Markus v. Aerojet RocketDyne Holdings, Inc. et al

Filing 57

MEMORANDUM & ORDER Re: Defendants' Motion To Dismiss Relator's Second Amended Complaint, Stay Proceedings, And Compel Arbitration 50 , signed by Senior Judge William B. Shubb on 5/8/2019: IT IS ORDERED that 50 Defendants' Motion to Dismiss Relator's Second Amended Complaint be, and the same hereby is, GRANTED IN PART. Count Three of relator's Second Amended Complaint is DISMISSED WITH PREJUDICE. The motion is DENIED in all other respects. IT IS FURTHER ORDERED t hat 50 Defendants' Motion to Compel Arbitration and Stay Proceedings be, and the same hereby is, GRANTED with respect to Counts Four, Five, and Six of relator's Second Amended Complaint. Proceedings as to Counts One and Two are not stayed. (Kirksey Smith, K)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---- 11 12 UNITED STATES OF AMERICA ex rel. BRIAN MARKUS, 13 14 15 16 17 No. 2:15-cv-2245 WBS AC Plaintiff, MEMORANDUM & ORDER RE: DEFENDANTS’ MOTION TO DISMISS RELATOR’S SECOND AMENDED COMPLAINT, STAY PROCEEDINGS, and COMPEL ARBITRATION v. AEROJET ROCKETDYNE HOLDINGS, INC., a corporation and AEROJET ROCKETDYNE, INC., a corporation, Defendants. 18 19 ----oo0oo---- 20 21 Plaintiff-relator Brian Markus brings this action 22 against defendants Aerojet Rocketdyne Holdings, Inc. (“ARH”) and 23 Aerojet Rocketdyne, Inc. (“AR”), arising from defendants’ 24 allegedly wrongful conduct in violation of the False Claims Act 25 (“FCA”), 31 U.S.C. §§ 3729 et seq., and relating to defendants’ 26 termination of relator’s employment. 27 dismiss the Second Amended Complaint (“SAC”) in part for the 28 failure to state upon which can be granted under Federal Rule of 1 Defendants now move to (1) 1 Civil Procedure 12(b)(6), (2) stay proceedings, and (3) compel 2 arbitration. 3 I. Background 4 Relator Brian Markus is resident of the State of 5 California. (SAC ¶ 6 (Docket No. 42).) He worked for defendants 6 as the senior director of Cyber Security, Compliance, and 7 Controls from June 2014 to September 2015. 8 and AR develop and manufacture products for the aerospace and 9 defense industry. (Id.) Defendants ARH (Id. ¶ 7.) Defendants’ primary aerospace and 10 defense customers include the Department of Defense (“DoD”) and 11 the National Aeronautics & Space Administration (“NASA”), who 12 purchase defendants’ products pursuant to government contracts. 13 (See id.) 14 ARH uses AR to perform its contractual obligations. 15 Defendant AR is a wholly-owned subsidiary of ARH, and (Id. ¶ 8.) Government contracts are subject to Federal Acquisition 16 Regulations and are supplemented by agency specific regulations. 17 On November 18, 2013, the DoD issued a final rule, which imposed 18 requirements on defense contractors to safeguard unclassified 19 controlled technical information from cybersecurity threats. 20 C.F.R. § 252.204-7012 (2013). 21 contractors to implement specific controls covering many 22 different areas of cybersecurity, though it did allow contractors 23 to submit an explanation to federal officers explaining how the 24 company had alternative methods for achieving adequate 25 cybersecurity protection, or why standards were inapplicable. 26 See id. 27 modifying the government’s cybersecurity requirements for 28 contractor and subcontractor information systems. 48 The rule required defense In August 2015, the DoD issued an interim rule, 2 48 C.F.R. § 1 252.204-7012 (Aug. 2015). The interim rule incorporated more 2 cybersecurity controls and required that any alternative measures 3 be “approved in writing prior by an authorized representative of 4 the DoD [Chief Information Officer] prior to contract award.” 5 Id. at 252.204-7012(b)(1)(ii)(B). 6 rule in December 2015 to allow contractors until December 31, 7 2017 to have compliant or equally effective alternative controls 8 in place. 9 Each version of this regulation defines adequate security as The DoD amended the interim See 48 C.F.R. § 252.204-7012(b)(1)(ii)(A) (Dec. 2015). 10 “protective measures that are commensurate with the consequences 11 and probability of loss, misuse, or unauthorized access to, or 12 modification of information.” 13 48 C.F.R. § 252.204–7012(a). Contractors awarded contracts from NASA must comply 14 with relevant NASA acquisition regulations. 15 1852.204-76 lists the relevant security requirements where a 16 contractor stores sensitive but unclassified information 17 belonging to the federal government. 18 regulation, this NASA regulation makes no allowance for the 19 contractor to use alternative controls or protective measures. 20 NASA contractor is required to “protect the confidentiality, 21 integrity, and availability of NASA Electronic Information and IT 22 resources and protect NASA Electronic Information from 23 unauthorized disclosure.” 24 48 C.F.R. § Unlike the relevant DoD A 48 C.F.R. § 1852.204-76(a). Relator alleges that defendants fraudulently entered 25 into contracts with the federal government despite knowing that 26 they did not meet the minimum standards required to be awarded a 27 government contract. 28 started working for defendants in 2014, he found that defendants’ (SAC ¶ 30.) 3 He alleges that when he 1 computer systems failed to meet the minimum cybersecurity 2 requirements to be awarded contracts funded by the DoD or NASA. 3 (Id. ¶ 36.) 4 with the relevant standards as early as 2014, when defendants 5 engaged Emagined Security, Inc. to audit the company’s 6 compliance. 7 defendants repeatedly misrepresented its compliance with these 8 technical standards in communications with government officials. 9 (Id. ¶ 59-64.) He claims that defendants knew AR was not compliant (See id. at ¶¶ 43, 51-53.) Relator avers that Relator alleges that the government awarded AR a 10 contract based on these allegedly false and misleading 11 statements.1 12 documents that defendants were now compliant with the 13 cybersecurity requirements, contacted the company’s ethics 14 hotline, and filed an internal report. 15 Defendants terminated relator’s employment on September 14, 2015. 16 (Id. ¶ 83.) 17 (Id. ¶ 65.) In July 2015, relator refused to sign (Id. ¶¶ 81-82.) Relator filed his initial complaint in this action on 18 October 29, 2015. 19 still deciding whether to intervene in this action, relator filed 20 his First Amended Complaint (“FAC”) on September 13, 2017. 21 (Docket No. 22.) 22 notice of election to decline intervention. 23 few months later defendants filed a motion to dismiss, stay 24 proceedings, and compel arbitration as to the FAC. 25 39.) 26 27 28 (Docket No. 1.) While the government was On June 5, 2018, the United States filed a (Docket No. 25.) A (Docket No. In response to this motion, relator filed the SAC, alleging In total, relator alleges that AR entered into at least six contracts with the DoD between February 2014 and April 2015 (id. ¶¶ 84-93) and at least nine contracts with NASA between March 2014 and April 2016 (id. ¶¶ 105-114). 4 1 1 the following causes of action against defendants: (1) promissory 2 fraud in violation of 31 U.S.C. § 3729(a)(1)(A); (2) false or 3 fraudulent statement or record in violation of 31 U.S.C. § 4 3729(a)(1)(B); (3) conspiracy to submit false claims in violation 5 of 31 U.S.C. § 3729(a)(1)(C); (4) retaliation in violation of 31 6 U.S.C. § 3730(h); (5) misrepresentation in violation of 7 California Labor Code § 970; and (6) wrongful termination. 8 Defendants now move to dismiss the SAC, stay proceedings, and 9 compel arbitration. 10 11 II. (Docket No. 50.) Motion to Dismiss A. 12 Legal Standard On a Rule 12(b)(6) motion, the inquiry before the court 13 is whether, accepting the allegations in the complaint as true 14 and drawing all reasonable inferences in the plaintiff’s favor, 15 the plaintiff has stated a claim to relief that is plausible on 16 its face. 17 plausibility standard is not akin to a ‘probability requirement,’ 18 but it asks for more than a sheer possibility that a defendant 19 has acted unlawfully.” 20 when the plaintiff pleads factual content that allows the court 21 to draw the reasonable inference that the defendant is liable for 22 the misconduct alleged.” 23 “labels and conclusions” will not survive a motion to dismiss. 24 Id. (internal quotation marks and citations omitted). 25 26 B. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Id. “The “A claim has facial plausibility Id. A complaint that offers mere Fraud Claims under the FCA Relator brings two claims for fraud under the FCA. 27 These two claims impose liability on anyone who “knowingly 28 presents, or causes to be presented, a false or fraudulent claim 5 1 for payment or approval,” 31 U.S.C. § 3729(a)(1)(A), or 2 “knowingly makes, uses, or causes to be made or used, a false 3 record or statement material to a false or fraudulent claim,” id. 4 § 3729(a)(1)(B). 5 Outside of the context where “the claim for payment is 6 itself literally false or fraudulent,” the Ninth Circuit 7 recognizes two different doctrines that attach FCA liability to 8 allegedly false or fraudulent claims: (1) false certification and 9 (2) promissory fraud, also known as fraud in the inducement. See 10 United States ex rel. Hendow v. Univ. of Phoenix, 461 F.3d 1166, 11 1170-71 (9th Cir. 2006) (citation omitted). 12 certification theory, the relator can allege either express false 13 certification or implied false certification. 14 certification theory requires that the claimant plainly and 15 directly certify its compliance with certain requirements that it 16 has breached. 17 “can be a basis for liability, at least where two conditions are 18 satisfied: first, the claim does not merely request payment, but 19 also makes specific representations about the goods or services 20 provided; and second, the defendant’s failure to disclose 21 noncompliance with material statutory, regulatory, or contractual 22 requirements makes those representations misleading half-truths.” 23 Universal Health Servs., Inc. v. United States ex rel. Escobar, 24 136 S. Ct. 1989, 2001 (2016). 25 broader and “holds that liability will attach to each claim 26 submitted to the government under a contract, when the contract 27 or extension of government benefit was originally obtained 28 through false statements or fraudulent conduct.” See id. Under a false The express false An implied false certification theory The promissory fraud approach is 6 Hendow, 461 1 F.3d at 1173. 2 Under either false certification or promissory fraud, 3 “the essential elements of [FCA] liability remain the same: (1) a 4 false statement or fraudulent course of conduct, (2) made with 5 scienter, (3) that was material, causing (4) the government to 6 pay out money or forfeit moneys due.” 7 of the complaint as to the materiality requirement is at issue on 8 this motion.2 9 Id. Only the sufficiency Under the FCA, a falsehood is material if it has “a 10 natural tendency to influence, or be capable of influencing, the 11 payment or receipt of money or property.” 12 3729(b)(4). 13 clarified that “[t]he materiality standard is demanding.” 14 Ct. at 2003. 15 the recipient of the alleged misrepresentation. 16 misrepresentation is not material simply because the government 17 requires compliance with certain requirements as a condition of 18 payment. 19 “the Government would have the option to decline to pay if it 20 knew of the defendant’s noncompliance.” 21 “minor or insubstantial” noncompliance is not material. 22 Evidence relevant to the materiality inquiry includes the 31 U.S.C. § Most recently in Escobar, the Supreme Court 136 S. Materiality looks to the effect on the behavior of Id. at 2003. Id. at 2002. A Nor can a court find materiality where Id. Relatedly, mere Id. 23 Defendants correctly observe that relator’s FCA claims must not only be plausible but pled with particularity under Federal Rule of Civil Procedure 9(b). See Cafasso ex rel. United States v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1054–55 (9th Cir. 2011). However, defendants reference Rule 9(b) only to the extent they argue that relator has failed to plead particular facts in support of materiality. (See Mot. to Dismiss at 2-3, 15 & 18.) Therefore, the court assumes, without deciding, that relator has otherwise satisfied the requirements of Rule 9(b). 7 2 24 25 26 27 28 1 government’s conduct in similar circumstances and whether the 2 government has knowledge of the alleged noncompliance. 3 Defendants puts forth four different arguments in support of 4 their contention that relator has insufficiently pled facts as to 5 the materiality requirement. 6 See id. First, defendants argue that AR disclosed to its 7 government customers that it was not compliant with relevant DoD 8 and NASA regulations and therefore it is impossible for relator 9 to satisfy the materiality prong. The Supreme Court did observe 10 in Escobar that “if the Government pays a particular claim in 11 full despite its actual knowledge that certain requirements were 12 violated, that is very strong evidence that those requirements 13 are not material.” 14 with sufficient particularity that defendants did not fully 15 disclose the extent of AR’s noncompliance with relevant 16 regulations. 17 that state the truth only so far as it goes, while omitting 18 critical qualifying information--can be actionable 19 misrepresentations.”). 20 misrepresented in its September 18, 2014 letter to the government 21 the extent to which it had equipment required by the regulations 22 (SAC ¶ 63), instituted required security controls (id. ¶¶ 60-61, 23 63), and possessed necessary firewalls (id. ¶ 62). 24 alleges that these misrepresentations persisted over time, 25 whereby AR knowingly and falsely certified compliance with 26 security requirements when submitting invoices for its services. Id. Here, however, relator properly alleges See id. at 2000 (“[H]alf-truths--representations For instance, relator alleges that AR 27 28 8 Relator also 1 (Id. ¶¶ 135-36.)3 While it may be true that AR disclosed some of 2 its noncompliance (see id. ¶¶ 59-64), a partial disclosure would 3 not relieve defendants of liability where defendants failed to 4 “disclose noncompliance with material statutory, regulatory, or 5 contractual requirements.” See Escobar, 136 S. Ct. at 2001. 6 In fact, some of the evidence defendants put forth in 7 favor of their motion to dismiss provides support for relator’s 8 allegations relevant to materiality.4 9 federal contracting officer that it could not waive compliance The DoD informed the 10 with DoD regulations, even for an urgent contract. 11 68; Req. for Judicial Notice Ex. Z at 1-4.) 12 contracting officer was not prohibited from awarding the contract 13 because of AR’s noncompliance, AR could not process, store, or 14 transmit controlled technical information until it was fully 15 compliant. 16 DoD representative believed it to “be a relatively simple matter 17 for the contractor to become compliant” based on the disclosure 18 letter AR sent to the contracting negotiator. 19 Yet, relator’s complaint alleges possible material nondisclosures 20 The court recognizes that “allegations of fraud based on information and belief usually do not satisfy the particularity requirements under rule 9(b).” Moore v. Kayport Package Exp., Inc., 885 F.2d 531, 540 (9th Cir. 1989) (citation omitted). However, as explained elsewhere in this motion, there are other parts of the complaint that allege fraud with sufficient particularity for the purposes of Rule 9(b). 21 22 23 24 25 26 27 28 (SAC ¶¶ 67- While the (Req. for Judicial Notice Ex. Z at 1.) Still, the (Id. at 1-2.) 3 Because relator’s complaint references the documents contained in defendants’ Exhibits Y & Z (Docket Nos. 52-25 & 5226) in his complaint, the court considers these materials, without converting the motion to dismiss into a motion for summary judgment, under the doctrine of incorporation by reference. See United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). 9 4 1 in this letter, such as AR’s failure to report its status on all 2 required controls, its alleged misstatements as to partial 3 compliance with protection measures, and the fact that the 4 company cherrypicked what data it chose to report. 5 59-64.)5 6 not have awarded these contracts if it knew the full extent of 7 the company’s noncompliance, because how close AR was to full 8 compliance was a factor in the government’s decision to enter 9 into some contracts.6 10 (See SAC ¶¶ Accepting these allegations as true, the government may Second, defendants contend that the government’s 11 response to the investigation into AR’s representations 12 Defendants argue for the first time in their reply that these alleged misstatements were not associated with a claim for payment and thus cannot support liability under the FCA. (See Reply in Supp. of Mot. to Dismiss (“Reply”) at 4 (Docket No. 54).) Contrary to defendants’ understanding, the FCA merely requires that the false statement(s) or fraudulent course of conduct cause the government to pay out money due. See Hendow, 461 F.3d at 1173. Under a promissory fraud theory, the relator only needs to allege that a claim was submitted “under a contract” that “was originally obtained through false statements or fraudulent conduct.” See id.; see also United States ex rel. Campie v. Gilead Scis., Inc., 862 F.3d 890, 902 (9th Cir. 2017) (reaffirming Hendow’s test for promissory fraud after Escobar). Here, relator alleges that AR secured its contracts with the government through misrepresentations made to government contracting agents and that the government ultimately paid out on these contracts. (See SAC ¶¶ 59-66, 129-131.) 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5 This promissory fraud theory, supported by these allegations of specific misrepresentations, distinguishes this case from United States ex rel. Mateski v. Raytheon Co., No. 2:06-CV-03614 ODW KSX, 2017 WL 3326452 (C.D. Cal. Aug. 3, 2017), aff’d, 745 F. App’x 49 (9th Cir. 2018). In Mateski, the relator merely alleged general violations of contract provisions that the government designated compliance with as mandatory to support a false certification theory. See id. at *7. Applying Escobar, the district court concluded that “such designations do not automatically make misrepresentations concerning those provisions material.” Id. (citing 136 S. Ct. at 2003). 10 6 1 surrounding its cybersecurity compliance undermines relator’s 2 allegations as to materiality. 3 continued to contract with AR since the government’s 4 investigation into the allegations of this complaint. 5 for Judicial Notice Exs. S-V (Docket Nos. 52-19, 52-20, 52-21 & 6 52-22).)7 7 to dismiss. 8 to read too much into “continued approval” by the government, 9 albeit in a different context). Both the DoD and NASA have (See Req. Such evidence is not entirely dispositive on a motion Cf. Campie, 862 F.3d at 906 (cautioning courts not Instead, the appropriate inquiry 10 is whether AR’s alleged misrepresentations were material at the 11 time the government entered into or made payments on the relevant 12 contracts. 13 government agencies entered with AR after relator commenced this 14 litigation are not at issue and possibly relate to a different 15 set of factual circumstances. 16 has sufficiently alleged that AR’s misrepresentations as to the 17 extent of its noncompliance with government regulations could 18 have affected the government’s decision to enter into and pay on 19 the contracts at issue in this case. 20 See Escobar, 136 S. Ct. at 2002. The contracts As discussed previously, relator Defendants also argue that the government’s decision 21 22 23 24 25 26 27 28 The court GRANTS defendants’ request that it take judicial notice of these exhibits. Exhibits T through V are publications on government websites and thus properly subject to judicial notice. See, e.g., Daniels-Hall v. Nat’l Educ. Ass’n, 629 F.3d 992, 998-99 (9th Cir. 2010) (finding that it is “appropriate to take judicial notice of [information on government website], as it was made publicly available by government entities [], and neither party disputes the authenticity of web sites or the accuracy of the information displayed therein.”). Exhibit S is an official Authorization to Operate signed by NASA officials, so its “accuracy cannot reasonably be questioned.” See Fed. R. Evid. 201(b)(2). 11 7 1 not to intervene in this case indicates that the alleged 2 misrepresentations were not material. 3 Reply at 9.) 4 itself, the government chose not to intervene and the Supreme 5 Court did not mention it as a factor relevant to materiality. 6 See United States ex rel. Prather v. Brookdale Senior Living 7 Communities, Inc., 892 F.3d 822, 836 (6th Cir. 2018) (citing 136 8 S. Ct. at 1998). 9 sufficiently the element of materiality were stymied by the (See Mot. to Dismiss at 3; As the Sixth Circuit has observed, in Escobar Separately, “[i]f relators’ ability to plead 10 government’s choice not to intervene, this would undermine the 11 purposes of the Act,” as the FCA allows relators to proceed even 12 without government intervention. 13 finally, there is no reason believe that the decision not to 14 intervene is a comment on the merits of this case. 15 United States ex rel. Atkins v. McInteer, 470 F.3d 1350, 1360 16 n.17 (11th Cir. 2006) (“In any given case, the government may 17 have a host of reasons for not pursuing a claim.”); United States 18 ex rel. Chandler v. Cook Cty., Ill., 277 F.3d 969, 974 n.5 (7th 19 Cir. 2002) (“The Justice Department may have myriad reasons for 20 permitting the private suit to go forward including limited 21 prosecutorial resources and confidence in the relator’s 22 attorney.”). 23 Id. (citation omitted). And See, e.g., Third, defendants argue that AR’s noncompliance does 24 not go to the central purpose of any of the contracts, as the 25 contracts pertain to missile defense and rocket engine 26 technology, not cybersecurity. 27 n.5 (noting that a misrepresentation is material where it goes to 28 the “essence of the bargain”). See Escobar, 136 S. Ct. at 2004 This argument is unavailing at 12 1 this stage of the proceedings. Relator alleges that all of AR’s 2 relevant contracts with the DoD and NASA incorporated each 3 entity’s acquisition regulations. 4 acquisition regulations require that the defense contractor 5 undertake cybersecurity specific measures before the contractor 6 can handle certain technical information. 7 these cybersecurity requirements could have affected AR’s ability 8 to handle technical information pertaining to missile defense and 9 rocket engine technology. (See SAC ¶¶ 84, 105.) These Here, compliance with (See Req. for Judicial Notice Ex. Z at 10 1.) Accordingly, misrepresentations as to compliance with these 11 cybersecurity requirements could have influenced the extent to 12 which AR could have performed the work specified by the contract. 13 Fourth and finally, defendants argue that the 14 government’s response to the defense industry’s non-compliance 15 with these regulations as a whole weighs against a finding of 16 materiality. 17 “consider how the [government] has treated similar violations.” 18 See United States ex rel. Rose v. Stephens Inst., 909 F.3d 1012, 19 1020 (9th Cir. 2018). 20 expected full technical compliance because it constantly amended 21 its acquisition regulations and promogulated guidances that 22 attempted to ease the burdens on the industry. 23 is not dispositive. 24 technical compliance, relator properly pleads that the extent to 25 which a company was technically complaint still mattered to the 26 government’s decision to enter into a contract. 27 72.) 28 evidence that the government paid a company it knew was When evaluating materiality, courts should Defendants contend that the DoD never This observation Even if the government never expected full (See SAC ¶¶ 66- Defendants have not put forth any judicially noticeable 13 1 noncompliant to the same extent as AR was. 2 consideration does not weigh in favor of dismissal. 3 Therefore, this Accordingly, given the above considerations, relator 4 has plausibly pled that defendants’ alleged failure to fully 5 disclose its noncompliance was material to the government’s 6 decision to enter into and pay on the relevant contracts.8 7 C. 8 9 Conspiracy under the FCA Relator’s third count alleges that defendants participated in a conspiracy to submit false claims in violation 10 of 31 U.S.C. § 3729(a)(1)(C). 11 and their officers conspired together to defraud the United 12 States by knowingly submitting false claims. 13 Section 3729(a)(1)(C) imposes liability on a person who conspires 14 to commit a violation of Section 3729(a)(1)(A) or Section 15 3729(a)(1)(B). 16 Relator maintains that defendants (See SAC ¶ 144.) Defendants argue that this count fails as a matter of 17 law because relator has failed to identify two distinct entities 18 that conspired. 19 conspiracy doctrine “holds that a conspiracy requires an 20 agreement among two or more persons or distinct business 21 entities.” 22 979 (9th Cir. 1994) (internal quotation marks omitted). 23 doctrine stems from the definition of a conspiracy and the 24 requirement that there be a meeting of the minds. 25 Fluor Daniel, Inc., 92 F. Supp. 2d 1055, 1057 (C.D. Cal. 2000) 26 (citing Fonda v. Gray, 707 F.2d 435, 438 (9th Cir. 1983)). 27 28 Derived from antitrust law, the intracorporate United States v. Hughes Aircraft Co., 20 F.3d 974, The See Hoefer v. While The court expresses no opinion as to what relator will be able to establish at summary judgment or trial. 14 8 1 the Ninth Circuit has not addressed this issue, several district 2 courts have applied the intracorporate conspiracy doctrine to FCA 3 claims. 4 Servs., Inc., 242 F. Supp. 3d 1020, 1027 (S.D. Cal. 2017) 5 (collecting cases). 6 conspiracy claims where the alleged conspirators are a parent 7 corporation and its wholly-owned subsidiary. 8 States ex. rel. Campie v. Gilead Scis., Inc., No. C-11-0941 EMC, 9 2015 WL 106255, at *15 (N.D. Cal. Jan. 7, 2015). 10 See United States ex rel. Lupo v. Quality Assurance Courts have used this principle to bar See, e.g., United Here, relator identifies only a parent company, ARH, 11 and its wholly-owned subsidiary, AR, as defendants. (SAC ¶¶ 7- 12 8.) 13 its officers, a corporation, as a matter of law, “cannot conspire 14 with its own employees or agents.” 15 1057. 16 independent individual or entity, relator’s conspiracy claim 17 fails as a matter of law. While relator alleges that defendants also conspired with Hoefer, 92 F. Supp. 2d at By failing to allege that defendants conspired with any 18 Accordingly, the court will dismiss relator’s third 19 claim, that defendants participated in a conspiracy to submit 20 false claims in violation of 31 U.S.C. § 3729(a)(1)(C). 21 III. 22 Motion to Compel Arbitration and Stay Proceedings “Relator does not oppose defendants’ motion to refer 23 his employment related claims to arbitration” based on his 24 arbitration agreement with defendants. 25 at 16 (Docket No. 53); see also Decl. of Ashley Neglia Ex. 1 26 (arbitration agreement) (Docket No. 51-1).) 27 however, defendants’ request that the entire proceedings be 28 stayed pending the resolution of these employment related claims 15 (Opp’n to Mot. to Dismiss Relator does oppose, 1 in arbitration. Relator contends that a stay is inappropriate as 2 to his FCA claims because they are brought on behalf of the 3 government, are not referable to arbitration, and are separate 4 from the issues involved in his employment-related claims. 5 Opp’n to Mot. to Dismiss at 16-17.) (See 6 Section 3 of the FAA provides that a court “shall on 7 application of one of the parties stay the trial” of “any suit 8 proceeding” brought “upon any issue referable to arbitration 9 under [an arbitration] agreement . . . until such arbitration has 10 been had in accordance with the terms of the agreement.” 11 U.S.C. § 3. 12 section 3” as to arbitrable claims. 13 of Cal., Ltd., 593 F.2d 857, 863 (9th Cir. 1979). 14 nonarbitrable claims, which defendants concede the FCA claims 15 are, this court has discretion whether to stay the litigation 16 pending arbitration. 17 whether “it is efficient for its own docket and the fairest 18 course for the parties to enter a stay of an action before it, 19 pending resolution of independent proceedings which bear upon the 20 case.” 21 may work damage to another party, a stay may be inappropriate. 22 See Dependable Highway Exp., Inc. v. Navigators Ins. Co., 498 23 F.3d 1059, 1066 (9th Cir. 2007) (citation omitted). 24 9 A party is only “entitled to a stay pursuant to Id. at 863. Id. at 863-64. Leyva v. Certified Grocers As to This court may decide If there is a fair possibility that the stay The court will not expand the stay to encompass the 25 nonarbitrable FCA claims. The issues involved in the FCA claims 26 differ from those involved in relator’s employment-based claims. 27 Relator’s FCA claims concern fraud that defendants allegedly 28 perpetrated on the government, while relator’s employment-based 16 1 claims concern the alleged violation of his own rights during his 2 employment. 3 not narrow the factual and legal issues underlying the FCA 4 claims. 5 the FCA, “[t]he elements differ for a FCA violation claim and a 6 FCA retaliation claim.” 7 521 F.3d 1097, 1103 (9th Cir. 2008). 8 unnecessarily work to delay resolution of relator’s FCA claims, 9 which have been pending for more than three years. Resolution of relator’s employment-based claims will While relator brings one of his employment claims under Mendiondo v. Centinela Hosp. Med. Ctr., Moreover, a stay would 10 Accordingly, the court will refer relator’s employment- 11 based claims, Counts Four, Five, and Six, to arbitration and stay 12 proceedings as to these claims only.9 13 IT IS THEREFORE ORDERED that defendants’ Motion to 14 Dismiss Relator’s Second Amended Complaint (Docket No. 50) be, 15 and the same hereby is, GRANTED IN PART. 16 relator’s Second Amended Complaint is DISMISSED WITH PREJUDICE. 17 The motion is DENIED in all other respects. Count Three of 18 IT IS FURTHER ORDERED that defendants’ Motion to Compel 19 Arbitration and Stay Proceedings (Docket No. 50) be, and the same 20 hereby is, GRANTED with respect to Counts Four, Five, and Six of 21 relator’s Second Amended Complaint. 22 and Two are not stayed. 23 Dated: Proceedings as to Counts One May 8, 2019 24 25 26 27 All remaining Requests for Judicial Notice (Docket No. 52) are DENIED as MOOT. 9 28 17

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