9th Circuit Rejects Claims That 2 TruConnect Employees Were Fired for Exposing Fraud

The 9th U.S. Circuit Court of Appeals affirmed the district court’s grant of summary judgment against plaintiff-appellants Regie Salgado and Melinda Zambrano, two former employees of TruConnect Communications who alleged that the cellphone network operator fired them in retaliation for raising claims that the company engaged in schemes to defraud the FCC’s Lifeline program, said the 9th Circuit’s memorandum Friday (docket 22-55721).

Salgado and Zambrano's fraud claims don’t meet the “heightened pleading standard” of Rule 9(b), said the memorandum. Their allegation that TruConnect used third-party vendors, called “street teams,” to sign up subscribers without confirming their eligibility “fails for two reasons,” it said.

TruConnect, as a matter of law, isn’t responsible for determining initial subscriber Lifeline eligibility, said the memorandum. The complaint also lacks “any well-pled allegation that TruConnect failed to receive proper documentation for any subscriber for which TruConnect actually submitted a claim” for Lifeline reimbursement, it said.

“We do not relax Rule 9(b)’s particularity requirement” simply because the plaintiff-appellants allege that the fraudulent billing is within TruConnect’s “exclusive possession,” said the memorandum. “At bottom,” they can’t, “as they repeatedly purport to do here, describe a fraudulent scheme” but then allege simply and without any stated reason that claims requesting illegal payments must have been submitted, it said.

The allegation that TruConnect knowingly submitted fraudulent usage minutes from robocalls and wrong-number calls to circumvent the FCC’s usage requirements “does not meet the requirements of Rule 9(b),” said the memorandum. Though the plaintiff-appellants allege that Salgado analyzed TruConnect’s subscriber data and found a low amount of subscriber usage, they don’t explain “how billing the government for low usage violates FCC regulations or otherwise constitutes fraud,” it said.

Their further allegations that TruConnect essentially manipulates robocalls and then submits fraudulent usage data “are vague and fatally unsupported,” said the memorandum. The complaint doesn’t explain “with particularity” who at TruConnect was behind pushing the robocalls, “or how or when they went about doing so,” it said.

Salgado and Zambrano “have also failed to adduce sufficient evidence to support their claims for retaliation,” said the memorandum. They don’t dispute that TruConnect co-CEOs Nathan and Matthew Johnson “made the ultimate decision” to eliminate their positions, it said.

But Salgado and Zambrano haven’t presented any evidence that the Johnson brothers “acted with a discriminatory or retaliatory motive,” said the memorandum. They’re thus left to survive summary judgment with a “cat’s paw theory” of liability, which requires establishing that one of the Johnsons’ subordinates, in response to the whistleblowing, set in motion the Johnsons’ decision to eliminate their jobs, it said.

Salgado and Zambrano identify three TruConnect employees potentially involved in their firing, said the memorandum. But they fail to present “non-speculative evidence” from which a reasonable jury could conclude that any of those three individuals were aware of their whistleblowing and were involved in the decision to eliminate their jobs, it said. “We have found summary judgment appropriate in these circumstances,” it said.