Albers v. Yarbrough World Solutions, LLC

Background

Peter Albers sued Yarbrough World Solutions, LLC (YWS) and Dally E. Yarbrough. He alleged a federal Racketeer Influenced and Corrupt Organizations Act (RICO) violation and four California-law claims involving alleged unlawful or unfair business practices, wrongful termination in violation of public policy, and wrongful termination involving the duty of good faith and fair dealing.

Albers alleged that YWS controlled his construction work, negotiated compensation with contractor clients, required workers to report hours through those clients, and could terminate workers at a client’s request. He also alleged that YWS required him to sign documents classifying him as an independent contractor and excluding him from benefits and workers’ compensation. According to the complaint, Yarbrough threatened to terminate him if he testified in litigation involving a construction project and terminated him after he said he had not received payment for testifying.

The defendants filed a motion under Federal Rule of Civil Procedure 12(b)(6), which challenges whether a complaint states a legally sufficient claim.

RICO claim

The court granted the motion to dismiss the RICO claim. Albers alleged that YWS misled contractor clients by representing that YWS construction workers were employees when they were actually independent contractors. The court held that this alleged statement concerned the workers’ legal employment status and therefore was a misrepresentation of law, rather than a factual misrepresentation that could support mail or wire fraud as the required RICO predicate acts.

The court rejected Albers’s argument that the analysis changed because the statements were made to contractor clients rather than to the workers themselves. It also concluded that the decision in Bridge v. Phoenix Bond & Indemnity Co. did not eliminate the requirement for an actionable misrepresentation of fact. Because the court found that the RICO theory failed on this basis, it did not address the defendants’ other RICO arguments.

The court allowed Albers to file an amended complaint concerning the RICO claim by June 26, 2020, because it was possible that additional facts could show misrepresentations of fact. The court stated that he could not add new claims or parties without the court’s permission or the parties’ stipulation.

California-law claims and federal enclaves

The defendants argued that Albers’s California-law claims were barred by the federal-enclave doctrine. A federal enclave is land over which the federal government has exclusive jurisdiction. The court agreed that claims stemming from work at the Monterey Presidio Project or other federal lands were barred. It rejected Albers’s argument that federal statutes allowing California authorities to enforce certain labor laws created a private right for him to sue under those statutes.

The court nevertheless found that Albers had pleaded sufficient facts concerning projects outside federal enclaves. It reasoned that the alleged agreement requiring him to accept independent-contractor status applied to all of his contracted services, including nonfederal projects. Those nonfederal projects could support his unlawful- and unfair-business-practices claims.

The court also held that the federal-enclave doctrine did not bar the wrongful-termination claims. Unlike a case involving employment practices exclusively on a federal enclave, Albers allegedly worked on both commercial and government projects, and the termination decision allegedly concerned an effort to stop him from speaking rather than employment practices on the federal enclave. The termination prevented him from working on YWS projects generally.

Disposition

The court granted in part and denied in part the defendants’ motion to dismiss. It granted the motion as to the RICO claim, while allowing amendment, and rejected the federal-enclave defense to the state-law claims to the extent those claims were based on nonfederal projects or the alleged termination. The court also granted the defendants’ requests for judicial notice of the Presidio’s history and public court documents.