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United States ex rel Howard v. Urban Investment Trust

January 14, 2010


The opinion of the court was delivered by: Wayne R. Andersen District Judge


This case is before the Court on Defendant Roxanne Gardner's 12(b)(6) Motion to Dismiss Counts III and IV of the Fourth Amended Complaint [214], which was joined by Defendant Rudy Mulder. For the following reasons, Defendants' motion is denied.


Plaintiff Ann Howard's well-pleaded allegations in her Fourth Amended Complaint, which the court treats as true and views in a light most favorable to the plaintiff for purposes of this motion, are as follows. Howard began doing work for Urban Investment Trust, Inc. ("Urban") in June 2000 as Senior Residential Accountant. In her position at Urban, Howard had access to accounting information of the Chicago Housing Authority ("CHA"). Between 2000 and the summer of 2002, Urban was the property manager for residential and commercial properties owned and operated by the United States Department of Housing and Urban Development ("HUD") and the CHA. Urban had a contract with the CHA that prohibited Urban from using money in CHA-HUD accounts for any purposes other than those listed in the contract. Under the terms of the contract, Urban was permitted to deduct funds from the CHA accounts for housing expenses and payroll, but was prohibited from using government money for personal uses.

Howard alleges that in early 2000, she observed that the CHA bank accounts did not reconcile with the CHA tenant ledgers and that the money missing from the CHA accounts had been deducted by Urban without proper supporting documentation. Howard alleges that Urban manager Peter Mori told Howard that Urban would return the money to the CHA accounts by the end of the year and that she should reconcile the accounts as if the money was there. Howard reconciled the bank accounts to indicate that the withdrawals had never occurred. Howard alleges that this was the only time that she reconciled the bank accounts and that in April 2002, after Howard subsequently refused to further reconcile the accounts, Mori hired another employee who assumed many of Howard's responsibilities. Howard alleges that on June 1, 2002, she called Synergy and spoke to a woman named Madeline who told Howard that Madeline had heard about the claims concerning the CHA investigation of Urban's withdrawal of funds from the CHA-HUD accounts and that she would talk to defendant Mulder. The next day, Howard decided to permanently leave her employment at Urban because she felt she was being harassed.

On July 2, 2007, Defendant Urban and its successor RM Holdings, and individual defendants Rudy Mulder, Roxanne Gardner, and Johnny Terzakis (the "individual defendants") moved to dismiss Plaintiff's Third Amended Complaint in its entirety for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6). The Third Amended Complaint consisted of three counts:

(I) Embezzlement of HUD Funds Under the False Claims Act, (II) Presenting a False Claim Under the False Claims Act, and (III) Retaliation and Constructive Discharge.

On September 28, 2007, this Court issued an opinion which denied Urban and the individual defendants' motion with respect to Counts I and II of the Third Amended Complaint, and granted the motion with respect to Count III of the Third Amended Complaint (though Count III remained with respect to Defendant Synergy). In dismissing Count III as against Urban and the individual defendants, the court reasoned as follows: "Howard's complaint clearly states that she was employed by Synergy, which then assigned her to work at Urban. Simply put, this made Synergy Howard's employer, not Urban. Because Urban and the individual defendants are not Howard's employer, she cannot bring an action against them under 31 U.S.C. § 3730(h)."

On June 23, 2009, Plaintiff filed a Motion for Leave to Amend Third Amended Complaint. Howard summarized the intended amendments to the complaint as follows:

· Amend the caption and defendants' description to include successors to RM Holdings

· Amend introductory language for clarity and to conform to language changes in the amendments to the False Claims Act signed into law on May 20, 2009

· Conform pleadings to the proof and some of the discovery adduced to date

· Set forth factual allegations warranting the piercing of the corporate veil

· Add all defendants to Count III, Retaliation

· Add Count IV, Intentional Infliction of Emotional Distress (Pl.'s Mot. For Leave to Amend Third Am. Compl. 2.) The Court granted Plaintiff's motion to file the amended complaint on July 29, 2009, and Plaintiff filed the Fourth Amended Complaint on August 14, 2009.

Defendant Gardner filed the instant motion to dismiss Counts III and IV of the Fourth Amended Complaint on September 14, 2009. Gardner argues that Count III should fail because she was not Plaintiff's employer, and Plaintiff's new "corporate-veil allegations" invalid.

Gardner argues that Count IV should fail because it is purely formulaic, and Plaintiff has not alleged any extreme or outrageous behavior or ...

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