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Lyons Insurance Agency Inc. v. Wilson

Court of Chancery of Delaware

January 19, 2018

Lyons Insurance Agency Inc.
v.
Wilson

          Date Submitted: October 11, 2017

          Michael Kelly, Esquire Andrew Dupre, Esquire Janine Fabien, Esquire McCarter & English LLP

          Herbert Mondros, Esquire

         Dear Counsel:

         Before me is a Motion for Leave to File an Amended Answer and Verified Counterclaims (the "Motion to Amend" or the "Amendment") seeking to assert a claim that the Defendant, Howard Wilson, was not paid a $25, 000 salary increase owed to him under an employment contract. The Amended Counterclaim seeks statutory damages, and recovery of the allegedly unpaid salary under sundry other theories. The Motion to Amend is denied because the proposed new counterclaims fail to state a claim, and the Amendment would thus be futile. My analysis follows.

         I. BACKGROUND

         The underlying claim by Plaintiff Lyons Insurance Agency Inc. ("Lyons") alleges that Defendants Howard Wilson and GMG Insurance Agency ("GMG") conspired to have Wilson violate an employment agreement with Lyons by competing against Lyons for certain insurance clients.[1] Wilson left Lyons's employment in August 2016 and thereafter began working for Defendant GMG, a competitor of Lyons. Lyons's Complaint seeks injunctive relief and damages. Wilson and GMG filed a timely Answer and Counterclaim, alleging Lyons's tortious interference with Defendants' prospective contractual relations with one another. Wilson now contends that, during discovery in this matter, he "learned" that he had not been given a salary increase promised him as an inducement to employment. According to the Amendment, the promise is memorialized in Lyons's July 14, 2014 offer letter of employment to Wilson (the "Offer"), which Wilson accepted. The Offer states in pertinent part as follows:

Your starting salary will be $205, 000.00 annually which is paid in the amount of $8541.66 per pay on the 15th and the last day of the month . . . . On your one-year employment anniversary with our company, (approximately July 18, 2015) and pending approval from your manager and CEO, David Lyons, Sr., your annual salary will increase to $230, 000 . . . .[2]

         After the Defendants filed their Answer and Counterclaims, they:

[L]earned that [Defendant] Wilson did not receive the $25, 000.00 salary increase that was due to him as per the Offer, and that Defendant Howard Wilson has a potential claim under the Delaware Wage Payment and Collection Act . . . ("DWPCA"), as well as potential claims for promissory estoppel, breach of the covenant of good faith and fair dealing, and negligent misrepresentation.[3]

         The Defendants filed the Motion to Amend in order to "conform to these facts."[4] I note that the incongruous assertion that Wilson was unaware that he had not been paid the salary promised is belied by his own testimony:

Q. Did you ever have any discussions with [manager] Joe Valerio about why you're not receiving that salary increase?
A. We did talk about it and I expressed a little bit of concern, but I knew everything that was going on and I didn't really push it. Joe had mentioned to me as well that, you know, he was due a bonus that he had never received. So he expressed some concern there on his part, on his own part. So, you know, I just basically left it. You know, I didn't want to raise it as a major issue.[5]

         The Defendants argue that this Court's "liberal standard for allowing amendments to pleadings, " and a purported lack of prejudice toward the Plaintiff at this early stage of litigation, should require this Court to allow the Amendment.[6] The Defendants also argue[7] that the Plaintiff would not be prejudiced by the Amendment due to notice of a potential amendment through Wilson's deposition testimony on June 1, 2017:

Q: I need to know if you're square with Lyons. Do they owe you any money? Did they pay you everything they promised to pay you, et cetera? . . . What's your knowledge? Do you think you're square or not square?
A: I would say no. I was per my, per my offer letter I was supposed to get an increase in salary. I don't know off the top of my head, but I want to say 25, 000, somewhere in that range in the second year. It never happened. I never really questioned it.[8]

         The Defendants contend that the Amendment is plainly supported by the evidence and "not futile."[9]

         The Plaintiff argues that the Defendants' Motion to Amend is a "litigation ploy" designed to "prolong and unduly complicate" the resolution of the Plaintiff's pending Motion for Summary Judgment and the case itself.[10] The Plaintiff argues that the DWPCA claim fails because the $25, 000 payment was discretionary and outside the definition of "wages" under the DWPCA.[11] The Plaintiff also contends that the Offer cannot give rise to a cause of action because the $25, 000 payment was discretionary on its face, that Wilson did not properly plead or rely on any purported promise of $25, 000 as required to plead promissory estoppel and negligent misrepresentation, and that any DWPCA claim is time-barred.[12]

         II. ANALYSIS

         Chancery Court Rule 15(a) provides that the amendment sought requires consent of the Court, but that leave shall be freely given as justice requires.[13] Here, given the stage of the proceedings and the lack of prejudice to the Counterclaim Defendants, a non-frivolous amendment would appropriately be granted. However, if it appears that the claims added would fail a motion to dismiss, litigant's economy dictates that an amendment should be denied. "A court will not grant a motion to amend . . . if the amendment would be futile. An amendment is futile if it would not survive a motion to dismiss under Court of Chancery Rule 12(b)(6)."[14] Accordingly, I apply a motion to dismiss standard in review of the Motion to Amend. When reviewing a motion to dismiss under Court of Chancery Rule 12(b)(6),

(i) all well-pleaded factual allegations are accepted as true; (ii) even vague allegations are well-pleaded if they give the opposing party notice of the claim; (iii) the Court must draw all reasonable inferences in favor of the non-moving party; and (iv) dismissal is inappropriate unless the plaintiff would not be entitled to recover under any reasonably conceivable set of circumstances susceptible of proof.[15]

         I need not, however, "accept conclusory allegations unsupported by specific facts or . . . draw unreasonable inferences in favor of the non-moving party."[16] In addition, I refer to certain documents that are incorporated by reference in the Motion to Amend.[17] I address each purported new cause of action in turn.

         The flaw in Wilson's general premise is that the promise relied on in the Offer is for a salary increase conditioned on approval "from your manager and . . . David Lyons, Sr." The Amendment does not allege such approval was granted, and therefore the facts pled cannot sustain a claim for damages. Presumably, this is why Wilson eschews a contract claim, and instead seeks statutory and equitable relief.

         A. The DWCPA ...


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