O'Ryan v. Dehler Mfg. Co., Inc.

• Decision Date: 09 June 2000
• Docket Number: No. 2:99cv2049.,2:99cv2049.
• Citation: 99 F.Supp.2d 714
• Court: U.S. District Court — Eastern District of Virginia
• Parties: John F. O'RYAN, Plaintiff, v. DEHLER MANUFACTURING CO., INC., Defendant.

99 F.Supp.2d 714

John F. O'RYAN, Plaintiff, v. DEHLER MANUFACTURING CO., INC., Defendant.

No. 2:99cv2049.

United States District Court, E.D. Virginia, Norfolk Division.

June 9, 2000.

COPYRIGHT MATERIAL OMITTED

Gregory R. Wright, Wright & Associates, P.C., Christian L. Connell, Mays & Valentine, L.L.P., Virginia Beach, VA, for Plaintiff.

Gregory N. Stillman, Benita W. Ellen, Hunton & Williams, Norfolk, Reuben A. Bernick, Maurice P. Raizes, Cohon, Raizes & Regal, Chicago, IL, for Defendant.

MEMORANDUM OPINION AND ORDER

REBECCA BEACH SMITH, District Judge.

The present matter comes before the court on defendant Dehler Manufacturing Co., Inc.'s ("Dehler") motion for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c). Defendant moves to dismiss count one of plaintiff's complaint for breach of contract based on the statute of frauds. For the reasons set forth below, defendant's motion is GRANTED.

I. Factual and Procedural History

Assuming all facts as alleged in the complaint as true, plaintiff, John O'Ryan ("O'Ryan"), a resident of Virginia Beach, Virginia, and Dehler, a furniture manufacturer incorporated in Illinois, entered into a written employment contract on January 1, 1998, employing plaintiff to sell Dehler's products. (Compl. ¶ V; Compl. Ex. A). Under this agreement, the parties agreed that defendant would employ plaintiff as a sales director to sell defendant's furniture in three market areas: commercial sales, "ADM" government sales, and non-conflicting "ADM" government sales. This first employment contract terminated by mutual agreement of the parties on February 8, 1999. (Compl. ¶ V).

In January, 1999, a month before the termination of his contract with Dehler, plaintiff accepted employment as a sales director with a competitor of defendant, Blockhouse Dormitory Furniture Corporation ("Blockhouse"). Defendant gave notice to Dehler that he was terminating his employment and accepting new employment with a competitor. (Compl. ¶ VI). At that time, Morton Herman, President of Dehler, requested that plaintiff continue employment with defendant on new, more advantageous terms. (Compl. ¶ VII). On February 8, 1999, the parties met at Dehler's place of business in Chicago, Illinois, to discuss terms of a second employment contract. The terms discussed and agreed upon as the basis of a new contractual relationship were those derived from a written memorandum from plaintiff to Mr. Herman dated February 8, 1999 ("February 8th memorandum"), and provided, inter alia, for a salary increase, an automobile allowance, increased commissions, a new severance payment award, and a contract term of five years. (Compl. ¶ VII; Compl. Ex. B).¹ As additional inducement to enter into a contractual relationship, defendant promised to pay, and did, in fact, pay $6,000.00 to plaintiff's wife for commissions she had previously earned under a separate contract, but which defendant had refused to pay. At the conclusion of the meeting, both parties agreed that the terms discussed would be written down in defendant's contractual format for both parties to sign in the future. (Compl. ¶ VII). This action did not occur.

From February 8, 1999, to April 14, 1999, plaintiff continued to work for Dehler, and Dehler paid plaintiff pursuant to the terms negotiated at the February 8th meeting. (Compl. ¶ VII). On April 14, 1999, Mr. Herman and plaintiff again met at Dehler's place of business in Chicago, Illinois. Mr. Herman presented a written employment contract for plaintiff to sign, but the terms of the written contract differed from those agreed on at the February 8, 1999, meeting. (Compl. ¶ VIII). Consequently, plaintiff refused to sign the agreement and asked that he be given the opportunity to confer with counsel. However, in the interim, plaintiff continued to perform as Dehler's sales director. (Compl. ¶ VIII).

On July 9, 1999, plaintiff again met with Mr. Herman in Chicago. At that time, plaintiff alleges that Mr. Herman insisted he sign the written contract originally presented at the April 14th meeting. When plaintiff refused to so sign, Mr. Herman accused plaintiff of professional improprieties, such as taking kickbacks, creating side deals, and being disloyal, and continued to threaten plaintiff if he refused sign the contract. Under this pressure, plaintiff resigned effective July 23, 1999. (Compl. ¶ IX).

On December 13, 1999, plaintiff filed suit for: (1) breach of contract; (2) intentional infliction of emotional distress; and (3) malice, bad faith, and deliberately deceitful behavior. Specifically, plaintiff argues that the discussion at the February 8, 1999, meeting, and terms of the February 8th memorandum, constituted a second contract under which plaintiff and defendant were bound at the time of his resignation in July, 1999. Plaintiff claims that defendant's behavior at the July 9, 1999, meeting constituted constructive discharge, and as such, defendant breached the employment agreement such that plaintiff is entitled to relief.

On March 27, 2000, defendant filed the instant motion pursuant to Federal Rule of Civil Procedure 12(c) for judgment on the pleadings on plaintiff's first claim for breach of contract. Plaintiff responded on April 10, 2000, raising a new issue in his brief. Specifically, plaintiff argued that Illinois law governed this court's substantive analysis of the issues presented in the pending motion. In light of the new law offered by plaintiff, defendant submitted a reply memorandum on April 13, 2000.² The matter came before the court for a hearing on April 20, 2000. After argument by both parties, the court directed counsel to submit any additional authority to the court. On April 27, 2000, counsel for plaintiff and defendant both submitted memoranda of supplemental authority for the positions outlined in their briefs and at oral argument. The matter is now ripe for review.

II. Legal Standard and Applicable Law

A party may move for judgment on the pleadings, pursuant to Federal Rule of Civil Procedure 12(c), "any time after the pleadings are closed but within such time as not to delay the trial." Fed.R.Civ.P. 12(c). Judgment should be entered when the pleadings, construing the facts in the light most favorable to the non-moving party, fail to state any cognizable claim for relief, and the matter can, therefore, be decided as a matter of law. See Zeran v. America Online, Inc., 129 F.3d 327, 329 (4th Cir.1997) (citing Bruce v. Riddle, 631 F.2d 272, 273 (4th Cir.1980)); Greene v. Nat'l Car Rental Sys., No. 91-2756, 1992 WL 296364, at *1 (4th Cir. Oct.16, 1992) (unpublished).

In the case at bar, plaintiff has alleged that an oral contract was negotiated between the parties on February 8, 1999, that was to govern the continuing employment relationship between plaintiff and defendant. Defendant argues that no legally enforceable contract exists between the parties, and has brought the instant motion to dismiss plaintiff's breach of contract claim on the basis that any oral agreement reached between the two parties is barred by the statute of frauds. A federal court sitting in diversity applies the substantive law of the forum state, including its choice of law provisions. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Wells v. Liddy, 186 F.3d 505, 521 (4th Cir.1999). In Virginia, while questions of breach are determined by the law of the place of performance, the validity, interpretation, or construction of a contract is governed by the substantive law of the lex loci contractus — the place of contracting. See Lexie v. State Farm Mut. Auto. Ins. Co., 251 Va. 390, 394, 469 S.E.2d 61 (1996); Woodson v. Celina Mut. Ins. Co., 211 Va. 423, 426, 177 S.E.2d 610 (1970). The place of contracting is determined by the place where the final act necessary to make the contract binding occurs. See Blue Cross & Blue Shield Ass'n v. Group Hosp. & Med. Servs., Inc., 744 F.Supp. 700, 713 n. 4 (E.D.Va.1990). Plaintiff alleges that "on February 8, 1000, the parties met at defendant's place of business [in Illinois] and agreed ... to terms of a second employment contract ...." (Compl. ¶ VII). Accordingly, the court applies Illinois law to the current questions before the court.³

III. Analysis

It is axiomatic that, in order to state a claim for breach of contract, plaintiff must allege the existence of a valid and enforceable contract upon which such a claim can be based. See Kastel v. Winnetka Bd. of Ed., 975 F.Supp. 1072, 1083 (N.D.Ill.1997) (applying Illinois law); Lewis-Kearns v. Mayflower Transit, Inc., 932 F.Supp. 1061, 1070 (N.D.Ill.1996) (applying Illinois law). Defendant argues that plaintiff cannot, as a matter of law, bring suit for breach of contract as no legally enforceable employment contract exists between the parties. According to defendant, any agreement between the parties contemplated performance for five years, thus precluding enforcement based on the statute of frauds.⁴ The Illinois statute of frauds provides, in pertinent part:

No action shall be brought ... upon any agreement that is not to be performed within the space of one year from the making thereof, unless the promise or agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorized.

740 Ill. Comp. Stat. 80/1 (West 1998).

In response, plaintiff argues that, notwithstanding the five-year term of employment the agreement could be performed within a year and is, therefore, enforceable against defendant despite the absence of a written contract. Alternatively, plaintiff argues that the defendant satisfied the requirements of the statute of frauds with collateral documents which form an enforceable written contract, and also that plaint...