Albers v. Yarbrough World Solutions, LLC

Background

Peter Albers filed a First Amended Complaint against Yarbrough World Solutions, LLC (YWS) and Dally E. Yarbrough. He alleged violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), California’s unfair-business-practices statute, wrongful termination in violation of public policy, and breach of the implied covenant of good faith and fair dealing.

According to the allegations, YWS helped contractors find construction workers and handled compensation, benefits, and taxes. Albers alleged that YWS represented to its contractor-clients that its workers were employees, while requiring workers to sign independent-contractor or exclusion waivers and allegedly failing to provide benefits or insurance, pay the employer’s share of taxes, or withhold taxes. Albers worked for YWS from approximately 2006 until August 6, 2019.

Albers was assigned to a construction project at the United States Army Garrison Facility, Presidio of Monterey. During related federal litigation, he was identified as a possible witness. He alleged that Yarbrough told him not to testify and threatened to terminate his employment if he did. Albers traveled to San Diego to testify but was not called. On or around August 6, 2019, Yarbrough terminated him after demanding reimbursement for fees Albers allegedly received for testifying.

RICO claim

The court held that Albers had not adequately pleaded a RICO claim under 18 U.S.C. § 1962(c). That provision requires conduct of an enterprise through a pattern of racketeering activity. Albers relied on alleged mail fraud and wire fraud based on representations about the employment status of YWS workers. The court treated those representations as misrepresentations of law rather than actionable misrepresentations of fact. It rejected Albers’s reliance on exceptions for special knowledge, a relationship of trust, efforts to secure confidence, or another special reason to expect reliance.

The court also rejected Albers’s alternative argument that witness tampering and witness retaliation supplied the required predicate acts. Although RICO requires at least two racketeering acts for a pattern, the court explained that two acts alone are not enough. It found that the alleged conduct served one goal—preventing Albers from testifying in a federal trial—and involved one alleged victim. The court therefore concluded that the allegations did not establish a pattern of racketeering activity.

The court granted defendants’ motion to dismiss Albers’s RICO claim and stated that further amendment of that claim would be futile. It declined to give Albers another opportunity to amend the RICO allegations.

Wrongful-termination claims against Yarbrough

The court granted defendants’ motion to dismiss Albers’s claims against Yarbrough for wrongful termination in violation of public policy and breach of the implied covenant of good faith and fair dealing. Applying California law, the court concluded that a wrongful-termination claim based on public policy may be asserted against the employer, but not against an individual supervisor or manager. It also concluded that an individual who was not a party to the employment contract could not be liable for breaching the covenant related to that contract.

The court additionally granted the motion to dismiss for lack of personal jurisdiction over Yarbrough. It found that Albers’s jurisdictional allegations were based on Yarbrough’s role as a principal of YWS rather than on personal contacts Yarbrough had undertaken with California. The court also found no sufficient allegations to disregard YWS’s separate corporate form or to show that Yarbrough was a primary participant in the alleged wrongful conduct apart from his role within YWS.

Motion for leave to amend

Albers sought leave to file a Second Amended Complaint asserting California Business and Professions Code § 17200 claims on behalf of himself and similarly situated YWS employees. He asserted that an investigation by his counsel had identified workers who were allegedly misclassified as independent contractors rather than employees.

The court granted Albers’s motion for leave to amend. It found no undue delay or failure to cure a deficiency because the proposed amendment focused on § 17200 claims that had not been dismissed in the earlier round of this case. The court also found no prejudice because the case remained at the pleading stage and no discovery had occurred. It found no strong showing of bad faith and no viable argument that the proposed amendment would be futile. The court stated that challenges to class certification would be premature at this stage.

Disposition

Judge Edward J. Davila granted defendants’ motion to dismiss for failure to state a claim and lack of personal jurisdiction. The order states that Albers may file an amended complaint concerning his wrongful-termination claims against Yarbrough. It also grants Albers’s motion for leave to amend so that he may assert § 17200 claims on behalf of himself and similarly situated YWS employees. The order does not state that any dismissal is with prejudice or without prejudice. Albers was ordered to file the amended complaint by November 4, 2020, and could not add new claims or parties without permission or the parties’ agreement.