U.S. ex rel. Mcvey v. Bd. of Regents of U. of Cal.

• Decision Date: 14 March 2001
• Docket Number: No. C-98-4780.,C-98-4780.
• Citation: 165 F.Supp.2d 1052
• Parties: UNITED STATES of America, ex. rel. W. Lee MCVEY, Plaintiff, v. The BOARD OF REGENTS OF the UNIVERSITY OF CALIFORNIA, dba Lawrence Livermore National Laboratory; and David K. Johnson, Defendants.
• Court: U.S. District Court — Northern District of California

165 F.Supp.2d 1052

UNITED STATES of America, ex. rel. W. Lee MCVEY, Plaintiff, v. The BOARD OF REGENTS OF the UNIVERSITY OF CALIFORNIA, dba Lawrence Livermore National Laboratory; and David K. Johnson, Defendants.

No. C-98-4780.

United States District Court, N.D. California.

March 14, 2001.

COPYRIGHT MATERIAL OMITTED

Jeremy L. Friedman, Oakland, CA, for W. Lee McVey.

Malcolm A. Heinicke, Munger Tolles & Olson, San Francisco, CA, Gabriela B. Odell, Office of Laboratory Counsel, Lawrence Livermore Natl Laboratory, Livermore, CA, for Bd. of Regents of University of California, David K. Johnson.

MEMORANDUM AND ORDER

PATEL, Chief Judge.

Plaintiff/relator W. Lee McVey instituted this qui tam action against defendants Board of Regents of the University of California ("Board") dba Lawrence Livermore National Laboratory ("Livermore") and David K. Johnson ("Johnson") (collectively "defendants"), alleging violations of the False Claims Act, 31 U.S.C. § 3729 et seq. ("FCA"), and 42 U.S.C. § 1983 ("Section 1983"). On September 5, 2000, the Court dismissed with prejudice McVey's FCA claim against the Board pursuant to Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765, 120 S.Ct. 1858, 146 L.Ed.2d 836 (2000).¹ Remaining in the case are McVey's FCA claims against Johnson, and retaliation claims under the FCA and Section 1983 against both the Board and Johnson. McVey has stipulated that he seeks only prospective relief for the retaliation claims. Defendants bring this motion to dismiss the remaining claims. Having considered the parties' arguments and submissions, and for the reasons set forth below, the court enters the following memorandum and order.

BACKGROUND

Livermore is a federally-funded research and development facility under the auspices of the United States Department of Energy ("DOE"). Livermore is operated by the Board pursuant to a cost-reimbursement contract with DOE. Under the contract, the Board bills DOE for the costs incurred for the benefit of DOE research, plus an additional fee. Under federal regulations governing the contract, Livermore may only bill DOE for costs that are "reasonable," "allowable" and in conformance with contract terms.

In 1988, Livermore suffered a three-day power outage. Concerned with the impact of such a massive power failure on a critical research facility, Congress appropriated funds to upgrade the reliability and safety of Livermore's power system. Johnson, in his position as Division Leader at Livermore's Plant Engineering in the Electric Utilities Division, headed the upgrade project, known as the Electric Power System Replacements and Upgrade Line Item Project ("EPSRU"). In 1990, Livermore hired McVey to serve as Electric Utility System Manager for its Electrical Utilities Division. In that position, McVey was responsible for the operation and maintenance of Livermore's electrical utilities system. McVey worked on EPSRU under Johnson's direct supervision.

McVey alleges that between 1991 and the present, Livermore, through Johnson, incurred and billed to DOE costs that Johnson knew or should have known were unjustified and unnecessary. Among the costs were those for installation of a differential fast-transfer relay system, modifications to prevent the accidental tripping of circuit breakers, modifications and design of a 115kV ring-bus substation, modifications of a battery failure protection system, purchase of a new software system and travel costs.

McVey avers that he complained directly to Johnson about these expenses, and when Johnson failed to take action, reported his concerns to Johnson's supervisor, Charles Cain ("Cain"). When Cain did not do enough to satisfy McVey, McVey contacted the DOE Inspector General. The Inspector General ordered an external review of the fast-transfer relay system.² McVey continued his internal complaints and also contacted the United States Attorney's office. McVey claims that due to his whistleblower actions, he suffered retaliatory action from Livermore and Johnson, including transfer to the Maintenance Engineering and Production Control Division, a purported demotion, and denial of the opportunity for upward mobility and for future income gains.

In December 1998, McVey instituted this action under seal. On April 20, 1999, the United States Government decided not to intervene. On April 21, 1999, the court ordered the complaint unsealed and served on defendants.

DISCUSSION

McVey alleges that: (1) Johnson violated the FCA through falsely charging the federal government for unnecessary and wasteful engineering modifications; and (2) Johnson and the Board violated the FCA's whistleblower provision, 31 U.S.C. § 3730(h), and Section 1983 by taking employment actions aimed at chilling McVey's First Amendment right to free speech and punishing him for raising spending concerns. McVey seeks monetary and punitive damages, back pay and injunctive relief reinstating him to his former position with appropriate promotions and salary increases.

Defendants seek to dismiss the complaint for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure ("F.R.C.P.") 12(b)(1) and failure to state a claim pursuant to F.R.C.P. 12(b)(6). Defendants contend that McVey cannot bring retaliation causes of action against the Board or Johnson as the Board is a state agency and Johnson a state official and therefore both are immune from this type of action under the Eleventh Amendment. Johnson also individually argues that the FCA claim should be dismissed because no fraud took place; rather, he and McVey merely disagree regarding engineering decisions. Johnson also seeks dismissal of the FCA claim based on failure to plead fraud allegations with sufficient particularity in violation of F.R.C.P. 9(b).

I. Legal Standard

A. Federal Rule of Civil Procedure 12(b)(1)

F.R.C.P. 12(b)(1) allows a party to challenge a federal court's jurisdiction over the subject matter of the complaint. A complaint will be dismissed if, looking at the complaint as a whole, it appears to lack federal jurisdiction either facially or factually. See Thornhill Publ'g Co., Inc. v. General Tel. & Elec. Corp., 594 F.2d 730, 733 (9th Cir.1979). In considering a motion to dismiss for lack of subject matter jurisdiction, the court must accept all of plaintiff's factual allegations as true. See Dreier v. United States, 106 F.3d 844, 847 (9th Cir.1996).

B. Federal Rule of Civil Procedure 12(b)(6)

A motion to dismiss for failure to state a claim under F.R.C.P. 12(b)(6) will be denied unless it appears that the plaintiff can prove no set of facts which would entitle him to relief. See Fed.R.Civ.P. 12(b)(6); Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Fidelity Fin. Corp. v. Fed. Home Loan Bank of San Francisco, 792 F.2d 1432, 1435 (9th Cir.1986). All material allegations in the complaint will be taken as true and construed in the light most favorable to the plaintiff. See NL Ind., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir.1986).

II. Retaliation Claims

A. False Claims Act

McVey seeks relief under the FCA, which provides in relevant part:

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 ... shall be entitled to all relief necessary to make the employee whole. Such relief shall include reinstatement with the same seniority status such employee would have had but for the discrimination, 2 times the amount of back pay, interest on the back pay and compensation for any special damages sustained as a result of the discrimination including litigation and reasonable attorneys' fees.

31 U.S.C. § 3730(h).

McVey cannot maintain an FCA-based retaliation claim against the Board after the Supreme Court's decision in Stevens. See Bhatnagar v. Kiewit Pacific Co., 2000 WL 1456940, *5 (N.D.Cal.2000). The retaliation provision of the FCA falls within the Supreme Court's broad conclusion in Stevens that the FCA does not subject states to liability. See Stevens, 120 S.Ct. at 1871 (holding "that a private individual has standing to bring suit in federal court on behalf of the United States under the False Claims Act, 31 U.S.C. §§ 3729-3733, but that the False Claims Act does not subject a State (or state agency) to liability in such actions"); Bhatnagar, 2000 WL 1456940 at *5.

Nor can McVey maintain an FCA retaliation claim against Johnson as an individual. Section 3730(h) provides for an action against an "employer." The Board, not Johnson, is the employer for the purpose of this provision. See Clemes v. Del Norte Cty. United Sch. Dist., 1996 WL 331096, *7, n. 6 (N.D.Cal.1996) (dismissing claim without leave to amend to include defendants in their individual capacity because "[School] District, not the individual defendants, is the employer for the purpose of [31 U.S.C. § 3730(h) ]"); U.S. ex rel. Lamar v. Burke, 894 F.Supp. 1345 (E.D.Mo.1995) (holding "employer" as used in 31 U.S.C. § 3730(h) does not extend to corporate supervisors); cf. Miller v. Maxwell's Int'l. Inc., 991 F.2d 583, 587 (9th Cir.1993), cert. denied, 510 U.S. 1109, 114 S.Ct. 1049, 127 L.Ed.2d 372 (1994) (finding that the term "employer" used in Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., does not include individual defendants for civil liability purposes even though the term "agent" is used in the definition). Therefore, McVey's second cause of action must be dismissed.

B. 42 U.S.C. § 1983

McVey cannot maintain a Section 1983 damages action against the Board because the Board is a state agency. See Stivers v. Pierce, 71 F.3d 732, 749 (9th Cir.1995) ("The Eleventh Amendment prohibits suits against a state, and section 1983 does not abrogate this immunity.... As an...