Wiederman v. Spark Energy, Inc.

Background

Mark Wiederman asserted a breach-of-contract claim against Spark Energy, Inc., Spark HoldCo, LLC, Major Energy Services, LLC, Major Energy Electric Services, LLC, and Respond Power, LLC. He also asserted a tortious-interference claim against Spark Energy and HoldCo and sought punitive damages.

Wiederman alleged that he founded and developed the Major LLCs and entered into an employment agreement with them in April 2016. The agreement provided that he would serve as president through 2018, with automatic one-year renewals unless either side gave notice of nonrenewal. It allowed termination with or without cause and provided benefits, including unpaid salary, bonuses, and severance, for a termination without cause.

Wiederman alleged that he was terminated for cause in March 2019 based on accusations that he deleted company files and copied them to an external device. The termination notice was on Major LLC letterhead and was signed by Nathan Kroeker, who identified himself as the Major LLCs’ president and chief executive officer. Wiederman alleged that Kroeker instead was Spark Energy’s president and chief executive officer. He also alleged that Spark Energy and HoldCo made or caused disparaging statements about him and interfered with his employment agreement.

Report and Recommendation

Defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a complaint does not plausibly state a legal claim. Magistrate Judge Debra Freeman recommended denying the motion as to the contract claim against the Major LLCs and the tortious-interference claim against Spark Energy and HoldCo; granting it as to the contract claim against Spark Energy and HoldCo, with leave to replead; and granting it with prejudice as to punitive damages.

The parties did not object to the Report and Recommendation. Judge Gardephe therefore reviewed the recommendations for clear error, meaning an obvious mistake in the record, rather than conducting a full reconsideration of every issue.

Analysis

Contract claim against the Major LLCs. The court held that Wiederman plausibly alleged that the Major LLCs were involved in the alleged breach. The termination notice appeared on their letterhead, and Kroeker identified himself as their president and chief executive officer. Whether Kroeker and Griffin had actual or apparent authority to act for the Major LLCs could not be resolved on a motion to dismiss. The court therefore denied the motion as to this claim.

Contract claim against Spark Energy and HoldCo. The court dismissed this claim because the amended complaint alleged that the employment agreement was between Wiederman and the Major LLCs, not Spark Energy or HoldCo. The court recognized possible exceptions to the general rule that a nonparty is not liable for breach of contract, including complete domination of a subsidiary or an express assumption of contractual obligations. It found that the complaint did not adequately allege either exception. The claim was dismissed with leave to amend, and the court stated that a second amended complaint could potentially allege facts showing complete domination.

Tortious-interference claim. The court denied the motion as to this claim. Because the complaint did not plausibly allege that Spark Energy or HoldCo breached the employment agreement themselves, the tortious-interference claim was not duplicative of the contract claim. The court also found that Spark Energy and HoldCo were not parties to the employment agreement, so the rule against interfering with one’s own contract did not apply. Wiederman plausibly alleged that Spark Energy officers knew about the agreement, made false accusations, and took steps that caused the Major LLCs to breach it. The court also accepted, at this stage, the allegation that the purchase agreement involving the Spark Entities was invalid, which prevented resolving the asserted parent-subsidiary defense on the pleadings.

Punitive damages. Judge Gardephe found clear error in the recommendation to dismiss the punitive-damages claim. Punitive damages are a form of relief rather than a separate cause of action, so the court held that dismissing the request at the motion-to-dismiss stage was premature. The court therefore denied the motion as to punitive damages.

Disposition

Judge Gardephe adopted the Report and Recommendation as modified. Defendants’ motion to dismiss was granted to the extent that Wiederman’s breach-of-contract claim against Spark Energy and HoldCo was dismissed with leave to amend. The motion was otherwise denied. Any second amended complaint was due by April 28, 2020.