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BERGSTEIN v. JORDACHE ENTERPRISES

June 24, 1991

DAVID BERGSTEIN, PLAINTIFF,
v.
JORDACHE ENTERPRISES, INC., DEFENDANT.



The opinion of the court was delivered by: Cannella, District Judge:

MEMORANDUM AND ORDER

Defendant's motion to dismiss plaintiff's complaint is granted in part and denied in part. Fed.R.Civ.P. 12(b)(6).

BACKGROUND

In April 1982, Jordache Enterprises, Inc., ["Jordache"] a New York
corporation with its principal place of business in New York, engaged
David Bergstein, a Pennsylvania domiciliary, to be its sales
representative in Western Pennsylvania and West Virginia. Bergstein
agreed to develop accounts among clothing retailers within his territory
and in return Jordache promised to pay him a five percent commission on
all goods shipped into his area. Jordache terminated its relationship
with Bergstein in 1989. Bergstein thereafter commenced the instant action
alleging the following claims: (1) wrongful discharge (count one); (2)
prima facie tort (alternative count one); (3) breach of contract (count
two); (4) intentional interference with contract (count three); and (5)
violation of the Pennsylvania Commissioned Sales Representative Act, 43
Pa.Cons.Stat.Ann. §§ 1471 et seq.  (Purdon 1991) [the "Sales
Representative Act"] (count four). Jordache now moves to dismiss
Bergstein's complaint in its entirety under Rule 12(b)(6) of the Federal
Rules of Civil Procedure.

DISCUSSION

In deciding a motion to dismiss for failure to state a claim upon which
relief can be granted, the court must accept as true all of plaintiff's
factual allegations and must construe the complaint in the light most
favorable to the plaintiff. See Scheuer v. Rhodes, 416 U.S. 232, 236, 94
S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974). All permissible inferences from
those facts must also be drawn in plaintiff's favor. See Murray v. City
of Milford, 380 F.2d 468, 470 (2d Cir. 1967). A complaint should not be
dismissed for failure to state a claim unless it appears beyond doubt
that no relief can be granted under any set of facts plaintiff could
prove in support of his claim. See Hishon v. King & Spalding,

467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984);
Dahlberg v. Becker, 748 F.2d 85, 88 (2d Cir. 1984), cert. denied,
470 U.S. 1084, 105 S.Ct. 1845, 85 L.Ed.2d 144 (1985).

I. Wrongful Discharge

The jurisdictional basis for all of plaintiff's claims, including wrongful discharge, is diversity of citizenship; therefore, state law controls plaintiff's recovery. See Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 LEd. 1188 (1938). To decide which state's law applies, the court must look to the choice of law rules of the forum state. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941).

New York applies the interest analysis approach to choice of law questions in tort actions. See Schultz v. Boy Scouts of America, Inc., 65 N.Y.2d 189, 197, 480 N.E.2d 679, 684, 491 N.Y.S.2d 90, 95 (1985); Babcock v. Jackson, 12 N.Y.2d 473, 481, 191 N.E.2d 279, 283, 240 N.Y.S.2d 743, 749 (1963). Under this formulation, "`controlling effect' must be given `to the law of the jurisdiction which, because of its relationship or contact with the occurrence or the parties, has the greatest concern with the specific issue raised in the litigation.'" Schultz, 65 N.Y.2d at 196, 480 N.E.2d at 683, 491 N.Y.S.2d at 94 (quoting Babcock, 12 N.Y.2d at 481, 191 N.E.2d at 283, 240 N YS.2d at 749). In making this determination, the most relevant contacts are the parties' domicile and the locus of the tort. See id. at 197, 480 N.E.2d at 684, 491 N YS.2d at 95.

Here, plaintiff is a Pennsylvania domiciliary and defendant is a New York corporation with its principal place of business in New York. Under New York law, where defendant's negligent conduct occurs in one jurisdiction and plaintiff's injuries are suffered in another, the place of the wrong is deemed to be "the place where the last event necessary to make the actor liable occurred." Id. at 195, 480 N.E.2d at 683, 491 N YS.2d at 94. Since plaintiff's injuries occurred in Pennsylvania, the locus of the tort is Pennsylvania. Given that Bergstein lived in Pennsylvania and that the tort occurred in that state, Pennsylvania has the greatest nexus with the controversy. See Perdue v. J. C. Penney Co., 470 F. Supp. 1234, 1238 (S.D.N.Y. 1979) (finding that Texas had the greatest interest in wrongful discharge claim asserted by Texas domiciliary working in Texas against New York corporation).

Nevertheless, Pennsylvania law could be displaced. In Neumeier v. Keuhner, 31 N.Y.2d 121, 286 N.E.2d 454, 335 N.Y.S.2d 64 (1972), an action involving parties with different domiciles, the court observed as follows:

  Normally, the applicable rule of decision will be that
  of the state where the accident occurred but not if it
  can be shown that displacing that normally applicable
  rule will advance the relevant substantive law
  purposes without impairing the smooth working of the
  multi-state system or producing great uncertainty for
  litigants.

Id. at 128, 286 N.E.2d at 458, 335 N.Y.S.2d at 70. Neither party contends that New York has a substantial interest in the underlying controversy which would justify displacing Pennsylvania law on wrongful discharge. Absent cause to deviate from the usual rule, the Court finds that Pennsylvania law governs plaintiff's wrongful discharge claim. In the context of Jordache's motion to dismiss, the issue before the Court is whether Pennsylvania recognizes a claim for wrongful discharge, and if so, whether the facts plaintiff alleges sufficiently state a claim.

The long standing rule in Pennsylvania is that absent an express statutory or contractual provision concerning the duration of the contract or the permissible grounds for dismissal, employee at will principles apply. See Pociask v. KDI Sylvan Pools, Inc., No. 89 Civ. 3447, slip op. at 8, 1990 WL 161256 (E.D.Pa. Oct. 17, 1990); McGonagle v. Union Fidelity Corp., 383 Pa. Super. 223, 556 A.2d 878, 881 (Super.Ct. 1989); Darlington v. General Elec., 350 Pa. Super. 183, 504 A.2d 306, 309 (Super.Ct. 1986). An at-will employee may be terminated "at any time, for any reason, or for no reason at all." Martin v. Capital Cities Media, Inc., 354 Pa. Super. 199, 207, 511 A.2d 830, 834 (Super.Ct. 1986). Thus, an at-will employee has no right of action against his employer for wrongful discharge. See Geary v. United States Steel Corp., 456 Pa. 171, 319 A.2d 174, 176 (1974); McGonagle, 556 A.2d at 881; Richardson v. Charles Cole Memorial Hosp., 320 Pa. Super. 106, 466 A.2d 1084, 1085 (Super.Ct. 1983). The rule is designed to safeguard the employer's right to manage his business as he sees fit and to uphold freedom of contract. See Darlington, 504 A.2d at 309.

There is one narrow exception to the rule. The leading case of Geary
v. United States Steel Corp., 456 Pa. 171, 319 A.2d 174 (1974)
established a nonstatutory cause of action for wrongful discharge from
employment at-will where the employee discharge violates public policy
and there is no legitimate or plausible reason for termination. See 319
A.2d at 180. To recover, the employee must show a "clearly mandated
public policy" of the type that "strikes at the heart of a citizen's
social rights, duties, and responsibilities." Novosel v. Nationwide Ins.
Co., 721 F.2d 894, 899 (3d Cir. 1983) (applying Pennsylvania law).
Pennsylvania courts, however, are reluctant to recognize a wrongful
discharge claim based on an employee's allegation that his discharge
violated public policy, see Rossi v. Pennsylvania State Univ.,
340 Pa. Super. 39, 489 A.2d 828, 837 (Super.Ct. 1985), and recognize the
exception only in narrow circumstances, see Hineline v. Stroudsburg
Elec. Supply Co., 384 Pa. Super. 537,  559 A.2d 566, 568 (Super.Ct.
1989).

A survey of Pennsylvania case law indicates that there are two factual situations which give rise to a claim that an employer's termination contravenes public policy. First, a wrongful discharge claim is recognized where the employee is terminated for fulfilling a statutory duty or exercising a constitutional right. See Novosel, 721 F.2d at 900 (discharge for exercising first amendment rights); Perks v. Firestone Tire & Rubber Co., 611 F.2d 1363, 1366 (3d Cir. 1979) (discharge for refusal to submit to polygraph examination which by statute an employer could not legally require an employee to take); Field v. Philadelphia Elec. Co., 388 Pa. Super. 400, 565 A.2d 1170, 1180 (Super.Ct. 1989) (discharge for performing statutory duty of notifying Nuclear Regulatory Commission of public safety violations); Reuther v. Fowler & Williams, Inc., 255 Pa. Super. 28, 386 A.2d 119, 121 (Super.Ct. 1978) (discharge for fulfilling jury duty, a statutory obligation). Pennsylvania also affords relief where the employee is discharged for refusing to comply with his employer's order to violate the law. See Woodson v. AMF Leisureland Centers, Inc., 842 F.2d 699, 702 (3d Cir. 1988) (discharge for refusal to serve alcohol to clearly intoxicated patron); Shaw v. Russell Trucking Lines, Inc., 542 F. Supp. 776, 779 (W.D.Pa. 1982) (termination for refusal to commit motor vehicle violation); McNulty v. Borden, Inc., 474 F. Supp. 1111, 1119 (E.D.Pa. 1979) (termination for refusal to participate in antitrust violation).

An employee's termination does not threaten a clear mandate of public policy, however, where a nonmanagement employee is discharged merely for objecting to company policy, regardless of the commendable nature of his action. This is best illustrated by the Pennsylvania Supreme Court's decision in Geary, which introduced the public policy exception but found that the facts presented did not give rise to a wrongful discharge claim. In Geary, a former salesman alleged that he had been wrongfully discharged for complaining to management about the marketing of a product he believed was defective. The court distinguished Geary's discharge from employee discharges for refusing to commit perjury or for filing a workmen's compensation claim. The public policy implicated in these situations was "clear and compelling." Id. at n. 16. However, the court concluded that any public policy considerations raised by Geary's complaint were outweighed by the employer's legitimate interest in maintaining normal business operations. See id.; see also Callahan v. Scott Paper Co., 541 F. Supp. 550, 563 (E.D.Pa. 1982) (no claim existed where sales managers discharged for objecting to company's antitrust violations); Hineline, 559 A.2d at 569 (no claim existed where former employee discharged for dismantling employer's illegal video camera without authority or right).

Bergstein alleges that pursuant to the parties' "partly oral and partly
written" contract, he "would not be terminated without good cause so long
as his performance was satisfactory." Complaint, at  ΒΆΒΆ 5, 15. Under
Pennsylvania law, however, "terms such as employment will continue so
long as performance is satisfactory are too ambiguous to overcome the
[at-will] presumption." Darlington, 504 A.2d at 312 (emphasis in
original). Moreover, an intent to offer an express duration of employment
may not be inferred from the employer's statement that the term of
employment is contingent on satisfactory performance. See Mc Williams v.
AT ...

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