Dreves et al v. Hudson Group, Inc. et al

Filing 54

OPINION AND ORDER granting in part and denying in part 49 Motion to Dismiss Plaintiffs' Wrongful Termination and Quantum Meruit Claims, and to Dismiss All Claims Brought by Plaintiff Richard Dreves. Signed by Judge William K. Sessions III on 2/29/2012. (law)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF VERMONT
WENDIE and RICHARD DREVES,
Plaintiffs,
v.
HUDSON GROUP (HG)
RETAIL,LLC,
Defendant.

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Case No. 2:11-CV-00004

OPINION and ORDER
Plaintiffs, Wendie Dreves and Richard Dreves have sued
Defendant, Hudson Group Retail, LLC, (“Hudson”), alleging
violation of the Equal Pay Act provisions of the Fair Labor
Standards Act (“FLSA”), 29 U.S.C. § 206(d)(1), violation of the
equal pay provisions of the Vermont Fair Employment Practices
Act (“VFEPA”), Vt. Stat. Ann. tit. 21, § 495(a)(8), age and
gender discrimination under the VFEPA Vt. Stat. Ann. tit. 21, §
495(a)(1), age discrimination under the Age Discrimination in
Employment Act (“ADEA”), 19 U.S.C. § 623(a)(1), unjust
enrichment under the doctrine of quasi contract, and breach of
implied contract.

Hudson has moved to dismiss three of the

Dreveses’ claims pursuant to Rule 12(b)(6) of the Federal Rules
of Civil Procedure.

Specifically, Hudson seeks to dismiss: 1)

Ms. Dreves’s claim that her termination was a breach of implied
contract (contained in Count 3); 2) Ms. Dreves’s claim that
Hudson was unjustly enriched by uncompensated labor time

performed for them by her, and that she is entitled to
compensation under the doctrine of quasi-contract (contained in
Count 2); and 3) Mr. Dreves’s claim that he is entitled to
damages because he lost his health insurance as a result of Ms.
Dreves’s termination (contained in Count 3).
For the reasons that follow, Hudson’s motion to dismiss is
GRANTED in part, and DENIED in part.
FACTUAL BACKGROUND
For purposes of this motion to dismiss, the Court accepts
as true all allegations set forth in the Complaint.

Hudson

operates retail establishments at the Burlington International
Airport.

Wendie Dreves formerly held the title of general

manager of Hudson’s Burlington operation, but was terminated in
September of 2010 for allegedly unsatisfactory job performance.
Ms. Dreves claims that the firing was unlawful for a number of
reasons.

Relevant here, Count III of the Complaint alleges that

Hudson had a policy and practice of providing Ms. Dreves with
progressive discipline, that this policy and practice created an
implied contract between Hudson and Ms. Dreves, and that Hudson
breached this contract in its termination of Ms. Dreves.
Additionally, Ms. Dreves claims that while she worked for
Hudson, “her corporate superiors . . . deliberately kept the
operations understaffed,” and that “[t]his understaffing
required her to . . . work unfilled job positions and to put in
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extensive overtime hours for which she was not compensated.”

In

Count II of the Complaint, Ms. Dreves claims that she is
entitled to “just compensation for the reasonable value of her
time given [Hudson] under the doctrine of quasi-contract.”
Finally, Ms. Dreves’s spouse, Richard Dreves, alleges that
he “was a third party beneficiary of his wife’s employment
benefits with [Hudson], and as a result of her termination lost
his health insurance . . . requiring him to pay out of pocket
for replacement coverage.”

In Count III of the Complaint, Mr.

Dreves seeks damages as a third-party beneficiary.

Hudson seeks

to have the above three claims dismissed.
DISCUSSION
I. Standard of Review
The standard for reviewing a motion to dismiss pursuant to
Rule 12(b)(6) is well-known, and has recently been articulated
by this court:
In Ashcroft v. Iqbal, the Supreme Court set forth
a “two-pronged” approach for analyzing a Rule 12(b)(6)
motion to dismiss. 129 S.Ct. 1937, 1949-50 (2009).
First, a court must accept a plaintiff’s factual
allegations as true and draw all reasonable inferences
from those allegations in the plaintiff’s favor. This
assumption of truth, however, does not apply to legal
conclusions, and threadbare recitals of the elements
of a cause of action, supported by mere conclusory
statements, do not suffice.
Second, a court must determine whether the
complaint’s well-pleaded factual allegations . . .
plausibly give rise to an entitlement to relief. A
claim has facial plausibility when the plaintiff
pleads factual content that allows the court to draw
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the reasonable inference that the defendant is liable
for the misconduct alleged. The plausibility standard
is not akin a “probability requirement,” but it asks
for more than a sheer possibility that the defendant
acted unlawfully.
Gadreault v. Grearson, No. 2:11–cv–63, 2011 WL 4915746, at *4
(D. Vt. Oct. 14, 2011) (internal quotation marks and citations
omitted).
II. Ms. Dreves’s Common Law Wrongful Termination Claim
To sustain a claim of wrongful discharge under Vermont law,
the claim “must involve the breach of an express or implied
employment contract.

At-will employees are thus barred from

bringing wrongful discharge claims.”

Cook v. Arrowsmith

Shelburne Inc., 69 F.3d 1235, 1242 (2d Cir. 1995) (citing
Baldwin v. Upper Valley Servs., Inc., 644 A.2d 316 (Vt. 1994);
Taylor v. Nat’l Life Ins. Co., 652 A.2d 466 (Vt. 1993))
(applying Vermont law).

Additionally, “[u]nder Vermont law,

there is a presumption that employment for an indefinite period
is employment ‘at will.’”

Green v. Vt. Country Store, 191 F.

Supp. 2d 476, 480 (D. Vt. 2002) (citing Havill v. Woodstock
Soapstone Co., 783 A.2d 423, 427 (Vt. 2001)).

However, this

presumption “is simply a general rule of contract construction,”
and “imposes no substantive limitation on the right of
contracting parties to modify terms of their arrangement.”
Dillon v. Champion Jogbra, 819 A.2d 703, 707 (Vt. 2002)
(internal quotation marks and citations omitted).
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Hudson argues that the Complaint “references no agreement
or other basis for any allegation that [Ms. Dreves] could not be
terminated at will.”

The question is whether Ms. Dreves has

pleaded facts sufficient to support the claim that Hudson
modified Ms. Dreves’s at-will status so as to create an implied
employment contract, and then breached that contract.
The Vermont Supreme Court defined evidence that could
overcome the presumption of at-will employment in Sherman v.
Rutland Hospital, Inc., 500 A.2d 230 (1985).

The Sherman court

held that “the employee and employer could bargain for, and
agree to be bound by, termination provisions set forth in the
personnel manual, even if the bargain applies only to the
employee before the court and not the entire employment
population.”

Id. (citing Sherman, 500 A.2d at 232).

Moreover,

“[p]ersonnel policies that commit an employer to a progressive
discipline system present a triable issue of fact on whether an
employer may terminate an employee only for just cause.”
Havill, 783 A.2d at 428.
Ms. Dreves alleges that:

1) Hudson had a policy and

practice of providing her with progressive discipline and
requiring just cause for her termination; 2) that policy and
practice modified her at-will status and created an implied
employment contract; and 3) Hudson breached that contract by
violating its policy and practice of providing her with
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progressive discipline and requiring just cause for her
termination.
The Complaint provides more than a mere “threadbare
recital” of the elements.

Implied employment contracts may be

created a number of ways.

See Raymond v. IBM, 954 F. Supp. 744,

748 (D. Vt. 1997) (collecting cases) (“At-will employment
contracts may be modified by express agreement, statute, public
policy, the personnel policies or practices of the employer, and
actions or communications by the employer reflecting assurances
of continued employment.”)

In her complaint, Ms. Dreves has

specifically alleged that Hudson created an implied contract
with her by implementing a “policy and practice of providing her
with progressive discipline and requiring just cause for her
termination.”

This statement rises above the “conclusory

statement” that Ms. Dreves’s at-will status was modified, and is
sufficient to “give the defendant fair notice of what the . . .
claim is and the grounds upon which it rests.” Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson,
355 U.S. 41, 47 (1957)).

Accordingly, the allegation is

sufficient to allow this court to “accept [it] as true and draw
all reasonable inferences from [that] allegation[] in the
plaintiff’s favor.”
Second, Ms. Dreves’s “well-pleaded factual allegations . .
. plausibly give rise to an entitlement to relief.”
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As Ms.

Dreves noted in her reply memorandum, “at-will employment
relationships ‘have fallen into disfavor.’”

Pl. Mem. in Opp’n

to Rule 12(b)(6) Dismissal of Certain Claims 2 (citing Dillon,
819 A.2d at 706 (Vt. 2002).

It is not uncommon for employers to

establish disciplinary policies and procedures that have the
potential to modify at-will employment relationships.
Green v. Vt. Country Store, 191 F. Supp.2d at 480;

See e.g.

McKenney v.

John V. Carr & Son, Inc., 922 F. Supp. 967, 975 (D. Vt. 1996);
Ross v. Times Mirror, Inc., 665 A.2d 580, 583 (Vt. 1995).

Ms.

Dreves’s allegations that Hudson established a disciplinary
policy which it then failed to apply to her “plausibly give rise
to an entitlement to relief,” because—as described above—under
Vermont law, such policies can change an employee’s at-will
status (creating an implied contract).

Failure to follow such

policies can breach that contract.
Hudson argues that the alleged policies and practices at
issue here could not have altered Ms. Dreves’ at-will status
because the Complaint alleges that the policies and practices
were applied to her alone.

Hudson relies on the Vermont Supreme

Court’s holding in Ross v. Times Mirror, that “[a] proffered
procedure or practice may be enforceable, if it is clearly
established and uniformly and consistently applied throughout
the company.”

Ross, 665 A.2d at 585.

Ross, however, dealt with

a unilateral contract modification claim.
7

Id. at 583.

Here,

Ms. Dreves has alleged facts sufficient to support a bilateral
contract modification claim.

This Court has reiterated

Sherman’s fundamental holding that “[a]n employee and an
employer may contractually bind themselves to certain
termination procedures.”

LeBlanc v. United Parcel Serv., Inc.,

972 F. Supp. 827, 832 (D. Vt. 1997) (citing Sherman, 500 A.2d at
232).

Sherman continues to hold that an employer and employee

may “bargain[] for, and agree[] to be bound by, termination
provisions set forth in [a] manual, even though those provisions
may not be binding against the employer as to any other
employee.”

Sherman, 500 A.2d at 232 (emphasis added).

Thus, Ms. Dreves’s allegation that Hudson had a “policy and
practice of providing her with progressive discipline and
requiring just cause for her termination” plausibly supports a
claim.

It is not fatal that Ms. Dreves has failed to allege

that the policy was applied company-wide.

Accordingly, the

Court need not reach the issue of whether the application of
disciplinary policies “to Ms. Dreves’s situation meant that, as
Hudson’s only Vermont general manager, the policy had companywide application in Vermont.”
The Court notes that Ms. Dreves incorporated numerous facts
beyond those articulated in the Complaint into her Reply
Memorandum.

Defendants then felt compelled to respond in kind

in their own response.

Of course, “[t]he court . . . does not
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ordinarily look beyond the complaint and attached documents in
deciding a motion to dismiss.”
131 (2d Cir. 2011).

Halebian v. Berv, 644 F.3d 122,

There are exceptions to this general

practice, but none apply here.

See id. n. 7.

Accordingly, the

above analysis considered only the facts set forth in the
Complaint.
III.

Ms. Dreves’ Unjust Enrichment Claim
Hudson argues that Ms. Dreves’s unjust enrichment claim is

preempted by the FLSA, and should be dismissed.

However, Hudson

concedes that “if Plaintiffs were seeking any relief not
provided for by the FLSA, common-law claims for such relief
likely would not be preempted and Plaintiffs would likely be
allowed to prosecute such claims.”

Reply Mem. of Law of Df. 8

(citing Sosnowy v. A. Perri Farms, Inc., 764 F. Supp. 2d 457,
462 (E.D.N.Y. 2011).

Hudson then argues, however, that Ms.

Dreves’s unjust enrichment claim is preempted by the FLSA
because “allegedly unpaid overtime compensation . . . is
expressly provided for by the FLSA.”

The question is whether

this is in fact true in Ms. Dreves’s case.

It is not.

Rather,

because she was an “exempt” employee, the FLSA does not provide
Ms. Dreves with a claim for unpaid overtime, and thus, her
common law unjust enrichment claim is not preempted, and may
proceed.

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The FLSA sets forth a “comprehensive remedial scheme”
designed to “correct and . . . eliminate . . . [labor conditions
detrimental to the maintenance of the minimum standard of living
necessary for health, efficiency, and general well-being of
workers].”

Herman v. RSR Sec. Servs. Ltd., 172 F.3d 132, 144

(2d Cir. 1999); 29 U.S.C. § 202(b).

It provides “express

provision for private enforcement in certain carefully defined
circumstances.”

Herman, 172 F.3d at 144 (quoting Nw. Airlines,

Inc. v. Transp. Workers Union of Am., AFL-CIO, 451 U.S. 77, 93
(1981)).

Sections 206 and 207 of the FLSA set forth remedies

for wage and hour violations.

29 U.S.C. §§ 206-07.

However,

certain classes of employees are “exempt” from the provisions of
sections 206 and 207.

29 U.S.C. § 213.

Relevant here, “[t]he

provisions of sections 206 and 207 . . . [do] not apply with
respect to any employee in a bona fide executive,
administrative, or professional capacity.”

Id. at § 213(a)(1).

Hudson concedes that Ms. Dreves was an exempt employee.
Moreover, the Complaint states that Ms. Dreves “held the job
title of general manager of Hudson.”

That statement suggests

that Ms. Dreves was employed by Hudson in “a bona fide executive
[or] administrative . . . capacity” as defined by the FLSA, and
thus was an exempt employee.

Because Ms. Dreves was an exempt

employee, she cannot bring an action for unpaid overtime under
the FLSA.

29 U.S.C. § 213.

As one court has noted, “[i]n an
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action to recover unpaid overtime wages under FLSA, a plaintiff
must show that: “(1) he was an employee who was eligible for
overtime ( [ i.e.,] not exempt from the Act's overtime pay
requirements); and (2) that he actually worked overtime hours
for which he was not compensated.” DeSilva v. North Shore-Long
Island Jewish Health Sys., Inc., 770 F.Supp. 2d 497, 507
(E.D.N.Y. 2011) (quoting Hosking v. New World Mortg., Inc., 602
F. Supp. 2d 441, 447 (E.D.N.Y.2009))(emphasis added, internal
quotation marks omitted).
In contrast, “[c]laims for quasi-contract are based on an
implied promise to pay when a party receives a benefit and the
retention of the benefit would be inequitable.”

DJ Painting,

Inc. v. Baraw Enterprises, Inc., 776 A.2d 413, 417 (Vt. 2001)
(citing In re Estate of Elliott, 542 A.2d 282, 285 (Vt. 1988)).
To prevail on such a claim, a “plaintiff must prove that (1) a
benefit was conferred on defendant; (2) defendant accepted the
benefit; and (3) defendant retained the benefit under such
circumstances that it would be inequitable for defendant not to
compensate plaintiff for its value.”

Center v. Mad River Corp.,

561 A.2d 90, 93 (Vt. 1989) (citing In re Estate of Elliott, 542
A.2d at 285).

The elements required to prove an unjust

enrichment claim are distinct from those required to prove a
claim under the FLSA.

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In their memoranda, both parties exert much effort
addressing the question of whether state common law remedies
might coexist with the FLSA as a general matter.

The Court need

not address that issue, however, because both parties agree
that state claims are not preempted where the FLSA and state law
claims are independent.
(E.D.N.Y. 2011).
exempt employees.

Sosnowy, 764 F. Supp. 2d at 463

The FLSA simply does not provide a remedy for
Ms. Dreves has pled facts sufficient to allow

the Court to infer that she is an exempt employee, and Hudson
has agreed that she is an exempt employee.

Because “state

common law claims [that] seek recovery for claims that are
unavailable under the FLSA . . . are not preempted,” Ms. Dreves’
claim for unjust enrichment need not be dismissed.

Id.

This result is consistent with “the central purpose of the
FLSA,” which is “to enact minimum wage and maximum hour
provisions designed to protect employees.”

Williamson v. Gen.

Dynamics Corp., 208 F.3d 1144, 1154 (9th Cir. 2000).

Moreover,

it is consistent with “Congress' intent to allow state
regulation to coexist with the federal scheme.” Overnite
Transportation Co. v. Tianti, 926 F.2d 220, 220 (2d Cir. 1991).
IV.

Mr. Dreves’ Standing
The Complaint alleges that “Richard Dreves was a third

party beneficiary of his wife’s employment benefits with
defendants, and as a result of her termination lost his health
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insurance . . . requiring him to pay out of pocket for
replacement coverage.”

Complaint ¶ 10.

As an initial matter,

the complaint does not clearly articulate the grounds on which
Mr. Dreves seeks relief.

However, the complaint suggests that

Mr. Dreves seeks relief through: 1) the age discrimination claim
under the ADEA; 2) the gender and age discrimination claim under
the VFEPA; and 3) the common law wrongful termination claim.
It is well established that the ADEA does not afford a
“direct cause of action to a non-employee due to discrimination
against his spouse.”
(2d Cir. 1999).

Moss v. Stinnes Corp., 169 F.3d 784, 785

Thus, Mr. Dreves has no claim under the ADEA.

The Vermont Supreme Court has not directly addressed the
question of whether the VFEPA affords a cause of action to
spouses of employees who allege discrimination.
related precedent is useful.

However,

The Vermont Supreme Court often

bases its construction of the VFEPA on the federal courts’
interpretation of Title VII of the Civil Rights Act of 1964.
Payne v. U.S. Airways Inc., 987 A.2d 944, 948 (2009) (citing
Lavalley v. E.B. & A.C. Whiting Co., 692 A.2d 367, 369 (1997)).
This is because “the VFEPA is patterned on Title VII of the
Civil Rights Act of 1964, and the standards and burdens of proof
under VFEPA are identical to those under Title VII.”

Id.

(quoting Hodgdon v. Mt. Mansfield Co., 624 A.2d 1122, 1128
(1992)) (internal quotation marks omitted).
13

Similarly, the

Vermont Supreme Court has noted that “[t]he Age Discrimination
in Employment Act (ADEA), 29 U.S.C. § 621, and its precedent
provide useful analytical tools” in applying the age
discrimination provisions of the VFEPA.

Ross, 665 A.2d at 586.

Since the federal courts have held that the ADEA prohibits
claims by employees’ spouses, it seems likely that the Vermont
Supreme Court would hold that the VFEPA also prohibits such
claims.

Mr. Dreves therefore has no claim under the VFEPA.

This leaves the question of whether Mr. Dreves has standing
as a third-party beneficiary to his wife’s employment contract.
“Whether or not a party is a third-party beneficiary is based on
the intention of the original contracting parties.”

Morrisville

Lumber Co., Inc., v. Okcuoglu, 531 A.2d 887, 890 (Vt. 1987)
(citing Broadway Maintenance Corp. v. Rutgers, 447 A.2d 906, 909
(N.J. 1982).

Proving that a party is a third-party beneficiary

requires the introduction of proof that the contracting parties
“entered into their agreement in contemplation of conferring a
benefit on the plaintiff.”

Id.

The Complaint fails to state

any facts that would allow the Court to infer such
contemplation.

Rather, the complaint states the bare legal

conclusion that “Richard Dreves was a third party beneficiary of
his wife’s employment benefits.”

Complaint ¶ 10.

Because the

Complaint lacks a factual basis which would allow the Court to
infer that Mr. Dreves was in fact a third-party beneficiary of
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his wife’s employment benefits, it fails to state a plausible
claim sufficient to find recovery for Mr. Dreves.

Accordingly,

his claim is dismissed.
CONCLUSION
For the reasons set forth above, Hudson’s motion to dismiss
Ms. Dreves’s common law claims for wrongful termination and
unjust enrichment is DENIED, and Hudson’s motion to dismiss Mr.
Dreves’s claim is GRANTED.

Dated at Burlington, Vermont this 29th day of February, 2012.

/s/ William K. Sessions III
William K. Sessions III
District Judge

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