Melton v. Precision Laser & Instrument, Inc.

Filing 46

MEMORANDUM OPINION AND ORDER granting in part and denying in part defendant Precision Laser & Instrument, Inc.'s 4 PARTIAL MOTION to Dismiss, denying said motion as to Counts One and Three; granting said motion as to Counts Two and Five; and granting Precision's motion to dismiss Count Four to the extent it seeks, under the Wage Payment and Collection Act, post-termination commissions. Signed by Judge John T. Copenhaver, Jr. on 1/18/2013. (cc: attys) (taq)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF WEST VIRGINIA
AT CHARLESTON
RANDY MELTON,
Plaintiff,
v.

Civil Action No. 2:12-cv-1697

PRECISION LASER & INSTRUMENT, INC.,
Defendant.
MEMORANDUM OPINION AND ORDER
Pending is the motion to dismiss for failure to state
a claim by defendant Precision Laser & Instruments
(“Precision”), filed June 1, 2012.

I. Background
Plaintiff Randy Melton (“Melton”) commenced this
action in the Circuit Court of Kanawha County, West Virginia on
April 24, 2012.
Virginia.

He is a resident of Kanawha County, West

Compl. ¶ 1.

Precision is a Pennsylvania corporation

with a principal place of business in Ambridge, Pennsylvania.
Id. ¶ 2.
Precision hired Melton as “Survey/Mapping Sales and
Support Manager” of its Charleston, West Virginia office in June
2009.

Id. ¶ 5.

On June 16, 2009, the parties signed an

Employment Agreement which provided that Melton would receive a
yearly salary of $55,000.

Id. ¶¶ 6-7.

Additionally, the

Employment Agreement provided for commissions, including a 5%
commission on “all sales from existing „Special Project
Contract‟ Sales that have existing contracts with GPS
Innovations.”

Employment Agreement 1.

Melton‟s relationship to GPS Innovations (“GPSI”) and
the meaning of “Special Project Contract Sales” are unclear from
the record.
company.”

The complaint describes GPSI as “Melton‟s former

Compl. ¶ 6.

On June 29, 2009, Melton, acting on

behalf of GPSI as its president, signed an Asset Purchase
Agreement with Precision, pursuant to which Precision appears to
have acquired assets of GPSI.

Asset Purchase Agreement 7.

These factors and the nature of the contracts, claims, and
parties‟ briefing suggest to the court that Melton owned GPSI,
although the record does not expressly state that to be the
case.

The term “Special Project Contract Sales” is not defined,

but the Employment Agreement indicates that any such contract
would be “transferred over to [Precision] ownership” from GPSI.
Employment Agreement 1.

The court surmises that the term refers

to any Precision contract that originated with GPSI, although it
is possible that the true meaning is limited to some subset
thereof.

The Employment Contract does specify that the Special

2

Project Contracts “include . . . West Virginia Highway Contract,
NASA GIST, Navy Research Lab, Weeks Marine and Marine MC (NZ).”
Id.
The Asset Purchase Agreement transferred to Precision
“all of Seller‟s right, title, and interest in and to all the
assets, property rights (tangible and intangible), used in the
operation of GPS Innovations.”

Asset Purchase Agreement 1.

In

consideration, Precision paid to GPSI $215,000, with $100,000 of
the purchase price allocated toward “Fixed Assets and Inventory”
and the remaining $115,000 allocated to “Intangible Assets.”
Id. at 3.

It is those Intangible Assets which presumably give

rise to the Special Project Contracts.

Accordingly, in his

complaint, Melton claims that he transferred the “„Special
Project Contract‟ sales” to Precision ownership “[a]s a result
of” his promised 5% commission on all sales therefrom.

Compl.

¶ 23.
On June 30, 2009, Melton and Precision entered into a
Confidentiality and Non-Competition Agreement (“CNC Agreement”).
The CNC Agreement stated that Melton‟s employment could be
terminated “at any time, with or without cause,” and it “d[id]
not create any obligations on the part of [Precision] to employ
Melton for a fixed period of time.”

Id. ¶¶ 8-9, 33.

The

agreement, nonetheless, indicated Precision‟s “intention” to
3

retain Melton for at least five years.

Id. ¶ 9.

Also on June

30, 2012, Melton and Precision entered into an Addendum to the
Employment Agreement (“Addendum”).

Id. ¶ 10.

The Addendum

reiterated Precision‟s intent to retain Melton for five years
and provided for a severance payment of one year‟s salary if
Precision terminated Melton‟s employment within the first nine
months.

Id. ¶¶ 11-12.

Precision terminated Melton‟s employment

on May 14, 2010, nearly eleven months after his hiring.

Id.

¶ 16.
The complaint contends that Precision‟s intentions, as
represented in the CNC Agreement and the Addendum, altered
Melton‟s at-will status to that of an employee with an
employment term of no less than five years.

Id. ¶ 38.

Melton

entered into the agreements “under the assumption” that his
employment would last for that term.

Id. ¶ 13.

The complaint

further states that Precision “did not intend” to employ Melton
for five years, but rather made such representations to “induce
Melton to enter into the [Asset Purchase] Agreement.”

Id. ¶ 15.

Melton asserts that he relied on Precision‟s false
representations and that his reliance “was justified” due to
“the large amount of GPSI‟s assets” sold under the Asset
Purchase Agreement.

Id. ¶ 45.

The Asset Purchase Agreement is

itself a source of contention, as Melton alleges that Precision

4

has refused to pay him for certain assets or to remove the items
from his storage facility.

Id. ¶ 18.

Melton also claims that Precision has refused to pay
him the 5% commission on sales from the Special Project
Contracts.

Id. ¶ 19.

since May 14, 2010.

No commission payments have been made
Id. ¶ 29.

The complaint asserts that

payments should have been made for “all sales to any customer or
client referenced as a former GPSI customer or client, not just
for those sales made by Melton.”

Id. ¶ 26.

It states that

Precision “ignored many of the types of sales” which would have
resulted in commissions and consequently “failed to pay Melton
everything due to him under the Employment Agreement.”

Id.

¶¶ 24-25.
Melton adds that Precision “interfered with Melton‟s
right to receive the 5% commission” by selling the “West
Virginia-based [Precision] Machine Control Business.”

Id. ¶ 27.

The record does not make clear what the Machine Control Business
is or how it relates to “Melton‟s right” to receive commissions.
Presumably, Melton means that the Machine Control Business
generated Special Projects Contract sales and that Precision
improperly interfered with his contractual rights by selling it.
Along these lines, in an allegation that is rather inscrutable,
he asserts that he is owed a commission for the “anticipated
5

sales from the lost business to the [Precision] Machine Control
Business.”

Id. ¶ 28.
Melton‟s five-count complaint sets forth the following

claims: Count One, “Breach of Employment Contract”; Count Two,
“Breach of Confidentiality and Non-Competition Agreement and
Breach of Addendum to Employment Agreement”; Count Three,
“Fraudulent Inducement”; Count Four, “Violation of the Wage
Payment and Collection Act”; and Count Five, “Negligence.”
On May 25, 2012, Precision removed, invoking the
court‟s diversity jurisdiction, pursuant to 28 U.S.C.
§ 1332(a)(1).

On June 1, 2012, Precision filed a motion to

dismiss Counts One, Two, Three, and Five and to dismiss Count
Four in part, all for failing to state a claim upon which relief
can be granted, pursuant to Federal Rule of Civil Procedure
12(b)(6).

II. The Governing Standard
Under Federal Rule of Civil Procedure 8(a)(2), a
complaint must contain “a short and plain statement of the claim
showing that the pleader is entitled to relief.”

Rule 12(b)(6)

correspondingly permits a defendant to challenge a complaint
when it “fail[s] to state a claim upon which relief can be
granted.”

Fed. R. Civ. P. 12(b)(6).
6

The required “short and plain statement” must provide
“„fair notice of what the . . . claim is and the grounds upon
which it rests.‟”

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

545 (2007) (alternation in original) (quoting Conley v. Gibson,
355 U.S. 41, 47 (1957)); see also Anderson v. Sara Lee Corp.,
508 F.3d 181, 188 (4th Cir. 2007).

“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.‟”

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

(quoting Twombly, 550 U.S. at 570); see also Monroe v. City of
Charlottesville, 579 F.3d 380, 386 (4th Cir. 2009).

Facial

plausibility exists when the court is able “to draw the
reasonable inference that the defendant is liable for the
misconduct alleged.”
550 U.S. at 556).

Iqbal, 566 U.S. at 678 (quoting Twombly,

The plausibility standard “is not akin to a

„probability requirement,‟” but it requires more than a “sheer
possibility that a defendant has acted unlawfully.”

Id.

(quoting Twombly, 550 U.S. at 556).
In assessing plausibility, the court must accept as
true the factual allegations contained in the complaint, but not
the legal conclusions.

Id.

“Threadbare recitals of the

elements of a cause of action, supported by mere conclusory
statements, do not suffice.”

Id.

7

The determination is

“context-specific” and requires “the reviewing court to draw on
its judicial experience and common sense.”

Id. at 679.

III. Discussion

A. Choice of Law
Precision and Melton dispute what law should govern
their contracts and related claims.

Precision asserts that the

CNC Agreement and Asset Purchase Agreement must be construed in
accordance with Pennsylvania law due to choice-of-law provisions
within the agreements.

Def.‟s Mem. Supp. Mot. Dismiss 6.

Precision asserts that the fraud and negligence counts, which
arise from those contracts, should likewise fall under
Pennsylvania law.

Melton responds that “[w]hile some of the

contractual claims may be governed by Pennsylvania law, any tort
claims are not.”

Pl.‟s Resp. Opp‟n. to Def.‟s Mot. Dismiss 3.

The parties appear to agree that West Virginia law controls
construction of the Employment Agreement and its Addendum and
that the West Virginia Wage Payment and Collection Act is
applicable.

The court must determine what law governs the CNC

Agreement, the Asset Purchase Agreement, and the tort claims.
When exercising diversity jurisdiction, a federal
district court must apply the choice-of-law rules of the state

8

in which it sits.

Klaxon Co. v. Stentor Elec. Mfg. Co., 313

U.S. 487, 496 (1941); Volvo Const. Equip. N. Am., Inc. v. CLM
Equip. Co., 386 F.3d 581, 599-600 (4th Cir. 2004).

In this

case, West Virginia‟s rules apply.
For contract cases, the West Virginia rule provides
that “[t]he law of the state in which a contract is made and to
be performed governs the construction of a contract when it is
involved in litigation in the courts of this state.”
Howe, 218 W.Va. 638, 643, 625 S.E.2d 716, 721 (2005).

Howe v.
However,

“the parties themselves may defeat the traditional conflict of
laws principle . . . by making a choice of law in the contract.”
Nadler v. Liberty Mut. Fire Ins. Co., 188 W.Va. 329, 334 n.8,
424 S.E.2d 256, 261 n.8 (1992).

Such a provision will be

enforced “unless the chosen state has no substantial
relationship to the parties” or the chosen state‟s law “would be
contrary to the fundamental public policy of the state whose law
would” otherwise apply.

Bryan v. Mass. Mut. Life. Ins. Co., 178

W.Va. 773, 777, 364 S.E.2d 786, 790 (1987).

Public policy

concerns will not invalidate a choice-of-law provision based on
“[t]he mere fact that the substantive law of another
jurisdiction . . . is less favorable than the law of the forum
state.”

Nadler, 188 W.Va. at 336, 424 S.E.2d at 263.

The West

Virginia Supreme Court has stated that it “does not take a

9

request to invoke our public policy to avoid application of
otherwise valid foreign law lightly.”

Howe, 218 W.Va. at 646,

625 S.E.2d at 724.
There are two choice-of-law provisions in this case.
The CNC Agreement states, “(g) This agreement shall be construed
in accordance with the Laws of the Commonwealth of Pennsylvania;
and the Laws of the Commonwealth of Pennsylvania shall govern
the rights and obligations of the parties hereunder.”
Mot. Dismiss Ex. C, at 3.

Def.‟s

The Asset Purchase Agreement

similarly states, “(b) Governing Law.

This Agreement shall be

construed and enforced in accordance with and shall be governed
by the laws of the Commonwealth of Pennsylvania.”
Dismiss Ex. A, at 5.

Def.‟s Mot.

Upon review, the court finds the choice-

of-law provisions to be valid.
relationship to the parties.

Pennsylvania has a substantial
Precision is headquartered in

Pennsylvania, and the facts on the record indicate that it was
Precision representatives from Pennsylvania who contracted with
Melton.

Application of Pennsylvania law does not thwart any

fundamental public policies of West Virginia.
Melton‟s claim that Precision asks the court to accept
the choice-of-law assertion “without the benefit of the
contracts” is plainly erroneous as Precision placed the
contracts on the record as exhibits to its motion to dismiss.
10

Additionally, despite Melton‟s suggestion to the contrary, the
court is able to make a choice-of-law determination without a
separate “motion supporting the claim.”

The court, therefore,

finds that the choice-of-law provisions are valid and that
Pennsylvania law controls construction of the CNC Agreement and
Asset Purchase Agreement.
Melton‟s remaining two counts - fraud in the
inducement and negligence - are not controlled by the choice-oflaw provisions because they sound in tort rather than in
contract.

See Cavcon, Inc. v. Endress + Hauser, Inc., 557 F.

Supp. 2d 706, 720 (S.D. W. Va. 2008) (finding that the
plaintiff‟s negligence and fraud counts were “tort or quasi-tort
claims, which d[id] not require an interpretation of the
agreement,” and applying West Virginia law to those counts
despite a valid out-of-state choice-of-law provision in the
underlying contract).

Tort claims are governed by “the

traditional, general choice-of-law principle used in West
Virginia of lex loci delicti.”

Id.

Under this theory, “the

substantive rights between the parties are determined by the law
of the place of injury.”

West Virginia ex rel. Chemtall Inc. v.

Madden, 216 W.Va. 443, 451, 607 S.E.2d 772, 780 (2004).

Melton

was employed in West Virginia, and the record suggests that the
injury occurred there.

The record does not suggest that the

11

injury in any way occurred in Pennsylvania or elsewhere.
Accordingly, West Virginia law applies to Melton‟s fraud and
negligence claims.

B. “Special Project Contract” Sales Commissions
Count One asserts that Precision breached the
Employment Contract by withholding 5% commissions due to Melton
from “Special Project Contract” Sales.

The relevant paragraphs

of the Employment Contract provide as follows:
Salary: $1,057.70/week ($55,000.00/year) plus 3%
commission on sales (Net 1 or Gross minus tax) to
benchmark sales goal and 5% thereafter. 3%
commissions will be paid on all warranties sold. 10%
commission will be paid on rentals (Net 1 or Gross
minus tax). 10% commission will be paid on all
training revenue generated by you.
5% commission will be paid on all sales from existing
“Special Project Contract” Sales that have existing
contracts with GPS Innovations. In turn, those
contracts will be transferred to [Precision]
ownership. Those contracts include, West Virginia
Highway Contract, NASA GIST, Navy Research Lab, Weeks
Marine and Marine MC(NZ).
Def.‟s Mem. Supp. Mot. Dismiss 4.

Melton‟s complaint asserts

that he is owed money because Precision “ignored many types of
sales covered” by the commission agreement.

Not. Removal ¶ 25.

He also asserts that the 5% commission applies to all “Special
Project Contracts” sales and not merely to sales conducted by
him personally.

Id. ¶ 26.

Finally, Melton specifies that he is
12

owed commissions on Precision‟s sale of the Precision Machine
Control Business and on all sales that would have occurred but
for the sale of that business.

Id. ¶¶ 27-28.

Precision seeks to dismiss Claim One to the extent
that it seeks commissions for sales arising subsequent to the
termination of Plaintiff‟s employment.

Def.‟s Mot. Dismiss ¶ 4.

Precision argues that the Employment Agreement does not provide
for such commissions and does not place limitations on
Precision‟s right to dispose of or discontinue any parts of its
business.

Id. ¶ 6.

Precision contends that Melton‟s

interpretation is not “factually plausible” and “would turn an
otherwise ordinary offer of employment into a contract requiring
the perpetual payment of commission to Plaintiff without
relation to the terms and conditions of employment.”
Mem. Supp. Mot. Dismiss 3-4.

Def.‟s

Precision further contends that

Melton‟s contractual construction contradicts the “underlying
premise of commission-based sales” and would “overturn the
standard practice in an industry for decades.”

Id. at 5.

Melton counters only with the assertion that Precision
did not support its argument by attaching the contract - a claim
that, as discussed above, is plainly inaccurate.
Opp‟n. to Def.‟s Mot. Dismiss 2-3.

Pl.‟s Resp.

Precision points out that

Melton‟s Response does not reference post-employment commissions
13

or obligations, despite the focus of Precision‟s motion on that
very point.

Def.‟s Reply Supp. Mot. Dismiss 4.

As such,

Precision again contends that the contract unambiguously limits
commissions to the employment term and should be interpreted by
its plain language.

Id.

Precision correctly states the principle that
“contracts containing unambiguous language must be construed
according to their plain and natural meaning.”

Fraternal Order

of Police, Lodge No. 69 v. City of Fairmont, 196 W.Va. 97, 101,
468 S.E.2d 712, 716 (1996).

Ambiguities exist, however, where

an “agreement‟s terms are inconsistent on their face or where
phraseology can support reasonable differences of opinion as to
the meaning of words employed and obligations undertaken.”

Id.

The resolution of such ambiguities typically hinges on the
parties‟ intent, which is “often, but not always” revealed by
“marshaling facts extrinsic to the language of the contract
document.”

Id. at 101 n.7, 468 S.E.2d at 716 n.7.

The court finds that the Employment Contract in this
case is ambiguous.

Melton‟s interpretation does stretch the

“underlying premise of commission-based sales,” as Precision
asserts.

Yet, the language that the commissions be paid “[i]n

turn” so that the Special Project Contracts “will be transferred
over to [Precision] ownership” suggests elements of a purchase
14

agreement, rather than that of a run-of-the-mill commissionbased sale.

One could reasonably conclude that Precision would

not be able to terminate its obligation at will under such a
contract.
The court acknowledges that the indefiniteness of the
term under which Precision would have to pay a commission
strains this interpretation, but Precision‟s interpretation has
similar shortcomings.

First, the provision lacks language

limiting the commission to Melton‟s term of employment.

Second,

the provision does not specify that Melton himself must make the
sales or, if so, how the commission would relate to the standard
sales commissions listed in the previous paragraph.

Finally,

Precision‟s interpretation does not explain the provision
regarding the transfer of contracts, a provision that appears to
be well outside the purview of an ordinary employment contract.
These apparent inconsistencies prevent the court from
concluding, as Precision insists, that the contract plainly
limits commissions to the employment term.
It is possible that, as Precision argues, “standard
practice[s] in the industry” render the language unambiguous in
light of the parties‟ expertise.

The record, nonetheless,

indicates no such standard practices, and the contract, on its
face and as interpreted by its plain meaning, is ambiguous.
15

As

the court cannot conclude as a matter of law that Melton‟s
interpretation is unreasonable, Precision‟s motion to dismiss
with respect to Count One must be denied.

C. Melton‟s Employment Term
Count Two alleges that Precision breached the CNC
Agreement and Employment Agreement Addendum by terminating
Melton‟s employment after less than five years.
language of the agreements is reproduced here.

The relevant
The Addendum

states that
It is understood that [Precision] wishes to retain
Randy Melton for a period of no less than 5 years.
Randy will work under a non-compete while employed by
[Precision] and the non-compete will be valid for 3
years, in the event Randy should depart from
[Precision]. . . .
In the event, [Precision], should choose to release
Randy within the first 9 months of employment, unless
released for any illegal partaking by Randy Melton,
[Precision] agrees to pay Randy, 1-year severance
pay.
Def.‟s Mot. Dismiss Ex. B, at 4.
the employment term in two places.

The CNC Agreement discusses
It begins by declaring,

“WHEREAS, Precision Laser employs the Employee on an at-will
basis” and elaborates as follows:
The Employee acknowledges that this Agreement does
not create any obligation on the Employee‟s part to
work for Precision Laser nor for Precision Laser to
employ the Employee for any fixed period of time, and
16

that Employee‟s employment may be terminated at any
time with or without cause. [Precision‟s] intention
within this acquisition will be to retain Randy
Melton for a period of no less than 5 years.
Def.‟s Mot. Dismiss Ex. C, at 4.

Precision argues that the

agreements make clear that Melton was an at-will employee.
Melton responds that the “intention” language within the two
contracts is sufficient to transform his at-will employment into
a term contract.

Pl.‟s Resp. Opp‟n. to Def.‟s Mot. Dismiss 3.

As discussed above, the agreements at issue here are
subject to two different states‟ laws: West Virginia law for the
Employment Agreement and Addendum and Pennsylvania law for the
CNC Agreement.

The two states, however, take substantially the

same approach to at-will employment.

Both states, absent

statutory or contractual provisions to the contrary, are at-will
jurisdictions in which employment can be terminated for any
reason by either party to the contract.

Nix v. Temple Univ. of

the Commw. Sys. of Higher Educ., 408 Pa. Super. 369, 374, 596
A.2d 1132, 1135 (Pa. Super. Ct. 1991) (“[I]n Pennsylvania an atwill employment environment is the norm, absent a contract to
the contrary, and thus, an employee can be terminated for good
reason, bad reason, or no reason at all.”); Cook v. Heck‟s Inc.,
176 W.Va. 368, 372, 342 S.E.2d 453, 457 (1986) (“In the realm of

17

the employer-employee relationship, West Virginia is an „at
will‟ jurisdiction.”).
Both states place the burden on the employee to
overcome the presumption of at-will employment.

In

Pennsylvania, “[t]he burden is on the plaintiff in such cases to
overcome the presumption by showing facts and circumstances
establishing some tenure of employment.”

Cummings v. Kelling

Nut Co., 368 Pa. 448, 452, 84 A.2d 323, 325 (1951).

In West

Virginia, terms which allegedly alter at-will employment “must
be very definite to be enforceable.”

Suter v. Harsco Corp., 184

W.Va. 734, 737, 403 S.E.2d 751, 754 (1991) (emphasis in
original).

In addition, “where an employee seeks to establish a

permanent employment contract or other substantial employment
right, either through express promises by the employer or by
implication . . ., such claim must be established by clear and
convincing evidence.”

Adkins v. Inco Alloys Int‟l., Inc., 187

W.Va. 219, 225, 417 S.E.2d 910, 916 (1992).
Under either formulation, Melton has not met his
burden.

The provisions on which he relies only express that

Precision “wishes” or has the “intention” to employ Melton for
five years.

Taken within the context of the contracts as a

whole, these indefinite terms are far from establishing that
Precision will employ Melton for five years.
18

Language that

Melton will receive a one-year severance if Precision should
“choose to release Randy within the first 9 months” is
inconsistent with a five-year term.

And language that the

agreement “does not create any obligation . . . to employ the
Employee for any fixed period of time” is directly contradictory
to a five-year term.
Melton‟s reliance on Cook is unpersuasive, as the
analogy between the current case and those involving personnel
manuals does not hold.

In personnel manual cases, the manuals

constitute a unilateral promise, which the employees accept
through continued employment.
342 S.E.2d at 459.

See Cook, 176 W.Va. at 373-74,

Precision‟s stated intentions in this case

cannot constitute a promise to employ Melton for five years when
considered with the other limiting language.

The facts before

the court do not plausibly support the contention that the
agreements created a five-year employment term.

Thus,

Precision‟s motion to dismiss with regard to Count Two must be
granted.

D. The Wage Payment and Collection Act
Count Four asserts that Precision is in violation of
the Wage Payment and Collection Act (“the Act”), West Virginia
Code § 21-5-4(b), for not paying to Melton, within seventy-two

19

hours, money owed under the Employment Agreement with respect to
Special Project Contract Sales commissions.

Precision moves to

dismiss the claim to the extent that it includes commissions for
“sales occurring subsequent to Plaintiff‟s separation from
employment.”

Def.‟s Mot. Dismiss ¶ 16.

Precision asserts that

such commissions are not “wages” as contemplated by the Act.
Def.‟s Mem. Supp. Mot. Dismiss 14.

In his Response, Melton

states that he “has not made a claim for post-termination
violations of the [Act].”

Pl.‟s Resp. Opp‟n. to Def.‟s Mot.

Dismiss 6.
In the Act, “wages” are defined as “compensation for
labor or services” and “then accrued fringe benefits.”
Code § 25-5-1(c).

W. Va.

While post-termination commissions do not

appear to be wages, Melton‟s stipulation that he is not claiming
violation for such commissions obviates the need for the court
to address the issue.

The court grants Precision‟s motion with

regard to Count Four, dismissing any claims Melton has or may
have had under the Wage Payment and Collection Act with respect
to post-termination commissions.

E.

Fraudulent Inducement
Count Three alleges that Melton was fraudulently

“induced into entering into the [Asset Purchase Agreement]” by

20

the Addendum‟s and CNC Agreement‟s “stated employment period of
no less than five years.”

Compl. ¶¶ 41-43.

Melton asserts that

his reliance on Precision‟s intentions “was justified” “[g]iven
the large amount of GPSI‟s assets sold to [Precision].”
¶ 45.

Id.

Regarding relief for his fraudulent inducement claim,

Melton states that he “was damaged when [Precision] terminated
his employment with [Precision] less than eleven months after it
started, a breach of the . . . employment term of no less than
five years.”

Id. ¶ 46.

Precision argues that Melton‟s fraudulent inducement
claim fails because a fraudulently induced contract is, at most,
voidable under West Virginia law.
Dismiss 7-8.

Def.‟s Reply Supp. Mot.

When fraud is asserted as a contractual defense,

“[a] contract fraudulently procured is not void, but only
voidable, and the party complaining may elect to repudiate it or
to be bound by it.”
(W. Va. 1915).

Coffman v. Viquesney, 84 S.E. 1069, 1071

Precision is correct that Melton‟s request for

relief is inconsistent with the contract law concept of
fraudulent inducement.
The court observes, however, that the alleged fraud in
this case is more naturally construed as a tort claim rather
than a fraudulent inducement contract law defense.

See Herrod

v. First Republic Mortg. Corp., Inc., 218 W.Va. 611, 625, 625
21

S.E.2d 373, 387 (2005) (discussing “the difference between fraud
as a contractual defense and fraud as a tort”).

Despite Melton

titling Count Three “Fraudulent Inducement,” the induced Asset
Purchase Agreement is only incidentally involved in the claim.
Inducement is relevant only insofar as it supplies Precision‟s
alleged motive for making a fraudulent misrepresentations as to
the employment term.

A tort construction is more consistent

with the claim‟s affirmative nature and Melton‟s request for
relief since “tort law imposes liability in damages for
misrepresentation, while contract law does not.”

Id. (quoting

Restatement (Second) Contracts ch. 7, intro. note (1981)).

The

court therefore construes Count Three not as an assertion of
fraudulent inducement under a contract theory, but rather as an
inarticulately pled fraud tort claim, which happens to relate to
inducement.
Precision alternatively argues that Melton‟s
fraudulent inducement claim is precluded by the Asset Purchase
Agreement‟s integration clause.

Def.‟s Mot. Dismiss ¶ 14.

The

integration clause states that the Asset Purchase Agreement
“constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior
oral and written agreements between the parties with respect to
the subject matter hereof.”

Asset Purchase Agreement 5.

22

Because fraud claims are a recognized exception to the liability
limits arising from integration and merger clauses, see Traders
Bank v. Dils, 226 W.Va. 691, 696, 704 S.E.2d 691, 696 (2010),
Precision‟s argument is without merit.

Moreover, the Asset

Purchase Agreement and its integration clause are only
indirectly relevant to the alleged fraud since both the relief
requested and misrepresentations claimed concern the employment
contracts.
Finally, Precision argues that Pennsylvania‟s “gist of
the action” doctrine bars Melton from pursuing tort claims that
are in essence for the breach of contractual duties.
Mot. Dismiss ¶ 12.

Def.‟s

Pennsylvania‟s “gist of the action”

doctrine, however, is inapplicable because West Virginia law
governs Melton‟s tort claims.

West Virginia law does not

preclude the fraudulent inducement claim.

The Supreme Court of

Appeals has stated,
Tort liability of the parties to a contract arises
from the breach of some positive legal duty imposed by
law because of the relationship of the parties, rather
than from a mere omission to perform a contract
obligation. An action in tort will not arise for
breach of contract unless the action in tort would
arise independent of the existence of the contract.
Lockhart v. Airco Heating & Cooling, Inc., 211 W.Va. 609, 614,
567 S.E.2d 619, 624 (2002) (quoting 86 C.J.S. Torts § 4).

It is

apparent that Melton‟s fraud claim arises independently of the

23

underlying contracts.

As discussed above, Precision‟s

statements of intentions are not central to the agreement and do
not constitute binding contractual promises.
can establish grounds for fraud.

They nonetheless

See Croston v. Emax Oil Co.,

195 W.Va. 86, 90, 464 S.E.2d 728, 734 (1995) (observing that
fraud can be “based on statements . . . which constitute
expressions of intention” if the “non-existence of the intention
to fulfill the promise at the time it was made is shown”).

The

court concludes that the alleged misrepresentations are
sufficiently distinct from the underlying contracts to support a
fraud tort claim.1

F. Negligence
Count Five alleges that Precision “negligently
breached” its “duty to act reasonably in its dealings with
Melton.

Compl. ¶¶ 53-54.

“As a direct, proximate, and

foreseeable result” of that breach, Melton claims he suffered
various financial injuries as well as emotional distress.
¶ 55.

Id.

Precision seeks to dismiss the negligence claim on the

grounds that the Gist of the Action doctrine bars the claim as
1

Melton‟s complaint vaguely suggests that Precision might have
made other misrepresentations, oral or otherwise, that are
external to the Addendum and CNC Agreement writings. It states
that Precision “made this representation [about the employment
term] to Melton, and in fact the representation . . . was
incorporated into the [agreements].” Compl. ¶ 44. Any such
evidence would further support the court‟s conclusion that fraud
exists independently of the contract.
24

duplicative of breach of contract and, in addition, that Melton
has not properly pled a duty that Precision owed to him.
Mem. Supp. Mot. Dismiss 9-11.

Def.‟s

Because the court agrees that

Melton‟s negligence claim fails in its entirety, the court does
not address Precision‟s third argument: that Melton failed to
plead a cognizable claim for emotional distress.

Id. at 11

To establish a prima facie case of negligence, a
plaintiff must show that the defendant “has been guilty of some
act or omission in violation of a duty owed to the plaintiff.”
Conley v. Stollings, 223 W.Va. 762, 766, 679 S.E.2d 594, 598
(2009) (quoting Syl. Pt. 1, Parsley v. General Motors Acceptance
Corp., 167 W.Va. 866, 866, 280 S.E.2d 703, 704 (1981)).

There

can be no negligence action without a duty broken.

Where

Id.

the duty is one based solely upon contract, however, the
plaintiff‟s remedy is for breach of contract rather than
negligence.

Cavcon, Inc., 557 F. Supp. 2d at 723-24.

“To the

extent plaintiff's negligence claim is based on a duty set forth
in the agreement, it fails.”

Id. at 724.

Unlike the fraudulent inducement claim, Melton‟s
negligence claim does not exist independently of the contract
and is not a valid cause of action.

Melton fails to establish

that Precision‟s “duty to act reasonably in its dealings” is in
any way distinct from its contractual duties.
25

See Stand Energy

Corp. v. Columbia Gas Transmission Corp., 373 F. Supp. 2d 631,
644 (S.D. W. Va. 2005) (agreeing with the defendant‟s position
“that West Virginia law does not recognize an independent cause
of action for a breach of duty of good faith and fair dealing
separate and apart from a breach of contract claim”).

Apart

from the contractual duties, it is unclear what duty Precision
owed Melton and could have breached.

See Fifth Third Bank v.

McClure Properties, Inc., 724 F. Supp. 2d 598 (S.D. W. Va. 2010)
(concluding that a negligence claim based on the defendant
having “breached its duty to fund the loan in a reasonable
manner” is really a contract claim); Steel of West Virginia,
Inc. v. AMI G.E., LLC, 2009 WL 1648915 (S.D. W. Va. June 10,
2009) (“Despite Plaintiff's contention its negligence claims
arise separate and apart from the contract, they clearly do not.
But for the contract, Defendant would have no duty to provide
engineering services to Plaintiff and Defendant would owe no
duty of care to Plaintiff.”).

Because Precision‟s only duties

to Melton are contractual, Melton‟s negligence claim is not
tenable.
IV.
Based upon the foregoing discussion, it is,
accordingly, ORDERED as follows:
1.

Precision‟s motion to dismiss be, and it hereby is,
denied as to Counts One and Three;
26

2.

Precision‟s motion to dismiss be, and it hereby is,
granted as to Counts Two and Five; and

3.

Precision‟s motion to dismiss Court Four to the extent
it seeks, under the Wage Payment and Collection Act,
post-termination commissions is granted.
The Clerk is directed to forward copies of this

written opinion and order to all counsel of record.
ENTER:

January 18, 2013

John T. Copenhaver, Jr.
United States District Judge

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