Jass v. Cherryroad Techs., Inc.

• Decision Date: 13 July 2020
• Docket Number: Case No. 19-cv-00609-DKW-RT
• Parties: Haralds JASS, Plaintiff, v. CHERRYROAD TECHNOLOGIES, INC., et al., Defendants.
• Court: U.S. District Court — District of Hawaii

472 F.Supp.3d 787

Haralds JASS, Plaintiff,

v.CHERRYROAD TECHNOLOGIES, INC., et al., Defendants.

Case No. 19-cv-00609-DKW-RT

United States District Court, D. Hawai‘i.

Signed July 13, 2020

Roman F. Amaguin, Law Office of Roman Amaguin, Honolulu, HI, for Plaintiff.

Richard P. Sybert, Gordon and Rees LLP, San Diego, CA, Mia Dianne Obciana, Law Office of Mia D. Obciana, LLLC, Honolulu, HI, for Defendants.

ORDER (1) GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS; AND (2) GRANTING PLAINTIFF LEAVE TO AMEND THE COMPLAINT

Derrick K. Watson, United States District Judge

Plaintiff Haralds Jass alleges that shortly after he began complaining about several potentially illegal business practices by CherryRoad Technologies, Inc., he was terminated from his position as President of Superb Management Corporation, a company allegedly "controlled" by CherryRoad. Defendants filed a motion to dismiss certain claims in the first amended complaint, arguing Jass has failed to state a claim for civil conspiracy (Count III); aiding, abetting, or inciting discriminatory employment practices under Haw. Rev. Stat. § 378-2(a)(3) (Count VI); violation of the COBRA notice requirements under ERISA, 29 U.S.C. § 1166 (Count VII); unjust enrichment (Count VIII); and conversion (Count IX). Dkt. No. 20 at 2–3.

Contrary to Defendants' arguments, Jass has not alleged a standalone civil conspiracy claim; individual liability is authorized under Section 378-2(a)(3) ; an unjust enrichment claim may be pursued because it is unclear, at this stage of the proceedings, whether Jass has a complete and adequate remedy under his employment agreement; and unauthorized credit card transactions may be the basis for a conversion claim under Hawaii law. However, only the plan administrator can be sued for violations of Section 1166 of ERISA, and because Jass has not offered even a conclusory allegation that CherryRoad is the "plan administrator," Count VII is dismissed. Accordingly, Defendants' motion to dismiss is GRANTED IN PART AND DENIED IN PART, and Jass is granted leave to amend the complaint.

FACTUAL & PROCEDURAL BACKGROUND

A. Relevant Factual Allegations

Jass was previously the principal of Superb Internet Corporation until May 1, 2019 when Jass sold the company's assets to Defendant CherryRoad Technologies, Inc. (CherryRoad). At the same time, Jass became President of Superb Management Corporation (SMC), an entity allegedly "controlled by [CherryRoad]." Dkt. No. 17, ¶¶ 14–15.

1. Terms of the Employment Agreement

On May 1, 2019, Jass and SMC entered into an employment agreement (Agreement), Dkt. No. 5-2, with a three-year Term. Dkt. No. 17, ¶ 18. The Agreement provides that for the first year, Jass would be paid a base salary of $15,000 per month and be eligible for a bonus. Dkt. No. 5-2, ¶ 4(a). During the second and third years of the Agreement, Jass would be paid a salary of $7,500 per month and would no longer be eligible to participate in any bonus plans. Id. at ¶ 4(b).

Under the Agreement, Jass' employment could "only be terminated by a majority vote of the [SMC] directors." Id. at ¶ 10. Jass could be terminated "without Cause at any time upon written notice," id. at ¶ 10(a), or "for Cause," so long as Jass was provided "written notice specifying in reasonable detail the act(s) or omission(s)" believed to constitute "Cause" and, in certain cases, "a reasonable opportunity ... to correct such act(s) or omission(s)." Id. at ¶¶ 10(b), 10(e)(i) (defining "Cause" for termination). Only if Jass was terminated "without Cause" would he be entitled to receive his salary remaining for the Term of the Agreement and SMC's monthly medical insurance contribution payments. Id. at ¶ 10(a).

2. Alleged Whistleblower Conduct

When Jass assumed his position as President of SMC, Defendant Jeremy Gulban was the Chief Executive Officer of CherryRoad. Defendant Nicholas Visco served as CherryRoad's Chief Financial Officer. Dkt. No. 17, ¶¶ 4–5. Around June 11, 2019, Jass asserts he was asked such questions as: "Why are you not a U.S. citizen?"; "What is your marital status?"; and "What is your sexual orientation?" Id. at ¶¶ 29, 104. Throughout Jass' employment, Gulban allegedly made comments suggesting that he and CherryRoad favored white, male, American-born, and "straight" employees over other employees outside those classes. Id. at ¶ 29.

Beginning sometime in June 2019 through late July 2019, Jass alleges he engaged in protected activities as a whistleblower when he complained to Defendants about suspected or perceived violations of the law related to five topics: (1) discrimination against minority employees; (2) tax and accounting fraud; (3) consumer fraud; (4) interference with personal electronic communications; and (5) contracts between CherryRoad and the State of Hawaii. See id. at ¶¶ 29, 32, 38, 40–54, 77.

In response, Visco allegedly threatened Jass, stating that he and Gulban would make Jass' "life miserable." Id. at ¶ 47. Visco further stated he would "misrepresent" Jass' work. Id. In fact, shortly after Jass began to voice his various concerns, including those relating to consumer fraud, Jass alleges that Gulban and Visco began to make false claims about the quality of Jass' work. Id. at ¶ 56. Gulban further warned that he and Visco had started a "file" on Jass, which Jass understood as an admission that he was being retaliated against and that he would eventually be terminated by Gulban, Visco, and CherryRoad. See id. at ¶¶ 28, 34.

Jass specifically alleges that around mid-July 2019, he discovered that his business email accounts had been altered and copies of the emails sent to those business email addresses were being directed to the email addresses jgulban@superb.net and jralph@superb.net. See id. at ¶ 42. Jass also avers that CherryRoad, under the direction of Gulban and Visco, "hijacked" his personal email account, which he had used for twenty-five years exclusively for personal communications. Id. at ¶¶ 43–44, 57. All of the emails sent to Jass' personal email account were forwarded to Jass' business email accounts and to jgulban@superb.net, an account that belonged to Gulban. Id. at ¶ 43.

When Jass discovered that CherryRoad had intercepted or accessed his private email, he complained several times to Gulban, Visco, and Joe Ralph (another CherryRoad manager). Id. at ¶ 45. Without notice, CherryRoad then deleted Jass' personal email account. As a result, numerous emails bounced back to the sender; Jass was unable to access personal healthcare, banking and other online services, which require two-factor authentication; and Jass lost vendor statements, invoices and personal email. Id. at ¶ 46.

To make matters worse, on July 1, 2019, Defendants allegedly: (a) blocked Jass from accessing internal customer and operational systems; and (b) removed Jass from numerous internal mailing lists, such as the internal sales management email group. Id. at ¶¶ 35, 46–47, 58. As a result, it was difficult, if not impossible, for Jass to fulfill his obligations under the Agreement, and Jass could no longer observe Defendants' business practices or utilize the systems to voice additional concerns. Id. at ¶¶ 35, 58. In addition, Jass was "demoted" without forewarning or explanation when his employee status was changed from exempt to non-exempt. Jass maintains, however, that he was never paid for overtime hours associated with his non-exempt status. Id. at ¶¶ 16–17, 36–37.

Throughout July 2019, Gulban and Visco allegedly placed "unrealistic job demands" on Jass, compounded by Jass' restricted access to the systems and emails necessary for him to fulfill these demands. Id. at ¶ 55. For example, during the last week of July 2019, Jass claims Gulban and Visco forced him to prepare an activity report requiring twenty hours of work, in addition to other mandatory assignments, even though Jass had been preapproved for a vacation during that week to spend time with his ailing mother. Id. Then, also in late July 2019, Jass alleges Visco threatened that he and Gulban would "shut down Superb" and leave Jass with the resulting liabilities, including CherryRoad customer chargebacks and non-performance of services on Superb Internet Corporation merchant accounts used by CherryRoad, for which Jass was a personal guarantor. Id. at ¶ 48.

The retaliation continued, according to Jass, when Defendants repeatedly used Jass' credit card information for their own business expenses—without authorization—and refused to repay Jass for the unauthorized charges and late fees. Id. at ¶¶ 68, 86–87, 130, 136–37. Defendants then continued to do so even after Jass expressly told Defendants to cease using his credit cards. Id. at ¶ 68. Moreover, Defendants reversed past reimbursement payments for business expenses Jass incurred with his credit cards, claiming the reimbursement payments were unauthorized. Id.

Tensions eventually came to a head on August 21, 2019 when Gulban and Visco verbally terminated Jass' employment, effective August 31, 2019, and informed Jass that the termination was for "cause." Id. at ¶¶ 19, 61. According to Jass, he did not receive a "written notice" explaining the basis for the termination decision or a "reasonable opportunity" to cure. Id. at ¶¶ 22, 25. In fact, Jass alleges Defendants did not have cause to terminate his employment. Id. at ¶¶ 23–24. Rather, Defendants retaliated against Jass and then terminated his employment due to his protected activities as a whistleblower, as well as his national origin, sexual orientation, and marital status. Id. at ¶¶ 31, 66–68, 77–80, 97, 103–106.

In a statement to Jass, Gulban later admitted Jass had performed his work diligently and with the company's best interests in mind. Gulban allegedly made such a statement on two occasions, the day Defendants informed Jass his employment was being terminated and then again one week later. See id. at ¶¶ 64, 126. But Jass' alleged difficulties did not end there.

Despite Defendants previously stating...