Wright v. Common Ground Health Clinic, Inc.

PRESTON WRIGHT ET AL. v. COMMON GROUND HEALTH CLINIC, INC. ET AL.

CIVIL ACTION No. 16-11623 SECTION I

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA

September 9, 2016

ORDER AND REASONS

Before the Court is a motion¹ for partial dismissal filed by all defendants pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Plaintiffs oppose² the motion. For the following reasons, plaintiffs' claim under the National Defense Authorization Act ("NDAA"), 41 U.S.C. § 4712 et seq. is dismissed without prejudice and the case is remanded to the Civil District Court for the Parish of Orleans.

BACKGROUND

Plaintiffs are Preston Wright ("Wright") and Michele Watson ("Watson"), formerly the chief executive officer and chief financial officer, respectively, of defendant Common Ground Health Clinic, Inc. ("Common Ground"), a nonprofit health clinic located in New Orleans. Common Ground is governed by a twelve member board of directors ("Board"), each of whom has also been made a defendant in this lawsuit. All of the individual defendants are being sued in their official capacities as members of the Board, except defendants Max Camp and Stephanie Bridges, who plaintiffs have sued in both their official and individual capacities.

As a federally qualified health center, Common Ground is a Health Center Program grantee which means that the clinic receives federal funding in the form of grants from the Health Resources and Services Administration ("HRSA") of the U.S. Department of Health and Human Services. As a grantee, Common Ground is subject to the requirements of 42 U.S.C. § 254b. Plaintiffs generally allege that after they were hired by Common Ground, they became aware that the clinic was not compliant with a number of the HRSA requirements necessary for it to receive grant funding. Plaintiffs reported these violations to HRSA officials on multiple occasions and notified the Board that they had done so. Plaintiffs were fired soon thereafter.

Wright and Watson claim that they were terminated in retaliation for reporting the noncompliance. They assert that defendants fabricated pretextual grounds for the termination, accusing Wright of failing to hire a medical director—something that potentially could have put the clinic at risk of being closed—and accusing both Wright and Watson of stealing money from patients. Wright and Watson claim that both accusations are demonstrably false, and that defendants knew they were false when they made them. Soon after these accusations were leveled, Wright and Watson were indefinitely suspended pending investigation of the claims. Wright was terminated shortly thereafter on April 29, 2016, and Watson was terminated on May 11, 2016.

Less than one week after Watson was fired, plaintiffs filed this lawsuit in the Civil District Court for the Parish of Orleans. Defendants timely removed. This Court has subject-matter jurisdiction over the lawsuit pursuant to 28 U.S.C. § 1331and 28 U.S.C. § 1367.³ Plaintiffs assert four claims in their state court petition, but only their claim under the NDAA arises under federal law. In their motion, defendants move to dismiss, inter alia, the NDAA claim because the statute requires exhaustion of administrative remedies and plaintiffs have not satisfied that requirement.⁴

STANDARD OF LAW

Although defendants filed their motion pursuant to Rule 12(b)(6), the Fifth Circuit has held that administrative exhaustion requirements imposed by statute are jurisdictional, Williams v. J.B. Hunt Transp., Inc., 826 F.3d 806, 810 (5th Cir. 2016), and challenges to subject-matter jurisdiction are properly brought under Rule 12(b)(1). Blankenship v. Buenger, No. 15-50974, 2016 WL 3538829, at *2 (5th Cir. June 28, 2016). Accordingly, the Court evaluates defendants' challenge to Wright and Watson's NDAA claim pursuant to Rule 12(b)(1).

A motion to dismiss filed pursuant to Rule 12(b)(1) "allow[s] a party to challenge the subject matter jurisdiction of the district court to hear a case." Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001). "At the outset [the Court] must emphasize a crucial distinction, often overlooked, between 12(b)(1) motions that attack the complaint on its face and 12(b)(1) motions that attack the existence of subject matter jurisdiction in fact, quite apart from any pleadings."Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977); see also 5B Wright & Miller, Federal Practice and Procedure § 1350 (3d ed. 2013) ("As many judicial decisions make clear, a motion under Rule 12(b)(1) may be used to attack two different types of jurisdiction defects."). The Fifth Circuit has explained:

A motion to dismiss for lack of subject matter jurisdiction, Rule 12(b)(1), can be based on the lack of jurisdiction on the face of the complaint. If so, the plaintiff is left with safeguards similar to those retained when a Rule 12(b)(6) motion to dismiss for failure to state a claim is raised—the court must consider the allegations in the plaintiff's complaint as true. But the two motions are treated quite differently when matter outside the complaint is the basis of the attack.

Williamson v. Tucker, 645 F.2d 404, 412 (5th Cir. 1981) (citation omitted). The court further explained by quoting the Third Circuit:

The facial attack [on subject matter jurisdiction] does offer similar safeguards to the plaintiff: the court must consider the allegations of the complaint as true. The factual attack, however, differs greatly for here the trial court may proceed as it never could under 12(b)(6) or Fed. R. Civ. P. 56. Because at issue in a factual 12(b)(1) motion is the trial court's jurisdiction—its very power to hear the case—there is substantial authority that the trial court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case. In short, no presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims.

Id. at 412-13 (quoting Mortensen, 549 F.2d at 891).

"The district court consequently has the power to dismiss for lack of subject matter jurisdiction on any one of three separate bases: (1) the complaint alone; (2) the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts." Id. at 413. "The burden of proof for a Rule 12(b)(1) motion to dismiss is on theparty asserting jurisdiction." Edwards v. Burwell, No. 15-10807, 2016 WL 4073298, at *1 (5th Cir. July 29, 2016).

In this case, the petition supplemented by undisputed facts as evidenced in the record convinces the Court that it lacks subject-matter jurisdiction over the NDAA claim, and therefore over this lawsuit.

ANALYSIS

The NDAA is a whistleblower statute. It provides a private right of action to employees of federal contractors who are discharged or discriminated against in retaliation for disclosing information about regulatory violations to a federal entity responsible for overseeing the employer's federal contract.⁵

Section 4712(b)(1)of the NDAA provides:

(b) Investigation of complaints. -

(1) Submission of complaint. -- A person who believes that the person has been subjected to a reprisal prohibited by subsection (a) may submit a complaint to the Inspector General of the executive agency involved. Unless the Inspector General determines that the complaint is frivolous, fails to allege a violation of the prohibition in subsection (a), or has previously been addressed in another Federal or State judicial or administrative proceeding initiated by the complainant, the Inspector General shall investigate the complaint and, upon completion of such investigation, submit a report of the findings of the investigation to the person, the contractor or grantee concerned, and the head of the agency.

Section 4712(c) is titled "Remedy and enforcement authority." It provides that after receiving the Inspector General's report, the head of the agency shall "determinewhether there is sufficient basis to conclude that the contractor or grantee concerned has subjected the complainant to a reprisal prohibited by subsection (a) and shall either issue an order denying relief or shall take one or more of [several actions]." 41 U.S.C. § 4712(c)(1). Section 4712(c)(2)—the provision whose significance the parties dispute—states as follows:

(2) Exhaustion of remedies. - If the head of an executive agency issues an order denying relief under paragraph (1) or has not issued an order within 210 days after the submission of a complaint under subsection (b), or in the case of an extension of time under paragraph (b)(2)(B), not later than 30 days after the expiration of the extension of time, and there is no showing that such delay is due to the bad faith of the complainant, the complainant shall be deemed to have exhausted all administrative remedies with respect to the complaint, and the complainant may bring a de novo action at law or equity against the contractor or grantee to seek compensatory damages and other relief available under this section in the appropriate district court of the United States, which shall have jurisdiction over such an action without regard to the amount in controversy. Such an action shall, at the request of either party to the action, be tried by the court with a jury. An action under this paragraph may not be brought more than two years after the date on which remedies are deemed to have been exhausted.

Defendants interpret Section 4712(c)(2) as requiring the exhaustion of administrative remedies before an aggrieved employee can file a lawsuit. Plaintiffs do not dispute that they failed to exhaust administrative remedies, but instead argue that exhaustion is not required. They assert that defendants' position is belied by the language of Section 4712(b)(1), which states that "[a] person who...