Brady v. Liquidity Servs., Inc., Civil Case No. 18-cv-1040 (RCL)
| Decision Date | 29 November 2018 |
| Docket Number | Civil Case No. 18-cv-1040 (RCL) |
| Parties | DANIEL BRADY, Plaintiff, v. LIQUIDITY SERVICES, INC., Defendant. |
| Court | U.S. District Court — District of Columbia |
Before the Court is defendant Liquidity Services, Inc.'s (LSI) Motion to Dismiss. After having considered the motion, the opposition and reply thereto, and the record herein, the Court will GRANT LSI's Motion to Dismiss.
Plaintiff Daniel Brady worked as Vice President of Finance for LSI from 2013 until his termination in 2016. Compl. ¶¶ 1, 85. LSI had entered into a revenue sharing agreement with the Defense Logistics Agency (DLA), a federal government agency, to sell excess scrap metal from military bases. Id. ¶¶ 2, 3, 17, 20-21, 72.
In 2016, Brady completed an assignment to "develop an activity-based and/or resource-based approach to allocate IT expenses to each business unit for the FY17 Budget," and Brady found that this new approach resulted in "significantly" lower IT costs for FY16 and FY17, as it related to LSI's "profit-sharing Scrap business." Id. ¶¶ 65-66:
Brady's direct supervisor, LSI's Chief Financial Officer Jorge Celaya, called to discuss LSI's "scrap metal contract," or revenue sharing agreement, with the DLA. Id. ¶ 31. In response to Celaya's questions, Brady said that "if LSI had less IT costs . . . LSI would need to share with the government" as "a matter of proper accounting and federal mandates." Id. ¶¶ 75, 77. Celaya replied, "I'm not sure if I see it that way." Id. ¶ 78. Brady replied that "doing it any other way would be illegal." Id. ¶ 6.
Brady immediately reported his conversation with Celaya to LSI's Chief Accounting Officer and "expressed his concerns about the measures Celaya would use." Id. ¶¶ 7-9, 79-80. The Chief Accounting Officer told Brady not to worry about it. Id. ¶ 80.
Days later, Celaya fired Brady. Id. ¶¶ 8, 81, 83. However, Brady had unused paid time off and remained an LSI employee until November 1, 2016. Id. ¶¶ 84-85.
In Count I of the Complaint, Brady alleges retaliation under § 3730(h) of the False Claims Act," 31 U.S.C. §§ 3729 et seq. Brady argues that he engaged in protected activity twice: (1) when he told Celaya "about proper accounting protocols that must be followed on LSI's scrap metal contract with the Defense Logistics Agency and that any other approach would be illegal," and (2) when he "reported concerns about an impending violation to the Chief Accounting Officer." Id. ¶¶ 94-95. Brady claims that he "disclosed potential accounting fraud" and was terminated "only days later." Id. at 8.
In Count II, Brady alleges that LSI violated § 32-1301 of the D.C. Wage Payment and Collection Law (DCWPCL), D.C. Code § 32-1301 et seq., by failing to pay his "earned 2016 bonus." Id. ¶¶ 105-06. "Per [his] offer letter," Brady claims that the bonus amount is approximately $62,000, based on "qualitative and quantitative measures established by LSI as part of the Capital Assets Group." Id. ¶¶ 89. Brady alleges that, according to his offer letter, LSI will pay him a forty percent target bonus annually. Id. ¶ 86. Although "the offer letter does not state when the payment will be made or that Brady must be employed on a certain date to receive thebonus," Brady claims that the bonus "generally occurs within 60 days" of the fiscal year's end on September 30. Id. ¶¶ 87-88.
To survive a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), "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) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A plaintiff must furnish "more than labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Twombly, 550 U.S. at 555. Instead, the complaint's "[f]actual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Id. (internal citations omitted). While FCA actions for fraud are evaluated under the heightened pleading standard of Rule 9(b), retaliation claims are evaluated under the standard Rule 8 pleading standard. United States ex rel. Williams v. Martin-Baker Aircraft Co., Ltd., 389 F.3d 1251, 1259-60 (D.C. Cir. 2004).
The FCA's whistleblower protection provision entitles an employee who, inter alia, is discharged or discriminated against in the terms and conditions of his employment, as the result of engaging in protected activity, "to all relief necessary to make that employee . . . whole." 31 U.S.C. § 3730(h) (2009). To prevail on an FCA whistleblower claim, an employee must demonstrate that:
(1) he engaged in protected activity, that is, "acts done . . . in furtherance of an action under this section"; and (2) he was discriminated against "because of" that activity. To establish thesecond element, the employee must in turn make two further showings. The employee must show that: (a) "the employer had knowledge the employee was engaged in protected activity"; (b) "the retaliation was motivated, at least in part, by the employee's engaging in [that] protected activity."
Martin-Baker, 389 F.3d at 1260 (alteration in original) (quoting United States ex rel. Yesudian v. Howard Univ., 153 F.3d 731, 736 (D.C. Cir. 1998)); accord Shekoyan v. Sibley Int'l, 409 F.3d 414, 422 (D.C. Cir. 2005). In 2009, § 3730(h)(1) was amended and "significantly broadened" whistleblowers' protection by allowing retaliation claims based on: "acts done . . . 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) (2009) (emphasis added); see Hicks v. District of Columbia, 306 F. Supp. 3d 131, 155 (D.D.C. 2018).
Brady fails to demonstrate that he was engaged in protected activity and thus does not satisfy the first prong of the test. Brady also does not meet the second prong of the test—that Brady was discriminated against "because of" that activity—because he fails to show that LSI had knowledge that he was engaged in protected activity. Therefore, the Court need not evaluate whether the retaliation was motivated, at least in part, by Brady's engaging in protected activity.
protected activity.
Regarding the first element of a whistleblower retaliation claim, "[d]etermining whether an employee has engaged in protected conduct under the FCA is a 'fact specific inquiry.'" Shekoyan, 409 F.3d 414, 423 (D.C. Cir. 2005) (quoting Hutchins v. Wilentz, Goldman & Spitzer, 253 F.3d 176, 187 (3d Cir. 2001)). "An employee does not engage in protected conduct if he'merely inform[s] a supervisor of the problem.'" Shekoyan, 409 F.3d at 423 (quoting Zahodnick v. IBM Corp., 135 F.3d 911, 914 (4th Cir. 1997)). Id. (alteration in original) (citing Yesudian, 153 F.3d at 741). Rather, "[i]t is sufficient that a plaintiff be investigating matters that reasonably could lead to a viable False Claims Act case." Williams, 389 F.3d at 1260 (quoting Yesudian, 153 F.3d at 740).
"The retaliation provision of the FCA 'was designed to protect persons who assist the discovery and prosecution of fraud and thus to improve the federal government's prospects of deterring and redressing crime.'" United States ex rel. Tran v. Computer Sciences Corp., 53 F. Supp. 3d 104, 135 (D.D.C. 2014) (quoting Schweizer, 677 F.3d at 1237) (internal quotation marks and citation omitted). With its 2009 addition, § 3730 now protects employees in their efforts to stop a violation of the FCA and covers employees who "are collecting information about a possible fraud, before they have put all the pieces of the puzzle together." Pencheng Si v. Laogai Research Found., 71 F. Supp. 3d 73, 99 (D.D.C. 2014) (quoting Yesudian 153 F.3d at 740) (emphasis in original). Actually proving a violation of the FCA is not an element of a retaliation claim, and § 3730 "protects an employee's conduct even if the target of an investigation or action to be filed was innocent." Hoyte v. American Nat. Red Cross, 518 F.3d 61, 69 (D.C. Cir. 2008) (quoting Graham County Soil & Water Conservation District v. United States ex rel. Wilson, 545 U.S. 409, 416 (2005)). Although "a well-pleaded retaliation complaint need not allege that the defendant submitted a false claim," the complaint "must allege that the defendant retaliated against him for engaging in . . . protected conduct." Id. (internal quotation marks omitted). Again, protectedactivity is conduct that "'reasonably could lead' to a viable False Claims Act case." Id. (citing Yesudian, 153 F.3d at 740).
Brady's conduct could not reasonably lead to a viable False Claims Act case. Brady reported "concerns about an impending violation" to LSI's Chief Accounting Officer. Compl. ¶ 95. He states, "Had LSI used improper accounting procedures, the Defense Logistics Agency would have received a lower profit share[.]" Pl.'s Opp. At 10. But Brady does not allege a violation actually took place, nor does he allege LSI took steps to commit, or conspired to commit, fraud upon the government. Brady instead acknowledges that he knew that his claimed protected activity was in advance of any fraudulent conduct. In other words, Brady knew there was no violation. Yet Brady does not cite—and the court cannot find—any case in which a plaintiff successfully brought an FCA retaliation claim for actions taken in advance of any actual fraudulent conduct knowing that no fraud had taken place. This Court is not willing to expand ...
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