Steele v. Great Basin Scientific
Filing
21
MEMORANDUM DECISION granting 6 Motion to Dismiss. Dismissal is with prejudice. Signed by Judge Jill N. Parrish on 11/21/16. (jlw)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
CHRISTINA STEELE,
Plaintiff,
MEMORANDUM DECISION AND ORDER
GRANTING DEFENDANT’S MOTION TO
DISMISS
v.
Case No. 2:16-cv-00628-JNP-BCW
GREAT BASIN SCIENTIFIC, INC.
District Judge Jill N. Parrish
Defendant.
Before the court is a motion brought by defendant Great Basin Scientific, Inc. to dismiss
the single cause of action asserted against it by plaintiff Christina Steele. (Docket 6). The court
GRANTS the motion and dismisses the complaint with prejudice.
BACKGROUND
Great Basin manufactures diagnostic testing kits used to detect the presence of blood
pathogens. Strict anti-contamination protocols are required to manufacture accurate testing kits.
If a kit is contaminated during the manufacturing process, it will produce a false-positive test
result. Great Basin sells the testing kits to hospitals nationwide. Hospitals then bill patients for
the kits when they are used. For at least some of the kits, hospitals request payment from the
Federal Government through Medicare and Medicaid.
Ms. Steele worked for Great Basin as its director of recruitment and company culture. On
multiple occasions, Ms. Steele raised concerns about the potential for testing kit contamination
caused by employees moving from “dirty” areas of the facility to “clean” areas where the kits are
produced. Some of the concerns she voiced to her superiors included inadequate signage on the
entry to the clean portion of the facility; inadequate door locks and security card panels; the
absence of color coded employee identification badges to differentiate employees in the clean
facility from employees in the dirty facility; inadequate ventilation, which caused employees to
leave doors between clean areas and dirty areas open; the absence of security cameras to enforce
anti-contamination protocols; and the lack of comprehensive anti-contamination training.
Ms. Steele periodically made suggestions for improvement in these areas over the course
of approximately eight months. Great Basin fired her soon after she made one of her proposals
for improvement.
Ms. Steele sued Great Basin, alleging in her sole cause of action that she had been
wrongfully terminated in retaliation for her efforts to stop her employer from violating the False
Claims Act (the “FCA” or the “Act”) and because Great Basin believed that she was preparing to
file a lawsuit under the Act. Great Basin moved for the dismissal of her suit, arguing that Ms.
Steele has not alleged any facts showing that it had notice that she had engaged in any activities
protected by the Act.1
LEGAL STANDARD
Under rule 12(b)(6) of the Federal Rules of Civil Procedure, a court may dismiss a
complaint if it fails “to state a claim upon which relief can be granted.” When considering a
motion to dismiss for failure to state a claim, a court “accept[s] as true all well-pleaded factual
allegations in the complaint and view[s] them in the light most favorable to the plaintiff.” Burnett
v. Mortg. Elec. Registration Sys., Inc., 706 F.3d 1231, 1235 (10th Cir. 2013).
Great Basin also argued that Ms. Steele failed to allege a causal connection between any
protected activity and her termination. The court does not address this argument because it
dismisses the complaint with prejudice on the grounds of lack of notice.
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2
“To survive a motion to dismiss, 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) (citation omitted)). However, a court will not accept as true “legal
conclusions” or “[t]hreadbare recitals of the elements of a cause of action, supported by mere
conclusory statements.” Id. Thus, a claim must be dismissed where the complaint does not
contain sufficient facts to make the claim “plausible on its face.” See Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Iqbal, 556 U.S. at 678.
ANALYSIS
Enacted during the Civil War to curb fraud against the government, see Universal Health
Servs., Inc. v. United States, 136 S. Ct. 1989, 1996 (2016), the False Claims Act imposes
penalties against “any person who . . . knowingly presents, or causes to be presented, a false or
fraudulent claim for payment or approval [or] knowingly makes, uses, or causes to be made or
used, a false record or statement material to a false or fraudulent claim,” 31 U.S.C. § 3729(a)(1).
The Act permits individuals to sue on behalf of the government to enforce the statute. Id.
§ 3730(b).
The Act also contains an anti-retaliation provision that states:
Any employee, contractor, or agent shall be entitled to all relief
necessary to make that employee, contractor, or agent whole, if
that employee, contractor, or agent is discharged, demoted,
suspended, threatened, harassed, or in any other manner
discriminated against in the terms and conditions of employment
because of lawful acts done by the employee, contractor, agent or
associated others in furtherance of an action under this section or
other efforts to stop 1 or more violations of this subchapter.
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Id. § 3730(h)(1) (emphasis added). Thus, an employee who has suffered an adverse employment
action may successfully sue an employer (1) if the adverse action is in retaliation for “lawful acts
. . . in furtherance of” a qui tam or Government action under the False Claims Act or (2) if the
adverse action is in retaliation for “other efforts to stop 1 or more violations of” the Act. Id.
In order to determine if Ms. Steele has pled a viable retaliation claim under the False
Claims Act, the court will examine each of these two theories of liability in turn.
I.
Acts in Furtherance of a Legal Action
A plaintiff alleging retaliation for acts in furtherance of a legal action “has the burden of
pleading facts which would demonstrate that defendants had been put on notice that plaintiff was
either taking action in furtherance of a private qui tam action or assisting in an FCA action
brought by the government.” McBride v. Peak Wellness Ctr., Inc., 688 F.3d 698, 704 (10th Cir.
2012) (citation omitted). Notice may be provided by “informing the employer of ‘illegal
activities’ that would constitute fraud on the United States; by warning the employer of
regulatory noncompliance and false reporting of information to a government agency; or by
explicitly informing the employer of an FCA violation.” Id. (citations omitted). “But merely
informing the employer of regulatory violations, without more, does not provide sufficient
notice, because doing so gives the employer ‘no suggestion that [the plaintiff is] going to report
such noncompliance to government officials’ or bring ‘her own qui tam action.’” Id. (alteration
in original) (citation omitted). “Whistleblowers ‘must make clear their intentions of bringing or
assisting in an FCA action in order to overcome the presumption that they are merely acting in
accordance with their employment obligations.’” Id. (citation omitted).
In this case, Ms. Steele produced evidence that that she complained about several
deficiencies in Great Basin’s policies and procedures for preventing contamination of the testing
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kits and recommended to her superiors that various actions be taken to reduce the chances of
contamination. But Ms. Steele does not allege any facts suggesting that Great Basin was on
notice that she was either preparing to file a qui tam lawsuit against her employer or cooperating
with the Government in preparing a lawsuit.
The Tenth Circuit has consistently held that absent specific allegations of notice of a
potential lawsuit, a plaintiff’s complaints to superiors are insufficient to sustain a retaliation
claim. In McBride, for example, an employer knew that an employee was going to tell outside
auditors “how terrible” the employer was and that the employee was examining the employer’s
policies to see where it was out of compliance with government regulations. 688 F.3d at 704.
This knowledge, however, did not support an inference that the employer knew that the
employee was planning to sue. Id. Similarly, in United States ex rel. Sikkenga v. Regence
Bluecross Blueshield of Utah, 472 F.3d 702, 729 (10th Cir. 2006) and United States ex rel.
Ramseyer v. Century Healthcare Corp., 90 F.3d 1514, 1522–23 (10th Cir. 1996), the Tenth
Circuit held that complaints to superiors or to an internal fraud department regarding the
employer’s lack of compliance with Medicare and Medicaid billing requirements were
inadequate to prove that the employer had notice of an impending lawsuit brought under the
False Claims Act.
Ms. Steele argues that her retaliation claim is distinguishable from McBride, Sikkenga,
and Ramseyer because in those cases the complaining employee’s job duties included insuring
that the employer complied with government regulations and standards. She asserts that because
her job title was director of recruitment and company culture, this court should infer that her
employment duties did not include the improvement of Great Basin’s anti-contamination
policies. Ms. Steele further contends that since she was acting outside the scope of her job
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description when she made her recommendations, Great Basin was on notice of an impending
lawsuit under the FCA.
Ms. Steele’s attempt to differentiate her case from Tenth Circuit precedent is misplaced.
First, Ms. Steele did not allege in her complaint that her job had nothing to do with regulating
employee access to clean areas of the facility. And although the complaint must be viewed in the
light most favorable to her claims, her job title alone is too thin a reed to support such an
inference.
Second, her retaliation claim would fail as a matter of law even if Ms. Steele had alleged
that she was acting outside the scope of her specific job duties when she made her suggestions.
The strongest support for Ms. Steele’s argument can be found in Sikkenga, which states that
“where employees’ regular duties include investigation of fraud, such persons must clearly plead
notice to their employers of their intentions of bringing or assisting in an FCA action in order to
overcome the presumption that they are merely acting in accordance with their employment
obligations.” 472 F.3d at 729. Although Sikkenga stands for the proposition that an employee
reporting fraud to superiors as part of regular job duties is insufficient by itself to alert an
employer of an impending lawsuit, that opinion does not support the proposition that an
employee acting outside of her regular job duties by suggesting improvements to the process of
manufacturing a product is sufficient to put the employer on notice that the employee plans to
sue it for defrauding the Government.
In other respects, moreover, Ms. Steele’s claim that her employer was on notice of a
possible lawsuit is more tenuous than the inadequately supported claims made by the plaintiffs in
McBride, Sikkenga, and Ramseyer. In all three of those cases, the employer was directly involved
in making claims for payment from the federal government. But in this case, Great Basin did not
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submit any request for payment to the Government. Nor is there any indication that it made any
misrepresentations to the Government in connection to a request for payment. Instead, it sold
testing kits to hospitals, which in turn requested payment from federal agencies. Although it may
be theoretically possible to bring a viable FCA claim against Great Basin under a conspiracy
theory, it would be less than apparent that Great Basin could be liable for making a false claim
for payment from the Government simply by allegedly injecting substandard products into the
stream of commerce with the knowledge that some of those products would eventually be
purchased by the Government. Thus, the inference that Ms. Steele’s suggestions for improvement
were a prelude to a lawsuit under the False Claims Act is even more attenuated than such an
inference was in McBride, Sikkenga, and Ramseyer.
In sum, an employee’s suggestions to improve the quality of the employer’s product,
whether pursuant to a specific job duty or not, do not notify the employer of the employee’s
plans to sue the employer at a future date. Ms. Steele never intimated that she intended to
somehow use Great Basin’s anti-contamination policies as a basis for a lawsuit. See Ramseyer,
90 F.3d at 1523 (“[P]laintiff never suggested to defendants that she intended to utilize such
noncompliance [with Medicaid requirements] in furtherance of an FCA action.”). Therefore, her
suggestions, without more, did not “make clear [her] intentions of bringing or assisting in an
FCA action.” McBride, 688 F.3d at 704 (citation omitted).
II.
Efforts to Stop Violations of the FCA
Ms. Steele also argues that she has properly pled a retaliation claim because the facts
asserted in her complaint can lead to the conclusion that Great Basin fired her because of her
“efforts to stop 1 or more violations of” the FCA. See 31 U.S.C. § 3730(h)(1). In order to
evaluate this argument, the court must first determine the proper standard for evaluating when an
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employer is on notice of an employee’s efforts to stop violations of the Act. In particular, the
court must examine whether a 2009 amendment to the False Claims Act modified the standard
for determining notice. Second, the court must decide whether the facts pled in the complaint
meet the appropriate notice standard.
Prior to 2009, the anti-retaliation provision of the False Claims Act provided remedies for
employees that had been subjected to an adverse employment action “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.” 31 U.S.C. § 3730(h) (2008) (emphasis added). In 2009, this
provision was amended to provide remedies for employees subjected to an adverse employment
action “because of lawful acts done by the employee, contractor, agent or associated others 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) (2016) (emphasis added); see Pub.L. No. 111–21, § 4(d),
131 Stat. 1617 (2009); Pub.L. No. 111–203, § 1079A(c)(1), 124 Stat. 1376 (2010). Thus, the
pre-2009 version of the statute protected workers when they engage in “lawful acts . . . in
furtherance of an action” under the FCA, while the current version of the statute protects workers
when they engage in “lawful acts . . . in furtherance of an action . . . or other efforts to stop 1 or
more violations” of the Act.
Ms. Steele argues that this court should disregard the standard for determining when an
employer is on notice that an employee is engaged in protected activity articulated in McBride,
Sikkenga, and Ramseyer because the 2009 amendment effectively overruled the notice standard
found in those cases. The court disagrees. The amendment undoubtedly expanded the sweep of
the Act’s protections against retaliation. Post-amendment, the FCA protects employees from
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retaliation for efforts to halt violations of the Act as well as for actions taken in furtherance of a
lawsuit. But the 2009 amendment did not fundamentally alter the standard laid out in McBride
and other cases for determining when an employer is on notice that an employee has engaged in
one of these protected activities.2
It is true that McBride and its precedents only addressed the question of whether the
employer was on notice of a potential lawsuit. Those opinions did not speak to the question of
whether the employer had notice of the employee’s efforts to stop a fraud on the Government.
See McBride, 688 F.3d at 704; Sikkenga, 472 F.3d at 729; Ramseyer, 90 F.3d at 1522–23. But at
least as applied to the facts of this case, the rationale of McBride, Sikkenga, and Ramseyer is
relevant to the question of whether Great Basin was on notice of any efforts on the part of Ms.
Steele to stop a violation of the FCA.
As noted above, these Tenth Circuit opinions held that a plaintiff must allege specific
facts that show the employer knew that the employee had engaged in a protected activity and that
the employee was subjected to an adverse employment action because the protected activity. But
in this case, Ms. Steele’s suggestions aimed at improving anti-contamination protocols did not
notify Great Basin that she was attempting to stop a violation of the FCA. There is no indication
that her suggestions were aimed at curbing a fraud on the Government rather than at improving
the quality and consistency of Great Basin’s product. And there was no reason for Great Basin to
Great Basin argues that because the Tenth Circuit issued the McBride opinion in 2012, about
three years after the 2009 amendment, the court of appeals has implicitly rejected the notion that
the amendment has changed the notice standard. But McBride never mentioned the 2009
amendment, nor did it analyze or apply the new “efforts to stop 1 or more violations” language.
And this court’s review of the appellate briefing in the McBride case reveals that the parties did
not raise the issue. The McBride opinion cannot be authority for a principle of law that the court
did not mention or consider.
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believe that Ms. Steele was doing anything other than attempting to serve her employer by
making these suggestions. See Sikkenga, 472 F.3d at 729.
Moreover, in order to show that Ms. Steele was fired for efforts to stop violations of the
FCA, she must plead facts that show that there was a fraud on the Government to be stopped. But
Ms. Steele has not adequately pled that Great Basin was violating the Act. Broadly speaking,
liability under the FCA requires a knowing lie to the Government in order to receive a payment
that it would not have otherwise remitted. The Act’s “focus remains on those who present or
directly induce the submission of false or fraudulent claims.” Universal Health Servs., 136 S. Ct.
at 1996. Great Basin, however, did not submit or directly induce claims for payment from the
Government. Nor are there allegations that it make any fraudulent representations to the
Government in connect with such a claim. Manufacturing a substandard product and placing it in
the stream of commerce with the knowledge that the Government may purchase it from a third
party does not violate the Act. Therefore, Great Basin had no reason to believe that Ms. Steele’s
suggestions aimed at improving the quality of its products were attempts to stop a violation of
the Act.
CONCLUSION
Ms. Steele has not pled facts that could support a conclusion that Great Basin had notice
that she was either taking steps to bring a lawsuit or to stop a violation of the False Claims Act.
Absent notice on the part of Great Basin of one of these protected activities, Great Basin cannot
make out a retaliation claim under the Act. At the hearing on this motion, counsel for Ms. Steele
represented that she has pled all of the relevant facts and that permitting her leave to file an
amended complaint would be futile. The court, therefore, GRANTS Great Basin’s motion to
dismiss Ms. Steele’s complaint. (Docket 6). Dismissal is with prejudice.
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Signed November 21, 2016.
BY THE COURT
______________________________
Jill N. Parrish
United States District Court Judge
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