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Davis v. Office Depot, Inc.

United States District Court, D. Massachusetts

February 28, 2017

PETER C. DAVIS, III, and MERRY WHITE, Plaintiffs,
v.
OFFICE DEPOT, INC. and OFFICEMAX INCORPORATED, Defendants. MICHELLE B. SIGEL, Plaintiff,
v.
OFFICE DEPOT, INC. and OFFICEMAX INCORPORATED, Defendants.

          MEMORANDUM AND ORDER

          Indira Talwani, United States District Judge

         Plaintiff Michelle Sigel brings Civil Action No. 16-cv-11823-IT for claims arising out of her former employment with Defendants Office Depot, Inc. (“Office Depot”) and OfficeMax Incorporated (“OfficeMax”). Plaintiffs Peter C. Davis, III, and Merry White bring Civil Action No. 16-cv-11783-IT for similar claims arising out of their former employment with Defendants. In both actions, Defendants have moved to dismiss Plaintiffs' claims of fraud and unjust enrichment.[1] For the following reasons, Defendants' Motion to Dismiss Counts V and VI of Plaintiffs' Second Amended Complaint [#43] in Civil Action No. 16-cv-11783-IT and Motion to Dismiss Counts IV and V of Plaintiffs' First Amended Complaint [#38] in Civil Action No. 16-cv-11823-IT are DENIED.

         I. Background

         OfficeMax operated as a large office products supplier until November 2013 when it was acquired by and became a wholly-owned subsidiary of Office Depot, also a large office products supplier. Plaintiffs, who had been OfficeMax employees, accepted sales positions with Office Depot after the acquisition. During the course of Plaintiffs' employment, each company offered Plaintiffs incentive compensation packages in addition to their base salaries. Davis resigned from his position in August 2016, and White and Sigel resigned from their positions in September 2016.

         The operative complaints allege violation of the Massachusetts Wage Act, [2] breach of contract, unjust enrichment, and fraud. Plaintiffs further seek declaratory judgments that any restrictive covenants contained in their respective employment contracts are unenforceable.

         As grounds for the fraud and unjust enrichment claims, Plaintiffs allege that, during their tenure with OfficeMax and Office Depot, each defendant intentionally misrepresented the manner in which it calculated Plaintiffs' incentive compensation. Specifically, Plaintiffs allege that Defendants represented to them in writing that their incentive compensation was based in part on gross profits from Plaintiffs' respective sales, or in other words, on the difference between the prices charged to customers and the actual cost to Defendants for the products sold. According to Plaintiffs, despite these representations, Defendants knowingly inflated the actual costs incurred when calculating Plaintiffs' gross profits. Plaintiffs allege that, as a result of these intentional miscalculations, they did not receive the full amount of incentive compensation to which they were entitled.

         Defendants now move, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, to dismiss the fraud and unjust enrichment claims. Plaintiffs oppose Defendants' motions.[3]

         II. Discussion

         A. Standard

         To survive a motion to dismiss brought under Rule 12(b)(6), a complaint must allege facts sufficient “to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); accord Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In resolving these motions, the court must accept all factual allegations in the complaints as true and draw all reasonable inferences in favor of the plaintiffs. Iqbal, 556 U.S. at 678-79.

         B. Fraud

         “Under Massachusetts law, ‘fraud is a knowing false representation of a material fact intended to induce a plaintiff to act in reliance, where the plaintiff did, in fact, rely on the misrepresentation to his detriment.'” Smith v. Jenkins, 732 F.3d 51, 62 (1st Cir. 2013) (quoting Fordyce v. Town of Hanover, 929 N.E.2d 929, 936 (Mass. 2010)). Additionally, a claim of fraud must satisfy the particularity requirements set forth in Rule 9(b). Woods v. Wells Fargo Bank, N.A., 733 F.3d 349, 358 (1st Cir. 2013) (quoting Juarez v. Select Portfolio Servicing, Inc., 708 F.3d 269, 279-80 (1st Cir.2013)). Under this heightened pleading standard, a plaintiff must “specify the who, what, where, and when of the allegedly false or fraudulent representation.” Alt. Sys. Concepts, Inc. v. Synopsys, Inc., 374 F.3d 23, 29 (1st Cir. 2004); see also Fed.R.Civ.P. 9(b) (“In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally.”).

         Defendants first argue that Plaintiffs have failed to set forth a prima facie case of fraud because their claims are premised on a failure to disclose a material fact. However, this argument overlooks Plaintiffs' allegations that Defendants informed Plaintiffs in writing that their incentive compensation would be calculated in one manner and then knowingly calculated it another way. This constitutes an affirmative misrepresentation of material fact, not a failure to disclose.

         Defendants next argue that Plaintiffs failed to allege the requisite fraudulent intent. Specifically, they posit that Plaintiffs do not allege facts regarding Defendants' “state of mind.” However, Plaintiffs allege that Defendants intentionally misrepresented, miscalculated, and understated their incentive compensation by knowingly inflating the costs used in the calculation of their gross profits. Since “[m]alice, intent, knowledge, and other conditions of a ...


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