Lead Opinion
Opinion for the court filed by Circuit Judge HENDERSON.
Oрinion concurring in part and dissenting in part filed by Circuit Judge TATEL.
Michelle Hoyte filed this action under the False Claims Act (FCA), 31 U.S.C. §§ 3729 et seq. The complaint alleges that Hoyte’s former employer, the American National Red Cross (ARC), (1) violated
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 adopt 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 máximums. 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 mеeting 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.”
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,
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
Section 3730(c)(2)(A), which sets out the “[rjights of the parties to qui tam actions” brought on behalf of the United States, provides: “The Government may dismiss the action notwithstanding the objections of the person initiating the action if the person has been notified by thе Government of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion.” In granting the Government’s motion to dismiss Count I, the district court concluded that under this provision, as construed in Swift v. United States,
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” discretion 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 recognition 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 excеption 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.
B. Count II: Retaliation Claim
FCA section 3730(h) provides in relevant part:
*66 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.
31 U.S.C. § 3730(h) (emphasis added). Count II alleges that ARC violated this provision by discharging Hoyte in retaliation for her “protected activity,” namely, “repeatedly advising her supervisors that she believed that the American Red Cross had violated the law, [standard operating procedures], and the Consent Decree by not appropriately addressing the problems associated with the collection of the 607 unsuitable units of blood in Penn-Jersey.” Compl. ¶ 71. The district court dismissed Count II оn the ground that Hoyte’s investigation and complaints about the blood handling and reporting were not “in furtherance of’ an FCA action as required by section 3730(h) because Count I&emdash;asserting the reverse false claim under section 3729(a)(7)&emdash;did not allege that ARC had any “obligation to pay or transmit money or property to the Government” as section 3729(a)(7) requires. We agree.
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.,
Like Hoyte, the plaintiff in Yesudian filed a qui tam action asserting both (1) a false claim count — alleging that his superi- or 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 whistleblower 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,”
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 section 3730(h). See
Relying again on language in Yesudian, Hoyte contends the court should focus on “whether Hoyte had a good faith chance of success at the timе that she suffered the retaliation.” Appellant’s Br. 27. In Yesu-dian 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 reasonаble to conclude there was a ‘distinct possibility’ he would find evidence of resubmission of the claims.”
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 culled from the Supreme Court’s decision in Graham County Soil & Water Conservation District v. United States ex rel. Wilson,
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.
Notes
. Ordinarily under the FCA, "the government, or a party suing on its behalf, may recover for false claims made by the defendant to secure a payment by the government.” United States ex rel. Bain v. Ga. Gulf Corp.,
. Section 3730(b)(1) further provides: "The action shall be brought in the name of the Government. The action may be dismissed
. The FCA provides the United States with two options in a qui tam action:
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.
31 U.S.C. § 3730(b)(4).
. In Swift, we declined to adopt the judicial review standard for a qui tam action endorsed by the Ninth Circuit, under which the Government must initially show that dismissal is “rationally related to a valid purpose,” after which the relator bears the burden to show the decision to dismiss is "fraudulent, illegal, or arbitrary and capricious.” See Swift,
. Although both Williams and Yesudian involved the more usual type of FCA action to recover for false claims made to secure а payment by the Government, the retaliation requirements set forth therein apply equally to a reverse false claim retaliation action. See Hutchins v. Wilentz, Goldman & Spitzer,
. The Government argues as amicus on Count II that the district court erroneously "advanced the view that an actionable 'obligation' means 'a present, existing debt or liability, owed at the time the alleged false statement is made, and not some future or contingent liability.’ " United States Br. 24 (quoting
. The Court also noted that circuit courts had adopted varying "formulations” of what constitutes protected activity, without endorsing any particular one.
Concurrence Opinion
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), 31 U.S.C. § 3729 et seq., because she never alleged that the Red Cross actually filed a false claim. The Supreme Court has made clear, however, that “a well-pleaded retaliation complaint need not allege that the defendant submitted a false claim.” Graham County Soil & Water Conservation Dist. v. United States ex rel. Wilson,
Congress enacted the FCA to prevent fraud against the government. Because “[detecting 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 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.
Id.
As we explained in United States ex rel. Yesudian v. Howard University,
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.,
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 eause[] 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.” 31 U.S.C. § 3729(a)(7). The consent decree the Red Cross signed with the government required the organization to disclose certain types of blood handling errors — such as the ones alleged here — and failurе to do so authorized the government to impose substantial fines. Thus, Hoyte could reasonably have believed that by hiding its blood handling errors, the Red Cross was attempting “to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government.” Id. To be clear, I take no position on whether the Red Cross actually violated section 3729(a)(7); I maintain only that Hoyte could reasonably have believed that the Red Cross violated the statute by hiding this information.
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 plaintiffs beliefs wеre reasonable. The first is the statute’s plain text, which requires only that the act the employee engaged in was somehow “in furtherance of an action under this section,” 31 U.S.C. § 3730(h) (emphasis added), not “an action that is reasonably likely to succeed,” or even “a non-frivolous action.” See Graham County,
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 when courts themselves disagree over what constitutes a viable FCA claim. Compare United States ex rel. Bahrani v. Conagra, Inc.,
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 blоod 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 section 3729(a)(7) by lying to avoid an obligation to the government, but it certainly made it reasonable for Hoyte to believe as much.
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,
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 obligatiоn 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 ‘conceal, avoid, or decrease an obligation to tender money or property’ to the Government.” Maj. Op. at 70. But this is no different from Yesu-dian itself, where we allowed the plaintiffs whistleblower claim even though he never proved that “the activity [he] claim[ed] to have been investigating ... constitute^] an attempt to ‘conceal, avoid, or decrease an obligation to tender money or property’ to the Government.” Id.; see also Yesudi-an,
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.” 31 U.S.C. § 3729(a)(7). Because the FCA requires nothing more to state a retaliation claim, I would reverse the district court’s dismissal of Hoyte’s claim.