Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_16-cv-00737/USCOURTS-casd-3_16-cv-00737-1/pdf.json

Nature of Suit Code: 376
Nature of Suit: other
Cause of Action: 31:3729 False Claims Act - Liability

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

UNITED STATES OF AMERICA 

ex rel. ERIN HAYES LUPO, 

Plaintiff,

v.

QUALITY ASSURANCE SERVICES, 

INC., an entity; GLENN RUSSELL 

DEACON II, an individual; GLENN 

RUSSELL DEACON, an individual; 

SUSAN DEACON, an individual; and 

SHELLY BECKER, an individual,

Defendants.

Case No.: 16cv737 JM (JMA)

ORDER (1) GRANTING IN PART 

AND DENYING IN PART

DEFENDANTS’ MOTION TO 

DISMISS PLAINTIFF/RELATOR’S 

SECOND AMENDED COMPLAINT; 

(2) GRANTING IN PART AND 

DENYING IN PART DEFENDANTS’ 

MOTION TO STRIKE PORTIONS 

OF THE SECOND AMENDED 

COMPLAINT

Defendants Quality Assurance Services, Inc. (“QAS”), Glenn Russell Deacon II, 

Glenn Russell Deacon, Susan Deacon, and Shelly Becker (collectively, “Defendants”) 

move the court to dismiss the second amended complaint (“SAC”) of Relator Erin Hayes 

Lupo for failure to state a claim. (Doc. No. 29.) In addition, Defendants move to strike 

portions of the SAC. (Doc. No. 30.) Relator opposes both motions. (Doc. Nos. 31, 32.) 

The court finds the matters suitable for decision without oral argument pursuant to Civil 

Local Rule 7.1(d)(1). For the following reasons, the court grants both motions in part and 

denies both motions in part.

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BACKGROUND

QAS is a California corporation that contracts to perform inspections and 

diagnostic testing on medical equipment for hospitals and other health care providers. 

(Doc. No. 25 ¶¶ 6, 17.) The individual defendants are all shareholders of QAS. (Id.

¶¶ 7–10.) Relator worked at QAS for approximately eight years, including as office 

manager. (Id. ¶¶ 5, 20.)

In September 2016, Relator filed a first amended complaint, alleging six counts: (I) 

substantive violations of the False Claims Act (“FCA”), 31 U.S.C. § 3729(a)(1); (II) 

conspiracy to violate the FCA, id. § 3729(a)(3); (III) retaliation in violation of the FCA, 

id. § 3730(h); (IV) retaliation in violation of California Labor Code section 1102.5

(“section 1102.5”); (V) retaliation in violation of California Labor Code section 232.5

(“section 232.5”); and (VI) wrongful termination in violation of California public policy. 

(See generally Doc. No. 13.) All six counts stemmed from allegations that Defendants 

falsified medical device inspection reports, which caused the submission of false claims

to the government, and that QAS terminated Relator for exposing that activity.

In February 2017, Defendants filed a motion to dismiss the first amended 

complaint, (Doc. No. 18), which the court granted in part and denied in part, (Doc. No. 

22). Specifically, the court: granted Defendants’ motion to dismiss Count I with leave to 

amend as to Glenn Russell Deacon, Susan Deacon, and Shelly Becker, but denied it as to 

QAS and Glenn Russell Deacon II; granted Defendants’ motion to dismiss Count II with 

partial leave to amend; granted Defendants’ motion to dismiss Count III without leave to 

amend as to the individual defendants, but denied it as to QAS; granted Defendants’ 

motion to dismiss Count IV without leave to amend as to the individual defendants, but 

denied it as to QAS; granted Defendants’ motion to dismiss Count V with leave to 

amend; granted Defendants’ motion to dismiss Count VI without leave to amend as to the 

individual defendants, but denied it as to QAS; and granted Defendants’ motion to 

dismiss Relator’s prayer for punitive damages, with leave to amend as to Counts IV, V, 

and VI.

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On April 5, 2017, Relator filed the SAC. (Doc. No. 25.)1 The SAC omits 

Relator’s previous claim for conspiracy to violate the FCA, but maintains the other 

counts, adding allegations in a number of places. The crux of the SAC continues to be 

Defendants’ alleged falsification of medical device inspection reports, the submission of 

false claims to the government, and Relator’s termination. Relator now lays out the 

counts as follows: (I) substantive violations of the FCA, against all defendants; (II) 

retaliation in violation of the FCA, against QAS; (III) retaliation in violation of section 

1102.5, against QAS; (IV) retaliation in violation of section 232.5, against all defendants; 

and (V) wrongful termination in violation of California public policy, against QAS. 

Relator again seeks punitive damages, on what are now labeled as Counts III, IV, and V. 

(See id.)

After an extension of time to respond to the SAC, Defendants filed the instant 

motions on May 22, 2017.

DISCUSSION

The court will first address Defendants’ motion to dismiss before turning to their 

motion to strike.

I. MOTION TO DISMISS

Defendant moves to dismiss each count in the SAC, as well as Relator’s request for 

punitive damages.

///

 

1 The SAC is actually an unsigned, redlined version of the first amended complaint. (See

Doc. No. 25.) And although the SAC continues to reference exhibits that were attached 

to the first amended complaint, those exhibits are not attached to the SAC. While 

Defendants did not object to the form of the SAC, the court would prefer, for clarity’s 

sake, to have a signed, clean version on the docket. Accordingly, Relator is directed to 

file, within ten days of this order, a signed, clean version of the SAC, with exhibits 

attached. (If Defendants object to Relator attaching the exhibits anew, they may file an 

ex parte motion to strike the exhibits explaining their position.) The SAC will continue 

to be operative as of the original filing date (April 5, 2017). The Clerk of Court shall

docket the corrected SAC as a new entry. 

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A. Legal Standards

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) challenges the 

legal sufficiency of the pleadings. Generally, to overcome such a motion, the complaint 

must contain “enough facts to state a claim to relief that is plausible on its face.” Bell 

Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when 

the plaintiff pleads factual content that allows the court to draw the reasonable inference 

that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 

678 (2009). Facts merely consistent with a defendant’s liability are insufficient to 

survive a motion to dismiss because they establish only that the allegations are possible 

rather than plausible. Id. at 678–79. The court must accept as true the facts alleged in a 

well-pleaded complaint, but mere legal conclusions are not entitled to an assumption of 

truth. Id. The court must construe the pleading in the light most favorable to the nonmoving party. Concha v. London, 62 F.3d 1493, 1500 (9th Cir. 1995).

A heightened pleading standard governs FCA claims, however. United States ex 

rel. Cafasso v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1054 (9th Cir. 2011). That 

heightened standard, provided by Federal Rule of Civil Procedure 9(b), requires that the 

complaint “state with particularity the circumstances constituting fraud or mistake,” 

although “[m]alice, intent, knowledge, and other conditions of a person’s mind may be 

alleged generally.” “Rule 9(b) demands that, when averments of fraud are made, the 

circumstances constituting the alleged fraud be specific enough to give defendants notice 

of the particular misconduct so that they can defend against the charge and not just deny 

that they have done anything wrong.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 

1106 (9th Cir. 2003) (internal ellipsis omitted). To satisfy Rule 9(b), “[a]verments of 

fraud must be accompanied by ‘the who, what, when, where, and how’ of the misconduct 

charged.” Id. (quoting Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997)).

///

///

///

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B. Analysis

1. Count I: Substantive Violations of the FCA

a. Relevant Law

The FCA prohibits the submission of false or fraudulent claims to the United 

States. Subsection (A) of 31 U.S.C. § 3729(a)(1) imposes liability upon any person who 

“knowingly presents, or causes to be presented, a false or fraudulent claim for payment or 

approval[.]” 31 U.S.C. § 3729(a)(1)(A). Subsection (B) imposes liability upon any

person who “knowingly makes, uses, or causes to be made or used, a false record or 

statement material to a false or fraudulent claim[.]” Id. § 3729(a)(1)(B). The difference 

between subsections (A) and (B), then, “is that the former imposes liability for presenting 

a false claim, while the latter imposes liability for using a false record or statement to get 

a false claim paid.” Jana, Inc. v. United States, 34 Fed. Cl. 447, 449 (1995).

To state a claim under subsection (A), Relator must show: “(1) a false or fraudulent 

claim (2) that was material to the decision-making process (3) which defendant 

presented, or caused to be presented, to the United States for payment or approval (4) 

with knowledge that the claim was false or fraudulent.” Hooper v. Lockheed Martin 

Corp., 688 F.3d 1037, 1047 (9th Cir. 2012). To state a claim under subsection (B), 

Relator must show that Defendants “knowingly made, used, or caused to be made or 

used, a false record or statement material to a false or fraudulent claim.” Id. Given the 

“causes to be” language in both subsections, the “FCA reaches ‘any person who 

knowingly assisted in causing the government to pay claims which were grounded in 

fraud, without regard to whether that person had direct contractual relations with the 

government.’ Thus, a person need not be the one who actually submitted the claim forms 

in order to be liable.” United States v. Mackby, 261 F.3d 821, 827 (9th Cir. 2001) 

(quoting United States ex rel. Marcus v. Hess, 317 U.S. 537, 544–45 (1943)).

b. Defendants’ Previous Arguments on this Issue, and the 

Court’s Ruling

In moving to dismiss the first amended complaint, Defendants focused on

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Relator’s failure to identify any actual claims made to the government. In denying the 

motion, the court noted that concrete evidence of claims was not required at this stage. 

Rather, as the Ninth Circuit has held, “it is sufficient to allege particular details of a 

scheme to submit false claims paired with reliable indicia that lead to a strong inference 

that claims were actually submitted.” Ebeid ex rel. United States v. Lungwitz, 616 F.3d 

993, 998–99 (9th Cir. 2010) (internal quotations omitted). Given that standard, the court 

found that the first amended complaint, “even if not artfully drafted,” met Ebeid’s 

requirements.

First, Relator alleges particular details of a scheme: rather than 

properly test medical equipment, Defendants produced reports

on the performance of medical equipment using falsified data

and provided those reports to various health care providers, 

including government-run institutions. Second, there is 

convincing reason to infer that this alleged scheme caused 

claims to be submitted to the government: the various health 

care providers used the equipment to treat patients and sought 

reimbursement for that treatment via claims to the government 

for Medicare and Medicaid funds; but the government would 

not have made those payments had it known the treatment was 

rendered on improperly tested and uncertified medical 

equipment. Through this process, false claims for payment 

were submitted.

(Doc. No. 22 at 5.)

In addition, the court ruled that Relator had satisfied Rule 9(b) by giving QAS and 

Glenn Russell Deacon II “notice of the particular misconduct so that they can defend 

against the charge and not just deny that they have done anything wrong.” Vess, 317 

F.3d at 1106. 

c. Defendants’ Current Arguments on this Issue

Now, in moving to dismiss the SAC, Defendants advance a different theory. In a 

nutshell, Defendants argue that Relator brings her claims under a “false certification 

theory” of FCA liability, but fails to plead essential elements of either an “express” or 

“implied” false certification claim.

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As an initial matter, the court questions whether this portion of Defendants’ motion 

is appropriate and timely with respect to QAS and Glenn Russell Deacon II. As 

discussed, the court already ruled on Defendants’ motion to dismiss Relator’s claim that 

QAS and Glenn Russell Deacon II violated the FCA. That claim was part of Count I in 

the first amended complaint and it remains a nearly identical part of Count I in the SAC. 

Defendants could have made their false certification argument in their first motion to 

dismiss; they did not. The court considered the arguments they did make and denied that 

portion of the motion. Consequently, this portion of Defendants’ motion to dismiss has 

the air of a motion for reconsideration. See Amaretto Ranch Breedables, LLC v. 

Ozimals, Inc., No. C 10-05696 CRB, 2011 WL 2690437, at *1–2 (N.D. Cal. July 8, 

2011) (summarily denying defendant’s motion to dismiss plaintiff’s statutory unfair 

competition claim because order on previous complaint had already addressed it).

And indeed, Federal Rule of Civil Procedure 12(g) generally prohibits successive 

motions to dismiss that raise arguments that could have been made in the prior 

motion. See Fed. R. Civ. P. 12(g)(2) (“Except as provided in Rule 12(h)(2) or (3), a party 

that makes a motion under this rule must not make another motion under this rule raising 

a defense or objection that was available to the party but omitted from its earlier 

motion.”). But one of the exceptions referenced in Rule 12(g) and found in Rule 12(h) is 

a motion for judgment on the pleadings under Rule 12(c). Thus, if the court did not 

consider Defendants arguments now, they could simply answer the SAC and make these 

same arguments in a Rule 12(c) motion. Rather than face that possibility, the court, in 

order “to secure the just, speedy, and inexpensive determination of this case,” Fed. R. 

Civ. P. 1, will rule on Defendants’ arguments at this time. See Nat’l City Bank, N.A. v. 

Prime Lending, Inc., No. CV-10-034-EFS, 2010 WL 2854247, at *2 (E.D. Wash. July 19, 

2010) (reaching same decision). 

d. Allegations Against QAS and Glenn Russell Deacon II

Turning to the merits of Defendants’ argument, the court again declines to dismiss 

Count I as to QAS and Glenn Russell Deacon II. In the court’s view, Defendants 

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misunderstand Relator’s allegations. Relator does not merely allege that Defendants 

violated the FCA because they “falsely certifie[d] compliance with a statute or regulation 

as a condition to government payment,” as was discussed in United States ex rel. Hendow 

v. Univ. of Phoenix, 461 F.3d 1166, 1171 (9th Cir. 2006). Rather, the allegations, in 

essence, are that Defendants “knowingly made, used, or caused to be made or used, a 

false record or statement material to a false or fraudulent claim”—precisely what the 

Ninth Circuit requires in order to state a claim under 31 U.S.C. § 3729 (a)(1)(B). See

Hooper, 688 F.3d at 1047. As the Ninth Circuit has put it, “[i]n an appropriate case, 

knowingly billing for worthless services or recklessly doing so with deliberate ignorance 

may be actionable under § 3729, regardless of any false certification conduct.” United 

States ex rel. Lee v. SmithKline Beecham, Inc., 245 F.3d 1048, 1053 (9th Cir. 2001).

Put differently, Relator does not have to resort to a false certification theory, 

because she does premise Count I on explicitly false records—specifically, medical 

device inspection reports. That makes this case unlike United States v. Todd Spencer 

M.D. Med. Grp., No. 1:11-CV-1776-LJO-SMS, 2016 WL 7229135 (E.D. Cal. Dec. 14, 

2016), which Defendants cite extensively, and in which the relator’s claims were “not 

premised on an assertion that Defendants’ claims for payment were ‘explicitly and/or 

independently false’” and thus “only viable under two doctrines: (1) false certification 

(either express or implied); and (2) promissory fraud.” See id. at *4 (citing Hendrow, 

461 F.3d at 1171).

Here, Relator specifically alleges that “Defendant Glenn Russell Deacon II has, on 

numerous occasions, created false, fraudulent reports, and submitted them to the 

California State Government for payment, as well as hospitals and other medical care 

providers in return for payment, which payment is funded, in part, by the government 

through Medicare, Medicaid, MediCal, and Tri-Care.” (Doc. No. 25 at 6, ¶ 21.) And to 

demonstrate this fraudulent conduct, Relator alleges that Defendants have created 

identical reports on different equipment, something she claims is “statistically 

impossible,” (id. at 7, ¶ 22), which the court presumes to be true for the purposes of this 

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motion.

Moreover, the “causes to be” language in 31 U.S.C. § 3729 (a)(1)(B) means that 

Relator need not plead Defendants themselves submitted the claims. Rather, at this stage 

it is enough that Defendants “knowingly assisted in causing the government to pay claims 

which were grounded in fraud.” Mackby, 261 F.3d at 827. In claiming that Defendants 

submitted fraudulent reports that hospitals relied on to make (false, as a result of 

Defendants’ conduct) claims to the government for reimbursement in the form of 

Medicare, Medicaid, Medi-Cal, or Tri-Care funds, Relator has done just that. See Lee, 

245 F.3d at 1053 (“If, for sake of analysis, we assume that a party to a government 

contract knowingly or with deliberate ignorance charged the government for worthless 

services, then there would be fraud on the government that may be pursued under the 

FCA.”).

In short, now, as before, the court finds that in alleging this activity the SAC:

satisfies the stated purposes of Rule 9(b)—giving [QAS and 

Glenn Russell Deacon II] ‘notice of the particular misconduct 

so that they can defend against the charge and not just deny that 

they have done anything wrong.’ Vess, 317 F.3d at 1106. 

Relator claims that on numerous occasions, but at minimum on 

January 15, 2016 (when), Glenn Russell Deacon II, through his 

employment at QAS (who and where), generated fraudulent 

reports that were not based on actual testing done (what), which 

were provided to health care providers, which were then used to 

garner improper government payments (how). This recitation 

makes clear what wrongs Relator believes Glenn Russell 

Deacon II (and QAS) committed, and the manner in which 

those wrongs were committed. At this point in the case, the 

specific manner in which reports were delivered to the health 

care providers and then incorporated into false claims is less 

important.

(Doc. No. 22 at 5–6.)

Consequently, though Relator must undoubtedly offer more in the ensuing stages 

of this case, the court finds that, at least with regard to QAS and Glenn Russell Deacon II, 

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she has satisfied her burden at the pleading stage. 

e. Allegations Against the Other Defendants

In the first go-round on Count I, the court ruled that Relator’s allegations against 

the other defendants—that they “were aware of Glenn Russell Deacon II’s fraudulent 

practices”—was “not sufficient to put each individual defendant on notice of their alleged 

role in a fraudulent scheme as required by the particularity requirements of the FCA.” 

Accordingly, the court granted Defendants’ motion, with leave to amend, as to Glenn 

Russell Deacon, Susan Deacon, and Shelly Becker. 

Relator has now returned with new allegations against Russell Deacon, Susan 

Deacon, and Shelly Becker. Much of what she adds to the SAC is plainly conclusory (the 

terms “fraudulent” and “fraudulently” play starring roles). Looking to the actual facts2

alleged, though, the court finds that—though it is extremely close and the SAC still 

leaves much to be desired—Relator has satisfied Rule 9(b) against Glenn Russell Deacon 

and Shelly Becker. Her allegations against Susan Deacon continue to fall short, however.

On the one hand, Relator alleges that Glenn Russell Deacon provided her “with a 

post-it note with handwritten numbers on it, and ordered [her] to manually input those 

numbers into a report previously generated.” (Doc. No. 25 at 8, ¶ 26.) The court can 

draw the reasonable inference in Relator’s favor that this is an indication of fraud; 

presumably, if the report were authentic, it would be automatically generated and not 

manually altered. Likewise, Relator alleges that “with the knowledge that the reports 

were fraudulently created,” Glenn Russell Deacon “would then create an invoice for the 

fraudulent report, and submit it to the institution for payment.” (Id. at 9, ¶ 27; see also id.

at 10, ¶ 28.) And Relator similarly alleges that Shelly Becker “routinely . . . created 

reports by changing the name and date of old reports that were generated for other 

hospitals and medical care providers.” (Id. at 9, ¶ 27.) Finally, Relator alleges that 

 

2 One might wonder why these facts were not alleged the first time around. Whatever the 

answer, the court has no choice but to accept them as true at this point. 

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Becker gave Glenn Russell Deacon “a list of institutions to invoice, which invoices were 

submitted for payment, for reports that had never actually been generated.” (Id. at 10, ¶ 

28.) 

These allegations are sufficient to give notice of the purported misconduct so that 

Glenn Russell Deacon and Shelly Becker “can defend against the charge and not just 

deny that they have done anything wrong.” Vess, 317 F.3d at 1106. Though the court is 

troubled by Relator’s failure to attach dates to her allegations, the court understands that 

it may be difficult to plead, for each individual instance, the date and institution involved 

in conduct that “routinely” took place and involved “lists of institutions” as Relator 

claims. For that reason, the court will not dismiss Relator’s claims against Glenn Russell 

Deacon and Shelly Becker for want of the “when” requirement. See id.

On the other hand, Relator’s allegations that Susan Deacon told Relator to provide 

old reports, (Doc. No. 25 at 8, ¶ 25), told Relator to do what Glenn Russell Deacon II 

asked, (id. at 10–11, ¶ 30), and knew about two identical reports, (id. at 11, ¶ 31), do not

combine to satisfy Rule 9(b) in stating a claim under the FCA. As Relator has had a 

number of chances to adequately plead this claim, the court dismisses Count I as to Susan

Deacon without leave to amend.

In sum, the court denies Defendants’ motion to dismiss Count I against QAS, 

Glenn Russell Deacon II, Glenn Russell Deacon, and Shelly Becker, but grants it, without 

leave to amend, as to Susan Deacon.

2. Counts II, III, and V: Retaliation in Violation of the FCA, 

Retaliation in Violation of Section 1102.5, and Wrongful 

Termination in Violation of Public Policy, Respectively

Defendants’ motion to dismiss Counts II, III, and V, all of which are alleged 

against QAS only, presents the same problem as its motion to dismiss Count I against 

QAS and Glenn Russell Deacon II—the court has already ruled on the issues. (See Doc. 

No. 22 at 10 (“[Relator] has stated a claim that QAS retaliated against her in violation of 

the FCA.”); id. at 11 (“Relator alleges that she disclosed Glenn Russell Deacon II’s 

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practices to Susan Deacon (the protected activity) and was fired (the adverse employment 

action) two days later (the causal link). Thus, Relator has pled a prima facie case [under 

section 1102.5] against QAS.”); id. at 14 (“Relator alleges sufficient facts to support her 

FCA and section 1102.5 retaliation claims. Consequently, she has alleged sufficient facts 

to support this [wrongful termination in violation of public policy] claim against QAS.”).)

Nevertheless, Defendants move to dismiss those claims again, in the seeming hope

that their new arguments on Count I will prevail and, in turn, cause the court to rethink its 

rulings on Counts II, III, and V. As discussed above, however, the court rejects 

Defendants’ new arguments on Count I. Thus, the analysis on Counts II, III, and V is 

unchanged, and the court need not repeat its basis for previously denying Defendants’ 

motion to dismiss those claims. So the court will keep it brief: As to Count II, Relator 

has adequately alleged that (1) she was engaging in conduct protected under the FCA; (2)

QAS knew that she was engaging in such conduct; and (3) QAS discriminated against her

because of that conduct. See United States ex rel. Hopper v. Anton, 91 F.3d 1261, 1269 

(9th Cir. 1996). As to Count III, Relator has alleged that (1) she was engaged in 

protected activity; (2) she was thereafter subjected to adverse employment action by 

QAS; and (3) there was a causal link between the two. See Soukup v. Law Offices of 

Herbert Hafif, 39 Cal. 4th 260, 287–88 (2006). And because Relator has alleged facts 

sufficient to support Counts II and III, she has alleged facts sufficient to support Count V. 

See Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1103 (9th Cir. 2008).

The court denies Defendants’ motion to dismiss Counts II, III, and V.

3. Count IV: Violation of Section 232.5

Count IV alleges that Defendants violated section 232.5, which provides that an 

employer may not discharge or otherwise discriminate against an employee who 

discloses information about the employer’s “working conditions.” As discussed in the 

court’s prior order, the Legislature did not define the phrase “working conditions” in 

section 232.5, and as Defendants point out, “there is scant case law on the issue.” Only 

an unpublished California Court of Appeal case, Massey v. Thrifty Payless, Inc., 2014 

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WL 2901377 (Cal. Ct. App. June 27, 2014), has examined section 232.5 in any detail, but 

even that court could not settle on a precise definition. Thus, in previously deciding this 

issue, this court undertook its own evaluation of section 232.5, as well as its legislative 

history (as discussed in Massey), to find that Relator had not alleged a violation of the 

section. The court reasoned that Relator had not alleged that falsifying reports was a 

condition of her employment with QAS—only that she was asked to provide old reports

so that others could do the falsifying. (Doc. No. 22 at 14.)

Now, in the SAC, Relator alleges that she was “ordered to manually input numbers 

into reports, which were submitted for payment along with invoices submitted for 

payment.” (Doc. No. 25 at 9, ¶ 26.) Again, as mentioned above, the court can infer that 

manually inputting numbers into what should be automatically generated reports

constitutes falsification of those reports. And Relator also now claims that she disclosed 

those conditions by “complain[ing] of the requirement that she participate in” this activity

to Susan Deacon, only to be instructed by Susan Deacon, on several occasions, that she 

needed to do what her boss told her to do. According to Relator, she “understood those 

instructions to mean that if she did not follow . . . orders, she would be fired.” (Id. at 25, 

¶ 30.) To cap it off, Relator alleges that two days after showing Susan Deacon identical 

reports, “to demonstrate . . . the report produced by Glenn Russell Deacon was therefore 

fraudulent,” she was fired.

Based on these allegations, accepted as true, the court finds that Relator has 

adequately pled that QAS violated section 232.5 by firing her for disclosing information 

about her working conditions.

The court dismisses Count IV as to the individual defendants, however. By its 

plain language, section 232.5 applies to employers only. Moreover, even where statutes 

use the word “person,” see Jones v. Lodge at Torrey Pines P’ship, 42 Cal. 4th 1158, 1162 

(2008), or define employer to include “any person acting as an agent of an employer,” see

Reno v. Baird, 18 Cal. 4th 640, 645 (1998), the California Supreme Court has held that 

that no individual liability exists. Given this authority, the court finds that no individual 

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liability can exist under section 232.5. See Jones, 42 Cal. 4th at 1162 (contrasting “clear 

language” such as “[a]n employee of an entity . . . is personally liable for any 

harassment” that is sufficient to impose personal liability).

4. Relator’s Request for Punitive Damages

Finally, Defendants seek dismissal of Relator’s prayer for punitive damages on

Counts III–V. Under California law, a plaintiff may recover punitive damages in 

connection with a non-contractual claim if she establishes by clear and convincing 

evidence that the defendant is guilty of fraud, oppression, or malice. Cal. Civil 

Code § 3294(a).

In its prior order on Relator’s first amended complaint, the court dismissed the 

request for punitive damages, but provided leave to amend. Nothing has changed with 

the filing of the SAC. Relator still alleges standard violations of California statutory and 

common law—nothing more. Accordingly, the court grants Defendants’ motion to 

dismiss the SAC’s prayer for punitive damages, without leave to amend. See Turman v. 

Turning Point of Cent. California, Inc., 191 Cal. App. 4th 53, 64 (2010) (requiring facts 

pled in the complaint to “rise to the level of malice, oppression or fraud necessary under 

Civil Code section 3294 to state a claim for punitive damages”).

///

///

///

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II. MOTION TO STRIKE

Defendants move to strike the following portions of the SAC:

Paragraph 17, line 12: ‘Medicaid, MediCal’

Paragraph 17, line 13: ‘and/or the California State’

Paragraph 17, line 15: ‘Medicaid, MediCal’

Paragraph 18: entire paragraph

Paragraph 19, line 23: ‘California State and’

Paragraph 19, line 7: ‘State and’

Paragraph 20, line 12: ‘Medicaid, MediCal’

Paragraph 21, line 15: ‘the California State Government for 

payment, as well as’

Paragraph 21, line 18: ‘Medicaid, MediCal’

Paragraph 24: entire paragraph

Paragraph 34, line 25: ‘and state governments’

Paragraph 34, line 28: ‘Medicaid, MediCal’

Paragraph 36, line 15: ‘and state’

Paragraph 37, line 16–17: ‘and the state Medicaid/MediCal 

programs’

Paragraph 38, line 22: ‘and the state Medical/MediCal 

programs’

Paragraph 38, line 26: ‘Medicaid, MediCal’

Paragraph 39, lines 1–2: ‘and the state Medicaid programs’

Paragraph 39, line 3: ‘MediCal, Medicaid’

Paragraph 63, lines 11–15: ‘A fundamental public policy is 

embodied in California Government Code § 12650, et. (sic) 

seq., prohibiting employers from retaliating against an 

employee for efforts to prevent false claims from being filed

against the State government.’

Paragraph 67, line 9–10: ‘and governmental agencies in the 

State of California.’

(Doc. No. 30 at 2–3.)3

A. Legal Standards

Federal Rule of Civil Procedure 12(f) states that a district court “may strike from a 

 

3 Defendants’ motion cites different line numbers from those reflected in the SAC. But

the court can decipher which portions of the SAC Defendants want to strike. And 

considering that the SAC is a redlined version of the first amended complaint (as 

discussed in footnote 1, above), the court understands the potential for confusion.

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pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous 

matter.” “The 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 

prior to trial.” Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970, 973 (9th Cir. 2010) 

(internal quotations omitted). “‘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.’” Varrasso v. Barksdale, No. 13cv1982 BAS (JLB), 2016 

WL 1375594, at *1 (S.D. Cal. Apr. 5, 2016) (quoting Neilson v. Union Bank of 

California, N.A., 290 F. Supp. 2d 1101, 1152 (C.D. Cal. 2003)). “The motion should not 

be granted unless the matter to be stricken clearly could have no possible bearing on the 

subject of the litigation. If there is any doubt the court should deny the motion.” Obesity 

Research Inst., LLC v. Fiber Research Int’l, LLC, No. 15cv595 BAS (MDD), 2016 WL 

739795, at *3 (S.D. Cal. Feb. 25, 2016) (internal quotations and alterations omitted). 

When deciding a Rule 12(f) motion, a court must accept the nonmoving party’s 

allegations as true and liberally construe the pleadings in its favor. Multimedia Patent 

Trust v. Microsoft Corp., 525 F. Supp. 2d 1200, 1211 (S.D. Cal. 2007). 

B. Analysis

Defendants argue that, because Relator has brought suit on behalf of the United 

States under the federal FCA, “her allegations relating to alleged fraud on the State of 

California are immaterial, impertinent, improper, prejudicial, and seek to confuse the 

issues for the jury.”

1. Relator’s References to Medicaid and Medi-Cal

Defendants characterize Relator’s references to Medicaid and Medi-Cal as

“immaterial and impertinent.” The court disagrees. As Defendants themselves 

acknowledge, “Medicaid is a joint federal-state program administered by the individual 

states that choose to participate. In California, the Medicaid program is known as MediCal . . . [meaning] Medi-Cal and Medicaid are essentially the same thing in California.” 

(Doc. No. 30-1 at 3–4 (citing information found on Medicaid.gov stating that Medicaid 

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“is funded jointly by states and the federal government”).)

4 Given that Medicaid is 

funded in part by the federal government, it strikes the court as logical that fraud against 

Medicaid (or Medi-Cal) may be fraud against the federal government, and Defendants 

provide no authority to the contrary. Thus, liberally construing the SAC in Relator’s 

favor, Multimedia Patent Trust, 525 F. Supp. 2d at 1211, and recognizing that a motion to 

strike “should not be granted unless the matter to be stricken clearly could have no 

possible bearing on the subject of the litigation,” Obesity Research, 2016 WL 739795, at 

*3, the court declines to strike Relator’s references to Medicaid and Medi-Cal, as well as 

to State hospitals that may provide services using Medicaid and Medi-Cal funds.

2. Relator’s General References to the California State Government

By contrast, Relator’s allegations concerning the State of California alone (without 

anything tying the State to even partially federally funded programs such as Medicaid or 

Medi-Cal), and specifically California’s prisons, have no bearing on the litigation. 

Relator is not bringing a claim for fraud against the State of California, or on behalf of 

the State of California. And her retaliation and wrongful termination claims are all 

adequately supported by her allegations that she investigated and disclosed fraudulent 

conduct of any type. See Moore v. California Inst. of Tech. Jet Propulsion Lab., 275 F.3d 

838, 845 (9th Cir. 2002) (stating, relevant to Count II here, that protected activity under 

the FCA is the investigation of “matters which are calculated, or reasonably could lead, to 

a viable FCA action”); Ferrick v. Santa Clara Univ., 231 Cal. App. 4th 1337, 1345 (2014) 

(stating, relevant to Count III here, that protected activity is the disclosure of, among 

other things, a reasonably based suspicion of a violation of a federal statute); Cal. Lab. 

Code § 232.5 (prohibiting discrimination for disclosure of “working conditions,” which, 

relevant to Count IV here, the court has determined includes being required to assist in 

fraud); Haney v. Aramark Unif. Servs., Inc., 121 Cal. App. 4th 623, 641–42 (2004)

(stating, relevant to Count V here, that the public policy motivating a wrongful 

 

4 The court grants Defendants’ requests for judicial notice. (Doc. Nos. 29-2, 30-2.)

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termination may be laid out in statute).

Thus, striking references related to purely California entities and issues will not 

limit Relator’s ability to litigate her case. To the contrary, striking those references may

streamline the case and save time and money—especially in discovery. See Whittlestone, 

618 F.3d at 973. Defendants will not have to chase down, and turn over, documents with 

no connection to the federal government and therefore no connection to Relator’s claims. 

As a result, rather than serving as “a delaying tactic,” Varrasso, 2016 WL 1375594, at *1, 

Defendants’ motion to strike actually helps move this case forward more efficiently. 

Accordingly, the court strikes the following portions of the SAC:

 paragraph 18, line 20: “California State Prisons and”

 paragraph 18, lines 22–23: “California Institution for Men, California 

Institution for Women, Valley State Prison, Richard J. Donovan 

Correctional Facility” 

 paragraph 21, line 18: “the California State Government for payment, as 

well as”

 paragraph 24, line 18: “prisons and”

 paragraph 63, lines 11–15: “A fundamental public policy is embodied in 

California Government Code § 12650, et. (sic) seq., prohibiting employers 

from retaliating against an employee for efforts to prevent false claims from 

being filed against the State government.”

 paragraph 67, line 15: “in the State of California.”

CONCLUSION

For the reasons stated, the court:

 denies Defendants’ motion to dismiss Count I against QAS, Glenn Russell 

Deacon II, Glenn Russell Deacon, and Shelly Becker, but grants it, without 

leave to amend, as to Susan Deacon;

 denies Defendants’ motion to dismiss Counts II, III, and V;

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 denies Defendants’ motion to dismiss Count IV against QAS, but grants it as 

to the other defendants;

 grants Defendants’ motion to dismiss Relator’s prayer for punitive damages, 

without leave to amend;

 strikes the portions of the SAC described above.

Relator shall file a signed, clean version of the SAC with exhibits attached within 

ten days of this order, as specified in footnote 1. Defendants shall answer the SAC within 

fifteen days of this order.

IT IS SO ORDERED. 

DATED: July 26, 2017 

JEFFREY T. MILLER

United States District Judge

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