Costa Precision v. Farris, et al.

2007 DNH 070

• Court: District Court, D. New Hampshire
• Decided: May 29, 2007
• Docket: 06-CV-332-SM
• Status: Published

Opinion

Costa Precision v . Farris, et a l . 06-CV-332-SM 05/29/07 UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

Costa Precision Manufacturing Corporation, Plaintiff

v. Civil N o . 06-cv-332-SM Opinion N o . 2007 DNH 070 Edward Farris; Farris Consulting; Matrix Aerospace, Inc., Defendants

O R D E R

Plaintiff Costa Precision Manufacturing Corporation (“Costa”

or “the Company”) brought this suit against Edward Farris

individually (“Farris”), Farris Consulting, and Matrix Aerospace,

Inc. (“Matrix”), alleging violations of the Computer Fraud and

Abuse Act, 18 U.S.C. § 1030 et seq., the Stored Communications

Act, 18 U.S.C. § 2791 et seq., and a number of discrete state

common law claims, all arising out of Farris’s prior employment

with Costa. Defendants have asserted various counterclaims

against plaintiff, alleging constructive discharge, interference

with advantageous business relationships, defamation, and abuse

of process. Before the court are plaintiff’s motion to dismiss

the counterclaims (document n o . 1 3 ) , and defendants’ motion to

amend its first counterclaim (document n o . 1 6 ) . The Legal Standard

A party may file an amended pleading once, as a matter of

right, prior to the filing of a responsive pleading, and

thereafter, only with permission of the court. See F E D . R . C I V .

P . 15(a); see also Steir v . Girl Scouts of the U S A , 383 F.3d 7 ,

12 (1st Cir. 2004). Leave to file an amended pleading is to be

“freely given when justice so requires,” F E D . R . C I V . P . 15(a),

unless the amendment “would be futile, or reward, inter alia,

undue or intended delay.” Resolution Trust Corp. v . Gold, 30

F.3d 2 5 1 , 253 (1st Cir. 1994) (citations omitted).

Where, as here, the motion to amend is brought before

discovery is complete, the court considers whether a proposed

amendment is futile by applying the standard applicable to

motions to dismiss. F E D . R . C I V . P . 12(b)(6); see Hatch v . Dep’t

for Children, 274 F.3d 1 2 , 19 (1st Cir. 2001) (explaining that a

proposed amended complaint is not futile so long as it “sets

forth a general scenario which, if proven, would entitle the

plaintiff to relief against the defendant on some cognizable

theory”); see also Glassman v . Computervision Corp., 90 F.3d 6 1 7 ,

623 (1st Cir. 1996).

2 A claim is subject to dismissal under F E D . R . C I V . P .

12(b)(6) when the plaintiff “fail[s] to state a claim upon which

relief can be granted.” The inquiry under Rule 12(b)(6) is

limited, focusing not on “whether a plaintiff will ultimately

prevail but whether the claimant is entitled to offer evidence to

support the claims.” Scheuer v . Rhodes, 416 U . S . 2 3 2 , 236 (1974).

All facts pled in the complaint are accepted as true and

inferences are drawn in the light most favorable to the

plaintiff. See, e.g., Citibank v . Grupo Cupey, Inc., 382 F.3d

2 9 , 31 (1st Cir. 2004) (quoting T A G / I C I B Servs., Inc. v . Pan Am.

Grain Co., 215 F.3d 1 7 2 , 175 (1st Cir. 2000)). But, claims

consisting of “bald assertions” or “unsupportable conclusions”

will be rejected. United States ex rel. Karvelas v . Melrose-

Wakefield Hosp., 360 F.3d 2 2 0 , 224 (1st Cir. 2004) (quoting

Arruda v . Sears, Roebuck & Co., 310 F.3d 1 3 , 18 (1st Cir. 2002)).

“ A district court may grant a 12(b)(6) motion to dismiss for

failure to state a claim upon which relief can be granted only if

‘it clearly appears, according to the facts alleged, that the

plaintiff cannot recover on any viable theory.’” Pomerleau v . W .

Springfield Pub. Sch., 362 F.3d 143, 145 (1st Cir. 2004) (quoting

Correa-Martinez v . Arrillaga-Belendez, 903 F.2d 4 9 , 52 (1st Cir.

1990)).

3 Background

The facts, taken from the pleadings and construed in the

light most favorable to Farris are as follows.

Costa, based in Claremont, New Hampshire, manufactures

complex molds and models for the aerospace and defense

industries. Farris began working for Costa in 1991 as a computer

programmer. In 1993 he was promoted to general manager and

assumed responsibility for the Company’s day-to-day operations.

Under Farris’s direction, Costa enjoyed considerable financial

success, which was shared with Farris in the form of

discretionary bonuses and ownership shares in the Company.

Although Farris officially reported to then Company president and

chief executive officer Edward Zielinski, Farris was subject to

very little direct supervision.

Farris often worked irregular hours at the Company, as he

would frequently work on various computer programming tasks well

into the evening, returning to work in the late morning of the

following day. Farris, however, operating under the name Farris

Consulting, frequently did programming work, and billed Costa

separately for, programming work. Farris Consulting invoices

went directly to Costa’s accounting staff for payment.

4 Although the timing is unclear from the record, at some

point during his employment with Costa, Farris founded Matrix,

which, like Costa, constructs models and molds for the aerospace

and defense industries. Matrix often handled Costa’s excess work

— that Costa allegedly was unable to accommodate. In doing s o ,

Matrix would occasionally use Costa’s quality inspection and

control equipment. In September of 2003, Costa entered into an

agreement with Matrix under the terms of which the Costa Pattern

Shop was moved into Matrix’s facilities. Subsequently, the two

companies occasionally shared staff and tools.

Costa also entered into a lease agreement with Farris’s

friend, John Welsh, for equipment that Costa required for its

production work. Although the lease persisted for four years,

when Costa became unable to make the required lease payments,

Farris moved the machine to Matrix’s facilities. Additionally,

Farris, and his friend Welch, were co-owners of Kerrville Co.,

Inc. (“Kerrville”), a holding company formed to facilitate the

joint ownership of an airplane. Costa, at Farris’s direction,

occasionally paid Kerrville for use of the airplane.

Sometime during Farris’s tenure as its general manager,

Costa began to suffer financially. In July of 2005, Zielinski

5 became ill. He was replaced by James Pelletier, a management

consultant, who was asked to analyze the company’s operations and

finances to determine the cause of the Company’s declining

performance. Nearly a year later, in May of 2006, Pelletier told

Farris that his involvement with Matrix was a problem, and that

Farris would have to sell or close Matrix to maintain his

employment with Costa. Pelletier also intimated that Costa would

fire Farris if he continued operating Matrix, and noting that

Farris would not want to have Pelletier as an enemy. Farris was

also told that he should consider his family and the possibility

that he might “lose everything” if he continued to operate

Matrix. Construing Pelletier’s statements as threats, Farris

left Costa.

In July and August of 2006, after Farris left Costa, he

accessed Costa’s proprietary computer systems to perform work for

Matrix customers, customers who had previously been Costa’s

customers. Matrix employs a number of former Costa employees,

and several other Costa employees are seeking positions with

Matrix.

Farris’s departure, subsequent defections of Costa employees

to Matrix, and other related conduct, led Costa to file this

6 suit, on September 7 , 2006. Count I alleges violations of the

Computer Fraud and Abuse Act, 18 U.S.C. § 1030, et seq., and

Count II alleges violations of the Stored Communications Act, 18

U.S.C. § 2701, et seq. The remaining counts1 allege a number of

state common law claims, including breach of the duty of loyalty

(Count I I I ) , unjust enrichment (Count I V ) , unfair and deceptive

trade practices (Count V ) , interference with advantageous

business relations (Count V I ) , defamation (Count V I I ) ,

destruction of property (Count VIII), and breach of contract

(Count X I ) . Costa seeks disgorgement of Farris’s and Matrix’s

profits (Count I X ) , o r , imposition of a constructive trust on

those profits (Count X ) . Costa also seeks to enjoin Farris and

Matrix from accessing Costa’s proprietary computer system (Count

X * ) , publicly making misrepresentations about Costa (Count X I * ) ,

and from continuing to compete with Costa (Count X I I ) .

As noted earlier, defendants have asserted counterclaims for

constructive [wrongful] discharge (Count I ) , interference with

Matrix’s advantageous business relationships (Count I I ) ,

1 An apparent typographical error in plaintiff’s complaint has resulted in two counts being numbered “X” and two counts being numbered “XI.” The court will refer to plaintiff’s second “Count X” (injunction) as “X*” and the second “XI” (injunction) as “XI*.”

7 defamation (Count I I I ) , and abuse of process (Count V ) .

Defendants also seek an injunction (Count I V ) to stop Costa from

making “improper statements” about Matrix, Farris, and this

litigation.

Discussion

Costa moves to dismiss the defendants’ counterclaims

pursuant to F E D . R . C I V . P . 12(b)(6). With respect to Count I ,

Costa asserts that the claim is facially deficient because the

defendants fail to plead each of the essential elements of a

constructive [wrongful] discharge claim. Costa argues that the

other claims are barred by the litigation privilege.

I. Count I

In response to Costa’s motion to dismiss, defendants have

moved to amend Count I to more fully articulate the elements of a

constructive [wrongful] discharge claim. Costa objects, arguing

that the proposed amended claim is futile. See Steir, 383 F.3d

at 12 (a court need not grant a motion to amend if the amended

pleading is futile). Because the standard applicable in

determining whether a proposed amendment is futile is the same as

that used to determine whether a claim should be dismissed, see

8 Hatch v . Dep’t for Children, 274 F.3d 1 2 , 19 (1st Cir. 2001), the

court considers both issues together.

“Constructive discharge occurs when an employer renders an

employee’s working conditions so difficult and intolerable that a

reasonable person would feel forced to resign.” Porter v . City

of Manchester, 151 N.H. 3 0 , 42 (2004) (citing Karch v . BayBank

FSB, 147 N.H. 525, 536 (2002)). But, “‘[r]elatively minor abuse

of an employee is not sufficient for a constructive discharge.’”

Id. (quoting 2 M . Rothstein et a l . , Employment Law § 8.7 at 258

(1999)). “‘Rather, the adverse working conditions must generally

be ongoing, repetitive, pervasive, and severe.” Id. (citation

omitted).

Farris asserts that Pelletier’s statements about Farris’s

continued involvement with Matrix were threatening and “motivated

by bad faith, retaliation and malice,” (Def.’s Amended Answer

1 0 ) , and, were the type of statements that would force a

reasonable person to resign. Farris further asserts that

“Pelletier made it clear to defendant that such conduct would be

ongoing, repetitive, and pervasive” (Def.’s Amended Answer 1 0 ) . 2

2 There is some irony to Farris’s constructive discharge claim, as it seems that Pelletier’s primary objective in making

9 Taking the facts set forth in his pleading as true, as is

required when considering a motion to dismiss, Farris has failed

to adequately plead the elements necessary to establish a viable

cause of action. First, and critically, there is no assertion

that the alleged “constructive discharge” was “wrongful” in any

legally redressable sense. Beyond that, the pleading falls short

in describing a constructive discharge. Farris describes only

one instance of allegedly abusive conduct and offers no

indication that similar conduct had occurred previously.

Moreover, although Farris alleges that he inferred that

Pelletier’s conduct would continue, nothing suggests that the

threatening conduct had, in fact, been ongoing, repetitive,

pervasive, or even severe.

Simply put, the proposed amended Count I fails to allege

that Pelletier’s conduct consisted of anything more than

commonplace, though perhaps socially objectionable, conduct that

is generally excluded from notions of “constructive discharge.”

Farris’s proposed amended Count I thus fails to state a cause of

the allegedly “threatening” statements was to keep Farris as an employee at Costa, by encouraging him to abandon his apparently competing involvement with Matrix.

10 action and i s , therefore, futile. Accordingly, Farris’s motion

to amend (document n o . 16) is necessarily denied.

Farris’s original, unamended Count I also fails to state a

claim because, like the proposed amended version, the allegations

do not describe a wrongful discharge, or breach of employment

contract, as the case may b e .

II. Counts II-V

Counts II-V of Farris’s counterclaims consist of one or two

sentences that describe, in conclusory fashion, the general

nature of each cause of action and a brief, generalized sketch of

facts giving rise to the assertions. In Count I I , Farris alleges

that Costa interfered with Matrix’s relationships with suppliers

and employees, but fails to describe facts which, if true, would

constitute redressable interference. Similarly, in Counts III

and IV, Farris asserts that Costa has defamed Matrix to potential

and current customers and employees, but does not identify

statements that might qualify as defamatory. Finally in Count V ,

Farris asserts that Costa filed its complaint in bad faith and

that it knew or should have known that many of its allegations

11 were untrue and frivolous.3 But, again, Farris offers no support

for the statement beyond the conclusory language of the pleading

itself.

Although the federal notice pleading standard requires only

“a short and plain statement of the claim showing the pleader is

entitled to relief,” F E D . R . C I V . P . 8(a)(2); see Aponte-Torres v .

Univ. of P . R . , 445 F.3d 5 0 , 55 (1st Cir. 2006), the court need

not credit “‘bald assertions, unsupportable conclusions,

periphrastic circumlocutions, and the like.’” Aponte-Torres, 445

F.3d at 55 (quoting Aulson v . Blanchard, 83 F.3d 1 , 3 (1st Cir.

1996)). In other words, the threshold for stating a claim under

the federal rules “may be low, but it is real – and it is the

plaintiff’s burden to take the step which brings his case safely

into the next phase of the litigation.” Gooley v . Mobil Oil

Corp., 851 F.2d 513, 514 (1st Cir. 1998).

3 It bears noting that although pleadings generally need not be accompanied by an affidavit, see F E D . R . C I V . P . 11(a), Costa’s pleading was, in fact, verified, and thus the factual allegations set forth are afforded the same weight as if contained in an affidavit. See Sheinkopf v . Stone, 927 F.2d 1259, 1262 (1st Cir. 1991) (explaining that a verified complaint is the functional equivalent of an affidavit to the extent that it satisfies the standards set forth in Rule 56(e)). Defendants argue that the allegations in plaintiffs’ pleading are untrue and frivolous, but do not identify which is which.

12 Farris’s counterclaims fall somewhat short of the minimum

pleading threshold. Accordingly, Costa’s motion to dismiss

defendants’ counterclaims is necessarily granted as to Counts II-

V.

Given the early stage of this litigation, and the absence of

prejudice to plaintiff, defendants should be afforded an

opportunity to reconsider the operative facts and candidly assess

whether counterclaims of sufficient legal merit exist, and if s o ,

an opportunity to fully plead them.

Conclusion

Defendants’ motion to amend first counterclaim (document n o .

16) is denied. Plaintiff’s motion to dismiss defendants’

counterclaims (document n o . 13) is granted, and defendants’

counterclaims are dismissed, but without prejudice to refiling an

amended answer asserting viable claims. The amended pleading

shall be filed within thirty (30) days of the date of this order,

or not at all.

13 SO ORDERED.

Steven J. McAuliffe ^Chief Judge

May 2 9 , 2007

cc: Marc R. Scheer, Esq. Wayne F. Dennison, Esq. Mark H . Puffer, Esq.