United States Ex Rel. Ziebell v. Fox Valley Workforce Development Board, Inc.

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 14-1780
UNITED STATES OF AMERICA
ex rel. LUANN ZIEBELL,
Plaintiff-Appellant,
v.
FOX VALLEY WORKFORCE
DEVELOPMENT BOARD, INC., and
WORKFORCE ECONOMICS, INC.,
Defendants-Appellees.
____________________
Appeal from the United States District Court
for the Eastern District of Wisconsin.
No. 10 C 436 — William C. Griesbach, Chief Judge.
____________________
ARGUED FEBRUARY 9, 2015 — DECIDED NOVEMBER 25, 2015
____________________
Before ROVNER and SYKES, Circuit Judges, and ANDREA R.
WOOD, District Judge.*
* Of the Northern District of Illinois, sitting by designation.
2 No. 14-1780
SYKES, Circuit Judge. In 2003 LuAnn Ziebell began work-
ing at the Fox Valley Workforce Development Board, Inc., a
state job-training agency serving central Wisconsin with
funding from the federal government. She was fired in 2008.
Almost two years later, she filed a qui tam action alleging
that the Board violated the False Claims Act, 31 U.S.C.
§§ 3729 et seq., by improperly contracting services through a
subsidiary corporation. As best we can tell, her claim relies
on a theory known as “false certification”; she alleges that
the Board made false certifications of regulatory compliance
as a predicate to receiving federal funds. She also alleges that
she was fired in retaliation for engaging in activity protected
by the Act. The district court found both claims factually
deficient and entered summary judgment for the Board.
Ziebell’s qui tam claim faces a jurisdictional hurdle. To
prevent parasitic lawsuits, the False Claims Act blocks
jurisdiction over qui tam claims that are based on infor-
mation already in the public domain. Here, the alleged
improprieties by the Board were revealed in a routine audit
performed by its supervising state agency, which counts as a
“public disclosure” under the Act. An exception applies if
Ziebell can show that she was the “original source” of the
information. She has not done so. Accordingly, we dismiss
Ziebell’s qui tam claim for lack of jurisdiction. On the retalia-
tion claim, we affirm the judgment for the Board. There’s no
evidence that Ziebell was fired in retaliation for engaging in
protected activity.
I. Background
The Fox Valley Workforce Development Board was
formed in 2000 under the auspices of the Workforce Invest-
ment Act of 1998, see 29 U.S.C. §§ 2801 et seq., a federal job-
No. 14-1780 3
training program that provides funding to state-level in-
vestment boards, which in turn channel funds to area-
designated workforce “development boards.” The develop-
ment boards are multi-stakeholder bodies whose representa-
tives are appointed by local elected officials.
During the time period relevant here, the Fox Valley
Board provided job-training services in the Wisconsin
counties of Calumet, Fond du Lac, Green Lake, Outagamie,
Waupaca, Waushara, and Winnebago. Ziebell was hired as
an executive assistant in 2003 and the following year was
promoted to finance director. During Ziebell’s entire tenure
with the Board, she reported to its executive director, Cheryl
Welch.
Development boards provide services through subcon-
tractors selected via a competitive bidding process. The Fox
Valley Board contracted out a particular basket of services—
called Adult and Dislocated Worker Services—to a firm
known as Career Pros. That company dissolved in the
summer of 2004. The Board responded to this event by
creating its own subsidiary, Workforce Economics, Inc.,
which subsumed the former Career Pros staff. This had the
desirable effect of maintaining continuity of service, but it
took the agency out of regulatory compliance. Under federal
rules implementing the Workforce Investment Act, devel-
opment boards are not supposed to directly provide ser-
vices.
In September 2007 the Wisconsin Department of Work-
force Development (“DWD”), the state agency responsible
for overseeing the area development boards, conducted a
routine audit of the Board’s activities. The audit report
criticized the Board for providing services through its own
4 No. 14-1780
subsidiary and recommended an end to the practice. In a
letter dated February 1, 2008, Welch acknowledged the
problem and advised DWD that the Board would return to
competitive bidding for Adult and Dislocated Worker Ser-
vices. The letter also stated that Workforce Economics would
not bid on services for the remainder of 2008 or for 2009.
The Board thereafter solicited bids but received only two.
Of those two, one covered only four of the counties in the
Board’s service area, while the other bidder was deemed too
inexperienced to competently provide the required services.
As a result, by the time the full Board met on May 15, 2008,
Welch had decided to continue providing services through
Workforce Economics.
Ziebell attended the May 15 meeting with copies of the
DWD audit report and Welch’s responsive letter in hand. She
did not ask to speak but instead “tried to create a disturb-
ance” by speaking to other board members while the meet-
ing was in progress. She hoped that by disrupting the meet-
ing she would prompt someone to inquire about the docu-
ments she brought with her, at which point she would
expose Welch’s plot to stick with Workforce Economics, the
Board’s in-house service provider. Things didn’t unfold that
way. Rather, Welch explained the problem with the bids and
suggested that the Board allow Workforce Economics to bid
to provide the necessary services. The board members and
local elected officials agreed. Ziebell had no influence on the
decision.
Four days later Welch and the Board’s Chief Operating
Officer called Ziebell to a meeting and fired her. Welch read
from a script listing the reasons for the termination decision.
These included (among other reasons): (1) Ziebell had
No. 14-1780 5
admitted to skipping work to play golf; (2) she had disrupt-
ed the May 15 board meeting; (3) she chose not to further her
formal education; and (4) she submitted mileage-
reimbursement forms that contained some irregularities.
After reading the script, Welch asked Ziebell if she preferred
to resign. Ziebell rejected that suggestion, saying, “[t]here is
no way in Hell I am going to resign. If you want to terminate
me, you will have to pay the consequences.”
In July Ziebell filed a complaint with DWD alleging un-
lawful retaliation for engaging in activity protected by the
False Claims Act. Almost two years later she brought this qui
tam action on behalf of herself and the United States alleging
that the Board violated the Act. She also alleged that the
Board fired her in retaliation for activity protected under the
Act. The United States declined to participate in the qui tam
claim. While the suit was pending, the U.S. Department of
Labor conducted its own review of Wisconsin’s workforce
development programs and found various compliance
deficiencies by a number of area workforce development
boards. There were no findings of fraud. The Labor Depart-
ment reported its findings to the DWD, which has since been
working with federal authorities to alleviate the remaining
concerns.
The district court granted summary judgment for the
Board, concluding that Ziebell’s claims lacked factual sup-
port. This appeal followed.
II. Analysis
The False Claims Act prohibits the submission of a false
or fraudulent claim for payment to the government.
31 U.S.C. § 3729(a). Under the Act, private citizens may file
6 No. 14-1780
civil actions on behalf of the United States to recover money
the government paid because of a false or fraudulent claim.
Id. § 3730(b)(1). The Act incentivizes these qui tam suits by
allowing prevailing “relators” (the citizen plaintiffs) to
recover a share of the enhanced recovery allowed under the
statute. Id. § 3729(a) (providing for treble damages and other
penalties); id. § 3730(d)(1)–(2) (providing for an award to
prevailing qui tam plaintiffs).
Ziebell focuses on the Board’s regulatory noncompli-
ance—its use of an in-house service provider—but she hasn’t
clearly articulated a false-claims theory of her case. She
appears to be trying to invoke a theory known as “false
certification,” which derives from § 3729(a)(1)(B). That
section imposes liability against any person who “knowingly
makes, uses, or causes to be made or used, a false record or
statement material to a false or fraudulent claim.” Id. To
prevail on a claim of false certification, the relator must
prove that: (1) the defendant certified its compliance with
particular statutory or regulatory requirements that were
“conditions of, or prerequisites to, government payment”;
(2) the defendant “did not actually comply with those condi-
tions; and (3) the defendant “knew it had failed to comply
with those conditions.” United States ex rel. Absher v. Momence
Nursing Center, Inc., 764 F.3d 699, 710–11 (7th Cir. 2014)
(citing United States ex rel. Gross v. AIDS Research Alliance-
Chi., 415 F.3d 601, 604 (7th Cir. 2005)).
Ziebell identifies three documents that she claims were
false or misleading certifications—a 2000 “Consortium
Agreement,” a “Local Plan” for the years 2005–2007, and
Welch’s February 1, 2008 response to the DWD audit.
No. 14-1780 7
We note for starters that the Consortium Agreement pre-
dates the formation of the Board; it also contains only a
generic promise to “conform to all the fiscal requirements of
all applicable laws.” The Local Plan, too, contains only a
boilerplate general promise of future regulatory compliance.
Welch’s letter is only somewhat more specific. In it she states
that Workforce Economics—the Board’s in-house service
provider—would not be bidding to provide services for the
rest of 2008 or for 2009. She also states more generally that
the Board would be “reviewing procedures” to “ensure
[Workforce Investment Act] rules are followed.”
Promises of future compliance can be false or fraudulent
only if made with intent not to perform. As we’ve explained
before in this context, “fraud requires more than breach of
promise: fraud entails making a false representation, such as
a statement that the speaker will do something it plans not to
do.” United States ex rel. Main v. Oakland City Univ., 426 F.3d
914, 917 (7th Cir. 2005) (emphasis added). Ziebell has ad-
duced no evidence suggesting that any of these statements
was made with fraudulent intent. Ziebell’s false-certification
theory runs into further trouble in that none of these docu-
ments has any apparent nexus to federal payments.
But aside from these factual infirmities, there’s an ante-
cedent question of our jurisdiction over Ziebell’s claim. The
False Claims Act generally bars qui tam actions that are
based on information already in the public domain. At the
time period in question here, the so-called “public disclo-
sure” bar stated as follows (it has since been amended):
No court shall have jurisdiction over an action
under this section based upon the public dis-
closure of allegations or transactions in a crim-
8 No. 14-1780
inal, civil, or administrative hearing, in a con-
gressional, administrative, or Government
Accounting Office report, hearing, audit, or in-
vestigation, or from the news media, unless the
action is brought by the Attorney General or
the person bringing the action is an original
source of the information.
31 U.S.C. § 3730(e)(4)(A).
This language clearly withdraws jurisdiction over qui
tam actions that are based on publicly disclosed information
unless the relator is an “original source” of the information.
See Rockwell Int’l Corp. v. United States, 549 U.S. 457, 468
(2007); Glaser v. Wound Care Consultants, Inc., 570 F.3d 907,
912 (7th Cir. 2009). The point of the jurisdictional bar is to
“deter parasitic qui tam actions.” United States ex rel. Gear v.
Emergency Med. Assocs. of Ill., Inc., 436 F.3d 726, 728 (7th Cir.
2006). Once information is public, “only the Attorney Gen-
eral and a relator who is an ‘original source’ of the infor-
mation may represent the United States.” Id. (quoting United
States ex rel. Fallon v. Accudyne Corp., 97 F.3d 937, 941 (7th
Cir. 1996)).
Our cases establish a three-step inquiry to determine
whether a qui tam claim falls within the public-disclosure
bar. We ask (1) have the relator’s allegations been publicly
disclosed; (2) if so, is the lawsuit “based upon” those public-
ly disclosed allegations; and (3) if it is, was the relator the
original source of the information? Glaser, 570 F.3d at 913.
The relator bears the burden of establishing jurisdiction.
Absher, 764 F.3d at 707; Glaser, 570 F.3d at 913 (“At each stage
of the jurisdictional analysis, the plaintiff bears the burden of
proof.”).
No. 14-1780 9
Information is publicly disclosed if “the critical elements
exposing the transaction as fraudulent are placed in the
public domain.” United States ex rel. Feingold v. AdminaStar
Fed., Inc., 324 F.3d 492, 495 (7th Cir. 2003). Disclosure by
units of state and local governments count as public disclo-
sures. See Graham Cnty. Soil & Water Conservation Dist. v.
United States ex rel. Wilson, 559 U.S. 280, 301 (2010) (“Today’s
ruling … confirms that disclosures made in one type of
context—a state or local report, audit, or investigation—may
trigger the public disclosure bar.”). “[A] relator’s [qui tam]
complaint is ‘based upon’ publicly disclosed allegations or
transactions when the allegations in the relator’s complaint
are substantially similar to publicly disclosed allegations.”
Glaser, 570 F.3d at 920 (emphasis added).
Ziebell’s claim rests on the Board’s improper practice of
provided services directly through Workforce Economics.
That’s precisely what DWD found in its audit, so her qui tam
claim is plainly “based on” the DWD’s public disclosure of
this information. Ziebell doesn’t argue otherwise. Instead,
she tries to bring herself within the original-source excep-
tion. “The original-source exception requires relators to
establish that they have (1) ‘direct’ knowledge of fraudulent
activity; (2) ‘independent’ knowledge of fraudulent activity;
and (3) voluntarily provided their information to the gov-
ernment before filing a qui tam action.” Id. at 917 (quoting
31 U.S.C. § 3730(e)(4)(B)).
Ziebell hasn’t come close to satisfying these require-
ments. Although it may be reasonable to infer that she had
direct knowledge of the Board’s relationship with Workforce
Economics as a general matter, she hasn’t shown that she
had direct and independent knowledge—apart from the DWD
10 No. 14-1780
audit report—that this relationship created a problem of
regulatory compliance. More to the point, she hasn’t shown
that she had direct and independent knowledge of any
fraudulent-claims activity by the Board. Finally, it’s clear that
Ziebell did not voluntarily provide any information about
her allegations to the federal government before filing suit.
Indeed, she admitted in her deposition that it was the DWD
report that “started some of the ball rolling” regarding the
regulatory dilemma created by the use of an in-house service
provider and that she talked to “no one” in the federal
government about this until after she filed suit. Ziebell’s qui
tam claim clearly falls within the public-disclosure bar and
must be dismissed for lack of jurisdiction.
Ziebell’s retaliation claim fails on the merits. The False
Claims Act provides a cause of action to any employee who
is “discharged, demoted, suspended, threatened, harassed,
or [otherwise] discriminated against … because of lawful
acts” undertaken “in furtherance of” a qui tam action.
31 U.S.C. § 3730(h)(1). To prevail on a retaliation claim
requires proof that “(a) [the plaintiff’s] actions were taken ‘in
furtherance’ of [a False Claims Act] enforcement action and
were therefore protected by the statute; (b) his employer had
knowledge that he was engaged in this protected conduct;
and (c) his discharge was motivated, at least in part, by the
protected conduct.” Fanslow v. Chi. Mfg. Ctr., Inc., 384 F.3d
469, 479 (7th Cir. 2004).
Ziebell has satisfied none of these elements. First, as
we’ve already noted, the record doesn’t show any fraudu-
lent-claims activity; at most it shows regulatory noncompli-
ance. As Fanslow explains, “there is an objective component
to the test for a [retaliation] claim under § 3730(h), as well as
No. 14-1780 11
a subjective one.” Id. at 479–80. In other works, it’s not
enough for Ziebell to think she’s enforcing the False Claims
Act; a reasonable employee in the same position must be
able to think the same thing. Id. at 480 (“We agree with
several of our sister circuits, which have held that the rele-
vant inquiry to determine whether an employee’s actions are
protected under § 3730(h) is whether: ‘(1) the employee in
good faith believes, and (2) a reasonable employee in the
same or similar circumstances might believe, that the em-
ployer is committing fraud against the government.’” (quot-
ing Moore v. Cal. Inst. of Tech. Jet Propulsion Lab., 275 F.3d 838,
845 (9th Cir. 2002))). Because Ziebell’s qui tam claim lacks
factual support, no reasonable employee in similar circum-
stances would believe that the Board was committing fraud
against the federal government.
Moreover, there’s no evidence that Ziebell took any ac-
tion toward a qui tam claim before she was fired. Nor is
there anything in the record to suggest that the Board had
any idea that she was even contemplating a qui tam claim.
Finally, Ziebell was fired for a variety of reasons ranging
from truancy to causing a disruption at the May 2008 board
meeting. Nothing suggests that the decision was motivated
in part by protected activity. Ziebell offers no evidence that
the reasons given for her firing were pretexual. Nor could
she; Ziebell gave her superiors no indication she was taking
steps toward a False Claims Act enforcement action. Alt-
hough her disruption of the May 2008 board meeting was
related to the improper subcontract with Workforce
Economics, disrupting a meeting hardly qualifies as protect-
ed activity absent something more. The retaliation claim is
woefully lacking in factual support.
12 No. 14-1780
Accordingly, for the foregoing reasons, we DISMISS the
qui tam claim for lack of jurisdiction. In other respects the
judgment is AFFIRMED.