United States of America et al v. Bluebird Media, LLC et al
ORDER entered by Judge Nanette Laughrey. Schell's Complaint is sufficient to state a claim for relief under Rule 12(b)(6). Additionally, his claims alleging fraud under the False Claims Act meet the heightened pleading requirements of Rule 9(b). Therefore, Defendants' Motion to Dismiss [Doc. #22] is DENIED. (Matthes, Renea)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MISSOURI
UNITED STATES OF AMERICA,
Ex rel. Martin Schell,
Martin Schell , individually,
BLUEBIRD MEDIA, LLC, et al.,
Case No. 12-cv-04019
Pending before the Court is a Motion to Dismiss by Defendants Bluebird
Network, LLC, and Bluebird Media, LLC. [Doc. #22]. Defendants move to
dismiss Relator Martin Schell’s Complaint pursuant to Federal Rules of Civil
Procedure 9(b) and 12(b)(6).
Relator Martin Schell was employed by Defendant Bluebird Media, LLC as
Vice President of Business Development beginning on or about October 9, 2010.
Bluebird Media later merged with Missouri Network Alliance to form Defendant
Bluebird Network, LLC. At this point, his title changed to Vice President of
Operations. As VP of Operations, Schell was a key member of a management
team in charge of constructing and operating a fiber optics cable network across
northern Missouri. Schell asserts that because of the responsibilities attendant on
this position, he has direct and independent knowledge of the events described in
Schell brings a Qui Tam action under the False Claims Act, alleging that
Defendants Bluebird Media and Bluebird Network knowingly made false
statements to the National Telecommuncations and Information Administration
(“NTIA”) in order to procure a 3-year, $45-million grant from the American
Reinvestment Recovery Act Broadband Technology Opportunities Program
(“ARRA BTOP”). Specifically, Schell alleges that Defendants 1) falsely
represented that the area to be served by the grant was “under-served” in terms of
broadband internet access; 2) falsely represented that Boone County National
Bank would match certain funds, as required by NTIA; 3) falsely classified that
State of Missouri’s “in-kind” contribution; 4) falsely stated that two individuals
whom NTIA had declared ineligible to work on the project because of their
involvement in bankruptcy proceedings, Christopher and Tatum Martin, would not
manage Defendant’s involvement with the project; and 5) falsely claimed they
could create a viable and sustainable business when they knew that providing
below-market services to the state of Missouri foreclosed this possibility. He
further alleges that he was terminated from his position as the result of his active
opposition to Defendants’ alleged misrepresentations. [Doc. #27 – Relator’s
Suggestions in Opposition].
Schell brings three Counts against Defendants. Count I is an action under
the False Claims Act, 31 U.S.C. § 3729, for fraud against the United States. Count
II is a claim for Retaliation under the False Claims Act, 31 U.S.C. § 3730(h).
Count III alleges a violation of Missouri’s Letter of Dismissal Statute, Mo. Ann.
Stat. § 290.140. [Doc. #1 – Complaint]. The United States has chosen not to
intervene on Schell’s behalf. [Doc. #5].
Defendants have moved to dismiss Schell’s Complaint under Federal Rules
of Civil Procedure 9(b) and 12(b)(6), arguing that Schell has failed to plead with
the particularity required by Rule 9(b) in claims alleging fraud or
misrepresentation, and failed to plead factual allegations that rise above the
speculative level as required by Rule 12(b)(6).
Motion to Dismiss Standard
Federal Rule 8(a)(2) requires that a complaint contain “a short and plain
statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ.
P. 8(a)(2). The purpose of this “notice pleading” requirement is to “give the
defendant fair notice of what the ... claim is and the grounds upon which it rests.”
Erickson v. Pardus, 551 U.S. 89, 93, 127 S. Ct. 2197, 2200 (2007) (quoting Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955 (2007)). To
survive a motion to dismiss for failure to state a claim under Rule 12(b)(6), “a
complaint must contain sufficient factual matter, accepted as true, to ‘state a claim
to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.
Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 570, 127 S. Ct. at 1974). A
claim is sufficiently plausible when it sets forth “factual content that allows the
court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Gomez v. Wells Fargo Bank, N.A., 676 F.3d 655, 660 (8th
Cir. 2012) (quoting Ashcroft, 556 U.S. at 678, 129 S. Ct. at 1949). Importantly, “a
formulaic recitation of a cause of action’s elements” will not satisfy the pleading
standard. Twombly, 550 U.S. at 545, 127 S. Ct. at 1959.
Additionally, when a complaint alleges fraud under the False Claims Act, it
must meet the slightly higher standard of particularity established by Rule 9(b).
U.S. ex rel. Costner v. United States, 317 F.3d 883, 888 (8th Cir. 2003). Rule 9(b)
requires that the complaint “must state with particularity the circumstances
constituting fraud or mistake,” although mental states such as malice, intent, and
knowledge may be alleged generally. Fed.R.Civ.P. 9(b). This particularity
requirement “is intended to enable the defendant to respond specifically and
quickly to the potentially damaging allegations.” Costner, 317 F.3d at 888. To
meet this heightened standard, “the complaint must plead such facts as the time,
place, and content of the defendant's false representations, as well as the details of
the defendant's fraudulent acts, including when the acts occurred, who engaged in
them, and what was obtained as a result... Put another way, the complaint must
identify the ‘who, what, where, when, and how’ of the alleged fraud.” U.S. ex rel.
Joshi v. St. Luke's Hosp., Inc., 441 F.3d 552, 556 (8th Cir. 2006). A plaintiff need
not state each element of the fraud claim with particularity to satisfy this
requirement; rather, a plaintiff “must state enough so that his/her pleadings are not
merely conclusory.” Roberts v. Francis, 128 F.3d 647, 651 (8th Cir. 1997). “In
resolving a Rule 9(b) motion in an FCA matter, allegations should be taken as true
and all reasonable inferences drawn in the relator's favor.” U.S. ex rel. Sandager
v. Dell Mktg., L.P., 872 F. Supp. 2d 801, 812 (D. Minn. 2012) (citing Joshi, 441
F.3d at 556).
Count I – False Claims Act
The False Claims Act imposes liability on anyone who “(1) ‘knowingly
presents, or causes to be presented, [to a federal official] a false or fraudulent
claim for payment or approval,’ or (2) ‘knowingly makes ... a false record or
statement to get a false or fraudulent claim paid or approved.’” U.S. ex rel. Roop
v. Hypoguard USA, Inc., 559 F.3d 818, 822 (8th Cir. 2009) (quoting 31 U.S.C. §
3729(a)(1)-(2)). The Act is intended to “protect the federal fisc by imposing
severe penalties on those whose false or fraudulent claims cause the government to
pay money.” U.S. ex rel. Vigil v. Nelnet, Inc., 639 F.3d 791, 796 (8th Cir. 2011).
Under the Act’s qui tam provision, private persons, or relators, may “sue for
violations ‘in the name of the government’ and recover a share of the proceeds if
the suit is successful.” U.S. ex rel. Raynor v. Nat'l Rural Utilities Co-op. Fin.,
Corp., 690 F.3d 951, 955 (8th Cir. 2012) (quoting 31 U.S.C. § 3730(b), (d)). To
state a prima facie case under the Act, the relator must show “(1) the defendant
made a claim against the United States; (2) the claim was false or fraudulent; and
(3) the defendant knew the claim was false or fraudulent.” Id. (quoting United
States v. Basin Elec. Power Coop., 248 F.3d 781, 803 (8th Cir. 2001)).
Additionally, for liability to attach, the fraudulent claim must be “material” to the
government’s decision to disperse money. U.S. ex rel. Vigil v. Nelnet, Inc., 639
F.3d 791, 796 (8th Cir. 2011).
Defendants argue that Schell’s allegations do not state a claim for violation
of the False Claims Act with the particularity required by Rule 9(b).
Schell makes the following allegation: that the “purpose of the grant
program was to provide broadband internet services to under-served, primarily
rural regions of the United States,” and that Defendant Bluebird Media falsely and
“represented to NTIA in its grant application that the area of northern
Missouri it was to service was under-served even though there are a
plethora of service providers in the area and an existing 3,000-mile fiber
optic network that weaves in and out of the 59 counties in Defendant
[Bluebird] Media’s proposed service territory.”
[Doc. #1 – Complaint]. Defendants argue that this allegation is “conclusory” and
that Schell does not cite any law or grant eligibility requirements defining the
meaning of “under-served.” They also argue that Schell should have included
who made the representation and who the other service providers in the area were,
as well as the services they provided. [Doc. #22 – Motion to Dismiss].
This level of detail is not required even under Rule 9(b)’s heightened
pleading standard. Rule 9(b) “was never meant to require a plaintiff to set forth
every factual detail supporting its claim....” United States v. NHC Healthcare
Corp., 115 F. Supp. 2d 1149, 1152 (W.D. Mo. 2000); U.S. ex rel. Joshi v. St.
Luke's Hosp., Inc., 441 F.3d 552, 557 (8th Cir. 2006) (a plaintiff is not required “to
allege specific details of every alleged fraudulent claim forming the basis” of his
complaint) (emphasis in original). Rather, the purpose of Rule 9(b)’s heightened
pleading standard is “to inhibit the filing of a complaint as a pretext for the
discovery of unknown wrong, protect defendants from the harm that might come
to their reputations when charged with acts of moral turpitude, and finally ensure
that the allegations are particularized enough to enable defendants to prepare an
adequate defense.” U.S. ex rel. O'Keefe v. McDonnell Douglas Corp., 918 F.
Supp. 1338, 1345 (E.D. Mo. 1996) (internal quotes omitted). Where a defendant
is able to “mount a vigorous defense” at the motion to dismiss stage, it is an
indication that the pleadings are sufficiently specific. NHC Healthcare, 115 F.
Supp. 2d at 1151.
Here Defendants are clearly on notice as to Schell’s allegations. Schell has
satisfied the requirements of 9(b) by claiming that Defendants made the allegedly
false statement to NTIA that the area they proposed to service was under-served,
that this was a requirement of grant funding, and that evidence exists to challenge
the veracity of Defendants’ statement that the area was under-served. Contrary to
Defendants’ argument, Schell does not have to provide a legal argument for what
constitutes “under-served” at this stage of the pleadings or go into detail about
who made the statement or which companies provided the services. He must only
cite enough detailed information to allow Defendants to “prepare a responsive
pleading.” O’Keefe, 918 F. Supp. at 1345. By alleging the above facts, Schell has
provided sufficient information to engender a responsive pleading. Indeed,
Defendants’ arguments about the legal definition of “under-served” go to the
merits, which indicate that the Complaint “does not appear to be hampered by a
lack of specific allegations.” NHC Healthcare, 115 F. Supp. 2d at 1151.
Bank Financing Letter
Defendants also take issue with Schell’s allegation that “NTIA required that
the grantee… be able to match a certain amount of grant funds in order to receive
the grant” and that Boone County National Bank, “as a personal favor to
Defendant [Bluebird] Media owner Otto Maly, provided NTIA a letter stating that
it would provide the necessary match of cash,” while actually “never intend[ing]
to supply the necessary funds,” and that no funds were ever provided. [Doc. #1 –
Complaint]. Schell alleges that “Defendants and the bank knew there was never
any intention to follow through on this promise.” Id. Defendants argue that Schell
has not alleged that Defendants made the false statement or knew that the
statement by Boone County National Bank was false.
The False Claims Act does not require that the defendant itself “make” the
false representation to the government. Rather, liability attaches to any person
who “knowingly presents, or causes to be presented, a false or fraudulent claim for
payment or approval” or “knowingly makes, uses, or causes to be made or used, a
false record or statement material to a false or fraudulent claim.” 31 U.S.C. §
3729 (a)(1)(A)-(B). By submitting a letter from the Bank attesting that
Defendants would receive the necessary amount of funding, Defendants “caused
to be presented” or “caused to be used” the allegedly false statement. The fact that
they did not make the statement themselves does not affect their potential liability
under the False Claims Act.
Defendants also argue that Schell hasn’t alleged specific facts to show they
knew the letter was false. To be found liable under the False Claims act, a
defendant must act “knowingly” in submitting a false claim. 31 U.S.C. §
3729(a)(1)(A)-(B). In addition to “actual knowledge,” “knowingly” includes
“deliberate indifference” or “reckless disregard” of the truth or falsity of the
information. 31 U.S.C. § 3729(b)(1)(A)(i)-(iii). Under certain circumstances,
knowledge may also be imputed to defendants under the False Claims Act. See,
e.g., U. S. v. Rohleder, 157 F.2d 126, 129-30 (3d Cir. 1946) (where false
representations were made by defendant’s agents for defendant’s sole benefit,
defendant could not escape liability on ground that he had no knowledge of
falsity). Furthermore, at the pleading stage, mental states like malice, intent, and
knowledge may be alleged generally. Fed. R. Civ. P. 9(b). Rather, the relator
need only set forth “factual content that allows the court to draw the reasonable
inference” of knowledge. Ashcroft, 556 U.S. at 678, 129 S. Ct. at 1949. An
allegation of knowledge is sufficiently pled under the False Claims Act where,
read in the light most favorable to the relator, “it can reasonably be inferred from
these facts that [the defendant] knew” of the false representations. U.S. ex rel.
Budike v. PECO Energy, 897 F. Supp. 2d 300, 320-21 (E.D. Pa. 2012). Here,
Schell alleges that the letter was provided by the Bank as a “personal favor” to
Defendant Bluebird Media’s owner for purposes of obtaining the grant, that the
Bank never intended to supply the funding, and that no funding was ever provided.
He further alleges that both “Defendants and the bank knew there was never any
intention to follow through on this promise” to provide funding. Under Rule 9(b),
this is sufficient to infer that Defendants knew of the false representation in the
Defendants further argue that Schell failed to plead with particularity his
allegation that Defendants “knowingly ma[de] a false statement to NTIA and the
United States that Defendants received a requisite $10.5 million in-kind
contribution from the State of Missouri so as to be eligible for the $45 million
ARRA BTOP grant, when in fact Defendants sold its services at cut rates in
exchange for the rights-of-way and parcels of land, a transaction Defendants
falsely classified as an ‘in-kind contribution.’” [Doc. #1 – Complaint].
Defendants argue that this allegation was not pled with particularity because
Schell failed to define “in-kind contribution” or show that an exchange of property
or services did not meet this definition.
The definition of “in-kind contribution” and whether the arrangement
between Defendants and Missouri satisfied this requirement of the grant goes to
the merits of the case. As discussed above regarding Defendants’ claim that
“under-served” was not defined, Schell need not delve into legal arguments at the
pleading stage. Indeed, the fact that Defendants proceed to challenge this
allegation on the merits reveals that Schell has provided sufficient factual
information so as to permit Defendants to file a responsive pleading. O’Keefe,
918 F. Supp. at 1345. As discussed above, if a defendant “mount[s] a vigorous
defense” at the motion to dismiss stage, it is an indication that the pleadings are
sufficiently specific. NHC Healthcare, 115 F. Supp. 2d at 1151.
Defendants also claim that Schell has not alleged a factual basis showing
that the in-kind contribution was material to the NTIA’s decision to award the
grant. For liability to attach, the fraudulent claim must be “material” to the
government’s decision to disperse money. Vigil, 639 F.3d at 796. In other words,
“the FCA ‘requires a causal link between the ‘false statement or record’ and the
government's payment of a false claim.’” U.S. ex rel. Miller v. Weston Educ., Inc.,
2012 WL 6190307 at *2 (W.D. Mo. Dec. 12, 2012) (citing Vigil, 639 F.3d at 799).
Defendants point out that Schell concedes that Defendants could have provided
the required $10.5 million in liquid capitalized assets rather than receive the
money through an in-kind contribution, and attained grant eligibility that way.
[Doc. #22 – Motion to Dismiss]. However, just because a condition of funding
could have been satisfied two different ways does not mean that Defendants’
decision to meet the condition one way through a false representation is not
“material.” To qualify for the grant, Defendants would have either had to receive
an in-kind contribution from Missouri for $10.5 million, or provide their own
assets in that amount. Schell alleges that Defendants did not have that money in
their own assets, and so had to receive an in-kind contribution to be eligible. He
further alleges that Defendants informed NTIA that they received an in-kind
contribution. Since the grant was conditioned on Defendants having this amount,
and they informed NTIA they received the amount through an in-kind
contribution, it can be concluded that NTIA’s decision to award the grant was
based on this representation of Defendants’. Therefore, the allegedly fraudulent
representation was material.
Management by the Martins
Schell also alleges that Defendant Bluebird Media owner Otto Maly “was
required to verify to NTIA that two Defendant [Bluebird] Media owners,
Christopher Martin and Tatum Martin…, who are also on the Board of Directors
for Defendant [Bluebird] Network, would not be involved in management of
Defendant [Bluebird] Network due to ongoing bankruptcy proceedings of the
Martins” and companies owned by them. [Doc #1 – Complaint]. Schell alleges,
“Upon knowledge and belief, at all times relevant herein, the Martins actively
participated in management of Defendant [Bluebird] Network, despite Maly’s
representation to NTIA that they would not.” Id. He also alleges that work on the
grant was outsourced to a limited liability company owned and managed by the
Martins, and that the Martins’ company “was awarded approximately one-third of
the allocated routes to accomplish the engineering projects” funded by the grant.
Defendants argue that Schell did not allege when Maly’s misrepresentation
occurred or particular facts showing the Martins participated in the management of
Bluebird Network. However, a plaintiff is not required “to allege specific details
of every alleged fraudulent claim forming the basis” of his complaint. Joshi, 441
F.3d at 557 (emphasis in original). “The sufficiency of the pleading under Rule
9(b) depends upon the nature of the case, the complexity or simplicity of the
transaction or occurrence, the relationship of the parties and the determination of
how much circumstantial detail is necessary to give notice to the adverse party and
enable him to prepare a responsive pleading.” O'Keefe, 918 F. Supp. at 1345
(internal quotes omitted) (finding that although the 25-page Complaint did not
“cite every instance of mischarging,… given the complexity of this case and
length of time during which the fraudulent conduct allegedly occurred,” the factual
basis set out in the complaint satisfied Rule 9(b)). Schell has alleged that the grant
was conditioned on the Martins’ not exercising a management role over Bluebird
Network, but that in spite of Maly’s representation that this would not occur, the
Martins continued to exercise control such that their company was actively
involved in work on the grant and was awarded 1/3 of the projects funded by the
grant. This is sufficient to put Defendants on notice as to the basis of Schell’s
Complaint. Given the complexity of the case, under the reasoning of Joshi and
O’Keefe, Schell is not required under Rule 9(b) to allege every specific detail
showing that the Martins exercised a management role.
Viable and Sustainable Business
Defendants also contest the sufficiency of Schell’s allegation that
Defendants falsely represented that they would provide “a viable and sustainable
business with the proceeds of the grant” while all the while knowing that this
promise was illusory because, given the terms of their contract with the State of
Missouri, creation of a viable and sustainable business was impossible.
Specifically, Schell alleges that Defendants knew that the “complicated and
expensive network services” provided to Missouri below market value in lieu of
an in-kind contribution “effectively foreclosed” their ability to create a viable and
sustainable business. [Doc. #1 – Complaint].
Defendants argue that Schell has not pled a sufficient factual basis for this
“conclusory” allegation. For the reasons already discussed above, this contention
has no merit. Schell has alleged that Defendants knew their arrangement with
Missouri would prevent the company from creating a viable and sustainable
business, but that they nonetheless represented that this condition would be met in
their grant application. Schell need not prove at this stage that the business was in
fact not viable or sustainable. Nor under the general pleading requirement for
knowledge is he required to show specific facts indicating Defendants knew that
the business was not viable or sustainable. Again, “Rule 9(b) was meant to require
detailed pleadings in cases of fraud so as to aid a defendant in supporting its case.
It was never meant to require a plaintiff to set forth every factual detail supporting
its claim, nor was it meant to fuse the stages of pretrial investigation and
discovery.” NHC Healthcare, 115 F. Supp. 2d at 1152. Schell’s allegations are
sufficient to put Defendants on notice of the substance of Schell’s Complaint and
permit them to file a responsive pleading.
Furthermore, Rule 9(b) does not require a relator “to allege specific details
of every alleged fraudulent claim” – rather, the relator “must provide some
representative examples of [defendants’] alleged fraudulent conduct.” Joshi, 441
F.3d at 557 (emphasis added). Defendants concede that “if Relator pleaded all the
requisite elements of a single false claim with the particularity required under Rule
9(b), his Complaint would survive dismissal notwithstanding the lack of
particularity surrounding other alleged claims.” [Doc. #29 – Reply Suggestions]
(emphasis omitted). Schell has provided representative examples of Defendants’
alleged fraud in the submission of the grant to NTIA. Even if Schell’s allegation
that Defendants misrepresented that viability of the project to NTIA was not
sufficiently supported, this would not merit a dismissal of his Complaint, because
he has pled the other instances of alleged fraud with sufficient particularity. For
these reasons, Schell’s Complaint satisfies Rule 9(b).
Count II – Retaliation
In Count II of his Complaint, Schell brings a claim under the False Claims
Act’s whistleblower protection provision, which provides relief for employees
who engage in conduct protected by the False Claims Act and are discharged,
demoted, or experience other discriminatory consequences as a result. 31 U.S.C. §
3730(h). Schell alleges that he communicated with Defendants’ Chief Executive
Officer five times between October 2010 and August 2011 to express his “fears of
potential misrepresentation and fraud on the part of Defendants regarding their
statements to NTIA...” [Doc. #1 – Complaint]. Schell alleges that as a result of
voicing his concerns, his employment status was changed from hourly to salaried
in January 2011, which had the effect of reducing his compensation. He was then
summarily discharged in October 2011. Schell alleges that this retaliation
“was motivated solely by Schell’s engaging in activities protected by the
False Claims Act, in that Schell was terminated because he reported to his
supervisors his good faith suspicions, inter alia, of self-dealing by
[Defendants’] Board members…, fraudulent statements Defendant made to
NTIA regarding the ARRA BTOP grant application and within associated
documents, and the fact Defendants did not actually receive an ‘in-kind’
contribution from the State of Missouri…”
[Doc. #1 – Complaint].
To state a claim for retaliation under the False Claims Act, the plaintiff
must show “(1) the plaintiff was engaged in conduct protected by the FCA; (2) the
plaintiff's employer knew that the plaintiff engaged in the protected activity; (3)
the employer retaliated against the plaintiff; and (4) the retaliation was motivated
solely by the plaintiff’s protected activity.” Schuhardt v. Washington Univ., 390
F.3d 563, 566 (8th Cir. 2004).
“An employee engages in protected activity where (1) the employee in
good faith believes, and (2) a reasonable employee in the same or similar
circumstances might believe, that the employer is possibly committing fraud
against the government.” Id. In other words, the employee must have “both a
good-faith and an objectively reasonable belief that [the employer] was
committing fraud against the government.” Wilkins v. St. Louis Hous. Auth., 314
F.3d 927, 933 (8th Cir. 2002). As discussed above, Schell has stated a claim for
violation of the False Claims Act by Defendants. As Vice President of
Operations, Schell had personal knowledge of Defendants’ grant application and
conduct in this regard. He alleges in his Complaint that he communicated his
concerns about potential False Claims Act violations to Defendants’ CEO and
other officers multiple times over a year-long period, and that as a result of his
persistent complaints his pay was reduced and he was ultimately fired. The fact
that Schell repeatedly voiced his concerns to Defendants indicates that he believed
in good faith that these violations were occurring. Additionally, taking the
allegations in the Complaint as true, it would not be unreasonable for a person
witnessing the conduct Schell witnessed to believe that Defendants were
An “employee’s report of illegal or unlawful activity is sufficient to put an
employer on notice that the employee is engaged in protected activity.”
Schuhardt, 390 F.3d at 568 (citing Robertson v. Bell Helicopter Textron, Inc., 32
F.3d 948, 951 (5th Cir. 1994)). According to the facts alleged in his Complaint,
Schell specifically communicated to Defendants his concerns that they were
making false statements to the NTIA. As such, Defendants were on notice that
Schell was engaging in protected activity.
Additionally, to state a retaliation claim, “the retaliation must have been
motivated solely by the plaintiff's protected activity.” Collins v. Ctr. For
Siouxland, 2011 WL 2893038 at *12 (N.D. Iowa July 15, 2011) (citing Schuhardt,
390 F.3d at 566). Schell alleges that the stated reason for his termination was
“elimination of position,” but that this reason was a pretext concocted by the
Board at the advice of counsel to avoid a potential damages suit. [Doc. #1 –
Complaint]. Defendants argue that Schell has failed to allege facts to support this
claim. However, Schell has offered specific facts, including the date of the Board
meeting at which his termination was decided; the instructions given to CEO
Fogle to terminate Schell; Fogle’s subsequent consultation with counsel Karen
Milner regarding the legal consequences of terminating Schell; and the date of a
second meeting by the Board to concoct a reason for Schell’s termination. [Doc.
#1 – Complaint]. These pleadings are sufficiently detailed to state a claim for
relief. As such, Schell has state a claim of retaliation under the False Claims Act.
Count III – Missouri Letter of Dismissal Statute
In his final count, Schell brings a claim for violation of Missouri’s Letter of
Dismissal statute. This statute requires an employer to issue, upon request, a letter
“setting forth the nature and character of service rendered by such employee to
such corporation and the duration thereof, and truly stating for what cause, if any,
such employee was discharged or voluntarily quit such service.” Mo. Ann. Stat. §
290.140.1. Schell alleges that he requested a letter of dismissal pursuant to this
statute, and the letter falsely stated that he was terminated because the Company
decided to eliminate his position. [Doc. #1 – Complaint].
“In order to recover damages based upon a service letter, a plaintiff must
prove that he or she was refused or hindered in obtaining employment due to the
absence or inadequacy of a service letter, that the position plaintiff was refused or
hindered in obtaining was actually open[,] and the rate of pay for such position.”
Uhle v. Sachs Elec., 831 S.W.2d 774, 777 (Mo. Ct. App. 1992). Schell alleges
that since his termination, he has applied for other employment advertised through
various media and with remuneration ranging from federal minimum wage to
$60/hour. He has not received an offer of employment, and alleges that this is
because “he must state the reason for his termination for applying for new
positions and he must list Defendant [Bluebird] Network as a reference.” He
asserts that “[a]s a result of Defendant [Bluebird] Network’s failure to issue a
properly requested and delivered letter of dismissal,” he suffered damages
including lost income and expenses in searching for replacement employment.
[Doc. #1 – Complaint]. Plaintiff has alleged each element of the claim for a
violation of the Letter of Dismissal Statute. Defendants dwell on Schell’s
statement in his Complaint that “Defendant [Bluebird] Network’s board met in
executive session and voted to terminate Schell, for reasons unknown to Schell.”
[Doc. #1 – Complaint]. Defendants claim that if Schell did not know the reason
for his termination, he can’t allege that the reason given in the dismissal letter was
false. However, taken in context, it is clear that this statement in the Complaint
refers to Schell not knowing at the time why he was terminated. At numerous
other points in the Complaint, Schell alleges that he was terminated because he
engaged in protected activity under the False Claims Act. Furthermore, “plaintiff
has no burden of proving the true reason for his discharge; his burden is negative
in character because such true reason is peculiarly within the knowledge of the
employer, and burden of showing the truth of the asserted reason for discharge is
on the employer.” Potter v. Milbank Mfg. Co., 489 S.W.2d 197, 203 (Mo. 1972).
As such, Defendants’ argument has no merit. Schell’s Complaint is sufficient to
state a claim for a violation of Missouri’s Letter of Dismissal Statute.
For the reasons discussed above, Schell’s Complaint is sufficient to state a
claim for relief under Rule 12(b)(6). Additionally, his claims alleging fraud under
the False Claims Act meet the heightened pleading requirements of Rule 9(b).
Therefore, Defendants’ Motion to Dismiss [Doc. #22] is DENIED.
s/ NANETTE K. LAUGHREY
NANETTE K. LAUGHREY
United States District Judge
Dated: June 28, 2013
Jefferson City, Missouri
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