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Allen Coleman, et al v. Kathleen Sterling

May 3, 2011

ALLEN COLEMAN, ET AL.,
PLAINTIFFS,
v.
KATHLEEN STERLING, ET AL.,
DEFENDANTS.
TRI-CITY HEALTHCARE DISTRICT,
COUNTERCLAIMANT,
v.
AND ALLEN COLEMAN, ET AL.,
COUNTERDEFENDANTS.



The opinion of the court was delivered by: Hon. Thomas J. Whelan United States District Judge

(1) SUSTAINING COUNTERCLAIMANT'S OBJECTION [DOC. 73], COUNTERDEFENDANTS' (2) DENYING MOTION TO DISMISS COUNTERCLAIM [DOC. 67], (3) DENYING COUNTERDEFENDANTS' MOTION FOR A MORE DEFINITE STATEMENT [DOC. 67]

ORDER:

On October 14, 2010, Counterclaimant Tri-City Healthcare District ("District") filed a counterclaim for a common count against Counterdefendants Allen Coleman, Suellyn Ellerbe, Dan Groszkruger, Terry Howell, Doreen Sanderson, and Robert Wardwell (collectively, "Counterdefendants"). The counterclaim is based on the allegation that erroneously calculated bonus payments mistakenly paid to Counterdefendants have not been returned. On November 4, 2010, Counterdefendants moved to dismiss, and in the alternative, moved for a more definite statement. The District opposes the motion and objects to Counterdefendants' reply.

The Court decides the matter on the papers submitted and without oral argument. See Civ. L.R. 7.1(d)(1). For the following reasons, the Court SUSTAINS the District's objection (Doc. 73), DENIES Counterdefendants' motion to dismiss (Doc. 67), and DENIES Counterdefendants' motion for a more definite statement (Doc. 67).

I. BACKGROUND

Counterdefendants were all senior executives employed by the District under written employment agreements. (First Am. Compl. ("FAC") ¶¶ 11, 125 [Doc. 34].) According to a written incentive plan, they were each "eligible to receive sizeable bonus[es] if certain financial goals and other non-financial benchmarks were met." (Countercl. ¶ 23 [Doc. 54].)

In September 2008, the District calculated the bonuses apparently owed to Counterdefendants. (Countercl. ¶ 20.) Based on the information available at the time, as allegedly prepared by and at the direction of Counterdefendants, the calculations and tabulations indicated that Counterdefendants had met sufficient goals and benchmarks to qualify them for bonuses. (Id. ¶ 21.) On December 3, 2008, the District Board of Directors awarded bonuses to each of the counterdefendants. (Id. ¶ 12.)

However, the District alleges that "[Counterdefendants] did not actually meet the necessary benchmarks to trigger the bonuses that were paid." (Countercl. ¶ 13.) It only seemed as though the requisite benchmarks had been met through allegedly erroneous accounting practices. (Id. ¶ 14.) Specifically, the erroneous accounting methods and practices overstated revenue and understated liabilities. (Id. ¶ 25.) As a result, bonuses were improperly paid based on flawed financial data. (Id.) The District alleges that it demanded payment from Counterdefendants, but no payment has been made.*fn1 (Id. ¶¶ 36--37.)

On December 18, 2008, Counterdefendants were each placed on administrative leave. (FAC ¶ 47.) On April 23, 2009, they were all terminated. (Id. ¶ 57.)

On July 15, 2009, Counterdefendants filed a complaint in San Diego Superior Court. Shortly thereafter, the lawsuit was removed to this Court. After having several causes of action dismissed, Counterdefendants filed their First Amended Complaint on April 16, 2010. It includes nine state-law causes of action and a tenth for an alleged violation of 42 U.S.C. § 1983. Each cause of action relates to or arises out of Counterdefendants' termination from the District.

On October 14, 2010, the District filed a counterclaim for a common count along with its answer. On November 4, 2010, Counterdefendants moved to dismiss the counterclaim, or, in the alternative, moved for a more definite statement. The District opposes the motion. On December 12, 2010, Counterdefendants filed a reply. The District objects to the reply.

II. MOTION TO DISMISS -RULE 12(B)(6)

A. Legal Standard

The court must dismiss a cause of action for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). A motion to dismiss under Rule 12(b)(6) tests the complaint's sufficiency. See N. Star Int'l v. Ariz. Corp. Comm'n., 720 F.2d 578, 581 (9th Cir. 1983). All material allegations in the complaint, "even if doubtful in fact," are assumed to be true. Id. The court must assume the ...


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