Eberhardt v. Integrated Design & Const., Inc.

• Decision Date: 10 February 1999
• Docket Number: Nos. 97-2522,98-1034,s. 97-2522
• Citation: 167 F.3d 861
• Parties: 15 IER Cases 687 Ronald G. EBERHARDT, Plaintiff-Appellee, and United States of America, ex rel, Intervenor-Plaintiff, v. INTEGRATED DESIGN & CONSTRUCTION, INCORPORATED; Albert H. McCoubrey, III, Defendants-Appellants. Ronald G. Eberhardt, Plaintiff-Appellant, and United States of America, ex rel, Intervenor-Plaintiff, v. Integrated Design & Construction, Incorporated; Albert H. McCoubrey, III, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 861

167 F.3d 861

15 IER Cases 687

Ronald G. EBERHARDT, Plaintiff-Appellee, and United States of America, ex rel, Intervenor-Plaintiff, v. INTEGRATED DESIGN & CONSTRUCTION, INCORPORATED; Albert H.

McCoubrey, III, Defendants-Appellants.

Ronald G. Eberhardt, Plaintiff-Appellant, and United States of America, ex rel, Intervenor-Plaintiff, v. Integrated Design & Construction, Incorporated; Albert H.

McCoubrey, III, Defendants-Appellees.

Nos. 97-2522, 98-1034.

United States Court of Appeals, Fourth Circuit.

Argued Dec. 3, 1998.

Decided Feb. 10, 1999.

ARGUED: David Thomas Ralston, Jr., Hopkins & Sutter, Washington, D.C., for Appellants. Stephen R. Smith, Kutak Rock, Washington, D.C., for Appellee. ON BRIEF: Karen Marie Grane, Hopkins & Sutter, Washington, D.C., for Appellants. Allen S. Rugg, Kutak Rock, Washington, D.C., for Appellee.

Before MURNAGHAN and MICHAEL, Circuit Judges, and HERLONG, United States District Judge for the District of South Carolina, sitting by designation.

Affirmed in part, reversed in part, and remanded by published opinion. Judge HERLONG wrote the opinion, in which Judge MURNAGHAN and Judge MICHAEL joined.

OPINION

HERLONG, District Judge:

In 1996, Ronald G. Eberhardt ("Eberhardt") brought a qui tam action under 31 U.S.C.A. § 3730(b)(1) (West 1983 & Supp.1998) against his former employer, Integrated Design & Construction, Inc. ("IDC"), and its majority owner, Albert H. McCoubrey ("McCoubrey"), for falsely billing the government in violation of the False Claims Act, 31 U.S.C.A. § 3729 (West 1983 & Supp.1998). Eberhardt also claimed that IDC discriminated against him by decreasing his salary, demoting him, and terminating him--in violation of 31 U.S.C.A. § 3730(h) (West Supp.1998)--for acts he took in furtherance of a qui tam action.

On October 2, 1996, the United States intervened as to the section 3729(b)(1) count and ultimately settled this claim on January 7, 1997. Eberhardt's discrimination claim proceeded to trial. On July 15, 1997, Eberhardt received a jury verdict in his favor of $417,700.99, and the district court entered a judgment on the verdict. On July 24, 1997, Eberhardt filed a motion for reinstatement and interest. On July 29, 1997, IDC filed a motion for judgment as a matter of law or, in the alternative, motion for new trial under Rules 50 and 59 of the Federal Rules of Civil Procedure. On September 22, 1997, IDC and McCoubrey filed a joint Rule 60(b) motion as well as separate Rule 60(b) motions for relief from the judgment.

On October 3, 1997, the district court denied IDC's motion for judgment as a matter of law or, in the alternative, motion for new trial. On November 21, 1997, the district court granted Eberhardt's motion for prejudgment interest on the back pay award, denied reinstatement to Eberhardt, dismissed McCoubrey from the action pursuant to his Rule 60(b) motion, denied all other Rule 60(b) motions, and confirmed the denial of the Rule 50/59 motion. IDC and Eberhardt now appeal. Because the district court accurately considered and applied the relevant law, this court finds no reason for reversal of the district court's decisions, with the exception of its decision to grant McCoubrey relief from the judgment. Accordingly, we reverse the trial court's grant of McCoubrey's Rule 60(b) motion and affirm in all remaining respects.

I.

IDC was an architectural/engineering/construction firm which managed the design and construction of embassy facilities for the United States Department of State ("State Department"). IDC essentially acted as a conduit between the Government and subcontractors, invoicing the Government for subcontractors' work plus IDC's administrative costs ("pass-through contracts"). McCoubrey was IDC's President, CEO, and 90% shareholder. IDC hired Eberhardt in January 1994 as Director of Congressional and Governmental Affairs.

Eberhardt was promoted to Senior Staff Vice President on July 13, 1994, and he initiated an effort to organize IDC's accounting system and records. In late July 1994, IDC's then-CFO and in-house counsel, William Roemer ("Roemer"), who was responsible for administering IDC's pass-through contracts, informed Eberhardt that IDC had invoiced the State Department on uncompleted work in order to alleviate its cash flow problems. Roemer also told Eberhardt that McCoubrey knew of the billings. Eberhardt went to McCoubrey with this information, and McCoubrey stated that he would speak with Roemer. Eberhardt discovered more information supporting Roemer's claims and discussed the issue further with McCoubrey. In October 1994, they agreed to have a senior employee, Pascal Pittman ("Pittman"), review the contracts in question. Pittman reported to Eberhardt that $1.3 million in advance billings had taken place. IDC did not have these funds in its bank accounts and was facing a severe shortage in cash flow. Roemer became a focus of IDC's investigation, but he refused to cooperate and was terminated.

In December 1994, Eberhardt informed McCoubrey that there was an appearance of criminality, and he advised McCoubrey that IDC should obtain legal counsel. The next day, McCoubrey ordered Eberhardt to lead an official investigation with the aid of corporate counsel Mark Kellogg ("Kellogg") and to submit a written report which was to be presented to the Board of Directors and ultimately forwarded to the federal government. The investigation continued until January 9, 1995, at which point Eberhardt submitted a written report revealing that the money from the advanced billings had been received and spent, creating a significant cash flow problem. During the course of the investigation, Eberhardt discovered that McCoubrey had personally signed the invoices, and he advised McCoubrey to obtain separate counsel. He also issued a set of questions to McCoubrey asking about McCoubrey's involvement in the scheme. Over the course of the investigation, Eberhardt's previous close relationship with McCoubrey deteriorated significantly, and McCoubrey excluded Eberhardt from closed door meetings.

On January 16, 1995, McCoubrey directed Eberhardt to return to his normal tasks and to monitor IDC's financial condition, but he allegedly issued a separate order for Eberhardt to no longer have access to any IDC financial information. On January 20, 1995, IDC officials met with the State Department and disclosed the advance billings. Eberhardt was excluded from this meeting. On January 30, 1995, Eberhardt reported to the board of directors that IDC had discharged its duty to report to the government and that he was disbanding the investigation.

On February 1, 1995, IDC implemented a plan to alleviate its cash flow problems, cutting the salaries of all senior staff employees by fifteen percent. An exception was made for the two lowest salaried senior employees, at their request, and they received ten percent cuts. In all, four employees (including Eberhardt) received a fifteen percent cut, and two received a ten percent cut. On February 7, 1995, IDC implemented a corporate reorganization, whereby it laid off two architects, formed an Executive Committee, and eliminated Eberhardt's position of Senior Staff Vice President, allegedly due to McCoubrey's increased involvement with the company. Eberhardt was tasked for business development, a job which Eberhardt felt was outside his expertise. In addition, on February 9, 1995, McCoubrey gave Eberhardt the special task of drafting IDC's 1995 comprehensive business plan/budget--an assignment for which Eberhardt felt unqualified.

Eberhardt responded by memorandum that same day, stating that he was being singled out for leading the investigation, that he was pretextually being put in an impossible predicament, and that IDC's actions were a violation of the Federal Whistleblower Protection Act. In a February 13, 1995, memorandum, McCoubrey denied these claims. Eberhardt responded by memorandum that same day that he was protected by the False Claims Act. That same day he also told Kellogg (IDC's corporate counsel) of his intention to bring a qui tam action. On February 16, 1995, Eberhardt met with the Board of Directors and informed them of his intention to file suit against IDC under the False Claims Act. He declined to perform his newly assigned duties, and the Board fired him. Eberhardt then went to the FBI to advise it of evidence stored at IDC that could be relevant to an investigation of False Claim Act violations.

II.

31 U.S.C.A. § 3729 creates liability for any person who presents false claims to the federal government for payment. Section 3730 allows a private person to bring a civil action on behalf of the Government for violations of section 3729 (i.e., a "qui tam action"). Section 3730(h)--sometimes called the "whistleblower" provision of the False Claims Act--"prevents the harassment, retaliation, or threatening of employees who assist in or bring qui tam actions." Zahodnick v. IBM Corp., 135 F.3d 911, 914 (4th Cir.1997). It provides:

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, 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.A. § 3730(h). This court has previously spoken to the issues relevant to the instant case. In Zahodnick, this court extracted three elements from section 3730(h) that constitute a prima facie case: "[A]n employee must prove that (1) he took acts in furtherance of a qui tam suit [i.e. engaged in 'protected activity']; (2) his employer knew of these acts; and (3) his employer discharged him as a result of these acts." Zahodnick, 135 F.3d at 914.

IDC...