Opinion
CIVIL ACTION NO. 02-CV-8385
August 27, 2003
MEMORANDUM AND ORDER
Plaintiff N. Douglas Fluke brings this diversity action against Defendant Heidrick Struggles, Inc., alleging various state law tort claims arising out of Defendant's assessment of Plaintiff's suitability for advancement to the presidency of one of his employer's corporate divisions. Now before the Court is Defendant's Motion to Dismiss. For the reasons set forth below, the Motion to Dismiss will be granted in part and denied in part.
I. Background
Viewed in the light most favorable to Plaintiff, the relevant facts are as follows. Plaintiff was employed on an at-will basis as a vice-president of Cognis, a chemical company that was a division of Henkel Corporation ("Henkel"). (Compl. ¶¶ 7, 61.) In 2001, Henkel was in the process of negotiating the sale of Cognis to a group of investors (the "investors"). (Compl. ¶ 11.) During that negotiation process, either Cognis or the investors or both sought to determine whether any of the three vice-presidents of Cognis' North American offices were capable of taking over the post of president of North American operations. (Compl. ¶ 12.) The investors stated repeatedly that they wanted an American to hold this position, and Plaintiff was the only American among the three vice-presidents of Cognis' North American offices. (Compl. ¶ 13.)
Either Cognis or the investors or both retained Defendant to evaluate Cognis' inside personnel, including Plaintiff. (Compl. ¶ 14.) Plaintiff was directed by company e-mail to meet representatives of Defendant for a "strategic leadership initiative". (Compl. ¶ 15.) Plaintiff was told to bring a current resume but not to prepare otherwise. (Id.) On or about October 16, 2001, Plaintiff met with Defendant's representatives. (Compl. ¶ 17.) Although not asked to do so, he presented a summary of his accomplishments at Cognis and prepared a hypothetical case study. (Compl. ¶ 19.) The meeting lasted for two hours, approximately twenty minutes of which was consumed by introductory "small talk" and the balance of which consisted of general conversation about the industry and Plaintiff's work. (Compl. ¶ 18.) No objective tests were administered and no hypothetical questions were posed to Plaintiff. (Compl. ¶¶ 21-22.) This two-hour meeting was the sole opportunity for Plaintiff to have contact with any representative of Defendant. (Compl. ¶ 25.) Neither of Defendant's representatives had any training in psychology or other disciplines that would aid them in assessing personality traits beyond the ability of an average layman. (Compl. ¶ 23.)
After the meeting, Plaintiff received a copy of a written assessment which included the following conclusions:
"His ability to learn is likely inhibited by his somewhat underdeveloped listening skills. He will work a problem long and may have a tendency to overwork it, trading analysis for action. His vision is average and medium termed. He does not display a long term, creative vision of his own. His ability to create buy-in therefore could be somewhat limited as well. He maybe will not be able to contribute too much with his own ideas and concepts to develop the company further."
(Compl. ¶¶ 26-27.)
Subsequently, Plaintiff was informed by Cognis that he would not be offered the position of president. Instead, he was given a copy of a flow chart that revealed that his oversight responsibilities would be reduced from two divisions to one. (Compl. ¶ 28.) The presidency was filled by an outsider, recruited out of retirement by Defendant. (Compl. ¶¶ 29-30.) Defendant's assessment of Plaintiff not only ruined his opportunity for advancement, but also caused Cognis to reduce his responsibilities. (Compl. ¶ 27.) He was humiliated and, after executing a severance package, left Cognis in May 2002. (Compl. ¶ 33.)
Defendant had a financial interest in placing an outsider, since it would receive a sizeable "headhunting" commission. (Compl. ¶ 31.)
II. Legal Standard
When deciding a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), the Court may look only to the facts alleged in the complaint and its attachments. Jordan v. Fox. Rothschild. O'Brien Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994). The Court must accept as true all well-pleaded allegations in the complaint and view them in the light most favorable to the plaintiff. Angelastro v. Prudential-Bache Sec., Inc., 764 F.2d 939, 944 (3d Cir. 1985). A Rule 12(b)(6) motion will be granted only when it is certain that no relief could be granted under any set of facts that could be proved by the plaintiff. Ransom v. Marrazzo, 848 F.2d 398, 401 (3d Cir. 1988).
III. Analysis A. Negligence
In Count I, Plaintiff claims that Defendant is liable for negligence because it breached the duty it owed to Cognis and Plaintiff to conduct an assessment of Plaintiff s abilities in a fair, competent, and professional manner. "[T]he elements of a negligence-based cause of action are a duty, a breach of that duty, a causal relationship between the breach and the resulting injury, and actual loss." Campo v. St. Luke's Hosp., 755 A.2d 20, 23-24 (Pa.Super. 2000); see also In re TMI, 67 F.3d 1103, 1117 (3d Cir. 1995): Philadelphia v. Beretta USA Corp., 126 F. Supp.2d 882, 898 (E.D. Pa. 2001).
Defendant argues that Plaintiff's negligence claim must fail because it owed no duty of care to Plaintiff. The Court disagrees. Whether a duty exists is a matter of law. In re TMI, 67 F.3d at 1117. The determination of whether a duty should be imposed upon an alleged tortfeasor involves a balancing of the following factors: (1) the relationship between the parties; (2) the social utility of the actor's conduct; (3) the nature of the risk imposed and foreseeability of the harm incurred; (4) the consequences of imposing a duty upon the actor; and (5) the overall public interest in the proposed solution. Althaus v. Cohen, 756 A.2d 1166, 1169 (Pa. 2000). See also Lindstrom v. City of Corrv, 763 A.2d 394 (Pa. 2000).
It is clear that a sufficient relationship existed between Plaintiff and Defendant to support the imposition of a duty on Defendant to Plaintiff to exercise reasonable care. See Sharpe v. St. Luke's Hospital, 821 A.2d 1215, 1219 (Pa. 2003) (finding a duty of reasonable care between a hospital and a plaintiff alleging that she was negligently screened and given a false positive result for the presence of cocaine because "a sufficient relationship exists between the Hospital and [plaintiff] to justify the imposition of a duty upon the Hospital to exercise reasonable care in the collection and handling of the urine specimen, despite the absence of a contract between the two parties. Specifically, plaintiff personally presented herself to the Hospital, which was aware of the purpose of the screening; the Hospital, in turn, should have realized that any negligence with respect to the handling of the specimen could harm [Plaintiff's] employment."). Defendant's representatives should have foreseen the inevitable harm to Plaintiff's career if his evaluation was performed negligently. Regarding the other Althaus factors, while Defendant's service is certainly socially useful, the Court sees no overridding public policy interest in protecting consulting services from liability for negligent performance.
Accord Merrick v. Thomas, 522 N.W.2d 402 (Neb. 1994) (finding that merit commission owed plaintiff a duty of care in examining her for suitability for employment with sheriff's department when the negligent party could foresee that its negligence could cause harm to plaintiff);Reed v. Boiarski, 764 A.2d433, 442-43 (N.J. 2001) (stating that "[a] professionally unreasonable examination that is detrimental to the examinee is not immunized from liability because a third-party authorized or paid for the exam").
Defendant also argues that there is no cause of action for negligent evaluation under Pennsylvania law. However, the only cases cited in support of this proposition involved evaluation by the Plaintiff's employer. See. e.g., Mann v. J.E. Baker Co., 733 F. Supp. 885, 889 (M.D. Pa. 1990) (holding that a supervisor could not be found liable for a negligent performance review that led to the at-will employee-Plaintiff's termination because "absent a showing otherwise, her employment could have been ended by [Defendant] at any time for any reason if not proscribed by statute or public policy."). As Defendant is not Plaintiff's employer, these cases are inapposite. Accordingly, the Court will deny the Motion to Dismiss as to Plaintiff's negligence claim. B. Fraud
Defendant also argues that Plaintiff's negligence claim should be dismissed because he has not alleged that he was harmed by Defendant's negligence. However, it is clear from the face of the Complaint that Plaintiff alleges that he was denied the promotion he sought as a result of Defendant's unfavorable assessment. See Compl. ¶ 27.
In Counts II, IIA, and III, Plaintiff alleges fraud, intentional misrepresentation, and negligent misrepresentation. In order to state a claim for fraud and fraudulent misrepresentation, Plaintiff must show "(1) a material representation of fact; (2) which was false; (3) that the maker was aware of the falsity or reckless as to whether it was true or false; (4) that the statement was made with the intent of misleading another into relying on it; (5) there existed a justifiable reliance on the misrepresentation; and (6) the resulting injury was proximately caused by the reliance." Kerrigan v. Vellei, 22 F. Supp.2d 419, 428-29 (E.D. Pa. 1998): see also Delahanty v. First Pa. Bank, 464 A.2d 1243, 1252-53 (Pa.Super. 1983). Negligent misrepresentation similarly contains requirements of "false information, justifiable reliance, causation and pecuniary loss." Kerrigan, 22 F. Supp.2d at 429.
The Complaint lists two counts, both labeled "Count II". For the purposes of differentiation between the two, the Court will refer to Plaintiff's claim of "Fraud — Intentional Misrepresentation" as Count IIA.
The only differences between intentional fraudulent misrepresentation and negligent misrepresentation are "the state of mind of the person making the representation and the standard of proof that must be met by the plaintiff." Kerrigan, 22 F. Supp.2d at 429.
Defendant argues that Plaintiff's claims of fraud, intentional misrepresentation, and negligent misrepresentation should be dismissed because he has failed to allege reliance upon the statements made by Defendant. In KBT Corporation. Inc. v. Ceridian Corporation, 966 F. Supp. 369 (E.D. Pa. 1997), the court faced a similar issue. In KBT, the owners of a radio station brought suit against a ratings company that conducted surveys on listener habits. These surveys were published in quarterly reports and advertising purchases were based on them. Plaintiff's in that case contended that the defendants' surveys were compiled using a method known to be biased and that they therefore had knowingly published false and misleading information that damaged Plaintiff's' share of advertising revenues. Id. at 372. The court dismissed the Plaintiff's' fraud claims because of their failure to allege reliance: "[A]ccepting KBT's allegations as true, it is theadvertisers (1) who Defendants intended to act on their statements and (2) who did in fact act on them, not to their own damage, but to [Plaintiff's]. . . . If, in fact, Defendants' statements were fraudulent, only the advertisers would have a claim, and only to the extent that the advertisers themselves incurred damage." Id. at 377. See also Michelson v. Exxon Research Engineering Co., 629 F. Supp. 418, 423-24 (W.D. Pa. 1986) (holding that a cause of action for fraud "is available to those who receive misrepresentations and rely on such misrepresentations to their injury. . . . Plaintiff thus may not invoke this cause of action because he cannot . . . satisfy the requirement that he himself must detrimentally rely on the alleged misrepresentation.").
In KBT, the Plaintiff's were KBT Corporation, Inc. and W. Cody Anderson, its sole shareholder; the defendants were Ceridian Corporation and Arbitron Company. KBT Corporation. Inc., 966 F. Supp. 369.
The Complaint in the present action alleges that Cognis — not Plaintiff — relied upon the statements made by Defendant in deciding not to promote Plaintiff. Thus, Plaintiff has failed to allege that he relied on Defendant's allegedly fraudulent and negligent statements. See Berda v. CBS. Inc., 800 F. Supp. 1272, 1276 (W.D. Pa. 1992) (noting that fraudulent misrepresentation requires a showing of "justifiable reliance by the plaintiff); Delhanty, 464 A.2d 1243, 1252-53 (Pa.Super. 1983) (fraud requires a showing of "justifiable reliance by the recipient upon the misrepresentation"). See also Eisenberg v. Gagnon, 766 F.2d 770, 778 (3d Cir. 1985) (reliance is a required element of negligent misrepresentation); In re Prudential Ins. Co. of America Sales Practices Litigation, 975 F. Supp. 584, 619 (D.N.J. 1996) ("The common law tort of negligent misrepresentation shares all the components of fraud . . ."). Accordingly, Plaintiff's claims of fraud, intentional misrepresentation, and negligent misrepresentation will be dismissed. C. Tortious Interference
See Mellon Bank Corp. v. First Union, 951 F.2d 1399. 1411-12 (3d Cir. 1991) (affirming summary judgment on fraudulent misrepresentation claim because plaintiff failed to present evidence of justifiable reliance on the alleged misrepresentation); Huddleston v. Infertility Ctr. of Amer., 700 A.2d 453, 461 (Pa.Super. 1997) (dismissing fraud claims; explaining that a "complaint must provide sufficient facts to support a Plaintiff's contention that the defendant intended to induce him to act based on the misrepresentation").
In Count IV, Plaintiff alleges tortious interference. Although it is not explicitly labeled as such, Count IV states allegations which support a claim for tortious interference with prospective or future contractual relations. To articulate such a claim, Plaintiff must allege: "(1) a prospective contractual relation; (2) the purpose or intent to harm the plaintiff by preventing the relation from occurring; (3) the absence of privilege or justification on the part of the defendant; and (4) the occasioning of actual damage resulting from the defendant's conduct."U.S. Healthcare. Inc. v. Blue Cross of Greater Phila., 898 F.2d 914, 925 (3d Cir. 1990).
Defendant argues that Plaintiff's claim of tortious interference should be dismissed because it was acting as an agent of Cognis, and an agent of a corporation cannot interfere with the corporation's relationships with its own employees. See Michelson v. Exxon Research Engineering Co., 808 F.2d 1005, 1007-08 (3d Cir. 1987). As previously discussed, this argument assumes facts not alleged in the Complaint or its attachments. The Complaint does not allege that Defendant was hired by Cognis to assess Plaintiff; rather, it alleges that Defendant was hired by either Cognis or the prospective buyers of Cognis for that purpose. Thus, Plaintiff may have a cause of action for tortious interference if he can support his allegation that Defendant's interference was not justified or privileged. "The privilege determination is not susceptible of precise definition but is informed by . . . the area of socially acceptable conduct which the law regards as privileged." U.S. Healthcare, 898 F.2d at 925 (internal quotations omitted). Accordingly, if Defendant's alleged interference with Plaintiff's prospective relations resulted from its socially valuable function of providing accurate evaluations, it would be regarded as privileged. If, however, Plaintiff can prove his allegation that Defendant provided an intentionally false negative evaluation solely in order to gain a headhunter's fee for placing an outsider in the position, its conduct would not be privileged.
Defendant also argues that Plaintiff's tortious interference claim should be dismissed because Plaintiff has failed to allege that he had any likelihood of receiving the promotion but for Defendant's assessment. Before a future contract can be the basis of a claim, the prospective contract must have been something more than a "mere hope," and there must have been a "reasonable probability" that a plaintiff would have entered into a contract for employment in the position but for the defendant's interference. U.S. Healthcare, 898 F.2d at 925; Fresh Made Inc. v. Lifeway Foods. Inc., 2002 WL 31246922, *12 (E.D. Pa. 2002) (The complaint "must allege facts that, if true, would give rise to a reasonable probability that particular anticipated contracts would have been entered into."). Viewed in the light most favorable to Plaintiff, the Complaint alleges that he was a leading candidate for the presidency and that the statements made by Defendant were intentionally negative in order to eliminate him from consideration so that Defendant could place an outsider in the position and thereby earn a large "headhunter" commission. See Compl. ¶¶ 41, 66. Accordingly, Defendant's Motion to Dismiss will be denied as to Plaintiff's tortious interference claim. D. Defamation
In Count V, Plaintiff alleges that Defendant's circulation of its evaluation to Cognis executives and the investors constitutes defamation. In order to state a claim for defamation, Plaintiff must allege: "(1) a defamatory communication; (2) pertaining to the plaintiff; (3) published by the defendant to a third party; (4) who understands the communication to have defamatory meaning with respect to plaintiff; and (5) that results in Plaintiff's injury." Smith v. School District of Phila., 112 F. Supp.2d 417, 429 (E.D. Pa. 2000); Russoli v. Salisbury Township, 126 F. Supp.2d 821, 872 (E.D. Pa. 2000); D'Errico v. Defazio, 763 A.2d 424, 432 (Pa.Super. 2000). Defendant argues that Plaintiff's defamation claim should be dismissed because the statements are incapable of defamatory meaning and because the statements at issue were protected by privilege.
Defendant also argues that the allegedly defamatory statements were not publicized, as they were only disseminated to Cognis personnel and the investors who were purchasing the company. However, "publication" is defined merely as "the communication of a defamatory matter either intentionally or by a negligent act to one other than the person defamed." Laniecki v. Polish Army Veterans Assn., 486 A.2d 1101 (Pa.Super. 1984). See also Feldman v. Lafayette Green Condominium Assn., 806 A.2d 497, 500 (Pa. Com. Pl. 2002). Plaintiff clearly alleges that Defendant disseminated its evaluation to Cognis executives and the investors.
In order to determine whether a statement is capable of defamatory meaning, the Court must look to whether the statements would harm Plaintiff's reputation in the community or "deter third persons from associating with him" or ascribe to him "conduct, character or a condition that would adversely affect his fitness for the proper conduct of his proper business, trade or profession." D'Errico, 763 A.2d at 432.See also Wilson v. Slatalla, 970 F. Supp. 405, 415 (E.D. Pa. 1997) ("Injury to reputation is judged by the reaction of other persons in the community and not by the party's self-estimation."). Plaintiff has alleged that Defendant stated that he possessed an "inhibited" ability to learn and "underdeveloped" listening skills, both of which may prove to characterize him in a way that would affect his fitness for the proper conduct of his business as a high-level corporate executive. See Walker v. Grand Central Sanitation. Inc., 634 A.2d 237, 244 ( Pa. Super. 1993) (statements made about person seeking a particular employment position which question his ability to handle the responsibilities attendant to the position can be capable of having a defamatory meaning); Maier v. Maretti, 671 A.2d 701, 704 ( Pa. Super. 1995) (where a statement is capable of a defamatory meaning and a non-defamatory meaning, the matter should proceed to trial; only where the statements are incapable of a defamatory meaning should the matter be dismissed on motion).
In the alternative, Defendant argues that the statements at issue are protected by privilege because the only individuals who viewed the statements were those who had a direct interest in Plaintiff's leadership potential with regard to the position of president:
"Statements are conditionally privileged if some interest of the person who published defamatory matter is involved, some interest of the person to whom the matter is published or some other third person is involved or a recognized interest of the public is involved. Communications among managers regarding employee job performance, discipline and termination are privileged when the publisher of the defamatory communication shares an interest in the employee's performance with the recipients."Puchalski v. School Dist. of Springfield, 161 F. Supp.2d 395, 409 (E.D. Pa. 2001). "To show abuse of the conditional privilege, a plaintiff must show the statements were actuated by malice or negligence, [or] were made for a purpose other than that for which the privilege is given . . ."Puchalski, 161 F. Supp.2d at 409-10 n. 8.
In the present case, Plaintiff has alleged that Defendant's statements were made not for the purpose of serving Cognis' interest and the investors' interest in finding out whether Plaintiff was the best candidate for the position, but for the purpose of causing Cognis to hire an outside candidate so that Defendant would receive a large commission.See Compl. ¶¶ 29-31. Plaintiff has, therefore, alleged facts which, if true, would support a finding of abuse of any conditional privilege. Accordingly, the Court will deny Defendant's Motion as to Plaintiff's defamation claim.
E. Invasion of Privacy
In Count VI, Plaintiff alleges that Defendant's distribution of the assessment to the investors (who did not yet own Cognis) constituted an intrusion upon seclusion. "One who intentionally intrudes, physically or otherwise, upon the solitude or seclusion of another or his private affairs or concerns, is subject to liability to the other for invasion of his privacy, if the intrusion would be highly offensive to a reasonable person." Restatement (Second) of Torts § 652B. See also Chicarella v. Passant. 494 A.2d 1109, 1114 (Pa.Super. 1985) (noting that Pennsylvania law follows this section of the Restatement).
Defendant argues that this claim should be dismissed because Plaintiff consented to being assessed by Defendant. The Court agrees. "[A]n actor commits an intentional intrusion only if he believes, or is substantially certain, that he lacks the necessary legal or personal permission to commit the intrusive act." O'Donnell v. United States, 891 F.2d 1079, 1083 (3d Cir. 1989). Plaintiff has alleged that he was directed by Cognis to meet with Defendant's representatives. Defendant therefore reasonably believed that it had the necessary permission to engage in the interview and assessment of Plaintiff. See also Harris v. Easton Publishing Co., 483 A.2d 1377, 1383 (Pa.Super. 1984) ("The defendant is subject to liability . . . only when he has intruded into a private place, or has otherwise invaded a private seclusion that the plaintiff has thrown about his person or affairs."); Woodside v. New Jersey Higher Ed. Assistance Authority, 1993 WL 56020, at *6 (E.D. Pa. 1993). Accordingly, Plaintiff's claim for invasion of privacy based on intrusion of seclusion will be dismissed.
F. Breach of Contract
In Count VII, Plaintiff alleges that he is a third-party beneficiary to the contract between Defendant and Cognis, and that Defendant breached that contract by failing to carry out its evaluations in a fair, ethical, and unbiased manner. Defendant argues that the parties never intended to benefit Plaintiff by entering into the contract and, therefore, that this claim should be dismissed. "[A] party becomes a third-party beneficiary only where both parties to the contract express an intention to benefit the third party in the contract itself, . . .unless the circumstances are so compelling that recognition of the beneficiary's right is appropriate to effectuate the intention of the parties, and the performance satisfies an obligation of the promisee to pay money to the beneficiary or the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance." Scarpitti v. Weborg, 609 A.2d 147, 150-51 (Pa. 1992). See also Two Rivers Terminal. L.P. v. Chevron USA. Inc., 96 F. Supp.2d 432, 449-50 (M.D. Pa. 2000); Blue Mountain Mushroom Co., Inc. v. Monterey Mushroom. Inc., 246 F. Supp.2d 394 (E.D. Pa. 2002).
The Court finds that, on the face of his allegations, Plaintiff is not a third-party beneficiary to the contract because he has not alleged that the parties intended the contract to benefit him. See Hammond v. City of Philadelphia, 164 F. Supp.2d 481, 483 n. 3 (E.D. Pa. 2001) (stating that employee could not claim breach of contract where her employer had contracted with a laboratory to test her for the presence of illegal drugs because "there is no suggestion that both [the laboratory] and [her employer] intended to benefit plaintiff'). IV. Conclusion
As described in the Complaint, the contract's beneficiaries were Defendant and Cognis and/or the investors. Specifically, Cognis and/or the investors would receive Defendant's evaluations of various personnel and Defendant would receive a fee in return. Plaintiff does not allege that the contract between Cognis and Defendant specified that the evaluations produced would be positive or helpful to those being evaluated. Accordingly, the terms of the contract did not provide for a benefit to Plaintiff, but allowed for a range of outcomes which may have had a positive, negative, or neutral effect on his career.
See also Sharpe, 821 A.2d at 1219, 1220 n. 3 (differentiating between a duty of reasonable care in the context of a negligence claim and a duty owing to a party as a third-party beneficiary to a contract);Frost v. Caldwell Store. Inc., 187 A.2d 273, 276 (Pa. 1963) (distinguishing between a duty imposed by law and a duty self-imposed by contract).
For the foregoing reasons, the Motion to Dismiss will be granted with regard to Plaintiff's claims of fraud (Count II), intentional misrepresentation (Count IIA), negligent misrepresentation (Count III), invasion of privacy (Count VI), and breach of contract (Count VII). The Motion to Dismiss will be denied with regard to Plaintiff's claims of negligence (Count I), tortious interference (Count IV), and defamation (Count V). An appropriate Order follows.
ORDER
AND NOW, this __ day of August, 2003, upon consideration of Defendant's Motion to Dismiss Plaintiff's Complaint (docket no. 2) and all responses, replies, and supplemental memoranda, IT IS ORDERED that the Motion is denied in part and granted in part as follows:
I. The Motion is DENIED with regard to Plaintiff's claims of negligence (Count I), tortious interference (Count IV), and defamation (Count V).
II. The Motion is GRANTED with regard to Plaintiff's claims of fraud (Count II), intentional misrepresentation (Count III), negligent misrepresentation (Count III), invasion of privacy (Count VI), and breach of contract (Count VII). Accordingly, Counts II, IIA, III, VI, and VII are DISMISSED.