Opinion
01 Civ. 2895 (JSM)
January 4, 2002
For Plaintiff: Chinyere Y. Okoronkwo, 130 West 42nd Street, Suite 1700, New York, N.Y. 10036.
For Defendants: Robert S. Whitman, Orrick, Herrington Sutcliffe, LLP, 666 Fifth Ave., New York, N.Y. 10103-0001.
MEMORANDUM OPINION ORDER
Marti Vazquez ("Plaintiff") brings this action against Salomon Smith Barney ("Smith Barney") and Alan Parsowith ("Parsowith") (collectively "Defendants") following Smith Barney's alleged breach of a negotiated settlement agreement. Defendants move to dismiss the Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Defendants' motion is granted in part and denied in part.
Facts
Accepting the factual allegations in the Amended Complaint as true, Plaintiff, a Hispanic woman, was an employee of Smith Barney until October, 1999. In October, 2000, Smith Barney, Plaintiff, and the Equal Employment Opportunity Commission ("EEOC") entered into a negotiated settlement agreement concerning charges of sex and race discrimination and retaliation in violation of Title VII of the Civil Rights Act of 1964. In addition to monetary payments from Smith Barney to Plaintiff, Smith Barney agreed to require Parsowith, a Smith Barney vice president, to undergo individual coaching on employee management and supervision. Smith Barney was also responsible for monitoring the effectiveness of this program. Parsowith resigned on or about February 2001, but Smith Barney rehired him soon after. He resumed his former job responsibilities as vice president and manager.
In March, 2001, Plaintiff learned that Smith Barney had refused to perform the remedial elements of the agreement despite Plaintiff's demands for specific performance. Although the coaching sessions had been arranged, Parsowith attended less than five of the twenty-six required sessions, and none of those attended dealt with Title VII's prohibitions against sex or race discrimination. Plaintiff alleges that Parsowith's acts and omissions are a direct result of his racial animus against Plaintiff. In alleging Smith Barney's failure to comply with the terms of the agreement, Plaintiff also states that Smith Barney has previously entered into and complied with EEOC-negotiated settlement agreements concerning sex discrimination with white individuals, and has complied with these without judicial intervention.
Thereafter, Plaintiff filed this action in May, 2001, claiming that Smith Barney is liable to Plaintiff (1) for violating her rights under 42 U.S.C. § 1981, (2) for breach of contract under state law, (2) for discrimination in violation of the laws of New York State and New York City, and (3) for negligently retaining, rehiring, and supervising Parsowith.
Plaintiff also claims that Parsowith is liable to Plaintiff (1) for aiding and abetting Smith Barney's breach of the settlement agreement, and (2) for violating her rights under 42 U.S.C. § 1981. Plaintiff seeks damages, specific performance, declaratory relief, injunctive relief, and attorney's fees.
Discussion
I. Standing
Defendants' central argument is that Plaintiff lacks standing to assert claims under 42 U.S.C. § 1981 because she has not alleged any injury-in-fact. Defendants argue that the alleged breach has not impacted Plaintiff in any way and that Plaintiff is instead seeking to address injuries sustained by current Salomon Smith Barney employees who would be affected by the alleged breach. According to Defendants, "Plaintiff has already received her benefit of the bargain in the amount of $35,000 paid to her and her attorney." (Def.s' Mem. at 7).
With respect to the injury, Plaintiff alleges that Defendants' conduct has "deprived [her] of her right to enter into contracts with the company and to obtain the same benefits as Whites," (Am. Compl. ¶ 30) and "has compromised [her] sense of empowerment, and constitutes a painful reminder of institutional barriers that persist in corporate America. . . ." (Am. Compl. ¶ 33) These alleged injuries have been sustained by the Plaintiff and not by others. The issue is whether these injuries are sufficient with respect to constitutional and prudential standing.
A. Constitutional Standing
In order for a plaintiff to bring a case in federal court and satisfy the "case and controversy" requirement of Art. III of the Constitution, the plaintiff must establish standing. Warth v. Seldon, 422 U.S. 490, 525 (1975). The underlying concern is whether the plaintiff has "alleged such a personal stake in the outcome of the controversy as to warrant . . . invocation of federal court jurisdiction and to justify exercise of the court's remedial powers on his behalf." Warth v. Seldon, 422 U.S. at 498 (quoting Baker v. Carr, 369 U.S. 186, 204 (1962)). The constitutional requirement for standing consists of three elements:
First, the plaintiff must have suffered an "injury in fact" — an invasion of a legally protected interest which is (a) concrete and particularized, and (b) "actual or imminent, not `conjectural' or `hypothetical.'" Second, there must be a causal connection between the injury and the conduct complained of — the injury has to be "fairly . . . trace[able] to the challenged action of the defendant, and not . . . th[e] result [of] the independent action of some third party not before the court." Third, it must be "likely," as opposed to merely "speculative," that the injury will be "redressed by a favorable decision."
Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992) (citations omitted).
When ruling on a motion to dismiss for want of standing, "the trial court . . . must accept as true all material allegations of the complaint, and must construe the complaint in favor of the complaining party." Warth v. Seldon, 422 U.S. 490, 501 (1975).
Focusing on the injury-in-fact requirement, the injury alleged can be non-economic. Ass'n of Data Processing Service v. Camp, 397 U.S. 150, 154 (1970); Nash v. Califano, 613 F.2d 10, 14 n. 9 (2d Cir. 1980). Courts have found a variety of non-economic injuries sufficient to satisfy the injury-in-fact requirement. See, e.g., Dep't of Commerce v. U.S. House of Representatives, 119 S.Ct. 765 (1999) (loss of state representative and dilution of voting strength resulting from use of statistical sampling); United States v. Students Chal. Reg. Agcy. Pro. (SCRAP), 412 U.S. 669, 685 (1973) (impaired ability to enjoy natural resources); see also Scenic Hudson Pres. Conference v. FPC, 354 F.2d 608 (2d Cir. 1965) (construction project's injurious interference with scenic, historical and recreational value of river and surrounding area). At the same time, non-economic injuries in the form of emotional loss may not always satisfy the standing requirement. See Scodari v. Alexander, 69 F.R.D. 652, 657 (E.D.N.Y. 1976) (finding that potential ridicule, loss of respect, and loss of social esteem were "entirely subjective" and not the type of concrete injuries contemplated by the injury-in-fact requirement).
In the context of racial discrimination, however, non-economic injuries which leave a mark of social disgrace can be considered injuries-in-fact for standing purposes. In Allen v. Wright, 468 U.S. 737 (1984), the plaintiffs were parents of black public school children who challenged IRS procedures for denying tax-exempt status to private schools that discriminated on the basis of race. While the plaintiffs ultimately did not have standing because they were not among those who were personally denied equal treatment, the Supreme Court nevertheless recognized that the "stigmatizing injury often caused by racial discrimination . . . is one of the most serious consequences of discriminatory . . . action and is sufficient in some circumstances to support standing." Id. at 755. See Heckler v. Mathews, 465 U.S. 728, 739-40 (1984) ("[D]iscrimination itself, by perpetuating `archaic and stereotypic' notions or by stigmatizing members of the disfavored group as `innately inferior' and therefore as less worthy participants in the political community, can cause serious noneconomic injuries to those persons who are personally denied equal treatment solely because of their membership in a disfavored group.") (citations omitted).
Here, Plaintiff does allege that she suffered a stigmatizing injury caused by racial discrimination. That Defendant allegedly breached the contract on account of Plaintiff's race "has compromised [her] sense of empowerment [as a minority], and constitutes a persistent and painful reminder of institutional barriers that persist in corporate America." (Am. Compl. ¶ 33) This does not appear to be a mere subjective sense of disappointment. See Scodari, 69 F.R.D. at 657. Rather, it is more like the type of non-economic stigmatic injury contemplated in Allen and Heckler.
Furthermore, unlike the plaintiffs in Allen, Plaintiff was the actual victim of the alleged discrimination. While Defendants argue that Plaintiff is seeking to vindicate the rights of Hispanic women currently employed by Defendant, it was Plaintiff's right to contract and Plaintiff's sense of empowerment that were compromised by Defendant's alleged discriminatory behavior. See Smith v. City of Cleveland Heights, 760 F.2d 720 (6th Cir. 1985) (finding that plaintiff had standing to challenge a race-based housing program where plaintiff was a resident in the community affected by the program and suffered the daily stigmatic injury of knowing that members of his race were tolerated but not desired in the area); Puglisi v. Underhill Park Taxpayer Assoc., 947 F. Supp. 673 (S.D.N.Y. 1996) (finding that plaintiff, who rented to black tenants against the will of a community association, had standing to bring a § 1981 claim against the association where plaintiff suffered economic injuries and non-economic injuries in the form of "loss of reputation, mental anguish, pain and humiliation").
Additionally, Plaintiff's injury is not limited to the stigmatic harm suffered. In allegedly refusing to honor the terms of the contract, Defendant has "injured" Plaintiff's right to contract. This, coupled with the stigmatic injury, is sufficient to satisfy the injury-in-fact requirement for Article III standing. Furthermore, there is little question that Plaintiff's alleged injuries are fairly traceable to Defendant's alleged conduct and can be redressed by an order of this Court. See Lujan, 504 U.S. at 560.
The Court notes that the Amended Complaint seeks declaratory and injunctive relief. While there are additional requirements for constitutional standing with respect to such relief, see City of Los Angeles v. Lyons, 461 U.S. 95, 102 (1983), County of Riverside v. McLaughlin, 500 U.S. 44, 51 (1991), it is unnecessary to address these at this time because the remedy sought by Plaintiff is not limited to declaratory and injunctive relief.
B. Prudential Standing
In addition to constitutional requirements, there are also prudential requirements for standing. See Valley Forge Christian Coll. v. Ams. United for Separation of Church State, Inc., 454 U.S. 464, 474-75 (1982). In determining whether a party has prudential standing, a court must inquire whether a plaintiff's claim rests on the legal rights of third parties, asserts only a generalized grievance, or asserts a claim that falls outside the zone of interests protected by the statute invoked. Id.; Etuk v. Slattery, 936 F.2d 1433, 1440 (2d Cir. 1991). Where the injury stems from the violation of statutorily-created rights, the issue for prudential standing is "whether the . . . statutory provision on which the claim rests properly can be understood as granting persons in the plaintiff's position a right to judicial relief." Warth, 422 U.S. at 500.
Here, Plaintiff meets the requirements for prudential standing. Plaintiff has a statutory right under § 1981 to "the same right in every State and Territory to make and enforce contracts . . . as is enjoyed by white citizens." 42 U.S.C. § 1981(a). In the Amended Complaint, Plaintiff alleges that her right to contract was violated on account of Defendant's alleged discriminatory behavior. Plaintiff has asserted her own legal right and has identified an injury that is particular to her. See Clifton Terrace Assoc. v. United Techs. Corp., 929 F.2d 714, 721 (D.C. Cir. 1991) ("Prudential limitations on standing ordinarily require that an action under section 1981 . . . be brought by the direct victims of the alleged discrimination because they are best situated to assert the individual rights in question.") Nat'l Cong. for Puerto Rican Rights v. City of New York, 75 F. Supp.2d 154, 162 (S.D.N.Y. 1999); see also Puglisi, 947 F. Supp. at 683.
Accordingly, Plaintiff has satisfied the constitutional and prudential requirements for standing.
II. § 1981 Claim Against Smith Barney
Plaintiff has satisfied the requirements of stating a claim under § 1981 against Smith Barney. According to the Amended Complaint:
Salomon Smith Barney previously entered into and complied with EEOC-negotiated settlement agreements that concern the sex discrimination complaints of Whites. Based on information and belief, Salomon Smith Barney has complied with the remedial provisions of EEOC negotiated settlement agreements that benefit Whites, and has so complied without judicial intervention.
(Am. Compl. ¶ 29.) The Amended Complaint sufficiently alleges that she is a member of a racial minority, that Smith Barney had an intent to discriminate against her on the basis of race, and that this discrimination concerned an activity enumerated in 42 U.S.C. § 1981 (i.e. enjoyment of the benefits of a contractual relationship). See Mian v. Donaldson, Lufkin Jenrette Sec. Corp., 7 F.3d 1085, 1087 (2d Cir. 1993); Reyes v. Bronx-Lebanon Hosp. Ctr., No. 99 Civ. 4534, 2000 WL 377511, at *4 (S.D.N.Y. Apr 13, 2000).
III. § 1981 Claim Against Parsowith
Parsowith argues that he cannot be held personally liable under 42 U.S.C. § 1981 and therefore this claim should be dismissed. Specifically, Parsowith asserts that he is not liable because he was not personally involved in Smith Barney's alleged breach of the settlement agreement.
The Second Circuit has recently held that individuals may be held liable under § 1981, but the plaintiff must demonstrate "some affirmative link to causally connect the actor with the discriminatory action" and the claim must be predicated on "the actor's personal involvement." Whidbee v. Garzarelli Food Specialties, Inc., 223 F.3d 62, 75 (2d Cir. 2000) (quoting Allen v. Denver Pub. Sch. Bd, 928 F.2d 978, 983 (10th Cir. 1991); see Hicks v. IBM, 44 F. Supp.2d 593, 597 (S.D.N.Y. 1999) ("In each of the cases that have allowed individual liability [under § 1981], the individuals have been supervisors who were personally involved in the discriminatory activity.") cited in Whidbee, 223 F.3d at 75. In Whidbee, a § 1981 hostile work environment claim was made against an employer as well as against the owner of the employer. The court found that the owner was not personally involved in the discriminatory acts; at most, the owner was negligent in maintaining the employer's anti-discrimination policy. Such negligence, the court held, does not establish a causal relationship between the owner and the employer's alleged discriminatory acts. Whidbee, 223 F.3d at 75.
Here, Parsowith cannot be held individually liable. The Amended Complaint does not allege that Parsowith had supervisory authority over the Plaintiff with respect to the alleged breach.
While the Amended Complaint alleges that Parsowith's failure to attend the weekly coaching sessions contributed to Smith Barney's breach of the agreement, it does not allege that he was an active partner with Smith Barney in the breach. Plaintiff's statutory right concerns her ability to make and enforce contracts; Parsowith played no role in either the making of the agreement or Smith Barney's alleged failure to enforce it. This is not a case where the individual is essentially one and the same with the employer. See Hicks, 44 F. Supp.2d at 597.
IV. State Law Claim Against Smith Barney for Breach of Settlement
Agreement Smith Barney contends that Plaintiff has not alleged that she has suffered an injury-in-fact with respect to the breach of contract claim and therefore does not have standing. Defendant also argues that the breach of contract claim must fail as a matter of law because Plaintiff has not pled the existence of any economic damages.
The purpose of standing under New York law is to "ensure that the party seeking relief has a sufficiently cognizable stake in the outcome so as to `cast the dispute `in a form traditionally capable of judicial resolution.''" Smith v. Hurley, 634 N.Y.S.2d 334, 335 (N.Y.App.Div. 1995) (quoting Community Bd. 7 of Borough of Manhattan v. Schaffer, 84 N.Y.2d 148, 154-155 (N.Y. 1994)) (finding such a stake where the defendant's breach of a covenant affected plaintiff's property interest).
Plaintiff's status as a party to the settlement agreement gives her a cognizable stake in matters concerning enforcement of that agreement. Furthermore, Defendant's alleged breach does injure the Plaintiff in that it has a detrimental affect on the benefit for which she bargained. New York law does not require that economic injury be pled in a breach of contract action. While Plaintiff has not alleged any monetary loss that could be remedied by compensatory damages, the Plaintiff has alleged injuries resulting from the breach. Such injuries may be redressed by nominal damages, which Plaintiff has requested. See Hirsch Elec. Co., Inc. v. Cmty. Serv., Inc., 536 N.Y.S.2d 141, 143 (N.Y.App.Div. 1988) ("[I]t is a well-settled tenet of contract law that even if the breach of contract cannot be proven with sufficient certainty, the injured party is entitled to recover as nominal damages a small sum fixed without regard to the amount of the loss, if any."); Goldberg v. New York Times, 411 N.Y.S.2d 294, 295 (N.Y.App.Div. 197 8) ("If breach [of contract] is proven, a remedy is available even though provable damage may actually be no more than nominal. `A person violating his contract should not be permitted entirely to escape liability because the amount of the damages which he has caused is uncertain.'"). Because Plaintiff has alleged deprivation of her "right to contract" and of "the benefit of her bargain," her breach of contract claim satisfies the requirement that Plaintiff suffer actual damages.
However, Defendant is correct that Plaintiff is not entitled to damages for emotional distress or punitive damages on the breach of contract claim. See Dana v. Oak Park Marina, Inc., 660 N.Y.S.2d 906 (N.Y.App.Div. 1997); Garrity v. Lyle Stuart, Inc., 40 N.Y.S.2d 523, 525 (N.Y.App.Div. 1982).
Thus, Defendants' motion to dismiss Plaintiff's breach of contract claim under state law is denied.
V. Parsowith's "Aiding Abetting" Smith Barney's Breach of the Settlement Agreement
Plaintiff's fifth cause of action alleges that Parsowith "aided and abetted defendant Salomon Smith Barney's breach" of the agreement. (Am. Compl. at 9.) Plaintiff later stated that this cause of action is actually alleging tortious interference with contract. (Pl.'s Mem. at 19.) Aside from this alteration to the pleading, Parsowith contends that Plaintiff has failed to plead the essential elements of a tortious interference claim. Parsowith is correct, and this claim is dismissed.
Under New York law, the tort of inducement of breach of contract has four elements: (1) the existence of a contract between the plaintiff and a third party; (2) the defendant's knowledge of the contract; (3) the defendant's intentional inducement of the third party to breach or otherwise render performance impossible; and (4) damages to the plaintiff. Kronos, Inc. v. AVX Corp., 81 N.Y.2d 90, 94, 595 N.Y.S.2d 931, 934 (N.Y. 1993) (citations omitted). With respect to the third element, Plaintiff must allege that the contract would not have been breached "but for" Parsowith's conduct, Washington Ave. Assoc., Inc. v. Euclid Equip., Inc., 645 N.Y.S.2d 511, 512 (N.Y.App.Div. 1996) (citing Israel v. Wood Dolson Co., 1 N.Y.2d 116, 151 N.Y.S.2d 1 (N.Y. 1956), and the inducement must be improper, See Guard-Life Corp. v. S. Parker Hardware Mfg. Corp., 50 N.Y.2d 183, 189-90 (1980); Restatement (Second) of Torts § 766 (1977). Here, Plaintiff has failed to sufficiently state a claim.
Although a few cases do casually refer to a claim for aiding and abetting breach of contract, See, e.g., Graubard Mollen Dannett Horowitz v. Moskovitz, 612 N.Y.S.2d 39 (N.Y.App.Div. 1994), Kessler v. Gen. Dental Supply Co., 272 N.Y.S.2d 390 (N.Y.Sup.Ct. 1966), "aiding and abetting" is generally associated with fraud and criminal matters.
The Amended Complaint does not allege any facts to show that Parsowith wrongfully induced a breach. While Parsowith's absence from the sessions may have made it difficult for Smith Barney to honor its obligations under the agreement, to support a claim for tortious interference Parsowith's conduct would have to be wrongful or improper and there is no such wrongful conduct alleged. See Guard-Life Corp., 50 N.Y.2d at 190; Restatement (Second) of Torts § 766 (1977).
Furthermore, the Amended Complaint does not allege any intent to induce a breach or that the contract would not have been breached but for Parsowith's conduct. The Amended Complaint simply alleges that Parsowith knew or had reason to know his actions caused the breach and that his actions were a direct result of his animus towards Plaintiff on account of her race. (Am. Compl. at ¶ 26) Such conclusory allegations in the Amended Complaint are not sufficient pleadings of intent. Granite Partners, L.P. v. Bear Stearns Co., Inc., 58 F. Supp.2d 228, 267 n. 21 (S.D.N.Y. 1999).
VII. Smith Barney's Negligence in Retaining, Re-hiring, and Supervising Parsowith
In order to establish a claim for negligent supervision or negligent retention, Plaintiff must allege, inter alia, an injury caused by the employee's behavior. See Kirkman by Kirkman v. Astoria Gen. Hosp., 611 N.Y.S.2d 615, 616 (N.Y.App.Div. 1994).
Claims of negligent hiring or retention made against employers normally involve plaintiffs who have suffered significant physical injury as a result of the employee's behavior. Perry v. Burger King Corp., 924 F. Supp. 548, 553 (S.D.N.Y. 1996). Here, Parsowith did not inflict upon Plaintiff an injury that Smith Barney had a duty to prevent. While Plaintiff does allege racial animus on the part of Parsowith, Plaintiff does not allege that Parsowith actively engaged in racial harassment or discrimination directly against Plaintiff. Even if such allegations were made, it is questionable whether, under New York law, a claim for negligent hiring can be made where the employee's offense involves racial harassment. See Brown v. Bronx Cross County Med. Group, 834 F. Supp. 105, 109 (S.D.N.Y. 1993) ("New York courts have not recognized claims for negligent hiring of an employee whose subsequent offense involved racial harassment."); Perry, at 552. Accordingly, Parsowith's alleged interference with the agreement does not create the type of injury which sustains a claim for negligent hiring or retention in New York.
Conclusion
For the forgoing reasons, Defendant's motion is granted in part and denied in part. The fifth, sixth, seventh, eighth, and ninth causes of action in the Amended Complaint are dismissed.
SO ORDERED.