ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS AND STRIKE ALLEGATIONS FROM FIRST AMENDED COMPLAINT
[ECF No. 35]
Plaintiff Charles Matthew Erhart commenced this whistleblower retaliation action against Defendant BofI Holding,' Inc. alleging violations of the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and California state law.
Previously, the Court dismissed Erhart’s federal whistleblower retaliation claims with leave to amend. (ECF No. 31.) Erhart filed a First Amended Complaint, and BofI now moves to again dismiss Erhart’s federal whistleblower retaliation claims, as well as several of his state law causes of action. (ECF No. 35.) In addition, BofI seeks to strike numerous allegations from the First Amended Complaint. (Id.) Er-hart opposes. (ECF No, 36.)
The Court finds Bofl’s motion suitable for determination on the papers submitted and without oral argument. See Fed. R. Civ. P. 78(b); Civ. L.R. 7.1(d)(1). For the following reasons, the Court' GRANTS IN PART and DENIES IN PART Bofl’s motion to dismiss and strike allegations from Erhart’s First Amended Complaint.
1. BACKGROUND
A. Bofl’s Internal Audit Department
In September 2013, Erhart began working as an internal auditor for BofI at its headquarters in San .Diego, California. (First Amended Complaint (“FAC”) ¶¶ 3-4, 9, ECF No. 32.) Erhart reported to Jonathan Ball, Vice President (“VP”)—Internal Audit. (Id. ¶ 9.) One level above VP Ball on the corporate hierarchy was John Tolla, Senior Vice President (“SVP”)—Au-dit and Compliance. (Id. ¶ 10.) VP Ball and the internal audit department were to report to SVP Tolla “for administrative purposes only” to allow the audit department “to have independence to do its function without undue pressure from senior management.” (Id.) However, as detailed below, Erhart alleges SVP Tolla repeatedly, interfered with the audit department’s investigations and' independence. (See id. ¶¶ 15, 24-25, 30, 42, 47, 49, 52, 56.)
B. Alleged Wrongdoing
From late 2013 to early 2015, Erhart claims he repeatedly encountered conduct at BofI that he believed to be wrongful, and he provides over a dozen examples of this conduct. (See FAC ¶¶ 11-45.) The con
1.Deposit Concentration Risk Findings and Negative Performance Review ¡
In November 2014, Erhart sent an email to Chief Risk Officer Thomas Williams regarding the Bank’s deposit concentration risk—the risk posed- to a bank “when a large percentage of its -deposits are derived from a few depositors” and these depositors may suddenly withdraw their funds. (FAC ¶ 22.) -Erhart allegedly reported to Williams “that a mere four customers accounted for approximately 25% of total deposits, and nine- customers accounted for approximately 40% of total deposits” at the Bank. (Id. -¶ 23.) In doing so, Erhart “was aware that other banks had gotten into trouble with regulators for deposit concentration levels lower than this.” (Id,) SVP Tolla, however, later commented on Erhart’s e-mail to Williams and instructed Erhart “not to put-his concerns in.writing.” (Id. ¶24.) Management had previously chastised Erhart for stating in an internal audit report,.that he believed Bofl was violating the law. (Id.- ¶¶ 13-16.)
About a month later, Erhart received his performance review from SVP Tolla. (FAC ¶25.) His rating was downgraded, with SVP Tolla specifically referencing Erhart’s practice of putting findings into writing. (Id.) Erhart’s bonus was also adversely affected. (Id.)
2.SEC Subpoena
On December 12, 2014, the Securities and Exchange Commission ' (“SEC”) “served a subpoena on Bofl, requesting account identifying information for a certain investment advisory firm with initials ETIA LLC.” (FAC ¶ 26.) Bofl “responded to the SEC that it did not have any information regarding ETIA.” (Id.) In early January: 2015, Erhart. “became aware of the SEC subpoena, and knew that the Bank did indeed have a loan file containing information regarding ETIA.” (M ¶ 27.) He also became aware “that a file had been created in response to the SEC subpoena, containing the information, located regarding ETIA.” (Id.) “In the course of investigating why the file was not turned over to the SEC in response to its subpoena, [Erhart] learned from a Bank employee... that she had informed the B.ank’s legal department of the existence of the file on or about December 17, 2014, before the Bank sent its response to the SEC denying the existence of any such files.” (Id.) Shortly thereafter, VP Ball informed Erhart that Chief Lending Officer Brian Swanson was upset that Erhart inter-* viewed an employee about the issue and said that Erhart “should cease performing his duties to the extent they involved interviewing ‘his’ employees.” (Id. ¶ 28.) Erhart then “placed a call to the SEC to be sure it was aware of the situation regarding the ETIA subpoena.” (Id, ¶ 29.)
In February 2015, Erhart “submitted two whistleblower tips to ,the SEC, one regarding the ETIA subpoena'issue, and another regarding a suspicious loan customer, whom [Erhart] suspected of operating as an unregistered broker/investment advisor. He submitted them through his work computer, and Bofl had knowledge of his whistleblowing.” (FAC ¶ 31.) Later,, in 2016, federal law enforcement officials would arrest “the Founder and Chief Operating Officer of Florida-based Elm Tree Investment Advisors LLC (ETIA) on charges that they engaged in a scheme to defraud investors out of more than $17 million.” (Id. ¶ 31A.)
3.Bofl’s CEO’s Personal Accounts
■ In early 2015, Erhart participated in a review of personal deposit accounts held
In addition, Erhart allegedly discovered the “largest consumer account at the Bank” had a.- taxpayer identification number belonging to CEO Garrabrants’s brother: (FAC ¶45.) “The account had,a balance of approximately $4 million, and the CEO was the signer on the account.” (Id.) Erhart alleges that because the -CEO’s brother “was a minor league baseball player earning poverty wages, [Er-hart] could find no evidence of how he had come legally into possession of. the $4 million wired into the account.” (Id.) Based on the foregoing, Erhart was concerned about whether CEO Garrabrants “could be involved in tax evasion i and/or money laundering.” (Id.)
Erhart alleges-he believed this conduct and the other actions'described in his allegations violated ■ various federal laws, including the Dodd-Frank Act, fraud statutes, and “rules and regulations promulgated by the Securities and Exchange Commission.” (FAC ¶74A.) He - also claims he believed that “because Bofl was regulated by so many different federal agencies, and because its stock was publicly traded, that additional federal statutes, rules, and regulations were likely being violated, including without limitation, Rule 10b-5.” (Id.) These beliefs were based on the circumstances, including “guidance and instruction he received from” his manager, VP Ball. (Id.)
C. Turmoil in the Internal Audit Department
By. early 2015, approximately sixteen months after he joined Bofl, Erhart believed- his job was in -jeopardy. (See FAC ¶47.) On or about January 27, 2015, SVP Tolla walked by Erhart’s desk and stated, in the presence of others, “If [Erhart] continues to turn over rocks, eventually he is going to find a snake and he’s going to get bit.” (Id.) Erhart viewed this statement “as a direct and serious threat, and became concerned for his personal safety as well as for his job,” (Id.) .
Around this time, the United States Department 'of the Treasury’s Office of. the Coinptroller of the Currency (“OCC”), Bofl Federal Bank’s principal -regulator, was examining Bofl on-site at its headquarters in San Diego. (FAC ¶ 49.) During this examination, SVP Tolla told all of the members of the internal audit department “that they would no longer be permitted to use Microsoft Outlook to communicate.” (Id.) Erhart alleges SVP Tolla gave this directive because he “did not want a paper trail regarding Bank improprieties.” (Id;) Erhart informed the-OCC’s examiner of this directive. (Id.) >
Then,' in late February 2015, VP Ball informed the internal audit department that a “meeting would be held to discuss major findings that needed to be presented to the Bank’s Audit Committee.” (FAC ¶ 50.) This action was significant because VP Ball “felt that the level of wrongdoing at. the Bank had become so egregious that the staff had.no choice but to bring it up to the Audit Committee.” (Id.) VP Ball allegedly planned to present memos documenting the wrongdoing from internal audit staff, including. Erhart, to the Audit Committee. (Id.)
D. Alleged Whistleblowing to the OCC ,
After VP Ball’s sudden resignation, Er-hart “felt very unwell and on the following day, March 6, 2015, he called off sick.” (FAC ¶ 53.) He asked a coworker to relay his illness to SVP Tolla—as no one had yet replaced VP Ball as Erhart’s direct manager. (Id.) At 7:30 a.m. on that same day, Erhart’s coworker informed him that SVP Tolla said he was to attend a mandatory call with the OCC, despite his illness. (Id. ¶ 54.) She also informed Erhart that SVP Tolla had accessed VP Ball’s e-mail account .and found an internal audit memo Erhart had co-authored regarding believed wrongdoing involving a vendor that distributed cash cards to customers. (Id.) Er-hart “became extremely concerned that the Bank would try to destroy the records of wrongdoing that [he] had placed on the Bank’s computers.” (Id. ¶ 55.) He called the OCC’s Denver Regional Office and said he was seeking whistleblower protection, and an appointment to speak with the OCC was confirmed for the next business day. (Id.)
Meanwhile, SVP Tolla was calling Er-hart on his cell phone, and a coworker informed Erhart that his work computer had been “opened up.” (FAC ¶ 56.) Erhart also allegedly received a text-message stating: “Tolla is going crazy over here bro. Going through balls computer too. Fyi.” (Id.) Erhart then e-mailed the OCC a copy of the internal audit memo regarding cash card customers and disclosed that CEO Garrabrants and SVP Tolla had discovered the memo and that he feared upper management had accessed his work laptop remotely. (Id., ¶ 57.)
Minutes later, Erhart received a phone call from a coworker that SVP Tolla had arranged for the locked file cabinets at Erhart’s desk to be opened up and “was going through all the documents.” (FAC ¶ 58.) SVP Tolla located Erhart’s review of CEO Garrabrants’s personal accounts. (Id.) He continued to call Erhart’s mobile phone repeatedly throughout that day. (Id.)
Erhart allegedly later learned that on the same day, Friday, March 6, 2015, Bofl had prepared a letter terminating him' and had attempted to deliver it to him. (FAC ¶ 61.) Erhart claims-Bofl also “intended to and may have informed local police authorities” that i it wanted Erhart’s “apartment searched and his computer seized and for him to be arrested.” (Id.) Erhart “was extremely fearful.” (Id.) The police did not arrive, but Erhart alleges Bofl sent someone to his residence “on that day to attempt to deliver the termination letter and recover [his] work laptop.” (Id.) On Saturday, Erhart was informed that CEO Gar-rabrants had “grilled” a coworker “for nearly an hour” about the investigation into his personal accounts , and that they “had an all hands yesterday where [SVP Tolla] and [CEO Garrabrants] spoke about [Erhart] and [VP Ball]. It was terrible.” (Id. ¶ 60.)
By early Monday morning, March 9, 2015, Erhart alleges he learned SVP Tolla was falsely claiming that Bofl had not heard from Erhart for forty-eight hours— a basis for termination. (FAC ¶ 63.) Erhart sent an e-mail to SVP Tolla and several others reminding them “that he had called off sick Friday,” would remain out for the
That same morning, an attorney with the OCC confirmed to Erhart “that his communications with the OCC would be covered under the applicable whistleblower statute.” (FAC ¶ 64.) Erhart had-a lengthy phone call with the OCC that afternoon, and he was directed to bring any documents he had to the OCC’s office in Carlsbad, California, the following morning. (Id. ¶ 66.) At the same time, a Bofl employee was sending text messages to Erhart in an attempt to arrange the delivery of an envelope to Erhart—presumably containing his termination letter—and to recover his laptop. (Id.) Erhart alleges “it was highly unusual for the Bank to demand return of the work laptop of an employee who was out sick.” .(Id. ¶ 67.) “Rather, the Bank had decided to terminate [Erhart] and feared his disclosures to regulators, and wanted to seize the evidence before it could be turned over to regulators.” (Id.)
The next morning, Erhart provided files to the OCC at its office in Carlsbad. (FAC ¶ 68.) An OCC attorney confirmed receipt of these items the next day and told Er-hart “that the Bank had informed the OCC that it was going to call the San Diego police to go to [Erhart]’s residence and seize his computer.” (Id. ¶ 69.) Therefore, Erhart alleges Bofl “was obviously well aware” of his whistleblowing activities. (Id.)
Erhart ultimately returned his laptop to Bofl bn March 12, 2015. (FAC ¶ 70.) Bofl’s Chief Legal Officer “ordered him to come to a conference room to speak,” but Erhart “reiterated he was in no mental state to speak to management.” (Id.) That same day, a Bofl employee called Erhart and told him that an employee had processed Erhart’s termination paperwork the previous week—presumably on the Friday Er-hart sought whistleblower protection. (Id.)
E. Aftermath
On March 14,2015, a Bofl employee told Erhart that SVP Tolla was informing employees that Erhart “was responsible for a negative article about B off on the Seeking Alpha website published December 2, 2014.” (FAC ¶ 71.) SVP Tolla previously called Erhart “Seeking Alpha” “to his face.” (Id;) Erhart, however, was not responsible for the article. (Id.) Erhart also alleges that two coworkers informed him .that SVP Tolla stated at an “All Hands Meeting” of members of Bofl’s audit and compliance department that “any information [Erhart] provided to the OCC could not be considered credible because of [Erhard’s psychiatric medical leave.” (Id. ¶73.) SVP Tolla and CEO Garrabrants allegedly told this same group of employees that Erhart’s “whistleblowing activities were ‘malicious.’” (Id. ¶74.) CEO Garra-brants also told the employees he was going to “bury the Bofl whistleblower.” (Id.)
Further, Erhart alleges that in the past year, Bofl, “through SVP Tolla, CEO Gar-rabrants, and others, has continued to widely publish false and defamatory statements about [Erhart], claiming that he has colluded and/or collaborated with ‘short sellers’ of Bofl’s stock, and that he was a dishonest and incompetent employee.” (FAC ¶ 74B.) Because of this conduct and “the notoriety of this case,” Erhart claims he has “been unable to retain employment.” (Id.)
Based on the foregoing allegations, Er-hart brings various claims against Bofl, including two claims for whistleblower retaliation under federal law. (FAC ¶¶76-163.) Bofl moves under Federal Rule of Civil Procedure 12(b)(6) to dismiss Er-
II. MOTION TO DISMISS
A. Legal Standard
A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure “tests the legal sufficiency” of the claims asserted in the complaint; Navarro v. Block,
“[A] plaintiffs obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly,
As a general rule, a court freely grants leave to amend a complaint that has been dismissed. Fed. R. Civ. P. 15(a); Schreiber Distrib. Co. v. Serv-Well Furniture Co.,
B. Analysis
. 1. Sarbanes-Oxley Whistleblower Retaliation
BofI seeks to dismiss Erhart’s first claim for whistleblower retaliation" under Sarbanes-Oxley. Congress enacted the Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, 116 Stat. 745, to “safeguard investors in public companies and restore trust in the financial markets following the collapse of Enron Corporation,” Lawson v. FMR LLC, — U.S. -,
To address this issue, Section 806 of Sarbanes-Oxley added a new whistleblower protection provision to Title 18 of the United States Code, 18 U.S.C. § 1514A. Lawson,
No [publicly-traded] company.. .may discharge.. .or in any other manner discriminate against an employee in the terms and conditions of employment because of any lawful act done by the employee—
(1)to provide information.. .regarding any conduct which the employee reasonably believes constitutes a violation of section 1341 [mail fraud], 1343 [wire fraud], 1344 [bank fraud], or 1348. [securities or commodities fraud], any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders, when the information or assistance is provided to or the investiga- ’ tion is conducted by
(A) a Federal regulatory or law enforcement agency;
(B) any Member of Congress or any committee of Congress; or
(C) a person with supervisory authority over the employee....
18 U.S.C. § 1514A.
Whistleblower retaliation claims under Sarbanes-Oxley “are governed by a burden-shifting procedure under which the plaintiff is first required to establish a prima facie case of retaliatory discrimination,” Tides v. Boeing Co.,
i. Protected Activity
First,' Erhart must allege that he engaged in protected activity under Sar-banes-Oxley. See, e.g., Tides,
In the Court’s order .on Bofl’s first motion to dismiss, the Court considered at length which standard to apply to determine whether Erhart alleges he engaged in protected activity. (ECF No. 22 at 17:15-22:3.) The Court ultimately adopted the Department of Labor’s Administrative
To allege protected activity under this standard, an employee “need only show that he or she ‘reasonably believes’ that the conduct complained of’ is a violation of the laws enumerated in 18 U.S.C. § 1514A. Rhinehimer v. U.S. Bancorp Invs., Inc.,
It also follows from this standard that a plaintiff “need not prove a violation of the substantive laws listed in [18 U.S.C. § 1514A]” to engage in protected activity. See Sylvester,
The Court previously dismissed Erhart’s Sarbanes-Oxley claim because it determined the subjective component of the reasonable belief standard was not satisfied. (ECF No. 22 at 23:26-26:13.) This conclusion was based on Erhart’s failure to allege anywhere in his initial Complaint that he believed the alleged wrongdoing violated the laws enumerated in § 1514A. (Id. at 25:6-11 (“But again, to satisfy the subjective component of the reasonable belief standard, Erhart must allege he ‘actually believed that the conduct complained of constituted a violation of relevant law.’ ” (quoting Rhinehimer,
Boñ argues that Erhart still fails to allege protected activity under Sarbanes-Oxley. (Mot. 11:6-16:10.) Although Er-hart’s lengthy pleading is imperfect, and at times imprecise, the Court disagrees. Er-hart sufficiently pleads he reported at least some conduct that could constitute a reasonable belief of a violation of the laws enumerated in Sarbanes-Oxley’s anti-retaliation provision.
For instance, Bofl is a federally-insured bank, and one of the laws enumerated in Sarbanes-Oxley’s whistleblower retaliation provision, 18 U.S.C. § 1514A, is bank fraud, 18 U.S.C. § 1344. “The essential elements of bank fraud under 18 U.S.C. § 1344(1) are: ‘(1) that the defendant knowingly executed or attempted to execute a scheme to defraud a financial institution; (2) that the defendant did so with the intent to defraud; and (3) that the financial institution was insured by the FDIC [Federal Deposit Insurance Corporation].’ ” United States v. Rizk,
The district court’s decision at the summary judgment phase in Guitron v. Wells Fargo Bank, N.A. demonstrates an application of Sarbanes-Oxley’s whistleblower provision in the context of potential bank fraud. No. C 10-3461 CW,
In this case, Erhart alleges Boñ— through its AnFed Bank division—operates a business that purchases the income streams from lottery winnings and structured settlements. (FAC ¶ 11.) The Bank employs a “team of callers who cold-call prospects with the goal of purchasing the income streams from these individuals, offering them a lump sum in lieu of the periodic payments they are receiving.” (Id. ¶ 12.) Relatedly, as described above, Er-hart claims he conducted an audit of Boñ’s
Erhart claims he reported this conduct—as well as the other instances of believed wrongdoing he describes—“to appropriate government agencies as a whis-tleblower in April 2015.” (FAC ¶ 46.) Er-hart' also “had a lengthy phoné call with the OCC, lasting nearly two hours,” on March 10, 2015, and he turned over documents to the OCC on March 11, 2015, to support his whistleblower allegations. (Id. ¶¶ 65, 68-69.)
When all inferences are drawn in his favor, Erhart sufficiently alleges that he engaged in protected activity under Sar-banes-Oxley. From Erhart’s perspective in early 2015—or from anyone else’s for that matter—it is challenging to discern what proper purpose a CEO would have for depositing “nearly $100,000 in checks made payable to third parties” into his personal deposit account. (FAC ¶44.) Upon discovering this conduct, a reasonable person in Erhart’s position could believe that CEO Garrabrants was engaged in a scheme where he deposited checks made payable from BofI to third-parties into his personal account for his own benefit—thereby possibly defrauding the Bank, (See id. ¶¶ 12, 44, 72A.) See Guitron,
ii. Knowledge of Protected Activity
Second, Erhart must allege that BofI “knew or suspected that [he]- engaged in the protected activity.” 29 CFR § 1980,104(e)(2)(ii); see also Tides,
Further, the events that allegedly transpired around the time Erhart called off sick from work indicate BofI, at the minimum, “suspected that [he] engaged in the protected activity.” See 29 CFR § 1980. Í 04(e) (2)(ii). These circumstances include BofI accessing Erhart’s work computer, BofI “going through all the documents” in Erhart’s locked file cabinets, SVP Tolla locating Erhart’s review of CEO Garrabrants’s personal accounts,-BofI preparing a letter terminating Erhart, Bofl’s alleged statements to the OCC about Er-hart, and Bofl’s general counsel demanding that Erhart “come to a conference room to speak” when he returned his work laptop. (See FAC ¶¶ 56-74.) If these allegations are true, a factfinder could draw the inference that BofI suspected or knew Erhart engaged in protected activity. Accordingly, Erhart’s pleading meets the sec
iii. Adverse Action
Third, Erhart’s pleading must demonstrate that he suffered “an adverse action ” See 29 C.F.R. § 1980.104(e)(2)(iii); see also Tides,
Consistent with § 1514A’s text, the Administrative Review Board has adopted an expansive view of “adverse action.” E.g., Menendez v. Haliburton, Inc., ARB Case Nos. 09-002,
The Administrative Review Board has also used the Supreme Court’s standard for Title VII discrimination from Burlington Northern & Santa Fe Railway Co. v. White,
Erhart’s allegations satisfy the adverse action requirement. He alleges Bofl officially discharged him on June 9, 2015. (FAC ¶ 72.) In addition, setting aside Er-hart’s discharge, Erhart’s pleading contains various other allegations of discriminatory conduct. Viewing these allegations in the light most favorable to Erhart, they show his performance rating was downgraded and his was bonus was adversely affected, (id. ¶ 25), he was threatened, (id. ¶ 47), and he was harassed, (see id. ¶¶ 54, 56, 59, 63, 66, 70-71). Upon learning'Er-hart was communicating with the OCC, Bofl also allegedly engaged in conduct that may be viewed as the Bank attempting to intimidate Erhart or discourage him from sharing any-more information with the government, (See id. ¶ 73 (“SVP Tolla stated, at an ‘All Hands Meeting’ of members of Audit and Compliance that any information [Erhart] provided to the OCC could not be considered credible because of [Erhartjs ‘psychiatric medical leave.’”); id. ¶74 (“SVP Tolla and CEO Gregory Garrabrants told this same group of employees that [Erhart]’s whistleblowing activities were ‘malicious’.... Garrabrants also told Bank employees that he was going to ‘bury the Bofl whistleblower.’ ”). A factfinder could draw the reasonable inference that management expected that the threats and derogatory statements they made at an “All Hands Meeting” of Er-hart’s coworkers would be shared with
iv. Contributing Factor in the Adverse Action
Last, Erhart must plead facts demonstrating “the circumstances raise an inference that the protected activity was a contributing factor in the unfavorable action.” See, e.g., Tides,
For example, in Van Asdale, after the two plaintiffs disclosed believed wrongdoing, the employer terminated one of the plaintiffs two and a half months later and the other plaintiff several weeks thereafter.
Erhart’s allegations fulfill this final requirement. Bofl’s alleged retaliatory conduct occurred within close temporal proximity to Erhart’s purported whistle-blowing activities. Causation, therefore, can be inferred from the timing alone. See Van Asdale,
Accordingly, Erhart states a prima facie case against BofI for whistleblower retaliation under Sarbanes-Oxley. He pleads sufficient facts that allow the Court “to draw the reasonable inference that [BofI] is liable for the misconduct alleged.” See Iqbal,
2. Dodd-Frank Whistleblower Retaliation
BofI also moves to dismiss Erhart’s whistleblower retaliation claim brought under the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010). “Like Sar-banes-Oxley, [Dodd-Frank] was passed in
No employer may discharge.. .or in any other manner discriminate against, a whistleblower in the terms and conditions of employment.. .because of any lawful act done by the whistleblower: (i) in providing information to the [SEC] in accordance with this section; [or]
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(iii) in making disclosures that are required or protected under the Sar-banes-Oxley Act of 2002
Id. § 78u-6(h)(l)(A). Accordingly, in addition to protecting reports made to the SEC, Dodd-Frank’s anti-retaliation provision incorporates protection for those disclosures made under Sarbanes-Oxley’s analogous provision. Id.; see also 17 C.F.R. § 240.21F-2 (interpreting 15 U.S.C. § 78u-6(a)(6)),
Despite that Dodd-Frank incorporates Sarbanes-Oxley disclosures, there is a split of authority as to whether Dodd-Frank protects Sarbanes-Oxley disclosures that'are not made directly to the SEC. Compare Asadi v. G.E. Energy (USA), L.L.C.,
Here, the Court has already determined Erhart sufficiently alleges that he engaged in protected activity under Sarbanes-Ox-ley. Because Dodd-Frank also prohibits BofI from retaliating against Erhart for engaging in this purported conduct, he has stated a plausible claim for whistleblower retaliation under Dodd-Frank as well. See Somers,
3. Violation of the Confidentiality of Medical Information Act
In his fourth claim, Erhart alleges BofI violated California’s Confidentiality of
The CMIA “is intended to'protect the confidentiality of individually identifiable medical information obtained from a patient by a health care provider, while at the same time setting forth limited circumstances in which the release'of such information to specified entities or individuals is permissible.” Brown v. Mortensen,
Relevant to this prohibition, the CMIA defines “medical information” as “any individually identifiable information, in electronic or physical form, in possession of or derived from a provider of health care, health care service plan, pharmaceutical company, or contractor regarding, a patient’s medical history, mental or physical condition, or treatment.” Cal, Civ. Code § 56.05(j) (emphasis added). Further, a “patient” is defined as “any natural person... who received health care services from a provider of healthcare and to whom medical information pertains.” Id. § 56.05(k).
■■ To ■ illustrate, an employer violated the CMIA when it misused information conr tainéd in two psychiatrists’ written evaluations regarding an employee’s alcohol consumption and anger toward a colleague. Pettus v. Cole,
Here, the Court agrees that Er-hart has not stated a plausible claim under the CMIA. Erhart alleges he “called off sick” and informed BofI “he was seeking an appointment with his physician to. discuss a medical leave of absence.” (FAC ¶ 63.) He also alleges he submitted “paperwork”. for his leave of absence. (Id. ¶ 72.) There is no allegation, however, that Er-hart “received health care services from a provider of healthcare.” See Cal. Civ. Code § 56.05(k). There is similarly no specific allegation that BofI received any “medical information” regarding Erhart under the CMIA—e.g,, medical records, a medical certification, or other information in “electronic or physical form... derived from a provider of health care,” See id. § 56.05(j). Without factual allegations establishing that BofI received “medical information” under the CMIA, Erhart fails to state a claim- that Boil improperly used or disclosed this information. See id. § 56.20(c).
Accordingly, Erhart’s fourth claim for violation of the CMIA is subject to dismissal. That said, because it is* possible
4. Breach of the Implied Covenant of Good Faith and Fair Dealing
■ Erhart’s seventh claim asserts that Bofl breached the implied covenant of good faith and fair dealing by terminating him without good cause. (FAC ■ ¶ 133.) Bofl moves to dismiss this claim on the basis that Erhart has not sufficiently alleged that an agreement existed between the parties that would allow him to pursue an implied covenant claim. (Mot. 19:12-28.)
“The law implies-in every contract a covenant of good faith and fair dealing.” Koehrer v. Superior Court,
In the employment context, these limitations on the implied covenant of good faith and fair dealing mean that the covenant “cannot supply limitations on termination rights to which the parties have not actually agreed.” Guz v. Bechtel Nat'l, Inc.,
Here, Erhart claims the'parties agreed “that [he] would be able to perform the duties of an internal auditor in accordance with federal and state regulations and commonly understood business practices, without fear of losing his job, being threatened physically and otherwise, and without having his performance evaluation downgraded and bonus reduced because he .spoke up about unlawful and improper
The Court finds that Erhart’s First Amended Complaint lacks sufficient factual allegations to state a plausible claim for breach of the implied covenant of good faith and fair dealing. Under California Labor Code § 2922, Erhart’s employment with BofI was presumed to be at-will. Er-hart does not plead sufficient facts to overcome this presumption.
Accordingly, Erhart’s claim for breach of the implied covenant of good faith and fair dealing is not plausible. The Court will therefore grant Bofl’s motion to dismiss Erhart’s seventh cause of action with leave to amend. See Fed. R. Civ. P. 15(a); Cafas-so,
5. Intentional Infliction of Emotional Distress
Erhart’s eighth claim seeks relief for intentional infliction of emotional distress. (FAC ¶ 135-38.) BofI argues this claim is barred by the exclusive remedy provisions of California’s Workers’ Compensation Act. (Mot. 20:5-27.)
“California’s Workers’ Compensation Act provides an employee’s exclusive remedy against his or her employer for injuries arising out of and in the course of employment.” Wright v. State,
The exclusive remedy rule is not absolute, however, for several reasons. First, the rule does not prohibit a claim where the employer’s conduct “contravenes fundamental public policy.” Miklosy,
Another exception to the exclusive remedy rule is if the employer’s conduct “exceeds the risks inherent in the employment relationship.” Miklosy,
Further, the California Supreme Court has held whistleblower retaliation is a risk inherent in the employment relationship. Shoemaker,
In this case, the Court.firids Er-hart’s claim for intentional -infliction of emotional - distress does not escape the reach of the exclusive remedy rule. First, the exception for conduct that contravenes fundamental public policy is inapplicable. As explained above, that exception is designed to allow a Tameny action for wrongful discharge in violation of public policy, Miklosy,
In , addition, in light .of the - California Supreme Court cases mentioned above, Erhart does not plead conduct that exceeds the risks inherent in the employment, relationship. Erhart alleges that “he was officially fired on June, .9, 2015.” (FAC ¶72.) .Thus, the.alleged threats, harassment, and other retaliatory acts he suffered before and up to this point occurred during the course of his employment. BofPs alleged retaliatory conduct “may be characterized as intentional, unfair or outrageous,” but “it is nevertheless covered by the by the workers’ compensation exclusivity provisions.” See Shoemaker,
6. Defamation
Erhart’s ninth cause of action seeks relief for defamation. (FAC ¶¶ 139-57.) Bofl moves to dismiss, arguing that Erhart fails to state his claim with the réquired specificity. (Mot, 22:17-24.)
Defamation “is an invasion of the interest in reputation” and “involves the intentional publication of a statement of fact which is false, unprivileged, and has a natural tendency to injure or which causes special damage.” Ringler Assocs., Inc. v. Maryland Cas. Co.,
“Under California law, the defamatory statement must be specifically identified, and the plaintiff must plead the substance of the statement. Even under the liberal federal pleading standards, general allegations of the defamatory statements that do not identify the substance of what was said are insufficient.” Norsat Int’l v. B.I.P. Corp., No. 12-cv-674-WQH,
Further,.the plaintiff must allege the statement was published. See Ringler Assocs.,
Liability may also be based on self-publication of the defamatory statement. “Generally, when a plaintiff voluntarily discloses the contents of a [defamatory] communication to others, the
Bofl’s primary contention is that “Er-hart fails to allege the substance of the allegedly defamatory . statement(s), the identity of the person(s) who allegedly made the statement(s), the identity of any person(s) who heard or received the statement, or even when the statement(s) was made.” (See Mot. 22:17-20.) The Court finds that this argument runs counter to the pleadings.
Erhart specifically alleges that in March 2015, SVP Tolla told BofI employees that Erhart was responsible for a negative article about BofT published on the Seeking Alpha website, and SVP Tolla had previously implied the same by calling Er-hart “Seeking Alpha” in February 2015. (FAC ¶71.) Erhart similarly alleges that Bofl’s agents and employees, including SVP Tolla and CEO Garrabrants, have widely published claims that Erhart “colluded and/or collaborated with ‘short sellers’ of Bofl’s stock.” (Id. ¶ 74B.) These allegations support a claim for defamation. Bofl’s alleged statement that Erhart caused the publication of a negative article about his employer is “a provably false factual assertion.” See Moyer,
As to the publication requirement, Er-hart alleges that Bofl’s statement that he was responsible for a negative article was made to third-parties. (FAC ¶ 71.) Erhart also alleges BofI was aware that he would be under significant pressure to disclose the contents of the alleged defamatory statements described in his pleading to various other third-parties, including prospective employers. (Id. ¶ 148.) Given the nature of the financial industry and the requirements of the auditing profession, Erhart plausibly alleges that he felt compelled to disclose and explain the circumstances of Bofl’s statements to prospective employers. Cf. Webber v. Nike USA, Inc., No. 12-CV-00974-BEN,
III. MOTION TO STRIKE
A. Legal Standard
Rule 12(f) of the Federal Rules of Civil Procedure provides that a court may strike from a pleading “an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” “[T]he function of a 12(f) motion to strike is to avoid the expenditure of time and money that must arise from litigating spurious issues by dispensing with those issues pri- or to trial.” Sidney-Vinstein v. A.H. Robins Co.,
“Motions to strike are generally regarded with disfavor because of the limited importance of pleading in federal practice, and because they are often used as a delaying tactic.” Neilson v. Union Bank of Cal.,
B. Analysis
In addition to moving to dismiss six of Erhart’s claims, BofI requests the Court strike numerous allegations from his First Amended Complaint. (Mot. 23:1-25:17.) Boil groups these allegations into three categories. (Id.) The Court will consider each category in turn.
1. Allegations Regarding Believed Wrongdoing
The first category is a selection of Erhart’s allegations in which he describes the perceived wrongdoing he discovered at Boñ. (See Mot. 23:1-21.) Boñ claims these allegations are immaterial because Erhart fails to allege he reported the alleged conduct to the government or other appropriate recipient. (Id. 23:15-21.) Thus, Bofl requests the Court strike all of these allegations. (Id.)
Boñ’s request is meritless. Erhart does in fact allege he reported the perceived wrongdoing at issue. He claims he “reported each of these matters to appropriate government agencies as a whistleblower in April 2015.” (FAC ¶ 45.) Moreover, even if the First Amended Complaint lacked this specific allegation, the Court would still deny Boñ’s request. The allegations Boñ seeks to- strike provide support for not only Erhart’s federal whistleblower retaliation claims, but also his amalgam of state law causes of action. Hence, the Bank fails to demonstrate these allegations “could have no possible bearing on the subject of the litigation.” See Platte Anchor Bolt,
2. Allegations Regarding Exhaustion . of Administrative Remedies
The second category of allegations Bofl seeks to expunge overlaps with the first. (See Mot. 25:2-8.) This time, Bofl requests the Court strike a selection of Erhart’s factual allegations regarding his discovery of wrongdoing because the Bank claims Erhart failed to exhaust his administrative remedies under Sarbanes-Oxley. (Id. 24:1-8.) Although Erhart alleges he did indeed exhaust his administrative remedies, (FAC ¶ 8), Bofl invites the Court to take judicial notice of Erhart’s administrative complaint filed with the Department of Labor and determine which of his present allegations were. not. included in his administrative filing, (Mot. 25:2-8).
The Court declines Bofl’s invitation to carve up Erhart’s amended pleading based on what he included in his administrative complaint. The Bank’s; motion overlooks the -.fact that Erhart is not simply bringing a claim under Sarbanes-Ox-ley. He has nine other claims. Although Sarbanes-Oxley may require Erhart to exhaust his administrative remedies before bringing a whistleblower retaliation claim, Dodd-Frank does not. Compare 18 U.S.C. § 1514A(b)(2)(D), with 15 U.S.C. § 78u-6(h)(l)(B)(i); see also Somers v. Digital Realty Trust, Inc.,
3. Allegations Regarding Confidential Information
Last, Bofl targets twenty-six paragraphs of allegations where it claims Erhart—by including these allegations in his pleading—“has violated the privacy, confidentiality and attorney-client privilege rights of Bofl’s employees, clients, and business counterparties.” (Mot. 25:13-15.) The Bank asks the Court to strike these allegations from Erhart’s pleading as impertinent. (Id. 25:9-17.)
The- Court will not do so for two reasons. First, given that many of Erhart’s- allegations were reported in The New York Times, his pléading has existed in the public record for months, and the Court has discussed his allegations in its orders, “the cat is out of the bag.” See SmithKline Beecham Corp. v. Pentech Pharm., Inc.,
In addition, this Court has already determined Erhart was “permitted to disclose Bofl’s information in his complaint if doing so was ‘reasonably necessary to pursue his retaliation claim.” (ECF No. 40.) See Cafasso,
In sum, because striking any of the three categories of allegations identified by Bofl is not warranted, the Court is unpersuaded by the Bank’s motion to strike.
IV. CONCLUSION
In light of the foregoing, the Court GRANTS IN PART and DENIES IN PART Bofl’s motion to dismiss and strike allegations from Erhart’s First Amended Complaint (ECF No. 35).- Specifically, the Court denies Bofl’s request to dismiss Er-hart’s claims for whistleblower retaliation under Sarbanes-Oxley, whistleblower retaliation under Dodd-Frank, and defamation. The Court, however, grants Bofl’s motion to dismiss .Erhart’s claims for violation of California’s Confidentiality of Medical Information Act, breach of the implied covenant of good faith and fair, dealing, and intentional infliction of emotional distress. The Court dismisses these claims with leave to amend. In addition, the Court denies Bofl’s motion to strike, allegations from Erhart’s pleading. If Erhart chooses to file a Second Amended Complaint, he must do so no later than September 29,. 2017.
IT IS SO ORDERED.
Notes
. BofI Holding, Inc. is the publicly-traded holding company for BofI Federal Bank, a federally-chartered savings and loan association that operates several brands of banks including Bank of Internet. The Court uses the term "BofI” to refer to either BofI Holding, Inc. or BofI Federal Bank.
. The following narrative is based on the allegations in Erhart’s First Amended Complaint. At the motion to dismiss phase, the Court assumes that Erhart’s factual allegations are true. See, e.g., O’Brien v. Welty,
. The Ninth Circuit has since recognized in an unpublished opinion that the Administrative Review Board's standard for protected activity has shifted to the “reasonable belief” standard used by this Court in its prior order. See Rochelean v. Microsemi Corp., Inc.,
. The Court recognizes the possibility that even under the narrower interpretation of Dodd-Frank, 'Erhart may have a claim for retaliation based on his "two whistleblower tips” submitted directly to the SEC. (See FAC ¶ 31.) To proceed on this basis, Erhart would need to demonstrate that he possessed "a reasonable belief that the information [he] was providing relate[d] to a possible securities law violation (or, where applicable, to a possible violation of the provisions set forth in 18 U.S.C. § 1514A(a)) that ha[d] occurred, [was] ongoing, or [was] about to occur.” See 17 C.F.R. § 240.21F-2. However, in light of Erhart stating a claim under the broader interpretation of Dodd-Frank adopted by the Ninth Circuit in Somers, the Court need not further explore the viability of this theory at the motion to dismiss phase.
. In addition to not alleging an express contract that overcomes the presumption of at-will employment, Erhart does not demonstrate an implied contract modifying Bofl’s termination rights existed. An employee who cannot identify an express contract limiting the employer’s termination rights may be able to rely upon an implied agreement to this effect. Guz,
, The exclusive remedy rule also cannot be used to bar a federal statute’s private right of action that "is unaffected by the availability of remedies under state workers’ compensation law.” See Adams Fruit Co. v. Barrett,
.' Some of Erhart's allegations mention defamatory statements, including statements purportedly made after Bofl terminated him. (FAC ¶ 74b.) BofTs alleged statements “after [Erhart] was terminated.. .can, by no stretch, be deemed to have occurred in the course and scope of [his] employment.” See Davaris v. Cubaleski,