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Boone v. Mountainmade Foundation

February 15, 2010

CRYSTAL BOONE ET AL., PLAINTIFFS,
v.
MOUNTAINMADE FOUNDATION, DEFENDANT.



The opinion of the court was delivered by: Ricardo M. Urbina United States District Judge

Re Document No.: 15

MEMORANDUM OPINION GRANTING THE DEFENDANT'S MOTION TO DISMISS

I. INTRODUCTION

This case is before the court on the defendant's motion to dismiss.*fn1 The plaintiffs commenced this action against the defendant, MountainMade Foundation, asserting claims of retaliation in violation of the False Claims Act ("FCA"), 31 U.S.C. §§ 3729 et. seq. and wrongful termination in violation of public policy under West Virginia common law, as well as a request for declaratory judgment. The defendant moves to dismiss the complaint, contending that the plaintiffs have failed to state a claim upon which relief can be granted.

Because the plaintiffs have failed to adequately plead that their activities reasonably could have led to the investigation of a viable FCA claim, the court grants the defendant's motion to dismiss the plaintiffs' retaliation claim under the FCA. Furthermore, because the FCA-based retaliation claim provided the court with subject matter jurisdiction over this case, and because the plaintiffs can re-file their common law wrongful discharge claim in state court, the court declines to exercise supplemental jurisdiction over the plaintiffs' state law claim. The court, however, dismisses both the plaintiffs' retaliation claim under the FCA and wrongful discharge claim without prejudice. Finally, because the plaintiffs' request for declaratory judgment is superfluous in light of their FCA claim, the court dismisses this request with prejudice.

II. FACTUAL & PROCEDURAL BACKGROUND

The defendant is a non-profit 501(c)(3) corporation established in West Virginia in 2001 to promote the regional art community.*fn2 Am. Compl. ¶ 11. The defendant receives a portion of its funding from the federal government through grants from the Small Business Administration ("SBA"). Id. ¶ 5.

Plaintiffs Crystal Boone, Melissa Harris, Holly Smith and Charles Barker, all residents of West Virginia, are former employees of the defendant. Id. ¶¶ 6-10. Plaintiff Boone began working for the defendant in 2004. Id. ¶ 33. In April 2005, she was promoted to Director of Finance, and in January 2006, to Vice President of Finance. Id. ¶ 34. From April 2005, Boone was responsible for "all internal accounting functions," which included "working up the data" for SBA grant applications, reconciling bank accounts and "posting debit card charges to the books under its chart of accounts." Id. ¶¶ 35-36.

Plaintiff Harris was an assistant to Kate McComas, the defendant's President and Executive Director. Id. ¶¶ 7, 16. Plaintiff Smith was the defendant's Purchasing Director and reported directly to McComas. Id. ¶ 8. Plaintiff Barker served as Operations Director and also reported directly to McComas. Id. ¶ 9. Between August 2006 and January 2007, all four plaintiffs were terminated from their positions, allegedly in retaliation for their investigations into McComas's misuse of funds. Id. ¶¶ 103-04, 107-08.

The plaintiffs' principle allegations concern the alleged misuse of funds contained in the defendant's bank accounts. Id. ¶¶ 33-53. According to the plaintiffs' complaint, the defendant maintained bank accounts at Huntington National Bank, Miners and Merchants Bank and Grant County Bank, each of which allegedly held funds that the defendant had received from the federal government. Id. ¶ 31. These accounts were not strictly segregated and money was routinely transferred between them. Id. ¶ 31. The defendant maintained a debit card tied to its Huntington National Bank checking account, which was under McComas's exclusive control. Id. ¶¶ 16, 30, 38.

Although it was the defendant's policy to reimburse employees for expenses only upon presentation of receipts and proof that the expenditures were business-related, McComas did not adhere to this policy. Id. ¶ 39. Indeed, the complaint alleges that Boone received monthly debit card statements from the Huntington National Bank reflecting thousands of dollars of unaccounted-for expenditures made by McComas. Id. ¶¶ 37, 42, 44, 46. In March 2006, Boone created a spreadsheet listing the unaccounted-for expenses, which totaled more than $12,000 over a nine-month period. Id. ¶ 36 & Ex.1. Boone's investigation of the issue allegedly revealed "with certainty" that McComas had stolen money from the defendant that had been provided by the federal government. Id. ¶ 41.

Harris, Smith and Barker also conducted separate investigations into McComas's alleged misuse of funds.*fn3 Id. ¶ 46. In March 2006, all four plaintiffs met to discuss their individual findings and concluded that McComas had stolen a substantial amount of federal funds. Id. ¶ 50. During this meeting, the plaintiffs designated Boone as the spokesperson for the group and decided that she should first disclose their findings to Toothman Rice, the defendant's accounting firm. Id. ¶¶ 49, 54. On February 28, 2006, Boone met with William Phillips, the Toothman Rice partner assigned to the defendant's account, and recounted the details of the alleged fraud committed by McComas. Id. ¶¶ 23, 55. Phillips told Boone that she should report her findings to the defendant's board of directors and warned that her failure to do so could have criminal implications. Id. ¶ 57.

The plaintiffs then decided that Boone should disclose the results of the plaintiffs' investigation to board member Dale McBride. Id. ¶¶ 58-59. On March 15, 2006, Boone spoke first with McBride, and then with Peter Wolk, counsel to the board, and Jack Carpenter, chairman of the board. Id. ¶¶ 60-62. On March 16 or 17, 2006, Carpenter asked Boone to have each plaintiff write a letter to the board detailing their complaints regarding McComas. Id. ¶¶ 37, 42. On March 17, 2006, the plaintiffs sent their letters to Carpenter, McBride and Wolk. Id. ¶ 64. Boone's letter described McComas's "improper use of SBA monies" as well as "time-sheet fraud and theft." Id. ¶ 65. Smith's letter also alleged misuse of funds. Id. ¶ 66. Harris's letter alleged that McComas had misappropriated funds, that Boone's predecessor, Pamela Corey, also believed that McComas had misappropriated funds and that Susan O'Dell, Corey's predecessor, had disclosed the fraud to Laura Kurtz Kuhns, another board member. Id. ¶¶ 17, 25-26, 67. Barker's letter described McComas's alleged misuse of a company car. Id. ¶ 68.

Carpenter subsequently asked Boone to attend a special meeting of the board on March 23, 2006, which was to be followed by a regular board meeting. Id. ¶ 70. At the special board meeting, which was attended by Carpenter, McBride and Wolk, Boone discussed her allegations regarding McComas. Id. ¶ 71. All three board members assured Boone that she would suffer no reprisal for her actions. Id. ¶ 73. At the subsequent regular board meeting, the board asked McComas to review the expense spreadsheet that Boone had created and to repay any expenses that were personal. Id. ¶ 75. That same evening, McComas announced ...


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