Gary L. Sharpe, U.S. District Judge.
Plaintiff-relator John Rubar filed this qui tam action against defendants Hayner Hoyt Corporation, Jeremy Thurston, Gary Thurston, LeMoyne Interiors, Doyner, Inc., Ralph Bennett, and 229 Constructors, LLC pursuant to the False Claims Act (FCA)
Pending is defendants' motion to dismiss several of the remaining claims, (Dkt. No. 30), Rubar's motion for attorneys' fees, costs, and expenses, (Dkt. No. 31), and The Travelers Indemnity Company's motion to intervene, (Dkt. No. 65). For the following reasons, the parties' motions are both granted in part and denied in part, and Travelers' motion is granted.
Hayner Hoyt is a general contractor and construction management firm operated by Gary and Jeremy Thurston. (3d Am. Compl ¶¶ 12, 15.) Doyner and LeMoyne are wholly-owned subsidiaries of Hayner Hoyt. (Id. ¶¶ 13-14.) The Thurstons used Bennett, a service-disabled veteran employed as their warehouse manager, as a figurehead to fraudulently obtain federal contracts via a sham corporation, 229 Constructors, and to funnel illicit subcontract fees into their coffers via Doyner and LeMoyne. (Id. ¶¶ 25-36.)
Rubar worked closely with the Thurstons as Vice President of Doyner, where he was employed for over two decades without ever receiving a negative review or complaint. (Id. ¶¶ 11, 38.) Upon discovering the fraudulent scheme, Rubar refused to participate in it or assist in its coverup; instead, he notified the government and filed this qui tam action. (Id. ¶¶ 39, 48.)
Although the United States reached a settlement agreement with defendants regarding their fraudulent construction contract scheme, (Dkt. No. 12, Attach. 1), Rubar maintains a retaliation claim under 31 U.S.C. § 3730(h) and several common law tort claims, (3d Am. Compl.).
Defendants moved to dismiss Rubar's claims of retaliation, intentional infliction of emotional distress (IIED), negligent infliction of emotional distress (NIED), tortious interference with contract and prospective business relations, and prima facie tort. (Dkt. No. 30.) Thereafter, defendants filed a partial answer
After some confusion born by procedural impropriety, (Dkt. Nos. 55, 94), Rubar filed a Third Amended Complaint, (3d Am. Compl., Dkt. No. 95). Given defendants' contention that "the ... Third Amended Complaint does not cure the deficiencies that have been identified in [d]efendants' motion to dismiss," (Dkt. No. 56 at 2-3), the court applies defendants' previously-filed motion to dismiss, (Dkt. No. 30), against this newly-amended complaint.
In addition to resolving the arguments presented in defendants' motion to dismiss, the court must also resolve Rubar's motion for attorneys' fees, costs, and expenses related to the settled portion of the FCA claims, (Dkt. No. 31), as well as a subsequent motion to intervene filed by Travelers, (Dkt. No. 65).
The standard of review under Federal Rule of Civil Procedure 12(b)(6) is well settled and will not be repeated here. For a full discussion of the standard, the court refers the parties to its prior decision in Ellis v. Cohen & Slamowitz, LLP, 701 F.Supp.2d 215, 218 (N.D.N.Y. 2010).
The FCA's anti-retaliation provision provides that
31 U.S.C. § 3730(h)(1). Generally, to set forth a retaliation claim under this section, a relator must show that "(1) he engaged in activity protected under the statute, (2) the employer was aware of such activity, and (3) the employer took adverse action against him because he engaged in the protected activity." United States ex rel. Chorches for Bankr. Estate of Fabula v. Am. Med. Response, Inc., 865 F.3d 71, 95 (2d Cir. 2017).
Rubar argues that by eliminating any reference to "employer" in a 2009 amendment to the FCA, Congress "effectively left the universe of defendants undefined and wide-open." (Dkt. No. 39 at 14-16) (quoting Weihua Huang v. Rector & Visitors of Univ. of Va., 896 F.Supp.2d 524, 548 n.16 (W.D. Va. 2012)). As such, he asserts a retaliation claim against all defendants, including the Thurstons and Bennett. (3d Am. Compl. ¶¶ 114-117.) However, defendants contend that the 2009 amendment does not allow a relator to maintain a retaliation claim against individuals as opposed to their actual employers. (Dkt. No. 42 at 2-3).
Neither side points to a Second Circuit decision resolving this relatively novel issue. However, courts in the Northern District have held that, under the post-2009 version of § 3730(h), liability may not be imposed on an individual either in an individual or official capacity. See, e.g., Taylor v. N.Y. State Office for People with Developmental Disabilities, No. 1:13-CV-740, 2014 WL 1202587, at *10 (N.D.N.Y. Mar. 24, 2014); Monsour v. N.Y. State Office for People with Developmental Disabilities, No. 1:13-CV-0336, 2014 WL 975604, at *10-11 (N.D.N.Y. Mar. 12, 2014). The Southern District recently considered this issue in depth and they too joined "the overwhelming majority of courts, including the Fifth Circuit, [that] have held that the current version of § 3730(h) does not create a cause of action against supervisors sued in their individual capacities." Diffley v. Bostwick, 17-CV-1410, slip op. at 4, 2017 WL 6948358 (S.D.N.Y. Dec. 6, 2017). Therefore, in an effort to promote consistency within this district and for the reasons cited by defendants, (Dkt. No. 42 at 2-3), the court grants defendants' motion to the extent that it seeks dismissal of the FCA retaliation claims against the Thurstons and Bennett.
Next, defendants urge the court to dismiss Rubar's retaliation claim against all defendants except Doyner because, in their view, the FCA does not extend liability to a parent corporation and thus a claim can only lie against Doyner — Rubar's immediate "employer." (Dkt. No. 30, Attach. 1 at 2-5; Dkt. No. 42 at 3-4.) Rubar argues that the court is free to pierce the corporate veil in the FCA context using the alter ego doctrine and, alternatively, that Hayner Hoyt maintained an "employment-like" relationship with Rubar sufficient to fit within the scope of FCA liability. (Dkt. No. 39 at 16-19.)
Given the high-level of control, commonality of ownership, and close relationship between Hayner Hoyt and its subsidiaries, including Doyner, (3d Am. Compl. ¶¶ 30-32), and other reasonable inferences
Defendants also seek dismissal of Rubar's retaliation claim against them to the extent that it relates to conduct occurring after Rubar was terminated. (Dkt. No. 42 at 5.)
Although allegations consisting only of post-employment conduct may not be actionable under FCA § 3730(h)(1), see Weslowski v. Zugibe, 14 F.Supp.3d 295, 306 (S.D.N.Y. 2014) aff'd on alternative grounds, 626 Fed.Appx. 20, 21 (2d Cir. 2015), the court is satisfied that Rubar has sufficiently detailed conduct occurring before or at the time of his termination to state an FCA retaliation claim. (3d Am. Compl. ¶¶ 40-43, 48.) Therefore, this portion of defendants' motion is denied.
Defendants also argue that the court should dismiss Rubar's common law claim for IIED because, as they posit, the complaint does not contain allegations that satisfy the high standard of "extreme and outrageous conduct," (Dkt. No. 30, Attach. 1 at 5-8), or sufficient specifics regarding the "severe emotional distress" Rubar suffered, (id. at 7), and the alleged conduct falls within the ambit of Rubar's defamation claim, (id. at 8 n.2).
Indeed, the threshold for conduct that constitutes IIED is quite demanding. See Murphy v. Am. Home Prods. Corp., 58 N.Y.2d 293, 303, 461 N.Y.S.2d 232, 448 N.E.2d 86 (1983). However, the court finds that Rubar's allegations demonstrate a combination of public humiliation, threatening behavior, and other actions contrary to public policy that is sufficiently "extreme and outrageous." See, e.g., Stuto v. Fleishman, 164 F.3d 820, 828-29 (2d Cir. 1999) (collecting cases in which courts have sustained claims of IIED when a collection of similar conduct was alleged). Additionally, Rubar has sufficiently demonstrated plausible grounds to support a finding that he suffered severe emotional distress. (3d Am. Compl. ¶¶ 88-91.) Lastly, even assuming that claims are barred "where the conduct complained of falls well within the ambit of other traditional tort liability," Fischer v. Maloney, 43 N.Y.2d 553, 558, 402 N.Y.S.2d 991, 373 N.E.2d 1215 (1978), Rubar's IIED claim does not fit squarely within his other claims, which do not take into account the full sequence of extreme and outrageous conduct or its byproducts.
Therefore, the portion of defendants' motion pertaining to Rubar's IIED claim is denied.
In addition to the legal elements shared with IIED, the tort of NIED is generally "premised upon the breach of a duty owed to plaintiff which either unreasonably endangers the plaintiff's physical safety, or causes the plaintiff to fear for his or her own safety." Dawkins v. Williams, 413 F.Supp.2d 161, 179 (N.D.N.Y. 2006); see Mortise v. United
Rubar alleges that "[d]efendants owed a special duty to [R]ubar as a whistleblower." (3d Am. Compl. ¶ 127.) Defendants argue that such an assertion is insufficient to allege that Bennett owed him any special duty, (Dkt. No. 30, Attach. 1 at 8-9), and that "any special duty [Rubar] alleges he was owed by his employer could not exist after the conclusion of his employment," (id. at 9, n.3). Rubar tersely responds by arguing that Bennett owed him "the duty of refraining from attempting to physically harm him." (Dkt. No. 39 at 24 n.10.)
First, Rubar's claim that "[d]efendants owed a special duty to R[ubar] as a whistleblower," (3d Am. Compl. ¶ 127), is a legal conclusion that the court is not bound to accept as true, see Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Rather, "[t]he question of the existence and scope of an alleged tortfeasor's duty is, in the first instance, a legal issue for the court to resolve." Alfaro v. Wal-Mart Stores, Inc., 210 F.3d 111, 114 (2d Cir. 2000) (internal quotation marks and citation omitted).
Rubar fails to adequately allege in his complaint, or argue in his responsive papers, the existence of any post-termination duty that was specifically owed to him by Doyner. Instead, the allegations merely support the finding of "some amorphous, free-floating duty to society." Mortise, 102 F.3d at 696 (citing Johnson, 62 N.Y.2d at 526-27, 478 N.Y.S.2d 838, 467 N.E.2d 502). As such, to the extent that defendants had a specific duty while employing Rubar, the alleged conduct occurring at or before the time of his termination, (3d Am. Compl. ¶¶ 40-43, 48), was not "so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community[.]" Murphy, 58 N.Y.2d at 303, 461 N.Y.S.2d 232, 448 N.E.2d 86 (internal quotation marks and citation omitted). For these reasons, Rubar's NIED claim is dismissed in its entirety.
Under New York law, the elements of tortious interference with contract are "(1) the existence of a valid contract between the plaintiff and a third party; (2) the defendant's knowledge of the contract; (3) the defendant's intentional procurement of the third-party's breach of the contract without justification; (4) actual breach of the contract; and (5) damages resulting therefrom." Kirch v. Liberty Media Corp., 449 F.3d 388, 401 (2d Cir. 2006) (internal quotation marks and citation omitted).
Defendants argue that Rubar fails to allege defendants had knowledge of any contract(s) between Rubar and a third-party or that any contract was in fact breached. (Dkt. No. 30, Attach. 1 at 10-11.) Although defendants' knowledge may be
Similarly, defendants seek dismissal of Rubar's tortious interference with prospective business relations claim because "[Rubar] has failed to allege any specific relationship with which any [d]efendant purportedly interfered" or "that any [d]efendant had knowledge of any business relationship that [Rubar] had with any specific third part[y.]" (Dkt. No. 30, Attach. 1 at 11.) However, given that the court must draw all reasonable inferences in favor of the non-moving party at this stage, Rubar's allegation that defendants interfered with his business relationship with MCK Builders involving a masonry project, (3d Am. Compl. ¶ 86), is enough for the court to deny defendants' motion to dismiss this claim.
Lastly, defendants argue that Rubar fails to plead special damages with particularity, (Dkt. No. 30, Attach. 1 at 11-12), and a claim for prima facie tort is inapplicable where another specified tort provides a remedy, (Dkt. No. 42 at 10). However, these arguments fail because Rubar sufficiently alleges that "on October 24, 2014, [d]efendant ... informed a client of [r]elator's employer that it would not work with any company that had any relation to [r]elator, which resulted in the loss of several hundred thousand dollars." (3d Am. Compl. ¶ 85.) This allegation alone cites lost earnings in the amount of several hundred thousand dollars, see, e.g., Liberman v. Gelstein, 80 N.Y.2d 429, 434-35, 590 N.Y.S.2d 857, 605 N.E.2d 344 (1992) (defining "special damages" as "the loss of something having economic or pecuniary value"), caused by defendants' otherwise lawful conduct that is not contained within the scope of a traditional tort, cf. Freihofer v. Hearst Corp., 65 N.Y.2d 135, 142-43, 490 N.Y.S.2d 735, 480 N.E.2d 349 (1985). As such, Rubar's claim survives dismissal at this stage.
Defendants note that their motion to dismiss the FCA claims covered by the settlement agreement is premature. (Dkt. No. 32.) Although the court takes notice of the settlement agreement regarding Rubar's first three claims, (Dkt. No. 12, Attach. 1), it will not take action on these claims until it receives written confirmation from the United States that it is in receipt of the full settlement payment, (id. at 17 ¶ 12). As such, defendants' motion to dismiss these claims, (Dkt. No. 30, Attach. 1 at 2), is denied with leave to renew.
Since May 15, 2014, Rubar has been primarily represented by attorneys Raphael
Under the FCA, a relator who brings a successful qui tam lawsuit is entitled to attorneys' fees. See United States ex rel. Keshner v. Nursing Pers. Home Care, 794 F.3d 232, 237 (2d Cir. 2015) (citing 31 U.S.C. § 3730(d)(1)). To determine a reasonable amount of attorneys' fees, courts use the lodestar method — the product of a reasonable hourly rate and the hours reasonably spent on the case. See Millea v. Metro-North R.R. Co., 658 F.3d 154, 166 (2d Cir. 2011); Miller v. City of Ithaca, No. 310-cv-597, 2017 WL 61947, at *2 (N.D.N.Y. Jan. 5, 2017). Generally, the district court relies on the prevailing hourly rate from the district in which it sits in calculating the lodestar. See Arbor Hill Concerned Citizens Neighborhood Ass'n v. Cty. of Albany & Albany Cty. Bd. of Elections, 522 F.3d 182, 191 (2d Cir. 2008). However, "a district court may use... some rate in between the out-of-district rate sought and the rates charged by local attorneys ... in calculating the presumptively reasonable fee if it is clear that a reasonable, paying client would have paid those higher rates." Id.; see Bergerson v. N.Y. State Office of Mental Health, 652 F.3d 277, 289-90 (2d Cir. 2011). In determining what a reasonable client would be willing to pay, the court considers several factors, including:
Arbor Hill, 522 F.3d at 184.
Additionally, a district court may use a percentage deduction of the requested fees "as a practical means of trimming fat from a fee application[.]" McDonald ex rel. Prendergast v. Pension Plan of the NYSA-ILA Pension Tr. Fund, 450 F.3d 91, 96 (2d Cir. 2006) (internal quotation marks and citation omitted). In determining the appropriate fee, district courts have substantial deference and may use estimates based on their overall sense of a suit. See Fox v. Vice, 563 U.S. 826, 838, 131 S.Ct. 2205, 180 L.Ed.2d 45 (2011) ("The essential goal in shifting fees ... is to do rough justice, not to achieve auditing perfection.").
The court agrees with defendants that it would be unreasonable to award attorneys' fees at a rate common to New York City
Given Katz and Sadowski's specialized expertise in FCA cases, the length of time spent on the case, the amount involved in the case, and the results obtained (for both Rubar as well as the United States), an award of attorneys' fees at the higher end of the prevailing District rate is reasonable. Therefore, a reasonable, paying client seeking attorney services would be willing to pay an hourly rate of $450.00 for Sadowski, $400.00 for Katz, $280.00 for DeRienzo, and $150.00 for support staff.
Given the degree of vagueness in the annexed invoice entries, as highlighted by defendants, (Dkt. No. 37, Attach. 1 at 22-23), an across-the-board reduction of 10% is appropriate to accurately reflect the hours allotted to the portion of Rubar's FCA claims that settled.
Accordingly, a reasonable number of hours worked are as follows: 93.1 hours for Sadowski (98.6 hours less the 5.5 hour travel reduction), 420.4 hours for Katz (431 hours less the 10.6 hour travel reduction), 50.0 hours for DeRienzo, 30.0 hours for Santiago, and 5.0 hours for Chudzik. (Dkt. No. 31, Attach. 2 at 8.) As such, the total amount of attorneys' fees are $41,895.00 for Sadowski ($450.00 × 93.1), $168,160.00 for Katz ($400.00 × 420.4), $14,000.00 for DeRienzo ($280.00 × 50.0), and $5,250.00 for support staff ($150 × 35.0). After a 10% reduction ($22,930.50), the reasonable amount of attorneys' fees awarded is $206,374.50.
Thus, the court awards Rubar $206,374.50 in attorneys' fees and $2,070.85 in costs and expenses for a grand total of $208,445.35.
Defendants' counterclaims seek to recover damages arising from Rubar's fraudulent conduct while Doyner employed him. (Dkt. No. 53 at 26-41.) Hayner Hoyt reported these losses and accordingly Doyner recovered $246,127.22 under an indemnity agreement with Travelers. (Dkt. No. 65, Attach. 2 ¶¶ 5, 13-16.) Travelers
Pursuant to Fed. R. Civ. P. 24(a)(2),
Despite Rubar's contention that Travelers' interest is adequately represented
A determination on timeliness resides within the court's sound discretion and requires it to consider the following factors: "`(1) how long the applicant had notice of the interest before it made the motion to intervene; (2) prejudice to existing parties resulting from any delay; (3) prejudice to the applicant if the motion is denied; and (4) any unusual circumstances militating for or against a finding of timeliness.'" Ley v. Novelis Corp., No. 5:14-cv-775, 2014 WL 3735720, at *2 (N.D.N.Y. July 29, 2014) (quoting United States v. Pitney Bowes, Inc., 25 F.3d 66, 70 (2d Cir. 1994)).
First, the motion to intervene was filed on January 3, 2017, within four months of the filing of counterclaims in this matter. (Dkt. No. 53; Dkt. No. 65.) As Rubar himself points out, the statute of limitations on the proposed intervenor's claim extended until at least January 23, 2017. (Dkt. No. 66 at 6.) Although the statute of limitations has now lapsed, it would be unjust to penalize proposed intervenor for a factor beyond their control, such as a court's deliberate consideration of their timely-filed motion and proposed complaint. See U.S. for Use & Benefit of Canion v. Randall & Blake, 817 F.2d 1188, 1192 (5th Cir. 1987) ("Once the party seeking intervention has filed its motion to intervene with its proposed complaint, it has done all it can do, in a timely sense, to commence its action."); Sec. & Exch. Comm'n v. Keller Bros. Sec. Co., 30 F.R.D. 532, 533-34 (D. Mass. 1962). Most importantly, the existing parties would not be prejudiced by allowing the proposed intervenor to seek an assertion of its subrogation rights in this matter as discovery is still ongoing and the conduct that is the subject of proposed intervenor's claims is already at the forefront of this litigation.
As such, Travelers' motion to intervene is granted. Travelers is directed to file its complaint in intervention, (Dkt. No. 65, Attach. 2), on or before February 8, 2018.