*2 Before MURNAGHAN and MICHAEL, Circuit Judges, and HERLONG, United States District Judge for the District of South Carolina, sitting by designation. _________________________________________________________________ Affirmed in part, reversed in part, and remanded by published opin- ion. Judge Herlong wrote the opinion, in which Judge Murnaghan and Judge Michael joined. _________________________________________________________________ COUNSEL
ARGUED: David Thomas Ralston, Jr., HOPKINS & SUTTER, Washington, D.C., for Appellants. Stephen R. Smith, KUTAK ROCK, Washington, D.C., for Appellee. ON BRIEF: Karen Marie Grane, HOPKINS & SUTTER, Washington, D.C., for Appellants. Allen S. Rugg, KUTAK ROCK, Washington, D.C., for Appellee. OPINION
HERLONG, District Judge:
In 1996, Ronald G. Eberhardt ("Eberhardt") brought a qui tam action under 31 U.S.C.A. § 3730(b)(1) (West 1983 & Supp. 1998) against his former employer, Integrated Design & Construction, Inc. ("IDC"), and its majority owner, Albert H. McCoubrey ("McCoubrey"), for falsely billing the government in violation of the False Claims Act, 31 U.S.C.A. § 3729 (West 1983 & Supp. 1998). Eberhardt also claimed that IDC discriminated against him by decreasing his salary, demoting him, and terminating him -- in viola- tion of 31 U.S.C.A. § 3730(h) (West Supp. 1998) -- for acts he took in furtherance of a qui tam action.
On October 2, 1996, the United States intervened as to the section 3729(b)(1) count and ultimately settled this claim on January 7, 1997. Eberhardt's discrimination claim proceeded to trial. On July 15, 1997, Eberhardt received a jury verdict in his favor of $417,700.99, and the *3 district court entered a judgment on the verdict. On July 24, 1997, Eberhardt filed a motion for reinstatement and interest. On July 29, 1997, IDC filed a motion for judgment as a matter of law or, in the alternative, motion for new trial under Rules 50 and 59 of the Federal Rules of Civil Procedure. On September 22, 1997, IDC and McCou- brey filed a joint Rule 60(b) motion as well as separate Rule 60(b) motions for relief from the judgment. On October 3, 1997, the district court denied IDC's motion for judgment as a matter of law or, in the alternative, motion for new trial. On November 21, 1997, the district court granted Eberhardt's motion for prejudgment interest on the back pay award, denied rein- statement to Eberhardt, dismissed McCoubrey from the action pursu- ant to his Rule 60(b) motion, denied all other Rule 60(b) motions, and confirmed the denial of the Rule 50/59 motion. IDC and Eberhardt now appeal. Because the district court accurately considered and applied the relevant law, this court finds no reason for reversal of the district court's decisions, with the exception of its decision to grant McCoubrey relief from the judgment. Accordingly, we reverse the trial court's grant of McCoubrey's Rule 60(b) motion and affirm in all remaining respects.
I.
IDC was an architectural/engineering/construction firm which managed the design and construction of embassy facilities for the United States Department of State ("State Department"). IDC essen- tially acted as a conduit between the Government and subcontractors, invoicing the Government for subcontractors' work plus IDC's administrative costs ("pass-through contracts"). McCoubrey was IDC's President, CEO, and 90% shareholder. IDC hired Eberhardt in January 1994 as Director of Congressional and Governmental Affairs. Eberhardt was promoted to Senior Staff Vice President on July 13, 1994, and he initiated an effort to organize IDC's accounting system and records. In late July 1994, IDC's then-CFO and in-house counsel, William Roemer ("Roemer"), who was responsible for administering IDC's pass-through contracts, informed Eberhardt that IDC had invoiced the State Department on uncompleted work in order to alle- viate its cash flow problems. Roemer also told Eberhardt that McCou- *4 brey knew of the billings. Eberhardt went to McCoubrey with this information, and McCoubrey stated that he would speak with Roemer. Eberhardt discovered more information supporting Roemer's claims and discussed the issue further with McCoubrey. In October 1994, they agreed to have a senior employee, Pascal Pittman ("Pittman"), review the contracts in question. Pittman reported to Eberhardt that $1.3 million in advance billings had taken place. IDC did not have these funds in its bank accounts and was facing a severe shortage in cash flow. Roemer became a focus of IDC's investigation, but he refused to cooperate and was terminated.
In December 1994, Eberhardt informed McCoubrey that there was an appearance of criminality, and he advised McCoubrey that IDC should obtain legal counsel. The next day, McCoubrey ordered Eber- hardt to lead an official investigation with the aid of corporate counsel Mark Kellogg ("Kellogg") and to submit a written report which was to be presented to the Board of Directors and ultimately forwarded to the federal government. The investigation continued until January 9, 1995, at which point Eberhardt submitted a written report revealing that the money from the advanced billings had been received and spent, creating a significant cash flow problem. During the course of the investigation, Eberhardt discovered that McCoubrey had person- ally signed the invoices, and he advised McCoubrey to obtain sepa- rate counsel. He also issued a set of questions to McCoubrey asking about McCoubrey's involvement in the scheme. Over the course of the investigation, Eberhardt's previous close relationship with McCoubrey deteriorated significantly, and McCoubrey excluded Eberhardt from closed door meetings.
On January 16, 1995, McCoubrey directed Eberhardt to return to his normal tasks and to monitor IDC's financial condition, but he allegedly issued a separate order for Eberhardt to no longer have access to any IDC financial information. On January 20, 1995, IDC officials met with the State Department and disclosed the advance bil- lings. Eberhardt was excluded from this meeting. On January 30, 1995, Eberhardt reported to the board of directors that IDC had dis- charged its duty to report to the government and that he was disband- ing the investigation.
On February 1, 1995, IDC implemented a plan to alleviate its cash flow problems, cutting the salaries of all senior staff employees by fif- *5 teen percent. An exception was made for the two lowest salaried senior employees, at their request, and they received ten percent cuts.
In all, four employees (including Eberhardt) received a fifteen percent cut, and two received a ten percent cut. On February 7, 1995, IDC implemented a corporate reorganization, whereby it laid off two architects, formed an Executive Committee, and eliminated Eber- hardt's position of Senior Staff Vice President, allegedly due to McCoubrey's increased involvement with the company. Eberhardt was tasked for business development, a job which Eberhardt felt was outside his expertise. In addition, on February 9, 1995, McCoubrey gave Eberhardt the special task of drafting IDC's 1995 comprehen- sive business plan/budget -- an assignment for which Eberhardt felt unqualified.
Eberhardt responded by memorandum that same day, stating that he was being singled out for leading the investigation, that he was pretextually being put in an impossible predicament, and that IDC's actions were a violation of the Federal Whistleblower Protection Act. In a February 13, 1995, memorandum, McCoubrey denied these claims. Eberhardt responded by memorandum that same day that he was protected by the False Claims Act. That same day he also told Kellogg (IDC's corporate counsel) of his intention to bring a qui tam action. On February 16, 1995, Eberhardt met with the Board of Direc- tors and informed them of his intention to file suit against IDC under the False Claims Act. He declined to perform his newly assigned duties, and the Board fired him. Eberhardt then went to the FBI to advise it of evidence stored at IDC that could be relevant to an inves- tigation of False Claim Act violations.
II.
31 U.S.C.A. § 3729 creates liability for any person who presents
false claims to the federal government for payment. Section 3730
allows a private person to bring a civil action on behalf of the Gov-
ernment for violations of section 3729 (i.e., a"qui tam action"). Sec-
tion 3730(h) -- sometimes called the "whistleblower" provision of
the False Claims Act -- "prevents the harassment, retaliation, or
threatening of employees who assist in or bring qui tam actions."
Zahodnick v. IBM Corp.,
Any employee who is discharged, demoted, suspended,
threatened, harassed, or in any other manner discriminated
against in the terms and conditions of employment by his or
her employer because of lawful acts done by the employee
on behalf of the employee or others in furtherance of an
action under this section, including investigation for, initia-
tion of, testimony for, or assistance in an action filed or to
be filed under this section, shall be entitled to all relief nec-
essary to make the employee whole.
31 U.S.C.A. § 3730(h). This court has previously spoken to the issues
relevant to the instant case. In Zahodnick, this court extracted three
elements from section 3730(h) that constitute a prima facie case:
"[A]n employee must prove that (1) he took acts in furtherance of a
qui tam suit [i.e. engaged in `protected activity']; (2) his employer
knew of these acts; and (3) his employer discharged him as a result
of these acts." Zahodnick,
IDC argues Eberhardt did not make any of these three required
showings.
1
As a result of this failure, IDC argues that the district court
1
As a preliminary matter, Eberhardt argues that IDC failed to preserve
various grounds for appeal. His argument is unavailing. With respect to
the motions for judgment as a matter of law, Eberhardt states that the
only ground offered by IDC in support of a directed verdict was that
Eberhardt failed to show causation. See Fed. R. Civ. P. 50(a)(2) (requir-
ing the moving party to "specify the judgment sought and the law and
the facts on which the moving party is entitled to judgment"); see also
Miller v. Premier Corp.,
A. Motions for Judgment as a Matter of Law
IDC claims that denying its motions for judgment as a matter of
law was error because Eberhardt did not make out a prima facie case
for retaliation. This issue is reviewed de novo , and the evidence must
be viewed in the light most favorable to the non-moving party, Eber-
hardt. See Singer v. Dungan,
The primary area of contention is whether Eberhardt met the first element of a prima facie case by engaging in protected activity. The statute protects "lawful acts done by the employee on behalf of the employee or others in furtherance of an action under this section, including investigation for, initiation of, testimony for, or assistance in an action filed or to be filed under this section." 31 U.S.C.A. § 3730(h). IDC contends that because the investigation was done on behalf of the employer, Eberhardt never engaged in protected activity. IDC neglects the fact that protected activity includes "initiation of . . . an action filed or to be filed under this section." 31 U.S.C.A. § 3730(h) (emphasis added). Thus, wholly apart from whether his With respect to the jury instruction, Rule 51 requires a party's objec- tion to "stat[e] distinctly the matter objected to and the grounds of the objection." Fed. R. Civ. P. 51. Eberhardt argues that the objection to the instruction regarding the protected activity element of a prima facie case was not specific enough. At trial, however, there was an extended discus- sion as to this issue, and IDC offered an alternative instruction that the court rejected. See (J.A. at 461-64.) The issue is preserved for review. *8 internal investigation rose to the level of protected activity, Eberhardt made it clear to IDC prior to his termination that he intended to bring a qui tam action under the False Claims Act and that the Act protected him from retaliation. Eberhardt made his intentions known on several occasions prior to his termination. First, he wrote a February 9, 1995, memo to McCou- brey stating that he was being singled out for leading the investiga- tion, that he was pretextually being put in an impossible predicament, and that IDC's actions were a violation of the Federal Whistleblower Protection Act. In a February 13, 1995, memo to Kellogg (IDC's cor- porate counsel), Eberhardt explicitly alleged that IDC had violated the False Claims Act and that Eberhardt was protected by section 3730(h). See (id. at 718.) That same day he told Kellogg of his inten- tion to bring a qui tam action. On February 16, 1995, Eberhardt met with the Board of Directors and informed them of his intention to file suit against IDC under the False Claims Act. Because these acts con- stituted the "initiation of . . . an action . . . to be filed [under section 3730]," Eberhardt engaged in protected activity. 31 U.S.C.A. § 3730(h). In addition, IDC received express notice of Eberhardt's protected activity, and it was permissible for the jury to find that Eberhardt's termination was a result of this protected activity. Thus, sufficient evidence existed which could establish a prima facie case under section 3730(h). Accordingly, it was not error for the trial court to deny IDC's motions for judgment as a matter of law. 2. Investigation for a Qui Tam Action
Even had Eberhardt not made explicit claims that he would bring
a qui tam suit against IDC, his investigatory actions nevertheless rose
to the level of protected activity. Other circuits have held that an
employee need not have actually filed a qui tam suit or even known
about the protections of section 3730(h) in order to engage in pro-
tected activity. See, e.g., United States ex rel. Yesudian v. Howard
University,
IDC relies on the proposition that the actions of an employee who
is assigned to investigate fraudulent activity is not sufficient under the
statute because (1) it is not on behalf of the employee and therefore
not protected activity, and (2) it does not put the employer on notice
that the employee is engaged in protected activity. See, e.g., United
States ex rel. Ramseyer v. Century Healthcare Corp. ,
Our citation to these cases should not be read to suggest
that an individual whose job entails the investigation of
fraud is automatically precluded from bringing a section
3730(h) action. However, we do note that such persons must
make clear their intentions of bringing or assisting in an
FCA action in order to overcome the presumption that they
are merely acting in accordance with their employment
obligations.
Ramseyer,
IDC contends that the district court erred in instructing the jury regarding the element of protected activity under 31 U.S.C.A.
2 IDC expresses concern that any employee who is tasked with investi- gating fraud against the government would automatically be engaged in protected activity and would automatically have the benefit of construc- tive notice, which would nullify the statutory requirements of engaging in protected activity and giving notice. Apparently, IDC laments that an employer could not task an employee with investigating fraud without immediately being exposed to liability under a section 3730(h) action. IDC, however, is incorrect that an employee tasked with investigating fraud would automatically expose the employer to liability. Under our holding today, the investigation would not rise to the level of protected activity until the employee uncovered likely fraud, thereby making litiga- tion a reasonable possibility. In addition, the notice requirement would not be met until the employee expressed concerns about the likelihood of fraud to the employer. Furthermore, the flip side of IDC's argument is that when an employee stumbles upon potential fraud, as here, and reports it to the employer, the employer can avoid liability by assigning that employee the task of investigating the fraud. The statute does not intend to offer such protection to the employer.
§ 3730(h). The applicable standard is whether the jury charge, as a
whole, adequately states the controlling law. See Spell v. McDaniel,
C. Motion for New Trial
"[T]he granting or refusing of a new trial is a matter resting in the
sound discretion of the trial judge, and . . . his action thereon is not
reviewable upon appeal, save in the most exceptional circumstances."
Aetna Cas. & Sur. Co. v. Yeatts,
IDC and McCoubrey move for relief from judgment under Rule 60(b)(4) of the Federal Rules of Civil Procedure on the basis that the judgment is "void" for lack of subject matter jurisdiction. They rely on section 3730(e)(4), which denies jurisdiction to any court over an action under section 3730 that is based upon prior public disclosure. Subsection (e)(4) provides:
No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.
31 U.S.C.A. § 3730(e)(4)(A). Because there was no public disclosure, this provision does not deny subject matter jurisdiction.
While several sub-issues exist with respect to this question, 4 the threshold issue is whether there was public disclosure. The statute specifically refers to three types of public disclosure: (1) "in a crimi- nal, civil, or administrative hearing"; (2) "in a congressional, adminis- trative, or Government Accounting Office report, hearing, audit, or 3 McCoubrey incorporates this motion into his independent Rule 60(b) motion in which he claims that he is not an "employer" under the Act. See infra Part II.D.3. The argument is unavailing there as well. 4 For example, there are issues whether subsection (e)(4) applies to actions under subsection (h) or whether Eberhardt is an "original source." *14 investigation"; or (3) "from the news media." Id. The Eleventh Circuit has held these forums to be exclusive:
As a preliminary matter, we find that the methods of"public
disclosure" set forth in section 3730(e)(4)(A) are exclusive
of the types of public disclosure that would defeat jurisdic-
tion under that section. The list of methods of"public dis-
closure" is specific and is not qualified by words that would
indicate that they are only examples of the types of"public
disclosure" to which the jurisdictional bar would apply.
Congress could easily have used "such as" or"for example"
to indicate that its list was not exhaustive. Because it did
not, however, we will not give the statute a broader effect
than that which appears in its plain language.
United States ex rel. Williams v. NEC Corp.,
3. McCoubrey's Rule 60(b) Motion for Relief from Judgment
The district court granted McCoubrey's Rule 60(b) motion to be
relieved from the judgment on the basis that he could not be held indi-
vidually liable as an "employer" under section 3730(h). The district
court abused its discretion in granting this motion. Rule 60(b) is not
a proper vehicle for such a motion.
Essentially, McCoubrey asserts a Rule 12(b)(6) motion for failure
to state a claim. But there is no authority for such a motion to be
brought after trial. Rule 12(h), entitled "waiver or preservation of cer-
tain defenses," specifically provides that "[a] defense of failure to
state a claim upon which relief can be granted . . . may be made in
any pleading permitted or ordered under Rule 7(a), or by motion for
judgment on the pleadings, or at the trial on the merits." Fed. R. Civ.
*15
P. 12(h)(2). This rule implies that the defense is waived after the com-
pletion of a trial on the merits. Other circuits have so held. See
Anderson v. United Tel. Co.,
McCoubrey nevertheless argues that Rule 60(b) offers relief
because the judgment is "void," Fed. R. Civ. P. 60(b)(4), or because
of "other reason[s] justifying relief," id. at 60(b)(6). His argument
fails. Although Rule 60(b) offers relief from judgments that are void,
"`a judgment is not void merely because it is erroneous. It is void only
if the court that rendered it lacked jurisdiction of the subject matter,
or of the parties, or if it acted in a manner inconsistent with due pro-
cess of law.'" Schwartz v. United States,
[Rule 60(b)(6)] has been described as the"catch-all" clause because it provides the court with "a grand reservoir of equi- table power to do justice in a particular case" and "vests default judgment for the plaintiff based upon an erroneous interpretation of a statute. The Fourth Circuit held that the trial court's "mistake lead to a judgment unauthorized under both [the relevant statute] and under the pleadings. Such a judgment would meet the criteria of the fourth itemized ground for relief set fourth in the Rule, i.e. `the judgment is void.'" Id. at 104. Compton, however, does not apply to the instant case because it involved a default judgment. The basis for the court's decision to allow relief under Rule 60(b) was as follows:
The judgment entered in this case violated the mandate of Rule 54(c). The first sentence of that rule states that a judgment by default is limited to relief to which the plaintiff is entitled under his complaint. There is a reference in the prayer of the complaint to "penalty wages as provided by the United States statutes," (without the specification of the applicable statute) but the alle- gations in the body of the complaint, in which the plaintiff sets forth the facts of his claim, demonstrate indisputably that the claim of the plaintiff did not qualify for the penalty award allow- able under [the statute]." Id. at 104-05. Thus, the reasoning of Compton does not apply to Eber- hardt's claim against McCoubrey because there is no default judgment in the instant case with relief limited to what was in the pleadings. Due process concerns exist when relief under a default judgment goes beyond the complaint because it would result in fundamental unfairness to a defendant who chooses not to appear and thereby limit relief to the grounds of the complaint. See id. at 106 & n.18. In the instant case, these due process concerns do not exist because the defendant was present for trial. Accordingly, Compton is inapplicable, the judgment is not void for lack of due process, and Rule 60(b) provides no relief. 6 Although the district court granted the motion based upon an analysis of Rule 60(b)(4) and not upon 60(b)(6), subsection (6) was one of the bases proffered by McCoubrey for relief from the judgment.
power in courts adequate to enable them to vacate judg- ments whenever such action is appropriate to accomplish justice" where relief might not be available under any other clause in 60(b).
Compton v. Alton S.S. Co.,
E. Prejudgment Interest
Finally, 8 IDC contends that the district court erred in granting Eber- hardt's motion for prejudgment interest. Under section 3730(h), a suc- cessful plaintiff is entitled to certain forms of relief, including interest on an award of back pay:
Such relief shall include reinstatement with the same senior- ity status such employee would have had but for the dis- crimination, 2 times the amount of back pay, interest on the back pay, and compensation for any special damages sus- tained as a result of the discrimination, including litigation costs and reasonable attorneys' fees.
31 U.S.C.A. § 3730(h) (emphasis added). The trial court instructed the jury that if it found for Eberhardt, he was entitled to two times the amount of back pay, interest on that back pay, and any special dam- ages. The jury awarded a lump sum, and judgment was entered on the verdict. There was no categorization of the award, but IDC concedes that it did not include prejudgment interest, as it clearly totaled two 7 Because Rule 60(b) is not a proper mechanism for relief, it is unnec- essary to determine whether individuals may be considered "employers" under section 3730(h). 8 Eberhardt's claim that the district court erred in denying him rein- statement was abandoned at oral argument.
times the back pay. See (Appellant's Br. at 45; Appellant's Reply Br.
at 20-21.)
Section 3730(h), however, does not provide for a discretionary
award of prejudgment interest. Rather, use of the word "shall" man-
dates such an award. See Anderson v. Yungkau,
We reverse the grant of McCoubrey's Rule 60(b) motion for relief from the judgment and remand in order for judgment to be entered against McCoubrey. Finding no other reversible error, we affirm all other decisions by the district court.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED