Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_05-cv-00117/USCOURTS-caed-1_05-cv-00117-6/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 29:1132 E.R.I.S.A.-Employee Benefits

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1

IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF CALIFORNIA

OPTISTREAMS, INC., ) 

 )

Plaintiff, )

)

vs. )

)

SEAN GAHAN and DOES 1 through )

25, inclusive, )

 )

Defendants. )

)

) 

No. CV-F-05-0117 REC SMS

ORDER GRANTING OPTISTREAMS,

INC.’S MOTION TO DISMISS

FOURTH CLAIM FOR RELIEF OF

SEAN GAHAN’S COUNTERCLAIM

PURSUANT TO RULE 12(b)(6)

AND DIRECTING SEAN GAHAN TO

FILE A SECOND AMENDED

COUNTERCLAIM. 

(Doc. 48) 

On November 28, 2005, the Court heard Plaintiff OptiStreams,

Inc.’s (“OptiStreams”) Motion to Dismiss Sean Gahan’s Fourth

Claim for Relief Pursuant to Rule 12(b)(6) (the “Motion”). Upon

due consideration of the written and oral arguments of the

parties and the record herein, the Court GRANTS the Motion and

GRANTS Mr. Gahan’s request for leave to amend. 

I. Factual Background

Defendant and Counter-Claimant Sean Gahan worked as a

computer programmer for Plaintiff and Counter-Defendant

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OptiStreams, Inc., from August 2002 through September 30, 2004. 

OptiStreams alleges that, on or about July 15, 2004, Mr. Gahan

accessed OptiStreams’ computer network and electronic database to

tamper with data it contained and caused harm to electronic

storage files. OptiStreams also alleges that, in or around

August 2004, Plaintiff falsely told a third party that

OptiStreams was insolvent and could not pay its bills. 

On August 30, 2004, Mr. Gahan gave OptiStreams notice that he was

resigning effective September 30, 2004. 

Before Mr. Gahan’s employment ended, OptiStreams asked him

to sign a declaration. Mr. Gahan claims that the declaration

contained false and misleading statements.

Mr. Gahan claims that, on or around October 18, 2004, and on

other occasions, agents of OptiStreams told third parties that

Mr. Gahan had wrongfully engaged in computer hacking, that a

criminal investigation had implicated Mr. Gahan, and that Mr.

Gahan had failed to sign a truthful declaration arising from the

incident. Mr. Gahan alleges that Steve Genuser, an OptiStreams

employee, made statements about him in a memorandum of October

18, 2004. 1st Am. Countercl. Ex. C. Mr. Gahan alleges that

these claims were false and injured his reputation.

II. Procedural History

On December 22, 2004, OptiStreams sued Mr. Gahan in the

Superior Court of California in Fresno. OptiStreams alleged

causes of action for slander, breach of fiduciary duty/duty of

loyalty, trespass to chattels, computer tampering, and

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conversion. On January 24, 2005, Mr. Gahan removed the action to

this Court and filed a counterclaim for damages. The

counterclaim featured the following causes of action: waiting

time penalties under California Labor Code section 203, penalties

for failure to provide COBRA notice under 29 U.S.C. section 1132,

defamation, and retaliation/abuse of process. Mr. Gahan filed an

amended counterclaim on August 26, 2005.

On October 19, 2005, OptiStreams filed this motion. On

November 9, 2005, Mr. Gahan filed his opposition along with an

excerpt from the deposition of Jon Haugan, the CEO of

OptiStreams.

III. Discussion

A. Legal Standard

Dismissal of a complaint pursuant to Rule 12(b)(6) is proper

if “it appears beyond doubt that the plaintiff can prove no set

of facts in support of his claim which would entitle him to

relief.” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 2

L. Ed. 2d 80 (1957). In testing the sufficiency of a complaint

against a Rule 12(b)(6) challenge, a court must “accept all

material allegations in the complaint as true and construe them

in the light most favorable to the plaintiff.” North Star Int’l

v. Arizona Corp. Comm’n, 720 F.2d 578, 580 (9th Cir. 1983). The

Court need not, however, “accept legal conclusions cast in the

form of factual allegations if those conclusions cannot

reasonably be drawn from the facts alleged.” Clegg v. Cult

Awareness Network, 18 F.3d 752, 754-55 (9th Cir. 1994). 

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Mr. Gahan’s Fourth Claim for Relief in actuality encompasses 1

two types of claims: abuse of process and retaliation.

4

A complaint may be dismissed as a matter of law if there is

a lack of a cognizable legal theory or if there are insufficient

facts alleged under a cognizable legal theory. Balistreri v.

Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990). The

Court must determine whether or not it appears to a certainty

under existing law that no relief can be granted under any set of

facts that might be proved in support of a plaintiff’s claims. 

De La Crux v. Tormey, 582 F.2d 45, 48 (9th Cir. 1978), cert.

denied, 441 U.S. 965, 99 S. Ct. 2416, 60 L. Ed. 2d 1072 (1979). 

Where the complaint fails to state a claim on which relief can be

granted, leave to amend “shall be freely given when justice so

requires.” Fed. R. Civ. P. 15(a); Allen v. Beverly Hills, 911

F.2d 367, 373 (9th Cir. 1990). 

B. Abuse of Process1

California courts define the tort of abuse of process as

follows:

The tort of abuse of process has two

elements: there must be wrongful use of

process, not merely a request for or

initiation of process — and second, the act

complained of must involve the use of

process. Process is action taken pursuant to

judicial authority. It is not action taken

without reference to the power of the court. 

Thus, serving upon plaintiff a false notice

that a bench warrant had been issued is not

process, because in making the false

statement defendant took no action pursuant

to court authority. Merely obtaining or

seeking process is not enough; there must be

subsequent abuse, by a misuse of the judicial

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Mr. Gahan points to the following deposition testimony: 2

Q: Have you ever told anyone that the

lawsuit was file [sic] because Mr. Gahan

would not sign the declaration?

A: No.

Q: Was that a factor in the decision to file

the lawsuit?

A: I’m sure it was a factor, but it was just

one of many.

Sagaser Decl. Ex. A.

5

process for a purpose other than that which

it was intended to serve.

Adams v. Super. Ct., 2 Cal. App. 4th 521, 530 (1992) (internal

citations omitted).

1. Deposition Testimony

OptiStreams’ only argument against Mr. Gahan’s abuse of

process claim is that it improperly relies upon privileged

evidence. Mr. Gahan supports his abuse of process claim with the

allegation that: “In his deposition taken on June 27, 2005 Jon

Haugan testified that one of the reasons that Gahan was sued was

because he refused to sign the declaration.” Compl. at 5. 2

OptiStreams claims the deposition testimony is privileged

under California Civil Code section 47(b), which states:

A privileged publication or broadcast is one

made:

. . .

 (b) In any (1) legislative proceeding,

(2) judicial proceeding, (3) in any other

official proceeding authorized by law, or (4)

in the initiation or course of any other

proceeding authorized by law and reviewable

pursuant to Chapter 2 (commencing with

Section 1084) of Title 1 of Part 3 of the

Code of Civil Procedure,

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with certain exceptions that are inapplicable here. Cal. Civ.

Code § 47. A deposition is a “judicial proceeding” within the

meaning of section 47(b). Sipple v. Found. for Nat’l Progress,

71 Cal. App. 4th 226, 243 (1999).

Contrary to OptiStreams’ contention, section 47 does not

function as an evidentiary privilege. Oren Royal Oaks Venture v.

Greenberg, Bernhard, Weiss & Karma, Inc., 42 Cal. 3d 1157, 1168

(Cal. 1986). Rather, “[t]he privileges of Civil Code section 47,

unlike evidentiary privileges which function by the exclusion of

evidence (see Evid. Code, § 900 et seq.), operate as limitations

upon liability.” Id. In actuality, section 47 merely bars

certain tort claims predicated on conduct in judicial

proceedings. Id. It does not exclude statements made in

judicial proceedings that go to the speaker’s intent “when

allegations of misconduct properly put an individual’s intent at

issue in a civil action.” Id.

To prove his abuse of process claim, Mr. Gahan must show

that OptiStreams acted with an improper purpose. Mr. Haugan’s

deposition testimony tends to show that OptiStreams filed the

lawsuit, at least in part, as a reaction to certain conduct of

Mr. Gahan, rather than to obtain recovery on the merits. Because

it does not appear as if Mr. Gahan is claiming that Mr. Haugan’s

deposition testimony itself was tortious, the Court need not

decide whether section 47 bars such a claim.

2. Improper Litigation Conduct 

An abuse of process claim requires that OptiStreams did

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something more than simply file and maintain a lawsuit with an

improper purpose. Oren Royal Oaks, 42 Cal. 3d at 1169. Rather,

Mr. Gahan must allege, in addition to the filing with an improper

purpose, “a wilful act . . . not proper in the regular conduct of

the proceeding.” Id. at 1168-69; see, e.g., Trear v. Sills, 69

Cal. App. 4th 1341, 1359 (1999) (plaintiff failed to state a

claim for abuse of process because he did not allege an improper

use of process other than filing the suit). 

This requirement distinguishes the tort from a malicious

prosecution claim and properly balances “the freedom of an

individual to seek redress in the courts and the interest of a

potential defendant in being free from unjustified litigation.” 

Id. at 1169. Redress based on merely initiating and maintaining

a suit for an improper purpose is limited to the common law tort

of malicious prosecution, which requires “‘that the prior action

(1) was commenced by or at the direction of the defendant and was

pursued to a legal termination in his . . . favor . . .; (2) was

brought without probable cause . . .; and (3) was initiated with

malice . . . .’” Id. (quoting Bertero v. Nat’l Gen. Corp., 13

Cal.3d 43, 50 (1974)). Allowing an abuse of process tort to

proceed merely on the basis of an improper filing and maintenance

of a lawsuit would effectively negate the probable-cause

requirement of an action for malicious prosecution. Id. at 1169-

70.

Mr. Gahan’s complaint does not claim that OptiStreams has

prosecuted the lawsuit in an abusive manner. Rather, he only

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California Labor Code sections 98.6(a) provides, in full: 3

No person shall discharge an employee or in

any manner discriminate against any employee

or applicant for employment because the

employee or applicant engaged in any conduct

delineated in this chapter, including the

conduct described in subdivision (k) of

Section 96, and Chapter 5 (commencing with

Section 1101) of Part 3 of Division 2, or

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claims that “Gahan was sued” for an improper purpose (Compl. at

5), that OptiStreams’ “filing of the lawsuit” constitutes an

abuse of process (id. at 6), and that “the retaliatory

institution of the present legal action” harmed him (id.). These

claims are insufficient as a matter of law to support a claim for

abuse of process. The Court holds that Mr. Gahan has not stated

a claim for abuse of process.

C. Retaliation

Mr. Gahan claims that he is entitled to recover for

retaliation on two bases: (1) under California Labor Code

sections 98.6 and 1102.5 and (2) for what he calls “retaliation

in violation of public policy” (Opp’n at 4) under Tameny v.

Atlantic Richfield Co. (Tameny) 27 Cal. 3d 167 (1980). 

OptiStreams claims that dismissal of the retaliation claim is

proper because none of these authorities recognize a claim by a

former employee based on conduct by an employer following

voluntary resignation. In response, Mr. Gahan cites no case law

that supports a retaliation claim under such a theory. 

1. California Labor Code sections 98.6 and 1102.5

Under California Labor Code section 98.6(a), an employer 3

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because the employee or applicant for

employment has filed a bona fide complaint or

claim or instituted or caused to be instituted

any proceeding under or relating to his or her

rights, which are under the jurisdiction of

the Labor Commissioner, or because the

employee has initiated any action or notice

pursuant to Section 2699, or has testified or

is about to testify in any such proceeding or

because of the exercise by the employee or

applicant for employment on behalf of himself,

herself, or others of any rights afforded him

or her.

Section 98.6(b) provides, in full: 4

Any employee who is discharged, threatened

with discharge, demoted, suspended, or in any

other manner discriminated against in the

terms and conditions of his or her employment

because the employee engaged in any conduct

delineated in this chapter, including the

conduct described in subdivision (k) of

Section 96, and Chapter 5 (commencing with

Section 1101) of Part 3 of Division 2, or

because the employee has made a bona fide

complaint or claim to the division pursuant to

this part, or because the employee has

initiated any action or notice pursuant to

Section 2699 shall be entitled to

9

may not “discharge an employee or in any manner discriminate

against any employee or applicant for employment” on the basis

that the employee or applicant engaged in certain protected

activities. As a remedy for such a violation “any employee who

is discharged, threatened with discharge, demoted, suspended, or

in any other manner discriminated against in the terms and

conditions of his or her employment” is entitled to

“reinstatement and reimbursement for lost wages and work benefits

caused by such acts of the employer.” Cal. Labor Code §

98.6(b). Mr. Gahan claims that his refusal to sign the 4

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reinstatement and reimbursement for lost wages

and work benefits caused by such acts of the

employer. Any employer who willfully refuses

to hire, promote, or otherwise restore an

employee or former employee who has been

determined to be eligible for such rehiring or

promotion by a grievance procedure,

arbitration, or hearing authorized by law, is

guilty of a misdemeanor.

Section 1102.5 provides, in relevant part: 5

 (b) An employer may not retaliate against

an employee for disclosing information to a

government or law enforcement agency, where

the employee has reasonable cause to believe

that the information discloses a violation of

state or federal statute, or a violation or

noncompliance with a state or federal rule or

regulation.

 (c) An employer may not retaliate against

an employee for refusing to participate in an

activity that would result in a violation of

state or federal statute, or a violation or

noncompliance with a state or federal rule or

regulation.

 (d) An employer may not retaliate against

an employee for having exercised his or her

rights under subdivision (a), (b), or (c) in

any former employment.

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declaration at OptiStreams’ request is qualifying conduct

protected under Labor Code section 1102.5. “To establish a 5

prima facie case for retaliation under Section 1102.5, an

employee must show (1) that he engaged in protected activity, (2)

that he was thereafter subjected to an adverse employment action

by his employer, and (3) that there was a causal link between the

protected activity and the adverse employment action.” Love v.

Motion Indus., 309 F. Supp. 2d 1128, 1134 (N.D. Cal. 2004)

(citing Morgan v. Regents of Univ. of Cal., 88 Cal. App. 4th 52,

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69 (2000)).

Mr. Gahan cannot meet the second requirement for a prima

facie case for retaliation because he does not allege that he

faced an “adverse employment action.” The requirement of an

adverse employment action is supported by the text of section

98.6(b). Under that section, a claim only arises where the

employee is “discharged, threatened with discharge, demoted,

suspended, or in any other manner discriminated against in the

terms and conditions of his or her employment.” Cal. Labor Code

98.6(b) (emphasis added). Furthermore, sections 98.6 and 1102.5

apply by their terms only to actions that employers take against

“employees” or “applicants,” not former employees. See Cal.

Labor Code § 98.6(b) (“No person shall . . . in any manner

discriminate against any employee or applicant for employment”);

Cal. Labor Code § 1102.5 (“employer may not retaliate against an

employee”).

Mr. Gahan claims that language in section 1102.5 expressly

forbids such retaliation against former employees. Mr. Gahan

apparently is referring to the language of section 1102.5(d): 

“An employer may not retaliate against an employee for having

exercised his or her rights under subdivision (a), (b), or (c) in

any former employment.” The Court does not read this language as

authorizing a claim for an adverse action outside of the

employment relationship. By its plain language it authorizes a

suit by an employee against a present employer only. The “former

employment” language authorizes a suit where the present employer

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At oral argument, OptiStreams urged the Court to consider in 6

support of its interpretation the definition of “employee” that

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retaliates against the employee because of something that the

employee did in a former job. The statute uses the modifier

“former” to indicate when the employee’s protected act occurred. 

However, in indicating who may sue for the retaliation, that is,

“an employee,” no similar modifier is used. The statue could

have easily authorized a claim like Mr. Gahan’s by extending the

cause of action to prohibit retaliation against a “former

employee.” The statute contains no such language. Consequently,

section 1102.5(d) does not create a cause of action by former

employees who face adverse action after resigning.

Furthermore, Mr. Gahan’s reading of section 1102.5(d) would

render it inconsistent with the language in section 98.6 that

limits relief to discrimination “in the terms and conditions” of

employment. “‘[S]tatutes should be interpreted in such a way as

to make them consistent with each other, rather than obviate one

another.’” K & K Services, Inc. v. Irwindale, 47 Cal. App. 4th

818, 826 (1996) (quoting Nickelsberg v. Workers’ Comp. Appeals

Bd., 54 Cal. 3d 288, 298 (1991)). Section 98.6(b) provides

relief in certain cases where an employee’s conduct meets certain

statutory requirements, such as those specified in 1102.5. The

Court does not read the language in the statute that defines the

protected conduct of the employee, section 1102.5, to rewrite the

statute defining the class of individuals who may obtain relief

under a private right of action, section 98.6(b).6

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appears in California Labor Code section 3351: “‘Employee’ means

every person in the service of an employer under any appointment or

contract of hire or apprenticeship, express or implied, oral or

written, whether lawfully or unlawfully employed, . . . .” This

definition, however, applies only to Division 4 of the Labor Code,

entitled “Workers’ Compensation and Insurance” and not to sections

98.6 or 1102.5. Cal. Labor Code § 3350. Nor does the Court find

instructive OptiStreams’ reference to Yanowitz v. L’Oreal USA,

Inc., 36 Cal. 4th 1028 (2005). The Yanowitz court interpreted

California Government Code section 12940, a provision of the

California Fair Employment and Housing Act (FEHA), to determine the

meaning of “adverse employment action” in the context of a

retaliation action. Id. at 1050. Though the statute in that case

is similar to those on which Mr. Gahan bases his claim, the

analysis does not inform the Court’s reading of Labor Code sections

98.6 and 1102.5. This is because the Yanowitz court reached its

holding by reading together of two different provisions of that

statute in light of the goals of the FEHA. Id. Consequently, that

analysis is unique to that statute and does not inform our

interpretation of the provisions here.

13

It is undisputed that Mr. Gahan voluntarily resigned from

his position at OptiStreams prior to the lawsuit. The only

conduct that Mr. Gahan points to in support of the retaliation

claim is OptiStreams’ filing of the postemployment lawsuit. This

conduct did not affect the “terms and conditions” of Mr. Gahan’s

employment: he had resigned voluntarily three months prior. Nor

did OptiStreams, even if the suit was in retaliation for

statutorily protected conduct of Mr. Gahan, a former employee,

retaliate against “an employee” by filing the suit. Accordingly,

Mr. Gahan has failed to state a claim for retaliation under

sections 98.6 and 1102.5.

2. Tameny Claim

Mr. Gahan claims that California courts recognize a claim

for “retaliation in violation of public policy” (Opp’n at 4)

under a line of cases beginning with Tameny, 27 Cal. 3d 167. In

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Tameny the Supreme Court of California held that an employee

could recover tort damages where the employer discharges the

employee in violation of public policy. Id. at 170. 

Subsequently, the court expanded the relief created in Tameny to

protect employees who faced employment actions short of

termination. Garcia v. Rockwell Int’l Corp., 187 Cal. App. 3d

1556, 1562 (1986). Under Garcia, an employee who was not

terminated could recover “where disciplinary action has been

taken against the employee in retaliation for the employee’s

‘whistle-blowing’ activities, even though the ultimate sanction

of discharge has not been imposed.” Id.; see Scott v. Pac. Gas &

Elec. Co., 11 Cal. 4th 454, 465 (1995) (“an employee, who was not

discharged but was wrongfully disciplined by the employer in

retaliation for revealing the latter’s illegal activity, may sue

in tort” (citing Garcia, 187 Cal. App. 3d at 1562)). California

courts have rejected attempts to expand Tameny claims to

encompass retaliatory actions outside of the employment

relationship. Harris v. Atl. Richfield Co., 14 Cal. App. 4th 70,

75 (1993); see, e.g., Abrahamson v. NME Hosp., Inc., 195 Cal.

App. 3d 1325, 1329-30 (1987) (not applicable to termination of

contract with independent contractor); Premier Wine & Spirits v.

E. & J. Gallo Winery, 846 F.2d 537, 540 (9th Cir. 1988) (winerydistributor contract).

OptiStreams did not terminate Mr. Gahan. Nor does Mr. Gahan

allege that OptiStreams took any disciplinary action against him

while he was an employee. Mr. Gahan alleges that he refused to

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participate in an illegal activity while employed by OptiStreams,

that he later voluntarily resigned, and that after resignation

OptiStreams filed a lawsuit against him to retaliate for his

earlier refusal. Mr. Gahan cites no authority that extends

Tameny claims to retaliatory actions that occur after the

employment relationship ends. Nor does any authority indicate

that an employer’s retaliatory lawsuit could amount to a

“disciplinary action” that would support a Tameny claim absent

termination. See Garcia, 187 Cal. App. 3d at 1562. 

Therefore, Mr. Gahan has failed to state a claim that

entitles him to relief for a retaliatory adverse employment

action under California Labor Code sections 98.6 and 1102.5 or

under Tameny.

ACCORDINGLY:

1. OptiStreams’ Motion to Dismiss Sean Gahan’s Fourth 

Claim for Relief Pursuant to Rule 12(b)(6) is GRANTED.

2. Mr. Gahan shall file a second amended counterclaim 

within 30 days of the issuance of this order. Failure 

to comply will result in dismissal of the counterclaim.

IT IS SO ORDERED.

Dated: December 6, 2005 /s/ Robert E. Coyle 

810ha4 UNITED STATES DISTRICT JUDGE

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