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Costello v. Board of Trustees of Flavius J. Witham Memorial Hospital

United States District Court, S.D. Indiana, Indianapolis Division

November 22, 2019

Cindy Costello, Plaintiff,
Board of Trustees of the Flavius J. Witham Memorial Hospital, d/b/a Witham Health Services, Michael Wagner, Brenda Strohl, George Pogas, and Emily Rogers, Defendants.


          Hon. Jane Magnus-Stinson, Chief Judge

         Plaintiff Cindy Costello filed a Complaint against her employer, Board of Trustees of the Flavius J. Witham Memorial Hospital d/b/a Witham Health Services (“Witham”) and several of its employees, alleging that she was denied employment benefits that were owed to her, including overtime compensation, bonuses, paid time off, and reimbursement of expenses. [Filing No. 1.] Defendants filed a Motion for Partial Judgment on the Pleadings, pursuant to Federal Rule of Civil Procedure 12(c), seeking judgment on some of Ms. Costello's state law claims, which was fully briefed by the parties. [Filing No. 14; Filing No. 15; Filing No. 20; Filing No. 24.] Ms. Costello then filed a Motion for Leave to File an Amended Complaint, seeking to add additional claims without changing the claims raised in her initial Complaint. [Filing No. 36.] Pursuant to the Court's order, [Filing No. 38], Defendants filed a Notice, declining to oppose the Motion to Amend and indicating their desire to stand on the arguments made in their Motion for Partial Judgment on the Pleadings and apply those arguments to the Amended Complaint, if amendment was permitted, [Filing No. 39].

         The Court now GRANTS Ms. Costello's Motion for Leave to Amend, [Filing No. 36], and DIRECTS the Clerk to docket the proposed Amended Complaint, [Filing No. 36-1], as the operative complaint in this action, with the proposed exhibits, [Filing No. 36-2; Filing No. 36-3], docketed as exhibits thereto. The remainder of this Order will address Defendant's Motion for Partial Judgment on the Pleadings is it relates to the Amended Complaint. For the reasons stated herein, the Court grants the motion in part and denies the motion in part.


         Standard of Review

         A motion for judgment on the pleadings under Rule 12(c) is governed by the same standards as a motion to dismiss for failure to state a claim under Rule 12(b)(6). Adams v. City of Indianapolis, 742 F.3d 720, 727-28 (7th Cir. 2014). To survive a motion to dismiss under Rule 12(b)(6), the complaint must contain allegations that collectively “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555). In deciding a Rule 12(c) motion, the Court must accept all well-pled facts as true and draw all permissible inferences in favor of the non-movant. Archer v. Chisholm, 870 F.3d 603, 612 (7th Cir. 2017).

         However, to allege fraud, the plaintiff “must state with particularity the circumstances constituting fraud.” Fed.R.Civ.P. 9(b). This means that the plaintiff ordinarily must describe the “who, what, when, where, and how” of the fraud. United States ex rel. Berkowitz v. Automation Aids, Inc., 896 F.3d 834, 839 (7th Cir. 2018) (internal quotations and citation omitted). Although what constitutes “particularity” may depend on the facts of each case, plaintiffs must “use some means of injecting precision and some measure of substantiation into their allegations of fraud.” Id. (internal quotations, alteration, and citation omitted). This heightened standard does not only apply to causes of action for fraud specifically, but applies to any claim that “sounds in fraud, ” meaning any claim that is premised upon a course of fraudulent conduct. Borsellino v. Goldman Sachs Grp., Inc., 477 F.3d 502, 507 (7th Cir. 2007). Whether a claim “sounds in fraud” will depend upon the plaintiff's specific factual allegations. Id.



         Consistent with the standard of review described above, the following allegations from the Amended Complaint are accepted as true for purposes of deciding this Motion.

         In 2014, Witham offered Ms. Costello a position in sales and marketing in its Toxicology Laboratory, to begin in January 2015. [Filing No. 36-1 at 2.] Prior to receiving this offer, Ms. Costello had worked in forensic and clinical laboratory services for 35 years and had developed a strong professional reputation within the industry and a large book of clients. [Filing No. 36-1 at 2.] Ms. Costello moved over 100 miles in order to take the position at Witham, which forced her husband to retire from his employment. [Filing No. 36-1 at 2.]

         The job description provided by Witham indicated that the job was “Non-Exempt, ” meaning that she would be entitled to overtime pay. [Filing No. 36-1 at 2.] Pursuant to the offer, Witham was to pay Ms. Costello a base salary, plus an additional bonus in the amount of 5% of annual revenues above $1, 380, 000. [Filing No. 36-1 at 2.] However, Ms. Costello alleges that Witham misrepresented its annual revenue and failed to incorporate into its representation various clients and accounts that it had lost. [Filing No. 36-1 at 3.]

         During negotiations, Witham represented that it would reimburse meal costs incurred during required travel and provide Ms. Costello with three weeks of paid time off per year. [Filing No. 36-1 at 3.] After Ms. Costello began working, Witham failed to reimburse her meal costs, required her to work during her paid time off, forced her to use her paid time off for any day on which she was unable to travel, only paid her for 40 hours per week even though she worked more hours, and refused to pay her overtime. [Filing No. 36-1 at 3.] In addition, Ms. Costello personally established a $100, 000 line of credit with a distributor, and several credit accounts with partnering laboratories, which Witham knowingly and intentionally defaulted on. [Filing No. 36-1 at 4.]

         Ms. Costello brought the lack of overtime pay to the attention of Jeff Retz, the toxicology lab manager, and informed all of the individual Defendants. [Filing No. 36-1 at 3.] Mr. Retz threatened Ms. Costello that if she did not stop pursuing overtime pay or commission that was owed to her, she would either be fired, or the toxicology lab would be shut down. [Filing No. 36-1 at 3.] Defendant Dr. Michael Wagner also told Ms. Costello that, if she pursued her requests for overtime pay or unpaid commission, she would be “axed.” [Filing No. 36-1 at 3.] Ms. Costello complained to human resources about the threats, but nothing was done. [Filing No. 36-1 at 4.]

         Based on these allegations, Ms. Costello asserted various claims under the federal Fair Labor Standards Act (“FLSA”), the Indiana Wage Payment Statute, the federal Family and Medical Leave Act (“FMLA”), Title VII, the federal Equal Pay Act, and Indiana common law. [Filing No. 36-1 at 4-14.] Relevant here, Ms. Costello asserted state law claims for breach of contract, unjust enrichment, promissory estoppel, constructive fraud, and breach of fiduciary duty. [Filing No. 36-1 at 5-10.]

         As to the breach of contract claim, Ms. Costello asserts that she entered into negotiations with Witham based upon a job description for a non-exempt position. [Filing No. 36-1 at 6.] She then entered into a contract with Witham, under which Witham agreed to pay her a 5% bonus every six months, no later than January 15th and July 15th of each consecutive year. [Filing No. 36-1 at 6.] Witham also agreed to reimburse her for the cost of meals during any necessary travel and for office expenses. [Filing No. 36-1 at 6.] According to Ms. Costello, Witham breached the contract by “failing to provide [her] with the agreed upon terms of employment, ” and by failing to pay her bonuses and reimburse her for meals and office expenses, resulting in substantial monetary damage. [Filing No. 36-1 at 6.]

         Ms. Costello attached to her Amended Complaint a copy of the job posting for the Sales and Marketing Representative position at Witham, which contains a notation that the job is “Nonexempt.” [Filing No. 36-2 at 2.] The posting also states that it “is not a contract of employment, nor does it establish an employment relationship that requires the hospital or employee to have a reason to terminate the employment relationship.” [Filing No. 36-2 at 3.] In addition, the posting states that Witham “may unilaterally modify the content of this document at any time, ” with or without notice to or approval from the employee, and that if the employee “continues to remain employed after notification of any changes, it shall be considered an acceptance of the same.” [Filing No. 36-2 at 3.] The posting was unsigned. [Filing No. 36-2 at 2-3.]

         Ms. Costello also attached a series of emails which culminated in the following terms of the offer of employment: (1) a yearly salary of $55, 000 plus a 5% bonus for revenues in excess of $1, 380, 000, to be paid semi-annually; (2) reimbursement for mileage at the rate established by the Internal Revenue Service; (3) reimbursement for office supplies and meals at a rate of one meal per day unless overnight travel is required; and (4) furnishing of a laptop and cell phone. [Filing No. 36-3 at 2.]

         Regarding unjust enrichment, Ms. Costello asserts that Witham is a large, wealthy business organization that was in a superior position in terms of knowledge and business sophistication and it owed her a fiduciary duty to be honest and tell her the truth. [Filing No. 36-1 at 7.] She states that Witham took advantage of this superior position and “implemented a scheme to defraud” her by lying about and failing to inform her of material facts. [Filing No. 36-1 at 7.] Specifically, she alleges that she was under a contract to receive a bonus based on revenue, but Witham refused to inform her of its actual revenue and intentionally lied to her about the amount of revenue generated to avoid paying the bonus. [Filing No. 36-1 at 8.] Ms. Costello also alleges that Witham allotted her three weeks of paid time off, but then required her to maintain availability and answer phone calls and emails while she used the time. [Filing No. 36-1 at 8.]

         As to the claim for promissory estoppel, Ms. Costello alleges that Witham made “numerous promises” in order to induce her to accept its offer of employment, including but not limited to the promise that it would accept the clients she presented. [Filing No. 36-1 at 8.] Despite this promise, Witham repeatedly refused to provide services to numerous large clients that Ms. Costello presented. [Filing No. 36-1 at 8.] Ms. Costello also alleges that she personally established a $100, 000 line of credit with a distributor and two credit accounts with partnering laboratories, “under the implied assurance that [Witham] would make timely payments” on the accounts, and that Witham used her name and reputation to negotiate the terms of the line of credit in order to obtain products vital for its daily operations. [Filing No. 36-1 at 9.] She alleges that Witham then knowingly and intentionally defaulted on these accounts, which caused the distributor and laboratories to contact Ms. Costello personally for payment, irreparably harming her professional reputation. [Filing No. 36-1 at 9.]

         Regarding her claim for breach of fiduciary duty, Ms. Costello alleges that Defendants owed fiduciary duties to her, and Defendants have breached those duties, resulting in substantial damages. [Filing No. 36-1 at 10.]

         Defendants have filed a Rule 12(c) Motion for Partial Judgment on the Pleadings as to Ms. Costello's claims for breach of contract, unjust enrichment, promissory estoppel, constructive fraud, and breach of fiduciary duty. [Filing No. 14.] The Court now considers the Motion and the related briefing by both parties as it relates to the Amended Complaint.



         At the outset, the Court notes that Ms. Costello, in her Response to Defendants' Motion, conceded that her claim for constructive fraud did not satisfy the particularity requirements of Rule 9(b) and voluntarily withdrew it. [Filing No. 20 at 5-6.] Although Ms. Costello later reasserted her constructive fraud claim in her Amended Complaint, [Filing No. 36-1 at 9], this appears to have been an oversight, as the allegations were not altered to account for her concession that the claim was insufficiently pled. Accordingly, the Court will treat the constructive fraud claim as WITHDRAWN, and Defendants' Motion is DENIED AS MOOT with respect to that claim. The Court will address the remaining claims in turn.

         A. ...

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