Randolph Wilkins v. St. Louis Housing ( 2002 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
Nos. 02-1332/02-1471
___________
Randolph Wilkins, *
*
Appellee/Cross-Appellant, *
* Appeal from the United States
v. * District Court for the
* Eastern District of Missouri.
St. Louis Housing Authority, *
*
Appellant/Cross-Appellee. *
___________
Submitted: November 7, 2002
Filed: December 31, 2002
___________
Before RILEY, BEAM, and SMITH, Circuit Judges.
___________
BEAM, Circuit Judge.
In this action arising under the whistleblower protection provision of the False
Claims Act ("FCA"), 31 U.S.C. § 3730(h), the St. Louis Housing Authority ("SLHA")
appeals from the district court's1 submission to the jury of a special verdict form and
from its denial of SLHA's motions for judgment as a matter of law. Randolph
1
The Honorable David D. Noce, United States Magistrate Judge for the Eastern
District of Missouri. The parties consented to trial before a United States Magistrate
Judge pursuant to 28 U.S.C. § 636(c), with direct review to this court.
Wilkins cross-appeals from the district court's calculation of double back-pay
damages under the statute. We affirm.
I. BACKGROUND
SLHA is a municipal corporation created by the City of St. Louis to administer
and operate its public housing developments. SLHA receives funding from the
United States Department of Housing and Urban Development ("HUD") pursuant to
an annual contributions contract. In 1992, HUD established the Public Housing
Management Assessment Program ("PHMAP") in an effort to standardize and
objectively measure the management performance of public housing agencies that it
funds. As part of that program, SLHA is required to submit annual performance
certifications and suggested scores in eight categories or "indicators." 24 C.F.R. §§
901.10 to 901.45. HUD then combines these certifications and suggestions with its
own data and, after confirmatory review, assigns final grades for each indicator and
an overall percentage score for the reporting period. Agencies with scores of 90% or
better are designated "high performers"; those with scores from 60% to 89% are
designated "standard"; and agencies with scores below 60% are designated
"troubled." 24 C.F.R. § 901.115.
Wilkins joined SLHA in 1996 as a Quality Control Evaluator for Public Safety.
He was responsible for evaluating the performance of public safety officers and other
aspects of SLHA's security division. While working in that capacity Wilkins became
concerned about, and eventually reported to HUD, various deficiencies in SLHA's
security operations and the misreporting of those deficiencies. HUD subsequently
hired Quadel, an outside agency, to evaluate SLHA. Based on Quadel's report and
on a failing PHMAP score of 18.5%2 for fiscal year 1997, HUD designated SLHA a
2
HUD assigned a final PHMAP score of 18.5% after a confirmatory review of
SLHA's own PHMAP report revealed discrepancies between SLHA's reported score
-2-
"troubled" agency in March 1998. Consequently, HUD assigned a Troubled Agency
Recovery Center ("TARC") team to help SLHA improve its performance and required
SLHA to enter into a formal agreement governing strategies for improvement.3
Shortly thereafter, Wilkins was promoted4 to Manager of Security Operations
and given primary responsibility for tracking and reporting SLHA's performance in
all four components of Indicator 8,5 the PHMAP category for security. He continued
to report SLHA's noncompliance with HUD security regulations, both to his
supervisors within SLHA and directly to members of the TARC team, and to express
concerns that PHMAP scores would be falsely reported. As Wilkins's
communications increased and the time for 1998 PHMAP reporting drew near,
Wilkins was first temporarily reassigned from SLHA's main office to a satellite
location, and then suspended for two weeks without pay.6 During that time, SLHA
of 48.83% and its actual performance.
3
According to 24 C.F.R. § 901.200, failure to comply with the agreement or to
improve its PHMAP score by at least ten points within one year would put SLHA into
"substantial default." At that point, HUD would have the discretion to (1) take
control of the agency, (2) transfer control to an alternative management entity, or (3)
discontinue funding and appoint a receiver to take control of the agency. 24 C.F.R.
§§ 901.210, 901.215, 901.230.
4
He also received a $5,000 annual pay increase.
5
Indicator 8 includes the following components: (1) tracking and reporting
crime-related problems; (2) screening applicants with history of criminal and/or drug-
related activity; (3) enforcing lease provisions related to criminal and/or drug-related
activity; and (4) reaching goals in crime- and drug-prevention programs. 24 C.F.R.
§ 901.45.
6
Officially, the suspension resulted from Wilkins's failure to report an incident
at one of SLHA's housing complexes. However, Wilkins filed a grievance over the
suspension, alleging that the real reason for the suspension was to remove Wilkins
from the PHMAP reporting process because of his unwillingness to report inflated
-3-
compiled and reported PHMAP data for 1998, certifying a suggested overall score of
37.1%, which reflected an improvement from the previous year of almost twenty
percentage points.
Wilkins returned to work in December 1998 and was told to report directly to
SLHA Executive Director Thomas Costello. He resumed his efforts to expose what
he believed to be fraudulent PHMAP reporting practices, informing TARC team-
member Tom Atzmiller that the 1998 scores were inaccurate. Atzmiller wrote to
Costello and expressed concern over SLHA's compliance with security regulations.
And once again, HUD's confirmatory review of SLHA's report resulted in a corrected
PHMAP score of 14.25%, less than half the reported score of 37.1%, and well below
the corrected score for 1997, 18.5%. Not only had SLHA failed to improve by the ten
points required under 24 C.F.R. § 901.200, its performance had declined.
In January 1999, Wilkins's title was changed to Security Monitor/Coordinator,
but he retained responsibility for monitoring and reporting on various components of
the PHMAP report. In June 1999, Cheryl Lovell replaced Costello as SLHA
Executive Director. She met with all SLHA personnel in July 1999 to discuss large-
scale workforce reduction plans, which included plans to privatize security operations
by October 1999. As a result, Wilkins lost administrative oversight of SLHA security
officers, and instead monitored security performance through the reports of private
security contractors. He continued to complain to his supervisors about security
problems and the private contractors' noncompliance with reporting requirements, and
he again informed HUD personnel that SLHA's reported PHMAP scores for fiscal
year 1999 were incorrect. He intensified his efforts in November and December
1999, sending letters to HUD and to his SLHA supervisors that described breakdowns
in crime-reporting processes and fraudulent PHMAP reporting practices. Finally,
after Wilkins's numerous attempts to expose SLHA's failing performance and false
scores. The suspension was subsequently reversed.
-4-
reporting with respect to tracking and reporting crime, screening of potentially
dangerous applicants, enforcement of HUD lease provisions relating to crime and
drug-related activity, particularized security risks in elderly living facilities, and
unsafe security conditions generally, SLHA fired Wilkins on December 31, 1999.
At the time of his termination, Wilkins was fifty-one years old and earning an
annual salary of $39,000. He began seeking related employment, but did not apply
with any of the private contractors who had taken over security for SLHA because he
considered the pay inadequate. In October 2000, he was hired by the United States
Department of Defense in a security position with an annual salary of $40,000. On
June 28, 2001, Wilkins was terminated from this position as well. He earned
approximately $30,000 during his nine months of work for the department. Since his
termination, Wilkins has sought employment in security and law enforcement, but
only with federal executive branch agencies in the St. Louis area. He has been unable
to find a suitable position.
On May 12, 2000, before Wilkins began working for the Department of
Defense, he filed this action in the district court. He alleged that SLHA violated the
whistleblower protection provision of the FCA when it terminated him in retaliation
for his statements to HUD concerning SLHA's security deficiencies and PHMAP
reporting practices. The case was tried before a jury, which found, via special verdict
form, that SLHA terminated Wilkins as a direct result of his statements to SLHA and
HUD personnel, and that Wilkins suffered $79,170 in lost wages. The district court
after discounting Wilkins' mitigating income, awarded statutorily-authorized double
back-pay damages in the amount of $98,340. The court also awarded front pay in the
amount of $10,000.7 Finally, the court denied SLHA's motions for judgment as a
7
Wilkins originally sought $198,667 in front pay, arguing that he would have
worked at SLHA until retirement at age 65, that he would have required ten months
to find a full-time job, that it would be an entry-level job at $30,000 per year, and that
his annual wage-and-benefits loss until retirement would be $14,000 per year. The
-5-
matter of law. SLHA appeals from the special verdict form and from the denial of its
motions. Wilkins cross-appeals from the calculation of back-pay damages.
II. DISCUSSION
This appeal raises two basic issues: whether there was sufficient evidence that
Wilkins's conduct amounted to protected activity under the anti-retaliation provision
of the FCA, and whether, in the instant case, the statute required the district court to
double the back-pay damages before or after subtracting Wilkins's interim earnings.
Before we reach those substantive issues, however, we must consider the extent of
our jurisdiction under the statute.
A. Jurisdiction Under 31 U.S.C. § 3730(h)
The anti-retaliation provision of the FCA provides a cause of action in federal
district court for employees who are "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
. . . in furtherance of a [civil action for false claims]." 31 U.S.C. § 3730(h) (emphasis
added). Because our jurisdiction is limited to actions between employees and
employers, we must decide whether a municipal corporation like SLHA is an
"employer" who can be sued under the statute.
The Supreme Court held in Vermont Agency of Natural Resources v. United
States ex rel. Stevens, 529 U.S. 765, 787 (2000), that a state cannot be a "person"
subject to suit under the qui tam provision of the FCA, 31 U.S.C. § 3729. The court
premised its holding on two basic presumptions. First, it noted the "longstanding
district court, however, rejected most of these arguments, finding that Wilkins had
failed to mitigate his lost-future-income damages.
-6-
interpretive presumption that 'person' does not include the sovereign." Id. at 780.
Second, it found that, because the treble-damages component of the qui tam statute
is "essentially punitive in nature," state liability would be inconsistent with the
"presumption against imposition of punitive damages on governmental entities."8 Id.
at 784-85. The Court reasoned that, since Congress has failed to overcome these
presumptions by expressing a clear intent to subject states to liability, states are not
persons under the statute. Id. at 787.
Stevens has given rise to much litigation and divided authority in the lower
courts over its application to local governments and municipal entities like SLHA.
Some of our sister circuits have extended Stevens "immunity" to local governments
in the qui tam context. See United States ex rel. Dunleavy v. County of Delaware,
279 F.3d 219, 225 (3d Cir. 2002) (holding that "Congress did not intend to disturb
local governmental immunity from punitive damages under the FCA by clearly
including local governments within the meaning of the term 'person'"); United States
ex rel. Garibaldi v. Orleans Parish Sch. Bd., 244 F.3d 486, 493 (5th Cir. 2001)
(holding that "the punitive damages regime of the False Claims Act . . . reflects a
congressional intent that the term 'person' in the liability provisions of the [act] not
include local governments"). Other courts have held that Stevens does not apply to
local governments. United States ex rel. Chandler v. Cook County, 277 F.3d 969,
980, 981 (7th Cir. 2002) (finding that Stevens's presumptions "cut[] the other way for
municipalities" and holding that counties are amenable to suit under the qui tam
provision); United States ex rel. Rosales v. San Francisco Hous. Auth., 173 F. Supp.
2d 987, 1015 (N.D. Cal. 2001) (holding that a municipal housing authority "is a
statutory 'person' subject to private lawsuit under the FCA"). But none of these courts
addressed the question before us in this appeal: whether Stevens requires a finding
8
On this point, the Court acknowledged a critical distinction between the
punitive nature of treble damages and the compensatory nature of double damages.
Stevens, 529 U.S. at 785-86.
-7-
that local governments cannot be sued as "employers" under the FCA's anti-retaliation
statute.
One federal district court has, however, squarely addressed this question, and
we are persuaded by its reasoning. In United States ex rel. Satalich v. Los Angeles,
160 F. Supp. 2d 1092 (C.D. Cal. 2001), the court held that Stevens bars qui tam suits
against municipalities because of the punitive nature of the mandatory treble
damages. Id. at 1102-07. But it went on to state that "retaliation claims under section
3730(h) are not dependent on a relator's ability to succeed on, or even file, a cause of
action under section 3729." Id. at 1108. And it noted the distinction, recognized by
the Stevens Court, between treble damages and double damages, agreeing that the
double back-pay damages in the anti-retaliation provision are compensatory rather
than punitive. Id. at 1109. Thus, the court concluded that "employer" in the
retaliation context should logically be read more broadly than "person" in the qui tam
context and held that a municipality is an "employer" under section 3730(h). See id.
at 1110.
While we need not decide whether SLHA is a "person" for purposes of the qui
tam provision, we agree with the Satalich court's view of the anti-retaliation
provision, and this view is supported by the statute's legislative history: "As is the
rule under other Federal whistleblower statutes as well as discrimination laws, the
definitions of 'employee' and 'employer' should be all-inclusive. . . . Additionally,
'employers' should include public as well as private sector entities." S. Rep. No. 99-
345, at 34-35 (1986), reprinted in 1986 U.S.C.C.A.N. 5299-5300. We find that
SLHA is an "employer" subject to suit under section 3730(h). The case is, therefore,
properly before us on appeal.
-8-
B. Protected Activity
We turn now to the merits. SLHA advances two main arguments: first, that the
trial court erred by omitting the essential element of protected activity from the
special verdict form it submitted to the jury; and second, that Wilkins failed to present
sufficient evidence that he engaged in protected activity under section 3730(h).9 The
submission and form of interrogatories to the jury are matters within the sound
discretion of the trial court, and we review only for abuse of discretion. E. I. du Pont
de Nemours & Co. v. Berkley and Co., Inc., 620 F.2d 1247, 1271 (8th Cir. 1980). We
review de novo the district court's denial of a motion for judgment as a matter of law
and view the facts in the light most favorable to the nonmoving party. Mattis v.
Carlon Elec. Prods., 295 F.3d 856, 860 (8th Cir. 2002) (citing Cardenas v. AT & T
Corp., 245 F.3d 994, 998 (8th Cir. 2001)). Judgment as a matter of law is only
appropriate when no reasonable jury could have found for the nonmoving party. Id.The FCA whistleblower statute protects employees who are "discharged
. . . because of lawful acts done by the employee . . . in furtherance of [a civil action
for false claims]." 31 U.S.C. § 3730(h). The district court held that, in order to prove
retaliation under this section, a plaintiff must establish that (1) the plaintiff was
9
Although Wilkins also disputes the merits of these contentions, he argues,
primarily, that SLHA has failed to preserve the issues for appellate review. We
disagree. We are satisfied that SLHA objected to the special verdict form with
adequate specificity and that the alternative verdict director it submitted before trial
was sufficient to preserve the issue under our cases. See Morse v. S. Union Co., 174
F.3d 917, 926 (8th Cir. 1999). We also find that SLHA preserved the issue of
whether Wilkins presented sufficient evidence of protected activity. It argued the
issue as part of its oral motion for judgment as a matter of law at the close of the
evidence, and its renewed motion incorporated the argument by reference. Although
SLHA could certainly have been more thorough in its compliance with Rules 50 and
51 of the Federal Rules of Civil Procedure, its deficiencies do not rise to the level of
waiver.
-9-
engaged in conduct protected by the FCA; (2) the plaintiff's employer knew that the
plaintiff engaged in the protected activity; (3) the employer retaliated against the
plaintiff; and (4) the retaliation was motivated solely by the plaintiff's protected
activity. Wilkins v. St. Louis Hous. Auth., 198 F. Supp. 2d 1080, 1086 (E.D. Mo.
2001) (citing Norbeck v. Basin Elec. Power Coop., 215 F.3d 848, 851 (8th Cir.
2000)). This was a correct statement of the law.
Thus, the question is: what qualifies as "protected activity" in the
whistleblower context? SLHA argues that falsely reported PHMAP scores do not
constitute a "claim" as defined by the qui tam statute because they could not, as
failing scores, have resulted in any economic loss to the government. See 31 U.S.C.
§ 3729(c). Thus, SLHA argues, Wilkins's attempts to expose those reports were not
done in furtherance of a qui tam action. This argument misses the distinction between
the standards for a successful qui tam suit and those for an anti-retaliation claim.
Under the whistleblower statute, "an employee engages in protected activity where
(1) the employee in good faith believes, and (2) a reasonable employee in the same
or similar circumstances might believe, that the employer is possibly committing
fraud against the government." Moore v. Cal. Inst. of Tech. Jet Propulsion Lab., 275
F.3d 838, 845 (9th Cir. 2002). In adopting that standard, the Moore court drew upon
its interpretation of Title VII's anti-retaliation provision. See id. at 845 n. 1 (citing
Trent v. Valley Elec. Ass'n, 41 F.3d 524, 526 (9th Cir. 1994)). Along with the Fifth,
Seventh, and Ninth Circuits, we have also employed a reasonable-belief standard in
the Title VII context. See Sisco v. J.S. Alberici Constr. Co., 655 F.2d 146, 150 (8th
Cir. 1981) ("[A]s long as the employee had a reasonable belief . . . the claim of
retaliation does not hinge upon a showing that the employer was in fact in violation
of Title VII."); see also Trent, 41 F.3d at 526 (citing similar cases from other circuits).
We think the Moore reasonableness test is the appropriate standard for
determining whether an employee engaged in protected activity under section
3730(h). Thus, we must determine whether Wilkins had both a good-faith and an
-10-
objectively reasonable belief that SLHA was committing fraud against the
government. We are persuaded by evidence in the record that Wilkins had both.
Congress passed, and President Lincoln signed, the False Claims Act of 1863
to combat the "massive frauds" committed by government contractors against the
Union Army during the Civil War. United States v. Bornstein, 423 U.S. 303, 309
(1976). Congressional hearings at the time revealed instances of the same horses
being sold twice to the army, sand being substituted for gunpowder, and crates full
of sawdust being shipped to the front lines labeled as muskets. See 144 Cong. Rec.
S7675-76 (daily ed. July 8, 1998) (statement of Sen. Grassley). Viewed in the light
most favorable to Wilkins, there is sufficient evidence in this case of Wilkins's belief
that SLHA, like the Civil-War contractors, was, in essence, shipping crates full of
sawdust (i.e., unsafe public housing) for which the government had paid full price
(i.e., an annual contract contribution for a housing environment that was safe). We
agree with SLHA that Wilkins could not reasonably have believed that falsely
reported PHMAP scores would somehow induce the government to spend more
money than it was already spending under its annual contributions contract. But
fraudulently concealing "defective goods" is also a false "claim" for payment within
the purview of the FCA, and Wilkins reasonably believed he was acting to prevent,
or at least report, such concealment. Because we find sufficient evidence that Wilkins
engaged in protected activity under section 3730(h), we affirm the district court's
denial of SLHA's motions for judgment as a matter of law.
Thus, SLHA's argument that the special verdict form erroneously omitted the
essential element of protected activity is without merit. The district court simply
bifurcated the issue of protected activity, submitting the factual component of the
issue to the jury via special verdict form, and reserving the legal determination for
itself. Accordingly, the jury found that Wilkins engaged in specific conduct, and the
judge determined that such conduct amounted to protected activity. While the court
-11-
could have been more precise in wording the special verdict form and in articulating
the grounds for its legal determination, we find no abuse of discretion.
C. Double Back-Pay Damages
Finally, we address the issue raised by Wilkins in his cross-appeal from the
calculation of damages. He argues that the district court erred by subtracting his
interim earnings from the back-pay damages before doubling them.10 The statute, for
its part, is silent on the issue of mitigation, providing only for "2 times the amount of
back pay." 31 U.S.C. § 3730(h).
We considered this issue, albeit in a different factual context, in Hammond v.
Northland Counseling Center, Inc., 218 F.3d 886 (8th Cir. 2000). The plaintiff in that
case had, after her termination, secured alternate employment with compensation
equal to or greater than her position with the defendant, including retroactive pay
from the date of her termination. Id. at 890. We held that doubling back-pay
damages before subtracting mitigating income would have resulted in a windfall to
a plaintiff who sustained no actual damages. Id. at 892. Although Wilkins, having
sustained nearly $80,000 in actual damages, certainly stands in a different position
than the plaintiff in Hammond, we think Hammond's underlying policy of preventing
a windfall to whistleblower plaintiffs applies to this case with equal force. The
statute clearly expresses an intent to grant "all relief necessary to make the employee
whole." 31 U.S.C. § 3730(h). We feel confident that an award of nearly $100,000
completely compensates Wilkins for the $80,000, offset by $30,000 in mitigating
income, that he lost as a result of his retaliatory termination. The district court
10
The court subtracted Wilkins's income while employed with the Department
of Defense ($30,000) from the lost wages he suffered as a result of SLHA's retaliatory
termination ($79,170), then multiplied the difference by two (($79,170 - $30,000) x
2), for a total award of $98,340.
-12-
properly doubled Wilkins's back-pay damages after subtracting his interim earnings.
III. CONCLUSION
We affirm the district court in all respects.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
-13-