387 F. Supp. 3d 1046
S.D. Cal.2019Background
- BofI Holding (holding company for BofI Federal Bank) employed Charles Erhart as a staff internal auditor; the parties filed competing suits consolidated by the court.
- Erhart alleges he uncovered regulatory and internal misconduct and was retaliated against (including termination), asserting Sarbanes-Oxley, Dodd-Frank, California Labor Code §1102.5, UCL, and other claims.
- BofI countersues, alleging Erhart conducted unauthorized "rogue" investigations, misused and disseminated confidential information, deleted data from his company laptop, and asserts causes of action including fraud, breach of duty of loyalty, negligence (including under Cal. Labor Code §2865), CAL. PEN. CODE §502, the CFAA, UCL, and conversion.
- Both parties moved for judgment on the pleadings under Fed. R. Civ. P. 12(c); the Court considered whether each challenged claim is legally insufficient on the face of the pleadings.
- The Court denied Erhart’s motion in full. It granted BofI’s motion only to the extent that Erhart named the incorrect defendant (BofI Holding, Inc.); Erhart was given leave to amend solely to correct the named defendant; all other portions of BofI’s 12(c) motion were denied without prejudice where appropriate.
Issues
| Issue | Plaintiff's Argument (Erhart) | Defendant's Argument (BofI) | Held |
|---|---|---|---|
| Sufficiency of BofI's fraud, loyalty, negligence, §502, CFAA, UCL, conversion claims | Erhart argued many of these claims lack particularity, legal basis (e.g., duty of loyalty for lower-level employees), or fail as a matter of law | BofI argued its FAC alleges the who/what/when/where/how of fraud, misappropriation of confidential data, rescission of laptop access, damages, and thus states claims | Court denied Erhart's Rule 12(c) motion; found BofI pleadings generally sufficient to survive judgment on the pleadings (fraud pleaded with Rule 9(b) specificity; loyalty, negligence, §502, CFAA, UCL, conversion survived) |
| CFAA and authorization to use company laptop | Erhart contended he was authorized to use the laptop as an employee; no unauthorized access | BofI alleged it rescinded permission during his leave and that Erhart deleted large amounts of data and caused damage to a protected computer | Court held BofI plausibly alleged rescission of authorization and damage under 18 U.S.C. §1030(a)(5)(C); CFAA claim survives 12(c) |
| Exhaustion of administrative remedies under Sarbanes-Oxley | Erhart alleged exhaustion with OSHA filing; opposed parsing his factual allegations at pleading stage | BofI argued certain whistleblower allegations were not exhausted and should be dismissed now | Court declined to decide partial exhaustion on 12(c); denied BofI’s exhaustion challenge without prejudice, preferring summary adjudication after evidence/stipulated procedures |
| Proper defendant and naming | N/A (Erhart inadvertently named BofI Holding rather than the bank employer) | BofI argued it was incorrectly named and sought dismissal with leave to amend to name the correct entity | Court granted dismissal as to the misnamed defendant and gave Erhart leave to file a Third Amended Complaint to correct the defendant name only (deadline set) |
Key Cases Cited
- Chavez v. United States, 683 F.3d 1102 (9th Cir. 2012) (standard for Rule 12(c) judgment on the pleadings)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plausibility standard for pleadings)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (application of Twombly plausibility standard)
- Kearns v. Ford Motor Co., 567 F.3d 1120 (9th Cir. 2009) (Rule 9(b) particularity for fraud allegations)
- LVRC Holdings LLC v. Brekka, 581 F.3d 1127 (9th Cir. 2009) (authorization/rescission analysis under the CFAA)
- United States v. Nosal, 844 F.3d 1024 (9th Cir. 2016) (CFAA interpretation regarding authorization and exceeding authorized use)
- United States v. Christensen, 828 F.3d 763 (9th Cir. 2015) (interpretation of California Penal Code §502 and "access")
- Cel‑Tech Commc'ns, Inc. v. L.A. Cellular Tel. Co., 20 Cal.4th 163 (Cal. 1999) (scope of California UCL)
- Lazar v. Superior Court, 12 Cal.4th 631 (Cal. 1996) (elements of fraud under California law)