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Crystal Boone, et al v. Mountainmade Foundation

April 30, 2012

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



The opinion of the court was delivered by: Colleen Kollar-kotelly United States District Judge

MEMORANDUM OPINION

Plaintiffs Crystal Boone, Melissa Harris, Charles Barker, and Holly Smith (collectively "Plaintiffs") filed suit alleging their former employer, Defendant MountainMade Foundation, retaliated against and wrongfully terminated the Plaintiffs for reporting to MountainMade's Board of Directors that another employee submitted fraudulent requests for reimbursement to the United States Small Business Administration. Presently before the Court is Defendant's [35] Motion to Dismiss Count II of Plaintiffs' Second Amended Complaint. Upon consideration of the parties' submissions*fn1 and the relevant legal authorities, Defendant's motion is DENIED.

I. BACKGROUND

The MountainMade Foundation "support[s] and develop[s] the West Virginia arts and crafts small businesses by assisting them with effective marketing of their work, expanding their businesses and increasing demand for their work." http://www.mountainmade.com/about/ (last accessed April 30, 2012); Second Am. Compl., ECF No. [33], ¶ 11. As part of this mission, MountainMade operates a "Country Store" and two retail art galleries offering for sale works of art from West Virginia artists. Second Am. Compl. ¶ 11. MountainMade's business model relies in large part on grants from the Small Business Administration ("SBA"). Id. at ¶ 15. Although the precise funding structure is not clear from the pleadings, Plaintiffs indicate that MountainMade provides two types of submissions to the SBA: (1) proposed budgets, submitted each spring for the fiscal year to begin October 1; and (2) requests for reimbursement for actual expenditures, submitted at the end of each quarter. Id. at ¶¶ 17-21.

The focal point of Plaintiffs' allegations is Kate McComas, the President and Executive Director of MountainMade. Second Am. Compl. ¶ 12. Plaintiffs claim that between (at least) 2004 and 2006, McComas engaged in financial misconduct by (1) "us[ing] the MountainMade debit card to make purchases and expenditures fro her own personal benefit," id. at ¶¶ 26-30; (2) working fewer than 40 hours per week despite being classified as a full time employee, id. at ¶ 32; and (3) using the company vehicle for personal use and failing to log miles traveled in the vehicle, id. at ¶¶ 35-36. McComas purportedly submitted fraudulent requests for reimbursement to the SBA for her personal expenses, unearned salary, and personal travel. Id. at ¶¶ 31, 34, 38.

Throughout the relevant time period, the Plaintiffs served in a variety of roles at MountainMade, including Vice President of Finance (Plaintiff Boone), assistant to McComas (Plaintiff Harris), Purchasing Director (Plaintiff Smith), and Operations Director (Plaintiff Barker). Second Am. Compl. ¶¶ 6-9. Plaintiffs claim to have discovered McComas' wrongdoing through various means, "pooled their information," and "realized that together they had evidence of a fraud on the United States Government." Id. at ¶ 60. On behalf of the Plaintiffs collectively, Plaintiff Boone reported McComas' actions to a member of the MountainMade Board of Directors. Id. at ¶¶ 64-66. Subsequent to the disclosure, the Board of Directors purportedly did not undertake an investigation into the allegations, but instead retaliated against the Plaintiffs by instructing Plaintiffs not to communicate with McComas, id. at ¶¶ 81-82, restricting the flexibility of Plaintiffs' work schedules, id. at ¶¶ 81, 84, demoting Plaintiffs Smith, Barker and Boone, and removing supervisory roles and other responsibilities from the Plaintiffs, id. at ¶¶ 85-89. Plaintiff Harris claims to have been fired, and Plaintiff Boone alleges she (Boone) was constructively discharged. Id. at ¶¶ 81, 93.

Plaintiffs filed suit against MountainMade Foundation, McComas, and Jack R. Carpenter on June 20, 2008 asserting claims for violation of the whistleblower provisions of the False Claims Act, 31 U.S.C. § 3730(h), common law wrongful discharge in violation of public policy, and civil conspiracy. Compl., ECF No. [1], ¶¶ 127-143. The First Amended Complaint omitted McComas and Carpenter as defendants, withdrew the claim of civil conspiracy, and included a new count seeking a declaratory judgment. First Am. Compl., ECF No. [14], ¶¶ 135-36. The Court (per Judge Ricardo M. Urbina) granted Defendants' motion to dismiss the First Amended Complaint, dismissing the False Claims Act count without prejudice, and declining to exercise supplemental jurisdiction over the remaining claims. 2/15/2010 Mem. Opin. at 14-15. The Court (per Judge Urbina) subsequently granted Plaintiffs' motion to amend the complaint on April 7, 2011, and docketed the Second Amended Complaint.

II. LEGAL STANDARD

Federal Rule of Civil Procedure 12(b)(6) provides that a party may challenge the sufficiency of a complaint on the grounds it "fail[s] to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). When evaluating a motion to dismiss for failure to state a claim, the district court must accept as true the well-pleaded factual allegations contained in the complaint. Atherton v. D.C. Office of Mayor, 567 F.3d 672, 681 (D.C. Cir. 2009), cert. denied, 130 S. Ct. 2064 (2010). "[A] complaint [does not] suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.'" Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007)). Rather, a complaint must contain sufficient factual allegations that, if accepted as true, "state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S. Ct. at 1949. Additionally, in deciding a Rule 12(b)(6) motion, a court may consider "'the facts alleged in the complaint, documents attached as exhibits or incorporated by reference in the complaint,'" Ward v. D.C. Dep't of Youth Rehab. Servs., 768 F. Supp. 2d 117, 119 (D.D.C. 2011) (quoting Gustave--Schmidt v. Chao, 226 F. Supp. 2d 191, 196 (D.D.C. 2002)), or "'documents upon which the plaintiff's complaint necessarily relies' even if the document is produced not by [the parties]," id. (quoting Hinton v. Corr. Corp. of Am., 624 F. Supp. 2d 45, 46 (D.D.C. 2009)).

III. DISCUSSION

Despite having two opportunities to brief the issue, the parties have largely succeeded in obfuscating their own arguments and the issues to be determined by the Court. Compounding this lack of clarity, Defendant relies almost entirely on portions of a brief written in reference to the First Amended Complaint, rather than the significantly revised Second Amended Complaint, which is now before the Court. Nevertheless, the Court understands Defendant to contend that the Second Amended Complaint should be dismissed because West Virginia common law does not provide for a wrongful discharge in violation of public policy cause of action where (1) the plaintiff relies on a statute to establish the relevant "public policy"; and (2) that statute provides a "comprehensive remedy" for any wrongdoing.*fn2 Plaintiffs argue that the state law claim requires a lower standard of proof and otherwise is not duplicative of their False Claims Act claim, the Federal Rules of Civil Procedure allow Plaintiffs to plead in the alternative, the "public policy" underlying the wrongful discharge claim is not derived from the False Claims Act, and West Virginia common law does not preclude a wrongful discharge claim even where a statute provides a comprehensive remedy. The Court will evaluate each argument in turn.

First, Plaintiffs argue that their wrongful discharge claim requires a lower standard of proof, and thus is not duplicative of their claim under the False Claims Act. Relatedly, Plaintiffs contend that the Federal Rules of Civil Procedure authorize pleading in the alternative in the event the wrongful discharge and False Claims Act cases are considered duplicative. This argument is misplaced, though through no fault of the Plaintiffs. Defendant inartfully describes the wrongful discharge claim as "duplicative" of Plaintiffs' other claim. Def.'s Second Mot. at 2. However, the crux of Defendant's argument is not that the claims are duplicative, but rather that a claim for wrongful discharge in violation of public policy does not exist under West Virginia law when the public policy is derived from a statute that contains a comprehensive remedial scheme. If state law does not authorize the claim, Plaintiffs are precluded from raising the claim regardless of the elements of the various claims or the requirements of the Federal Rules.

Plaintiffs' third argument attempts to undercut the fundamental premise of Defendant's motion: that Plaintiffs' wrongful discharge claim relies on the False Claims Act to establish the public policy at issue. Plaintiff's Second Amended Complaint provides little explanation of exactly what public policy they are relying on to establish a claim of "wrongful discharge in violation of public policy," except to say that "Defendant terminated Plaintiffs unlawfully because of, and as a direct and proximate outcome of [P]laintiffs' protected whistleblowing activities." Second Am. Compl. ¶ 131 (emphasis added). Plaintiffs assert that under the common law of West Virginia, "it is against public policy to 'knowingly perpetrate a fraud or deception on the federal . . . government.'" Pl.'s Opp'n at 2 (quoting Kanagy v. Fiesta Salons, Inc., 541 S.E.2d 616, 623 (W. Va. 2000)). Although it is not clear that the Second Amended Complaint actually refers to the Kanagy court's articulation of a "public policy" as the basis for Count II, the Court need not decide the issue because the Court finds West Virginia law permits Plaintiffs' wrongful discharge claim even if based solely on the public policy embodied in the False Claims Act.

Plaintiffs' fourth and final argument reflects a fundamental disagreement with Defendant as to scope of wrongful discharge claims in West Virginia. The parties' arguments on this point are two ships passing in the night, relying on separate lines of case law without examining how they intersect. In Harless v. First National Bank in Fairmont, 246 S.E.2d 270 (W. Va. 1978), the West Virginia Supreme Court of Appeals ...


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