Kolstad v. Leehar Distributors, LLC

Filing 40

MEMORANDUM OPINION OF THE COURT signed by District Judge Eli J. Richardson on 12/28/2018. (DOCKET TEXT SUMMARY ONLY-ATTORNEYS MUST OPEN THE PDF AND READ THE ORDER.)(jm)

IN THE UNITED STATES DISTRICT COURT FOR THE
MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION
KEVIN KOLSTAD,
Plaintiff,
v.
LEEHAR DISTRIBUTORS, LLC d/b/a
LDI INTEGRATED PHARMACY
SERVICES,

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NO. 3:18-cv-00060
JUDGE RICHARDSON

Defendant.

MEMORANDUM OPINION
Plaintiff Kevin Kolstad filed this action against his former employer, Leehar Distributors,
LLC d/b/a LDI Integrated Pharmacy Services, alleging fraudulent inducement, promissory
estoppel, and tortious interference with a business relationship. Before the Court is Defendant’s
Motion to Dismiss (Doc. No. 15), supported by an accompanying brief (Doc. No. 16). Plaintiff
filed a response (Doc. No. 19), and Defendant replied (Doc. No. 23). For the below stated reasons,
Defendant’s motion will be denied.
FACTUAL BACKGROUND 1
Plaintiff is a managed care professional with over twenty-four years of experience. (Doc.
No. 14 ¶¶ 8, 16). In July 2017, Defendant’s Chief Operations Officer, Albert Thigpen, offered
Plaintiff a position as Vice President of Account Management. (Id. ¶¶ 8-9). Although the offered
salary and bonus plan was below market rate for someone with Plaintiff’s experience, the offer
included an opportunity to participate in the Management Employee Incentive Program (“MEIP”),
which would give Plaintiff a 0.25 percent rate of equity in the company. (Id. ¶¶ 8-11; Doc. No. 16-

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The cited facts are alleged in the Complaint and accepted as true for purposes of the instant motion to dismiss.

1

1 at 1). Mr. Thigpen informed Plaintiff that he and other management level employees accepted a
lower salary and bonus plan in exchange for the long-term benefit of the value of equity in the
MEIP. (Doc. No. 14 ¶ 11). Mr. Thigpen assured Plaintiff that the acquisition of the company would
occur in the next four to five years and could result in Plaintiff receiving as much as $1.9 million
for his 0.25 rate of equity. (Id. ¶¶ 12, 34-36). In reliance on Mr. Thigpen’s statements, Plaintiff
accepted and signed Defendant’s Offer Letter on July 31, 2017. (Id. ¶ 15; See Doc. No. 16-1). In
doing so, Plaintiff declined offers of employment with higher paying salaries from two other
managed care companies. (Id. ¶ 16).
The Offer Letter states in pertinent part:
Management Employee Incentive Program (MEIP): You will participate in the
MEIP at a rate of 0.25% subject to all terms and conditions of the Plan.
...
Your employment with LDI is at-will and either party can terminate the relationship
at any time with or without cause and with or without notice. In accepting our offer
of employment, you certify your understanding that your employment will be on
an at-will basis, and that neither you nor LDI has entered into a contract regarding
the terms or duration of your employment.
You further acknowledge that this offer letter (along with the final form of any
referenced documents), represents the entire agreement between you and LDI and
that no verbal or written agreements, promises or representations that are not
specifically stated in this offer, are or will be binding upon LDI.
(Doc No. 16-1 at 1-2)
On October 6, 2017, before Plaintiff signed the MEIP Agreement, Mr. Thigpen informed
Plaintiff that there was a “really good chance” the company would be acquired in the next thirty
days, “perhaps maybe as soon as two weeks.” (Doc. No. 14 ¶ 18). Mr. Thigpen indicated he was
the “linchpin” and “integral” to the acquisition going through to execution. (Id.). He also advised
Plaintiff that nothing would change with respect to Plaintiff’s role with the company, except that

2

Plaintiff would lead a larger team and be part of the leadership group, and that he would “get a
really nice payday.” (Id.).
On October 11, 2017, Plaintiff executed the MEIP agreement with LDI Holding Company,
LLC, of which Defendant is a wholly-owned subsidiary. The MEIP agreement granted Defendant
unvested Class B equity units and provided that Plaintiff’s equity units would immediately vest
when the company sold. (Id. ¶¶ 20-21; Doc. No. 16-2 at 1, 8). All unvested equity units were
“subject to risk of forfeiture upon termination of employment.” (Doc. No. 16-2 at 9). Unvested
equity units that became subject to forfeiture were made available to be awarded to other
individuals within the Company. (Doc. No. 14 ¶ 22). The MEIP agreement also included the
following sections:
Entire Agreement; Counterparts . . . There are no representations, agreements,
arrangements, or understandings, oral or written, between or among the parties
hereto, relating to the subject matter of this Agreement, that are not fully expressed
herein.
...
No Right to Continued Employment or Service. Nothing contained in this
Agreement shall be construed under any circumstances to bind the Company or any
of its Affiliates to continue to employ, or retain the services of, the Recipient for
any period.
Adequate Review. The Recipient has consulted with such legal, financial, technical
or other experts or advisors as he or she deems necessary or desirable before
entering into this Agreement. The Recipient represents and warrants that the
Recipient has read, understands, and agrees with the terms and conditions of this
Agreement, the LLC Agreement and the Equity Incentive Plan. The Recipient has
not relied upon any oral or written representation of the Company or any of the
Company’s Affiliates in entering into the Agreement. The Recipient acknowledges
the risks of the Recipient’s undertakings under this Agreement and his or her
assumption of such risks and uncertainty.

(Doc. No. 16-2 ¶¶ 11, 13, 14).

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From August to November 2017, Plaintiff received positive job performance feedback.
(Doc. No. 14 ¶ 17). On November 9, 2017, Mr. Thigpen emailed Plaintiff alleging Plaintiff was
responsible for the resignation of a co-worker. (Id. ¶ 25). On November 10, 2017, Mr. Thigpen
called Plaintiff and terminated his employment. (Id. ¶¶ 22-24). Five days later, on November 15,
2017, Diplomat Pharmacy Inc. announced that it was acquiring the company for $595 million. (Id.
¶ 27).
LEGAL STANDARD
For purposes of a motion to dismiss, the Court must take all of the factual allegations in
the complaint as true, as the Court has done above. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as
true, to state a claim to relief that is plausible on its face. Id. A claim has facial plausibility when
the plaintiff pleads factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged. Id. Threadbare recitals of the elements of a cause
of action, supported by mere conclusory statements, do not suffice. Id. When there are wellpleaded factual allegations, a court should assume their veracity and then determine whether they
plausibly give rise to an entitlement to relief. Id. at 679. A legal conclusion, including one couched
as a factual allegation, need not be accepted as true on a motion to dismiss, nor are mere recitations
of the elements of a cause of action sufficient. Id. at 678; Fritz v. Charter Township of Comstock,
592 F.3d 718, 722 (6th Cir. 2010); Abriq v. Hall, 295 F. Supp. 3d 874, 877 (M.D. Tenn. 2018)
(citing Fritz). Moreover, factual allegations that are merely consistent with the defendant’s liability
do not satisfy the claimant’s burden, as mere consistency does not establish plausibility of
entitlement to relief even if it supports the possibility of relief. Iqbal, 556 U.S. at 678.

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In determining whether a complaint is sufficient under the standards of Iqbal and its
predecessor and complementary case, Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), it may
be appropriate to “begin [the] analysis by identifying the allegations in the complaint that are not
entitled to the assumption of truth.” Iqbal, 556 U.S. at 680. Identifying and setting aside such
allegations is crucial, because they simply do not count toward the plaintiff’s goal of showing
plausibility of entitlement to relief. As suggested above, such allegations include “bare assertions,”
formulaic recitation of the elements, and “conclusory” or “bald” allegations. Id. at 681. The
question is whether the remaining allegations – factual allegations, i.e., allegations of factual
matter – plausibly suggest an entitlement to relief. Id. If not, the pleading fails to meet the standard
of Fed. R. Civ. P. 8 and thus must be dismissed pursuant to Rule 12(b)(6). Id. at 683.
As a general rule, matters outside the pleadings may not be considered in ruling on a motion
to dismiss under Federal Rule of Civil Procedure 12(b)(6) unless the motion is converted to one
for summary judgment under Rule 56. Fed. R. Civ. P. 12(d). However, when a document is referred
to in the pleadings and is integral to the claims, it may be considered without converting a motion
to dismiss into one for summary judgment. Doe v. Ohio State Univ., 219 F. Supp. 3d 645, 652-53
(S.D. Ohio 2016); Blanch v. Trans Union, LLC, __ F. Supp. 3d __ , 2018 WL 4561248 at * 2
(M.D. Tenn. Sept. 24, 2018). 2

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The Court notes that as part of his discussion of the applicable standard, Plaintiff claims that “[a] Rule 12(b)(6)
motion ‘should not be granted unless it appears beyond doubt that the plaintiff can prove no set of facts in support of
his claim which would entitle him to relief.’” (Doc. No. 19 at 4 (quoting Ricco v. Potter, 377 F.3d 599, 602 (6th Cir.
2004))). It is inappropriate to invoke this standard because it has been “retired” since Ricco was decided. This standard
is the one enunciated in Conley v. Gibson, 355 U.S. 41, 45–46 (1957)—“a complaint should not be dismissed for
failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim
which would entitle him to relief.” But Conley’s standard was supplanted by Twombly and Iqbal. See Courie v. Alcoa
Wheel & Forged Prods., 577 F.3d 625, 629–30 (6th Cir. 2009). As Twombly put it, the Conley “no set of facts”
standard has “earned its retirement” and “is best forgotten as an incomplete, negative gloss on an accepted pleading
standard. Thus, litigants no longer should “rel[y] on the now defunct Conley standard for motions to dismiss.” Girl
Scouts of Middle Tenn., Inc. v. Girl Scouts of the U.S.A., 770 F.3d 414, 427 (6th Cir. 2014) (citation omitted).

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ANALYSIS
I.

FRAUDULENT INDUCEMENT AND PROMISSORY ESTOPPEL
Plaintiff alleges Defendant fraudulently induced the contract by intentionally

misrepresenting to Plaintiff that he would be compensated for his MEIP equity, and Plaintiff relied
on this promise to his detriment. (Doc. No. 14 ¶¶ 33-49). Under Tennessee law, to establish a claim
of either fraudulent inducement or promissory estoppel, a plaintiff must show that it reasonably
relied upon the allegedly false information. See Lamb v. MegaFlight, Inc., 26 S.W.3d 627, 630–
31 (Tenn. Ct. App. 2000) (noting the elements of fraudulent inducement are: “(1) a false statement
concerning a fact material to the transaction; (2) knowledge of the statement’s falsity or utter
disregard for its truth; (3) intent to induce reliance on the statement; (4) reliance under
circumstances manifesting a reasonable right to rely on the statement; [and] (5) an injury resulting
from the reliance”); Chavez v. Broadway Elec. Serv. Corp., 245 S.W.3d 398, 404 (Tenn. Ct. App.
2007) (noting proof of promissory estoppel requires: “(1) that a promise was made; (2) that the
promise was unambiguous and not unenforceably vague; and (3) that [the plaintiff] reasonably
relied upon the promise to [his or her] detriment”) (internal citation omitted).
Defendant asserts Plaintiff’s fraudulent inducement and promissory estoppel claims fail
because Plaintiff cannot demonstrate he reasonably and justifiably relied on Defendant’s
statements due to the integration clause in the Offer Letter and MEIP contract, which disavow the
alleged misrepresentations made prior to entering the contract. (Doc. No. 16 at 7). Although the
question of reasonable reliance is generally one of fact for the jury, J.C. Bradford & Co. v. S.
Realty Partners, No. W1999-01617-COA-R3-CV, 2000 WL 34411153, at *10 (Tenn. Ct. App.
Aug. 14, 2000), Defendant argues Plaintiff’s reliance is unreasonable as a matter of law.

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In response, Plaintiff cites Shah v. Racetrac Petroleum Co., 338 F.3d 557, 568 (6th Cir.
2003), where the court held that
. . . there is no rule that a merger clause makes reliance on oral representations
unreasonable per se so as to necessarily defeat a fraudulent inducement or
promissory fraud claim. . . . [N]othing suggest the Tennessee judiciary has either
adopted or would adopt a per se rule that an integration clause makes it always
unreasonable to rely on prior oral representations.
(internal citation omitted). Therefore, Plaintiff argues that under Tennessee law, the question of
reasonable reliance should be reserved for the jury. (Doc. No. 16 at 6-9).
In reply, Defendant argues Shah is no longer good law. (Doc. No. 23 at 4-5). Defendant
relies on Guesthouse International Franchise Systems, Inc. v. British American Properties
MacArthur Inn, LLC, No. 3:07-cv-01814, 2009 WL 278214, at *7 (M.D. Tenn. 2009) (J. Trauger),
where the district court noted Shah was not “particularly helpful” to the counter-defendant’s
“attempt to avoid the integration clause” because “[a] little less than a year after Shah, the
Tennessee Court of Appeals held that ‘proof of fraud in the inducement or promissory fraud is
limited to subject matter which does not contradict or vary the terms that are plainly expressed in
the written contract.’” Id. (quoting Burton v. Hardwood Pallets, Inc., No. E2003-01439-COA-R3CV, 2004 WL 572350, at *2 (Tenn. Ct. App. Mar. 22, 2004).
The district court in Guesthouse relied on Burton, an unpublished Tennessee Court of
Appeals decision which held that the plaintiff’s fraudulent inducement and promissory fraud
claims failed as a matter of law because of the parol evidence rule. Id. (citing Burton, 2004 WL
572350 at *2). However, the case Burton cites in support of its holding states this rule applies only
in the absence of fraud. See Airline Constr. Inc. v. Barr, 807 S.W.2d 247, 259 (Tenn. Ct. App.
1990). Moreover, the same district court later held that “the parol evidence rule applies only to
contract claims and does not apply where a plaintiff alleges a fraudulent misrepresentation that

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induced that contract.” BKB Prop., LLC v. Suntrust Bank, No. 3:08-cv-529, Memo. Op. at 20-21
(M.D. Tenn. Mar. 2, 2009) (J. Trauger) (citation omitted). Furthermore, Gibson Guitar Corp. v.
Elderly Instruments, Inc., No. 3:05-cv-00523, 2006 WL 1638404, at *3 (M.D. Tenn. June 8, 2006)
(J. T. Campbell), another case on which Defendant relies heavily, also based its dismissal of a
plaintiff’s promissory fraud claim on the parol evidence rule. Although Defendant does not
specifically argue that the parol evidence rule bars Plaintiff’s fraudulent inducement and
promissory estoppel claims, because two of the key cases on which he relies based dismissal on
the parol evidence rule, the Court will examine whether it applies here.
Under Tennessee law, “parol evidence is inadmissible to contradict, vary, or alter a written
contract where the written instrument is valid, complete and unambiguous, absent fraud or mistake
or any claim or allegations thereof.” Airline Constr., 807 S.W.2d at 259. An examination of
pertinent Tennessee case law reveals inconsistencies in the application of parol evidence rule to
claims involving allegations of fraud. Nevertheless, the Court finds the better interpretation of
Tennessee case law, and the one that the Tennessee Supreme Court likely would articulate at this
time, is that the parol evidence rule will not bar evidence of claims involving allegations of fraud
that sound in tort. In Brungard v. Caprice Records, Inc., 608 S.W.2d 585, 587 (Tenn. Ct. App.
1980), the Tennessee Court of Appeals adopted the doctrine of promissory fraud, which was
affirmed by implication by the Tennessee Supreme Court’s denial of permission to appeal. In doing
so, the court held the parol evidence rule “has no application to a case involving a fraudulent
misrepresentation which induces the execution of a contract.” Id. (citing Haynes v. Cumberland
Builders, Inc., 546 S.W.2d 228, 231 (Tenn. Ct. App. 1976)). The court explained that the plaintiff
was not bringing suit on the contract, but rather, sought tort damages for fraudulent inducement,
whereas the parol evidence rule only applies to suits on a contract. Id. (citing Haynes, 546 S.W.2d

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at 231 (holding that the misrepresentation claim “sounded in tort” and the parol evidence rule
should have no application to a case involving a misrepresentation which induced the execution of
a written contract)). Numerous Tennessee courts have adhered to this same principle. See Stamp
v. Honest Abe Log Homes, Inc., 804 S.W.2d 455, 459 (Tenn. Ct. App. 1991) (holding that the parol
evidence rule did not apply to tort action of fraudulent misrepresentation in an inducement of
contract); Lipford v. First Family Fin. Serv., Inc., No. W2003-01208-COA-R3-CV, 2004 WL
948645, at *4 (Tenn. Ct. App. April 29, 2004) (same); Biancheri v. Johnson, Nos. M2008–00599–
COA–R3–CV & M2007–02861–COA–R3–CV, 2009 WL 723540, at *9 n. 9 (Tenn. Ct. App. Mar.
18, 2009) (same); Ewan v. Hardison Law Firm, No. W2011-00763-COA-R3CV, 2012 WL
1269148, at *7 (Tenn. Ct. App. Apr. 16, 2012) (same). Therefore, this Court will not apply the
parol evidence rule to bar claims of fraudulent inducement of a contract.
Here, Plaintiff seeks damages for injuries caused by “Defendant’s fraudulent inducement
to induce Plaintiff to accept employment with Defendant [and] continue to work with Defendant.”
(Doc. No. 14 ¶ 42). The damages Plaintiff seeks sound in tort and are based on allegations of fraud.
Therefore, the Court holds the parol evidence rule will not bar evidence of Plaintiff’s fraudulent
inducement and promissory estoppel claims.
Accordingly, the Court holds that these claims will survive Defendant’s motion to dismiss.
As there is not a per se rule in Tennessee that an integration clause makes a plaintiff’s reliance
unreasonable as a matter of law, the Court cannot determine at the motion to dismiss stage whether
Plaintiff’s reliance was unreasonable. See Shah, 338 F.3d at 566. Although the integration clause
may certainly be strong evidence that Plaintiff’s reliance was unreasonable, it does not foreclose
Plaintiff’s claims as a matter of law. See Nichols v. A.B. Colemans, Inc., 652 S.W.2d 907, 908
(Tenn. Ct. App. 1983) (finding error by the trial judge in withdrawing question of reasonable

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reliance from the jury in a fraud case); Arch Wood Protection, Inc. v. Flamdexx, LLC, 932 F. Supp.
2d 858, 865 n.5 (E.D. Tenn. 2013) (explaining the question of reasonable reliance is generally one
of fact for the jury); Exprezit Convenience Stores, LLC v. Transaction Tracking Techs., Inc., No.
3:05-CV-0945, 2007 WL 7604947, at *2 (M.D. Tenn. Feb. 13, 2007) (“[The Plaintiff] has a
promissory estoppel claim and an integration clause is not to be used to restrict the scope of the
proof with regard to fraudulent inducement or misrepresentation claims (citing Loew v. Gulf Coast
Develop., Inc., No. 01-A-019010CH00374, 1991 WL 220576, at *5 (Tenn. Ct. App. 1991)).
Moreover, as the cases Defendant relies on to support his argument aptly point out, under
Tennessee law, several factors should be considered in the determination that a plaintiff’s reliance
is unreasonable, including, sophistication of the parties, the length of the negotiations, whether the
parties were represented by counsel, and if the plaintiff had the means to discover the alleged fraud.
See Allied Sound, Inc. v. Neely, 58 S.W.3d 119, 122 (Tenn. Ct. App. 2001); Laundries Inc., v.
Coinmach Corp., No: M2011-01336-COA-R3-CV, 2012 WL 982968, at *17-18 (Tenn. Ct. App.
Mar. 20, 2012). Therefore, the integration clause, on its own, cannot conclusively prove Plaintiff’s
unreasonable reliance. For these reasons, the Defendant’s motion to dismiss the fraudulent
inducement

and

promissory

estoppel

3

claims

will

be

DENIED. 3

As noted herein, by their very nature, such claims are not per se defeated by the existence of the integration clause,
so Plaintiff’s choice of such claims enables him to sidestep for the time being any negative consequences of the merger
clause. The Court notes, however, that it will hold Plaintiff to his choice—meaning that these two claims must be
treated for what they are, and cannot be treated, for instance, as if they were breach-of-contract claims if and when, if
ever, it becomes time to determine damages. The Court is inclined to scrutinize, for example, the claim that Plaintiff,
by being fraudulently induced into an employment situation that resulted in his obtaining MEIP equity units, was
injured by “los[ing the] value of his MEIP equity units.” (Doc No. 1-1 at ¶ 42). The Court presently is having difficulty
understanding how fraudulent inducement can be the cause of a plaintiff losing something that he or she never would
have had in the first place but for the fraudulent inducement.

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II.

TORTIOUS INTERFERENCE WITH A BUSINESS RELATIONSHIP

Plaintiff alleges Defendant tortiously interfered with his business relationship with LDI
Holding Company, LLC, Defendant’s parent company. (Doc. No. 14 ¶¶ 50-55). To survive a
motion to dismiss a tortious interference of a business relationship claim, a plaintiff must plead
facts sufficient to establish the following elements:
(1) an existing business relationship with specific third parties or a prospective
relationship with an identifiable class of third persons; (2) the defendant’s
knowledge of that relationship and not a mere awareness of the plaintiff’s business
dealings with others in general; (3) the defendant’s intent to cause the breach or
termination of the business relationship; (4) the defendant’s improper motive or
improper means . . . and finally, (5) damages resulting from the tortious
interference.
Trau-Med of America, Inc. v. Allstate Ins. Co., 71 S.W.3d 691, 701 (Tenn. 2002) (internal citation
omitted).
Defendant argues Plaintiff’s tortious interference with a business relationship claim fails
as a matter of law because: (1) Defendant has a unity of interest privilege with a party to the MEIP
Agreement—LDI Holding Company, LLC—which conclusively defeats any claim that Defendant
tortuously interfered with the MEIP Agreement; and (2) Plaintiff cannot prove Defendant
maliciously or intentionally, by improper motive or means, caused LDI Holding Company, LLC
to breach the MEIP Agreement or end its relationship with Plaintiff because Defendant’s
termination of Plaintiff’s employment was specifically authorized under the MEIP agreement. The
Court will examine each argument in turn.
1. THE UNITY OF INTEREST PRIVILEGE
A claim of tortious interference with a contract or a business relationship requires the
existence of a three-party relationship—the plaintiff, the breaching party, and the interfering
party—reflecting the principle that a party to a contract may not be liable for interference with the
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contract. See Cambio Health Sols., LLC v. Reardon, 213 S.W.2d 785, 789 (Tenn. 2006) (“[The]
basic principle under Tennessee law that a party to a contract cannot be liable for tortious
interference with that contract”). Thus, the law in Tennessee recognizes a privilege against tortious
interference claims when there is a unity of interest between the allegedly interfering party and the
allegedly breaching party. Waste Conversion Sys. v. Greenstone Indus., 33 S.W.3d 779, 782 (Tenn.
2000). Defendant argues that it is privileged to interfere in LDI Holding Company, LLC’s business
relationships because it is a wholly-owned subsidiary of LDI Holding Company, LLC. (Doc. No.
16 at 10). In response, Plaintiff asserts that this privilege applies only to parent companies that
interfere in business relationships between a third party and a subsidiary, and not the other way
around. (Doc. No. 19 at 16). Thus, Plaintiff argues Defendant cannot assert the unity of interest
privilege in the matter at hand. The Court agrees.
Defendant has not provided, and the Court has not found, a case in which a Tennessee court
allowed a subsidiary to assert the unity of interest privilege in a claim involving interference with
a business relationship with its parent company. In fact, the Tennessee Supreme Court specifically
held that “a parent company is privileged to interfere in the contractual relations of a whollyowned subsidiary.” Id. at 784 (emphasis added). Moreover, the Court does not believe that the
apparent rationale for granting such privilege to a parent company would apply to support granting
such a privilege to a subsidiary. In Waste Conversion, the Tennessee Supreme Court cited to
Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 771-72 (1984), which discussed
the justification for the unity of interest privilege and noted “the parent may assert full control at
any moment if the subsidiary fails to act in the parent’s best interest.” A subsidiary does not have
the same level control over a parent company. Therefore, a parent company’s contract with a third
party is not a subsidiary’s contract the same way that a subsidiary’s contract with a third party is

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the parent company’s contract. Accordingly, the Court predicts that the Tennessee Supreme Court
would not hold that the unity of interest privilege applies in this case, where a subsidiary has
allegedly interfered with the business relationship of a parent company and a third party. Thus, the
Court will not apply the unity of interest privilege here.
2. PLAINTIFF ADEQUATELY PLED THE ELEMENTS OF HIS CLAIM
Next, Defendant argues Plaintiff has not pleaded facts to credibly show that Defendant
acted with an improper motive or improper means because Defendant’s decision to terminate
Plaintiff was authorized under both the Offer Letter and the MEIP Agreement; thus, according to
Defendant, Plaintiff has not pleaded facts to demonstrate the fourth element of his tortious
interference with a business relationship claim. (Doc. No. 16 at 11). In support of his argument,
Defendant cites to Trau-Med of America, Inc. v. Allstate Insurance Co., 71 S.W.3d 691, 699 (Tenn.
2002) and Watson’s Carpet and Floor Coverings, Inc. v. McCormick, 247 S.W.3d 169, 178 (Tenn.
Ct. App. 2007). The Court finds Defendant’s reliance on these cases inapposite.
In Trau-Med, the Tennessee Supreme Court adopted the tort of intentional interference
with a business relationship and embraced a broad view of what can constitute improper motive
and improper means. 71 S.W.3d at 699 n.5, 701. To demonstrate that a defendant acted with an
improper motive when interfering with plaintiff’s business relationship, the Tennessee Supreme
Court explained that “the plaintiff [must] demonstrate that the defendant’s predominate purpose
was to injure the plaintiff.” Id. at 699 n.5 (quoting Leigh Furniture & Carpet Co. v. Isom, 657 P.2d
293, 307–08 (Utah 1982)). In regards to the standard for determining whether a defendant acted
with improper means when interfering with a business relationship, the court explained:
[I]n the attempt to provide further guidance, we cite the following methods as some
examples of improper interference: those means that are illegal or independently
tortious, such as violations of statutes, regulations, or recognized common-law
rules; violence, threats or intimidation, bribery, unfounded litigation, fraud,
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misrepresentation or deceit, defamation, duress, undue influence, misuse of inside
or confidential information, or breach of a fiduciary relationship; and those methods
that violate an established standard of a trade or profession, or otherwise involve
unethical conduct, such as sharp dealing, overreaching, or unfair competition.
Id. (citing Duggin v. Adams, 360 S.E.2d 832, 836 (Va. 1986)).
Here, Plaintiff alleged in the Amended Complaint that Defendant’s decision to terminate
Plaintiff was “perpetrated to both avoid paying Plaintiff for the value of his MEIP Equity Units as
promised, and to redistribute MEIP Equity Units to others at the Company who would therefore
receive a larger payment in the impending acquisition.” (Doc. No. 14 ¶ 54). Viewing these factual
allegations in a light most favorable to Plaintiff, these allegations at the very least constitute sharp
dealing, which is one of the examples of improper means offered by the Tennessee Supreme Court
in Trau-Med. 71 S.W.3d at 699 n.5. See also Watson’s Carpet, 247 S.W.3d at 176 (“It is important
to note that either ‘improper motive’ or ‘improve means’ will suffice.” (citing Trau-Med, 71
S.W.3d at 699 n.5)). Accordingly, the Court does not see how Defendant’s citation to Trau-Med
is helpful, where Plaintiff has alleged acts the Tennessee Supreme Court specifically prescribed as
examples of “improper means.” Id.
Similarly, the Court finds the Tennessee Court of Appeals decision in Watson’s Carpet
equally unpersuasive. In Watson’s Carpet, the plaintiff, a carpet supplier, brought a tortious
interference with a business relationship claim against another carpet supplier that refused to sell
a certain brand of carpet to the plaintiff. 247 S.W.3d at 170. The Court noted “[t]he act that caused
[the plaintiff] damage was [the defendant’s] refusal to deal, not any other action by [the defendant]
such as defamation, etc. . . .” and “an unwillingness to deal with a person or entity for any reason
not independently unlawful is not ‘improper.’” Id. at 178. Thus, the Court found that the defendant
did not act improperly because “a supplier has a privilege that allows it to refuse to sell and that
such a refusal to deal is not improper” and “the fourth element of the tort [] requires [the defendant]
14

act improperly before liability can attach.” Id. Because there was no evidence of improper motive
or improper means on the part of the defendant, the court granted the defendant’s motion for
summary judgment and dismissed the plaintiff’s intentional interference with a business
relationship claim. Id. at 179.
Here, similar to the defendant’s right to refuse to sell carpet to the plaintiff in Watson’s
Carpet, Defendant had a contractual right to terminate Plaintiff because of his status as an at-will
employee. However, unlike the plaintiff in Watson’s Carpet, Plaintiff properly pleaded that
Defendant acted with improper means when exercising this contractual right. See XYZ Two Way
Radio Serv., Inc. v. Uber Techs., Inc., 214 F. Supp. 3d 179, 186 (E.D.N.Y. 2016) (examining
comparable New York law and noting that “[a]t-will contracts can support a claim for tortious
interference with business relations.” (citing Waste Serv., Inc. v. Jamaica Ash & Rubbish Removal
Co., 691 N.Y.S.2d 150, 151 (2d Dep’t 1999))). Accordingly, the Court finds Watson’s Carpet
distinguishable. Plaintiff’s allegations of improper means discussed above—which must be taken
as true, and construed in Plaintiff’s favor, at the motion to dismiss stage—allow Plaintiff’s claim
of tortious interference with a business relationship to survive.
The Court holds that Plaintiff has sufficiently stated a claim for tortious interference with
a business relationship. 4 Accordingly, Defendant’s motion to dismiss Plaintiff’s tortious
interference with a business relationship claim will be DENIED.

4

Although Plaintiff’s claim for tortious interference (Count 3) survives Defendant’s motion to dismiss, the Court
believes that it is somewhat in tension with Counts 1 and 2. In those counts, Plaintiff complains that Mr. Thigpen
fraudulently induced Plaintiff into, inter alia, the business relationship with Defendant’s parent company; in other
words, he complains about that business relationship coming into existence in the first place. In Count 3, by contrast,
no longer complaining about the existence of that business relationship, Plaintiff complains about the disintegration
of that business relationship. To the Court, these complaints seem to conflict with one another. Nevertheless, Plaintiff
has plead facts that meet the elements of each of his individual claims. Furthermore, the Federal Rules of Civil
Procedure allow Plaintiff to make alternative claims. See Fed. R. Civ. P. 8(d)(2). Moreover, there is no basis to require
Plaintiff to choose between conflicting theories at this stage. Therefore, all of Plaintiff’s claims at least survive the
motion to dismiss

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CONCLUSION
For the reasons set forth above, Defendant’s Motion to Dismiss (Doc. No. 15) will be
DENIED.
An appropriate Order will be entered.

____________________________________
ELI RICHARDSON
UNITED STATES DISTRICT JUDGE

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