United States ex rel. Rubar v. Hayner Hoyt Corp.
United States ex rel. Rubar v. Hayner Hoyt Corp.
Opinion of the Court
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.
II. Background
A. Facts
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.)
*483After identifying Rubar as a whistleblower, defendants threatened him with criminal prosecution based on fabricated accusations, (id. ¶¶ 42-43), terminated him from employment, (id. ), eventually levied false charges against him, (id. ¶¶ 47-54), stalked him, (id. ¶ 80), defamed him to several newspapers, subcontractors, and employers, (id. ¶¶ 76-79, 84), maliciously interfered with his business opportunities, (id. ¶¶ 84-86), caused him to be terminated from subsequent employment, (id. ¶ 87), and attempted to physically harm him by crashing into a car that they believed he was driving, (id. ¶ 81).
B. Procedural History
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
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).
III. Discussion
A. Rule 12(b)(6) Motion to Dismiss
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 ,
1. Retaliation Claim
a. Proper Defendants
The FCA's anti-retaliation provision provides that
*484[a]ny employee, contractor, or agent shall be entitled to all relief necessary to make that employee, contractor, or agent whole, if that employee, contractor, or agent is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts done by the employee, contractor, agent or associated others in furtherance of an action under this section or other efforts to stop [one] or more violations of [the FCA].
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. ,
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,
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 *485that can be drawn from this relationship, the court will not dismiss the retaliation claim against Hayner Hoyt at this stage. However, Rubar does not allege facts to demonstrate that either LeMoyne or 229 Constructors maintained a similarly-situated relationship with him or level of control over him as an employee. (See generally
b. Post-Employment Conduct
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 ,
2. IIED
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. ,
Therefore, the portion of defendants' motion pertaining to Rubar's IIED claim is denied.
3. NIED
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 ,
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 ,
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 ,
4. Tortious Interference with Contract
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. ,
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 *487reasonably inferred at this stage based on the surrounding allegations, Rubar indeed fails to allege that a contract was breached by a third-party. Instead, he merely states that, as a result of defendants' conduct, he was "forced to leave" and "lost his job at [another company]." (3d Am. Compl ¶ 87.) Even if the court infers that Rubar had an employment contract with this subsequent employer and that it terminated him, (id. ¶¶ 83, 87), Rubar fails to allege that this amounted to a contractual breach. Additionally, although Rubar alludes to lost opportunities with subcontractors because of defendants' conduct, (id. ¶¶ 84-86), he does not allege the existence of any specific contracts or whether they were breached. Furthermore, Rubar does not respond to this aspect of defendants' argument in his opposition. (Dkt. No. 39 at 24-25, 25 n.11.) As such, Rubar's tortious interference with contract claim is dismissed. See Burns ,
5. Tortious Interference with Prospective Business Relations
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.
6. Prima Facie Tort
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 ,
7. Settlement of Claims
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.
B. Attorney's Fees and Costs
Since May 15, 2014, Rubar has been primarily represented by attorneys Raphael *488Katz
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 ,
the complexity and difficulty of the case, the available expertise and capacity of the client's other counsel (if any), the resources required to prosecute the case effectively (taking account of the resources *489being marshaled on the other side but not endorsing scorched earth tactics), the timing demands of the case, whether an attorney might have an interest (independent of that of his client) in achieving the ends of the litigation or might initiate the representation himself, ... and other returns (such as reputation, etc.) that an attorney might expect from the representation.
Arbor Hill ,
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 ,
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 x 93.1), $168,160.00 for Katz ($400.00 x 420.4), $14,000.00 for DeRienzo ($280.00 x 50.0), and $5,250.00 for support staff ($150 x 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.
C. Motion to Intervene
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),
[1] [o]n timely motion, the court must permit anyone to intervene who ... [2] claims an interest relating to the property or transaction that is the subject of the action, [3] and is so situated that disposing of the action may as a practical matter impair or impede the movant's ability to protect its interest, [4] unless existing parties adequately represent that interest.
Despite Rubar's contention that Travelers' interest is adequately represented *491by existing parties because they share the same counsel, (Dkt. No. 66 at 7-8) (citing Carroll v. Am. Fed'n of Musicians of U. S. & Canada ,
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,
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 ,
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.
IV. Conclusion
WHEREFORE , for the foregoing reasons, it is hereby
ORDERED that defendants' motion to dismiss (Dkt. No. 30) is GRANTED IN PART and DENIED IN PART as follows:
GRANTED with respect to the FCA retaliation claim (fourth claim) as against Gary Thurston, Jeremy Thurston, Ralph Bennett, LeMoyne Interiors, and 229 Constructors, LLC, the NIED claim (seventh claim) as against all defendants, and the tortious interference with contract claim (ninth claim) as against all defendants; and
DENIED in all other respects; and it is further
*492ORDERED that defendants shall file an appropriate responsive pleading within the time allotted by the rules; and it is further
ORDERED that Rubar's motion for attorneys' fees, costs, and expenses (Dkt. No. 31) is GRANTED IN PART and DENIED IN PART as follows:
GRANTED to the extent that attorneys' fees in the amount of $206,374.50 and costs and expenses in the amount of $2,070.85 are imposed against defendants; and
DENIED in all other respects; and it is further
ORDERED that Travelers' motion to intervene (Dkt. No. 65) is GRANTED and Travelers shall file its pleading on or before February 8, 2018; and it is further
ORDERED that the parties shall contact Magistrate Judge Hummel to schedule further proceedings in accordance with this order; and it is further
ORDERED that the Clerk provide a copy of this Memorandum-Decision and Order to the parties.
IT IS SO ORDERED.
Unless otherwise noted, the facts are drawn from Rubar's Third Amended Complaint and presented in the light most favorable to him.
Specifically, these torts consist of defamation, intentional infliction of emotional distress, negligent infliction of emotional distress, abuse of process, tortious interference with contract, tortious interference with prospective business relations, false imprisonment, prima facie tort, and malicious prosecution. (3d Am. Compl. ¶¶ 118-157.) Although not specified in the complaint, the posture of both parties' briefs indicate that these torts are brought under New York State common law, (Dkt. No. 30, Attach. 1 at 5, 8-11; Dkt. No. 39 at 19-22, 24-25), and the court treats them as such.
Defendants refused to answer the portion of Rubar's claims that are now at the center of their motion to dismiss. (Dkt. No. 53 at 20-22.)
Because Rubar does not allege that he was a bystander who witnessed Bennett crash into the car of a fellow employee, he can only recover if he "suffer[ed] an emotional injury from defendant's breach of a duty which unreasonably endangered h[is] own physical safety." Mortise ,
Katz is a partner with a decade of experience in all phases of qui tam litigation who has successfully represented relators in numerous FCA cases. (Dkt. No. 31, Attach. 2 ¶¶ 18-19.)
Sadowski is a partner and experienced litigator of nearly three decades who previously supervised "the investigation, litigation[,] and settlement of fraud prosecutions under the [FCA]" in his role as Health Care Fraud Coordinator in the United States Attorney's Office for the Southern District of New York. (Dkt. No. 31, Attach. 2 ¶ 19(a.) )
Rubar notes that, although attorneys from Sadowski Fischer PLLC originally represented Rubar, "some incarnation" of Sadowski Katz LLP has been Rubar's counsel since the inception of this case. (Dkt. No. 31, Attach. 2 ¶ 3 & n.1.) As such, even though Rubar divides invoices by firm, pinning down exactly which firm was representing Rubar when is immaterial to the court's analysis.
The only associated cost that defendants contest is the $775.00 process server fee because Rubar "never requested that [d]efendants waive service of the complaint ... [and] did not provide the notice required by [Fed. R. Civ. P.] 4(d) before engaging in a process server to serve the complaint." (Dkt. No. 37, Attach. 1 at 24.) Although Rule 4(d) does allow a party to recover costs associated with service of process when an opposing party fails to waive service, Rubar seeks costs under the FCA, not pursuant to this rule. However, for the same economical reasons underlying Rule 4(d), Rubar should have given defendants the opportunity to avoid this expense. Therefore, the court reduces this expense by 50% to reflect both Rubar's unreasonableness and the uncertainty surrounding whether defendants would have actually agreed to such a request. As such, Rubar is awarded $2,070.85 in costs and expenses.
Rubar's counsel requests $850.00 and $650.00 per hour for Sadowski and Katz, respectively. (Dkt. No. 31, Attach. 1 at 13-14; Attach. 2 ¶ 17.)
Here, for instance, Rubar will receive approximately $875,000.00 from the settled claims. (Dkt. No. 12, Attach. 1 ¶¶ 1-2.)
Defendants argue that various invoice entries should be specifically excluded because they are associated with Rubar's still-pending claims. (Dkt. No. 37, Attach. 1 at 19-20.) However, the court finds that these entries appear to be sufficiently related to the successfully-settled claims, see Quaratino v. Tiffany & Co. ,
In its reply, intervenor's counsel asserts that "[t]he proposed [i]ntervenor is The Charter Oak Fire Insurance Company [ (Charter Oak) ], which is an affiliate of [Travelers] and an underwriting company for Travelers." (Dkt. No. 69 at 1, n.1.) In fact, the reply opens by stating "Charter Oak ... respectfully submits this [r]eply ... in further support of its [m]otion to [i]ntervene in this acton to assert its subrogation and reimbursement rights." (Id. at 1.) (emphases added). To add to the confusion, the reply concludes by stating that "Travelers respectfully requests that the [c]ourt grant its motion to intervene." (Id. at 5.) (emphasis added). Given that the motion pending before the court was submitted by Travelers, (Dkt. No. 65, Attach. 6), the court refers to Travelers as the proposed intervenor, and directs counsel to do the same.
Reference
- Full Case Name
- UNITED STATES of America, EX REL. John RUBAR v. The HAYNER HOYT CORPORATION v. The Travelers Indemnity Company, Proposed Intervenor.
- Cited By
- 8 cases
- Status
- Published