NANCY G. EDMUNDS, District Judge.
This matter comes before the Court on Defendants Scoutware LLC and Kathleen Cronin's motion to dismiss. For the reasons set forth below, Defendants' motion is GRANTED in part and DENIED in part.
On July 11, 2011, Plaintiff Christopher Bailey began working as a sales representative for Defendant Scoutware. (Compl. ¶¶ 4, 11.) Plaintiff was hired by Jeff Murphy, who Plaintiff believes is the majority shareholder and CEO of Defendant Scoutware. (Compl. ¶ 10.) Plaintiff received a formal offer, stating, "Scoutware, LLC is pleased to formally extend to you anoffer of full-time employment, working as a Sales Representative, reporting to Kate Cronin." (Compl. Ex. 1.) Plaintiff signed a written contract, which had a two year non-compete clause and a termination clause that required two weeks notice. (Compl. ¶ 12.)
On October 17, 2011, Plaintiff handed over a copy of his employment contract with Defendant to Fast Model Technologies LLC, in compliance with a discovery request because Plaintiff had filed a lawsuit against Fast Model, his former employer. (Compl. ¶ 22.) On November 4, 2011, less than three weeks later, Jeff Murphy called Plaintiff and told him the check for the pay period ending October 31, 2011 would be his last check because he was being terminated effective immediately. (Compl. ¶ 23.) Murphy asked Plaintiff why he had not informed Defendant that he was suing his former employer. (Compl. ¶ 25.) Murphy further stated that he had learned things about Plaintiff that did not fit the type of employee the company wanted, but Murphy would not say where or how he learned these things. (Compl. ¶¶ 26-27.) Murphy also said that Plaintiff was not performing as expected. (Compl. ¶ 28.) This was the first time Plaintiff's work performance had ever been questioned and when Plaintiff asked why no one had expressed Plaintiff's unsatisfactory work performance before this, Murphy did not respond. (Compl. ¶¶ 29-30.)
Plaintiff attempted to contact Murphy several times to get clarification and learn who had told Murphy about Plaintiff's lawsuit against Fast Model, but Murphy refused to respond. (Compl. ¶ 34.) Defendant did not pay Plaintiff for wages owed to Plaintiff for the period of November 1, 2011 through November 4, 2011 and for the two weeks "termination period" following November 4, 2011, as required by Plaintiff's employment contract. (Compl. ¶ 36.) Plaintiff's employment contract specifically states:
(Compl. Ex. 1.) Despite Plaintiff's request, Defendant Scoutware refused release him from the two-year non-compete clause. (Compl. ¶¶ 37-38).
On December 13, 2011, in a deposition in Plaintiff's case against Fast Model, Ross Comerford, a Fast Model employee, admitted that he spoke to Defendant Cronin, a sales representative at Defendant Scoutware and that "Plaintiff's employment with Fast Model came up in conversation." (Compl. ¶¶ 39-40.) After subpoenaing phone records, Plaintiff found that on October 19, 2011, two days after Plaintiff turned over his employment contract to Fast Model's attorney, Ross Comerford attempted to call Defendant Cronin four times in four minutes, and when Defendant Cronin called Comerford back, they spoke for more than twelve minutes. (Compl. ¶ 46.) Before these calls, Comerford and Defendant Cronin had not spoken in seven months.
Immediately after hanging up with Comerford, Defendant Cronin called the executive vice president of Defendant Scoutware and Jeff Murphy. (Compl. ¶¶ 47-48.) On November 3, 2011, the day before Plaintiff was terminated, Defendant Cronin and Murphy had a 45-minute phone conversation and exchanged eight texts. (Compl. ¶¶ 50-51.) On November 4, 2011, less than two minutes after Murphy called and terminated Plaintiff, Murphy texted Defendant Cronin. (Compl. ¶ 53.)
On December 3, 2011, Plaintiff's attorney notified Fast Model's attorney that Defendant Scoutware had terminated Plaintiff's employment and expressed concern that Plaintiff was terminated very close in time to when Plaintiff had given Fast Model his employment contract. (Compl. ¶ 54.) On December 5, 2011, two days later, Comerford called Defendant Cronin and spoke to her for twenty minutes and they exchanged four texts. (Compl. ¶ 55.) On December 13, 2011, Comerford, in his deposition, stated:
(Compl. Ex. 3.)
On January 21, 2012, Plaintiff filed his four-count Complaint, alleging: (1) retaliatory discharge under the Michigan Whistleblowers' Protection Act (the "WPA") (against Scoutware); (2) breach of contract (against Scoutware); (3) a declaration that the contractual non-compete provision is unenforceable (against Scoutware); and (4) tortious interference with a contract (against Cronin).
On March 27, 2012, Defendants filed this motion to dismiss pursuant to Rule 12(b)(1), (2) and (6) for lack of subject-matter jurisdiction, lack of personal jurisdiction, and failure to plausibly state a claim upon which relief can be granted. Plaintiff's response was due on April 17, 2012. Plaintiff did not submit his response until May 18, 2012.
Subject matter jurisdiction is governed by Fed. R. Civ. P. 12(b)(1). A motion to dismiss pursuant to Rule 12(b)(1) may either attack the claim of jurisdiction on its face or it can attack the factual basis of jurisdiction. Golden v. Gorno Bros., Inc., 410 F.3d 879, 881 (6th Cir. 2005). When a defendant challenges subject matter jurisdiction on a factual basis, the plaintiff has the burden of proving jurisdiction in order to survive the motion. Moir v. Greater Cleveland Reg'l Transit Auth., 895 F.2d 266, 269 (6th Cir. 1990). "In reviewing a 12(b)(1) motion, the Court may consider evidence outside the pleadings to resolve factual disputes concerning jurisdiction, and both parties are free to supplement the record by affidavits." Nichols v. Muskingum Coll., 318 F.3d 674, 677 (6th Cir. 2003) (citation omitted).
Defendant argues that Plaintiff failed to properly allege that this Court has subject matter jurisdiction on the basis of diversity of citizenship. In the Jurisdictional Claims of the Complaint, it states:
Defendant argues that Plaintiff was required to allege that he was a citizen of Michigan and that the Defendants were citizens of Illinois, not merely that they were residents of those states or that Defendant Scoutware was an Illinois LLC with an Illinois address.
On June 8, 2012, this Court ordered Plaintiff to file a responsive pleading to allege that there was diversity of citizenship among the parties in order to move forward in this Court. On June 13, 2012, Plaintiff responded and properly alleged diversity of citizenship. This cured the defect in Plaintiffs' Complaint. See Sun Printing & Publishing Ass'n v. Edwards, 194 U.S. 377, 382 (1904) ("The whole record, however, may be looked to, for the purpose of curing a defective averment of citizenship, where jurisdiction in a Federal court is asserted to depend upon diversity of citizenship, and if the requisite citizenship is anywhere expressly averred in the record, or facts are therein stated which, in legal intendment, constitute such allegation, that is sufficient.").
Defendants' motion to dismiss for lack of subject matter jurisdiction is DENIED.
A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of a complaint. In a light most favorable to the plaintiff, the court must assume that the plaintiff's factual allegations are true and determine whether the complaint states a valid claim for relief. See Albright v. Oliver, 510 U.S. 266 (1994); Bower v. Fed. Express Corp., 96 F.3d 200, 203 (6th Cir. 1996). To survive a Rule 12(b)(6) motion to dismiss, the complaint's "[f]actual allegations must be enough to raise a right to relief above the speculative level on the assumption that all of the allegations in the complaint are true." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations and emphasis omitted). See also Ass'n of Cleveland Fire Fighters v. City of Cleveland, Ohio, 502 F.3d 545, 548 (6th Cir. 2007).
"[T]hat a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of all the elements of a cause of action, supported by mere conclusory statements do not suffice." Ashcroft v. Iqbal, ___ U.S. ___, 129 S.Ct. 1937, 1949 (2009). The court is "not bound to accept as true a legal conclusion couched as a factual allegation." Id. at 1950 (internal quotation marks and citation omitted). Moreover, "[o]nly a complaint that states a plausible claim for relief survives a motion to dismiss." Id.
Id. (internal quotation marks and citation omitted). Thus:
Id. In sum, "[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face." Id. at 1949 (internal quotation marks and citation omitted).
Defendants argue that Plaintiff has failed to state a claim for relief under the Whistleblower Protection Act or for tortious interference with a contract against Defendant Cronin.
Under the Whistleblowers' Protection Act ("WPA"):
Mich. Comp. Laws § 15.362. To state a prima facie case of retaliation under the WPA, a plaintiff must show: (1) he was engaged in protected activity as defined by the act; (2) he was discharged or discriminated against; and (3) a causal connection exists between the protected activity and the discharge or adverse employment action. West v. Gen. Motors Corp., 655 N.W.2d 468, 471-72 (Mich. 2003). A burden-shifting analysis applies to claims brought pursuant to the WPA.
Eckstein v. Kuhn, 408 N.W.2d. 131, 134 (Mich. Ct. App. 1987).
Under the WPA, protected activity is when the "employee . . . reports . . . a violation or a suspected violation of a law or regulation or rule promulgated pursuant to law of this state." In this case, the protected activity is that Plaintiff reported his former employer's violation of law and filed a lawsuit to correct those violations. Defendant argues, however, that Plaintiff has failed show a causal connection between his protected action and his termination. Defendant states that Plaintiff's sole factual support is his timeline of events and phone calls and that this shows nothing more than that Plaintiff's termination came after the protected action, not because of it.
On October 19, 2011, two days after Plaintiff turned over his employment contract to Fast Model's attorney, Ross Comerford attempted to call Defendant Cronin four times in four minutes, and when Defendant Cronin called Comerford back, they spoke for more than twelve minutes. Before that day, Comerfold and Defendant Cronin had not exchanged a phone call or text message in seven months. Immediately after hanging up with Comerford, Defendant Cronin called the executive vice president of Defendant Scoutware and Jeff Murphy. On November 3, 2011, the day before Plaintiff was terminated, Cronin and Murphy had a 45-minute phone conversation and exchanged eight texts. On November 4, 2011, Murphy fired Plaintiff over the phone.
In the phone conversation, Murphy asked Plaintiff why he did not inform Murphy that he was suing his former employer. Murphy also stated that he had learned things about Plaintiff that did not fit the type of employee Defendant Scoutware wanted. Plaintiff asked Murphy about how Murphy came to have this information but Murphy refused to answer. After asking about the lawsuit, Murphy went on to say that Plaintiff was not performing as expected, but this was the first time Plaintiff's work performance had ever been questioned. When Plaintiff asked Murphy why no one had expressed Plaintiff's alleged unsatisfactory work performance, Murphy did not respond.
This Court finds Plaintiff's timeline, in conjunction with his other allegations, persuasive. The fact that Murphy brought up Plaintiff's lawsuit and questioned why he had not told anyone he was suing his former employer when Murphy called to terminate Plaintiff, along with the timing and frequency of the phone calls between Comerford, Defendant Cronin, and Murphy, indicates causation.
Plaintiff attached an email he sent to Jeff Murphy about a week after he was terminated that states, in relevant part:
(Compl. Ex. 2.)
In this email, Plaintiff identifies that he is confused about the actual reasons he was terminated and questions whether someone at his old employer reached out to people at Scoutware. Plaintiff wrote this email before he had access to the phone records that confirmed his suspicions that someone at Fast Model had called Scoutware. Defendants argue that this email shows that Plaintiff was terminated for legitimate reasons having nothing to do with his pending lawsuit.
At this point in the litigation, Plaintiff need only state a plausible claim for relief and this Court must accept all the allegations in the Complaint as true. Plaintiff has adequately shown a prima facie case, including causation. Additionally, Plaintiff has alleged enough facts, with his phone conversation with Jeff Murphy, the timeline of phone calls and text messages, and his early—on suspicious that his termination was motivated by his protected activity—the lawsuit against his former employer—to allege that Defendants' "legitimate reason" for terminating Plaintiff was pretext and withstand a motion to dismiss.
Defendants also argue that the main purpose of the WPA is to "alleviate the inability to combat corruption or criminally irresponsible behavior in the conduct of government or large business" by overcoming "fear of retribution," prohibiting "employer reprisals against whistleblowing employees for the purpose of encouraging employees to report violations." Shallal v. Catholic Soc. Servs. of Wayne Cnty., 455 Mich. 604 (1997) (internal citations and quotations omitted). "The primary motivation of an employee pursuing a whistleblower claim must be a desire to inform the public on matters of public concern, and not personal vindictiveness." Id. at 579. There is "no evidence which suggests that the Michigan Legislature intended the Whistleblowers Act to be used as an offensive weapon by disgruntled employees." Id.
Defendants argue that Plaintiff's protected act, filing the Fast Model Litigation, was merely a suit against his former employer for Plaintiff's own personal financial gain. Defendants argue that this is of no public concern and that there is no evidence that it was intended to provide any public benefit.
Defendants' reliance on Shallal is misplaced. In Shallal, the court determined that the plaintiff was using the WPA as a shield against being fired where she knew she was going to be fired before threatening to report her supervisor. The court determined that the plaintiff was effectively extorting her employer by threatening to report alleged violations a year later, in an effort to gain leverage and job security.
These facts are completely dissimilar from the current case, where Plaintiff had appropriately reported a violation of his former employer and had not even told his new employer about it, let alone tried to use it as leverage or to extort anyone. There is nothing in the language of the WPA that the protected activity must be a matter of public concern in the way that Defendants are attempting to argue. Further, reporting actual violations to help aggrieved parties and bring light to the violations so that they do not continue to occur is a matter of public concern. The subject matter of the action need not be a public safety issue or something deserving national attention.
Defendants' motion to dismiss Plaintiff's WPA claim for failure to state a claim is DENIED.
To prevail on a claim for tortious interference with a contract under Michigan Law, a plaintiff must allege: "(1) the existence of a contract, (2) a breach of the contract, and (3) an unjustified instigation of the breach by the defendant." Health Call of Detroit v. Atrium Home & Health Care Servs., Inc., 706 N.W.2d 843, 848-49 (Mich. Ct. App. 2005). To show an unjustified instigation of the breach by the defendant, the plaintiff "must allege the intentional doing of a per se wrongful act or the doing of a lawful act with malice and unjustified in law for the purpose of invading the contractual rights or business relationship of another." CMI Int'l., Inc. v. Intermet Int'l. Corp. 649 N.W.2d 808, 812 (Mich. Ct. App. 2002). If the "defendant's conduct was not wrongful per se, the plaintiff must demonstrate specific, affirmative acts that corroborate the unlawful purpose of the interference." Id.
A claim for tortious interference with contract cannot be brought against a party to the contract or an agent of a party to the contract. See Reed v. Mich. Metro Girl Scout Council, 506 N.W.2d 231, 233 (1993). Employees of a contracting party are agents of that party and, therefore, not "third-parties" for purposes of a tortious interference with a contract claim. Id. An agent of a corporation may be held liable only when the agent's actions were purely for personal gain and with no benefit to the corporation. Id.
In this case, Plaintiff alleges a tortious interference claim against Defendant Cronin, who was Plaintiff's supervisor at Scoutware. Because Defendant Cronin was a Scoutware employee, in order to bring a claim for tortious interference, Plaintiff must allege that her actions were purely for personal gain and with no benefit to the corporation. Plaintiff has failed to do this.
In his Complaint, Plaintiff alleges that Defendant Cronin acted unethically and improperly in going directly to "Andy Clark and Jeff Murphy of Defendant Scoutware LLC after speaking with Ross Comerford for the purpose of invading the contractual rights of Plaintiff." Nowhere in the Complaint, however, does Plaintiff suggest that Defendant Cronin had any personal motives for doing this. In his Response brief, Plaintiff states that Defendant Cronin is no longer working for Defendant Scoutware and "her multiple communications with Ross Comerford leaves the question of whether she was compensated for her actions by Mr. Comerford or promised some sort of employment at the conclusion of these cases with his company." Plaintiff argues that it is premature to dismiss Defendant Cronin without Plaintiff finding out whether her interference with Plaintiff's contract was self-serving because she was leaving the company. Defendant Cronin signed a declaration stating that at all times during the term of Plaintiff's employment with Defendant Scoutware, from July 11, 2011 to November 4, 2011, she was employed by Defendant Scoutware. (Defs. Mot. Ex. E.)
Plaintiff has not alleged any facts that suggest that Defendant Cronin was acting for personal gain with no benefit to the company. In order to withstand a motion to dismiss, Plaintiff must allege sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face. Plaintiff has failed to do this here.
Defendants' motion to dismiss the tortious interference claim against Defendant Cronin is GRANTED.
Because Plaintiff failed to state a tortious interference claim against Defendant Cronin, Defendants' personal jurisdiction argument is moot. Plaintiff's remaining claims are alleged only against Defendant Scoutware.
Plaintiff seeks declaratory judgment on the enforceability and legality of the two-year non-compete clause in the employment contract he entered into with Defendant Scoutware. Defendant argues that Plaintiff's claim should be dismissed because it is not ripe.
28 U.S.C. § 2201(a). Federal courts' constitutional authority extends only to actual cases or controversies. Iron Arrow Honor Soc'y v. Heckler, 464 U.S. 67, 70 (1983).
To satisfy the Article III case or controversy requirement, a litigant must have suffered some actual injury that can be redressed by a favorable judicial decision; otherwise the case is moot. Id. The requirements of case or controversy are no less strict under the Declaratory Judgment Act than in any other suits. Alvatar v. Freeman, 319 U.S. 359, 363 (1945). The Supreme Court established that in order to be ripe for adjudication, "it must be a real and substantial controversy admitting of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts." Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 241 (1937).
The Sixth Circuit has held that there is no doubt that "where there is controversy as to the meaning and effect of a written contract interpretation may be sought from and made by the declaratory judgment of a court having jurisdiction over the parties." Panhandle E. Pipe Line Co. v. Michigan Consol. Gas Co., 177 F.2d 942 (6th Cir. 1949). A court, in deciding whether declaratory judgment is appropriate, should consider:
Stockton v. Gen. Accident Ins. Co., No. 89-5492, 1990 WL 20477, at *4 (6th Cir. March 6, 1990).
Plaintiff alleges that an actual controversy exists regarding the enforceability and legality of the non-compete clause in Plaintiff's employment contract with Defendant. In the Complaint, Plaintiff alleges that he will be severely limited in seeking employment if the non-compete is not set aside and in his Response Brief, Plaintiff states that he has, in fact, reached out to competing companies seeking a job since his termination and his "ability to obtain employment has been severely compromised by this non-compete agreement, and he is currently still unemployed." (Pl. Resp. 12.)
Defendants argue that Plaintiff is inappropriately seeking an advisory opinion from this Court and that Plaintiff presents no actual controversy for this Court to resolve and has no injury that would be redressed by a favorable opinion. The non-compete clause at issue, effective for two years following the termination date, is not set to expire until November 4, 2013.
At the motion to dismiss stage of this litigation, this Court finds that it is premature to dismiss Plaintiff's claim for declaratory judgment. This is particularly true where Plaintiff has alleged that this provision is preventing him from finding employment and Defendant Scoutware holds the position that it still has a contractual right based on the noncompete clause. Declaratory judgment in this case would serve a useful purpose in clarifying the legal relations in issue and it is not being used for the purpose of procedural fencing or to race to res judicata, as there are no other actions pending between the parties. Additionally, the use of a declaratory action will not increase friction between federal and state courts.
Defendants' motion to dismiss the declaratory judgment count is DENIED.
For the foregoing reasons, Defendants' motion to dismiss is GRANTED in part and DENIED in part. Defendants' motion is GRANTED as to the tortious interference claim against Defendant Cronin and DENIED as to the counts against Defendant Scoutware.
