John W. Larson _Dis_trict Judge Fourth District, Dept. 3 Missoula Count Courthouse 200 West Broa wa Missoula MT 5980 (406) 258-4773 MONTANA FIRST JUDICIAL DISTRICT COURT, LEWIS CLARK COUNTY i t_ Cause INST OPINION AND ORDER DENYING MOTION To DISMISS CONVERTED To MOTICEDRIITFOR SUMMARY JUDGM . ?f,n0g-f, @115 GALLIK, I 3,,I;imitedxLia,biIIta Com an NHA {Ml Ljand* 52'' ., -. '7 Thismatter comesbefore theuCourt on State of Montana, byaitsa Special Assistant Attorney General's Motion to Dismiss. The Court heard oral argument, received supplemental documentation, and the matter is A ready for decision. Background The Courtfinds the facts asthe following. Defendant David Gallik has owned Gallik Law Offices, PLLC, since February 2006. In May 2011, Governor Brian Schweitzer appointed Mr. Gallik to serve as the State of Order -- Page 1 261 Montana's Commissioner of Political Practices ("Commissioner"). On October 24, 2011, The Montana Policy Institute (MPI) directed Dave Brown to submit an open records request to the Commissioner's office, seeking Mr. Gallik's time cards, records for work time submitted to the State, and emails that were sent to and from Mr. Gallik since he served as Commissioner. In January 2012, Great Falls Tribune journalist John Adams also submitted an open records request to the Commissioner's office.>> On January 15, 2012, the Great Falls Tribune published an article written by Mr. 1 Adams about Mr. Gallik's alleged misuse of,State time and resources, including Mr. Ga|lik's failure to properly record time, Mr. Gal|ik's work for private clients while in the Commissioner's office, and Mr. Gal|ik's use of government equipment for the benefit of his private clients. On January 18, -2012, Mr.'Gallik resigned as Commissioner. 1 11 On.January 27,2012, Carl Graham, 'President of MPI, submitted an open records request to the Commissioner's office, requesting copies of Mr. Gallik's emails and timesheets. On January 30, 2012, Mr.'Graham submitted another open records request to the Commissioner's office, requesting time sheets from May 2011 through December 2011 and all emails pertaining to the allegations that Mr.1Gallik conducted private business on state time or used state resources. - Order -- Page 2 .17February 7, 2012, filed a Complaint against Mr. Gallik, Gallik Law Offices. Governor Schweitzer's Chief of Staff Vivian Hammill, Mr. Gallik's wife Gail Gallik, and the Montana Department of Administration supervisory employee Paula Stoll, asserting violations of Section 17-8-403, MCA, pursuant to the False Claims Act MPl's allegations against Mr. Gallik charge that Mr. Gallik made false claims by submitting payment requests to the Statethat inaccurately reflect actual time worked for the Commissioner's office or work performed for Mr. Gallik's private clients. MPI alleges that Ms. Hammill and Ms. Stoll failed to take action to prevent Mr. Gallik's timekeeping irregularities. MPI also alleges that Ms. Gallik used state equipment for personal uses. 'MPl's Complaint with supplemental documentation was presented to the office of the Montana Attorney General on orabout February 6, 2012. See State Exh. 2. 2 . 1'he State now moves todismiss Complaint with prejudice pursuant to Sections 17-8-406 and 407, MCA, on the grounds that MPI: 1) lacks standing to bring this action, and 2) the allegationsin the Complaint do notstate a meritorious claim against any Defendant. Because the Court allowed evidence outside the pleadings to be considered inthe dismissal hearing, the Courthereby converts the State's Motion to Dismiss to a summary judgmentmotion under Rule 56, Order - Page 3 Standard Pursuant to Rule12(d), on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56." Under Rule 56, summaryjudgment is proper if "the pleadings, depositions, answers tointerrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.'' The Montana Supreme Court explained the standardas follows: . The movant must demonstrate that no genuine issues of material fact exist. Once this has been accomplished, the burdenythen shifts to the non-moving party to prove, by more than mere denial and speculation, that a genuine issue does exist. Having determined that genuine issues oftfact do not exist, the court must then the mo'vi'ng "party is entitled to judgment asa matter of lawMathews v. BJS Constr., ,lnc., 2003 MT 116, 11 12, 315.Mont. 441, 444-45, 68 P.3d 865, 868 (citing Oliver v. Stimson Lumber Co, 91999 MT 328, 11 21, 297 Mont. 336, 342, 993 P.2d 11, 16 (quoting Bruner v. Yellowstone County, 272 Mont. 261, 264-65, 900 P.2d 901, 903 (1995)). Order --'Page 4 11,7, 18 19 -20Discussion l. Standing The State asserts that has no standing to bring this false claims action because Mr, Ga|lik's alleged conduct described in the Complaint was performed within the scope of Defendant Gallik's duties to the State, and Section MCA, excludessuch conduct performed within the scope of the employee's duties to a governmental entity as a basis for filing a false claims action. The State also argues that the allegations in the a Complaint mirror the allegations that were publicly disclosed in news a articles, and therefore, the false claim allegations cannot be sustained against Mr. Gallik because MPI has not identified direct and independent knowledge of the information on which the allegations are based. 17-8- 403(5)(c), MCA, The State also argues thatMPl failed to comply legal requirement to disclose to the State all material evidence and information that MPI possessed pursuant to Section MCA, MPI responds that the Act doesnotpreclude MPI from bringing this action becauseithe limitations for filing a viable false claims under the Act found in Section MCA, do not apply to the facts of this case. MPI argues that an emp|oyee,who receives compensation for time thatthe employee knowingly did not work, is not the type ofjob duty contemplated in Order -- Page 5 17126 Section MCA, which precludes a person from bringing an action against a government employee if that employee performed a task that was within the scope of his job duties. MPI also argues that the limitation in Section which precludes a person from bringing a false claims action if that person relies upon allegations or transactions set forth in certaintypes of investigations, actions, hearings, or the news media, does not apply in this case. MPI asserts that it based the subject action upon information it obtained from the employees at the Commissioner's office, not allegations in any of the news articles. MPI also asserts that the information that MPlgave to the State when MPI filed the Complaint consisted of more extensive and detailed information than that which was published in the news articles. See State's Exhibit 11. argues that Mr. Graham received more information than Mr. Adams received through additional emails that were discovered after Mr. Gallik resigned more detailed time log showing the discrepancies in Mr. Gallik's time that was recreated by the Commissioner's office staff. Finally, MPI argues that none of the published articles regarding Mr. Gallik's misuse of State resources contained allegations against the other Defendants in this action, and the limitations forfiling a false claim do not apply to those Defendants. Order -- Page 6 A201 21 22 23 24 25 26 Section 17-8-406, MCA, provides that a person may bring a civil action for a violation of the Act on behalf of the person and the governmental entity. Section 407 of the Act authorizes the State to unilaterally seek dismissal before Defendants appear in the action. In pertinent part Section 17-8-407, MCA, states, the motion of the government attorney, the court may dismiss a civil action notwithstanding the objection of the person who initiated the action if the government attorney has notified the person of the filing of the motion to dismiss and the court has given the person an opportunity to oppose the motion and present evidence at a hearing." Section 17-8-403(5) of the Act sets certain limitations on filing a complaint or civil action in accordance with the Act. Section of the Act precludes a person from filing a complaint orcivil action against "an officer or employee of a governmental entity arising from conduct by the officer or employee within the scope of the officers or employee's duties to A thegovernmental entity." For conduct to fall within the scope of employment, it "must be of the same general nature as that authorized, or incidental to the conduct authorized." Kornec v. Mike Horse Mining Milling co., 120 Mont. 1, 8, 2180 P.2d _252, 256 An employer who acts entirely for his own benefit is generally held to be outside the scope of his employment. ld. Section of the Act precludes a party from filing a Order - Page 7 complaint or civil action: that is based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing or in an investigation, report, hearing, or audit conducted by or at the request of the senate or house of representatives, the state audltoror legislative auditor, the auditor or legislative body of a political subdivision, or the news. . 1 However, there is an exception to this limitation which allows a person to initiate an action even if it is based upon the public disclosure of allegations in a news report if that person: 1 A has direct and independent knowledge ofthe information on which the allegations are based and, before filing the complaint or civil action, voluntarily provided the information to the agency of the governmental entity that is involved with the claim that is the basis for 1 the complaint or civil action and unless the information provided the basis or catalyst for the investigation, report, hearing, or audit that led to the public disclosure; MCA. 1 "This Court has determined that 'Mr.Gallik's alleged conduct of if submitting false claims did not arise withinthescope of the Mr. duties to the stete, and Section MCA, does not preclude MPI from filing this action on such grounds. MPI also complied with the Act'srequirement to serve on the government attorney a copy of the Complaint and written disclosure of substantially all-material evidence and information that the person possesses. See Response to Motion, Exh. 2; State's Exh. 2. Order -- Page 8 Next, the information which MPI based its Complaint did not originate from "any public disclosure of allegations or transactions in a criminal, civil, or administrative or the news media" per Section MCA. Evidence before the Court shows MPI based its Complaint on information that MPI requested from staff members at the Commissioner's office, which information was voluntarily produced as early as October 2011, prior to and independent of the news articles. Mr. Graham, Mary Baker, who has worked in the Commissioner's office for the past ten years, and Julie Steab, who has worked in the Commissioner's office for the prior two years, testified at the dismissal hearing that Mr. Brown submitted an open records request to the Commissioner's office months before Mr. Adams began investigating the matter. See Exh. 419. Mr. Graham also testified that MPI paid for the cost of the copies Mr. Brown received in response to the request. Ms. Steab and Ms. Baker also testified that Mr. Graham received material information that Mr. Adams did not receive for his article more 1 detailed time sheets, office notes, and email correspondencepertaining to Mr. Gal|ik's private law practice or personal business). Thus, MPl's' Complaint is not based upon allegations in the news articles that were published in the Great Falls Tribune and Helena Independent Record, but from sources that provided information to MPI prior to the publication of the 1 Order - Page 9 24' 25>> 26 newsarticles. See Response to Motion to Dismiss, Exhibits 1-0. The limitations for 'filing a civil action outlined subsection 17-8- 403(5)(a) and MCA do not apply to the facts of this case, nor do the exceptions. Therefore, State has not met its burden in establishing that the A Act precludes MPI from proceeding in this matter. ll. False Claim Allegations The State argues that there has been no provable loss tothe State because Mr. Gallikwas never paid more than his agreed annual salary. The State argues the otherstate and federal courts have construed similar false claims laws and held that submission of false claims do not violate a False A Claims Act absent a loss to the government. See, Hutchins v. ll/l/ilentz, Goldman Spitzer, 253 F.3d 176 (3d Cir. 2001). The State concedes that it may be true that Mr. Gallik recorded time that he did not actually perform 1 work for theCommissioner's Office; however, there has been no loss to the State of Montana.' See State's PostHearing Response Brief, p. 11. The State argues that Montana statutes on state employee classification and compensation do not apply to members of commissions or boards, or agency heads, appointed by the Governor. M.C.A. 2-18-101, et seq.; 1M.C.A. A As such, the State argues that Mr. Gallik, as _Order Page 10 Commissioner, was a salaried, exemptemployee who was not subject to time keeping requirements of an hourly wage employee. The State also argues in its Post l-learing Memorandum that no false claim liability attaches to Defendants Vivian Hammill, Paul Stoll, or Gail Gallik. See State Post Hearing Memo, p.4. MPI responds that dismissalis unwarranted because the claims against Gallik are factually complex and disputed, involving differences in recollection or perception. During the motion to dismiss hearing, Mr. Gallik admitted that I occasionally he would receive emails pertaining to his private practice on his State email account, and evidence in the record supports this admission. For example, evidence in the record shows that on July 7,2011, Mr.xGa|lik received approximately eight emails pertaining to his private practice. "See I 1 Exhs. 151, 157,154, 158, 159, 160. Evidence before th_e Court indicates that on August 2, 2011, Mr. Gallik contacted Deb Belleau in the Human Resources Policy and Programs Bureau in 'an attempt to change his employment status from hourly to exempt salary. Exh. 212. On August 8, 2011, Mr. Gallik also contacted Vivian Hammill at the Governor's office in another attempt to clarify his employment status as a salaried exempt employee. See Exh. 84. There is aquestion of material fact 1 . regarding whether Mr. Gallik was a salaried, exempt employee or paid on an Order -- Page 11 hourly basis. After considering the documents in the Court's record as well as testimony and evidence presented by the parties at the dismissal hearing, there are disputed material facts regarding the basis ofliability for the false claim action against Mr. Gallik, precluding summary judgment. There are also genuine issues of material fact regarding whether the remaining Defendants had the requisite knowledge under the Act so to have violated it. The State has primarily focused on its arguments that Mr. Gallik's acts were within his job duties as Commissioner and MPI based its Complaint on news articles, failing to adequately show why the action should be dismissed as to the remaining Defendants named in the Complaint. Additionally, there was limited or no at hearing regarding the State's recently I proposed dismissal of all Defendants. Therefore, the Court declines to address the State's motion to dismiss regarding the other Defendants as the issue has not been sufficiently briefed and argued at this time. I IT IS HEREBY ORDERED that subsections 403(5)(not preclude MPI from proceeding in this matter. IF FURTHER ORDERED that the State's Motion to Dismiss, A converted to a Motion for Summary Judgment is DENIED. Order - Page 12 FURTHER ORDERED that the State has ten (10) days after the date on this Order to elect to intervene and proceed with this action or to notify the Court that it declines to take over the action in accordance with MCA. If the State elects to intervene, the State is ordered to serve the Complaint on all Defendants within twenty (20) days after intervening in the action. If the State declines to takeover the action, Plaintiff may serve the Complaint on Defendants within the applicable statute of limitations. DATED this day of April, 2013. Copies of the foreqoinq were sent to: ArthL_ir V. Wittich, Esq. Carrie R. Wasserburger, Esq. 5 Wittich Law Firm, P. . 0 0 . 602. Ferguson- Ave. Ste 5 Bozeman, MT 59718 (406) 585-5598 I Attorneys for Plaintiff Ward_ E. Tal_eff, Esq. Special Assistant Attorney General Taleff Law Office, P.C. P. O. Box 609 Great Falls MT 59403 (406) 701-9400 Attorney for the State of Montana Mark Mattioli, Deput Attorney General mmattioligmtaov 1 Mike Black, Special ssistant Attorney Genera ac ,mt.qov Attorney General's -Office P. O. Box 201401 Helena, MT 59620 Order - Page 13