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Long v. Valley Forge Military Academy Foundation

December 8, 2008

PETER A.C. LONG,
v.
VALLEY FORGE MILITARY ACADEMY FOUNDATION, ET AL.



The opinion of the court was delivered by: Surrick, J.

MEMORANDUM & ORDER

Presently before the Court are Defendants Valley Forge Military Academy Foundation and the Board of Trustees of the Valley Forge Military Academy Foundation's Motion to Dismiss (Doc. No. 11) and Defendant H.R. Impact's Motion to Dismiss (Doc. No. 12). For the following reasons, the motions will be granted in part and denied in part.

I. BACKGROUND

Plaintiff Peter A.C. Long ("Plaintiff') is a retired Admiral of the United States Navy. (Doc. No. 10 ¶ 6.) On August 17, 2000, the Valley Forge Military Academy and College (the "VFMAC") hired Plaintiff as its eighth President. (Id.) The VFMAC is a military-based boarding school in Delaware County, Pennsylvania, that enrolls approximately 600 young male students in the seventh grade through the second year of college. (Id. ¶ 7.) The Valley Forge Military Academy Foundation (the "Foundation") operates the VFMAC. (Id. ¶ 2.) The Foundation has a Board of Trustees (the "Board of Trustees"), which oversees the VFMAC's operations. (Id. ¶ 3.)

On July 1, 2003, Plaintiff entered into an Employment Agreement with the Foundation. (Id., Ex. A.) The Employment Agreement is governed by Pennsylvania law and provides that the Foundation will employ Plaintiff as the VFMAC's President for a period of three years, beginning on July 1, 2003, and ending on June 30, 2006. (Id.) The Employment Agreement outlines Plaintiff's salary and employment benefits, including paid vacation and a Non-Qualified Deferred Compensation Plan maintained by the Foundation. (Id. at 4.) The Employment Agreement allows the Foundation to terminate Plaintiff's employment at any time "for cause" or "without cause." (Id. at 3-4.)The Employment Agreement defines "for cause" as:

(i) the failure by [Plaintiff] to perform the Duties of the President satisfactorily; (ii) any material misrepresentation by [Plaintiff] of his background or qualifications; or (iii) unacceptable personal conduct, as determined by a two-thirds (2/3) vote of the Board of Trustees of The Foundation in its sole discretion and without further recourse by [Plaintiff]. (Id. at 3.) The Employment Agreement does not define "without cause," but provides that it may be "determined by a two-thirds vote of the Board of Trustees of the Foundation, in its sole discretion and without any further recourse by [Plaintiff]." (Id. at 4.) The classification of Plaintiff's termination of employment as "for cause" or "without cause" affects the benefits Plaintiff is entitled to receive. If the Foundation terminates Plaintiff's employment "without cause," the Foundation "shall continue to pay [Plaintiff's] salary at its then-current rate and Fringe Benefits for a period of one year." (Id. at 4.) If the Foundation terminates Plaintiff's employment "for cause," Plaintiff does not receive those benefits.

Termination of Plaintiff's employment "for cause" similarly affects the benefits he is entitled to receive under a Non-Qualified Deferred Compensation Plan (the "Plan"). The Plan provides that "[if Plaintiff] voluntarily terminates his employment with the Foundation without Good Reason, or if [Plaintiff] is terminated by the Foundation for Cause . . . the Allocations shall be irrevocably forfeited. . . ." (Doc. No. 10, Ex. B at 2.) The Plan provides that "[if Plaintiff] voluntarily terminates employment with the Foundation for Good Reason, or if [Plaintiff] is terminated by the Foundation without Cause . . . , an amount equal to the surrender value of the Policy shall be distributed to [Plaintiff] as soon as practicable after such termination of employment. . . ." (Id.)

The amended complaint alleges that in the Spring of 2004, the Board of Trustees hired a human relations firm, Defendant H.R. Impact, to build a sexual harassment case against Plaintiff in order to justify termination of his employment "for cause." (Doc. No. 10 ¶ 18.) Plaintiff alleges that to build such a case, an employee of H.R. Impact, Catherine Warrin ("Warrin"), approached several women at the VFMAC -- in the absence of any written or oral complaints against Plaintiff -- and inquired whether Plaintiff had ever engaged in any unwanted physical contact or made them feel uncomfortable. (Id. ¶¶ 19-22.) Two of the women allegedly told Warrin about isolated instances of non-sexual, non-harassing contact. (Id. ¶ 21.) A third woman strongly denied any inappropriate conduct. (Id.) A fourth woman described a peck on the cheek for which Plaintiff apologized and did not repeat. (Id.) Plaintiff asserts that Warrin drafted a summary of her investigation that improperly and inaccurately suggests that he committed sexual harassment. (Id. ¶¶ 20, 23.) Plaintiff asserts that Warrin used her investigation to manufacture a false "cause" for terminating his employment, thereby denying him various benefits. (Id. ¶ 23.)

On June 16, 2004, the Foundation informed Plaintiff that the four women had filed complaints against him for unwanted physical touching and sexual harassment. (Id. ¶¶ 25-26.) Once informed of the allegations, Plaintiff retained counsel. (Id. ¶ 27.) Thereafter, the Board of Trustees convened a Conduct Review Committee to review the results of H.R. Impact's investigation and to present a report. (Id., Ex. C.) The report recommended that the Foundation continue Plaintiff's employment so long as he agreed to accept a number of Resolutions (the "September Resolutions"). (Id., Ex. D.) The September Resolutions required, among other things, that Plaintiff: (1) sign a release and indemnification extending to the VFMAC, its agents, Board members, officers, and employees; (2) sign and send letters of apology to each of the complainants; (3) distribute a memorandum to the entire VFMAC staff reaffirming his commitment to the school's Sexual Harassment Policy; (4) participate in an executive coaching course at his expense; (5) adhere to the Resolutions as part of his Duties under his Employment Agreement; and (6) reimburse the VFMAC and all released parties for costs and legal fees should the VFMAC have to seek court action to enforce the Employment Agreement. (Id., Ex. E.) On September 28, 2004, the Board of Trustees adopted the September Resolutions and voted not to terminate Plaintiff's employment "for cause." (Id.) On the advice of counsel, Plaintiff refused to agree to the terms of the September Resolutions. (Doc. No. 10 ¶¶ 37-41.)

The Board of Trustees characterized Plaintiff's refusal to adopt the September Resolutions as insubordination and grounds for dismissal. (Id. ¶ 43.) On November 3, 2004, the Board adopted another set of Resolutions (the "November Resolutions") which stated that:

[Plaintiff] is terminated for cause for the reasons set forth in pages 8 and 9 of the Conduct Review Committee Report, failure to comply with the Board resolutions of September 28, 2004 . . . The termination is effective fourteen (14) days from today's date (November 3, 2004) unless an earlier written agreed retirement is executed between [Plaintiff] and Valley Forge Military Academy. . . . (Id., Ex. G.) The Board of Trustees authorized a subcommittee "to meet with [Plaintiff] and attempt to negotiate and execute" an agreed retirement with Plaintiff. (Id. ¶ 46; see also id., Ex. G.) On November 9, 2004, the subcommittee presented Plaintiff with terms and conditions for an agreed retirement. (Doc. No. 10 ¶¶ 46-48.) The terms and conditions required Plaintiff to release the VFMAC from any future liability, but did not require the VFMAC to release Plaintiff from similar liability. (Id. ¶ 49.) Plaintiff allegedly proffered an alternative release that mutually absolved both Plaintiff and the VFMAC of all future liability, but the subcommittee rejected it. (Id.) Plaintiff claims that he acted in good faith to fulfill the other terms and conditions that the subcommittee presented. On November 13, 2004, Plaintiff tendered his resignation and, on December 15, 2004, he vacated the President's house in a timely manner. (Id. ¶¶ 50-51.)

Plaintiff then applied for unemployment compensation with the Commonwealth of Pennsylvania. (Id. ¶ 53.) On February 10, 2005, the Pennsylvania Unemployment Compensation Board awarded Plaintiff unemployment compensation, finding that the VFMAC discharged Plaintiff and that Plaintiff was not guilty of willful misconduct. (Id. ¶ 55.) The Pennsylvania Unemployment Compensation Board of Review twice affirmed the decision. (Id. ¶ 57.)

On August 22, 2005, Plaintiff commenced the instant action against Defendants. (See Doc. No. 1.) On September 22, 2005, Plaintiff filed an amended complaint. (See Doc. No. 10.) The amended complaint contains five counts. Counts I through III assert claims against the Foundation and the Board of Trustees (collectively, the "Academy Defendants"). Counts IV and V assert claims only against Defendant H.R. Impact. The amended complaint specifically alleges the following claims:

Count I: Breach of contract against the Academy Defendants for violations of the Employment Agreement. (Doc. No. 10 ¶¶ 59-71.)

Count II: Breach of contract against the Academy Defendants for violations of the Employment Agreement, as allegedly modified. (Id. ¶¶ 72-83.)

Count III: Violation of the Pennsylvania Wage Payment and Collection Law, 43 P.S. § 260, et seq., against the Academy Defendants. (Id. ¶¶ 84-88.)

Count IV: Common law negligence or gross negligence against H.R. Impact. (Id. ¶¶ 89- 95.)

Count V: Common law intentional interference with contract against H.R. Impact. (Id. ¶¶ 96-98.)

Plaintiff also seeks punitive damages against H.R. Impact in Counts IV and V. (Id. ¶¶ 95, 98.) Plaintiff asserts that this Court has diversity jurisdiction because he is a resident of Florida, and Defendants are organized under the laws of Pennsylvania and conduct business principally in Pennsylvania. (Id. ¶¶ 1-5.)

The Academy Defendants filed the instant motion to dismiss the amended complaint based on several grounds. (See Doc. No. 11). They argue under Rule 12(b)(1) that the Court lacks diversity jurisdiction because members of the Board of Trustees are citizens of Florida, as is Plaintiff. (See Doc. 11-13 at 7-16.) They argue under Rules 4 and 12(b)(5) that Plaintiff did not properly serve theBoard of Trustees with the summons and amended complaint. (Id. at 4-7.) Finally, they argue under Rule 12(b)(6) that Plaintiff fails to state claims in Counts I through III. (Id. at 16-22.) The Academy Defendants have also moved to strike from the amended complaint references to certain evidence that it claims is not admissible. (Id. at 22-25.)

Defendant H.R. Impact filed its motion to dismiss the amended complaint asserting under Rule 12(b)(6) that Plaintiff fails to state a claim in Counts IV and V. (See Doc. No. 12.) Defendant H.R. Impact has also moved to dismiss Plaintiff's claims for punitive damages. (Id.)

II. DISCUSSION

A. Subject Matter Jurisdiction

Pursuant to Federal Rule of Civil Procedure 12(b)(1), a court must grant a motion to dismiss if the court lacks subject matter jurisdiction. Fin. Software Sys. v. First Union Nat'l Bank, 84 F. Supp. 2d 594, 596 (E.D. Pa. 1999) (citing Mortensen v. First Fed. Sav. and Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977)). District courts have subject matter jurisdiction over all civil actions (1) arising under the United States Constitution, laws, or treaties of the United States or (2) between citizens of different states where the matter in controversy exceeds $75,000. 28 U.S.C. §§ 1332-1333 (2000). Diversity jurisdiction is not available when any plaintiff is a citizen of the same state as any defendant. 28 U.S.C. § 1332(a); Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 374 (1978). When a party is an unincorporated association, its citizenship for diversity purposes is that of each of its members. United Steelworkers of Am. v. R. H. Bouligny, Inc., 382 U.S. 145, 146 (1965) (rejecting the district court's reasoning that unincorporated associations should be treated in the same manner as corporations); Carlsberg Res. Corp. v. Cambria Sav. & Loan Ass'n, 554 F.2d 1254, 1259 (3d Cir. 1977) ("The citizenship of an unincorporated association, for at least jurisdictional purposes, is deemed to be that of each of its members").*fn1

"The party asserting diversity jurisdiction bears the burden of proof. . . . A party generally meets this burden by proving diversity of citizenship by a preponderance of the evidence." McCann v. Newman Irrevocable Trust, 458 F.3d 281, 286 (3d Cir. 2006) (citations omitted). We note that "no presumptive truthfulness attaches to [a] plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims." Petruska v. Gannon Univ., 462 F.3d 294, 302 n.3 (3d Cir. 2006) (citations and internal quotations marks omitted).

The Academy Defendants contend that this Court lacks diversity jurisdiction, because the Board of Trustees includes members who are citizens of Florida, the same state of which Plaintiff is a citizen. (See Doc. No. 11-13 at 7-16.) The Supreme Court considered this issue in Thomas v. Board of Trustees of the Ohio State University, 195 U.S. 207, 213 (1904). The plaintiff in Thomas named the university's board of trustees as a defendant. Id. The plaintiff did not assert that the university's board of trustees was a corporation, and there were no facts to indicate that the board of trustees was organized as a corporation under state law. Id. The court observed that, "the averment is only that the defendant board of trustees is a citizen of and domiciled in Ohio; not that the trustees themselves are citizens of that state." Id. at 214. The court concluded that the board of trustees was not a citizen of Ohio for purposes of diversity jurisdiction because diversity jurisdiction "must appear from distinct allegations or from facts clearly proven." Id. at 218. The court held that the board of trustees was a citizen of each state where its members resided. Id.; see also Carden v. Arkoma, 494 U.S. 185, 195-96 (1990) ("We adhere to our oft-repeated rule that diversity jurisdiction in a suit by or against the entity depends on the citizenship of 'all the members[.]'") (citations omitted); DPCC, Inc. v. Cedar Fair, L.P., 21 F. Supp. 2d 488, 490 (E.D. Pa. 1998) (same). The court noted that the board of trustees could be sued in its collective name -- without naming as defendants the individual board members -- so long as the members had diverse citizenship. Thomas, 195 U.S. at 218; see also Carlsberg Res. Corp., 544 F.2d at 1258 (rejecting the argument that an unincorporated entity is a citizen of the state of creation because it can sue and be sued in its collective name).

Clearly, Plaintiff does not have to name the individual members of the Board of Trustees as defendants in order to sue the Board of Trustees in its collective name. See Thomas, 195 U.S. at 218. However, Plaintiff must allege either that the Board of Trustees is incorporated in a state other than Florida, or that each individual Trustee is not a citizen of Florida. See id. Plaintiff alleges neither of these things. Moreover, Defendants contend that the Board of Trustees is an unincorporated association and that its membership includes at least one citizen from Florida now, and during the period of Plaintiff's employment. (See Doc. No. 11 at 9-10, Ex. E.) Defendants have proffered a sworn affidavit from a former board member that supports this contention. (Id.) Since it appears that the Board of Trustees is an ...


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