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IVES v. GUILFORD MILLS

March 26, 1998

LAURIE E. IVES, f/k/a Laurie E. Powers, Plaintiff, against GUILFORD MILLS, INC., ADVISORY RESEARCH SERVICES, INC. and CHARLES HAYES, Defendants.


The opinion of the court was delivered by: KAHN

MEMORANDUM-DECISION AND ORDER

 In this diversity action, plaintiff has brought claims for tortious interference with contract and slander. Now before the Court are two motions made by the defendants: a motion to dismiss and a motion to disqualify plaintiff's attorney. In a previous Order dated February 20, 1998, the Court directed the parties to address the issues raised in defendants' motion to dismiss in light of the amended complaint's allegations. These supplemental arguments have been filed. Now, and for the reasons discussed below, the motion to dismiss is granted in part and denied in part, and the motion to disqualify is denied.

 I. Amended Complaint

 Defendants argue first that the Amended Complaint should be ignored as being in violation of Fed. R. Civ. P. Rule 5(d). Rule 5(d) requires "all papers after the complaint required to be served upon a party, together with a certificate of service, shall be filed with the court within a reasonable time after service . . . ." Fed. R. Civ. P. Rule 5(d). Defendants argue that the Amended Complaint was not filed in a reasonable time after service. They acknowledge receiving the Amended Complaint on April 18, 1997. The Amended Complaint was filed on May 5, 1997. The Court does not find this period unreasonable under the circumstances.

 Defendants also point out that there was no certificate of service. The Court also expressed concern in its February 20 order at this absence, since it left the Court unable to determine whether the defendants had been served. See Dkt. No. 24 at 2 n.1. The Federal Rules require that "every pleading subsequent to the original . . . shall be served upon each of the parties." Fed. R. Civ. P. 5(a). However, defendants have made it clear that they were, in fact, served. The question then becomes whether the Amended Complaint, although served on the parties and filed with the Court, should be disregarded because of the absence of a certificate of service.

 The Court concludes that it should not. The principal importance of the certificate of service is to provide the Court with clear proof that service has been accomplished. See United States v. McCoy, 1996 U.S. Dist. LEXIS 8898, 1996 WL 351309 (S.D.N.Y. Jun 26, 1996) (court considered the absence of a certificate of service in effort to determine whether or not attorney had in fact been served). Where actual service is not contested, there is little point to invalidating an Amended Complaint for lack of a certificate, particularly given the plaintiff's right to amend the complaint at least once. Invalidation would seem to serve no purpose except to fruitlessly extend the length of this litigation. The Court will therefore accept the Amended Complaint and review the motion to dismiss in light of its allegations.

 II. Motion To Dismiss

 A district court should grant a motion to dismiss under Fed. R. Civ. P. 12(b)(6) for failure to state a claim only if "'it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.'" H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 249-50, 106 L. Ed. 2d 195, 109 S. Ct. 2893 (1989) (quoting Hishon v. King & Spalding, 467 U.S. 69, 73, 81 L. Ed. 2d 59, 104 S. Ct. 2229 (1984)); Annis v. County of Westchester, N.Y., 36 F.3d 251, 253 (2d Cir. 1994). In applying this standard, a district court must "read the facts alleged in the complaint in the light most favorable" to the plaintiff, and accept these allegations as true. Id. at 249; see Christ Gatzonis Elec. Contractor, Inc. v. New York Sch. Constr. Auth., 23 F.3d 636, 639 (2d Cir. 1994). Further, on a motion to dismiss for failure to state a claim, the Court is limited in its consideration to the complaint, documents attached to the complaint, undisputed documents alleged or referenced in the complaint, and public records. See 2 James Wm. Moore, Moore's Federal Practice, P 12.34[2] at 12-66 (3d ed. 1997). The Court's duty is "to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof." Geisler v. Petrocelli, 616 F.2d 636, 639 (2d Cir. 1980); accord Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir. 1985). The appropriate inquiry, therefore, is not "whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Scheuer v. Rhodes, 416 U.S. 232, 236, 40 L. Ed. 2d 90, 94 S. Ct. 1683 (1974); Ricciuti v. New York City Transit Auth., 941 F.2d 119, 124 (2d Cir. 1991) (plaintiff is not compelled to prove his case at the pleading stage).

 A. Facts

 For purposes of the motion to dismiss under Fed. R. Civ. P. 12(b)(6), the allegations in the complaint are taken as true. Doe v. City of New York, 15 F.3d 264, 266 (2d Cir. 1994). Plaintiff alleges as follows. Defendant Guilford Mills, Inc. ("Guilford") is a corporation organized under the laws of Delaware and maintaining its principal place of business in North Carolina. Advisory Research Services, Inc. ("Advisory") is a wholly owned subsidiary of Guilford which was organized and operates under the laws of North Carolina. Charles Hayes ("Hayes") is both the Chairman of the Board of Guilford and the president of Advisory. He resides in North Carolina. Plaintiff is a New York citizen and jurisdiction is therefore properly based on diversity. *fn1"

 On November 1, 1991, defendants Advisory and Keryakos, Inc. ("Keryakos"), a New York corporation managed and wholly owned by Charles Contompasis ("Contompasis"), formed a partnership known as Twin Rivers Textile Printing and Finishing ("Twin Rivers"). The purpose of the partnership, as stated in the Partnership Agreement, was to engage in a "lycra and cellulosic wet process print operation," in addition to other types of printing processes. Weiss Aff. Exh. A at P 1.5. In the same agreement, Contompasis was made Executive Director, essentially in charge of day-to-day operations.

 Plaintiff was an employee of Twin Rivers from its creation. On January 1, 1996, plaintiff entered into an Executive Employment Agreement ("Executive Agreement") with Twin Rivers, see Am. Compl. Exh. A, making plaintiff the General Manager of the partnership, though still working under Contompasis. Section 5 of the Executive Agreement established that the initial term of her employment would be two years from January 1, 1996 and that her employment would then be renewed upon the mutual agreement of plaintiff and the partnership. Section 5 also established conditions under which plaintiff could be terminated. Subsection A provided for termination without cause provided that plaintiff would continue to be paid at 150 per cent of her base salary for the remainder of her initial term. Subsection D provided, in part:

 
In the event that Executive is in breach of any material obligation owed Company in this Agreement, habitually neglects the duties to be performed under this Agreement, engages in any conduct which is dishonest, damages the reputation or standing of the Company, or is convicted of any criminal act or engages in any act of moral turpitude, then Company may terminate this Agreement upon five (5) days notice to Executive. In event of termination of the agreement pursuant to this subsection, Executive shall be paid only at the then applicable base salary rate up to and including the date of termination.

 Am. Compl. Exh. A. On or around March 26, 1996, plaintiff received a letter from Hayes indicating that she was being discharged "for cause" pursuant to § 5(D) of the Executive Agreement. The letter explained that

 
we have learned that you actively participated in various acts of fraud and deceit against Guilford Mills, Inc. ("Guilford"). Specifically, we have learned that the Partnership's Executive Director routinely made sales of Partnership goods without properly recording them on the books of the Partnership, thereby allowing him to profit at the expense of Guilford. Moreover, we have been advised that you were aware of such conduct and, in fact, on several occasions, after having observed a vehicle being loaded with goods, rode in the vehicle as the delivery of the goods in these off-the-book sales were being made. In addition, our investigation has revealed numerous questionable transactions between Twin Rivers and Cherechian Trading Company ("Cherechian"). . . . Due to your numerous acts of deceit in connection with the performance of your duties as General Manager of the Partnership, we are hereby terminating your employment with the Partnership, effective immediately.

 Am. Compl. Exh. A. Contompasis was discharged around the same time as plaintiff. On March 29, 1996, Hayes advised employees of Twin Rivers that new management had been installed to stop the "'old management practice of letting things go out the back door.'" Am. Compl. P 40.

 Plaintiff alleges that the accusations made in the March 26 letter are untrue and that Hayes was aware of their falsity. She further alleges two possible explanations for her termination. First, she submits that Hayes sought to gain full control of the partnership, and, under the Partnership Agreement, could purchase Contompasis' interest from him at a much lower price if Contompasis were discharged for cause. She does not suggest, however, that her own discharge for cause had any effect on the purchase price. Second, she alleges that Hayes terminated her because she was a woman.

 Plaintiff alleges three causes of action. The first two are difficult to distinguish, both alleging tortious interference with her employment contract. The third is a cause of action for slander. Defendants move to dismiss all claims, and further move to have plaintiff's attorney disqualified.

 B. Tortious Interference With Contract

 Defendants move to dismiss plaintiff's claim for tortious interference with contract. Under New York law, the elements of a tortious interference claim are "(a) that a valid contract exists; (b) that a 'third party' had knowledge of the contract; (c) that the third party intentionally and improperly procured the breach of the contract; and (d) that the breach resulted in damage to the plaintiff." Finley v. Giacobbe, 79 F.3d 1285, 1294 (2d Cir. 1996) (citing Israel v. Wood Dolson Co., 1 N.Y.2d 116, 120, 151 N.Y.S.2d 1, 134 N.E.2d 97 (N.Y. 1956).

 Defendants argue that they may not be sued for tortious interference because Advisor is one of the partners that employed plaintiff and defendants are therefore parties to the employment contract. It is settled law in New York that a plaintiff bringing a tortious interference claim must show that the defendants were not parties to the contract. See Minetos v. City University of New York, 925 F. Supp. 177, 187 (S.D.N.Y. 1996). Because of the "third party" requirement, a claim for tortious interference with an employment contract may not lie against agents of an employer, and by analogy, partners to a partnership, "absent a showing that they acted outside the scope of their authority." Kosson v. Algaze, 203 A.D.2d 112, 610 N.Y.S.2d 227, 228-29 (N.Y. App. Div. 1994), aff'd, 84 N.Y.2d 1019, 646 N.E.2d 1101, 622 N.Y.S.2d 674(N.Y. 1995).

 Plaintiff argues that Hayes acted outside his authority as president of Advisory, one of the partners, when he terminated plaintiff's employment. Plaintiff alleges that the Partnership Agreement grants the exclusive power to discharge employees to the Executive Director. The Court's review of the Partnership Agreement, see Weisz Aff. Exh. A, supports this conclusion. Defendants concede that a partnership agreement could limit the power of partners to make employment decisions but claim that their agreement contains no such limitation. While there is no limitation specifically directed toward employment decisions in the Partnership Agreement, it does contain several clauses more broadly limiting the power of the partners. First, § 6.5, "Restrictions on the Executive Director," states that "neither the Executive Director nor any Partner shall have authority to take any action not delegated to such Executive Director or Partner hereunder." Weisz Aff. Exh. A at 15 (emphasis added). In addition, § 6.8, "Scope of Authority of Partners Other Than Executive," states that

 
except as otherwise expressly provided in this Agreement to the contrary, neither of the Partners shall have any authority to act for, or to assume any obligations or responsibility on behalf of, the other Partner or the Partnership.

 Weisz Aff. Exh. A at 20 (emphasis added). Under § 6.1, "Management," it is stated that

 
the day-to-day management and control of the business and affairs of the Partnership shall be vested in the Executive Director. Contompasis shall act as the Executive Director of the Partnership . . . and shall exercise and carry out such powers, authority and responsibility consistent with the ...

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