employee in Oregon may be fired for any legal reason, including no reason.
Cocchiara v. Lithia Motors, Inc., 353 Or. 282, 290 (2013). However, if an at-will employee
accepts a job based upon a justified reliance on a representation that the employer, but not the
employee, knew to be false, the employee may still have a cognizable fraudulent
misrepresentation claim even if he is legally fired. Meade v. Cedarapids, Inc., 164 F.3d 1218,
1223 (9th Cir. 1999); see also Knepper v. Brown, 182 Or. App. 597, 605 (2002). Edmondson’s
admission that he knew that his background was not clear prevented him from justifiably relying
on Rite Aid’s alleged representation that his background was clear. Therefore, I GRANT Rite
Aid’s motion to dismiss Edmondson’s fraudulent misrepresentation claim.
2. Negligent Misrepresentation
“[I]n Oregon, the tort of negligent misrepresentation requires that one party in a
relationship owe a duty ‘beyond the common law duty to exercise reasonable care to prevent
foreseeable harm’ to the other party.” Conway v. Pac. Univ., 324 Or. 231, 236 (1996)
(quoting Onita Pac. Corp. v. Trustees of Bronson, 315 Or. 149, 159 (1992)). This “special
relationship” is a necessary requirement to a claim of negligent misrepresentation. Id. at 237. The
defining feature of such a special relationship is that one party has ceded to another decisionmaking authority with the expectation that decisions will be made in the best interests of the
ceding party. Smith v. Bank of Am. NA, No. 3:12-cv-01597-AA, 2013 WL 2659562, at *3 (D. Or.
June 4, 2013).

6—Opinion and Order

“Under Onita, an arm’s length, vendor-buyer relationship is not a ‘special relationship’
for purposes of finding liability in negligence claims.” A.T. Kearney, Inc. v. Int’l Bus. Machines
Corp., 867 F. Supp. 943, 948 (D. Or. 1994), aff’d, 73 F.3d 238 (9th Cir. 1995). The relationship
between Edmondson and Rite Aid was an arm’s length, adversarial relationship where each party
negotiated in its own economic self-interest. Unlike the attorney-client or doctor-patient
relationship where a professional has a duty to look out for the best interests of her client, a seller
of real property has no expectation that a buyer will look out for his best interests. See Conway,
324 Or. at 239-240 (Special relationships are “those in which the party who owes a duty of care
is acting, at least in part, to further the economic interests of the client, the person owed the duty
of care.”) (internal quotations omitted). Nor does an individual negotiating for a job have a
reasonable expectation that his would-be employer will make decisions in his best interests. Id.at
243.
Edmondson does not allege that he ceded any decision-making authority to Rite Aid, or
that Rite Aid had a duty to make decisions with his best interests in mind. Edmondson and Rite
Aid were in an adversarial, arm’s length posture as they negotiated the sale of RPCC and
Edmondson’s employment with Rite Aid. Therefore, there was no special relationship between
Edmondson and Rite Aid, and Rite Aid’s motion to dismiss Edmondson’s claim of negligent
misrepresentation is GRANTED.
CONCLUSION
Because the facts alleged by Edmondson viewed in the light most favorable to him
cannot support his claims of fraudulent or negligent misrepresentation, Rite Aid’s motion to
dismiss, ECF No. 46, is GRANTED.

7—Opinion and Order

Edmondson admits he knew that his background was not clear. See, e.g., SAC ¶ 12. In
fact, Edmondson admits that before Lambert told Edmondson he had a clean background,
Edmondson was negotiating a settlement with the OBOP that would, amongst other things,
prevent Edmondson from working as a pharmacist-in-charge. This precludes Edmondson from
pleading that he was ignorant of the falsity of Rite Aid’s alleged statement that his background
was clear. Because leave to amend Edmondson’s claim for fraudulent misrepresentation would
be futile, plaintiff’s fraudulent misrepresentation claim is dismissed with prejudice.
Edmondson admits that he was negotiating the sale of RPCC and employment with Rite
Aid when Rite Aid allegedly negligently represented that his background was clear. Because Rite
Aid did not have a fiduciary duty to Edmondson to make decisions on his behalf, there was no
special relationship between Edmondson and Rite Aid. As the complaint clearly alleges the
parties negotiated this transaction in an arms-length manner, leave to amend plaintiff’s negligent
misrepresentation claim would be futile and the claim is dismissed with prejudice.
IT IS SO ORDERED.
DATED this 19th day of September, 2018.

_______/s/ Michael J. McShane________
Michael McShane
United States District Judge

8—Opinion and Order