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Hearbest, Inc. v. Adecco USA

United States District Court, W.D. Pennsylvania

December 16, 2014

HEARBEST, INC., Plaintiff,
v.
ADECCO USA; ADECCO EMPLOYMENT SERVICES, INC., Defendants. ADECCO USA; ADECCO EMPLOYMENT SERVICES, INC., Counter-Claimants, HEARBEST, INC., Counter-Defendant

For HEARBEST, INC., Plaintiff: Andrew J. Leger, Jr., LEAD ATTORNEY, Law Office of Andrew J. Leger, Jr., Pittsburgh, PA.

For ADECCO USA, ADECCO EMPLOYMENT SERVICES, INC., Defendants: James P. Hollihan, LEAD ATTORNEY, Duane Morris, Pittsburgh, PA.

OPINION RE: ECF No. 25

MAUREEN P. KELLY, CHIEF UNITED STATES MAGISTRATE JUDGE.

Defendants Adecco USA and Adecco Employment Services, Inc. (collectively " Adecco") have filed a Motion for Summary Judgment (ECF No. 25), seeking the entry of judgment in their favor as to all claims asserted against them in this action. Upon consideration of the Motion for Summary Judgment, the briefs filed in support and in opposition thereto (ECF Nos. 26 and 31-1), the Defendants' Concise Statement of Material Facts (ECF No. 27), the Joint Statement of Undisputed Facts (ECF No. 28), as well as the extensive exhibits filed by both parties (ECF Nos. 29 and 31), and for the following reasons, the Motion for Summary Judgment is granted as to Plaintiff's fraud claim (Count II) but denied in all other respects.

I. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff HearBest Inc. (" Plaintiff" or HearBest") has filed this breach of contract action arising out of an employment services contract entered into with Adecco. Hearbest is a corporation that provides hearing aids and related services to persons who are hearing impaired, with offices in Mt. Lebanon, Pennsylvania and Wheeling, West Virginia. In the spring of 2011, HearBest's President and Chief Executive Officer, Deborah Jo Albaugh (" Albaugh"), entered into discussions with an Adecco representative to hire a temporary medical office administrator for HearBest's Mt. Lebanon Office. The parties subsequently entered into a written contract wherein Adecco agreed, inter alia, to conduct a National Criminal Record File check for any assigned employee (" Associate") who possessed the qualifications sought by HearBest.

On September 21, 2011, Adecco informed HearBest that it had selected a qualified Associate for the position of medical office administrator and forwarded Evalyn McKinney's name to Plaintiff. On October 3, 2011, McKinney began working for HearBest in the position as a temporary contract employee. McKinney worked as a contract employee until November 1, 2011, when she was hired as a permanent employee by HearBest. Upon converting McKinney to an employee of HearBest, Hearbest paid Adecco a " separation fee" of $6, 750.00. (ECF No. 29-20, pp. 10-11).

Beginning in March 2012, McKinney embezzled money from HearBest and some of its customers. Between March 2012 and June 2012, McKinney stole approximately $16, 000. McKinney's embezzlement was eventually discovered, and her employment with HearBest was terminated. McKinney was prosecuted and convicted for her criminal activity. HearBest claims additional damages flowing from McKinney's manipulation of billing and office management to cover up her theft.

The contract between the Adecco and HearBest that governed McKinney's placement expressly provides:

Adecco's standard pricing provides for emailed invoices, Web Time approval system, full Adecco interview and standard Adecco assessments and National Criminal Record File check for each Associate at time of first assignment. Further screens may be performed at additional costs.

(ECF No. 29-11). The contract also provides for a subsequent or additional " Background Check" as follows: " Adecco provides discount pricing for background screenings through LexisNexis. Client will pay for the cost of all background checks plus an administrative fee equal to 12%." Id. The standard pricing provision includes a " National Criminal Record File check" at no additional cost and, in contrast to the Background Check provision, does not refer to LexisNexis. It is undisputed that Adecco did not conduct a national criminal record file check or a background check of McKinney in conjunction with her referral to HearBest.

HearBest has provided evidence it obtained after McKinney's arrest, establishing that in 2006, two criminal indictments were lodged against McKinney in the United States District Court for the Western District of Pennsylvania. The first indictment, at No. 2:06-CR-53 (W.D. Pa. February 7, 2006), alleges that Ms. McKinney violated 18 U.S.C. § 1029(a)(2) when she knowingly and with the intent to defraud, used a credit card belonging to another person. The indictment alleges that McKinney also violated 18 U.S.C. § 513(a) when she forged at least fourteen checks over the course of three months. The docket entries at No. 2:06-CR-53 reveal that after McKinney was released on bond to await trial, the United States Attorney filed a Motion to Revoke Bond. The prosecution sought revocation of bond because McKinney continued to violate the law by stealing and cashing checks from her employer, in violation of the conditions of her bond. (See, No. 06-cr-53, ECF No. 16).

The Court's examination of the docket (available through PACER, as explained at length by Defendant) reveals that the Motion to Revoke Bond, No. 06-CR-53 (ECF No. 16)(W.D. Pa. May 25, 2006), was filed with publicly available " Supporting Documentation and Evidence." [1] The documentation identifies McKinney by her Social Security number and explains that while McKinney was released on bond, she gained employment as an Administrative Assistant with Commercial Cleaning Systems. A statement from the owner of Commercial Cleaning Systems identifies McKinney by her Social Security number. The statement explains that on April 28, 2006, McKinney pried open the door to his business office and stole checks, which she then made out in her name, forging her employer's signature. Other missing checks forged by McKinney were discovered by her employer, and losses estimated as a result of her criminal conduct totaled nearly $30, 000. McKinney's criminal activity while on bond led to a second criminal action filed against her in federal court at No. 06-CR-239, (W.D. Pa. July 7, 2006).

The docket entries in No. 06-CR-53 also separately and plainly reveal that in conjunction with the Court's decision to release McKinney on bond to await sentencing, McKinney was required to obtain permission from Federal Pretrial Services prior to obtaining any further employment. (No. 06-CR-2006, ECF No. 23). McKinney was sentenced to a term of imprisonment for fifteen months and three years of supervised release. (No. 06-CR-53, ECF No. 30). The parties do not dispute that had Adecco disclosed McKinney's criminal background, HearBest would not have agreed to her placement and would not have hired her as its office manager.

In the pending Motion for Summary Judgment, Adecco claims that it did not breach the contract and, in any event, HearBest did not suffer damages as a result of the alleged breach. First, Adecco claims it was not required to conduct a criminal background check because McKinney was first placed into a position by Adecco in 2004, before Adecco changed its standard pricing provision to include completion of a national criminal record file check on all associates. At the time it changed its policy, Adecco " grandfathered" those individuals who had been previously placed with employers. Thus, because Adecco " first assigned" McKinney with an employer in 2004, and again with an employer in 2010, Adecco claims it would not have conducted a criminal background check prior to placing her with HearBest.[2] (ECF No. 27, ¶ ¶ 7, 8, 24).

Second, Adecco claims that the phrase " National Criminal Record File check" refers to a propriety database maintained by LexisNexis. This database does not include federal criminal indictments and convictions. Accordingly, if a National Criminal Record File check had been completed, McKinney's 2006 convictions for embezzling from employers would not have been discovered or disclosed and, therefore, no damages were sustained by the alleged breach of contract. (ECF No. 27, ¶ 25).

Third, Adecco claims that even if the LexisNexis database included federal indictments and convictions, a search would not have disclosed McKinney's 2006 convictions because insufficient " identifiers" connected the convictions to McKinney. According to Adecco, LexisNexis requires two " identifier hits" to match an individual with a conviction record. Such identifiers include " a person's name, birthdate, driver's license number, or social security number." (ECF No. 27, ¶ 27). Adecco states that a physical check of the federal docket conducted after suit was filed failed to locate a second identifier. Adecco ignores the fact that such identifiers are plainly listed in several documents filed in McKinney's criminal proceedings; however, relying on its inability to locate them, Adecco contends HearBest sustained no damages as a result of the alleged breach.

Citing these reasons, Adecco argues that it is entitled to summary judgment in its favor as a matter of law as to HearBest's claim for breach of contract. In addition, Adecco seeks judgment in its favor as to HearBest's fraud claim, as barred by the " gist of the action doctrine" and alternatively, seeks the dismissal of certain elements of the damages claimed by HearBest, which it contends were not caused by the alleged breach of contract.

HearBest opposes Adecco's Motion for Summary Judgment, arguing that the contract is capable of interpretation and patently requires a national criminal background check at the time McKinney was first assigned by Adecco to HearBest. Alternatively, HearBest contends that there are material issues of fact regarding the meaning of the contract's standard pricing provisions and, in either event, HearBest contends that summary judgment in favor of Adecco is inappropriate. HearBest also argues: (1) that the gist of the action doctrine does not apply to its fraud claim, (2) that sufficient evidence exists to connect all damages sustained to Adecco's breach of its obligations and, (3) that full recovery is permitted under the broad damages provision of the employment services contract.

II. STANDARD OF REVIEW

Pursuant to Federal Rule of Civil Procedure 56(a), " [t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). " [T]his standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary ...


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