United States Ex Rel. Ziebell v. Fox Valley Workforce Development Board, Inc.

In the

United States Court of Appeals

For the Seventh Circuit

____________________

No. 14-1780

UNITED STATES OF AMERICA

ex rel. LUANN ZIEBELL,

Plaintiff-Appellant,

v.

FOX VALLEY WORKFORCE

DEVELOPMENT BOARD, INC., and

WORKFORCE ECONOMICS, INC.,

Defendants-Appellees.

____________________

Appeal from the United States District Court

for the Eastern District of Wisconsin.

No. 10 C 436 — William C. Griesbach, Chief Judge.

____________________

ARGUED FEBRUARY 9, 2015 — DECIDED NOVEMBER 25, 2015

____________________

Before ROVNER and SYKES, Circuit Judges, and ANDREA R.

WOOD, District Judge.*

* Of the Northern District of Illinois, sitting by designation.

2 No. 14-1780

SYKES, Circuit Judge. In 2003 LuAnn Ziebell began work-

ing at the Fox Valley Workforce Development Board, Inc., a

state job-training agency serving central Wisconsin with

funding from the federal government. She was fired in 2008.

Almost two years later, she filed a qui tam action alleging

that the Board violated the False Claims Act, 31 U.S.C.

§§ 3729 et seq., by improperly contracting services through a

subsidiary corporation. As best we can tell, her claim relies

on a theory known as “false certification”; she alleges that

the Board made false certifications of regulatory compliance

as a predicate to receiving federal funds. She also alleges that

she was fired in retaliation for engaging in activity protected

by the Act. The district court found both claims factually

deficient and entered summary judgment for the Board.

Ziebell’s qui tam claim faces a jurisdictional hurdle. To

prevent parasitic lawsuits, the False Claims Act blocks

jurisdiction over qui tam claims that are based on infor-

mation already in the public domain. Here, the alleged

improprieties by the Board were revealed in a routine audit

performed by its supervising state agency, which counts as a

“public disclosure” under the Act. An exception applies if

Ziebell can show that she was the “original source” of the

information. She has not done so. Accordingly, we dismiss

Ziebell’s qui tam claim for lack of jurisdiction. On the retalia-

tion claim, we affirm the judgment for the Board. There’s no

evidence that Ziebell was fired in retaliation for engaging in

protected activity.

I. Background

The Fox Valley Workforce Development Board was

formed in 2000 under the auspices of the Workforce Invest-

ment Act of 1998, see 29 U.S.C. §§ 2801 et seq., a federal job-

No. 14-1780 3

training program that provides funding to state-level in-

vestment boards, which in turn channel funds to area-

designated workforce “development boards.” The develop-

ment boards are multi-stakeholder bodies whose representa-

tives are appointed by local elected officials.

During the time period relevant here, the Fox Valley

Board provided job-training services in the Wisconsin

counties of Calumet, Fond du Lac, Green Lake, Outagamie,

Waupaca, Waushara, and Winnebago. Ziebell was hired as

an executive assistant in 2003 and the following year was

promoted to finance director. During Ziebell’s entire tenure

with the Board, she reported to its executive director, Cheryl

Welch.

Development boards provide services through subcon-

tractors selected via a competitive bidding process. The Fox

Valley Board contracted out a particular basket of services—

called Adult and Dislocated Worker Services—to a firm

known as Career Pros. That company dissolved in the

summer of 2004. The Board responded to this event by

creating its own subsidiary, Workforce Economics, Inc.,

which subsumed the former Career Pros staff. This had the

desirable effect of maintaining continuity of service, but it

took the agency out of regulatory compliance. Under federal

rules implementing the Workforce Investment Act, devel-

opment boards are not supposed to directly provide ser-

vices.

In September 2007 the Wisconsin Department of Work-

force Development (“DWD”), the state agency responsible

for overseeing the area development boards, conducted a

routine audit of the Board’s activities. The audit report

criticized the Board for providing services through its own

4 No. 14-1780

subsidiary and recommended an end to the practice. In a

letter dated February 1, 2008, Welch acknowledged the

problem and advised DWD that the Board would return to

competitive bidding for Adult and Dislocated Worker Ser-

vices. The letter also stated that Workforce Economics would

not bid on services for the remainder of 2008 or for 2009.

The Board thereafter solicited bids but received only two.

Of those two, one covered only four of the counties in the

Board’s service area, while the other bidder was deemed too

inexperienced to competently provide the required services.

As a result, by the time the full Board met on May 15, 2008,

Welch had decided to continue providing services through

Workforce Economics.

Ziebell attended the May 15 meeting with copies of the

DWD audit report and Welch’s responsive letter in hand. She

did not ask to speak but instead “tried to create a disturb-

ance” by speaking to other board members while the meet-

ing was in progress. She hoped that by disrupting the meet-

ing she would prompt someone to inquire about the docu-

ments she brought with her, at which point she would

expose Welch’s plot to stick with Workforce Economics, the

Board’s in-house service provider. Things didn’t unfold that

way. Rather, Welch explained the problem with the bids and

suggested that the Board allow Workforce Economics to bid

to provide the necessary services. The board members and

local elected officials agreed. Ziebell had no influence on the

decision.

Four days later Welch and the Board’s Chief Operating

Officer called Ziebell to a meeting and fired her. Welch read

from a script listing the reasons for the termination decision.

These included (among other reasons): (1) Ziebell had

No. 14-1780 5

admitted to skipping work to play golf; (2) she had disrupt-

ed the May 15 board meeting; (3) she chose not to further her

formal education; and (4) she submitted mileage-

reimbursement forms that contained some irregularities.

After reading the script, Welch asked Ziebell if she preferred

to resign. Ziebell rejected that suggestion, saying, “[t]here is

no way in Hell I am going to resign. If you want to terminate

me, you will have to pay the consequences.”

In July Ziebell filed a complaint with DWD alleging un-

lawful retaliation for engaging in activity protected by the

False Claims Act. Almost two years later she brought this qui

tam action on behalf of herself and the United States alleging

that the Board violated the Act. She also alleged that the

Board fired her in retaliation for activity protected under the

Act. The United States declined to participate in the qui tam

claim. While the suit was pending, the U.S. Department of

Labor conducted its own review of Wisconsin’s workforce

development programs and found various compliance

deficiencies by a number of area workforce development

boards. There were no findings of fraud. The Labor Depart-

ment reported its findings to the DWD, which has since been

working with federal authorities to alleviate the remaining

concerns.

The district court granted summary judgment for the

Board, concluding that Ziebell’s claims lacked factual sup-

port. This appeal followed.

II. Analysis

The False Claims Act prohibits the submission of a false

or fraudulent claim for payment to the government.

31 U.S.C. § 3729(a). Under the Act, private citizens may file

6 No. 14-1780

civil actions on behalf of the United States to recover money

the government paid because of a false or fraudulent claim.

Id. § 3730(b)(1). The Act incentivizes these qui tam suits by

allowing prevailing “relators” (the citizen plaintiffs) to

recover a share of the enhanced recovery allowed under the

statute. Id. § 3729(a) (providing for treble damages and other

penalties); id. § 3730(d)(1)–(2) (providing for an award to

prevailing qui tam plaintiffs).

Ziebell focuses on the Board’s regulatory noncompli-

ance—its use of an in-house service provider—but she hasn’t

clearly articulated a false-claims theory of her case. She

appears to be trying to invoke a theory known as “false

certification,” which derives from § 3729(a)(1)(B). That

section imposes liability against any person who “knowingly

makes, uses, or causes to be made or used, a false record or

statement material to a false or fraudulent claim.” Id. To

prevail on a claim of false certification, the relator must

prove that: (1) the defendant certified its compliance with

particular statutory or regulatory requirements that were

“conditions of, or prerequisites to, government payment”;

(2) the defendant “did not actually comply with those condi-

tions; and (3) the defendant “knew it had failed to comply

with those conditions.” United States ex rel. Absher v. Momence

Nursing Center, Inc., 764 F.3d 699, 710–11 (7th Cir. 2014)

(citing United States ex rel. Gross v. AIDS Research Alliance-

Chi., 415 F.3d 601, 604 (7th Cir. 2005)).

Ziebell identifies three documents that she claims were

false or misleading certifications—a 2000 “Consortium

Agreement,” a “Local Plan” for the years 2005–2007, and

Welch’s February 1, 2008 response to the DWD audit.

No. 14-1780 7

We note for starters that the Consortium Agreement pre-

dates the formation of the Board; it also contains only a

generic promise to “conform to all the fiscal requirements of

all applicable laws.” The Local Plan, too, contains only a

boilerplate general promise of future regulatory compliance.

Welch’s letter is only somewhat more specific. In it she states

that Workforce Economics—the Board’s in-house service

provider—would not be bidding to provide services for the

rest of 2008 or for 2009. She also states more generally that

the Board would be “reviewing procedures” to “ensure

[Workforce Investment Act] rules are followed.”

Promises of future compliance can be false or fraudulent

only if made with intent not to perform. As we’ve explained

before in this context, “fraud requires more than breach of

promise: fraud entails making a false representation, such as

a statement that the speaker will do something it plans not to

do.” United States ex rel. Main v. Oakland City Univ., 426 F.3d

914, 917 (7th Cir. 2005) (emphasis added). Ziebell has ad-

duced no evidence suggesting that any of these statements

was made with fraudulent intent. Ziebell’s false-certification

theory runs into further trouble in that none of these docu-

ments has any apparent nexus to federal payments.

But aside from these factual infirmities, there’s an ante-

cedent question of our jurisdiction over Ziebell’s claim. The

False Claims Act generally bars qui tam actions that are

based on information already in the public domain. At the

time period in question here, the so-called “public disclo-

sure” bar stated as follows (it has since been amended):

No court shall have jurisdiction over an action

under this section based upon the public dis-

closure of allegations or transactions in a crim-

8 No. 14-1780

inal, civil, or administrative hearing, in a con-

gressional, administrative, or Government

Accounting Office report, hearing, audit, or in-

vestigation, or from the news media, unless the

action is brought by the Attorney General or

the person bringing the action is an original

source of the information.

31 U.S.C. § 3730(e)(4)(A).

This language clearly withdraws jurisdiction over qui

tam actions that are based on publicly disclosed information

unless the relator is an “original source” of the information.

See Rockwell Int’l Corp. v. United States, 549 U.S. 457, 468

(2007); Glaser v. Wound Care Consultants, Inc., 570 F.3d 907,

912 (7th Cir. 2009). The point of the jurisdictional bar is to

“deter parasitic qui tam actions.” United States ex rel. Gear v.

Emergency Med. Assocs. of Ill., Inc., 436 F.3d 726, 728 (7th Cir.

2006). Once information is public, “only the Attorney Gen-

eral and a relator who is an ‘original source’ of the infor-

mation may represent the United States.” Id. (quoting United

States ex rel. Fallon v. Accudyne Corp., 97 F.3d 937, 941 (7th

Cir. 1996)).

Our cases establish a three-step inquiry to determine

whether a qui tam claim falls within the public-disclosure

bar. We ask (1) have the relator’s allegations been publicly

disclosed; (2) if so, is the lawsuit “based upon” those public-

ly disclosed allegations; and (3) if it is, was the relator the

original source of the information? Glaser, 570 F.3d at 913.

The relator bears the burden of establishing jurisdiction.

Absher, 764 F.3d at 707; Glaser, 570 F.3d at 913 (“At each stage

of the jurisdictional analysis, the plaintiff bears the burden of

proof.”).

No. 14-1780 9

Information is publicly disclosed if “the critical elements

exposing the transaction as fraudulent are placed in the

public domain.” United States ex rel. Feingold v. AdminaStar

Fed., Inc., 324 F.3d 492, 495 (7th Cir. 2003). Disclosure by

units of state and local governments count as public disclo-

sures. See Graham Cnty. Soil & Water Conservation Dist. v.

United States ex rel. Wilson, 559 U.S. 280, 301 (2010) (“Today’s

ruling … confirms that disclosures made in one type of

context—a state or local report, audit, or investigation—may

trigger the public disclosure bar.”). “[A] relator’s [qui tam]

complaint is ‘based upon’ publicly disclosed allegations or

transactions when the allegations in the relator’s complaint

are substantially similar to publicly disclosed allegations.”

Glaser, 570 F.3d at 920 (emphasis added).

Ziebell’s claim rests on the Board’s improper practice of

provided services directly through Workforce Economics.

That’s precisely what DWD found in its audit, so her qui tam

claim is plainly “based on” the DWD’s public disclosure of

this information. Ziebell doesn’t argue otherwise. Instead,

she tries to bring herself within the original-source excep-

tion. “The original-source exception requires relators to

establish that they have (1) ‘direct’ knowledge of fraudulent

activity; (2) ‘independent’ knowledge of fraudulent activity;

and (3) voluntarily provided their information to the gov-

ernment before filing a qui tam action.” Id. at 917 (quoting

31 U.S.C. § 3730(e)(4)(B)).

Ziebell hasn’t come close to satisfying these require-

ments. Although it may be reasonable to infer that she had

direct knowledge of the Board’s relationship with Workforce

Economics as a general matter, she hasn’t shown that she

had direct and independent knowledge—apart from the DWD

10 No. 14-1780

audit report—that this relationship created a problem of

regulatory compliance. More to the point, she hasn’t shown

that she had direct and independent knowledge of any

fraudulent-claims activity by the Board. Finally, it’s clear that

Ziebell did not voluntarily provide any information about

her allegations to the federal government before filing suit.

Indeed, she admitted in her deposition that it was the DWD

report that “started some of the ball rolling” regarding the

regulatory dilemma created by the use of an in-house service

provider and that she talked to “no one” in the federal

government about this until after she filed suit. Ziebell’s qui

tam claim clearly falls within the public-disclosure bar and

must be dismissed for lack of jurisdiction.

Ziebell’s retaliation claim fails on the merits. The False

Claims Act provides a cause of action to any employee who

is “discharged, demoted, suspended, threatened, harassed,

or [otherwise] discriminated against … because of lawful

acts” undertaken “in furtherance of” a qui tam action.

31 U.S.C. § 3730(h)(1). To prevail on a retaliation claim

requires proof that “(a) [the plaintiff’s] actions were taken ‘in

furtherance’ of [a False Claims Act] enforcement action and

were therefore protected by the statute; (b) his employer had

knowledge that he was engaged in this protected conduct;

and (c) his discharge was motivated, at least in part, by the

protected conduct.” Fanslow v. Chi. Mfg. Ctr., Inc., 384 F.3d

469, 479 (7th Cir. 2004).

Ziebell has satisfied none of these elements. First, as

we’ve already noted, the record doesn’t show any fraudu-

lent-claims activity; at most it shows regulatory noncompli-

ance. As Fanslow explains, “there is an objective component

to the test for a [retaliation] claim under § 3730(h), as well as

No. 14-1780 11

a subjective one.” Id. at 479–80. In other works, it’s not

enough for Ziebell to think she’s enforcing the False Claims

Act; a reasonable employee in the same position must be

able to think the same thing. Id. at 480 (“We agree with

several of our sister circuits, which have held that the rele-

vant inquiry to determine whether an employee’s actions are

protected under § 3730(h) is whether: ‘(1) the employee in

good faith believes, and (2) a reasonable employee in the

same or similar circumstances might believe, that the em-

ployer is committing fraud against the government.’” (quot-

ing Moore v. Cal. Inst. of Tech. Jet Propulsion Lab., 275 F.3d 838,

845 (9th Cir. 2002))). Because Ziebell’s qui tam claim lacks

factual support, no reasonable employee in similar circum-

stances would believe that the Board was committing fraud

against the federal government.

Moreover, there’s no evidence that Ziebell took any ac-

tion toward a qui tam claim before she was fired. Nor is

there anything in the record to suggest that the Board had

any idea that she was even contemplating a qui tam claim.

Finally, Ziebell was fired for a variety of reasons ranging

from truancy to causing a disruption at the May 2008 board

meeting. Nothing suggests that the decision was motivated

in part by protected activity. Ziebell offers no evidence that

the reasons given for her firing were pretexual. Nor could

she; Ziebell gave her superiors no indication she was taking

steps toward a False Claims Act enforcement action. Alt-

hough her disruption of the May 2008 board meeting was

related to the improper subcontract with Workforce

Economics, disrupting a meeting hardly qualifies as protect-

ed activity absent something more. The retaliation claim is

woefully lacking in factual support.

12 No. 14-1780

Accordingly, for the foregoing reasons, we DISMISS the

qui tam claim for lack of jurisdiction. In other respects the

judgment is AFFIRMED.