Trang v. Bank of George

STEVEN TRANG, Plaintiff v. BANK OF GEORGE, et al. Defendants

No. 2:17-cv-00162-APG-EJY

United States District Court, D. Nevada

December 13, 2022

ORDER GRANTING IN PART MOTION TO DISMISS AMENDED COUNTERCLAIMS [ECF NO. 72]

ANDREW P. GORDON, UNITED STATES DISTRICT JUDGE.

Plaintiff Steven Trang sues defendants Bank of George (his former employer) and T. Ryan Sullivan (the Bank's president) for wrongful termination under the False Claims Act and Nevada law.^[1] Bank of George filed amended counterclaims against Trang for (1) intentional misrepresentation; (2) negligent misrepresentation; (3) breach of employment offer letter; (4) breach of confidentiality agreement; (5) breach of code of ethics; (6) breach of the implied covenant of good faith and fair dealing; (7) breach of the duty of loyalty; and (8) tortious interference with prospective business advantage. Trang moves to dismiss the counterclaims, arguing they are not plausibly pleaded, are not pleaded with particularity, or are time-barred.

The parties are familiar with the facts, so I repeat them only as necessary to resolve the motion. I partially dismiss the third, fourth, and fifth amended counterclaims, with leave to amend. I dismiss the first, second, sixth, seventh, and eighth amended counterclaims because they are time-barred.

I. ANALYSIS

A complaint must provide a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2); Bell Atl. Corp. v Twombly, 550 U.S. 544, 555 (2007). While the pleading “does not need detailed factual allegations,” it should give the defendant fair notice of the claim “and the grounds upon which it rests.” Twombly, 550 U.S. at 555. The pleading must contain more than “labels and conclusions” or a “formulaic recitation of the elements of a cause of action,” and the “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Id. The Bank's amended counterclaims should thus contain “enough facts to state a claim to relief that is plausible on its face.” Id. at 570.

When adjudicating a 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted, I use a two-step approach. Ashcroft v. Iqbal, 556 U.S. 662 679 (2009). First, I accept as true all well-pleaded factual allegations and draw all reasonable inferences in the claimant's favor. Id.; Brown v. Elec. Arts Inc., 724 F.3d 1235, 1247-48 (9th Cir. 2013). But I do not accept legal conclusions as true, even if they are framed as factual allegations. Navajo Nation v. Dep't of the Interior, 876 F.3d 1144, 1163 (9th Cir. 2017). Second, I consider whether the factual allegations allege a plausible claim for relief. Iqbal, 556 U.S. at 679. A claim for relief is plausible when the factual allegations allow me to reasonably infer that the defendant is liable. Id. at 678. If the complaint states a conceivable but not plausible claim, I must dismiss that claim. Twombly, 550 U.S. at 570.

A. Failure to State a Plausible Claim

1. Breach of Employment Offer Letter (Amended Counterclaim 3) and Breach of Confidentiality Agreement (Amended Counterclaim 4)

The Bank alleges Trang breached his employment offer letter and confidentiality agreement by taking confidential Bank documents and sharing them with the government and others. Trang argues the Bank fails to state a plausible claim because it does not identify the others or specify which documents were taken. He asserts that insofar as the Bank's claims are based on sharing documents with the government to pursue his qui tam action, that conduct is protected by the Noerr-Pennington doctrine. The Bank contends it sufficiently supports an inference that Trang disseminated confidential documents to someone other than the government, which is not protected petitioning activity. It also argues Trang is not immunized from liability for sharing with the government because his petitioning activity was a sham.

I previously dismissed a similar breach of contract claim in part because the Bank did not specify which documents were taken and to whom, other than the government, Trang disseminated them. ECF No. 69 at 6. I ruled that the Bank's “hope that discovery will reveal other disclosures is insufficient to avoid dismissal for failure to state a plausible claim.” Id. at 7. The Bank does not rectify this defect in its amended counterclaims because it still fails to identify the non-government entities to whom Trang gave the documents. The Bank states in conclusory fashion that Trang disclosed the documents to “others,” but it does not offer any factual allegations supporting an inference that Trang gave the documents to anyone other than the government. ECF No. 70 at 17-19. These amended counterclaims therefore do not cross the line from conceivable to plausible and I dismiss them insofar as they allege Trang disseminated documents to non-government entities or people. Because it is not clear that amendment would be futile, I dismiss with leave to amend. See Ebner v. Fresh, Inc., 838 F.3d 958, 963 (9th Cir. 2016) (“In dismissing for failure to state a claim, a district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts.”).

I also dismissed the prior claim because the Bank failed to plausibly plead that Trang was not entitled to Noerr-Pennington immunity. ECF No. 69 at 7. The Noerr-Pennington doctrine “is a rule of statutory construction that requires courts to construe statutes to avoid burdening conduct that implicates the protections of the Petition Clause of the First Amendment.” United States v. Koziol, 993 F.3d 1160, 1171 (9th Cir. 2021). While the doctrine was initially rooted in antitrust law, it now extends to the petitioning of any branch of government. Theme Promotions, Inc. v. News Am. Mktg. FSI, 546 F.3d 991, 1006-07 (9th Cir. 2008). Thus, parties who petition the government are generally immune from liability for that activity. Sosa v. DIRECTV, Inc., 437 F.3d 923, 929 (9th Cir. 2006).

But under the “sham exception,” petitioning conduct is not entitled to immunity if the conduct was “objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits” and the petitioner had an unlawful motive in bringing the suit. B&G Foods N. Am., Inc. v. Embry, 29 F.4th 527, 537-38 (9th Cir. 2022) (quotation omitted). An unlawful motive includes “[use of] government processes, as opposed to the outcome of those processes, as a mechanism to injure.” Id. at 538 (quotation omitted). Whether the sham exception applies is a question of fact. Rock River Commc'ns, Inc. v. Universal Music Grp., Inc., 745 F.3d 343, 352-53 (9th Cir. 2014). At the motion to dismiss stage, I decide only whether the Bank has plausibly pleaded that the sham exception applies, accepting all well-pleaded facts as true. See Kearney v. Foley & Lardner, LLP, 590 F.3d 638, 647 (9th Cir. 2009) (a district court errs if it requires more than plausible pleading of a sham exception claim at the motion to dismiss stage). A pretrial decision on the merits of a Noerr-Pennington defense is inappropriate when the relevant facts are disputed. See Rock River Commc'ns, 745 F.3d at 352-53. Some district courts have noted that a finding of Noerr-Pennington immunity at the motion to dismiss stage is “rare” because it is a fact-dependent inquiry. See, e.g., In Re Xyrem (Sodium Oxybate) Antitrust Litig., 555 F.Supp.3d 829, 877 (N.D. Cal. 2021).

The Ninth Circuit has previously applied a heightened pleading standard to sham exception claims. See, e.g., Kottle v. Nw. Kidney Ctrs., 146 F.3d 1056, 1063 (9th Cir. 1998). It later appeared to repudiate that approach, holding “a heightened pleading standard should only be applied when the Federal Rules of Civil Procedure so require.” Empress LLC v. City and Cnty. of S.F., 419 F.3d 1052, 1056 (9th Cir. 2005). Yet after Empress, the Ninth Circuit and district courts within this circuit have continued to apply a heightened pleading standard to sham exception claims. See, e.g., Kearney, 590 F.3d at 647; In re Outlaw Laboratories, LP Litig., 352 F.Supp.3d 992, 1004-05 (S.D. Cal. 2018).

I need not resolve this conflict because even under a heightened pleading standard, the Bank has sufficiently pleaded that Trang's qui tam claims were objectively baseless and brought with an unlawful motive. Its amended counterclaims allege facts (which I must take as true) demonstrating that no reasonable plaintiff could have expected to succeed on the merits of Trang's claims. The Bank describes why each allegedly fraudulent loan complied with the law or it disputes Trang's allegations about the illegality of the loans. ECF No. 70 at 11-15. And it plausibly pleads that Trang brought his qui tam action with an unlawful motive: to harm the Bank in retaliation for his proposed role change and subsequent termination. Id. at 7-10, 15, 1721. The Bank has thus met even a heightened pleading standard because it has provided “more specific allegations than would otherwise be required” to show the sham exception applies. Kottle, 146 F.3d at 1063 (quotation omitted). I therefore deny the motion to dismiss these breach of contract claims insofar as they are based on Trang sharing confidential documents with the government.^[2]

2. Breach of Code of Ethics (Amended Counterclaim 5)

The Bank asserts that Trang breached its code of ethics by taking confidential documents from the Bank and giving them to the government and others. For the reasons already discussed, I dismiss with leave to amend the claim insofar as it is based on sharing documents with nongovernment entities. But I do not dismiss the claim...