United States District Court, N.D. California
October 5, 2005.
DONALD H. PUTNAM, Plaintiff,
PUTNAM LOVELL GROUP NBF SECURITIES, INC., a Delaware corporation; NATIONAL BANK OF CANADA, a Canadian chartered bank; NATIONAL BANK FINANCIAL, INC., a Quebec corporation; and DOES 1-20, inclusive, Defendants.
The opinion of the court was delivered by: CLAUDIA WILKEN, District Judge
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO
Defendants Putnam Lovell Group NBF Securities, Inc., (PLNBF),
National Bank of Canada (NBC) and National Bank Financial, Inc.,
(NBF) (collectively, Defendants) move pursuant to Federal Rules
of Civil Procedure 12(b)(6) and 9(b) to dismiss Plaintiff Donald
Putnam's complaint. Plaintiff opposes this motion.
The matter was heard on August 12, 2005. Having considered all
of the papers filed by the parties and oral argument on the
motion, the Court GRANTS Defendants' motion in part and DENIES it
in part, as explained below. BACKGROUND
Unless otherwise noted, the facts are drawn from Plaintiff's
complaint and the July 23, 2003 memo attached as an exhibit to
the complaint, and are taken as true.
Plaintiff is a founder and ex-CEO of the former Putnam Lovell
Group (Putnam Lovell), a boutique investment banking firm. In
April, 2002, Putnam Lovell was acquired by NBF, a Canadian
broker-dealer and subsidiary of NBC, a large chartered Canadian
bank. The surviving entity was named PLNBF. Plaintiff retained
managerial control of certain businesses, known collectively as
the Global FIG Business. The April 13, 2002 Agreement and Plan of
Merger*fn1 provides that decisions regarding "hiring or
termination of senior professional staff of the Global FIG
Business . . . will, in each case, be subject to prior review and
approval by the Chief Executive Officer of NBF." Merger Agreement
(MA) § 18.104.22.168.3. Plaintiff was to be "subject to the supervision
and direction" of NBF, but retained "day to day responsibility
for the management of the Global FIG Business on a basis
consistent with that division's business plan and NBF's general
operating procedures." MA § 22.214.171.124.1. Plaintiff contends that
his management responsibilities were such that "he and only he
could hire or fire personnel within [the FIG Business] so long as
he was employed by PLNBF." Complaint ¶ 9.
The Merger Agreement's choice-of-law section provides that it
shall be construed in accordance with New York law. MA § 11.8.
The Merger Agreement divided the Putnam Lovell shareholders
into two groups, one to receive cash at closing and a second,
termed the FIG Shareholders, to receive shares in NBC, which were
deposited into escrow for release in installments. Plaintiff was
a FIG Shareholder holding the majority of the escrow and the
Managing Member of the limited liability corporation governing
the interests of the FIG Shareholders. The last installment (the
Global FIG Installment) constituted a substantial portion of the
consideration for the merger and was scheduled to be released
from escrow on December 31, 2004. The release and size of the
Global Release Installment depended in part upon the amount of
revenue generated by the FIG Business during this "Earn Out"
After the merger transaction was completed, NBF executives
negotiated with Plaintiff to terminate twelve PLNBF employees.
Because the proposed personnel reduction would affect the ability
of the FIG Business to meet the agreed-upon revenue targets, NBF
and NBC agreed, as set forth in the July 23, 2003 memo, to revise
the Earn Out formula. The memo, authored by NBF executive Kym
Anthony and sent to FIG Shareholders, is short enough to be
quoted in its entirety,
I understand that Don [Plaintiff] and Ian [Brimecome,
another PLNBF manager] have had discussions with you
regarding contemplated changes to the arrangements
regarding the contingent Earn Out arrangements, i.e.,
Global FIG Installment, agreed to in the context of
the purchase by NBF of Putnam Lovell. I understand
that your discussions have taken place in the context
of focusing on the role of the FIG leadership team relative to profitability, expense
control and retention issues regarding Global FIG as
opposed to just revenues.
I wish to confirm that these Earn Out arrangements
regarding each of you, other than Don and Ian, will
be modified so that the test for your being able to
earn your share of the Global FIG Installment will
change from a revenue and time contingency test to a
time contingency test only, (i.e., NB will waive the
revenue hurdle test, and the condition for you being
entitled to your share of the Installment will only
be a function of your continued employment through to
the end of the Earn Out Period, i.e. September 30,
2004). For Don's and Ian's share, the same time test
will apply, but will also include certain other tests
relating to the performance of the Global FIG
business. All other terms and conditions regarding
the Earn Out will remain the same, and will continue
to apply. The details of these arrangements and the
related paperwork will follow in the next few weeks.
I thank you for your efforts to date, and know that
you will all continue to contribute to the success of
Global FIG and to the firm.
In or around March, 2004, Putnam and Brimecome reached an oral
agreement with NBC and NBF regarding the other tests relating to
the performance of the Global FIG business. Complaint ¶ 15.
According to this alleged oral agreement, forty percent of the
Global FIG Installment would be earned by Plaintiff and Brimecome
if they remained as PLNBF employees through September 30, 2004;
twenty-five percent of the Global FIG Installment would be earned
based on successful cost cutting measures (i.e., termination of
PLNBF employees); and the remaining thirty-five percent of
Plaintiff and Brimecome's Global FIG Installment would be
"dependent upon the FIG Business revenues achieving revised
targets, the details of which the parties agreed to negotiate in
good faith." Id. (Emphasis in original.)
Documents memorializing this oral agreement were drafted, but
were "not formally executed" because of a recommendation by
counsel for NBF that doing so would increase tax risks for employee
shareholders. Id. ¶ 16. Plaintiff was urged to rely on the July
23, 2003 memo and related promises "instead of pressing for
formal documentation." Id. Acting in reliance on the alleged
oral agreement, Plaintiff terminated the twelve PLNBF employees
originally targeted, as well as other revenue-producing
personnel. In December, 2004, Plaintiff also terminated
Brimecome, likewise in reliance on promises made regarding
adjustments to the Earn Out formula.
In November and December, 2004, NBC and NBF told Plaintiff that
they never agreed to modify the Earn Out formula associated with
the Global FIG Installment. NBC and NBF failed to release any
part of the Global FIG Installment to Plaintiff or other FIG
Shareholders. When Plaintiff accused NBC and NBF of reneging on
their promises, Defendants terminated Plaintiff without cause and
with no prior notice.
Plaintiff was denied severance payments upon termination,
thereby depriving him of "compensation rights under his implied
contract with PLNBF, NBC and NBF," in that those entities had
assumed Putnam Lovell's long-standing policy and practice of
providing "substantial severance and benefit payments to
executives and employees upon their retirement." Complaint ¶ 24.
NBC and NBF had similar long-standing policies regarding
severance payments, and NBF's Chief Human Resources Executive
informed Plaintiff in January, 2005, that he would be entitled to
a benefits package worth approximately $2.2 million if he were
terminated. Plaintiff was then told that he could obtain these
benefits only if he agreed to forego payment of the Global FIG Installment.
Plaintiff brings seven claims. The first five are based on NBC
and NBF's alleged failure to release the Global FIG Installment,
as follows: (1) breach of express oral contract, against NBC and
NBF; (2) breach of implied contract, against NBC and NBF; (3)
promissory estoppel, against NBC and NBF; (4) fraud and deceit,
against NBC and NBF; and (5) breach of fiduciary duty, against
NBC only. The last two claims for (6) breach of implied contract
and (7) breach of the implied covenant of good faith and fair
dealing are brought against NBC, NBF and PLNBF, and relate to
their alleged failure to provide Plaintiff with a severance and
I. Failure to State a Claim
A motion to dismiss for failure to state a claim will be denied
unless it is "clear that no relief could be granted under any set
of facts that could be proved consistent with the allegations."
Falkowski v. Imation Corp., 309 F.3d 1123, 1132 (9th Cir.
2002), citing Swierkiewicz v. Sorema N.A., 534 U.S. 506
(2002). All material allegations in the complaint will be taken
as true and construed in the light most favorable to the
plaintiff. See NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898
(9th Cir. 1986). A complaint must contain a "short and plain
statement of the claim showing that the pleader is entitled to
relief." Fed.R.Civ.P. 8(a). "Each averment of a pleading shall
be simple, concise, and direct. No technical forms of pleading or
motions are required." Fed.R.Civ.P. 8(e). These rules "do not
require a claimant to set out in detail the facts upon which he bases his claim. To the
contrary, all the Rules require is `a short and plain statement
of the claim' that will give the defendant fair notice of what
the plaintiff's claim is and the grounds on which it rests."
Conley v. Gibson, 355 U.S. 41, 47 (1957).
When granting a motion to dismiss, a court is generally
required to grant a plaintiff leave to amend, even if no request
to amend the pleading was made, unless amendment would be futile.
Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv. Inc.,
911 F.2d 242, 246-47 (9th Cir. 1990). In determining whether
amendment would be futile, a court examines whether the complaint
could be amended to cure the defect requiring dismissal "without
contradicting any of the allegations of [the] original
complaint." Reddy v. Litton Indus., Inc., 912 F.2d 291, 296
(9th Cir. 1990). Leave to amend should be liberally granted, but
an amended complaint cannot allege facts inconsistent with the
challenged pleading. Id. at 296-97.
II. Rule 9(b)
"In all averments of fraud or mistake, the circumstances
constituting fraud or mistake shall be stated with
particularity." Fed.R.Civ.P. 9(b). The allegations must be
"specific enough to give defendants notice of the particular
misconduct which is alleged to constitute the fraud charged so
that they can defend against the charge and not just deny that
they have done anything wrong." Semegen v. Weidner,
780 F.2d 727, 731 (9th Cir. 1985). Statements of the time, place and
nature of the alleged fraudulent activities are sufficient, Wool
v. Tandem Computers, Inc., 818 F.2d 1433, 1439 (9th Cir. 1987), provided the plaintiff sets forth
"what is false or misleading about a statement, and why it is
false." In re GlenFed, Inc., Sec. Litig., 42 F.3d 1541, 1548
(9th Cir. 1994). Scienter may be averred generally, simply by
saying that it existed. See id. at 1547; see
Fed.R.Civ.P. 9(b) ("Malice, intent, knowledge, and other condition of mind
of a person may be averred generally"). As to matters peculiarly
within the opposing party's knowledge, pleadings based on
information and belief may satisfy Rule 9(b) if they also state
the facts on which the belief is founded. Wool,
818 F.2d at 1439 (9th Cir. 1987).
I. Choice of Law
In diversity actions such as this, federal courts must apply
the conflict of law principles of the forum State, here
California. S.A. Empresa De Viacao Aerea Rio Grandense v. Boeing
Co., 641 F.2d 746, 749 (9th Cir. 1981). California law applies
the principles of Restatement § 187, which "reflect a strong
policy favoring enforcement" of contractual choice-of-law
provisions. Nedlloyd Lines B.V. v. Superior Court,
3 Cal. 4th 459, 465 (1992).
The parties agree, pursuant to California conflict of law
principles, that Plaintiff's sixth and seventh employment-related
claims are governed by California law. However, they dispute the
applicable law relating to Plaintiff's five Global FIG
Defendants argue that the Global FIG Installment claims are
governed by the Merger Agreement's choice-of-law clause, which
specifies that the Agreement is to be governed by New York State law. Plaintiff argues that these claims arise out of a later
contract that "superseded all portions of the Merger Agreement
bearing on Putnam's current claim to a share of the Global FIG
Installment," including the choice-of-law provision. Pl.'s Opp.
Plaintiff's position is somewhat inconsistent. In the
complaint, Plaintiff alleges that he relied on the July 23, 2003
memo to support an alleged later oral contract. In his brief,
Plaintiff states that the oral contract was in fact "created by
the July 23, 2003 memorandum" as well as other representations
and conduct. The memo itself, in turn, provides, "All other terms
and conditions regarding the Earn Out will remain the same, and
will continue to apply." None of Plaintiff's allegations suggest
that the later oral contract modified or rescinded the Merger
Agreement's choice-of-law clause. If the new agreement modified
some but not all of the terms of the original agreement,
California choice-of-law principles would "provide? that the
unmodified terms of the original agreement are to be applied
together with the terms of the new, modifying agreement." Gen.
Signal Corp. v. MCI Telecommunications Corp., 66 F.3d 1500, 1506
(9th Cir. 1995). In that case, the choice-of-law provision
selecting New York State law would apply to the oral agreement.
It might be possible for Plaintiff to show, consistent with the
complaint, that the later oral contract did indeed entirely
supercede all portions of the Merger Agreement which pertain to
Plaintiff's share of the Global FIG Installment, including its
choice-of-law provision. Therefore, the Court addresses both California and New York law in its order.
II. Breach of Oral Contract
Defendants move to dismiss Plaintiff's first Global FIG
Installment cause of action for breach of oral contract on the
grounds that this claim fails to allege the elements of an
enforceable contract and is barred by the statute of frauds. In
his opposition, Plaintiff characterizes the alleged oral contract
as a three-stage, divisible contract which could be performed in
less than one year. Defendants, on the other hand, describe the
alleged oral contract as a modification of the Merger Agreement,
and as such required by the statute of frauds to be in writing.
A. Pleading of Valid Oral Contract
1. Mutual Assent
Defendants contend that the fact that the parties failed to
reach an agreement regarding revised revenue targets for the FIG
Business shows that any alleged oral contract was not
enforceable. The complaint states that thirty-five percent of the
Global FIG Installment would be dependent upon the FIG Business
revenues achieving revised targets, the details of which the
parties were to negotiate in good faith. A "mere agreement to
agree, in which a material term is left for future negotiations,
is unenforceable." Joseph Martin, Jr., Delicatessen, Inc. v.
Schumacher, 417 N.E. 2d 541, 543 (N.Y. 1981) (holding
unenforceable a lease provision with rental amount "to be agreed
Plaintiff argues that, even if the oral contract is not binding
with respect to the thirty-five percent of the Global FIG
Installment being dependent on revised revenue targets, the oral contract was divisible into three stages, and therefore any
defect caused by the "agreement to agree" did not affect the
parties' obligations with respect to the remaining sixty-five
percent of the Global FIG Installment. Plaintiff maintains that
even a partially valid contract is sufficient to overcome
Defendants' Rule 12(b)(6) motion.
Defendants argue that this position is inconsistent with that
taken in the complaint because the complaint never describes a
"three-stage" divisible oral contract. However, Plaintiff's
current characterization of a three-stage, divisible contract is
not necessarily inconsistent with the complaint's references to a
single oral contract resulting in a single share of the Global
FIG Installment. Plaintiff could be entitled to relief on the
basis of a single oral contract divisible into three severable
Defendants correctly note that there is a "presumption against
finding a contract divisible, unless expressly stated in the
contract itself, or the intent of the parties to treat the
contract as divisible is otherwise clearly manifested." Williston
on Contracts § 45:4. However, Plaintiff contends that he clearly
meant to treat the contract as divisible, based on his
performance of a portion of the alleged oral contract, and that
the complaint is not otherwise inconsistent with an allegation of
a divisible oral contract. While the complaint does not allege
that the oral contract contained an express provision of
divisibility, such a provision could have superceded either or
both of the Merger Agreement and the July 23 memo.
For these reasons, the Court finds that mutual assent to at least a portion of a three-stage, divisible contract would not be
inconsistent with the allegations in the complaint.
2. Intent to Be Bound
Defendants contend that the July 23, 2003 memo attached to the
complaint suggests that the parties did not intend to be bound by
any modification to the Merger Agreement until the parties had
executed a formal written amendment. Yet Plaintiff's allegations
in the complaint suggest that the later oral contract superceded
this portion of the July 23, 2003 memo. According to the
complaint, Defendants refused to sign the later draft written
agreement in order to avoid increased tax risks, yet encouraged
Plaintiff to rely on the new agreement, based on the July 23,
2003 memo as well as "related promises." Complaint ¶ 16. While
Plaintiff cannot prove an intent to be bound by a later oral
contract based on the terms of the July 23, 2003 memo, which
suggests a writing requirement, it would be possible for
Plaintiff to prove facts to support NBC and NBF's intent to be
bound to a later oral contract based on "related promises."
3. Valid Consideration
Defendants contend that Plaintiff's alleged consideration was
insufficient because Plaintiff did not retain the authority to
fire PLNBF staff. Plaintiff explains that allegations in his
Complaint and the terms of the Merger Agreement are not
inconsistent because the latter provides Mr. Anthony with a veto
over Plaintiff's decisions to hire and fire PLNBF staff, but does
not allow NBF to hire and fire staff independently. This
explanation is consistent with the language of the Merger
Agreement, which specifies that Plaintiff retains day-to-day responsibility for the management of
the Global FIG Business but that any termination of employees is
"subject to prior review" of NBF. MA § 126.96.36.199.3. Therefore,
Plaintiff may be able to prove, consistently with the complaint,
that the oral contract is supported, at least in part, by valid
B. Statute of Frauds
New York's statute of frauds applies to an agreement which by
"its terms is not to be performed within one year from the making
thereof." N.Y. Gen. Oblig. § 5-701(a). The statute of frauds
therefore applies to the April, 2002 Merger Agreement, which
depended upon calculation of cumulative revenues over a
three-year period ending September 30, 2004. MA § 188.8.131.52.
Defendants argue that because the statute of frauds applies to
the Merger Agreement, it must also apply to the alleged oral
contract, which modified or rescinded portions of the Merger
Agreement. However, the authority Defendants cite in support of
this position involves only modifications which in themselves
cannot be performed within one year. See Nikora v. Mayer,
257 F.2d 246, 249 (2nd Cir. 1958) (involving modification of
long-term mortgage contract); New York Yankees P'ship v.
Sportschannel Assoc., 510 N.Y.S. 2d 870, 872 (App. Div. 1987)
(involving alleged modification of contract in which performance
spanned two years from point of modification). In contrast, a
contract originally required by the statute of frauds to be in
writing "may be modified without a writing at a time when
performance within the year is possible." Lieberman v. Templar
Motor Co., 140 N.E. 222, 224 (N.Y. 1923).
In this case, the alleged oral contract could be performed in
less than one year. Therefore, Plaintiff's Global FIG Installment
claims arising out of the alleged oral contract are not barred by
the statute of frauds.
III. Breach of Implied Contract and Promissory Estoppel Claims
Defendants move to dismiss Plaintiff's claims for breach of an
implied contract and for promissory estoppel on the grounds that
these claims are precluded by the express Merger Agreement.
A contract "cannot be implied . . . where there is an express
contract covering the same subject-matter." Missigman v. USI
Northeast, Inc., 131 F. Supp. 2d 495, 512 (S.D.N.Y. 2001)
(quoting Miller v. Schloss, 218 N.Y. 400, 406 (1916)); see
also Eisenberg v. Alameda Newspaper, Inc.,
74 Cal. App. 4th 1359, 1387 (1999) ("There cannot be a valid express contract and
an implied contract, each embracing the same subject, but
compelling different results."). Similarly, a "valid and
enforceable written contract governing a particular subject
matter ordinarily precludes recovery in quasi contract for events
arising out of the same subject matter." Telecom Int'l Am.,
Ltd., v. AT&T Corp., 67 F. Supp. 2d 189, 206 (S.D.N.Y. 1999)
(quoting Clark-Fitzpatrick, Inc., v. Long Island R.R. Co.,
70 N.Y. 2d 382, 388 (1987)).
Plaintiff does not contest this authority. Instead, Plaintiff
argues, as the Court above finds, that he has sufficiently
alleged an alternative oral contract which modified or superceded
the relevant portions of the Merger Agreement. To the extent that
this oral contract is express, however, it would render the
implied contract and promissory estoppel claims superfluous, unless
Plaintiff were also to allege that the portions of the Merger
Agreement embracing the same subject matter were rescinded. To
the extent that the alleged contract can only be inferred from
the parties' actions, or that there is no oral contract but only
a promise on which Plaintiff detrimentally relied, the claim
would indeed be barred by the Merger Agreement, which also covers
the same subject matter but would compel a contrary result.
Because the Court finds that Plaintiff has failed to state a
claim for breach of an implied contract with respect to the
Global FIG Installment or for promissory estoppel, the Court
grants Defendants' motion to dismiss these two claims. This
dismissal is with leave to amend if Plaintiff can truthfully
allege, consistent with his original complaint, that the portions
of the Merger Agreement embracing the same subject matter as the
alleged implied contract or alleged promise were rescinded.
IV. Fraud and Deceit
Defendants move to dismiss Plaintiff's claim for fraud and
deceit on the grounds that it is barred under New York and
California law because it merely duplicates his breach of
Under New York law, a misrepresentation which is a statement of
intent to perform under a contract cannot constitute a fraud
claim. Manning v. Utils. Mut. Ins. Co., 254 F.3d 387, 401 (2nd
Cir. 2001) (citing Bridgestone/Firestone, Inc., v. Recovery
Credit Servs., Inc., 98 F.3d 13, 19-20 (2nd Cir. 1996)).*fn2 In
order to maintain a tort claim for fraud based on an alleged
breach of contract, a plaintiff must "either (i) demonstrate a
legal duty separate from the duty to perform under the contract;
or (ii) demonstrate a fraudulent misrepresentation collateral or
extraneous to the contract; or (iii) seek special damages that
are caused by the misrepresentation and unrecoverable as contract
damages." Bridgestone/Firestone at 20 (internal citations
Plaintiff argues that the conduct alleged constitutes more than
failure to perform the alleged contract, but fails to explain how
the conduct went beyond intentional failure to perform. The list
of allegedly fraudulent acts committed by Defendants includes
acquiring Putnam Lovell, forcing Plaintiff to terminate his
employees and failing to release the Global FIG Installment.
See Pl.'s Opp. at 23. All of these acts involve either
Plaintiff's performance in reliance upon, or Defendants'
non-performance of, the alleged oral contract. Plaintiff
therefore has not sufficiently alleged the type of
misrepresentations that would allow him to recover in tort under
Bridgestone/Firestone. Nor has Plaintiff alleged that
Defendants' alleged misrepresentations exposed him to liability
for special damages.
Under California law, on the other hand, a "promise made without any intention of performing it" does constitute "actual
fraud." Cal. Civ. Code § 1572(4). A tortious breach of contract
may be found "when the breach is accompanied by a traditional
common law tort, such as fraud. . . ." Robinson Helicopter Co.,
Inc., v. Dana Corp., 34 Cal. 4th 979, 990 (2004) (quoting
Erlich v. Menezes, 21 Cal. 4th 543, 553 (1999)). In this case,
Plaintiff alleges that Defendants entered into the contract with
the fraudulent intent not to perform it. These allegations do, as
noted above, incorporate the facts of Plaintiff's contract
claims, and are sufficiently detailed to give Defendants notice
of the particular misconduct which is alleged to constitute
For these reasons, the Court denies Defendants' motion to
dismiss Plaintiff's fraud claim. However, if it is later decided
that New York law applies to this claim, it will be dismissed. In
light of that, Plaintiff may amend it, in an abundance of
caution, if he can allege, truthfully and without contradicting
the original complaint, conduct that constitutes breach of a duty
independent of the contract or special damages.
V. Breach of Fiduciary Duty
Plaintiff alleges that NBC breached a fiduciary duty to him as
a minority shareholder in NBC. Defendants move to dismiss this
claim on the grounds that such a duty is not legally cognizable.
Under New York law, a corporation does not have a fiduciary
relationship with its minority shareholders. State Teachers Ret.
Bd. v. Fluor Corp., 566 F. Supp. 939, 941 (S.D.N.Y. 1982).
However, the applicability of New York law need not be decided in
this motion to dismiss. Plaintiff asserts that NBC's transactions with him are "most
likely governed by Canadian or California law." Pl.'s Opp. at 24.
However, Plaintiff does not show that the law of those
jurisdictions would avail him. Cf. Jones v. H.F. Ahmonson &
Co., 1 Cal. 3d 93, 110 (1969) (noting fiduciary duty is owed
under California law to minority shareholders by officers,
directors and controlling shareholders); Weiss v. Schad, 
O.J. No. 4356 ¶ 89 (Ont. S.C.J.) (noting general rule that
"directors and controlling shareholders do not owe fiduciary
duties to minority shareholders," first set forth in Percival v.
Wright,  2 Ch. 421 (Eng. Ch. Div.)). Plaintiff's fiduciary
duty claim against NBC is dismissed with leave to amend to
identify a legally cognizable basis for this claim.
VI. Breach of Implied Contract
Defendants move to dismiss Plaintiff's claim for breach of an
implied contract to pay severance benefits on the grounds that
such an implied contract runs contrary to PLNBF's express policy.
In any event, Defendants argue, Plaintiff's claim should be
dismissed against NBC and NBF because they did not employ
To support this portion of their motion, Defendants request
that the Court take judicial notice of an excerpt from Putnam
Lovell's 2001 Employee Handbook, authored by Plaintiff, which
states in relevant part that "Putnam Lovell does not, as a matter
of policy, provide severance pay to employees whose employment is
terminated for any reason." Defendants' Request for Judicial
Notice, Ex. 2, Putnam Lovell Employee Handbook. Defendants argue
that this is an "express written agreement, signed by the
employee, [which] cannot be overcome by proof of an implied contrary
understanding." Guz v. Bechtel Nat'l, Inc., 24 Cal. 4th 317,
320 n. 10 (2000).
The Court cannot take judicial notice of this portion of the
Putnam Lovell Employee Handbook because it is not integral to
Plaintiff's breach of implied contract allegations. Cf.
Parrino v. FHP, Inc., 146 F.3d 699, 706 (9th Cir. 1998)
(holding district court did not err in considering written health
plan on motion to dismiss ERISA claims). Evaluation of the effect
of the Putnam Lovell Employee Handbook on Plaintiff's implied
contract claim would involve factual issues that are not
appropriately addressed in a motion to dismiss, such as whether
the terms of the handbook extended to its founder and CEO.
Defendants contend that, even if the implied contract claim
against PLNBF is allowed to proceed, it should be dismissed
against NBC and NBF because neither entity employed Plaintiff and
thus neither can be held responsible for failure to pay
severance. Neither party introduces any authority on the question
of whether an entity that is not an employer, but has promised a
severance package, may be held liable for failure to pay those
benefits. For these reasons, the Court denies Defendants' motion
to dismiss Plaintiff's claim for breach of implied contract based
on failure to pay severance and other benefits.
VII. Breach of Implied Covenant of Good Faith and Fair Dealing
Defendants move to dismiss Plaintiff's companion claim for
breach of the implied covenant of good faith and fair dealing on
the grounds that such a claim is invalid or superfluous. As Defendants note, under California law an implied covenant
theory in the employment context does not provide an basis for
relief independent of an express or implied contract. Guz,
24 Cal. 4th at 352. However, the covenant does "prevent? a party
from acting in bad faith to frustrate the contract's actual
benefits." Id. at n. 18 (emphasis omitted). For the reasons
explained above, Plaintiff may proceed with his implied contract
claim, and therefore Plaintiff may also proceed with his
allegations that Defendants' actions frustrated benefits owed
under that implied contract.
Therefore, the Court denies Defendants' motion to dismiss
Plaintiff's claim for breach of the implied covenant of good
faith and fair dealing.
For the foregoing reasons, the Court GRANTS in part Defendants'
motion to dismiss (Docket No. 11) and DENIES it in part as
follows. The Court denies Defendants' motion to dismiss
Plaintiff's first Global FIG Installment claim for breach of oral
contract as well as his sixth and seventh employment-related
claims for breach of implied contract and breach of the implied
covenant of good faith and fair dealing. The Court grants
Defendants' motion to dismiss Plaintiff's second and third Global
FIG Installment claims for breach of implied contract and
promissory estoppel, with leave to amend if Plaintiff can
truthfully allege, without contradicting his original complaint,
that portions of the Merger Agreement embracing the same subject
matter as the alleged implied contract or alleged promise were
rescinded. The Court denies Defendants' motion to dismiss Plaintiff's fraud claim.
However, Plaintiff may, in an abundance of caution, amend it if
he can allege, truthfully and without contradicting the original
complaint, conduct that constitutes breach of a duty independent
of the contract or special damages. Plaintiff's fifth Global FIG
Installment claim for breach of fiduciary duty is dismissed with
leave to amend to state a legally cognizable claim.
Plaintiff may file a first amended complaint within twenty days
of the date of this order.
The Court GRANTS Defendants' request for judicial notice of
excerpts of the Merger Agreement, but otherwise DENIES
Defendants' request (Docket No. 13). The Court GRANTS Plaintiff's
Request for Judicial Notice of the entire Merger Agreement
(Docket No. 25). The Court DENIES Defendants' Supplemental
Request for Judicial Notice of additional portions of the Putnam
Lovell employee handbook (Docket No. 30).
IT IS SO ORDERED.
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