Miсhelle HOYTE, Bringing this action on behalf of the United States of America, Appellant v. AMERICAN NATIONAL RED CROSS, Appellee.
No. 06-5230.
United States Court of Appeals, District of Columbia Circuit.
Decided March 4, 2008.
Argued Nov. 5, 2007.
518 F.3d 61
Here, DEA provided sufficient information in its affidavits to allow a court to affirm withholding of the documents in toto. DEA stated that it had conducted a page-by-page review of all investigative records contained in the requested documents, and determined that each document, and each page of each document, contained information subject to law enforcement withholding exemptions. It justified its inability to simply redact sensitive portions (i.e., informant names) from these documents by pointing out that the balance of information remaining in the documents could still reveal the extent of the government‘s investigation, the acts on which it is focused, what evidence of wrongdoing it is aware of, the identity of cooperating sources, and the agency‘s investigative techniques in this investigation. The affidavits further attested that release of any of this information could jeopardize the investigation. For these reasons we are satisfied that no portions of the withheld documents may be segregated and released to appellant.
V. Conclusion
For the reasons discussed above, we affirm the district court‘s judgment.
So ordered.
Tracy L. Hilmer, Attorney, United States Department of Justice, argued the cause for appellee United States of America. Peter D. Keisler, Assistant Attorney General, Jeffrey A. Taylor, United States Attorney, Douglas N. Letter, Appellate Litigation Counsel, and Michael D. Granston and Daniel R. Anderson, Attorneys, United States Department of Justice, were on brief. R. Craig Lawrence, Assistant United States Attorney, entered an appearance.
John R. Fleder argued the cause for appellee American National Red Cross.
Bеfore: HENDERSON and TATEL, Circuit Judges, and WILLIAMS, Senior Circuit Judge.
Opinion for the court filed by Circuit Judge HENDERSON.
Opinion concurring in part and dissenting in part filed by Circuit Judge TATEL.
KAREN LECRAFT HENDERSON, Circuit Judge:
Michelle Hoyte filed this action under the False Claims Act (FCA),
I.
On April 15, 2003, the district court issued a consent decree incorporating an agreement between ARC and the United States in which ARC agreed to аdopt and follow specified blood handling and reporting requirements. See United States v. Am. Nat‘l Red Cross, C.A. No. 93-0949 (Apr. 15, 2003) (Consent Decree), reprinted in Joint App. (JA) at 27. The Consent Decree provides that the FDA “may assess” financial penalties for various violations of its provisions “up to” specified maximums. See, e.g., id. at 35-36, 42, 52, 56-57, 61-64.
Hoyte was an ARC employee from 1997 until June 17, 2004. She alleges that in February 2004, when she was Director of Quality Audits, she discovered ARC had mishandled 607 units of blood at its “Penn-Jersey” facility in Philadelphia. She further alleges that ARC‘s officials and staff were aware of the mishandled blood but did nothing about it even after she and her staff urged her superiors to report the matter to the FDA as required under the Consent Decree. Finally, she alleges that she scheduled a meeting with ARC‘s Senior Vice President for Quality Assurance and Regulatory Affairs for June 18, 2004 but was fired by her supervisor over the telephone the day before the meeting.
On June 25, 2004, Hoyte filed this qui tam action under FCA section 3730(b)(1), which provides that “[a] person may bring a civil action for a violation of section 3729 for the person and for the United States Government.”2 As noted, the complaint includes a reverse false claim count under section 3729(a)(7) for which Hoyte is authorized to bring a qui tam action under
On April 27, 2006 the district court held a hearing on the motions to dismiss at the conclusion of which it granted the Government‘s motion to dismiss Count I and deferred ruling on ARC‘S motion. 4/27/06 Hr‘g Tr. 43-44. On July 14, 2006 the court issued an opinion and order in which it granted ARC‘S motion to dismiss Count II. United States ex rel. Hoyte v. Am. Nat‘l Red Cross, 439 F.Supp.2d 38 (D.D.C. 2006).
Hoyte filed a notice of appeal on August 3, 2006.
II.
Hoyte contends the district court erred in dismissing Count I and Count II. We consider each count in turn.
A. Count I: Reverse False Claim Charge
In Swift, a Department of Justice (DOJ) lawyer filed a qui tam action alleging that three employees of the DOJ Office of Legal Counsel had conspired to defraud the Government of $6,169.20 using falsified time sheets and leave slips. The Government moved to dismiss the action and the
We conclude that under Swift the district court correctly deferred to the Government‘s virtually “unfettered” discretion4 to dismiss the qui tam claim. As in Swift, there is no evidence here of fraud on the court or any similar exceptional circumstance to warrant departure from the usual deference we owe the Government‘s determination whether an action should proceed in the Government‘s name. Hoyte asks us to recognize a new exception for a dismissal “clearly contrary to manifest public interest,” Appellant‘s Br. at 14, contending that in Swift we left the door open for future reсognition of other types of exceptions in addition to “fraud on the court.” In Swift, however, we flatly rejected the relator‘s suggestion that we routinely review the Government‘s decision to dismiss a qui tam action, instead holding the door only barely ajar for review in an exceptional circumstance—in particular, where there is “fraud on the court.” See id. at 253. It is clear from Swift that any exception to section 3730(c)(2)(A)—if there are any—must be like “fraud on the court” and Hoyte‘s proposed “manifest public interest” exception is not.4 Hoyte was afforded the hearing the FCA mandates to give her “a formal opportunity to convince the government not to end the case.” Id. The Government was not persuaded to proceed, however, and its decision to dismiss the case, based on its own assessment, is not reviewable in the district court or this court. Accordingly, we affirm the district court‘s dismissal of Count I.
B. Count II: Retaliation Claim
FCA section 3730(h) provides in relevant part:
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, initiation of, testimony for, or assistance in an action filed or to be filed under this section, shall be entitled to all relief necessary to make the employee whole.
This court has established that to prevail on a whistleblower claim, an employee must demonstrate that:
(1) he engaged in protected activity, that is, “acts done ... in furtherance of an action under this section“; and (2) he was discriminated against “because of” that activity. To establish the second element, the employee must in turn make two further showings. The employee must show that: (a) “the employer had knowledge the employee was engaged in protected activity“; and (b) “the retaliation was motivated, at least in part, by the employee‘s engaging in [that] protected activity.”
United States ex rel. Williams v. Martin-Baker Aircraft Co., 389 F.3d 1251, 1260 (D.C.Cir.2004) (quoting United States ex rel. Yesudian v. Howard Univ., 153 F.3d 731, 736 (D.C.Cir.1998) (quoting S.Rep. No. 99-345, at 35 (1986), U.S.Code Cong. & Admin.News 1986 pp. 5266, 5300 (alterations in Yesudian))).5 For the first requirement—engaging in protected activity—“‘it is sufficient that a plaintiff be investigating matters that “reasonably could lead” to a viable False Claims Act case.‘” Id. (quoting Yesudian, 153 F.3d at 740). The matters Hoyte was investigating, however, could not have reasonably led to a viable FCA case. Section 3729(a)(7), on which Hoyte relies, imposes civil liability on a person who “knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government.” Yet Hoyte has not alleged that ARC had any “obligation to pay or transmit money or property to the Government” which it “could conceal, avoid, or decrease” through a false statement or
Like Hoyte, the plaintiff in Yesudian filed a qui tam action asserting both (1) a false claim count—alleging that his superior in the Purchasing Department at Howard University (Howard) falsified time and attendance records, accepted bribes from vendors, permitted payments to vendors who provided no services to Howard and took university property home for personal use—and (2) a whistleblower claim—alleging he was discharged because he reported the misconduct to various Howard officials. A jury returned a verdict against the relator on the false claim count and in his favor on the whistlеblower count but the district court subsequently granted the defendants’ motion for judgment as a matter of law on the whistleblower count.
On appeal, we reversed the judgment on the whistleblower claim. Noting that in a whistleblower claim, “it is sufficient that a plaintiff be investigating matters that ‘reasonably could lead’ to a viable False Claims Act case,” Yesudian, 153 F.3d at 740, we concluded that neither the relator‘s uncertainty whether a FCA suit would follow nor the jury‘s adverse verdict on the false claim count precluded success on the whistleblower count. See id. at 741 (“Nor was it necessary for Yesudian to ‘know’ that the investigation he was pursuing could lead to a False Claims Act suit.“), 739 (“[T]he protected conduct element of such a claim does not require the plaintiff to have developed a winning qui tam action before he is retaliated against.“). Nonetheless, we unequivocally stated that “an employee‘s investigation of nothing more than his employer‘s non-compliance with federal or state regulations” is not enough to support a whistleblower claim. Id. at 740 (citing Hopper v. Anton, 91 F.3d 1261, 1269 (9th Cir.1996); United States ex rel. Ramseyer v. Century Healthcare Corp., 90 F.3d 1514, 1523 (10th Cir.1996)). In Yesudian, we found that “the nature of [the relator‘s] charges could not have been mistaken for a complaint about mere regulatory compliance” because his was a “classic” false claim which charged his supervisor with attempting to defraud the Government of money. Id. at 744. Not so with Hoyte‘s claim, which cannot be deemed a “classic” reverse false claim—in which the defendant‘s alleged deception “results in no payment to the government when a payment is obligated,” United States ex rel. Bain v. Ga. Gulf Corp., 386 F.3d 648, 653 (5th Cir.2004) (emphasis added)—but, in contrast to Yesudian, involves “mere regulatory compliance,” namеly, ARC‘S failure to follow the blood handling and reporting procedures spelled out in the Consent Decree.
Relying heavily on Yesudian, Hoyte contends the district court erred in dismissing her whistleblower count because “winning the underlying claim is not a necessary predicate to maintaining a Section (h) action.” Appellant‘s Br. 27. It is true that under Yesudian a relator need not ultimately prevail on a FCA charge in order to recover for retaliation under
Relying again on language in Yesudian, Hoyte contends the court should focus on “whether Hoyte had a good faith chance of success at the time that she suffered the retaliation.” Appellant‘s Br. 27. In Yesudian the defendants argued that no actionable false claim charge existed at the time of the relator‘s investigation because there was no evidence that Howard ever resubmitted the allegedly false claims to the Government so as to transform the defendants’ fraud on Howard into fraud on the United States as well. Without expressly deciding whether resubmission was necessary, the court concluded that Yesudian‘s personal knowledge that “80% of Howard‘s money came from the United States Government” afforded “a good faith basis for going forward at the time of the retaliation” because, “[g]iven the information he had about Howard‘s finances, it would have been reasonable to conclude there was a ‘distinct possibility’ he would find evidence of resubmission of the claims.” Yesudian, 153 F.3d at 739-40 (quoting Childree v. UAP/GA AG Chem., Inc., 92 F.3d 1140, 1146 (11th Cir.1996) (requiring “distinct possibility” of suit), and Neal v. Honeywell Inc., 33 F.3d 860, 864 (7th Cir.1994) (sufficient if litigation was “distinct possibility” or “could be filed legitimately“)). As we explained in Yesudian, determining whether the false claims were resubmitted required “the kind of information a plaintiff normally cannot acquire until he files a suit and obtains the benefits of court-sanctioned discovery.” Id. at 740. We therefore concluded Yesudian‘s personal knowledge provided the requisite “good faith basis” at the time of the investigation and retaliation to believe the defendants were defrauding the federal Government. Hoyte, in contrast, regardless of her subjective beliefs, had no objectively reasonable basis to believe that she was “‘investigating matters that reasonably could lead’ to a viable False Claims Act case.” Martin-Baker Aircraft Co., 389 F.3d at 1260 (quoting Yesudian, 153 F.3d at 740); see Lang v. Nw. Univ., 472 F.3d 493, 495 (7th Cir.2006) (“What [FCA relator] actually believed is irrelevant, for people believe the most fantastic things in perfect good faith; a kind heart but empty head is not enough. The right question is whether
The dissent argues that Hoyte can pursue a retaliation claim even in the absence of a viable reverse FCA claim, relying in part on language сulled from the Supreme Court‘s decision in Graham County Soil & Water Conservation District v. United States ex rel. Wilson, 545 U.S. 409 (2005). Dissent at 70, 71-72, 72, 74. In Graham County, the question before the Supreme Court was whether the correct limitations period for an FCA retaliation claim is the 6-year period prescribed in FCA for “[a] civil action under
As we have explained, supra pp. 67-69, under Yesudian Hoyte‘s investigation
For the foregoing reasons, we affirm the district court‘s judgment dismissing Hoyte‘s complaint.
So ordered.
TATEL, Circuit Judge, concurring in part and dissenting in part:
Michelle Hoyte, Director of Quality Audits for the American Red Cross, discovered that the organization had mishandled hundreds of units of blood destined for human transfusion and was hiding its mistake from the government. Under a consent decree the Red Cross had signed with the government, this deception authorized the government to impose substantial fines on the organization. Hoyte urged her supervisors to report what had occurred, ultimately scheduling a meeting with a Senior Vice President to discuss her concerns. But the day before the meeting, Hoyte‘s supervisor fired her because of her actions.
Acknowledging these sordid allegations, the court nevertheless concludes that Hoyte failed to state a retaliation claim under the False Claims Act (FCA),
Congress enacted the FCA to prevent fraud against the government. Because “[d]etecting fraud is usually very difficult without the cooperation of individuals who
Any employee who is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditiоns 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, initiation of, testimony for, or assistance in an action filed or to be filed under this section, shall be entitled to all relief necessary to make the employee whole.
Id.
As we explained in United States ex rel. Yesudian v. Howard University, 153 F.3d 731 (D.C.Cir.1998), to prevail on a whistleblower claim “an employee must demonstrate that: (1) he engaged in protected activity, that is, ‘acts done ... in furtherance of an action under this section‘; and (2) he was discriminated against ‘because of that activity.‘” Id. at 736 (quoting
Thus, instead of requiring an actual possibility of success on the underlying FCA claim, Yesudian holds only that the employee must have reasonably believed her investigative acts could lead to a viable FCA claim. Three of our sister circuits have described the test this way: “[T]he relevant inquiry to determine whether an employee‘s actions are protected under § 3730(h) is whether: ‘(1) the employee in good faith believes, and (2) a reasonable employee in the same or similar circumstances might believe, that the employer is committing fraud against the government.‘” Fanslow v. Chicago Mfg. Ctr., Inc., 384 F.3d 469, 480 (7th Cir.2004) (quoting Moore v. Cal. Inst. of Tech. Jet Propulsion Lab., 275 F.3d 838, 845 (9th Cir. 2002)); accord Wilkins v. St. Louis Housing Auth., 314 F.3d 927, 933 (8th Cir.2002). The FCA‘s legislative history confirms that this test mirrors what Congress intended. The Senate Report accompanying the FCA‘s retaliation provision explains that for an employee to be protected by the Act, “the employer would not have to be proven in violation of the False Claims Act,” but “the actions of the employee must result from a ‘good faith’ belief that violations exist.” S.Rep. No. 99-345, at 35, reprinted in 1986 U.S.C.C.A.N. at 5300; see also Graham County, 545 U.S. at 416 (“[A] well-pleaded retaliation complaint need not al-
Properly understood then, the question before us is this: could Hoyte have reasonably believed that the Red Cross had violated the FCA? The answer is plainly yes.
The FCA makes it illegal to “knowingly make[], use[], or cause[] to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government.”
Even were the reasonableness of Hoyte‘s belief debatable, I would give her the benefit of the doubt, for several factors counsel a generous approach in deciding whether an FCA retaliation plaintiff‘s beliefs were reasonable. The first is the statute‘s plain text, which requires only that the act the employee engaged in was somehow “in furtherance of аn action under this section,”
Moreover, we must keep in mind that nearly all employees who investigate and bring fraud claims are laypeople, not lawyers. Expecting laypeople to know with any degree of certainty whether their employers’ actions violate the FCA‘s often vague provisions is simply unrealistic, especially whеn courts themselves disagree over what constitutes a viable FCA claim. Compare United States ex rel. Bahrani v. Conagra, Inc., 465 F.3d 1189, 1201 (10th Cir.2006) (holding that the term “obligation” in the FCA includes “instances in which a party is required to pay money to the government, but, at the time the obligation arises, the sum has not been precisely determined“), with United States v. Q Int‘l Courier, Inc., 131 F.3d 770, 774 (8th Cir.1997) (“[A]n obligation under the
Given these considerations, it becomes even clearer that Hoyte‘s belief was reasonable. The court holds to the contrary, but its reasons for doing so are unpersuasive.
The court first states that no one could have thought the Red Cross violated the FCA because “[t]he Consent Decree imposed no obligation on [the Red Cross] to tender money or property to the Government but only to follow the prescribed blood handling and reporting requirements.” Maj. Op. at 67. The consent decree, however, expressly authorized the government to fine the Red Cross if it failed to disclose information like the blood mishandling incident that allegedly occurred here. Am. Consent Decree of Permanent Inj., United States v. Am. Nat‘l Red Cross, Civ. No. 93-0949, at 52 (D.D.C. Apr. 15, 2003). Thus, at the time Hoyte began pressuring her superiors to report the mistake, the government already had the authority to fine the Red Cross—all it needed was to know of the Red Cross‘s error, precisely the information the Red Cross hid. Again, I take no position on whether this means the Red Cross actually violated
The court next says there was no obligation here because the Red Cross “is in the same position as any regulated entity subject to possible sanctions for violating an administrative requirement and we made clear in Yesudian that an unassessed potential penalty for regulatory noncompliance does not constitute an obligation that gives rise to a viable FCA claim.” Maj. Op. at 67. I would agree if the Red Cross had only violated federal statutes or regulations governing blood handling. But the Red Cross violated a consent decree it had entered with the government, and as we have repeatedly held, “a consent decree ... is essentially a contract.” Segar v. Mukasey, 508 F.3d 16, 21 (D.C.Cir.2007) (citation omitted). Given that the Red Cross was violating a contract with the government, Hoyte could reasonably have believed the organization was violating the FCA, for courts have universally held that “a contractual obligation falls within the scope of § 3729(a)(7).” Bahrani, 465 F.3d at 1204; see also, e.g., Am. Textile Mfrs. Inst., Inc. v. The Limited, Inc., 190 F.3d 729, 741 (6th Cir.1999) (“§ 3729(a)‘s definition of ‘obligation’ certainly includes those arising from ... breaches of government contracts....“).
Third, the court states that “[u]nder no reasonable interpretation of the statutory language can [the Red Cross] be deemed to have had an ‘obligation to pay or transmit money ... to the Government,’ as section 3729(a)(7) requires.” Maj. Op. at 68. But this ignores a key part of the statute. The reverse false claims provision prohibits making a false statement to “conceal, avoid, or decrease an obligation to pay or transmit money or property to
Finally, the court asserts that “under Yesudian Hoyte‘s investigation could not reasonably lead to a viable reverse false claim action under section 3729(a) (so as to support a whistleblower claim under section 3730(h)) because the activity she claims to have been investigating did not constitute an attempt to ‘concеal, avoid, or decrease an obligation to tender money or property to the Government.‘” Maj. Op. at 70. But this is no different from Yesudian itself, where we allowed the plaintiff‘s whistleblower claim even though he never proved that “the activity [he] claim[ed] to have been investigating ... constitute[d] an attempt to ‘conceal, avoid, or decrease an obligation to tender money or property to the Government.‘” Id. at 740; see also Yesudian, 153 F.3d at 740-41 (stating that Yesudian‘s retaliation claim could proceed even without “evidence ... necessary to prove a False Claims Act case“). And it again ignores the Supreme Court‘s directive in Graham County that “a well-pleaded retaliation complaint need not allege that the defendant submitted a false claim.” 545 U.S. at 416.
In sum, the Red Cross fired Hoyte for acting on her good faith, reasonable belief that the organization had violated the FCA by attempting to “avoid ... an obligation to pay or transmit money ... to the Government.”
Notes
Before the expiration of the 60-day period or any extensions obtained under paragraph (3), the Government shall—
(A) proceed with the action, in which case the action shall be conducted by the Government; or
(B) notify the court that it declines to take over the action, in which case the person bringing the action shall have the right to conduct the action.