STEVEN J. McAULIFFE, District Judge.
Plaintiff, Stephen Gately, filed this suit asserting claims arising out of his employment by the defendant, Mortara Instrument, Inc. ("Mortara" or the "Company"). Gately advances claims for breach of contract, promissory estoppel, violation of the New Hampshire Consumer Protection Act ("CPA," or the "Act"), negligent/fraudulent misrepresentation, violation of the Whistleblower Protection Act, wrongful discharge, and for payment of wages. Mortara has moved to dismiss Gately's breach of contract, promissory estoppel and CPA claims. The motion is denied in part, and granted in part.
STANDARD OF REVIEW
When ruling on a motion to dismiss under Fed. R. Civ. P. 12(b)(6), the court must "accept as true all well-pleaded facts set out in the complaint and indulge all reasonable inferences in favor of the pleader."
In other words, "a plaintiff's obligation to provide the `grounds' of his `entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do."
"Under Rule 12(b)(6), the district court may properly consider only facts and documents that are part of or incorporated into the complaint; if matters outside the pleadings are considered, the motion must be decided under the more stringent standards applicable to a Rule 56 motion for summary judgment."
Accepting the allegations in the amended complaint as true, the relevant facts appear to be as follows. Mortara, a diagnostic cardiology company based in Wisconsin, manufactures patient monitoring devices that are sold worldwide. Stephen Gately, a New Hampshire resident, worked as a sales executive in the field of medical devices (specifically, acute care monitoring devices) for more than a decade.
In the spring of 2016, Gately accepted a position with General Electric as a Senior Account Manager, covering all GE healthcare divisions, including its acute care patient monitoring division. Prior to accepting the position at GE, Gately interviewed with several potential employers, including Mortara. After accepting the position with GE, Gately contacted Mortara's Chief Operating Officer, Brian Brenegan, to withdraw his candidacy. Brenegan asked Gately to first speak with Mortara's president, Justin Mortara, about working for Mortara instead of GE.
Two days later, Justin Mortara and Gately spoke by telephone. They discussed the Company and its ambition to enter the acute care patient monitoring market. Intrigued, Gately agreed to visit Wisconsin to tour the Company's operations, and meet Justin Mortara and the Company's other executives in person.
During his visit, Gately spoke extensively with Mortara executives about his potential role at the Company. When Gately explained to Justin Mortara that penetrating the acute care patient monitoring market would require an investment of between $15 million and $20 million over several years, Justin Mortara responded that the Company was prepared to make that investment, and wanted Gately to spearhead those efforts.
The next morning, Gately spoke with Brenegan. Gately expressed his misgivings about working with some of the individuals at the Company, but Brenegan assured him that his concerns would not be a problem because employee roles were changing within Mortara. Brenegan then asked Gately what it would take for Gately to turn down the position at GE, and come to work for Mortara.
Excited by the prospect of building an acute care patient monitoring division within Mortara, Gately attempted to negotiate a pay package with Brenegan that would take into account any reputational damage he might suffer as a result of withdrawing from the job he had accepted with GE. Gately and Brenegan ultimately agreed upon a pay package that would guarantee Gately compensation of $250,000 for each of his first two years of employment at Mortara, plus performance incentives and benefits. They also agreed that Gately would work from his home in New Hampshire. Gately left Wisconsin with a commitment that he would soon receive an offer letter from Mortara, setting out the terms of his employment agreement.
Six hours later, Mortara sent Gately an offer letter dated May 2, 2016. Written by Mortara's Human Resource Director, the letter described the terms of Gately's employment package. It read, in part:
Compl. ¶ 18.
The May 2 letter did not explicitly state that Gately's anticipated employment would be "at-will." While the letter described Gately's variable compensation for months 13-24 as a "monthly recoverable draw," Brenegan subsequently assured Gately that his variable compensation for that period was guaranteed at a minimum of $100,000. Brenegan further explained to Gately that the phrase "recoverable draw" meant that Gately would be eligible to "recover" additional variable compensation based on a commission schedule, assuming his sales during the period supported it. However, Brenegan said, Gately would not be required to disgorge any draw paid to him during the 13 to 24 month period if his sales fell below target.
Gately accepted Mortara's offer on May 2, 2016. He returned a signed copy of the offer letter to Mortara's Human Resources Director. Gately then notified GE that he was withdrawing from the job he had previously accepted. He began working for Mortara as Vice President for Patient Monitoring Sales on May 16, 2016.
Within just a few weeks of beginning work at Mortara, Gately was informed by Brenegan that Mortara was suspending its push into the acute care patient monitoring market, and had instituted several organizational changes before Gately's start date. Brenegan told Gately that, because Mortara lacked confidence in its newly assigned Vice President of Sales, Michael Shultz, Gately was expected to take on an additional role in the cardiology side of Mortara's business. Brenegan told Gately that, while he wanted Gately to "shake things up," he also needed Gately to accept Shultz as his boss for the time being. Compl. ¶ 23. Working for Shultz was a "dramatic change" from the working relationship that Brenegan had described when the two negotiated Gately's employment contract. Compl. ¶ 24. Gately would not have accepted the contract with Mortara under that condition.
In his altered role, Gately soon discovered a troubling practice by Mortara. The Company manufactured an electrocardiograph for use in physician offices, sold under the name "ELI 250c." The ELI 250c was marketed by the Company as "portable," because it was designed to be powered by a built-in, rechargeable battery. However, the batteries Mortara installed in the ELI 250c were defective, and failed almost immediately after their first use. Gately learned that Mortara's management refused to acknowledge the defect. Sales staff and customer support teams were instructed not to reveal the device's faulty batteries to customers, but to instead tell customers that the ELI 205c should only be operated when plugged in to an electrical power source, notwithstanding its claimed "portability" attribute.
Gately confronted Shultz about the practice. Shultz responded that Gately should "suck it up," and do what he was told. Compl. ¶ 27. Shultz told Gately that senior leadership at the Company, including Justin Mortara, knew about the defect, but were unwilling to divert Research and Development resources to fix it. Id. Gately spoke with a colleague in another Mortara department about the ELI 250c defect, and his concerns regarding how the Company was handling the issue. Gately expressed his discomfort over having to lie to customers about the problem. Gately's colleague warned him that he would be "blackballed" within the Company if he continued to press the issue. Compl. ¶ 27.
But, Gately's "fate at Mortara had already been sealed." Compl. ¶ 28. Two weeks after his confrontation with Shultz, Gately was notified that his employment with Mortara was terminated effective October 28, 2016, six months into his employment. Gately insisted that he be compensated consistently with the terms of his employment agreement (i.e., two years of guaranteed compensation and benefits), but Mortara refused.
On January 9, 2017, some two months after firing Gately, Mortara announced that it would be acquired by Hill-Rom Holdings, Inc. ("Hill-Rom"). A wholly owned subsidiary of Hill-Rom, Welch Allyn, Inc., acquired all issued and outstanding shares of Mortara in exchange for a purchase price of $330 million.
Gately alleges, upon information and belief, that Mortara conceived of the new acute care patient monitoring division as a marketing ploy to make itself attractive to a potential buyer. Mortara then persuaded Gately to abandon his position at GE to run the division, all the while knowing that the Company had no intention of actually entering the acute care patient monitoring market. Once Mortara's negotiations with Hill-Rom were substantially complete, Mortara no longer needed to keep up the façade of building an acute patient care monitoring division. That, Gately says, combined with his refusal to "suck it up" and lie to customers about the ELI 250c battery problem, prompted Mortara to fire him and breach its obligations under the employment agreement.
Gately filed suit in state court. Mortara timely removed the action, invoking this court's diversity jurisdiction, and it now moves to dismiss.
As noted above, Mortara moves to dismiss the Counts I, II and III of Gately's complaint.
Count I — Breach of Contract
Mortara argues that Gately's breach of contract claim must be dismissed because the employment contract between Gately and Mortara established an "at-will" employment relationship. Mortara points out that, under both New Hampshire and Wisconsin law, an employment relationship is presumed to be at-will when the contract of employment is silent as to term. It contends that Gately has not pled facts sufficient to overcome that presumption.
Gately responds that, as alleged, his breach of contract claim has two components. First, he argues, he
Whether Gately's discharge constituted a breach of contract turns on the existence of an enforceable employment agreement. Gately argues that he has sufficiently alleged that the parties entered an employment contract for a definite, two-year term. In support, he relies upon language in the May 2 letter declaring that his variable compensation would be "guaranteed for the initial twelve months of [his] employment," and that, "[f]or months 13-24," the "variable compensation plan" would be paid "by means of a monthly recoverable draw." Compl. ¶ 18. That language, Gately says, establishes a 24-month employment term, consistent with the bargain Gately and Brenegan struck.
As a preliminary matter, "the interpretation of a contract is an issue of law for this court to resolve."
Gately says that, despite the May 2 letter's description of his variable compensation for months 13-24 as "monthly recoverable draw," Brenegan told him that such compensation was guaranteed at a minimum of $100,000, and that he would not be required to disgorge any draw paid to him during that period. Compl. ¶ 19. But, those allegations are not particularly useful in determining whether Gately's employment status was at-will. In his opposition to Mortara's motion to dismiss, Gately relies entirely on the terms of the May 2 letter as fully describing the employment agreement.
Under New Hampshire law, "the at-will status of an employment relationship is `one of prima facie construction.'"
The employment agreement between Gately and Mortara is plainly silent as to the duration of his employment. Gately, however, attempts to read a two-year term into the agreement, based on the agreement's compensation language. But, generally, "[a] hiring at so much a day, week, month or year, no time being specified, is an indefinite hiring, and no presumption attaches that it was for a day even, but only at the rate fixed for whatever time the party may serve."
Gately construes his agreed-upon compensation over his first two years of employment as an agreement to retain him for a definite term of two years. He points out that some courts have found like provisions consistent with a hiring for a definite period.
Given the employment agreement at issue here, Gately's argument is unconvincing. The offer letter lacks any provision tending to establish a fixed term of employment or undermine the at-will presumption. Second, the compensation provisions upon which Gately relies cannot reasonably be interpreted as describing a definite term, nor do they give rise to an ambiguity with regard to Gately's employment status. That language relates not to the durational status of Gately's employment, but rather to "the incidents of employment such as compensation and fringe benefits."
In other words, while the agreement describes Gately's compensation over a 24-month period, it is silent as to the duration of his employment.
Nevertheless, relying on
While it is apparent that Gately's compensation was clearly defined, and "guaranteed" in the sense that had he continued in Mortara's employment, he would be entitled to be paid as provided, still, that "guarantee" does not operate as a guarantee that he would be so compensated whether he worked or not, nor does it constitute a "guarantee" that he would be kept on as an employee for the period covered by the defined compensation formula, as no fixed term was agreed upon and the at-will presumption governs.
Accordingly, defendant's motion to dismiss plaintiff's breach of contract claim is granted.
Count II — Promissory Estoppel
Mortara argues that that Gately's promissory estoppel claim is based on the same allegations that form his breach of contract claim. Because the two causes of action are mutually exclusive, Mortara says, Gately's promissory estoppel claim must be dismissed as well.
As a preliminary matter, Federal Rule of Civil Procedure 8 allows a party to assert as many separate claims as it has "regardless of consistency." Gately's promissory estoppel claim rests on promises other than those memorialized in the employment agreement, specifically Mortara's representation that it was willing and prepared to invest the time and sufficient money to launch a new acute care patient monitoring division, which Gately would spearhead.
While the claim may face other hurdles, mutual exclusivity is not one of them. Mortara's motion to dismiss that claim is denied.
Count III — Consumer Protection Act
Finally, Mortara contends that Gately's claim under the New Hampshire Consumer Protection Act must be dismissed. In support of that contention, Mortara first argues that Gately's CPA claim arises from his private employment relationship with the Company, and therefore lacks the necessary "trade or commerce" element required by the Act. Second, Mortara argues that Gately has not sufficiently alleged an "unfair or deceptive act or practice" prohibited by the Act.
New Hampshire's Consumer Protection Act, "RSA 358-A:2[,] provides that `[i]t shall be unlawful for any person to use any unfair method of competition or any unfair or deceptive act or practice in the conduct of any trade or commerce within this state.'"
The Act "lists thirteen representative categories of unlawful acts or practices, each dealing with transactions for the provision of goods or services to consumers."
The New Hampshire Supreme Court has not yet resolved whether an employer-employee relationship sufficiently affects trade or commerce. In
Courts in this district, however, have generally held that the Act does not apply to conflicts arising from employment.
But, Gately argues, his allegations go beyond an employeremployee dispute, because he has also alleged that Mortara engaged in deceptive conduct (representing its intent to enter the acute patient care monitoring market) in order to increase the purchase price paid for its stock, using Gately as a pawn in its deceptive negotiations. Those representations, Gately says, were false and made to manipulate Gately into joining Mortara, all in an effort to persuade Hill-Rom that Mortara was prepared to expand into the acute care monitoring market. It is those allegations, Gately argues, that implicate trade and commerce under the statute. And, he says, as a result of that deceptive conduct, he was injured. In support of his argument, Gately relies on
Given that RSA chapter 358-A "defines who may bring a private action broadly,"
For the foregoing reasons, and for those stated in defendant's memorandum in support of its motion, defendant's motion to dismiss (document no. 3) is