McDermott v. Clondalkin Grp., Inc.

• Decision Date: 18 May 2016
• Docket Number: No. 15-2782,15-2782
• Citation: McDermott v. Clondalkin Grp., Inc., No. 15-2782 (3rd Cir. May 18, 2016)
• Parties: NORBERT MCDERMOTT, Appellant v. CLONDALKIN GROUP, INC.
• Court: U.S. Court of Appeals — Third Circuit

NORBERT MCDERMOTT, Appellant v. CLONDALKIN GROUP, INC.

No. 15-2782

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

Submitted: March 22, 2016

May 18, 2016

NOT PRECEDENTIAL

On Appeal from the United States District Court for the Eastern District of Pennsylvania

(D.C. Civ. No. 2-15-cv-00341)

District Judge: Honorable Mary A. McLaughlin

Submitted Under Third Circuit L.A.R. 34.1(a)

March 22, 2016

Before: GREENAWAY, JR., VANASKIE, and SHWARTZ, Circuit Judges.

OPINION^*

VANASKIE, Circuit Judge.

Norbert McDermott appeals the dismissal of his complaint against his former employer, Clondalkin Group, Inc. We disagree with the District Court's determination that McDermott's Amended Complaint failed to plead viable claims of relief. As such, we will vacate the order of dismissal and remand for further proceedings.

I.

We write primarily for the parties, who are familiar with the facts and procedural history of this case. Accordingly, we set forth only those facts necessary to our analysis.

Norbert McDermott is the former CEO of U.S. Operations for Clondalkin Group, Inc. During his employment, McDermott participated in a bonus plan (the "Bonus Plan"), pursuant to which he was to receive an annual bonus upon Clondalkin attaining certain results. Specifically, the Bonus Plan was predicated upon two factors: (1) Clondalkin's earnings before interest, taxes, depreciation, and amortization ("EBITDA"), and (2) "working capital objectives." The 2013 Bonus Plan, revised on September 15, 2013, provided that McDermott could "qualify for bonus payments up to 60% of [his] salary as of January 2013, split as to 50% on EBiTDA targets and 10% on working capital objectives[.]" App. 190. The Bonus Plan explained how the working capital objectives and EBITDA were to be measured and dictated that Clondalkin's supervisory board would "have the final authority in determining the Ebitda and Working Capital calculations[.]" Id.

By letter agreement signed September 30, 2013 (the "Severance Agreement" or the "Agreement"), McDermott and Clondalkin set forth the terms and conditions for the termination of McDermott's employment with Clondalkin, effective December 31, 2013. See App. 192-94. Relevant here, the Severance Agreement provided that Clondalkin would pay McDermott the following:

[A]ny bonus or incentive compensation earned through December 31, 2013 based on the actual achievement of performance criteria as determined by [Clondalkin] in accordance with the terms of [Clondalkin's] bonus plan . . . payable at the same time annual bonuses are generally paid to other senior executives of the Company and in no event later than March 15, 2014[.]

App. 192. The Severance Agreement also provided that it was to "be construed in accordance with the laws of the State of Delaware." App. 194.

Clondalkin eventually paid McDermott $74,005 as his 2013 bonus. Dissatisfied with the amount of the bonus, McDermott repeatedly asked Clondalkin to provide the basis for its calculation. Clondalkin refused and its executives indicated that they would no longer communicate with McDermott. In response, McDermott hired counsel to assist him with this matter. McDermott's counsel twice requested that Clondalkin provide support for its bonus calculation. His counsel also offered to enter into a confidentiality agreement to alleviate concerns over the proprietary nature of any financial information being disclosed. Clondalkin still did not comply.

Unable to get information regarding his bonus—the EBITDA information, in particular—McDermott commenced an action in the Court of Common Pleas forPhiladelphia County, Pennsylvania by filing a Praecipe to Issue Writ of Summons. Consistent with Pennsylvania procedural rules, McDermott then sought pre-complaint discovery. Clondalkin, however, continued to refuse to provide the requested information, and instead invoked a procedural device to compel McDermott to file a complaint. On January 5, 2015, McDermott filed his Complaint, asserting two causes of action: (1) breach of contract and (2) a violation of the Delaware Wage Payment and Collection Act ("WPCA"), Del. Code Ann. tit. 19 §§ 1101-1115.

On January 23, 2015, Clondalkin removed the case to the United States District Court for the Eastern District of Pennsylvania. On April 7, 2015, the District Court granted Clondalkin's first Motion to Dismiss, calling McDermott's Complaint "wholly inadequate" because it "fail[ed] to identify any express contract provision that was breached" and "fail[ed] to assert any facts to support the allegations that [Clondalkin] breached the agreement or bonus plan and that [McDermott] was paid less than was owed to him under the bonus plan." App. 171. The District Court granted McDermott leave to amend his original Complaint, and specifically instructed him to "add as much specificity as he can to any amended complaint." App. 172.

On May 7, 2015, McDermott filed his Amended Complaint, which asserted the same two causes of action as the original Complaint but added more information. On June 30, 2015, the District Court granted, with prejudice, Clondalkin's Motion to Dismiss the Amended Complaint after finding that "McDermott's amended complaint fails to provide any facts to support his claim that [Clondalkin] breached either the Bonus Plan orthe Severance Agreement by failing to pay him the full amount of his bonus." App. 4. In this regard, the District Court found that "the amended complaint offers only speculation that McDermott's bonus payment was calculated improperly and that he should have received a payment of at least $200,000" and that "[s]uch speculation cannot put the defendant on notice of the breach of contract claim asserted against it."¹ Id.

This appeal followed.

II.

The District Court had jurisdiction pursuant to 28 U.S.C. § 1332(a). We have jurisdiction pursuant to 28 U.S.C. § 1291. We exercise plenary review of a District Court's decision to grant a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Fowler v. UPMC Shadyside, 578 F.3d 203, 206 (3d Cir. 2009). We are "required to accept as true all allegations in the complaint and all reasonable inferences that can be drawn from them after construing them in the light most favorable to the nonmovant." Foglia v. Renal Ventures Mgmt., LLC, 754 F.3d 153, 154 n.1 (3d Cir. 2014) (quotation marks and citations omitted). "However, . . . we disregard legal conclusions and recitals of the elements of a cause of action supported by mere conclusory statements." Connelly v. Lane Constr. Corp., 809 F.3d 780, 786 n.2 (3d Cir. 2016) (citing Santiago v. Warminster Twp., 629 F.3d 121, 128 (3d Cir. 2010)).

III.

In Connelly, we reiterated the established standard that "detailed pleading is not generally required" and that, instead, the "Rules demand only a short and plain statement of the claim showing that the pleader is entitled to relief, in order to give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." 809 F.3d at 786 (quoting, inter alia, Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)) (internal quotation marks omitted). We further reiterated that "[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). "Under the pleading regime established by Twombly and Iqbal, a court reviewing the sufficiency of a complaint must take three steps." Id. at 787 (footnote omitted). First, the reviewing court must "tak[e] note of the elements a plaintiff must plead to state a claim." Iqbal, 556 U.S. at 675. Second, the court should identify allegations that, "because they are no more than conclusions, are not entitled to the assumption of truth." Id. at 679. Finally, "[w]hen there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Id. Applying this framework here, we find that the Amended Complaint's factual allegations provide Clondalkin with adequate notice of McDermott's claims for relief and the grounds upon which they rest.

A. Step One: Noting the Elements Necessary to State a Claim.

The first step requires the reviewing Court to take note of the elements the plaintiff must plead to state a claim. The parties correctly note that Delaware law applies to this breach of contract claim. The parties also correctly note that to state a breach of contract claim under Delaware law, McDermott must plead (1) the existence of a contract, (2) the breach of a contractual obligation, and (3) a resultant damage. See VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606, 612 (Del. 2003). Because McDermott attached the Bonus Plan and the Severance Agreement to the Amended Complaint—the operative contracts in this case—only the final two elements are at issue. Therefore, at this early stage of the proceedings, McDermott's breach of contract claim may survive if he pleads sufficient factual allegations "to raise a reasonable expectation that discovery will reveal evidence" of a breach of contract and resultant damage. See Connelly, 809 F.3d at 789 (quoting, inter alia, Phillips v. Cty. of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008)).

B. Step Two: Identifying and Excluding Conclusory Allegations

The second step requires us to identify and exclude those allegations that, being merely conclusory, are not entitled to the presumption of truth. In Connelly, this Court noted that "[a]lthough the District Court considered the Amended Complaint to be 'extremely vague and conclusory,' it did not specifically identify any allegations that, being mere legal conclusions, should have been discounted." 809 F.3d at 790. Likewise, here, the District Court failed to point to any allegations that were conclusory. Instead, the District Court simply found that "McDermott's amended complaint fails to provide any...