Neely v. Crown Solutions Co.

• Decision Date: 15 November 2013
• Docket Number: Case No. 3:13-cv-00109
• Parties: LUNDY L. NEELY, Plaintiff, v. CROWN SOLUTIONS CO., LLC., et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

LUNDY L. NEELY, Plaintiff, v. CROWN SOLUTIONS CO., LLC., et al., Defendants.

Case No. 3:13-cv-00109

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO WESTERN DIVISION AT DAYTON

November 15, 2013

District Judge Walter H. Rice

Magistrate Judge Michael R. Merz

REPORT AND RECOMMENDATIONS ON DEFENDANTS' MOTION

TO DISMISS

Before the Court is Defendants' Motion to Dismiss (Doc. No. 2). Plaintiff filed a Memorandum in Opposition (Doc. No. 10) and Defendant filed a Reply (Doc. No. 12).

This case was referred to a magistrate judge on June 19, 2013, and was transferred to Magistrate Judge Michael R. Merz on June 20, 2013. (Preliminary Pretrial Order, Doc. No. 14); (Transfer, Doc. No. 15). Motions to dismiss involuntarily are classified as dispositive under 28 U.S.C. § 636(b) and Fed. R. Civ. P. 72, requiring a recommended disposition from a-Magistrate Judge to whom they are referred.

As of March 11, 2013, the time of the filing of the Complaint in the Montgomery County Common Pleas Court, Plaintiff Neely was a resident of the State of Ohio. Defendant Crown Solutions Co., LLC, whose sole member is Veolia Water Solutions and Technologies North America, Inc., is incorporated in Delaware and maintains its principal place of business in Pennsylvania. (Notice of Removal, Doc. No. 1, PageID 2.) Defendants removed the case to thisCourt based on diversity of citizenship jurisdiction. 28 U.S.C. §§ 1441(a) and (b) and 1332. Id. at ¶ 4

In a diversity action, the district court is obliged to apply the choice of law rules of the State in which it sits. Klaxon v. Stentor Electric Mfg. Co., 313 U.S. 487, 491 (1941); Boyd v. LaMaster, 927 F.2d 237 (6^th Cir. 1991); Macurdy v. Sikov & Love, P.A., 894 F.2d 818 (6^th Cir. 1990). The Supreme Court of Ohio has adopted the Restatement of Law (Second), Conflict of Laws, Section 187 in applying the choice of law provisions in contracts. Transp. Ins. Co. v. Busy Beaver Bldg. Ctrs., Inc., 2013 U.S. Dist. LEXIS 121838 at *13-14 (S.D. Ohio 2013), citing Schulke Radio Productions, Ltd. v. Midwestern Broad. Co., 6 Ohio St. 3d 436 (1983). In the event of a dispute as to which law governs, the Court should consider the elements as set forth in Section 188 of the Restatement to determine which law to apply. The Court should consider 1) the place of contracting; 2) the place of negotiation; 3) the place of performance; 4) the location of the subject matter; and 5) the domicile, residence, nationality, place of incorporation, and place of business of the parties. Id., citing Ohayon v. Safeco Ins. Co. of Ill., 91 Ohio St. 3d 474 (2001). The law of the State with the "most significant relationship" to both the parties and transition should be applied. Id., citing Restatement (Second) of Conflict of Laws § 188.

Here the parties expressly agreed in the Employment Agreement that disputes arising from the Agreement would be governed by Delaware law, "[t]his Agreement shall be construed in accordance with and governed by the laws of the State of Delaware . . ." (Complaint, Doc. No. 1-2, PageID 111); (Motion to Dismiss, Doc. No. 2-1, PageID 141). The parties do not contest that choice of law should be honored and Delaware law applied to the claims that deal directly with the rights contained within Employment Agreement.

A federal court exercising diversity subject matter jurisdiction over state law claims must apply state substantive law to those claims. 28 U.S.C. § 1652; Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938). In applying state law, the Sixth Circuit follows the law of the State as announced by that State's supreme court. Savedoff v. Access Group, Inc., 524 F.3d 754, 762 (6^th Cir. 2008); Ray Industries, Inc. v. Liberty Mut. Ins. Co., 974 F.2d 754, 758 (6^th Cir. 1992); Miles v. Kohli & Kaliher Assocs., 917 F.2d 235, 241 (6^th Cir. 1990). "Where the state supreme court has not spoken, our task is to discern, from all available sources, how that court would respond if confronted with the issue." Id.; In re Akron-Cleveland Auto Rental, Inc., 921 F.2d 659, 662 (6^th Cir. 1990); Bailey v. V & O Press Co, 770 F.2d 601 (6^th Cir. 1985); Angelotta v. American Broadcasting Corp., 820 F.2d 806 (1987). The available sources to be considered if the highest court has not spoken include relevant dicta from the state supreme court, decisional law of appellate courts, restatements of law, law review commentaries, and the "majority rule" among other States. Bailey, 770 F.2d at 604. "Where a state's highest court has not spoken on a precise issue, a federal court may not disregard a decision of the state appellate court on point, unless it is convinced by other persuasive data that the highest court of the state would decide otherwise." Puckett v. Tennessee Eastman Co., 889 F.2d 1481, 1485 (6^th Cir.1989); accord Northland Ins. Co. v. Guardsman Products, Inc., 141 F.3d 612, 617 (6^th Cir.1998); Melson v. Prime Ins. Syndicate, Inc., 429 F. 3d 633, 636 (6^th Cir. 2005). This rule applies regardless of whether the appellate court decision is published or unpublished. See Talley v. State Farm Fire & Cas. Co., 223 F.3d 323, 328 (6^th Cir. 2000); Puckett, 889 F.2d at 1485. Ziegler v. IBP Hog Market, 249 F.3d 509, 517 (6^th Cir. 2001).

Respondent's Motion is made under Fed. R. Civ. P. 12(b)(6). "The purpose of a motion under Rule 12(b)(6) is to test the formal sufficiency of the statement of the claim for relief; it isnot a procedure for resolving a contest about the facts or merits of the case." Wright & Miller, FEDERAL PRACTICE AND PROCEDURE: Civil 2d § 1356 at 294 (1990); see also Gex v. Toys "R" Us, 2007 U.S. Dist. LEXIS 73495, *3-5 (S.D. Ohio, Oct. 2, 2007); Mayer v. Mylod, 988 F.2d 635, 638 (6^th Cir. 1993), citing Nishiyama v. Dickson County, Tennessee, 814 F.2d 277, 279 (6^th Cir. 1987). Stated differently, a motion to dismiss under Fed. R. Civ. P. 12(b)(6) is designed to test, whether as a matter of law, the plaintiff is entitled to legal relief even if everything alleged in the complaint is true. Mayer, 988 F.2d at 638, citing Nishiyama, 814 F.2d at 279.

The test for dismissal under Fed. R. Civ. P. 12(b)(6) has recently been re-stated by the Supreme Court:

Factual allegations must be enough to raise a right to relief above the speculative level, see 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235-236 (3d ed.2004)("[T]he pleading must contain something more ... than ... a statement of facts that merely creates a suspicion [of] a legally cognizable right of action"), on the assumption that all the allegations in the complaint are true (even if doubtful in fact), see, e.g., Swierkiewicz v. Sorema N. A., 534 U.S. 506, 508, n. 1, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002); Neitzke v. Williams, 490 U.S. 319, 327, 109 S.Ct. 1827, 104 L.Ed.2d 338 (1989)(" Rule 12(b)(6) does not countenance ... dismissals based on a judge's disbelief of a complaint's factual allegations"); Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974) (a well-pleaded complaint may proceed even if it appears "that a recovery is very remote and unlikely").

Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).

[W]hen the allegations in a complaint, however true, could not raise a claim of entitlement to relief, "'this basic deficiency should ... be exposed at the point of minimum expenditure of time and money by the parties and the court.'" 5 Wright & Miller § 1216, at 233-234 (quoting Daves v. Hawaiian Dredging Co., 114 F. Supp. 643, 645 (D. Hawaii 1953) ); see also Dura [Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336, 125 S.Ct. 1627, 161 L.Ed.2d 577 (2005)], at 346, 125 S.Ct. 1627, 161 L. Ed. 2d 577; Asahi Glass Co. v. Pentech Pharmaceuticals, Inc ., 289F. Supp. 2d 986, 995 (N.D.Ill.2003) (Posner, J., sitting by designation) ("[S]ome threshold of plausibility must be crossed at the outset before a patent antitrust case should be permitted to go into its inevitably costly and protracted discovery phase").

Twombly, 550 U.S. at 558 (overruling Conley v. Gibson, 355 U.S. 41, 45-46 (1957), specifically disapproving of the proposition that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief"); see also Association of Cleveland Fire Fighters v. City of Cleveland, Ohio, 502 F.3d 545 (6^th Cir. 2007).

In Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), the Supreme Court made it clear that Twombly applies in all areas of federal law and not just in the antitrust context in which it was announced. Following Iqbal, district courts faced with motions to dismiss must first accept as true all of the factual allegations contained in a complaint. This requirement "is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Twombly, 550 U.S. at 555. Second, only a complaint that states a plausible claim for relief survives a motion to dismiss. Id. at 556. Under Iqbal, a civil complaint will only survive a motion to dismiss if it "contain[s] sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face. . . . Exactly how implausible is "implausible" remains to be seen, as a malleable standard will have to be worked out in practice." Courie v. Alcoa Wheel & Forged Products, 577 F.3d 625, 629-30 (6^th Cir. 2009). Applying the Twombly/Iqbal standard, Judge Rice has written:

[O]n the plausibility issue, the factual allegations in the complaint need to be sufficient "to give notice to the defendant as to what claims are alleged, and the plaintiff must plead 'sufficient factual matter' to render the legal claim plausible, i.e., more than merely possible." Fritz v. Charter Twp. Of Comstock, 592 F.3d 718, 722 (6^th Cir. 2010) (quoting Iqbal, 129 S. Ct. at 1949-50). Further, "a legal conclusion [may not be] couched as a factual allegation" andmere "recitations of the

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