United States District Court, D. Colorado
ORDER ON MOTION TO DISMISS
Brooke Jackson, United States District Judge.
matter is before the Court on defendants Wells Fargo &
Company's; Wells Fargo Bank, N.A.'s; Wells Fargo
Capital Finance, LLC's; Global Alternative
Investments'; and Global Alternative Investment Services,
Inc.'s (“defendants”) motion to dismiss. ECF
No. 16. For the reasons stated below, the Court GRANTS
John Schmidt is a former Wells Fargo employee. ECF No. 1 at
4. Before joining Wells Fargo, Mr. Schmidt co-founded Castle
Pines Capital, LLC (“Castle Pines”). Id.
at 1. After Wells Fargo acquired Castle Pines, Mr. Schmidt
entered into an employment agreement with Wells Fargo on May
25, 2011 (the “2011 Agreement”) whereby Mr.
Schmidt would remain employed as the Managing Partner of
Castle Pines for a period of five years. Id. at 4.
In April of 2016, as the 2011 Agreement was nearing
expiration, Wells Fargo asked Mr. Schmidt to apply for a
position in which he would assist with another large Wells
Fargo acquisition. Id. Mr. Schmidt declined and
instead chose to resign from Wells Fargo. Id. After
the acquisition occurred, Mr. Schmidt engaged in employment
discussions with Wells Fargo executives which resulted in his
being offered the position of Head of Supply Chain Finance
for Wells Fargo Capital Finance, LLC, effective May 5, 2016.
terms of Mr. Schmidt's new position were set forth in
oral communications and in a May 5, 2016 letter sent to Mr.
Schmidt by Scott Diehl, Executive Vice President and Head of
Global Solutions Group with Wells Fargo Capital Finance, LLC.
Id. According to Mr. Schmidt, the parties orally
agreed that his term of employment would be for five years.
Id. at 5. Additionally, the May 2016 letter
allegedly provided partial terms of Mr. Schmidt's
employment, including his annual base pay and bonuses.
Id. at 4. On August 25, 2016 Wells Fargo
disseminated a press release announcing that Mr. Schmidt
would be leading the Supply Chain Finance Group. Id.
at 5. Mr. Diehl also issued statements in September 2016
touting Mr. Schmidt's experience and expertise and noting
that Wells Fargo was “fortunate to have him leading
this group.” Id.
to Mr. Schmidt, this honeymoon period would soon draw to a
close as implementation of the so-called “Volcker
Rule” drew closer. Codified in section 619 of the
Dodd-Frank Wall Street Reform and Consumer Protection Act,
the Volcker Rule prohibits an employee of a banking
entity-like Mr. Schmidt-from investing in certain types of
funds sponsored by the banking entity unless the employee is
directly engaged in providing investment advisory or other
services to the covered fund. Id. at 6 (citing 12
U.S.C. § 1851(d)(1)(G)(vii)). The restrictions of the
Volcker Rule became effective on July 21, 2012, but in July
2016 the deadline for banking entities to comply with the
Rule was extended to July 21, 2017. Id.
Schmidt was subject to the requirements of the Volcker Rule
because he had “significant assets” managed in
Wells Fargo's securities and was a Wells Fargo employee.
Id. At the crux of the instant case are the actions
undertaken by Mr. Schmidt to comply with the Volcker Rule.
Mr. Schmidt states that he was “assured by Wells Fargo
Senior Vice President, Wealth Advisor Liz O'Connor's
and Investment Manager Paul Hojnick's conduct, actions,
and representations that he would be given the opportunity to
assess his financial position at the end of 2016 and would
have several months into 2017 to take any action required
under the Volcker Rule.” Id. Specifically, Mr.
Schmidt alleges that Wells Fargo's plan was to value his
hedge fund investments after the end of 2016, determine the
impact of selling his assets, and allow Mr. Schmidt time to
make a decision in 2017 about whether or not to sell his
assets to ensure compliance with the Volcker Rule.
Id. at 6-7. At some point the plan changed.
being assured that his hedge fund investments would not be
redeemed until “several months into 2017, ” Mr.
Schmidt alleges that he received notice from Wells Fargo on
December 8, 2016 that Wells Fargo would redeem his hedge fund
investments on December 31, 2016. Id. at 7. Mr.
Schmidt attempted to elicit an explanation for the
accelerated redemption timeline but claims that “no
satisfactory answer was provided.” Id. Mr.
Schmidt alleges that the accelerated timeline put him in the
“untenable position of choosing whether to remain
employed and potentially face unknown colossal tax and/or
opportunity cost consequences by having to redeem his
investment without the opportunity to conduct due diligence
prior to the redemption, or to resign from his position
before the [end of the] five-year term of his employment
agreement.” Id. On December 13, 2016 Ms.
O'Connor requested that Mr. Schmidt submit his
resignation and Mr. Schmidt complied. Id. Mr.
Schmidt asserts that this interaction amounted to
constructive discharge. Id. at 2, 9.
Schmidt filed a complaint on June 26, 2017, asserting four
claims: (1) breach of contract; (2) negligent
misrepresentation; (3) negligence; and (4) promissory
estoppel. See Id. at 8-13. On August 9, 2017 Wells
Fargo filed a motion to dismiss Mr. Schmidt's complaint
in its entirety. ECF No. 16. That motion has been fully
briefed. See ECF Nos. 16, 24, 27.
STANDARD OF REVIEW
survive a 12(b)(6) motion to dismiss, the complaint must
contain “enough facts to state a claim to relief that
is plausible on its face.” Ridge at Red Hawk,
L.L.C. v. Schneider, 493 F.3d 1174, 1177 (10th Cir.
2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007)). A plausible claim is a claim that
“allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). While
the Court must accept the well-pleaded allegations of the
complaint as true and construe them in the light most
favorable to the plaintiff, Robbins v. Wilkie, 300
F.3d 1208, 1210 (10th Cir. 2002), conclusory allegations are
not entitled to be presumed true, Iqbal, 556 U.S. at
681. However, so long as the plaintiff offers sufficient
factual allegations such that the right to relief is raised
above the speculative level, he has met the threshold
pleading standard. See, e.g., Twombly, 550 U.S. at
556; Bryson v. Gonzales, 534 F.3d 1282, 1286 (10th
move to dismiss plaintiff's complaint in its entirety for
failure to state a claim. ECF 16 at 1. Defendants argue that
each of plaintiff's four counts should be dismissed as a
matter of law. Id. I will address each count in
Count I: Breach of Contract.
complaint, plaintiff asserts that he entered into a five-year
employment contract with defendants on May 5, 2016 which
incorporated both oral and written terms. ECF No. 1 at 8.
Plaintiff contends that defendants' accelerating his
investment redemption timeline-which resulted in his
resigning-amounted to a constructive discharge, thereby
breaching the terms of his employment contract. ECF No. 16 at
9-10. Plaintiff further asserts that defendants' actions
constituted a breach of the implied covenant of good faith
and fair dealing that is inherent in every contract under
Colorado law. Id. at 10. Defendants argue in their
motion to dismiss that Colorado's statute of frauds
renders plaintiff's alleged contract void, precluding his
breach of contract claim and his related claim for breach of
the implied covenant of good faith and fair dealing. ECF No.
16 at 1-2. Because I ...