Olsen v. Hortica Insurance Company

Background

David Olsen sued Hortica Insurance Company on four claims: breach of contract, breach of the implied covenant of good faith and fair dealing, disparate treatment under California’s Fair Employment and Housing Act (FEHA), and wrongful termination in violation of public policy. Hortica moved to dismiss all claims under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim.

Olsen alleged that he sold his insurance company’s $4 million book of business to Hortica in or around 2012 and joined Hortica as an employee. He alleged an oral agreement under which Hortica would provide training, assign him a Northern California sales territory, provide qualified leads, and allow him to buy back the book of business. He also alleged that employees and supervisors harassed him and treated him less favorably because he was a man and white, and that the company terminated him after he tried to exercise the alleged promise to buy back the book of business.

Procedural and pleading issues

The court denied the motion to dismiss to the extent it relied on Olsen’s failure to file a redlined amended complaint, a table of contents, or a table of authorities, or on the alleged lack of a sufficiently concise factual statement. The court said those violations did not justify disregarding Olsen’s opposition or dismissing the case.

The court also granted Olsen leave to add the three claims that were new in his amended complaint: breach of contract, breach of the implied covenant, and wrongful termination in violation of public policy. The court treated his opposition as a late request for permission to add those claims and denied the motion to dismiss insofar as it argued that Olsen exceeded the scope of his earlier permission to amend.

Contract claims

The court identified two alleged contract breaches: refusal to sell Olsen’s book of business back to him under an express oral agreement, and termination in violation of an implied-in-fact employment agreement.

The court granted the motion to dismiss the express oral contract theory. It held that California’s statute of frauds generally requires a written record for an agreement involving the sale of personal property worth $5,000 or more. The court concluded that the book of business was a form of business goodwill and personal property, and that Olsen’s complaint alleged an oral agreement without alleging a written record identifying the price and property.

The court also granted the motion to dismiss the implied-in-fact employment-contract theory. California employment is presumed to be at will unless an express or implied agreement limits the employer’s ability to terminate the employee. The court held that Olsen’s ten years of employment and favorable performance reviews were not enough to establish such an agreement. It also found his allegations about an established no-termination-without-cause policy and oral promises from his recruiter too conclusory because he did not identify the policy, explain how it was communicated, or describe the recruiter’s alleged promises.

Because an implied covenant of good faith and fair dealing depends on an underlying contractual relationship, the court granted the motion to dismiss that claim after finding that Olsen had not adequately pleaded an enforceable contract.

FEHA discrimination claim

The court denied the motion to dismiss Olsen’s FEHA disparate-treatment claim. The court explained that a plaintiff generally must plead facts showing membership in a protected class, qualification or competent performance, an adverse employment action, and circumstances suggesting discriminatory motive. The defendant challenged only whether Olsen had sufficiently alleged discriminatory motive; the court did not decide whether the amended complaint adequately pleaded his qualifications or competent performance.

Although the court described many of Olsen’s allegations as conclusory, it found that he had alleged enough to proceed past the pleading stage. In particular, Olsen alleged that a national director admitted targeting him because she disliked men, particularly white men, and had tried to make him quit. He also alleged that another employee received more scheduled credits and qualified leads. The court held that these allegations, considered together, were sufficient at this stage to support an inference that discriminatory motive contributed to his termination.

Wrongful-termination claim

The court granted the motion to dismiss Olsen’s claim for wrongful termination in violation of public policy. Under California law, this type of claim requires a clearly established public policy grounded in a constitutional or statutory provision and benefiting the public. Olsen identified only the alleged agreement allowing him to buy back his book of business. The court held that a private agreement cannot serve as the public policy supporting this claim.

Disposition

The court denied the motion to dismiss Olsen’s FEHA disparate-treatment claim and granted the motion to dismiss all other claims. The court granted Olsen leave to amend the contract-based claims and the wrongful-termination claim because he had not previously had an opportunity to amend them and the court could not conclude that further amendment would be futile. Olsen could not add new claims or revive claims dismissed from the original complaint but omitted from the amended complaint. The court ordered him to file any amended complaint by March 13, 2023, and stated that failure to do so would result in the contract-based claims and wrongful-termination claim being dismissed with prejudice.