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Thomas v. Starz Entertainment, LLC

United States District Court, C.D. California

July 11, 2016

KENO V. THOMAS
v.
STARZ ENTERTAINMENT LLC, ET AL.

          Attorneys Present for Plaintiffs: Dan Stormer Brian Olney

          Attorneys Present for Defendants: Eric Amdursky Margaret Carter

          Present: The Honorable CHRISTINA A. SNYDER Judge

          DEFENDANTS’ MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT (DKT. 63, FILED APRIL 13, 2016)

          CHRISTINA A. SNYDER Judge

         I. INTRODUCTION

         On October 29, 2015, plaintiff Keno V. Thomas (“plaintiff”) filed this action in the Los Angeles County Superior Court against defendants Starz Entertainment (“Starz”); Michael Thornton (“Thornton”); Liberty Media Corp.; Starz; Starz, LLC; Chris Albrecht (“Albrecht”), and Does 1 through 20 (collectively, “defendants”).[1] Dkt. 1, Ex. A, (“Complaint”). On November 30, 2015, defendants removed this action to this Court on the basis of federal question and diversity jurisdiction. Dkt. 1.

         In brief, plaintiff, who is a former executive of the television network Starz, alleges that defendants retaliated against and ultimately fired him in violation of state and federal law. Specifically, plaintiff’s original complaint asserted claims for (1) Retaliation in Violation of California Labor Code § 1102.5(b); (2) Retaliation in Violation of California Labor Code § 1102.5(c); (3) Retaliation in Violation of California Government Code § 12940(h); (4) Retaliation in Violation of 42 U.S.C. § 1981; (5) Wrongful Termination in Violation of Public Policy; (6) Failure to Prevent Retaliation in Violation of California Government Code§ 12940, et seq.; and (7) Intentional Infliction of Emotional Distress (“IIED”). See generally Complaint.

         On December 7, 2015, defendants filed a Rule 12(b)(6) motion to dismiss (i) plaintiff’s first and second claims for retaliation in violation of the California Labor Code; (ii) plaintiff’s fourth claim for retaliation in violation of 42 U.S.C. § 1981, and (iii) plaintiff’s seventh claim for intentional infliction of emotional distress. Dkt. 21. In an order dated February 29, 2016, the Court dismissed without prejudice plaintiff’s first and second claims for retaliation in violation of Labor Code § 1102.5(b) and (c), and similarly dismissed without prejudice plaintiff’s seventh claim for intentional infliction of emotional distress.[2]

         On March 30, 2016, plaintiff filed the operative first amended complaint (“FAC”). On April 13, 2016, defendant filed the instant motion to dismiss the first, second, and seventh claims in the operative FAC. Dkt. 63 (“Motion”). On May 9, 2016, plaintiff filed an opposition to the instant motion. Dkt. 67 (“Opp’n”). On May 23, 2016, defendant filed a reply. Dkt. 68 (“Reply”). On July 11, 2016, the Court provided the parties with a tentative order and held oral argument on the instant motion.

         Having carefully considered the parties’ arguments, the Court concludes as follows.

         II. BACKGROUND

         Plaintiff alleges the following facts in his FAC:

         In 2004, plaintiff was hired by defendant Starz as its Senior Vice President of Sales and Affiliate Marketing. FAC ¶ 14. In this role, plaintiff held management responsibility for Starz’s accounts with several of its distributors, including DirecTV, Dish Network, Verizon FiOS, and AT&T U-verse. Id. ¶ 15. Plaintiff states that throughout his employment at Starz he has been troubled by what he perceives as a lack of diversity among Starz’s senior level management. Id. ¶ 13. For example, plaintiff asserts that, at the time of his termination, he was the only senior-level African-American at Starz. Id. Plaintiff claims that, as a senior executive at Starz, he advocated on behalf of women and minorities by, among other things, speaking to human resources about the lack of diversity at Starz and prioritizing the hiring of women and minorities in his department. Id. ¶ 20. Nonetheless, plaintiff states that these actions exposed him to ridicule at the hands of Starz’s management. Id.

         On August 16, 2013, defendant Thornton was named Starz’s Chief Revenue Officer and became plaintiff’s direct supervisor. Id. ¶ 18. In 2013 and 2014, plaintiff raised concerns to the management of Starz regarding two practices that he believed were unlawful. First, in January 2013, Starz announced the appointment of Derek Chang, a former Executive Vice President at DirecTV, to its board of directors. Id. ¶ 24(b). As detailed more fully infra, plaintiff informed Starz management, including defendant Thornton, that he believed Chang could use confidential information he had obtained from DirecTV, such as DirecTV’s proprietary information concerning its pricing and licensing fees, for his own benefit. Id. ¶ 24(c). Plaintiff states that the management personnel to whom he raised these concerns agreed with plaintiff that there may be a risk of Chang improperly using DirecTV’s confidential information for his own benefit. Id. However, when plaintiff raised the issue again a few months later, Thornton threatened to fire plaintiff if he ever spoke about the matter again. Id. ¶ 24(f).

         Second, plaintiff alleges that he disclosed to Thornton that he believed Starz had obtained a favorable deal with one of its major distributors, Comcast, as a result of illegal insider manipulation and unfair influence on a pending merger. Id. ¶¶ 26-34. Specifically, plaintiff alleges that, in early 2014, “Comcast’s affiliate carriage contract with Starz was set to expire” and that “it was . . . anticipated among Starz’[s] executives that Comcast would . . . seek to negotiate a new affiliate carriage contract.” Id. ¶ 27. Plaintiff further alleges that, at the same time, Comcast and Time Warner Cable, another distribution company, were attempting to obtain federal approval for a merger of their two companies. Id. ¶ 28. Plaintiff contends that “the FCC and Department of Justice were scrutinizing the proposed Comcast and Time Warner Cable merger, ” and that, “[i]n an effort to obtain governmental approval for the merger, ” Comcast and Time Warner Cable proposed to sell millions of subscribers to a third distribution company, Charter Communications. Id. Plaintiff alleges that a member of the Starz board of directors, non-party Gregory Maffei, who is also on the Charter board of directors, “conspired” with defendant Thornton “to manipulate the Charter/Comcast deal”––specifically, “Thornton boasted [to plaintiff during dinner one evening] that he had urged Mr. Maffei to call Comcast and demand that, as a clandestine part of the Charter/Comcast deal, Comcast extend its Starz affiliate carriage deal at a loss for Comcast and at a great profit for Starz.” Id. ¶ 31. Plaintiff states that when he learned about these events from defendant Thornton, he became concerned that such conduct may have violated the law and that Maffei’s actions in particular breached his fiduciary duty to Charter and thus violated California Corporations Code § 309(a). Id. ¶ 32. However, when plaintiff “approached [defendant] Thornton and raised concerns about the legality of Comcast’s deal with Starz, ” Thornton “sternly warned [plaintiff] to never repeat what he just said because it could cost [plaintiff] his job.” Id. ¶ 34.

         In Fall 2013, Starz and DirecTV entered into negotiations because their existing contract was set to expire on August 31, 2014. Id. ¶ 35. Plaintiff alleges that Thornton repeatedly threatened to fire plaintiff, who was largely responsible for the DirecTV negotiations, if the deal was not completed by August 31, 2014. Id. By February 2014, Starz and DirecTV had not concluded their negotiations and DirecTV began removing Starz from its marketing packages. Id. ¶ 36. Plaintiff alleges that by mid-2014, Thornton and other Starz executives began excluding plaintiff from meetings and emails regarding the DirecTV negotiations. Id. ¶ 39. Plaintiff states that negotiations between Starz and DirecTV intensified in the Summer of 2014. Id. ¶ 41. But plaintiff avers that he was left out of key meetings and emails, and that Thornton negotiated directly with DirecTV on behalf of Starz. Id. ¶¶ 41-43. By mid-August 2014, plaintiff had been so excluded from the DirecTV negotiations that Thornton refused even to tell plaintiff about Starz’s negotiations strategy with DirecTV. Id. ¶¶ 46-47.

         Ultimately, on August 22, 2014, Starz and DirecTV executed an agreement extending their contract. Id. ¶ 49. The following month, during a meeting on September 4, 2014, defendant Thornton allegedly directed Kara Tefft, Starz’s Director of Finance, to order Mr. Thomas to “arbitrarily inflate [certain] revenue figures and subscriber numbers” for a presentation to Starz’s Board. Id. ¶ 51. As detailed more fully infra, plaintiff refused the order, believing that acting upon Tefft’s directive “would have violated numerous state and federal statutes prohibiting the knowing falsification of a corporation’s documents, ” including California Corporations Code § 2254; California Corporations Code § 2255(b); California Corporations Code § 1507; and Section 13(b)(5) of the Securities Exchange Act, 15 U.S.C. § 78m(b)(5), and Rule 13b2-1 thereunder, 17 C.F.R. § 240.13b2-1. FAC ¶ 53.

         Plaintiff further states that beginning in the Summer of 2014, he “began experiencing significant emotional distress and health deterioration, in large part due to . . . Starz’[s] deplorable treatment of him.” Id. ¶ 58. During the week of September 8, 2014, plaintiff states that his health “reached a breaking point” forcing him to miss work. Id. Shortly thereafter, plaintiff took a three-week medical leave of absence for alleged depression and anxiety. Id. ¶ 59. The week that plaintiff returned from his medical leave, Starz terminated his employment. Id. ¶ 60.

         III. LEGAL STANDARD

         A. Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6)

         A motion pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of the claims asserted in a complaint. Under this Rule, a district court properly dismisses a claim if “there is a ‘lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.’ ” Conservation Force v. Salazar, 646 F.3d 1240, 1242 (9th Cir. 2011) (quoting Balisteri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988)). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, 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.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). “[F]actual allegations must be enough to raise a right to relief above the speculative level.” Id.

         In considering a motion pursuant to Rule 12(b)(6), a court must accept as true all material allegations in the complaint, as well as all reasonable inferences to be drawn from them. Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998). The complaint must be read in the light most favorable to the nonmoving party. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). However, “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.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009); see Moss v. United States Secret Service, 572 F.3d 962, 969 (9th Cir. 2009) (“[F]or a complaint to survive a motion to dismiss, the non-conclusory ‘factual content, ’ and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.”). Ultimately, “[d]etermining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679.

         Unless a court converts a Rule 12(b)(6) motion into a motion for summary judgment, a court cannot consider material outside of the complaint (e.g., facts presented in briefs, affidavits, or discovery materials). In re American Cont’l Corp./Lincoln Sav. & Loan Sec. Litig., 102 F.3d 1524, 1537 (9th Cir. 1996), rev’d on other grounds sub nom Lexecon, Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26 (1998). A court may, however, consider exhibits submitted with or alleged in the complaint and matters that may be judicially noticed pursuant to Federal Rule of Evidence 201. In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999); see Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001).

         As a general rule, leave to amend a complaint which has been dismissed should be freely granted. Fed.R.Civ.P. 15(a). However, leave to amend may be denied when “the court determines that the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986).

         IV. DISCUSSION

         In the instant motion, defendants seek to dismiss claims one and two for retaliation in violation of California Labor Code §§ 1102.5(b) and 1102.5(c), respectively, as well as claim seven for intentional infliction of emotional distress. For the reasons explained below, the Court (1) GRANTS defendants’ motion as to plaintiff’s section 1102.5(b) claim for retaliation based upon disclosure of unlawful conduct, (2) DENIES the motion as to plaintiff’s section 1102.5(c) ...


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