Hale v. Woodward

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF TENNESSEE

NORTHEASTERN DIVISION

CONNIE HALE, )

)

Plaintiff, )

)

v. ) No. 2:24-cv-00008

)

JOHN MICHAEL WOODWARD, )

CLOUDCOOKIES, LLC, )

)

Defendants. )

MEMORANDUM OPINION

Before the Court in this employment dispute is Defendants John Michael Woodward and

CloudCookies, LLC’s Motion to Dismiss under Federal Rule of Civil Procedure 12(b)(6). (Doc.

No. 9). Plaintiff Connie Hale, proceeding through counsel, filed a belated response in opposition.

(Doc. No. 14). For the following reasons, Defendants’ Motion will be granted, and this case will

be remanded for lack of subject-matter jurisdiction.

I. BACKGROUND AND FACTUAL ALLEGATIONS1

Hale is a Tennessee resident, and both Defendants reside in Arizona. (Doc. No. 1 ¶ I.A).

In or around May 2022, Hale allegedly entered into an oral employment agreement with

Defendants “to provide services to John Michael Woodward . . . and his closely-held Arizona

limited liability company, CloudCookies, LLC.” (Id. ¶ II.A). In return, “Hale would be assigned

to the position of ‘Account Executive’ under an ‘at will employment arrangement that included

Defendants’ obligation to pay to [Hale] a 10% commission on all sales generated by [Hale] for the

benefit of the company.” (Id. ¶ II.B). Although Hale “was promised a comprehensive, detailed

1 The Court draws the facts in this section from the Complaint (Doc. No. 1-1) and assumes the

truth of those facts for purposes of ruling on the instant motion. See Erickson v. Pardus, 551 U.S.

89, 94 (2007).

written contract including more specific terms and details of the agreement, . . . no written

agreement was ever executed by both parties.” (Id. ¶ II.C).

In her role as Account Executive, Hale claims she “actively advanced account sales for the

benefit of CloudCookies for a broad range of customers, including Brown’s Shoes, Door Dash,

and other prospects.” (Id. ¶ II.F). But those projects “were never finalized” because “Hale

terminated her arrangement with the Defendants upon identifying apparent bad-faith

misrepresentations regarding the payment for” her work. (Id.). Hale claims she “was not paid”

for “the consummation of the customer sales” she helped advance. (Id.). She further alleges that

as part of her role, she was required to front “work-related travel expenses” for which she was

never reimbursed. (Id.).

On February 24, 2023, Hale filed a lawsuit against Defendants in Tennessee state court for

“reckless/intentional tortious misrepresentation,” “breach of oral contract,” “detrimental

reliance/unjust enrichment,” and “violation of T.C.A. § 50-2-103 and 104.” (Id. ¶¶ III, IV, V, VI).

Hale claims that “[i]n total,” she is “owed the sum of $12,197.02 for the document sales projects

and travel reimbursement completed by her during her brief tenure with the Defendants.” (Id. ¶

II.F). She also “requests compensatory and punitive damages in the amount of $100,000.00 . . .

for the tortious misrepresentations made by the Defendants.” (Id. ¶¶ VII.A). These alleged

“misrepresentations” consist of statements involving “the existing status of the company, and

Woodward’s future intent and promises, known by Woodward to be false at the time the

representations were made.” (Id. ¶ III.A).

On February 19, 2024, Defendants removed the instant action to this Court. (See Doc. No.

1). On February 26, 2024, Defendants filed a partial answer to the Complaint and asserted various

counterclaims, including a federal claim under the Federal Defend Trade Secrets Act, 18 U.S.C. §

1836, et seq., involving Hale’s failure to return her company-issued laptop computer. (Doc. No.

10 at ¶¶ 84–97). On that same day, Defendants filed the instant Rule 12(b)(6) motion to dismiss

Hale’s claims for “reckless or fraudulent” misrepresentation and wage claims under Tennessee

Code Ann. §§ 50-2-103 and 104. (Doc. Nos. 8; 9 at 3–8). Woodward also requests that he be

dismissed from this action entirely. (Doc. No. 9 at 8–9).

II. LEGAL STANDARD

To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), “the

complaint must include a ‘short and plain statement of the claim showing that the pleader is entitled

to relief.’” Ryan v. Blackwell, 979 F.3d 519, 524 (6th Cir. 2020) (quoting Fed. R. Civ. P. 8(a)(2)).

When determining whether the complaint meets this standard, the Court must accept all of the

complaint’s factual allegations as true, draw all reasonable inferences in the plaintiff’s favor, and

“take all of those facts and inferences and determine whether they plausibly give rise to an

entitlement to relief.” Doe v. Baum, 903 F.3d 575, 581 (6th Cir. 2018); see also Ashcroft v. Iqbal,

556 U.S. 662, 678–79 (2009). Moreover, the Court must determine only whether “the claimant is

entitled to offer evidence to support the claims,” not whether the plaintiff can ultimately prove the

facts alleged. Swierkiewicz v. Sorema N.A., 534 U.S. 506, 511 (2002) (quoting Scheuer v.

Rhodes, 416 U.S. 232 (1974)). And “[w]hile the complaint does not need detailed factual

allegations, a plaintiff’s obligation to provide the grounds of his entitlement to relief requires more

than labels and conclusions” or “a formulaic recitation of a cause of action’s elements[.]”

Blackwell, 979 F.3d at 524 (internal quotation marks omitted) (quoting Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 555 (2007)).

Where, as here, the plaintiff’s claims are based on fraud, Rule 9(b) provides that the

complaint must state with particularity the circumstances constituting fraud. See Fed. R. Civ. P.

9(b). “At a minimum, Rule 9(b) requires that the plaintiff specify the who, what, when, where,

and how of the alleged fraud.” Sanderson v. HCA-The Healthcare Co., 447 F.3d 873, 877 (6th

Cir. 2006) (citation and internal quotation marks omitted); see also United States ex rel. SNAPP,

Inc. v. Ford Motor Co., 532 F.3d 496, 504 (6th Cir. 2008). “The Rule’s purpose is to alert

defendants ‘as to the particulars of their alleged misconduct’ so that they may respond.”

Chesbrough v. VPA, PC, 655 F.3d 461, 466 (6th Cir. 2011) (quoting United States ex rel. Bledsoe

v. Cmty. Health Sys., Inc., 501 F.3d 493, 503 (6th Cir. 2007)). “The heightened pleading standard

is also designed to prevent fishing expeditions, to protect defendants’ reputations from allegations

of fraud, and to narrow potentially wide-ranging discovery to relevant matters.” Id. at 466–67

(citations and internal quotation marks omitted); see also Bennett v. MIS Corp., 607 F.3d 1076,

1101 (6th Cir. 2010).

III. ANALYSIS

A. Defendants’ Motion is Deemed Unopposed

As an initial matter, Hale did not file a timely response to Defendants’ motion. When a

plaintiff fails to respond to arguments in a motion, she waives any opposition to that argument.

See Humphrey v. United States Att’y Gen.’s Office, 279 F. App’x 328, 331 (6th Cir. 2008)

(citation omitted). Likewise, Local Rule 7.01(a)(3) provides that “any party opposing a motion

[to dismiss] must serve and file a memorandum of law in response . . . not later than fourteen (14)

days after service of the motion.” L.R. 7.01(a)(3). “If a timely response is not filed, the motion

shall be deemed to be unopposed[.]” Id. Hale’s deadline to file a response in opposition to

Defendants’ motion to dismiss was March 11, 2024. That deadline came and went with no filing,

and Hale did not request an extension. Instead, on April 3, Hale submitted a belated response

without explanation or justification for why she failed to comply with this Court’s Local Rules.

Accordingly, Defendants’ motion is deemed unopposed and could very well be granted on

this basis alone. As explained below, however, the Court will also grant Defendants’ motion for

the independent reason that Hale’s claims fail on the merits.

B. The Complaint Fails to State a Claim for “Reckless/Intentional Tortious

Misrepresentation”

In Tennessee, “intentional misrepresentation,” “fraudulent misrepresentation,” and “fraud”

are different names for the same cause of action and involve the same elements. See Hodge v.

Craig, 382 S.W.3d 325, 342 (Tenn. 2012) (citations omitted). Regardless of the nomenclature,

“[t]he elements of a fraud claim are: (1) an intentional misrepresentation of material fact; (2) the

misrepresentation was made knowingly, without belief in its truth, or recklessly without regard to

its truth or falsity; (3) the plaintiff reasonably relied on the misrepresentation and suffered

damages; and (4) the misrepresentation relates to an existing or past fact, or, if the claim is based

on promissory fraud, then the misrepresentation must embody a promise of future action without

the present intention to carry out the promise[.]” Power & Tel. Supply Co., Inc. v. SunTrust Banks,

Inc., 447 F.3d 923, 931 (6th Cir. 2006) (internal quotation marks omitted) (quoting Stacks v.

Saunders, 812 S.W.2d 587, 592 (Tenn. Ct. App. 1990)). The claim also “must be stated with

particularity, and the plaintiff must, at a minimum, allege the time, place and content of the

misrepresentations; the defendant’s fraudulent intent; the fraudulent scheme; and the injury

resulting from the fraud.” Id.

The essence of Hale’s fraud claim is that Defendants fraudulently induced her to enter into

an at-will employment agreement by making false representations to her. The alleged “false and

misleading” representations at issue consist of the following four statements:

(1) That Plaintiff could accept as truth [Woodward’s] assurance that her decision

to suspend her previous work activities could be safely made, in reliance upon his

promises; and

(2) That CloudCookies, LLC was financially secure and stable, and Plaintiff would

be paid promptly without conditions, reservations, or set-offs of any type, upon

completion of the sales procured by Plaintiff from the present and future LLC

customers; and

(3) The LLC company had a history of employment stability for its sales

representatives due to its employee-friendly personnel practices; and

(4) Finally, that Plaintiff certainly was not advised in advance of her efforts, that

she would be expected to advance travel expenses on behalf of Mr. Woodward or

herself, for the benefit of the company, as soon occurred (without her knowledge

or permission in the manipulation of her bank account) for reasons that remain

undisclosed to the Plaintiff at this time.

(Doc. No. 1-1 ¶¶ II.E, II.D). Even construing these statements in the light most favorable to Hale,

accepting them as true, and drawing all inferences in her favor, the Court does not find that these

statements support a claim for fraud.

As to the first statement, it is unclear what misleading “assurance” or “promises” Hale

relied on to believe she could “suspend her previous work activities” safely. “Fraudulent

inducement, recognized in Tennessee as promissory fraud, requires that the misrepresentation be

made without the present intention to carry it out.” SunTrust Banks, Inc., 447 F.3d at 931. Hale

does not allege any conversations she had with Woodward, in which Woodward promised her she

could “suspend her previous work activities” safely (whatever that means) “without the present

intention to carry” out that promise. Without more, the Court can only speculate as to what Hale’s

“previous work activities” were, and what Woodward may have said to prompt Hale’s belief about

her job security as an at-will employee.

Regarding the second and third statements, Hale fails to allege how she detrimentally relied

on Woodward’s opinions about the financial viability of CloudCookies, LLC. Even assuming

Woodward made a false “promise” that “CloudCookies, LLC was financially secure and stable,”

and that the “company had a history of employment stability for its sales representatives due to its

employee-friendly personnel practices,” the Complaint does not explain how those promises alone

damaged Hale. See Stacks, 812 S.W.2d at 592. Hale does not allege, for example, that her

acceptance of Defendants’ job offer caused her to lose benefits from her previous employment,

thwarted her career objectives, caused a loss of professional opportunity and reputation, or

damaged her career growth and potential. See Kwon v. Yun, 606 F. Supp. 2d 344, 360–61

(S.D.N.Y. 2009) (citations omitted). The Complaint instead makes a conclusory allegation that

Defendants’ “tortious misrepresentations” caused Hale $100,000.00 in damages, without

explaining how she was injured above and beyond the $12,197.02 she allegedly is owed for

commission and travel reimbursements. (See Doc. No. 1-1 ¶¶ II.F, VII). But if Defendants made

“promises” to Hale that she “would be paid promptly” a 10% commission on qualifying sales, (id.

¶ II.E, II.B), and Defendants refused to pay her that amount, then Hale’s resulting damages for her

unpaid commissions (as alleged in the Complaint) would sound in contract, not tort. See Mid-

South Milling Co., Inc. v. Loret Farms, Inc., 521 S.W.2d 586, 588 (Tenn. 1975) (“A contract may

be negligently or fraudulently breached and the cause of action remains in contract rather than in

tort.”).

As to the fourth statement, Hale does not allege how she detrimentally relied on

Defendants’ failure to inform her that she was required to pay out-of-pocket for travel expenses

and then seek reimbursement. The Court acknowledges that fraud itself “can be the concealment

or nondisclosure of a known fact when there is a duty to disclose.” Justice v. Anderson Cnty., 955

S.W.2d 613, 616 (Tenn. Ct. App. 1997) (citations omitted). However, “[c]onclusory statements

of reliance are not sufficient to explain with particularity how [the plaintiff] detrimentally relied

on the alleged fraud[.]” Evans v. Pearson Enters., 434 F.3d 839, 852–53 (6th Cir. 2006). Hale

offers nothing more than vague, conclusory allegations of fraud and reliance on Defendants’

nondisclosure of company travel reimbursement procedures. And, in any event, any damages

flowing from her unreimbursed travel expenses would be included in the $12,197.02 “for the

documented sales projects and travel reimbursement” she seeks pursuant to her contract claim.2

(Doc. No. 1-1 ¶ II.F).

Hale’s belated opposition relies heavily on the Tennessee Supreme Court’s opinion in

Brungard v. Caprice Records, in which a music artist sought recission of a recording contract

because the record company “fraudulently induced her to enter into the contract.” 608 S.W.2d

585, 588 (Tenn. 1980). The artist claimed that the recording studio misled her into believing it

“would make a financial commitment to promote her record” and that the nature of its “business

was selling records” when, in fact, the studio made more than 99% of its money by selling

“production services to artists such as the plaintiff.” Id. at 589.

The fraudulently induced business transaction in Brungard, however, is much different

from the at-will employment agreement in this case. Notably, there are no allegations here that

Defendants gave Hale “a false impression of the character” of her employment. See id. at 590.

There are no allegations explaining how or why Woodward made his “assurances” with the intent

not to perform. See Am. Cable Corp. v. ACI Mgmt., Inc., No. M1997-00280-C0A-R3-CV, 2000

WL 1291265, at *5 (Tenn. Ct. App. Sept. 14, 2000) (holding that “[i]n the context of a promissory

fraud claim, the mere fact that the promisor failed to perform the promised act is insufficient by

itself to prove fraudulent intent”). Instead, the Complaint merely alleges that Woodward’s

intentional misrepresentations about Hale’s ability to receive commissions and safely “suspend

her previous work activities” fraudulently induced her to enter into an at-will employment

agreement with Defendants. (See id. ¶ III.A). Although at least one Tennessee court from the

1990s found similar allegations to be “minimally sufficient to state a claim for promissory fraud,”

2 The Complaint alleges that travel expenses were “improperly and unlawfully removed and

converted from her Tennessee bank account,” but it does not allege a separate cause of action for

conversion. (Doc. No. 1-1 ¶ II.F).

see Lee v. Hippodrome Oldsmobile, Inc., No. 01A01-9705-CV-00202, 1997 WL 629951, at *2

(Tenn. Ct. App. Oct. 14, 1997), these types of conclusory allegations are no longer sufficient under

Twombly, Iqbal, and their progeny. Thus, Hale’s “reckless/intentional tortious misrepresentation”

claim must be dismissed.

C. The Complaint Fails to State a Claim Under the Tennessee Wage Regulation Act

Defendants also ask this Court to dismiss Hale’s wage violation claims as a matter of law

because there is no private right of action for a violation of Tenn. Code Ann. §§ 50-2-103 and 50-

2-104. (Doc. No. 9 at 7–8). The Court has already held “that there is no private right of action

under Tenn. Code. Ann. § 50-2-103,” Rositano v. Freightwise, LLC, No. 3:20-cv-00420, 2021 WL

1174589, at *7 (M.D. Tenn. Mar. 26, 2021), and it agrees with Defendants that there is no private

right of action under § 50-2-104. These two provisions are part of the Tennessee Wage Regulation

Act (“TWRA”), and the Tennessee Legislature “clarified that the TWRA does not confer a private

right of action and is only enforceable by the Department of Labor and Workforce.” Harris v.

Tenn. Rehabilitative Initiative in Correction, No. M2013–01858–COA–R3–CV, 2014 WL

1887302, at *2 n.3 (Tenn. Ct. App. May 8, 2014) (citations omitted); see also Abadeer v. Tyson

Foods, Inc., 975 F. Supp. 2d 890, 915–19 (M.D. Tenn. 2013) (discussing the legislative history of

the TWRA and holding that “no private right of action was ever intended” by the Tennessee

legislature).

Hale ostensibly agrees that there is no private right of action under the TWRA, and instead

argues that she brought these claims solely so the Court could make “specific findings of fact in

the present civil matter.” (Doc. No. 1-1 ¶ VI.A). Hale wants these “findings of fact” so she can

send them to the Tennessee Department of Labor and hopefully prompt an “investigation and

administrative action.” (Id.; see also Doc. No. 14 at 6). Hale is, of course, free to send the

Tennessee Department of Labor materials on her own without court intervention. But the Court

refuses to expend judicial resources making “findings of fact,” and ultimately issuing an advisory

opinion, merely so Hale can convince the Tennessee Department of Labor to bring an enforcement

action. As a result, the Court will dismiss Hale’s statutory wage claims.

D. The Court No Longer Has Diversity Jurisdiction Over Hale’s Claims

The Court has “an independent obligation to determine whether subject-matter jurisdiction

exists, even in the absence of a challenge from any party.” Arbaugh v. Y&H Corp., 546 U.S. 500,

514 (2006) (citation omitted). “A district court has subject-matter jurisdiction where the complaint

(1) raises a federal question, or (2) where the parties have diversity of citizenship and the amount

in controversy exceeds $75,000.” Wilson v. Allstate Ins. Co., No. 17-4248, 2018 WL 6422853, at

*1 (6th Cir. June 25, 2018) (citing 28 U.S.C. §§ 1331, 1332). Here, because the Complaint does

not state a federal claim, the Court has subject-matter jurisdiction over Hale’s remaining state law

claims only if it has diversity jurisdiction.

Given the Court’s rulings above, there is no longer a sufficient amount in controversy to

meet the requirements of § 1332. Although Hale requests $100,000.00 in “exemplary or punitive

damages” to compensate “for the tortious misrepresentations made by the Defendants,” (Doc. No.

1-1 ¶ VII.A), the tort claims have been dismissed. At most, Hale can recover the $12,197.02 in

compensatory damages for her contract-based claims based on the “documented sales projects and

travel reimbursement completed by her during her brief tenure with the Defendants.” (See id. ¶

II.F). Moreover, under Tennessee law, “punitive damages are not available in a breach of contract

case” unless the circumstances are “egregious” and the plaintiff provides “clear and convincing

proof that the defendant has acted either intentionally, fraudulently, maliciously, or recklessly.”

Rogers v. Louisville Land Co., 367 S.W.3d 196, 212 n.14 (Tenn. 2012). Hale comes nowhere

near meeting that standard. Thus, it appears to a legal certainty that “the matter in controversy”

does not “exceed[] the sum or value of $75,000,” and the Court no longer has subject matter

jurisdiction. See 28 U.S.C. § 1332(a)(1); see also Charvat v. NMP, LLC, 656 F.3d 440, 447 (6th

Cir. 2011).

The Sixth Circuit instructs that “even when a court lacks subject matter jurisdiction over

an initial complaint, it may resolve counterclaims where it has an independent basis for jurisdiction

over those claims.” NOCO Co. v. OJ Commerce, LLC, 35 F.4th 475, 480–81 (6th Cir. 2022)

(citations omitted). The Court finds, however, that it does not have an independent basis for

jurisdiction over Defendants’ counterclaims. Although Defendants raise a federal claim under the

Federal Defend Trade Secrets Act, the Supreme Court has “held that federal-question jurisdiction

depends on the contents of a well-pleaded complaint, and may not be predicated on counterclaims.”

See Vaden v. Discover Bank, 556 U.S. 49, 56 (2009) (citations omitted). Similarly, even if this

Court could predicate diversity jurisdiction on a counterclaim filed in a removed case,3 Defendants

have not alleged that Hale’s failure to return her laptop (which has an “estimated value” of $4,000)

exceeds the sum or value of $75,000 in damages. (See Doc. No. 10 at ¶ 31).

The only other way the Court could exercise jurisdiction over Hale’s remaining claims is

through supplemental jurisdiction under 28 U.S.C. § 1367(c). “[I]f some event subsequent to the

complaint reduces the amount in controversy, . . . the court must then decide in its discretion

whether to retain jurisdiction over the remainder of the case.” Farrell v. Macy’s Retail Holdings,

Inc., 645 F. App’x 246, 249 (6th Cir. 2016) (quoting Shanaghan v. Cahill, 58 F.3d 106, 112 (4th

Cir. 1995)); see also Charvat v. NMP, LLC, 656 F.3d 440, 446 (6th Cir. 2011) (“[S]upplemental

3 Courts in this Circuit have held that they “must disregard the value of Defendant’s Counterclaim

in deciding whether the jurisdictional threshold has been met” because the Sixth Circuit has

“consistently held that the amount in controversy for federal diversity jurisdiction purposes is

determined as of the time the action is commenced.” See McMahon v. Alternative Claims Serv.,

Inc., 521 F. Supp. 2d 656, 658 (N.D. Ohio 2007) (collecting cases); SMTS Grp. V. Hardy, No.

1:17-cv-00453-RJJ, 2017 WL 3252209, at *2 (W.D. Mich. July 5, 2017) (citation omitted).

Jurisdiction is discretionary, not mandatory.”). “After a 12(b)(6) dismissal, there is a strong

presumption in favor of dismissing supplemental claims.” Musson Theatrical, Inc. v. Fed. Exp.

Corp., 89 F.3d 1244, 1255 (6th Cir. 1996). “This presumption follows from the common-sense

recognition that our state-court brethren are better equipped to address issues of state law.”

Martinez v. City of Cleveland, 700 F. App’x 521, 523 (6th Cir. 2017). Given this presumption,

the Court declines to exercise supplemental jurisdiction over any remaining state-law claims in

this case.

Pursuant to the rules governing cases removed from state court, “[i]f at any time before

final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be

remanded.” 28 U.S.C. § 1447(c) (emphasis added). Accordingly, the Court will remand, rather

than dismiss, this action so the parties can litigate Hale’s remaining claims in state court.

IV. CONCLUSION

For the foregoing reasons, Defendants’ Motion to Dismiss (Doc. No. 8) will be granted,

and this case will be remanded for lack of subject-matter jurisdiction.

An appropriate order will enter.

Woh. Eusbe.

CHIEF UNITED STATES DISTRICT JUDGE

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