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Arakelian v. Omnicare

August 18, 2010


The opinion of the court was delivered by: Honorable Paul A. Crotty, United States District Judge


Plaintiff Christine Arakelian ("Arakelian") brings this action against her former employer, Defendant Omnicare, Inc. ("Omnicare"), asserting claims for breach of contract, violation of the Maryland Wage Payment and Collection Law ("Maryland Wage Payment Act" or "Act"), Md. Code Ann., Lab.. & Empl. §§ 3-501 to -509, and for a declaratory judgment. The dispute arises out of Omnicare's failure to provide Arakelian with severance benefits, and to pay her for unused vacation time, after she was discharged without cause in May, 2009. In addition to the value of the severance benefits and unused vacation time, Arakelian seeks to recover treble damages and attorney's fees under the Maryland Wage Payment Act. Arakelian also seeks a declaration that the non-compete and non-solicitation provisions in an agreement she entered into with Omnicare are unenforceable.

Both parties move for summary judgment under Rule 56 of the Federal Rules of Civil Procedure. For the reasons that follow, both motions are GRANTED in part and DENIED in part. Omnicare breached its contract with Arakelian when it failed to pay her severance benefits. Arakelian is not, however, entitled to severance in the amount she seeks because she waived her right to that amount by entering into a subsequent agreement with Omnicare. Omnicare did not breach its contract with Arakelian by failing to pay her for unused vacation time because Arakelian did not have any unused vacation time when her employment ended. Further, Arakelian cannot recover under the Maryland Wage Payment Act because Maryland law does not apply. Finally, the non-compete and non-solicitation provisions in Arakelian's agreement with Omnicare are unenforceable.


I. Facts

NeighborCare, Inc. ("NeighborCare") offered Arakelian a position as one of its Vice Presidents for Business Development in May, 2005. (Declaration of Christine Arakelian dated 10/26/2009 ("Arakelian Decl.") ¶ 2.) NeighborCare is a Pennsylvania corporation, and when it extended the offer, its corporate headquarters were in Baltimore, Maryland. (Affidavit of Tracy Finn dated October 26, 2009 ("Finn Aff.") ¶ 6; Arakelian Decl. ¶ 2.) Arakelian was a resident of Virginia when she received the offer, and she has been a resident of Virginia ever since. (Compl. ¶ 2; Ans. ¶ 2.)

The terms of NeighborCare's offer were set forth in a letter ("Offer Letter") dated May 11, 2005. (Offer Letter, Declaration of Howard Scher ("Scher Decl."), Ex. A.) The Offer Letter is signed by a NeighborCare executive, and at its outset states, "I am pleased to offer you the position of Vice President, Business Development with NeighborCare." (Id.) After explaining that, should she accept, Arakelian will start her new job "on or about May 23, 2005," the Offer Letter details Arakelian's "basic employment information." (Id.) Under the heading "Your Position," the Offer Letter lists Arakelian's title and supervisor, and states that she will be working at NeighborCare's office in Baltimore. (Id.) Next to the term "Compensation," the Offer Letter provides:

Salary: biweekly salary will be $5,961.54, which is $155,000 on an annualized basis. .

Severance: In the event of a change in ownership through an acquisition by OmniCare, should your position be eliminated for reasons other than for cause, you will receive 9 months continuation of your current salary and medical benefits. Should your position be eliminated for any other reason, other than for cause, you will receive 6 months continuation of your current salary and medical benefits. (Id.) The Offer Letter also states that Arakelian will "receive 4 weeks of vacation," and requires Arakelian to sign and return a "non-compete and confidentiality agreement." (Id.)

After setting forth the details of Arakelian's position, the Offer Letter explains that "pay and benefit plans" are subject to change:

As you know, in the ordinary course of business, pay and benefit plans evolve as laws, employee and/or business needs change. Should it become necessary in the future to change any benefit or compensation plan currently in effect, these changes will apply to you as they do to all other eligible employees. (Id.) The Offer Letter also makes clear that NeighborCare was not offering Arakelian employment for a specific period of time:

While this letter is our commitment to employ you in the previous mentioned position, please understand that it does not constitute a contract or promise of employment for any specific length of time. (Id.)

Arakelian accepted the position and signed the Offer Letter on May 16, 2005. (Id.) Her signature is found below the heading "Offer Acceptance," and after the phrase, "I accept the position of Vice President, Business Development and the above terms and conditions of employment." (Id.) While the Offer Letter is addressed to Arakelian at her home in Virginia, Arakelian states that she signed the Offer Letter at NeighborCare's corporate headquarters in Baltimore. (Declaration of Christine Arakelian dated 11/16/2009 ("Arakelian Opp. Decl.") ¶ 2.) As required by the Offer Letter, Arakelian also executed a Non-Competition and Confidentiality Agreement. (Non-Compete and Confidentiality Agreement, Arakelian Decl., Ex. 1.)

After signing the Offer Letter, Arakelian went to work for NeighborCare at its headquarters in Baltimore. (Arakelian Decl. ¶ 2.) Arakelian's employment relationship with NeighborCare changed, however, soon after she commenced her duties as a Vice President for Business Development. At the time of hiring, it was contemplated that Omnicare might purchase NeighborCare, (Offer Letter, Scher Decl., Ex. A; Defendant's Rule 56.1 Statement ("Def's Rule 56.1 Statement") ¶ 12; Plaintiff's Response to Def's Rule 56.1 Statement ("Pl's Rule 56.1 Resp.") ¶ 12), and Omnicare -- which is a Delaware corporation, headquartered in Covington, Kentucky -- did so on July 28, 2005. (Def's Rule 56.1 Statement ¶ 12; Pl's Rule 56.1 Resp. ¶ 12; Finn Aff. ¶ 6.)

Following the acquisition, Omnicare closed NeighborCare's headquarters in Baltimore. (Declaration of Christine Arakelian dated November 30, 2009 ("Arakelian Reply Decl.") ¶ 2; Finn Aff ¶ 10.)*fn1 Arakelian, however, continued to work out of an Omnicare office in Baltimore until September, 2005, when she was given an office in an Omnicare pharmacy in her home state of Virginia. (Finn. Aff. ¶ 11; Arakelian Reply. Decl. ¶ 2.)*fn2 Arakelian worked from the pharmacy "for a period of some months," (Finn Aff. ¶ 12), and then began working from her home in Virginia. (Id.) She worked from her home in Virginia throughout the duration of her employment with Omnicare. (Finn Aff. ¶ 13; Def's Rule 56.1 Statement ¶ 28; Pl's Rule 56.1 Resp. ¶ 28.)

Two months after it acquired NeighborCare, on September 29, 2005, Omnicare adopted a "Severance Pay Plan." (Severance Pay Plan, Affidavit of Barbara Henderson dated October 22, 2009 ("Henderson Aff."), Ex. B.) The Severance Pay Plan's purpose is "to provide Eligible Employees . . . with severance benefits in the event of a Covered Termination of such employees." (Id. ¶ 1.2.) The term "Eligible Employee" is defined in paragraph 2.9 to mean, an Employee who (i) is employed by a Participating Company on the Effective Date and has worked for a Participating Company for at least siX (6) consecutive months . . . and (ii) is either a salaried Employee working full time or an hourly Employee who customarily works at least twenty (20) hours per week for a participating company. (Id. ¶ 2.9)*fn3 Certain employees are, however, expressly excluded from the definition of "Eligible Employee," including: "an employee who is party to an individual employment agreement or severance agreement that provides for rights or benefits upon a termination of employment." (Id. ¶ 2.9(iv).) While the Severance Pay Plan supersedes all earlier severance plans, it does not apply to "[a]ny Employee who is eligible to receive benefits under any . . . applicable law or contractual obligation of the Company or any Participating Company." (Id. ¶ 10.4.)

As to the substance of the Severance Pay Plan, employees with three or more years of service are eligible to receive severance pay amounting to one week of base pay per year of service. (Id. ¶ 4.2.) But whether an employee receives severance pay is entirely discretionary. (Id. ¶¶ 4.1, 4.4.) The plan administrator is empowered to pay an employee severance at the scheduled rate, above or below the scheduled rate, or not at all. (Id. ¶ 4.4.) Moreover, severance pay is expressly conditioned on the employee agreeing in writing to, among other things: (1) protect all confidential information; (2) waive all claims against Omnicare and its affiliates; and (3) comply with all additional requirements in "any employment letter or agreement or restrictive covenants agreement to which the Participant is a party." (Id. ¶ 5.1.)

In a letter dated May 9, 2006, Omnicare offered to enter into a retention bonus agreement (the "Retention Bonus Agreement") with Arakelian. (Retention Bonus Agreement, Scher Decl., Ex. B.) Pursuant to the offer, Omnicare would pay Arakelian a retention bonus of $23,250 in return for Arakelian's "agreement and compliance with the terms and conditions of this letter." (Id.) The letter states that by signing:

You agree that the Retention Bonus shall be in full satisfaction of any and all rights that you may have to retention or similar bonuses from Omnicare or NeighborCare in connection with the acquisition and the combination of the businesses of Omnicare and NeighborCare, and waive any rights to claim any additional entitlement to retention or similar bonus payments.

The foregoing does not effect your eligibility for any regular bonuses which may or may not be awarded to you in the future under an Omnicare bonus program, and will not be taken into account in any way when determining the amount, if any, payable under any other employee compensation of benefit program. (Id.) The letter also provides that, in return for the bonus, Arakelian will execute and agree to the attached non-competition agreement. (Id.)

Arakelian agreed to the terms of the Retention Bonus Agreement and signed the letter on August 31, 2006. (Id.) She also signed a Restrictive Covenants Agreement which states that it is governed by New York law. (Restrictive Covenants Agreement ¶ 7, Scher Decl., Ex. B.) The "Non-competition" and "Nonsolicitation" provisions of the Restrictive Covenants Agreement both apply to Arakelian for a period of twenty-four months following the termination of her employment. (Id. ¶¶ 2-3.) Pursuant to the Non-competition provision ("Non-Compete Provision"), Arakelian is barred from competing with Omnicare anywhere in the continental United States. (Id. ¶ 2.) The Nonsolicitation provision ("Non-Solicit Provision") forbids Arakelian from soliciting any of Omnicare's clients or employees. (Id. ¶ 3.) The Restrictive Covenants Agreement also contains a "Nondisclosure of Confidential Information" provision ("Nondisclosure Provision") which prohibits Arakelian from disclosing Omnicare's confidential business information. (Id. ¶ 1.)

Omnicare's Vacation/Sick Day/Holiday Pay Policy ("Vacation Policy") was in effect when it acquired NeighborCare in July, 2005. (Vacation Policy at 1, Henderson Aff., Ex. A.) On January 1, 2007, Omnicare amended the Vacation Policy. (Id.) As amended, the Vacation Policy applies to all full time employees and provides that employees who have completed less than five years of service are entitled to a maximum of eighty hours of vacation time per year. (Id. § I(A)-(B).) Employees covered by the Vacation Policy earn vacation time on a per pay period basis. (Id. § I(A).) Arakelian, who was paid bi-weekly, requested seven days of vacation from her supervisor at Omnicare in March, 2009. (Henderson Declaration dated November 30, 2009 ("Henderson Decl.") ¶ 8, 10.) As evidenced by the Paid-Time-Off Request Form ("Vacation Request Form") submitted by Omnicare, Arakelian's request for vacation time was approved by her supervisor on March 27, 2009. (Vacation Request Form, Henderson Decl., Ex. 1.)

Arakelian's employment with Omnicare was terminated without cause on May 12, 2009. (Plaintiff's Rule 56.1 Statement ("Pl's Rule 56.1 Statement") ¶¶ 14-15; Defendant's Response to Pl's Rule 56.1 Statement ("Def's Rule 56.1 Resp.") ¶¶ 14-15.) Omnicare offered to pay Arakelian severance equal to six months of her base salary, if she complied with the requirements of the Severance Pay Plan and executed a Confidential Separation Agreement and General Release ("Separation Agreement"). (Finn Aff. ¶ 14; Separation Agreement, Finn Aff., Ex.A.) Believing that she was entitled to nine months of severance under the terms of the Offer Letter, Arakelian rejected Omnicare's offer and refused to sign the Separation Agreement. (Arakelian Decl. ¶ 8; Finn Aff. ¶ 14.) In light of Arakelian's refusal to sign the Separation Agreement, Omnicare did not pay her severance benefits. (Finn Aff. ¶ 16.)

When her employment ended, Arakelian's annual salary was $180,000 and her medical benefits were worth $495 per month. (Compl. ¶14; Ans. ¶ 14; Arakelian Decl. ¶ 8; Henderson Decl. ¶ 8.)*fn4 In her affidavit, Arakelian states that she accrued fifteen vacation days prior to her termination and that Omnicare never reimbursed her for this unused vacation time. (Arakelian Aff. ΒΆ 8.) She values the fifteen days of vacation at $24,545, (id.), but the basis and method of calculation is not specified. Further, Arakelian's valuation of her unused vacation time ...

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