Armstrong v. Reynolds

• Decision Date: 13 January 2022
• Docket Number: No. 20-15256,20-15256
• Citation: 22 F.4th 1058
• Parties: Helen ARMSTRONG, Plaintiff-Appellant, v. Terry REYNOLDS; Steve George; Jess Lankford; Lara Pellegrini, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

22 F.4th 1058

Helen ARMSTRONG, Plaintiff-Appellant,

v.Terry REYNOLDS; Steve George; Jess Lankford; Lara Pellegrini, Defendants-Appellees.

No. 20-15256

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 3, 2021 Seattle, Washington

Filed January 13, 2022

Phillip Spector (argued), Messing & Spector LLP, Baltimore, Maryland; Noah Messing, Messing & Spector LLP, New York, New York; John Napier Tye, Whistleblower Aid, Washington, D.C.; for Plaintiff-Appellant.

Jeffrey Morgan Conner (argued) and Vivienne Rakowsky, Deputy Assistant Attorneys General; Office of the Attorney General, Las Vegas, Nevada; for Defendants-Appellees.

Before: Danny J. Boggs,^** A. Wallace Tashima, and Marsha S. Berzon, Circuit Judges.

BERZON, Circuit Judge

Helen Armstrong witnessed unsafe medical practices in her workplace, Ear Nose and Throat Associates (ENTA). After attempting without success to raise her concerns with her employer, Armstrong filed a complaint with the Nevada Occupational Safety and Health Administration (NOSHA). Nevada law supports and encourages such reporting by prohibiting retaliation against whistleblowers who report health and safety hazards. Nev. Rev. Stat. § 618.445.

Armstrong alleges that ENTA did retaliate against her, leading her to return to NOSHA to file a second complaint against ENTA. But when Armstrong withdrew the whistleblowing complaint for fear of further retaliation—before ENTA learned of it—NOSHA notified ENTA about the complaint and, Armstrong alleges, more retaliation followed. When she filed a third whistleblowing complaint, NOSHA scuttled any investigation. Eventually, ENTA fired Armstrong.

Armstrong sued four Nevada state officials in their individual capacities under 42 U.S.C. § 1983, alleging that the officials violated her substantive and procedural due process rights and further alleging violations of both state and federal statutes and regulations. She also brought Nevada state law claims for civil conspiracy, intentional and negligent infliction of emotional distress, fraud, and malfeasance, misfeasance, or nonfeasance in office. The district court dismissed all the claims.

Armstrong now appeals the dismissal of her due process, negligent infliction of emotional distress (NIED), and civil conspiracy claims. We reverse the dismissal of Armstrong's procedural due process and NIED claims, affirm the dismissal of her substantive due process claim, reverse the district court's denial of leave to amend some of her claims, and remand for further proceedings.

I.

Helen Armstrong worked as a supervisor in human resources at ENTA. She had been with the company for twenty-three years at the time of these events. In February 2014, Armstrong and a coworker filed whistleblower complaints with NOSHA against ENTA, describing unsafe practices, including the use of contaminated syringes and sale of expired prescriptions. NOSHA investigated ENTA and issued citations and fines for various health and safety violations. But, Armstrong alleges, instead of simply paying the fines and fixing the violations, ENTA began retaliating against the whistleblowers.¹

Shortly after NOSHA opened its investigation, Armstrong was removed from her role as a supervisor and demoted. Following the close of NOSHA's investigation, Armstrong began to receive workplace write-ups and complaints. Before Armstrong acted as a whistleblower, no co-worker complaints had been filed against Armstrong in her twenty-three years at ENTA; fifty were filed after the investigation.

On May 30, 2014, Armstrong lodged a complaint with NOSHA alleging illegal retaliation for her earlier whistleblower filing. Shortly after that, Armstrong was diagnosed with cancer. Worried about the loss of her health insurance if she lost her job and concerned about facing further retaliation once ENTA was informed of her new complaint, Armstrong discussed her options with case investigator Michael Ybarra and decided to withdraw her claim. Ybarra made note of this conversation in Armstrong's file and specified that Armstrong made the decision to withdraw to protect herself from retaliation, noting that "her employer had not been notified of the complaint." (Capitalization simplified.)

But, on June 24, 2014, NOSHA's Chief Investigator Lara Pellegrini copied ENTA on a letter to Armstrong acknowledging the withdrawal. Armstrong alleges that Pellegrini admitted to others at NOSHA that sending the letter copy to ENTA was a "mistake"; Pellegrini says she sent the letter to ENTA because she was "[f]ollowing a template letter from the OSHA manual." Either way, instead of the quiet end to the complaint process Armstrong had hoped would help her keep her job and health insurance, NOSHA informed an allegedly retaliatory employer that its employee had continued to report violations of the law but had given up on seeking redress. After ENTA learned of the new complaint, Armstrong alleges, the retaliation she experienced increased.

Armstrong met with Pellegrini on July 24, 2014, expecting an apology. Pellegrini instead insisted she had made no mistake, as she was required to send ENTA the letter copy. The next day, Armstrong was "physically ill and mentally destroyed" and so requested an additional day of leave on top of her previously scheduled medical leave. When she returned to work on Monday, July 28, 2014, she was berated in front of her office colleagues and patients and accused of violating company policy and lying about having been ill the prior week. The first of several disciplinary write-ups followed. Later that day, Armstrong was hospitalized and required a heart stent implant.

Armstrong filed another retaliation complaint on August 14, 2014. She was fired from ENTA on November 17.

Armstrong alleges that NOSHA's investigation of her last complaint was effectively shut down by the Defendants, acting in concert, through foot-dragging and subterfuge. This sequence of events began on April 1, 2015, when Ybarra sent ENTA a letter notifying it of Armstrong's amended complaint to NOSHA, in which she alleged that her disciplinary write-ups and termination were retaliatory. In the letter, Ybarra requested that ENTA provide a statement responding to the allegation and any supporting documentation, including personnel records, within 10 business days. Two days after Ybarra sent the letter, Pellegrini reassigned the case to herself and thereafter requested documents from Armstrong; Pellegrini never followed up on the documents previously requested from ENTA. When Armstrong objected to Pellegrini's assignment of the case to herself, Jess Lankford, NOSHA Chief Administrative Officer and a defendant in this case, reassigned the case to a new investigator, Rick Lucas. But Pellegrini continued to be involved with the case after being replaced: she met with ENTA's attorney and corresponded with ENTA about the status of the case, without copying Armstrong on correspondence or otherwise communicating with her.

According to Armstrong, other NOSHA officials also blocked investigation of her case: Terry Reynolds, Deputy Director of the Nevada Division of Business and Industry, and Steve George, Administrator of the Division of Industrial Relations, ordered investigators not to communicate with her. Also, ENTA made a settlement offer but NOSHA never told Armstrong about it. And, on July 16, 2015, Lucas was ordered by Lankford, Reynolds, and George to "stand down"—apparently meaning entirely suspend—the investigation, but Armstrong was never told that the investigation was not going forward. From July until November 2015, Armstrong and her representative continued to reach out to Lucas and Lankford but received no information about the status of the investigation or why it had stopped.

On November 18, 2015, Lucas was allowed to restart the investigation. Lucas again requested the documents—first requested in April by Ybarra—that ENTA had never provided. He then prepared a subpoena ordering ENTA to provide documents supporting their decision to terminate Armstrong. ENTA did not meet the deadline set for producing the documents, but Lankford and George blocked Lucas's requests to issue the subpoena for the documents. In the end, NOSHA never received any documentation from ENTA supporting their allegations about Armstrong's misconduct.

On December 10, 2015, ENTA's attorney emailed NOSHA a copy of an indictment filed against Armstrong for obtaining controlled substances by fraud or forgery. According to the FAC, ENTA's attorney acknowledged that the criminal charges—which were eventually dismissed—were irrelevant to the whistleblower investigation. Nonetheless, and despite Lucas's protests, Reynolds and George directed that Armstrong's file be closed. On February 4, 2016, Lucas turned the file over to Pellegrini without signing the final report. He then resigned in disgust.

Armstrong received a letter closing her case. She alleges that, after that, her representative was denied access to relevant documents in the investigation file.

The FAC alleges that Reynolds, George, Lankford, Pellegrini, and unnamed Nevada state officials violated her rights under 42 U.S.C. § 1983, the Due Process Clause, and the Occupational Safety and Health Act, and committed various state law violations. The district court granted Defendants' motion to dismiss. The court (1) dismissed Armstrong's procedural due process claim without prejudice and her substantive due process claim with prejudice, holding that she failed to allege a property interest in her continued employment because she was an at-will employee; (2) dismissed Armstrong's state-law negligence claims, including her claim for negligent infliction of emotional distress, with prejudice, on the basis that the defendants were entitled to discretionary-function immunity; and (3) dismissed Armstrong's state-law civil conspiracy claim with prejudice, holding that her claim was barred by the intracorporate conspiracy doctrine because it alleged a conspiracy between...