The defendant's motion to dismiss an implied contract claim in a subrogation action was denied. Cumis Ins. Soc'y v. Count, 2018 U.S. Dist. LEXIS 118380 (D. Haw. July 16, 2018).
Cumis issued a fidelity bond to Kauai Government Employee's Federal Credit Union (KGE). The bond provided coverage of losses incurred as a result of fraudulent acts by specified individuals. A Senior Loan Manager employed by KGE, Vallatini, allegedly committed fraudulent acts between 2008 and 2014 in approving loans for various members of the Credit Union. Cumis had to make payments under the fidelity bond. According to Cumis' complaint, Vallatini misrepresented that various members were qualified borrowers when they were not.
Vallatini moved to dismiss Count III of the complaint, breach of implied contract. He argued Count III failed to state a claim for breach of implied contract. Cumis argued that each of the misrepresentations made by Vallatini to the Credit Union constituted a failure to perform under the implied contract.
The Federal District Court for the District of Hawaii found that Cumis adequately stated a claim for breach of an implied contract. Vallatini had an implied obligation, as a condition of his continued employment with KGE, that he would comply with company policy regarding approval of loans to borrowers and selling repossessed vehicles to the highest bidder. KGE performed under the implied-in-fact contract, while Vallatini, allegedly, did not. Therefore, Count III sufficiently stated a breach of implied contract claim.
Vallatini also argued that Cumis' implied-in-fact contract allegations were insufficient in the at-will employment context because the complaint did not allege any qualifying statements of actions by either party that would modify the relationship between KGE and Vallatini from an employment-at-will relationship to something more. The court disagreed. Vallatini's employment relationship with KGE was subject to his implied promise to comply with company policy regarding approval of loans to borrowers and selling repossessed vehicles to the highest bidder.
Vallatini alternatively argued that even if an implied contract existed wherein he agreed not to misrepresent information to KGE, the remedy for any alleged breach of an implied employment contract was termination. He provided no legal authority for this argument, however. Instead, the non-breaching party would seek to recover its compensatory damages for actual losses sustained as a result of Vallatini's alleged breach. The claimed losses sustained by Cumis and its insured, KGE, were reasonably foreseeable damages that flowed from the type of breach attributed to Vallatini.
