Mendoza v. Cederquist et al, No. 1:2009cv00163 - Document 23 (E.D. Va. 2009)
Court Description: MEMORANDUM OPINION Re: 14 MOTION to Dismiss Plaintiff's First Amended Complaint by Caroline J. Cederquist, Edward Cederquist, Cederquist Medical Wellness Center, Inc., Dr. Cederquist's Good for You Gormet. Signed by District Judge Leonie M. Brinkema on 5/6/2009. (stas)
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IN THE UNITED STATES DISTRICT COURT FOR THE ' EASTERN DISTRICT OF VIRGINIA Alexandria Division LIONEL MENDOZA, ... ' ,' ri-1 ' ¢' '. US D'cTRlCTC ) 1 ) ) ) v. CAROLINE J. MAY - 6 2009 ) Plaintiff, CEDERQUIST et al.. H|f p l t L. u. l:09cvl63 ALEXANDRIA. VIHGIM A (LMB/IDD) ) ) ) Defendant. MEMORANDUM OPINION Defendants have moved to dismiss Counts 2 plaintiff's First Amended Complaint. below, through 5 of the For the reasons stated defendants' motion will be granted in part and denied in part. I. Background Plaintiff Lionel Mendoza, work in the United States, a citizen of France authorized to moved to Virginia in 1999 to work as a business analyst for Cuisine Solutions, a subsidiary of a French company. While employed there, Mendoza developed a business relationship with co-defendant Edward Cederquist, the part-owner of one of Cuisine Solutions' customers, co-defendant Cederquist Medical Wellness Center ("the Wellness Center"), a medical facility that treats patients in the areas of diet and weight management. The other part-owner of the Wellness Center is Cederquist's wife, In 2004, Solutions, co-defendant Dr. Caroline Cederquist. when Mendoza was no longer working for Cuisine he contacted Edward Cederquist for assistance in finding a job. The Cederquists, seeking to expand their business by creating a line of diet meals Mendoza, for sale, sought who had experience in the food industry, launch this new venture. to hire to help them After a series of negotiations, Mendoza was hired as Vice President of Business Development for the Culinary Division of the Wellness Center. Amended Complaint, with Mendoza's assistance, created several companies foods nationwide, According to the the Cederquists that have successfully marketed diet including Diet to Your Door d/b/a Bistro MD, the Smart Distribution Center, Good For You Gourmet. began working for them, and co-defendant Dr. Cederquist's Mendoza further alleges that until he the Cederquists had virtually no experience in food sales, and that he was largely responsible for the success of this aspect of the defendants' business. The employment negotiations between the defendants and Mendoza allegedly occurred during July and August 2004, and Mendoza began working for the defendants in August 2004. Attached to the First Amended Complaint is a letter dated June 22, 2004, August 3, which the plaintiff alleges was actually written on 2004 but back-dated.1 The letter, signed by Caroline Considering this letter agreement, as well as the addendum mentioned infra, does not convert the instant Rule 12(b)(6) motion to dismiss into a motion for summary judgment, because these materials are "integral to and explicitly relied on in the Complaint" and their authenticity has not been challenged. Phillips v. LCI Int'l. Inc.. 190 F.3d 609, 618 (4th Cir. 1999). -2- Cederquist, terms of Center, states that its purpose is [Mendoza's] Inc. Division." "to confirm in writing the employment with Cederquist Medical Wellness as VP of Business Development for the Culinary Under the heading "Compensation," the letter states: As we discussed and agreed during our conversations, your compensation will be based on achievements with no limits on earnings. Your compensation will be 20% of EBITDA for the Culinary Division. Your base salary will be $35,000 per year. You will be entitled to 3 weeks vacation a year. First Am. Compl. Ex. A. Mendoza asserts that this letter was modified by an unsigned document titled "Addendum to Employment Agreement dated June August 3, 1. 2004. 22, 2004," which was also completed on The addendum states: Your compensation will be based at 25% of gross margin until such time you attain a salary of $75,000 per year. back to 20% 2. At this time the compensation will revert of EBITDA. If at such time we decide to sell the company, will be additionally compensated the following: a. Total company sales > b. Total company sales > $4,500,000, $3,000,000, 7.50% c. Total company sales > $6,000,000, you 5% 10% The above numbers are to be calculated on net proceeds collected after all related sales expense and less any capital invested. It is also based that you are still working for the company. First Am. Compl. Ex. B. Mendoza alleges that the two written documents memorialized some, but not all, of his terms of employment. Specifically, claims that the parties also orally agreed that Mendoza would -3- he receive an ownership share in the companies and manage. According to Mendoza, that he helped create the parties "agreed that would settle upon an ownership structure whereby Mr. would become a co-owner of business," First Am. the food-related aspects Compl. 31 10, they Mendoza of the and he began working for the defendants in part in reliance on the promise that he would receive an ownership interest. Mendoza further claims that Edward Cederguist "repeatedly and purposefully reiterated" the promise of an ownership interest to him "[r]egularly throughout the course of the employment relationship," id. SI 46, and met with Mendoza on several occasions and specifically discussed the ownership interest. occasions, Mendoza also asserts that on at least Cederquist attempted to justify his Mendoza with official ownership shares, would be more beneficial two failure to provide once stating that it for Mendoza to receive an official interest only when the companies began to make a profit, and once claiming that the failure to provide Mendoza with official shares was merely an administrative oversight. Mendoza claims that he never received the ownership shares he was promised. In addition, he claims that he never received any of the bonus payments based on a percentage of the companies' earnings (either 25% of the gross margin or 20% of EBITDA) that he was promised in the written letter agreement and addendum. On November 24, 2006, Mendoza was -4- laid off by the defendants. He was "significant 'organizational' Mendoza asserts told that his that he was termination was changes," fired so avoid paying him his bonus payments, percentage upon sale of the id. that SI 58; due to however, the defendants ownership interest, company. He further could and alleges that defendants never intended to provide him with any of these of compensation, and repeatedly made promises before and during his the forms to him - both employment - while intending not to keep them. Mendoza has breach of filed a contract, the inducement, five-count Amended Complaint, unjust enrichment, alleging quantum meruit. and intentional misrepresentation.2 defendants have moved to dismiss all counts fraud in The except the breach of contract claim in Count 1. II. Standard of Review In reviewing a Rule 12(b)(6) assumes the truth of all facts motion to dismiss, alleged in the complaint and the existence of any fact that can be proved, complaint's allegations, and construes favorable to the plaintiff. J.D. Associates Ltd. 2000). However, a court consistent with the facts in the light most See Eastern Shore Markets, Partnership. 213 F.3d 175, 180 Inc. v. (4th Cir. "a plaintiff's obligation to provide the grounds 2This action was initiated in the Circuit Court of Arlington County, and was removed to this court -5- on February 13, 2009. of his entitle [merit] conclusions, to relief requires more than labels and and a formulaic recitation of the elements of a cause of action will not do." 550 U.S. 544, 555 (2007) Bell Atlantic Corp. v. Twomblv. (internal quotation marks and citations omitted). III. A. Discussion Unjust Enrichment and Quantum Meruit Claims. The defendants have moved to dismiss Counts 2 and 3, the unjust enrichment and quantum meruit claims, arguing that because Mendoza has pled the existence of an express contract, therefore cannot plead counts See Southern Biscuit Co. (holding that "an express v. theat rely on an implied contract. Llovd. 6 S.E.2d 601, 606 (Va. contract defining the rights parties necessarily precludes he of 1940) the the existence of an implied contract of a different nature containing the same subject matter"). However, under Virginia and federal law, a plaintiff is permitted to plead equitable theories of relief such as unjust enrichment and quantum meruit as alternatives to contract recovery. *4 (E.D. See Ford v. Va. Mar. 3, Torres. 2009). No. Here, l:08cvll53, 2009 WL 537563, the plaintiff has properly pled the unjust enrichment and quantum meruit claims alternative, the event express in the alleging both of these theories specifically "[i]n the trier-of-fact determines contract that governs each of -6- either that the rights of there is no the parties at expressed herein, or that the express parties does not govern each of contract between the the subject matters upon which Plaintiff seeks to recover damages." First Am. Compl. Alternative pleading of an implied contract, remedies of unjust enrichment and quantum meruit, appropriate in the case at bar, 55 76, 83. and the is particularly where the plaintiff has claimed that any contractual rights were established through a combination of oral and written agreements, the alleged written agreements - and where neither of the letter or the addendum - was signed by both parties or contained an integration clause. fact pattern suggests disagree as the possibility that This the parties may to both the existence and the scope of any contract. Under such circumstances, eminently reasonable. pleading in the alternative is See Ford, supra, Civil Aviation Admin, v. Project Momt. Supp. Md. 2d 785, 792-93 (D. 2002) at *4, Enters., quoting Swedish Inc., 190 F. (holding that a plaintiff is "not barred from pleading alternative theories of recovery *where the existence of a contract concerning the subject matter is in dispute'"). Given that the plaintiff has explicitly pled the unjust enrichment and quantum meruit claims in the alternative, and has attached to the First Amended Complaint written agreements that may very well not be contracts, defendants' contention that "[p]laintiff's allegations leave no room for an argument.by him that there was anything other than an express -7- agreement between the parties," Clearly, Def.'s Mem. if Mendoza prevails, 6, is misplaced.3 he will not be able to recover on both his contract and implied contract claims matters. However, contract, and, whether the parties had an express if so, the terms to be resolved after discovery, Accordingly, for the same of such a contract, or implied are matters not on a motion to dismiss. the Motion to Dismiss will be denied as to Counts 2 and 3. B. Fraud in the Inducement and Intentional Misrepresentation Claims. The defendants have also moved to dismiss Counts 4 and 5, which allege fraud in the inducement and intentional misrepresentation. In Count 4, Mendoza claims that Edward Cederquist induced him to work for the defendants by promising him bonus payments, an ownership interest, upon a sale of the company, promises. In Count 5, to make these promises, and a share in profits while intending not to keep these Mendoza asserts that Cederquist continued without intending to keep them, throughout Mendoza's employment with the defendants. The defendants argue that such allegations do not state a 3Along the same lines, the defendants have argued that Mendoza may not pursue equitable remedies because he has an adequate remedy at law. However, if the factfinder determines that no contract existed, or that any contract between the parties did not cover all of the claims at issue, then Mendoza clearly would not have an adequate remedy at law. -8- claim for fraud because any statements allegedly made by Cederquist pertained to future, not present, conduct, and that fraud must related to a misrepresentation of a present fact. Soble v. Herman. 9 S.E.2d 459, 464 (Va. 1940) See (holding that "fraud must relate to a present or a pre-existing fact, and cannot ordinarily be predicated on unfulfilled promises or statements as to future events"). However, Mendoza has properly pled claims for fraud and misrepresentation by alleging that Edward Cederquist made promises while intending not to keep them. See Colonial Ford Truck Sales v. (Va. 1985) Schneider. 325 S.E.2d 91, 94 (holding that making a promise made with intent not to keep it is a misrepresentation of present fact and therefore actionable as fraud). Defendants next argue that the fraud counts are not pled with specificity. See Fed. Consultant 'Ena. Servs.. However, speaker R. Civ. in his response, (Edward Cederquist), the content specific forms of compensation), occurred. 9(b); Mortarino v. Inc.. 467 S.E.2d 778, as Mendoza states including dates, P. 782 (Va. 1996). he has alleged the (promises to provide and several specific occasions, on which the alleged misrepresentations He has therefore alleged fraud with the required particularity. The defendants also attack the plaintiff's allegations regarding the defendants' state of mind, which they claim are speculative and inconsistent with other facts alleged -9- in the First Amended Complaint. However, to dismiss the fraud claims on this ground would be inconsistent with the requirement that at this early stage, the truth of all facts alleged, and the existence of any fact that can be proved consistent with the allegations in the complaint, Finally, should be assumed. defendants argue that the fraud and misrepresentation claims are not actionable because they are based purely on the contractual relationship between the parties. Virginia law holds that "to avoid turning every breach of contract into a tort ... in order to recover in tort, the duty tortiously or negligently breached must be a common law duty, not one existing between the parties solely by virtue of the contract." (Va. 2007) however, Augusta Mutual Mason. 645 S.E.2d 290, constituting an inducement to the contract, 294 If, for recovery in tort as well as in contract. S.E.2d 682, on had a right to rely," such a misrepresentation is quoting George Robberecht Seafood. 255 v. a party to a contract makes a "false representation of a [a party] grounds Co. (internal quotation marks and citations omitted). material fact, which Ins. 683 (Va. Inc. v. Id. Maitland Bros. at 293, Co.. 1979). The above rule requires that the Motion to Dismiss be denied as to Count 4, 5, fraud in the inducement, intentional misrepresentation. but granted as to Count In Count 4, Mendoza has pled that Edward Cederquist made misrepresentations that induced -10- Mendoza into entering into an employment relationship with him. Such an allegation states a separate common law claim for fraud in the inducement apart from any breach of contract claim. City of Richmond v. (4th Cir. 1990) Madison Mamt. Group, Inc., See 918 F.2d 438, 447 (holding that plaintiffs stated a claim for fraud when they alleged that the defendants made promises certain type of pipe, with intent not to do so, to supply a and that these promises induced the plaintiff into entering into a contract); Tidewater Beverage Servs. (E.D. Va. 1995) v. Coca Cola Co.. (holding that plaintiffs 907 F. Supp. 943, 948 stated a claim for fraud when alleging that the defendant had induced the plaintiff to enter into a contract by falsely promising not to use a local bottler to service and install soda fountains); 645 S.E.2d at 293. In contrast, in Count 5, Augusta Mutual. Mendoza has alleged that the defendants made misrepresentions after the parties had already entered into an employment agreement, misrepresentations concerned the defendants' fulfill the very terms of the agreement. and that the intentions to Misrepresentations concerning a duty owed solely by virtue of a contract are not independently actionable as fraud. McDevitt St. Bovis. Inc.. See Richmond Metro. Auth. v. 507 S.E.2d 344, 347-48 (Va. 1998) (dismissing a claim for fraud where the complaint alleged that the defendant, who was already in a contract with the plaintiff, made misrepresentations when periodically signing certifications -11- to obtain payment under the contract). As such, Count 5 will be dismissed. IV. For the above reasons, Conclusion the defendant's Motion to Dismiss will be denied as to Counts 2, 5, 3, and 4, but granted as to Count by an Order to be issued with this opinion. Entered this Alexandria, lo day of May, 2009. Virginia -12-
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