Grady B. Jones and Susan R. Lockwood v. Oakland City University Founded by General Baptists, Inc. and Ray G. Barber , 122 N.E.3d 911 ( 2019 )

FILED
Apr 18 2019, 9:00 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEY FOR APPELLANTS ATTORNEYS FOR APPELLEES
Joseph G. Striewe Patrick A. Shoulders
Indianapolis, Indiana Wm. Michael Schiff
L. Katherine Boren
Ziemer, Stayman, Weitzel &
Shoulders, LLP
Evansville, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Grady B. Jones and Susan R. April 18, 2019
Lockwood, Court of Appeals Case No.
Appellants-Plaintiffs, 18A-PL-2994
Appeal from the Gibson Superior
v. Court
The Honorable Robert R.
Oakland City University Aylsworth, Special Judge
Founded by General Baptists, Trial Court Cause No.
Inc. and Ray G. Barber, 26D01-1712-PL-1876
Appellees-Defendants.
Najam, Judge.
Statement of the Case
[1] Grady B. Jones and Susan R. Lockwood appeal the trial court’s judgment on
the pleadings in favor of Oakland City University Founded by General Baptists,
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Inc. (“OCU”) and Ray G. Barber. Jones and Lockwood raise three issues for
our review, which we restate as the following three issues:
1. Whether the trial court erred when it entered judgment on
the pleadings on two counts of fraud in the inducement,
which judgment the court based on integration clauses in
the parties’ contracts.
2. Whether the trial court erred when it entered judgment on
the pleadings on a count of retaliatory discharge, which
count was premised on OCU’s termination of Jones’ and
Lockwood’s employment after they had orally reported
on the misuse of public funds by OCU officers.
3. Whether the trial court erred when it entered judgment on
the pleadings on various theories of at-will employment.
[2] Although we disagree with the trial court’s reliance on the integration clauses
on the first issue, we nonetheless reach the same conclusion on that issue
because the pleadings show that the alleged misrepresentations relied on by
Jones and Lockwood were statements of current intentions made by OCU
officers during their contract negotiations. As a matter of Indiana law, such
statements do not establish a basis for fraud. Accordingly, we affirm the trial
court’s judgment on the first issue. We also affirm the trial court’s judgment on
the other issues in this appeal.
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Facts and Procedural History 1
[3] On December 8, 2017, Jones and Lockwood filed their complaint against OCU
and Barber, which Jones and Lockwood later supplemented and amended. On
August 28, 2018, Jones and Lockwood filed their supplemented second
amended complaint, which provided in relevant part as follows:
Count I Fraud in the Inducement . . . : Jones
1. On or about March 2, 2017, Jones was contacted with regard
to potential future employment by [Barber,] President of OCU.
2. Between March 13, 2017[,] and June 5, 2017, Jones engaged
in discussions with regard to employment by OCU as its Vice
President for Advancement (“VPA”) addressing the terms and
conditions of employment with representatives of OCU,
including, but not limited to:
A. [Barber], its President;
B. C. William Blackburn . . . , its Chairman of the OCU
Board of Trustees;
C. John Dunn . . . , its Special Advisor to the OCU Board
of Trustees.
1
We agree with OCU and Barber that, among other deficiencies, Jones and Lockwood “have failed to
include numerous relevant materials in their Appellants’ Appendix,” contrary to Indiana Appellate Rule
50(A)(2). Appellees’ Br. at 5 n.1. We thank OCU and Barber for their submission of an Appellees’
Appendix to supplement the Appellants’ Appendix.
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3. On or about May 18, 2017, during discussions referenced
herein, Barber, Blackburn, and Dunn orally represented to Jones
that his employment would be contingent on his agreement to
serve as VPA for a period of five years, during which time his
duties would include preparing his prospective successor to
accede to VPA upon his retirement.
4. Prior to accepting the VPA position at OCU, Jones orally
advised Barber that he had been selected to fill the position of
Associate Vice Chancellor for Advancement at Troy University,
in Troy, Alabama.
5. On or about May 31, 2017, Jones and Barber executed a
Provisionary Administrative Member Agreement (“Employment
Agreement”), whereby the parties agreed to a salary and specific
duration of employment commencing June 5, 2017[,] and ending
May 31, 2018.
***
9. The terms of the Employment Agreement do not contemplate
employment of Jones for five years.
10. The terms of the Employment Agreement are inconsistent
with the representations made to Jones by Barber, Blackburn,
and Dunn during the hiring process.
***
13. The Employment Agreement states[:] “Either party may
terminate this Agreement for any reason without cause upon
thirty (30) days prior written notice to the other party.”
[(“Termination Clause.”)]
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14. The contents . . . of the Employment Agreement describe an
at-will relationship.
15. The [Termination Clause] . . . is inconsistent with the oral
representations of Barber, Blackburn, and Dunn during the hiring
process of Jones with regard to the specific duration of
employment.
***
24. The Employment Agreement states[:] “Entire Agreement.
This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof, and it
supersedes all prior oral or written agreements[,] commitments or
understandings with respect to the matters provided for
herein . . . .” (“Integration Clause”).
***
32. Barber intended that Jones’ nature of employment be at-will.
33. On October 2, 2017, Barber hand-delivered written 30-day
notice to Jones that Jones’ employment was terminated “without
cause” (“Termination Notice”).
34. Jones is an alumnus of OCU.
35. Jones was 64 years of age at the time of the transaction
described herein.
36. Barber is a clergyman in the General Baptist Church.
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37. Jones was acquainted with Barber in his capacity as a
clergyman of the General Baptist Church in excess of 40 years.
38. Jones reposed a confidence in Barber that Barber’s actions
would be consistent with his oral representations and assurances
regarding the specific duration of Jones’ employment made
during [the] hiring process.
***
41. Jones was induced to execute the Employment Agreement
by the oral representations and assurances of Barber,
Blackburn[,] and Dunn to accept employment of specific
duration for a period of not less than five years as VPA.
42. Jones relied on the oral representations [and] assurances of
Barber, Blackburn[,] and Dunn and agreed to accept employment
consistent with the terms and conditions of employment
represented, which induced him to believe he would be employed
by OCU in the capacity of VPA for a period of five years.
43. Jones had a right to rely on the oral representations of
Barber, Blackburn, and Dunn made prior to the execution of the
Employment Agreement[] with regard to the term of his
employment . . . .
44. Based on the oral representation . . . Jones advised
representatives of Troy University that he was accepting OCU’s
offer of employment.
45. The actions of Barber described herein constitute fraud in the
inducement.
***
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Count II Fraud in the Inducement . . . : Lockwood
***
51. On or about April 2017, Lockwood was contacted with
regard to potential future employment by OCU by Robert
Yeager, who was then the Vice President For Administration and
Finance (“VPAF”) of OCU.
52. Between April[] 2017 and July 7, 2017, Lockwood engaged
in discussions with regard to employment by OCU as its [VPAF]
addressing the terms and conditions of employment with
representatives of OCU, including, but not limited to:
A. [Barber];
B. Daniel Dunivan . . . , its Provost;
C. [Blackburn].
53. Prior to accepting the VPAF position, Lockwood orally
advised Barber that she held a position of assured permanency of
employment with the Indiana Department of Correction[.]
***
55. Prior to accepting the VPAF position, Barber orally assured
Lockwood that her employment would be permanent.
56. On or about July 10, 2017, Lockwood and Barber executed a
Provisionary Administrative Member Agreement (“Employment
Agreement[ ]2”), whereby the parties agreed to a salary and a
term of employment ending on May 31, 2018.
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57. The terms of the Employment Agreement[ ]2 contemplate
employment of Lockwood for a specific duration.
58. The oral representations and assurances of Blackburn were
not reduced to writing regarding . . . [her employment] for a
specified period.
59. Lockwood intended to accept OCU’s offer of permanent
employment.
***
63. The Employment Agreement[ ]2 states [a Termination
Clause identical to Jones’ Termination Clause].
64. The contents of [the Termination Clause] describe an at-will
relationship.
65. The contents of [the Termination Clause] are inconsistent
with the oral representations of Barber, Blackburn, and Dunivan
during the hiring process of Lockwood . . . .
***
72. The Employment Agreement[ ]2 states [an Integration
Clause identical to Jones’ Integration Clause].
73. The Integration Clause disavows OCU’s obligation to
comply with oral representations made by Barber, Blackburn,
and Dunivan during the hiring of Lockwood.
***
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76. Barber was aware of the terms contained in [the Termination
Clause and the Integration Clause] prior to presenting [the
Employment Agreement] to Lockwood for execution.
***
80. Barber held a position of superior knowledge over Lockwood
with regard to the content of the Employment Agreement.
81. Barber intended that Lockwood’s nature of employment
would be at-will.
82. On October 2, 2017, Barber hand-delivered written 30-day
notice to Lockwood that Lockwood’s employment was
terminated “without cause” (“Termination Notice”).
83. Lockwood is an alumna of OCU.
84. Barber is a clergyman in the General Baptist Church.
85. Lockwood reposed a confidence in Barber that Barber’s
actions would be consistent with his oral representations and
assurances regarding the specific duration of Lockwood’s
employment made during [the] hiring process.
***
87. Lockwood was induced by the oral representations and
assurances of Barber, Blackburn[,] and Dunivan to accept
employment consistent with the terms and conditions described
herein and advised Barber that she was ready and willing to serve
in the capacity of VPAF until retirement.
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88. Lockwood relied on the oral representations [and]
assurances of Barber, Blackburn[,] and Dunivan and agreed to
accept employment under those terms and conditions described
herein, which induced her to believe she would be employed by
OCU in the capacity of VPAF indefinitely.
89. Lockwood had the right to rely on the oral representations of
Barber, Blackburn, and Dunivan made prior to the execution of
the Employment Agreement[] with regard to the term of her
employment by OCU.
90. Lockwood was induced by the oral representations of
Barber, Blackburn, and Dunivan to accept permanent
employment by OCU, to her detriment.
91. Lockwood’s reliance on the oral representations and
assurances of Barber, Blackburn, and Dunivan induced her to
forego a permanent employment with the Indiana Department of
Correction[.]
92. Lockwood’s reliance on the oral representations and
assurances of Barber, Blackburn, and Dunivan induced her to
believe she would be employed indefinitely by OCU.
93. The actions of Barber described herein constitute fraud in the
inducement.
***
Count III Retaliatory Discharge
***
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113. On or about August 27, 2017, in their respective capacities
as VPA and VPAF, and at the direction of Blackburn, Jones and
Lockwood advised members of the OCU Board of Trustees of
observations, findings[,] and evidence of [the] following matters
which fall within their duties and responsibilities as officers of
OCU and custodians of the public fisc, in violation of I.C. § 22-5-
3-3.
114. Jones and Lockwood, during the course of their
employment[,] found evidence of misappropriation of
endowment funds.
115. Jones and Lockwood, during the course of their
employment[,] found evidence that CFO[ Beth Barber, wife of
OCU President Barber,] failed to produce, or was incapable of
producing, monthly financial reports.
116. Lockwood was denied complete access to OCU financial
records but was required to take actions for which she could be
personally liable.
117. Jones and Lockwood, during the course of their
employment[,] found evidence that entity “Blue Oak, LLC” was
created by Barber in collaboration with former VPAF [Yeager]
for the purpose of controlling funds provided OCU by [the]
United States Department of Agriculture and [the] Indiana
Regional Cities Initiative associated with a capital project,
commonly known as University Boulevard Commons.
118. Jones and Lockwood, during the course of their
employment[,] . . . found evidence that the entity “Blue Oak,
LLC” was created without the knowledge of the entire Board of
Trustees.
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***
121. Jones and Lockwood, during the course of their
employment[,] . . . found evidence that Yeager was to be
compensated from funds provided to OCU associated with a
capital project, which constitutes misuse of public resources by
the terms of the award.
122. Jones and Lockwood, during the course of their
employment[,] . . . found evidence that funds in excess of $25,000
were designated in the proposed budget provided to the
Southwest Indiana Regional Development Authority for
payment to [a local law firm] for expenses associated with Blue
Oak, LLC.
123. Jones and Lockwood were discharged in retaliation for
their disclosure of the foregoing matters to members of the OCU
Board of Trustees.
***
130. The wrongful/retaliatory discharge of Jones and Lockwood
by Barber violates Indiana’s public policy and I.C. § 22-5-3-3. . . .
Appellants’ App. Vol. 2 at 27-39 (emphases and citations removed).
[4] In addition to those three counts, Jones and Lockwood alleged, as relevant
here, two additional counts that were premised on a theory of at-will
employment with OCU (“the at-will employment counts”). 2 The at-will
2
In their complaint, Jones and Lockwood additionally alleged that OCU and Barber had engaged in undue
influence and that Jones’ and Lockwood’s purported at-will employment had been unlawfully terminated
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employment counts specifically alleged that OCU and Barber had unlawfully
terminated Jones’ and Lockwood’s at-will employment under a theory of
“independent consideration,” which was based on Jones’ lost employment
opportunity with Troy University and Lockwood’s lost employment
opportunity with the Department of Correction. The at-will employment
counts also alleged unlawful termination of Jones’ and Lockwood’s
employment under a theory of “promissory estoppel,” which was based on their
reliance on the oral representations of OCU’s officers during their respective
hiring processes. Id. at 39-41 (emphases removed). Jones and Lockwood
attached their Employment Agreements and Termination Notices to their
complaint.
[5] OCU and Barber jointly moved for judgment on the pleadings under Indiana
Trial Rule 12(C). The court granted the motion and entered final judgment for
OCU and Barber in light of the “clear and unambiguous” “language of the
contract[s],” especially “the integration clause[s].” Id. at 21-22. This appeal
ensued.
under a theory of constructive fraud. Jones and Lockwood also referred to the Employment Agreements as
“unconscionable.” Appellants’ App. Vol. 2 at 30, 34. However, Jones and Lockwood do not argue on
appeal that the trial court erred when it entered judgment on the pleadings with respect to those additional
counts, and, thus, we do not consider the trial court’s judgment with respect to those additional counts on
appeal. See Ind. Appellate Rule 46(A)(8)(a).
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Discussion and Decision
Standard of Review
[6] Jones and Lockwood appeal the trial court’s entry of judgment on the
pleadings. As our Supreme Court has explained:
A motion for judgment on the pleadings under Trial Rule 12(C)
tests the sufficiency of a claim or defense presented in the
pleadings and should be granted only where it is clear from the
face of the complaint that under no circumstances could relief be
granted. Because we base our ruling solely on the pleadings, we
accept as true the material facts alleged in the complaint. When,
as here, a 12(C) motion essentially argues the complaint fails to
state a claim upon which relief can be granted, we treat it as a
12(B)(6) motion. Like a trial court’s 12(B)(6) ruling, we review a
12(C) ruling de novo.
KS&E Sports v. Runnels, 72 N.E.3d 892, 898 (Ind. 2017) (quotations marks and
citations omitted). For purposes of a Rule 12(C) motion, the pleadings, as
relevant here, consist of the complaint and any written instrument attached to
the complaint. Celadon Trucking Servs., Inc. v. Wilmoth, 70 N.E.3d 833, 840 (Ind.
Ct. App. 2017), trans. denied.
[7] As Jones and Lockwood’s complaint alleges multiple and alternative theories of
recovery, we address the counts as follows: the two counts of fraud in the
inducement; the allegation of retaliatory discharge; and the two at-will
employment counts.
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Issue One: Fraud in the Inducement Counts
[8] We first consider Jones and Lockwood’s allegations that OCU and Barber
fraudulently induced them into executing the Employment Agreements. The
trial court entered judgment on the pleadings against Jones and Lockwood on
these two counts based on the Integration Clauses of the Employment
Agreements, in which Jones and Lockwood expressly disclaimed “all prior oral
or written agreements, commitments or understandings” between the parties.
Appellants’ App. Vol. 2 at 73, 81-82.
[9] To plead a claim of fraud in the inducement, Jones and Lockwood needed to
state (1) a material misrepresentation of past or existing facts; (2) made with
knowledge or reckless ignorance of its falsity; (3) which caused the claimant to
rely upon the misrepresentation to the claimant’s detriment. Siegal v. Williams,
818 N.E.2d 510, 515 (Ind. Ct. App. 2004). Such claims of actual fraud “may
not be predicated upon representations of future conduct.” Id. Neither may a
claim of actual fraud be based on “broken promises, unfulfilled predictions, or
statements of intent which are not executed.” Maynard v. 84 Lumber Co., 657
N.E.2d 406, 409 (Ind. Ct. App. 1995), trans. denied.
[10] On appeal, OCU and Barber first assert that the pleadings fail to show that
Jones and Lockwood’s fraud in the inducement counts were based on past or
existing facts. We initially note that OCU and Barber did not argue that theory
in support of their motion for judgment on the pleadings to the trial court. See
Appellees’ App. Vol. 2 at 25-26, 45, 61, 98, 113-14. However, we nonetheless
conclude that the issue is properly before us in that our standard of review on
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Rule 12(C) issues is de novo and requires us to read the pleadings for ourselves to
determine if they state any circumstances under which relief can be granted.
E.g., KS&E Sports, 72 N.E.3d at 898; see also Celadon, 70 N.E.3d at 840-41. In
other words, we may affirm the trial court’s judgment on a Rule 12(C) motion
on any theory supported by the record, just as we can on appeal from a Rule
12(B)(6) judgment. See Citizens Action Coalition of Ind. v. Koch, 51 N.E.3d 236,
241 (Ind. 2016); see also Celadon, 70 N.E.3d at 841 (interpreting a new argument
on appeal in support of the trial court’s Rule 12(C) judgment as “merely [an]
expression[] upon [the parties’] earlier arguments” to the trial court).
Accordingly, we will consider OCU and Barber’s contention that the pleadings
fail to show a legally sufficient misrepresentation.
[11] We agree with OCU and Barber that, as a matter of Indiana law, Jones and
Lockwood have failed to plead a misrepresentation of a past or existing fact.
According to the complaint, the alleged misrepresentation underlying Jones’
fraud in the inducement count occurred “during discussions” of employment
terms when OCU’s officers “orally represented to Jones that his employment
would be contingent on his agreement to serve as VPA for a period of five
years . . . .” Appellants’ App. at 27-28. The complaint similarly alleges that the
misrepresentation underlying Lockwood’s fraud in the inducement count
occurred “during the hiring process” when the parties were “in discussion with
regard to employment by OCU,” and Barber “orally assured Lockwood that
her employment” with OCU “would be permanent.” Id. at 32-33.
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[12] “Indiana law has not recognized a claim for fraud based on misrepresentation
of the speaker’s current intentions.” Sees v. Bank One, Ind., N.A., 839 N.E.2d
154, 163 (Boehm, J., concurring in part and dissenting in part) (quoting Sachs v.
Blewett, 206 Ind. 151, 155-56, 185 N.E. 856, 858 (1933); Kopis v. Savage, 498
N.E.2d 1266, 1272 (Ind. Ct. App. 1986)); see also id. at 161 n.6 (majority
opinion) (agreeing with Justice Boehm that existing Indiana precedent does not
permit an action for fraud based on a statement of current intention but noting
that our precedent is in conflict with the Restatement (Second) of Contracts §
159 cmt. d (1981)).
[13] For example, in Sachs, a seller of real property alleged that putative buyers of
that property had orally agreed to purchase the property for a specific price at
an auction but had “intended to repudiate the agreement with the object of
procuring the real estate at a lower price” after the auction. 185 N.E. at 858.
Our Supreme Court stated that the buyers’ “promises and representations were
only false in the sense that the [buyers] intended to and did refuse to comply
with them . . . .” Id. The court then held that such false intentions did not
support a claim for fraud, stating that “[a] fraudulent intent alone is not
actionable. . . . This court has repeatedly said that actionable fraud cannot be
predicated upon a promise to do a thing in the future, although there may be no
intention of fulfilling the promise.” Id. The court further noted that “the law
did not require” the parties “to carry out their agreement, and fraud cannot be
predicated upon a failure to do that which there is no legal obligation to do.”
Id. at 859.
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[14] Similarly, in Kopis, the seller of a business “promised” a prospective buyer that
he would “help arrange financing and to take the [business] off the market for
90 days.” 498 N.E.2d at 1272. The seller failed to do so, and the prospective
buyer was unable to finalize his purchase of the property because of the seller’s
failures. After a bench trial on the buyer’s complaint, the trial court ultimately
concluded that the buyer did not present sufficient evidence to show fraud on
the part of the seller. We affirmed on appeal and held that the evidence showed
that the seller’s statements “were not misrepresentations of existing fact[] but
[were] promises of future conduct for which an action of fraud will not lie.” Id.[15] Jones and Lockwood’s fraud in the inducement counts are premised on
statements of current intentions by OCU’s officers. Specifically, the alleged
misrepresentations were with respect to the durations of employment OCU’s
officers had offered to Jones and Lockwood during their respective hiring
processes and prior to the execution of their Employment Agreements.
Assuming that those representations “were false in the sense that [OCU’s
officers] intended to and did refuse to comply with them,” as in Sachs there is
no factual basis for a fraud claim as “[a] fraudulent intent alone is not
actionable.” 185 N.E. at 858. Rather, as in Kopis, the representations of OCU’s
officers to Jones and Lockwood during their negotiations for employment
“were not misrepresentations of existing fact[] but were promises of future
conduct,” that is, they were promises as to what the Employment Agreements
would say when those agreements were eventually reduced to writing. 498
N.E.2d at 1272. That the Employment Agreements ended up saying something
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different might go to the parties’ meeting of the minds in the formation of a
valid contract, but it does not go to a tort claim for fraud. See Sachs, 185 N.E. at
858.
[16] Indeed, the actual basis for the trial court’s entry of judgment on the pleadings
on the two fraud in the inducement counts was not that the pleadings failed to
state a legally sufficient misrepresentation but that the parties’ Integration
Clauses precluded fraud. 3 That rationale was incorrect. As we have explained:
The parol evidence rule provides that “[w]hen two parties have
made a contract and have expressed it in a writing to which they
have both assented as the complete and accurate integration of
that contract, evidence . . . of antecedent understandings and
negotiations will not be admitted for the purpose of varying or
contradicting the writing.” Dicen v. New Sesco, Inc., 839 N.E.2d
684, 688 (Ind. 2005) (quoting 6 Arthur Linton Corbin, Corbin on
Contracts § 573 (2002 reprint)) (emphasis removed). This rule
“effectuates a presumption that a subsequent written contract is
of a higher nature than earlier statements, negotiations, or oral
agreements by deeming those earlier expressions to be merged in
to or superseded by the written document.” 11 Richard A. Lord,
Williston on Contracts § 33:1 (4th ed. 1999) (footnote omitted).
The first step when applying the parol evidence rule is
determining whether the parties’ written contract represents a
complete or partial integration of their agreement. See
Restatement (Second) of Contracts §§ 209, 210 (1981). If the
contract is completely integrated, constituting a final and
3
Jones and Lockwood’s assertion on appeal that the Integration Clauses “do[] not extend to promises made
thereafter” by OCU and Barber is not supported by cogent reasoning, and we do not consider it. Appellants’
Br. at 24 (emphasis removed).
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complete expression of all the parties’ agreements, then evidence
of prior or contemporaneous written or oral statements and
negotiations cannot operate to either add to or contradict the
written contract. Franklin v. White, 493 N.E.2d 161, 167 (Ind.
1986). The preliminary question of integration, either complete or
partial, requires the court to hear all relevant evidence, parol or written.
Id. “Whether a writing has been adopted as an integrated agreement is a
question of fact to be determined in accordance with all relevant
evidence.” Restatement (Second) of Contracts §§ 209 cmt. c.
Nevertheless, what is ordinarily a question of fact may become a
question of law “where the facts are undisputed and only a single
inference can be drawn from those facts.” Jones v. Ind. Bell Tel.
Co., 864 N.E.2d 1125, 1127 (Ind. Ct. App. 2007) (breach of
duty); see also Hamilton v. Ashton, 846 N.E.2d 309, 316 (Ind. Ct.
App. 2006) (proximate cause), clarified on reh’g, 850 N.E.2d 466,
trans. denied.
Hinkel v. Sataria Distrib. & Packaging, Inc., 920 N.E.2d 766, 768-69 (Ind. Ct. App.
2010) (emphasis added; alteration and omissions original to Hinkel).
[17] In other words, whether a written contract represents the parties’ complete and
integrated agreement is a question of fact that may turn on parol evidence
despite what the written contract itself may say. Franklin, 493 N.E.2d at 166-
67. Moreover, “[p]arol evidence is admissible when fraud is at issue” and the
purported written agreement is alleged to be void. Peoples Trust & Sav. Bank v.
Humphrey, 451 N.E.2d 1104, 1112 (Ind. Ct. App. 1983). As the Indiana
Supreme Court has long held, “[f]raud arising out of the negotiations leading up
to the execution of a written contract is not merged therein . . . .” Moore v.
Harmon, 142 Ind. 555, 41 N.E. 599, 600 (1895); see also Franklin, 493 N.E.2d at
166. Thus, the Integration Clauses did not preclude Jones and Lockwood from
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introducing parol evidence to a fact finder on their claims that they were
fraudulently induced to execute the Employment Agreements and, as such, that
those agreements do not in fact represent the parties’ intended agreements.
[18] In the trial court and on appeal, OCU and Barber substantially relied on this
Court’s opinion in Circle Center Development Co. v. Y/G Indiana, L.P. for the
proposition that, to plead a claim of fraud in the inducement to a contract that
contains an integration clause, the plaintiff must specifically assert that he was
“fraudulently induced . . . to execute the disclaimer” itself. 762 N.E.2d 176,
180-81 (Ind. Ct. App. 2002), trans. denied. However, we have since clarified
that, while such arguments “accurately quote[] our decision” in Circle Center,
“the proposition upon which [our statement in Circle Center relied] has a broader
application,” namely, that a party “could overcome the effect of an integration
clause if it could show it had a right to rely on the alleged misrepresentations
and did in fact rely on them in executing the release and/or the integration clause.”
Wind Wire, LLC v. Finney, 977 N.E.2d 401, 405 (Ind. Ct. App. 2012) (quoting
Tru-Cal, Inc. v. Conrad Kacsik Instrument Sys., Inc., 905 N.E.2d 40, 45 (Ind. Ct.
App. 2009), trans. denied) (emphasis original to Wind Wire); see also Judson
Atkinson Candies, Inc. v. Kenray Assocs., Inc., 719 F.3d 635, 639-44 (7th Cir. 2013)
(concluding that, insofar as Circle Center might be read to “announce a new
categorical rule” of Indiana law, such rule “is inconsistent with the Indiana
Supreme Court’s pronouncements” and other decisions of our Court). We
agree with those authorities and decline to follow Circle Center insofar as OCU
Court of Appeals of Indiana | Opinion 18A-PL-2994 | April 18, 2019 Page 21 of 25
and Barber narrowly read it in a manner inconsistent with prevailing Indiana
law.
[19] Nonetheless, regardless of the Integration Clauses, the pleadings demonstrate
that Jones and Lockwood have not stated a claim for fraud because they have
not identified a legally sufficient misrepresentation by OCU and its officers.
Accordingly, on that basis we affirm the trial court’s entry of judgment on the
pleadings for OCU and Barber on the two fraud in the inducement counts.
Issue Two: Retaliatory Discharge
[20] We next consider Jones and Lockwood’s claim that they were discharged in
retaliation for reporting the misuse of public funds by OCU or its officers.
According to their complaint, Jones and Lockwood’s claim of retaliatory
discharge is based on Indiana Code Section 22-5-3-3 (2018), which provides in
relevant part as follows:
(a) An employee of a private employer that is under public
contract may report in writing the existence of:
***
(4) the misuse of public resources;
concerning the execution of a public contract first to the private
employer, unless the private employer is the person whom the
employee believes is committing the . . . misuse of public
resources. In that case, the employee may report the . . . misuse
of public resources in writing to either the private employer or to
Court of Appeals of Indiana | Opinion 18A-PL-2994 | April 18, 2019 Page 22 of 25
any official or agency entitled to receive a report from the state
ethics commission . . . .
(b) For having made a report under subsection (a), an employee may
not:
(1) be dismissed from employment . . . .
(Emphases added.)
[21] Assuming for the sake of argument that Indiana Code Section 22-5-3-3 creates a
private cause of action, it is clear that, before the statute can apply, the
employee’s report must have been made “in writing.” Id. There is no dispute
that Jones and Lockwood did not make their report of misuse in writing.
[22] Instead, in the trial court Jones and Lockwood asserted that the statute’s use of
“may” means that they were not required to make a report in writing in order to
be protected under the statute. We cannot agree. The statute’s use of “may”
means that an employee “may” report misuse but is not legally compelled to do
so. However, if the employee chooses to make a report, he or she must do so
“in writing” to be protected under the statute. As Jones and Lockwood did not
make their report in writing, the trial court properly entered judgment on the
pleadings for OCU and Barber on the retaliatory discharge count.
Issue Three: At-Will Employment Counts
[23] Finally, we address Jones and Lockwood’s at-will employment counts. In their
complaint, Jones and Lockwood assert that, because the Termination Clauses
Court of Appeals of Indiana | Opinion 18A-PL-2994 | April 18, 2019 Page 23 of 25
provide that they could be terminated for any reason on thirty days written
notice, they were, despite appearances, at-will employees. They further allege
that, as at-will employees, they were protected against dismissal without cause
based on a theory of promissory estoppel and/or a theory of “independent
consideration,” namely, their forfeiture of job opportunities elsewhere to accept
their employments with OCU. See Appellants’ App. Vol. 2 at 39.
[24] Jones and Lockwood were clearly not at-will employees. 4 As the Indiana
Supreme Court has made clear:
Historically, Indiana has recognized two basic forms of
employment: (1) employment for a definite or ascertainable
term; and (2) employment at-will. If there is an employment
contract for a definite term, and the employer has not reserved
the right to terminate the employment before the conclusion of
the contract, the employer generally may not terminate the
employment relationship before the end of the specified term
except for cause or by mutual agreement. If there is no definite
or ascertainable term of employment, then the employment is at-
will, and is presumptively terminable at any time, with or
without cause, by either party.
Orr v. Westminster Vill. N., Inc., 689 N.E.2d 712, 717 (Ind. 1997) (footnote
omitted).
4
Jones and Lockwood’s argument here is that they were at-will employees under the terms of their
Employment Agreements. Insofar as Jones and Lockwood may have been able to claim at-will status by
avoiding the Employment Agreements under a theory of fraud in the inducement, as explained in Issue One
that theory is not available to them.
Court of Appeals of Indiana | Opinion 18A-PL-2994 | April 18, 2019 Page 24 of 25
[25] The Termination Clauses may have provided broad opportunities for OCU to
end Jones’ and Lockwood’s employment, but the Employment Agreements
unambiguously established a definite term for their employment with OCU.
While the Employment Agreements were contracts for definite terms, the
Termination Clauses also reserved OCU’s right to terminate Jones’ and
Lockwood’s employment before the end of those terms under the conditions
provided in those clauses, a right which OCU exercised. See id. We agree with
the trial court that the unambiguous language of the Employment Agreements
precludes Jones and Lockwood’s at-will employment counts, and we affirm the
trial court’s entry of judgment on the pleadings for OCU and Barber on those
counts.
Conclusion
[26] We affirm the trial court’s entry of judgment on the pleadings for OCU and
Barber on all counts. 5
[27] Affirmed.
Pyle, J., and Altice, J., concur.
5
Given our disposition, we need not consider Jones and Lockwood’s additional arguments regarding
discovery.
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