Mississippi Cases November 30, 2020: Red Canyon Recruiting, LLC v. BancorpSouth Bank

Case Description

Cecil Maison Heidelberg, Chadwick Mitchell Welch, Watson Heidelberg Jones, PLLC, Flowood, MS, for Plaintiff.

Simon T. Bailey, Bradley Arant Boult Cummings LLP, John Alexander Purvis, Bradley Arant Boult Cummings LLP, Jackson, MS, for Defendants.

ORDER

Michael P. Mills, UNITED STATES DISTRICT JUDGE

This cause comes before the court on the motion of defendant BancorpSouth to dismiss several of the claims asserted by plaintiff Red Canyon Recruiting, LLC in this case, pursuant to Fed. R. Civ. P. 12. Plaintiff has responded in opposition to the motion, and the court, having considered the memoranda and submissions of the parties, is prepared to rule.

This is, inter alia , a breach of contract and tortious breach of contract case in which plaintiff Red Canyon, a corporate recruiting firm, alleges that BancorpSouth failed to pay the agreed-upon amounts for services it provided in securing executive talent. On October 17, 2018, Red Canyon and BancorpSouth executed a written contract by which the former agreed to recruit executives to work at defendant's bank. In exchange, BancorpSouth agreed to pay plaintiff fees if it hired a particular candidate within one year of the parties' most recent conversation about that candidate. Plaintiff contends that it assisted defendant in finding four employees, which the parties refer to as Employees 1-4. The parties appear to agree that defendant's liability for securing the services of Employees 1 and 2 is clear, while its liability for services related to Employees 3 and 4 is disputed.

This court notes at the outset that, while this is a Rule 12 motion to dismiss, both parties have essentially treated it as a summary judgment motion by attaching exhibits to their briefing to dismiss and by providing factual assertions without citations

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to the record. [ See, e.g. plaintiff's brief at 5, defendants brief at 3, stating that "BancorpSouth has not paid for the recruitment of Employee 4. The Bank hired that employee after the contract's expiration."]. For its part, however, this court will limit its ruling to issues of law which are properly raised in the Rule 12 context, since that is what the law requires. Nevertheless, given that both sides have sought to make extensive factual assertions in their briefing, this court will make some tentative observations regarding the facts of this case, without actually ruling on the basis of them.

Once again, it is defendant's liability relating to its hiring of Employees 3 and 4 which is at issue in this case, and, in its brief, plaintiff describes the circumstances relating to Employee 3 as follows:

Bancorp apparently wired services fees for Employee No. 3, in the amount of $63,750, to the wrong bank account; Red Canyon never received its fee. Bancorp refused to pay Red Canyon for Employee No. 3, claiming the loss is Red Canyon's alone to bear. Notably, Red Canyon has, on multiple occasions, requested that Bancorp provide an alleged email Bancorp claims to have received from a cybercriminal who impersonated Red Canyon and requested Bancorp initiate a wire transfer for fees owed for Employee No. 3. Bancorp has refused to provide this email (or emails) to Red Canyon, so Red Canyon cannot independently confirm whether a cybercriminal actually contacted Bancorp, how the criminal contacted Bancorp, when the criminal made the contact, or what the criminal and Bancorp discussed. Further, Bancorp's refusal to provide this evidence to Red Canyon has obstructed its efforts to file an actionable report with the Federal Bureau of Investigation.

[Plaintiff's Brief at 4].

For its part, defendant describes its actions relating to Employee 3 as follows:

BancorpSouth wired payment for the recruitment of Employee 3. It understands that Red Canyon did not receive that payment because a cyber criminal hacked Red Canyon's email server. Exs. 2-3. BancorpSouth does not concede that it must pay twice for the recruitment of Employee 3, when the theft of the first payment occurred for reasons beyond its control.

[Defendant's brief at 5].

As to Employee 4, plaintiff contends that:

Bancorp also has refused to pay Red Canyon the service fees it owes for the placement of Employee No. 4. Bancorp justified its refusal to pay on grounds it hired Employee No. 4 after the Contract expired. See id. As explained above, however, the Contract provides that payment is owed if Bancorp hires a candidate within one year of the most recent communication between Red Canyon and Bancorp about the candidate. Bancorp and Red Canyon communicated about Employee No. 4 less than a year before Bancorp hired him, so Bancorp owes Red Canyon the applicable fee.

[Plaintiff's Brief at 4]. In its brief, defendant responds to plaintiff's arguments on this issue as follows:

Nor does BancorpSouth concede that it owes anything for the recruitment of Employee 4. That employee was hired after the contract expired. Ex. 3. BancorpSouth's position is that the contract does not require BancorpSouth to pay employees hired after the contract expires. Red Canyon's apparent position is that the first sentence in the contract's third paragraph overrides the contract's expiration date. That sentence reads:

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"Our service fees are ... payable only if a candidate enters into a service relationship ... within one year after our most recent communication relating to the candidate."

[Defendant's brief at 5].

While this court will, once again, decline to make formal rulings regarding the facts of the case in this order, it does note its initial impression that plaintiff appears to have the stronger arguments relating to Employee 4. Indeed, defendant concedes that the contract provides that "[o]ur service fees are ... payable only if a candidate enters into a service relationship ... within one year after our most recent communication relating to the candidate," and it does not appear to dispute that Employee 4 was, in fact, hired within one year of that most recent communication. That being the case, this court harbors considerable doubts regarding the sincerity and good faith behind defendant's argument that "the contract does not require BancorpSouth to pay employees hired after the contract expires." Plaintiff appears to have a very reasonable argument that the above-quoted language in the contract does precisely that, and this court is doubtful that defendant would be able to obtain dismissal of plaintiff's claims in this context even on summary judgment. As to Employee 3, the facts surrounding the payment relating to this individual seem very much unclear, and it strikes this court that clarifying matters such as these is why the discovery process exists.

Returning to Employee 4, this court's doubts regarding BancorpSouth's position are heightened by defendant's representations regarding the nature of Mississippi law in this context. Citing the Mississippi Court of Appeals' decision in Sports Page Inc. v. Punzo , 900 So.2d 1193, 1207 (Miss. Ct. App. 2004), defendant writes that "for there to be a cause of action the defendant must ‘concede that he owe[s] the amount stated and yet refuse to pay without any justification.’ " [Reply brief at 2]. In support of this assertion, defendant notes that

Red Canyon also does not dispute that BancorpSouth has attempted (multiple times) to pay the amounts it owes and only refused to pay the amounts for which it states a reason for its refusal. Those concessions are dispositive under controlling Mississippi law.

[ Id. ] Defendant thus contends that its merely offering some reason for not paying (no matter how fanciful) insulates it from liability for extracontractual damages, but, as discussed below, this court does not believe that Mississippi law supports this contention. Once again, defendant has offered this court a reason for its not paying for services rendered in relation to Employee 4, but this court's initial impression is that it is not a particularly good reason, and it is not convinced that defendant itself sincerely believes its own interpretation of the contract in this context. Plaintiff further notes that defendant has refused to pay even for services rendered with regard to Employees 1 and 2, without it first agreeing to waive any claims relating to Employees 3 and 4. Under these circumstances, this court has considerable sympathy for plaintiff's contention that "Bancorp essentially is extorting Red Canyon with its own money" by refusing to unconditionally pay for services rendered in regard to Employees 1 and 2, [plaintiff's brief at 5] and it is presently disinclined to prevent a jury from considering the issue of extra-contractual damages in this context.

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Returning to the Mississippi Court of Appeals' decision in Sports Page , this court can discern multiple reasons to doubt defendant's characterization of the decision as establishing a strict rule of law precluding any liability for tortious breach of contract in cases in which a defendant merely "states a reason" for not paying the contractual amount in question. Indeed, this notion struck this court as being suspect even before it reviewed the Court of Appeals' decision, since it would seemingly be very easy for any defendant to avoid potential liability for extra-contractual damages by merely providing some reason for not paying under a contract, whether it actually believed in good faith that this reason had merit or not. That being the case this court was skeptical at the outset that Mississippi law provided such an easy "get out of jail free" card to defendants in tortious breach of contract cases, and its review of Sports Page only heightened this skepticism.

After reviewing the decision, this court can discern four independently sufficient reasons for not applying Sports Page as the strict bar to liability which defendant characterizes it as being. First, it is well settled that the Mississippi Court of Appeals is, as its own website acknowledges, an "error correction court" which "hears and decides appeals on issues in which the law is already settled, but the facts are in dispute." It is left to the Mississippi Supreme Court to actually create new law in this state, and neither defendant nor Sports Page itself cites a tortious interference with contract case in which the Supreme Court adopted the principle upon which it relies in this case. Second, even if the Mississippi Court of Appeals could create new law in this context, the fact would remain that Sports Page itself was not a tortious breach of contract case at all; to the contrary, the issue in that case was the availability of prejudgment interest. Sports Page , 900 So. 2d at 1206-07. Third, while the Court of Appeals in Sports Page did make reference to the Mississippi Supreme Court's decision in Bailey v. Bailey , 724 So.2d 335, 338 (Miss. 1998) on the issue of bad faith refusal to pay, Bailey was a child support case. Bailey , 724 So. 2d at 336. Clearly, whatever the Supreme Court might have said about refusals to pay in the context of child support payments does not necessarily extend to the tortious breach of contract context.

This court concludes that a fourth (and perhaps the most compelling) reason why Sports Page does not assist defendant in this case lies in the fact that the language upon which it relies was arguably dicta which, in any event, did not correctly characterize Bailey 's holding even in the child support context. Specifically, the Court of Appeals wrote in Sports Page that:

If there is no liquidated amount due, then prejudgment interest may be awarded for a bad faith or frivolous refusal to pay an amount owed. The cases cited above do not define "bad faith" or "frivolous;" instead, the cases simply assert that there was or was not bad faith based upon the record. Thus, "bad faith" does not appear to have a specialized meaning in this context, but a workable definition has been provided by the court in other contexts: " ‘bad faith’ implies some conscious wrongdoing ‘because of dishonest purpose or moral obliquity.’ Bailey v. Bailey , 724 So.2d 335, 338 (Miss. 1998)." For Mattina's

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actions to be in bad faith, under the basic definition given above, he would have had to concede that he owed the amount stated and yet refuse to pay without any justification.

Sports Page , 900 So. 2d at 1207. The Court of Appeals in Sports Page cited no authority for the last sentence quoted above, and this court does not regard it as an accurate characterization of Bailey 's holding that "bad faith implies some conscious wrongdoing because of dishonest purpose or moral obliquity." Id. Clearly, a defendant could consciously be acting in bad faith while still refusing to outwardly concede that it owed a particular amount, and this court therefore regards defendant's position in this case as being unsupported by both Supreme Court precedent and common sense.

In light of the foregoing, this court is unwilling to grant defendant's motions to dismiss the claims seeking extra-contractual damages, and it seems unlikely at this juncture that it would do so at the summary judgment stage either. At the same time, this court does acknowledge that there is some question regarding exactly what causes of action seeking extra-contractual damages should go before a jury, but this is an issue which it is inclined to decide at the directed verdict and/or jury instruction phase of trial. Indeed, depending upon how the proof develops at trial, it is even possible that this court would choose to grant plaintiff a directed verdict as to the contractual claims involving Employee 4 and leave it to the jury to decide the issue of extra-contractual damages in this context. This court will not prejudge this issue at this juncture, however.

As a final note, this court observes that defendant initially raised questions regarding whether diversity jurisdiction exists in this case, but it appears to now concede, based upon declarations submitted by plaintiff, that such jurisdiction does exist. [Reply brief at 8]. Defendant represents that it will leave it to this court's discretion whether to require a formal amendment of the complaint to reflect these jurisdictional facts, [ id. ] and it concludes that it would be better for plaintiff to file such an amended complaint. This court will therefore deny defendant's motion to dismiss, but it will require plaintiff to file an amended complaint which properly asserts diversity jurisdiction in this case.

In light of the foregoing, it is ordered that defendant's motion to dismiss is DENIED . Plaintiff shall submit an amended complaint which properly asserts jurisdictional facts within fourteen (14) days of this order.