Wichansky v. Zowine
| Decision Date | 24 January 2014 |
| Docket Number | No. CV-13-01208-PHX-DGC,CV-13-01208-PHX-DGC |
| Parties | Marc A Wichansky, Plaintiff, v. David T Zowine, et al., Defendants. |
| Court | U.S. District Court — District of Arizona |
Defendants David Zowine, Karen Zowine, and Zoel Holding Corporation have filed a motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). Doc. 12. Defendants Martha Leon, Charles Johnson, Patricia Gonzalez, Pat Shanahan, Sarah Shanahan, Mike Ilardo, Rio Mayo, Michael Narducci, and Brett Costello ("Employee Defendants") have joined the motion. Doc. 13. The motions are fully briefed.1 For the reasons that follow, the Court will grant Defendants' motion.2
Plaintiff Marc A. Wichansky began this action on June 14, 2013, alleging violations of the anti-retaliation provisions of the False Claims Act ("FCA"),31 U.S.C. § 3729 et seq., violations of the Computer Fraud and Abuse Act ("CFAA"), 18 U.S.C. §§ 1030(a)(2)(C), 1030(a)(4), 1030(a)(5)(C), 1030(b), and violations of Section 10(b) of the Securities Exchange Act of 1934, and rule 10b-5. Doc. 1 at 2. Plaintiff also alleges many claims arising under state law, including breach of fiduciary duty, constructive fraud, defamation, defamation per se, assault, battery, intentional infliction of emotional distress, intentional interference with existing business relations, intentional interference with prospective business relations, unjust enrichment, intrusion upon seclusion, prima facie tort, and aiding and abetting tortious conduct. Id. at 38-48.
Plaintiff alleges that in 2006 he and Defendant David Zowine ("Zowine") founded Defendant Zoel Holding Company, Inc. ("Zoel"), a company specializing in employee placement services. Id., ¶ 43. Plaintiff owned a 50% interest and served as Zoel's chairman and president. Id., ¶ 41. As president, Plaintiff primarily ran Zoel's back office and administrative operations. Zowine also owned 50% and was Zoel's secretary and vice president. Id., ¶ 42. Zowine ran sales operations. By 2011, Zoel generated an excess of $40 million in revenues, maintained offices in five states, and employed hundreds of people. Id., ¶ 47.
Between December 2010 and January 2011, Plaintiff alleges that Zowine's behavior toward Plaintiff changed dramatically. Zowine began to intimidate, harass, and disparage Plaintiff, members of Plaintiff's family, and any Zoel employees who Zowine believed remained loyal to Plaintiff. Id., ¶ 51. Plaintiff alleges that Zowine would scream obscenities at Plaintiff and other Zoel employees while holding or swinging a baseball bat and that Zowine would knowingly express falsehoods about Plaintiff. Zowine's belligerent behavior continued for some time and caused the staff at Zoel to fracture into two camps: those who respected the chain of command and remained loyal to Plaintiff, and those loyal to Zowine and under his immediate influence and command. Id., ¶ 62. Zowine's camp, the Employee Defendants, began to be unruly and uncooperative and to engage in obstructive, demeaning, and intimidating conduct. On January 19, 2011, Zowine allegedly attacked and beat Plaintiff on Zoel's premises. In hiscapacity as Zoel's president and chairman, Plaintiff caused Zoel to place Zowine on paid administrative leave on January 25, 2011. Id., ¶ 74.
Plaintiff alleges that Zowine and the Employee Defendants conspired to operate a secret office at the Regus business center. Id., ¶ 88. While Plaintiff and Zowine were attending a court hearing, six of the Employee Defendants forced their way into Zoel's server room and attempted to make a duplicate copy of Zoel's email server and main server. Id., ¶ 92. Unable to rapidly copy the server's data, they allegedly ripped servers from the wall and absconded with the servers and over 30 computers. Id., ¶ 93. Zowine and the Employee Defendants refused to return the servers or computers. In addition, Zowine subsequently dispatched an expert to Zoel's headquarters who accessed and copied Plaintiff's personal office computer. Id, ¶ 105. In order to retrieve information that was vital for the continued operation of Zoel, Plaintiff personally hired a firm specializing in computer forensics to image the stolen devices and paid them $165,934.66. Id., ¶¶ 107-11. After this incident, Zowine and the Employee Defendants would routinely leave their secret office and arrive at Zoel unannounced, where they would aggressively threaten, disparage, humiliate, and victimize Plaintiff and other Zoel employees. Id., ¶¶ 115-19.
On January 26, 2011, Plaintiff caused Zoel to terminate Zowine's employment. Id., ¶ 82. Zowine disputed Plaintiff's authority to terminate his employment in superior court. Zowine prevailed in superior court. Id, ¶ 120. Given the immense tension that existed between the parties, Plaintiff concluded that he had no alternative but to seek judicial dissolution of Zoel. Id., ¶ 121. Under Arizona law, Zowine elected to buy Plaintiff out in lieu of permitting Zoel to be wound down. Id., ¶ 132.
In preparation for the valuation hearing, Plaintiff retained experts who allegedly discovered facts that exposed a fraudulent billing scheme taking place at MGA Home Healthcare LLC ("HHL"), one of Zoel's subsidiaries overseen by Zowine. Id., ¶ 133. The sprawling scope of the fraudulent scheme suggested to Plaintiff that Zowine had been intimately involved with it. Id., ¶¶ 154-56. Plaintiff claims that upon discovery ofthe billing fraud he realized that Zowine's violent and abrasive conduct had been designed from the start to drive Plaintiff from Zoel and dupe him into petitioning for dissolution, thereby enabling Zowine to buy Plaintiff out and prevent anyone from discovering the fraudulent scheme. Id., ¶¶ 135-36, 163-64. Accordingly, Plaintiff moved to withdraw his dissolution petition, but the superior court denied his motion. Id., ¶ 165-66. A five day valuation proceeding took place in February 2012. In December 2012, the superior court ordered that Zowine be permitted to purchase Plaintiff's shares of Zoel at a price that Plaintiff believed to be materially below their fair value. Id., ¶ 173.
When analyzing a complaint for failure to state a claim to relief under Rule 12(b)(6), the well-pled factual allegations are taken as true and construed in the light most favorable to the nonmoving party. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). Legal conclusions couched as factual allegations are not entitled to the assumption of truth, Ashcroft v. Iqbal, 556 U.S. 662, 680 (2009), and therefore are insufficient to defeat a motion to dismiss for failure to state a claim, In re Cutera Sec. Litig., 610 F.3d 1103, 1108 (9th Cir. 2010). To avoid a Rule 12(b)(6) dismissal, the complaint must plead enough facts to state a claim to relief that is plausible on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). This plausibility standard "is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 556).
Defendants assert that Plaintiff's claim arising under the False Claims Act must be dismissed because Plaintiff has failed to plead a sufficient employment relationship or protected activity in furtherance of a qui tam action or other efforts to stop FCA violations. Doc. 12 at 6-9. The Court will address both assertions.
The FCA prohibits persons from submitting fraudulent records or claims to theUnited States. 31 U.S.C. § 3729(a)(1). The FCA imposes civil liability on any person who knowingly uses a "false record or statement" to get fraudulent claims paid or approved by the government. Id. To encourage insiders who are aware of fraud to come forward, the FCA creates a private cause of action for "[a]ny employee, contractor, or agent" who is "discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment" in response to lawful acts done in furtherance of a qui tam action or other efforts to stop FCA violations. Id. § 3730(h)(1). The purpose of the anti-retaliation provision is to prevent companies from using the threat of retaliation to silence whistleblowers and thereby "make employees feel more secure in reporting fraud to the United States." Cell Therapeutics, Inc. v. Lash Grp., Inc., 586 F.3d 1204, 1206 (9th Cir. 2009) (internal quotations omitted).
To make out a §3730(h) retaliation claim under the FCA, a plaintiff must prove three elements: (1) that the employee engaged in activity protected under the statute; (2) that the employer knew that the employee engaged in protected activity; and (3) that the employer discriminated against the employee because he engaged in protected activity." United States ex rel. Hopper v. Anton, 91 F.3d 1261, 1269 (9th Cir. 1996).
Defendants assert that implicit in every retaliation claim under the FCA is a threshold showing that the plaintiff is an "employee, contractor, or agent" of the defendant and that the defendant is plaintiff's "employer." Doc. 12 at 6; see Moore v. Cal. Inst. Tech. Jet Propulsion Lab, 275 F.3d 838, 844-45 (9th Cir. 2002). Plaintiff disagrees. Plaintiff argues that the Fraudulent Enforcement and Recovery Act of 2009 removed the statutory language that limited liability under the FCA to company employers. Doc. 24 at 13. Plaintiff cites a number of cases to support his position. See United States ex rel. Moore v. Cmty. Health Servs., Inc., No. 3:09cv1127(JBA), 2012 WL 1069474, at *9 (D. Conn. Mar. 29, 2012); Weihua Hang v. Rector & Visitors of Univ. of Va., 896 F.Supp.2d 524, 548 n.16 (W.D. Va. 2012); Laborde v. Rivera-Dueno, 719 F.Supp.2d 198, 205 (D.P.R. 2010).
Although the amended provision omits the reference to "his or her employer," Plaintiff is incorrect that this deletion signaled Congress' intention to "grant a federal right of action against...
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