LeCroy v. Canon USA Inc, No. 1:2021cv00035 - Document 29 (N.D. Tex. 2021)

Court Description: MEMORANDUM OPINION AND ORDER. Before the Court is Canon's Motion for Judgment on the Pleadings 14 . For the reasons stated in this Memorandum Opinion and Order, the Court grants Canon's motion for judgment on the pleadings in part and denies it in part. If Le Croy wishes to amend his complaint to replead his claim for fraud in compliance with this Order, he must do so no later than June 30, 2021. (Ordered by Judge James Wesley Hendrix on 6/8/2021) (jak)

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LeCroy v. Canon USA Inc Doc. 29 UNITED STATES DISTRiCT COURT NORTHERN DISTRICT OF TEXAS ABILENE DIVISION DEREK LECROY, Plaintiff, No. 1:21-CV-035-H CANON U.S.A., INC., Defendant. MEMORANDIJM OPIMON AND ORDER Derek LeCroy brings several claims against Canon U.S.A., Inc. related to the alleged non-payment of eamed commissions. Belore the Court is Canon's Motion for Judgment on the Pleadings. Dkt. No. 14. Canon argues that any claim related to LeCroy's alleged commission contract fails as a result of the integation clause in LeCroy's compensation conffact. Thus, Canon asserts that LeCroy's breach-of-contract, fiaud, promissory-estoppel, and quanrum-meruit claims should be dismissed. In response, LeCroy contends that his contract claim is based on an entirely diflerent agreement that was expressly intended to be handled outside ofthe compensation contract. After considering the motion, the parties' arguments, and the applicable law, the Court grants the motion in part and denies it in part. The Court grants Canon's motion wlth respect to the fraud claim because Texas 1aw precludes such claims when they are premised on a contract dispute. But the Court denies the motion for the remaining three claims because Canon's motion seeks to resolve factual disputes regarding the contents and scope ofthe alleged agreement. Dockets.Justia.com 1. Factual Backgroundl and Procedural History Canon U.S.A., Inc. is a provider of consumer, business-to-business, and industrial digital imaging solutions in the United States, Latin America, and the Caribbean Markets.2 Derek LeCroy was employed by Canon flom 2016 to 2020. During this time, he was responsible for Canon's business development west of the Mississippi River. Dkt. No. 6 at 13. During a conference call in 2016, Canon senior executives encouraged members of Canon's Business Information Solutions Group, including LeCroy, to spend more so the company could grow morc. Id. LeCroy took action to develop his personal idea for company $owth. Id. LeCroy shared his vertical-growth pian with his supervisor. /d This plan identified three business segments with a market specialist to be engaged by Canon and assigned LeCroy to manage each business segment and its respective conffactor. /d. LeCroy's plan would compensate the three market specialists and Lecroy through a commission system.3 Id. at 74. In May 2016, LeCroy was invited to present his plan to his superiors, which he did through a PowerPoint presentation. 1d This presentation included every element of his proposed plan, including the commission system to pay both the market speciaiists and LeCroy. 1d. InAugust2016, the Senior Vice President of the Business Information ' These allegations are taken from LeCroy's complaint, which the Court must accept as true when resolving a motion forjudgment on the pleadings. Villarreal t,. Wells Fargo Bank, N.A,8l4F.3d763, 7 66 (sth Cit . 2016) . Plofle, Canon, https:/ /www.usa,canon.com/internet/ porlal/ $/home/about/aboutcanon/corporate-profile (last visited Apr. 20, 2021). 2 Corporate I LeCroy contends that his commission was based on an increasing scale ranging from loh to l1ok dependent on company performance, Dkt. No. 6 at 14. 2 Solutions Group, on behalf of Canon, accepted the plan in writing, inciuding LeCroy,s commissron-compensation scheme. Id. LeCroy's direct supervisor acknowledged LeCroy,s proposed commission and explained to him in an email that his commission would be addressed outside ofhis ordinary salary structure. /d. After receiving apptoval for his plan and securing the aileged commission-based contract, LeCroy began implementing the p1an. 1d With Canon's petmission, he engaged the three specialists identified in the plan and executed their contracts. 1d These contracts included verbatim terms and language from LeCroy's plan. Id. By the last quarter of2016, the plan was in full effect, and LeCroy was managing the three market segments. Id. at 14- 15. This plan was iargely successful and increased new revenue il each market. Id. at 15. In the fust quarter of 2017, the three market specialists were paid their respective commissions outlined by LeCroy's plan, but LeCroy was not. Id. After Canon failed to pay LeCroy's commission under the plan, it demoted LeCroy by removing him from his managerial capacity over two of the market segments. Id In December 2020, LeCroy filed his original petition in the 104th District Court for Taylor County, Texas. Dkt. No. 6 at 11. Canon properiy removed the case to this Court. Dkt. No. 6. Canon filed its current motion for judgment on the pleadrngs (Dkt. No. 14), which has been fully briefed and is ripe for review. 2. Legal Standard A motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) provides a means to dispose of a case where the palties do not dispute the material facts "and a judgment on the merits can be rendered by looking to the substance ofthe pleadrngs and any judicially noticed facts." Hebert Abstract v. Touchstone Props., Ltd.,914F.2d74,76 3 (5th cn. 1990). The standard for resolving a motion for judgment on the pleadings is the same as a motion to dismiss under Rule l2(b)(6). Genrilelto t,. Rege,627 F.3d 540,543-44 (5th Cir. 2010). When reviewing a Rule 12(b)(6) motion to dismiss, courts must,,accept ail wellpleaded facts as true and vrew those facts in the light most favorable to the plaintiff.,, Richardson t. Axion Logistics, L.L.C.,780 F.3d 304, 306 (5th Cn. 2015) (quoting Maxini Club, lnc,,599 F.3d 458, 461 (5th Cir. 2010). "Genera1ly, a Bustos v. court ruling on a 12(b)(6) motion may rely on the complaint, its proper attachments, documents incorporated into the complaint by reference, and matters of whrch the court may take judicial notice. " Innova Hosp. San Antonio, Ltd. P'ship y. Blue Cross & Blue Shield of Ga., Inc.,892F.3d 719,726 (5th Cn. 2018) (quoting Wolcortv. Sebelius,635 F.3d 757,763 (sth Ck.2011) (intemal citatrons and quotations omitted)). A motion to dismiss pursuant to Rule 12(b)(6) "rs viewed with disfavor and is rarely granted." Tumer v. Pleasant,663 F.3d 770,775 (sth Cir. 2011) (intemal citation omitted). When a plaintiff s complaint fails to state a claim, a court should generally give the plaintiffat least one chance to amend before dismissing the action with prejudice. See Great Plains Tr. Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 329 (sth Ck. 2002): also Fed. see R. Civ. P. 15(a)(2) ("The court should freely give leave [to amend] when justice so requires."). Disffict courts "often afford plaintiffs at least one opportunity to cure pleading deficiencies before dismissing a case, unless it is clear that the defects are incutable or the plaintrffs advise the court that they are unwilling or unable to amend in a manner that will avoid dismissal ." Great Plains Tr.,313 F.3d at 329', Regents of the Univ. of Cal., 363 F .3d 398, 403 see also United States ex rel. Adrian v. (5th Cir. 2004) ("Leave to amend should be 4 fieely given, and outright refusal to grant leave to amend without a justification . . . is considered an abuse of discretion.") (intemal citation omitted). However, a plaintiff should be denied leave to amend a complaint if the proposed change clearly is frivolous or advances a claim or defense that is legally insufficient on its face. 6 Fed, Prac. & Proc. Civ. 0 1487 (3d ed.202I). 3. Analysis A, Canon's motion was timely. Rule 12(c) provides "[a]fter the pleadings are closed-but early enough not to delay trial-a pafiy may move for judgment on the pleadings." The pleadings are closed for the purposes of a Rule 12(c) motion "upon the filing of a complaint and an answer (absent a court-ordered reply), unless a counterclaim, crossclaim, or third-party claim is interposed." Mundujano r. City of Pharr,786 F. App'x 434, 436 (5th Cir. 2019) (citing Fed. R. Civ. P. 7(a)) (holding that the pleadings were closed even though the plaintiffcould stil1 amend its complaint as of right when the motion was f,led). LeCroy contends that Canon's motion is plematule because he was still entitled to amend his pleadings as a matter of course until June 4,202I purs'tant to the Court's scheduling order. Dkt. No. 24 at 8. But this argument overlooks when pleadings are closed for the purposes of Rule 12(c). LeCroy filed his original petition in state court on December 29, 2020. Dkt. No. 6 at 11 . Canon removed the case to this Court and subsequently filed its answer on February 19, 2021,. Dkt Nos. 1, counterclaims. .9ee Dkt. No. 8. As 8. Canon's answer did not include any a resuit, the Coult finds that the pieadings were closed under Rule 12(c) on February 19,2021. Canon did not file its motion for judgment on the 5 pleadings until March 4,2021. Dkt. No. 14. Additionally, Canon filed rts Rule 12(c) motion before the Court issued a scheduling order in this case. A plain language reading of Rule 12(c) suppots the timing of Canon's motion. And delaying the filing of a motion for judgment on the pleadings to June 4,2021 wodd not promote judicial efficiency contemplated by the ru1e. Moreover, even if the Court granted the Rule 12(c) motion in fuli, it would stil1 grant the plaintiffleave to amend his complaiat at least once. Accordingly, Canon's motion was timely because the pleadings had closed for the purposes of a Rule l2(c) morion. B. The Court may consider all ofthe materials attached to the pleadings. A Rule 12(c) motion for judgment on the pleadings as a is govemed by the same standard motion to dismiss under Rule 12(b)(6). Gentilello,62T F.3d ar 543-44. "In determining whether to grant a motion to dismiss, the distdct court must not go outside the pleadings and must accept all well-pleaded facts as ffue, viewing those facts most favorably to the p1ahtiff." Scanlan y. Tex. A&M Untu., 343 F.3d 533, 536 (5th Ci. 2003). Pleadings include a complaint and an answer to a complaint. Fed. R. Civ. P. 7(a). The Court may also consider documents that are referred to in the plaintiffs complaint and are central to the plaintiffs clatm. Collins v. Morgan Stanley Dean Witter,224 F .3d 496,498-99 (5rh Cir.2000). LeCroy contends that the Court may only consider the contents of its complaint at this stage and should ignore the materials attached to Canon's answer. Dkt. No. 24 at8-9. Specifically, LeCroy challenges the consrderation ofthe PowerPoint presentation that Canon represents as the alleged contract and several sales-compensatron plans. Dkt. No. 24 at9. 6 The Court may consider the attached materials for several reasons. First, a plainlanguage reading of the rule-that the Court is limited to the pleadings-suggests that the Court may consider all pleadings and their anachments. SeeFed. R. Civ. p. 7(a). If the Court were limited to the plaintiffs complaint, then the rule would limit it to the complaint, and not all the pleadilgs.a Second, the Fifth circuit's holding in Collins indicates that the Court may consider materials referenced by the plaintiff in the complaint and those that are essential to its claims. 224 F .3d at 498-99. Here, LeCroy references the attached PowerPoint presentation and the saies-compensation plans relied on by Canon.s Dkt. No. 6 at 14. These documents are essential to the claim because they weigh on the vahdiry ofthe alleged contract and the intent of the parties. While the Court considers these documents, it notes that, at this stage, all well-pled facts are accepted as ffue and viewed in the light most favorable to the plaintiff As a result, any factual disputes that arise will be resolved in favor ofthe plaintiff and support a denial of the motion for judgment on the pleadings. C, LeCroy adequately alleged a See Richardson, 780 F .3d at306. breach-of-contract claim, Under Texas law, the essential elements of a breach-of-contract claim are: "(1) the existence ofa valid contract; (2) performance or tendered performance by the plaintiff; (3) breach ofcontract by the defendant; and (4) damages sustained by the plaintiff as a result of the breach." Smith Int'I, Inc. a tt. Egle Cil"., LLC,490 F.3d 380, 387 (5th Cir. 2007) "The expression of one thing implies the exclusion of others." Antonin Scalia & Bryan A. Garncr, Reading Law; The Interpretation of Legal Texts 107 (2012). s "Mr. LeCroy presented his Vertical Growth Pian by way of a detailed PowerPoint presentation that contained every element of the plan." Dkt. No. 6 at 14. After the alleged contract was formed, "Mr. Ikcda even explained to Mr. LeCroy in an emaii that his commission would be dealt with outside ofhis normal salary structure at Canorl." Id. 1 (quoting Valero Mktg. & Supply Co. y. Kalama Int'L, L.L.C.,51 S.W.3d 345, 35i (Tex. App.- Houston [1st Dist.] 2001, no pet.)). "What constitutes an enforceable conffact is a question of law for the trial court.,, Adams v. Mut. of Omaha Ins, Co,, No. 3:13-CV-4881-D, 2015 WL 1378720, at *2 (ctring Gaede y. SKIns.1nc.,38 S.W.3d 753,757 (Tex. App.-Houston [14thDist.] 2001, pet. denied)). valid and enforceable contract under Texas 1aw requires: "(i) A an offer; (2) an acceptance in strict compliance with the terms of the offer; (3) a meeting of the minds; (4) a communrcation that each parry consented to the terms ofthe contract; (5) execution and delivery ofthe conffact with an intent that it be mutual and binding on the parties; and (6) consideration." Owens v. Specialized Loan Servicing, L,L.C., 694 F. App'x 950, 953 (5th Cn.2017) (qr;oting Adrantage Physical Therapy, Inc. v. Cruse, i65 S.W.3d 2L,24 (Tex. App.- Houston [14th Dist.] 2005, no pet.)). Canon argues that LeCroy's breach-of-contract claim fails because LeCroy's salescompensation plans contained an integration clause, which precludes any commission payments. Dkt. No. 15 at 9-10. Canon appears to equate LeCroy's alleged commission contract with the PowerPoint presentation. Id. at 10. Canon focuses its briefing on the presentation and contends that the PowerPoint lacks the essential elements ofa contract. Id. 10-11. Canon specifically challenges the validity ofthe contract and whether LeCroy sustained damages from the alleged breach. Conversely, LeCroy alleges a separate conffact was formed as a result ofhis presentafion, not the presentation itself. LeCroy also states that the PowerPoint attached to Canon's answer is not the actual file presented to Canon, but an earlier draft provided to the company. Dkt. No. 24 at9. To rebut the integration clause of the compensation conffact, 8 LeCroy alleges that he was told "in an email that his commrssion would be dealt with outside of his normal salary sftucture." Dkt. No. 6 at 14. Despite Canon,s argument that the PowerPoint presentation does not satisfl, the elements ofa contract, LeCroy contends that the presentation itselfis not the alleged contract. Dkt. No. 24at9. This alone raises a facrual dispute making resolution of the claim inappropriate for a motion for judgment on the pleadings. Canon also argues that, because the confact contained an integratron clause, the parol-evidence rule would preclude the consideration of the alleged commission contract. Under Texas law, parol evidence generally prohibits admission of extrinsic evidence ofa prior agreement or prior terms, not subsequent agreements that come after the integrated contract. Jack H. Brown & Co., Inc. t, Toys"R"Us, lnc.,906F.2d169,173 (5th Cir. 1990). Additionally, parol evidence does not preclude the consideration of a completely separate "side deal" when that deal is supported by evidence ofseparate consideration. West y. Quintanilla,5T3 5.W.3d237,245 (Tex.2079). Herc, the alleged commission agreement arose after the sales contracts, whrch means that the intefation clause and any parol- evidence argument would appear to fail under these facts. As to contract damages, LeCroy provides sufficient factuai allegations to demonstrate damages from the alleged breach. LeCroy alleges a specific commission percentage to which he was entitled under the alleged contract. Dkt. No. 6 at 14. Therefore, the Court may surmise what damages LeCroy seeks for the breach-of-contract claim. LeCroy does more than merely recite 1ega1 conclusions or implausible facts, but instead, provides an adequate factual basis for the damages claimed. Accordingly, the Court denies the motion for judgment on the pleadings. 9 D. The economic-loss rule precludes LeCroy,s fraud claim because it is premised on the alleged commi55lsl contract. Canon challenges LeCroy's fraud claim and argues that it is both barred by the economicloss ruie and that it is not sufficiently pled with particularify. Dkt. No. t5 at 12. The Court concludes that the fiaud claim is barred by the economicloss rule and, thus, need not reach the issue of whether the claim satisfies pleading standards. In Texas, the economic loss rule "generally precludes a recovery in tort for economic losses resulting from a party's failure to perform under a contract when the harm consists only of the economic loss of a contractual expectancy. " Galentine r. Tidepox Distributing, Inc.,715 F.App'x394,395 (5th Cir.2018) (quoting Chapman Custom Homes, Inc.v. Dall. Plumbing Co., 445 S.W.3d 716, 718 (Tex. 2074)). B:ut " a party fcannot] avoid tort liability to the world simply by entering into a confract with one parry[; otherwise, thel economic loss rule [would] swallow all claims between conffacrual and commercial strangers." Sharyland Water Supply Corp. v. City of Alton,354 S.W.3d 407, 419 (Tex. 2011). "Thus, a party states a tort claim when the duty allegedly breached is independent ofthe contractual undertaking and the harm suffered is not merely the economic loss of a contractual ben eftt." Chapman Custom Homes,445 S.W.3d at 718. Here, LeCroy alleges fraud arising directly from the alleged commission confract. Dkt. No. 6 at 16. These allegations and the soughtafter damages from the promised commissron payments fa11 squarely withrn the economic-loss ru1e. LeCroy does not a11ege that Canon's liaudulent activity and its resulting damages are independent Iiom his breach- of-conffact claim. Nor does he undertaking. As a result, the a11ege a duty breached that is independent of the conffactual Court dismisses LeCroy's fiaud claim. Because the Court 10 drsmisses the Iiaud ciaim based on the economic-1oss ru1e, rt need not reach whether the allegations satisfu Federal Rule of Civil Procedure 9(b). E. LeCroy adequately alleged a claim for promissory estoppel. To establish a promissory-estoppel claim in Texas, a plaintiffmust allege: (1) that the defendant made a promise; (2) that it was foreseeable that the plaintiff would rely on the promise; (3) substantial reliance by the plaintiffto his detriment; and (4) a definite finding that injustice can be avoided only by the enforcement of the promise. Zenor v. El Paso Healthcare Sys., Ltd., 176 F .3d 847 ,864 (5th Cn. 1999). Canon conrends that it did nor make a sufficiently definite promise to support LeCroy's promissory-estoppel ciaim and that any claim would be precluded based on the existence of the sales-compensation contract. Dkt. No. 15 at 16. The Court finds that LeCroy adequately alleged a promissory-estoppel action. In his complaint, LeCroy alleges that Kitajina accepted LeCroy's offer and that Ikeda emailed Lecroy stating that "his commission would be dealt with outside of his normal sa1ary structure at Canon." Dkt. No. 6 at 14. This is sufficient to demonstrate a promise to pay LeCroy within the terms of the alleged contract and outside of his existing sales-compensation plan. LeCroy also provides a sufficient factual basis to a11ege that his reliance was foreseeable. LeCroy presented a new structure for the company that gave him certain responsibrlities and commission payment. Id. The company then authorized him to act under the plan after promisrng hrm he would be paid in accordance with the plan. Id. Additionally, LeCroy did in fact begin to carry out the plan by hiring and overseeing three market specialists. Id. Finally, LeCroy alleges that he would not be properly compensated for his development and implementation of the plan without payment under the promise. 11 Id. at14*75. As the Court must view ai1 ofthe adequately alleged facts as true, the Court concludes that LeCroy has stated a claim for promissory estoppel. F. LeCroy adequately alleged a claim for quantum meruit. Quantum meruit is an equitable theory of recovery which is based on an implied agreement to pay for benefits received, such as services or materials furnished. Voxt Exploration Co.,Inc. v. Chevron U.S.A., lnc.,787 5.W.2d942,944('lex. 1990). agreement govems a dispute, a lfan plailtiffmay not recover under quantum meruit. express See Villareal y. First Presidio Bank, 744 F . App'x 204, 206 (sth Cir. 2018) (citrng Foxune Prod. Co. t. Conoco, Inc.,52 5.W.3d67I,684 (Tex. 2000)). However, at the motion to dismiss stage, a quantum-meruit claim may be stated in the altemative to a breach of contract claim. Pension Advisory Group, Ltd. t. Country Life Ins. Co.,77l F. Supp. 2d680,704 n.5 (S.D. Tex. 201i) (concluding that quantum-meruit and unjust-enrichment claims under Texas law may be stated in the alternative to a breach-of-contract claim). To recover under the doctrine of quantum meruit, a plaintlffmust estabhsh that: furnished; 2) for the person which services and materials were accepted by the person sought to be charged, used and enjoyed by him; [and] 4) under such circumstances as reasonably notified the person sought to be charged that the plaintiff[,] in performing such services[,] was expecting to be paid by the 1) valuable services were rendered or materials sought to be charged; 3) person sought to be charged. Vortt, 787 S.W.2d at 9M; accord Heldenfek Bros., Inc. v City of Coryus Chisti,832 S.W.2d 39, 4l (Tex. 1992). Here, Canon argues that Lecroy's action for quantum meruit must fail because he also had a sales-compensation agreement. Dkt. No. 75 at77. Conversely, LeCroy argues, and adequately pleads, that the alleged conffact is outside the scope of the compensation t2 agreement. Ifhe fails on his breach-of-contract claim at a later stage, Texas law sti1l permits him to fall back on a claim for quantum meruit. And LeCroy aileges each element of quantum meruit. LeCroy alleges he rendered valuable services by designiag the plan and implementing it with the three market specialists as requested. Dkt. No. 6 at14-15. Canon then accepted those services and benefited from the implementation of the plan, and LeCroy expected compensation based on both the express agreement and the nature of his commission in the plan. Id. Accordingly, the quantum-meruit claim survives the motion for judgment on the pleadings. G. The Court grants LeCroy's request to amend his complaint. Federal Rule of Civil Procedure 15(a)(2) states that " [t]he court should free1y give leave when justice so requres." And the Fifth Circuit has dictated strong po1iry favoring amendment of pleadings after dismissal. Great Plains Tr., 313 F .3d at 329 ("[D]istrict courts often afford plaintiffs at least one opportuniry to cure pleading deficiencies before dismissing a case, unless it is clear that the defects are incurabie or the plaintiffs advise the court that they are unwilling or unable to amend in a manner that will avoid dismissal."). In flact, the Fifth Circuit has even held that a district court abuses its discretion if, after dismissal, ir denies a timely motion to amend without justrfication, at least when the defendant would not be unduly prejudiced by the amendment . United States ex rel. Steury v. Cardinal Heahh, Inc., 625 F.3d 262, 27 0 (sth Cir. 2010). In his response to Canon's motion for judgment on the pleadings, LeCroy requests leave to amend his complaint in the event that the Court grants the motion. Dkt- No. 24 at 19. After considering LeCroy's request and the strong policy favoring amendment of pleadings after dismrssal, the Court grants LeCroy leave to amend his complaint. LeCroy 13 may therefore file one amended complaint no later than 2l days from the issuance of the Court's order. Any amended complaint shal1 address the pleading deficiencies identified in the Court's order. 4, Conclusion For the reasons stated above, the Court gants Canon's motion for judgment on the pleadings in part and denies it in part. If Lecroy wishes to amend his complaint to replead his claim for fraud in compliance with this Order, he must do so no later than June 30, 202t. <,1 So ordered on June -L, ZOZ|. J S 14 WESLEY HENDRIX STATES DISTRICT JUDGE

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