Opinion
CV 00-1468-AS
March 7, 2001
FINDINGS AND RECOMMENDATION
This action is before the court on defendants Adkisson and Navarre's ("the individual defendants") motion (#12) to dismiss, defendant Chrome's motion (#14) to dismiss, and defendant Chrome's motion (#16) to compel arbitration and stay proceedings. Because plaintiffs have failed to allege facts that might entitle them to relief on their intentional infliction of emotional distress claims, Chrome's motion (#14) to dismiss should be GRANTED. Because plaintiffs have failed to allege facts entitling them to relief on their fourth, sixth, eighth, ninth and tenth claims, the individual defendants' motion (#12) to dismiss should be GRANTED. Finally, because the parties signed an agreement to arbitrate all claims arising out of the employment relationship, and Oregon law provides for a stay in such a situation, Chrome's motion (#16) to compel arbitration and stay proceedings should be GRANTED.
BACKGROUND
Five former officers of defendant Chrome Data Corporation ("Chrome"), an Oregon company providing automotive data and software for selling vehicles on-line, bring this action against Chrome, Robert Navarre, the Chief Executive Officer of Chrome, and James Adkisson, Chrome's President and a member of the Board of Directors. Plaintiffs make the following factual allegations: a female Chrome employee reported to Garbayo she was being sexually harassed by Mark Boyd. Garbayo asked Wasserman and Brandon to assist in his investigation. Garbayo and Wasserman concluded Boyd had sexually harassed the complainant, and Boyd should therefore be terminated. Garbayo and Wasserman further investigated another employee, Lawson, and determined Lawson should be terminated for improper conduct. Adkisson agreed Lawson would be terminated. Plaintiffs further allege Adkisson then instructed Wasserman to stop all participation in preparation of a financial offering to potential investors, not to terminate Boyd or Lawson, and to either resign or take his concern directly to the Board of Directors. Plaintiffs allege Garbayo, Wasserman, Brandon, Garcia, and Fahrenkopf met with the Board to report their concerns. Plaintiffs allege Navarre accused them of falsification of revenues, in front of other employees, stating he "won't go to jail for" them. Finally, plaintiffs allege Chrome, with Adkisson and Navarre's authorization, terminated Wasserman, Garbayo, Fahrenkopf, Brandon, and Garcia.
Plaintiffs allege all defendants are liable for violation of 42 U.S.C. § 2000 et seq. ("Title VII") and 29 U.S.C. § 621 et seq. ("the ADEA"), wrongful termination, intentional infliction of emotional distress, and violation of O.R.S. § 659.030. Plaintiffs further allege defendants Navarre and Adkisson are liable for aiding and abetting sexual harassment and age discrimination in violation of state law, breach of fiduciary duties, and tortious interference.
Plaintiffs have apparently agreed to withdraw their first, second, third, fifth, and seventh claims against the individual defendants. Plaintiffs have also agreed to withdraw their requests for compensatory and punitive damages from their fifth and seventh claims against the individual defendants. Plaintiffs' first, second, third, fourth, fifth, and seventh claims against Chrome, and fourth, sixth, eighth, ninth, and tenth claims against the individual defendants, have not been withdrawn.
DISCUSSION
Motions To Dismiss
Pursuant to Fed.R.Civ.P. 12(b), a complaint may be dismissed if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief." Tanner v. Heise, 879 F.2d 572, 576 (9th Cir. 1989) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). In making this determination, the court accepts all allegations of material fact as true and construes the allegations in the light most favorable to the nonmoving party. Id.
Defendant Chrome's Motion (#14) to Dismiss
Chrome moves to dismiss plaintiffs' fourth claim for relief for intentional infliction of emotional distress ("IIED"). To bring an IIED claim, a plaintiff must plead and prove that the defendant's acts constituted an extraordinary transgression of the bounds of socially tolerable conduct. McGanty v. Staudenraus, 321 Or. 532, 544 (1995).
Socially intolerable conduct is that which is "outrageous in the extreme." Watte v. Edgar Maeyens, 112 Or. App. 234, 239 (1992). In Watte, the court held the employer's conduct during the course of discharging former employees in directing them to hold hands, demanding they surrender their keys, pacing tensely in front of them with clenched hands, accusing them of being liars and saboteurs, terminating employment, refusing to explain conduct, and rashly ordering employees from the premises did not rise to the level of socially intolerable conduct and was not actionable as IIED.
In a footnote, the Watte court addressed their decision in Woods v. First American Title Ins. Co., 102 Or. App. 343 (1990). In Woods, the court found the plaintiff had stated a claim for IIED where the plaintiff alleged her employer accused her of being a liar, a thief, and a fraud, in front of a third person, knowing those accusations were false, and further persuaded a police officer to harass her on the basis of those accusations. The Watte court noted while they found plaintiff had stated a claim for IIED in Woods, they declined to do so in Watte, where the plaintiffs did not allege they were falsely accused of criminal or fraudulent conduct, nor did they allege defendant subjected them to an unwarranted criminal investigation.
Plaintiffs have alleged Navarre accused them of falsification of revenues, and implied they had engaged in criminal conduct, in front of co-workers. While the plaintiff in Woods made a similar allegation, it was coupled with the alleged act of persuading an officer to harass the plaintiff. The allegations in this action are akin to the plaintiffs' allegations in Watte. While Navarre's alleged conduct may have been rude or inappropriate, it was not coupled with action as in Woods, and was less outrageous than the conduct found not actionable as IIED in Watte. Plaintiffs have failed to allege facts sufficient to overcome Chrome's motion to dismiss.
Defendants Navarre and Adkisson's Motion (#12) to Dismiss
The individual defendants move to dismiss plaintiffs' fourth, sixth, eighth, ninth and tenth claims for relief.
A. Intentional infliction of emotional distress (plaintiffs' fourth claim for relief)
As discussed above, plaintiffs have alleged "defendants intended to cause and did cause plaintiffs severe emotional distress." (Complaint ¶ 47). Plaintiffs have further alleged Navarre accused plaintiffs, in front of other employees, of falsification of revenues, and implied plaintiffs had engaged in criminal conduct. (Complaint ¶ 25). As further discussed above, plaintiffs have failed to allege facts upon which a claim for intentional infliction of emotional distress might be proven against the defendants.
B. O.R.S. § 659.030 claims (plaintiffs' sixth and eighth claims for relief)
Plaintiffs bring claims against the individual defendants for violation of O.R.S. § 659.030, seeking lost back and front pay, and lost Chrome ownership interests. O.R.S. § 659.121(1) restricts the remedies available for violations of O.R.S. § 659.030 to injunctive relief and such other equitable relief as may be appropriate, including reinstatement or the hiring of employees with or without back pay. Logan v. West Coast Benson Hotel, 981 F. Supp. 1301 (D.Or. 1997). The equitable remedies of reinstatement and back pay are available only against the employer. Id. Plaintiffs seek equitable relief against the individual defendants. As discussed in Logan, an individual defendant is not in a position to give a plaintiff equitable relief such as reinstatement.
Plaintiffs argue Schram v. Albertsons, Inc., 146 Or. App. 415 (Or.App. 1997), allows for back pay as a claim for equitable relief because of the relationship between back pay and reinstatement. While the Schram court held front and back pay were not available under the circumstances, plaintiffs argue because the factual circumstances in the present action are different, such relief may be available. Plaintiffs are mistaken. In Schram, the court declined to hold the employees liable for front or back pay because the employer benefitted from not having to pay the plaintiff wages. Given the theory of restitution, upon which equitable relief in the context of O.R.S. § 659.121(1) is based, the court deemed the appropriate remedy to be against the employer, not the employees. Similarly, here Chrome benefitted from not having to pay plaintiffs' wages. While in Schram the employees were lower level supervisors than the individual defendants here, it does not follow that the individual defendants, as high level supervisors, benefitted in such a manner from plaintiffs' termination as to warrant an award of back pay or front pay against them. Plaintiffs have failed to allege facts upon which they might prevail against the individual defendants in their sixth and eighth claims.
C. breach of fiduciary duty claim (plaintiffs' ninth claim for relief)
In plaintiffs' ninth claim for relief, plaintiffs allege the individual defendants owed plaintiffs fiduciary duties as owners of options and warrants in Chrome. Plaintiffs further allege by terminating plaintiffs, the individual defendants terminated plaintiffs' rights to own options and warrants, which directly benefitted the individual defendants' percentage of ownership in Chrome. (Complaint ¶ 64-66).
Defendants first argue plaintiffs lack standing to bring this claim because plaintiffs have failed to allege they were owners of Chrome stock at the time of the individual defendants' alleged breaches of their fiduciary duties. Generally, Oregon law provides a shareholder must own stock at the time of the alleged wrong, and retain ownership throughout the litigation, in order to bring a derivative suit. Noakes v. Schoenborn, 116 Or. App. 464 (1992). While Oregon courts have not specifically addressed this issue, other courts have held a director does not owe a fiduciary duty to a holder of options. Powers v. British Vita, 969 F. Supp. 4, 5-6 (S.D.N.Y. 1997). Other courts have held "a mere expectancy interest" such as that held by an owner of options or warrants "does not create a fiduciary relationship." In re Cendant Corporation Securities Litigation, 76 F. Supp.2d 539, 549 (D.N.J. 1999). Moreover, "for one to be owed a fiduciary obligation an existing property right or equitable interest supporting such a claim must exist." Simons v. Cogan, 549 A.2d 300, 303-7 (Del. 1990).
In contrast, plaintiffs direct the court to other decisions holding a warrant confers the status of shareholder entitling its holder to standing. Hoff v. Sprayregan, 52 FRD 243, 247 (S.D.N Y 1971); Entel v. Guilden, 223 F. Supp. 129, 132-33 (S.D.N.Y. 1963). In Hoff and Entel, the courts carved out an exception to the general rule, and found the plaintiffs had standing based on their status as holders of warrants. However, these cases are factually distinguishable. In Hoff, the plaintiffs had standing because they paid $22,000 for the privilege of owning the options, and the court held "it is plain that their interest in the stock . . . was real and far weightier than that of a shareholder of, say, 100 shares who would unquestionably be entitled to maintain the action." Hoff, 52 FRD at 247. Here, plaintiffs lack such an ownership interest, as they, unlike the Hoff plaintiffs, have not paid for the options and warrants, but received them incidental to their employment, and the options and warrants had not vested. In Entel, the warrants were found to be an exception because they were traded on the open market, and were used by the company to raise capital. Here, plaintiffs ownership interests are not publicly traded, and thus are not comparable to the ownership interest deserving standing in Entel. Plaintiffs, as holders of non-vested options and warrants, but not stock, lack standing to bring a claim for breach of fiduciary duty under Oregon law.
Tortious Interference Claim (plaintiffs' tenth claim for relief)
To state a claim for intentional interference with economic relations, a plaintiff must allege each of the following elements: (1) the existence of a professional or business relationship; (2) intentional interference with that relationship; (3) by a third party; (4) accomplished through improper means for an improper purpose; (5) a causal effect between the interference and damage to the economic relationship; and (6) damages. McGanty, 321 Or. at 544. The individual defendants move to dismiss this claim because they were acting as Chrome's agents, and therefore were not third parties to plaintiffs' employment relationships with Chrome. Plaintiffs argue defendants can be held liable because they acted against the best interests of their employer or solely for their own benefit.
A managing officer of a corporation is subject to liability for intentional interference in the same way as any other corporate employee if the officer acts without any purpose to serve the employer. Boers v. Payline Systems, et al., 141 Or. App. 238, 243 (1996). In Boers, the plaintiff alleged the corporate agent fired the plaintiff "for the improper purpose to retaliate against plaintiff." Id. The court held this allegation is broad enough to admit evidence the corporate agent had acted for personal purposes and had no motivation to serve the employer. Id. at 244. However, where a supervisor acts, in part, out of personal animus toward an employee when terminating the employee's employment, this conduct is of no legal consequence. Sims v. Software Solutions Unlimited, Inc., 148 Or. App. 358, 365 (1997).
Plaintiffs allege "Chrome, through Adkisson, Navarre, and Mark Hackett, terminated Wasserman. That same day, Hackett terminated Garbayo. On March 10, 2000, Hackett terminated Fahrenkopf, Brandon, and Garcia. All terminations were with the authorization of Navarre and Adkisson." (Complaint ¶ 27). Plaintiffs further acknowledged at oral argument that defendants were acting, at least in part, in the scope of their employment. Plaintiffs argue their claim for intentional interference should not be dismissed, however, because a jury might disbelieve this allegation.
In McGanty, the plaintiff failed to allege the employee defendant had acted outside the scope of his employment when he allegedly committed the acts that interfered with the plaintiff's economic relations with the employer. Accordingly, the court found the plaintiff failed to allege facts by which the defendant could be held liable for intentional interference with the economic relations between the plaintiff and the employer. In Sims, the court noted if the actor's actions are within the scope of his authority and are undertaken at least in part to further the best interests of the employer, it is immaterial that the actor has additional motives. Sims, 148 Or.App. at 364-5. In contrast, when the actor acts against the best interests of the employer or solely for his own benefit he could be held liable in tort for the harm done to the other contracting party. Id.
Plaintiffs allege the individual defendants acted to benefit themselves, in violation of their fiduciary duties to Chrome, in terminating plaintiffs. However, as stated above, plaintiffs also agree defendants were acting in part in the scope of their employment. Plaintiffs fail to allege defendants acted against the best interests of Chrome in terminating plaintiffs. Accordingly, plaintiffs fail to allege facts upon which they could prevail in demonstrating the individual defendants were acting to benefit solely their own interests, and could therefore be held liable for tortious interference. Accordingly, Chrome's motion to dismiss claim four should be GRANTED. Moreover, the individual defendants' motions to dismiss should be GRANTED. Plaintiffs' fourth, sixth, eighth, ninth, and tenth claims should be dismissed.
Motion (#16) to Compel Arbitration and Stay
Arbitration
Chrome moves for an order compelling arbitration of plaintiffs' claims pursuant to each plaintiff's alleged agreement with Chrome to resolve all disputes arising in connection with his employment with or termination from Chrome in accordance with Chrome's Alternative Dispute Resolution ("ADR") policy. Defendant Chrome further requests the court stay the claims not subject to arbitration, plaintiffs' first and fifth claims, pending the outcome of the arbitration. Plaintiffs respond with three arguments: (1) plaintiffs cannot be considered to have waived their rights as provided in the ADR policy; (2) the ADR provision is unconscionable; and (3) the arbitration provisions are unenforceable as against public policy.
Plaintiffs do not dispute that each signed a form prepared by Chrome in which they agreed to mediate and arbitrate employment disputes pursuant to Chrome's ADR policy. Plaintiffs dispute the enforceability of the agreement. Under the Oregon Arbitration Act ("OAA"), agreements to arbitrate are valid, irrevocable, and enforceable, and parties have the right to compel arbitration, and to have court proceedings abated pending the outcome of the arbitration. O.R.S. §§ 36.300, 36.305, 36.310. The OAA further provides that any doubts be resolved in favor of arbitration. Snow Mountain Pine, Ltd. v. Tecton Laminates Corp., 126 Or. App. 523, 529 (Or.App. 1994). A federal court can enforce an agreement to arbitrate under the OAA or under Oregon common law, even if the FAA does not apply, although the strong federal presumption in favor of arbitration does not apply. See Chapel v. Laboratory Corporation of America, 232 F.3d 719, 725 (9th Cir. 2000).
The ADR policy states "the enforceability . . . of this policy shall be subject to arbitration, to the extent permitted by law." As plaintiffs appear to concede the existence of the ADR policy, and their acquiescence to it, the question is one of enforceability. Because the agreement specifically provides enforceability of the agreement is subject to arbitration, the question is properly for the arbitrators. See United Brotherhood v. Desert Palace, 94 F.3d 1308 (9th Cir. 1996); Bush v. Paragon Property, Inc., 165 Or. App. 700 (2000) (Wollheim, J., concurring) (noting similarities between FAA and OAA).
Even if enforceability weren't a question for the arbitrators, the agreement appears to be enforceable. Despite plaintiffs' affidavits in opposition to Chrome's motion, plaintiffs' business experience indicates they knowingly entered into the agreement, and the contract is not one of adhesion. Further, the ADR provision is conscionable, as the plaintiffs were experienced in business, and of legal age to enter into such an agreement. It is difficult to imagine plaintiffs, as experienced in business, would have failed to realize they were relinquishing their right to a jury trial in agreeing to arbitration. Additionally, plaintiffs have failed to show the terms of the agreement are oppressive.
Finally, it appears the arbitration provisions are consistent with sound public policy, as the agreement provides it shall be construed consistent with the law. Plaintiffs' second, third, fourth, and seventh claims against Chrome should be arbitrated.
Individual Defendants
The next inquiry is whether the claims against the individual defendants are likewise arbitrable. An agent for a party to the agreement can have standing to compel arbitration. Britton v. Co-op Banking Group, 4 F.3d 742 (9th Cir. 1993). For an agent to have such standing, the allegations must arise out of the contract or be covered by the contract. Id. Here, the allegations against the individual defendants arose out of the employment relationship, the subject covered by the arbitration agreement. Accordingly, the individual defendants have standing to compel arbitration, and the claims against them should be arbitrated with the claims to be arbitrated against Chrome.
Stay
The final inquiry is whether to stay the remainder of this action pending the outcome of the arbitration. O.R.S. § 36.315 provides courts may stay actions arising out of disputes, where some of the issues are subject to an arbitration agreement. Accordingly, this action should be stayed pending the outcome of the arbitration.
CONCLUSION
For the reasons stated herein, defendant Chrome's motion (#14) to dismiss should be GRANTED; the individual defendants' motion (#12) to dismiss should be GRANTED; and defendant Chrome's motion (#16) to compel arbitration and stay should be GRANTED. Accordingly, plaintiffs' fourth, sixth, eighth, ninth and tenth claims for relief should be DISMISSED. Plaintiffs' second, third, and seventh claims should be ARBITRATED, according to the terms of the arbitration agreement. Plaintiffs' first and fifth claims should be STAYED, pending resolution of the arbitration.
SCHEDULING ORDER
Objections to these Findings and Recommendation(s), if any, are due March 23, 2001. If no objections are filed, the Findings and Recommendation(s) will be referred to a district court judge and go under advisement on that date.
If objections are filed, the response is due no later than April 9, 2001. When the response is due or filed, whichever date is earlier, the Findings and Recommendation(s) will be referred to a district court judge and go under advisement.