Officemax Inc. v. Cnty. Qwik Print, Inc.

• Decision Date: 09 August 2011
• Docket Number: No. 1:10–cv–00110–JAW.,1:10–cv–00110–JAW.
• Citation: 802 F.Supp.2d 271
• Parties: OFFICEMAX INCORPORATED, Plaintiff, v. COUNTY QWIK PRINT, INC., d/b/a/ CQP Office Solutions, et al., Defendants.
• Court: U.S. District Court — District of Maine

802 F.Supp.2d 271

OFFICEMAX INCORPORATED, Plaintiff,

v.COUNTY QWIK PRINT, INC., d/b/a/ CQP Office Solutions, et al., Defendants.

No. 1:10–cv–00110–JAW.

United States District Court, D. Maine.

Aug. 9, 2011.

John B. Flood, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., Washington, DC, Kindra L. Hansen, OfficeMax Incorporated, Boise, ID, Russell Pierce, Norman, Hanson & Detroy, Portland, ME, for Plaintiff.

Edward W. Gould, Joseph M. Bethony, Gross, Minsky & Mogul, P.A., Bangor, ME, for Defendants.

ORDER ON MOTIONS TO DISMISS AND TO AMEND COUNTERCLAIMS

JOHN A. WOODCOCK, JR., Chief Judge.

In this fiercely litigated suit between an employer and its former employees, the employer seeks dismissal under Rule 12(b)(6) of the employees' counterclaims of breach of contract, fraud, and violation of Maine's Timely Payment of Wages Statute, 26 M.R.S. § 621–A. At the same time, the former employees move to amend their counterclaims. The Court concludes that the breach of contract and statutory counterclaims state claims on which relief may be granted and thus survive the motion to dismiss, but that the fraud counterclaim must be dismissed as failing to satisfy the heightened pleading requirements for fraud. The Court grants the employees' motion to amend their counterclaims.

I. STATEMENT OF FACTSA. Procedural History

On March 18, 2010, OfficeMax Incorporated (OfficeMax) filed a complaint in this Court claiming that County Qwik Print, Incorporated (CQP), David Levesque, and Dana Rattray (collectively, “the Defendants”) breached Confidential Information and NonCompetition Agreements and violated Maine's Uniform Trade Secrets Act. Compl. (Docket # 1). OfficeMax sought injunctive relief and actual and exemplary damages against the Defendants. Id. at 14–15. In addition to denying the substance of OfficeMax's claims, the Defendants asserted counterclaims of Breach of Contract (Count I); Fraud (Count II); violation of Maine's Timely Payment of Wages Statute, 26 M.R.S. § 621–A (Count III); and violation of the Maine Trade Secrets Act, 10 M.R.S. § 1451 et seq. (Count IV). Answer, Affirmative Defenses, Demand for Jury Trial, and Countercl. of Defs. (Docket # 66) ( Defs.' Countercls.).

On December 15, 2010, OfficeMax moved to dismiss the Defendants' Counterclaims Counts I through III. Pl.'s/Counter–Def.'s Mot. to Dismiss Counts I–III of Def./Counter–Pls.' Countercls. (Docket # 72) ( Mot. to Dismiss ). On May 16, 2011, the Defendants responded in opposition to OfficeMax's motion.¹ Def./Countercl. Pls.' Opp'n to Pl./Countercl. Def.'s Mot. to Dismiss Counts I–III of Def./Countercl. Pls.' Countercls. (Docket # 89) ( Opp'n to Mot. to Dismiss ). At the same time, they moved to amend their Counterclaims. Def./ Countercl. Pls.' Mot. for Leave to Amend Their Answer, Affirmative Defenses, Demand for Jury Trial, and Countercls. (Docket # 90) ( Mot. to Amend ). OfficeMax replied in support of its motion to dismiss, Pl./Countercl. Def.'s Reply to Defs./Countercl. Pls.' Opp'n to Mot. to Dismiss Counts I–III of Defs./ Countercl. Pls.' Countercls. (Docket # 93) ( Reply to Mot. to Dismiss ), and shortly thereafter, responded in opposition to the Defendants' Motion to amend their counterclaims, Pl./Countercl. Def.'s Opp'n to Defs./Countercl. Pls.' Mot. for Leave to Amend Their Answer, Affirmative Defenses, Demand for Jury Trial, and Countercls. (Docket # 96) ( Opp'n to Mot. to Amend ). On June 20, 2011, the Defendants replied in support of their motion to amend their counterclaims. Def./Countercl. Pls.' Reply Mem. in Further Support of Their Mot. for Leave to Amend Their Answer, Affirmative Defenses, Demand for Jury Trial, and Countercls. (Docket # 97) ( Reply to Mot. to Amend ).

B. The Defendant's Counterclaims

The Defendants' counterclaims focus on OfficeMax's calculation of Messrs. Levesque and Rattray's compensation under OfficeMax's compensation plan. Under the plan, they received a base salary supplemented by an amount that depended on their sales performance. The Defendants allege that under OfficeMax's compensation plan, which the Defendants regard as a binding contract, the non-salary compensation was based on the “gross profit percentages and/or dollars earned by OfficeMax on sales to customers.” Defs.' Countercls. at 8. The profit was allegedly based upon “the difference between the price charged to the OfficeMax customer and the listed ‘cost’ of the product to OfficeMax.” Id. In other words, the greater the profit made on a given product, the greater the Defendants' non-salary pay. According to the Defendants, OfficeMax breached the compensation plan when it “manipulated, misrepresented, and/or miscalculated their gross profit percentages and/or gross profit dollars” by increasing the listed cost above the product's true cost. Id. That is, by increasing the listed cost of certain products, OfficeMax enriched itself by reducing the profits it reported under the compensation plan and thus making smaller non-salary payouts to the Defendants.

C. The Motion to Dismiss

1. OfficeMax's Motion

OfficeMax's motion seeks dismissal of Counterclaim Counts I, II and III under Rule 12(b)(6) for failure to state a claim on which relief could be granted. The central feature of OfficeMax's motion is an attached Incentive Plan dated July 1, 2008, which OfficeMax says is the “compensation plan” referenced by the Defendants in their Counterclaims. Sales Incentive Compensation For Plan Relationship Sales Associate (Docket # 73). According to OfficeMax, language in the Incentive Plan is fatal to Counterclaim Counts I through III. As to Count I, OfficeMax says that the Incentive Plan includes an explicit disclaimer that it is not a contract, and even if viewed as a contract, the Plan allows OfficeMax, at its sole discretion, to change the manner in which profit margin was calculated. Mot. to Dismiss at 9. Regarding Count II, OfficeMax says that “the Incentive Plan makes it explicitly clear that the OfficeMax ‘sales ledger method’ would be used in calculating margin dollars in relation to the compensation of sales representatives,” and that there is no other language in the plan “that could possibly serve as the basis for Defendants' blanket assertion that OfficeMax represented that it would have used its ‘true costs' in determining the profit margin in relation to its Incentive Plan.” Id. at 8. Lastly, OfficeMax says that Count III should be dismissed because there was no violation of Maine's wage statute since the Defendants received what they were entitled under the Incentive Plan. Reply to Mot. to Dismiss at 6.

Looking beyond the Incentive Plan, OfficeMax asserts that, as a matter of law, Count II should be dismissed because the Defendants did not satisfy the heightened pleading standard required of allegations of fraud. Mot. to Dismiss at 7. Likewise, OfficeMax says that as a matter of law Claim III should be dismissed because the Defendants alleged only violations of 26 M.R.S. § 621–A, which covers only current employees. Id. at 10. Apparently anticipating the Defendants' eventual amendment to their Count III to include claims under 26 M.R.S. § 626, OfficeMax also says that section 626 is inapplicable first, because the Defendants did not allege that they previously made a demand for back pay and, second, because section 626 applies only to wages, not bonuses. Id. at 10–11.

2. The Defendants' Response

Regarding their Counterclaim Count I, the Defendants observe that OfficeMax's focus on the Incentive Plan “appears to have support based on this Court's order in the related matter of OfficeMax Incorporated v. Sousa, 2:09–cv–00631–JAW” where the Court concluded that the Plan was not a contract and could not support a breach of contract claim. Opp'n to Mot. to Dismiss at 2–3. According to the Defendants, it is premature to consider the import of the Incentive Plan since at this stage of the proceedings the Court must accept the truth of the Defendants' factual allegations. Id. at 3. Nonetheless, the Defendants say that even if the Court considers the Incentive Plan, “[d]iscovery will be necessary to determine [its] scope and applicability.” Furthermore, they argue that the Plan at most speaks to Messrs. Levesque and Rattray's compensation after July 1, 2008, the date listed on the Plan. Id. at 3–4. It does not speak to their pre-July 1, 2008 compensation. Id.

Turning to Count II, the Defendants reject OfficeMax's argument that the language of the Incentive Plan is fatal to their allegations of fraud. Id. at 8–9. Repeating their arguments against dismissal of Count I, the Defendants say that the alleged fraud extended beyond the period of time covered by the Incentive Plan and, furthermore, that OfficeMax violated its own plan when it substituted the listed cost for the true cost of its products. Id. at 9–10. The Defendants also reject the notion that they failed to plead the allegations of fraud with the requisite specificity, saying that because the allegedly fraudulent “conduct occurred throughout Defendants' tenure with [OfficeMax's predecessor] and OfficeMax,” there was no need to allege specific dates. Id. at 10.

Finally, regarding their Counterclaim Count III, the Defendants read the case law as limiting only section 621–A(1) and (2) to current employees, not section 621–A(5). Id. at 5–6. Moreover, they explain that their amended Count III alleges violations not only of section 621–A(1) and (5), but also section 626. Id. at 6. They say of their section 626 claim, that this Court previously rejected both of OfficeMax's arguments in Sousa and that the same reasoning applies here. Id. at 6–8.

3. OfficeMax's Reply

In its reply, OfficeMax reasserts the same points as in its original motion and presses the argument that the compensation plan was the “sole basis” for the Defendants' counterclaims, and that, therefore, the Court is justified in considering the Incentive Plan. Reply to Mot. to Dismiss at 1, 3, 5. To the extent the Defendants rely...