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Fotouhi v. Mobile Rf Solutions, Inc.

United States District Court, D. Kansas

May 26, 2015

Fred Fotouhi, Plaintiff,
v.
Mobile RF Solutions, Inc.; Wireless Site Services, Inc.; and Brian Troia, Defendants.

MEMORANDUM & ORDER

JOHN W. LUNGSTRUM, District Judge.

Plaintiff Fred Fotouhi filed a state court petition against defendants for breach of contract and failure to pay wages after defendants terminated Mr. Fotouhi's employment as Chief Executive Officer of defendant Mobile RF Solutions, Inc. Defendants timely removed the case to this court on the basis of diversity jurisdiction under 28 U.S.C. § 1332. This matter is now before the court on defendant Brian Troia's motion to dismiss the single claim asserted against him (a claim for failure to pay wages under the Kansas Wage Payment Act (KWPA), K.S.A. § 44-313 et seq.) or, in the alternative, to transfer the case to a more convenient forum. With respect to the motion to dismiss, Mr. Troia asserts that the court lacks personal jurisdiction over him and that plaintiff's KWPA claim fails to state a claim for relief. As will be explained, Mr. Troia's motion to dismiss is granted in part and denied in part and the motion to transfer is denied.

Background

In July 2013, plaintiff Fred Fotouhi executed an employment contract under which he agreed to serve as the Chief Executive Officer of defendants Mobile RF Solutions, Inc. and Wireless Site Services, Inc.[1] Defendant Brian Troia executed the agreement on behalf of the corporate defendants in his capacity as president and chairman of those entities. The parties' written agreement provided that plaintiff would serve as CEO beginning August 1, 2013 for a five-year term ending August 1, 2018. Plaintiff was employed at defendants' headquarters in Overland Park, Kansas and he is a Kansas resident.

Plaintiff's annual salary as set forth in the agreement was $180, 000 and the agreement provided for additional incentives based on the financial performance of Mobile RF Solutions, Inc. and Wireless Site Solutions, Inc. Specifically, paragraph 4 of the parties' agreement provided for a "bonus rate" of a certain percentage of sales depending on the company's net profit margin. For example, if the company's net profit margin ranged from 10% to 15%, plaintiff was entitled to a bonus calculated as 1.5% of "sales across the board." While paragraph 5 of the parties' agreement is less clear, it appears that plaintiff was either entitled to a certain percentage of ownership in the company or could exercise certain stock options and that potential ownership percentage increased as the company's gross revenues increased. For example, the chart contained in the agreement reflects "CEO Ownership" of 3% if the company's gross revenues reached $10 million. Paragraph 8 of the parties' agreement contains a provision concerning severance pay in the event of defendants' early termination of the agreement. That provision provides as follows:

The Company may cancel this Agreement for any reason, with or without cause, which need not be disclosed to CEO, by giving him thirty (30) days notice in writing, and then paying to CEO severance consisting of twelve (12) months salary plus one additional month salary for each year (or prorated portion thereof) of completed service to the Company, in addition to all accrued vacation or personal days, and any unused or prorated Professional Development Leave.

Mr. Troia terminated plaintiff's employment in September 2014. In November 2014, plaintiff contacted Mr. Troia to request payment of his severance pay and to confirm the amount owed to him under the short- and long-term incentive provisions. According to plaintiff, Mr. Troia refused to pay any and all amounts owed to plaintiff.

Personal Jurisdiction

In his motion to dismiss, Mr. Troia contends that his contacts with the forum state (he does not dispute that he had numerous contacts with Kansas, including multiple visits to Kansas) were made solely as an officer of Mobile RF Solutions, Inc. or Wireless Site Services, Inc. such that the fiduciary shield doctrine precludes this court from exercising personal jurisdiction over him. Under the "fiduciary shield" doctrine, a nonresident corporate agent generally is not individually subject to a court's jurisdiction based on acts undertaken on behalf of the corporation." Newsome v. Gallacher, 722 F.3d 1257, 1275 (10th Cir. 2013). Thus, even if a particular corporate employee has substantial contacts with the forum state-i.e., the employee repeatedly traveled to Kansas to negotiate a contract on behalf of the corporation-those contacts will not "count against the employee in the personal jurisdiction analysis so long as the employee acted solely on the corporation's behalf." See id. As explained by the Circuit in Newsome, however, the fiduciary shield doctrine "only exists as a matter of state law." Id.

Thus, the threshold question is whether Kansas recognizes the fiduciary shield doctrine. This court has previously expressed doubt on the viability of the doctrine in Kansas. See First Magnus Fin. Corp. v. Star Equity Funding, LLC, 2007 WL 635312, at *6 n.3 (D. Kan. 2007) (because Kansas long-arm statute is coterminous with the full reach of the due process clause, and Constitution itself does not shield persons who act as corporate agents from individual capacity suits, court not persuaded that doctrine would apply). Mr. Troia does not cite, nor could the court locate any Kansas law recognizing the fiduciary shield doctrine. Certainly, the Kansas long-arm statute does not authorize the application of the fiduciary shield doctrine, as it permits the exercise of personal jurisdiction up to the limits of federal due process. Intercon, Inc. v. Bell Atl. Internet Solutions, Inc., 205 F.3d 1244, 1247 (10th Cir. 2000); Newsome, 722 F.3d at 1278 (Oklahoma long-arm statute did not authorize fiduciary shield doctrine because statute permits exercise of jurisdiction up to the limits of federal due process). While Mr. Troia relies on several Kansas federal district court cases applying the fiduciary shield, those cases in turn rely upon Ten Mile Industrial Park v. Western Plains Service Corp., 810 F.2d 1518 (10th Cir. 1987) and Wilshire Oil Company of Texas v. Riffe, 409 F.2d 1277, 1281 n.8 (10th Cir. 1961) as authority for the doctrine in Kansas. But Ten Mile has been confined to the doctrine as applied in Wyoming, see Newsome, 722 F.3d at 1278, and Wilshire Oil, although purporting to apply the Kansas long-arm statute, relied exclusively on New York cases in its brief discussion of the doctrine. Wilshire Oil, then, does not establish the existence of the fiduciary shield doctrine as a matter of Kansas law. See Newsome, 722 F.3d at 1278.

Based on the foregoing, the court does not believe that Kansas courts, if faced with the issue, would graft the fiduciary shield doctrine into a long-arm statute intended to reach as far as due process allows. The fiduciary shield doctrine therefore does not provide a basis for Mr. Troia to avoid personal jurisdiction in Kansas. Because Mr. Troia does not otherwise dispute the issue of personal jurisdiction, the court denies this aspect of his motion.

Kansas Wage Payment Act

Mr. Troia next moves to dismiss plaintiff's Kansas Wage Payment Act (KWPA) claim for failure to state a claim for relief. The KWPA gives employees the right to receive their "wages due" and concerns when and how those wages are paid. See K. S.A. § 44-314. In those instances when an employer willfully fails to pay an employee his or her wages, the KWPA provides that the employer is liable for both the wages due and a penalty in an amount up to 100% of the unpaid wages. See id. § 44-315(b). The KWPA defines "wages" as "compensation for labor or services rendered by an employee, whether the amount is determined on a time, task, piece, commission or other basis less authorized withholding and deductions." Id. § 44-313(c). Kansas Administrative Regulations defines "or other basis" within the meaning of K.S.A. 44-§ 313(c) as:

all agreed compensation for services for which the conditions required for entitlement, eligibility, accrual or earning have been met by the employee. Such compensation may include, but is not limited to, profit sharing, fringe benefits, or compensation due as a result of services performed under an employment contract that has a wage rate required or implied by state or federal law. Conditions subsequent to such entitlement, eligibility, ...

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