Morgan v. DS Smith Holdings, Inc.

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF OHIO

WESTERN DIVISION - CINCINNATI

JAMES W. MORGAN, : Case No. 1:21-cv-481

Plaintiff, : Judge Matthew W. McFarland

INTERSTATE RESOURCES, INC., :

Defendant.

ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT

(Doc. 45)

This matter is before the Court on Defendant Interstate Resources, Inc. (“IRI”)’s

Motion for Summary Judgment (Doc. 45). Plaintiff James W. Morgan filed a

Memorandum in Opposition to the motion (Doc. 53), to which Interstate filed a Reply in

Support (Doc. 54). Thus, this matter is ripe for the Court’s review. For the reasons below,

IRI’s Motion for Summary Judgment (Doc. 45) is GRANTED.!

FACTS

Morgan, an American citizen born in 1958, entered into an Employment

Agreement with IRI in 2006 to be the company’s Executive Vice President. (Employment

Agreement, Doc. 1-2, Pg. ID 12-23; Compl., Doc. 1, { 9.) The Employment Agreement

states that it will “be executed, construed and performed in accordance with the laws of

1 The parties request oral arguments on IRI’s motion for summary judgment. (See Motion for Summary

Judgment, Doc. 45, Pg. ID 4014; Response in Opp., Doc. 53, Pg. ID 4224.) The undersigned finds that oral

arguments are not “essential to the fair resolution of the” motion before the Court. See S.D. Ohio Civ. R.

7.1(b)(2). Accordingly, the parties’ request is denied.

the Commonwealth of Virginia.” (Employment Agreement, Doc. 1-2, Pg. ID 23.)

In August 2017, DS Smith PLC acquired IRI and assumed Morgan’s Employment

Agreement. (Compl., Doc. 1, § 14; Morgan Dep., Doc. 27, Pg. ID 716; Offer Letter, Doc.

27-1, Pg. ID 1054-59.) At the time of the acquisition, DS Smith’s Group Chief Executive,

Miles Roberts, chose Morgan to become the Managing Director of the North American

branch of the company. (Id.)

I. Benefits of Morgan’s New Role

The Managing Director position included eligibility in a Deferred Share Bonus

Plan (“DSBP”) and a Performance Share Plan (“PSP”). (Offer Letter, Doc. 27-1, Pg. ID

1054-59.) These plans allocate certain awards that would become available to Morgan if

he remained with the company for at least three years after accepting the Managing

Director position. (Id.) If Morgan left the company before the three-year requirement was

met, those awards could still become available if he were deemed a “Good Leaver.”

(DSBP, Doc. 27-1, Pg. ID 1091.)

An employee could be considered a Good Leaver for various reasons, including

through “retirement with the agreement of his employer and the [Remuneration]

Committee” or for “any other reason, if the [Remuneration] Committee so decides.”

(DSBP, Doc. 27-1, Pg. ID 1091.) If an employee was terminated for under-performance,

the Remuneration Committee was not required to deem the employee a Good Leaver.

(Termination Guidance, Doc. 27-11, Pg. ID 1144.)

In October 2017, Morgan agreed to a change-in-control amendment to his

Employment Agreement. (Amendment, Doc. 27-1, Pg. ID 1052.) This amendment stated

that, in the event of a change in control of the company, Morgan could be eligible for a

severance payment if he (1) continued to work for the new owners for three months, if

requested by the new owners, and (2) voluntarily terminated his employment by August

25, 2019. (Id.)

II. Morgan’s Performance as Managing Director

As the Managing Director, Morgan acted as the head manager of the company’s

North American Packing and Paper (“NAPP”) business. (Morgan Dep., Doc. 27, Pg. ID

716, 725, 775-76.) As a part of this position, Morgan helped create annual and monthly

financial forecasts for NAPP. (Id. at Pg. ID 851-54.) In 2017 and 2018, NAAP met its

forecasts as predicted. (Id.) In 2019, however, NAPP began falling short. (See Financial

Performance Email, Doc. 27-1, Pg. ID 1165-66.)

At the beginning of 2019, NAPP was about $3.5 million below its forecasted

performance level. (Financial Performance Email, Doc. 27-1, Pg. ID 1165-66.) By April

2019, Roberts notified Morgan that he saw “a drop on over [$4 million] in the month,”

which was “a problem.” (Roberts’ Text, Doc. 44-1, Pg. ID 3968.) In June 2019, NAPP

missed its forecast by $1.3 million. (Summer Email Correspondence, Doc. 27-1, Pg. ID

1170.) By July 2019, NAPP’s forecast for earnings before interest, taxes, and amortization

(“EBTA”) had declined by $6.5 million. (Id.)

Still, the company as a whole continued to perform well. And, on July 2, 2019,

Roberts awarded Morgan a bonus for the company’s 2018/2019 performance. (Bonus

Letter, Doc. 27-1, Pg. ID 1061.) In the bonus letter, Roberts noted the “significant year of

progress” in the company’s business. ([d.) Additionally, Roberts noted that “[t]he North

American business [] acquired in 2017 continue[d] to perform well.” (Id.)

On July 18, 2019, Morgan informed Roberts that he was considering retirement

and had concerns about his eligibility for the DSBP and PSP awards, as well as the

change-in-control severance payment. (Morgan Dep., Doc. 27, Pg. ID 729-30.) In response,

Roberts allegedly told Morgan that he had nothing to be concerned about, that Morgan

“was in their plans for the future,” that “they were happy with what was going on,” and

that Morgan should have “no concerns about a change in control.” (Id. at Pg. ID 731.)

Roberts denies ever making such statements. (Roberts Dep., Doc. 35, Pg. ID 2364.)

NAPP continually failed to meet its objectives for the 2018/2019 fiscal year, which

Morgan discussed in an email sent out to NAPP employees at the end of July.

(Performance Email, Doc. 27-1, Pg. ID 1168-69.) The email stated that “[w]hile there were

many individual and team successes, the overall outcome fell short of Budget and most

of our established targets.” (Id. at 1168.) Most notably, Morgan touched on the fact that

(1) “NAPP had a miss on EBITA (92.7% of Budget), which put the division below the 95%

threshold,” (2) “[p]ackaging had a material miss on EBITA (42.2% of budget), which was

far below the 95% threshold,” (3) “Mill Productivity was 92.7% of Budget, while our

ROACE was below the 95% threshold at 91.4% and 89%,” and (4) “[p]acking delivery in

FY 18/19 was consistency below budget throughout the year.” (Id.) The email noted some

success in NAPP, such as the “short paper position” which offset decline. (Id. at Pg. ID

1169.)

Morgan maintains that the market caused NAPP’s decline. (Morgan Dep., Doc. 27,

Pg. ID 868-87.) In Morgan’s estimation, decreasing paper prices, coupled with the US.

trade war with China, created the perfect storm for a troubled market. (Id.) Morgan also

maintains that the European branch of the company continued to “move paper into the

U.S. but would not take any back,” meaning that NAPP was left with large amounts of

paper with no one to sell it to. (Id. at Pg. ID 868.) Roberts agreed that, to some extent, the

market affected NAPP’s financial position. (Roberts Dep., Doc. 35, Pg. ID 2444-45.) But

Roberts also found that Morgan’s management style had some impact on NAPP’s

performance. (Id.)

So, at the end of July, Roberts sent one of the company’s packaging managers,

Thomas Jakobsen, to NAPP to act as an internal consultant. (Jakobsen Dep., Doc. 36, Pg.

ID 2611-12; 2620-22; Jakobsen Role Correspondence, Doc. 36-1 at Page ID 2751-53.)

Jakobsen was born in Denmark in 1969. (Jakobsen Dep., Doc. 36, Pg. ID 2556-57.)

Previously, in May 2019, Roberts had discussions with Jakobsen about a more long-term

role with NAPP, but Jakobsen found that a temporary consulting position aligned more

with his family situation. (Jakobsen Role Correspondence, Doc. 36-1 at Page ID 2751-53.)

On a previous occasion, Roberts had communicated his plans for the future of

NAPP to Jakobsen. (See Organization Chart, Doc. 41, Pg. ID 3588-89.) On May 10, 2019,

Roberts emailed two hand-drawn charts of NAPP’s organizational structure to Jakobsen.

(Id.) In the “current” chart, Roberts laid out NAPP’s management structure as a pyramid,

with Morgan at the top as “MD.” (Id. at Pg. ID 3589.) In the “future” chart, Roberts

divided out NAPP’s top management, separating out the “MD” role into two positions

for a “Managing Director of Paper” and a “Managing Director of Packaging.” (Id.)

Roberts made no more specific identifications for those roles. (Id.)

While consulting, Jakobsen observed a number of problems with NAPP. These

problems included “a complete lack of NAPP strategy and direction,” “little real buy-in

to DSS strategy [] - words but no real action,” “no structure and processes to drive

improvement in any function,” and “huge capability issues in top management.”

(Jakobsen Dep., Doc. 36, Pg. ID 2611-12, 2620-22, 2647; Jakobsen Notes, Doc. 36-1, Pg. ID

2776-77.) Jakobsen concluded that the “clear underlying problem” was “top

management.” (Id.) These observations were expanded upon in an official report released

that September. (Analysis Report, Doc. 36-1, Pg. ID 2778-822.)

On August 20, 2019, Jakobsen expressed his concerns to Roberts, who “was not

surprised.” (Jakobsen Text, Doc. 35-1, Pg. ID 2540.) Roberts found that NAPP’s

performance had “significantly deteriorated” and specifically communicated to Morgan

that “the [NAPP’s packaging] results were very poor.” (Roberts Dep., Doc. 35, Pg. ID

2443; July 27, 2019 Email, Doc. 27-1, Pg. ID 1172-73.) Roberts inquired with Morgan

whether there was any sort of correction plan to remedy NAPP’s financial downfall.

(Roberts Dep., Doc. 35, Pg. ID 2442-44.) After repeated inquiries, Roberts found that

Morgan had “no clear action plan.” (Id.) Though, other employees maintain that NAPP

had “detailed plans on how to improve.” (Nelson Dep., Doc. 32, Pg. ID 2004.)

In August, discussions of Morgan’s termination began. On August 28, 2019,

Roberts emailed the legal department about terminating Morgan. (Roberts Dep., Doc. 35,

Pg. ID 2414.) Around this time, another supervisor informed NAPP’s Chief Financial

Officer, Kevin Ledbetter, that Morgan would soon be let go. (Ledbetter Dep., Doc. 31, Pg.

ID 1854-55.) And, on October 6, 2019, Roberts officially terminated Morgan for his role in

NAPP’s poor performance. (Roberts Dep., Doc. 35, Pg. ID 2332, 2416-17.)

Morgan maintains that he was blindsided by his termination. (Morgan Dep., Doc.

27, Pg. ID 829-30, 861-62.) Before he was terminated, Morgan maintains that he never

spoke with Roberts about his performance and Roberts never gave any other indication

that Morgan was “in trouble.” (Id.) Roberts maintains that he had several conversations

with Morgan about NAPP’s “unacceptable” performance. (Roberts Dep., Doc. 35, Pg. ID

2331.)

Other American employees over the age of 60 were also being terminated around

this time. (Morgan Dep., Doc. 27, Pg. ID 725-937.) Among these employees included

Susan Newman from human resources, John Cristo, a regional general manager, and Al

Cantrell, a managing director of paper. (Id.)

Following Morgan’s termination, the company appointed Ledbetter as the interim

Managing Director of NAPP. (Appointment Email, Doc. 27-1, Pg. ID 1182-83.) In the

meantime, the company looked for possible replacements for the position. (Id.; Roberts

Dep., Doc. 35, Pg. ID 2327, 2419-20.) Roberts specifically had discussions with Jakobsen

about taking the role, but Jakobsen was not interested. (Roberts Dep., Doc. 35, Page ID

2391-98; 2456; Denial of Offer Email, Doc. 35-1, Page ID 2517-19.) Jakobsen understood

these discussions to be an offer for the Managing Director position, though Roberts

maintains these were merely conversations. ([d.) Ledbetter was later terminated with

Good Leaver status in 2022 and was replaced by American Jeff Jones, born in 1966.

(Ledbetter Dep., Doc. 42, Pg. ID 3738, 3770-71.)

LAW & ANALYSIS

I. Requests for Judicial Notice

Before turning to IRI’s motion for summary judgment, the Court will first address

the parties’ requests for judicial notice of certain facts.

Under Federal Rule of Evidence 201, the Court “may judicially notice a fact that is

not subject to reasonable dispute because it” is either “generally known within the trial

court’s jurisdiction” or it “can be accurately and readily determined from sources whose

accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b). But “[a] fact is not the

proper subject of judicial notice if the notice is sought for a purpose that is ‘not relevant

or necessary to resolve [the] action.’” Jones v. Prudential Sec., Inc., 534 F. Supp. 3d 839, 841

(E.D. Mich. 2021) (quoting Cece v. Wayne Cnty., 758 F. App’x 418, 425 (6th Cir. 2018)).

Ultimately, if a party requests judicial notice “and the court is supplied with the necessary

information,” then the court “must take judicial notice.” Fed. R. Evid. 201(c)(2).

First, IRI asks this Court to take judicial notice of (1) “IRI’s Annual Reports filed

with the Virginia Secretary of State from 2007 through 2019,” (2) “[d]Jocuments produced

by the U.S. Equal Employment Opportunity Commission concerning [] Morgan’s charge

of discrimination,” and (3) “[e]xcerpts of pages from DS Smith [PLC’s] 2010 Annual

Report.” (IRI’s Judicial Notice Request, Doc. 45-3, Pg. ID 4011.) IRI has supplied

supporting documents for each request (See Hill Aff., Doc. 44), and Morgan does not

oppose IRI’s request. (See Response in Opp., Doc. 53.) Accordingly, the Court finds it

appropriate to take judicial notice of these facts and grants IRI’s Request (Doc. 45-3).

Next, Morgan requests that this Court take judicial notice of Lienbenberg v. DS

Smith Packaging LTD., et al., No. 220786/2019, Judgment, (Employment Tribunal June 29,

2020), a judicial decision rendered by the United Kingdom’s Employment Tribunal in the

England and Wales jurisdiction. (Morgan’s Judicial Notice Request, Doc. 51.) This case

centers on a claim filed by a former DS Smith PLC employee. (See id.) Morgan requests

judicial notice of this case because it cites statements made by Roberts and another

employee that are “directly relevant to the issues in Morgan’s case.” (Plaintiff's Reply to

Defendant’s Objections, Doc. 57.) But these allegedly “relevant” facts only pertain to

behavioral issues of Jakobsen and his ultimate dismissal as a Good Leaver. (See Plaintiff's

Statement of Facts, Doc. 53-1.) As demonstrated below, these facts are “not relevant or

necessary to resolve [this] action.’” Cece, 758 F. App’x at 425. Moreover, Morgan has not

provided the Court with any “necessary information” that would mandate this Court to

take judicial notice of the facts in that case. See Fed. R. Evid. 201(b). Accordingly, the Court

will not take judicial notice of Lienbenberg v. DS Smith Packaging LTD., et al., No.

220786/ 2019, Judgment, (Employment Tribunal June 29, 2020). Morgan’s Request (Doc.

51) is denied.

II. Motion for Summary Judgment

The Court now turns to IRI’s Motion for Summary Judgment (Doc. 45). When there

is no genuine dispute as to any material fact and the moving party is entitled to judgment

as a matter of law, the district court shall grant summary judgment. Fed. R. Civ. P. 56(a).

The moving party has the burden to conclusively show that no genuine issue of material

fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Lansing Dairy, Inc. v. Espy, 39

F.3d 1339, 1347 (6th Cir. 1994). If the moving party meets that burden, then it becomes

the nonmoving party’s responsibility to point to specific facts showing that there is a

genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986).

A court is under no obligation to search the record for genuine issues of material

fact. Betkerur v. Aultman Hosp. Ass'n, 78 F.3d 1079, 1087 (6th Cir. 1996). And a “mere

scintilla” of evidence in support of the nonmoving party’s position is not enough to avoid

summary judgment. Daniels v. Woodside, 396 F.3d 730, 734 (6th Cir. 2005). Rather, to

preclude summary judgment, the nonmoving party must put forward probative

evidence on which a jury could reasonably reach a verdict in that party’s favor. Anderson,

477 US. at 251-52; Lansing Dairy, 39 F.3d at 1347. If the nonmoving party fails to make the

necessary showing for an element upon which it has the burden of proof, then the moving

party is entitled to summary judgment. Celotex, 477 U.S. at 323.

Morgan brings claims against IRI for: (1) national origin discrimination in violation

of Title VIL (2) national origin discrimination in violation of Ohio Revised Code § 4112,

(3) age discrimination in violation of the Age Discrimination in Employment Act

(“ADEA”), (4) negligent/intentional misrepresentation, and (5) fraudulent inducement.

(Compl., Doc. 1, 28-54.) IRI moves for summary judgment on all claims brought

against it. (Motion for Summary Judgment, Doc. 45.) The Court will take each in turn.

1) Federal Age and National Origin Discrimination Claims

Morgan brings claims against IRI for national origin discrimination under Title VII

and age discrimination under the ADEA. (Compl., Doc. 1, 44 28-32, 38-43). These

discrimination claims are both analyzed under the same framework, so the Court will

review them in tandem. See Blizzard v. Marion Tech. Coll., 698 F.3d 275, 283 (6th Cir. 2012)

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(addressing age discrimination standard); Khamati v. Sec’y of the Dep't of the Treasury, 557

F. App’x. 343, 438 (6th Cir. 2014) (addressing national origin discrimination standard).

Title VII prohibits an employer from “ discriminat[ing] against any individual with

respect to his compensation, terms, conditions, or privileges of employment, because of

such individual's . . . national origin.” 42 U.S.C. § 2000e-2(a)(1). And the ADEA prohibits

an employer from discriminating against an employee “because of such individual's

age.” 29 U.S.C. § 623(a)(1). Where, as here, a plaintiff seeks to establish discrimination

through indirect, rather than direct, evidence, the Court applies the McDonnell Douglas

burden-shifting framework. Younis v. Pinnacle Airlines, Inc., 610 F.3d 359, 363 (6th Cir.

2010).

The first step of this framework requires a plaintiff to establish a prima facie case

for discrimination. Younis, 610 F.3d at 363. To establish a prima facie case, a plaintiff must

show that he was: (1) a member of a protected class, (2) qualified for the position, (3) the

victim of an adverse employment action, and (4) replaced by someone outside the

protected class. See Ang v. Procter & Gamble Co., 932 F.2d 540, 548 (6th Cir. 1991). Once the

plaintiff establishes his prima facie case, the burden shifts to the defendant to articulate a

legitimate, nondiscriminatory reason for the adverse employment action. Id. at 548. If the

defendant meets its burden, the burden shifts back to the plaintiff to demonstrate that the

defendant's reason was but a pretext for unlawful discrimination. Id.; see also Texas Dep’t

of Cmty. Affairs v. Burdine, 450 U.S. 248, 253 (1981).

The Court proceeds on the assumption that Morgan has proven his prima facie

case. IRI too satisfies its burden of showing that it terminated Morgan for a legitimate,

11

nondiscriminatory reason: Morgan’s management had a negative impact on NAPP’s

performance. (See Motion for Summary Judgment, Doc. 3985-86.) Poor performance is a

legitimate and nondiscriminatory reason for terminating an employee. Hussain v.

Highgate Hotels, Inc., 126 F. App’x. 256, 265 (6th Cir. 2005) (citation omitted). The burden

thus shifts back to Morgan to show that this reason is pretextual.

The fundamental question in the pretext analysis is: did the employer make the

adverse employment decision for the stated reason or not? Tingle v. Arbors at Hilliard, 692

F.3d 523, 530 (6th Cir. 2012). A plaintiff must produce sufficient evidence such that a

reasonable jury could doubt the employer's stated reason for its actions. McCart v. Univ.

of Cincinnati Found., No. 1:08-cv-656, 2010 U.S. Dist. LEXIS 34406, at *7 (S.D. Ohio Apr. 7,

2010). Plaintiffs may refute an employer's proffered legitimate reason by showing that

the reason (1) has no basis in fact, (2) did not actually motivate the challenged conduct,

or (3) was insufficient to warrant the challenged conduct. Wexler v. White's Fine Furniture,

Inc., 317 F.3d 564, 576 (6th Cir. 2003).

Morgan first argues that IRI’s reasoning was pretextual because outside market

forces caused NAPP’s poor performance, not Morgan’s management. (Response in Opp.,

Doc. 53, Pg. ID 4238-39.) But Morgan does not point to any evidence, other than his own

testimony, to show that market forces were the sole cause of NAPP’s poor performance.

(See id.) In fact, Jakobsen observed and reported that “top management” had a large role

in NAPP’s financial failings. (Jakobsen Dep., Doc. 36, Pg. ID 2611-12, 2620-22; Jakobsen

Notes, Doc. 36-1, Pg. ID 2776-77; Analysis Report, Doc. 36-1, Pg. ID 2778-22.) IRI

understood, then, that Morgan’s management had some role in NAPP’s poor

12

performance. (See Roberts Dep., Doc. 35, Pg. ID 2332, 2416-17.) IRI terminated Morgan

accordingly. This decision to terminate Morgan for what IRI believed to be the cause of

NAPP’s poor performance does not constitute pretext, even if Morgan’s management

ultimately was not the actual cause. See Seeger v. Cincinnati Bell Tel. Co., LLC., 681 F.3d

274, 285-86 (6th Cir. 2012) (As long as the employer held an honest belief in its proffered

reason, “the employee cannot establish pretext even if the employer’s reason is ultimately

found to be mistaken, foolish, trivial, or baseless.”). Accordingly, Morgan’s first

argument fails.

Morgan next argues that IRI’s proffered reason was pretextual because IRI actually

terminated Morgan to replace him with Jakobsen. (Response in Opp., Doc. 53, Pg. ID

4238-39.) In support of this argument, Morgan points to Roberts’ conversations with

Jakobsen about finding him a long-term role with NAPP, as well as Roberts’ discussions

with Jakobsen about taking the role of Managing Director after Morgan was terminated.

(See id.) But these conversations do not definitively show that the real reason for Morgan’s

termination was to fill the position with Jakobsen. And in any event, this type of evidence,

while relevant to establishing a prima facie case of discrimination, is usually not enough

to overcome pretext. Arnold v. Cincinnati Sportservice, Inc., No. 1:12-cv-460, 2013 U.S. Dist.

LEXIS 99011, at *26-27 (S.D. Ohio July 16, 2013) (“[Plaintiff] notes that the position was

offered to substantially younger women on two separate occasions, but . . . this is not

enough to establish pretext.”).

Finally, Morgan argues that IRI’s proffered reason was pretextual based on the

termination of other older American employees who were fired around the same time as

Morgan. (Response in Opp., Doc. 53, Pg. ID 4238-39.) But this argument also fails to show ~

pretext. The only evidence offered on these terminations comes directly from Morgan.

(See Morgan Dep., Doc. 27, Pg. ID Pg. ID 725-937.) Morgan provides only the names and

occupations of these employees; he provides no other relevant information on their

terminations. (I[d.) Without more, the Court has no way of relating these terminations to

Morgans. See Sprint/United Mgmt. Co. v. Medelsohn, 552 U.S. 379, 388 (2008) (Nothing that

the relevancy of this sort of evidence “is fact based and depends on many factors,

including how closely related the evidence is to the plaintiff's circumstances and theory

of the case.”). Moreover, courts in this circuit hesitate to rely on this sort of “me too”

evidence to show pretext. See Megivern v. Glacier Hills Inc., No. 11-10026, 2012 U.S. Dist.

LEXIS 20749, at *58-59 (E.D. Mich. Feb. 17, 2012) (collecting cases).

Morgan failed to overcome his burden to show that IRI’s proffered reason for

terminating Morgan was pretextual. Accordingly, summary judgment must be entered

in favor of IRI on Morgan’s federal discrimination claims.

Ohio National Origin Discrimination

The Court now turns to Morgan's national origin discrimination claim brought

under Ohio Revised Code § 4112. (See Compl., Doc. 1, /] 33-37.) IRI moves for summary

judgment on this claim, arguing that it should have been brought under Virginia law □

under the Employment Agreement’s choice-of-law provision—and that Virginia has no

parallel law to enforce against IRI. (Motion for Summary Judgment, Doc. 45, Pg. ID 3990.)

Morgan does not oppose this argument in his response. (See Response in Opp., Doc. 53.)

This failure alone entitles IRI to summary judgment on this claim. Brown v. VHS of

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Michigan, Inc., 545 F. App’x 368, 372 (6th Cir. 2013) (“This Court’s jurisprudence on

abandonment of claims is clear: a plaintiff is deemed to have abandoned a claim when a

plaintiff fails to address it in response to a motion for summary judgment.”). But even if

this claim was properly brought under Ohio law, it would still fail under the framework

applied above. See Vechvitvarakul v. Health All, Of Greater Cincinnati, No. 1:10-cv-114, 2012

U.S. Dist. LEXIS 17674, at *24 (S.D. Ohio Feb. 13, 2012) (applying McDonell Douglas

framework to Ohio national origin discrimination claim). Accordingly, summary

judgment must be entered in favor of IRI on Morgan’s Ohio national origin

discrimination claim.

IV. Negligent/Intentional Misrepresentation and Fraudulent Inducement Claims

Next, the Court turns its attention to Morgan’s remaining claims for

negligent/intentional misrepresentation and fraudulent inducement. (See Compl., Doc.

1, {{ 44-54.) IRI moves for summary judgment on these claims, arguing that they fail

under the economic loss rule and because Morgan has not shown any misrepresentations

by IRI. (Motion for Summary Judgment, Doc. 45, Pg. ID 3990-92.)

Before the Court can consider the substance of these claims, it must first address

which state’s law applies. The Employment Agreement states that it will “be executed,

construed and performed in accordance with the laws of the Commonwealth of

Virginia.” (Employment Agreement, Doc. 1-2, Pg. ID 23.) IRI maintains that Morgan’s

negligent/intentional misrepresentation and fraudulent inducement claims are subject to

this choice-of-law provision because they relate to Morgan’s contractual rights under the

Employment Agreement. (Motion for Summary Judgment, Doc. 45, Pg. ID 3989-90.)

15

Morgan does not contest this assertion. (See Response in Opp, Doc. 53.) And, to be sure,

the Sixth Circuit has extended the scope of choice-of-law provisions with similar

language to tort claims when they relate to performance of an agreement. See Baumgardner

v. Bimbo Food Bakeries Distrib., Inc., 697 F. Supp. 2d 801, 804-06 (N.D. Ohio 2010) (collecting

cases). Accordingly, the Court will apply Virginia law to these claims.

IRI first argues that Morgan’s negligent/intentional misrepresentation and

fraudulent inducement claims fail under the economic loss rule. The economic loss rule

provides that a person may not recover damages for a tort where the damages are purely

economic losses rather than physical injury to a person or property. See Sensenbrenner v.

Rust, Orling & Neale, Architects, Inc., 374 S.E.2d 55, 57 (Va. 1988). The economic loss rule

is closely tied to the independent duty rule, which states that “in order to recover in tort,

the duty tortiously breached must be a common law duty, not one existing between the

parties solely by virtue of the contract.” Tingler v. Graystone Hopmes, Inc., 834 S.E.2d 244,

255, 264-65 (Va. 2019).

These rules are based on policy considerations underlying contract and tort law:

The law of torts is well equipped to offer redress for losses suffered by

reason of a breach of some duty imposed by law to protect the broad

interests of social policy. Tort law is not designed, however, to compensate

parties for losses suffered as a result of a breach of duties assumed only by

agreement. That type of compensation necessitates an analysis of the

damages which were within the contemplation of the parties when framing

their agreement. It remains the particular province of the law of contracts.

Sensenbrenner, 374 S.E.2d at 58 (citation omitted). Thus, when a plaintiff alleges economic

losses suffered from disappointed bargained-for expectations “assumed only by

agreement, the law of contracts, not the law of torts, provides the remedy for such

16

economic losses.” Filak v. George, 594 S.E.2d 610, 613 (Va. 2004).

“[T]o determine whether a claim is subject to the restrictions imposed by the

economic loss rule, a court must first determine the nature and source of the duty

allegedly violated.” Lynnwood Tech Holdings LLC v. NR Int. LLC, No. 2015-15954, 2017 Va.

Cir. LEXIS 52, at *14 (Va. Cir. Ct. Feb. 24, 201) (citation omitted). “If the duty does not

exist absent an agreement establishing that duty, then it is a duty based in contract, and

the economic loss rule applies.” Id.

The economic loss rule does not apply to Morgan’s negligent/intentional

misrepresentation and fraudulent inducement claims because they do not implicate a

duty arising out of the Employment Agreement. These claims center on the July 18, 2019

conversation between Roberts and Morgan, wherein Roberts seemingly encouraged

Morgan not to retire through allegedly misleading statements. (Response in Opp., Doc.

53, Pg. ID 241-44.) IRI maintains that the duty breached by Roberts under these claims

relate to the Employment Agreement. (Motion for Summary Judgment, Doc. 45, Pg. ID

3990-92.) But IRI does not point to any provision in the Employment Agreement that

would require Roberts to discuss retirement or job prospects in a particular way to

Morgan. (See id.) To be sure, “the duty not to mislead others to their detriment arises from

common law,” not the Employment Agreement. Fenner BL, LLC v. Fenner Garden Partners,

LLC, No. CL17-13859, 2018 Va. Cir. LEXIS 709, at *8 (Cir. Ct. 2018); Cf Richmond Metro.

Auth. v. McDevvitt St. Bovis, 507 S.E.2d 344, 347 (Va. 1998) (Because “each particular

misrepresentation by [the contractor] related to a duty or an obligation that was

specifically required by the [c]ontract,” the court concluded that the contractor’s

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misrepresentations did not “give rise to a cause of action for actual fraud.”).

Further, these claims allege damages that are not solely economic. Morgan alleges

that, as a result of his reliance on Roberts’ misrepresentations, he suffered damages in the

form of a loss of employee benefits and reputation, as well as mental anguish. (Response

in Opp., Doc. 56, Pg. ID 4244.) Morgan also seeks punitive damages. (Id.) While some of

these losses stem from the Employment Agreement, they are not all purely economic.

Accordingly, the economic loss rule does not apply.

The Court now turns to the substance of these claims. A central element to both

claims is the requirement for clear and convincing evidence of a false representation.

Hansen v. Stanley Marin Cos., 585 S.E.2d 567, 573 (Va. 2003) (Virginia courts consider fraud

and misrepresentation claims together because both counts “sound in fraud.”); Cromer v.

Molden Real Est. Corp., No. 84-L-100, 1991 Va. Cir. LEXIS 187, at *6 (Va. Cir. Ct. Sept. 26,

1991) (both actual and constructive fraud require a showing of a misrepresentation);

Chlanda v. Hiller, No. 21-3865, 2022 Va. Cir. LEXIS 348, at *8 (Va. Cir. Ct. June 3, 2022) (the

elements of a claim for fraudulent inducement include “statements of fact” that are “false

and material”). The misrepresentation must involve an affirmative false statement or

concealment by word or conduct that amounts to the equivalent of a false representation.

Lambert v. Downtown Garage, Inc., 553 S.E.2d 714, 717 (Va. 2001).

Morgan’s negligent/intentional misrepresentation and fraudulent inducement

claims fail because Morgan has shown no misrepresentation by IRI. Morgan maintains

that IRI made misrepresentations through Roberts when he and Morgan discussed

Morgan’s potential retirement on July 18, 2019. (Response in Opp., Doc. 53, Pg. ID 4242.)

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Morgan maintains that, during that conversation, Roberts “encouraged Morgan not to

retire and told Morgan he would be taken care of,” which were misrepresentations

because Roberts planned to fire Morgan when he made those statements. (Id.) But

Morgan cannot point to any evidence to show that Roberts intended to fire Morgan when

he made those statements to Morgan on July 18, 2019.

Morgan points to two conversations that Roberts had with Jakobsen to show that

Roberts had long-term intentions of firing Morgan. (Response in Opp., Doc. 53, Pg. ID

4239.) Morgan first points to Roberts’ hand-made charts that he sent to Jakobsen to show

intent (Response in Opp., Doc. 53, Pg. ID 4239), but these charts merely show that Roberts

hoped to restructure NAPP’s management. (See Organization Chart, Doc. 41, Pg. ID 3588-

89.) These charts do not show that Roberts intended to fire Morgan. Morgan next points

to Roberts’ conversations with Jakobsen in May 2019 about a potential long-term role for

Jakobsen at NAPP (Response in Opp., Doc. 53, Pg. ID 4239), but these conversations never

reference the Managing Director role and simply discuss finding a permanent position

for Jakobsen. (Jakobsen Dep., Doc. 36, Pg. ID 2556-57; Jakobsen Role Correspondence,

Doc. 36-1 at Page ID 2751-2753.) Neither piece of evidence shows that Roberts intended

to fire Morgan at the time of the July 18, 2019 conversation.

To be sure, the only instance where Roberts demonstrates some intention to

terminate Morgan—prior to actually terminating him—was on August 28, 2019. (See

Roberts Dep., Doc. 35, Pg. ID 2414.) On this date, Roberts corresponded with the

company’s legal department about firing Morgan. (Id.) This conversation, of course,

occurred after Morgan and Roberts’ July 18, 2019 conversation.

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Accordingly, Morgan cannot show that Roberts intended to fire Morgan during

the July 18, 2019 conversation. In turn, Morgan cannot establish that Roberts’ statements

were misrepresentations about Morgan’s job security. Morgan does not present any other

argument to show that IRI made misrepresentations to Morgan. As Morgan cannot show

by clear and convincing evidence that Roberts or IRI made any misrepresentations to

Morgan, his intentional/ negligent misrepresentation and fraudulent inducement claims

fail. Thus, summary judgment must be entered in favor of IRI on these claims.

CONCLUSION

Based on the foregoing, the Court GRANTS Defendant Interstate Resources, Inc.’s

Motion for Summary Judgment (Doc. 45) and TERMINATES this matter from its docket.

IT IS SO ORDERED.

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF OHIO

West sTalled

By: :

JUDGE MATTHEW W. McFARLAND

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