Deleu v. Scaife

• Decision Date: 24 October 1991
• Docket Number: No. 90 Civ. 2132 (DNE).,90 Civ. 2132 (DNE).
• Citation: 775 F. Supp. 712
• Parties: Cynthia A. DELEU, Plaintiff, v. Frances G. SCAIFE, Defendant.
• Court: U.S. District Court — Southern District of New York

775 F. Supp. 712

Cynthia A. DELEU, Plaintiff, v. Frances G. SCAIFE, Defendant.

No. 90 Civ. 2132 (DNE).

United States District Court, S.D. New York.

October 24, 1991.

Richards Spears Kibbe & Orbe, New York City (David Spears, of counsel), for plaintiff.

Friedman & Kaplan, New York City (Robert D. Kaplan and Hal Neier, of counsel) for defendant.

OPINION & ORDER

EDELSTEIN, District Judge:

BACKGROUND

This action arises out of defendant's alleged failure to make certain payments on behalf of her employee, Jose A. Deleu, as required by federal and state law. Because Mr. Deleu has died since initiating this action, his sister-in-law Cynthia Deleu is now prosecuting this action as executrix of his will. While the parties provide contrasting accounts of the circumstances surrounding the termination of Mr. Deleu's employment, the genesis of this conflict does not appear to be in dispute. Plaintiff alleges that from approximately September 1983 through December 1989, Mr. Deleu worked as a domestic servant in defendant's Fifth Avenue apartment. In this capacity, he cleaned and maintained the apartment, prepared meals for defendant's family and generally attended to the family's needs. Between May and December 1989, Mr. Deleu experienced various physical ailments that kept him out of work. In November 1989, Mr. Deleu was diagnosed as having the AIDS virus. Defendant dismissed Mr. Deleu the following month.

For at least a portion of Mr. Deleu's employment, defendant admittedly failed to pay on Mr. Deleu's behalf federal social security taxes, and also failed to remit payments to the unemployment insurance fund as required under the New York Labor Law. In addition, defendant failed to purchase insurance for Mr. Deleu's benefit as required by the New York Workmen's Compensation Law.

Plaintiff further alleges, though the allegation is denied, that defendant informed Mr. Deleu that she did not have to furnish him with a W-2 statement of earnings because he did not earn enough money to pay taxes. Plaintiff alleges that in reliance on this statement, Mr. Deleu failed to pay income taxes for the next five years. Defendant also contests plaintiff's assertion that she knew of her obligations to make the required payments under federal and New York law, and also knew that she had to furnish the W-2 form, but wilfully failed to comply with the laws. In addition, defendant contends that she has now made all payments and has furnished all required W-2 forms.

PROCEDURAL HISTORY

In March 1990, Mr. Deleu commenced a lawsuit in New York State Supreme Court that alleged five causes of action, including claims for: (1) earned but unpaid overtime salary; (2) unpaid vacation time; (3) breach of contract and breach of the covenants of good faith and fair dealing due to defendant's failure to make various payments required under state and federal law; (4) breach of fiduciary duty due to defendant's failure to make these payments; and (5) unlawful discharge under the New York State Human Rights Law on the grounds that defendant fired Mr. Deleu because he contracted AIDS. Defendant then removed the case to the United States District Court for the Southern District of New York on diversity grounds.

Plaintiff subsequently filed an amended verified complaint that was identical to the original complaint, except that it also asserted a claim for damages due to supposedly fraudulent misrepresentations made by defendant to Mr. Deleu concerning both Mr. Deleu's tax liability and defendant's obligation to provide him with a W-2 form; in addition, the complaint asserted a claim for damages based on defendant's violation of the federal tax laws. Finally, Mr. Deleu abandoned the AIDS discrimination claim.

Defendant has moved to dismiss all causes of action, except those that state claims for overtime and vacation pay, under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim on which relief can be granted. In the alternative, defendant has moved for summary judgment on these causes of action pursuant to Rule 56. This Court has ruled that the parties could not conduct discovery until it decided defendant's motion.

In her memorandum of law in opposition to defendant's motion ("Plaintiff's Memo."), plaintiff states that she does not oppose the motion as to the Fifth and Sixth causes of action, which concern the fraudulent misrepresentation claim and the claim of breach of fiduciary duty premised upon that misrepresentation. See Plaintiff's Memo. at 10. In addition, pursuant to Rule 41(a)(2), plaintiff has requested that this Court dismiss the First and Fourth causes of action, which concern vacation and overtime pay. Accordingly, the First, Fourth, Fifth and Sixth causes of action of plaintiff's amended complaint are dismissed.

Therefore, this Court will consider defendant's motion only as it relates to the Second, Third and Seventh causes of action, which assert claims for: (1) breach of contract based upon defendant's failure to make payments on Mr. Deleu's behalf as required by federal and state law; (2) breach of fiduciary duty based upon failure to make these payments; and (3) damages based upon defendant's supposedly willful failure to comply with federal and state tax laws.

DISCUSSION

I. Breach of Contract and Breach of Fiduciary Duty

A. Motion to Dismiss under Rule 12(b)(6)

Under a Rule 12(b)(6) standard, courts "view all facts and allegations in the complaint in the light most favorable to" the plaintiff. Juster Assoc. v. City of Rutland, 901 F.2d 266, 269 (2d Cir.1990). Moreover, courts must liberally construe allegations in the complaint and deny the motion "`unless it appears beyond doubt that the plaintiff can prove no set of facts in support of her claim which would entitle her to relief.'" Rauch v. RCA Corp., 861 F.2d 29, 30 (2d Cir.1988) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957)).

1. Breach of Contract

Plaintiff's Second cause of action asserts a claim for breach of contract on the theory that defendant breached the duties of fair dealing and good faith by failing to make payments required by federal and state law. It is well settled that

in every contract there is an implied covenant that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract, which means that there exists an implied covenant of good faith and fair dealing.

Kirke LaShelle Co. v. Armstrong Co., 263 N.Y. 79, 87, 188 N.E. 163 (1933); see Filner v. Shapiro, 633 F.2d 139, 143 (2d Cir.1980) (contracting party cannot engage in conduct that will "deprive the other party of the benefits of their agreement"). Plaintiff has alleged that defendant breached this covenant by failing to make statutorily required payments on Mr. Deleu's behalf. Defendant has not cited, nor has this Court found, any decision that bars such a claim. While defendant's memoranda of law attack the claim on the merits, this Court cannot assess the merits of the claim under a 12(b)(6) standard. While hardly a model of precise pleading and possessing suspect substantive value, the complaint states a claim upon which this Court may grant relief. Accordingly, defendant's motion to dismiss the Second cause of action of the amended complaint is denied.

2. Breach of Fiduciary Duty

Similarly, plaintiff has alleged that defendant's failure to make payments under federal and state statutes breached a fiduciary duty owed to Mr. Deleu. While defendant attacks this claim on the grounds that Mr. Deleu did not enjoy a fiduciary relationship with defendant, this Court cannot resolve such a dispute on a motion to dismiss. It is by no means clear that an employer and employee can never stand in a fiduciary relationship to one another. "New York law is clear that a fiduciary relationship exists from the assumption of control and responsibility, and is founded upon trust reposed by one party in integrity and fidelity of another." Beneficial Commercial Corp. v. Murray Glick Datsun, Inc., 601 F.Supp. 770, 772 (S.D.N.Y.1985). Plaintiff has alleged sufficient facts to suggest such a relationship, and thus, this Court cannot grant defendant's motion to dismiss. Accordingly, defendant's motion to dismiss the Third cause of action of the amended complaint is denied.

B. Summary Judgment Motion under Rule 56

"It is well settled that a court should grant a motion for summary judgment only if the evidence, viewed in the light most favorable to the party opposing the motion, presents no genuine issue of material fact." Cable Science Corp. v. Rochdale Village, Inc., 920 F.2d 147, 151 (2d Cir.1990); see United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962). The Supreme Court has noted that whether an issue is genuine and material for purposes of summary judgment is decided under the directed verdict standard: "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 2511-12, 91 L.Ed.2d 202 (1986); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986) ("court may grant summary judgment ... against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.").

Furthermore, the Second Circuit has stated that "summary judgment should rarely be granted ... when the plaintiff has not had an opportunity to resort to discovery procedures." Schlesinger Inv. Partnership v. Fluor Corp., 671 F.2d 739, 743 (2d Cir.1982); Quinn v. Syracuse Model Neighborhood Corp., 613 F.2d 438, 445 (2d Cir.1980). In addition, summary judgment is rarely appropriate in contract actions where the intent of the...