United States ex rel. Rubar v. Hayner Hoyt Corp.

• Decision Date: 25 January 2018
• Docket Number: 5:14–cv–830 (GLS/CFH)
• Parties: UNITED STATES of America, EX REL. John RUBAR, Plaintiffs, v. The HAYNER HOYT CORPORATION et al., Defendants, v. The Travelers Indemnity Company, Proposed Intervenor.
• Court: U.S. District Court — Northern District of New York

306 F.Supp.3d 478

UNITED STATES of America, EX REL. John RUBAR, Plaintiffs,

v.The HAYNER HOYT CORPORATION et al., Defendants,

v.The Travelers Indemnity Company, Proposed Intervenor.

5:14–cv–830 (GLS/CFH)

United States District Court, N.D. New York.

Signed January 25, 2018

FOR THE PLAINTIFFS/COUNTERDEFENDANTS: U.S. Department of Justice, OF COUNSEL: ADAM J. KATZ, ESQ., Albany Office, 445 Broadway, James T. Foley Courthouse, Albany, NY 12201, Sadowski Katz LLP, OF COUNSEL: RAPHAEL KATZ, ESQ., ROBERT W. SADOWSKI, ESQ., 11 Broadway, Suite 615, New York, NY 10004, Hancock Estabrook, LLP, OF COUNSEL: JOHN G. POWERS, ESQ., PAUL J. TUCK, ESQ., 1500 AXA Tower I, 100 Madison Street, Syracuse, NY 13202.

FOR THE DEFENDANTS/COUNTERCLAIMANTS: The Hayner Hoyt Corporation, Jeremy Thurston, Gary Thurston, LeMoyne Interiors, and Doyner, Inc. Greenberg Traurig, LLP, OF COUNSEL: MELISSA P. PRUSOCK, ESQ., DC Office, 2101 L Street, N.W., Washington, DC 20037, Barclay Damon LLP, OF COUNSEL: JON P. DEVENDORF, ESQ., KAYLA A. ARIAS, ESQ., Syracuse Office, One Park Place, 300 South State Street, Syracuse, NY 13202, Ralph Bennett and 229 Constructors, LLC, Barclay Damon LLP, OF COUNSEL: JON P. DEVENDORF, ESQ., Syracuse Office, One Park Place, 300 South State Street, Syracuse, NY 13202.

FOR THE PROPOSED INTERVENOR: Barclay Damon LLP, OF COUNSEL: JON P. DEVENDORF, ESQ., Syracuse Office, One Park Place, 300 South State Street, Syracuse, NY 13202.

MEMORANDUM–DECISION AND ORDER

Gary L. Sharpe, U.S. District Judge

I. Introduction

Plaintiff-relator John Rubar filed this qui tam action against defendants Hayner Hoyt Corporation, Jeremy Thurston, Gary Thurston, LeMoyne Interiors, Doyner, Inc., Ralph Bennett, and 229 Constructors, LLC pursuant to the False Claims Act (FCA)¹ . (Compl., Dkt. No. 1.) The United States elected to intervene for the limited purpose of effectuating a settlement agreement between the parties, which resolved the FCA claims regarding defendants' fraudulent acquisition of construction contracts. (Dkt. No. 12.) Rubar maintains an FCA retaliation claim² and numerous common law tort claims against defendants, which were not covered by the settlement agreement. (3d Am. Compl., Dkt. No. 95.)

Pending is defendants' motion to dismiss several of the remaining claims, (Dkt. No. 30), Rubar's motion for attorneys' fees, costs, and expenses, (Dkt. No. 31), and The Travelers Indemnity Company's motion to intervene, (Dkt. No. 65). For the following reasons, the parties' motions are both granted in part and denied in part, and Travelers' motion is granted.

II. Background

A. Facts ³

Hayner Hoyt is a general contractor and construction management firm operated by Gary and Jeremy Thurston. (3d Am. Compl ¶¶ 12, 15.) Doyner and LeMoyne are wholly-owned subsidiaries of Hayner Hoyt. (Id. ¶¶ 13–14.) The Thurstons used Bennett, a service-disabled veteran employed as their warehouse manager, as a figurehead to fraudulently obtain federal contracts via a sham corporation, 229 Constructors, and to funnel illicit subcontract fees into their coffers via Doyner and LeMoyne. (Id. ¶¶ 25–36.)

Rubar worked closely with the Thurstons as Vice President of Doyner, where he was employed for over two decades without ever receiving a negative review or complaint. (Id. ¶¶ 11, 38.) Upon discovering the fraudulent scheme, Rubar refused to participate in it or assist in its coverup; instead, he notified the government and filed this qui tam action. (Id. ¶¶ 39, 48.)

After identifying Rubar as a whistleblower, defendants threatened him with criminal prosecution based on fabricated accusations, (id. ¶¶ 42–43), terminated him from employment, (id. ), eventually levied false charges against him, (id. ¶¶ 47–54), stalked him, (id. ¶ 80), defamed him to several newspapers, subcontractors, and employers, (id. ¶¶ 76–79, 84), maliciously interfered with his business opportunities, (id. ¶¶ 84–86), caused him to be terminated from subsequent employment, (id. ¶ 87), and attempted to physically harm him by crashing into a car that they believed he was driving, (id. ¶ 81).

B. Procedural History

Although the United States reached a settlement agreement with defendants regarding their fraudulent construction contract scheme, (Dkt. No. 12, Attach. 1), Rubar maintains a retaliation claim under 31 U.S.C. § 3730(h) and several common law tort claims, (3d Am. Compl.).⁴

Defendants moved to dismiss Rubar's claims of retaliation, intentional infliction of emotional distress (IIED), negligent infliction of emotional distress (NIED), tortious interference with contract and prospective business relations, and prima facie tort. (Dkt. No. 30.) Thereafter, defendants filed a partial answer⁵ to Rubar's Second Amended Complaint, which included their own common law tort counterclaims against Rubar for "fraudulent, unlawful[,] and disloyal conduct undertaken by Rubar over a span of several years while he was an employee of Doyner." (Dkt. No. 53 at 25–41.)

After some confusion born by procedural impropriety, (Dkt. Nos. 55, 94), Rubar filed a Third Amended Complaint, (3d Am. Compl., Dkt. No. 95). Given defendants' contention that "the ... Third Amended Complaint does not cure the deficiencies that have been identified in [d]efendants' motion to dismiss," (Dkt. No. 56 at 2–3), the court applies defendants' previously-filed motion to dismiss, (Dkt. No. 30), against this newly-amended complaint.

In addition to resolving the arguments presented in defendants' motion to dismiss, the court must also resolve Rubar's motion for attorneys' fees, costs, and expenses related to the settled portion of the FCA claims, (Dkt. No. 31), as well as a subsequent motion to intervene filed by Travelers, (Dkt. No. 65).

III. Discussion

A. Rule 12(b)(6) Motion to Dismiss

The standard of review under Federal Rule of Civil Procedure 12(b)(6) is well settled and will not be repeated here. For a full discussion of the standard, the court refers the parties to its prior decision in Ellis v. Cohen & Slamowitz, LLP , 701 F.Supp.2d 215, 218 (N.D.N.Y. 2010).

1. Retaliation Claim

a. Proper Defendants

The FCA's anti-retaliation provision provides that

[a]ny employee, contractor, or agent shall be entitled to all relief necessary to make that employee, contractor, or agent whole, if that employee, contractor, or agent is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts done by the employee, contractor, agent or associated others in furtherance of an action under this section or other efforts to stop [one] or more violations of [the FCA].

31 U.S.C. § 3730(h)(1). Generally, to set forth a retaliation claim under this section, a relator must show that "(1) he engaged in activity protected under the statute, (2) the employer was aware of such activity, and (3) the employer took adverse action against him because he engaged in the protected activity." United States ex rel. Chorches for Bankr. Estate of Fabula v. Am. Med. Response, Inc. , 865 F.3d 71, 95 (2d Cir. 2017).

Rubar argues that by eliminating any reference to "employer" in a 2009 amendment to the FCA, Congress "effectively left the universe of defendants undefined and wide-open." (Dkt. No. 39 at 14–16) (quoting Weihua Huang v. Rector & Visitors of Univ. of Va. , 896 F.Supp.2d 524, 548 n.16 (W.D. Va. 2012) ). As such, he asserts a retaliation claim against all defendants, including the Thurstons and Bennett. (3d Am. Compl. ¶¶ 114–117.) However, defendants contend that the 2009 amendment does not allow a relator to maintain a retaliation claim against individuals as opposed to their actual employers. (Dkt. No. 42 at 2–3).

Neither side points to a Second Circuit decision resolving this relatively novel issue. However, courts in the Northern District have held that, under the post–2009 version of § 3730(h), liability may not be imposed on an individual either in an individual or official capacity. See, e.g. , Taylor v. N.Y. State Office for People with Developmental Disabilities , No. 1:13-CV-740, 2014 WL 1202587, at *10 (N.D.N.Y. Mar. 24, 2014) ; Monsour v. N.Y. State Office for People with Developmental Disabilities , No. 1:13-CV-0336, 2014 WL 975604, at *10–11 (N.D.N.Y. Mar. 12, 2014). The Southern District recently considered this issue in depth and they too joined "the overwhelming majority of courts, including the Fifth Circuit, [that] have held that the current version of § 3730(h) does not create a cause of action against supervisors sued in their individual capacities." Diffley v. Bostwick , 17–CV–1410, slip op. at 4, 2017 WL 6948358 (S.D.N.Y. Dec. 6, 2017). Therefore, in an effort to promote consistency within this district and for the reasons cited by defendants, (Dkt. No. 42 at 2–3), the court grants defendants' motion to the extent that it seeks dismissal of the FCA retaliation claims against the Thurstons and Bennett.

Next, defendants urge the court to dismiss Rubar's retaliation claim against all defendants except Doyner because, in their view, the FCA does not extend liability to a parent corporation and thus a claim can only lie against Doyner—Rubar's immediate "employer." (Dkt. No. 30, Attach. 1 at 2–5; Dkt. No. 42 at 3–4.) Rubar argues that the court is free to pierce the corporate veil in the FCA context using the alter ego doctrine and, alternatively, that Hayner Hoyt maintained an "employment-like" relationship with Rubar sufficient to fit within the scope of FCA liability. (Dkt. No. 39 at 16–19.)

Given the high-level of control, commonality of ownership, and close relationship between Hayner Hoyt and its subsidiaries, including Doyner, (3d Am. Compl. ¶¶ 30–32), and other reasonable inferences that can be drawn from this relationship, the court will not dismiss the retaliation claim against Hayner Hoyt at this stage. However, Rubar does not allege facts to demonstrate that either LeMoyne or 229 Constructors maintained a similarly-situated relationship with him or level of...