Opinion
NOT TO BE PUBLISHED
APPEAL from the judgments of the Superior Court of Los Angeles County No. BC334334, Ralph W. Dau, Judge.
Walsworth, Franklin, Bevins & McCall, Ferdie F. Franklin, John S. Murray; Law Offices of Pamela A. Mozer and Pamela A. Mozer for Plaintiff and Appellant Dennis Dockstader.
Leonidou & Rosin, Janette G. Leonidou and A. Robert Rosin for Defendant and Appellant S.J. Amoroso Construction Co., Inc.
Collins, Collins, Muir & Stewart, David E. Barker and Douglas Fee for Defendant and Respondent HMC Corporation.
Reed Smith, Margaret Grignon, Terry B. Bates and Brian P. McKeever for Defendant and Respondent Emerald Development Company, Inc.
Orbach, Huff & Suarez, David M. Huff, Colin E. Barr and Marley S. Fox for Defendants and Respondents Beth Hamby, James A. McConnell, Jr., and Mark DeMan.
KRIEGLER, J.
Plaintiff and appellant Dennis Dockstader appeals from a judgment of dismissal following the sustaining of demurrers in favor of defendants and respondents S.J. Amoroso Construction Co., Inc., HMC Corporation, and Emerald Development Company, Inc., in this action arising out of claims submitted by the Los Angeles Unified School District (LAUSD) to the State Allocation Board (SAB) for reimbursement of costs related to new school construction. Dockstader contends the allegations of the complaint stated a cause of action against Amoroso, HMC, and Emerald under the California False Claims Act (Gov. Code, § 12650 et seq.) (CFCA). We conclude that fraud allegations must be pled with specificity to state a cause of action under the CFCA and Dockstader failed to meet this requirement. Therefore, we affirm the judgment.
In a consolidated appeal, Amoroso appeals from a postjudgment order denying its motion for attorney fees. Amoroso contends: (1) Code of Civil Procedure section 2033.420, which allows a party to recover expenses incurred to prove the truth of a matter after a request for admission is denied, does not require evidence to have been presented; and (2) the trial court abused its discretion under Government Code section 12652, subdivision (g)(9), by declining to award attorney fees against Dockstader for proceeding with a clearly frivolous claim. We conclude the trial court properly applied Code of Civil Procedure section 2033.420 and Dockstader’s claims were not clearly frivolous. Therefore, we affirm.
We treat the facts stated in the complaint as admitted in accordance with the standard of review on appeal. (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 38.)
Site Acquisition
The LAUSD was interested in purchasing property known as the Santee site from W.P. Carey & Co., LLC, to use for new school buildings. W.P. Carey transferred ownership of the Santee site to Corporate Property Associates 4, a California limited partnership of which W.P. Carey is a general partner and an alter ego. The LAUSD agreed to acquire the Santee site for $24 million. An appraisal prepared on March 18, 2002, stated the value of the property was $22 million.
W.P. Carey & Co., LLC, and Corporate Property Associates 4 were named as defendants in Dockstader’s second amended complaint, but they were not served with the complaint and are not respondents on appeal.
The SAB can apportion funds to school districts for new facilities through the School Facility Program (SFP) established pursuant to the LeRoy F. Greene School Facilities Act of 1998 (Ed. Code, § 17070.10 et seq.; Cal. Code Regs., tit. 2, § 1859 et seq.). The funding may include: a new construction grant; 50 percent of the cost of site development or 50 percent of the site cost or the appraised value, whichever is less; and 50 percent of the cost of evaluation and removal of hazardous substances. (Ed. Code, §§ 17070.10, subd. (a), 17070.12, subd. (a), 17072.13, subd. (a).) However, unless the school district qualifies for an environmental hardship, the additional funding for hazardous substances is limited to 50 percent of the difference between the cost of the site and the value of the site after remediation. (Ed. Code, § 17070.13, subd. (a).)
Beth Hamby is the LAUSD’s Director of Facilities Grants and Funding. On behalf of the LAUSD, Hamby executed an application for funding on March 28, 2002, requesting reimbursement from the SAB of 50 percent of the funds expended in connection with the Santee site purchase. Although the application instructed to check only one box for the type of application being submitted, Hamby checked boxes for new construction and environmental hardship. The application stated that 50 percent of the actual cost or appraised value was $11,140,000 and provided other site acquisition costs. No amount was entered for hazardous waste removal. Hamby certified in the application that “[a]ll contracts . . . for the service of any architect, structural engineer or other design professional for any work under the project have been obtained pursuant to a competitive process that is consistent with the requirements of Chapter 10 (commencing with § 4525) of Division 5 of Title 1, of the Government Codes.”
Emerald, HMC, Amoroso, and the LAUSD, including Hamby, LAUSD Chief Facilities Executive James A. McConnell, and the LAUSD Senior Facilities Project Manager Mark DeMan were aware that the site was severely contaminated. Public school sites must be free from contamination before construction can commence. The California Department of Toxic Substances Control (DTSC) must certify that a site is clean before construction can commence. If the site is contaminated, the school district must pay for the DTSC to monitor clean up. Construction will be delayed until the site is completely remediated. If defendants had disclosed the contamination, construction would have been delayed, the LAUSD could not have opened the new school as scheduled, the LAUSD would have incurred monitoring costs, and the delay would have been costly for Amoroso, the construction company. On May 20, 2002, the DTSC issued a letter stating further action was required with respect to lead and asbestos contamination of the site. However, not all of the information concerning contamination at the site had been disclosed to DTSC.
Development Agreement, Construction, and Reimbursement Claim
Emerald is a subsidiary and an alter ego of W.P. Carey. On May 28, 2002, the LAUSD and Emerald entered into a development agreement for the construction of a school on the Santee site pursuant to section 17406 of the Education Code. Section 17406 permits a school district to lease property that it owns for a nominal amount to a contractor for the construction of school facilities on the property without advertising for bids and to provide for title to the building to vest in the school district at the expiration of the term. Under the agreement, the LAUSD assumed the risk of cost overruns and delays, while Emerald assumed little risk.
The agreement provided for Emerald to receive management services fees of $3.5 million. In addition, if the project were completed by September 1, 2004, Emerald was eligible for an incentive bonus of $2 million. If Emerald obtained approval of certain aspects of the project from the Division of the State Architect by June 24, 2002, Emerald was eligible for an additional incentive bonus of $500,000. The agreement paid overhead to Emerald of $15,000 per month, up to $500,000. Emerald could also share in cost savings. Emerald was able to charge the LAUSD higher fees and overhead than it would have charged as a successful low bidder for the contract.
Amoroso is a large construction company that has performed numerous large public works construction projects and has expertise in the development of public schools. Amoroso received millions of dollars in profits that it would not have received if it had been a successful low bidder for the contract. HMC is an architectural firm with an emphasis in public works construction and was the architect of record for the Santee project. HMC also realized substantial profits that it would not have received as a successful low bidder for the contract.
As an employee of the LAUSD, McConnell knew the claims submitted to the SAB were materially false. McConnell recommended that the LAUSD board enter into the development agreement with Emerald, even though he knew the agreement was of questionable legality. McConnell knew the intent of defendants in entering into the agreement was to avoid the competitive bidding requirements of the State of California and to cause the SAB to pay funds to the LAUSD to which it was not entitled, including reimbursement of one-half of the site acquisition price without deduction for costs of clean up, remediation, and demolition. McConnell knew his recommendation to the SAB would result in the LAUSD submitting false claims to the State and payments by the State to the LAUSD to which the school district was not entitled.
DeMan was the LAUSD’s Senior Facilities Project Manager with specific responsibility for the Santee project. Before and during the construction process, DeMan withheld information showing the site was contaminated from the DTSC that the LAUSD was required to disclose. DeMan knew that if the DTSC was informed of the contamination, the DTSC would halt construction until the site had been remediated. An application for project funding requires final California Department of Education (CDE) approval of the proposed school site and the CDE will not give its approval until environmental cleanup has been completed. DeMan knew if the DTSC were informed of the contamination at the site, the LAUSD could not obtain funding until the remediation was completed, and therefore, the LAUSD could not use the funds from the State to pay for the remediation. In addition, the State might learn that costs related to remediation had not been deducted from the acquisition price. DeMan knew the LAUSD had requested reimbursement of one-half the acquisition cost without deducting the costs related to remediation, then submitted the costs related to remediation to the State for one-half reimbursement as construction costs, resulting in a windfall.
On May 31, 2002, Hamby and DeMan signed a form on behalf of the LAUSD which was falsely submitted to the State stating the LAUSD had received a “no action” or “no further action” determination letter from the DTSC, dated May 29, 2002.
On June 25, 2002, Hamby executed an application for funding with a new application number (50/64733-00-63). It was marked as an application for new construction funding and the box for environmental hardship was not marked. In addition to the site acquisition costs listed on the previous application, the June 25, 2002 application requested reimbursement of site development costs, specifically, $6,776,032 for site services, $747,797 for off-site services, and $261,008 for utilities. The application was signed by Richard Luke as “architect of record or licensed architect” and as “architect of record or design professional.” Luke certified, “I have developed a cost estimate of the proposed project which indicates that the estimated construction cost of the work . . . is at least 60 percent of the total grant amount provided by the State and the [school] district’s matching share, less site acquisition costs. This cost estimate does not include site acquisition, planning, tests, inspection, or furniture and equipment.” The complaint alleges HMC was the architect of record, and in fact, remediation, clean up, and demolition costs were included in the cost estimate, including costs for testing and inspecting.
On July 18, 2002, Hamby and Luke executed a substantially similar application with the same application number (50/64733-00-63). The July 18, 2002 application stated the application’s priority in relation to other new construction applications submitted by the school district was 15 of 29. The site development costs were lower for site services and higher for off-site services. On July 24, 2002, Hamby and Luke executed another substantially similar application with the same application number (50/64733-00-63) that contained slightly different reimbursement amounts. On August 5, 2002, Hamby and Luke signed a draft of a substantially similar application number (50/64733-00-63) that contained the same reimbursement amounts as the previous application and an additional certification concerning compliance with fire code requirements. None of the applications numbered 50/64733-00-63 provided any amount for hazardous waste removal.
A sewer line located under the site had to be moved to comply with school site regulations. HMC’s preconstruction documents disclosed that the cost of moving the sewer line would be paid by the City of Los Angeles. Therefore, it was not payable by the LAUSD. However, Amoroso’s construction cost submittals included the cost of moving the sewer line, and Hamby, on behalf of the LAUSD, included $1,797,220 for moving the sewer line in claims to the State. The City, in fact, paid the cost of moving the sewer line.
The LAUSD, acting through Hamby, eventually submitted claims and received reimbursement for 50 percent of approximately $6.8 million in remediation, removal, and clean-up costs, which should have been deducted from the price of the site. In September 2002, Education Code section 17070.13, subdivision (a), was amended, effective January 1, 2003, to increase the additional funding available to school districts for work related to hazardous substances.
Dockstader was employed by the LAUSD at one time, but no longer worked for the LAUSD in 2002. He began investigating the circumstances surrounding construction at the Santee site in October 2002. By early 2003, the DTSC became aware of the additional contamination at the site that defendants had not disclosed. The DTSC halted construction. However, stores of materials that the DTSC ordered were to remain in place, in fact were moved and mixed with soil on the site. Contaminated material was used as backfill and mixed with uncontaminated material on the site, spreading the contamination to areas where it did not previously exist.
Amoroso billed the LAUSD for hauling material to disposal sites, and the LAUSD sought reimbursement, when in fact, significant amounts of material were not removed, but rather, used as backfill and otherwise graded and mixed with uncontaminated material on the site.
Emerald did not meet the completion deadline stated in the development agreement and received no bonus payment. However, Hamby, on behalf of LAUSD, submitted the payment of a $2 million completion bonus to the State as part of the application for reimbursement of construction costs and the LAUSD received $1 million as a result. Emerald did not receive a $500,000 approval bonus, but Hamby, on behalf of LAUSD, applied for and received reimbursement of $250,000.
PROCEDURAL BACKGROUND
On June 3, 2005, Dockstader filed a complaint under seal which included a claim for qui tam relief on behalf of the State against the LAUSD, Amoroso, HMC, and Emerald for making knowingly false statements to get a false or fraudulent claim paid or approved in violation of the CFCA. The California Attorney General declined to intervene.
Dockstader filed an amended complaint on April 24, 2006. On August 31, 2006, the California Supreme Court issued opinions in Wells v. One2One Learning Foundation (2006) 39 Cal.4th 1164 (Wells) and State ex rel. Harris v. PricewaterhouseCoopers, LLP (2006) 39 Cal.4th 1220 (Harris), holding that a public entity is not a “person” who can sue or be sued under the CFCA.
On October 26, 2006, Dockstader filed a second amended complaint. Rather than naming the LAUSD, the complaint named individual LAUSD employees Hamby, McConnell, and DeMan as defendants. Dockstader’s CFCA action is based in part on his assumption that the LAUSD was required to deduct the cost of preparing the site for construction, including toxics remediation, demolition, or removal of objects that are not permitted on school property such as sewer lines from the purchase price or the appraised value prior to calculation of the reimbursement amount. Specifically, he alleges that remediation, demolition, and clean up costs of $6.8 million should have been deducted from the total amount of the appraised value. These costs were not deducted, and therefore, he alleges that the LAUSD requested and received an overpayment of $3.4 million.
The complaint also alleged that defendants were aware the development agreement was a sham and a conspiracy to improperly avoid legal requirements and obtain funds from the State to which defendants were not entitled. Moreover, new school construction expenditures incurred under a development agreement pursuant to Education Code section 17406 are not reimbursable from the SFP.
The complaint alleged that cash incentives, such as bonuses for early completion, are not eligible for reimbursement from the SFP. However, defendants, acting in concert, caused the false claims to be submitted to the State by including these amounts as construction costs and without disclosing their true nature, thereby allowing the LAUSD to obtain partial reimbursement for expenses which are specifically disallowed under the SFP.
Defendants knew the purchase price for which the LAUSD sought reimbursement was grossly overinflated, because it did not deduct for clean up, demolition, and remediation. Defendants knew that if the transaction had been subjected to scrutiny by independent sources, such as through competitive bidding procedures, the LAUSD’s overpayment might have been discovered and Emerald would have been forced to disgorge the unjust portion of the payments, or the entire transaction would have been disqualified from the SFP, with the consequence that defendants would have received no funds from the State.
In addition, the complaint stated that defendants knew the site was significantly contaminated and discovery of the contamination might prevent reimbursement from the State and substantially delay construction, at a cost to the LAUSD and Amoroso. DeMan withheld information from DTSC that would reveal the extent of contamination on the site. In fact, defendants proceeded with construction though they knew that school construction is not allowed until a site has been fully remediated and also knew that it was a violation of the law to request reimbursement for construction that was going forward before the site was remediated.
Amoroso and the LAUSD, acting though Hamby, billed the State for hauling charges and dump fees that were not, in fact, incurred. Contaminated material was kept on site and defendants falsely and fraudulently charged for hauling and disposal of it. These charges were included in the false claims submitted to the SAB.
Without competitive bidding requirements, defendants could charge for unnecessary work, such as the unnecessary removal of a sidewalk. Only necessary construction costs are reimbursable, thus the sidewalk charge should not have been submitted to the SAB for reimbursement.
Amoroso, HMC, and Emerald submitted charges to LAUSD that were incorporated in Hamby’s submittals on behalf of the LAUSD to the State for reimbursement and, thus, became part of the false claim process. The complaint alleged, “The defendants knew that the actions described herein were wrongful and in violation of those laws and knowingly did the things herein described in order to cause improper and excessive payments by the State of California through the use of false claims.” “In doing the things herein described, the defendants, and each of them, knowingly acted in concert and in conspiracy to present or cause to be presented to the State of California multiple false claims, including the use of false records and statements to get such false claims paid or approved. The wrongful acts herein were in furtherance of that conspiracy. But for the wrongful acts described herein, the State would not have paid funds improperly.”
Defendants demurred on multiple grounds, including that the individual employees of a public entity could not be sued and the complaint failed to meet the particularized pleading requirements for fraud. On December 14, 2006, the trial court sustained the demurrers of Amoroso, HMC, and Emerald on the grounds that the pleading requirements had not been met. On February 1, 2007, the trial court sustained the individuals’ demurrers on the ground that the CFCA does not permit public entity employees to be sued. On February 8, 2007, the trial court entered an order of dismissal. Dockstader filed a timely notice of appeal from the February 8, 2007 order.
Amoroso filed a motion for attorney fees pursuant to Code of Civil Procedure section 2033.420 for recovery of expenses incurred to prove matters after requests for admission were denied, and Government Code section 12652, subdivision (g)(9), for proceeding with a clearly frivolous claim. On May 7, 2007, the trial court found Amoroso could not recover fees under Code of Civil Procedure section 2033.420 because the case was resolved without any presentation of evidence, and Amoroso did not have to prove any issue within the requests for admission. In addition, the trial court found that the action was not “clearly frivolous.” The trial court denied Amoroso’s motion. Amoroso filed a timely notice of appeal.
During the pendency of this appeal, the Fourth District appellate court issued its opinion in State of California ex rel. Dockstader v. Hamby (2008) 162 Cal.App.4th 480 holding that individual employees of a public entity cannot be sued under the CFCA for actions taken within the scope of their employment solely for the benefit of the public entity. Dockstader dismissed his appeal in the instant action as against the individual LAUSD employees Hamby, McConnell, and DeMan.
DISCUSSION
Dockstader’s Appeal
Dockstader contends that the allegations of fraud were sufficiently specific to state causes of action under the CFCA against the private companies Emerald, Amoroso, and HMC. We disagree.
A. Standard of Review
“In reviewing the sufficiency of a complaint against a general demurrer, we are guided by long-settled rules. ‘We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.’ [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.] And when it is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. [Citations.] The burden of proving such reasonable possibility is squarely on the plaintiff.” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “Where written documents are the foundation of an action and are attached to the complaint and incorporated therein by reference, they become a part of the complaint and may be considered on demurrer.” (City of Pomona v. Superior Court (2001) 89 Cal.App.4th 793, 800.) “[F]acts appearing in exhibits attached to the complaint . . ., if contrary to the allegations in the pleading, will be given precedence.” (Dodd v. Citizens Bank of Costa Mesa (1990) 222 Cal.App.3d 1624, 1627.)
B. Applicable Law
The CFCA permits the recovery of civil penalties and treble damages from any person who “[k]nowingly presents or causes to be presented [to the state or any political subdivision] . . . a false claim for payment or approval,” “[k]nowingly makes, uses, or causes to be made or used a false record or statement to get a false claim paid or approved by the state or by any political subdivision,” “[c]onspires to defraud the state or any political subdivision by getting a false claim allowed or paid by the state or any political subdivision,” or “[i]s a beneficiary of an inadvertent submission of a false claim to the state or a political subdivision, subsequently discovers the falsity of the claim, and fails to disclose the false claim to the state or the political subdivision within a reasonable time after discovery[.]” (Gov. Code, § 12651, subds. (a)(1)-(3), (8).)The plaintiff must allege that the person had actual knowledge of the falsity of the information, acted in deliberate ignorance of its truth or falsity, and/or acted in reckless disregard of its truth or falsity. (Id., subd. (b)(2).)
“The suit may be brought by the Attorney General where state funds are involved, or by the ‘prosecuting authority’ of a political subdivision where the political subdivision’s funds are involved, subject to intervention and participation by the other official where both state and political subdivision funds are involved. ([Gov. Code], § 12652, subds. (a), (b).)” (Harris, supra, 39 Cal.4th at p. 1223.)
In addition, “[a] ‘person’ with independent knowledge of the facts, who gets to the courthouse first, may bring a qui tam action for and in the name of the state (if state funds are involved), or a political subdivision (where the political subdivision’s funds are involved), or both. (Gov. Code, § 12652, subds. (c)(1), (10), (d)(2), (3).)” (Harris, supra, 39 Cal.4th at p. 1228, emphasis added.)
The Legislature designed the CFCA “ ‘to prevent fraud on the public treasury,’ [citation], and . . . ‘to protect the public fisc.’ [Citations.]” (State of California v. Altus Finance, S.A. (2005) 36 Cal.4th 1284, 1296-1297.) “The CFCA certainly seeks to induce private ‘whistleblowers,’ uniquely armed with information about false claims, to risk the failure of their qui tam suits in hopes of sharing in a handsome recovery if they succeed. Indeed, this prospect of reward may be the only means of inducing such private parties to come forward with their information.” (Harris, supra, 39 Cal.4th at p. 1231, emphasis added.)
The CFCA is an anti-fraud statute, and therefore, California law requires the facts constituting the fraud to be alleged with sufficient specificity that the defendant can understand the nature of the charge being made. (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157; City of Pomona v. Superior Court, supra, 89 Cal.App.4th at p. 803.) “The requirement of specificity in a fraud action against a corporation requires the plaintiff to allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written. [Citations.]” (Tarmann v. State Farm Mut. Auto. Ins. Co., supra, 2 Cal.App.4th at p. 157.)
A fraud action may be based on a false representation, concealment of facts or nondisclosure. (Buckland v. Threshold Enterprises, Ltd. (2007) 155 Cal.App.4th 798, 807.) To establish fraud through nondisclosure or concealment of facts, it must be shown that the defendant “‘was under a legal duty to disclose them.’ [Citation.]” (Ibid.) In most circumstances, an independent duty to disclose is required; however, liability for concealment may attach where a party under no duty to speak, nevertheless does so, but does not speak honestly or makes misleading statements or suppresses facts which materially qualify those stated. (Cicone v. URS Corp. (1986) 183 Cal.App.3d 194, 201.)
The CFCA is patterned after the federal false claims statute (FFCA) (31 U.S.C. § 3729 et seq.). Although there are significant differences (Harris, supra, 39 Cal.4th at p. 1234), it is appropriate to look to federal cases interpreting similar provisions of the FFCA for guidance in interpreting the CFCA. (City of Pomona v. Superior Court, supra, 89 Cal.App.4th at p. 802.)
“Like the California False Claims act, the federal act is to be construed broadly rather than restrictively. [Citations.] It is ‘intended to reach all types of fraud, without qualification, that might result in financial loss to the Government.’ [Citation.] Its reach extends to ‘any person who knowingly assisted in causing the government to pay claims which were grounded in fraud.’ [Citation.] The federal act ‘is the government’s “primary litigative tool for combatting fraud” against the . . . government.’ [Citation.]” (City of Pomona v. Superior Court, supra, 89 Cal.App.4th at p. 802.)
“The federal act permits private litigants to bring actions on behalf of the government against anyone who (1) knowingly presents, or causes to be presented, to the government a false or fraudulent claim for payment or approval; (2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the government; or (3) conspires to defraud the government by getting a false or fraudulent claim allowed or paid. (31 U.S.C. §§ 3729(a), 3730(b).)” (City of Pomona v. Superior Court, supra, 89 Cal.App.4th at p. 802.) A claim that is not false itself, but is underpinned by fraud, such as a contract based on false information or fraudulent pricing, violates the FFCA. (Ibid.)
“As in any action sounding in fraud, the allegations of a federal False Claims Act complaint must be pleaded with particularity. The complaint must plead ‘“the time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what he obtained thereby.”’ (Harrison v. Westinghouse Savannah River Co. [(4th Cir. 1999) 176 F.3d 776,] 784; cf. Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) Allegations of the defendant’s knowledge and intent to deceive may use conclusive language, however. (Harrison, supra, at p. 784.)” (City of Pomona v. Superior Court, supra, 89 Cal.App.4th at p. 803.)
The heightened pleading requirement for fraud allegations “serves not only to give notice to defendants of the specific fraudulent conduct against which they must defend, but also ‘to deter the filing of complaints as a pretext for the discovery of unknown wrongs, to protect [defendants] from the harm that comes from being subject to fraud charges, and to prohibit plaintiffs from unilaterally imposing upon the court, the parties and society enormous social and economic costs absent some factual basis.’ [Citations.]” (Bly-Magee v. California (9th Cir. 2001) 236 F.3d 1014, 1018.)
It is true that “the requirement of specificity is relaxed when the allegations indicate that ‘the defendant must necessarily possess full information concerning the facts of the controversy’ [citation] or ‘when the facts lie more in the knowledge of the opposite party[.]’ [Citation.]” (Tarmann v. State Farm Mut. Auto. Ins. Co., supra, 2 Cal.App.4th at p. 158.) However, qui tam actions are meant to encourage private “whistleblowers,” uniquely armed with information about false claims, to come forward. These insiders should have adequate knowledge of the fraudulent acts to comply with the pleading requirement. (See Bly-Magee v. California, supra, 236 F.3d at p. 1019 [“insiders privy to a fraud on the government” should have adequate knowledge of the wrongdoing at issue to comply with the heightened federal pleading requirement for fraud].)
As stated in detail below, Dockstader’s allegations of fraud were not pled with sufficient particularity.
C. Development Agreement
Dockstader contends either (1) the development agreement was a sham transaction to avoid competitive bidding requirements, and therefore, the LAUSD’s request for payment on a void contract was a false claim, (2) the development agreement failed to meet the statutory requirements of a valid contract under Education Code section 17406, and therefore, the LAUSD’s request for payment on a void contract was a false claim, or (3) the costs incurred under an agreement made pursuant to Education Code section 17406 are not reimbursable under the SFP, and therefore, submission of the costs for reimbursement was a false claim. Dockstader further contends that the complaint sufficiently alleges causes of action against the private companies in connection with these false claims. We disagree.
There is no allegation that any employee of Amoroso, Emerald or HMC made a representation concerning the development agreement that was false. Instead, the complaint alleges in conclusory fashion that defendants defrauded the State by concealing the nature of the agreement. However, the complaint fails to allege any specific act of concealment by any individual employed by any of the private companies, nor does the complaint allege that any of the private companies had a duty to disclose the nature of the agreement to the State. There are no specific factual allegations that the private companies caused the LAUSD to submit false claims or made false records or statements to get a false claim paid. There are also no allegations that the private companies were the beneficiaries of an inadvertent submission of a false claim that was subsequently discovered. The allegations were simply not sufficient to state a cause of action against the private companies under the CFCA.
Dockstader similarly contends the incentive bonuses that Emerald was eligible to receive under the development agreement were never paid to Emerald and were not reimbursable items under the SFP, and therefore, the LAUSD’s request for reimbursement of bonus payments from the State was a false claim. However, as to the private companies, Dockstader again makes only conclusory allegations that defendants, acting in concert, caused the false claims to be submitted to the State. There are no allegations as to any action or any statement made by an employee of one of the private companies that caused the LAUSD to submit a claim for reimbursement of the bonus payments or concealed from the SAB that the LAUSD had submitted such a claim. There are no allegations that Amoroso, Emerald, or HMC had a duty to inform the SAB that the LAUSD was submitting bonus payments for reimbursement. There are no allegations that any of the private companies made a false record or statement to get the LAUSD’s false claim paid by the State, nor are there any factual allegations to show a conspiracy to defraud the State by getting a false claim paid. No false claim action has been stated based on a request for reimbursement of bonus payments.
D. Costs for Remediation of Hazardous Substances
1. Deduction of Remediation Costs from Appraised Value
Dockstader contends that the LAUSD was required to deduct the costs of remediation from the appraised value of the property and request 50 percent reimbursement of the adjusted appraised value. He contends the LAUSD’s request for 50 percent of the appraised value without deduction for remediation costs was a false claim.
Apart from whether Dockstader’s statement of the law is correct, the complaint fails to allege any facts to show that any employee of any of the private companies made any representation or took any action that caused the LAUSD to make the false claim, or that anyone at any of the companies made a false record or statement to get the false claim paid, or made any statement or took any action as part of a conspiracy with any other defendant to have the LAUSD request 50 percent of the appraised value of the property without deduction for remediation.
The amount of an applicant’s new construction grant is based on the number of unhoused pupils. (Ed. Code, § 17070.10, subd. (a).) In addition to the grant, the SAB may provide funding of 50 percent of the cost of site development, plus 50 percent of the site cost or the appraised value, whichever is less. (Ed. Code, § 17070.12, subd. (a).) The site acquisition guidelines provide that the site shall be appraised as if it were a clean site, safe of all toxic contaminants. (Cal. Code Regs., tit. 2, § 1859.74.1.) In addition to these funds, the SAB can reimburse 50 percent of the cost of the evaluation of hazardous materials at the site and 50 percent of the costs of removing hazardous substances. (Ed. Code, § 17072.13, subd. (a).) However, unless the school district qualifies for an environmental hardship, the additional funding related to hazardous substances cannot exceed 50 percent of the number obtained by subtracting the school district’s cost of the site from what the appraised value of the site would be after the response action was completed. (Ed. Code, § 17070.13, subd. (a).) In this case, the appraised value was $22 million. The complaint does not allege that the appraisal was inaccurate or fraudulent. Therefore, if the site had been clean, the appraised value would have been $22 million. No deduction of remediation costs from the appraised value appears to be required.
2. Remediation Costs Concealed as Demolition Costs
The complaint alleges that in order to get reimbursement from the State, the LAUSD concealed the nature of its remediation costs by categorizing them as construction costs. The complaint further alleges that HMC assisted in presenting the false claim to the State by providing a cost estimate that concealed remediation costs as construction costs. Specifically, the complaint alleges that HMC estimated demolition costs would be $1,335,000. One month later, after the SAB disallowed certain remediation costs and without any changes to the anticipated construction process, the estimate provided by “defendants” to the State for demolition work was between $4,880,884.26 and $4,917,739.40. The actual demolition costs were $1,335,000, and therefore, the State overpaid by $3.6 million.
However, the nonspecific allegation that the increased demolition costs were provided to the SAB by “defendants” is not sufficient to state a cause of action against HMC. The complaint does not allege the name of any HMC employee who provided a revised estimate, nor does it allege specifically that HMC provided a revised estimate. There are no specific factual allegations of any false statement or action by an employee of HMC.
Moreover, although the complaint alleges HMC was the architect of record on the project, it does not allege that Luke was an employee of HMC and there are no specific allegations to show Luke executed the applications for funding as a representative of HMC in order to get a false claim paid beyond the mere fact of his signature on the applications for funding.
HMC asked the trial court to take judicial notice of the fact that Luke is a staff architect for the LAUSD based on a statement in an October 25, 2005 federal court judgment in the case Rachlin Architects, Inc. v. Los Angeles Unified School District (case No. CV046670 AHM (CWX)). The judgment stated in pertinent part: “[T]he Court found that Luke, as staff architect to the Los Angeles Unified School District, could have reasonably believed his conduct at issue to be lawful with respect to Plaintiff’s statutory rights under copyright and is entitled to qualified immunity.” The trial court in the instant case does not appear to have ruled on HMC’s request for judicial notice. However, we cannot take judicial notice of the truth of a factual assertion in a court order or a judge’s factual finding. (Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1568.)
E. Contamination Concealed from the DTSC
The complaint alleges that defendants concealed contamination from the DTSC in order to continue construction on the project. Dockstader asserts that a site must be fully remediated before a school district is eligible for construction funds, and therefore, the LAUSD’s application for funding was a false claim. However, the complaint fails to allege any representation or action taken by any employee of the private companies to conceal contamination information from the DTSC. The complaint fails to allege sufficient facts to show that the private companies caused the LAUSD to submit a false claim, or made a false record or statement in order to get a false claim paid, or conspired with any other defendant to get a false claim paid.
F. Charges for Sewer Line Work
Dockstader contends that the complaint alleges a false claim cause of action against the private companies based on payment requested from the State for relocation of a sewer line. Specifically, Dockstader alleges that Amoroso included the cost of sewer line work payable by the City of Los Angeles in its construction cost submittals to the LAUSD, and the LAUSD included the charges for sewer line work in the application for funding submitted to the State. Amoroso performed the sewer line work. It is not clear why the cost for the work should not have been included in Amoroso’s construction cost submittals or that the submittals were false. Moreover, the complaint does not allege that Amoroso caused the sewer line charges to be presented to the State, made a false record or statement in order to get the claim paid, or conspired with any other defendant to payment of the sewer line work reimbursed by the State.
G. Hauling Charges and Dump Fees
Dockstader contends a false claim cause of action is stated based on allegations that Amoroso billed the LAUSD for work that it did not perform and the LAUSD requested payment from the State. We disagree. The complaint alleges that Amoroso charged the LAUSD for hauling hazardous material to disposal sites and for dump fees, when in fact, the material was kept on site and graded in with the uncontaminated material on the site. However, the complaint fails to allege the names of any Amoroso employees who took these actions and submitted the charges to the LAUSD, the dates that the charges were submitted, or the amounts that were charged. The fraud is not alleged with sufficient specificity to state a cause of action.
H. Unnecessary Work
Dockstader contends the complaint states a false claim action based on allegations that Amoroso charged the LAUSD for performing unnecessary work. He further alleges the cost of unnecessary work is not payable by the State, and therefore, the LAUSD’s claim for reimbursement was a false claim. However, there is no allegation that the LAUSD was not required to pay for the work. Moreover, there are no allegations as to any statement or action by any employee of Amoroso that caused the LAUSD to present the claim for the sidewalk work to the State, or that an employee of Amoroso made a false record or statement in order to get the claim paid, or otherwise made any statement or took any action as part of a conspiracy with any other defendant to have the State pay for the sidewalk work.
I. Summary
In summary, the complaint does not allege any statement or action by any employee of Amoroso, Emerald, or HMC to support a cause of action based on misrepresentation or concealment. Nor does the complaint allege that any of the private companies had any specific duty to disclose information that was not complied with. There are no allegations that Amoroso, Emerald, or HMC were the beneficiaries of an inadvertently submitted false claim that they subsequently discovered. No false claim cause of action was stated against Amoroso, Emerald, or HMC, and therefore, the trial court properly sustained their demurrers.
J. Leave to Amend
Dockstader did not request leave to amend his second amended complaint to add specific factual allegations of fraud in the trial court or in his appellate briefs. At oral argument, counsel for Dockstader argued that whatever deficiencies existed in his second amended complaint were the result of the trial court’s order precluding discovery at the demurrer stage. Had Dockstader been able to conduct discovery, he could cure the lack of specificity in his complaint. Counsel therefore requested that we allow leave to amend.
We reject Dockstader’s request for leave to amend. Dockstader did not seek appellate review of the trial court’s order precluding discovery, and he may not now rely on the lack of discovery as a basis for relief.
More fundamentally, in a qui tam action under the CFCA, Dockstader must be an original source of the information alleging fraud. “The statutory ‘original source’ requirement was enacted to prevent parasitic lawsuits, those that do not sound the alarm, but echo it. [Citation.] It seeks to reward whistleblowers ‘brave enough to speak in the face of a “conspiracy of silence” and not their mimics.’ [Citation.] The FCA precludes ‘“qui tam suits based on information that would have been equally available to strangers to the fraud transaction had they chosen to look for it as it was to the relator.”’ [Citation.]” (State of California v. Pacific Bell Telephone Co. (2006) 142 Cal.App.4th 741, 755-756.) If he were an original source, Dockstader would be expected to have been able to identify with specificity in his pleading what individuals acted on behalf of the defendant corporation in the perpetration of the alleged fraud. Dockstader has repeatedly failed in this respect.
Dockstader filed three complaints in this action. In response to each complaint, defendants filed demurrers on the ground the pleading lacked the necessary specificity for a fraud action. Despite three complaints and demurrers, at no point has Dockstader alleged facts with anything approaching the degree of specificity required in a fraud action. There is no reason to believe Dockstader could cure the deficiencies of the complaint if he were given leave to amend. Simply adding the names of the individuals who executed the documents described in the complaint would not be sufficient to allege a fraud was committed by these individuals on behalf of the private companies. We deny Dockstader’s oral request for leave to amend.
Amoroso’s Appeal
In a consolidated appeal, Amoroso appealed from the postjudment order denying its motion for attorney fees. Amoroso contends attorney fees should have been awarded pursuant to Code of Civil Procedure section 2033.420 and Government Code section 12652, subdivision (g)(9). We disagree.
A. Standard of Review
A trial court’s award of attorney fees is generally reviewed for abuse of discretion. (Robbins v. Alibrandi (2005) 127 Cal.App.4th 438, 452.) The determination whether a party is entitled to attorney fees under Code of Civil Procedure section 2033.420 is a matter within the sound discretion of the trial court. (Wimberly v. Derby Cycle Corp. (1997) 56 Cal.App.4th 618, 637, fn 10.) Code of Civil Procedure section 2033.420 “clearly vests in the trial judge the authority to determine whether the party propounding the admission thereafter proved the truth of the matter which was denied.” (Garcia v. Hyster Co. (1994) 28 Cal.App.4th 724, 735.) We also review the trial court’s denial of the request for attorney fees against a qui tam plaintiff under Government Code section 12652, subdivision (g)(9), for abuse of discretion. (See Bartling v. Glendale Adventist Medical Center (1986) 184 Cal.App.3d 97, 103.)
“An abuse of discretion occurs only where it is shown that the trial court exceeded the bounds of reason. [Citation.] It is a deferential standard of review that requires us to uphold the trial court’s determination, even if we disagree with it, so long as it is reasonable. [Citation.]” (Stull v. Sparrow (2001) 92 Cal.App.4th 860, 864.)
A trial court decision that contravenes applicable principles of law is outside the scope of discretion and considered an “abuse” of discretion. (Horsford v. Board of Trustees of California State University (2005) 132 Cal.App.4th 359, 393.) If the issue is whether the statutory criteria for an award of attorney fees have been satisfied, “this may be a mixed question of law and fact and, if factual questions predominate, may warrant a deferential standard of review.” (Connerly v. State Personnel Bd. (2006) 37 Cal.4th 1169, 1175.) However, if the underlying facts are largely undisputed and the question is one of statutory construction, we review the issue de novo. (Id. at pp. 1175-1176.)
B. Code of Civil Procedure Section 2033.420
Amoroso propounded requests for admission to Dockstader, including admissions that Amoroso “did not violate the California False Claims Act[,]” “did not present or cause to be presented a false claim for payment or approval,” “did not make or use, or cause to be made or used, a false record or statement to get a false claim paid or approved,” “did not conspire to defraud the state or its political subdivision,” and “did not make or use, or cause to be made or used, a false record or statement to conceal or decrease an obligation owed to the state.” Dockstader denied the requests. Amoroso contends that attorney fees are recoverable under the circumstances of this case pursuant to Code of Civil Procedure section 2033.420 without the presentation of evidence to a trier of fact. We disagree.
Any party may request that another party admit “the truth of specified matters of fact, opinion relating to fact, or application of law to fact. A request for admissions may relate to a matter that is in controversy between the parties.” (Code Civ. Proc., § 2033.010.) The purpose of requests for admissions is to eliminate the need for proof and limit the issues to be tried, thereby sparing the parties the expense of litigating undisputed issues and expediting the trial. (Shepard & Morgan v. Lee & Daniel, Inc. (1982) 31 Cal.3d 256, 261; Wimberly v. Derby Cycle Corp., supra, 56 Cal.App.4th at p. 634; Stull v. Sparrow, supra, 92 Cal.App.4th at p. 864.)
If a party fails to admit the truth of any matter in response to a request for admission, “and if the party requesting that admission thereafter proves . . . the truth of that matter,” the party who propounded the request may recover “the reasonable expenses incurred in making that proof, including reasonable attorney’s fees.” (Code Civ. Proc., § 2033.420, subd. (a).) However, this provision does not apply in certain circumstances, including when “[t]he party failing to make the admission had reasonable ground to believe that that party would prevail on the matter” or “[t]here was other good reason for the failure to admit.” (Id., subds. (b)(3)-b)(4).)
Allowing the propounding party to recover expenses “is directly related” to the underlying purpose of requests for admissions, which is to expedite trial. (Brooks v. American Broadcasting Co. (1986) 179 Cal.App.3d 500, 509.) “Unlike other discovery sanctions, an award of expenses pursuant to [Code of Civil Procedure] section [2033.420], is not a penalty. Instead, it is designed to reimburse reasonable expenses incurred by a party in proving the truth of a requested admission . . . such that trial would have been expedited or shortened if the request had been admitted.” (Ibid., discussing former Code Civ. Proc., § 2034, subd. (c); accord, Stull v. Sparrow, supra, 92 Cal.App.4th at p. 865.)
“As we observed earlier, it is entirely within the trial court’s discretion to determine whether a party proved the truth of matter that had been denied. [Citation.] That an issue be proved is an express statutory prerequisite to recovery under [former Code of Civil Procedure] section 2033, subdivision (o)[, now section 2033.420]. Proof is something more than just evidence. It is the establishment of a fact in the mind of a judge or jury by way of evidence. [Citation.] Until a trier of fact is exposed to evidence and concludes that the evidence supports a position, it cannot be said that anything has been proved.” (Stull v. Sparrow, supra, 92 Cal.App.4th at pp. 865-866.)
It is clear from the plain language of the statute that in order to be awarded attorney fees under Code of Civil Procedure section 2033.420, the party who propounded the request for admission must “prove the truth” of the matter at issue before being entitled to recover expenses. Amoroso did not prove the truth of any matter. Instead, Amoroso demurred, and the trial court agreed, that the complaint failed to allege a cause of action. No proof was required, and the trial court correctly determined that Amoroso was not entitled to recover attorney fees under the discovery provision.
C. Government Code Section 12652, subdivision (g)(9)
Amoroso alternately contends the trial court abused its discretion by finding Dockstader’s claim was not clearly frivolous. We disagree.
Government Code section 12652, subdivision (g)(9), provides: “If the state, a political subdivision, or the qui tam plaintiff proceeds with the action, the court may award to the defendant its reasonable attorney’s fees and expenses against the party that proceeded with the action if the defendant prevails in the action and the court finds that the claim was clearly frivolous, clearly vexatious, or brought solely for purposes of harassment.”
The complaint alleged that the site was severely contaminated, claims submitted by the LAUSD to the SAB concealed remediation costs that were not subject to reimbursement as construction costs in order to obtain payment, and the private companies Emerald, Amoroso, and HMC assisted the LAUSD by disguising the costs of remediation as charges for construction work. Dockstader was unable to allege specific facts necessary to state a cause of action, but the complaint was not clearly frivolous. The trial court did not abuse its discretion by denying the motion for attorney fees.
DISPOSITION
The judgment is affirmed. Respondents HMC Corporation and Emerald Development Company, Inc. are awarded their costs on appeal against appellant Dennis Dockstader. Dennis Dockstader and S.J. Amoroso Construction Co., Inc. are to bear their own costs on appeal.
I concur: TURNER, P. J.
MOSK, J., Concurring in part and dissenting in part
I agree that there should be no award of attorney fees. As to the other points raised by the parties, both the trial court and the majority focus only on the lack of specificity in the pleadings. I would not sustain the demurrer on that ground. The trial court’s and the majority’s conclusions are understandable, as the second amended complaint lacks precision, and in some respects, clarity. I believe, however, there is enough alleged to overcome the lack of specificity ground. It is true that some of the alleged malfeasance is not directly tied into the corporate defendants (defendants). But some is. Thus, I respectfully dissent with regard to the conclusions regarding a lack of sufficient specificity in the second amended complaint.
I do so based on various applicable principles. “‘All material facts pleaded in the complaint and those which arise by reasonable implications are . . . deemed true.’” (Doe 1 v. City of Murrieta (2002) 102 Cal.App.4th 899, 906.) “In passing upon the sufficiency of a pleading, its allegations must be liberally construed with a view to substantial justice between the parties.” (Hayter Trucking, Inc. v. Shell Western E&P, Inc. (1993) 18 Cal.App.4th 1, 13). We “‘give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.’” (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th, 26, 38). We should not revert “to the formalistic days of common law pleading.” (Erler v. Five Points Motors, Inc. (1967) 249 Cal.App.2d 560, 568). The reviewing court must reverse a judgment based on a demurrer if the plaintiff has stated a cause of action under any possible theory (Quelimane Co. v. Stewart Title Guaranty Co., supra, 19 Cal.4th at p. 38).
Plaintiff alleges that the defendants did certain specified acts—e.g., entering into the “sham” Development Agreement; disguising incentive bonus claims that were not entitled to reimbursement; inflating the purchase price without deductions for clean-up, demolition, and remediation costs; concealing contamination from a state agency; and providing false billings—all in concert with each other and the Los Angeles Unified School District (LAUSD), knowing that the latter would use these devices to submit false claims to the state. Plaintiff specifically sets forth why the Development Agreement between defendants and LAUSD was a “sham” and then pleads that the defendants recognized “it would ultimately result in the submission of false claims to the State of California.” Government Code section 12651, subdivision (a)(1), provides for liability against anyone who “[k]nowingly presents or causes to be presented to an officer of the state or of any political subdivision thereof, a false claim for payment or approval.” (Italics added.) Plaintiff alleges such causation. (See Turner v. United States (9th Cir. 1953) 202 F.2d 523.)
Plaintiff did not have to plead that the defendants had some duty to inform the state of their alleged duplicity. Defendants had a duty not to cause false claims to be made. Also, plaintiff did not have to allege specific meetings or conversations regarding the actual false claims. As long as plaintiff alleges, as he did, that the information given to the LAUSD was false and that defendants knew this information would be the basis of claims to the state, plaintiff has adequately pleaded that those defendants caused false claims.
One purported defect in the pleading is that plaintiff has not named the specific individual representatives of the defendants who committed the alleged acts. In California, in alleging fraud against a corporate defendant, the plaintiff must specify the individuals who made the alleged fraudulent representations. (See Lazar v. Superior Court (1996) 12 Cal.4th 631, 645; Weil et al., Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2008) ¶ 6:145, pp. 6-44.) On the other hand, in Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 217, superseded by statute on other grounds, as recognized in Californians For Disability Rights v. Mervyn’s, LLC (2006) 39 Cal.4th 223, 228, our Supreme Court stated, “We observe, however, certain exceptions which mitigate the rigor of the rule requiring specific pleading of fraud. Less specificity is required when ‘it appears from the nature of the allegations that the defendant must necessarily possess full information concerning the facts of the controversy,’ (Bradley v. Hartford Acc. & Indem. Co. (1973) 30 Cal.App.3d 818, 825 [106 Cal.Rptr. 718]); ‘[e]ven under the strict rules of common law pleading, one of the canons was that less particularity is required when the facts lie more in the knowledge of the opposite party . . . .’ (Turner v. Milstein (1951) 103 Cal.App.2d 651, 658 [230 P.2d 25].)”
The court also noted: “Witkin adds, however, that: ‘In reading the cases one gains the impression that entirely too much emphasis has been laid upon the requirement of specific pleading. The characterization of some actions as “disfavored” has little to recommend it . . . and actions based on fraud are so numerous and commonplace that the implications of immoral conduct are seldom considered more serious than those involved in other intentional torts. Hence, while it seems sound to require specific pleading of the facts of fraud rather than general conclusions, the courts should not look askance at the complaint, and seek to absolve the defendant from liability on highly technical requirements of form in pleading. Pleading facts in ordinary and concise language is as permissible in fraud cases as in any others, and liberal construction of the pleading is as much a duty of the court in these as in other cases.’ (3 Witkin, op. cit. supra, Pleading, § 575, quoted in Lacy v. Laurentide Finance Corp. (1972) 28 Cal.App.3d 251, 258, fn. 2 [104 Cal.Rptr. 547].)” (Committee on Children’s Television, Inc. v. General Foods Corp., supra, 35 Cal.3d at p. 216, fn. 17.)
In this case, the “nature of the allegations” suggests that defendants “must necessarily possess full information concerning the facts of the controversy.” Plaintiff has attached the specific alleged false claims and has identified the actions taken by defendant that form the basis of these claims. Plaintiff has alleged the names of the LAUSD personnel involved and the alleged false claims that are attached have the names of the signatories. The precise information as to defendants’ agents in these transactions is within the knowledge of defendants. Accordingly, I do not believe the second amended complaint is defective for failure to name the specific agents of the defendants who allegedly committed acts set forth in the pleading.
Defendants have set forth in support of the demurrer a number of other grounds not discussed by the majority, or as far as I can tell, by the trial court. The trial court appears to have relied upon the lack of specificity in pleading in sustaining the demurrer and did not address the other grounds.
Defendants raise the issue of whether there can be a conspiracy with a party that is immune from liability (see Chavers v. Gatke Corp. (2003) 107 Cal.App.4th 606, 614; but cf. 6 Federal Procedural Forms, L.Ed. (2008) § 11:314 [cases stating there can be liability under 42 U.S.C. § 1983 for conspiracy with state officers who are immune]; Dennis v. Sparks (1980) 449 U.S. 24, 28-29). Nevertheless, the allegations are that defendants caused false claims. The conspiracy causes of action may not be necessary.
Defendants, requesting judicial notice, challenge whether plaintiff was the original source, a requirement for a qui tam action. Plaintiff may be able to deal with this issue by challenging or explaining the matters that are the subject of the judicial notice request. Defendants assert that the absence of competitive bidding does not create a cause of action. But plaintiff alleges that the avoidance of competitive bidding facilitated the other actions that led to false claims.
All of these and other grounds to the demurrers were not addressed by the trial court or this court. If there is merit to them, plaintiff should be given leave to amend. Plaintiff did not state how it would amend the second amended complaint because the trial court had not ruled upon these other grounds. It may well be the plaintiff will not be able to state a cause of action to overcome these points raised by defendants. But he should have the chance to amend his complaint to deal with the alternative grounds of the demurrers and any specific court ruling on those grounds.
Thus, I would reverse the judgment in order to allow plaintiff to amend his second amended complaint. (See Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 971).