United States ex rel. Schweizer v. Océ N.V.

677 F.3d 1228

UNITED STATES ex rel. Stephanie SCHWEIZER, AppellantNancy Vee, Appellee

v.OCÉ N.V., et al., Appellees.

No. 11–7030.

United States Court of Appeals, District of Columbia Circuit.

Argued Jan. 13, 2012.Decided April 10, 2012.Reissued April 20, 2012.

Appeal from the United States District Court for the District of Columbia (No. 1:06–cv–00648).Jason H. Ehrenberg argued the cause and filed the briefs for appellant.

Douglas Letter, Attorney, U.S. Department of Justice, argued the cause for appellee United States. With him on the brief were Tony West, Assistant Attorney General, and Ronald C. Machen Jr., U.S. Attorney. R. Craig Lawrence, Assistant U.S. Attorney, entered an appearance.

Tillman J. Breckenridge argued the cause for appellees Océ N. V., et al. With him on the brief were Tyree P. Jones Jr., and Michael B. Roberts. Altomease R. Kennedy, Herbert V. McKnight Jr., and David W. Sanford entered appearances.

Before: SENTELLE, Chief Judge, GRIFFITH, Circuit Judge, and RANDOLPH, Senior Circuit Judge.

Opinion for the Court filed by Senior Circuit Judge RANDOLPH.

RANDOLPH, Senior Circuit Judge:

Stephanie Schweizer sued Océ North America, Inc., her former employer, under the False Claims Act's qui tam and retaliation provisions, 31 U.S.C. § 3730(b) & (h). The government moved to dismiss the qui tam claims after reaching a settlement agreement with Océ.¹ The district court granted the motion over Schweizer's objection. It then granted Océ summary judgment on the remaining retaliation claim. We reverse and remand on all counts.

Océ sells copying and printing products. It had two supply contracts with the General Services Administration: one for copiers, printers, and document management software; the other for larger digital printing systems. The contracts required Océ to provide government customers with the same discount offered to certain private sector purchasers. See 48 C.F.R. § 552.238–75. The contracts also required Océ to sell to the government only goods made in the United States or other countries designated under the Trade Agreements Act, 19 U.S.C. § 2501 et seq. We refer to these provisions as the price reduction and country-of-origin clauses, respectively.

Océ hired Schweizer in December 2004 to serve as a “GSA contracts manager” in Arlington, Virginia. The position required Schweizer to monitor Océ's compliance with the contracts described above. Other day-to-day responsibilities included updating product listings, negotiating modifications with the General Services Administration's contracting officer, and answering questions from Océ sales personnel. Ronald Frost, Océ's director of government contracting, oversaw Schweizer's work and served as her immediate supervisor.

In early 2005 Schweizer began to suspect that Océ was violating the price reduction clauses.² Through discussions with several co-workers, she learned that Océ representatives had been offering private sector customers significant ad hoc discounts. Her further investigation revealed that Océ was not passing these discounts on to the government, as the price reduction clauses required. If accurate, these findings meant that Océ regularly overcharged government agencies.

Schweizer sought to correct the violations, consistent with her duties as GSA contracts manager. She provided Frost with records documenting the private sector discounts, which she said were causing Océ “not to be in compliance with the [contracts].” Frost allegedly responded by forbidding Schweizer from investigating the matter and stating that management would “destroy” her if she disobeyed.

A second set of concerns arose in November 2005 as Océ was planning to merge with Imagistics, a rival print and document management company. In preparation for the merger, Océ officials asked Schweizer to determine whether Imagistics' products complied with the contracts' country-of-origin clauses. Schweizer replied that they did not. She explained in an e-mail to Bryan Beauchamp, Océ's vice president of business development, that most Imagistics products were manufactured in China, a country not certified under the Trade Agreements Act. Beauchamp agreed with Schweizer's assessment. Despite this understanding, Frost directed Schweizer to add Imagistics' products to Océ's government contract listings just a few days later. When Schweizer refused, Frost allegedly told her not to pursue the issue any further and again threatened to “destroy” her if she did not comply.

Schweizer did not heed Frost's warning. Instead, she contacted Beauchamp, Frost's superior, in early December 2005. Schweizer informed Beauchamp of Frost's actions, her pricing investigation, and her belief that Océ was violating the False Claims Act. She also alleged that many of Océ's own products were made in China, rather than in the Netherlands as stated in the contracts. Beauchamp referred Schweizer to Océ's human resources director, Gerald Whelan, who then directed her to meet with in-house counsel, Dan Harper. That meeting resulted in a further referral to Kenneth Weckstein, Océ's outside counsel for government contracting issues. In each of these conversations Schweizer reiterated her claim that Océ was violating the False Claims Act.

On December 6, 2005, Schweizer made a final, emotional plea to Beauchamp. She complained that the meetings with Whelan, Harper, and Weckstein were not productive, and that Beauchamp was “her last hope in terms of ... saving the company” from “legal trouble.” Beauchamp suspended Schweizer two days later, and terminated her employment on December 15. In a letter memorializing these actions, Beauchamp wrote that Schweizer had engaged in “inappropriate communications with [her] colleagues and supervisors”; “refused to follow orders”; ignored “the chain of command”; and “failed to maintain necessary standards of workmanship and productivity.” The letter added that Océ would “continue to investigate” Schweizer's “numerous complaints ... about illegal conduct,” including “fraud and crimes” committed in conjunction with the company's “Federal Supply Schedule contract.” It closed by stating

While Océ's initial response to your allegations is that they are without basis, you may want to bring your concerns to the attention of the Inspector General at the U.S. General Services Administration (“GSA”). Separately, Océ intends to report your allegations to the GSA Inspector General.

Schweizer filed a three-count complaint against Océ in April 2006. The first two counts rely on the False Claims Act's qui tam provisions, which permit private citizen “relators” to sue on behalf of the United States. See 31 U.S.C. §§ 3729(a), 3730(b) (2006).³ Count I alleges that Océ knowingly defrauded federal agencies by misrepresenting the origin of its products and by breaching its promise to provide the same discount offered to private sector customers. See id. § 3729(a)(1)–(2). Count II charges Océ with conspiring to do the same. See id. § 3729(a)(3).⁴ The third count states a claim for retaliation under 31 U.S.C. § 3730(h), which prohibits employers from discriminating against an employee “because of lawful acts done by the employee ... 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 [ § 3730].” Specifically, Count III asserts that Océ fired Schweizer as a result of her pricing and product sourcing investigations. Schweizer filed an amended complaint in December 2006, which added Océ employee Nancy Vee as a co-plaintiff on Counts I and II.

The government declined to intervene in the case after conducting an extensive investigation of Schweizer's qui tam claims. See 31 U.S.C. § 3730(a) & (b)(2). Nonetheless, it remained an active participant in settlement discussions. These talks came to fruition in September 2009, when Océ, Vee, and the government—but not Schweizer—reached an agreement to dispose of Counts I and II. The agreement required Océ to pay $1.2 million, plus interest, to the government, with nineteen percent of that total set aside for Schweizer and Vee. In return, Océ received a partial release from liability and a promise that the government would move to dismiss Counts I and II of the amended complaint. The government filed its notice of intervention and corresponding motion to dismiss on September 8, 2009. Océ filed an answer later that day.

Schweizer opposed the settlement and the motion to dismiss. She argued that the settlement understated the extent of Océ's violations, and thus could not satisfy the criteria set forth in 31 U.S.C. § 3730(c)(2)(B). That provision allows the government to “settle [a qui tam ] action ... notwithstanding the objections of the person initiating the action if the court determines, after a hearing, that the proposed settlement is fair, adequate, and reasonable under all the circumstances.” Id. § 3730(c)(2)(B). The government offered two responses. First, it asserted that the district court could dismiss Counts I and II over Schweizer's objection pursuant to § 3730(c)(2)(A) without reviewing the settlement.⁵ Section 3730(c)(2)(A) states that “[t]he Government may dismiss [a qui tam ] action notwithstanding the objections of the person initiating the action if the person has been notified ... of the filing of the motion [to dismiss] and the court has provided the person with an opportunity for a hearing on the motion.” In the alternative, the government urged the district court to deem the settlement “fair, adequate, and reasonable” under § 3730(c)(2)(B).

The district court dismissed Counts I and II after holding a hearing. United States ex rel. Schweizer v. Océ N.V., 681 F.Supp.2d 64 (D.D.C.2010). It declined to review the settlement, concluding that § 3730(c)(2)(A) gave the government “an unfettered right to dismiss” qui tam claims. 681 F.Supp.2d at 65–66 (quoting United States ex rel. Hoyte v. Am. Nat'l Red Cross, ...