Engstrom v. John Nuveen & Co., Inc.

• Decision Date: 31 August 1987
• Docket Number: Civ. A. No. 86-1989.
• Citation: 668 F. Supp. 953
• Parties: Frederick P. ENGSTROM and Barbara A. Engstrom v. JOHN NUVEEN & COMPANY, INC.
• Court: U.S. District Court — Eastern District of Pennsylvania

668 F. Supp. 953

Frederick P. ENGSTROM and Barbara A. Engstrom v. JOHN NUVEEN & COMPANY, INC.

Civ. A. No. 86-1989.

United States District Court, E.D. Pennsylvania.

August 31, 1987.

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David L. Pennington, Philadelphia, Pa., for plaintiff.

Robert S. Hawkins, Stephen J. Sundheim, Philadelphia, Pa., for defendant.

MEMORANDUM AND ORDER

SHAPIRO, District Judge.

In this diversity action, plaintiffs Frederick P. and Barbara A. Engstrom, husband and wife, filed suit against Mr. Engstrom's former employer, defendant John Nuveen and Company, Inc. ("Nuveen"), arising out of Mr. Engstrom's discharge from employment in 1985 after more than 27 years of employment with Nuveen. For the reasons stated below, defendant's motion for summary judgment will be granted and plaintiffs' motion to open and set aside entry of default on the counterclaim will be granted.

Plaintiffs filed their complaint on April 8, 1986, and an amended complaint on May 15, 1986. In response to a motion by defendant, the court struck paragraph three of the complaint for failure to comply with Fed.R.Civ.P. 11, count IV for failure to comply with Fed.R.Civ.P. 9(b), and the remainder of the complaint for failure to comply with Fed.R.Civ.P. 8; the court gave plaintiffs leave to file a second amended complaint, which plaintiffs filed August 14, 1986.

In the second amended complaint, the Engstroms alleged claims of breach of contract, breach of implied contract, promissory estoppel, breach of duty of good faith and fair dealing, fraud, wrongful discharge, negligence, intentional infliction of emotional distress, and loss of consortium. Nuveen filed a motion to dismiss the second amended complaint; plaintiffs opposed the Fed.R.Civ.P. 12(b)(6) motion. The court dismissed the claims of breach of implied contract, breach of duty of good faith and fair dealing, wrongful discharge, negligence, and intentional infliction of emotional distress for failure to state a claim upon which relief can be granted.¹ The court denied the motion on the fraud count, but limited plaintiffs' claim to those misrepresentations averred in paragraphs 16 and 17 of the second amended complaint. The court granted plaintiffs leave to file a third amended complaint adding averments supporting any additional claim for fraud; plaintiffs did not file a third amended complaint.

Nuveen then answered the counts remaining in the second amended complaint and asserted a counterclaim under the Pennsylvania Wiretapping and Electronic Surveillance Control Act, 18 Pa. C.S.A. § 5701 et seq. (West 1983 and Supp.1987). On request of defendant Nuveen, the clerk entered a default on the counterclaim because plaintiffs failed to plead or otherwise defendant against the counterclaim.² The Engstroms have moved to vacate the default on Nuveen's counterclaim. Nuveen has filed a motion for summary judgment.

When deciding a motion to dismiss, the court must consider all of the well-pleaded allegations in the complaint as true and construe the complaint in the light most favorable to plaintiffs. Jenkins v. McKeithen, 395 U.S. 411, 421, 89 S.Ct. 1843, 1848, 23 L.Ed.2d 404 (1969); Hochman v. Board of Education of Newark, 534 F.2d 1094, 1097 n. 1 (3d Cir.1976). A complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that plaintiffs can prove no set of facts in support of the claim that would entitle plaintiffs to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957).

In the second amended complaint, plaintiffs allege as follows:

In 1957, Nuveen hired Mr. Engstrom to sell and tade tax-exempt securities (paragraph 7). From 1961 through 1968, Mr. Engstrom purchased 2500 shares of Nuveen stock with borrowed money at the behest of Nuveen's agents. (paragraph 11). Engstrom was also encouraged to pledge his profit-sharing interest in Nuveen stock. (paragraph 12). On or about October 24, 1968, Nuveen's agent advised Engstrom that:

"investment of your interest in the Profit Sharing Trust in Fund "B" is an opportunity that you have at this time to directly participate ... in the program, planned for the future of the Nuveen Organization by your Board of Directors, that contemplates not only a fair return to stockholders on their investment but also the continuance of generous employee benefits, including among other things:

a. Annual salary compensation that compares very favorably to the highest rates paid in our industry; and

b. Payment of cash bonuses or Christmas gifts in profitable years."

(paragraph 17). On or about September 12, 1969, Investors Diversified Services ("IDS") acquired Nuveen; at that time, the President of Nuveen assured Engstrom that:

"(a) Nuveen would employ him until his voluntary retirement;

(b) He would ultimately receive generous payments, to make up for lost monies invested in Nuveen stock prior to its acquisition by IDS, to reimburse him for anticipated salary reductions and lost bonuses that the Plaintiff incurred during the early years of the IDS acquisition of the Defendant Nuveen; and

(c) He would receive excellent treatment, salary increases and bonuses."

(paragraph 16). In reliance on these promises, Mr. Engstrom refrained from seeking other employment opportunities at higher rates of compensation. (paragraph 21). On February 28, 1985, Nuveen fired Engstrom. (paragraph 8). Following Engstrom's termination, Nuveen agents opened his mail and used his customer lists to Nuveen's exclusive benefit. (paragraphs 22-24).

The Court granted Nuveen's Fed.R. Civ.P. 12(b)(6) motion on the count alleging breach of an implied contract. Taking the well-pleaded allegations in the complaint as true and construed in the light most favorable to the Engstroms, Mr. Engstrom either had an oral contract of employment with definite terms, or was employed-at-will; under Pennsylvania law, there is no cause of action for breach of an implied employment contract, because every employment relationship is a contractual relationship. E.g., Darlington v. General Electric, 350 Pa.Super. 183, 504 A.2d 306, 309 (1986). The employment relationship is presumed to be employment-at-will unless the employee can overcome the presumption with evidence of definite and specific terms of employment concerning length of employment or cause for termination. Murray v. Commercial Union Insurance Co., 782 F.2d 432 (3d Cir.1986); Darlington, 504 A.2d at 311. Both parties conceded this point in their briefs and during the conference call by treating the claim for breach of implied contract as part of Mr. Engstrom's claim for breach of contract. Although contract terms can be implied, the employment contract itself cannot; either the employee works at-will or has an express employment contract with a term establishing a definite and specific length of employment. E.g., Bruffett v. Warner Communications, Inc., 692 F.2d 910, 913 (3d Cir.1982). Therefore, the court granted the 12(b)(6) motion on the claim for breach of implied contract and denied the motion on the claim for breach of contract.

Count 4 alleged a breach of a duty of good faith and fair dealing; the court granted defendant's motion to dismiss for failure to state a claim. There is no claim under Pennsylvania law for breach of a duty of good faith and fair dealing where the employment relationship is at-will. Wolk v. Saks Fifth Avenue, Inc., 728 F.2d 221, 225 (3d Cir.1984); Bruffett, 692 F.2d at 917. There may be an express or implied covenant of good faith and fair dealing in any contract between the parties, but if so, its breach is a breach of contract rather than an independent breach of a duty of good faith and fair dealing. Therefore, the court allowed discovery to proceed on Mr. Engstrom's breach of contract claim, but dismissed the separate claim for breach of a duty of good faith and fair dealing.

The court also dismissed the claim for wrongful discharge because it failed to state a claim upon which relief could be granted. An employee-at-will has no claim against his employer for wrongful discharge except where the employment termination violates a significant and recognized public policy, Novosel v. Nationwide Insurance Co., 721 F.2d 894, 898 (3d Cir. 1983); Geary v. United States Steel Corp., 456 Pa. 171, 319 A.2d 174 (1974), or where the complaint alleges a specific intent to harm in violation of public policy. E.g., Brennan v. Lion Manufacturing Co., Inc., No. 85-3650, slip op. at 2 (E.D.Pa. February 1, 1986) Available on WESTLAW, DCT database; Darlington, 504 A.2d at 317-319. Plaintiffs' complaint fails to identify any "significant and recognized public policy" abridged by the termination in this case, let alone a "clearly mandated public policy ... that strikes at the heart of a citizen's social right, duties and responsibilities." Novosel, 721 F.2d at 899. Plaintiffs' broad assertions in the complaint, even when viewed as true and in the light most favorable to plaintiffs, do not state a specific intent to harm rising to the level of a public policy violation within the Geary and Novosel exception for a wrongful discharge claim. Brennan, slip op. at 2; Darlington, 504 A.2d at 319.

If Engstrom were not an employee at will by reason of an oral contract for a specific term of employment, the wrongful discharge claim still failed to state a claim upon which relief could be granted. Pennsylvania recognizes a cause of action for wrongful discharge only when the employment is at-will because terminated employees who are not at-will employees may pursue their claims under breach of contract theories. Harrison v. Fred S. James, P.A., Inc., 558 F.Supp. 438, 444 (E.D.Pa. 1983); Darlington, 504 A.2d at 318; see also Ross v. Montour Railroad Co., 357 Pa.Super. 376, 516 A.2d 29, 32 (1986) ("the tort of wrongful discharge is available only when the employment relationship is at-will.")

Plaintiffs alleged a claim for negligence arising out...