I came across a recent case that presented fascinating and vigorous legal arguments by a Defendant employer regarding a plaintiff prospective employee’s claim of failure to hire. I will present this case in two articles.
Plaintiff alleged that the Defendant did not fulfill its promise of employment and sued to recover damages arising from his reliance on the proffered job. The facts are as follows.
I. FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff began looking for new employment in October 2013 while working at Toyota Motor Credit. On October 8, Plaintiff interviewed with Defendant’s representative, Kyle Brumby, where Plaintiff alleges he “made it crystal-clear” that he was secure in his current job and would only accept a position with Defendant if it provided greater compensation. After the interview, Plaintiff received a written job offer from Defendant for a position as a Senior Program Analyst with a salary of $54,000, a start date of October 28, 2013, and instructions to complete employment forms. The written job offer also stated: “[t]he offer of employment is contingent upon successful completion of the reference background checks,” “contingent upon your representation that you are not bound by the terms of any agreement with a previous employer,” and “contingent upon [Plaintiff’s] execution of the Company’s standard employee agreement.” The offer was further contingent on acceptance by October 16, 2013. Plaintiff alleges that Defendant did not disclose that employment was subject to any other contingencies and, instead, represented that the prospect of employment was “rock-solid.”
Plaintiff accepted Defendant’s offer and resigned from his former job to be available on the specified start date. On October 21, Defendant informed Plaintiff that it would need to modify the start date pending government approval of Plaintiff’s employment. Plaintiff alleges that prior to that date, “Defendant had not represented … that further review, or any other review, of Plaintiff’s credentials was required.” At Brumby’s request, Plaintiff met with Brumby again on October 24 to, allegedly, begin job training. During this meeting, Plaintiff alleges that “Brumby acted as if … Plaintiff had the job in hand.”
On October 28, Plaintiff emailed Defendant requesting information on his new start date and Defendant responded that Plaintiff would hear back the next day. Instead, Defendant did not communicate with Plaintiff until November 4, and shortly thereafter informed Plaintiff that his résumé was rejected by the government. Defendant thereafter allegedly promised it was not going to leave Plaintiff “out to dry” and told Plaintiff he needed to resign so that Defendant could offer him another position. Plaintiff was perplexed and disturbed by this request and refused to resign until he was offered another position. No replacement offer was ever made, and, in early November, Plaintiff alleges that Defendant informed him that he would not be hired.
Plaintiff brought suit claiming negligent misrepresentation, promissory estoppel, and quantum meruit for services rendered during the interview process. Plaintiff requested both compensatory and punitive damages.
A. Negligent Misrepresentation
The Maryland Court of Appeals recognizes five elements of a negligent misrepresentation claim:
(1) the defendant, owing a duty of care to the plaintiff, negligently asserts a false statement;
(2) the defendant intends that his statement will be acted upon by the plaintiff;
(3) the defendant has knowledge that the plaintiff will probably rely on the statement, which, if erroneous, will cause loss or injury;
(4) the plaintiff, justifiably, takes action in reliance on the statement; and
(5) the plaintiff suffers damage proximately caused by the defendant’s negligence.
To determine a party’s duty of care, Maryland assesses (1) the harm likely to result from a failure to exercise due care and (2) the relationship that exists between the parties. When the harm is limited to economic loss, Maryland additionally requires an “intimate nexus” between the parties similar to “contractual privity or its equivalent.”
Relying on Weisman and Lubore v. RPM Assocs., Inc., 109 Md.App. 312, (Md.Ct.Spec.App.1996), Defendant argued in its Motion that Maryland courts have only found this intimate nexus in the context of contractual negotiations between high level executives and have refused to find such a nexus in the context of offers of at-will employment.
Plaintiff responded, correctly, that the Maryland Court of Appeals had directly rejected Defendant’s arguments, citing Griesi v. Atl. Gen. Hosp. Corp., 360 Md. 1, 756 A.2d 548, 556–57 (2000). Plaintiff further noted that Defendant misconstrued Lubore, which held: “[W]e do not read Weisman to eliminate, in all cases, the existence of an “intimate nexus” when the parties are … negotiating for at-will employment. Weisman simply does not address the issue.” Lubore, 674 A.2d at 559–60.
Instead of the categorical approach urged by Defendant, the Court of Appeals in Griesi evaluated the “intimate nexus” requirement based on the parties’ reasonable knowledge of the purpose of the contact, the reasonable reliance on the information exchanged, and possibility of injury if the information is false or incomplete. 756 A.2d at 554–55. Specifically, the court found a personal interview, several telephone conversations, and a written offer for a non-executive position sufficient to establish the requisite intimate nexus. Id. at 550, 556, 559.
In this case, the Court found that the facts alleged by Plaintiff were similar to those found dispositive in Griesi: the parties conversed over the telephone and email, interviewed in person, and exchanged written documentation of an offer and acceptance with salary terms and a fixed start date. Therefore, the Court found that Plaintiff had pled an intimate nexus sufficient to establish a duty of care.
Defendant also argued that an employer’s right to terminate an employment relationship at will forecloses a claim of negligent misrepresentation. The court in Griesi also rejected this argument. The court reasoned that “[t]he employer’s post-employment right to terminate the employment relationship logically or legally cannot immunize the employer from liability for a tort committed before the termination occurred.” Griesi, 756 A.2d at 558. The court noted that the post-employment right to terminate may impact the plaintiff’s damages, but “has no effect whatsoever on whether he has plead a cognizable claim.” Id.
In its Reply, Defendant raised an entirely new argument that Plaintiff failed to assert a false statement. For purposes of negligent misrepresentation, the defendant has made a false statement when “the defendant (1) did not know the facts he should have known, failed to investigate facts, or investigated them with less than reasonable care; (2) knew the facts but used words or other communicative devices poorly; or (3) unreasonably failed to make statements at all, or failed to make statements needed to clarify the plaintiff’s understanding.” See Griesi, 756 A.2d at 554–56 (quoting and relying on Dan B. Dobbs, The Law of Torts § 472 (2000)).
In his Surreply, Plaintiff countered that the Complaint alleged Defendant made incomplete statements by failing to disclose that his employment was contingent on Government approval: “Defendant then made Plaintiff a rock-solid, written job offer, conditional only on Plaintiff passing security and background checks.” The Court found that Plaintiff sufficiently pled that Defendant failed to disclose material facts regarding the conditions of his employment.
Defendant further argued that, even if Plaintiff alleged a “false statement,” it did not constitute a “statement of past or present fact.” It is true that “predictive statements of future events” are generally not actionable under negligent misrepresentation. Cooper v. Berkshire Life Ins. Co., 148 Md.App. 41, 810 A.2d 1045, 1064 (Md.Ct.Spec.App.2002). Maryland has qualified, however, that statements of a speaker’s present intention to perform future acts within his control may support an action for negligent misrepresentation. Gross v. Sussex Inc., 332 Md. 247, 630 A.2d 1156, 1169 (1993) (citing Weisman, 540 A.2d at 796).
The Court found that Defendant’s alleged false statement—that the offer was “conditional only on Plaintiff passing security and background checks”—may be reasonably construed as a statement of present intention regarding matters within Defendant’s control. Therefore, Plaintiff sufficiently pled an actionable statement of past or present fact under Maryland law.
Defendant also argued that Plaintiff’s “actual employment” forecloses recovery. As evidence of Plaintiff’s “actual employment,” Defendant offered the hour-and-a-half of “work” Plaintiff performed prior to his official start date. Plaintiff responded that Defendant’s characterization of the “training tasks” as Plaintiff beginning work “was preposterous.”
The Court found the merit of Defendant’s argument dubious at best. Defendant’s argument was directly in conflict with the Complaint’s allegation that Plaintiff “would not be hired.” Courts assess complaints assuming the allegations are true. Twombly, 550 U.S. at 555, 127 S.Ct. 1955.
Having found that Plaintiff plausibly alleged the first element of negligent misrepresentation, the Court found that Plaintiff had also pled the remaining elements to “raise a right to relief above the speculative level.” Twombly, 550 U.S. at 556, 127 S.Ct. 1955. Plaintiff alleged that Defendant intended for him to resign from his previous job, that Defendant knew that the job was contingent on Government approval, and that without a job Plaintiff would suffer financial loss. Plaintiff further alleged that he justifiably relied on a “rock solid” job offer from an experienced recruiter and suffered damages when he was not employed.
While permitting the claim to go forward, the Court noted that, in Griesi, the court only found sufficient facts to support “consequential damages in reliance on [defendant’s] representations.” Griesi, 756 A.2d at 559; see also id. at 558 (remarking that “[t]he employer’s post-employment right to terminate … will have a substantial bearing on the amount of any damages”). Similarly, the Court found Plaintiff’s damages to be limited to damages arising from Plaintiff’s reliance on Defendant’s promise of employment.
The Court next analyzed Plaintiff’s claims under the “promissory estoppel” theory.