United States District Court, S.D. New York
April 15, 2004.
J. COLODNEY, Plaintiff,
CONTINUUM HEALTH PARTNERS, INC., MS. GAIL DONOVAN, COO, MR. PETER KELLEY, CEO & President, MR. MORTON HYMAN, Chairman, MR. JAMES HARDEN, Trustee, BETH ISRAEL MEDICAL CENTER, ST. LUKE'S-ROOSEVELT HOSPITAL, LONG ISLAND COLLEGE HOSPITAL, Defendants
The opinion of the court was delivered by: DENISE COTE, District Judge
OPINION AND ORDER
Pro se plaintiff Nathan J. Colodney ("Colodney") worked for
approximately one year and two months as a Chief Information Officer
("CIO") at Continuum Health Partners ("Continuum"). Colodney brought this
diversity*fn1 action on September 17, 2003, against Continuum and seven
other defendants alleging, inter alia, defamation, breach of good faith, breach of implied contract,
and constitutional and statutory violations, arising from his loss of
employment. On November 5, Colodney amended his complaint to add
additional claims against the same defendants.*fn2 All eight defendants
have moved to dismiss the amended complaint. For the reasons that follow,
the motion is granted in part.
All the facts in this Opinion are taken from the complaint and
documents upon which the complaint relies.*fn3 The events at issue
principally span the period between March 2001 and August 2002.
The Hiring Process
On March 15, 2001, Colodney was interviewed by Continuum*fn4 for a
position as its CIO. At the interview, Joseph Szmadzinski
("Szmadzinski"), a consultant to Continuum's technology department, explained that Continuum's technology operations had
been outsourced to Cap Gemini Ernst & Young ("CGEY") for a seven-year
period starting in December 2000. The CIO would be responsible for
managing Continuum's contract with CGEY, and for overseeing the
technology department's strategic planning. Szmadzinski informed Colodney
that the CIO position would be "steady employment throughout the term of
the outsourcing agreement."
On March 16, Colodney received a tentative job offer from Continuum. On
March 23, Colodney returned to Continuum for a follow-up interview with
Gail Donovan ("Donovan"), the Interim Chief Operating Officer of St.
Luke's-Roosevelt Hospital Center and the Chief Operating Officer of Beth
Israel Medical Center (the "Medical Center"). At the meeting, Colodney
asked Donovan if Continuum engaged in strategic planning, and whether it
had a business plan. Donovan answered yes to both questions. That day,
Colodney also met with Pamela Abner ("Abner"), a Human Resources
executive at Continuum. Abner explained that Colodney would be required
to complete a six-month probationary period, during which his employment
could be terminated at any time.
In a letter from Abner dated March 26 (the "Offer Letter"), Continuum
extended to Colodney a formal offer of employment. The Offer Letter
described Colodney's salary, job title, and the company's retirement
savings plan. Nothing in the Offer Letter referred to a fixed term of
employment or to the six-month probationary period. Colodney accepted the
job offer, rented out his Virginia home, resigned from his job at the United States Air
Force, and relocated to the New York City area.
Colodney began his employment at Continuum on June 4. On that day, he
received a copy of an employee handbook (the "Handbook"). The front page
of the Handbook bears the logos of both the Medical Center and Continuum.
The Handbook's first page contains a disclaimer that is boxed off and
shaded a different color. It states:
Neither this handbook nor any other Medical Center document, give you
right [sic], either express or implied, to remain employed by the Medical
Center. Nor does it guarantee any fixed terms and conditions of your
employment. Your employment is not for any specific time and may be
terminated at will with or without cause and without prior notice,
by Medical Center.
(Emphasis supplied.) The second page of the Handbook describes
Continuum as the parent corporation of several hospitals, including the
The Handbook provides that its list of "serious violations," which
subject an employee to disciplinary actions "up to and including
suspension and discharge," is not intended to be "comprehensive." The
list includes, inter alia, the misuse of property belonging to the
employer; the unauthorized possession, use, and copying of records or "disclosure of information contained
in such records to unauthorized persons;" and the "failure or refusal to
perform satisfactorily the duties and responsibilities of one's job or
related duties as assigned."
According to Colodney, "the Handbook does not state a single basis for
firing for cause." Moreover, Colodney asserts, none of the reasons for
his firing are listed.
2001 Meeting with Internal Audit
Shortly after commencing his employment at Continuum, Colodney
discovered that there was no supporting documentation for the pricing of
the CGEY-Continuum outsourcing agreement. Colodney noted this discrepancy
to Edward Shapoff ("Shapoff"), Continuum's Chief Financial Officer, who
suggested that Colodney contact Continuum's Internal Audit Team from
Ernst & Young Accounting ("Internal Audit"). Colodney met with two
Ernst & Young auditors, and turned over to them documents associated
with Continuum's prior technology budgets. Shapoff left Continuum within
sixty days of Colodney's meeting with Internal Audit, and was replaced by
Brendan Loughlin ("Loughlin").
Sometime after Shapoff's departure, Loughlin and Sharon Joy ("Joy"),
Continuum's Vice President of Finance, spoke with Colodney regarding his
meeting with Internal Audit. Loughlin, in Joy's presence, "scolded"
Colodney for turning over Continuum's technology budgets to Internal
Audit, and directed Colodney to seek Loughlin's permission before holding
any future meetings with Internal Audit. Loughlin explained that reports from Internal
Audit were sent directly to the Board of Directors.
Summer 2002; Szmadzinski Makes Bid to Become CIO
In early June 2002, Szmadzinski informed Colodney that there was "no
future" for Colodney at Continuum and that he should "consider looking
elsewhere." On June 22, Szmadzinski, in his role as a consultant to
Continuum, completed a study of the outsourcing agreement. He concluded
that a new retained organization led by a new CIO was needed to monitor
the agreement. Szmadzinski had himself in mind for the new CIO position.
On July 11, Donovan met with Colodney in the presence of Loughlin,
Szmadzinski, and Mark McDougle ("McDougle"), the Chief Operating Officer
of Long Island College Hospital. Donovan informed Colodney that, based on
Szmadzinski's study of the outsourcing agreement, Szmadzinski would be
joining Continuum as the Chief Information Resources Officer (CIRO),
effective immediately. Colodney would now report to Szmadzinski. Donovan
directed Colodney to turn over his CGEY files to Szmadzinski for copying.
The following day, Donovan and Colodney met with the Feld Group, a
consulting company. Donovan asked the company to bid on the same work she
had just awarded to Szmadzinski. At the meeting, Donovan indicated to the
Feld Group that, although she was inclined to use Szmadzinski because of
his familiarity with Continuum, no decision had been reached regarding who would receive
the contract. She stated that she wanted to make a decision as soon as
possible, and asked the Feld Group to submit a proposal within three
days. Donovan noted that the price of the proposal would be "the key
factor" in determining who was awarded the contract. The Feld Group gave
their price and stated that there was no room for compromise. Donovan did
not disclose to the Feld Group the conversation she had had with
Szmadzinski the day before.
July 2002: Colodnev's Meeting with the Feld Group
After the meeting and unbeknownst to Donovan, Colodney met privately
with the Feld Group representatives. He described to them "what was
happening" at Continuum so that the Feld Group could make a "competitive"
proposal. Colodney discussed with the Feld Group the "mess" at the
technology department caused by Donovan's lack of management skills,
described "the roles that each executive played" in the outsourcing
agreement, and gave specific examples of Donovan and Loughlin's
managerial shortcomings. According to Colodney, since all of this
information was already known to Szmadzinski, "nothing was a secret, but
it put the two competitors on the same level."
The Feld Group told Colodney that they were aware that Donovan was
being dishonest with them regarding the status of the contract award, and
expressed doubt about submitting a bid in light of Donovan's preference
for Szmadzinski. Colodney told them that it would be worth it to submit a proposal that "beat all
aspects of Szmadzinski's proposal." To that end, Colodney supplied the
Feld Group with copies of Szmadzinski's study of the outsourcing
agreement in order to "give them a better idea of what they were bidding
on." According to Colodney, none of the documents prepared by Szmadzinski
was marked proprietary by either Continuum or Szmadzinski. Colodney also
informed the Feld Group that their price was "a little high" and that
they would "need to do something about it if they were going to beat
Shortly after the Feld Group submitted its proposal, Donovan sent an
email to Colodney, Loughlin, and McDougle stating that the Feld Group no
longer wanted the job. Colodney expressed his concerns to McDougle
regarding Donovan's selection of Szmadzinski, noting that Szmadzinski was
the person who had originally negotiated the price and terms of the
July 22. 2002: Colodney's Meeting with Donovan
At a July 22 meeting, Donovan informed Colodney that Szmadzinski was
his new supervisor. Colodney asked Donovan what would happen to him in
the long term, and she assured him that he would have his job. Donovan
mentioned that she had heard from the Feld Group that Colodney had
indicated to them that Szmadzinski had already been hired for the
position on which they were bidding. Colodney denied having told the Feld
Group that Szmadzinski had already been hired, but admitted to having made
"suggestions" in order to improve the Feld Group's proposal. Donovan also
raised the issue of remarks made by Colodney to the Feld Group about her,
and asked Colodney to bring any future complaints he may have about her
directly to her attention.
August 13. 2002: Termination of Colodnev's Employment
On August 13, Colodney was called into Donovan's office. In the
presence of Kathy Meyer, Vice President of Continuum, Donovan informed
Colodney that he was being terminated "for cause." Donovan told Colodney
that she had heard from a "very reliable source" that Colodney had lied
to her on July 22 regarding what he had told the Feld Group. She stated
that Colodney had made disparaging remarks about senior executives at
Continuum, and had released proprietary information to the Feld Group.
Donovan asked Colodney if he had anything to say in his own defense;
Colodney remained silent. Colodney was escorted out of the building.
Colodney alleges that Donovan fired him for cause in order to avoid
paying him the severance package that Continuum typically provides to
"employees with whom it wished to sever an employment relationship" but
who were not fired for cause. According to Colodney, Continuum's
"corporate human resources policy" provides that employees not fired for
cause are entitled to a severance package of "a base amount plus an
additional amount for longevity." Colodney also alleges that Donovan
fired him for cause in order to cover up her own "fraud" with respect to
the Feld Group and her shortcomings as an executive.
September 2002: Request for Reimbursement
Colodney traveled to Wisconsin on behalf of Continuum in July 2002.
During his employment, Colodney also accrued miscellaneous expenses for
travel in and around Manhattan. At the time he was fired, Colodney had
not yet submitted his travel vouchers to Continuum for reimbursement. In
September 2002, Colodney sought reimbursement for approximately $1,500 in
travel expenses he had incurred while employed at Continuum. Continuum
denied Colodney's request for reimbursement.
In his amended complaint, Colodney charges the defendants with breach
of good faith (Claims 1-3), defamation (Claims 4-18, 27-29, 31-33),
breach of implied contract (Claim 19), negligent supervision (Claims
20-22), fraud (Claim 23), "failure to provide opportunity to transition
to COBRA" (Claim 24), intentional infliction of emotional distress (Claim
25), fraudulent inducement (Claim 26), conversion (Claim 30), negligence
(Claims 34-36), negligent recruitment (Claim 37), a violation of
42 U.S.C. § Section 1983 ("Section 1983") (Claim 38), a violation of the
Employee Retirement Income Security Act of 1974 ("ERISA"),
29 U.S.C. § 1001 et sea., (Claim 39), and a breach of ERISA (Claims 40-41). The defendants have moved to dismiss the amended complaint in its
entirety. Many of Colodney's state law claims turn on whether he had an
implied contract of employment with Continuum. For that reason, his
breach of contract claim will be discussed first. Colodney's federal
claims will be addressed last.
The defendants move to dismiss the amended complaint pursuant to
Rules 8(a), 9(b), 12(b)(1) and 12(b)(6), Fed.R.Civ.P. When considering a
motion to dismiss, a court must take all facts alleged in the complaint
as true and draw all reasonable inferences in favor of the plaintiff.
Securities Investor Protection Corp. v. BDO Seidman, LLP,
222 F.3d 63, 68 (2d Cir. 2000); Jaghory v. New York State Department of
Education, 131 F.3d 326, 329 (2d Cir. 1997). "Dismissal is inappropriate
unless it appears beyond doubt that the plaintiff can prove no set of
facts which would entitle him or him to relief." Raila v. United States.
355 F.3d 118, 119 (2d Cir. 2004); Securities Investor Protection
Corp., LLP. 222 F.3d at 68. Where, as here, a plaintiff is
proceeding pro se, the court has an obligation to "construe [the]
pleadings broadly, and interpret them to raise the strongest arguments
they suggest." Cruz v. Gomez, 202 F.3d 593, 597 (2d Cir. 2000)
(citation omitted); see also Cucco. v. Moritsugu, 222 F.3d 99,
112 (2d Cir. 2000).
Most of Colodney's claims are governed by the pleading standard set
forth in Rule 8(a), Fed.R.Civ.P. Under Rule 8(a), a complaint adequately states a claim when it contains "a
short and plain statement of the claim showing that the pleader is
entitled to relief." Swierkiewicz v. Sorema N.A., 534 U.S. 506,
512 (2002) (citing Rule 8(a)(2), Fed.R. Civ. P). Thus, under Rule 8(a)'s
liberal pleading standard, a complaint is sufficient if it gives "fair
notice of what the plaintiff's claim is and the grounds upon which it
rests." Id. (citation omitted). See also Phelps v. Kapnolas,
308 F.3d 180, 186 (2d Cir. 2002).
Breach of Implied Contract; Breach of Good Faith
Colodney alleges that he had an implied contract of employment with
Continuum and that Continuum breached the contract by terminating his
employment. Colodney admits that he had no written employment contract,
but alleges that Szmadzinski orally assured him at his initial job
interview that Colodney's employment would be for the remainder of the
seven-year outsourcing agreement with CGEY. Colodney points to his firing
"for cause" as evidence that he had an implied contract of employment
with Continuum. Colodney also alleges that the six-month probationary
period described by Abner at his final job interview supports the finding
of an implied contract.
Under New York law,*fn6 absent an express agreement of fixed duration, an employment relationship is presumed to be at will,
wand may be freely terminated by either party at any time without cause
or notice." Horn v. New York Times, 760 N.Y.S.2d 378, 380 (N.Y.
2003) (discussing development of at-will employment jurisprudence).
See Baron v. Port Authority of New York and New Jersey,
271 F.3d 81, 85 (2d Cir. 2001). The presumption of at-will employment status
may be rebutted, however, if a plaintiff can establish "that the employer
made its employee aware of an express written policy limiting the right
of discharge and the employee detrimentally relied on that policy in
accepting employment." Lobosco. v. New York Telephone Co.,
96 N.Y.2d 312, 316 (2001). See Baron, 271 F.3d at 85. Oral
assurances in conjunction with "general provisions in the employee
manual" are insufficient to state a claim for an implied employment
contract. Skelly v. Visiting Nurse Assoc. of Capital Region
Inc., 619 N.Y.S.2d 879, 881 (3d Dep't 1994).
Colodney's amended complaint does not plead sufficient facts to
establish a claim for a breach of an implied contract of employment. It
identifies no express agreement with a fixed term of employment. For
instance, the Offer Letter, which is integral to the complaint, makes no
mention that Colodney's position would be guaranteed until the expiration
of the seven-year outsourcing agreement with CGEY. Colodney's employment
at Continuum must therefore be presumed to be at will.
Colodney's pleading does not identify any written policy at Continuum
which limited the company's right to fire him, or which could be a source of an implied contract. The complaint's
description of Szmadzinski's oral representation at the initial job
interview to the effect that the CIO position would last the term of the
outsourcing agreement is not sufficient to plead the existence of an
implied contract of employment. Similarly, neither the fact that Colodney
was fired for cause, nor the existence of a probationary period is
sufficient to plead the existence of an implied contract. See
Harrison v. Indosuez, 6 F. Supp.2d 224, 232 (S.D.N.Y. 1998)
(existence of a probationary period "does not indicate an express
intention . . . to alter the at will status"); Wolde-Meskel v.
Vocational Instruction Project Community Servs., Inc., 950 F. Supp. 101,
104 (S.D.N.Y. 1997) (90-day probationary period during which
plaintiff could be fired for any reason did not create exception to
To the extent that Colodney may seek to rely on the Handbook as a
written policy, his complaint would also fail to state a claim.*fn7 The
Handbook contained a boxed-off, shaded disclaimer explicitly warning that
all employees were employed at will. Where there is "a sufficiently
unambiguous disclaimer, conspicuously placed in the employee handbook
such that the employee reasonably could be expected to read it," an
implied contract claim may be dismissed as a matter of law. See Baron,
271 F.3d at 88 (affirming summary judgment). Colodney's complaint fails to plead sufficient facts to identify any
implied contract of employment or to overcome the presumption that he was
an at-will employee. Consequently, it does not state a claim for a breach
of an implied contract of employment. A plaintiff in New York has no
claim for breach of contract where the employment is at will, regardless
of whether or not the termination was wrongful or violated public policy.
Lobosco, 96 N.Y.2d at 316. Since Colodney's breach of good
faith claims assume the existence of a contractual relationship between
Colodney and the defendants, they must be construed as an improper
attempt to circumvent the traditional at-will employment rule, and must
be dismissed as well. Murphy v. American Home Prods. Corp.,
461 N.Y.S.2d 232, 237 (N.Y. 1983) (no implied obligation of good faith and
fair dealing exists with respect to at-will employment).
Leave to amend will be "freely given when justice so requires."
Rule 15, Fed.R. Civ. P.; see also Simmons v. Abruzzo, 49 F.3d 83,
86-87 (2d. Cir. 1995). This is especially true in the case of pro
se plaintiffs. See Davis v. Goord, 320 F.3d 346, 352 (2d
Cir. 2003). "Where it appears that granting leave to amend is unlikely to
be productive," however, "it is not an abuse of discretion to deny leave
to amend." Lucente v. Int'l Bus. Mach. Corp., 310 F.3d 243, 258
(2d Cir. 2002) (citation omitted). Thus, it is appropriate to deny leave
to amend if the proposed amendment is fufile. Id.; see
also Foman v. Davis, 371 U.S. 178, 182 (1962). In their moving papers, the defendants clearly identified the law that
applies to the pleading of a claim for breach of a contract of
employment. Since Colodney has not identified in his opposition to this
motion any written policy that could be construed as a source of a
contract of employment, and since Colodney has not requested leave to
amend, leave to amend these claims will not be given because any proposed
amendment would be fufile.
Colodney charges Donovan with negligently terminating his employment
because she had an "obligation to conduct a good faith investigation"
into the truth of the allegations against Colodney prior to firing him
for cause. As stated supra, Colodney's employment with
Continuum was at will. New York "neither recognizes a tort of wrongful
discharge nor requires good faith in an at-will employment relationship."
De Petris v. Union Settlement Assn., 633 N.Y.S.2d 274, 276
(N.Y. 1995). See Rooney v. Tyson, 127 F.3d 295, 296-97 (2d Cir.
1997). Indeed, to allow a negligent discharge claim by an at-will
employee would be inconsistent with the well-established principle that
an at-will employee may be discharged for any reason or no reason at all.
See Horn, 760 N.Y.S.2d at 384. Thus, Colodney's allegation that
the defendants violated their duty to conduct a good faith investigation
into the reasons underlying his firing fails to state a cognizable cause
of action under New York law. The negligence claims are dismissed. Since any repleading of these
claims would be fufile, leave to amend these claims will not be given.
Colodney alleges that Donovan defamed him by telling other Continuum
executives that Colodney had: (1) lied to her regarding statements he had
made to the Feld Group in July 2002; (2) given away proprietary materials
to the Feld Group in July 2002; and (3) made derogatory statements about
"undisclosed" Continuum executives in July 2002. Colodney states that
Donovan maliciously and falsely concocted each of the three statements in
order to "circumvent" Continuum's severance payment policy, "ensure that
a stigma attached" to Colodney, and "conceal Donovan's fraud against the
Feld Group." In each of the defamation claims, Colodney charges Donovan
"or another in Continuum" with repeating each allegedly false statement
to different named executives.*fn8 "Defamation, consisting of the twin torts of libel and slander, is the
invasion of the interest in a reputation and good name." Albert v.
Loksen, 239 F.3d 256, 265 (2d Cir. 2001) (citation omitted). Spoken
defamatory words are slander; written defamatory words are libel. Id.
Colodney's defamation claim is directed at words spoken by Donovan and
"another," and therefore is a claim for slander.
To successfully state a claim for slander under New York law, a
plaintiff must plead: "(i) a defamatory statement of fact, (ii) that is
false, (iii) published to a third party, (iv)%of and concerning' the
plaintiff, (v) made with the applicable level of fault on the part of the
speaker, (vi) either causing special harm or constituting slander
per se,*fn9 and (vii) not protected by privilege." Loksen, 239
F.3d at 265-66 (citation omitted).
Colodney fails to state a cause of action for slander because the facts
contained in his own pleading contradict any naked assertion that
Donovan's statements about him were false. Colodney's defamation claim
concerns his statements to the Feld Group in July 2002, and his
subsequent description to Donovan of what he had done. In his pleading, Colodney admits that he gave
materials to the Feld Group, that he made disparaging comments to them
about Continuum executives, and that he lied to Donovan about what he had
said to them. Colodney admits that when Donovan confronted him at their
July 22 meeting about the statements he had made to the Feld Group,
Colodney did not disclose to her either that he had turned over
Szmadzinski's study, or that he had discussed with them how to tailor
their proposal to beat Szmadzinski's offer. Thus, Colodney has actually
alleged that Donovan's allegedly libelous statements about Colodney were
true. A bald assertion that libelous statements are false is
insufficient when it is contradicted by more particularized allegations
in the pleading. See Hirsch v. Arthur Andersen & Co.,
72 F.3d 1085, 1092 (2d Cir. 1995) (the court need not credit general
conclusory allegations that "are belied by more specific allegations of
Because Colodney's pleading demonstrates that Donovan's statements were
not false, it is unnecessary to address the other arguments made by the
defendants in support of their motion to dismiss these claims.*fn10
Leave to amend is properly denied since any amendment would be fufile. Colodney having himself undermined
any allegation that Donovan's alleged libelous statements were false,
further litigation regarding Donovan's statements is not warranted.
Intentional Infliction of Emotional Distress
Colodney charges defendants with the intentional infliction of
emotional distress by "concocting numerous serious false statements" in
order to fire Colodney, and for other circumstances surrounding his
firing, including having him escorted out of Continuum's offices.
Colodney states that the defendants' conduct was "outrageous,
intentional, and with utter disregard for the truth," and resulted in
Colodney's emotional distress, "physical ailments," and inability to
Under New York law, liability for the intentional infliction of
emotional distress may be found only where the conduct has been "so
outrageous in character, and so extreme in degree, as to go beyond all
possible bounds of decency, and to be regarded as atrocious, and utterly
intolerable in a civilized society." Conboy v. AT & T
Corp. 241 F.3d 242, 258 (2d Cir. 2001) (citation omitted).
See also DeFilippo v. Xerox Corp. 636 N.Y.S.2d 463, 465 (3d
Dep't 1996). Colodney has not alleged sufficient facts in his amended
complaint that, even if true, would constitute a claim for the
intentional infliction of emotional distress. Leave to amend is denied since there is no reason
to believe that an amendment would be anything other than fufile.
Negligent Suervision and Recruitment
Colodney charges three Continuum executives with failing to exercise
"due supervision" over Donovan. According to Colodney, they "knew or
should have known that [Donovan] had a propensity to lie and/or conceal
information to cover her own ignorance and incompetence." Colodney
asserts that, as a result of the executives' failure to supervise,
Donovan "felt free to, and did so freely, concoct lies about [Colodney]
to unlawfully terminate his employment for cause." Colodney also accuses
one of the executives of "negligent recruitment" in hiring Donovan
because it was "foreseeable" that Donovan, who lacked the "knowledge,
skills, and abilities" to perform the job for which she was hired, would
"engage in fraudulent and wrongful behavior," as she did with Colodney.
A claim for negligent hiring or supervision can only proceed against an
employer for an employee acting outside the scope of her employment.
See Murns v. City of New York No. 00 Civ. 9590 (DLC), 2001
WL 515201, at *5 (S.D.N.Y. May 15, 2001) (collecting cases). When an
employee is acting within the scope of her employment, her employer may
be held liable for the employee's negligence only under a theory of
respondeat superior and no claim may proceed against the
employer for negligent hiring or retention. Karoon v. New York City Transit Authority
659 N.Y.S.2d 27, 29 (1st Dep't 1997). Because the facts alleged by
Continuum only support an inference that Donovan was acting within the
scope of her employment when she fired Colodney, no claim may proceed
against Donovan's employer for the negligent hiring or supervision of
Donovan. Leave to amend is denied on the ground of futility.
Colodney alleges that he was fraudulently induced into accepting the
CIO position at Continuum based on the defendants' materially false
representations regarding the scope and duration of his employment.
Colodney alleges that Continuum executives*fn11 informed him that his
employment "was to parallel the CGEY outsourcing agreement term of 7
years," and that he was being hired for a "long-term, stable position."
In addition, Colodney alleges that Donovan told him that Continuum had
both strategic and business plans. Colodney avers that he relied on those
statements in making his decision to resign from his position at the
United States Air Force, and to relocate to New York City in order to
work for Continuum.
Under New York law, the elements of fraudulent inducement are: (1) a
knowingly false representation of a material fact, and (2) detrimental
reliance thereon. Fax Telecommunicaciones Inc. v. AT & T, 138 F.3d 479, 490 (2d Cir. 1998); National Union
Fire Ins, Co. v. Worley, 690 N.Y.S.2d 57, 61 (1st Dep't 1999).
Reliance means "reasonable" reliance. Remington Rand Corp. v.
Amsterdam-Rotterdam Bank, N.V., 68 F.3d 1478, 1484 (2d Cir. 1995).
Where a fraud claim is brought alongside a breach of contract claim,
the plaintiff must distinguish the two by (1) demonstrating a legal duty
separate from the duty to perform under the contract, (2) demonstrating a
fraudulent misrepresentation collateral or extraneous to the contract, or
(3) seeking special damages caused by the misrepresentation and
unrecoverable as contract damages. Bridgestone/Firestone, Inc. v.
Recovery Credit Services. Inc. 98 F.3d 13, 20 (2d Cir. 1996);
see Manning v. Utilities Mut. Ins. Co. Inc. 254 F.3d 387, 400
(2d Cir. 2001). Although ua valid fraud claim may be premised on
misrepresentations that were made before the formation of the contract
and that induced the plaintiff to enter the contract," Cohen v.
Koenig, 25 F.3d 1168, 1173 (2d Cir. 1994), an assertion that
defendants made intentionally false statements regarding their intent to
fulfill the terms of the contract does not constitute a misrepresentation
collateral or extraneous to a contract, Bridgestone/Firestone,
98 F.3d at 19. See Wilmoth v. Sandor, 686 N.Y.S.2d 388, 391
(1st Dep't 1999).
Colodney's fraudulent inducement claim fails insofar as it relies on
his understanding that his employment would last as long as the CGEY
outsourcing agreement. This claim is duplicative of his breach of implied contract claim. The crux of
both claims is that the defendants promised to hire Colodney for the
duration of the CGEY outsourcing agreement, but reneged on that promise
by firing him. The fraudulent inducement claim only adds that the
defendants intended not to perform the employment contract at the time
they offered Colodney the CIO position. A "contract action cannot be
converted to one for fraud merely by alleging that the contracting party
did not intend to meet its contractual obligations." Rocanova v.
Equitable Life Assurance Society of the United States. 612 N.Y.S.2d 339,
343 (N.Y. 1994). Defendants' alleged false promise was not
sufficiently collateral or extraneous to the terms of the alleged
underlying agreement between the parties to support an independent fraud
claim. In addition, the pleadings do not allege "reasonable reliance" on
the alleged promise that Colodney would be hired for the term of the
CGEY outsourcing agreement. The Offer letter did not contain any
definitive term of employment, nor any language tying his employment to
the duration of the outsourcing agreement. A written offer of employment
lacking any reference to a definite term of employment or the
CGEY outsourcing agreement makes Colodney's asserted reliance on the
defendants' oral assurances regarding the term of his employment
unreasonable as a matter of law.
Colodney does state a claim for fraudulent inducement, however, to the
extent that he alleges that he relied on Donovan's representation that
Continuum had strategic and business plans in making his decision to accept the CIO position.
The existence of such plans was extraneous to the terms of any agreement
between the parties regarding the scope and duration of Colodney's
employment. Colodney alleges that, in reliance on Donovan's statement, he
resigned from his previous job and relocated to the New York City area.
Colodney also alleges that Donovan knew or should have known that her
statement was false. As Continuum's Chief Operating Officer, Donovan was
in a position to know whether Continuum engaged in strategic and business
planning. Accordingly, at this early stage in this action, it cannot be
said that Colodney does not state a claim for fraudulent inducement with
respect to this prong of his claim.
Fraud and Conversion
Colodney alleges that the defendants committed fraud and conversion by
refusing to reimburse him for $1,500 in travel expenses that he incurred
while traveling on business in July 2002 to Wisconsin and on
miscellaneous local travel in and around Manhattan. Colodney alleges that
he was "led to believe" that he would be reimbursed for such expenses,
but had not yet had a chance to submit travel vouchers prior to his
firing. Colodney states that the defendants "maliciously" ignored his
requests for reimbursement.
Colodney does not state a claim for fraud. To prove fraud under New
York law, "a plaintiff must show that (1) the defendant made a material
false representation, (2) the defendant intended to defraud the plaintiff thereby, (3) the plaintiff reasonably
relied upon the representation, and (4) the plaintiff suffered damage as
a result of such reliance." Bancrue Arabe et Internationale
D'Investissement v. Maryland Nat'l Bank. 57 F.3d 146, 153 (2d Cir.
1995). All claims for fraud are subject to a heightened pleading
standard. See Rule 9(b), Fed.R. Civ. P.; Olsen v. Pratt
& Whitney Aircraft. Div. of United Technologies Corp.,
136 F.3d 273, 275 (2d Cir. 1998).
Colodney fails to identify with particularity who made the allegedly
false representations to him about reimbursement, when they were made,
and the nature of the statements. Since there is a possibility that
Colodney could cure this defect in his pleading, he will be permitted an
opportunity to amend in order to provide this specificity.
Colodney does state a claim for conversion. "Conversion is any
unauthorized exercise of dominion or control over property by one who is
not the owner of the property which interferes with and is in defiance of
a superior possessory right of another in the property." Schwartz v.
Capital Liquidators, Inc. 984 F.2d 53, 53-54 (2d Cir. 1993) (per
curiam) (citation omitted). "Where the original possession is lawful, a
conversion does not occur until the defendant refuses to return the
property after demand or until he sooner disposes of the property."
Schwartz 984 F.3d at 54 (citation omitted). See also King
v. Fox. No. 97 Civ. 4134 (RWS), 2004 WL 68397, at *7 (S.D.N.Y. Jan.
Continuum was the lawful possessor of any money due and owing to Colodney for his business travel expenses. Colodney
adequately alleges that he made several requests for reimbursement after
he was fired, but that Continuum denied his requests. Colodney's
conversion claim does not duplicate his breach of contract claim, since
he seeks damages wholly apart from contractual damages.
Colodney asserts that the defendants violated Section 1983 by
terminating his employment based on the allegedly disparaging comments
about Continuum executives that he made to the Feld Group. Colodney
locates the Section 1983 violation in the First Amendment's right to free
In order to state a claim under Section 1983, a plaintiff must allege
that he was injured by "either a state actor or a private party acting
under color of state law," Ciambriello v. County of Nassau,
292 F.3d 307, 323 (2d Cir. 2002), and that such conduct deprived the
plaintiffs of a right, privilege, or immunity secured by the Constitution
or laws of the United States, Dwares v. City of New York,
985 F.2d 94, 98 (2d Cir. 1993).
Continuum is not a state actor. Colodney does not allege that Continuum
executives acted under color of state law. Even reading his pleading
liberally, Colodney does not state a cause of action under Section 1983.
Because any amendment to this claim would be fufile, leave to amend shall
not be given. ERISA Claims
Colodney charges the defendants with violating ERISA. According to
Colodney, Donovan made false statements about him for the purpose of
firing him for cause so that the defendants could "evade" paying Colodney
severance pay "as dictated by Continuum's corporate policies." Colodney
claims that he is owed at least one year of severance "in accordance with
[Continuum's] actual practices established for the payment of
ERISA grants federal courts jurisdiction over all claims by an
"employee welfare benefit plan" beneficiary who seeks to "recover
benefits due to him under the terms of his plan, to enforce his rights
under the terms of the plan, or to clarify his rights to future benefits
under the terms of the plan." 29 U.S.C. § 1132(a)(1)(B) & (e)(1).
The term "employee welfare benefit plan" has been held to apply to "most,
but not all," employer obligations to pay severance benefits.
Schonholz v. Long Island Jewish Medical Center, 87 F.3d 72, 75
(2d Cir. 1996). As both the Supreme Court and the Second Circuit have
emphasized, "ERISA applies only where such an undertaking or obligation
requires the creation of an ongoing administrative program." Id.
For instance, a single lump-sum severance payment program is not an
employee benefit plan under ERISA because it "requires no administrative
scheme whatsoever to meet the employer's obligation." Fort Halifax
Packing Co. v. Coyne, 482 U.S. 1, 12 (1987); see James v.
Flet/Norstar Fin. Group, Inc., 992 F.2d 463, 467-68 (2d Cir. 1993)
(employer's payment of sixty days' salary following employees' last day of work did not create an
employee welfare benefit plan under ERISA).
In his amended complaint, Colodney does not allege the existence of a
qualified ERISA plan at Continuum or a denial of benefits under such a
plan. The amended complaint's reference to a "corporate human resources
policy" does not allege the existence of a benefit plan covered by ERISA.
Moreover, even if the complaint had alleged the existence of a qualified
ERISA plan, ERISA generally requires a beneficiary to exhaust a plan's
administrative remedies before bringing a suit for benefits. See,
e.g., Burke v. Kodak Retirement Income Plan, 336 F.3d 103, 107 (2d
Cir. 2003) (survivor income benefits). Colodney does not allege that
he sought administrative review of his purported ERISA claim.
Accordingly, Colodney's ERISA claims are dismissed, and leave to amend
will not be given. In their moving papers, the defendants provided
Colodney with adequate notice of the deficiencies in his ERISA claim. In
his opposition papers, Colodney did not address these deficiencies, or
seek leave to amend his pleadings.
COBRA Health Coverage
Colodney charges the defendants with failing to provide him with "the
opportunity to transition to [the Congressional Omnibus Budget
Reconciliation Act ("COBRA"), 29 U.S.C. § 1161-68] health insurance coverage."*fn12 According to Colodney, he was left without
healthcare insurance, and thus could not visit a physician on "several
occasions" when he was sick. Colodney alleges that he "unnecessarily
endured the pain and suffering of severe allergies and numerous
infections" due to his lack of health insurance.*fn13
COBRA permits an employee to continue to receive health benefits at the
group rate even after the termination of his employment.*fn14
See 29 U.S.C. § 1161(a), 1163; Local 217 v. MHM,
Inc., 976 F.2d 805, 809 (2d Cir. 1992). The statute sets out
deadlines by which the employer must notify the health plan
administrator of the employee's termination; by which the administrator
must notify the employee of his rights to continued coverage under the
plan; and by which the employee must elect his right to continue coverage
under COBRA. 29 U.S.C. § 1166 (a)(2), 1162(a)(4). A plan
administrator's failure to comply with COBRA'S notice provisions entitles
a beneficiary to statutory damages of up to $100 per day.
29 U.S.C. § 1132(c)(1). Statutory damages for a failure to give notice are not
available against an employer who is not the plan administrator.
29 U.S.C. § 1132 (c)(3).
Colodney may be able to state a claim for relief under COBRA, but his
pleading is deficient in several respects: Colodney fails to (1) allege
the existence of a qualified healthcare plan governed by COBRA; (2) name
the plan administrator as a defendant; and (3) allege that his employer
is the plan administrator if no separate administrator has been
designated. Accordingly, Colodney's COBRA claim is dismissed without
prejudice to his amendment of this claim.
For the reasons stated above, the defendants' motion to dismiss the
amended complaint is granted in part. It is hereby
ORDERED that the following claims are dismissed with prejudice: breach
of good faith (Claims 1-3), defamation (Claims 4-18, 27-29, 31-33),
breach of implied contract (Claim 19), negligent supervision (Claims
20-22), intentional infliction of emotional distress (Claim 25),
negligence (Claims 34-36), negligent recruitment (Claim 37),
42 U.S.C. § 1983 (Claim 38), and violations of ERISA (Claims 39-41).
IT IS FURTHER ORDERED that the fraud claim in connection with
reimbursement for $1,500 in business travel expenses (Claim 23) and the
COBRA claim (Claim 24) are dismissed without prejudice to being amended
by May 7, 2004.
IT IS FURTHER ORDERED that the plaintiff has stated a cause of action under New York law for (1) fraudulent inducement with
respect to the assertion that Colodney relied on Donovan's statements
regarding the strategic and business plans in accepting employment (Claim
26), and (2) conversion with respect to the $1,500 in business travel
expenses incurred by Colodney while employed by Continuum (Claim 30).