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WHELAN v. CAREERCOM CORP.

April 17, 1989

JOSEPH M. WHELAN, Plaintiff,
v.
CAREERCOM CORPORATION, Defendant



The opinion of the court was delivered by: CALDWELL

 WILLIAM W. CALDWELL, UNITED STATES DISTRICT JUDGE

 This action is before the court on defendant, CareerCom's, motion to dismiss plaintiff, Joseph M. Whelan's, complaint pursuant to Fed. R. Civ. P. 12(b)(6). This is a diversity action controlled by Pennsylvania law. *fn1" Count I of the complaint alleges that defendant breached a written employment agreement with plaintiff requiring CareerCom to pay him stock options worth $ 100,000 per year in 1987 and 1988. The remaining counts of the complaint, for negligent misrepresentation, breach of implied covenant of good faith, and wrongful discharge, arise from plaintiff's discharge from employment. Plaintiff was employed by defendant from November 18, 1987, until July 1, 1988. The motion can only be granted if plaintiff can prove no set of facts in support of his claims. See Labov v. Lalley, 809 F.2d 220 (3d Cir. 1987).

 The Breach of Contract Claim for the Stock Options.

 Plaintiff can establish a breach only if the contract required defendant to provide plaintiff with $ 100,000 in options in both 1987 and 1988, as plaintiff has alleged. Plaintiff contends the facts and circumstances surrounding the making of the contract support his interpretation. Defendant argues the contract did not obligate it to grant the options, and any extrinsic evidence is inadmissible under the parol evidence rule since the agreement is unambiguous in regard to the options.

 Under Pennsylvania law, when the terms of a written contract are clear and unequivocal, its meaning must be determined by the writing alone. Mellon Bank, N.A. v. Aetna Business Credit, Inc., 619 F.2d 1001, 1009-1010 (3d Cir. 1980). If, however, the contract terms are ambiguous, the court must construe their meaning. Thermice Corp. v. Vistron Corp., 528 F. Supp. 1275, 1284 (E.D. Pa. 1981), aff'd without opinion, 688 F.2d 825 (3d Cir. 1982). In construing a contract, the court may consider the situation of the parties and the circumstances under which the contract was made. Mellon Bank, 619 F.2d at 1010-11 (quoting United Ref. Co. v. Jenkins, 410 Pa. 126, 137-38, 189 A.2d 574, 580 (1963)). Such extrinsic evidence, when used to aid the court in its construction of the contract terms, is not barred by the parol evidence rule. Mellon Bank, 619 F.2d at 1010 n.9.

 In determining the propriety of using extrinsic evidence the question is whether the contract terms are ambiguous. A contract term is "ambiguous" when it is susceptible to two or more reasonable interpretations. Thermice, 528 F. Supp. at 1284. The portion of the contract at issue appears in paragraph four of the agreement and states, in part: "Employee's name shall be submitted for a grant of options to the Incentive Stock Option Committee or Compensation Committee for $ 100,000.00 in market value at the date of the grant in calendar year 1987 and 1988, as soon as legally possible, as the plan may permit." (complaint, Exhibit 2). Defendant contends the passage means "that Plaintiff's name would be submitted for consideration by the Stock Option Committee." (Defendant's brief at 9) (emphasis supplied). Plaintiff contends the passage means he would definitely receive $ 100,000 in options in both 1987 and 1988. We consider each of these a reasonable interpretation of an ambiguous contract term. Therefore, the motion to dismiss the contract claim will be denied.

 The Misrepresentation Claim

 In Count II of his complaint, plaintiff seeks recovery based upon allegedly false representations negligently made by defendant's president during contract negotiations. Those representations are set forth in paragraph 8 of the complaint. There are four of them but plaintiff's brief limits the grounds of the misrepresentation claim to two false statements: (1) that defendant "was a rapidly expanding and growing company" and (2) that defendants' "executive employees were stable and secure." Plaintiff's brief also asserts that Count II (although clearly labeled negligent misrepresentation) sets forth factual averments supporting fraudulent misrepresentation as well.

 Plaintiff relies upon Lokay v. Lehigh Valley Cooperative Farmers, Inc., 342 Pa. Super. 89, 492 A.2d 405 (1985) to support the claim based upon the defendant's supposed financial health. That case permits an employee who has been induced by fraudulent misrepresentations to quit his former job and begin working for the defendant employer to recover "all pecuniary losses which result as a consequence of his reliance on the truth of the [defendant's] representations." Id. at 99, 492 A.2d at 410 (1985) (quoting Delahanty v. First Pennsylvania Bank, N.A., 318 Pa. Super. 90, 117, 464 A.2d 1243, 1257 (1983)) (brackets in Lokay). Defendant argues that Lokay is distinguishable. It also maintains that the parol evidence rule and an integration clause in the written agreement bar plaintiff's misrepresentation claim.

 Initially, we note that defendant has apparently misperceived the nature of plaintiff's claim although we must admit that it has not been set forth with great clarity. Prior to plaintiff's employment, the parties' negotiations involved a written contract which they undoubtedly contemplated would be executed prior to plaintiff's tenure. But the contract was not executed at that time. Rather, a draft agreement (complaint, Exhibit 1) was submitted to plaintiff who made revisions to it, (id. para. 10), allegedly incorporating the terms of a verbal agreement the parties had been able to reach. The verbal agreement is set forth in paragraph 8 of the complaint and included, among other things, the representations upon which Count II is based. The plaintiff apparently went to work under the terms of the oral agreement on November 12, 1987, (complaint, para. 12), and did not execute the written agreement until May 27, 1988, which became binding on that date. (complaint, para. 9(e) of Exhibit 2). So plaintiff had two periods of employment, one under the oral agreement, and the other under the written agreement into which the oral agreement merged. (complaint, para. 9(g) of Exhibit 2).

  Thus, the parole evidence rule and the integration clause would not be relevant to that portion of the employment relationship governed by the oral contract. We are also not entirely convinced that the integration clause automatically bars any claim for either negligent or fraudulent misrepresentation even as to the written agreement. Defendant cites Harrison v. Fred S. James, P.A., Inc., 558 F. Supp. 438 (E.D. Pa. 1983) in support of this argument, but Betz Laboratories, Inc. v. Hines, 647 F.2d 402 (3d Cir. 1981) and Mancini v. Morrow, 312 Pa. Super. 192, 458 A.2d 580 (1983) indicate that there may be serious difficulties in using the integration clause to bar a misrepresentation claim based upon fraud. Nevertheless, we need not address this issue because the allegedly false representations are insufficient to support such a claim under Pennsylvania law in any event - either as to negligence or fraud.

 As noted, plaintiff's brief limits the basis of Count II to the false representation by the defendant's President that defendant "was a rapidly expanding and growing company." (complaint, para. 8). "The elements that negligent and fraudulent misrepresentation have in common are false information, justifiable reliance, causation and pecuniary loss." Browne v. Maxfield, 663 F. Supp. 1193, 1202 (E.D. Pa. 1987) (brackets added). In the instant case, plaintiff's cause of action based upon the above averment fails on the essential element of causation. Plaintiff may have been induced to take the job with CareerCom by false statements concerning its growth and expansion but he does not allege that his reliance upon those false statements caused him to lose his job. See Browne, supra, 663 F. Supp. at 1203. The complaint only alleges that plaintiff was fired, first, without cause, (complaint, para. 13), and, second, to save the defendant the expense of paying him his 1988 stock option and the increased salary he was due for his promotion to Chief Financial Officer. (complaint, para. 31). These reasons are not necessarily related to a lack of growth by the defendant. In contrast, in Lokay, as defendant has correctly distinguished it, plaintiff had relied upon false financial statements making the company look healthier than it really was, left his old job on the basis of those statements, and was later terminated for the express reason that the defendant could no longer afford to employ him.

 The second basis for the misrepresentation claim is defendant's false statement that its "executive employees were stable and secure." (complaint para. 8). In the past, employees have been unsuccessful in using this type of allegation to support a breach of contract claim. See Murray v. Commercial Union Insurance Co., 782 F.2d 432, 435 (3d Cir. 1986) (assurances of a "future and lifetime career" and of employment for as long as it was mutually agreeable "are to vague to create employment for a term.") We believe it is also insufficient to sustain a misrepresentation claim. Initially, at least in a fraud action brought under Pennsylvania law, "misrepresentation must be distinguished from mere 'puffing.'" Berkebile v. Brantly Helicopter Corp., 462 Pa. 83, 103, 337 A.2d 893, 903 (1975) (brackets added). The latter is not actionable. See Forbis v. Reilly, 684 F. Supp. 1317, 1321 (W.D. Pa.), aff'd without opinion, 862 F.2d 307 (3d Cir. 1988). We believe that this proposition would also apply to negligently made statements. We therefore conclude as a matter of law that, in the context of pre-employment discussions, a general statement that a business's executives enjoy a stable and secure tenure is neither an actionable ...


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