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Toulu Thao v. Shaun Donovan

September 14, 2012

TOULU THAO,
PLAINTIFF,
v.
SHAUN DONOVAN, SECRETARY OF
THE DEPARTMENT OF HOUSING
AND URBAN DEVELOPMENT; FORMER REGIONAL COUNSEL OF HUD REGION IX FAYE AUSTIN; FORMER FIELD DIRECTOR OF THE FRESNO HUD OFFICE MARIE SUDDUTH; TERESA CARSON, FORMER AGENT OF THE U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, HUD OFFICE OF THE INSPECTOR GENERAL; IN THEIR INDIVIDUAL AND/OR OFFICIAL CAPACITIES AND THE UNITED STATES OF AMERICA; AND DOES 1-75, INCLUSIVE,
DEFENDANTS.



MEMORANDUM OPINION AND ORDER ON DEFENDANTS' MOTION FOR PARTIAL DISMISSAL OF PLAINTIFF'S FIRST AMENDED COMPLAINT Doc. # 26

This is a civil rights action by plaintiff Toulu Thao ("Plaintiff") against various persons having present or past supervisory or investigatory responsibility in the Department of Housing and Urban Development("HUD") in their personal and official capacities and the United States of America (collectively, "Defendants"). Broadly, the claims alleged in Plaintiff's First Amended Complaint ("FAC") arise from two sets of allegations; the first set alleges workplace discrimination and discriminatory employment practices, and the second set alleges Defendants knowingly presented false information to a grand jury for purpose of seeking the unlawful criminal prosecution of Plaintiff. Plaintiff's claims for relief are alleged pursuant to Title VII of the Civil Rights Act, Bivins v. Six Unknown Agents, 403 U.S. 388 (1971) and the Federal Tort Claims Act. In the instant motion to dismiss, Defendants seek dismissal of Plaintiff's Bivins and Tort Claims Act claims. Federal question jurisdiction exists pursuant to 28 U.S.C. § 1331. Venue is proper in this court.

FACTUAL ALLEGATIONS

Plaintiff was born in Laos and moved to Fresno, California in 1983. In 1996, Plaintiff formed a non-profit organization called Hmong American Community, an organization to promote Hmong economic development. Hmong American Community is often referred to as "HAC". Plaintiff began employment with HUD in 1998. Approximately one week after commencing employment as a Community Builder Fellow, Plaintiff was instructed by Defendant Austin to complete a Confidential Financial Disclosure Report (OGE 450). At the time of Plaintiff's employment and until April of 2004, Defendant Sudduth was the Field Office Director of the Fresno HUD office. On or about May 2001, Sudduth "caused an investigation to be commenced by the Office of the Inspector General by alleging that Hmong American Community received a grant from HUD and that Plaintiff had failed to report [receiving HUD grant money] in the Government Ethics Form, OGE Form 450." Doc. 20 at ¶ 20. The principal participants in the investigation were Defendants Sudduth, Austin and Carson.

Plaintiff alleges that in 2004 Sudduth admitted to Carson that Sudduth was wrong in the allegation that the Hmong American Community had received a HUD grant; rather, the organization that had received the grant was Housing Assistance Corporation, an organization that was also frequently referred to by the acronym "HAC," and an organization that had no connection to Plaintiff. Despite knowing, or having reason to know, that Plaintiff had not falsely reported that he received no grant money from HUD, Defendant Carson falsely testified "to a Federal Grand Jury that indicted Plaintiff in February 2006 and continued to conceal [exonerating] information from federal prosecutors." Doc. # 20 at ¶ 23. Plaintiff alleges that Defendant Austin acquiesced in the false testimony and the concealment of exonerating information from federal prosecutors.

Plaintiff alleges that Defendants knew or had reason to know the falsity of the criminal allegations not later than 2004 but persisted in support of Plaintiff's prosecution nevertheless. Plaintiff also alleges that no other individual person employed by HUD has ever been criminally charged for failure to report required information on the OGE Form 450 or any supplements thereto. Plaintiff alleges that although he disputes that his position even required the completion of a OGE Form 450, he completed the form correctly according to instructions provided by HUD.

On February 10, 2006, Plaintiff was arrested pursuant to a federal warrant at the Fresno HUD office. As of March 10, 2006, he was placed on indefinite suspension from his position at HUD pending the outcome of the criminal prosecution. Plaintiff alleges that in 2008 the Office of the Inspector Genera ("OIG"), the agency responsible for the investigation of Plaintiff's criminal charges and for providing information to the parties in the criminal action, "received numerous confirmations from HUD that the Hmong American Community had not received a grant from HUD, yet did not take appropriate action to terminate the criminal proceeding in light of [Plaintiff's] actual innocence. Doc. # 20 at ¶ 28.

On July 3, 2008, Plaintiff entered into a "Deferred Prosecution Agreement" (hereinafter, the "Agreement"). There is some disagreement between the parties as to what conduct Plaintiff did or did not acknowledge in the agreement, and whether the conduct that was admitted constituted an admission of wrongdoing. However, it appears uncontested that under the agreement the government agreed to not take action in furtherance of the criminal action and agreed to dismiss the indictment at the end of twelve months provided Plaintiff refrained from any unlawful activity and performed a period of community service.

On July 15, 2008, approximately two weeks after the Agreement had been executed, the U.S. Attorney produced to Plaintiff's attorney discovery materials that included, inter alia, an e-mail exchange between Defendants Sudduth and Carson wherein Sudduth sent Carson an e-mail on February 25, 2004, "falsely stating that Hmong American Community, with whom Plaintiff had a relationship, had received HUD funding." Doc. # 20 at ¶. On the following day Sudduth sent Carson a second e-mail stating that the prior e-mail had been in error and the Hmong American Community had not received HUD funding. No explanation was provided as to why the e-mail exchange showing Defendants' knowledge of the falsity of the criminal charges was not provided prior to the time the Agreement was executed.

In July 2009, about one year after the Agreement was executed, all charges against Plaintiff were dismissed in accord with the terms of the Agreement. Although the dismissal of the charges coincided with the time-frame specified for dismissal of the charged in the Agreement, Plaintiff alleges he was factually innocent of the charges alleged from the outset.

Plaintiff's complaint alleges a number of facts pertaining to an Equal Employment Opportunity Commission ("EEOC") complaint that was filed by Plaintiff following his reinstatement and was denied by EEOC. Plaintiff's first claim for relief seeks judicial review of the EEOC's finding of no employment discrimination; however, Defendants do not challenge Plaintiff's first claim for relief in the instant motion to dismiss. The court will therefor not reiterate the facts alleged with regard to that claim.

LEGAL STANDARD

A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure can be based on the failure to allege a cognizable legal theory or the failure to allege sufficient facts under a cognizable legal theory. Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 533-34 (9th Cir.1984). To withstand a motion to dismiss pursuant to Rule 12(b)(6), a complaint must set forth factual allegations sufficient "to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) ("Twombly"). While a court considering a motion to dismiss must accept as true the allegations of the complaint in question, Hospital Bldg. Co. v. Rex Hospital Trustees, 425 U.S. 738, 740 (1976), and must construe the pleading in the light most favorable to the party opposing the motion, and resolve factual disputes in the pleader's favor, Jenkins v. McKeithen, 395 U.S. 411, 421, reh'g denied, 396 U.S. 869 (1969), the allegations must be factual in nature. See Twombly, 550 U.S. at 555 ("a plaintiff's obligation to provide the 'grounds' of his 'entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do"). The pleading standard set by Rule 8 of the Federal Rules of Civil Procedure "does not require 'detailed factual allegations,' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) ("Iqbal").

The Ninth Circuit follows the methodological approach set forth in Iqbal for the assessment of a plaintiff's complaint:

"[A] court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief."

Moss v. U.S. Secret Service, 572 F.3d 962, 970 (9th Cir. 2009) (quoting Iqbal, 129 S.Ct. at 1950).

DISCUSSION

Defendants have moved to dismiss Plaintiff's second and third claims for relief only. The graveman of these claims for relief is that Defendants' conduct amounted to malicious prosecution when Defendants knowingly provided incriminatory evidence they knew at the time to be false to the OIG and when they actively withheld evidence that was known to be exculpatory over the term of the criminal proceeding. Rule 8(d)(2) of the Federal Rules of Civil Procedure establishes the general rule that a plaintiff may plead alternative theories of recovery that arise from the same set of facts. This is precisely what Plaintiff's FAC does. If Plaintiff can prove that he suffered malicious prosecution as a result of employment discrimination, then he may be entitled to relief under his first claim for relief pursuant to Title VII. See Berry v. Stevinson Chevrolet, 74 F.3d 980, 986 (10th Cir. 1996) (malicious prosecution may be an adverse job action for purposes of Title VII). If Plaintiff cannot prove the alleged malicious prosecution was rooted in discriminatory animus, he may nonetheless be entitled to relief under his second claim for relief under Bivins if he can show he was prosecuted with malice, without probable cause and for the purpose of denying Plaintiff "equal protection or some other specific constitutional right." Freeman v. City of Santa Ana, 68 F.3d 1180, 1189 (9th Cir. 1995). Should Plaintiff be unable to prove malicious prosecution arising from discrimination or for the purpose of depriving him of equal protection or some other constitutional right, he may yet seek relief by way of his third claim for relief which alleges the tort of malicious prosecution under the Federal Tort Claims Act.

As Defendants' arguments in support of their motion to dismiss suggest, the general rule permitting pleading of alternative legal theories of recovery may be tempered by preemption or other preclusive doctrine where Congress has seen fit to provide a single remedy to the exclusion of others for certain kinds of claims. Specifically, Defendants contend that both Title VII and the Civil Service Reform Act ("CSRA") limit Plaintiff's ability to plead alternative theories for relief based on the allegation of malicious ...


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