Stradtman v. Republic Services, Inc. et al
Filing
174
MEMORANDUM OPINION re: 142 MOTION for Summary Judgment by Ronald Krall, Republic Services of Virginia, LLC, Republic Services, Inc. (See Memorandum Opinion For Details). Signed by District Judge James C. Cacheris on 6/11/15. (nhall )
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.
M E M O R A N D U M
1:14cv1289 (JCC/JFA)
O P I N I O N
Plaintiff Stephen M. Stradtman (“Stradtman”) filed
suit against Defendants Republic Services, Inc., Republic
Services of Virginia, LLC, and Ronald Krall (collectively
“Defendants”) originally alleging three counts under Virginia
law: (1) tortious interference with contractual relations; (2)
conspiracy; and (3) negligent retention of employees.
[Dkt. 1-3] ¶¶ 121-170.)
(Compl.
Stradtman requests millions of dollars
in compensatory and punitive damages.
(Id. at 32.)
The Court
previously granted in part Defendants’ motion to dismiss, and
dismissed counts two and three of the Complaint, leaving only
one claim for tortious interference with contractual relations
(“tortious interference”).
Order [Dkt. 15].)
(Nov. 25, 2014 Mem. Op. [Dkt. 14];
The matter is currently set for a jury trial
to commence on July 6, 2015.
1
Stradtman claims that Defendants tortiously interfered
with contractual rights regarding his former employment as the
Chief Executive Officer (“CEO”) of Otto Industries North
America, Inc. (“Otto”), a trash and recycling cart manufacturer.
(Compl. ¶¶ 121-140.)
Stradtman alleges that Defendants diverted
their business away from Otto in an attempt to force his
resignation.
(Id.)
Stradtman claims this was done in
retaliation for a discrimination lawsuit that Stradtman’s wife
had filed against Defendants.
(Id.)
Stradtman believes he had
no choice but to resign because of Defendants’ improper methods
and interference with his employment at Otto.
(Id.)
This matter is now before the Court on Defendants’
Motion for Summary Judgment pursuant to Rule 56 of the Federal
Rules of Civil Procedure.
(Defs.’ Mot. for Summ. J. [Dkt. 142];
Defs.’ Mem. in Supp. of Mot. for Summ. J. [Dkt. 143].)
Stradtman filed a brief in opposition (Pl.’s Opp’n [Dkt. 164]),
to which Defendants replied (Defs.’ Reply [Dkt. 170].)
On June
4, 2015, the Court heard oral argument of counsel and granted
Defendants’ motion in open court, which is memorialized herein.
I. Background
The following facts are taken from the parties’ Local
Rule 56(B) statements and are undisputed1 unless otherwise
1
For ease, undisputed facts are referred to by “SOF” without a
party designation.
2
indicated.
(See Defs.’ Stmt. of Facts (“SOF”) [Dkt. 143] at 3-
15; Pl.’s SOF [Dkt. 164] at 3-13.)
Republic Services, Inc. (“Republic”) provides
nationwide waste and recycling services through its subsidiaries
and affiliates, including Republic Services of Virginia, LLC
(“Republic-Virginia”).
(SOF ¶ 1.)
Otto2 manufactures trash and
recycling carts, and contracts with municipalities and waste
removal companies, including Republic, for other goods and
services.
(SOF ¶ 2.)
In 2005, Stradtman became CEO of Otto and
served as a director on the four-person board of directors.
(SOF ¶ 7.)
Stradtman was an at-will employee.
(SOF ¶ 8.)
Since at least 2008, Republic has been purchasing
carts from Otto.
(SOF ¶ 4.)
In 2010, Republic entered into an
“Amended and Restated Master Supplier Agreement” with Otto,
which extended their prior agreement for an additional five
years, or until December 31, 2015.
(SOF ¶ 5.)
This agreement
could be extended one additional year if, as of December 31,
2015, Republic had not averaged at least 70% of the average
purchases for the 3-year period prior to execution of the
agreement.
(SOF ¶ 6.)
On May 17, 2011, Stradtman posted his resume on the
website of Korn Ferry, an executive recruiting firm, even though
2
Otto is a subsidiary of the Otto Group, a privately owned
company controlled by Ulrich Otto (“Mr. Otto”), who owns between
98-100% of the stock. (SOF ¶ 3.)
3
he was not actively looking for a new job.
(Defs.’ SOF ¶ 16
(citing Stradtman Dep. [Dkt. 143-1, 143-2] at 346); Pl.’s SOF ¶
16 (citing Stradtman Dep. [Dkt. 164-3] at 347-48).)
In June of
2011, Stradtman became engaged to marry Jennifer Taylor
(“Taylor”), the then-East Region Director of Municipal Sales for
Republic-Virginia.
(SOF ¶ 11.)
On September 9, 2011, Taylor
filed an EEOC charge against Republic alleging sexual
harassment, hostile work environment, gender discrimination, and
after her employment with Republic-Virginia was terminated,
retaliation.
(SOF ¶ 12.)
Taylor were married.
On October 22, 2011, Stradtman and
(SOF ¶ 13.)
On October 27, 2011, Taylor
filed a discrimination lawsuit against Defendants.3
(SOF ¶ 14.)
In December of 2011, Stradtman asked the CEO of Otto Group and
fellow Otto board member, Luc Muller (“Muller”), to extend his
employment into 2012 and did not raise any concerns about
Republic or mention that he was seeking out other job
opportunities.
(SOF ¶¶ 17-18 (citing Muller Decl. [Dkt. 143-4]
¶ 7; Stradtman Decl. [Dkt. 164-1] ¶ 16).)
In early January of 2012, Stradtman was contacted by
an executive recruiter from Charles Aris, Inc. regarding an
opening for a CEO position at Precision Southeast, Inc. (“PSI”)
in Myrtle Beach, South Carolina, a company that is owned by the
3
Taylor ultimately prevailed in this lawsuit, obtaining back
pay, front pay, and compensatory damages. See Taylor v.
Republic Servs., Inc., 968 F. Supp. 2d 768 (E.D. Va. 2013).
4
private equity firm Gladstone Companies (“Gladstone”).
19-20.)
(SOF ¶¶
When asked why he wanted to leave his position as CEO
of Otto, Stradtman responded that he was concerned about the
direction of Otto, frustrated with the inability of Otto to
structure an equity plan for him, and that he disagreed with Mr.
Otto’s compensation, which in his opinion, was at odds with
growing the company.
(Defs.’ SOF ¶ 25 (citing Stradtman Dep. at
79-84; Charles Aris Candidate Profile [Dkt. 143-9] at 10); Pl.’s
SOF ¶ 25 (citing Stradtman Dep. at 348-49; Stradtman Decl. ¶ 34;
Williams Dep. [Dkt. 164-4] at 10-11, 23-24).)
One day later,
Stradtman updated, or re-uploaded, his resume with Korn Ferry.
(Defs.’ SOF ¶ 23; Pl.’s SOF ¶ 23.)
On January 16, 2012, Stradtman provided the Charles
Aris recruiters with a six-page memorandum entitled “Otto
Turnaround” that described his accomplishments at Otto.
(Defs.’
SOF ¶¶ 30, 32 (citing Otto Turnaround Mem. [Dkt. 143-12]); Pl.’s
SOF ¶¶ 30, 32 (citing Stradtman Dep. at 38, 48-49).)
It is
disputed whether the information Stradtman provided contained
confidential business information.
(Id.)
On January 24, 2012,
Stradtman provided the recruiters with a list of references.
(SOF ¶ 33.)
Shortly thereafter, Stradtman interviewed with
Christopher Lee, the Managing Director of Gladstone, who
reported that Stradtman wanted to leave Otto because “he’s been
frustrated with, at Otto, feels like he’s done a ton of work,
5
built a lot of value, and he’s not being given the equity piece
and that upside that he was promised” and that he was “[l]ooking
for an opportunity to grow a business, looking to recreate some
of the success he had in his former company.”
(Defs.’ SOF ¶¶
34-36 (citing Lee Dep. [Dkt. 143-14] at 24:12-17); Pl.’s SOF ¶¶
34-36 (citing Lee Dep. [Dkt. 164-5] at 14-15).)
On March 7, 2012, PSI offered Stradtman the CEO
position at PSI for a lower base salary than his base salary at
Otto,4 but also included an offer of equity in the company.
¶ 37 (citing PSI Offer Letter [Dkt. 143-15]).)
(SOF
Four days later,
on March 11, 2012, Muller agreed to pay Stradtman $270,000,
which can either be described as a bonus that would compensate
Stradtman for Otto’s performance from 2008 to 2010, or a payment
in lieu of equity for the years 2008 and 2011.
(Defs.’ SOF ¶ 38
(citing Muller Decl. ¶ 8); Pl.’s SOF ¶ 38 (citing Stradtman Dep.
at 392).)
During the negotiation of this payment, Stradtman did
not tell Muller that he was considering leaving Otto, that he
had interviewed with PSI, that he received the job offer to
become CEO of PSI, or that there were any problems with Republic
retaliating for Taylor’s lawsuit.
Decl. ¶¶ 9-10).)
(SOF ¶ 39 (citing Muller
In his March 2012 end of quarter report to
Otto, Stradtman reported that sales to Republic were up
4
By this point, Stradtman’s annual salary was approximately
$332,800. (Muller Decl. ¶ 5.)
6
approximately 14% from the same period the previous year and did
not mention any order cancellations or redirections by Republic;
instead, any concerns were attributed to non-Republic matters.
(Defs.’ SOF ¶ 40 (citing March 2012 Report [Dkt. 143-17]); Pl.’s
SOF ¶ 40 (citing Stradtman Decl. ¶ 6).)
On March 19, 2012, Stradtman continued the hiring
process with PSI by interviewing with ghSmart, a personnel
consultant.
(SOF ¶ 41.)
Stradtman again raised concerns about
Mr. Otto’s investment in the company and that he was frustrated
with his lack of equity in Otto.
(Defs.’ SOF ¶¶ 42-43 (citing
Stradtman Dep. at 85-88, 96-97, 98, 101); Pl.’s SOF ¶¶ 42-43
(citing Stradtman Dep. at 348-49).)
On March 22, 2012,
Stradtman sent an e-mail to Ms. Brown, the attorney representing
Taylor in the discrimination suit against Republic, who also now
represents him in this matter.
Brown [Dkt. 143-18]).)
(SOF ¶ 45 (citing E-mail to Ms.
In the e-mail, Stradtman referenced his
prior compensation from Otto, his job offer with PSI, and his
expectation of receiving the $270,000 payment from Otto in
March, April, and May of 2012.
(Id.)
Stradtman also wrote that
he “will need to try to force [his] termination [from Otto]
between March 28 and April 1, roughly, in order to try to
receive severance to support me with my new lower salary.”
¶ 46.)
(SOF
Stradtman disputes any implication that he wanted to be
terminated, and instead claims that by labeling his separation a
7
“termination,” he would be allowed to collect severance to
account for the 50% pay cut he would take in his new job at PSI.
(Pl.’s SOF ¶ 46.)
On April 10, 2012, Stradtman accepted the CEO position
with PSI by signing a written offer letter.
Executed Offer Letter [Dkt. 143-20).)
(SOF ¶ 47 (citing
Two days later, Stradtman
scheduled a conference call with Muller to discuss “a situation
which has arisen and which I am very upset about, but which must
be dealt with professionally and quickly.”
mail to Muller [Dkt. 143-21]).)
(SOF ¶ 48 (citing E-
During this communication,
Stradtman raised issues regarding cancelled or redirected orders
by Republic in the East Region for the very first time.
49-50 (citing E-mail to Muller at 390-93).)
(SOF ¶¶
Stradtman stated
that he was “willing to move on in the best interest of Otto’s
success.”
(SOF ¶ 50 (citing E-mail to Muller at 393).)
Initially, Muller expressed his desire for Stradtman
to remain at Otto and not resign.
(Pl.’s SOF ¶ 53.)
Muller
talked to Stradtman on April 11, 2012 and “assured him that the
Company did not want him to resign, and that we were very happy
with his performance and wanted him to continue to lead the
Company.”
(SOF ¶ 51 (citing Muller Decl. ¶ 14).)
Muller told
Stradtman that “in the context of our overall and long term
relationship with Republic Services, the issues he was raising
were not that significant, and certainly did not require him to
8
resign.”
(SOF ¶ 53 (citing Muller Decl. ¶ 14).)
During this
initial conversation, Stradtman did not tell Muller that he was
looking for other employment, that he had interviewed for
another job, or that he had accepted a job offer from PSI.
¶ 54 (citing Muller Decl. ¶ 16).)
Muller thought that this
discussion was the end of “the issue.”
Muller Decl. ¶ 17).)
(SOF
(Defs.’ SOF ¶ 55 (citing
Stradtman finds this hard to believe.
(Pl.’s SOF ¶ 55 (citing Stradtman Decl. ¶ 21).)
On May 31, 2012, Stradtman sent Muller a lengthy
memorandum explaining that he was still concerned about
potential damage to Otto’s business from Republic’s action in
the East Region and that he predicted “it’s going to be a couple
of very nasty years” if Taylor’s discrimination lawsuit moved
forward.
(SOF ¶¶ 56-59 (citing May 31, 2012 Mem. [Dkt. 143-22]
at 407-14).)
Stradtman offered Muller three options for his
exit from Otto: resignation with severance benefits, resignation
and a consulting role so he could earn his severance benefits,
or termination without cause.
Mem. at 411-12).)
(SOF ¶ 60 (citing May 31, 2012
Stradtman also explained, for the first time,
that another firm had approached him earlier in the year, that
an offer had recently been made, and that it was the “best way
to go,” but did not disclose that he had already accepted the
offer from PSI.
13).)
(SOF ¶ 61 (citing May 31, 2012 Mem. at 412-
In response, Muller again reiterated that “we wanted him
9
to stay at the Company” and that Otto would pay Stradtman an
additional $70,000 bonus through his resignation date to ensure
a proper transition.
(SOF ¶ 62 (citing Muller Decl. ¶ 23).)
Effective June 30, 2012, Stradtman resigned as CEO of
Otto.
(Defs.’ SOF ¶¶ 63-64 (citing Resignation Letter [Dkt.
143-23]).)
Stradtman remembers Muller telling him at the time
that “he understood there was no good decision” for Stradtman.
(Pl.’s SOF ¶ 64 (citing Stradtman Dep. at 372).)
nor Mr. Otto asked Stradtman to resign.
Neither Muller
(Defs.’ SOF ¶¶ 65-67
(citing Stradtman Dep. at 203 (“Quite the opposite. . . . They
preferred that I stay.”); id. at 215, 353-54); Pl.’s SOF ¶¶ 6567 (citing Stradtman Dep. at 393).)
Otto did not force
Stradtman to leave his job, or make his ability to act as CEO
unbearable.
(Id.)
Stradtman believed that his fiduciary duty
to Otto required him to resign for the good of the company.
(Id.)
II. Legal Standard
Summary judgment is appropriate only where, on the
basis of undisputed material facts, the moving party is entitled
to judgment as a matter of law.
See Fed. R. Civ. P. 56; Celotex
Corp. v. Catrett, 477 U.S. 317, 322 (1986).
The moving party
always bears the initial burden of “informing the district court
of the basis for its motion,” and identifying the matter “it
believes demonstrate[s] the absence of a genuine issue of
10
material fact.”
Celotex, 477 U.S. at 323.
Once a motion for
summary judgment is properly made and supported, the opposing
party has the burden of showing that a genuine dispute exists.
See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
574, 586-87 (1986); see also Ray Commc’ns, Inc. v. Clear Channel
Commc’ns, Inc., 673 F.3d 294, 299 (4th Cir. 2012) (stating the
opposing party must “come forward with specific facts showing
that there is a genuine issue for trial.”).
“[T]he non-moving
party ‘may not rest upon mere allegation or denials of his
pleading, but must set forth specific facts showing that there
is a genuine issue for trial.’”
Hughes v. Bedsole, 48 F.3d
1376, 1381 (4th Cir. 1995) (quoting Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 256 (1986)).
In reviewing the record on summary judgment, the Court
“must draw any inferences in the light most favorable to the
non-movant” and “determine whether the record taken as a whole
could lead a reasonable trier of fact to find for the nonmovant.”
Brock v. Entre Computer Ctrs., Inc., 933 F.2d 1253,
1259 (4th Cir. 1991) (citations omitted).
“[A]t the summary
judgment stage the judge’s function is not himself to weigh the
evidence and determine the truth of the matter but to determine
whether there is a genuine issue for trial.”
at 249.
Anderson, 477 U.S.
Where there is conflicting evidence, the court must
credit the evidence of both sides and acknowledge that there is
11
a genuine issue of material fact that cannot be resolved by
summary judgment.
See Tolan v. Cotton, 134 S. Ct. 1861, 1868-69
(2014) (stating that summary judgment is inappropriate where
each side has put forward competent evidence that raises a
dispute about a material fact).
III. Analysis
The Court finds that there is no genuine issue of
material fact and that Defendants are entitled to judgment as a
matter of law.
Stradtman’s tortious interference claim fails
for three reasons.
First, Stradtman fails to prove that
Defendants induced a third party to terminate his employment
contract.
Second, Stradtman’s voluntary resignation breaks the
causal chain between any supposed interference by Defendants and
the termination of his employment with Otto.
Third, Stradtman
was not constructively discharged or forced to resign.
All
three reasons are anchored in the undisputed fact that Otto did
not terminate Stradtman’s employment.
Regardless, each is
addressed in turn.
A. Third Party Otto Did Not Terminate Stradtman
In 1985, the Supreme Court of Virginia5 first
recognized the common law tort of intentional interference with
contract rights.
See Chaves v. Johnson, 335 S.E.2d 97, 102 (Va.
5
There is no dispute that Virginia law applies to the
substantive tortious interference claim.
12
1985) (“We have not previously had occasion to consider this
precise aspect of the law of torts . . . .”).
In doing so, the
Supreme Court of Virginia joined the Supreme Court of the United
States, the Queen’s Bench, and many other sister states.
Id.
(citing Angle v. Chicago, 151 U.S. 1 (1894) (additional
citations omitted); Lumley v. Gye, 2 El. & Bl. 216, 118 Eng.
Rep. 749 (1853)).
The Court also expressly referenced and
relied on the Restatement (Second) of Torts:
The
tort
is
succinctly
described
Restatement (Second) Torts § 766 (1977):
in
Intentional Interference with Performance of
Contract by Third Party
One
who
intentionally
and
improperly
interferences with the performance of a
contract
(except
a
contract
to
marry)
between another and a third person by
inducing or otherwise causing the third
person not to perform the contract, is
subject to liability to the other for
pecuniary loss resulting to the other from
the failure of the third person to perform
the contract.
Chaves, 335 S.E.2d at 102 (emphasis added).
Even in its most recent cases, the Supreme Court of
Virginia cites back to Chaves v. Johnson when discussing the
elements required for a prima facie case of intentional
interference with contract rights.
See, e.g., Dunlap v. Cottman
Transmission Sys., LLC, 754 S.E.2d 313, 318 (Va. 2014) (“We
recognized a cause of action for tortious interference with
13
contract rights in Chaves v. Johnson, 230 Va. 112, 335 S.E.2d 97
(1985).”).
Those elements 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
was disputed.
Id. (quoting Chaves, 335 S.E.2d at 102; Dunn, McCormack &
MacPherson v. Connolly, 708 S.E.2d 867, 870 (Va. 2011)).
If the
contract at issue is terminable at will, the plaintiff must also
prove the defendant employed improper methods6 in interfering
6
While not extensively briefed by the parties, the Court finds
that it is undisputed that, assuming Defendants did divert
business away from Otto, such acts did not constitute “improper
methods” under Virginia law because choosing one vendor over
another in and of itself is not illegal. Stradtman argues that
“Defendants sought to create a conflict of interest between Mr.
Stradtman and Otto, with knowledge that this would interfere
with Mr. Stradtman’s employment.” (Pl.’s Opp’n at 20 (citing
Stradtman Dep. at 363-64, 369-70).) This argument stretches the
logical bounds of Virginia law. “Under Virginia law, a threat
to perform an act one is legally entitled to perform is not a
wrongful act.” Lewis-Gale Med. Ctr., LLC v. Alldredge, 710
S.E.2d 716, 722 (Va. 2011) (citations omitted). It is
undisputed that Republic had contracted with Otto. But there
was no other legal relationship or obligation that bound
Republic to buy carts from Otto. Any remedy for Republic’s
cancellation of orders lied in a breach of contract action.
Hypothetically, if Republic’s actions violated the terms of
their agreement with Otto, then Otto presumably could have
sought to hold Republic liable for such a breach. But “the law
will not provide relief to every disgruntled player in the
rough-and-tumble world comprising the competitive marketplace.”
Id. (quoting Williams v. Dominion Tech. Partners, LLC, 576
S.E.2d 752, 758 (Va. 2003)). The law only provides a remedy for
14
with the contract.
Dunlap, 754 S.E.2d at 318 n.5 (listing
improper methods) (citations and internal quotations omitted).
“[T]ortious interference with contract . . . [is] predicated on
the common law duty to refrain from interfering with another’s
contractual and business relationships.
That duty does not
arise from the contract itself but is, instead, a common law
corollary of contract.”
Dunlap, 754 S.E.2d at 319 (citing Wyatt
v. McDermott, 725 S.E.2d 555, 558 (Va. 2012)).
The Virginia Supreme Court has held that it is
irrelevant whether defendants intentionally acted to induce the
plaintiff to terminate the relationship or otherwise abandon the
expectancy.
Rappahannock Pistol & Rifle Club, Inc. v. Bennett,
546 S.E.2d 440, 444 (Va. 2001).
Instead, the essence of a
tortious interference claim under Virginia law is that the
defendant intentionally induced the third party, in this case
Otto, to breach or terminate the relationship or expectancy with
the plaintiff.
Id. (“[T]he [plaintiff] Club must show . . .
that . . . the [third party] corporation . . . was induced by
[defendants] the Bennetts to breach the contract between the
tortious interference “where the plaintiff can prove that the .
. . actions were illegal or fell so far outside the accepted
practice of that ‘rough-and-tumble world’ as to constitute
improper methods.” Alldredge, 710 S.E.2d at 722. There is no
evidence in the record to support the proposition that
Defendants acted so far outside the accepted practice of the
competitive marketplace to constitute improper methods.
Accordingly, Stradtman’s claim also fails on this alternative
basis.
15
[plaintiff] Club and the [third party] corporation.”).
Indeed,
in Chaves v. Johnson, the Supreme Court of Virginia referenced
the Restatement section entitled “Intentional Interference with
Performance of Contract by Third Party,” and ultimately held
that liability attaches for “inducing or otherwise causing the
third person not to perform the contract.”
Chaves, 335 S.E.2d
at 102 (quoting Restatement (Second) of Torts § 766 (1977))
(emphasis added).
Here, quite simply, there is no evidence that
Otto--the third party contracting with Stradtman--breached or
terminated his at-will employment contract.
Instead, it is
undisputed that Stradtman7 voluntarily resigned after Mr. Otto
and Mr. Muller initially wanted him to stay in his position.
(See SOF ¶¶ 65-67 (citing Stradtman Dep. at 203 (“Quite the
opposite. . . . They preferred that I stay.”).)
Accordingly,
because it is undisputed that third party Otto did not breach or
terminate the contract with Stradtman, his tortious interference
claim fails as a matter of law.
7
Stradtman cites the Virginia Model Jury Instructions for the
proposition that termination by a third party is not required.
(See Pl.’s Opp’n at 15-16 (citing Va. Civil Model Jury
Instruction 40.250).) This argument is unavailing. The Court
referenced the model instruction in adjudicating the motion to
dismiss in an effort to construe all facts and inferences in
Stradtman’s favor. (See Mem. Op. at 13 (“[T]he Court is mindful
that dismissal pursuant to Rule 12(b)(6) is disfavored.”).)
However, ultimately, the Court is primarily concerned with the
case authority cited as a basis for the model instruction, which
includes many of the Chaves-progeny cases already referenced
above.
16
B. Stradtman Voluntarily Resigned
Relatedly, “[t]he most glaring problem with
[Stradtman’s] tortious interference claim is that he alone made
the decision to resign from [Otto].”
F. Supp. 2d 182, 204 (E.D. Va. 2010).
Taylor v. CNA Corp., 782
Stradtman’s voluntary
resignation from Otto breaks the chain of causation that is
necessary to show a relation between the alleged interference
and the supposed termination.
In holding that Stradtman’s
tortious interference claim fails because he voluntarily
resigned from Otto, this Court joins numerous federal courts
across the country.
See, e.g., Woodend v. Lenape Reg’l High
Sch. Dist., 535 F. App’x 164, 167-68 (3d Cir. 2013) (holding
tortious interference with contract claim failed where “the loss
was caused by Woodend’s voluntary resignation.”); Falzone v.
Licastro, No. 1:10cv2918, 2012 WL 711273, at *4 (N.D. Ohio Mar.
4, 2012) (“Voluntary resignation breaks the chain of causation
that would have linked any alleged interference to the
contract’s breach.”) (citation and internal alterations
omitted); Geller v. Von Hagens, No. 8:10-cv-1688, 2010 WL
4867540, at *4 (M.D. Fla. Nov. 23, 2010) (“Defendants’ point is
well-taken that, having presented that his resignation was
voluntary, Geller cannot now be allowed to maintain a cause of
action for tortious interference with his contract.”); Brescia
v. Leff, No. 3:04cv1680, 2006 WL 3231433, at *6 (D. Conn. Nov.
17
7, 2006) (holding plaintiff’s claim of tortious interference
with contractual rights fails in part because of her voluntary
resignation) (citation omitted); Thompson v. City of Columbus,
No. C2-98-822, 2001 WL 1681129, at * 6 (S.D. Ohio Sept. 26,
2001) (“Plaintiff’s tortious interference claims . . . fail as a
matter of law for two reasons. First, plaintiff . . .
voluntarily resigned from her employment.”); Mart v. Dr. Pepper
Co., 923 F. Supp. 1380, 1390 (D. Kan. 1996) (“Simply put, there
is no evidence that Pepsi or Terrell interfered with or induced
the breach of any such contract.
Plaintiff voluntarily resigned
from her position.”).
More importantly, this Court has previously held “[i]t
is axiomatic that a plaintiff cannot sustain a claim of tortious
interference with business expectancy when he willingly
surrendered his right to those expectancies.”
Supp. 2d at 204.
CNA Corp., 782 F.
Stradtman concedes--as he must--that it is
undisputed he resigned from Otto.
Resignation Letter).)
(See SOF ¶¶ 63-64 (citing
Stradtman attempts to argue, however,
that Virginia law permits a tortious interference claim where
the plaintiff voluntarily resigns.
The Court is not persuaded
by this argument.
First, Stradtman’s argument that a tortious
interference claim can survive where he voluntarily resigns is
crushed by the weight of federal authority cited above.
18
Second,
the only support Stradtman offers for this proposition is a case
from the Circuit Court for the City of Norfolk, where the state
trial court overruled a demurrer to a tortious interference
claim.
(See Pl.’s Opp’n at 16 (citing Wilson v. Modjadidi, No.
CL06-4670, 2008 WL 5539824, at *3 (Va. Cir. Ct. Jan. 23, 2008).)8
There, the plaintiff alleged that the defendant intended for the
plaintiff to resign, specifically threatened to force her
resignation, openly bragged about having caused her to lose
employment once she resigned, stating, “I did get rid of her.”
Id.
This factual scenario is distinguishable from the facts of
this case.
There is no evidence in the record that Defendants
specifically threatened Otto to force Stradtman’s resignation,
that they openly bragged about causing Stradtman to lose his
employment, or that they had anything remotely to do with
Stradtman’s separation.
This argument instead blends into
Stradtman’s final argument: that he was constructively
discharged from Otto and was left with no other option but to
voluntarily resign.
This theory, while questionable as a matter
of Virginia law,9 ultimately fails because there is no evidence
8
Stradtman also cites Judge Ellis’ opinion in Taylor v. CNA
Corp., but this case is more properly addressed in the Court’s
constructive discharge analysis, infra.
9
This Court has previously held that Virginia does not recognize
the tort of wrongful constructive discharge for an at-will
employee. Gordon v. ArmorGroup, N.A., No. 1:10cv2 (JCC), 2010
WL 3418219, at *4 (E.D. Va. Aug. 27, 2010). However, for
purposes of this motion, the Court assumes without expressly
19
in the record that Otto constructively discharged Stradtman.
C. Constructive Discharge
Stradtman’s tortious interference claim survived
Defendants’ motion to dismiss based on his theory that he was
“constructively discharged” from Otto and that he was given no
alternative but to resign.
(Mem. Op. at 9-13.)
The Court
concluded that Stradtman was entitled to discovery on this issue
to determine “if conditions at [Otto] had become so intolerable
that [Stradtman was] effectively left no practical choice other
than quitting, [because] then it would be unfair to characterize
his decision as willingly made.”
(Mem. Op. at 10 (quoting CNA
Corp., 782 F. Supp. 2d at 204).)
After discovery, there is no
support in the record for Stradtman’s claim that he was
constructively discharged from Otto.
Constructive discharge occurs in the employment
discrimination context when an employer deliberately makes the
holding that in certain instances, an at-will employee can
predicate a tortious interference claim on an alleged
constructive discharge. See CNA Corp., 782 F. Supp. 2d at 204
(“[I]f conditions . . . had become so intolerable that [the
employee was] effectively left no practical choice other than
quitting, then it would be unfair to characterize his decision
as willingly made.”); see also Gordon, 2010 WL 3418219, at *5
(“[T]his Court has allowed an at-will employee/plaintiff to
predicate a False Claims Act claim on an alleged constructive
discharge.”) (citations omitted). Because the undisputed facts
of this case do not support a claim for constructive discharge,
however, the Court need not expressly rule on this legal issue,
as it remains unaddressed by the Supreme Court of Virginia.
Gordon, 2010 WL 3418219, at *4 n.3.
20
working conditions of the employee so intolerable in an effort
to induce the employee to quit or force the employee into
involuntary resignation.
Martin v. Cavalier Hotel Corp., 48
F.3d 1343, 1353-54 (4th Cir. 1995) (citing Bristow v. The Daily
Press, Inc., 770 F.2d 1251, 1255 (4th Cir. 1985); Ugalde v. W.A.
McKenzie Asphalt Co., 990 F.2d 239, 242-43 (5th Cir. 1993)).
Here, first, the working conditions at Otto cannot be
described as “so intolerable.”
Stradtman had just negotiated a
$270,000 bonus for himself, and his superiors asked him to stay.
Quite contrary to Stradtman’s “beliefs” and argument here, not
only were these conditions tolerable by objective standards, a
reasonable person might even call them desirable.
See Byers v.
HSBC Fin. Corp., 416 F. Supp. 2d 424, 441-42 (E.D. Va. 2006)
(“Intolerability is judged by an objective standard of whether a
‘reasonable person’ in the employee’s position would have felt
compelled to resign.”) (citing Bristow v. Daily Press, Inc., 770
F.2d 1251, 1255 (4th Cir. 1985)).
Indeed, if these facts
supported a finding of “intolerable” working conditions, this
Court would turn the law of constructive discharge on its head.
See, e.g., Williams v. Giant Food Inc., 370 F.3d 423, 434 (4th
Cir. 2004) (“Dissatisfaction with work assignments, a feeling of
being unfairly criticized, or difficult or unpleasant working
conditions are not so intolerable as to compel a reasonable
person to resign.”) (citation omitted).
21
Second, Stradtman has admitted that Otto did not
intend to force his resignation, and there is no legal support
for the proposition that Defendants could have intended to
constructively discharge Stradtman.
(Defs.’ SOF ¶¶ 65-67
(citing Stradtman Dep. at 203 (“Quite the opposite. . . . They
preferred that I stay.”); id. at 215, 353-54); Pl.’s SOF ¶¶ 6567 (citing Stradtman Dep. at 393 (“Q: And there’s no question
Mr. Muller and Mr. Otto asked you to stay with Otto,
notwithstanding your presentations in writing and orally about
the problems in the east region?
stay.
A: So Mr. Otto asked me to
Luc said he understood there was no good choice.
Q: All
right. But Mr. Otto was the final say in that discussion, I take
it?
A: Well, I was the final say.”)).)
wanted him to stay.
In short, first, Otto
(See Muller Decl. ¶ 21 (“I told him that I
would not terminate his employment, because what was best for
the Company, was that he stay as CEO.”).)
Second, there is no
legal basis for the proposition that Defendants’ actions could
have somehow resulted in Stradtman’s constructive discharge;
instead, Otto’s “actions” are the only relevant consideration
for the Court.
See Martin, 48 F.3d at 1354 (“[I]n order to
demonstrate constructive discharge, a plaintiff must allege and
prove two elements: (1) deliberateness of the employer’s actions
and (2) intolerability of the working conditions.”) (citation
and internal quotation marks omitted and emphasis added).
22
The
Court noted at the motion to dismiss stage that this theory was
threadbare, and now on summary judgment the record confirms the
Court’s previous suspicion.
Third, the undisputed facts of this case are also not
supported by this Court’s opinion in Taylor v. CNA Corp., where
the Court hypothesized about a factual scenario in which it
“would be unfair to characterize [an employee’s] decision as
willingly made,” where the employee had “no practical choice
other than quitting.”
a case.
782 F. Supp. 2d at 204.
This is not such
The undisputed material facts show that this is a case
where Stradtman voluntarily resigned in the face of other
choices.
For one, he could have stayed at Otto, as initially
requested by Mr. Muller.
More importantly, the Court rejects
Stradtman’s theory that he had a fiduciary duty to resign.
Stradtman argues that he owed a duty of good faith and loyalty
to Otto, and that he “was entitled to consider all factors which
might be implicated, including the best interests of Otto’s
employees, and the realistic threat of harm to Otto’s finances
if orders from Republic continued to drop.”
(Pl.’s Opp’n at 33
(citing Feddeman & Co. v. Langan Assocs., 530 S.E.2d 668, 673
(Va. 2000); Willard ex rel. Moneta Bldg. Supply v. Moneta Bldg.
Supply, 50 Va. Cir. 558, 575-76 (Va. Cir. Ct. 1998)).)
Even if
the Court accepts Stradtman’s initial premise that he had a
fiduciary duty as stated above, Stradtman’s argument fails
23
because it is undisputed that there was no “realistic threat of
harm to Otto’s finances.”
“One of the most basic tenets of Delaware corporate
law is that the board of directors has the ultimate
responsibility for managing the business and affairs of a
corporation.”
Online Res. Corp. v. Lawlor, 736 S.E.2d 886, 900
(Va. 2013) (McClanahan, J., concurring in part and dissenting in
part) (quoting Quickturn Design Sys., Inc. v. Shapiro, 721 A.2d
1281, 1291 (Del. 1998)).
Ultimately, “the Board of Directors
controls the company, not the CEO.”
Lawlor, 736 S.E. 2d at 900
(citing Del. Code. Ann. tit. 8, § 141(a)).
However, corporate
officers, including the CEO, nonetheless owe the “duties of
‘utmost good faith’ and loyalty to his corporation.”
Office of
Strategic Servs., Inc. v. Sadeghian, 528 F. App’x 336, 343 (4th
Cir. 2013) (citing Feddeman & Co. v. Langan Assocs., 530 S.E.2d
668, 673 (Va. 2003)).
Stated differently, the CEO must disclose
conflicts of interest “and cannot place himself in any other
position which would subject him to conflicting duties, or
expose him to the temptation of acting contrary to the best
interests of [the corporation].”
Today Homes, Inc. v. Williams,
634 S.E.2d 737, 743 (Va. 2006) (quoting Rowland v. Kable, 6
S.E.2d 633, 642 (Va. 1940)).
Here, Stradtman disclosed to Otto his belief that
Defendants were intentionally diverting business away from Otto
24
in retaliation for his wife’s discrimination lawsuit.
His
fiduciary duty to Otto obligated such disclosure, especially if
he believed that it subjected him to conflicting duties.
Stradtman’s claim fails, however, because he has conceded that
Otto did not want him to resign, even when it was aware of and
knew of the alleged “threat” regarding diverted business in the
East Region of Republic.
(SOF ¶¶ 51-52 (citing Muller Decl. ¶
14 (“I didn’t think, assuming what he was telling me was
accurate, that our business was actually being significantly
harmed.
In fact, I told Mr. Stradtman that in the context of
our overall and long term relationship with Republic Services,
the issues he was raising were not that significant, and
certainly did not require him to resign.”) (emphasis added); SOF
¶¶ 65-67; Muller Decl. ¶ 25 (“From our perspective, Republic
Services did not force Mr. Stradtman to resign, and Otto
certainly did not want him to resign.”).)
Not only did fellow
board member Luc Miller not want Stradtman to resign, he wanted
him to stay “because [it] was best for the Company . . . that he
stay as CEO.”
(Muller Decl. ¶ 21.)
Stradtman scours the record
in an attempt to find support for his belief that continuing as
CEO of Otto realistically harmed and posed a threat to the best
interests of Otto--but any attempt is doomed by Mr. Muller’s
concession that these issues, no matter how they are framed by
Stradtman (see Pl.’s Opp’n at 25-27), were not significant to
25
Otto, did not implicate any fiduciary duty, and did not require
Stradtman to resign.
Clearly, Stradtman disagreed with Otto and
voluntarily resigned from the company anyway.
But this decision
certainly was not required or compelled by any fiduciary duty he
owed to Otto.
Lawlor, 736 S.E. 2d at 900.
Instead, the record is clear that Stradtman executed a
calculated, years-long scheme in an attempt to cast liability on
Defendants for actions he willingly took.
These actions, in the
Court’s view, show Stradtman was motivated by self-interest, and
took every opportunity to maximize his own personal gain.
First, unbeknownst to Otto management, Stradtman set
out in early January of 2012 (if not earlier) to find another
CEO position.
He re-posted his resume on a recruiter website,
spoke with recruiters, went through the interview process, and
engaged in negotiations with another company.
He did not
disclose these efforts, and ultimately, he accepted the CEO
position with PSI, still without informing anyone at Otto.
Second, only four days after PSI offered him the CEO
position, Stradtman negotiated a $270,000 payment from Otto.
Label this payment however you want.
During his negotiations
with Mr. Muller regarding the payment, Stradtman never alerted
him to the fact that he was actively seeking other employment,
or that PSI had already offered him the CEO position.
26
Third, after accepting the CEO position with PSI and
negotiating the $270,000 payment from Otto, Stradtman now needed
to create the illusion that he was being forced to resign from
Otto, in Otto’s “best interests,” because of alleged improper
methods employed by Republic to divert business from Otto.
He
even told his attorney: “I will need to try to force my
termination between March 28 and April 1, roughly, in order to
try to receive severance to support me with my new lower
salary.”10
Taylor’s discrimination lawsuit had now been pending
against Defendants for over six months, and Stradtman seized
this opportunity to cite “diverted business” as a reason for his
departure from Otto.
In reality, just a month or two earlier,
in his quarterly report to Otto, Stradtman never mentioned any
diverted business from Republic.
And when confronted with “the
issue,” Mr. Otto and Mr. Muller were not concerned with any
cancelled or redirected orders from Republic in the East Region,
and instead wanted Stradtman to remain as Otto’s CEO, which was
in the best interest of the company.
10
There is also evidence in the record that Stradtman and his
attorney knew his claim was not likely to succeed, given the
facts and circumstances of this case, no matter the forum. (See
Defs.’ Reply Ex. A [Dkt. 170-1] at 3 (“I think Steve’s biggest
hurdle is going to be that he quit and whether that resignation
was forced. Otto will likely testify that they wanted him to
stay . . . . Given the Fairfax Court -- and the lack of any
confidence in it -- I am just trying to get the issue prepped
for an appeal in state court -- and it looks like we might have
to rely on federal law for that.”).)
27
But Stradtman could not turn back now.
He had already
accepted another CEO position with PSI, negotiated a sizable
payment from Otto, and told his attorney that he would need to
force his termination from Otto during a specific timeframe to
maximize severance benefits from Otto.
Ultimately, the
undisputed facts show that: (1) Otto did not terminate
Stradtman’s employment; (2) Stradtman voluntarily resigned from
Otto; and (3) Stradtman was not constructively discharged or
forced to resign.
Instead, Stradtman’s voluntary resignation
was part of his own grand design to accept another CEO position,
maximize his own monetary return from Otto, and “tee up” a
lawsuit against Defendants.
With no material facts in dispute
that require the efforts of a jury, Defendants are entitled to
judgment as a matter of law.
IV. Conclusion
For the foregoing reasons, the Court granted
Defendants’ motion for summary judgment.
An appropriate Order shall issue.
June 11, 2015
Alexandria, Virginia
/s/
James C. Cacheris
UNITED STATES DISTRICT COURT JUDGE
28
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