Holcombe v. Ingredients Solutions, Inc. ( 2020 )

19‐1082‐cv
Holcombe v. Ingredients Solutions, Inc.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT.
CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1,
2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF
APPELLATE PROCEDURE 32.1 AND THIS COURT=S LOCAL RULE 32.1.1.
WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS
COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”).
A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT
ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit,
held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the
City of New York, on the 16th day of January, two thousand twenty.
PRESENT: JOHN M. WALKER, JR.,
GERARD E. LYNCH,
RICHARD J. SULLIVAN,
Circuit Judges.
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MARGARET HOLCOMBE,
Plaintiff‐Appellant,
v. No. 19‐1082‐cv
INGREDIENTS SOLUTIONS, INC.,
Defendant‐Appellee.
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FOR APPELLANT: DOUGLAS J. VARGA (Scott R. Lucas,
on the brief), Lucas & Varga LLC,
Southport, CT.
FOR APPELLEE: KIM E. RINEHART (Benjamin H.
Diessel, on the brief), Wiggin and Dana
LLP, New Haven, CT.
Appeal from a judgment of the United States District Court for the District
of Connecticut (Stefan R. Underhill, Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,
AND DECREED that the judgment of the district court is AFFIRMED.
Margaret Holcombe appeals an order of the district court (Underhill, J.)
dismissing her amended complaint against Ingredients Solutions, Inc. (“ISI”)
pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). Holcombe, an
ISI sales representative from 1999 to 2016, asserted claims for breach of contract,
breach of the covenant of good faith and fair dealing, promissory estoppel,
negligent misrepresentation, violations of the Connecticut Unfair Trade Practices
Act, Conn. Gen. Stat. § 42‐110 et seq., and lost commissions under Conn. Gen. Stat.
§ 42‐482. The district court construed these claims as broadly setting forth two sets
of allegations: (1) ISI engaged in misconduct relating to the sourcing of its
carrageenan food additive product (the “sourcing theory”); and (2) ISI breached
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agreements and promises to pay Holcombe commissions on sales it made to her
former customers after she terminated her relationship with the company (the
“commissions theory”). The district court held that Holcombe lacked Article III
standing to the extent her claims depended on the sourcing theory, and that she
failed to state a claim under the commissions theory. We assume the parties’
familiarity with the underlying facts and the record of prior proceedings. For the
reasons set forth below, we affirm the district court’s dismissal of the amended
complaint but remand with instructions to modify the judgment such that the
dismissal is without prejudice as to the sourcing theory.
I. Standing
To establish standing under Article III of the Constitution, a plaintiff must
show that (1) she suffered an “injury in fact” that is concrete and particularized, (2)
the injury bears a “causal connection” (or is “fairly traceable”) to the defendant’s
challenged action, and (3) the injury is likely to be redressed by a favorable
decision. Lujan v. Defs. of Wildlife, 504 U.S. 555, 560–61 (1992). “Although
standing in no way depends on the merits of the plaintiff’s contention that
particular conduct is illegal, it often turns on the nature and source of the claim
asserted.” Warth v. Seldin, 422 U.S. 490, 500 (1975) (internal citation omitted).
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Looking to the nature of the claims asserted here, we conclude that
Holcombe clearly has standing to assert her claims to the extent they are based on
the commissions theory. With respect to this theory, Holcombe alleges that she
suffered an injury in the form of lost commissions, that this injury was fairly
traceable to ISI’s wrongful failure to pay her commissions – an allegation that is
relevant to each of the six counts in the amended complaint – and that her loss of
commissions is redressable by a favorable decision.
With respect to the sourcing theory, however, Holcombe’s allegations of
misconduct are not fairly traceable to an injury in fact. Holcombe does not allege
that she lost out on commissions while she was an ISI sales representative; rather,
she alleges that she lost out on commissions only after she chose to resign rather
than become complicit in ISI’s misconduct. Although Holcombe may have been
in an unenviable position, on this record we conclude that her decision to resign
was voluntary, thus breaking the causal chain between any sourcing misconduct
on the part of ISI and her lost commissions. See McConnell v. FEC, 540 U.S. 93, 228
(2003) (concluding that plaintiffs’ injury stemmed from their “personal choice” and
thus was not “fairly traceable” to the challenged statute), overruled on other grounds
by Citizens United v. FEC, 558 U.S. 310 (2010). In other words, Holcombe’s decision
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to leave ISI, even if reasonable, was not undertaken to avoid an economic or
reputational injury that was itself “certainly impending” at the time she left.
Clapper v. Amnesty Int’l USA, 568 U.S. 398, 416 (2013). In addition, while Holcombe
alleges that she suffered a loss of goodwill and reputation, the amended complaint
likewise attributes that injury to her own decision to leave ISI abruptly and without
explanation, not to any sourcing misconduct itself.
Finally, Holcombe’s conclusory allegations that ISI’s sourcing misconduct
might expose her to future civil and criminal liability are insufficient to establish
an injury that is “actual or imminent, not conjectural or hypothetical.” Lujan, 504
U.S. at 560 (internal quotation marks omitted); see also Knife Rights, Inc. v. Vance, 802
F.3d 377, 384 (2d Cir. 2015) (explaining that, to establish an injury in fact based on
potential criminal liability, a plaintiff must demonstrate a “credible threat of
prosecution” that is not “imaginary or speculative” (internal quotation marks
omitted)). Thus, we conclude that Holcombe lacks Article III standing to bring
claims against ISI based on the sourcing theory alleged in the amended complaint.
II. Failure to State a Claim
Although Holcombe has standing to pursue her commissions theory, we
conclude that the allegations underlying this theory, construed in the light most
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favorable to Holcombe, are inadequate to state a claim. The gravamen of
Holcombe’s commissions theory is that ISI agreed or otherwise promised her that
she would receive commissions on sales made to customers that she had procured
regardless of whether she later terminated her relationship with ISI.
While we are unaware of Connecticut or Maine case law on point, courts
have consistently rejected claims for commissions on post‐termination sales absent
an express agreement providing otherwise. 1 See, e.g., Prod. Prods. Co. v. Vision
Corp., 706 N.Y.S.2d 289, 291 (App. Div. 2000) (“An at‐will sales representative is
entitled to post‐discharge commissions only if the parties’ agreement expressly
provided for such compensation.” (internal quotation marks omitted)); see also
Roberts Assocs., Inc. v. Blazer Int’l Corp., 741 F. Supp. 650, 653 (E.D. Mich. 1990)
(agreement to pay commissions on “all sales” did not entitle former sales
representative to commissions on post‐termination sales); cf. Restatement (Second)
of Agency § 449 cmt. b (1958) (“In the absence of specific terms in the contract or of
circumstances indicating otherwise, the principal is privileged to compete with the
1 Although Holcombe resides in Connecticut and ISI is located in Maine, the district court declined
to conduct a choice‐of‐law analysis because it concluded that Holcombe’s common law allegations
contained “broad inadequacies common to both states’ case law.” S. App’x at 10. Because the
parties have not identified any material difference between Connecticut and Maine law, we also
find it unnecessary to conduct a choice‐of‐law analysis here.
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agent and, either in person or through another agent, to accomplish the result
without compensation to the first agent.” (emphasis added)); id. § 453 cmt. d
(similar).
Here, Holcombe primarily alleges that: in an October 2000 letter, ISI
promised that she would receive a “4% commission . . . on all sales;” ISI had a
practice of paying sales representatives “commissions into their 70’s and 80’s (or
until their death) in connection with sales made to customers they procured for
accounts whenever secured, despite little or no activity;” and ISI promised
Holcombe that she would be compensated on the same “commission plan or
structure that applied to Frank Holcombe,” her father‐in‐law and one of the
representatives who received commissions past the age of 70. App’x at 68, 174–
77. But none of these allegations plausibly pleads an express promise, oral or
written, to pay commissions to Holcombe in perpetuity – that is, even after she
terminated her relationship with ISI, and indeed after she began representing a
competitor. Nothing in the October 2000 letter indicates that the commission
agreement was intended to extend past termination. To the contrary, the letter
states that the commissions will be paid “in addition to” a salary for which
Holcombe would be reimbursed. Salary and expenses are plainly not paid after
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termination of employment, undermining Holcombe’s assertion that the
commissions would be paid past that point. Although Holcombe alleges that the
October 2000 agreement was complemented by various oral communications, she
has failed to identify in her complaint any specific conversations in which ISI
officials promised to pay her commissions past termination. Nor does the mere
fact that ISI paid commissions to sales representatives into their 70’s and 80’s
plausibly support Holcombe’s commissions theory, since Holcombe does not allege
that any of those representatives had terminated their relationship with ISI.
Accordingly, the district court did not err in concluding that Holcombe’s amended
complaint fails to state a claim based on her commissions theory.
III. Dismissal without Prejudice and Leave to Amend
Holcombe argues in conclusory fashion that, “[a]t the very least, the
dismissal should be without prejudice and [she should be] granted leave to
amend.” Appellant’s Opening Br. at 59. With respect to Holcombe’s sourcing
theory, we conclude – and ISI concedes – that dismissal with prejudice on Article
III standing grounds was improper. See, e.g., Katz v. Donna Karan Co., L.L.C., 872
F.3d 114, 121 (2d Cir. 2017) (“[W]here a case is dismissed for lack of Article III
standing . . . that disposition cannot be entered with prejudice, and instead must be
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dismissed without prejudice.”). Nevertheless, that the dismissal of the sourcing
theory must be without prejudice does not mean that Holcombe must be granted
leave to amend. See, e.g., Wynder v. McMahon, 360 F.3d 73, 76 (2d Cir. 2004); see also
MAO‐MSO Recovery II, LLC v. State Farm Mut. Auto. Ins. Co., 935 F.3d 573, 581 (7th
Cir. 2019) (“A dismissal for lack of jurisdiction without leave to amend is not the
same thing as a dismissal with prejudice.”). Here, the district court’s failure to
grant Holcombe leave to file a second amended complaint was not error as to either
of her two theories, particularly given that Holcombe did not request leave to file a
second amended complaint. See Gallop v. Cheney, 642 F.3d 364, 369 (2d Cir. 2011)
(“[N]o court can be said to have erred in failing to grant a request [for leave to
amend] that was not made.”). In addition, Holcombe has not explained on appeal
how she would cure the Article III standing deficiencies in her sourcing allegations,
or how she would cure her failure to plead cognizable claims under a commissions
theory, in a second amended complaint. Thus, although the district court should
have dismissed Holcombe’s sourcing allegations without prejudice, we discern no
error in the district court’s dismissal of the amended complaint in its entirety
without leave to amend, and with prejudice as to her commissions theory.2
2 Unlike a dismissal with prejudice, a dismissal without prejudice does not carry with it preclusive
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Accordingly, we principally AFFIRM the judgment of the district court but
REMAND with instructions to dismiss the amended complaint without prejudice
insofar as it is based on Holcombe’s sourcing theory.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk of Court
effect, see Purdy v. Zeldes, 337 F.3d 253, 258 (2d Cir. 2003), even where the district court does not
grant leave to amend, see, e.g., Wynder, 360 F.3d at 76. Thus, Holcombe may attempt to bring
claims based on her sourcing theory in state court or, if she later believes that she can establish
Article III standing, she can attempt to bring a new action in federal court, assuming that no
independent barrier exists. See MAO‐MSO Recovery II, 935 F.3d at 582. Of course, we express no
view on whether a state or federal court would have jurisdiction over any future sourcing‐related
claims or on the merits of any such claims.
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