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David O. Kingsland v. Xerox Corporation

December 5, 2011

DAVID O. KINGSLAND, PLAINTIFF,
v.
XEROX CORPORATION, DEFENDANT.



The opinion of the court was delivered by: David G. Larimer United States District Judge

DECISION AND ORDER

Plaintiff David Kingsland ("plaintiff"), a former employee of defendant Xerox Corporation ("Xerox"), brings this action against Xerox seeking contractual and other damages related to his 1997 transfer to Xerox subsidiary Xerox Engineering Systems, Inc. ("XES"), and the subsequent dissolution/reabsorption of XES by Xerox. Xerox has moved to dismiss the complaint pursuant to Fed. R. Civ. Proc. 8(a)(2), 9(b) and 12(b)(6), arguing in part that: (1) plaintiff's claims are barred by a release he signed on December 19, 2002 (the "Release"); (2) plaintiff's state common law claims are preempted by the Employee Retirement Income Security Act, 29 U.S.C. §1001 et seq. ("ERISA");*fn1 (3) plaintiff's claims are time-barred; and (4) plaintiff has failed to state claims for breach of contract and/or unjust enrichment.

Plaintiff opposes the motion, and has cross moved to amend the ad damnum clause of the complaint (Dkt. #6) to seek an accounting and compensatory damages pegged to the value of the stock options that plaintiff claims were wrongfully rendered worthless by Xerox's decision to re-absorb XES.

For the reasons that follow, Xerox's motion to dismiss (Dkt. #4) is granted, and plaintiff's cross motion to amend (Dkt. #6) is denied as moot.

INTRODUCTION

Plaintiff claims that in or about 1997, while he was employed by Xerox as a Senior Vice President, Xerox offered him the option to join XES, a new Xerox subsidiary, in exchange for largely similar pay and benefits. There was a notable difference in the new benefit package: while plaintiff's Xerox retirement benefits included an annual employer contribution of up to 8.25% of plaintiff's salary, the XES package did not offer an employer contribution, but instead gave employees stock options in XES, which, plaintiff and the other XES employees were told, might be profitable if and when an initial public offering of XES stock took place. Plaintiff accepted the position with XES on these terms, and remained with XES for five (5) years, until 2002.

Plaintiff alleges that during his tenure with XES, the company was plagued by frequent turnovers in management, and that XES struggled to achieve sufficient revenue. Eventually, Xerox determined that XES was not profitable. Although Xerox initially informed XES officers, including plaintiff, that it intended to sell XES as an entity, Xerox ultimately decided to re-absorb XES into Xerox instead, and significantly reduced employees in that venture. Plaintiff was one of the employees to be terminated.

XES turned out not to be a profitable endeavor and, therefore, there never was an initial public stock offering. There was XES stock, but it was never publicly traded. Thus, when Xerox determined to re-absorb XES and not treat it as a wholly owned subsidiary, it rendered XES stock and the stock options held by plaintiff, and others, essentially worthless.

Plaintiff appealed to Xerox to reconsider its decision to reabsorb XES, and requested that Xerox consider offering the affected XES employees re-instatement into the Xerox Retirement Income Guaranty Plan, and replacement of XES stock options with Xerox stock options. Xerox declined to do so. In a letter to plaintiff on December 17, 2002, Xerox refused, explaining that "[t]he inability to sell XES led . . . to [Xerox's] decision to integrate portions of [XES] and close down the remainder. For everyone involved we wished there could have been a more positive outcome." (Dkt. #1 at ¶47, Exh. E).

Two days later, on December 19, 2002, and in exchange for a salary continuance and other benefits, plaintiff signed a Release of Claims in favor of Xerox and XES (the "Release"). The Release released both entities from any and all claims, known and unknown, relating to the parties' prior relationship, and acknowledged that it was made for valid consideration, and with the advice to seek legal counsel. Id.

Subsequently, plaintiff claims that he learned that despite its representation to the contrary, Xerox had in fact received and refused a cash purchase "offer" for XES, in the amount of one hundred million dollars. Plaintiff contends that he would not have signed the Release if he had known about the purchase offer, and alleges that his termination by Xerox as part of the XES reduction in force was wrongful, and that Xerox breached his contract and/or was unjustly enriched by its actions. In response, Xerox argues that to the extent plaintiff has any claims against Xerox arising out of the termination of his employment, those claims are barred by the Release, and/or are insufficiently stated.

DISCUSSION

I. Standard on a Motion to Dismiss

Rule 12(b)(6) provides that a complaint may be dismissed for failure to state a claim upon which relief can be granted. Fed. R. Civ. Proc. 12(b)(6). In deciding a motion to dismiss under Rule 12(b)(6), a court must "accept the allegations contained in the complaint as true, and draw all reasonable inferences in favor of the non-movant." Sheppard v. Beerman, 18 F.3d 147, 150 (2d Cir. 1994), citing Ad-Hoc Comm. of Baruch Black & Hispanic Alumni Ass'n v. Bernard M. Baruch College, 835 F.2d 980, 982 (2d Cir. 1987). "[A] plaintiff's obligation . . . requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. ...


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