Vessell v. DPS Associates of Charleston, Inc. ( 1998 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
GEORGE VESSELL,
Plaintiff-Appellant,
and
UNITED STATES OF AMERICA, ex
relatio,
Plaintiff,
v.
DPS ASSOCIATES OF CHARLESTON,
INCORPORATED, d/b/a Remax
Professional Realty, a/k/a DPS of
Charleston, Incorporated;
CANDACE N. PRATT, Broker-In-
No. 97-1484
Charge; DAVID FINN; JANINE
TOWNSEND; FRED RICE,
Defendants-Appellees,
and
THOMAS J. GIBBONS; BILL KONEFAL;
HOWARD JACKSON; CENTURY PEST
CONTROL, INCORPORATED; FRANK
THOMPSON; THOMPSON & SONS;
PRUDENTIAL CAROLINAS REALTY;
RESULTS REALTY; AGENT-OWNED
REALTY; ANITA DUNN,
Defendants.
Appeal from the United States District Court
for the District of South Carolina, at Charleston.
C. Weston Houck, Chief District Judge.
(CA-95-1887-2-12)
Argued: December 4, 1997
Decided: July 8, 1998
Before WILKINSON, Chief Judge, and ERVIN and
MICHAEL, Circuit Judges.
_________________________________________________________________
Affirmed by published opinion. Judge Ervin wrote the opinion, in
which Chief Judge Wilkinson and Judge Michael joined.
_________________________________________________________________
COUNSEL
ARGUED: Gregg Meyers, PRATT-THOMAS, PEARCE, EPTING
& WALKER, P.A., Charleston, South Carolina, for Appellant.
Charles R. Norris, NELSON, MULLINS, RILEY & SCARBOR-
OUGH, L.L.P., Charleston, South Carolina, for Appellees. ON
BRIEF: Craig E. Burgess, NELSON, MULLINS, RILEY & SCAR-
BOROUGH, L.L.P., Charleston, South Carolina, for Appellees.
_________________________________________________________________
OPINION
ERVIN, Circuit Judge:
This case comes before us on the district court's grant of judgment
as a matter of law for the defendant-appellee, DPS Associates, a real
estate agency doing business as Re/Max Professional Realty
("Re/Max"). The plaintiff-appellant, George Vessell, had claimed
breach of contract under state law and retaliatory discharge under the
False Claims Act, 31 U.S.C. § 3729 et seq. (1994). The district court
correctly found that any contract between Vessell and Re/Max was
saturated with fraud and thus unenforceable, and that Vessell, who
was at best an independent contractor, could not recover for retalia-
tory discharge under the False Claims Act because its coverage
extends only to employees. We therefore affirm the district court's
resolution of Vessell's claims.
I.
When the United States decided to close its Navy base in Charles-
ton, South Carolina, the government, under its Housing Assistance
2
Program ("HAP"), acquired the homes of government employees
forced to sell their homes because of the closing. Under the HAP, the
United States would manage and sell the homes over time to avoid
having to sell all of the homes in the depressed market that likely
would result from the base closing.
The United States Army Corps of Engineers, which oversaw the
HAP, contracted with various real estate agencies to manage and sell
the homes. One of the real estate agencies was the Re/Max agency in
this case, which operated under the supervision of Broker-In-Charge
Candace Pratt. The winning Re/Max bid was one of three submitted
by that Re/Max office, and had been prepared by Re/Max agent Tom
Gibbons.
In preparing the bid, Gibbons requested that George Vessell esti-
mate how much he would charge for the lawn maintenance and
upkeep on the HAP properties. Vessell had been a Re/Max agent him-
self at one time, and had since started a landscaping company. His
company maintained several yards for Gibbons and other Re/Max
agents. Vessell estimated to Gibbons that it would cost $43 per yard
for the initial yard cutting and $20 every two weeks to maintain the
yards. Vessell stated that Gibbons asked him not to provide a quote
for any of the other agents in the Re/Max office who were preparing
bids.
In the bid he submitted to the Corps of Engineers, Gibbons quoted
$0 for the initial cutting and $12 for recurring cuttings. He stated that
he did this to "get the contract for Re/Max." In March, 1994, the
Corps of Engineers opened the sealed bids and awarded one of the
contracts to Re/Max based on Gibbons's bid. One of the other bidders
disputed the award; the bid acceptance was not finalized until July,
1994. The one-year contract had renewal options for two more years.
Gibbons informed Vessell that he had bid the yardwork at $0/12
soon after he submitted the bid. Vessell argued with him about the
amount and prepared a breakdown of his costs to show Gibbons why
he could not cut the yards for that amount and still make a reasonable
profit. Vessell refused to cut the lawns at that amount. Gibbons sug-
gested that Vessell recover the price by bid-rigging and stealing appli-
ances to make up the difference. When Vessell protested, Gibbons
3
said that landscapers were easy to come by and that Vessell would not
get the HAP job if he did not cooperate.
Vessell had engaged in a similar enterprise with Gibbons in the
past. Vessell would remove "abandoned" personal property and appli-
ances from bank-repossessed homes and sell them at Gibbons's direc-
tion. Vessell maintained that Gibbons said the removals were
authorized and that he, Vessell, did not know otherwise, but that the
current enterprise suggested by Gibbons made Vessell realize that the
prior actions had probably been illegal.
Vessell decided to turn Gibbons in to the FBI. He considered, but
dismissed, the idea of talking to Broker-in-Charge Pratt, because his
previous experience with her led him to believe she would be ineffec-
tive in dealing with Gibbons. Vessell contacted FBI agent Quick, with
whom he worked over the next several months. Quick directed Ves-
sell to cooperate with Gibbons and not to tell Pratt about Gibbons's
practices. Vessell thus sold appliances, as suggested by Gibbons, and
created an apparent "slush fund" out of which Gibbons could pay
legitimate expenses incurred in the management of the HAP proper-
ties. The FBI paid Vessell's fees for the lawn maintenance; he did not
take monies out of the slush fund.
Vessell started cutting lawns around August 1, 1994. The FBI con-
ducted its "sting" operation against Gibbons in November. The FBI
did not direct its investigation against any other members of the
Re/Max staff, and Re/Max continued to operate under the HAP con-
tract, which was renewed for the two years permissible under the
original contract with increased rates awarded for lawn maintenance.
After the sting, Vessell sought to continue cutting HAP lawns for
Re/Max, but received no response from the Re/Max office. According
to Vessell, Re/Max managed and marketed an average of 180 homes
at a time under the HAP contract. When he could not get the HAP
work, he gave up landscaping and has since become a private investi-
gator.
Vessell brought suit under the False Claims Act against Gibbons,
Re/Max, and various Re/Max agents. The United States intervened,
as it is entitled to do in False Claims Act cases, and settled its claims
4
against Re/Max, Candace Pratt, Gibbons, and other interested parties
on February 28, 1997.
Vessell's primary claim was that he should be permitted to carry
out the terms of the contract he allegedly made with Re/Max through
Gibbons. He further argued that Re/Max retaliated against him in vio-
lation of the False Claims Act by refusing to carry out the terms of
his contract. Vessell's action went to trial in March, 1997, and the dis-
trict court directed a verdict against Vessell. The United States chose
not to intervene in Vessell's appeal from that verdict.
II.
The district court had jurisdiction over Vessell's False Claims Act
claim under 31 U.S.C. § 3732(a) and exercised supplemental jurisdic-
tion over Vessell's state law claims under 28 U.S.C.§ 1367. We have
jurisdiction over Vessell's timely appeal under 28 U.S.C. § 1291.
III.
Vessell first contends that the district court erred in dismissing his
breach of contract claim. The district court directed a verdict that no
contract existed between Vessell and Re/Max because 1) Vessell had
not demonstrated a meeting of the minds between the parties; 2) there
was no mutuality of obligation; and 3) Vessell's contract, if any, was
between him and Tom Gibbons, a Re/Max agent, and not between
him and the Re/Max agency. The district court further held that any
contract the parties could be said to have had was saturated with fraud
and thus unenforceable.
"Judgment as a matter of law is proper when without weighing the
credibility of the evidence there can be but one reasonable conclusion
as to the proper judgment." Benner v. Nationwide Mut. Ins. Co., 93
F.3d 1228, 1234 (4th Cir. 1996). Our review of the district court's
decision is plenary. Id. We must view the evidence in the light most
favorable to the non-moving party. Westfarm Assocs. Ltd. Partnership
v. Washington Suburban Sanitary Comm'n, 66 F.3d 669, 683 (4th Cir.
1995).
5
In order to have a binding contract, the parties must have a meeting
of the minds with regard "to all essential and material terms of the
agreement." Player v. Chandler, 382 S.E.2d 891, 893 (S.C. 1989).
These essential terms include price, time, and place. Edens v. Laurel
Hill, Inc., 247 S.E.2d 434, 436 (S.C. 1978). The meeting of the minds
cannot be based on "secret purpose or intention on the part of one of
the parties, stored away in his mind and not brought to the attention
of the other party." Player, 382 S.E.2d at 894.
Vessell argues that he and Gibbons had a meeting of the minds. He
contends that, after wrangling over the difference in price between
Vessell's proposal and Gibbons's bid, they agreed Vessell would do
the work for $12 per yard and make up any difference through the
"slush fund" that would be created by the sale of appliances. He con-
tends that his actual work cutting the lawns is evidence of this deal,
and that he further had a deal to cut the lawns at the straight price of
$26 and $27 per yard once the Corps of Engineers renewed the con-
tract and agreed to modify the contract price for option years two and
three.
Whether the parties have a meeting of the minds is ordinarily a
question of fact for the jury to decide. Hobgood v. Pennington, 387
S.E.2d 690, 693 (S.C. App. 1989). In this case, however, the most
Gibbons and Vessell could be said to have had agreed on was a deal
whereby Vessell would be minimally paid for mowing lawns, and
would supplement his lawn-mowing pay by stealing and selling
household appliances. This court will not set its imprimatur on a con-
tract permeated with fraud. See W&N Construction Co. v. Williams,
472 S.E.2d 622, 623 (S.C. 1996) (construction company cannot
recover on contract it had entered illegally); Jackson v. Bi-Lo Stores,
Inc., 437 S.E.2d 168, 170 (S.C. App. 1993) (contract secured by ille-
gal conduct cannot be enforced). Thus, even if a jury, taking all the
evidence in Vessell's favor, could have found that Gibbons and Ves-
sell had a contract, any such contract was unenforceable and the dis-
trict court appropriately directed a verdict on Vessell's breach of
contract claim.
Vessell cannot show that he had an enforceable contract for the
first year of the HAP contract. Any argument that his contract was
6
effectively renewed by virtue of the Corps of Engineers' renewal of
Re/Max's HAP contract must therefore fail as well.
Vessell argues that not enforcing his contract violates public policy
by penalizing him for cooperating with law enforcement officials.
This argument has some appeal, but is not ultimately persuasive. It
ignores the fact that Vessell entered into the alleged contract knowing
its fraudulent aspects. This is not a situation in which he was already
working for Gibbons, or Re/Max, under a legitimate contract, which
Gibbons then "modified" by requiring unlawful behavior. In this
instance, Vessell could have walked away from the entire business.
Our holding that Gibbons and Vessell had an unenforceable con-
tract effectively disposes of Vessell's remaining arguments on his
contract claim. Even were we to find that Gibbons had actual or
apparent authority to bind Re/Max to the contract, and that Vessell
and Re/Max were mutually obligated to perform the terms of the con-
tract, the fraudulent underpinnings of the contract would defeat its
enforceability.
IV.
The False Claims Act encourages private plaintiffs, acting on
behalf of the government, to prosecute any person who is attempting
to defraud the government. 31 U.S.C. § 3729. The False Claims Act
is also known as the Qui Tam Act, an abbreviation of "qui tam pro
domino rege quam pro si ipso in hac parte sequitur ," which means
one "[w]ho sues on behalf of the King as well as for himself." Black's
Law Dictionary 1251 (6th ed. 1990). It was originally adopted in
1863, and is based on the premise that private parties are often in a
better position to detect fraudulent activity than the government itself.
Congress amended the False Claims Act in 1986 to include an anti-
retaliation provision to protect "whistle blowers" from adverse
employment consequences as a result of their cooperation with the
federal government. False Claims Amendments Act, Pub. L. No. 99-
562, § 4, 100 Stat. 3153 (codified at 31 U.S.C. § 3730(h)).
The anti-retaliation provision of the False Claims Act provides
that:
7
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, initia-
tion of, testimony for, or assistance in an action filed or to
be filed under this section, shall be entitled to all relief nec-
essary to make the employee whole.
31 U.S.C. § 3730(h). Vessell claims that Re/Max's refusal to use his
landscaping service after he cooperated with the FBI in exposing Gib-
bons's scheme violated the anti-retaliation provision of the statute.
The district court found that Vessell was not an employee of Re/Max
and therefore was not entitled to protection under the plain language
of the statute.
On appeal, Vessell argues that the statute should not be read so nar-
rowly. He describes himself as a "subcontractor employee," which is
a defined term in the HAP contract, Joint Appendix at 172, and con-
tends that the presence of the word "employee" places him under the
statute's protection. He further argues that the provision should be
read to protect independent contractors. In addition, Vessell argues
that public policy dictates that he not be punished for having exposed
Gibbons's fraud.
The False Claims Act does not define "employee." No circuit court
has yet addressed whether the False Claims Act's protection of "em-
ployees" extends to independent contractors, though the few district
courts that have addressed the question have all held that it does not.
In Shapiro v. Sutherland, which involved a consultant who had for-
merly been an employee of a government contractor, the district court
applied the common-law agency test to determine whether the qui tam
plaintiff was an employee entitled to invoke § 3730(h), or an indepen-
dent contractor who did not fall within the law's ambit. 835 F. Supp.
836, 837-38 (E.D. Pa. 1993); see also Hardin v. DuPont Scandinavia,
731 F. Supp. 1202, 1205 (S.D.N.Y. 1990) (holding in dicta that anti-
retaliation provision does not extend to independent contractors); cf.
Mruz v. Caring, Inc., 991 F. Supp. 701 (D.N.J. 1998) (liability under
qui tam statute does not extend to employer's agents).
8
The Shapiro court applied the common-law agency test articulated
in Nationwide Mutual Insurance Company v. Darden , 503 U.S. 318
(1992), to determine whether the plaintiff had been an employee or
an independent contractor. In Darden, an ERISA case, the Supreme
Court reiterated its position that when Congress uses the term "em-
ployee" without defining it, the Court has concluded that Congress
intends to describe the conventional master-servant relationship as
understood by common-law agency doctrine. 503 U.S. at 322-23. The
Court set forth the test as follows:
In determining whether a hired party is an employee under
the general common law of agency, we consider the hiring
party's right to control the manner and means by which the
product is accomplished. Among the other factors relevant
to this inquiry are the skill required; the source of the instru-
mentalities and tools; the location of the work; the duration
of the relationship between the parties; whether the hiring
party has the right to assign additional projects to the hired
party; the extent of the hired party's discretion over when
and how long to work; the method of payment; the hired
party's role in hiring and paying assistants; whether the
work is part of the regular business of the hiring party;
whether the hiring party is in business; the provision of
employee benefits; and the tax treatment of the hired party.
Id. at 323-24 (quoting Community for Creative Non-Violence v.
Reid, 490 U.S. 730, 751-52 (1989) (internal citations omitted)).
Applying the common-law agency principles in this case leads to
the conclusion that Vessell was not Re/Max's employee. Vessell set
his own schedule for cutting the lawns; he owned his own tools; and
he hired, fired, and supervised his own assistants. In addition, his
work was not part of the regular business of the hiring party; he did
not receive any employee benefits; and his tax status was not that of
an employee. Vessell had at most a contract to perform services for
a specified period of time; he was to be paid for each service per-
formed, not on a salaried basis.
Vessell's attempt to categorize himself as a "subcontractor
employee" is unavailing. The term as used in the HAP contract refers
9
to employees of subcontractors hired by the main contractor; as such,
one of Vessell's employees might more properly be termed a "sub-
contractor employee." That contractual language, however, has no
effect on the statute's coverage.
Unless the anti-retaliation provision of the False Claims Act covers
independent contractors, Vessell's claim must fail. The plain language
of the statute includes only employees, and our inquiry generally
stops there. Other provisions of the False Claims Act, which permit
anyone with knowledge of wrongdoing to bring a qui tam action and
to share in the proceeds of the suit, 31 U.S.C.§ 3730(b)-(d), indicate
that Congress was perfectly capable of extending the statute's cover-
age as broadly as it desired. In contrast, the anti-retaliation provision
is limited by its express language to employees. We must presume
that Congress intended to so limit the anti-retaliation provision.
Even were we to examine the legislative history, our conclusion
would not change. The legislative history to the 1986 amendments
indicates only that the term "employee" is to be read broadly to
include "[t]emporary, blacklisted, or discharged workers," but says
nothing about including independent contractors. S. Rep. No. 99-345,
at 34 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5299.
Vessell's public policy argument is not wholly unpersuasive. If an
independent contractor were to learn of, and expose, the fraud of a
principal contractor, the independent contractor should not lose its
contract by virtue of having exposed wrongdoing any more than an
employee should. Nevertheless, the statutory language is plain and
does not, by its terms, extend to independent contractors. Moreover,
independent contractors would have a breach of contract remedy,
whereas an employee-at-will would not have such protection. The
facts of this particular case demonstrate the principle. Had Vessell's
contract not been permeated with fraud, he would have had a contrac-
tual remedy against Gibbons, and potentially against Re/Max, so long
as he could have established mutuality of obligation and Gibbons's
apparent authority to bind Re/Max to the contract.
The anti-retaliation provision of the False Claims Act does not
extend to independent contractors, and Vessell is therefore not cov-
ered.
10
V.
The district court's grant of judgment as a matter of law is
affirmed. The only contractual arrangement Vessell could be said to
have had with Re/Max was tainted by fraud and thus unenforceable.
Vessell is not entitled to recover under the anti retaliation provision
of the False Claims Act because he was, at most, an independent con-
tractor and thus is not protected by that provision of the Act.
AFFIRMED
11