Summary
In United States ex rel. Dihu v. IIT Research Institute, 1998 WL 299390 (N.D.Ill. May 21, 1998), for example, a plaintiff brought an FCA claim and alleged retaliatory termination under both the FCA and state law.
Summary of this case from U.S. ex Rel. Chandler v. Hektoen InstituteOpinion
No. 97 C 5695.
May 21, 1998
MEMORANDUM OPINION AND ORDER
This matter is before the Court on Defendant's motion to dismiss or in the alternative for summary judgment. For the following reasons, Defendant's motion is denied with respect to Counts I and II, but granted with respect to Count III.
BACKGROUND
Defendant has filed a motion styled as a motion to dismiss or, in the alternative, for summary judgment. In his response to the motion, Plaintiff bristles at the notion of having the Court consider a summary judgment motion at this early stage, asserting that many of the Defendant's arguments are premature as little or no discovery has yet occurred in this case. For these summary judgment arguments, Plaintiff requests time to conduct discovery on the issues raised by the motion. The Court agrees with Plaintiff that consideration of summary judgment issues (those necessitating consideration of facts outside the pleadings) are premature at this juncture, and thus the Court will consider only those arguments that are appropriate on a motion to dismiss. Since this opinion will only deal with Defendant's motion as one to dismiss the complaint, the following facts are taken from Plaintiff's complaint, the allegations of which must be assumed true for the purposes of such a motion.
Plaintiff Remon Dihu ("Dihu") is a scientist who has over twenty-five years experience in surety lab and science management and engineering. Dihu was employed by Defendant IIT Research Institute ("IITRI") for fourteen years from November 1982 to September 1996. IITRI, a subdivision of the Illinois Institute of Technology, is a research institute specializing in, inter alia, surety lab research for the Department of the Army. The Department of Army contracted with IITRI to test and research various chemical agents, for which IITRI receives monetary compensation on a per contract basis for this testing.
When IITRI enters into a contract with the Department of the Army, the Army requires IITRI to conform to certain Army regulations, including Army Regulation 50-6 ("AR 50-6"). See 29 C.F.R. § 1910.1450. Under these regulations, the Army requires that those providing services under contract, like IITRI, provide a written protocol known as Standing Operating Procedures (SOP). In providing services to the Army, IITRI is thus bound by AR 50-6, by the specific contract and agreements, by SOP protocols, and by any other applicable regulations for the testing and research of various chemicals and chemical weapons.
In mid-1996, an accident allegedly occurred in IITRI's surety laboratory. An IITRI scientist was conducting an experiment which involved reacting agent Mustard with water at an elevated temperature. A problem occurred with the experiment requiring the scientist to gain access to the hood that contained the experiment, reaching his bare arm into the hood without any protective clothing. Some of the Mustard agent was released and burned the IITRI scientist, causing a large blister to form on the scientist's hand and arm. This blister was allegedly apparent on the injured scientist's arm for approximately six weeks following the incident.
Dihu asserts that this incident ("the First Alleged Incident") was a reportable incident under AR 50-6. IITRI did not, however, report the incident to the Army. Dihu contends that this non-disclosure allowed IITRI to avoid a possible six-month shutdown of the lab that would have resulted if the incident had been reported. In failing to report the incident, IITRI is alleged to have violated regulations and express terms of its agreements with the Department of the Army. Further, IITRI submitted claims to the Army that expressly and/or impliedly stated that IITRI had conformed with all applicable procedures and regulations, submissions which Dihu alleges were false in light of IITRI's failure to report the First Alleged Incident as required.
Dihu, as a member of the IITRI Surety Committee, reported the First Alleged Incident to several IITRI management personnel. Prior to a Surety Committee meeting on July 2, 1996, Dihu reported the incident to Gug Sresty, Administrative Manager of the Environmental Sciences Section. Dihu discussed his views of the proper reporting procedure with Sresty, and Sresty apparently became angry and told Dihu to "mind his own business." Dihu also reported the incident to Dr. Ronald Pape, Administrative Manager of the Explosion Science Section, on at least three separate occasions. Finally, Dihu asserts that he reported the First Alleged Incident on at least two occasions to Ray McCauley, the Safety Officer and a Surety Committee member at IITRI.
After bringing the alleged false claims and fraudulent conduct to light in June through August 1996, Dihu was allegedly subjected to harassment, discriminated against, and ultimately forced from his job in retaliation for his efforts to investigate this conduct. After September 1996, Dihu was no longer allowed to work at IITRI on any schedule as an employee on any job.
Subsequent to Dihu's dismissal, in December 1996, Dihu was advised that another chemical accident had occurred at IITRI's Surety Laboratory ("the Second Alleged Incident"). In the Second Alleged Incident, another IITRI scientist dumped a chemical nerve agent, GB, on the surface of a decontamination solution in a plastic bucket. The mixing of these chemicals apparently caused a volatile reaction, resulting in the release of agent GB and hydrogen fluoride gases from the hood, causing personal injuries. Pinpointed pupils (the first sign of exposure to nerve agent) were apparent on various surety staff members who were present in the laboratory. Dihu asserts that this accident was caused by the IITRI scientist's failure to follow surety safety practices and written SOPs dealing with "Decontamination of Surety Material." Dihu asserts that the Second Alleged Incident was also a reportable incident under AR 50-6; however, IITRI likewise did not file the requisite report for this incident.
Plaintiff Dihu has since filed his complaint in this case. As required under the False Claims Act (FCA), Dihu furnished a statement of all material evidence related to this complaint to the appropriate federal prosecutors so that the United States government could decide whether to intervene in this action against IITRI. The United States has apparently chosen not to intervene, and thus Dihu can proceed with his claims on his own. The complaint asserts three counts for relief: (1) a qui tam action under 31 U.S.C. § 3730(b); (2) a retaliation claim under 31 U.S.C. § 3730(h); and (3) an Illinois state law claim for retaliatory discharge. Defendant IITRI has moved to dismiss all three of these claims, asserting several bases for why they fail as a matter of law. Before addressing the substance of this motion, however, it is first necessary to set forth the proper legal standard.
LEGAL STANDARD
The purpose of a motion to dismiss pursuant to Rule 12(b)(6) is to test the sufficiency of the complaint, not to decide the merits of the case. Defendants must meet a high standard in order to have a complaint dismissed for failure to state a claim upon which relief may be granted. In ruling on a motion to dismiss, the court must construe the complaint's allegations in the light most favorable to the plaintiff and all well-pleaded facts and allegations in the plaintiff's complaint must be taken as true. Bontkowski v. First National Bank of Cicero, 998 F.2d 459, 461 (7th Cir.), cert. denied, 510 U.S. 1012, 114 S.Ct. 602, 126 L.Ed.2d 567 (1993). The allegations of a complaint should not be dismissed for failure to state a claim "unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). See also Hartford Fire Insurance Co. v. California, 509 U.S. 764, 113 S.Ct. 2891, 125 L.Ed.2d 612 (1993); Sherwin Manor Nursing Center, Inc. v. McAuliffe, 37 F.3d 1216, 1219 (7th Cir. 1994), cert. denied, 516 U.S. 862, 116 S.Ct. 172, 133 L.Ed.2d 113 (1995). Nonetheless, in order to withstand a motion to dismiss, a complaint must allege facts sufficiently setting forth the essential elements of the cause of action. Lucien v. Preiner, 967 F.2d 1166, 1168 (7th Cir.), cert. denied, 506 U.S. 893, 113 S.Ct. 267, 121 L.Ed.2d 196(1992).
In reviewing a Rule 12(b)(6) motion to dismiss for failure to state a claim, the court is limited to the allegations contained in the pleadings themselves. Documents incorporated by reference into the pleadings and documents attached to the pleadings as exhibits are considered part of the pleadings for all purposes. Fed.R.Civ.P. 10(c). In addition, "[d]ocuments that a defendant attaches to a motion to dismiss are considered a part of the pleadings if they are referred to in the plaintiff's complaint and are central to her claim." Venture Associates Corp. v. Zenith Data Systems Corp., 987 F.2d 429, 431 (7th Cir. 1993). It is with these principles in mind that we turn to the motion before us.
DISCUSSION
In the memoranda filed in support of its motion, Defendant IITRI asserts several bases for why Plaintiff Dihu's complaint fails as a matter of law. As the Court has already explained, we find it presently appropriate to consider only those arguments for dismissal, and not summary judgment, which are necessarily based on the pleadings alone. The Court will analyze each of these arguments as they relate to the three counts of Dihu's complaint in turn.
I. Qui Tam Action under § 3730(b)
As Count I of his complaint, Dihu asserts an action pursuant to § 3730(b) of the FCA for IITRI's filing of a false or fraudulent claim which was paid by the United States government. This "whistleblower" provision of the FCA is intended to discourage fraud against the government and to encourage those with knowledge of such fraud to come forward. Robertson v. Bell Helicopter Textron, Inc., 32 F.3d 948, 951 (5th Cir. 1994). Dihu asserts that the failure of IITRI to report the chemical incidents to the Army was an actionable fraud under the statute; IITRI, on the other hand, argues that the facts alleged do not support a qui tam action in this case.
IITRI first argues that the facts alleged do not support Dihu's contention that the applicable Army regulation — AR 50-6 — was violated in this case. IITRI contends that the two chemical incidents described in the complaint would and did not trigger the reporting requirements set forth in Section 4-4 of AR 50-6. The relevant requirements of the "Chemical event reporting procedures" under Section 4-4 require the following types of incidents be reported:
. . . (a)(3) Confirmed detection of agent above threshold concentration occurring for any period outside the primary engineering control. This includes agent operations conducted in a closed system (e.g. lab hood or glove box). . . .
. . . (4) Actual exposure of personnel to agent above the allowable limits contained in AR 385-61, DA Pam 40-8, and DA Pam 40-173 that is confirmed by clinical evaluation, initial laboratory evaluation or documented by sampling techniques. This includes any case where there is reasonable belief that an exposure has occurred to any individual above these limits. Special attention needs to be given to workers reporting that they believe that they were exposed to agent or failure of personnel protective equipment.
. . . (6) Loss of chemical agent (other than deliberate destruction by approved, authorized laboratory and demilitarization processes).
AR 50-6, Sec. 4-4. With respect to Section (a)(3), IITRI contends that Dihu has not alleged anywhere in his complaint that a chemical agent escaped outside the enclosed hood in either of the two incidents, let alone that there were was a "confirmed detection" of these agents outside the hood. IITRI also argues that Dihu has not alleged that the scientists were exposed to the chemical agents at levels "above the allowable limits," as is required by Section (a)(4) of the regulations. Finally, IITRI notes that the complaint does not allege any "loss of chemical agent" as is listed under Section (a)(6). Thus, IITRI argues that Dihu's complaint simply fails to allege any incident that should have triggered the reporting obligations under AR 50-6, and that therefore IITRI cannot be held liable for not reporting these incidents to the Army.
Though the two alleged incidents may ultimately prove to not have been covered by AR 50-6's reporting requirements, the Court is convinced that Dihu has sufficiently alleged facts which would seem to trigger these requirements. Dihu has alleged that the scientists exposed to the chemical agents suffered injuries which were physically manifested — a severe burn and blister in the First Alleged Incident, and dilated pupils indicating exposure to nerve gas in the Second Alleged Incident. In the Court's view, such injuries would seemingly provide a reasonable basis to believe that an exposure had occurred to these individuals above the allowable limits as covered under Section 4-4(a)(4). Since we must construe Dihu's allegations in a light most favorable to him on this motion, the Court believes that Dihu has clearly set forth facts which should have triggered IITRI's obligation to report the chemical incidents to the Army. Thus, IITRI's motion is denied as to this argument.
IITRI alternatively argues that, even if it did violate the accident reporting obligations of AR 50-6, such a violation still cannot support an action under the FCA. Dihu acknowledges that IITRI in fact completed all of the work for which it billed the Army, and IITRI thus argues that it cannot be held liable for filing a false claim for payment with the United States government under § 3730(b). At bottom, IITRI basically contends that its failure to comply with Army regulations was not material to any payment tendered to IITRI for their surety work for the Army.
IITRI cites the Seventh Circuit's decision in Hindo v. University of Health Sciences/The Chicago Medical School, 65 F.3d 608 (7th Cir. 1995), for the proposition that a misrepresentation extraneous to the work billed to the government does not qualify as a "false or fraudulent claim for payment" under 31 U.S.C. § 3729(a). The Hindo court rejected the plaintiff's argument that each invoice submitted to the United States government for payment should be construed as an implied representation that all applicable regulations were being complied with. The court interpreted the statute more narrowly, explaining that "[a]n example of a false statement in an invoice . . . is the representation that a resident worked five days a week at a hospital . . . when he worked only three. . . ." Id. at 613. Thus, IITRI argues that it completed all the work for which the government was billed, and that any alleged misrepresentations were, like they were in Hindo, immaterial to IITRI's compensation and cannot support a claim under the FCA.
A recent decision from this District echoes the holding of Hindo. See Luckey v. Baxter Healthcare Corp., ___ F. Supp. ___, 1998 WL 199051 (N.D.Ill. Apr.20, 1998). The Luckey court noted that "the FCA is not designed to punish every type of fraud committed upon the government," and that the statute should not be interpreted to cover "every request for payment accompanied by a failure to comply with all applicable regulations." Id. at *10. Instead, the proper standard to be applied in these cases is "whether the defendants' compliance with the statutes and regulations in question was a condition to receiving payment from the government." Id. at *11 ( citing United States ex rel. Hopper v. Anton, 91 F.3d 1261, 1266-68 (9th Cir. 1996)).
Though not bound by this decision, the Court believes that Luckey strikes an appropriate balance for evaluating the merits of qui tam claims. In fact, the Luckey standard will ultimately determine whether IITRI's alleged misrepresentations — its failure to report the chemical release incidents — are actionable under § 3730(b). At this stage of the case, however, all that Dihu needs to do to avoid dismissal is allege that the Army would have withheld payment if the regulations had been complied with. Dihu has so alleged, and thus he has cleared the low hurdle of legal sufficiency set forth by a motion to dismiss. Though this issue may ultimately prove dispositive at a later stage of the case, IITRI's motion to dismiss Count I of Dihu's complaint is denied.
II Retaliation Claim under § 3730(h)
In Count II of his complaint, Dihu claims that he was retaliated against for having raised his concerns about IITRI's failure to report the chemical incidents to the Army. Dihu specifically alleges that he was harassed, retaliated against, discriminated against, and ultimately forced from his job in retaliation for his efforts to investigate the false claims alleged in this complaint. Dihu contends that IITRI's actions violate 31 U.S.C. § 3730(h), which provides that:
[a]ny 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, initiation of, testimony for, or assistance in an action filed or to be filed under this section, shall be entitled to all relief necessary to make the employee whole.31 U.S.C. § 3730(h). There is little question that Dihu has alleged that he suffered an adverse employment action — he says he was forced from his job, among other things — after he raised the fraudulent conduct. Though conceding this point, however, IITRI asserts several other reasons why Dihu cannot make out a retaliation claim under the FCA.
IITRI first argues that Dihu has not alleged that he performed acts "in furtherance of an action filed or to be filed" under the Act so as to trigger the protection of § 3730(h). The Seventh Circuit has recognized that "[t]he statute expressly covers investigatory activities preceding litigation." Neal v. Honeywell, Inc., 33 F.3d 860, 864 (7th Cir. 1994). IITRI contends, however, that although Dihu may have "reported" the First Alleged Incident to IITRI management, he does not allege that he engaged in acts protected by the statute — investigation, initiation, testifying, or assisting in an action. If Dihu has not engaged in such statutorily-protected activity, IITRI argues, his claim for retaliation under the Act must fail.
Despite IITRI's arguments to the contrary, the Court believes that Dihu's actions fit comfortably within the zone of protected activity defined by Neal. Dihu alleges that he reported the First Alleged Incident to several IITRI managers, apparently hoping that they would initiate an investigation of the incident. Likewise, the plaintiff in Neal merely "reported what she had learned" of the putative fraud in that case. But even if "reporting" such information is not enough, Dihu has expressly alleged that he was retaliated against "for his efforts to investigate the false claims" to the Army. In the Court's view, these allegations are clearly sufficient to establish that Dihu was engaged in protected activity under the Act when he suffered the adverse employment actions. Thus, this argument of IITRI's motion also must fail.
Assuming that Dihu did engage in statutorily-protected activity, IITRI alternatively argues that a § 3730(h) action cannot be predicated on that activity if it was not done in furtherance of an FCA action. Courts have held that a qui tam plaintiff must demonstrate that, in order for his reporting of a violation to be protected under the statute, his actions were undertaken with the intention of bringing an FCA action and not merely to comply with his employment obligations. See U.S. ex rel. Ramseyer v. Century Healthcare Corp., 90 F.3d 1514, 1523 fn. 7 (10th Cir. 1996); Robertson v. Bell Helicopter Textron, Inc., 32 F.3d 948, 951 (5th Cir. 1994). IITRI argues that Dihu, when he reported the First Alleged Incident, was merely acting in his role as a member of IITRI's Chemical Surety Committee, and that at that time he had no intention of filing a qui tam complaint.
Though this argument may very well carry the day at a later stage of the case, the Court is not presently convinced that Dihu's complaints were motivated solely by his employment obligations. Dihu has alleged that he was retaliated against because of his efforts to investigate the First Alleged Incident, efforts which ultimately led to the filing of Count I of this lawsuit. Though noting that he was a member and attended the meetings of the Chemical Surety Committee, Dihu has alleged that he reported the incident on several occasions outside his role on the committee. These allegations, when taken in a light most favorable to Dihu, are sufficient to survive a motion to dismiss on this point.
IITRI finally makes several other arguments as to why Dihu's retaliation claim must fail as a matter of law. IITRI asserts that Dihu has not established the requisite element of causation between his allegedly protected activities and the adverse employment decisions taken against him. In addition, IITRI offers evidence demonstrating that it had legitimate non-pretextual reasons for taking these adverse actions with respect to Dihu. Once again, however, the Court finds these argument premature. Though IITRI may prevail on one or more of these arguments at a later time, each of them require further factual development so that they can be properly raised in a motion for summary judgment. As to the present motion, however, IITRI's motion to dismiss Count II must be denied.
III. Illinois State Law Retaliatory Discharge Claim
As the third and final count of his complaint, Dihu asserts a claim for retaliatory discharge under Illinois common law. To establish a claim for retaliatory discharge under Illinois law, Dihu must show that he was (1) discharged, (2) in retaliation for his activities, and (3) that his discharge violates a clear mandate of public policy. Long v. Commercial Carriers, Inc., 57 F.3d 592, 594 (7th Cir. 1995). The first element of this claim is not in dispute. Similarly, Dihu has sufficiently alleged the existence of the second element, and IITRI's arguments as to the lack of any causal link between Dihu's activities and his discharge are not persuasive on this motion to dismiss. Thus, the legal sufficiency of Dihu's third claim rests on whether his discharge was in violation of an established public policy.
Dihu has alleged in his complaint that IITRI's chemical incident reporting violations, involving hazardous chemical agents, contravene the state's interests in the health and safety of its citizens. It is true that "Illinois courts have consistently held that policies affecting the health and safety of citizens will support a retaliatory discharge claim." Leweling v. Schnadig Corp. ., 276 Ill. App.3d 890, 212 Ill. Dec. 762, 657 N.E.2d 1107, 1109-10 (Ill.App. 1 Dist. 1995). Furthermore, employees engaged in "whistleblowing", like Dihu, have been found to have the most direct relationship to public policy and thus have merited the greatest protection. Fowler v. Great American Ins. Cos. ., 653 F. Supp. 692, 697 (N.D.Ill. 1987). Though the public policies are generally gleaned from violations of Illinois state law, the Illinois Supreme Court has made clear that federal laws that are national in scope and affect citizens generally can also define Illinois public policy. See Wheeler v. Caterpillar Tractor Co., 108 Ill.2d 502, 92 Ill. Dec. 561, 485 N.E.2d 372 (Ill. 1985). Dihu thus contends that his discharge, which was based on his blowing the whistle on IITRI's alleged violations of Army safety standards, was in violation of Illinois public policy and thus can support a claim of retaliatory discharge.
The Court does not agree with Dihu that Illinois courts would recognize a retaliatory discharge action in this case. Dihu's discharge did spawn from his concern that health and safety regulations were not being followed, an area of concern which has been afforded public policy protection in prior cases. However, the regulation that was allegedly violated in this case was an internal Army regulation which applied solely to Army contractors, one which does not seem to have the broad affect on Illinois citizens that would justify the recognition of a public policy in its application. But even if it did, another dispositive consideration renders Dihu's Illinois claim without merit. Illinois courts have held that the "availability of an adequate alternative remedy" should be considered when deciding whether to recognize a retaliatory discharge claim in a specific context. Leweling, 212 Ill. Dec. 762, 657 N.E.2d at 1112; see also Barr v. Kelso-Burnett, 106 Ill.2d 520, 88 Ill. Dec. 628, 478 N.E.2d 1354, 1357 (Ill. 1985); Fowler, 653 F. Supp. at 698. In this case, Dihu's Illinois claim essentially mirrors his retaliatory discharge claim under § 3730(h) of the FCA, and thus recognition of the Illinois common law claim is not necessary for Dihu to obtain the relief he seeks. Therefore, the Court declines to recognize an Illinois claim for retaliatory discharge since it is unnecessary to further any public policy in this case.
Thus, IITRI's motion to dismiss Count III of Dihu's complaint is granted.
CONCLUSION
For the foregoing reasons, Defendant IITRI's motion to dismiss is denied as to Counts I and II, but granted as to Count III. All other pending motions in this case are denied without prejudice.