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Denogean v. San Tan Behavioral Health Services LLC

United States District Court, D. Arizona

October 31, 2017

Rosemary Denogean, Plaintiff,
San Tan Behavioral Health Services LLC, Defendant.



         Plaintiff Rosemary Denogean filed a complaint against her former employer, Defendant San Tan Behavioral Health Services LLC, alleging violations of the Arizona Employment Protection Act (“AEPA”), A.R.S. § 23-1501, and the False Claims Act (“FCA”), 31 U.S.C. § 3730. Doc. 1. Plaintiff has moved to dismiss Defendant's counterclaim (Doc. 48) and Defendant has moved for summary judgment (Doc. 49). The motions are fully briefed, and no party has requested oral argument. For the reasons that follow, the Court will grant Plaintiff's motion to dismiss and deny Defendant's motion for summary judgment.

         I. Background.

         The following facts are undisputed. Plaintiff worked as a billing specialist for Defendant for 4.5 years. Doc. 54 at 5 ¶ 1. On August 25, 2016, Plaintiff discovered an abnormality in the billing system and reported it to her supervisor, Maritza Romero. Id. at 6 ¶¶ 9-10; Doc. 54-3 at 26-27. In late August, co-worker Amy Napoleon reported the same abnormality to Defendant's co-owner, Melissa Nelson. Doc. 50 ¶ 12; Doc. 50-1 at 37. During the ensuing investigation of the abnormality, Defendant received a report that Plaintiff might have trained employees to falsify signatures on billing records. Doc. 50-1 at 41-42. Defendant placed Plaintiff on administrative leave on August 29 to investigate the allegation. Doc. 54-3 at 42.

         Later that day, Defendant determined that Plaintiff was not at fault for the billing issues. Doc. 50 ¶ 21; Doc. 54 at 8 ¶ 25. Plaintiff returned to work on August 30, but was out sick on August 31. Doc. 54 at 8 ¶¶ 27, 29. On the evening of August 31, Romero informed Plaintiff over the phone that the billing fraud investigation had uncovered emails in which Plaintiff sent personal health information (“PHI”) to her personal email address in violation of the Health Insurance Portability and Accountability Act (“HIPAA”). Doc. 54 at 9 ¶ 32.

         Before 9:00 a.m. on September 1, Plaintiff went to work where she met with Nelson and Romero. Doc. 50-1 at 42 (Nelson testifies that Plaintiff was in the office before 8:10 a.m.); Doc. 54 at 9 ¶¶ 35-36. After a verbal argument, Romero asked Plaintiff to leave the premises until further notice. Doc. 50 ¶ 28; Doc. 54 at 9 ¶ 36. Defendant then sent Plaintiff a letter at 9:02 a.m. placing her on administrative leave while Defendant investigated possible HIPAA violations. Doc. 50 ¶ 26; Doc. 54 at 9 ¶ 37. The letter did not mention insubordination. Doc. 50-1 at 55.

         During the afternoon of September 1, Defendant's president called Plaintiff to terminate her employment. Doc. 50 ¶ 30; Doc. 54 at 10 ¶ 38. Defendant also sent Plaintiff a letter stating the reasons for her termination:

Failure to abide by [San Tan] protocals [sic] and procedures which resulted in the unauthorized use of client confidential information sent to a personal email which is a HIPAA violation.
Insubordination- not following specific instructions during the course of an internal confidential investigation[.]

Doc. 50-1 at 61.

         II. Plaintiff's Motion to Dismiss.

         A successful motion to dismiss under Rule 12(b)(6) must show either that the complaint lacks a cognizable legal theory or fails to allege facts sufficient to support its theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988). A complaint that sets forth a cognizable legal theory will survive a motion to dismiss as long as it contains “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Iqbal, 556 U.S. at 678 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

         Defendant's abuse of process counterclaim alleges as follows: “Through the filing of the Complaint in this action, [Plaintiff] has willfully misled this court based upon the knowingly false allegation that her termination was retaliatory based upon her reporting of billing fraud.” Doc. 8 at 7 ¶ 19 (emphasis added). Plaintiff argues that filing a complaint does not constitute abuse of process as a matter of law. Doc. 48 at 4. Defendant counters that Plaintiff abused the judicial process by filing a complaint containing false allegations. Doc. 51 at 3-4.

         The elements of an abuse of process claim are “(1) a willful act in the use of judicial process, (2) for an ulterior purpose not proper in the regular conduct of the proceedings.” Cruz v. City of Tucson, 401 P.3d 1018, 1021 (Ariz.Ct.App. 2017) (internal quotation marks omitted). Unlike the tort of malicious prosecution, which covers the initiation of civil proceedings with malice and without probable cause, abuse of process addresses misuse of process after proceedings have been initiated. See Joseph v. Markowitz, 551 P.2d 571, 573-74 (Ariz.Ct.App. 1976).

         Plaintiff's motive for filing the complaint, even if improper, cannot support an abuse of process claim because “abuse of process requires some act beyond the initiation of a lawsuit[.]” Id. at 575. Abuse of process “is not commencing an action or causing process to issue without justification, but misusing, or misapplying process justified in itself for an end other than that which it was designed to accomplish.” Id. at 574 (internal quotation marks and citation omitted). Courts have “explicitly rejected the contention that the initiation of a lawsuit can constitute the necessary act” for abuse of process. Blue Goose Growers, Inc. v. Yuma Groves, Inc., 641 F.2d 695, 697 (9th Cir. 1981) (citation omitted). Courts also have held that an abuse of process claim will not lie where a lawsuit initiated in bad faith is “continued without justification.” Morn v. City of Phx., 730 P.2d 873, 876 (Ariz.Ct.App. 1986). Plaintiff's “mere persistence in [this] litigation, even if based on an improper motive, does not sustain the tort.” Crackel v. Allstate Ins. Co., 92 P.3d 882, 888 (Ariz.Ct.App. 2004). Defendant's counterclaim, which is based entirely on Plaintiff's initiation and prosecution of this lawsuit, fails to state a claim for abuse of process.

         Plaintiff's reply memorandum asks the Court to award her attorneys' fees for defeating the counterclaim. Doc. 52 at 2. The Court will not grant relief requested for the first time in a reply memorandum, and will address ...

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