Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_07-cv-00611/USCOURTS-caed-2_07-cv-00611-1/pdf.json

Parties Involved:
Servicemaster
Defendant
Ken Sinclair
Plaintiff

Document Text:

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

KEN SINCLAIR,

NO. CIV. 07-0611 FCD/DAD

Plaintiff,

v. MEMORANDUM AND ORDER

THE SERVICEMASTER COMPANY, a

Delaware corporation,

Defendant.

----oo0oo---- 

This matter comes before the court on defendant The

ServiceMaster Company’s (“ServiceMaster”) motion to dismiss five

of plaintiff Ken Sinclair’s (“plaintiff”) claims for relief

pursuant to Rule 12(b)(6) of the Federal Rules of Civil

///

///

///

///

Case 2:07-cv-00611-FCD-DAD Document 20 Filed 08/03/07 Page 1 of 22
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1 Because oral argument will not be of material

assistance, the court orders this matter submitted on the briefs. 

E.D. Cal. Local Rule 78-230(h).

2 The facts of this case are taken from plaintiff’s

allegations in the complaint.

2

Procedure. For the reasons set forth below,1 defendant’s motion

is GRANTED IN PART and DENIED IN PART. 

BACKGROUND2

Plaintiff was a long term employee of ServiceMaster. (Pl.’s

Compl., filed Mar. 30, 2007 (“Compl.”), ¶ 5.) In 1998, plaintiff

entered into a Founder’s Employment Agreement (“Employment

Agreement”) as one of the principals and founding members of Four

Season Landscape Maintenance, Inc., a predecessor corporation of

ServiceMaster. (Id.) The Employment Agreement was for a fiveyear term, which then continued on a year-to-year basis upon the

same terms and conditions. (Id.) The Employment Agreement binds

successor corporations, which plaintiff alleges includes

ServiceMaster. (Id. ¶ 6 (citing Employment Agreement, Ex. A to

Compl., ¶ 10).) 

The Employment Agreement protects plaintiff’s employment

with ServiceMaster. (Id. ¶ 7.) The Agreement permits

ServiceMaster to terminate plaintiff for “cause” based upon a

“willful and material breach,” “gross negligence” or “willful

dishonesty, fraud or misconduct.” (Id.) Further, ServiceMaster

is required to provide plaintiff with 10 days written notice and

an opportunity to cure any willful and material breach of the

Employment Agreement before termination. (Id.)

In 2001, Plaintiff received a Change in Control Severance

Agreement (“CIC Agreement”) as part of his executive compensation

Case 2:07-cv-00611-FCD-DAD Document 20 Filed 08/03/07 Page 2 of 22
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

package. (Id. ¶ 8.) The CIC Agreement was designed to provide

protection to ServiceMaster’s management team in the event of

certain reorganizations, mergers, or acquisitions. (Id.) In

2005, Plaintiff was granted a restricted stock award of 10,000

shares under the ServiceMaster 2003 Equity Incentive Plan. (Id.

¶ 14.) The 2005 stock award was given pursuant to the terms of

The ServiceMaster Company Restricted Stock Award Agreement. 

Plaintiff was also promised, both orally by Rick Ascolese

(“Ascolese”) and confirmed in a written memorandum, that he would

receive restricted stock awards of 10,000 shares in 2006, 10,000

shares in 2007, and 8,000 shares in 2008. (Id.) 

ServiceMaster announced on November 28, 2006 that its Board

of Directors had decided to explore strategic alternatives

designed to maximize value for shareholders. (Id. ¶ 17.) In

January and February of 2007, plaintiff discussed his 2006 bonus

and expressed concerns to his immediate supervisor, Ascolese,

that plaintiff had not received his 2007 10,000 share restricted

stock award. (Id. ¶ 18.) Plaintiff did not receive an answer,

and plaintiff again pressed Ascolese for information about the

stock award on February 19 and 20, 2007. (Id.) Plaintiff did

not receive a definitive answer, and Ascolese told him that there

were “many unknowns as it relates to the potential change in

control.” (Id. ¶ 20.) 

ServiceMaster terminated plaintiff’s employment without

notice on March 8, 2007. (Id.) The termination was allegedly

for “cause” and was effective March 15, 2007. (Id. ¶ 20.) On

March 19, 2007, ServiceMaster announced that it had entered into

///

Case 2:07-cv-00611-FCD-DAD Document 20 Filed 08/03/07 Page 3 of 22
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

a definitive merger agreement to be acquired by an investment

group. (Id. ¶ 23.) 

Plaintiff alleges that ServiceMaster’s Board of Directors

was aware of a change in control or attempted change in control

prior to plaintiff’s termination. (Id. ¶ 20.) Plaintiff

further alleges that there was no cause for his termination and

that the true reason for his termination was to deny him

compensation due and owing from ServiceMaster, which includes the

restricted stock agreement, accrued and unused vacation time, and

benefits due under the CIC Agreement. (Id. ¶ 20.) 

Plaintiff alleges that ServiceMaster’s actions in

terminating plaintiff are in breach of both the CIC Agreement and

the restricted stock agreement. As such, plaintiff contends that

he is due all benefits under both agreements. (Id. ¶¶ 24-26.) 

Furthermore, ServiceMaster did not fully compensate plaintiff

following his wrongful termination in violation of California

Labor Code sections 201 and 227.3. (Id. ¶ 27.) ServiceMaster

failed to pay for plaintiff’s vacation time earned but not used

and failed to provide plaintiff with his restricted stock award

for 2007. (Id.)

On March 30, 2007, plaintiff filed this civil action against

defendant, alleging seven claims for relief. Defendant now moves

to dismiss five of plaintiff’s claims for failure to state a

claim upon which relief may be granted, pursuant to Federal Rule

of Civil Procedure 12(b)(6): (1) wrongful termination in

violation of public policy, (2) breach of written contract for

the Change in Control Severance Agreement, (3) breach of written

contract for the restricted stock award, (4) breach of the

Case 2:07-cv-00611-FCD-DAD Document 20 Filed 08/03/07 Page 4 of 22
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 3 Defendant did not move to dismiss plaintiff’s claims

for failure to pay wages and for declaratory relief.

5

covenant of good faith and fair dealing, and (5) intentional

infliction of emotional distress.3

STANDARD

On a motion to dismiss, the allegations of the complaint

must be accepted as true. Cruz v. Beto, 405 U.S. 319, 322

(1972). The court is bound to give plaintiff the benefit of

every reasonable inference to be drawn from the “well-pleaded”

allegations of the complaint. Retail Clerks Int’l Ass’n v.

Schermerhorn, 373 U.S. 746, 753 n.6 (1963). Thus, the plaintiff

need not necessarily plead a particular fact if that fact is a

reasonable inference from facts properly alleged. See id. 

Nevertheless, it is inappropriate to assume that the

plaintiff “can prove facts which it has not alleged or that the

defendant[] ha[s] violated the . . . laws in ways that have not

been alleged.” Associated Gen. Contractors of Cal., Inc. v. Cal.

State Council of Carpenters, 459 U.S. 519, 526 (1983). Moreover,

the court “need not assume the truth of legal conclusions cast in

the form of factual allegations.” United States ex rel. Chunie

v. Ringrose, 788 F.2d 638, 643 n.2 (9th Cir. 1986).

Ultimately, the court may not dismiss a complaint in which

the plaintiff has alleged “enough facts to state a claim to

relief that is plausible on its face.” Bell Atlantic Corp. v.

Twombly, 127 S.Ct. 1955, 1974 (2007). Only where a plaintiff has

not “nudged [his or her] claims across the line from conceivable

to plausible,” is the complaint properly dismissed. Id. “[A]

court may dismiss a complaint only if it is clear that no relief

Case 2:07-cv-00611-FCD-DAD Document 20 Filed 08/03/07 Page 5 of 22
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6

could be granted under any set of facts that could be proved

consistent with the allegations.” Swierkiewicz v. Sorema N.A.,

534 U.S. 506, 514 (2002) (quoting Hudson v. King & Spaulding, 467

U.S. 69, 73 (1984)). 

In ruling upon a motion to dismiss, the court may consider

only the complaint, any exhibits thereto, and matters which may

be judicially noticed pursuant to Federal Rule of Evidence 201. 

See Mir v. Little Co. of Mary Hospital, 844 F.2d 646, 649 (9th

Cir. 1988); Isuzu Motors Ltd. v. Consumers Union of United

States, Inc., 12 F. Supp. 2d 1035, 1042 (C.D. Cal. 1998). 

ANALYSIS

A. Choice of Law

This court has jurisdiction based upon the parties’

diversity of citizenship. Therefore, state law controls on all

substantive issues, including contractual interpretation issues. 

Sherman v. Mutual Benefit Life Ins. Co., 633 F.2d 782, 784 (9th

Cir. 1980). A district court sitting in diversity must apply the

choice of law rules of the forum state. Ledesma v. Jack Stewart

Produce, Inc., 816 F.2d 482, 484 (9th Cir. 1987).

The Change in Control Agreement provides that “[t]he

interpretation, construction and performance of this Agreement

shall be governed by and construed and enforced in accordance

with the internal law of the State of Illinois without regard to

the principle of conflict of laws.” (CIC Agreement ¶ 14.) Under

California law, absent the presence of strong public policy

requiring application of California law, the intention of the

parties to apply Illinois law should govern. Consolidated Data

Terminals v. Applied Digital Data, 708 F.2d 385, 390 n.3 (9th

Case 2:07-cv-00611-FCD-DAD Document 20 Filed 08/03/07 Page 6 of 22
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 4 As discussed below, plaintiff’s stock award claim is

premised upon the Ascolese memo, which does not contain a choice

of law provision.

7

Cir. 1983); see Haisten v. Grass Valley Med. Reimbursement Fund,

784 F.2d 1392, 1402 (9th Cir. 1986). Because the court is not

aware of any such strong public policy and because the parties

have not raised any argument as to why California law should

overrule the choice of law provision, the court will apply

Illinois state contract law to the interpretation of the CIC

Agreement, including the covenant of good faith and fair dealing

as it pertains to the CIC Agreement. 

The other claims in this case involve tort law and the stock

award agreement, neither of which are controlled by the CIC

Agreement’s choice of law provision.4 “California law requires

an analysis of the interests of states involved to determine the

law that most appropriately applies to each issue.” Consolidated

Data Terminals, 708 F.2d at 390 n.3. Because the alleged actions

took place in California and because neither party has raised any

argument why California law should not apply, the court concludes

that California law should govern all claims not arising out of

the CIC Agreement. 

B. Wrongful Termination in Violation of Public Policy

Defendant contends that plaintiff’s allegations are

insufficient to state a claim for wrongful termination in

violation of public policy because a private contractual dispute

between an employer and employee does not rise to the level of a

fundamental public policy. (Motion, filed May 21, 2007 (“Mot.”),

6-7.) Plaintiff alleges that defendant terminated plaintiff’s

employment in order to avoid paying his wages and compensation

Case 2:07-cv-00611-FCD-DAD Document 20 Filed 08/03/07 Page 7 of 22
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5 Plaintiff also alleges that defendant failed to provide

plaintiff with his restricted stock award for 2007. However, as

discussed, infra, the court finds that, as alleged, the stock

award is not legally enforceable. 

6 Defendant argues that plaintiff fails to identify

specific statutory provisions to support his complaint. (Mot. at

8.) However, plaintiff asserts these specific Labor Code

sections in the factual allegations (Compl. ¶ 27) and

incorporates them by reference in this claim for relief. 

8

due, including vacation time earned but not used,5 in violation

of California Labor Code §§ 201 and 227.3.6 (Compl. ¶¶ 27, 30.) 

Wrongful discharge actions that involve a cause of action

for termination in violation of public policy are “limited to

those claims finding support in an important public policy based

on a statutory or constitutional provision.” Green v. Ralee

Eng'g Co., 19 Cal. 4th 66, 79 (1998). California Labor Code §

201 states that “[i]f an employer discharges an employee, the

wages earned and unpaid at the time of discharge are due and

payable immediately.” Cal. Lab. Code § 201 (Deering 2007). “The

Legislature’s decision to criminalize violations of the prompt

payment policy supports [the] contention the policy involves a

broad public interest . . . .” Gould v. Maryland Sound Indus.,

Inc., 31 Cal. App. 4th 1137, 1147 (1995) (citing Cal. Lab. Code §

216 (Deering 2007) (providing that any employer who, “[h]aving

the ability to pay, willfully refuses to pay wages due and

payable after demand has been made” is guilty of a misdemeanor)). 

Thus, if the employer discharged plaintiff “in order to avoid

paying him the commissions, vacation pay, and other amounts he

had earned, it violated a fundamental public policy of this

state.” Id.

///

Case 2:07-cv-00611-FCD-DAD Document 20 Filed 08/03/07 Page 8 of 22
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

9

To the extent plaintiff alleges his termination was intended

to avoid payment of his accrued vacation time, his claim for

wrongful termination in violation of public policy is valid. 

However, California public policy does not prohibit termination

of employees in order to avoid paying future wages not yet

earned. Thus, plaintiff’s allegation that defendant terminated

his employment in order to avoid paying any future wages or

compensation due fails to state a claim for wrongful termination

in violation of public policy.

Defendant relies on Lett v. Paymentech, Inc., 81 F. Supp. 2d

992 (N.D. Cal. 1999), to argue that plaintiff does not have a

wrongful termination claim. However, the allegations in

plaintiff’s complaint are distinguishable from those presented in

Lett. The Lett court held that there is not necessarily a

wrongful termination claim where an employee terminates her own

employment and there is a dispute about compensation due. Id. at

1002. The court was concerned that such a claim “offers no

distinction that would allow a court to separate garden variety

disputes from those resonating with public policy concerns.” Id.

However, the Lett court noted that “Gould is distinguishable in

that the adverse job action was taken by the defendant . . .” 

Id. This same distinction applies to the present case. Because

plaintiff alleges that defendant terminated his position in order

to avoid payment of wages already accrued, plaintiff’s claim is

not precluded by Lett. 

For the reasons above, defendant’s motion to dismiss

plaintiff’s cause of action for wrongful termination in violation

of pubic policy is GRANTED IN PART and DENIED IN PART. To the

Case 2:07-cv-00611-FCD-DAD Document 20 Filed 08/03/07 Page 9 of 22
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

7 A “Change in Control” is defined as the acquisition by

any person or entity of 25% of the outstanding stock shares or an

equivalent voting power of ServiceMaster; a material change in

ServiceMaster’s Board of Directors; the consummation of a

reorganization, merger, consolidation, sale or other disposition

of all or substantially all of ServiceMaster’s assets; or the

consummation of a plan to liquidate or dissolve ServiceMaster. 

(CIC Agreement ¶ 1(d).)

8 Defendant maintains that this merger agreement was not

in fact a Change in Control event as defined in the CIC

Agreement. (Motion at 4). However, as discussed below,

plaintiff’s complaint alleges that the terms of the CIC Agreement

apply because defendant’s Board of Directors had knowledge of a

Change in Control event prior to his termination.

10

extent that plaintiff alleges defendant terminated plaintiff’s

employment to avoid paying wages already earned, including

vacation time accrued but not used, defendant’s motion is DENIED. 

To the extent that plaintiff alleges defendant terminated

plaintiff’s employment to avoid payment of future wages or

benefits not yet earned, defendant’s motion is GRANTED.

C. Breach of Contract 

1. Change in Control Severance Agreement

Defendant contends it did not breach the CIC Agreement

because there was not a Change in Control event7 prior to

plaintiff’s termination and therefore the CIC Agreement is

inapplicable. (Mot. at 3.) Defendant argues that in order to

receive any benefits under the CIC Agreement, the employee must

be terminated during the “termination period,” which is the two

years following a Change in Control. (Mot. at 3 (citing CIC

Agreement ¶¶ 1(h), 3(a)).) Defendant argues that even in the

light most favorable to plaintiff, a Change in Control event did

not take place until the March 19, 2007 announcement of a

definite merger agreement,8 four days after plaintiff’s

termination. (Mot. at 4). Defendant seeks dismissal because a

Case 2:07-cv-00611-FCD-DAD Document 20 Filed 08/03/07 Page 10 of 22
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

9 Defendant cites in particular paragraphs 1, 3, 7, and 8

of the CIC Agreement. These passages provide details regarding

“the termination of the contract in Paragraph 8, the requirement

in Paragraph 7 that Sinclair be employed at the time of a Change

in Control, and the precondition in Paragraphs 3 and 1 that

Sinclair be terminated after a Change in Control.” (Reply at 2

(citing CIC Agreement ¶¶ 1, 3, 7, 8) (emphasis in original).)

11

Change in Control event did not precede plaintiff’s termination

on March 15, 2007. (Mot. at 4.) 

However, plaintiff alleges that defendant’s Board of

Directors were aware of a Change in Control or attempted Change

in Control prior to plaintiff’s termination. (Complaint ¶ 20). 

Paragraph nine of the CIC Agreement, entitled “Scope of

Agreement,” states that “any termination” of employment

“following a Change in Control or the Board’s becoming aware of

an attempted Change in Control shall be subject to all of the

provisions of this Agreement.” (CIC Agreement ¶ 9 (emphasis

added).) Plaintiff contends that, accepting as true his

allegation that the ServiceMaster Board was aware of an attempted

Change in Control event, his termination is therefore within the

scope of and subject to the provisions the CIC Agreement. 

Defendant contends that plaintiff ignores applicable

paragraphs of the CIC Agreement that contradict plaintiff’s

assertion that he is due benefits under the terms of the

Agreement and which state that the effective date under the CIC

Agreement is the actual date of the Change in Control. (Reply,

filed June 15, 2007, at 2-3).9 Illinois law recognizes that a

“cardinal rule of contract construction is that a document should

be read to give effect to all its provisions and to render them

consistent with one another.” Roubik v. Merrill Lynch, Pierce,

Fenner & Smith, 285 Ill. App. 3d 217 (1996) (citing Restatement

Case 2:07-cv-00611-FCD-DAD Document 20 Filed 08/03/07 Page 11 of 22
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

12

(Second) of Contracts § 203(a) and Comment b (1981)). “Where an

inconsistency arises between a clause that is general and one

that is more specific, the latter prevails.” Alberto-Culver Co.

v. Aon Corp., 351 Ill. App. 3d 123, 135 (2004) (citing

Restatement (Second) of Contracts § 203(c) (1981)). Plaintiff’s

assertion that the CIC Agreement applies when defendant’s Board

becomes aware of an attempted Change in Control is internally

consistent with the employee’s obligation not to leave

ServiceMaster without good reason for six months from the date an

attempted Change in Control becomes known to the Board. (CIC

Agreement ¶ 2.) Plaintiff’s interpretation is also rooted in the

language of the specific “scope” section of the CIC Agreement,

which prevails under the Illinois rules of contract

interpretation. 

Furthermore, defendant’s proposed construction is

inconsistent with the stated intent of the CIC Agreement, which

protects management in the event of a Change in Control. (Compl.

¶ 8; see CIC Agreement, Ex. B to Compl., at 1.) Defendant’s

interpretation would allow an end run around its obligations

under the CIC Agreement by permitting the protected employee to

be terminated without recourse in advance of a Change in Control,

so long as the termination precedes the actual date of the

change. See In re Marriage of Olsen, 124 Ill. 2d 19, 25-26

(1988) (“When enforcing a contract, the primary objective is to

construe the contract to ascertain the intent of the parties and

to give effect to that intent.”) (citing United Airlines, Inc. v.

City of Chicago, 116 Ill. 2d 311, 318 (1987).

///

Case 2:07-cv-00611-FCD-DAD Document 20 Filed 08/03/07 Page 12 of 22
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

10 Plaintiff refers to the March 24, 2005 memorandum as

the “Restricted Stock Agreement.” “Ascolese memo” is used here

for clarity, as plaintiff also attached in Exhibit C to the

complaint a separate agreement that is entitled The ServiceMaster

Company Restricted Stock Award Agreement (“2005 Stock

Agreement”). Plaintiff concedes that the 2005 Stock Agreement has

not been breached. (Opp’n at 8). The court interprets this

concession to mean that the 2005 Stock Agreement is attached for

reference purposes only. Plaintiff's breach of contract claim is

thus based solely on the Ascolese memo.

13

Plaintiff alleges that contrary to the specific provisions

of the CIC Agreement, he was terminated without cause. 

(Complaint ¶¶ 20, 37.) Plaintiff further alleges that he did not

receive notice of the breach of his duties and responsibilities

as required in paragraph 1(c)(1) of the CIC Agreement and that

defendant failed to pay benefits due plaintiff under the CIC

Agreement. (Complaint ¶ 37.) These allegations are sufficient

to withstand defendant’s motion to dismiss for plaintiff’s

failure to state a claim for breach of the CIC Agreement. As

such, defendant’s motion to dismiss on this ground is DENIED.

2. Restricted Stock Award

Plaintiff alleges that at the time he was granted his 2005

restricted stock award, Rick Ascolese promised him, on behalf of

ServiceMaster, further stock awards of 10,000 shares in 2006,

10,000 shares in 2007, and 8,000 shares in 2008. (Compl. ¶ 14.) 

Ascolese, acting on behalf of defendant, confirmed this promised

in a written memorandum (“Ascolese memo”) dated March 24, 2005.10

(Id.) As clarified in his opposition, plaintiff alleges that,

although the award years 2005-2008 are listed in the Ascolese

Memo, only the 2005 award is controlled by the terms of The

ServiceMaster Company Restricted Stock Award Agreement (“2005

Stock Agreement”). Plaintiff contends that the Ascolese memo is

Case 2:07-cv-00611-FCD-DAD Document 20 Filed 08/03/07 Page 13 of 22
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

11 Plaintiff’s complaint also alleges that defendant

breached the stock agreement by:

[A]mong other things, failing to provide plaintiff with

notice of alleged breach of plaintiff’s duties and

responsibilities as an employee of ServiceMaster;

failing to provide plaintiff with any reasonable

opportunity to remedy any alleged breach of plaintiff’s

duties and responsibilities as an employee of

ServiceMaster; wrongfully terminating plaintiff’s

employment without cause; [and] wrongfully terminating

plaintiff’s employment in violation of public policy .

. . . (Compl. ¶ 42.) 

However, these duties are not contained in the Ascolese

memo, which plaintiff has identified as the operative contract

for this claim.

12 The Ascolese memo contains no choice of law provision,

therefore the court applies California state law in analyzing the

(continued...)

14

an enforceable promise to plaintiff of the listed stock awards

for the years 2006, 2007, and 2008, with no requirement of

continued employment. (Opp’n at 8.) Plaintiff alleges that

defendant breached this agreement by failing to pay the stock

awards promised in the Ascolese memo.11 (Id.)

Defendant argues that plaintiff has failed to state a claim

because the stock memo is not an enforceable contract. (Reply at

4.) In order to form a valid and enforceable contract under

California law, it is essential that there be: (1) parties

capable of contracting; (2) their consent; (3) a lawful object;

and, (4) a sufficient consideration. Cal. Civ. Code § 1550

(Deering 2007); see Binder v. Aetna Life Ins. Co., 75 Cal. App.

4th 832, 850 (1999) (noting that a manifestation of mutual assent

is required to form a valid contract); see also Restatement

(Second) of Contracts § 17 (1981) (“the formation of a contract

requires a bargain in which there is a manifestation of mutual

assent to the exchange and a consideration.”).12 “Under

Case 2:07-cv-00611-FCD-DAD Document 20 Filed 08/03/07 Page 14 of 22
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

12(...continued)

existence of an enforceable contract. To the extent that the

2005 Stock Agreement does contain a choice of law provision, the

court again notes that the 2005 Stock Agreement is at not issue. 

15

California law, a contract will be enforced if it is sufficiently

definite (and this is a question of law) for the court to

ascertain the parties’ obligations and to determine whether those

obligations have been performed or breached.” Ersa Grae Corp. v.

Fluor Corp., 1 Cal. App. 4th 613, 623 (1991). 

The Ascolese memo states in relevant part:

It is with great pleasure that I am able to forward you

the attached restricted stock award provided by

ServiceMaster [referring to the 2005 Stock Agreement]. 

As you and I discussed it is important for both of us

to feel secure and committed to the future success of

TruGreen LandCare.

I also wanted to restate for clarification our

commitment to you with this specific program. You will

receive the following stock awards over the below

stated four (4) year period. [List of stock awards for

2005-2008].” (March 24, 2005 memo from Rick Ascolese

to Ken Sinclair, Ex. C to Compl.) 

Plaintiff does not allege that the Ascolese memo was a bargained

for agreement, nor does plaintiff allege that there was mutual

assent for the memo. The plain language of the memo does not

reveal such mutual manifestation of assent by plaintiff and

defendant; rather, it merely expresses a statement by defendant

of its intention to render a benefit to plaintiff in the future. 

See Bustamante v. Intuit, Inc., 141 Cal. App. 4th 199, 208 (2006)

(“If there is no evidence establishing a manifestation of assent

. . . by both parties, then there is no mutual consent to

contract and no contract formation.”). Moreover, there are no

definite terms provided in this memo defining the scope of the

duties and obligations for each party. See California Lettuce

Case 2:07-cv-00611-FCD-DAD Document 20 Filed 08/03/07 Page 15 of 22
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

13 Plaintiff clarifies in his opposition that he “is not

claiming breach of an employment contract.” (Opp’n at 8). 

Therefore, this claim is necessarily based only upon the CIC

Agreement and the Ascolese memo.

16

Growers v. Union Sugar Co., 45 Cal. 2d 474, 481 (1955) (“Where a

contract is so uncertain and indefinite that the intention of the

parties in material particulars cannot be ascertained, the

contract is void and unenforceable.”). Further, there is no

allegation of consideration in plaintiff’s complaint, nor is

consideration clear from the face of the Ascolese memo. Rather,

a plain reading of the Ascolese memo reveals that the alleged

contract is more appropriately read as a proposed schedule of

future stock awards, without any benefit to defendant as

promisor. See Cal. Civ. Code § 1605 (providing that good

consideration of a promise consists of any benefit upon the

promisor as an inducement). Even taking plaintiff’s allegations

in the light most favorable to him, a plain reading of the

Ascolese memo and the allegations in the complaint demonstrate

that the Ascolese memo is not an enforceable contract. See

Restatement (Second) of Contracts § 17 (1981). 

Because on its face the Ascolese memo is not an enforceable

contract for plaintiff’s 2006-2008 stock awards, plaintiff does

not plead sufficient facts to state a claim for breach of written

contract. Thus, defendant’s motion to dismiss plaintiff’s claim

for breach of written contract for the stock award is GRANTED.

D. Breach of Covenant of Good Faith and Fair Dealing

Plaintiff alleges that the CIC Agreement and the Ascolese

memo each contain an implied covenant of good faith and fair

dealing.13 (Compl. ¶ 45.) Plaintiff alleges that ServiceMaster

Case 2:07-cv-00611-FCD-DAD Document 20 Filed 08/03/07 Page 16 of 22
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

17

breached this implied covenant by, inter alia, failing to act

with good faith and fairness toward plaintiff, unfairly

preventing plaintiff from obtaining benefits under the

agreements, terminating plaintiff without a fair and honest

cause, terminating plaintiff in violation of public policy and in

an unfair manner, and failing to give plaintiff’s interests as

much consideration at it gave its own interests. (Compl. ¶ 46.) 

1. CIC Agreement

Defendant moves to dismiss plaintiff’s claim for breach of

covenant of good faith and fair dealing concerning the CIC

Agreement because such a cause of action does not exist in

employment contexts under Illinois law. Defendant argues that

Illinois law should apply to plaintiff’s claim for breach of the

CIC Agreement based on the CIC Agreement’s choice of law

provision. Plaintiff fails to discuss whether Illinois law or

California law should apply, but cites only to California case

law in support of his arguments. 

In Nedlloyd Lines B.V. v. Superior Court, 3 Cal. 4th 459

(1992), the California Supreme Court ruled on the enforceability

of a choice of law agreement directing the application of Hong

Kong law to a breach of contract claim. The court stated that

“California courts shall apply the principles set forth in

Restatement section 187, which reflects a strong policy favoring

enforcement of such provisions.” Id. at 464-65. The court also

determined that it “perceive[d] no fundamental public policy of

California requiring the application of California law to []

claims based on the implied covenant of good faith and faith

dealing.” Id. at 468 (emphasis added). In light of California’s

Case 2:07-cv-00611-FCD-DAD Document 20 Filed 08/03/07 Page 17 of 22
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

18

clearly stated public policy favoring the enforcement of choice

of law provisions, the California Supreme Court’s finding that it

perceived no fundamental public policy in applying California law

to breach of covenant claims, and both parties’ silence as to why

the parties’ choice of law agreement should not be honored, the

court finds that Illinois law governs this claim as it pertains

to the CIC Agreement. 

Illinois law does not provide an independent tort claim for

breach of covenant of good faith and fair dealing. See Cramer v.

Insurance Exchange Agency, 174 Ill. 2d 513, 524-25 (1996). 

Rather, good faith and fair dealing functions as a means of

contract interpretation. See id. at 525 (“[T]his contract

covenant is not generally recognized as an independent source of

duties giving rise to a cause of action in tort. [Citations.]”). 

The Illinois Supreme Court later clarified that “the claim would

be proper only in the narrow context of cases involving an

insurer’s obligation to settle with a third party who has sued

the policyholder.” Voyles v. Sandia Mortgage Corp., 196 Ill. 2d

288, 296 (2001). Plaintiff’s tort claim does not fall within

this narrow exception. As such, his claim for violation of the

covenant of good faith and fair dealing pertaining to the CIC

Agreement is not recognized by the law of Illinois.

Because the CIC Agreement contains a choice of law provision

for Illinois, which does not recognize an independent cause of

action in tort for the alleged breach of an implied duty of good

faith and fair dealing, defendant’s motion to dismiss this claim

for breach of covenant of good faith and fair dealing as to the

CIC Agreement is GRANTED. 

Case 2:07-cv-00611-FCD-DAD Document 20 Filed 08/03/07 Page 18 of 22
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

19

2. Ascolese Memo

To the extent that plaintiff alleges breach of the covenant

of good faith and fair dealing based on the Ascolese memo, the

court again notes plaintiff has not alleged a valid and

enforceable contract. The California Supreme Court has held that

“[e]very contract imposes upon each party a duty of good faith

and fair dealing in its performance and enforcement.” Foley v.

Interactive Data Corp., 47 Cal. 3d 654, 683 (1998) (quoting Rest.

2d Contracts, § 205). This covenant “exists merely to prevent

one contracting party from unfairly frustrating the other party’s

right to receive the benefits of the agreement actually made.” 

Guz v. Bechtel Nat’l Inc., 24 Cal. 4th 317, 349 (2000) (emphasis

in original). Therefore, the covenant “cannot be endowed with an

existence independent of its contractual underpinnings” and

“cannot impose substantive duties or limits on the contracting

parties beyond those incorporated in the specific terms of their

agreement.” Id. at 349-350 (internal citations omitted). As set

forth above, the Ascolese memo is not, on its face, a contract

and imposes no enforceable duties. Therefore, a covenant of good

faith and fair dealing cannot be implied from it or create

substantive duties owed by defendant. 

Because the Ascolese memo is not a contract onto which the

implied duty may be imposed, defendant’s motion to dismiss this

claim for breach of covenant of good faith and fair dealing as to

the Ascolese Memo is GRANTED.

5. Intentional Infliction of Emotional Distress

Defendant moves to dismiss plaintiff’s claim for intentional

infliction of emotional distress (“IIED”) because it argues that

Case 2:07-cv-00611-FCD-DAD Document 20 Filed 08/03/07 Page 19 of 22
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

14 Defendant also argues plaintiff has failed to properly

allege the necessary elements of an IIED claim for lack of the

word “‘severe’ . . . to modify the term ‘emotional distress.’”

(Mot. at 17.) However, Plaintiff’s complaint is sufficient

to fulfill the notice pleading requirement of Federal Rule of

Civil Procedure 8(a).

20

such a claim is preempted by the exclusivity provision of

California’s worker’s compensation law.14 (Mot. at 17.) 

Plaintiff contends that an IIED claim for wrongful termination is

properly established where, as in the present case, there is a

violation of public policy because “[s]uch misconduct clearly

lies outside the exclusive remedy provisions of the Labor Code.” 

(Opp’n at 10.) 

“A claim for wrongful termination in violation of public

policy is one type of claim that is not barred by the exclusive

remedy provisions of the Workers' Compensation Act.” Kovatch v.

Cal. Casualty Management Co., 65 Cal. App. 4th 1256, 1277 (1998)

(citing Shoemaker v. Myers, 2 Cal. App. 4th 1407, 1416-19

(1992)), disapproved on other grounds by Aguilar v. Atlantic

Richfield Co., 23 Cal. 4th 826, 854 (2001). Violations of public

policy are not expected in the standard course of employment,

therefore such violations lie outside the exclusive remedy

provisions of the California Labor Code. See Leibert v.

Transworld Sys., 32 Cal. App. 4th 1693, 1706-07 (1995). As such,

plaintiff’s IIED claim is not preempted by worker’s compensation

law to the extent that the claim is premised upon defendant’s

alleged violation of public policy. 

However, as set forth above, plaintiff has properly alleged

a claim for wrongful termination in violation of public policy

only in regard to his allegations that he was terminated to avoid

Case 2:07-cv-00611-FCD-DAD Document 20 Filed 08/03/07 Page 20 of 22
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

21

payment of past wages already earned. As such, to the extent

plaintiff’s claim for IIED is premised upon a public policy

violation for wrongful termination to avoid payment of future

wages not yet earned, defendant’s motion to dismiss is GRANTED. 

To the extent that plaintiff’s claim for IIED is premised upon a

public policy violation to avoid payment of wages plaintiff has

already earned, defendant’s motion to dismiss is DENIED. 

C. Leave to Amend

In his opposition, plaintiff requests leave to amend the

complaint to cure any defects. Pursuant to Rule 15(a), "leave

[to amend] is to be freely given when justice so requires." 

"[L]eave to amend should be granted unless amendment would cause

prejudice to the opposing party, is sought in bad faith, is

futile, or creates undue delay." Martinez v. Newport Beach, 125

F.3d 777, 785 (9th Cir. 1997). There is no evidence or argument

that plaintiff’s request for amendment is sought in bad faith, is

futile, or would be prejudicial to defendant. Therefore,

plaintiff is granted leave to amend.

CONCLUSION

For the foregoing reasons, defendant’s motion to dismiss

plaintiff’s claims pursuant to Rule 12(b)(6) is GRANTED IN PART

and DENIED IN PART. 

(1) As to plaintiff’s claim for wrongful termination in

violation of public policy, defendant’s motion to dismiss is

GRANTED as to plaintiff’s allegations he was terminated to avoid

payment of future wages, and DENIED as to plaintiff’s allegations

he was terminated to avoid payment of wages already earned. 

Case 2:07-cv-00611-FCD-DAD Document 20 Filed 08/03/07 Page 21 of 22
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

22

(2) As to plaintiff’s claim for breach of written contract

for the Change in Control Severance Agreement, defendant’s motion

to dismiss is DENIED.

(3) As to plaintiff’s claim for breach of contract for the

restricted stock award, defendant’s motion to dismiss is GRANTED.

(4) As to plaintiff’s claim for breach of covenant of good

faith and fair dealing, defendant’s motion to dismiss is GRANTED.

(5) As to plaintiff’s claim for intentional infliction of

emotional distress, defendant’s motion to dismiss is GRANTED as

to plaintiff’s allegations he was terminated to avoid payment of

future wages, and DENIED as to plaintiff’s allegations he was

terminated to avoid payment of wages already earned.

Plaintiff’s motion to amend the complaint is GRANTED. 

Plaintiff is directed to file a first amended complaint within

twenty (20) days of the date of this order. Defendant is granted

thirty (30) days from the date of service of plaintiff’s amended

complaint to file a response thereto.

IT IS SO ORDERED.

DATED: August 2, 2007 

Case 2:07-cv-00611-FCD-DAD Document 20 Filed 08/03/07 Page 22 of 22