United States ex rel. Reed v. Keypoint Gov't Solutions

• Decision Date: 30 April 2019
• Docket Number: No. 17-1379,17-1379
• Citation: 923 F.3d 729
• Parties: UNITED STATES of America EX REL., Julie REED, Plaintiff - Appellant, v. KEYPOINT GOVERNMENT SOLUTIONS, Defendant - Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

923 F.3d 729

UNITED STATES of America EX REL., Julie REED, Plaintiff - Appellant,

v.KEYPOINT GOVERNMENT SOLUTIONS, Defendant - Appellee.

No. 17-1379

United States Court of Appeals, Tenth Circuit.

April 30, 2019

Richard E. Condit, Mehri & Skalet PLLC, Washington, District of Columbia (Steven A. Skalet and Brett D. Watson, Mehri & Skalet PLLC, Washington, District of Columbia, and John T. Harrington and Robert S. Oswald, The Employment Law Group, Washington, District of Columbia, with him on the briefs), for Plaintiff-Appellant.

Robert C. Blume, Gibson, Dunn & Crutcher LLP, Denver, Colorado (Ryan T. Bergsieker and Allison Chapin, Gibson, Dunn & Crutcher LLP, Denver, Colorado, with him on the brief), for Defendant-Appellee.

Before BRISCOE, SEYMOUR, and HOLMES, Circuit Judges.

HOLMES, Circuit Judge.

The False Claims Act (or the "Act") allows for the recovery of civil penalties and treble damages from anyone who defrauds the government by submitting fraudulent claims for payment. 31 U.S.C. §§ 3729 – 3733. To enforce its provisions, the Act empowers individuals to file suits on behalf of the government alleging that a third party made a fraudulent claim for payment to the government. Id. § 3730(b)(1). These suits are known as "qui tam " suits, and the individual plaintiffs are called "relators." Recognizing the risks relators face as prospective whistleblowers, the Act prohibits employers from retaliating against employees who try to stop violations of the Act. Id. § 3730(h).

Julie Reed sued her former employer, KeyPoint Government Solutions, LLC ("KeyPoint"), for violating the False Claims Act. Her qui tam claims alleged that KeyPoint violated the Act by knowingly and fraudulently billing the government for work that was inadequately or improperly completed. Ms. Reed also claimed that KeyPoint fired her in retaliation for her efforts to stop KeyPoint's fraud.

This case presents two overarching questions. First, did the district court err in granting summary judgment in KeyPoint's favor on Ms. Reed's qui tam claims? Second, did the district court err in dismissing Ms. Reed's retaliation claim under Federal Rule of Civil Procedure ("Rule") 12(b)(6) ?

Exercising jurisdiction under 28 U.S.C. § 1291, we hold that the district court erred in the first respect but not in the second. We therefore vacate the district court's order insofar as it granted summary judgment on Ms. Reed's qui tam claims and remand for further proceedings. We affirm the district court's order insofar as it dismissed Ms. Reed's retaliation claim.

I

This is a whistleblower case. The relevant background has three parts: (1) the statutory background, (2) the underlying (alleged) bad acts, and (3) the whistleblowing and ensuing procedural history. We recount each part below.

A

The False Claims Act "covers all fraudulent attempts to cause the government to pay out sums of money." United States ex rel. Conner v. Salina Reg'l Health Ctr., Inc. , 543 F.3d 1211, 1217 (10th Cir. 2008) (quoting United States ex rel. Boothe v. Sun Healthcare Grp., Inc. , 496 F.3d 1169, 1172 (10th Cir. 2007) ). It does so by permitting the recovery of civil penalties and treble damages from anyone who "knowingly presents ... a false or fraudulent claim for payment or approval." 31 U.S.C. § 3729(a)(1)(A). Liability also attaches to anyone who "knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim." Id. § 3729(a)(1)(B).

The Act's proscriptions may be effectuated in two ways. "First, the Government itself may" sue "the alleged false claimant" to remedy the fraud. Vt. Agency of Nat. Res. v. United States ex rel. Stevens , 529 U.S. 765, 769, 120 S.Ct. 1858, 146 L.Ed.2d 836 (2000). Second, "a private person (the relator) may bring a qui tam " suit on behalf of the government and also for herself alleging that a third party made fraudulent claims for payment to the government. Id. "As a bounty for identifying and prosecuting fraud," relators get to keep a portion "of any recovery they obtain." Boothe , 496 F.3d at 1172 (citing 31 U.S.C. § 3730(d) ).

But there are limits to a relator's right to bring a qui tam suit. One such limit is "known as the public disclosure bar." Id. ; see State Farm Fire & Cas. Co. v. United States ex rel. Rigsby , 580 U.S. ––––, 137 S.Ct. 436, 440, 196 L.Ed.2d 340 (2016) (describing the public disclosure bar as a threshold relators must pass for their qui tam suits to proceed). That bar compels courts to dismiss qui tam claims "if substantially the same allegations ... as alleged in the action or claim were publicly disclosed," unless the relator "is an original source of the information."¹

31 U.S.C. § 3730(e)(4)(A). The public disclosure bar aims to strike "the golden mean between" encouraging "whistle-blowing insiders with genuinely valuable information" to come forward while discouraging "opportunistic plaintiffs who have no significant information to contribute of their own." United States ex rel. Fine v. Sandia Corp. , 70 F.3d 568, 571 (10th Cir. 1995) (quoting United States ex rel. Springfield Terminal Ry. Co. v. Quinn , 14 F.3d 645, 649 (D.C. Cir. 1994) ).

And because insiders might be reluctant to use these qui tam provisions due to fear of employer backlash, the False Claims Act protects whistleblowers from employer retaliation. See Potts v. Ctr. for Excellence in Higher Educ., Inc. , 908 F.3d 610, 613–14 (10th Cir. 2018) (discussing 31 U.S.C. § 3730(h) ). To qualify for whistleblower protection, an employee must engage in "protected activity." Armstrong v. Arcanum Grp., Inc. , 897 F.3d 1283, 1286 (10th Cir. 2018). Until 2009, protected activity included only "lawful acts done by the employee ... in furtherance of an action under this section [i.e., a qui tam suit]." 31 U.S.C. § 3730(h) (2008). But Congress amended the anti-retaliation provision in 2009 and 2010, and it now protects employees who take steps "in furtherance of" either a qui tam claim or "other efforts to stop 1 or more violations" of the Act. 31 U.S.C. § 3730(h)(1). A whistleblower who prevails on her retaliation claim is entitled to reinstatement, double back pay, litigation costs, and attorneys' fees. Id. § 3730(h)(2). The events giving rise to this litigation took place against this statutory backdrop.

B

KeyPoint is a private company that conducts background investigations for the federal government—specifically, the Office of Personnel Management ("OPM"). OPM uses KeyPoint to investigate prospective federal employees. The depth of KeyPoint's investigations varies according to the level of security clearance involved. Most investigations, though, entail running background checks, interviewing the subject of the investigation, gathering testimony from the subject's neighbors and coworkers, and then compiling the information in a report. Government agencies rely on these reports in making employment decisions and deciding whether to issue (or reject) security clearances.

OPM's contract with KeyPoint rewards timeliness. If KeyPoint finishes its investigations on time, OPM pays KeyPoint a premium. But KeyPoint's pay decreases for each day an investigation runs past the deadline.

The contract also includes safeguards to ensure that KeyPoint's investigations are complete and accurate. For example, KeyPoint must do thorough case reviews of each investigation and reinterview a percentage of all sources. Another safeguard is the Telephone Testimony Program ("TTP"); KeyPoint developed such a program at OPM's request, and OPM endorsed KeyPoint's program. Ordinarily, investigators must conduct in-person interviews. But they may do telephone interviews under some circumstances, so long as they keep their total number of telephone interviews below a certain percentage threshold. Under the TTP, each month OPM sends KeyPoint a list of investigators who exceeded their allotted number of telephone interviews during the last month. KeyPoint then must send OPM "corrective action report[s]" explaining each infraction and what it is doing to remedy the problem. Aplt.'s App. at 31, ¶ 54 (Second Am. Compl., filed Dec. 5, 2016). The contract and OPM's Investigator's Handbook, which the contract incorporates, spell out these and other quality-control measures.

Along with KeyPoint, the background-investigation industry has two other main players—U.S. Investigations Services ("USIS") and CACI International, Inc. ("CACI"). This insular industry has had its share of troubles. From 2008 to 2010, the government prosecuted several individual investigators, including a former KeyPoint employee, for rushing investigations and falsifying information in reports to OPM. And a 2010 report summarizing an OPM audit concluded that KeyPoint's and its competitors' "quality assurance process" needed improvement. Id. at 273 (Final Audit Report, dated June 22, 2010).

The year 2013 was a particularly turbulent one for the industry. That year two federal government contractors—Edward Snowden and Aaron Alexis—committed high-profile crimes after having received security clearances. These embarrassing episodes put the industry under intense scrutiny.

With scrutiny came unflattering news reports. A June 2013 article reporting on allegations against USIS noted that the "concerns about background checks [were] not limited to USIS" and later named KeyPoint and CACI as USIS's "two main competitors." Id. at 159, 160 (Wash. Post Article, dated June 27, 2013). Another article that month reported that "a select group of private contractors conducting background checks for high-security jobs were not doing enough to ensure the quality of their investigations." Id. at 302 (Reuters Article, dated June 26, 2013). The article noted "problems with procedures and safeguards used by all three private contractors—USIS, KeyPoint ... and CACI." Id. at 303. A slew of other news reports covered such allegations roiling the background-investigation industry.

The allegations in the press worried Congress...