MCCRARY v. KNOX COUNTY INDIANA et al
Filing
24
ORDER - Presently pending before the Court in this action brought under the False Claims Act, 31 U.S.C. § 3729, et seq. ("FCA") and the First Amendment to the United States Constitution, is Defendants' Motion to Dismiss Plainti ff Zane E. McCrary's Complaint. [Filing No. 11.] For the reasons detailed herein, the Court grants Defendants' Motion to Dismiss. [Filing No. 11.] the Court GRANTS Defendants' Motion to Dismiss. [Filing No. 11.] Mr. McCrary's FCA and § 1983 claims are DISMISSED WITH PREJUDICE and his state law claims, over which the Court has declined to exercise supplemental jurisdiction, are DISMISSED WITHOUT PREJUDICE. Final judgment shall enter accordingly. Signed by Judge Jane Magnus-Stinson on 8/4/2016. (BRR)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
TERRE HAUTE DIVISION
ZANE E. McCRARY,
Plaintiff,
vs.
KNOX COUNTY, INDIANA,
LARRY HOLSCHER, individually and in his
official capacity as a Knox County
Commissioner, ROWE SERGEANT, in his
official capacity as a Knox County
Commissioner, and DONNIE HALTER, in his
official capacity as a Knox County
Commissioner,
Defendants.
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
No. 2:16-cv-00095-JMS-DKL
ORDER
Presently pending before the Court in this action brought under the False Claims Act, 31
U.S.C. § 3729, et seq. (“FCA”) and the First Amendment to the United States Constitution, is
Defendants’ Motion to Dismiss Plaintiff Zane E. McCrary’s Complaint. [Filing No. 11.] For the
reasons detailed herein, the Court grants Defendants’ Motion to Dismiss. [Filing No. 11.]
I.
STANDARD OF REVIEW
Federal Rule of Civil Procedure 8(a)(2) “requires only ‘a short and plain statement of the
claim showing that the pleader is entitled to relief.’” Erickson v. Pardus, 551 U.S. 89, 93 (2007)
(quoting Fed. R. Civ. P. 8(a)(2)). “Specific facts are not necessary, the statement need only ‘give
1
the defendant fair notice of what the…claim is and the grounds upon which it rests.’” Erickson,
551 U.S. at 93 (quoting Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007)). 1
To survive a motion to dismiss under Rule 12(b)(6), “a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). In reviewing the
sufficiency of a complaint, the Court must accept all well-pled facts as true and draw all
permissible inferences in favor of the plaintiff. See Active Disposal, Inc. v. City of Darien, 635
F.3d 883, 886 (7th Cir. 2011). The Court will not accept legal conclusions or conclusory
allegations as sufficient to state a claim for relief. See McCauley v. City of Chicago, 671 F.3d 611,
617 (7th Cir. 2011). Factual allegations must plausibly state an entitlement to relief “to a degree
that rises above the speculative level.” Munson v. Gaetz, 673 F.3d 630, 633 (7th Cir. 2012). This
plausibility determination is “a context-specific task that requires the reviewing court to draw on
its judicial experience and common sense.” Id.
1
Defendants assert that Mr. McCrary’s claims under the FCA and the Indiana False Claims Act
are subject to review under the heightened pleading standard set forth in Fed. R. Civ. P. 9(b).
[Filing No. 12 at 5-6.] However, because the claims allege retaliation based on reporting fraud,
not fraud itself, they are governed by Fed. R. Civ. P. 8. See, e.g., Mendiondo v. Centinela Hosp.
Med. Ctr., 521 F.3d 1097, 1103 (9th Cir. 2008) (“[U]nlike a FCA violation claim, a FCA retaliation
claim ‘does not require a showing of fraud and therefore need not meet the heightened pleading
requirements of Rule 9(b)’”) (quoting United States ex rel. Karvelas v. Melrose–Wakefield Hosp.,
360 F.3d 220, 238 n.23 (1st Cir. 2004))); see also Smith v. Clark/Smoot/Russell, 796 F.3d 424, 433
(4th Cir. 2015) (retaliation claim under FCA “need pass only Civil Procedure Rule 8(a)’s relatively
low notice-pleadings muster”). In any event, as discussed below, Mr. McCrary’s Complaint does
not meet even the lower pleading standard set forth in Fed. R. Civ. P. 8. The Court does not
address the Indiana claims.
2
II.
RELEVANT BACKGROUND
Consistent with the applicable standard of review set forth above, the following relevant
factual allegations from Mr. McCrary’s Complaint, [Filing No. 1], are taken as true for purposes
of addressing the pending motion.
Mr. McCrary began working for the Knox County Highway Department in October of
2010. [Filing No. 1 at 1.] During the time relevant to this litigation, he held the position of
“Operator,” [Filing No. 1 at 2], and his “ordinary job responsibilities involved road construction
work,” [Filing No. 1 at 9]. Knox County receives funds from the federal government and the State
of Indiana that are “specifically designated and dedicated for use by the Knox County Highway
Department…for road repair, road construction, bridge repair, bridge construction and purchase
of equipment and materials by the Knox County Highway Department.” [Filing No. 1 at 4.]
On August 31, 2015, Mr. McCrary had been performing work on a county road when he
was visited in person by his supervisor, Jerry Haggard. [Filing No. 1 at 2.] Mr. Haggard instructed
Mr. McCrary to use his truck to grade a side road in Johnson Township. [Filing No. 1 at 2.] Mr.
McCrary objected to this assignment, stating that he believed the road was not a county road, and
he showed Mr. Haggard that the road in question was not depicted on the county map. [Filing No.
1 at 2.] Mr. McCrary told Mr. Haggard that the road was used by Defendant Knox County
Commissioner Larry Holscher for his own private farming purposes. [Filing No. 1 at 2.] Mr.
Haggard told Mr. McCrary that “Well Larry said do it,” and instructed him to complete the work.
[Filing No. 1 at 2.]
Mr. McCrary followed Mr. Haggard’s instruction and graded the road. [Filing No. 1 at 2.]
He used equipment belonging to Knox County to complete the job, and was paid by Knox County
for the hour and a half he spent on this task. [Filing No. 1 at 2.] At the end of the work day, Mr.
3
McCrary filled out a Knox County Highway Department timesheet, on which he described the
grading work he had done. [Filing No. 1 at 2.] On that sheet, Mr. McCrary noted the road was
graded for “Larry,” that “Jerry said do it,” and that the road was “not on map” and “not county’s.”
[Filing No. 1 at 2.]
On September 22, 2015, Mr. McCrary was called to a meeting with Knox County Highway
Department Superintendent Donny Mize and Commissioner Holscher to discuss the comments he
had written on the timesheet. [Filing No. 1 at 2-3.] Regarding these statements, Commissioner
Holscher said, “If this gets in the wrong hands, we can be in trouble.” [Filing No. 1 at 3.] Mr.
McCrary was suspended without pay for five days. [Filing No. 1 at 3.] The written suspension
form he received stated that he was being suspended for making “false accusations against
supervisor and commissioner about existing county road.” [Filing No. 1 at 3.]
Following his five-day suspension, Mr. McCrary was not allowed to return to work. [Filing
No. 1 at 3.] On or about October 7, 2015, Mr. McCrary was asked to attend a meeting with
Commissioner Holscher, Defendant Donnie Halter (a Knox County Commissioner), Defendant
Rowe Sergeant (a Knox County Commissioner), Superintendent Mize, and two Knox County
Sheriff’s Deputies at the Knox County Highway Department Office.
[Filing No. 1 at 3.]
Commissioner Holscher, speaking for the group, asked Mr. McCrary to explain what he had
written on his timesheet. [Filing No. 1 at 3.] After telling his side of the story, Mr. McCrary was
asked to leave the room so that the group could discuss the situation, and when he was brought
back in, he was informed that he could resign from his position or he would be terminated. [Filing
No. 1 at 3.] He refused to resign. [Filing No. 1 at 3.] Two to three days later, Mr. McCrary
received a phone call from the Highway Department secretary asking that he return his work
4
uniforms. [Filing No. 1 at 3.] When Mr. McCrary went to the Highway Department office to do
so, he was given a written notice of termination. [Filing No. 1 at 3.]
Mr. McCrary initiated this action on March 15, 2016, asserting: (1) a claim under the
whistleblower provision of the FCA, 31 U.S.C. § 3730(h); (2) a claim under the whistleblower
provision of the Indiana False Claims Act, I.C. 5-11-5.5-8 (“Indiana FCA”); (3) a claim for
retaliation in violation of the First Amendment under 42 U.S.C. § 1983; and (4) a claim for tortious
interference with a contractual relationship under Indiana law. [Filing No. 1 at 6-10.] He seeks
reinstatement and damages. [Filing No. 1 at 10.]
III.
DISCUSSION
Mr. McCrary asserts that he was terminated for “investigating an act of fraud against the
Knox County government and for making actual written and verbal reports…about misuse of Knox
County Highway Department labor, equipment and resources by Knox County Commissioner
Larry Holscher, specifically, and by the Knox County Highway Department generally.” [Filing
No. 1 at 4.] Defendants ask the Court to dismiss all of Mr. McCrary’s claims pursuant to Fed. R.
Civ. P. 12(b)(6) for failure to state a claim upon which relief can be granted. [Filing No. 11.]
A. FCA Claim
Defendants argue that in order to state a claim for retaliation under the FCA, Mr. McCrary
must allege that he was terminated because he engaged in conduct protected by the statute, and in
doing so must provide a factual basis to show that Knox County submitted a false or fraudulent
claim to the federal government. [Filing No. 12 at 6-10.] They assert that Mr. McCrary has not
made any such allegations, and that “[a] local government’s ‘misuse of [its] labor, equipment, and
resources’ is not a ‘false claim’ under the Federal False Claims Act, and thus, any report of such
is not protected activity….” [Filing No. 12 at 9.]
5
In response, Mr. McCrary argues that “[r]etaliation claims under the False Claims Act are
certainly not so narrow that they must be based only upon facts where a plaintiff reports an
employer for the act of submitting an invoice or a claim for payment to the federal government.”
[Filing No. 13 at 7.] He contends that any proof of actual or possible misuse of federal funds is
sufficient to form the basis of an FCA retaliation claim. [Filing No. 13 at 7.] He further argues
that the notes on his timesheet and his subsequent oral remarks in the meetings with county
officials constitute protected conduct under the FCA because he believed in good faith, and a
reasonable employee in similar circumstances would believe, that his employer was committing
fraud against the government. [Filing No. 13 at 8-9.] Therefore, he asserts, his termination was
in violation of the FCA retaliation provision. [Filing No. 13 at 8-9.]
On reply, Defendants maintain that “reporting or investigating the suspected misuse of
funds is not an activity covered by the [FCA],” and that “to state a claim under the whistleblower
provision a plaintiff must allege facts to show that he was investigating or reporting a false claim
for payment by the federal government.” [Filing No. 14 at 2; Filing No. 14 at 5.]
The FCA was originally enacted in 1863 in order to punish and prevent fraud by defense
contractors against the federal government, which had become a serious problem during the Civil
War. See Universal Health Servs., Inc. v. United States, 136 S. Ct. 1989, 1996 (2016) (citing
United States v. Bornstein, 423 U.S. 303, 309 (1976)); Kellogg Brown & Root Servs., Inc. v. U.S.,
ex rel. Carter, 135 S. Ct. 1970, 1973 (2015) (citing S.Rep. No. 99–345, p. 8 (1986)). The FCA
“was not designed to reach every kind of fraud practiced on the Government,” United States v.
McNinch, 356 U.S. 595, 599 (U.S. 1958), but instead imposes civil and criminal liability for
specifically enumerated acts of fraud. See 31 U.S.C. § 3729(a)(1); Universal Health Servs. Inc.,
136 S. Ct. at 1996. Though the FCA has been amended several times, “its focus remains on those
6
who present or directly induce the submission of false or fraudulent claims.” Id. (citing 31 U.S.C.
§ 3729(a)); see also United States v. Neifert-White Co., 390 U.S. 228, 233 (1968) (The FCA
reaches “all fraudulent attempts to cause the Government to pay out sums of money”); U.S. ex rel.
Cafasso v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1056 (9th Cir. 2011) (“[T]o commit
conduct actionable under the FCA, one must, in some way, falsely assert entitlement to obtain or
retain government money or property”).
Under the FCA, the term “claim”:
(A) means any request or demand, whether under a contract or otherwise, for money
or property and whether or not the United States has title to the money or property,
that-(i) is presented to an officer, employee, or agent of the United States; or
(ii) is made to a contractor, grantee, or other recipient, if the money or
property is to be spent or used on the Government’s behalf or to advance a
Government program or interest, and if the United States Government-(I) provides or has provided any portion of the money or property
requested or demanded; or
(II) will reimburse such contractor, grantee, or other recipient for
any portion of the money or property which is requested or
demanded; and
(B) does not include requests or demands for money or property that the
Government has paid to an individual as compensation for Federal employment….
31 U.S.C. § 3729(b)(2). As interpreted by the Supreme Court, “‘claim’ now includes direct
requests to the Government for payment as well as reimbursement requests made to the recipients
of federal funds under federal benefits programs.” Universal Health Servs., Inc., 136 S. Ct. at
1996 (citing 31 U.S.C. § 3729(b)(2)(A)).
In 1968, Congress added subsection (h), often referred to as the “whistleblower” provision,
to the FCA in order to ensure that individuals who investigate and report their employers’
7
violations of the FCA will not face adverse employment consequences. Fanslow v. Chicago Mfg.
Ctr., Inc., 384 F.3d 469, 479 (7th Cir. 2004); Neal v. Honeywell, Inc., 191 F.3d 827, 829 (7th Cir.
1999). To succeed on a claim for retaliation under this provision, a plaintiff is required to prove
three elements: (1) that he acted in furtherance of an FCA enforcement action, so was engaged in
conduct protected by the statute; (2) that his employer had knowledge that he was engaged in such
protected conduct; and (3) that his discharge was motivated, at least in part, by the protected
conduct. Fanslow, 384 F.3d at 479.
By its terms, the whistleblower provision establishes two categories of protected conduct,
as it prohibits retaliation based on “lawful acts done…in furtherance of an action under this section
or other efforts to stop 1 or more violations of this subchapter.” 31 U.S.C. § 3730(h)(1) (emphasis
added). See also Halasa v. ITT Educ. Servs., Inc., 690 F.3d 844, 847 (7th Cir. 2012) (“Section
3730(h)(1) protects two categories of conduct”).
The first type of protected conduct – acts “in furtherance of” an FCA action – encompasses
conduct that puts an employer “‘on notice of potential [FCA] litigation.’” Id. (quoting Brandon v.
Anesthesia & Pain Mgmt. Assocs., 277 F.3d 936, 945 (7th Cir. 2002) (alterations in original)). The
Seventh Circuit, consistent with other circuits, uses a two-part inquiry to determine whether
particular conduct was “in furtherance of” an FCA action and therefore protected under the statute.
Fanslow, 384 F.3d at 480. In order for conduct to be considered protected, it must be shown that
“(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.” Id.
(quoting Moore v. Cal. Inst. of Tech. Jet Propulsion Lab., 275 F.3d 838, 845 (9th Cir. 2002)).
The precise scope of the second category of protected conduct – “other efforts to stop” one
or more FCA violations – is less clear. However, it “plainly encompasses more than just activities
8
undertaken in furtherance of a False Claims Act lawsuit.” Smith v. Clark/Smoot/Russell, 796 F.3d
424, 434 (4th Cir. 2015) (citing 31 U.S.C. § 3730(h)); see also U.S. ex rel. Grenadyor v. Ukrainian
Vill. Pharmacy, Inc., 772 F.3d 1102, 1108 (7th Cir. 2014). This includes things “such as reporting
suspected misconduct to internal supervisors.” Halasa, 690 F.3d at 847-48.
Mr. McCrary asserts that the comments he wrote on his timesheet and the oral statements
he made to county officials at both meetings he attended constitute protected conduct within the
first category. 2 [Filing No. 13 at 7-8.] Both parties agree that the appropriate standard for
determining whether conduct is protected under that category is the two-part test articulated in
Fanslow. [Filing No. 13 at 8; Filing No. 14 at 2.] Mr. McCrary argues that he satisfied both parts
of this test because he has alleged that he believed in good faith, and a reasonable employee in
similar circumstances would likewise believe, that the Knox County Highway Department was
misusing public funds and thereby engaging in fraud against the government. [Filing No. 13 at 79.]
The FCA’s retaliation provision is broader than Defendants assert, as a claim under the
provision does not require that a false or fraudulent claim actually be submitted to the federal
government directly. See Halasa, 690 F.3d at 847-48. However, the Act is narrower than Mr.
McCrary asserts, because a false or fraudulent claim must be made to some entity in order for the
Act to apply. In U.S. ex rel. Yesudian v. Howard University, 153 F.3d 731, 738 (D.C. Cir. 1998),
the District of Columbia Circuit first established the proposition that, under circumstances in which
an entity receives a majority of its funding from the federal government, it might be true that “a
2
In his response brief, Mr. McCrary quotes a prior version of the FCA that does not include the
second category of protected conduct, and does not discuss or rely upon this category in arguing
that he has adequately alleged an FCA retaliation claim.
9
claim to a grantee is effectively a claim to the United States,” and therefore the FCA will apply
when a false claim is made to that entity.
Consistent with this proposition, the text of the statute was amended such that the definition
of “claim” now explicitly includes demands for payment or reimbursement made to grantees of
federal money who use that money for federal purposes or will ask for payment or reimbursement
from the federal government. 31 U.S.C. § 3729(b)(2)(A)(ii); see also United States ex rel. Garbe
v. Kmart Corp., 2016 WL 3031099, *4 (7th Cir. 2016) (explaining that while the FCA does not
require presentation of a claim to the federal government, “FCA liability attaches to any false claim
to any entity – public or private – implementing a government program or a program using
government funds”). Ultimately, in order for the FCA to apply, a false claim must be made or
contemplated, whether it be to the federal government directly or to an entity that will pay the
claim with federal funds. 3
There are three key flaws with the allegations Mr. McCrary sets forth to support his FCA
retaliation claim: (1) he has not adequately alleged the involvement of the federal government or
a grantee thereof; (2) he has not alleged that a claim has been made or ever will be made; and (3)
the type of fraud Mr. McCrary alleges is not the type addressed by the FCA.
1. Inadequate Allegations Regarding Involvement of Federal Funds
Mr. McCrary acknowledges that an FCA retaliation claim must involve the misuse of
federal funds. [See Filing No. 13 at 7 (Mr. McCrary citing Yesudian for the proposition that “[a]ny
proof of misuse of federal funds or even ‘possible misuse of federal funds’ is sufficient to support
3
It is not required that the false claim actually be transmitted to the federal government or the
grantee, as investigating conduct leading up to the transmission of the claim can be considered “in
furtherance of” an FCA action and therefore be protected, even if the claim does not ultimately go
forward. See, e.g., Yesudian, 153 F.3d at 739-40.
10
a retaliation claim under the False Claims Act”).] Indeed, the FCA is clear that claims to grantees
or recipients of federal funding only fall within the purview of the statute if federal funds are “to
be spent or used on the Government’s behalf or to advance a Government program or interest,”
and the federal government “provides or has provided any portion of the money or property
requested or demanded; or…will reimburse [the recipient] for any portion of the money or property
which is requested or demanded.” 31 U.S.C. § 3729(b)(2)(A)(ii).
Mr. McCrary has alleged that Knox County receives some federal funding, [see Filing No.
1 at 4 (alleging that “Knox County receives Federal funds and funds from the State of Indiana that
are specifically designated and dedicated for use by the Knox County Highway Department. This
includes Federal and Indiana funds for road repair, road construction, bridge repair, bridge
construction and purchase of equipment and materials by the Knox County Highway
Department”).] As discussed above, while it is sufficient to allege that a claim was made to a
grantee that receives a majority of funding from the federal government, Yesudian, 153 F.3d at
739-40, Mr. McCrary has not alleged that a majority of the County’s funding comes from the
federal government, that the funds are used by the County to advance a federal government
program or interest, or that the federal government will be responsible for paying or reimbursing
any portion of the costs associated with the allegedly fraudulent grading job. His vague allegation
that Knox County receives some federal funding is not enough to bring his retaliation claim within
the purview of the FCA.
2. No Allegation That a “Claim” Was Made
Mr. McCrary’s FCA retaliation claim also falls short because an FCA retaliation claim
must involve the potential or actual filing of a “claim,” and he has not alleged that any such claim
was made or will be made. Mr. McCrary relies upon Yesudian, along with two other cases, Boone
11
v. MountainMade Foundation, 64 F.Supp.3d 216 (D.D.C. 2014) and Kuhn v. LaPorte County
Comprehensive Mental Health Counsel, 2008 WL 4099883 (N.D. Ind. 2008), in support of his
assertion that “[a]ny proof of misuse of federal funds or even ‘possible misuse of federal funds’ is
sufficient to support a retaliation claim under the False Claims Act,” [Filing No. 13 at 7]. Not only
are none of those cases binding on this Court, but Mr. McCrary’s reliance on them is misplaced
because they do not establish the proposition asserted.
In Boone, the defendant employer was an organization that received a majority of its
funding from federal grants through the Small Business Administration. 64 F. Supp. 3d at 220.
The plaintiff employees were allegedly fired or demoted because they had reported to the
organization’s board of directors their beliefs that another employee was using her employerissued debit card for personal expenditures. Id. The court, relying on Yesudian, found that the
plaintiffs had engaged in protected activity under the pre-2009 version of section 3730(h) because
the “Plaintiffs’ personal knowledge that the substantial majority of [the organization’s] funding
came from federal grants, coupled with [the plaintiff bookkeeper’s] specific assertion to the
[board] that she was covering the improper use of SBA funds is sufficient to demonstrate that
Plaintiffs’ investigation reasonably could have led to a FCA action.” Id. at 231.
Mr. McCrary interprets this language to mean that any misuse of government funds is
sufficient to establish a retaliation claim under the FCA. However, Mr. McCrary ignores what
was a critical factor in Boone (as well as in Yesudian) – that the misconduct being investigated,
while indeed involving the misuse of funds, also involved the false claims to the federal
government associated with the misuse of those funds. In fact, the Boone court, quoting Yesudian,
noted that “[t]o be covered by the False Claims Act, the plaintiff's investigation must concern ‘false
or fraudulent’ claims,” id. at 226 (quoting Yesudian, 153 F.3d at 740).
12
Ultimately, the Boone court found that the plaintiffs’ conduct was protected because the
facts gave rise to a reasonable possibility that their actions could have led to the discovery of
evidence of “resubmission of a claim from [the defendant employer] to the federal government,”
and accordingly, an FCA action. Boone, 64 F. Supp. 3d at 230-31. The Boone court’s use of the
word “resubmission” is instructive – the plaintiffs’ conduct was protected under the whistleblower
provision because they were reporting to their superiors false claims for payment that were made
to the defendant company (in the form of fraudulent debit card charges) that could have resulted
in false claims for payment or reimbursement (in the form of false financial records submitted as
a part of the grant approval or renewal process) in turn being made to the federal government. The
Yesudian court reached a similar conclusion for the same reasons. See Yesudian, 153 F.3d at 73941.
Kuhn is even less helpful to Mr. McCrary. That case involved the alteration of medical
billing documents that were to be submitted to the U.S. Department of Health and Human Services
for Medicaid reimbursement. 2008 WL 4099883 at *1. Again, this is precisely the type of conduct
– false or fraudulent claims for payment made to the United States Government – that the FCA is
designed to punish and prevent. As illustrated by these cases, an allegation of such conduct, or at
least a set of facts that creates a reasonable probability that an FCA action might ensue, is necessary
to sustain a claim under the whistleblower provision of the FCA.
Here, Mr. McCrary alleges only that Knox County receives some federal funding. [See
Filing No. 1 at 4.] He does not allege that Knox County would or did submit any type of claim to
the federal government for reimbursement relating to grading the road at issue. For example, he
does not allege that Defendants were preparing, or causing someone to prepare, false financial or
other records that would be submitted to the federal government. Again, merely alleging that Knox
13
County receives some federal funding – without tying that funding to grading the county road and
a subsequent claim – is insufficient to allege retaliation under the FCA.
3. Inadequate Allegations Regarding the Type of Fraud Alleged
Finally, Mr. McCrary’s FCA retaliation claim fails because he does not allege the type of
fraud covered by the FCA. The FCA attaches liability for specific acts of fraud; it does not seek
to punish fraud in a general sense. See McNinch, 356 U.S. at 599 (the FCA “was not designed to
reach every kind of fraud practiced on the Government”). Accordingly, in order for conduct to be
within the scope of the FCA, it must involve fraud as defined by the Act and the relevant case law
– namely, a false or fraudulent claim. It follows, then, that the basis of a retaliation claim under
the Act must be investigation or reports of this same type of conduct.
It may well be true that the misconduct Mr. McCrary alleges – that is, the misuse of Knox
County funds in the grading of a private road, [Filing No. 13 at 7-9] – fits some definition of
“fraud,” or is otherwise unlawful. However, that does not mean that Mr. McCrary is entitled to a
remedy under the FCA whistleblower provision. As discussed above, Mr. McCrary does not allege
that a false claim for payment or reimbursement was ever made to the federal government or to a
grantee thereof. In fact, he does not assert that a false claim was or would be made to any federal
entity at all. The Complaint does not suggest that any of the Defendants made “direct requests to
the Government for payment,” or that they made “reimbursement requests…to the recipients of
federal funds under federal benefits programs.” See Universal Health Servs., Inc., 136 S. Ct. at
1996. Instead, Mr. McCrary merely alleges that Knox County receives some federal funding, that
his supervisor asked him (at the direction of Commissioner Holscher) to use county resources to
grade a private road, and that he was terminated because he expressed his objections to that task
on his timecard and in meetings with county officials.
14
Additionally, Mr. McCrary himself alleges that he was “fired for investigating an act of
fraud against the Knox County government.” [Filing No. 1 at 4.] In making this allegation, he
frames the misconduct he was allegedly terminated for reporting not as fraud against the federal
government – which is the focus of the FCA – but as another type of fraud against a local
government. Thus, Mr. McCrary’s allegations regarding illegal conduct of the Defendants are
outside the purview of the FCA, as is retaliation based on those allegations. 4
Because Mr. McCrary does not allege any facts in his Complaint that suggest he was
terminated as a result of investigating or reporting false claims to the federal government or to a
program operated by a grantee of the federal government, his claim under the FCA whistleblower
provision must be dismissed. 5
B. 42 U.S.C. § 1983 Claim
Defendants argue that Mr. McCrary’s Section 1983 claim should be dismissed because the
First Amendment does not protect a public employee’s speech when he speaks as an employee,
rather than a private citizen. [Filing No. 12 at 12-17.] They assert that, under Garcetti v. Ceballos,
547 U.S. 410 (2006), Mr. McCrary’s speech was made pursuant to his official duties as a Knox
County employee, and therefore he cannot sustain a claim for retaliation in violation of the First
Amendment. [Filing No. 12 at 12-17.]
4
Mr. McCrary does not argue that his conduct should be considered “other efforts to stop” an FCA
violation because he does not cite the version of the statute containing that language. While the
Court will not address a theory not raised by the parties, it nonetheless notes that Mr. McCrary’s
conduct is not protected under the second category for the same reason it is not protected under
the first –he has not alleged that there was a false or fraudulent claim to the federal government.
5
This result is consistent with a previous case in this District addressing the same issue. See Boyd
v. Keystone Const., 2015 WL 4427630, *3 (S.D. Ind. 2015) (“Boyd simply does not allege that she
took any action to report or try to stop any false claims for payment from the federal government;
accordingly, Boyd has failed to state a claim for retaliatory discharge under the federal False
Claims Act”).
15
In response, Mr. McCrary contends that he was speaking as a private citizen on a matter of
public concern. [Filing No. 13 at 9-11.] He argues that under Lane v. Franks, 134 S. Ct. 2369
(2014), the most important consideration is that he was speaking out against public corruption, a
significant matter of public concern, and that he is therefore entitled to First Amendment
protection.
[Filing No. 13 at 9-11.]
Moreover, he asserts that Knox County violated his
constitutional rights because it cannot show a justifiable reason for terminating him based on his
comments. [Filing No. 13 at 9-11.]
On reply, Defendants maintain that whether Mr. McCrary was speaking in his capacity as
a public employee or as a citizen is the “threshold determination” the Court must make in
evaluating the sufficiency of a First Amendment claim. [Filing No. 14 at 7-9.] They assert that
Lane does not alter or eliminate this threshold requirement, and because Mr. McCrary did not
allege sufficient facts to show that he was speaking as a private citizen, his claim must be
dismissed. [Filing No. 14 at 7-9.] Defendants further argue that an employee’s personal grievance,
even if it touches on a matter of public interest, is not constitutionally protected speech. [Filing
No. 14 at 8.]
In both Garcetti and Lane, the Supreme Court used the following inquiry to determine
whether a public employee’s speech is entitled to First Amendment protection:
The first [step] requires determining whether the employee spoke as a citizen on a
matter of public concern. If the answer is no, the employee has no First Amendment
cause of action based on his or her employer’s reaction to the speech. If the answer
is yes, then the possibility of a First Amendment claim arises. The question
becomes whether the relevant government entity had an adequate justification for
treating the employee differently from any other member of the general public.
Lane, 134 S. Ct. at 2378 (quoting Garcetti, 547 U.S. at 418) (emphasis added). The Seventh
Circuit has also instructed that “[f]or a public employee’s speech to be protected under the First
Amendment, the employee must show that (1) he made the speech as a private citizen, (2) the
16
speech addressed a matter of public concern, and (3) his interest in expressing that speech was not
outweighed by the state’s interests as an employer in promoting effective and efficient public
service.” Swetlik v. Crawford, 738 F.3d 818, 825 (7th Cir. 2013) (internal quotations and citation
omitted). “The determination of whether speech is constitutionally protected is a question of law.”
Kubiak v. City of Chicago, 810 F.3d 476, 481 (7th Cir. 2016).
The threshold issue with respect to this inquiry is whether the speech was made by the
employee in his capacity as a private citizen or as a public employee. Chaklos v. Stevens, 560 F.3d
705, 711-12 (7th Cir. 2009) (“Garcetti requires a threshold determination regarding whether the
public employee spoke in his capacity as a private citizen or as an employee”) (citation omitted).
In Garcetti, the Supreme Court held that “when public employees make statements pursuant to
their official duties, the employees are not speaking as citizens for First Amendment purposes, and
the Constitution does not insulate their communications from employer discipline.” 547 U.S. at
421. This is true regardless of the content of the speech. Spiegla v. Hull, 481 F.3d 961, 965 (7th
Cir. 2007) (citing Garcetti, 547 U.S. at 419-23).
“Determining the official duties of a public employee requires a practical inquiry into what
duties the employee is expected to perform, and is not limited to the formal job description.”
Houskins v. Sheahan, 549 F.3d 480, 490 (7th Cir. 2008). See also Garcetti, 547 U.S. at 424-25
(“Formal job descriptions often bear little resemblance to the duties an employee actually is
expected to perform, and the listing of a given task in an employee’s written job description is
neither necessary nor sufficient to demonstrate that conducting the task is within the scope of the
employee’s professional duties for First Amendment purposes”). Courts must “take a practical
view of the facts alleged in the complaint, looking to the employee’s level of responsibility and
the context in which the statements were made.” Abcarian v. McDonald, 617 F.3d 931, 937 (7th
17
Cir. 2010). Moreover, “the mere fact that a citizen’s speech concerns information acquired by
virtue of his public employment does not transform that speech into employee – rather than citizen
– speech. The critical question under Garcetti is whether the speech at issue is itself ordinarily
within the scope of an employee’s duties, not whether it merely concerns those duties.” Lane, 134
S. Ct at 2379.
Courts need only “inquire into the content of the speech to ascertain whether [it] touched
on a matter of public concern” if the speaker was speaking as a private citizen. Renken v. Gregory,
541 F.3d 769, 773 (7th Cir. 2008) (internal quotations and citations omitted). An individual speaks
on a matter of public concern if the speech “can be fairly considered as relating to any matter of
political, social, or other concern to the community, or when it is a subject of legitimate news
interest; that is, a subject of general interest and of value and concern to the public.” Lane, 134
S.Ct. at 2380 (quoting Snyder v. Phelps, 562 U.S. 443, 453 (2011)) (internal quotations omitted).
“The inquiry turns on the ‘content, form, and context’ of the speech.” Lane, 134 S. Ct. at 2380
(quoting Connick v. Myers, 461 U.S. 138, 147-48 (1983)).
Once it has been determined that the speech in question was made by an employee speaking
as a citizen on a matter of public concern, the balancing test established in Pickering v. Board of
Education of Township High School District 205, Will County, Illinois, 391 U.S. 563 (1968), is
used to determine “whether the government had ‘an adequate justification for treating the
employee differently from any other member of the public’ based on the government’s needs as
an employer.” Lane, 134 S. Ct. at 2380 (quoting Garcetti, 547 U.S. at 418). To this end, the court
must weigh “the interests of the [public employee], as a citizen, in commenting upon matters of
public concern and the interest of the State, as an employer, in promoting the efficiency of the
18
public services it performs through its employees.” Lane, 134 S. Ct. at 2377 (quoting Pickering,
391 U.S. at 568) (alterations in original); see also Swetlik, 738 F.3d at 825.
The speech at issue in Mr. McCrary’s case encompasses the written notes on his timesheet
as well as oral remarks made during two meetings with county officials. The first question the
Court must address is whether the Complaint alleges facts to indicate that this speech was made
by Mr. McCrary in his capacity as a private citizen or, in other words, whether his statements were
made pursuant to his official duties. The Complaint states that Mr. McCrary’s job title was
“Operator,” [Filing No. 1 at 2], and that his “ordinary job responsibilities involved road
construction work,” [Filing No. 1 at 9]. Mr. McCrary asserts in his brief that his speech was “far
outside [his] ordinary job duties,” which included driving a truck but not “mak[ing] written reports
or appear[ing] on behalf of the Knox County Highway Department at meetings of the Knox County
Commissioners.” [Filing No. 13 at 10.]
Mr. McCrary seems to disregard the meaning of speech “pursuant to official duties” as
defined by Garcetti and subsequent cases. This analysis is not dependent on the particular content
of an individual’s official job description, nor is a job description dispositive. Houskins, 549 F.3d
at 490. Accordingly, the fact that he, as an “Operator,” generally drove a truck and performed
“road construction work” does not complete the analysis. The question is whether the speech itself
– in this case, the comments on his timesheet and the oral remarks at the meetings – were made by
Mr. McCrary as a part of his official duties while he was carrying out those duties.
With respect to the written comments on the timesheet, it is clear that Mr. McCrary’s
speech was made pursuant to his official duties. In the Complaint, Mr. McCrary refers to the
document he filled out as “a Knox County Highway Department time sheet” and states that the
comments he wrote were part of “a description of [the] grading work that he was instructed to
19
perform.” [Filing No. 1 at 2.] The fact that filling out a timesheet is not part of “road construction
work” does not mean that it was not part of Mr. McCrary’s official job duties. On the contrary,
the facts as alleged – including that he filled out this document at the end of his work day – suggest
that completing a time sheet is something that Mr. McCrary was expected to do as part of his job
duties. As a practical matter, employees in many jobs are expected to complete timesheets or
otherwise record their hours worked for administrative and payroll purposes.
It is unclear from the Complaint whether Mr. McCrary was required on the timesheet to
write notes describing the work he completed on any given day, or whether he decided to add that
information to the timesheet even though it was not a requirement. The use of the term “written
report” to refer to his comments suggests that the notes he wrote may constitute something separate
from the general information he provided on the timesheet. However, even if that is the case, the
notes were nonetheless written in the course of his official duties – specifically, filling out a
timesheet – for what appears to be an official purpose – identifying the work he had completed
that day in his capacity as a Knox County Highway Department employee. Thus, Mr. McCrary
was speaking in his capacity as a public employee while engaging in this speech.
The remarks made at the meetings were also made pursuant to Mr. McCrary’s official
duties. During those meetings, Mr. McCrary was speaking exclusively to Knox County employees
about matters of Knox County business, specifically the comments written on a timesheet
regarding work he performed as a county employee, with county resources. Mr. McCrary does
not allege that he voluntarily attended these meetings in order to express his views, but instead
states that he was “summoned” to those meetings – implying that he was required to attend – to
discuss his work, his timecard comments, and the future of his employment. [Filing No. 1 at 2-3.]
20
Accordingly, the facts as alleged in the Complaint establish that he was speaking as a public
employee, not as a private citizen, at these meetings.
Although the fact that Mr. McCrary was speaking as a public employee and not as a private
citizen is dispositive, the Court also notes that his speech did not involve a matter of public
concern, and therefore would also be deprived of First Amendment protection on that ground. A
grievance filed to further a purely private interest does not constitute protected speech, even if the
topic is potentially of interest to the public. See Bivens v. Trent, 591 F.3d 555, 561 (7th Cir. 2010)
(“[I]f the speech concerns a subject of public interest, but the expression addresses only the
personal effect upon the employee, then as a matter of law the speech is not of public concern”)
(emphasis omitted) (quoting Marshall v. Porter County Plan Comm’n, 32 F.3d 1215, 1219 (7th
Cir. 1994)); see also Garcetti, 547 U.S. 420 (“Underlying our cases has been the premise that
while the First Amendment invests public employees with certain rights, it does not empower them
to ‘constitutionalize the employee grievance’”) (quoting Connick, 461 U.S. at 154). While
exposing the misappropriation of public resources is generally a subject of public interest, the
content, form, and context of Mr. McCrary’s statements do not suggest that he was motivated to
bring this issue to the public’s attention or that anyone outside of the Knox County Highway
Department was ever made aware of the alleged problem. Specifically, Mr. McCrary made his
statements completely internally within the Highway Department and he does not allege any facts
in the Complaint to suggest he was motivated by concern for the public good rather than a personal
desire to avoid being disciplined for grading a road that he alleges the county should not have been
working on.
Accordingly, Mr. McCrary has not asserted a plausible claim for relief with respect to
retaliation based on his timesheet comments or his meeting remarks because the facts set forth in
21
his Complaint do not allege that he was speaking as a citizen on a matter of public concern. His
First Amendment retaliation claim under Section 1983 must therefore be dismissed.
C. Indiana FCA Claim and Tortious Interference with a Contractual Relationship
Claim
Because the Court is dismissing Mr. McCrary’s FCA and Section 1983 claims, Mr.
McCrary’s only remaining claims are those brought under Indiana state law. Accordingly, the
Court must determine whether to exercise its discretion to retain jurisdiction over those claims
pursuant to 28 U.S.C. § 1367(a).
The district court ultimately has discretion whether to exercise supplemental jurisdiction
over a plaintiff’s state law claims. Carlsbad Tech., Inc. v. HIF BIO, Inc., 556 U.S. 635 (2009); 28
U.S.C. § 1367(c) (“The district courts may decline to exercise supplemental jurisdiction over a
claim…if…the district court has dismissed all claims over which it has original jurisdiction…”).
When deciding whether to exercise supplemental jurisdiction, “‘a federal court should consider
and weigh in each case, and at every stage of the litigation, the values of judicial economy,
convenience, fairness, and comity.’” City of Chicago v. Int’l Coll. of Surgeons, 522 U.S. 156, 173
(1997) (quoting Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 n.7 (1988)). “In the usual
case in which all federal claims are dismissed before trial, the balance of these factors will point
to declining to exercise jurisdiction over any remaining pendent state-law claims. Hence the
general rule is that, when all federal claims are dismissed before trial, the district court should
relinquish jurisdiction over pendent state-law claims rather than resolving them on the merits.”
Wright v. Associated Ins. Companies Inc., 29 F.3d 1244, 1251 (7th Cir. 1994).
This litigation is in the early stages. Defendants have not yet even answered the allegations
of Mr. McCrary’s Complaint, and no discovery has taken place. Accordingly, the Court concludes
that all four factors – economy, convenience, fairness, and comity – strongly weigh in favor of it
22
relinquishing supplemental jurisdiction over Mr. McCrary’s state law claims and dismissing those
claims without prejudice.
IV.
CONCLUSION
For the reasons detailed herein, the Court GRANTS Defendants’ Motion to Dismiss.
[Filing No. 11.] Mr. McCrary’s FCA and § 1983 claims are DISMISSED WITH PREJUDICE
and his state law claims, over which the Court has declined to exercise supplemental jurisdiction,
are DISMISSED WITHOUT PREJUDICE. Final judgment shall enter accordingly.
_______________________________
Date: August 4, 2016
Hon. Jane Magnus-Stinson, Judge
United States District Court
Southern District of Indiana
Distribution via ECF only to all counsel of record
23
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?