Fox v. Lummus Co.
1981 U.S. Dist. LEXIS 11632, 524 F. Supp. 27 (1981)
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Rule of Law:
Under New York law, courts will not imply terms into an express written contract that are inconsistent with its clear provisions, nor will they allow claims for unjust enrichment where a valid contract governs the subject matter; furthermore, damages for breach of an employment contract are generally limited to economic losses like unpaid salary and do not include mental or physical anguish.
Facts:
- Ian Fox, a resident of England, entered into an "Iraqi Jobsite Employment Agreement" with The Lummus Company, a New Jersey corporation, for employment as a sub-contract administrator at a construction project in Basrah, Iraq.
- Paragraph 5 of the Employment Agreement explicitly stated that Fox's salary would be reduced by monthly amounts for "theoretical taxes" calculated on base pay plus overtime, as detailed in an attached compensation worksheet.
- The agreement further provided that The Lummus Company would hold Fox harmless for Iraqi and home country taxes on company-earned income, while Fox was responsible for taxes on outside income.
- Addendum B of the Employment Agreement, "Earnings Calculation," outlined monthly computations including base salary, overtime, total taxable salary, allowances, theoretical tax, and net monthly salary.
- The complaint stated that this agreement constituted the entire understanding between the parties regarding salary and tax withholding.
- No tax was ever levied by any governmental authority upon Fox's salary.
- Fox also claimed that The Lummus Company breached the contract by denying him holiday leave and by a "course of constant harrassment and pressure."
Procedural Posture:
- Ian Fox filed an action against The Lummus Company in the United States District Court for the Southern District of New York, alleging breach of their employment agreement.
- The Lummus Company moved the District Court for an order: 1) dismissing the first three causes of action (concerning salary deductions) for failure to state a claim upon which relief may be granted, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure; 2) directing Fox to provide a more definite statement of the fourth cause of action (concerning harassment), pursuant to Rule 12(e) of the Federal Rules of Civil Procedure; and 3) striking allegations of pain and suffering and related requests for relief from the fourth cause of action, pursuant to Rule 12(f) of the Federal Rules of Civil Procedure.
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Issue:
1. Does an employer breach an employment contract by making "theoretical tax" deductions expressly provided for in the agreement, even if no actual tax is levied, thereby entitling the employee to repayment under an implied term or unjust enrichment theory? 2. Are general allegations of "harassment and pressure" in a breach of employment contract claim sufficiently definite to require a responsive pleading, or do they warrant a more definite statement? 3. Are damages for mental and physical anguish and suffering recoverable in an action for breach of an employment contract under New York law?
Opinions:
Majority - Motley, District Judge
1. No, The Lummus Company did not breach the employment agreement by deducting "theoretical taxes" because the contract expressly provided for these reductions, and courts will not imply terms inconsistent with clear contractual provisions. The court found that the complaint itself confirmed The Lummus Company performed exactly as the contract stated, reducing Fox's salary by the theoretical tax amount. Fox's request for an implied term requiring repayment was rejected, as New York law dictates that "where the expressed intention of contracting parties is clear, a contrary intent will not be created by implication" (citing Neuman v. Pike, 591 F.2d 191, 194 (2d Cir. 1979)). Claims for unjust enrichment or quasi-contract also fail when an express written contract governs the parties' agreement (citing Bradkin v. Leverton, 26 N.Y.2d 192, 309 N.Y.S.2d 192, 257 N.E.2d 643 (1970)). 2. Yes, the allegation of "harassment and pressure" in the fourth cause of action is vague and warrants a more definite statement. The court agreed that these allegations were too ambiguous for The Lummus Company to reasonably frame a responsive pleading. Fox was directed to amend his complaint to specify the acts, timing, and perpetrators of the alleged harassment. 3. No, damages for mental and physical anguish and suffering are not legally cognizable in an action for breach of an employment contract under New York law. New York law limits such damages to economic injuries, specifically unpaid salary minus mitigation (citing Quinn v. Straus Broadcasting Group, Inc., 309 F.Supp. 1208, 1209 (S.D.N.Y.1970)). Allegations of mental distress are considered immaterial and will be stricken. The court also noted that the complaint did not contain sufficient allegations to properly state a tort claim for intentional infliction of emotional harm.
Analysis:
This case reinforces fundamental principles of contract law and civil procedure. It underscores that courts prioritize the express terms of a written contract, making it difficult for parties to argue for implied terms that contradict explicit provisions or to pursue quasi-contractual remedies when a valid contract exists. The decision also clarifies the limited scope of damages for breach of employment contracts under New York law, specifically excluding non-economic damages like emotional distress unless a distinct tort claim is properly pleaded. This limits recovery for employees and provides employers with greater certainty regarding potential liabilities in contract disputes.
