United States Ex Rel. Schweizer v. Océ N.V. , 677 F.3d 1228 ( 2012 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued January 13, 2012 Decided April 10, 2012
Reissued April 20, 2012
No. 11-7030
UNITED STATES EX REL. STEPHANIE SCHWEIZER,
APPELLANT
NANCY VEE,
APPELLEE
v.
OCÉ N.V., ET AL.,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 1:06-cv-00648)
Jason H. Ehrenberg argued the cause and filed the briefs
for appellant.
Douglas Letter, Attorney, U.S. Department of Justice,
argued the cause for appellee United States. With him on the
brief were Tony West, Assistant Attorney General, and Ronald
C. Machen Jr., U.S. Attorney. R. Craig Lawrence, Assistant
U.S. Attorney, entered an appearance.
Tillman J. Breckenridge argued the cause for appellees
2
Océ N.V., et al. With him on the brief were Tyree P. Jones Jr.,
and Michael B. Roberts. Altomease R. Kennedy, Herbert V.
McKnight Jr., and David W. Sanford entered appearances.
Before: SENTELLE, Chief Judge, GRIFFITH, Circuit
Judge, and RANDOLPH, Senior Circuit Judge.
Opinion for the Court filed by Senior Circuit Judge
RANDOLPH.
RANDOLPH, Senior Circuit Judge: Stephanie Schweizer
sued Océ North America, Inc., her former employer, under the
False Claims Act’s qui tam and retaliation provisions, 31 U.S.C.
§ 3730(b) & (h). The government moved to dismiss the qui tam
claims after reaching a settlement agreement with Océ.1 The
district court granted the motion over Schweizer’s objection. It
then granted Océ summary judgment on the remaining
retaliation claim. We reverse and remand on all counts.
Océ sells copying and printing products. It had two
supply contracts with the General Services Administration: one
for copiers, printers, and document management software; the
other for larger digital printing systems. The contracts required
Océ to provide government customers with the same discount
offered to certain private sector purchasers. See 48 C.F.R. §
552.238-75. The contracts also required Océ to sell to the
government only goods made in the United States or other
countries designated under the Trade Agreements Act, 19 U.S.C.
§ 2501 et seq. We refer to these provisions as the price
reduction and country-of-origin clauses, respectively.
1
Schweizer’s complaint names as defendants Océ North
America, Inc. and three related companies, Océ-USA Holding, Inc.,
Océ N.V., and Océ Imagistics Inc. We refer to these entities
collectively as Océ.
3
Océ hired Schweizer in December 2004 to serve as a
“GSA contracts manager” in Arlington, Virginia. The position
required Schweizer to monitor Océ’s compliance with the
contracts described above. Other day-to-day responsibilities
included updating product listings, negotiating modifications
with the General Services Administration’s contracting officer,
and answering questions from Océ sales personnel. Ronald
Frost, Océ’s director of government contracting, oversaw
Schweizer’s work and served as her immediate supervisor.
In early 2005 Schweizer began to suspect that Océ was
violating the price reduction clauses.2 Through discussions with
several co-workers, she learned that Océ representatives had
been offering private sector customers significant ad hoc
discounts. Her further investigation revealed that Océ was not
passing these discounts on to the government, as the price
reduction clauses required. If accurate, these findings meant
that Océ regularly overcharged government agencies.
Schweizer sought to correct the violations, consistent
with her duties as GSA contracts manager. She provided Frost
with records documenting the private sector discounts, which
she said were causing Océ “not to be in compliance with the
[contracts].” Frost allegedly responded by forbidding Schweizer
from investigating the matter and stating that management
would “destroy” her if she disobeyed.
A second set of concerns arose in November 2005 as
Océ was planning to merge with Imagistics, a rival print and
document management company. In preparation for the merger,
2
The parties disagree about many of the facts that follow. We
review the record in the light most favorable to Schweizer, the non-
moving party. See Shaw v. Marriott Int’l, Inc., 605 F.3d 1039, 1044
(D.C. Cir. 2010).
4
Océ officials asked Schweizer to determine whether Imagistics’
products complied with the contracts’ country-of-origin clauses.
Schweizer replied that they did not. She explained in an e-mail
to Bryan Beauchamp, Océ’s vice president of business
development, that most Imagistics products were manufactured
in China, a country not certified under the Trade Agreements
Act. Beauchamp agreed with Schweizer’s assessment. Despite
this understanding, Frost directed Schweizer to add Imagistics’
products to Océ’s government contract listings just a few days
later. When Schweizer refused, Frost allegedly told her not to
pursue the issue any further and again threatened to “destroy”
her if she did not comply.
Schweizer did not heed Frost’s warning. Instead, she
contacted Beauchamp, Frost’s superior, in early December 2005.
Schweizer informed Beauchamp of Frost’s actions, her pricing
investigation, and her belief that Océ was violating the False
Claims Act. She also alleged that many of Océ’s own products
were made in China, rather than in the Netherlands as stated in
the contracts. Beauchamp referred Schweizer to Océ’s human
resources director, Gerald Whelan, who then directed her to
meet with in-house counsel, Dan Harper. That meeting resulted
in a further referral to Kenneth Weckstein, Océ’s outside
counsel for government contracting issues. In each of these
conversations Schweizer reiterated her claim that Océ was
violating the False Claims Act.
On December 6, 2005, Schweizer made a final,
emotional plea to Beauchamp. She complained that the
meetings with Whelan, Harper, and Weckstein were not
productive, and that Beauchamp was “her last hope in terms of
. . . saving the company” from “legal trouble.” Beauchamp
suspended Schweizer two days later, and terminated her
employment on December 15. In a letter memorializing these
actions, Beauchamp wrote that Schweizer had engaged in
5
“inappropriate communications with [her] colleagues and
supervisors”; “refused to follow orders”; ignored “the chain of
command”; and “failed to maintain necessary standards of
workmanship and productivity.” The letter added that Océ
would “continue to investigate” Schweizer’s “numerous
complaints . . . about illegal conduct,” including “fraud and
crimes” committed in conjunction with the company’s “Federal
Supply Schedule contract.” It closed by stating
While Océ’s initial response to your allegations
is that they are without basis, you may want to
bring your concerns to the attention of the
Inspector General at the U.S. General Services
Administration (“GSA”). Separately, Océ
intends to report your allegations to the GSA
Inspector General.
Schweizer filed a three-count complaint against Océ in
April 2006. The first two counts rely on the False Claims Act’s
qui tam provisions, which permit private citizen “relators” to sue
on behalf of the United States. See 31 U.S.C. §§ 3729(a),
3730(b) (2006).3 Count I alleges that Océ knowingly defrauded
federal agencies by misrepresenting the origin of its products
3
Congress has amended sections 3729 and 3730 several times
since Schweizer filed suit in 2006. See Dodd-Frank Wall Street
Reform and Consumer Protection Act, Pub. L. No. 111-203, §
1079A(c)(1) & (2), 124 Stat. 1376, 2079 (2010); Patient Protection
and Affordable Care Act, Pub. L. No. 111-148, § 10104(j)(2), 124
Stat. 119, 901 (2010); Fraud Enforcement and Recovery Act of 2009,
Pub. L. No. 111-21, § 4(a) & (d), 123 Stat. 1617, 1621-25. With one
exception not relevant here, none of the changes apply retroactively.
See Pub. L. No. 111-203, § 4; Pub. L. No. 111-21, § 4(f); see also
Graham Cnty. Soil & Water Conservation Dist. v. United States ex rel.
Wilson, 130 S. Ct. 1396, 1400 n.1 (2010). We therefore apply the
2006 version of the Act.
6
and by breaching its promise to provide the same discount
offered to private sector customers. See id. § 3729(a)(1)-(2).
Count II charges Océ with conspiring to do the same. See id. §
3729(a)(3).4 The third count states a claim for retaliation under
31 U.S.C. § 3730(h), which prohibits employers from
discriminating against an employee “because of lawful acts done
by the employee . . . 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 [§ 3730].”
Specifically, Count III asserts that Océ fired Schweizer as a
result of her pricing and product sourcing investigations.
Schweizer filed an amended complaint in December 2006,
which added Océ employee Nancy Vee as a co-plaintiff on
Counts I and II.
The government declined to intervene in the case after
conducting an extensive investigation of Schweizer’s qui tam
claims. See 31 U.S.C. § 3730(a) & (b)(2). Nonetheless, it
remained an active participant in settlement discussions. These
talks came to fruition in September 2009, when Océ, Vee, and
the government – but not Schweizer – reached an agreement to
dispose of Counts I and II. The agreement required Océ to pay
$1.2 million, plus interest, to the government, with nineteen
percent of that total set aside for Schweizer and Vee. In return,
Océ received a partial release from liability and a promise that
the government would move to dismiss Counts I and II of the
amended complaint. The government filed its notice of
4
Schweizer’s opening brief characterizes Count I as a Trade
Agreements Act claim and Count II as a pricing claim. Her reply brief
reverses course and associates Count II with the Trade Agreements
Act. Neither characterization is correct. Counts I and II both contain
pricing and Trade Agreements Act claims; the only difference
between them is the cause of action. Count I asserts violations of §
3729(a)(1) and (2), while Count II asserts violations of § 3729(a)(3).
7
intervention and corresponding motion to dismiss on September
8, 2009. Océ filed an answer later that day.
Schweizer opposed the settlement and the motion to
dismiss. She argued that the settlement understated the extent
of Océ’s violations, and thus could not satisfy the criteria set
forth in 31 U.S.C. § 3730(c)(2)(B). That provision allows the
government to “settle [a qui tam] action . . . notwithstanding the
objections of the person initiating the action if the court
determines, after a hearing, that the proposed settlement is fair,
adequate, and reasonable under all the circumstances.” Id. §
3730(c)(2)(B). The government offered two responses. First,
it asserted that the district court could dismiss Counts I and II
over Schweizer’s objection pursuant to § 3730(c)(2)(A) without
reviewing the settlement.5 Section 3730(c)(2)(A) states that
“[t]he Government may dismiss [a qui tam] action
notwithstanding the objections of the person initiating the action
if the person has been notified . . . of the filing of the motion [to
dismiss] and the court has provided the person with an
opportunity for a hearing on the motion.” In the alternative, the
government urged the district court to deem the settlement “fair,
adequate, and reasonable” under § 3730(c)(2)(B).
The district court dismissed Counts I and II after holding
a hearing. United States ex rel. Schweizer v. Océ N.V., 681 F.
Supp. 2d 64 (D.D.C. 2010). It declined to review the settlement,
concluding that § 3730(c)(2)(A) gave the government “an
unfettered right to dismiss” qui tam claims. 681 F. Supp. 2d at
65-66 (quoting United States ex rel. Hoyte v. Am. Nat’l Red
Cross, 518 F.3d 61, 65 (D.C. Cir. 2008) (quoting Swift v. United
5
The motion also invoked Federal Rule of Civil Procedure
41(a), which permits plaintiffs to “dismiss an action without a court
order by filing . . . a notice of dismissal before the opposing party
serves . . . an answer.” FED. R. CIV. P. 41(a)(1)(A)(i).
8
States, 318 F.3d 250, 252 (D.C. Cir. 2003))). Although this
approach bypassed § 3730(c)(2)(B), the district court read Hoyte
and Swift as requiring that result. 681 F. Supp. 2d at 66. The
expansive reading of § 3730(c)(2)(A) in those decisions, the
court explained, had “already effectively rendered . . . §
3730(c)(2)(B) a dead letter.” Id. To this the district court added
a second justification for ignoring § 3730(c)(2)(B): its probable
unconstitutionality. In the court’s view, § 3730(c)(2)(B)
impermissibly undermined the Executive’s power “to conduct
litigation on behalf of the United States” by giving courts the
last word on settlement. Id. at 67-68 (citing U.S. CONST. art. II,
§ 3 (The President “shall take Care that the Laws be faithfully
executed.”)).
As to Count III, Schweizer’s retaliation claim, Océ
moved for summary judgment and the district court granted the
motion. United States ex rel. Schweizer v. Océ N. Am., Inc., 772
F. Supp. 2d 174 (D.D.C. 2011). It held that Schweizer had not
put Océ on notice that she was acting in furtherance of a False
Claims Act suit. Id. at 178-81. The court based this conclusion
on precedent indicating that employees whose job
responsibilities include fraud prevention “must ‘overcome the
presumption that they are merely acting in accordance with their
employment obligations’ to put their employers on notice.”
United States ex rel. Williams v. Martin-Baker Aircraft Co., 389
F.3d 1251, 1261 (D.C. Cir. 2004) (quoting Yuhasz v. Brush
Wellman, Inc., 341 F.3d 559, 568 (6th Cir. 2003)). According
to the district court, Schweizer did not rebut this presumption –
and thus did not put Océ on notice – because “every step she
took in furtherance of her ‘fraud investigation’ was an act that
fell within her job description or was undertaken at senior
management’s express instruction.” 772 F. Supp. 2d at 179.
9
I
Schweizer argues that the district court erred in
dismissing her qui tam claims without determining whether the
settlement was “fair, adequate, and reasonable.” The quotation
comes from 31 U.S.C. § 3730(c)(2)(B): the “Government may
settle [a qui tam] action with the defendant notwithstanding the
objections of the person initiating the action if the court
determines, after a hearing, that the proposed settlement is fair,
adequate, and reasonable under all the circumstances.” The
government’s reply, and Océ’s, is that judicial approval of the
settlement is not required in light of 31 U.S.C. § 3730(c)(2)(A),
which states that the “Government may dismiss [a qui tam]
action notwithstanding the objections of the person initiating the
action if the person has been notified by the Government of the
filing of the motion and the court has provided the person with
an opportunity for a hearing on the motion.” We have held that
§ 3730(c)(2)(A) provides the government with “an unfettered
right to dismiss” qui tam claims, Swift, 318 F.3d at 252; see also
Hoyte, 518 F.3d at 65, and that the only function of a hearing
under § 3730(c)(2)(A) “is simply to give the relator a formal
opportunity to convince the government not to end the case,”
Swift, 318 F.3d at 253.
As a preliminary matter, Schweizer claims the
government may not invoke § 3730(c)(2)(A) because it never
properly intervened in the case. She points out that the Act
prescribes only two ways for the government to intervene:
during an initial sixty-day window (subject to extension by the
district court), § 3730(b)(4); or “at a later date upon a showing
of good cause,” § 3730(c)(3). Because the government declined
to intervene during the initial sixty-day period, and did not
invoke subsection (c)(3) or show good cause in its later filing,
it never became a party to the suit. Thus, Schweizer concludes,
the government could not properly move for dismissal.
10
Schweizer’s view of the Act’s intervention provisions is
not accurate. Intervention is necessary “only if the government
wishes to ‘proceed with the action.’” Swift, 318 F.3d at 251
(quoting 31 U.S.C. § 3730(b)(2) & (b)(4)(A)). Here, the
government did not seek to proceed with the qui tam portion of
the case; it sought to end it. It follows that the government did
not have to intervene before filing its motion. Swift, 318 F.3d at
251-52. Nothing in United States ex rel. Eisenstein v. City of
New York, 556 U.S. 928 (2009), which addressed the
government’s party status for purposes of the Federal Rules of
Appellate Procedure, is to the contrary. Nor does it matter that
the government moved to dismiss outside the initial sixty-day
intervention period. See Hoyte, 518 F.3d at 63-65.
The settlement agreement here falls squarely within §
3730(c)(2)(B): the government reached an agreement with the
defendant to “settle the action . . . notwithstanding the objections
of the person initiating the action.” In that circumstance, the
statute required the district court to “determine, after a hearing,
[whether] the proposed settlement [was] fair, adequate, and
reasonable under all the circumstances.” 31 U.S.C. §
3730(c)(2)(B). Océ and the government maintain that this
conclusion is at odds with the government’s “unfettered”
dismissal power recognized in Swift and Hoyte. If the decision
to dismiss is free from judicial review, they reason, the decision
to dismiss because of a settlement must be as well. The
argument has merit. Why should it be that before the
government may end a case by settling it with the defendant, the
court must approve the settlement if the relator objects, yet when
the government simply dismisses the action over the relator’s
objection, the court has no say in the matter? At least in a
settlement the relator’s efforts have some protection: he will
receive no less than fifteen percent of whatever monetary
recovery the government negotiates. See 31 U.S.C. § 3730(d).
But in a pure dismissal as in Swift the relator has no protection:
11
he is not entitled to compensation or judicial review of the
government’s decision.
The full answer to the government’s and Océ’s point is
simply that the language of § 3730(c)(2)(B) leaves no space for
their interpretation. Neither the government nor Océ attempts
to parse the statutory text. That § 3730(c)(2)(B) speaks in terms,
not of a settlement, but of a “proposed settlement,” signifies that
an agreement between the government and the qui tam
defendant needs judicial approval to become effective.
Otherwise it remains just a proposal. Also significant is the
absence of any language in § 3730(c)(2)(B) indicating that
judicial approval is necessary only in some special category of
cases. There are but two conditions to trigger the section’s
operation: (1) the government and the defendant agree to settle
the case and (2) the relator objects. Both conditions existed in
this case.
In addition, allowing dismissal without judicial review
of the settlement would render § 3730(c)(2)(B) a nullity and thus
contravene “the longstanding canon of statutory construction
that terms in a statute should not be construed so as to render
any provision of that statute meaningless or superfluous.” Beck
v. Prupis, 529 U.S. 494, 506 (2000); see also Abourezk v.
Reagan, 785 F.2d 1043, 1054 (D.C. Cir. 1986). The government
insists this is not so because, in most cases, the Attorney General
voluntarily “choos[es]” to follow § 3730(c)(2)(B). Only in
“unusual circumstances” does the Attorney General override it
by invoking § 3730(c)(2)(A).
We reject the government’s argument. Section
3730(c)(2)(B) contains no opt-out clause for rare cases or
unusual circumstances. It does not permit the Attorney General
to decide when there shall be a hearing on the settlement: the
statute says that the government “may” settle a matter over a
12
relator’s objection “if the court” holds a hearing and finds the
“proposed settlement” reasonable. The meaning is clear. The
government may not settle a case when the relator objects unless
the court approves the settlement. This is the way the Supreme
Court read the statute in Vermont Agency of Natural Resources
v. United States ex rel. Stevens, 529 U.S. 765 (2000). The Court
stated that § 3730(c)(2)(B) “prohibits the Government from
settling [a] suit over [a] relator’s objection without a judicial
determination of ‘fair[ness], adequa[cy] and reasonable[ness].’”
Id. at 772 (quoting 31 U.S.C. § 3730(c)(2)(B)).
Océ and the government claim that § 3730(c)(2)(B)
should apply only when the government asks to “mak[e] the
settlement part of the judgment in the case.” If the government
does not do so, they say, then § 3730(c)(2)(A) gives it an
unfettered right to dismiss the case. The argument draws upon
Kokkonen v. Guardian Life Insurance Co., 511 U.S. 375 (1994).
There the Court explained that when parties settle a suit filed in
federal court, they typically must resort to contract law
remedies, rather than court supervision, for enforcement of the
agreement. Id. at 380-81. The situation is “quite different,”
however, when “the parties’ obligation to comply with the terms
of [a] settlement agreement ha[s] been made part of the order of
dismissal – either by separate provision (such as a provision
‘retaining jurisdiction’ over the settlement agreement) or by
incorporating the terms of the settlement agreement in the
order.” Id. at 381. In those instances, “a breach of the
agreement would be a violation of the order, and ancillary
jurisdiction to enforce the agreement would therefore exist.” Id.
Limiting § 3730(c)(2)(B) to these circumstances, the argument
goes, would “protect[] the government’s right to . . . dismiss an
action when it chooses,” while also ensuring that §
3730(c)(2)(B) retains meaning when the government asks the
court to play a role in the settlement process. Océ Br. 36.
13
Even if we credited the argument, it would not help the
government or Océ. The government’s motion to dismiss
“request[ed] that the Court retain jurisdiction to . . . enforce the
terms of the settlement agreement by and between the parties.”
The district court granted the motion and its order expressly
“retain[ed] jurisdiction to determine the award to relator
Schweizer, if any, from the proceeds of the settlement.” These
developments put the district court’s power and prestige behind
the settlement agreement, thereby triggering § 3730(c)(2)(B)
even under the government’s and Océ’s interpretation of the
statute.
Océ offers another argument against applying §
3730(c)(2)(B): it says the provision violates the separation of
powers and is therefore unconstitutional. (The government does
not join in the argument.6) Although Océ seems to phrase its
constitutional claim as a facial challenge to § 3730(c)(2)(B), we
will treat it as if it were an as-applied challenge. See Texas v.
Johnson, 491 U.S. 397, 403 n.3 (1989).7
6
Océ has standing to make the argument. Judicial review of
the settlement agreement exposes Océ to a risk that the agreement will
be rejected and a larger sum required to dispose of the relators’ claims.
This qualifies as an injury in fact. Section 3730(c)(2)(B) causes the
injury because § 3730(c)(2)(A) would otherwise permit dismissal
without judicial scrutiny. And the injury is redressable by a ruling that
§ 3730(c)(2)(B) is unconstitutional. See Bond v. United States, 131 S.
Ct. 2355, 2365 (2011); FEC v. NRA Political Victory Fund, 6 F.3d
821, 823-24 (D.C. Cir. 1993).
7
Section 3730(c)(2)(B) is valid when the government
affirmatively seeks judicial involvement in the settlement process, as
described in greater detail below. Indeed, Océ’s brief concedes as
much. Thus, regardless whether one applies the “no set of
circumstances” test or the “plainly legitimate sweep” test for facial
invalidity, § 3730(c)(2)(B) survives. See Gen. Electric Co. v. Jackson,
14
According to Océ, “[t]he decision of when, and under
what circumstances, a False Claims Act action should be settled
falls within the core and exclusive powers of the Executive
Branch.” For support, Océ points to Article II, § 3, of the
Constitution, which states that the President “shall take Care that
the Laws be faithfully executed.” We mentioned the Take Care
Clause in Swift when we interpreted § 3730(c)(2)(A). Decisions
to dismiss under § 3730(c)(2)(A), we said, were analogous to
decisions not to prosecute, which are committed to the
Executive Branch’s absolute discretion. Swift, 318 F.3d at 252
(citing Heckler v. Chaney, 470 U.S. 821, 831-33 (1985)). Océ
asserts that settlement decisions should be treated no differently,
since they involve policy judgments ill-suited to judicial
resolution. And because § 3730(c)(2)(B) gives the judiciary
“the final word on settlement decisions,” Océ concludes that it
unconstitutionally deprives the government of sufficient control
over cases brought in its name. Océ Br. 42; see Morrison v.
Olson, 487 U.S. 654, 696 (1988).
Although decisions not to prosecute may be immune
from review, the same cannot be said of decisions to dispose of
a pending case. Compare Heckler, 470 U.S. at 833, with Rinaldi
v. United States, 434 U.S. 22, 29-30 & n.15 (1977). We
recognized this distinction in Swift, stating that some limitations
on the Executive Branch’s dismissal authority may be valid
“despite the separation of powers.” 318 F.3d at 252 (citing
United States v. Cowan, 524 F.2d 504, 513 (5th Cir. 1975)). For
instance, the government “might be subject to Rule 41(a)(2),”
which conditions dismissal “upon such terms and conditions as
the court deems proper,” if it filed a § 3730(c)(2)(A) motion
“after the complaint had been served and the defendant
610 F.3d 110, 117 (D.C. Cir. 2010) (quoting United States v. Stevens,
130 S. Ct. 1577, 1587 (2010)).
15
answered.” Id. at 252-53. Two factors make the case for
judicial review even stronger here.
First, judicial scrutiny of settlement agreements and
similar devices is fairly common. Federal Rule of Criminal
Procedure 48(a) permits the government to “dismiss an
indictment, information, or complaint” only “with leave of
court.” Courts have upheld this provision even though it
restricts executive authority and “vest[s] some discretion in the
court.” Rinaldi, 434 U.S. at 29 n.15; see also Cowan, 524 F.2d
at 513. Other examples include judicial oversight of plea
agreements, see FED. R. CRIM. P. 11(c)(3)(A) (“[T]he court may
accept the agreement, reject it, or defer a decision until the court
has reviewed the presentence report.”); antitrust consent decrees,
see 15 U.S.C. § 16(e)(1) (“Before entering any consent
judgment proposed by the United States under this section, the
court shall determine that the entry of such judgment is in the
public interest.”); class action settlements, see FED. R. CIV. P.
23(e) (“The claims, issues, or defenses of a certified class may
be settled, voluntarily dismissed, or compromised only with the
court’s approval.”); and settlements in shareholder derivative
suits, see FED. R. CIV. P. 23.1(c) (“A derivative action may be
settled, voluntarily dismissed, or compromised only with the
court’s approval.”). Océ claims these provisions are irrelevant
because they “protect other parties who are absent or potentially
lack the savvy or representation to protect themselves.” But §
3730(c)(2)(B) does similar work – it protects the relator.8
In any event, here the government invoked the court’s
supervisory powers. By urging the district court to “retain
8
Section 3730(c)(2)(B) may also serve a more diffuse set of
public interests. Cf. Rinaldi, 434 U.S. at 29 n.15 (indicating that
Federal Rule of Criminal Procedure 48 might prohibit dismissals
“prompted by considerations clearly contrary to the public interest”).
16
jurisdiction to . . . enforce the terms of the settlement agreement
by and between the parties,” the government consented to
judicial involvement in the settlement process. Cf. Kokkonen,
511 U.S. at 380-81. The same general principle – that a court
cannot become a partner in enforcement without first examining
the reasonableness of the request – applies when parties call on
courts to issue preliminary injunctions, see Mills v. District of
Columbia, 571 F.3d 1304, 1308 (D.C. Cir. 2009), and consent
decrees, United States v. Trucking Emp’rs, Inc., 561 F.2d 313,
317 (D.C. Cir. 1977).
We therefore hold that § 3730(c)(2)(B) is constitutional
as applied to this case. Since the district court dismissed Counts
I and II without finding the settlement agreement fair, adequate,
and reasonable, we reverse and remand the case for a §
3730(c)(2)(B) hearing.9
II
Schweizer also argues that the district court erred in
granting Océ summary judgment on her retaliation claim. Our
review is de novo. Bush v. District of Columbia, 595 F.3d 384,
387 (D.C. Cir. 2010).
Section 3730(h), added in 1986, was “designed to protect
persons who assist the discovery and prosecution of fraud and
9
The government contends that dismissal of Schweizer’s
Trade Agreements Act claims was proper because the settlement
agreement did not “release any of [the government’s] own claims
under that statute.” The parties have not fully developed this point in
their briefs, or explained why the government’s “own claims” – as
opposed to those of the relators – are relevant to the § 3730(c)(2)(B)
analysis. Accordingly, we leave this question open for the parties to
address on remand.
17
thus to improve the federal government’s prospects of deterring
and redressing crime.” Neal v. Honeywell Inc., 33 F.3d 860, 861
(7th Cir. 1994), abrogated on other grounds by Graham Cnty.
Soil & Water Conservation Dist. v. United States ex rel. Wilson,
545 U.S. 409, 416-17 (2005). At the time Schweizer’s claim
accrued, the provision read:
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.
Such relief shall include reinstatement with the
same seniority status such employee would have
had but for the discrimination, 2 times the
amount of back pay, interest on the back pay,
and compensation for any special damages
sustained as a result of the discrimination,
including litigation costs and reasonable
attorneys’ fees. An employee may bring an
action in the appropriate district court of the
United States for the relief provided in this
subsection.
31 U.S.C. § 3730(h) (2006).
This language states two basic elements: (1) acts by the
employee “in furtherance of” a suit under § 3730 – acts also
known as “protected activity”; and (2) retaliation by the
18
employer against the employee “because of” those acts. United
States ex rel. Yesudian v. Howard Univ., 153 F.3d 731, 736
(D.C. Cir. 1998). For reasons we will explain in a moment, it is
important to recognize that when § 3730(h) speaks of acts “in
furtherance of an action under this section” it is not referring
only to qui tam actions. Section 3730 authorizes qui tam
actions, see 31 U.S.C. § 3730(b), but it also provides that “the
Attorney General may bring a civil action under this section,” id.
§ 3730(a). In other words, an employee’s actions may further a
qui tam suit or a suit by the United States under the False Claims
Act.
Decisions of this court and others have expounded on the
elements of a False Claims Act retaliation claim. We have, for
instance, divided the causation question into two parts: (1) did
“the employer ha[ve] knowledge the employee was engaged in
protected activity”; and (2) was the employer’s adverse action
against the employee “motivated, at least in part, by the
employee’s engaging in [that] protected activity.” Yesudian,
153 F.3d at 736 (quoting S. REP. NO. 99-345, at 35 (1986),
reprinted in 1986 U.S.C.C.A.N. 5266, 5300) (alteration in
original). The former, often referred to as a “notice”
requirement, recognizes that an employer cannot “possess the
retaliatory intent necessary to establish a violation of § 3730(h)”
unless it is “aware that the employee is investigating fraud.”
Martin-Baker, 389 F.3d at 1260-61 (quoting Yesudian, 153 F.3d
at 744); see also Robertson v. Bell Helicopter Textron, Inc., 32
F.3d 948, 952 (5th Cir. 1994).
To come within § 3730(h), an employee does not have
to alert his employer to the prospect of a False Claims Act suit.
Yesudian, 153 F.3d at 742. The employee has no obligation to
give such a warning because § 3730(h) does not require the
employee to “‘know’ that the investigation he was pursuing
could lead to a False Claims Act suit.” Id. at 741; see also
19
Childree v. UAP/GA AG CHEM, Inc., 92 F.3d 1140, 1145-46
(11th Cir. 1996); United States ex rel. Hopper v. Anton, 91 F.3d
1261, 1269 (9th Cir. 1996); Neal, 33 F.3d at 864. In terms of §
3730(h), an employee can be acting “in furtherance of an action
under this section” – can be engaging in protected activity –
although the employee is not contemplating bringing a qui tam
suit, is not even aware that there is such a thing as a qui tam
action, and has no idea whether his – the employee’s –
investigation or other acts, if made known to the government,
might cause the Attorney General to sue his employer under the
False Claims Act. From this, it follows that the employer may
incur liability under § 3730(h) even if the employer has no
inkling that a False Claims Act suit may be in the offing. As our
court stated in Yesudian, “the kind of knowledge the defendant
must have mirrors the kind of activity in which the plaintiff must
be engaged.” 153 F.3d at 742.
Some decisions have applied a different concept of
notice when employees claim that “performance of their normal
job responsibilities constitutes protected activity.”
Martin-Baker, 389 F.3d at 1261. In that situation, decisions
such as Martin-Baker10 hold that employees have not put their
employer on notice unless they “overcome the presumption that
they are merely acting in accordance with their employment
obligations.” Id. (quoting Yuhasz, 341 F.3d at 568). Although
the reasoning behind these rulings is not always fully spelled
out, it appears to proceed in three steps. One: only if the
employer is aware that its employee is engaging in, say, the
protected conduct of an investigation “in furtherance of” a False
10
See, e.g., Maturi v. McLaughlin Research Corp., 413 F.3d
166, 172-73 (1st Cir. 2005); Eberhardt v. Integrated Design &
Constr., Inc., 167 F.3d 861, 868 (4th Cir. 1999); United States ex rel.
Ramseyer v. Century Healthcare Corp., 90 F.3d 1514, 1522-23 (10th
Cir. 1996); Robertson, 32 F.3d at 951-52.
20
Claims Act suit can the employer fire the employee “because of”
the employee’s protected conduct. See, e.g., Martin-Baker, 389
F.3d at 1261. Two: an employer cannot be so aware if the
employee is just performing his job. See, e.g., Ramseyer, 90
F.3d at 1522-23.11 Three: therefore the employee must put his
employer on notice that he “was pursuing an FCA case” before
the employer “discharge[s]” him. Yuhasz, 341 F.3d at 567. Step
three presents some analytical difficulty in light of our holding
that an employee engages in protected conduct even if the
employee himself does not “‘know’ that the investigation he was
pursuing could lead to a False Claims Act suit.” Yesudian, 153
F.3d at 741.12
11
The notice requirement is derived from a Senate Judiciary
Committee Report. See, e.g., Yesudian, 153 F.3d at 736; Robertson,
32 F.3d at 951. The report cites cases involving other whistleblower
protection statutes as examples of the way in which § 3730(h) was
meant to operate. See S. REP. NO. 99-345, at 35, reprinted in 1986
U.S.C.C.A.N. at 5300. None of these cases impose a presumption like
the one described in Martin-Baker. For instance, in Mackowiak v.
University Nuclear Systems, Inc., 735 F.2d 1159, 1162-64 (9th Cir.
1984), the court held that 48 U.S.C. § 5851 – a whistleblower
protection provision in the Energy Reorganization Act – protects
compliance workers from retaliation regardless of whether they
contacted government regulators or departed from their usual job
duties. “[C]ontractors,” the court explained, “may not discharge
quality control inspectors because they do their jobs too well.” Id. at
1163; see also id. (noting that the plaintiff was “terminated, in part”
because of he was “very persistent” in performing job-related safety
functions).
12
The Fourth Circuit recognized the problem and sought to
solve it by holding that an employee “tasked with the internal
investigation of fraud” puts his employer on notice if he tells the
employer that its conduct is “illegal or fraudulent or recommend[s]
that legal counsel become involved.” Eberhardt, 167 F.3d at 868.
21
Nevertheless we must apply Martin-Baker to this case.
See LaShawn A. v. Barry, 87 F.3d 1389, 1395 (D.C. Cir. 1996)
(en banc). Like the employee in Martin-Baker and the other
employees in this line of cases from other circuits, Schweizer’s
job was to ensure compliance with government contracts. Her
retaliation claim therefore cannot succeed unless she alerted Océ
of her protected conduct by acting outside her normal job
responsibilities, notifying a party outside the usual chain of
command, advising Océ to hire counsel, or taking “any [other]
action which a factfinder reasonably could conclude would put
[Océ] on notice that litigation [was] a reasonable possibility.”
Martin-Baker, 389 F.3d at 1261-62 (quoting Eberhardt, 167
F.3d at 868).13 Since Schweizer’s case is here on appeal from a
grant of summary judgment, the question is whether there are
genuine issues of material fact with respect to notice (and thus
causation). Could a jury reasonably find that Océ discharged
Schweizer “because of lawful acts” she took “in furtherance of”
a False Claims Act suit? We believe the answer is yes when we
view the record in the light most favorable to Schweizer.
13
Eberhardt states that “an employee tasked with the internal
investigation of fraud against the government cannot bring a section
3730(h) action for retaliation unless the employee puts the employer
on notice that a qui tam suit under section 3730 is a reasonable
possibility.” 167 F.3d at 868. Other cases similarly have held that
employees must put their employer on notice of a potential qui tam
suit. See, e.g., Fanslow v. Chicago Mfg. Ctr., Inc., 384 F.3d 469, 483
(7th Cir. 2004); Brandon v. Anesthesia & Pain Mgmt. Assocs., 277
F.3d 936, 945 (7th Cir. 2002); Robertson, 32 F.3d at 951-52. As noted
above, these cases read § 3730(h) too narrowly. An employee acts “in
furtherance of an action under this section” if he advances a suit by the
Attorney General pursuant to § 3730(a) or a qui tam suit filed under
§ 3730(b). Thus, the employer need only have knowledge of actions
that would make either type of suit a “reasonable possibility.” See
Yesudian, 153 F.3d at 742.
22
Schweizer repeatedly disobeyed the orders of Frost, her
supervisor, to stop investigating Océ’s pricing and product
sourcing practices. She did so despite Frost’s warnings that the
company would “destroy” her if she did not comply.
Specifically, Schweizer contacted Beauchamp, Frost’s
supervisor, on two separate occasions in early December 2005.
The first time, she alleged a variety of specific False Claims Act
violations; the second time, she made an emotional plea to
“sav[e] the company” from “legal trouble” – a statement
Beauchamp knew involved “the contract[s]” and the company’s
“pricing policies.” The company fired Schweizer less than two
weeks later. In a letter explaining the decision, Beauchamp
stated that Schweizer was fired for several reasons, including
“refusing to follow orders” and ignoring “the chain of
command.” The letter also indicated that Océ would refer
Schweizer’s allegations to the General Services Administration
Inspector General for further review.
These facts, if proven, would be sufficient to support a
finding that Océ knew about Schweizer’s protected conduct and
fired her, at least in part, “because of” that conduct. See
Yesudian, 153 F.3d at 736. Schweizer’s actions were not of the
sort “typically [performed] as part of a contract administrator’s
job.” Martin-Baker, 389 F.3d at 1261 (quoting Robertson, 32
F.3d at 952). The company’s termination letter indicating that
Schweizer was fired for failing to follow orders and the chain of
command made precisely this point. As a result, Schweizer’s
factual allegations are sufficient to overcome “the presumption
that [she was] merely acting in accordance with [her]
employment obligations.” Id. (quoting Yuhasz, 341 F.3d at
568).
Océ argues that we should affirm on two other grounds.
First, it claims that Schweizer did not engage in protected
activity. The parties briefed this question in their summary
23
judgment filings. Although the district court did not reach the
issue, see 772 F. Supp. 2d at 180, the parties have again raised
it on appeal. We therefore may decide the issue. See Flynn v.
Dick Corp., 481 F.3d 824, 833 n.9 (D.C. Cir. 2007); Davis v.
U.S. Dep’t of Justice, 968 F.2d 1276, 1280 (D.C. Cir. 1992); see
also Singleton v. Wulff, 428 U.S. 106, 121 (1976).
According to Océ, Schweizer did not conduct her own
“meaningful investigation.” Instead, she merely “jumped to
conclusions and berated her superiors based on unfounded
assumptions.” From this Océ concludes that Schweizer did not
undertake actions “in furtherance of” a False Claims Act suit.
But on her version of the facts, Schweizer gathered evidence
that Océ defrauded federal agencies, shared that evidence with
her superiors, and warned them of potential False Claims Act
liability. Internal reporting of this kind is a classic example of
protected activity. See Yesudian, 153 F.3d at 741 n.9.
Accordingly, Océ is not entitled to summary judgment on
protected activity grounds.
Second, Océ asserts that Schweizer was fired for
legitimate, non-discriminatory reasons. Again, the district court
did not reach this question. 772 F. Supp. 2d at 180-81.
Although the parties have briefed the issue on appeal, their
arguments fail to address a basic question regarding the
appropriate legal standard: what are courts to do when an
employee has made out a prima facie case of retaliation, the
employer has offered a non-retaliatory motive for its actions,
and the employee has alleged that the employer’s proffered
motive is pretextual?
The familiar McDonnell Douglas burden-shifting
framework, see McDonnell Douglas Corp. v. Green, 411 U.S.
792 (1973), offers a possible solution. Under McDonnell
Douglas, an employee first must make out a prima facie case of
24
retaliation by showing “(1) that he engaged in statutorily
protected activity; (2) that he suffered a materially adverse
action by his employer; and (3) that a causal link connects the
two.” Jones v. Bernanke, 557 F.3d 670, 677 (D.C. Cir. 2009).
If the employee does so, then the burden shifts to the employer
to “produce admissible evidence that, if believed, would
establish that [its] action was motivated by a legitimate,
nondiscriminatory reason.” Carter v. George Washington Univ.,
387 F.3d 872, 878 (D.C. Cir. 2004) (quoting Teneyck v. Omni
Shoreham Hotel, 365 F.3d 1139, 1151 (D.C. Cir. 2004))
(alteration in original). Once that occurs, “the burden-shifting
framework disappears, and a court reviewing summary
judgment looks to whether a reasonable jury could infer . . .
retaliation from all the evidence.” Id.
The First Circuit recently held that the McDonnell
Douglas framework applies to § 3730(h) retaliation claims. See
Harrington v. Aggregate Indus.-Ne. Region, Inc., 668 F.3d 25,
30-31 (1st Cir. 2012).14 We agree with the First Circuit’s well-
reasoned opinion and adopt its approach here. Applying
McDonnell Douglas to Schweizer’s case, we believe that all of
the preliminary steps have been satisfied – Schweizer has set
forth a prima facie case of retaliation, and Océ has presented an
alternative, non-discriminatory basis for terminating her
employment. Thus, all that remains is the ultimate question
“whether a reasonable jury could infer . . . retaliation from all
the evidence.” Jones, 557 F.3d at 677 (quoting Carter, 387 F.3d
at 878) (alteration in original); see also Harrington, 668 F.3d at
14
Other circuits, while not always invoking McDonnell Douglas
by name, have adopted or alluded to a similar rule. See Scott v. Metro.
Health Corp., 234 F. App’x 341, 346 (6th Cir. 2007); Hutchins v.
Wilentz, Goldman & Spitzer, 253 F.3d 176, 186 (3d Cir. 2001);
Norbeck v. Basin Electric Power Coop., 215 F.3d 848, 850-51 (8th
Cir. 2000).
25
31 (“[T]o succeed . . . the [employee] must have adduced
sufficient evidence to create a genuine issue as to whether
retaliation was the real motive underlying his dismissal.”). The
parties have not briefed this question directly, so we remand it
to the district court for further consideration.
III
For the reasons given above, we reverse the district
court’s dismissal of Counts I and II and its grant of summary
judgment on Count III. The case is remanded for review of the
settlement agreement pursuant to 31 U.S.C. § 3730(c)(2)(B) and
consideration of the parties’ remaining summary judgment
arguments on Count III.
So ordered.