874 F. Supp. 2d 928
D. Idaho2012Background
- Tolman alleges he was fired from the Idaho Chapter of the American Red Cross for criticizing the use of public funds; sues both the Idaho Chapter and the national ARC alleging the Chapter was controlled by ARC and acted at ARC’s direction.
- Plaintiff's five initial claims: breach of contract; breach of the covenant of good faith and fair dealing; fraud; False Claims Act (FCA) retaliation; and a declaratory judgment that ARC and the Idaho Chapter are a single entity.
- Defendants moved to dismiss under Rule 9(b) and 12(b)(6), arguing fraud lacks specificity and other claims fail as pleaded; the court previously allowed amendments to cure defects.
- The court found the at-will status can be altered only by the Chapter’s CEO; promos by Rick Phillips (Board Chairman) were inadequate to alter at-will status; allegations against CEO Dick Rush could support a potential contract-based claim.
- The court allowed some fraud and contract claims to proceed after amendment but dismissed those tied to Phillips’s promises; FCA retaliation claim was not sufficiently alleged; the court denied dismissal of ARC and Idaho Chapter on alter-ego grounds without prejudice to later, more complete record.
- ORDER: grant in part and deny in part; dismiss Phillips-based promises and the “other members” fraud portion, dismiss Count Four, deny remaining portions; remaining claims hinge on Rush-based promises and the overall relationship between ARC and the Idaho Chapter.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of contract survives? | Tolman alleges 2006 CEO promises altered at-will status. | At-will status could be altered only by CEO; Phillips lacked authority. | Part survives; Phillips promises dismissed; Rush promises may support claim. |
| Good faith and fair dealing viability? | Based on contract promises by Rush or Phillips. | Depends on contract claim;Phillips-based promises insufficient. | Survives to extent based on Rush; Phillips-based portion dismissed. |
| Fraud claim sufficiency under Rule 9(b)? | Identifies three promisers and details content of promises. | Must identify each speaker and dates; vague portions fail. | Fraud claim survives as to Phillips, Rush, and Ahrens; other board members dismissed. |
| FCA retaliation claim actionable? | Fired for complaining about alleged government-related mismanagement. | Must allege protected FCA conduct and causation. | Dismissed; failure to plead protected conduct and causal link. |
| ARC v. Idaho Chapter alter-ego/veil issue? | Alleged lack of separate legal existence; joint action. | Need complete record to determine veil/alter-ego liability. | Denied without prejudice to raise on a fuller record. |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (plausibility standard; pleading must show plausible claims)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (facilitates plausibility; avoid bare recitals)
- Knievel v. ESPN, 393 F.3d 1068 (9th Cir. 2005) (court may consider documents referenced in complaint on dismissal)
- Krainski v. Nev. ex rel. Bd. of Regents, 616 F.3d 963 (9th Cir. 2010) (dismissal without leave to amend only if amendment would be futile)
- Cafasso v. General Dynamics C4 Systems, Inc., 637 F.3d 1047 (9th Cir. 2011) (Rule 9(b) particularity and plausibility required for fraud claims)
- Moore v. Cal. Inst. of Tech. Jet Propulsion Lab., 275 F.3d 838 (9th Cir. 2002) (protected activity under FCA requires belief of possible government fraud)
- McClaran v. Plastic Industries, Inc., 97 F.3d 347 (9th Cir. 1996) (alter ego/veil piercing standards context)