Franz v. Iolab, Inc.
| Decision Date | 18 August 1992 |
| Docket Number | Civ. A. No. 91-501. |
| Citation | 801 F. Supp. 1537 |
| Court | U.S. District Court — Eastern District of Louisiana |
| Parties | Art FRANZ, William Sem, Tom Walsh, Steve Montague and Pat Fox v. IOLAB, INC., A DIVISION OR SUBSIDIARY OF JOHNSON & JOHNSON, INC. |
COPYRIGHT MATERIAL OMITTED
Don M. Richard, Denechaud & Denechaud, New Orleans, La., Gerald J. Martinez, Metairie, La., for plaintiffs.
Brooke Duncan III, McGlinchey, Stafford, Cellini & Lang, New Orleans, La., Robert B. Mitchell, Durant, Sabanosh, Nichols & Houston, Bridgeport, Conn., Joseph A. Greenaway, Johnson & Johnson, New Brunswick, N.J., for defendants.
ORDER AND REASONS FOR RULING
Defendant's Motion for Summary Judgment was considered this date on memoranda. For the reasons stated below, defendant's motion is GRANTED in PART and DENIED in PART.
Prior to December 1986, the plaintiffs, Art Franz, William Sem, Tom Walsh, Steve Montague and Pat Fox, were all sales representatives with Precision-Cosmet Company, Inc. The plaintiffs became employees of defendant Iolab, Inc. in December 1986, when Iolab purchased Precision-Cosmet. At that time, each of the plaintiffs accepted a job offer from Iolab to serve as a sales representation in his or her respective home state: Sem in Wisconsin, Franz in Louisiana, Montague in Missouri, Fox in New Jersey and Walsh in Massachusetts.
All five of the plaintiffs were fired by Iolab in 1988 or 1989. Franz was fired on September 30, 1988, Fox on January 29, 1989, Walsh on June 4, 1989, Sem on September 29, 1989, and, finally, Montague on December 29, 1989. Plaintiffs note that all but two of the 25 former Precision sales representatives hired by Iolab have been terminated.
Plaintiffs contend that they were "wrongfully hired" by Iolab. They claim that Iolab fraudulently enticed them to work for Iolab, and stay with Iolab, under the pretense of offering them a secure and mutually beneficial employment relationship. The reality, plaintiffs claim, is that Iolab hired them solely to take advantage of their relationship with Precision's customers, thus enabling Iolab to control Precision's former market share, and intended to fire them once Iolab achieved this goal.
Plaintiffs further allege that they were discharged in violation of the Employment Retirement Income Security Act (ERISA), 29 U.S.C. § 1000, et seq. First, they allege that their discharge violated Section 510 (29 U.S.C. § 1140) of ERISA, in that Iolab discharged plaintiffs to prevent their pension benefits from vesting. Second, plaintiffs contend that their discharge violated Section 404 (29 U.S.C. § 1104) of ERISA, in that Iolab breached its fiduciary duty to them.
At the time of their discharge, Sem, Walsh and Montague (but not Franz or Fox) each executed a severance agreement which included a complete release of any and all claims they had against Johnson & Johnson or any of its subsidiaries, including Iolab, their direct employer. Each release was given in exchange for substantial severance pay and other benefits.
Plaintiffs contend that the signing of the severance packages by Walsh, Sem and Montague were conceived in fraud and, as such, are null and void. Plaintiffs assert that no contracts were entered into by signing of such documents since they were signed under fraudulent conditions. Specifically, plaintiffs contend that, because they were fraudulently hired and/or maintained as employees by Iolab, and, any release signed by them was ultimately tainted by said fraud.
Plaintiffs also contend that the fraudulent circumstances of their hiring preclude the application of statutes of limitations that might otherwise be applicable to their state law and ERISA wrongful discharge claims. Instead, plaintiffs contend that the relevant statutes of limitations for fraud should apply.
In a diversity case in federal court, the "choice of substantive law is governed by the forum state's choice of law rules." Allison v. ITE Imperial Corp., 928 F.2d 137, 138 (5th Cir.1991) (). Thus, Louisiana's conflict rules will apply here.
Since 1973, Louisiana has applied an interest analysis approach to choice of law questions with respect to both torts and contracts. Jagers v. Royalty Indemnity Co., 276 So.2d 309 (La.1973). This approach has been described by the Fifth Circuit as "a hybrid of Professor Brainerd Currie's governmental interest analysis theory and the Second Restatement's `most significant relationship' test." Fallon v. Superior Chaircraft Corp., 884 F.2d 229, 231 (5th Cir.1989) (citations omitted).
Id. In a true conflict case, the court must use the Second Restatement of Conflict of Laws' method to determine the applicable law. Id.
In this case, as Iolab points out, four of the five plaintiffs were hired, performed most of their job functions, resided at all relevant times, and were fired, in a single state. Thus, for these four plaintiffs, there is no "true" conflict as to which state's law applies. Sem's claim is governed by Wisconsin law, Montague's by Missouri law, Walsh by Massachusetts law, and Franz' by Louisiana law.
There is a "true" conflict as to which state's law applies to Pat Fox's claims. She resided in New Jersey at all relevant times, was hired by Iolab there, and was discharged at a meeting there. However, her sales territory was in New York.
In a tort case, Restatement § 145 provides that:
Brown v. DSI Transports, Inc., 496 So.2d 478, 481 (La.App. 1 Cir.1986).
In this case, the place where the injury occurred appears to be both New Jersey, where Fox resided, and New York, where she worked. The place where the conduct causing the injury occurred appears to be California, where Iolab is located, and New Jersey, where Fox was hired and terminated. Iolab is a Delaware corporation with its principle place of business in California, and Fox's residence is New Jersey. These three factors do not clearly favor the application of any one state's law.
The place where the parties' relationship was centered is New York, Fox's sales territory. Since this action arises out of her employment relationship, this factor is the most relevant of the four Restatement factors. Since that relationship was centered in New York, the laws of the state of New York shall govern all state law issues relevant to her claims.
Iolab raises a number of questions about plaintiff's fraud claim. First, Iolab contends that plaintiffs have not pled fraud with the specificity required by Fed.R.Civ. Proc. 9(b). Second, plaintiffs contend that there is no cause of action, under any of the five states' laws, for fraudulently inducing someone into entering, or staying in, an at-will employment relationship.
Pleading Fraud Under Rule 9(b)
Rule 9(b) of the Federal Rules of Civil Procedure requires that, in all averments of fraud, the circumstances constituting fraud must be stated with particularity.
In this case, the word "fraud" does not appear in any of the plaintiffs' pleadings until the theory of fraud is asserted in plaintiffs' opposition to Iolab's motion for summary judgment. However, it is not required that the plaintiff specifically allege the legal theory of fraud, only that he "allege with particularity the defendant's acts which the plaintiff contends amount to fraud." Unimobil 84 Inc. v. Spurney, 797 F.2d 214, 216 (5th Cir.1986) (emphasis added). Alleging the acts with "particularity" means disclosing such matters as "the time, place and contents of the false representations, as well as the identity of the person making the misrepresentation and what he obtained thereby." 5 Wright and Miller, Federal Practice and Procedure, § 1297, p. 590 (1990). See Ouaknine v. MacFarlane, 897 F.2d 75 (2d Cir.1990); American Town Center v. Hall 83 Assoc., 912 F.2d 104 (6th Cir.1990); Guidry v. Bank of LaPlace, 740 F.Supp. 1208, 1216 (E.D.La.1990).
In plaintiffs' complaints, the plaintiffs identify the time and place of the alleged misrepresentation. They state that they were "assured that their employment was secure" at a meeting called shortly after Iolab's buyout of Precision. Complaint and First Amended Complaint, ¶ VIII. In the next paragraph, the plaintiffs note that they were nonetheless terminated. Complaint and First Amended Complaint, ¶ IX. The complaints also describe what Iolab gained by the alleged fraud, alleging that Iolab used the plaintiffs to capture Precision's market share after leading the plaintiffs to believe their jobs were secure. Complaint and First Amended Complaint, ¶ XII. Thus,...
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