Whited v. WestRock Services, Inc.

Filing 25

MEMORANDUM AND ORDER: For the foregoing reasons, Whited's Motion to Dismiss Counterclaim ( 17 ) is hereby GRANTED in part. WestRock's claim for breach of the duty of loyalty is hereby dismissed. Signed by District Judge Aleta A. Trauger on 7/13/18. (DOCKET TEXT SUMMARY ONLY-ATTORNEYS MUST OPEN THE PDF AND READ THE ORDER.)(gb)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION
WILLIAM LEE (TOMMY) WHITED,

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Plaintiff/Counter-Defendant,
v.
WESTROCK SERVICES, INC.,
Defendant/Counter-Plaintiff.

Case No. 3:17-cv-01341
Judge Aleta A. Trauger

MEMORANDUM AND ORDER
Pending before the court is a Motion to Dismiss Counterclaim (Docket No. 17) filed by
the plaintiff/counter-defendant, William Lee (Tommy) Whited, to which the defendant/counterplaintiff, WestRock Services, Inc. (“WestRock”), has filed a Response (Docket No. 19), and
Whited has filed a Reply (Docket No. 22). For the reasons discussed herein, the motion will be
granted in part.
BACKGROUND1

Tommy Whited was employed by WestRock for 46 years, most recently serving as

General Manager of WestRock’s Gallatin, Tennessee facility. As General Manager, Whited was
the highest ranking member of local management at the facility, where his responsibilities
included oversight of operations, employee safety and relations, and business expansion.
Included within these responsibilities was enforcement of WestRock’s various policies and
procedures outlined in the company’s Employee Handbook and Code of Conduct. On August 8,
2016, WestRock received an anonymous complaint via its employee hotline, alleging that
Whited had created a hostile work environment and that employees were leaving the company as

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The facts are viewed in the light most favorable to the counter-plaintiff.
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a result. WestRock investigated the complaint by interviewing employees, who reported that
Whited had engaged in various forms of inappropriate behavior, including horseplay and
derogatory language toward employees. This conduct allegedly included physically hitting and
kicking subordinate employees. At least one of those employees resigned as a result, and at least
one2 filed suit against WestRock in this court3 for discrimination under the Tennessee Human
Rights Act, Tennessee Code Annotated Section 4-21-101 et seq. (“THRA”), assault and battery
under Tennessee state common law, and overtime wage violations under the Fair Labor
Standards Act, 29 U.S.C. § 203 et seq. On August 26, 2016, WestRock interviewed Whited as
part of its investigation. In the interview, Whited admitted to violations of WestRock’s Code of
Conduct. He was terminated on August 30, 2016.
On August 28, 2017, Whited filed suit against WestRock in Tennessee state court.
(Docket No. 1.) WestRock removed the case to this court, and, on January 19, 2018, Whited
filed an Amended Complaint, setting forth state and federal statutory claims for age
discrimination.

(Docket No. 15.)

On January 29, 2018, WestRock filed an Answer and

Counterclaim against Whited, denying his charges of age discrimination and bringing state
common law claims against him for breach of the duty of good faith and fair dealing and breach
of the duty of loyalty. (Docket No. 16.)
LEGAL STANDARD
In deciding a motion to dismiss for failure to state a claim under Rule 12(b)(6), the court
will “construe the complaint in the light most favorable to the plaintiff, accept its allegations as

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It is unclear from the pleadings whether the employee who resigned is the same employee who
filed suit against WestRock in this court.
3
That case, which was pending before another judge of this court, closed on May 30, 2018
pursuant to a Joint Stipulation of Dismissal following mediation. Kulakowski v. WestRock
Services, Inc., No. 3:16-cv-2510, at Docket No. 50.
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true, and draw all reasonable inferences in favor of the plaintiff.” Directv, Inc. v. Treesh, 487
F.3d 471, 476 (6th Cir. 2007); Inge v. Rock Fin. Corp., 281 F.3d 613, 619 (6th Cir. 2002). The
Federal Rules of Civil Procedure require only that a plaintiff provide “a short and plain statement
of the claim that will give the defendant fair notice of what the plaintiff’s claim is and the
grounds upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47 (1957). The court must
determine only whether “the claimant is entitled to offer evidence to support the claims,” not
whether the plaintiff can ultimately prove the facts alleged. Swierkiewicz v. Sorema N.A., 534
U.S. 506, 511 (2002) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).  
The complaint’s allegations, however, “must be enough to raise a right to relief above the
speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). To establish the
“facial plausibility” required to “unlock the doors of discovery,” the plaintiff cannot rely on
“legal conclusions” or “[t]hreadbare recitals of the elements of a cause of action,” but, instead,
the plaintiff must plead “factual content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678–79
(2009). “[O]nly a complaint that states a plausible claim for relief survives a motion to dismiss.”
Id. at 679; Twombly, 550 U.S. at 556. According to the Supreme Court, “plausibility” occupies
that wide space between “possibility” and “probability.” Iqbal, 556 U.S. at 678. If a reasonable
court can draw the necessary inference from the factual material stated in the complaint, the
plausibility standard has been satisfied. 
ANALYSIS
Whited contends that WestRock’s counterclaims are barred under the THRA. Whited’s
argument is that, because he brings a claim in his Amended Complaint under the THRA,
WestRock’s counterclaims are governed by the THRA’s constraints and are specifically barred

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by Tennessee Code Annotated Section 4-21-301(b), which states as follows: “No individual
employee or agent of an employer shall be liable for any violation of part 4 of this chapter that
any employer shall be found to have committed.” Tenn. Code Ann. § 4-21-301(b). Part 4 of the
THRA “deals exclusively with employment-related discriminatory practices.” Bowles v. Heath
Consultants, Inc., No. 2:16-cv-02982-STA-cgc, 2017 WL 1026017, at *4 (W.D. Tenn. Mar. 16,
2017). “Discriminatory practices” are defined in part 4 as “any direct or indirect act or practice
of exclusion, distinction, restriction, segregation, limitation, refusal, denial, or any other act or
practice of differentiation or preference in the treatment of a person or persons because of race,
creed, color, religion, sex, age or national origin.” Tenn. Code Ann. § 4-21-102(4). The crux of
Whited’s argument is that WestRock improperly seeks indemnification from him for its potential
liability in the lawsuit brought against it by the WestRock employee who resigned based on
Whited’s alleged behavior. Such indemnification, Whited argues, is barred by Section 4-21301(b)’s abrogation of supervisor liability in employment-discrimination suits.
Whited’s reliance on Section 4-21-301(b) is misplaced. WestRock does not bring its
counterclaims under the THRA, nor does it allege that Whited is liable for any discriminatory
practices as defined under the THRA. “In determining the gravamen, or real purpose of an
action, the court must look to the basis for which damages are sought. Another way of stating
this principle is ‘[t]he limitation is not determined by the form of the action but by its object.’”
Keller v. Colgems-EMI Music, Inc., 924 S.W.2d 357, 359 (Tenn. Ct. App. 1996) (quoting Bodne
v. Austin, 156 Tenn. 353 (1298) (internal citations omitted). The specific behavior that gives rise
to WestRock’s counterclaims is not facially discriminatory: “By engaging in inappropriate
workplace behavior that includes hitting and kicking employees and verbally demeaning
employees, Whited did not act in the best interests of [WestRock].” (Docket No. 16 at 8.)

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Furthermore, WestRock does not seek indemnification for the claims brought against it pursuant
to the THRA.

“To the contrary, [WestRock’s counterclaims] are based on the fact that

[WestRock] was subject to a lawsuit for assault and battery as a result of Whited’s actions.”
(Docket No. 19 at 3.)

Under Whited’s proposed approach, the THRA would protect employees

against employer claims that are not brought under the statute and are not based on
discriminatory conduct. Whited cites no precedent or legislative history suggesting that the
THRA was meant to operate in this fashion. The court thus finds that the THRA does not shield
Whited from liability for WestRock’s counterclaims.
Whited also argues that WestRock fails to state a claim for breach of the duty of good
faith and fair dealing because “it is not a stand-alone claim, but requires an underlying breach of
contract claim.” (Docket No. 7 at 6.) Indeed, under Tennessee law, “[t]he implied obligation of
good faith and fair dealing does not . . . create new contractual rights or obligations.” Goot v.
Metro Gov’t of Nashville & Davidson Cty., No. M2003–02013, 2005 WL 3031638, at *7 (Tenn.
Ct. App. Nov. 9, 2005); see also Dick Broad. Co., Inc.. v. Oak Ridge FM, Inc., 395 S.W.3d 653,
666 (Tenn. Ct. App. Nov. 9, 2005) (holding that the duty of good faith “‘does not extend beyond
the agreed upon terms of the contract and the reasonable contractual expectation of the parties.’”)
(quoting Wallace v. Nat’l Bank of Commerce, 938 S.W.2d 684, 687 (Tenn. 1996)).

“The

determination of what is required by the duty of good faith in a given case turns on an
interpretation of the contract at issue. In construing contracts, courts look to the language of the
instrument and to the intention of the parties, and impose a construction which is fair and
reasonable.” Lamar Advert. Co. v. By-Pass Partners, 313 S.W.3d 779, 791 (Tenn. Ct. App.
2009) (internal citations omitted). “[W]hile the implied covenant of good faith and fair dealing
does not create new contractual rights or obligations, it protects the parties’ reasonable

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expectations as well as their right to receive the benefits of their agreement.” Dick Broad. Co.,
Inc., 395 S.W.3d at 666.
WestRock does not tie its claim to a specific provision of its employment agreement
with Whited. It is unclear from WestRock’s counterclaim whether, for example, Whited’s
employment agreement with WestRock mandated compliance with WestRock’s Code of
Conduct. But WestRock explicitly pleads that it expected Whited to abide by its polices as
General Manager of its facility, treat his subordinate employees with respect, and not
intentionally take actions that would negatively impact the company, such as physically abusing
employees.

Moreover, WestRock pleads that these expectations were derived from the

agreement it had with Whited.

(See Docket No. 16 at 9 (“Implied in the employment

relationship between Whited and [WestRock] was the expectation that Whited would act in the
best interests of WestRock and not intentionally expose [WestRock] to potential legal
liability.”).) Courts have read a reasonableness standard of conduct into contracts that are silent
with regard to performance. See Dick Broad Co., Inc., 395 S.W.3d at 667. (“Tennessee courts
have imposed a standard of reasonableness in the performance of an agreement when the
circumstances have warranted such a construction.”). In Dick Broad Co., the court held that the
duty of good faith and fair dealing applied to a silent consent clause of an assignment provision
and that a party, thus, could act in bad faith when it arbitrarily withheld consent, despite no
language in the contract mandating reasonableness. The same principle applies here. WestRock
pleads that it had an employment agreement that required Whited to carry out certain duties as
General Manager of the Gallatin facility. The duty of good faith and fair dealing required
Whited to carry out those duties reasonably. Physically and verbally abusing his subordinates is a
derogation of that duty. The court finds WestRock’s expectations reasonable and therefore

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protected by the duty of good faith and fair dealing. WestRock’s claim will not be dismissed at
this stage.
In his Reply, Whited states, for the first time, an alternate ground for dismissal of
WestRock’s claim for breach of the duty of loyalty. He argues that WestRock fails to state a
claim for breach of the duty of loyalty because Whited’s alleged conduct does not reach the high
standard for satisfying such a claim under Tennessee law. Under Tennessee law, all employees
owe their employers a duty of loyalty. During the employment relationship, an employee has a
fiduciary duty of loyalty to the employer. Ram Tool & Supply Co., Inc. v. HD Supply Constr.
Supply Ltd., No. M2013-02264-COA-R3-CV, 2016 WL 4008718, at *5 (Tenn. Ct. App. July 21,
2016), appeal denied (Dec. 14, 2016) (“The employee must act solely for the benefit of the
employer in matters within the scope of his employment. The employee must not engage in
conduct that is adverse to the employer’s interests.”) (quoting Knott’s Wholesale Foods, Inc. v.
Azbell, No. 01A-01-9510-CH-00459, 1996 WL 697943, at *3 (Tenn. Ct. App. Dec. 6, 1996).
Tennessee courts have applied the requirement of adversity in situations where an employee
acted not just detrimentally to the employer, but in furtherance of the interests of another. For
example, in Ram Tool, the court found a breach of the duty of loyalty where an employee
recruited and solicited co-workers to leave and work for a competitor, at the behest of the
competitor, and diverted business from his employer to the competitor on his last day of work at
the employer. Id. at *6. Similarly, in Knott’s, the court affirmed a finding of summary judgment
against an employee who recruited customers of the employer before entering a business
arrangement with a competitor of the employer. Knott’s Wholesale Foods, Inc, 1996 WL
697943 at *4. As the Tennessee Court of Appeals has explained:
We equate breaches of duty of loyalty with the acts of a traitor.
Traditional examples of breaches of loyalty duties in the
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employment context include acts of an employee in direct
competition with the financial, proprietary, or business interests of
an employer, thereby placing the personal interests of the
employee before those of the employer, the sale or distribution of
employer’s protected trade secrets, and a myriad of other
destructive acts amounting to more than mere mistaken judgment
or negligence.
Booth v. Fred’s Inc., No. W2002-01414-COA-R3-CV, 2003 WL 21998410, at *13 (Tenn. Ct.
App. Aug. 19, 2003); see also Vraney v. Med. Specialty Clinic, P.C., No. W2012-02144-COAR3CV, 2013 WL 4806902, at *32 (Tenn. Ct. App. Sept. 9, 2013) (citing Booth).
While Whited’s alleged actions are troubling, they are not traitorous.

They are

unquestionably detrimental to WestRock, but they are not adverse to WestRock’s interests in the
sense that Whited was not plotting with one of WestRock’s competitors or seeking to undermine
its competitive business position with his actions. Put another way, Whited’s actions are not
qualitatively comparable to the types of perfidious acts that Tennessee courts have found to
breach duties of loyalty. That Whited allegedly violated company policy is insufficient to
establish a breach of the duty of loyalty. Booth, 2003 WL at *16 (“Regardless, we find no case
law to support defendant’s base assertion that violation of established company policy
necessarily constitutes a breach of duty of loyalty.”). WestRock’s claim for breach of the duty of
loyalty will be dismissed.
Finally, Whited argues that he should not liable for punitive damages as a matter of law.
He makes two arguments. First, he argues that punitive damages are not available under various
federal and state statutes that he states are implicated by WestRock’s counterclaims. Because
WestRock does not bring any statutory claims, this argument is inapposite. Whited also argues
that the conduct alleged is insufficient to state a claim for punitive damages. He relies on Goff v.
Elmo Greer and Sons Construction Co., 297 S.W.3d 175, 187 (Tenn. 2009) for the proposition

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that punitive damages are only appropriate in the most egregious cases. In Goff, the court
reaffirmed the principle that punitive damages are appropriate when “clear and convincing
evidence [supports] that the defendant acted intentionally, fraudulently, maliciously, or
recklessly.” Id. (citing Hodges v. S.C. Toof & Co., 833 S.W.2d 896, 901 (Tenn. 1992). “A
person acts intentionally when it is the person’s conscious objective or desire to engage in the
conduct or cause the result.” Hodges, 833 S.W.2d at 901. WestRock pleads that Whited
intentionally engaged in the conduct giving rise to its counterclaims.

Whether clear and

convincing evidence bears out WestRock’s claim will be determined at later stages of this case.
Punitive damages are not foreclosed at this stage as a matter of law.
CONCLUSION
For the foregoing reasons, Whited’s Motion to Dismiss Counterclaim (Docket No. 17) is
hereby GRANTED in part. WestRock’s claim for breach of the duty of loyalty is hereby
dismissed.
It is so ORDERED.
______________________________
ALETA A. TRAUGER
United States District Judge

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