Shaw v. AAA Engineering & Drafting Inc.

• Decision Date: 18 May 2000
• Docket Number: Nos. 97-6265,s. 97-6265
• Parties: (10th Cir. 2000) DEBRA A. SHAW, Plaintiff-Appellee, v. AAA ENGINEERING & DRAFTING, INC., a Utah corporation; WILBUR L. BRAKHAGE, Supervisor; JANICE KELLIN, Defendants-Appellants. UNITED STATES OF AMERICA, Amicus Curiae. & 97-6266
• Court: U.S. Court of Appeals — Tenth Circuit

Page 519

213 F.3d 519 (10th Cir. 2000)

DEBRA A. SHAW, Plaintiff-Appellee, v. AAA ENGINEERING & DRAFTING, INC., a Utah corporation; WILBUR L. BRAKHAGE, Supervisor; JANICE KELLIN, Defendants-Appellants.

UNITED STATES OF AMERICA, Amicus Curiae.

Nos. 97-6265 & 97-6266

UNITED STATES COURT OF APPEALS, TENTH CIRCUIT

May 18, 2000

Appeal from the United States District Court for the W. District of Oklahoma (D.C. No. 95-CV-950-M) (D.C. No. 95-CV-951-M) [Copyrighted Material Omitted]

[Copyrighted Material Omitted] John B. Hayes, of Hayes & Magrini, Oklahoma City, Oklahoma, for Defendants-Appellants.

Marilyn D. Barringer, Oklahoma City, Oklahoma, for Plaintiff-Appellee.

Matthew M. Collette, (Douglas N. Letter, with him on the brief), Appellate Staff, Civil Division, Department of Justice, Washington, D.C., for Amicus Curiae.

Before HENRY, and MURPHY, Circuit Judges, and KIMBALL,^*

MURPHY, Circuit Judge.

I. INTRODUCTION

One of these consolidated cases is a qui tam action brought under the False Claims Act ("FCA"), 31 U.S.C. 3729-33. Plaintiff Debra Shaw is the relator, suing her former employer on behalf of the United States Government for submitting false claims pursuant to a government contract. See 31 U.S.C. 3729(a)(1)-(2). Specifically, Shaw claimed that Defendants had recorded falsely inflated numbers on official work orders and then used these work orders to support an equitable adjustment claim. Shaw also asserted that Defendants failed to recover silver from photo laboratory chemicals as required by the contract. In the other case, Shaw filed suit on her own behalf under the wrongful termination provision of the FCA, 31 U.S.C. 3730(h). She also filed a pendant Oklahoma wrongful discharge claim. In these claims, Shaw asserted she was terminated in retaliation for reporting Defendants' fraudulent activities to U.S. government officials at TAFB.

Defendants AAA Engineering & Drafting, Inc. ("AAA"), Wilbur Brakhage, and Janice Keelin, now Keelin-Lowe, (collectively "Defendants") appeal from a judgment based on a jury verdict in Shaw's favor on all claims. Defendants raise the following issues on appeal: 1) whether the district court erred in denying Defendants' Rule 50 motions for judgment as a matter of law on Shaw's FCA qui tam claim that Defendants submitted false claims to the U.S. government; 2) whether the district court erroneously denied Defendants' Rule 50 motions on Shaw's FCA claim that she was terminated for her actions in furtherance of the FCA; 3) whether the district court erred in denying Defendants' Rule 50 motions on Shaw's Oklahoma public policy wrongful discharge claim; and 4) whether the district court erred in receiving certain evidence. This court exercises jurisdiction pursuant to 28 U.S.C. 1291 and affirms the judgment based on the qui tam action and the FCA wrongful discharge action, but reverses that part of the judgment premised on the Oklahoma wrongful discharge claim.

II. FACTUAL AND PROCEDURAL BACKGROUND

A. The Contract

In April 1993, Defendant AAA was awarded a government contract (the "contract") to perform photography services at Tinker Air Force Base ("TAFB") in Oklahoma.¹ AAA's duties under the contract included taking official Air Force studio photographs, taking passport photographs, providing a photo-journalist to photograph newsworthy events at TAFB, providing an on-call photographer to assist in TAFB law enforcement investigations, and developing photographs for TAFB personnel. Studio photography and most photography development was performed at TAFB's main photography laboratory (the "main lab"). Additionally, the contract required AAA to provide photography services at the metallurgical laboratory (the "met lab"), where AAA photographers assisted Air Force engineers by taking and developing detailed, technical photographs of failed aircraft parts.

When AAA began performance of the contract, it hired several employees of the preceding contractor, including Shaw. Shaw had been employed by photography service contractors at TAFB continuously since October 1980. During her employment with AAA, Shaw worked primarily as a photographer in the met lab.

B. Work Orders and the Request for an Equitable Adjustment

1. Work Orders and the Government's Surveillance Under the Contract

The contract required AAA to prepare work orders, form number 833, for all the work it performed under the contract. When a customer initially requested photography products or services, a work order would be generated. The customer would record on the work order the type and number of photographs or other products she was requesting and any materials, such as negatives, which she was providing. The work order would be assigned a number for tracking purposes (the "tracking number"), and the AAA employee responsible for the work order would record the work necessary to complete the customer's order. A priority level² would be assigned to the work and, if necessary, the work order would be routed through the government Quality Assurance Evaluator's ("QAE") office for pre-approval.³

An AAA employee would then perform the work and record matters such as the number of exposures taken, the amount of film developed, and how many pictures resulted. The finished products would then be packaged together with the work order. The government QAE would then have the opportunity to review the work order and the final products, after which the QAE would return the work order and products to AAA. After the customer picked up the finished products, the AAA employee would record the type and amount of products actually delivered to the customer.

AAA would temporarily retain the work orders, grouping them numerically and by function. The numbers recorded on the work orders were tallied monthly and the results printed in monthly production reports which AAA was required to submit to the government under the contract. The work orders would then be returned to the QAE monthly where they then remained.

In addition to being the organizational mechanism for recording and tracking photography service orders, the work orders also assisted the government employees who monitored AAA's performance. QAE Brenda Coil testified, however, that pursuant to the contract she would only inspect a portion of AAA's finished production through a method called random surveillance. Random surveillance was performed in the following manner: at the end of each month, a computer program provided Coil with a randomly-generated list of the tracking numbers for the work orders she should inspect during the following month. If the tracking number was on her list, she would then compare the information recorded on the work order with the final product to determine whether the work was performed timely and in compliance with the customer's request. She would also inspect the photographs, negatives, or other final products individually to determine whether the quality of the work was acceptable.⁴

2. The Equitable Adjustment

The contract originally required AAA to perform photography services for six months from April through September 1993, but it was later extended through December 1993. The contract called for a fixed monthly payment of $23,240. There were some circumstances, however, under which AAA's payment could be decreased or increased.

The way AAA could receive an increase in payment was by requesting an equitable adjustment. AAA could receive such an adjustment if it performed more work than was contemplated by the government at the time the contract was signed. Technical Exhibit Two to the contract specified the government's estimate of the amount of work AAA would be required to perform for specific tasks. If in the course of its performance AAA believed it was performing more work than indicated in the government's estimates, it could seek an equitable adjustment. Because the numbers recorded on the work orders should reflect the exact amount of work AAA had performed, in order to pursue an equitable adjustment AAA would need to calculate the total of the numbers recorded in the amount produced and amount delivered sections of those forms (the "production quantity sections"). If this total exceeded the government's previous production quantity estimates, AAA could use the work orders to support a claim for an equitable adjustment.

Indeed, on June 21, 1993, AAA complained in a letter to the government contracting officer ("CO") Steve Hammond that it had performed work in excess of that estimated by the government and thus requested an equitable adjustment. AAA first specifically linked this request to the work orders at a meeting with the government on June 30, 1993. At this meeting, AAA's president distributed a handout indicating that AAA's workload had exceeded the government's production estimates by an average of 31% per month during the first three months of the contract. AAA continued to claim that it was performing work in excess of the government's estimates throughout the contracting period. In January 1994, after the contracting period ended, AAA claimed that it had performed more work than the government's estimates in almost every category of work under the contract.

AAA originally claimed it was entitled to an equitable adjustment of $184,872 for the first six months of the contracting period. Because the requested equitable adjustment was greater than $100,000, AAA was required to certify the claim. AAA's President did so in a letter to the government which stated:

I certify that this claim for equitable adjustment in the amount of $184,872 is made in good faith, the supporting data is accurate and complete to the best of my knowledge, and that the amount to which I believe AAA is entitled accurately reflects the contract adjustment for which I believe the government is liable.

AAA later adjusted its claim to include expenses allegedly incurred for excess work performed during the last three months of the...