United States District Court, Western District of New York
February 14, 2003
GLENN THRESHER, PLAINTIFF
GULF STATES PAPER CORPORATION, DEFENDANT.
The opinion of the court was delivered by: Siragusa, District Judge
DECISION AND ORDER
This case is before the Court on defendant's motion (docket #2) to
dismiss plaintiff's complaint for failure to state a claim pursuant to
Federal Rule of Civil Procedure 12(b)(6). After carefully considering the
papers filed in support of and in opposition to the motion, and oral
argument held on February 14, 2003, the Court determines that defendant's
motion must be granted in part, and denied in part.
STANDARD OF REVIEW
Since the motion is brought under Federal Rule of Civil Procedure
12(b)(6), the Court must presume that the allegations in the complaint
are true and resolve all doubts and inferences in favor of the non-moving
party. Wright v. Ernst & Young LLP, 152 F.3d 169,173 (2d Cir. 1998).
The complaint cannot be dismissed, "unless it appears beyond doubt that
the plaintiff can prove no set of facts in support of his claim which
would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46
(1957); see also Easton v. Sundram, 947 F.2d 1011, 1015 (2d Cir. 1991).
In his complaint, plaintiff has referenced documents not attached to
his pleading. On this point, the Second Circuit has directed, "[f]or
purposes of a motion to dismiss, we have deemed a complaint to include any
written instrument attached to it as an exhibit or any statements or
documents incorporated in it by reference . . . and documents that the
plaintiffs either possessed or knew about and upon which they relied in
bringing the suit." Rothman v. Gregor, 220 F.3d 81, 88 (2d Cir. 2000)
(citation omitted).Thus, the Court will employ the Rothman rule and
consider Exhibits A,B, and C to Thresher's Affidavit in Opposition to
Defendant's Motion to Dismiss Plaintiff's Complaint.
Plaintiff was employed by Fold Pak Corporation from July 22, 1985 until
November, 1999. In 1998, Fold Pak Corporation was acquired by defendant.
Following the acquisition, during oral negotiations pertaining to the
terms and conditions his employment with defendant, plaintiff alleges,
that "it was orally agreed that the period of service between July 22,
1985 and the date of commencement of plaintiff's employment with the
defendant would be included toward determining the years of benefit
service under the defendant's retirement plan." Compl. ¶ 6.
Further, plaintiff alleges that in partial reliance on that
representation, he commenced employment with defendant.
According to plaintiff, on or about June 19, 2001, defendant
transmitted to him calculations of his retirement benefits, based upon a
projected retirement date of
October 1, 2002 and based upon a projected
retirement date of October 1, 2012. Plaintiff alleges that both confirmed
his agreement with defendant that his prior employment with Fold Pak
Corporation would be included in his years of service with defendant.
These communications*fn1 are attached to plaintiff's affidavit under
Exhibit B and both are from, "Plan Administrator," each with a subject
heading of, "Computation of Estimated Retirement Benefit." These
documents indicate that they were prepared by Shan Simon. As is clarified
by Exhibit C to Thresher's affidavit, a December 5, 2001 letter authored
by Shan Simon, she was employed by defendant with the title of
"Secretary, Retirement Programs."
On or about November 15, 2001, plaintiff was notified that his
employment would be terminated on November 30, 2001. The letter from
James P. Merrell, Vice President, Human Resources, Gulf States Paper
Corporation, contained a severance agreement stating in pertinent part,
"4. The Retirement and Savings and Investment Plans describe your rights
at termination. If you are vested under these plans, you will receive
information from the Benefits Department within the next few weeks."
Thresher aff. Ex. A. The agreement also contained a waiver with regard to
any claims against defendant. Plaintiff alleges in his complaint that he
timely accepted the severance plan on December 7, 2001. He further
alleges that his acceptance was in partial reliance on the confirmation
of his retirement benefits from the June 19 communication.
Subsequent to his December 7, 2001, acceptance of the severance
agreement, plaintiff alleges that he was notified by defendant that the
retirement benefits previously promised were to be denied. In the
December 5, 2001 letter from Shan Simon, plaintiff was told that although
he had completed 16.41667 years of vesting service, as of his November
30, 2001, termination date, his benefit service time was only 2.08333
years. Thresher Aff. Ex. C. Although Simon's letter was dated December
5, 2001, in his complaint, plaintiff alleges he did not receive it until
after he had already accepted the severance package. Moreover, plaintiff
alleges that he pursued the appellate route available under his
retirement plan, but that appeal had been denied.
Plaintiff filed his complaint in the Supreme Court of New York, Chemung
County, and defendant removed it to this Court. In the removal papers,
defendant stated that jurisdiction was based on 28 U.S.C. § 1331
(federal question), 1343 (civil rights), and 1367 (supplemental
jurisdiction). The Complaint alleges that plaintiff is a resident of New
York and that defendant is a corporation with its principal place of
business*fn2 in Alabama. Neither party has contested jurisdiction, nor
has plaintiff sought to remand the case to state court. Based on the
papers filed, it appears thus far that the Court has jurisdiction pursuant
to §§ 1331 and 1367.
Plaintiff's complaint alleges three causes of action: the first for
breach of an oral employment contract; the second for a declaratory
judgment that his employment with Fold Pak Corporation should be included
in calculating his retirement benefits with defendant; and third, for
fraud in inducing him to sign the severance agreement. Initially, the
Court will address the third cause of action first, since if it fails,
then the first cause of action may be barred by the waiver contained in
the severance agreement. As to this claim of fraud in the inducement,
plaintiff alleges that his pleading meets the requirements of Federal
Rules of Civil Procedure 9(b) and 8(a). Defendant, relying on state law
precedent, counters that he has not.
It is well settled that,
The elements of fraud in a federal civil action may be
derived from either federal law or state law. If a
claim is based on substantive federal law, federal law
usually defines fraud. If a claim is based on
diversity of citizenship or supplemental
jurisdiction, state substantive law usually defines
fraud. However, in an action in federal district
court, even if state law provides the elements of
fraud, claimants must plead the circumstances
constituting the fraud with particularity under Rule
9(b). Therefore, even if conclusory allegations of
fraud are sufficient under state law, they will be
insufficient in federal district court. In unusual
settings in which state pleading requirements on
allegations of fraud are deemed substantive, federal
courts hearing state law claims will apply state
2 MOORE'S FEDERAL PRACTICE (2002) § 9.03[e] (footnotes omitted).
Rule 9(b) requires that "the circumstances constituting fraud . . . shall be
stated with particularity." Although scienter may be averred generally,
the complaint must allege sufficient facts from which knowledge may be
inferred. Rule 9(b) must, of course, be read together with Rule 8(a)
which calls for "short and plain statement[s] of claims for relief." C.
Wright and A. Miller, Federal Practice and Procedure, § 1298 (1969);
NCC Sunday Inserts v. World Color Press, 692 F. Supp. 327, 329 (S.D.N.Y.
1988). The substantive elements of a fraud claim under New York law are
set forth in Shea v. Hambros PLC, 244 A.D.2d 39 (N.Y. App. Div. 1st
In order to sustain a cause of action for fraudulent
inducement, plaintiffs must show "misrepresentation or
a material omission of fact which was false and known
to be false by defendant, made for the purpose of
inducing the other party to rely upon it, justifiable
reliance of the other party on the misrepresentation
or material omission, and injury."
Shea, 244 A.D.2d at 46 (quoting Lama Holding Co. v Smith Barney,
88 N.Y.2d 413, 421 (1996)) (other citations omitted)).
Turning to the language of the complaint, plaintiff alleges that
defendant, "on November 15, 2001, in its offer of a severance package
fraudulently induced the Plaintiff into acceptance knowing that the
Plaintiff was relying upon his eligibility for the inclusion of the
benefit service years from Fold Pak Corporation into the Defendant's
Retirement Plan when it secured the Plaintiff's agreement to accept the
severance package. . . . That the Defendant immediately upon securing the
Plaintiff's acceptance withdrew the agreed upon benefits thereby
defrauding the Plaintiff herein." Complaint ¶¶ 22-23.
Although both parties have discussed the existence of a retirement plan
allegedly governed by federal law, neither has specifically identified
the plan, or its contents. As indicated previously, the calculations of
plaintiff's retirement years of included as Exhibit B to Thresher's
were from the "Plan Administrator," as preparerd by
defendant's employee, Shan Simon. This circumstance is consistent with
the implication in plaintiff's complaint that the "Plan Administrator"
and defendant are one in the same. See Complaint ¶ 8. Thus,
defendant's argument, that plaintiff has sued the wrong party, is
unpersuasive at this point in the litigation. Based on the allegations in
the Complaint, the Court finds that plaintiff's pleading has met the
particularity requirement of Federal Rule of Civil Procedure 9(b) and
state substantive law.
Therefore, the Court determines that plaintiff's cause of action for
fraudulent inducement does state a cause of action sufficient to
withstand defendant's motion to dismiss. Turning now to the first cause
of action, plaintiff alleges that defendant breached an oral employment
contract by not taking into account his prior employment with Fold Pak
Corporation in calculating his retirement benefits. For the purpose of
this motion, the Court concludes that, based upon plaintiff's
allegations, a valid oral contract existed between defendant and
plaintiff, and that one of its terms was defendant's agreement to include
plaintiff's prior service with Fold Pak Corporation in computing his
retirement benefits. Plaintiff alleges that by excluding his Fold Pak
years of service, defendant has breached the oral employment contract.
Defendant contends that plaintiff executed a valid and enforceable
release in favor of defendant which was not fraudulently induced. In view
of the Court's ruling on defendant's motion to dismiss the third cause of
action, the Court rejects this argument. Alternatively, defendant
contends that plaintiff's claims under the first and second causes of
action are preempted by federal law: the Employee Retirement Income
Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et seq., Pub.L.
93-406. Defendant points to, 29 U.S.C. § 1144, which preempts all
state laws pertaining to employee benefit plans of the type defined in
29 U.S.C. § 1003(a). Plaintiff responds that, since defendant has not
designated a plan administrator, then the Court must assume that
defendant is the de facto administrator. Plaintiff's assertion, while
true, see 29 U.S.C. § 1002(16)(A)(ii) ("if an administrator is not so
designated, the plan sponsor [is the administrator]," does not answer the
question of preemption, nor does plaintiff's curious argument that,
"factual distinctions preclude summary judgment declaring whether or not
defendant was or designated a plan administrator." The statutory language
clearly shows that plaintiff's first and second causes of action are
preempted by ERISA and must, therefore, be dismissed pursuant to Federal
Rule of Civil Procedure 12(b)(6). See Cicio v. Does, No. 01-9248, 2003 WL
283150, *11 (2d Cir. Feb. 11, 2003) (state law claims dismissed under
FED. R. CIV. P. 12(b)(6) as preempted by ERISA).
Since the Court has determined that plaintiff's third cause of action,
based on a state law claim of fraudulent inducement, may go forward, it
must address its supplemental jurisdiction under 28 U.S.C. § 1367. In
light of the dismissal of the causes of action preempted by ERISA, and
the resulting lack of any federal claim, the Court declines to exercise
its supplemental jurisdiction pursuant to 28 U.S.C. § 1367(c)(3), and
the case is, therefore, remanded to state court. See Carnegie-Mellon
University v. Cohill, 484 U.S. 343 (1988) (it is preferable to remand a
removed case to state court than to dismiss it without prejudice when the
district court declines to exercise supplemental jurisdiction).
For the reasons stated above, defendant's motion (docket #2) to
plaintiff's first and second causes of action is granted as to
those two causes of action only, and the third cause of action is
remanded to New York State Supreme Court, Chemung County.
IT IS SO ORDERED.