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Hall v. Family YMCA of Greater August

United States District Court, D. South Carolina, Aiken Division

July 25, 2017

Shadie Hall, Plaintiff,
v.
Family YMCA of Greater August d/b/a YMCA Child Development Academy, LLC, Defendant.

          ORDER AND OPINION

         Plaintiff Shadie Hall (“Plaintiff”) filed an action alleging claims for breach of contract and breach of contract with fraudulent intent in the Court of Common Pleas for Aiken County against her former employer Defendant Family YMCA of Greater Augusta, doing business as YMCA Child Development Academy, LLC (“Defendant”).[1] (ECF No. 1-1.) Asserting the court's diversity jurisdiction under 28 U.S.C. § 1332, Defendant removed the action to this court (ECF No. 1) and, thereafter, filed, pursuant to Fed.R.Civ.P. 12(b)(6), a motion to dismiss Plaintiff's complaint for failing to state a claim for which the court could grant relief (ECF No. 7). For the reasons that follow, the court DENIES Defendant's Rule 12(b)(6) motion to dismiss.

         I. RELEVANT FACTUAL AND PROCEDURAL BACKGROUND

         Plaintiff filed her complaint in state court on November 29, 2016, (ECF No. 1-1 at 16) and, in it, alleges the following facts. Plaintiff worked for Aiken-Barnwell Community Action Agency, Inc. (“ABCAA”) from 2005 to August 16, 2015, as the director of ABCAA's early care and education program and its Head Start program. (Id. at 7.) On August 17, 2015, Plaintiff was “transferred” to work for Defendant in the role of director of its Head Start program, after Defendant began receiving the grant that had previously funded ABCAA. (Id.) Under the transfer, “all policies that governed ABCAA would remain intact and would govern Defendant's workplace” and its employees, including Plaintiff. (Id.) As part of her duties, Plaintiff was to ensure compliance with all applicable federal and state regulations and guidelines in the implementation of the Head Start program. (Id. at 8.)

         During the course of her roughly four-month employment with Defendant, Plaintiff observed Defendant failing to comply with applicable safety and other regulations and reported these failures to her supervisors. (See Id. at 8-10). She continuously told her supervisors that playground and facility conditions were unsafe and violated regulations, that insecticides were required to be used on playgrounds and facilities, that Defendant's buses required registration cards, and that staff were required to undergo annual training from a state agency. (Id.) During the course of her employment, Defendant failed to provide Plaintiff with a professional development plan, even though Defendant is required to provide such a plan to all employees who are compensated through Head Start funding. (Id. at 10.) “Against company policy, ” Defendant also failed to provide Plaintiff a job description until November 6, 2015. (Id.)

         Of particular note for this order, Defendant began to institute a policy of requesting and reviewing employees' driving records, and a poor driving record disclosed by the review would negatively affect an employee's employment with Defendant. (Id. at 8-9.) Plaintiff believed that Defendant's newly instituted policy was not permitted because, “under the transfer, ” “Defendant was to abide by the policies and procedures of ABCAA.” (Id. at 9.) When Plaintiff requested information on this new policy in October 2015, Defendant, in retaliation, moved Plaintiff to its Augusta office, even though the employees she supervised were in Aiken. (Id. at 9-10.) After reviewing the driving record of a certain employee, Nadia Jones, Defendant decided to terminate Jones because of her poor driving record. (Id. at 10.) When Defendant requested that Plaintiff sign Jones' termination letter, Plaintiff refused to do so “because Defendant failed to follow employment policies that required Defendant to seek approval of any termination from the Policy Council according to Head Start Personnel Policies & Procedures, ” which Plaintiff describes as the “governing termination policy.” (Id.) In retaliation for her informing Defendant of the governing termination policy and for her refusal to sign Jones' termination letter, Defendant began to assign Plaintiff frivolous tasks or tasks that could not be completed in the time Defendant allotted. (Id.)

         On November 6, 2015, Defendant “wrote Plaintiff up alleging that Plaintiff had failed to perform designated assignments.” (Id.) Plaintiff alleges that the write-up was a pretext and was in retaliation for her “performing her job under the governance of the ABCAA policies, ” and, “knowing that she had performed . . . her job . . . under the governing policies, ” Plaintiff refused to sign the write-up when it was presented to her and, instead, “voiced her concerns about being written up.” (Id.) On November 19, 2015, the Policy Council convened a meeting, to which Plaintiff was invited. (Id. at 11.) At the meeting, Defendant informed Plaintiff that her services were no longer needed and that she was being replaced because of alleged negligence, failure to follow instructions, and deliberate non-performance of work. (Id.) Defendant's chief executive officer told Plaintiff that she could choose to resign, in which case she would retain temporary benefits and receive a good reference, or to be terminated, in which case no benefits or good reference would be provided. (Id.) “Plaintiff did not feel as if she was given adequate opportunity to rebut the allegations” but “informed the Council that she had followed Defendant's policies and procedures.” (Id.) Plaintiff did not resign, and Defendant presented her a termination letter effective November 19, 2015. (Id.)

         Based on the allegations in her complaint, Plaintiff asserts two claims against Defendant. In the first claim for breach of contract, Plaintiff alleges that she entered into an employment contract with Defendant, in which she agreed to perform her job duties in exchange for, among other things, “Defendant's guarantees that . . . she would be protected from discrimination.” (Id. at 12.) Plaintiff alleges that “Defendant maintains an employment handbook and its own policies and procedures” and that Plaintiff relied on the promises contained in Defendant's handbook and Defendant's policies and procedures.” (Id.) She further alleges that “Defendant breached its employment contract with Plaintiff . . . by failing to protect Plaintiff from the retaliatory acts of Defendant's managers after Plaintiff reported safety violations” and by “failing to follow the review plan it developed to improve Plaintiff's work performance.” (Id. at 12-13.)

         In her second claim for breach of contract with fraudulent intent, Plaintiff re-alleges the same grounds for breach that she alleged in her first claim. (See Id. at 13-14.) In addition, Plaintiff alleges that Defendant breached the terms of the employment contract “by reason of an intentional design on its part to defraud Plaintiff of her employment.” (Id. at 14.) She further alleges that she has been maligned and that “Defendant acted in a malicious, deliberate, intentional way, and with a deliberate indifference to the rights of Plaintiff.” (Id.) Plaintiff asserts that “Defendant's continuance of harassment and retaliatory acts towards Plaintiff did not comply with the terms of the employment contract” and that “Defendant sought out and fraudulently breached the agreement . . . by deliberately refusing to follow its own anti-discrimination and anti-harassment policies.” (Id.)

         Defendant removed the action to this court on February 3, 2017, (ECF No. 1) and filed the instant Rule 12(b)(6) motion to dismiss on February 24, 2017 (ECF No. 7). In its motion and subsequent briefing, Defendant argues that Plaintiff's complaint fails to sufficiently allege the existence of a contract that altered her at-will employment status, that the handbook to which Plaintiff refers in her complaint, as a matter of law, does not amount to a contract that altered her at-will employment status, and that Plaintiff's complaint fails to sufficiently allege that Defendant engaged in fraudulent activity in the alleged breach. (See ECF Nos. 7, 7-1, 12.) Plaintiff responds that she has alleged sufficient factual matter to establish the existence of an employment contract and Defendant's fraudulent activity in breaching it, and Plaintiff challenges Defendant's attempt to have the court consider an employee handbook that it attaches to its motion to dismiss. (See ECF No. 11.) Having received the parties' briefing and oral argument (see ECF Nos. 7-1, 11, 12, 15), Defendant's motion to dismiss is ripe for disposition.

         II. LEGAL STANDARD

         A Rule 12(b)(6) motion for failure to state a claim upon which relief can be granted “challenges the legal sufficiency of a complaint.” Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir. 2009) (citations omitted); see also Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992) (“A motion to dismiss under Rule 12(b)(6) . . . does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.”). To be legally sufficient a pleading must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). A Rule 12(b)(6) motion “should not be granted unless it appears certain that the plaintiff can prove no set of facts which would support its claim and would entitle it to relief.” Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993). When considering a Rule 12(b)(6) motion, the court should accept as true all well-pleaded allegations and should view the complaint in a light most favorable to the plaintiff. Ostrzenski v. Seigel, 177 F.3d 245, 251 (4th Cir. 1999); Mylan Labs., 7 F.3d at 1134. “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility 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).

         III. ANALYSIS

         Defendant's arguments for dismissal are (A) that the complaint fails to sufficiently allege the existence of a contract that altered Plaintiff's at-will employment status; (B) that the employee handbook on which Plaintiff's complaint relies, as a matter of law, does not create a contract that altered Plaintiff's at-will employment status; and (C) that the complaint fails to sufficiently allege that Defendant engaged in fraudulent activity in breaching the contract. The court addresses each of these arguments in turn.

         A. Existence of a contract altering at-will employment status

         “South Carolina[2] has long recognized the doctrine of employment at-will.” Brailsford v. Fresenius Med. Ctr. CAN Kidney Ctrs., LLC, No. 2:15-cv-00239-DCN, 2015 WL 4459032, at *3 (D.S.C. July 21, 2015) (citing Mathis v. Brown & Brown of S.C., Inc., 698 S.E.2d 773, 778 (S.C. 2010)); accord Weaver v. John Lucas Tree Expert Co., No. 2:13-cv-01698-PMD, 2013 WL 5587854, at *4 (D.S.C. Oct. 10, 2013). “Under the doctrine of at-will employment, an ‘at-will employee may be terminated at any time for any reason or for no reason, with or without cause.'” Weaver, 2013 WL 5587854, at *4 (quoting Legette v. Nucor Corp., 2:12-cv-1020-PMD, 2012 WL 3029650, at *3 (D.S.C. July 25, 2012)) (citing King v. Marriott Int'l, Inc., 520 F.Supp.2d 748, 755 (D.S.C. 2007); Barron v. Labor Finders of S.C., 713 S.E.2d 634, 636 (S.C. 2011)). “‘Of course, an employer and employee may choose to contractually alter the general rule of employment at-will and restrict their freedom to discharge without cause or to resign with impunity.'” Brailsford, 2015 WL 4459032, at *3 (quoting Prescott v. Farmers Tel. Co-op., Inc., 516 S.E.2d 923, 925 (S.C. 1999)). “Because employment is presumed to be at-will, in order to survive a motion to dismiss on a claim for breach of contract of employment, a plaintiff must plead sufficient factual allegations to establish the existence of an employment contract beyond the at-will relationship.” Id. (citing Weaver, 2013 WL 5587854, at *4). Thus, to assess a claim for breach of contract, “it is first necessary to determine whether a contract was formed, ” as “[i]t is axiomatic that to recover under a theory of breach of contract, a valid contract must have existed between the parties.” Weaver, 2013 WL 5587854, at *5 (citing, inter alia, Fung Lin Wah Enters. Ltd. v. E. Bay Imp. Co., 465 F.Supp.2d 536, 542-43 (D.S.C. 2006); Tidewater Supply Co. v. Indus. Elec. Co., 171 S.E.2d 607, 608 (S.C. 1969)); accord Brailsford, 2015 WL 4459032, at *3.

         Contracts will be either bilateral or unilateral in nature, and, in the employment context where no formal written agreement between the employer and employee appears to exist, [3] the contract, if any, is likely unilateral, meaning that, in response to the employer's offered promises, the employer accepts, not by making a reciprocal promise, but by commencing performance. See Weaver, 2013 WL 5587854, at *5 (citing Sauner v. Pub. Serv. Auth. of S.C., 581 S.E.2d 161, 165-66 (S.C. 2003). Prescott, 516 S.E.2d at 926; Small v. Springs Indus., Inc., 357 S.E.2d 452, 454 (S.C. 1987); Int'l Shoe Co. v. Herndon, 133 S.E. 202, 203 (S.C. 1926)). Under South Carolina law, a unilateral employment contract exists when the employer makes a specific offer, the offer is communicated to the employee, and the employee commences performance of employment-related duties in reliance on the offer. Id. at *5-6 (citing Sauner, 581 S.E.2d at 165-66; Prescott, 516 S.E.2d at 926; 82 Am. Jur. 2d Wrongful Discharge § 84 (1992)). In addition, “[t]o alter an employee's at-will status under South Carolina law, a contract . . . must limit either the duration of the employment or the employer's right to terminate the employee.” Id. at *6 (citing Wadford v. Hartford Fire Ins. Co., No. 3:87-2872-15, 1988 WL 492127, at *4 (D.S.C. Aug. 11, 1988); Lord v. Kimberly-Clark Corp., 827 F.Supp.2d 598, 602-05 (D.S.C. 2011)). “In sum, to survive [a motion to dismiss] with respect to [a] breach of contract claim, [a plaintiff-employee] needs to have set forth sufficient factual allegations in [her c]omplaint to state a facially plausible claim that the [p]arties entered into a contract with terms of employment that limited the duration of the relationship or the right of termination or both.” Id. (citing Battle v. Nikanth, LLC, No. 2:13-543-PMD, 2013 WL 4874976, at *5 (D.S.C. Sept. 11, 2013)); accord Brailsford, 2015 WL 4459032, at *4.

         “‘An employee handbook may create a contract altering an at-will arrangement.'” Brailsford, 2015 WL 4459032, at *3 (brackets omitted) (emphasis added in Brailsford) (quoting Nelson v. Charleston Cnty. Parks & Recreation Comm'n, 605 S.E.2d 744, 747 (S.C. Ct. App. 2004)). “A handbook forms an employment contract when: ‘(1) the handbook provision(s) and procedure(s) in question apply to the employee, (2) the handbook sets out procedures binding on the employer, and (3) the handbook does not contain a conspicuous and appropriate disclaimer.'” Id. (quoting Grant v. Mount Vernon Mills, Inc., 634 S.E.2d 15, 20 (S.C. Ct. App. 2006)). “In order for a handbook to alter an employee's at-will status and create an employment contract, the employer must ‘phrase the document's language in mandatory terms giving rise to a promise, an expectation and a benefit to an employee, '” id. at *4 (brackets omitted) (quoting Nelson, 605 S.E.2d at 747) (citing Hessenthaler v. Tri-Cnty. Sister Help, Inc., 616 S.E.2d 694, 698 (S.C. 2005); Grant, 634 S.E.2d at 20), because “‘[w]hen definite and mandatory, such [language] impose[s] a limitation on the employer's right to terminate an employee at any time, for any reason.'” id. (citing Grant, 634 S.E.2d at 20). “‘When the evidence conflicts or is capable of more than one inference, the issue of whether an employee handbook constitutes a contract should be submitted to the jury; however, a court should intervene to resolve the handbook issue as a matter of law if the handbook statements and the disclaimer, taken together, establish beyond any doubt that an enforceable promise either does or does not exist.'” Id. (brackets and ellipsis omitted) (quoting Grant, 634 S.E.2d at 20).

         Here, Defendant argues that, under Twombly and Iqbal, the complaint contains insufficient factual allegations establishing the existence of an employment contract between Defendant and Plaintiff that altered the default at-will employment status. (See ECF No. 7-1 at 3-5; ECF No. 12 at 1-2.) However, Defendant does not appear to argue that Plaintiff has failed to sufficiently plead the existence of a unilateral employment contract. More specifically, Defendant does not appear to argue that Plaintiff's complaint fails to plead that Defendant made a specific offer of employment to Plaintiff, that the offer was communicated to Plaintiff, or that Plaintiff began to perform job-related duties for Defendant in reliance on the offer. In fact, Defendant's summary of the complaint's allegations seems to confirm that it sufficiently pled the existence of a unilateral contract. (See ECF No. 7-1 at 2 (“Defendant took over [ABCAA] and inherited Plaintiff as an employee. Plaintiff was hired by and began working for Defendant as the Head Start Director that same day.” (internal citations omitted)).) In any event, the court concludes that Plaintiff's complaint sufficiently pleads the elements of a unilateral employment contract. The complaint states that Plaintiff was “transferred” from ABCAA to Defendant as a result of Defendant winning the grant that had previously been awarded to ABCAA and that as part of the transfer, polices that had governed ABCAA would continue to govern the former employees of ABCAA. (ECF No. 1-1 at 7.) Plaintiff further alleges that she began working for Defendant after the transfer occurred. (Id. at 8.) Viewing these factual allegations in the light most favorable to Plaintiff, the court has no trouble determining that the “transfer” constituted an offer by Defendant for Plaintiff to continue to perform duties similar to (if not the same as) those that she previously been assigned when she was employed by ABCAA, that this offer was communicated to Plaintiff, and that Plaintiff accepted the offer by commencing performance of those duties in reliance on Defendant's offer, including its promise to continue the policies that had governed ABCAA.

         The real thrust of Defendant's argument is not that Plaintiff has failed to allege the existence of a unilateral contract but, instead, that Plaintiff has failed to sufficiently allege that the contract altered the default at-will employment status under South Carolina law. (See ECF No. 7-1 at 4 (“What Plaintiff does not allege . . . is that the handbook or the[] ‘unidentified' policies and procedures upon which she relies altered her status as an at-will employee.”); id. (“Plaintiff has not . . . allege[d] the existence of any contract of employment that altered her at-will employee status or limited Defendant's ability to terminate her for any reason, at any time.”).) The court disagrees. The complaint alleges that, after ABCAA's employees were “transferred” to Defendant, “all policies that governed ABCAA would remain intact and would govern Defendant's workplace, ” “Defendant's employees, ” and “Plaintiff's employment.” (ECF No. 1-1 at 7.) Plaintiff further alleges that some (though perhaps not all) of these policies were contained in an employee handbook. (Id. at 12.) In describing Plaintiff's co-worker Jones' termination, the complaint alleges that, under these policies, Jones could not be terminated without first seeking the approval of the Policy Council. (Id. at 10.) Furthermore, reading the entire complaint in the light most favorable to Plaintiff, the court may draw the reasonable inference that it alleges that, under the policies on which Plaintiff relied, employees such as her could not be terminated in retaliation for reporting to their superiors non-compliance with federal and state regulations applicable to the Head Start program.

         In the court's view, these allegations sufficiently plead the existence of an employment contract that altered Plaintiff's at-will status. First, the complaint alleges the existence of an employee handbook that was applicable to ABCAA employees and later applicable to Defendant's employees, and the complaint details some of the handbook's provisions. At this stage, the court is obligated to accept these well-pled factual allegations as true, Ostrzenski, 177 F.3d at 251; Mylan Labs., 7 F.3d at 1134, meaning the court accepts, for purposes of deciding Defendant's Rule 12(b)(6) motion, that ABCAA issued an employee handbook that contained provisions preventing it from terminating employees in retaliation for reporting non-compliance with applicable regulations or without seeking the Policy Council's approval.[4] See Conner v. City of Forest Acres, 560 S.E.2d 606, 610 (S.C. 2002) (“Because an employee handbook may create a contract, the issue of the existence of an employment contract is proper for a jury when its existence is questioned and the evidence is either conflicting or admits of more than one inference.”)

         Second, the complaint sufficiently alleges that the handbook amounted to an employment contract. As explained above, the mere existence of an employee handbook, alone, does not create a contract altering the at-will arrangement. Brailsford, 2015 WL 4459032, at *3. To form an employment contract, the ABCAA handbook must have applied to Plaintiff, must set out procedures that are binding on Defendant, must not contain a conspicuous and appropriate disclaimer, and must be phrased in mandatory language that gives rise to a promise to Defendant. Id. at *3-4. Read in the light most favorable to Plaintiff, the complaint sufficiently alleges that the ABCAA handbook applied to Plaintiff and contained, in mandatory language, termination procedures that were binding on Defendant. The complaint contains no allegations regarding a disclaimer in the handbook. Nevertheless, even if the complaint had alleged the existence of a conspicuous and appropriate disclaimer, the procedural posture of this case combined with the other allegations regarding the ABCAA handbook would prevent the court from concluding that the handbook, as pled, does not amount to an enforceable contract. As explained above, a court may determine, as a matter of law, that an employee handbook does not amount to an enforceable contract, but only when the statements in the handbook and any disclaimer, taken together, establish beyond doubt that the handbook does not create contractual obligations. See Id. at *4. Here, the allegations of the complaint are the only indications of the handbook's contents that the court may consider, [5] and the allegations describe a handbook that applied to Plaintiff and contained mandatory, binding termination procedures. Thus, regardless of the presence of a disclaimer, the court could not determine at this stage, as a matter of law, that the handbook does not constitute an employment contract. See Lord, 827 F.Supp.2d at 602 (“‘An employee manual that contains promissory language and a disclaimer is inherently ambiguous, and a jury should interpret whether the manual creates or alters an existing contractual relationship.'” (internal quotation marks omitted) (quoting Horton v. Darby Elec. Co., Inc., 599 S.E.2d 456, 460 (2004))).

         Third, the complaint sufficiently alleges that the contract embodied by the provisions of the handbook altered the at-will employment arrangement. The complaint alleges that policies in the ABCAA handbook applied to all employees who had been transferred to Defendant's employment, including Plaintiff. In discussing Jones' termination, the complaint further alleges that the policies in the ABCAA handbook prevented Defendant from terminating employees without first seeking approval of the Policy Council. In the court's view, these allegations sufficiently plead that the terms of the employment contract limited Defendant's right to terminate Plaintiff. See Weaver, 2013 WL 5587854, at *5. Furthermore, as the court explained above, when read in the light most favorable to Plaintiff, the complaint as a whole alleges that the policies contained in the handbook prevented Defendant from terminating employees in retaliation for reporting non-compliance with applicable regulations.[6] This too, in the court's view sufficiently alleges that the terms of the employment contract limited Defendant's right to terminate Plaintiff.[7]

         In sum, the court concludes that the complaint sufficiently alleges that Defendant and Plaintiff entered into a unilateral contract with terms embodied in the ABCAA handbook that limited Defendant's right to terminate Plaintiff, thereby altering the default at-will arrangement. Thus, the court rejects Defendant's assertion that dismissal is appropriate on the ground that the complaint ...


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