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Hisey v. Qualtek USA, LLC

United States District Court, E.D. Pennsylvania

August 20, 2019

MICHAEL HISEY, Plaintiff,
v.
QUALTEK USA, LLC et al., Defendants. Hisey II (this action filed in E.D. Pa.)

          MEMORANDUM

          GENE E.K. PRATTER UNITED STATES DISTRICT JUDGE

         This is Michael Hisey's second attempt to sue his former employer, QualTek USA, LLC, and two QualTek executives for claims arising from QualTek's termination of Mr. Hisey's employment. Mr. Hisey brings claims here for (1) breach of contract, (2) violation of the Pennsylvania Wage Payment and Collection Law, and (3) retaliation under 42 U.S.C § 1981. In a previous lawsuit, Mr. Hisey's claims were premised chiefly on employment discrimination and were dismissed by a Florida federal court, without prejudice, for forum non conveniens.

         Defendants move to dismiss, making two basic arguments. First, they seek to apply several preclusion rules because the action is allegedly duplicative of Mr. Hisey's prior suit. Those principles are claim preclusion, claim splitting, and judicial estoppel. Second, they assert that several alleged pleading deficiencies in the complaint require dismissal. Defendants also move for sanctions-including the sanction of dismissal-based on the same preclusion arguments.

         As set forth below, the Court rejects all of the defendants' preclusion arguments. The Court also dismisses in its entirety the Pennsylvania Wage Payment and Collection Law claim and dismisses the § 1981 retaliation claim against the individual defendants only (granting leave to amend). Mr. Hisey's breach of contract claim survives, as does his § 1981 claim against QualTek.

         Factual Background[1]

         Michael Hisey was the Chief Business Officer for QualTek USA, LLC-a multinational telecommunications company-from April 29, 2013 until December 4, 2014. Two separate aspects of Mr. Hisey's employment with QualTek are relevant to this action: First, Mr. Hisey's economic interest in QualTek; and second, Mr. Hisey's allegations that QualTek and its employees engaged in unlawful conduct. Each is addressed in turn.

         I. Economic Interest Units

         Certain employees at QualTek are granted "Economic Interest Units" in QualTek's "Economic Interest Unit Plan."[2] It appears, based on a review of the Economic Interest Unit Plan, that each "Unit" conferred upon an employee represents a one percent (1%) financial stake in QualTek (after reductions for certain debts, expenses, and distribution preferences).

         The grant of each Unit is subject to certain conditions. As Mr. Hisey's Economic Interest Unit offer letter states, "the Units vest over time, but are subject to forfeiture in whole or in part," and employees with Units are required to "continue to be employed by the Company or its subsidiaries in order to receive any economic benefits under the Plan." Amended Compl., Ex. A (Offer Letter). Those limitations are discussed in greater detail in the Economic Interest Unit Plan itself and are outlined below.

         A. Terms of the Units

          According to the Economic Interest Unit Plan, employees' Units are effective "only for so long as the Participant remains an Employee of [QualTek], and shall be immediately cancelled and forfeited if the Participant ceases to be an Employee of [QualTek] for any reason, unless redeemed pursuant to [terms identified] below." Amended Compl., Ex. A (Plan ¶ 6(f)). Once an employee's employment is terminated, the circumstances of that termination dictate whether the employee is compensated for his or her Units.

         B. Effect of Termination on Units' Status

          Under the Economic Interest Unit Plan, an employee who is terminated must (1) forfeit unvested Units entirely, without compensation, and (2) allow QualTek to redeem vested Units pro rata, based on a formula reflecting QualTek's estimated market value. Redemption means that QualTek pays the terminated employee for his or her Units.

         Whether, upon employment termination, Units are forfeited or redeemed turns on two factors: (1) whether the Units are vested, and (2) whether the employment was terminated without cause or with cause.

         C. Vesting of Units

         Each Unit vests pursuant to two independent mechanisms, one based on the passage of time and one based on the performance of QualTek. Over the five years following the grant of a Unit, 50% of the Unit can vest pursuant to automatic, time-passage-based vesting, and 50% of the Unit can vest pursuant to performance-based vesting.

         First, a portion (up to 50%) of each Unit vests automatically over time. Over the five years immediately following the grant of a Unit, that Unit vests 10% per year, beginning one year after the Unit was granted. In other words, if a Unit is granted on January 1, 2020, 10% of that Unit vests on January 1, 2021, and then another 10% vests on January 1 in each of the subsequent four years. Before January 1, 2021, however, that Unit is unvested.

         Second, a portion of each Unit (up to 50%) has the possibility of vesting based on the performance of QualTek over the five years immediately following the grant of a Unit.[3]

         If a Unit is not vested, any terminated employee forfeits the Unit, regardless of whether employment is terminated without cause or with cause.

         If a Unit is vested, whether a terminated employee's Units are redeemed turns on whether the employment is terminated with or without cause.

         D. Termination Without Cause or With Cause

         For vested Units only, employees whose employment is terminated without cause (or due to death or disability) shall have that Unit redeemed by QualTek. A redeemed Unit is bought back by QualTek, with payments made in annual installments.

         Termination with cause (or because the employee voluntarily quit) causes forfeiture of that Unit.

         Thus, only employees with vested Units whose employment is terminated without cause are entitled to redemption of their Units.

         E. Mr. Hisey's Economic Interest Units.

         On January 24, 2014, Mr. Hisey and QualTek entered into an agreement that granted Mr. Hisey 3 Units (i.e., a 3% stake in QualTek). On December 4, 2014, before any of the Units were vested, QualTek terminated Mr. Hisey's employment. Mr. Hisey alleges that his employment was terminated without cause. QualTek did not redeem any of Mr. Hisey's unvested Units.

         II. Mr. Hisey's Allegations of Retaliation[4]

         Mr. Hisey alleges that while he worked for QualTek, he reported several instances of racial discrimination and was fired as a result of those reports. Mr. Hisey alleges that he was aware of several instances of employees at QualTek using racial slurs or racially insensitive language and that he reported those offending employees to QualTek executives. Mr. Hisey also allegedly filed a formal complaint of race discrimination after QualTek executives refused to offer an ownership interest to an African-American employee but offered the same ownership interest to similarly qualified white employees. According to Mr. Hisey, he was fired eleven days after filing this formal complaint.

         Procedural History

         This dispute has a somewhat fraught history, much of which predates this Eastern District of Pennsylvania action. The chart below briefly summarizes the procedural history:

Hisey I (Florida lawsuit that preceded this action)

EEOC issues right to sue letter

11/24/2015

Hisey I complaint filed in Florida state court

12/14/2015

Hisey I removed to S.D. Fla.

2/1/2016

Hisey I dismissed for forum non conveniens

4/13/2016

Hisey I reconsideration of dismissal denied

5/12/2016

Hisey /parties participate in Eleventh Circuit Court of Appeals mediation

9/23/2016

Hisey I dismissal affirmed by Eleventh Circuit Court of Appeals

10/9/2017

Hisey II (this action filed in E.D. Pa.)

Hisey II complaint filed

11/28/2018

Hisey II motion for sanctions filed

11/28/2018

Hisey II first motion to dismiss filed

1/28/2019

Hisey II amended complaint filed

2/19/2019

Hisey II second motion to dismiss filed

2/26/2019

         In December 2015, about a year after Mr. Hisey was fired, he sued QualTek and two of its executives (Joseph Kestenbaum and Christopher Hisey) in Florida state court. See Hisey v. QualTek USA, LLC, et al, No. 16-60197 (S.D. Fla.) ("Hisey I'').[5] Mr. Hisey brought ten claims: (1) Florida law wrongful termination; (2) Florida law medical disclosure violation; (3) Florida law unlawful employment practices; (4) Broward County hostile work environment violation; (5) Broward County sexual orientation discrimination; (6) Title VII wrongful termination; (7) Title VII sex discrimination; (8) Title VII hostile work environment; (9) Title VII retaliation; and (10) ADA discrimination. Notice of Removal and Complaint, Hisey I (Doc. No. 1). The crux of these claims was that QualTek and its employees discriminated against Mr. Hisey for being gay and because of a medical condition.

         QualTek removed Hisey I to the federal court in the Southern District of Florida. Id. The district court dismissed Mr. Hisey's lawsuit for forum non conveniens, because Mr. Hisey's employment contract included a forum selection clause requiring that he bring suit in Pennsylvania. See generally Order Granting Mot. to Dismiss, Hisey I (Doc. No. 25). Mr. Hisey moved for reconsideration of the dismissal, which the court denied. Mot. for Reconsideration and Order Denying Mot. for Reconsideration, Hisey I (Doc. Nos. 26, 27). In its order denying reconsideration, the court emphasized that the dismissal was without prejudice because forum non conveniens dismissal is not on the merits. See Order Denying Mot. for Reconsideration at 2, Hisey I (Doc. No. 27) ("Dismissal on grounds of forum non conveniens is not a determination on the merits and is therefore without prejudice.").

         The Eleventh Circuit Court of Appeals affirmed the dismissal for forum non conveniens. See generally Hisey v. QualTek USA, LLC, 753 Fed.Appx. 698 (11th Cir. 2018). In the briefing and during oral argument, Mr. Hisey argued for reversal because, among other reasons, even though the district court's dismissal was without prejudice, the effect of the dismissal would be with prejudice because his Title VII and ADA claims became time-barred during the initial district court litigation. See, e.g., Brief of Appellant at vii-viii, Hisey v. QualTek USA, LLC, No. 16-13477 (11th Cir. Aug. 5, 2016). Nonetheless, the Eleventh Circuit Court of Appeals left in place the dismissal, stating that "dismissal (or forum non conveniens of a lawsuit brought by one who has violated a contractual obligation by filing suit in a forum other than the one specified in a valid forum-selection clause results in no injustice on the plaintiff who loses out completely through the running of the statute of limitations." Hisey v. Qualtek USA, LLC, 753 Fed.Appx. at 705 (quotation and citation omitted).

         With Mr. Hisey's Florida action concluded and his Title VII and ADA claims time-barred, he filed this action against the same defendants, alleging (1) breach of contract, (2) violation of the Pennsylvania Wage Payment and Collection Law, and (3) a 42 U.S.C. § 1981 claim for retaliation. Defendants moved to dismiss and for sanctions, arguing that the new action is barred by claim preclusion, claim splitting, and judicial estoppel, as well as asserting that the complaint fails to state a claim. After Mr. Hisey amended his complaint, the defendants renewed their motion to dismiss. The Court heard oral argument on the motion.

         Discussion

         The defendants moved both to dismiss Mr. Hisey's claims and for sanctions against Mr. Hisey. Because the substance of motion for sanctions is entirely duplicative of Defendants' motion to dismiss, the Court addresses the motion to dismiss first. The Court grants in part and denies in part the motion to dismiss, but rejects all of the arguments regarding preclusion, which form the basis of Defendants' motion for sanctions. Consequently, the Court denies the motion for sanctions.

         I. Motion to Dismiss

         The defendants' motion to dismiss can be divided generally into two categories. First, Defendants make arguments based on various principles of preclusion, all of which implicate the alleged overlap between this action and Mr. Hisey's previously filed (and dismissed) Florida lawsuit. Second, Defendants make arguments about alleged pleading deficiencies that purportedly undermine each of Mr. Hisey's claims. The Court rejects all of the defendants' preclusion arguments, refuses to dismiss the breach of contract claim, dismisses the WPCL claim with prejudice, and dismisses the § 1981 claim against the individual defendants only, without prejudice and with leave to amend.

         A. Legal Standard

         Although "a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiffs obligation to provide the 'grounds' of his 'entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl, Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations omitted). To survive a Rule 12(b)(6) motion, therefore, the plaintiff must plead "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Specifically, "[f]actual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. The question is not whether the plaintiff "will ultimately prevail. .. but whether [the] complaint [is] sufficient to cross the federal court's threshold." Skinner v. Switzer, 562 U.S. 521, 530 (2011) (citation and quotation omitted). Thus, assessing the sufficiency of a complaint is "a context-dependent exercise" because "[s]ome claims require more factual explication than others to state a plausible claim for relief." W. Pa. Allegheny Health Sys., Inc. v. UPMC, 627 F.3d 85, 98 (3d Cir. 2010) (citations omitted).

         In evaluating the sufficiency of a complaint, the Court adheres to certain accepted benchmarks. For one, the Court "must consider only those facts alleged in the complaint and accept all of the allegations as true." ALA, Inc. v. CCAIR, Inc., 29 F.3d 855, 859 (3d Cir. 1994) (citation omitted); see also Twombly, 550 U.S. at 555 (stating that courts must "assum[e] that all the allegations in the complaint are true (even if doubtful in fact)"). The Court must accept as true all reasonable inferences emanating from the allegations and view those facts and inferences in the light most favorable to the nonmoving party. Rocks v. City of Phila., 868 F.2d 644, 645 (3d Cir. 1989).

         That admonition does not demand that the Court ignore or discount reality. The Court "need not accept as true unsupported conclusions and unwarranted inferences," Doug Grant, Inc. v. Greate Bay Casino Corp., 232 F.3d 173, 183-84 (3d Cir. 2000) (citations and quotation omitted), and "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 556 U.S. at 678 (citation omitted). If a claim "is vulnerable to 12(b)(6) dismissal, a district court must permit a curative amendment, unless an amendment would be inequitable or futile." Phillips v. Cty. of Allegheny, 515 F.3d 224, 236 (3d Cir. 2008) (citation omitted).

         B. Whether Preclusion Requires Dismissal of Mr. Hisey's Complaint

         Defendants argue that three theories of preclusion require dismissal: (1) claim preclusion, (2) claim splitting, and (3) judicial estoppel.

         1. ...


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