Martin v. Applied Cellular Technology, Inc.
| Decision Date | 19 March 2002 |
| Docket Number | No. 01-1568.,01-1568. |
| Parties | John H. MARTIN, Jr., Plaintiff, Appellant, v. APPLIED CELLULAR TECHNOLOGY, INC., Defendant, Appellee. |
| Court | U.S. Court of Appeals — First Circuit |
Richard A. Mitchell, with whom Francis L. Cramer and Sullivan & Gregg, P.A., were on brief, for appellant.
Alexander J. Walker, Jr., with whom Devine, Millimet & Branch, P.A., was on brief, for appellee.
Before BOUDIN, Chief Judge, LIPEZ, Circuit Judge, and BOWNES, Senior Circuit Judge.
Plaintiff-appellant John H. Martin, Jr. was employed by a company owned and controlled by defendant-appellee Applied Cellular Technology, Inc. ("ACT"). He brought this diversity action in the District Court for the District of New Hampshire to recover damages allegedly arising out of a criminal prosecution and a civil action that ACT commenced against him. The district court dismissed all of Martin's claims. We affirm.
In 1996 and 1997, Martin was vice president and chief operating officer of Tech Tools, Inc., a wholly owned subsidiary of ACT. Tech Tools was engaged in the marketing and sale of computer software and was subject to ACT's operational control.
Martin alleged that while employed at Tech Tools, he was asked to develop and market a wine bottle stopper called "Spirit Saver." Richard Sullivan and Angela Sullivan, directors of ACT, offered Martin ten percent of the profits from Spirit Saver in return for his efforts. Martin performed the work requested over a period of approximately eighteen months. Spirit Saver has sold over 100,000 units.
In early 1997, Martin began to negotiate with ACT for the purchase of Tech Tools. In March, 1997, Martin formed Impact Technology Inc. as a vehicle by which to acquire Tech Tools. A draft sale agreement was prepared but not executed.
On May 27, 1997, ACT broke off negotiations with Martin for the purchase of Tech Tools and terminated Martin's employment after Tech Tools's bookkeeper, Karen Clement, alerted ACT's management to several recent expenses that had been authorized by Martin. Two days later, ACT contacted the Nashua Police Department and reported that Martin had stolen funds from Tech Tools.
ACT's president, Garrett Sullivan, met with Nashua Police Detective Richard Widener and reported that Martin had given himself an unauthorized raise in salary in excess of $1,000.00. Sullivan also stated that invoices showed that a customer, the American Red Cross, had paid Impact Technology for software training on a Tech Tools product when the payment should have gone to Tech Tools. Additionally, invoices showed that Martin had transferred Tech Tools funds to a company called Execute Technologies for the purchase and installation of computer equipment. Some of the invoiced equipment could not be accounted for within Tech Tools, and the equipment that was located had been installed by Martin. Moreover, two checks made payable to Calligraphy Creations for bulk mailing services appeared to be overcharges. Calligraphy Creations was owned by Karen Martin, Martin's ex-wife.
Sullivan provided the police with returned checks and invoices related to these accusations, and stated that he wished to initiate a criminal prosecution against Martin. Both ACT and the Nashua Police Department investigated the questioned expenses.
On June 5, 1997, Detective Widener interviewed Karen Clement, the bookkeeper who initially noticed the questioned expenses. Clement provided Widener with Tech Tools's payroll records, which she claimed showed an unauthorized pay raise to Martin amounting to $1,076.92. She also provided documents showing that the American Red Cross paid Impact Technology $2,800.00 for technical training related to software it had purchased from Tech Tools. Clement told Widener that any payment for training should have been deposited in Tech Tools's account. Widener confirmed that Martin had endorsed and deposited the check in Impact Technology's bank account, and that Impact Technology's account listed the same address as Tech Tools's account.
Widener investigated Execute Technologies, the company that received checks signed by Martin on Tech Tools's account for computer equipment and installation. Widener learned that Execute Technologies had been co-founded by Martin, and suspected that Martin had created the invoice for the work.
Widener also investigated two payments authorized by Martin to Calligraphy Creations, the company owned by Martin's ex-wife, Karen Martin. ACT had reported that the amounts seemed high in comparison to previous payments for similar bulk mailing services. Widener found that each of the two invoices from Calligraphy Creations billed for 50,000 mailers when other records indicated that only 35,000 were sent on each occasion. Furthermore, one of the invoices appeared to bill Tech Tools for layout and design of a mailer that Tech Tools had already created. Widener attempted to interview Karen Martin but was unable to do so. According to Widener, in September of 1997, Karen Martin was subpoenaed to appear before a Hillsborough County Grand Jury to testify concerning her former husband, Impact Technology, and Execute Technologies. She invoked her Fifth Amendment privilege not to testify before the Grand Jury.
In February of 1998, Tech Tools commenced a civil action for conversion against Martin in state court. On April 14, 1998, ACT's private investigator submitted a four-page report to Widener; an arrest warrant issued the same day. Soon thereafter, Martin was arrested pursuant to the warrant and charged with theft by unauthorized taking. The civil action was terminated by a voluntary nonsuit in July of 1998, and in March of 1999, a nolle prosequi was entered in the criminal case.
On May 14, 1999, Martin filed a complaint against ACT in the District Court for the District of New Hampshire. The complaint set forth claims for wrongful civil action (Count I), malicious prosecution (Count II), intentional infliction of emotional distress (Count III), and negligent infliction of emotional distress (Count IV). In May, 2000, Martin filed an amended complaint adding a breach of contract claim (Count V) and a statutory wage claim (Count VI).
On July 19, 1999, ACT filed a motion to dismiss Counts I and II on the grounds that Martin failed to allege an adequate factual predicate as to malice or improper purpose and could not establish that the underlying civil action terminated in his favor. ACT also moved to dismiss Counts III and IV on the ground that Martin's claims for emotional distress were barred by New Hampshire's Workers' Compensation Act, N.H.Rev.Stat. Ann. § 281-A:8,I (Supp.1998).
On September 22, 1999, the district court denied ACT's motion to dismiss as to Counts I and II, but allowed the motion as to Counts III and IV. ACT then answered Martin's complaint and asserted counterclaims against him for conversion and breach of fiduciary duty.
On December 4, 2000, ACT moved for summary judgment with respect to the remaining counts. As to Counts I and II, ACT asserted that Martin could not prove the absence of probable cause for his prosecution; as to Counts V and VI, it asserted that both claims were barred by New Hampshire's Statute of Frauds, N.H.Rev.Stat. Ann. § 506:2 (Supp.1998). On March 21, 2001, the district court allowed ACT's motion for summary judgment as to all four remaining counts. ACT's counterclaims were voluntarily dismissed without prejudice.
Martin now appeals from the district court's dismissal of Counts III and IV and grant of summary judgment as to Counts I, II, V and VI.
We first consider Counts III and IV, which were dismissed for failure to state a claim. This Court applies a de novo standard of review to a district court's allowance of a motion to dismiss. TAG/ICIB Services, Inc. v. Pan American Grain Co., 215 F.3d 172, 175 (1st Cir.2000). We accept as true the well-pleaded factual allegations of the complaint, draw all reasonable inferences therefrom in the plaintiff's favor and determine whether the complaint, so read, sets forth facts sufficient to justify recovery on any cognizable theory. Id.
Counts III and IV are claims for intentional and negligent infliction of emotional distress. To be compensable under New Hampshire's worker's compensation law, an injury must have "aris[en] out of and in the course of employment." N.H.Rev.Stat. Ann. § 281-A:2, XI. To fulfill this requirement, the employee must prove:
(1) that the injury arose out of employment by demonstrating that it resulted from a risk created by the employment; and (2) that the injury arose in the course of employment by demonstrating that (A) it occurred within the boundaries of time and space created by the terms of employment; and (B) it occurred in the performance of an activity ... if reasonably expected and not forbidden, or an activity of mutual benefit to employer and employee.
Appeal of Griffin, 140 N.H. 650, 654, 671 A.2d 541 (1996) (quoting Murphy v. Town of Atkinson, 128 N.H. 641, 645-46, 517 A.2d 1170 (1986)). Courts construe the statute liberally, resolving all reasonable doubts in statutory construction in favor of the injured employee in order to give the broadest reasonable effect to the remedial purpose of workers' compensation laws. Id. The exclusive remedy provision of the statute, N.H.Rev.Stat. Ann. § 281-A:8 (Supp.1998), precludes claims under common law or statute by employees against employers for personal injuries falling under § 281-A:2, including emotional distress. Martin maintains that his injuries did not arise out of his employment. Rather, he contends, his emotional distress was the product of criminal and civil prosecutions instigated by the defendant months after the employee-employer relationship terminated, such that it was outside the "boundaries of time...
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