United States District Court, N.D. California, San Jose Division
THOMAS M. SEARS, Plaintiff,
HOUSING AUTHORITY OF THE COUNTY OF MONTEREY, et al., Defendants.
ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT, DENYING PLAINTIFF'S MOTION FOR LEAVE TO FILE FOURTH AMENDED COMPLAINT
LUCY H. KOH, District Judge.
Plaintiff Thomas Sears ("Sears") brings this action against his former employer, Monterey County Housing Authority Development Corporation ("HDC") for wrongful termination in violation of public policy, violation of Cal. Labor Code § 1102.5, and retaliation in violation of the False Claims Act ("FCA"), 31 U.S.C. § 3730(h)(1). Before the Court are Defendant HDC's Motion for Summary Judgment, see ECF No. 250, and Plaintiff Sears' Motion for Leave to File a Fourth Amended Complaint, see ECF No. 264. Both motions are fully briefed. Pursuant to Civil Local Rule 7-1(b), the Court finds these matters appropriate for resolution without oral argument and hereby VACATES the hearings on these Motions set for April 10, 2014, at 1:30 p.m. The Court, having considered the record in this case, applicable law, and parties' briefs, GRANTS HDC's Motion for Summary Judgment and DENIES Sears' Motion for Leave to File a Fourth Amended Complaint for the reasons stated below.
A. Factual Background
In October 2006, the Housing Authority of the County of Monterey ("HACM") hired Sears as a Senior Construction Manager and Deputy Director of Development for HDC, a nonprofit that had not yet launched. See ECF No. 268 ("Sears Opp. Decl.") ¶ 5. In or around June 2010, Sears officially transferred to HDC, as the entity became independent of HACM. ECF No. 253 ("Warren Decl.") ¶ 6. Starla Warren, who recruited Sears at HACM, was Sears' supervisor at HDC. Sears Opp. Decl. ¶¶ 4-5.
In early 2009, while he was still at HACM, Sears "began noticing and speaking out against practices which [he] felt were unlawful and in violation of state and federal regulations." Id. ¶ 9. These alleged violations included: (1) bid-fixing in violation of HUD federal procurement regulations, in connection to three different HDC development projects; (2) falsifying estimates on applications for federal HUD funding; (3) creating fraudulent documents on applications for state funding; (4) violations of the Fair Housing Act; and (5) commingling of funds. Id. ¶¶ 27-56. Sears contends that he reported the aforementioned legal violations to Warren. Id.
Sears asserts that his relationship with Warren began to change as a result of his vocal complaints. Id. ¶ 11. Sears felt that Warren wanted him out of HDC, and that because she was newly empowered with the authority to fire him after HDC's split from HACM, Warren engaged in a deliberate campaign to "paper" Sears by giving Sears several reprimands and warnings, and placing Sears on administrative leave. Id. ¶ 22.
The first of these reprimands took place in July 2010, shortly after HDC became an independent entity from HACM. Id. ¶ 13. Sears then complained to John Curro ("Curro"), a construction manager consultant, and Warren, about what Sears perceived to be bid-fixing in connection to two development projects. Id. ¶¶ 12, 14. Sears went on a two-week vacation, and upon his return, received a letter from Warren stating that Sears would be terminated within five working days. Id. ¶ 15. Sears was placed on administrative leave from July 19, 2010 to August 27, 2010, with a "Preliminary Notice of Proposed Termination Action." Id.
Sears argues that the preliminary termination notice was retaliation for his vocal complaints of bid-fixing. Opp. at 10. HDC's notice, however, detailed four reasons for HDC's preliminary decision to terminate Sears: (1) Sears prepared tax credit applications that were unreadable and had to be re-done by other HDC employees; (2) Sears improperly stored documents on an external hard drive; (3) Sears failed to develop a budget for permit fees in a timely fashion and did not obtain the necessary signatures for the permits' submission, jeopardizing the application; and (4) Sears mismanaged architectural contracts, which caused a time crunch in the application process and required two contracts to be re-written and re-executed. Warren Decl. ¶ 7. Sears filed a timely appeal, and while the hearing officer found deficiencies in Sears' performance, the officer concluded that Sears' conduct did not merit termination. Id. ¶ 8; Sears Opp. Decl. ¶ 16. Importantly, the second basis regarding storage of information on an external hard drive echoed Warren's previous warnings to Sears. In March 2010, Warren reprimanded Sears for not placing files on the shared drive. Warren Decl. Ex. E. At that time, Warren and Sears had discussed that Sears' external hard drive would be used for drawings and photos only. Id.; Sears Opp. Decl. Ex. F, at 2.
While Sears was on administrative leave, HDC employees had to access Sears' HDC computer to find HDC documents. Warren Decl. ¶ 11. HDC employees discovered voluminous amounts of non-HDC-related business documents. Id. Specifically, the employees discovered business documents related to EnTech, Inc., a corporation of which Sears and his wife, were officers, and numerous documents such as "passports of foreign nationals, one billion dollars in Treaty of Versailles gold certificates, ' gold certificates issued by the Sultanate of Sulu and North Borneo, '... offshore bank account documents" and wire transfers. Warren Decl. Ex. F. HDC discovered several emails relating to EnTech business that were addressed to and from Sears' HDC email address, and included his title and workplace email signature. Warren Decl. ¶ 13.
Shortly after returning to work, on August 27, 2010, Warren gave Sears a written reprimand for violation of HDC's Information Security and Conflict of Interest Policies and HDC's Standards of Conduct. Warren Decl. ¶ 15. Warren placed Sears on a "Corrective Action Plan, " asking for Sears to improve his time management, limit personal calls and emails, develop a system for organizing assignments, and be a good team player. Sears Opp. Decl. ¶ 17; Sears Opp. Decl. Ex. I. Sears felt that he was greeted by a "hostile and discriminatory" work environment, and engaged an attorney to direct HDC to address multiple concerns. Sears Opp. Decl. ¶ 19. On August 30, 2010, moreover, Sears sent a letter to the California Tax Credit Allocation Committee regarding HACM's violation of HUD bid procedures. Id. ¶ 20.
HDC hired CSI Human Resources Group ("CSI") in September 2010 to investigate Sears' complaints. Id. ¶ 19; Warren Decl. ¶ 9. CSI's investigation into Sears' work environment substantiated some of Sears' allegations, but rejected other allegations. ECF No. 251 ("Torres Decl.") Ex. A. For example, Sears complained about being issued a company phone, when HDC's previous policy had been to reimburse employees for work-related usages of their personal phone. Id. at 5. Sears stated that he was left with a cell phone contract that he could not cancel without incurring fees, and all of his business contacts had his previous number. Id. at 12. CSI found that Sears' allegation was accurate. Id. at 14. Sears also complained that his external hard drive was taken away, which contained important data needed to perform his work duties. Id. at 5. CSI found that Sears' allegation was true. Id. at 14. Finally, Sears alleged that Warren had ordered staff to not give Sears keys to his desk and the back door. Id. at 2. CSI substantiated this complaint. Id. at 14.
CSI did not substantiate Sears' allegation that HDC's staff had been told not to communicate with him, at risk of losing their jobs. Id. at 1, 13. None of the employees CSI interviewed corroborated Sears' claim. Id. at 13. CSI also did not find truth in Sears' allegation that Warren had been disparaging him in the community, stating that Sears provided no specific evidence to support this claim. Id. Sears also alleged that Warren ordered Sears to not speak to Paul Davis, a personal friend. Id. at 2. CSI found that Sears had taken Warren's direction out of context, as Paul Davis was an architect working on a project from which Sears had been removed. Id. at 13. Warren's order was limited to communicating with Davis as it relates to the project. Id. CSI also found that Sears provided no evidence to support his assertion that he was demoted to projects not befitting his educational background or experience, or that HDC was piling on unreasonable amounts of work. Id. at 13-14.
Sears also complained that Warren stated that he would be reviewed every two weeks for 90 days, arguing that this was a double standard without reasonable justification. Id. at 2. CSI did not find evidence of disparate treatment or a "double standard." Id. at 14. Sears also alleged that after Warren's promotion to CEO and President of HDC, Warren suddenly found fault with Sears' performance, even though nothing was brought to his attention prior to July 19, 2010. Id. at 2. Warren responded that she had been Sears' supervisor for years and had verbally coached him in the past on his performance. Id. at 6. CSI did not draw any conclusion as to this allegation. Id. at 14.
Importantly, during the course of the investigation, female HDC employees reported that Sears made inappropriate sexual comments in the workplace. Warren Decl. ¶ 10. Accordingly, CSI conducted a second investigation inquiring specifically into the sexual harassment claims. Id. In the second investigation, CSI learned that Sears had thrown a piece of candy at a female employee's cleavage, frequently made comments about a temporary co-worker's chest and stared at her breasts, told co-workers that he was a "boob guy, " and took pictures of a co-worker's breasts, zoomed in, and showed the picture to another employee. Warren Decl. Ex. D. Moreover, Warren Reed, a business partner of HDC, reported that Sears had made an inappropriate sexual comment about a female non-HDC employee during a construction meeting. Warren Decl. ¶ 21; ECF No. 252-2 ("Reed Decl.") Ex. A.
On September 16, 2010, Warren gave Sears a formal reprimand based on the findings of the second CSI investigation and placed Sears on administrative leave. Sears Opp. Decl. ¶ 21; Warren Decl. ¶ 16. Three days later, on September 19, 2010, members of HDC and HACM's board received a message from Sears' business associate, Charles Miller, at their personal email address. Warren Decl. ¶ 17. That same day, several board members received phone calls at their homes from Miller. Id. The next day, another one of Sears' business associates, Michael Hinrich, wrote HDC's board threatening to sue. Id. ¶ 18. One week later, Miller emailed the board threatening to sue as well. Id. ¶ 19.
While on administrative leave, Sears claims he "remained committed to getting someone to take seriously the abuse, waste, and unlawful activities that [Warren] and HDC were engaged in." Sears Opp. Decl. ¶ 23. Sears addressed HDC and HACM's boards on September 27, 2010, urging the boards to investigate violations of HUD, HACM, and HDC procurement regulations. Id.
On October 4, 2010, Warren notified Sears of Warren's decision to terminate Sears' employment at HDC. Warren Decl. ¶ 21. Pursuant to this notification, Sears was terminated that same day. Sears Opp. Decl. ¶ 24. Warren asserts that she based her decision on Sears' failures to comply with policies and standards, his engagement in inappropriate sexual conduct with HDC employees and third parties, and his poor work performance. Warren Decl. ¶ 21.
On October 14, 2010, ten days after he was terminated, Sears sent a written complaint to HUD's Office of the Inspector General ("OIG"). Sears Opp. Decl. ¶ 42. The complaint included information about the reprisal he had discussed with OIG over the phone, the script from his address to the Board of Commissioners, which occurred after his initial call, and information about additional developments since their first conversation. Sears Opp. Decl. Ex. Q. HUD OIG investigators later met with Sears and eventually concluded that there was some merit to Sears' allegations that HDC did not properly follow HUD protocol. Sears Opp. Decl. ¶ 57. However, Sears alleges that he "never received any information about investigations into his complaints of retaliation or reprisal first made in September 2010." ECF No. 208 ("TAC") ¶ 29. Plaintiff also "never received from HUD OIG an explanation of a decision not to conduct an investigation into his complaints of retaliation or reprisal." Id.
B. Procedural History
Plaintiff and his wife, Brenda L. Stealy Sears, appearing pro se, filed a complaint on April 19, 2011 against HACM, HDC, Warren, and approximately two-dozen other defendants. ECF No. 1. Eighteen defendants moved to dismiss several of the Sears' claims in five separate motions to dismiss. See ECF Nos. 53, 56, 61, 64, 91. On February 3, 2012, Judge Armstrong, to whom the case was assigned, granted all five motions to dismiss with partial leave to amend. See ECF No. 158.
On March 5, 2012, Sears,  represented by counsel, filed a First Amended Complaint against HACM, HDC, Warren, the County of Monterey, and CSI. See ECF No. 159. Sears also filed a motion to change venue from Oakland, where Judge Armstrong is located, to San Jose. See ECF No. 160. Four days after filing the FAC, on March 9, 2012, Sears voluntarily dismissed then-Defendant County of Monterey. See ECF No. 163. On April 11, 2012, Sears filed a Second Amended Complaint asserting seven causes of action against defendants HACM, HDC, and Warren. See ECF No. 176. CSI was no longer included as a defendant. See id. Judge Armstrong granted Sears' motion to transfer on May 10, 2012, and the case was transferred to San Jose and assigned the undersigned Judge. See ECF No. 181.
After the case was transferred, Sears voluntarily dismissed, with prejudice, his first cause of action for violation of California Labor Code Section 1102.5 against HACM, as well as his fourth through seventh causes of action against all remaining defendants. See ECF No. 187. Sears subsequently dismissed HACM altogether. See ECF No. 203. The Court set a case schedule on August 29, 2012. See ECF No. 189. Under that case schedule, fact discovery was set to close on April 25, 2013 with expert discovery to close on June 6, 2013. See id
On August 31, 2012, HDC and Warren filed a motion to dismiss the Second Amended Complaint. See ECF No. 190. In this motion, HDC and Warren sought to dismiss Sears' (1) first cause of action to the extent it alleges a violation of California Labor Code Section 1102.5, which prohibits an employer from retaliating against an employee for providing information of alleged illegal conduct to law enforcement agencies; and (2) second cause of action alleging whistleblower retaliation in violation of American Recovery and Reinvestment Act ("ARRA"). Id.
On January 23, 2013, this Court granted HDC and Warren's motion to dismiss with leave to amend because Plaintiff failed to exhaust his administrative remedies. See ECF No. 207. The Court noted that Sears filed complaints over the internet with the HUD OIG alleging violations by HACM, HDC, and Warren "[b]efore October 4, 2010" and "in or about September to November 2010." Id. at 9. The Court, however, dismissed the ARRA claim because the SAC "fail[ed] to show that Plaintiff filed a complaint with the HUD Inspector General regarding the alleged retaliation, a requirement if Plaintiff is to show Plaintiff exhausted his administrative remedies." Id. at 10. However, the Court granted Sears leave to amend as to the ARRA claim to allow Sears to allege facts showing that Sears filed a complaint with the HUD Inspector General alleging whistleblower retaliation. Id.
On February 11, 2013, Sears filed his TAC against HDC and Warren. See ECF No. 208. Sears alleged the following causes of action: (1) violation of California Labor Code Section 1102.5 and for wrongful termination in violation of public policy based on the aforementioned violation of Section 1102.5 (against HDC), see TAC ¶¶ 39-40; (2) whistleblower retaliation in violation of the ARRA (against HDC and Warren), see TAC ¶¶ 47-55; and (3) whistleblower retaliation in violation of the False Claims Act (against HDC), see TAC ¶¶ 56-63.
On February 22, 2013, HDC and Warren moved to dismiss the second cause of action- whistleblower retaliation in violation of ARRA-on the grounds that Sears failed to exhaust his administrative remedies as to this claim. See ECF No. 209-1. On April 3, 2013, the Court extended the deadline for discovery (both fact and expert) to September 12, 2013. See ECF No. 218. The Court granted Defendants' motion to dismiss with prejudice on August 22, 2013, because Sears had not adequately alleged exhaustion despite several opportunities to do so. See ECF No. 230. This effectively dismissed Defendant Warren from the case, since the ARRA cause of action was the only cause of action to which she was a defendant. The first cause of action (for violation of Section 1102.5 and wrongful termination in violation of public policy) and third cause of action (for False Claims Act retaliation) survived the various motions to dismiss. The Court then granted stipulations to continue the discovery deadlines through February 13, 2014. See ECF No. 232.
On February 25, 2014, HDC filed its Motion for Summary Judgment. ECF No. 250. On March 13, 2014, Sears filed an Opposition to HDC's Motion for Summary Judgment. ECF No. 267. On March 14, 2014, Sears filed an Ex Parte Motion to deem the Opposition as timely filed, which HDC has opposed. See ECF Nos. 288, 293, 296. On March 20, 2014, HDC filed a Reply in support of its Motion for Summary Judgment. See ECF No. 298.
On March 7, 2014, three weeks after the close of discovery and on week after a dispositive motion had been filed, Sears filed a Motion for Leave to File a Fourth Amended Complaint, seeking to add a cause of action for defamation against HDC and to re-add Starla Warren (who had been dismissed as a party on August 22, 2013) as a defendant. See ECF No. 264. On March 19, 2014, HDC filed an Opposition to Sears' Motion for Leave to Amend. See ...