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Duckworth v. R3 Education, Inc.

United States District Court, D. Massachusetts

November 9, 2017



          F. Dennis Saylor IV, United States District Judge.

         This is a lawsuit claiming an alleged wrongful termination. Dr. Hugh Duckworth contends that because his employer wrongfully categorized his termination as “for cause, ” he was deprived of his rights under a Securityholders Agreement and Stock Option Agreement. The complaint asserted claims under the Americans with Disabilities Act (“ADA”), the Massachusetts anti-discrimination statute, and state contract law. Defendants have moved to dismiss the complaint under Fed.R.Civ.P. 12(b)(6) for failure to state a claim. For the following reasons, the motion to dismiss will be granted.

         I. Background

         A. Factual Background

         The following facts are as stated in the complaint.

         1. Duckworth's Termination

         Dr. Hugh Duckworth was employed by R3 Education, Inc. (“R3”), a holding company that owns three medical schools in the Caribbean: St. Matthews University School of Medicine, Medical University of the Americas, and the Saba School of Medicine. (Compl. ¶ 10). Duckworth served as Executive Dean at the Saba University School of Medicine and Associate Dean of Basic Sciences at Medical University of the Americas and the Saba University School of Medicine. (Id. ¶ 13).

         R3 is a Delaware corporation with a principal place of business in Massachusetts. (Id. ¶ 2). Steven Rodger and Terry Moya are, respectively, the Chief Executive Officer and the Chief Financial Officer of R3. (Id. ¶¶ 11-12).

         On July 1, 2013, Duckworth received a letter signed by Rodger confirming that he had been placed on paid leave from his employment because of “repeated insobriety while rendering services as an employee.” (Id. ¶ 36; Docket No. 9, Ex. 5).[1] The letter indicated that his salary would be reduced to $110, 000 while he remained on paid leave. (Docket No. 9, Ex. 5). It also stated that his “repeated insobriety would justify [his] termination for cause, ” but that Rodger “was willing to continue [his] employment with the Company, ” subject to various terms and conditions. (Id.).

         Among the terms and conditions were that Duckworth would be relieved of his current duties, although he would retain certain titles; that he would “perform such duties as requested, ” but he would cease to come in to the office; and that he would surrender all keys and other company property. (Id. ¶¶ 1-4). It also provided that he would lose certain non-vested or non-exercised stock option rights. (Id. ¶ 6). It directed him to “immediately seek appropriate professional help for [his] substance abuse problem.” (Id. ¶ 7). It included a paragraph releasing the company and its officers and employers from all claims. (Id. ¶ 9). It included a statement that his continued employment would be at-will. (Id. ¶ 8). Finally, it included an integration clause that superseded and cancelled “all prior or contemporaneous discussions, negotiations, representations or agreements with respect to the matters addressed herein.” (Id. ¶ 11).

         Duckworth was given until 5:00 p.m. on July 28, 2013, to decide whether to accept the offer. (Id. ¶ 10). The release language of the letter also stated he would have seven days from the date of execution to revoke his acceptance of the agreement. (Id.). According to the complaint, Rodger orally assured Duckworth that he could keep his job provided he signed the letter. (Compl. ¶ 36). Duckworth ultimately signed the letter on July 29, 2013. (Docket No. 9, Ex. 5).

         About a year later, on July 14, 2014, Duckworth received a letter signed by Moya stating his employment would be terminated effective August 15, 2014. (Compl. ¶¶ 26-27). The termination was “for cause, ” although the letter did not specify the specific basis. (Id. ¶ 30).

         The July 1, 2013 letter did not provide any specific examples of Duckworth's insobriety. The complaint alleges that R3 encouraged a “party atmosphere” and that other employees, including top management, were intoxicated at company events but did not suffer similarly adverse employment consequences. (Id. ¶¶ 48-49).

         2. The Securityholders Agreement and Stock Option Agreement

         As noted, the letter provided that Duckworth would lose certain rights concerning R3 stock options. In December 2008, Duckworth became a party to R3's Securityholders Agreement by executing a joinder document to become a “management stockholder.” (Id. ¶ 14). As relevant here, the agreement stated:

[U]pon the occurrence of a Call Event affecting a Management Stockholder, the Company shall have the right to purchase . . . all . . . of the Shares held by such Management Stockholder at the Purchase Price and during the Exercise Period applicable thereto as described . . . in Schedule 2 hereto.

(Id. ¶ 15). The agreement defined “Call Event” as “the first to occur of any of the Triggering Events.” (Id. ¶ 16). A “Triggering Event” in turn was defined as the “termination of [the] employment relationship . . . for any reason.” (Id. ¶ 17). There were six categories of triggering events, including “a termination for Cause.” (Id.). Justification for termination with cause included “repeated insobriety or any use of illegal drugs while rendering services as an employee.” (Id. ¶ 19).

         Schedule 2 of the Securityholders Agreement provided that in the event of a termination for cause, the “purchase price” of the securities would be the “lower of initial value and book value.” (Id. ¶ 18). The “initial value” of the securities at Duckworth's termination was $0.001 per share. (Id. ΒΆ 43). Because Duckworth held 319 shares of R3 common stock at his termination ...

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