Allegis Group, Inc. et al v. Jordan et al, No. 1:2012cv02535 - Document 44 (D. Md. 2013)

Court Description: MEMORANDUM OPINION. Signed by Judge George Levi Russell, III on 4/17/13. (jnls, Deputy Clerk)
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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND ALLEGIS GROUP, INC., et al., : Plaintiffs/Counterclaim Defendants, : : v. : JUSTIN JORDAN, et al., : Civil Action No. GLR-12-2535 Defendants, : v. : DANIEL CURRAN, et al., : Counterclaim Plaintiffs. : MEMORANDUM OPINION THIS MATTER is before the Court on Plaintiffs/Counterclaim Defendants Allegis Group, Inc. ( Allegis ) and Aerotek, Inc. s ( Aerotek ) Motion to Partially Dismiss Counterclaim Plaintiffs Daniel Curran, Michael Nicholas, ( Plaintiffs ) Amended Counterclaim. involves Allegis s Plaintiffs under Plaintiffs Amended decision the to Incentive Counterclaim and Chris (ECF No. 35). discontinue Investment alleges Hadley s This case payments Plan breach of to ( IIP ). contract (Count I), violation of the Maryland Wage Payment and Collection Law (the Maryland Wage Act ), Md. Code Ann., Lab. & Empl. §§ 3501 et seq. (West 2013) (Count II), promissory estoppel (Count III), and unjust enrichment/quantum meruit (Count IV). 32). (ECF No. Specifically, Allegis and Aerotek move to dismiss Counts II, III, and IV. The issues have been fully briefed and the Motion is ripe for disposition. (D.Md. 2011). No hearing is necessary. See Local Rule 105.6 As will be outlined in specific detail below, the Court grants Allegis and Aerotek s Motion to Partially Dismiss because (1) the payments do not constitute wages under the Maryland Wage Act; (2) Plaintiffs failed to establish a prima facie case for promissory estoppel; and (3) Plaintiffs have not met the prerequisite for bringing a quasi-contractual claim when an express contract exists. I. Plaintiffs are former BACKGROUND1 employees of Aerotek, a Maryland employee staffing agency and wholly-owned subsidiary of Allegis. In January 1993, Allegis implemented the Allegis Group IIP, an investment plan that allows management and high-level employees to acquire a financial interest in the company by promising the employees the equivalent of company stock. IIP is to provide a select group of The purpose of the management or highly compensated employees . . . an incentive to promote the best interests of the Companies, and . . . an incentive to promote                                                              1 Unless otherwise noted, the following facts are taken from the Amended Counterclaim and are viewed in a light most favorable to Plaintiffs. 2   the long term economic growth of the Companies. Ex. A, at eligible 1, ECF No. employees are 25-1). Specifically, awarded incentive (Countercl. under the investment IIP, units ( Units ), which are equivalent to a common share of Allegis stock but do not actually grant equity in Allegis. While employed at Aerotek, employees receive cash dividends twice a year based on the value of their Units. In addition, once their employment has ended, Aerotek pays eligible employees the principle balance of the value of their Units, known as IIP payments, which are distinct from employees receive while employed. the dividend payments Following the termination of their employment, Aerotek makes IIP payments to former employees as follows: five-percent of their balance is paid every quarter for ten quarters, and then the remaining fifty-percent of their balance is paid after thirty months. Allegis awards Units through IIP Award Agreements, which employees must sign each time they earn Units. Agreements detail when employees receive the payments employment has ended. Units for will vest, vested The IIP Award and Units state once that their They also indicate that Unit payments are treated as income for the purposes of federal and state income tax withholding, Contributions Act. and withholding under the Federal Insurance The IIP Award Agreements further acknowledge that, although Aerotek anticipates that the federal income tax 3   consequences . . . are as described, the Internal Revenue Service is not bound by such description and the Company does not guaranty the federal income tax treatment of the award. (Countercl. Ex. B, at 3, ECF No. 25-2). Lastly, the IIP Award Agreements condition payment upon compliance with Section 9 of the IIP, stating that the terms and conditions set forth in Section 9 of the [IIP] are material and essential terms of your award of Units and your eligibility to receive payment for any vested Units. (Id. at 2). Section 9 of the IIP restricts employees from competing with Allegis and its subsidiaries, or soliciting Allegis s clients for a 30-month period and within a 250-mile radius of the office where the employees last worked. Compliance with these post-employment restrictions is the only limitation placed upon the payment of vested Units. Otherwise, IIP payments begin immediately after one s employment has ended. As director-level employees, Plaintiffs participated in the IIP and Aerotek. were awarded Units based on their employment with During their employment, Plaintiffs signed multiple IIP Award Agreements and received biannual dividend payments for their Units. At some point during their employment, Plaintiffs allegedly were told the IIP payments represented compensation earned as part of their compensation packages. were promoted to their director-level 4   When Plaintiffs positions, they faced potential pay cuts that Allegis and Aerotek allegedly stated would be offset by the IIP payments. Moreover, Allegis and Aerotek allegedly used increases in Units as a reason not to provide higher bonuses and pay increases for certain positions. Between September 2011 and Plaintiffs resigned from Aerotek. April 2012, each of the Under the IIP, Mr. Curran was scheduled to receive $196,470 in IIP payments at the time he resigned. Similarly, Mr. Nicholas was scheduled to receive $138,268, and Mr. Hadley was scheduled to receive $498,414. During their exit interviews, Kim Despaux, a human resources employee for Allegis, informed Plaintiffs they would receive a package of documents necessary to receive the postemployment IIP payments. Mr. Curran received his packet, completed the documents, and received two IIP payments of $8,851 each. When he did not receive his third IIP payment, Mr. Curran contacted Ms. Despaux. Jeff Reichert, from Ms. Despaux informed Mr. Curran that Allegis s legal department, halted the payments and did not provide a reason for doing so. Mr. Nicholas also received the packet and completed the necessary documents. He received one IIP payment of $6,195. When he did not receive his second IIP payment, Mr. Nicholas contacted stopped Ms. the Despaux payments and was without also told that explanation. Mr. received the packet of necessary documents. 5   Mr. Reichert Hadley never Like Mr. Curran and Mr. Nicholas, Ms. Despaux told Mr. Hadley that Mr. Reichert, without explanation, put his payments on hold. Although Ms. Despaux told Plaintiffs to contact Mr. Reichert directly, Mr. Reichert did not respond to any of Plaintiffs inquiries. On August 23, 2012, Allegis, Aerotek, and Teksystems, Inc.2 brought suit in this Court against Plaintiffs, and Justin Jordan, Ana Neto Rodrigues, and Alexander Ferrello,3 alleging, among other things, breach of their employment agreements and breach of the IIP Plaintiffs filed contract, Award violation estoppel, and an Agreements. Amended of unjust On Counterclaim, the Maryland enrichment/quantum January 22, alleging Wage Act, meruit. 2013, breach of promissory Allegis and Aerotek now move to dismiss Plaintiffs Counterclaim as to the Maryland Wage Act (Count II), promissory estoppel (Count III), and unjust enrichment/quantum meruit (Count IV) claims. II. A. DISCUSSION Standard of Review To survive a Federal Rule of Civil Procedure 12(b)(6) motion, the complaint must allege facts that, when accepted as                                                              2 Teksystems, Inc., also a wholly-owned subsidiary of Aerotek, is not a party to Plaintiffs Amended Counterclaim and does not participate in Allegis and Aerotek s Motion to Partially Dismiss. 3 Mr. Jordan, Ms. Rodrigues, and Mr. Ferrello are former employees of Aerotek. They did not join Plaintiffs in filing a counterclaim against Allegis and Aerotek, and do not participate in this matter. 6   true, state a claim to relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)) (internal quotation marks omitted). A claim is plausible on its face when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id. (citing Twombly, 550 U.S. at 556). Legal conclusions or conclusory statements do not suffice and are not entitled to the assumption Twombly, 550 U.S. at 555). of truth. Id. (citing Thus, the Court must determine whether it is plausible that the factual allegations in the complaint are enough speculative level. to raise a right to relief above the Monroe v. City of Charlottesville, 579 F.3d 380, 386 (4th Cir. 2009) (quoting Andrew v. Clark, 561 F.3d 261, 266 (4th Cir. 2009)) (internal quotation marks omitted). In determining whether to dismiss, the Court must examine the complaint as a whole, consider the factual allegations in the complaint as true, and construe the factual allegations in the light most favorable to the plaintiff. Lambeth v. Bd. of Comm rs of Davidson Cnty., 407 F.3d 266, 268 (4th Cir. 2005); Albright v. Oliver, 510 U.S. 266, 268 (1994). Lastly, as the basis of this Court s jurisdiction is in diversity of citizenship, the Court must follow the principles set forth in Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). 7   The Court is obligated to apply Maryland law to questions of substantive law. Ellis v. Grant Thorntnon LLP, 530 F.3d 280, 287 (4th Cir. 2008); Wells v. Liddy, 186 F.3d 505, 527 28 (4th Cir. 1999). B. Analysis 1. Maryland Wage Act In Count II, Plaintiffs allege that Allegis and Aerotek violated the Maryland Wage Act when they failed to make IIP payments to employment. Plaintiffs following the termination of their The Maryland Wage Act requires employers to pay an employee all wages due for work that the employee performed before the termination of employment. Md. Code Ann., Lab. & Empl. § 3-505(a). As a preliminary matter, the Court must determine whether the IIP payments constitute wages under the Act. The Act defines wage as all compensation that is due to an employee for employment. Id. § 3-501(c)(1). include commissions, bonuses, remuneration promised for Among other things, wages severance service. pay, Id. § and any other 3-501(c)(2); see Stevenson v. Branch Banking & Trust Corp., 861 A.2d 735, 749 (Md.Ct.Spec.App. 2004) (finding that the Act covers a severance benefit that is based on the length and/or nature employee s service, and promised upon termination ). 8   of the Allegis and Aerotek argue the IIP payments are conditioned on compliance with Section 9, the non-compete provision of the IIP, and thus do not constitute wages. Plaintiffs argue the IIP payments qualify as wages under the Act because the Units were awarded during the course of their employment and were based on their work performance. As Plaintiffs note, Maryland courts recognize that the Act extends to pay that represents deferred compensation for work performed during the employment. Stevenson, 861 A.2d at 749. Those payments, however, are recoverable under the Act only if the payment performed before is based his solely employment on the ended. work See the id. employee at 750 51 (finding that termination compensation did not constitute wages under the Act when the payment agreement contained a non-compete clause); see also Makowski v. Bovis Lend Lease, Inc., No. RDB 10-1844, 2011 WL 1045635, at *10 (D.Md. Mar. 17, 2011) (same). Indeed, the bright line rule of the Court of Appeals of Maryland makes clear that when a payment is exchanged as remuneration for an employee s work but also subject to any additional unfulfilled promises or conditions, the payment falls outside the definition of wages. Makowski, 2011 WL 1045635, at *8 (citing Catalyst Health Solutions, Inc. v. Magill, 995 A.2d 960, 969 (Md. 2010)) (emphasis in original); see Medex v. McCabe, 811 A.2d 297, 302 (Md. 2002) ( When the payments are dependent upon 9   conditions other than the employee s efforts, they lie outside of the definition [of wages]. ). The IIP payments thus do not constitute wages. To be eligible for the IIP payments, the IIP Award Agreements required Plaintiffs to refrain from competing against Allegis and Aerotek within 250 miles for 30 months following the termination of their employment. 32). Moreover, the IIP (Am. Countercl. ¶ 19, ECF No. Agreements explicitly state that employees shall be entitled to receive payment for the Units only to the extent that . . . [they] have complied with and fulfilled all of the terms of the [IIP]. 1). (Countercl. Ex. B, at Although Plaintiffs earned the Units during the course of their employment, the IIP Award Agreements state that payment is contingent upon Section 9. (Id. at 2). Section exchange stating 9 for that compliance confirms unfulfilled employees with that the IIP IIP, payments conditions must and comply specifically, are offered in following employment, with non-compete its provision [t]o earn and become entitled to receive payment for Units, that Allegis and Aerotek are only obligated to make IIP payments once the employee complies with Section 9, and that [t]he terms and conditions set forth in this Section 9 are material and (Countercl. Ex. essential A, at 4, terms of 6). As 10   any a award result, of the Units. IIP Award Agreements are not solely based on the work Plaintiffs performed before the termination of their employment and do not constitute wages under the Wage Act. Plaintiffs thus do not state a that can be plausible claim for relief under the Act. Plaintiffs easily disposed. proffer two additional arguments First, Plaintiffs argue the IIP payments are wages because the IIP Award Agreements characterize IIP payments as income and compensation for tax purposes. however, is misplaced. This argument, The IIP Award Agreements note that their characterization is only advisory and that the Internal Revenue Service is not bound by such description and the Company does not guaranty the federal income tax treatment of the award. (Countercl. Ex. B, at 3). Nonetheless, the IIP Award Agreements advisory characterization of IIP payments as income is irrelevant to the Court s determination under the Wage Act. Second, Plaintiffs contend that the IIP payments are not contingent upon post-employment conditions because Aerotek began making payments employment. to Plaintiffs during the course of their Plaintiffs, however, either confuse or blur the distinction between the two payments offered and the payments at issue here. Indeed, Aerotek made dividend payments Plaintiffs while they were employed with the company. to The IIP payments, however, are distinct post-employment payments that are contingent upon compliance with Section 9. 11   The dividend payments are separate and have no bearing on the determination that the IIP payments are not wages under the Maryland Wage Act. Accordingly, Plaintiffs have failed to state a claim upon which relief may be granted, and Count II of their Amended Counterclaim is dismissed. 2. Promissory Estoppel Plaintiffs allege that Allegis and Aerotek promised [Plaintiffs] the vested IIP payments as part of the compensation for their services and compliance with the IIP, upon which they relied to their detriment. (Am. Countercl. ¶¶ 56, 59). Specifically, Plaintiffs argue Allegis and Aerotek represented the IIP payments as compensation that offset potential pay cuts when Plaintiffs were promoted to director-level positions. To state a claim for promissory estoppel or detrimental reliance under Maryland law, Plaintiffs must show: (1) a clear and definite promise by Allegis and Aerotek; (2) a reasonable expectation by Allegis and Aerotek that the promise will induce action or forbearance by Plaintiffs; (3) the promise induces actual and reasonable action or forbearance by Plaintiffs; and (4) a resulting detriment to Plaintiffs that can only be avoided by enforcement of the promise. Pavel Enters., Inc. v. A.S. Johnson Co., 674 A.2d 521, 532 (Md. 1996) (citing Restatement (Second) of Contracts § 90(1) (2012)). 12   Plaintiffs pled neither a clear and definite promise by Allegis and Aerotek, nor a reasonable expectation by Allegis and Aerotek that their promise will induce action or forbearance, other than those employment. required to receive IIP payments after As previously explained, the IIP Award Agreements clearly and definitively promise IIP payments if the employee complies with Section 9 of the IIP. The IIP Award Agreements provide that employees are entitled to receive IIP payments upon the termination of their employment, but only to the extent that . . . [the employee] ha[s] complied with and fulfilled all of the terms of the [IIP], and that the employee acknowledge[s] and agree[s] that the terms and conditions set forth in Section 9 of the [IIP] are material and essential terms of [the] award of Units and [the employee s] eligibility to receive payment . . . . (Countercl. Ex. B, at 1 2). Section 9 requires an employee to promise that he will not compete with Allegis or its subsidiaries for thirty months following the termination of his employment to earn and become entitled to receive payment for the Units . . . . (Countercl. Ex. A, at 4). In fact, IIP payments are so intertwined with Section 9 that the return to IIP the Award Agreements Company any and provide all that amounts employees that shall [they] have received or otherwise are entitled to receive with respect to 13   the [IIP payments] should Section 9 be invalidated by a court of competent jurisdiction. (Countercl. Ex. B, at 2 3). Considering that Plaintiffs received and signed multiple [IIP] Award Agreements . . . over a period of years, it would be unreasonable for Plaintiffs to conclude otherwise, or to act in accordance thereof, despite any subsequent oral assertion to the contrary. See Pratt v. BAC Home Lending Servicing, LP, No. 12- cv-00368-AW, 2012 (finding unreasonable it WL 1565232, for at a *5 (D.Md. mortgagor Apr. to 30, continue 2012) making reduced-rate payments in reliance of a contract despite clear contractual language to the contrary). Plaintiffs, however, argue they can rely on Allegis and Aerotek s oral assertions because the IIP Award agreement is ambiguous argue as the payments to several agreements constitute material are terms. ambiguous wages, when as the commence, and whether the merger Agreement incorporates the entirety Specifically, to of whether the to right clause they payments in the IIP the IIP. IIP IIP Award The Court disagrees. First, as previously explained, the IIP Award Agreements do not represent IIP payments as income except for tax purposes. Second, the agreements clearly state that IIP payments commence following the termination of employment and continue periodically so long as the employee complies with Section 9. 14   Lastly, the IIP Award Agreements incorporate every aspect of the IIP, providing: This Agreement is intended to conform in all respects with, and is subject to all applicable provisions of, the [IIP], which is incorporated herein by reference. Inconsistencies between the Agreement and the [IIP] shall be resolved in accordance with (Countercl. Ex. B, at 4). the terms of the [IIP]. The IIP and IIP Award Agreements are thus unambiguous, and it is unreasonable for Plaintiffs to rely on subsequent oral statements. Accordingly, Plaintiffs have not sufficiently pled a claim for promissory estoppel and the motion to dismiss as to Count III must be granted. 3. Unjust Enrichment/Quantum Meruit Plaintiffs contend that they may bring a claim for unjust enrichment and quantum meruit if this Court finds the IIP Award Agreement unenforceable. Unjust enrichment and quantum meruit are quasi-contractual claims. Cnty. Comm rs of Caroline Cnty. v. J. Roland Dashiell & Sons, Inc., 747 A.2d 600, 607 (Md. 2000). Under Maryland law, quasi-contractual claims are not actionable when an express contract exists between parties that covers the subject matter of the claim. the two Id.; see also Swedish Civil Aviation Admin. v. Project Mgmt. Enters., Inc., 190 internal F.Supp.2d quotation 785, marks 792 omitted). 15   (D.Md. 2002) (citations Here, the IIP and Award Agreement is an express contract that covers the disbursement of and conditions placed upon the IIP payments. Plaintiffs have neither questioned its existence nor its legality. Nonetheless, Plaintiffs also argue they may allege unjust enrichment/quantum meruit as an alternative and inconsistent legal theory to their breach of contract claim under Federal Rule of Civil Procedure 8(d). Plaintiffs, however, are barred from alleging unjust enrichment/quantum meruit as an alternative theory when there is an express evidence of bad faith or fraud. contract and there is no See Doll v. Ford Motor Co., 814 F.Supp.2d 526, 551 (D.Md. 2011) (sustaining alternative breach of contract and unjust enrichment claims under Rule 8(d) when the plaintiff adequately pled a claim for fraud). Because an expressed contract exists that covers the subject matter of this claim and Plaintiffs have not also alleged fraud, their claim for unjust enrichment/quantum meruit will be dismissed.4                                                              4 In their Amended Counterclaim, Plaintiffs allege that Allegis and Aerotek s acceptance of their service made it inequitable for Allegis and Aerotek to retain the benefit of their service without paying the IIP payments. Allegis and Aerotek argue the IIP payments were not for services rendered, but rather were an incentive to promote the best interest and the economic growth of the company. In light of the fact that Plaintiffs may not raise a claim for unjust enrichment or quantum meruit here, it is unnecessary for the Court to address these arguments. 16   III. CONCLUSION For the Defendant s foregoing Motion to reasons, Partially it Dismiss Counterclaim (ECF No. 35) is GRANTED. Plaintiffs Order Amended follows, and Counterclaim a is ordered Plaintiffs that Amended Counts II, III, and IV of are preliminary hereby dismissed. Scheduling A Order separate will be issued. Entered this 17th day of April, 2013 /s/ ____________________________ George L. Russell, III United States District Judge 17