Hoefer v. Fluor Daniel, Inc.

50 F.Supp.2d 975

Patrick C. HOEFER, Plaintiff, v. FLUOR DANIEL, INC., et al., Defendants.

No. SA CV 98-447-GLT(KY).

United States District Court, C.D. California.

May 25, 1999.

Dean Francis Pace, Pace & Rose, Los Angeles, CA, for plaintiff.

Rita J. Miller, Munger, Tolles & Olson, Los Angeles, CA, for defendant.

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS

TAYLOR, District Judge.

On three issues not yet decided by the Ninth Circuit, the Court holds California's False Claims Act does not protect federal whistleblowers, the intracorporate conspiracy doctrine applies to a 42 U.S.C. § 1985 conspiracy claim, and a state wrongful employment retaliation claim is preempted by the Federal False Claims Act.

I. BACKGROUND

Plaintiff Hoefer was hired by Defendant Fluor Daniel in 1988, and later served as Fluor's Director of Government Finance Compliance. In 1998 Hoefer was suspended and in 1999 he was terminated. Hoefer alleges he was retaliated against for bringing two qui tam actions charging Fluor with violations of the Federal False Claims Act.

Plaintiff sued Fluor for (1) violation of the Federal False Claims Act, 31 U.S.C. § 3729 and following; (2) violation of the California False Claims Act, Cal. Government Code § 12653; (3) violation of 42 U.S.C. § 1985(2, 3); and (4) wrongful employment retaliation in violation of public policy. Defendant does not now challenge the Federal False Claims Act claim, but moves to dismiss the other claims.

II. DISCUSSION

By its motion, Fluor presents issues of first impression on each of the challenged claims.

A. California False Claims Act — non-application to federal whistleblowers

The Court holds California's False Claims Act does not provide protection from retaliation for federal whistleblowers.

Plaintiff claims Defendant Fluor violated California's False Claims Act, Government Code § 12653(b), by retaliating against him for filing two cases under the Federal False Claims Act (31 U.S.C. § 3729 et seq.) alleging Fluor overbilled the federal government. Defendants move to dismiss Plaintiff's second cause of action on the grounds Section 12653 protects only state whistleblowers.

California Government Code § 12653(b) provides:

No employer shall discharge, demote, suspend, threaten, harass, deny promotion to, or in any other manner discriminate against, an employee in the terms and conditions of employment because of lawful acts done by the employee on behalf of the employee or others in disclosing information to a government or law enforcement agency or in furthering a false claims action, including investigation for, initiation of, testimony for, or assistance in, an action filed or to be filed under Section 12652.

Plaintiff argues the first part of Section 12653, which prohibits retaliation against an employee for "disclosing information to a government or law enforcement agency," is not limited to state whistleblowers. Plaintiff argues only the second part of Section 12653, which prohibits retaliation against an employee for "furthering a false claims action," is limited to state whistleblowers.¹

The Court disagrees with Plaintiff's reading of Section 12653. That section is part of California's False Claims Act contained in Article 9 of the California Government Code. See Cal. Gov't.Code §§ 12650-12655. The purpose of Article 9 is to protect whistleblowers who report false claims requesting money from the state or local governments. According to Section 12650, for the purposes of this article the term "claim" includes:

any request or demand for money, property, or services made to any employee, officer, or agent of the state or of any political subdivision, or to any contractor, grantee, or other recipient, whether under contract or not, if any portion of the money, property, or services requested or demanded issued from, or was provided by, the state ... or by any political subdivision thereof.

Similarly, Section 12651 provides the false claims actionable under Article 9 are those against the state or a political subdivision of the state.

In light of its language and context, the Court concludes Section 12653(b) does not assist federal whistleblowers. The Court GRANTS Defendants' Motion to Dismiss Plaintiff's California False Claims Act cause of action.

B. 42 U.S.C. § 1985 Conspiracy Claim — Application of the Intracorporate Conspiracy Doctrine

The Court holds the intracorporate conspiracy doctrine applies to 42 U.S.C. § 1985 conspiracy claims.

Plaintiff alleges Defendant Fluor, three individual Fluor defendant employees, and Fluor's retained counsel conspired among themselves to retaliate against Plaintiff for bringing False Claims Act proceedings.²

The intracorporate conspiracy doctrine provides that, as a matter of law, a corporation cannot conspire with its own employees or agents. See Washington v. Duty Free Shoppers, 696 F.Supp. 1323, 1325 (N.D.Cal.1988).³ The logic for the doctrine comes directly from the definition of a conspiracy. A conspiracy requires a meeting of minds. See Fonda v. Gray, 707 F.2d 435, 438 (9th Cir.1983). "It is basic to the law of conspiracy that you must have two persons or entities to have a conspiracy. A corporation cannot conspire with itself anymore than a private individual can, and it is the general rule that the acts of the agent are the acts of the corporation." Nelson Radio & Supply Co., Inc. v. Motorola, Inc., 200 F.2d 911, 914 (5th Cir.1952), cert. denied, 345 U.S. 925, 73 S.Ct. 783, 97 L.Ed. 1356 (1953).

Plaintiff argues the Supreme Court in Haddle v. Garrison, 525 U.S. 121, 119 S.Ct. 489, 142 L.Ed.2d 502 (1998), implicitly considered and rejected the intracorporate conspiracy doctrine's application to Section 1985 by allowing an employee to bring a Section 1985(2) action against his employer and its officers. Plaintiff misconstrues the scope and holding of Haddle. Although Haddle involved a Section 1985(2) action alleging conspiracy among an employer and its officers, the intracorporate conspiracy issue was not considered. The Supreme Court made clear its review was "confined to one question: Can petitioner state a claim for damages by alleging that a conspiracy proscribed by § 1985(2) induced his employer to terminate his at-will employment?" See Haddle, 119 S.Ct. at 491. The Supreme Court ruled only on that issue. See Haddle, 119 S.Ct. at 492. The Eleventh circuit had already previously rejected the intracorporate conspiracy doctrine.⁴ Because the intracorporate conspiracy doctrine was not before the Supreme Court, it would be a mistake to draw any inference from the Court's silence on the issue. See United States v. Stewart, 650 F.2d 178, 180 (9th Cir.1981); Sacramento Valley Chapter of National Electrical Contractors Association v. International Brotherhood of Electrical Workers, 632 F.Supp. 1403, 1414 (E.D.Cal.1986), aff'd, 888 F.2d 604 (9th Cir.1989).

The intracorporate conspiracy doctrine first developed in the anti-trust context. See Nelson, 200 F.2d at 914 (holding a corporation cannot conspire with its officers and agents to restrain trade in its own products). The Seventh Circuit extended the doctrine to Section 1985 claims. See Dombrowski v. Dowling, 459 F.2d 190, 196 (7th Cir.1972) (holding that, when two executives of the same firm make a decision to discriminate in furtherance of the purposes of the business, this decision cannot be called a conspiracy for purposes of § 1985).

The Circuits are divided over whether extension of the intracorporate conspiracy doctrine to Section 1985 is appropriate. The Second, Fourth, Sixth and Eighth Circuits have followed the Seventh Circuit's extension of the doctrine to Section 1985, finding its logic applies equally in both contexts. According to the Eight Circuit, "If the challenged conduct is essentially a single act of discrimination by a single business entity, the fact that two or more agents participated in the decision or in the act itself will normally not constitute the conspiracy contemplated by this statute." Baker v. Stuart Broadcasting Co., 505 F.2d 181 (8th Cir.1974) (applying intracorporate conspiracy doctrine to Section 1985 action based on alleged sex discrimination). Similarly, the Second Circuit applied the intracorporate conspiracy doctrine to a Section 1985 claim based on alleged sex discrimination finding "plaintiff's allegations of multiple acts by the directors are not alleged to be other than the implementation of a single policy by a single policymaking body.... [P]laintiff does not allege that any of the individual defendants acted in any other capacity than his official role of director." Girard v. 94th Street & Fifth Avenue Corp., 530 F.2d 66, 71 (2nd Cir.1976), cert. denied, 425 U.S. 974, 96 S.Ct. 2173, 48 L.Ed.2d 798 (1976). See also Buschi v. Kirven, 775 F.2d 1240, 1251-52 (4th Cir.1985) (applying the intracorporate conspiracy doctrine to a Section 1985 conspiracy alleging violation of plaintiffs' First Amendment and due process rights). See also Doherty, 728 F.2d at 339-40 (applying the intracorporate conspiracy doctrine to a Section 1985(2) case alleging a corporate conspiracy to coerce plaintiff-employee to enter nolo contendere plea to federal bribery charges).

For public policy reasons, however, the First and Third Circuits have refused to apply the intracorporate conspiracy doctrine to Section 1985 cases alleging conspiracies to discriminate on the basis of race or sex. See Stathos v. Bowden, 728 F.2d 15, 20-21 (1st Cir.1984) (holding the logic of the intracorporate conspiracy doctrine in antitrust cases does not warrant its extension to civil rights cases). Similarly, the Third Circuit rejected the application of the intracorporate conspiracy doctrine to a Section 1985 claim based on alleged sex discrimination because it saw "nothing in the policies undergirding § 1985(3)" to support its application to cases alleging conspiracies to violate civil rights. See Novotny v. Great American Fed. Savings & Loan Assn., 584...