Stradtman v. Republic Services, Inc. et al

Filing 14

MEMORANDUM OPINION Signed by District Judge James C. Cacheris on 11/25/14. (Order to follow).(gwalk, )

IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF VIRGINIA
Alexandria Division

STEPHEN M. STRADTMAN,
Plaintiff,
v.
REPUBLIC SERVICES, INC.,
et al.,
Defendants.

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M E M O R A N D U M

1:14CV1289 (JCC/JFA)

O P I N I O N

This matter is before the Court on a Motion to Dismiss
filed by the collective Defendants in this matter, Republic
Services, Inc., Republic Services of Virginia, LLC (collectively
“Republic”), and Ronald Krall (collectively “Defendants”) [Dkt.
4].

The Court will grant the motion in part.
I. Background 1
This action arises from a once fruitful business

relationship between two companies in the waste management
industry that eventually deteriorated, leaving Plaintiff Stephen
Stradtman (“Stradtman” or “Plaintiff”) without a job.
On January 1, 2005, Stradtman became CEO of Otto
1

In considering a motion to dismiss for failure to state a claim, as is the
case here, “a court accepts all well-pled facts as true and construes these
facts in the light most favorable to the plaintiff[.]” Nemet Chevrolet, Ltd.
v. Consumeraffairs.com, Inc., 591 F.3d 250, 255 (4th Cir. 2009) (citations
omitted). Accordingly, the following facts, taken from Plaintiff’s
Complaint, are accepted as true for purposes of this motion. See Erickson v.
Pardus, 551 U.S. 89, 94 (2007).

1

Industries North America, Inc. (“Otto”), a company that
manufactures plastic containers for waste materials.
[Dkt. 8-3] ¶ 26.)

(Compl.

Plaintiff was responsible for, inter alia,

managing business operations and sales in the Commonwealth of
Virginia.

(Id.)

During his first five years as CEO from 2005

until 2010, Plaintiff significantly increased Otto’s profit
margins and expanded its business in the east region.
¶¶ 29-31).

(Id. at

A large part of this success was due to the business

relationship that grew over time between Otto and Republic, a
waste collection service company, which had merged in late-2008
with Otto’s major client, Allied Waste Industries, Inc.

(Id. at

¶ 32.)
Notably, Stradtman reformulated a five-year contract
with Republic –- the longest private contract Otto entered into
since 2005.

(Compl. ¶¶ 33-35.)

By this time, Otto had gone

from a company losing money “to a $100 million dollar company,”
due in large part to Otto’s “booming business relationship with
Republic, in particular the East Region of Republic (the ‘East
Region’).

The East Region accounted for approximately 25% of

the business between Otto and Republic, and approximately 10% of
Otto’s overall business.”

(Id. at ¶ 34.)

Continuing into 2011,

Plaintiff regularly received praise from Republic’s regional
executives and supervisors, including Defendant Ronald Krall,
Republic’s Senior Vice President of the East Region, who wanted
2

to continue to grow the relationship with Otto.

(Id. at ¶ 36.)

In one instance, Mr. Drew Isenhour (“Isenhour”), Republic’s Area
President, instructed all North Carolina divisions to buy from
Otto.

(Id. at ¶ 39.)

Business was good, and it continued to

grow.

(Id. at ¶¶ 38, 42-46.)

But by the end of 2011, the

relationship between Otto and Republic, and specifically,
between Stradtman and Republic, started to worsen.
In June of 2011, Stradtman was engaged to marry Ms.
Jennifer Taylor (“Taylor”), Republic’s Director for Municipal
Sales in the East Region.

(Compl. ¶ 41.)

Three months later in

September of 2011, Taylor filed an EEOC charge against Republic,
alleging sexual harassment, gender discrimination, and
retaliation for conduct that allegedly occurred between 2009 and
2011.

(Id. at ¶¶ 47-48.)

The same day Taylor filed the EEOC

charge, Republic notified her that her employment with the
company was terminated, effective September 23, 2011.
49.)

(Id. at ¶

Unable to resolve the allegations, in October of 2011,

Taylor filed a civil discrimination lawsuit against Republic and
various Republic employees in Fairfax Circuit Court, which was
subsequently removed to this Court.
and Taylor married the same month.

(Id. at ¶ 53.)

Stradtman

(Id. at 52.)

The business relationship between Otto and Republic
began to suffer.

Stradtman claims that Republic was retaliating

against him for his wife’s discrimination lawsuit by diverting
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business away from Otto.

(Compl. ¶ 78.)

For example, the same

month as the wedding, Christopher Synek (“Synek”), Republic’s
Executive Vice President of Sales, cancelled Republic’s
participation in an annual golf tournament due to Taylor’s
lawsuit, claiming he couldn’t be seen with Stradtman, and that
“lawsuits have unintended consequences.”

(Id. at ¶¶ 54-55.)

A

month later, during lunch with Isenhour, Stradtman learned that
Otto orders were “being questioned,” and that Krall’s
subordinates were getting quotes from Otto’s competitors.
at ¶¶ 57-58.)

(Id.

Republic employee Robert Formack was subsequently

terminated because he refused to shift a $1 million order from
Otto to an Otto competitor.

(Id. at ¶¶ 60, 62-63.)

When

Stradtman attempted to remedy the situation in December of 2011,
Synek promised to honor Republic’s contract with Otto, but
acknowledged that the relationship was now strained because of
Taylor’s lawsuit, and even went as far to try and resolve the
lawsuit through conversations with Stradtman.

(Id. at ¶¶ 64-

65.)
Relations did not get any better between Stradtman and
Republic in 2012.

Republic, under the direction of Krall,

continued redirecting orders and withholding business from Otto
in the aggregate amount of $3 million.

(Compl. ¶¶ 70-72, 74.)

When Otto investigated the reason for lost Republic business in
February of 2012, it found there were no quality, service, or
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price issues.

(Id. at ¶ 80.)

Moreover, discussions were

delayed regarding Otto’s upgrade in status from a “Preferred
Vendor” to a “Strategic Vendor,” (id. at ¶¶ 68-69.), and the
upgrade would be near impossible if Taylor’s lawsuit was not
resolved.

(Id. at ¶ 97.)
By April of 2012, efforts to repair the relationship

with Republic had failed, and Stradtman advised Otto’s Owner and
Board of Directors that he had no choice but to resign as Otto’s
CEO, because Republic would continue to divert business away
from Otto due to Taylor’s lawsuit.

(Compl. ¶ 109.)

The loss of

Republic’s business had cost Otto $5 million by May of 2012, and
Stradtman was in an “untenable position,” because of the
fiduciary duty he owed to Otto as the CEO.

(Id. at ¶¶ 111-112.)

On May 31, 2012, Stradtman was forced to resign from the
position of Otto’s CEO.

(Id. at ¶¶ 113-116.)

Sixty days later,

Republic resumed regular orders from Otto, and Krall planned to
attend the east region’s meeting, because “he heard there was a
new CEO” at Otto.

(Id. at ¶ 120.)

In December of 2013, Stradtman filed a lawsuit against
Republic and Krall in Fairfax County Circuit Court, but did not
serve each of the Defendants until September 29, 2014.
Notice of Removal [Dkt. 8] at 2.)

(Am.

The same day they were

served, the Defendants removed the matter to this Court,
invoking diversity jurisdiction.

(Id.)
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Stradtman brings three

counts: (1) tortious interference with contractual relations and
business expectancies against all Defendants (Compl. ¶¶ 121140.); (2) common law conspiracy against all Defendants (id. at
¶¶ 141-149.); and (3) negligent retention of employees (Ronald
Krall) against the two Republic Defendants (id. at ¶¶ 150-170.).
Stradtman asks for $20 million in compensatory damages and $30
million in punitive damages on each of the three counts.

(Id.

at 32.)
The Defendants now move to dismiss the Complaint.
[Dkt. 4.]

The motion is fully briefed and the Court heard oral

argument of counsel on November 20, 2014.

Thus, the motion is

ripe for disposition.
II. Standard of Review
In deciding a Rule 12(b)(6) motion, a court must be
mindful of the liberal pleading standards under Rule 8, which
require only “a short and plain statement of the claim showing
that the pleader is entitled to relief.”

Fed. R. Civ. P. 8.

While Rule 8 does not require “detailed factual allegations,” a
plaintiff must still provide “more than labels and conclusions”
because “a formulaic recitation of the elements of a cause of
action will not do.”

Bell Atl. Corp. v. Twombly, 550 U.S. 544,

555-56 (2007) (citation omitted).

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
6

on its face.’”

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

(quoting Twombly, 550 U.S. at 570).

“The purpose of a Rule

12(b)(6) motion is to test the sufficiency of a complaint;
importantly, [it] does not resolve contests surrounding the
facts, the merits of a claim, or the applicability of defenses.”
Butler v. United States, 702 F.3d 749, 752 (4th Cir. 2012)
(citations and internal quotation marks omitted).

A court

reviewing a complaint on a Rule 12(b)(6) motion must accept
well-pleaded allegations as true, and must construe all
allegations in favor of the plaintiffs.

See Randall v. United

States, 30 F.3d 518, 522 (4th Cir. 1994).
III. Analysis
As an initial matter, the Court is mindful that
dismissal pursuant to Rule 12(b)(6) is disfavored.

Fayetteville

Investors v. Commercial Builders, Inc., 936 F.2d 1462, 1471 (4th
Cir. 1991) (citing 2A Moore’s Federal practice, ¶ 12.07, p. 1263.).

Thus, the motion to dismiss will not be granted as long

as sufficient facts are alleged to support an inference that
plaintiff is entitled to the relief he seeks.

Francis v.

Giacomelli, 558 F.3d 186, 196-97 (4th Cir. 2009) (citing
Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) (additional citation
omitted)).

With this standard in mind, the Court will grant the

motion in part, but only as to Counts Two and Three. Otherwise,
the motion to dismiss will be denied and Count One will remain.
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A. Count One – Tortious Interference with Contract
Virginia common law recognizes a cause of action for
tortious interference with contract rights or business
expectancies.

See Chaves v. Johnson, 335 S.E.2d 97 (Va. 1985).

The necessary elements to establish a prima facie case are: (1)
the existence of a valid contractual relationship or business
expectancy; (2) knowledge of the relationship or expectancy on
the part of the interferor; (3) intentional interference
inducing or causing a breach or termination of the relationship
or expectancy; and (4) resultant damage to the party whose
relationship or expectancy has been disrupted.
Dunlap v. Cottman Transmission Sys., LLC, 754 S.E.2d 313, 318
(Va. 2014) (quoting Chaves, 335 S.E.2d at 102) (internal
quotation marks and additional citations omitted).

If the

contract is “at will,” however, it must also be proven “that the
defendant employed improper methods.”

Dunlap, 754 S.E.2d at 318

(internal quotation marks and citations omitted).
Here, the contractual relationship or business
expectancy at issue is Stradtman’s employment with Otto.
(Compl. ¶¶ 126, 138.)

Defendants contend, inter alia, that

Count One fails to state a claim because “Stradtman has not
alleged that the third party (Otto) terminated his employment
relationship as a result of defendants’ alleged interference,”
and moreover, Stradtman has not alleged that Defendants intended
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to cause his employment to be terminated. 2
at 6.)

(Defs.’ Mem. [Dkt. 5]

Even assuming Stradtman’s contract was for at-will

employment, the Court finds that he has sufficiently pled facts
to support a claim for tortious interference with a contract
expectancy.
Both sides rely on Judge Ellis’s opinion in Taylor v.
CNA Corp., 782 F. Supp. 2d 182 (E.D. Va. 2010) to support their
argument for, or against, the proposition that Defendants’
intentional interference caused the termination of Stradtman’s
employment with Otto.
10] at 7-9.)

(Defs.’ Mem. at 7-10; Pl.’s Opp’n [Dkt.

Defendants argue that Stradtman’s voluntary

resignation from Otto is fatal to his claim in Count One because
Virginia law requires the interfering party (Republic and Krall)
to cause a third party (Otto) to terminate the business
relationship with Stradtman.

(Defs.’ Mem. at 7-8 (citing

Rappahannock Pistol & Rifle Club v. Bennett, 262 Va. 5 (2001).)
Stradtman concedes that he resigned from Otto and was not
terminated, but contends that he was “constructively discharged”
and the Defendants intentionally acted to give him no other
choice but to resign.

(Pl.’s Opp’n at 7-9.)

Even though “[i]t is axiomatic that a plaintiff cannot
sustain a claim of tortious interference with business
2

Defendants also argue that Count One should be dismissed because Stradtman
did not allege that there was a competitive relationship between himself and
Republic and because Stradtman did not allege that defendants employed any
“improper methods” to interfere with his employment. (Defs.’ Mem at 6.)

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expectancy when he willingly surrendered his right to those
expectancies,” CNA Corp., 782 F. Supp. 2d at 204, the Complaint
alleges that Stradtman was “effectively left [with] no practical
choice other than quitting,” id.; see, e.g., Compl. ¶ 116 (“Mr.
Stradtman was forced to leave his promised ownership interests
in Otto, related equity compensation, and his annual bonuses.”)
(emphasis added).
Moreover, Stradtman’s Complaint alleges facts that
support each of the necessary elements for tortious interference
with an at-will contract expectancy as compared to the Civil
Virginia Model Jury Instruction Number 40.250.

Specifically,

the Court notes the following allegations:
(1) There was a contract expectancy between Stradtman
and Otto; see, e.g., Compl. ¶¶ 26-27 (“Mr. Stradtman was hired
as Chief Executive Officer (“CEO”) of Otto effective January 1,
2005 . . . . At all times relevant hereto, Mr. Stradtman carried
out his responsibilities in an exemplary manner, to the benefit
of Otto.”).
(2) There was a reasonable probability of future
economic benefit to Stradtman from that contract expectancy;
see, e.g. id. at ¶ 126 (“Stradtman had a virtual certainty of
continued and significant future economic benefits in his
employment with Otto, including salary, raises, commissions and
employment benefits.

Otto was in the process of expanding his
10

compensation package and extending the duration of his
employment agreements.).
(3) Republic and Krall knew of this contract
expectancy; see, e.g., id. at ¶ 124 (“In February 2011, at
Republic’s East Region Municipal Sales Meeting ([where] Mr.
Stradtman had been invited to represent Otto as a presenter),
Mr. Krall praised Otto’s product, service and support of
Republic’s East Region, and publically stated to the group that
he wished there were more vendors like Otto in the East
Region.”).
(4) Republic and Krall used improper methods to
interfere with the contract expectancy; see, e.g., id. at ¶ 128
(“Republic and Mr. Krall employed improper methods including,
but not limited to, violating Va. Code § 18.2-460 which
prohibits any obstruction of justice . . . breaching its
contract with Otto . . . defamatory allegations that Otto rather
than Republic had not performed under the contract, efforts to
discredit Mr. Stradtman and shift business away from Otto[.]”).
(5) Republic and Krall intended to interfere with the
contract expectancy; see, e.g., id. at ¶¶ 78-79 (“Republic
engaged in these acts of retaliation against Mr. Stradtman, and
therefore, indirectly against Ms. Taylor, because Ms. Taylor
complained and then filed a lawsuit against Republic.

This

retaliation further affected Mr. Stradtman because it associated
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him with Otto’s lost business, as well as hurt his overall sales
numbers, on which particular parts of his compensation were
based.”).
(6) It was reasonably certain that the business
relationship would have continued in the absence of Republic and
Krall’s conduct; see, e.g., id. at ¶ 117 (“At the time of Mr.
Stradtman’s termination, his employment agreement had been
extended through 2012 and Otto was in the process of expanding
Mr. Stradtman’s compensation package and completing another
three year agreement.

Mr. Stradtman’s discussions with Otto

during this time came to a chilling halt.”).
(7) Stradtman was damaged by the disruption of the
contract expectancy; see, e.g., id. at ¶ 169 (“As a direct and
proximate result of Republic Services’ actions, Mr. Stradtman
has suffered and continues to suffer injury, physical and
emotional distress, pain, suffering, inconvenience, mental
anguish, loss of enjoyment of life, past and future loss of
income and benefits of employment, lost career and business
opportunities and advancement, medical expenses, other past
pecuniary losses, future pecuniary losses, and other nonpecuniary losses.”).
In accepting these well-pleaded allegations as true
and in construing all allegations in favor of Stradtman, as the
Court is required to do at this stage, the Court will find that
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Stradtman sufficiently states a claim for relief for tortious
interference with a contract expectancy under Count One.

See

Randall v. United States, 30 F.3d 518, 522 (4th Cir. 1994).
Because the Court is mindful that dismissal pursuant to Rule
12(b)(6) is disfavored, see Fayetteville Investors v. Commercial
Builders, Inc., 936 F.2d 1462, 1471 (4th Cir. 1991), this claim,
and only this claim, shall remain.
B. Count Two – Common Law Civil Conspiracy
In Virginia, “[a] civil conspiracy is a combination of
two or more persons to accomplish an unlawful purpose or to
accomplish a lawful purpose by unlawful means, resulting in
damage to the plaintiff.”

Glass v. Glass, 321 S.E.2d 69, 74

(Va. 1984) (citations omitted).

However, “a common law claim of

civil conspiracy generally requires proof that the underlying
tort was committed.”

CNA Corp., 782 F. Supp. 2d at 204-205

(quoting Almy v. Grisham, 639 S.E.2d 182 (Va. 2007)) (“This is
so because the gist of the civil action of conspiracy is the
damage caused by the acts committed in pursuance of the formed
conspiracy and not the mere combination of two or more persons
to accomplish an unlawful purpose or use unlawful means.”)
(internal quotation marks and additional citation omitted).
However, “[a] corporate entity, which acts only
through its agents, cannot conspire with itself, so a conspiracy
cannot exist if Defendants were agents of the same principle
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acting within the scope of the agency.”

Phoenix Renovation

Corp. v. Rodriguez, 461 F. Supp. 2d 411, 429 (E.D. Va. 2006)
(citing Fox v. Deese, 362 S.E.2d 699, 708-709 (Va. 1987)), aff’d
258 F. App’x 526 (4th Cir. 2007).

Also, “Virginia has not

recognized the so-called ‘personal stake’ exception to this
general rule when the conspiring agent has an independent stake
in achieving the conspiracy’s illegal objective.”
Renovation Corp., 461 F. Supp. 2d at 429.

Phoenix

The Fourth Circuit

has applied the personal stake exception to questions of federal
law in very limited circumstances, including federal antitrust
litigation.

See, e.g., Greenville Publ’g Co. v. Daily

Reflector, Inc., 496 F.2d 391 (4th Cir. 1974).

Thus, it is

inapplicable here to claims brought under Virginia law.
Even though the underlying tort in Count One remains,
Count Two will be dismissed because Krall, an agent of Republic,
cannot conspire with Republic under the intracorporate immunity
doctrine discussed above.

In short, even if Krall’s interest in

getting himself dismissed from Taylor’s sexual harassment
lawsuit constituted an “independent stake” in achieving the
conspiracy’s illegal objective, such a theory is inapplicable to
overcome the intracorporate immunity doctrine because it has not
been recognized by the Supreme Court of Virginia, and only by
the Fourth Circuit in very limited circumstances.
Renovation Corp., 461 F. Supp. 2d at 429.
14

Phoenix

The Court declines to

indulge Stradtman’s extension of this argument.

Thus, Count Two

will be dismissed.
C. Count Three – Negligent Retention
Lastly, Stradtman brings count three against Republic
for negligent retention of Krall, an agent/employee.
150-170.)

(Compl. ¶¶

Virginia recognizes the tort of negligent retention.

Se. Apartments Mgmt., Inc. v. Jackman, 513 S.E.2d 395, 397 (Va.
1999) (citation omitted.)

“The test is whether the employer has

negligently placed an unfit person in an employment situation
involving an unreasonable risk of harm to others.”

Morgan v.

Wal-Mart Stores E., LP, No. 3:10CV669-HEH, 2010 WL 4394096, at
*3 (E.D. Va. Nov. 1, 2010) (citation omitted).

Additionally,

“the Virginia Supreme Court has determined that ‘an unreasonable
risk of harm’ element requires the threat of serious and
significant physical injury.”

Zaklit v. Global Linguist

Solutions, LLC, No. , 2014 WL 3109804, at *14 (E.D. Va. July 8,
2014) (quoting Parker v. Geneva Enters., Inc., 997 F. Supp. 706,
713 (E.D. Va. 1997)).
Here, Stradtman alleges that Republic was negligent in
retaining Krall after it learned that Krall was retaliating
against Stradtman and “harming him in his business, profession
and reputation,” but does not allege a “threat of serious and
significant physical injury,” nor can he, based on the facts as

15

currently alleged in the Complaint.
713.

Parker, 997 F. Supp. at

Therefore, Count Three will be dismissed as well.
IV. Conclusion
For the foregoing reasons, the Court will grant

Defendants’ motion to dismiss in part.
will be dismissed.

Counts Two and Three

In denying the motion to dismiss as to Count

One, the Court is guided by the Fourth Circuit’s strong
preference for resolving cases on their merits.

See United

States v. Shaffer Equip. Co., 11 F.3d 450, 453 (4th Cir. 1993).
An appropriate Order shall issue.

November 25, 2014
Alexandria, Virginia

/s/
James C. Cacheris
UNITED STATES DISTRICT COURT JUDGE

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