Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_12-cv-02524/USCOURTS-casd-3_12-cv-02524-0/pdf.json

Nature of Suit Code: 440
Nature of Suit: Other Civil Rights
Cause of Action: 42:1983 Civil Rights (Employment Discrimination)

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

STEVEN D. STEIN,

Plaintiff,

Case No. 12cv2524 BTM (BGS)

ORDER DENYING MOTION

v. TO DISMISS

TRI-CITY HEALTHCARE

DISTRICT, a California healthcare

district, LARRY B. ANDERSON, an

individual

Defendants.

On November 9, 2012, Defendants Tri-City Healthcare District and Larry B.

Anderson filed a motion to dismiss the Plaintiff’s Complaint (ECF No. 7). For the

reasons below, Defendants’ motion is hereby DENIED.

I. BACKGROUND

Plaintiff Steven D. Stein (“Plaintiff”) filed the Complaint against Tri-City

Healthcare District (“Tri-City”) and Larry B. Anderson (“Anderson”) (collectively

“Defendants”) on October 17, 2012. Beginning in August of 2009, Plaintiff was

employed as Tri-City’s Vice President of Legal Affairs and Chief Compliance Officer,

reporting directly to Anderson, Tri-City’s Chief Executive Officer. (Complaint ¶ 9.) 

Plaintiff alleges that Defendants had a pattern and practice of disability discrimination,

including the termination of employees seeking medical leave. (Complaint ¶ 12.) 

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In early 2011, Plaintiff was diagnosed with Irritable Bowel Syndrome (“IBS”),

which required Plaintiff to request medical leave, take approved time off, and

frequently work from home. (Complaint ¶¶ 14-15.) Soon thereafter, Plaintiff alleges

that Anderson regularly directed derogatory comments towards Plaintiff, refused to

accommodate Plaintiff’s medical condition, and harassed and vilified Plaintiff in the

presence of other employees. (Complaint ¶ 17.) Following an altercation during an

executive meeting on March 2, 2012, Plaintiff alleges that he received a letter from

Anderson accepting his resignation. (Complaint ¶ 23.) Plaintiff alleges that he neither

resigned, quit, nor informed others of an intention to do so. (Complaint ¶ 22.)

Although Plaintiff asserts a total of ten (10) causes of action arising under both

federal and state law, the Defendants’ motion to dismiss only challengesthe Plaintiff’s

ninth cause of action for retaliatory discharge in violation of Cal. Lab. Code §

1102.5(b).

II. LEGAL STANDARD

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) should be

granted only where a plaintiff's complaint lacks a “cognizable legal theory” or

sufficient facts to support a cognizable legal theory. Balistreri v. Pacifica Police Dept.,

901 F.2d 696, 699 (9th Cir. 1988). When reviewing a motion to dismiss, the

allegations of material fact in plaintiff’s complaint are taken as true and construed in

the light most favorable to the plaintiff. See Parks Sch. of Bus., Inc. v. Symington, 51

F.3d 1480, 1484 (9th Cir. 1995).

Although detailed factual allegations are not required, factual allegations “must

be enough to raise a right to relief above the speculative level.” Bell Atlantic v.

Twombly, 550 U.S. 544, 555 (2007). “A plaintiff’s obligation to prove 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.” Id. “[W]here the

well-pleaded facts do not permit the court to infer more than the mere possibility of

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misconduct, the complaint has alleged–but it has not show[n]–that the pleader is

entitled to relief.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) (internal quotation

marks omitted). 

III. DISCUSSION

Defendants move to dismiss the Plaintiff’s claim for retaliatory discharge in

violation of Cal. Lab. Code § 1102.5(b), commonly known as a “whistleblower”

statute. Defendants argue that Plaintiff cannot prosecute this claim without revealing

information protected by attorney-client privilege. For the reasons discussed below,

the Court denies Defendants’ motion to dismiss.

A. Federal Privilege Law Applies

Defendants argue that state privilege law governs a claim or defense for which

state law supplies the rule of decision. While ordinarily true, in cases where federal

privilege law governs the claim over which the Court has original subject matter

jurisdiction, federal privilege law also applies to supplemental state claims as well. 

Religious Tech. Ctr. v. Wollersheim, 971 F.2d 364, 367 n.10 (9th Cir. 1992); Crowe

v. County of San Diego, 242 F. Supp. 2d 740, 750 (S.D. Cal. 2003). In the present

case, the Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331 (federal

question jurisdiction). Because federal privilege law governs the rule of decision for

federal question claims, Fed. R. Evid. 501, federal privilege law applies to Plaintiff’s

state law claims as well. Therefore, the correct precedent guiding this Court’s decision

comes from federal privilege law.

B. Dismissal at This Stage is Improper

At thisstage, it would be improper to dismiss a claim made by the Plaintiff upon

fear of potential attorney-client privilege violations. Plaintiff argues that an employee

is protected from termination if and when an employee notifies a government agent of

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actual and/or potential violations oflaw. Because Tri-City is a local government entity,

and because Plaintiff alleges his termination wasthe direct result of notifying Tri-City

of actual and/or potential violations of law, Plaintiff alleges that his termination

violated Cal. Lab. Code § 1102.5(b). Defendants argue that Plaintiff is barred from

prosecuting his claim because doing so would require the disclosure of information

protected by attorney-client privilege. 

Federal courts have consistently refused to dismiss a claim on pretrial motions

claiming potential violations of attorney-client privilege. See Clarke v. American

Commerce Nat’l Bank, 974 F.2d 127, 129 (9th Cir. 1992) (noting that a complaint is

not required to anticipate or address a defense of attorney-client privilege). In

Meadows v. Kindercare Learning Centers, 2004 WL 2203299 (D. Or. 2004),

defendants moved to dismiss a wrongful discharge claim made by an attorneyemployee on the grounds that the proceeding would require the Plaintiff to violate

attorney-client privilege. Rejecting the defendant’s motion, the court in Meadows

recognized the equitable measures available to permit an attorney-plaintiff to prove his

claimwhile protecting attorney-client privilege. Id. at *3. In Kachmar v. Sungard Data

Sys., 109 F.3d 173 (3d Cir. 1997), the district court dismissed a Title VII claim made

by an attorney-employee on the basis of attorney-client privilege. However, the Third

Circuit vacated the dismissal, noting, “It is premature at this stage of litigation to

determine the range of evidence [Plaintiff] will offer and whether or how it will

implicate the attorney-client privilege.” Id. at 181. 

Additionally, it should be noted that California courts have aligned with federal

privilege law as it applies to pretrial motions to dismiss. Although the Defendants cite

General Dynamics Corp. v. Superior Court in support of their motion to dismiss, the

California Supreme Court, in the same decision, recognized that dismissal of an

attorney-employee’s retaliatory discharge claim is “rarely if ever appropriate” at the

pleading stage. 7 Cal. 4th 1164, 1170 (1994). This Court does not deem the present

situation to be “appropriate.” 

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IV. CONCLUSION

For the reasons discussed above, Defendants’ motion to dismiss is DENIED. 

Defendants shall file an answer to the complaint within twenty (20) days of the entry

of this order.

IT IS SO ORDERED.

DATED: June 3, 2013

BARRY TED MOSKOWITZ, Chief Judge

United States District Court

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