Braun v. Bureau of State Audits

• Decision Date: 23 November 1998
• Docket Number: No. A075423,A075423
• Citation: 79 Cal.Rptr.2d 791,67 Cal.App.4th 1382
• Court: California Court of Appeals Court of Appeals
• Parties: , 98 Daily Journal D.A.R. 11,905 Odelia S. BRAUN, Plaintiff and Appellant, v. BUREAU OF STATE AUDITS et al., Defendants and Respondents.

Page 791

79 Cal.Rptr.2d 791

67 Cal.App.4th 1382, 98 Daily Journal D.A.R. 11,905

Odelia S. BRAUN, Plaintiff and Appellant, v. BUREAU OF STATE AUDITS et al., Defendants and Respondents.

No. A075423.

Court of Appeal, First District, Division 4, California.

Nov. 23, 1998.

Certified for Partial Publication. ^*

Review Denied March 9, 1999.

Barbara A. Lawless, Carol Belcher, Lawless, Horowitz & Lawless, San Francisco, for Appellant.

Bion M. Gregory, Legislative Counsel, Peter Melnicoe, Deputy Legislative Counsel, Charity Kenyon, Diepenbrock, Wulff, Plant & Hannegan, Sacramento, for Respondents.

HANLON, P.J.

Odelia Braun appeals from the judgment in favor of respondents the Bureau of State Audits (Bureau), State Auditor Kurt R. Sjoberg, and Bureau auditors Ann Campbell and Dore Tanner, after their demurrer to appellant's complaint was sustained without leave to amend. Appellant sued respondents for damages arising from the State Auditor's 1994 investigation and report of the Center for Prehospital Research and Training (CPRT) at the University of California, San Francisco (UCSF), where appellant worked.

This appeal presents the first reported challenge to the State Auditor's conduct of an investigative audit under the Reporting of Improper Governmental Activities Act (Gov.Code, § 8547, et seq.; hereafter the Reporting Act). In the published portion of this opinion, we conclude that statements made in the CPRT audit report were privileged under Civil Code section 47, subdivision (b), and thus that appellant's tort claims based on those statements were properly dismissed. In the unpublished portion of the opinion, we uphold the dismissal of appellant's "due process" claims. The judgment is affirmed.

I. BACKGROUND

A. The Statutory Scheme

The Reporting Act is a "whistleblower" law enacted to encourage the disclosure of improper governmental activities. (Gov.Code, § 8547.1.) An "improper governmental activity" is broadly defined as any "that (1) is in violation of any state or federal law or regulation, including, but not limited to, corruption, malfeasance, bribery, theft of government property, fraudulent claims, fraud, coercion, conversion, malicious prosecution, misuse of government property, or willful omission to perform duty, or (2) is economically wasteful, or involves gross misconduct, incompetency, or inefficiency." (Gov.Code, § 8547.2, subd. (b).) The Reporting Act prohibits interference with the right to disclose such activities, and retaliation against those who exercise that right. (Gov.Code, § 8547.3, § 8547.8, et seq.)

The Reporting Act is administered by the State Auditor, who heads the Bureau. (Gov.Code, § 8543.2, subd. (a), § 8547.4.) "In order to be free of organizational impairments to independence, the [B]ureau [is] independent of the executive branch and legislative control." (Gov.Code, § 8543.) "Upon receiving specific information that any employee or state agency has engaged in an improper governmental activity, the State Auditor may conduct an investigative audit of the matter." (Gov.Code, § 8547.5.) The whistleblower's identity cannot be disclosed without his or her permission except to a law enforcement agency conducting a criminal investigation. (Gov.Code, § 8547.5.) The State Auditor may request assistance with an investigative audit from any state department, agency or employee. (Gov.Code, § 8547.6.) Information disclosed or produced by such a request cannot be divulged without the State Auditor's approval. (Gov.Code, § 8547.6.)

Government Code section 8547.7 provides:

"(a) If the State Auditor determines that there is reasonable cause to believe that an employee or state agency has engaged in any improper governmental activity, he or she shall report the nature and details of the activity to the head of the employing agency, or the appropriate appointing authority. If appropriate, the State Auditor shall report this information to the Attorney General, the policy committees of the Senate and Assembly having jurisdiction over the subject involved, and to any other authority that the State Auditor determines appropriate.

"(b) The State Auditor shall not have any enforcement power. In any case in which the State Auditor submits a report of alleged improper activity to the head of the employing agency or appropriate appointing authority, that individual shall report to the State Auditor with respect to any action taken by the individual regarding the activity, the first report being transmitted no later than 30 days after the date of the State Auditor's report and monthly thereafter until final action has been taken.

"(c) Every investigative audit shall be kept confidential, except that the State Auditor may issue any report of an investigation that has been substantiated, keeping confidential the identity of the individual or individuals involved, or release any findings resulting from an investigation conducted pursuant to this article that is deemed necessary to serve the interests of the state.

"(d) This section shall not limit any authority conferred upon the Attorney General or any other department or agency of government to investigate any matter."

B. Appellant's Case

In Braun v. Chronicle Publishing Co. (1997) 52 Cal.App.4th 1036, 61 Cal.Rptr.2d 58, we addressed appellant's claims in this case based on newspaper articles about investigations of the CPRT and the underlying allegations. As we noted in that opinion, appellant was the medical director of the CPRT, an activity within the UCSF School of Medicine which supported emergency medical services in the community. The State Auditor began an investigative audit of the CPRT in early 1994, after allegations about the CPRT were lodged with the Bureau pursuant to the Reporting Act. In August 1994, a search warrant was obtained based on the affidavit of respondent Tanner for the seizure of CPRT computers and time records. That month, the execution of this warrant and the State Auditor's investigation of the CPRT were reported in the newspaper. The CPRT was closed and appellant lost her employment there when the State Auditor's investigative report on the CPRT was made public in November of 1994.

The report found that appellant, who was identified in the report as "a" or "the" "CPRT administrator" rather than by name, had "grossly mismanaged" the CPRT. The report accused appellant of numerous improprieties, finding among other things that she had conflicts of interest relating to contracts between UCSF and the San Francisco Fire Department, where she was also employed; and had conspired to submit falsified payroll records; participated in the use of a "secret, unauthorized" bank account; falsified deposit records for student tuition fees; directed improper fundraising; used CPRT funds for her personal benefit and that of her family; used CPRT staff to handle her personal travel, bookkeeping, housekeeping, and child care arrangements; and misled the CPRT advisory board of directors about a 1992 audit.

The 73-page report included a 2-page summary of the "University Response" to the charges. This portion of the report noted that UCSF disagreed with a number of the State Auditor's findings, including the finding that appellant had a conflict of interest from her dual employment with UCSF and the San Francisco Fire Department, and the finding that there had been improper expenditures from the CPRT's bank account and petty cash fund. The report stated that the State Auditor had reviewed the list of errors and omissions UCSF identified in the report and disagreed with UCSF's objections.

The report was addressed to the Governor, the President pro Tempore of the Senate, and the Speaker of the Assembly, and copies of it were furnished to various other officers and offices of the state government as well as the "Capitol Press Corps." The day after the report was released, the San Francisco Chronicle newspaper published a front-page article about it under the headline, "State Auditors Blast Director of UCSF Center."

Appellant's third amended complaint included detailed allegations contesting the charges in the report. Appellant alleged among other things that the report included "criminal" conflict of interest charges which the Bureau knew were false. Appellant alleged that she had no role in developing the improper payroll practices identified in the report, that these practices were widespread at UCSF, and that she was simply being made the "scapegoat" for them. She alleged that statements were included in the "vitriolic" report "merely to be inflammatory," and that the report's accusation of her gross mismanagement was based on "purposefully false and misleading" conclusions. She alleged that the Bureau contacted "officials at UCSF, the Registry of Charitable Trusts, the State Department of Justice, the IRS, the Franchise Tax Board, the SF District Attorney's office ... and the San Francisco Fire Department," but that none of these entities concurred with or acted on any of the Bureau's findings against her.

The complaint set forth tort causes of action against respondents for defamation, intentional infliction of emotional distress, negligent infliction of emotional distress, and negligence. The defamation cause of action identified various false statements in the State Auditor's report, and alleged that the statements were made with knowledge of their falsity and with implied malice. The causes of action for negligence, and negligent and intentional infliction of emotional distress alleged in general terms that respondents should have known that their statements about appellant were false, and that their conduct was extreme and outrageous and intended to humiliate her. Appellant sought compensatory and punitive damages for defamation based on injury to reputation, loss of employment, and anguish and humiliation.

The complaint also included a cause of action against respondents for "violation of due process rights."...