T.S. Ellis, III, United States District Judge.
This dispute arises from plaintiff's brief employment with a defense contractor, during which plaintiff claims he discovered that his employer had been improperly billing the federal government for services that had not yet been delivered or provided. Plaintiff alleges that he reported his findings to his superiors and was fired as a result. Plaintiff subsequently pursued, unsuccessfully, an administrative Complaint of Reprisal with the Department of Defense, and then filed the first iteration of his complaint in this case, alleging retaliation, reprisal, improper denial of employment benefits, and wrongful denial of overtime pay. Shortly thereafter, the defense contractor's chief executive officer sent plaintiff several text messages that, in plaintiff's view, were designed to discourage plaintiff from pursuing his claims in this case. Plaintiff then added in his Second Amended Complaint ("SAC") two retaliation claims based on these text messages.
Defendants filed a timely Rule 12(b)(6) motion to dismiss five of the six counts alleged in plaintiff's SAC. Specifically, at issue are the following questions:
A hearing on defendants' motion to dismiss was held, and two Orders subsequently issued, granting the motion in part and denying it in part. See Brach v. Conflict Kinetics Corporation, No. 1:16-cv-978 (E.D. Va. Nov. 18, 2016) (Doc 23); id. (E.D. Va. Nov. 21, 2016) (Doc. 24). This Memorandum Opinion further records the grounds for those rulings.
Plaintiff, Cameron Brach ("Brach"), is a Virginia resident and military veteran with over eighteen years of experience as an operations director. From September 29, 2014 to August 9, 2015, Brach worked for defendant, Conflict Kinetics Corporation ("CKC"), a Virginia corporation that sells electronic firearms training devices and services to the United States military. Brach's supervisors included the two remaining defendants: (i) Brian Stanley ("Stanley"), a Virginia resident and CKC's chief executive officer, and (ii) Kathy Henderson ("Henderson"), a Virginia resident and CKC's Controller.
During his employment, Brach allegedly worked several overtime shifts without receiving overtime pay and was denied unspecified employment benefits. Moreover, in May 2015, Brach allegedly discovered that CKC was improperly billing the United States Navy for services not rendered. Specifically, Brach contends that he conducted an invoice audit for CKC's contracts, which showed (i) that CKC had billed the Navy $16,460 for pistols that CKC never delivered; and (ii) that CKC had billed the Navy roughly $400,000 relating to installation services that CKC had not yet performed.
On December 11, 2015, Brach filed an administrative Complaint of Reprisal with the Inspector General's Office at the Department of Defense. In a letter dated June 30, 2016, the Inspector General informed Brach that the Department of Defense had closed its investigation, effectively exhausting Brach's administrative remedies. On July 28, 2016, Brach filed the first iteration of the SAC.
Thereafter, on August 7, 2016, Stanley sent Brach a text message stating:
SAC Ex. 1. Ten days later, on August 17, 2016, Stanley sent Brach two more text messages:
Id. Ex. 2.
On August 23, 2016, Brach filed his first amended complaint, and thereafter, on October 11, 2016, Brach obtained leave to file the SAC, alleging six counts against CKC, Stanley, and Henderson:
Defendants, pursuant to Rule 12(b)(6), Fed. R. Civ. P., jointly moved to dismiss Counts I, II, III, V, and VI. With respect to Counts I and II, defendants argue that Brach's FCA and DCWPA claims fail against defendants Stanley and Henderson because a supervisor in his individual capacity cannot be liable for retaliation under the FCA or DCWPA. Defendants argue that Count III fails because Brach never alleged the existence of an employee benefits plan to which ERISA may apply. Finally, regarding Counts V and VI — the retaliation claims based on Stanley's text messages — defendants contend that the messages are merely threats of counter-suits during litigation, and therefore not actionable.
A district court should dismiss a complaint pursuant to Rule 12(b)(6), Fed. R. Civ. P., if, accepting all well-pleaded allegations in the complaint as true and drawing all reasonable factual inferences in the plaintiff's favor, the complaint does not allege "enough facts to state a claim to relief that is plausible on its face." Bell
Count I alleges that Brach was discharged because he had complained to his superiors that CKC was overbilling the United States Navy. Defendants have moved, pursuant to Rule 12(b)(6), Fed. R. Civ. P., to dismiss Brach's FCA Retaliation claim as against the individual defendants, Stanley and Henderson, on the ground that 31 U.S.C. § 3730(h)(1) authorizes relief only against an employer, and not against an individual supervisor sued in his individual capacity.
The FCA provides a cause of action to any "employee, contractor, or agent" who is:
31 U.S.C. § 3730(h)(1). But the statutory text of this provision, in its current form, does not identify what entity or entities may be liable for the relief authorized in § 3730(h). To be sure, the previous version of this statutory provision — which was in effect until 2009 — provided clearer guidance. The previous version provided:
31 U.S.C. § 3730(h) (2003) (emphasis added). Importantly, courts interpreting the pre-2009 provision unanimously ruled that § 3730(h) precluded individual supervisor liability, because a supervisor is not an "employer" under the statute.
To begin with, the Supreme Court has stated that the "task of resolving the dispute over the meaning of [a statute]
To state the obvious, the 2009 amendment to § 3730(h) expanded the class of potential plaintiffs, but is silent on the question whether a plaintiff may bring a cause of action against a supervisor sued in his individual capacity. Importantly, however, Congress is presumed to have known that courts had unanimously ruled that the pre-2009 version of § 3730 did not allow for individual supervisor liability. Thus, to accept Brach's argument — that Congress's amendment silently expanded § 3730(h) to include supervisor liability — is to assume that Congress overturned unanimous, pre-amendment judicial authority by negative implication. See, e.g., Howell, 827 F.3d at 530 ("Adopting [plaintiff's] argument means concluding that Congress overturned [unanimous] precedent, not by the insertion of express language expanding liability, but only by mere implication."); Aryai, 25 F.Supp.3d at 386 (noting same). Such an assumption is unwarranted because Congress, had it intended to overturn unanimous case law, could have simply replaced the term, "employer," with "any person" in order to expand the class of potential defendants.
Moreover, the text of § 3730(h), read as a whole, forecloses the argument that a supervisor may be sued in his individual capacity. See, e.g., Jantzen, 386 U.S. at 234-35, 87 S.Ct. 998 (courts should read a statute "as a whole" when evaluating an amendment's affect). This is so because the current version of § 3730(h) continues to prescribe mandatory remedies, such as reinstatement.
Similarly, insofar as it is appropriate to consider legislative history,
Similarly, the Senate Report shares this focus on expanding the class of plaintiffs, but, significantly, says nothing about expanding the class of defendants. Specifically, the Senate Report states that although § 3730(h) "was designed to protect employees from employer retaliation," court decisions had "narrowly interpreted the definition of `employee' and thus le[ft] contractors and subcontractors open to retaliation." S. Rep. No. 110-507, 110th Cong., 2nd Session (Sept. 25, 2008), 2008 WL 4415147 at *26 & n.93. Thus, the Senate Report states that the statutory amendment is to "correct this loophole" and "to assist individuals who are not technically employees ... but nonetheless have a contractual or agent relationship with an employer." Id. at *26-27 (emphasis added). Thus, as the legislative history makes clear, to accept Brach's position is to conclude that Congress changed the law significantly by amending the statute without explicitly stating so in either the legislative history or the statutory text.
In sum, this analysis points persuasively to the conclusion that 31 U.S.C. § 3730(h) does not provide for individual supervisor liability. Accordingly, Brach's FCA claim against defendants Stanley and Henderson fails as a matter of law.
Brach's DCWPA reprisal cause of action echoes his FCA retaliation claim. Brach alleges (i) that he made a disclosure protected by 10 U.S.C. § 2409(a) by raising with his superiors the issue of potential overbilling, and (ii) that Brach's termination was a reprisal for his doing so. Brach's claim against the individual defendants, Stanley and Henderson, fails for substantially similar reasons to those stated supra, Part II.A. Put simply, Brach's claim against his supervisors fails as a matter of law because § 2409 does not provide for individual supervisor liability.
As relevant here, § 2409(c)(2) states that a plaintiff who has exhausted his administrative remedies may bring a reprisal claim against a "contractor." 10 U.S.C. § 2409(c)(2).
Moreover, the analysis regarding proper defendants in the FCA anti-retaliation context is persuasive in the DCWPA anti-reprisal context because the two statutory provisions are essentially similar. See Flowers v. S. Reg'l Physician Servs. Inc., 247 F.3d 229, 233 n.4 (5th Cir. 2001) ("[A]s a matter of statutory interpretation in determining the meaning of a particular statutory provision, it is helpful to consider the interpretation of other statutory provisions that employ the same or similar language."); In re Crescent City Estates, LLC, 588 F.3d 822, 829 (4th Cir. 2009) (applying same principle to fee-shifting statutes); United States ex rel. Cody v. Mantech Int'l Corp., 207 F.Supp.3d 610, 2016 WL 4940332 (E.D. Va. Sept. 14, 2016) (interpreting 31 U.S.C. § 3730(h) and 10 U.S.C. § 2409 as requiring the same elements to state a prima facie case). Indeed, in the instant case, all parties properly agree that the FCA anti-retaliation provision, § 3730(h), provides an appropriate guide for interpreting the DCWPA's anti-reprisal provision, § 2409. It follows that because FCA liability is limited to employers and does not extend to individual supervisors, the same is true for the DCWPA — liability extends to "contractors," but not to a contractor's individual employees sued in their individual capacities.
Brach alleges in Count III that he was denied employment benefits in violation of ERISA, 29 U.S.C. § 1132(a). This claim fails because Brach has not alleged in the SAC the existence of an employee benefit plan to which ERISA might apply.
ERISA provides that a "participant or beneficiary" may "recover benefits due to him under the terms of his plan, to enforce rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." 29 U.S.C. § 1132(a)(1)(B).
Thus, Brach's § 1132(a) claim must fail, as the SAC never alleges that CKC implemented a benefit plan that would be subject to ERISA. Indeed, Brach conceded in his brief and at oral argument that the SAC is deficient in this regard. Yet, Brach forecasted that he could allege sufficient facts in a third amended complaint to state a plausible claim (i) that CKC offered a benefits plan to employees, (ii) that this plan was offered to non-owner employees of the company, and (iii) that plaintiff was denied such benefits, despite being an employee.
Accordingly, Count III has been dismissed with leave to amend. See Brach v. Conflict Kinetics Corporation, No. 1:16-cv-978 (E.D. Va. Nov. 18, 2016) (Order) (Doc. 23).
Count V alleges that each defendant retaliated against Brach for Brach's filing an FLSA claim in this action. Specifically, Brach alleges that Stanley, acting as CKC's agent, sent Brach text messages to dissuade Brach from pursuing an FLSA claim. Stanley sent the first text message on August 7, 2016 — just over a week after Brach filed his initial lawsuit — which stated:
SAC, Ex. 1. Ten days later, on August 17, 2015, Stanley sent the following two text messages to Brach:
SAC, Ex. 2. According to Brach, these text messages constitute actionable retaliation pursuant to 29 U.S.C. § 215. Defendants disagree, arguing that these messages do not rise to the level of retaliatory conduct.
The FLSA makes it unlawful "for any person ... to discharge or in any other manner discriminate against any employee because such employee has filed any complaint or instituted or caused to be instituted any proceeding under or related to this chapter[.]" 29 U.S.C. § 215(a)(3). Although Brach had already been discharged by the time Stanley sent the text messages, the Fourth Circuit has held that an FLSA retaliation claim may lie for retaliatory acts committed against an ex-employee. See Darveau v. Detecon, Inc., 515 F.3d 334, 343 (4th Cir. 2008). Importantly, "a plaintiff asserting a retaliation claim under the FLSA need only allege that his employer retaliated against him by engaging in an action `that would have been materially adverse to a reasonable employee' because the `employer's actions... could well dissuade a reasonable worker from making or supporting a charge of discrimination.'" Id. (quoting Burlington N. & Santa Fe Ry. Co. v. White, 548 U.S. 53, 57, 126 S.Ct. 2405, 165 L.Ed.2d 345 (2006)).
Here, Stanley's text messages are merely threats of counterclaims, which defendants argue are not, as a matter of law, materially adverse to a reasonable employee. In this regard, defendants cite Ergo v. Int'l Merch. Servs., Inc., 519 F.Supp.2d 765 (N.D. Ill. 2007), a case expressing doubt that the mere threat of countersuit "could ever constitute retaliation." Id. at 781. Defendants also emphasize that because Brach has in fact persisted in his claims in this action — indeed, Brach has twice amended the complaint after receiving Stanley's text messages — Brach cannot show that the messages dissuaded him from supporting his FLSA claim.
To be sure, there is some force in this argument. Indeed, any plaintiff must necessarily be aware that filing a lawsuit may result in the filing of a counterclaim; in some circumstances, the filing of a counterclaim is compelled by the Federal Rules of Civil Procedure. See Rule 13(a), Fed. R. Civ. P.
Yet, the Fourth Circuit has promulgated a permissive test that permits Brach's claim based on the text messages to survive a motion to dismiss. In this respect, in Darveau v. Detecon, Inc., the Fourth Circuit held that even a counterclaim could be retaliatory if the counterclaim (i) lacks "reasonable basis in fact or law" and (ii) was filed with "retaliatory motive." 515 F.3d at 341. Moreover, the Fourth Circuit in Darveau held that a plaintiff asserting an FLSA retaliation claim "need only allege"
Here, the text messages — which threaten that Brach could lose his savings and $100,000 as a result of bringing the instant lawsuit — and the allegations in the SAC are sufficient under Darveau to state a plausible claim that a reasonable worker could well be dissuaded from supporting an FLSA overtime claim. Similarly, the SAC states sufficient facts to make it plausible that the text messages were sent with retaliatory motive and without reasonable basis in fact or law.
Accordingly, the Rule 12(b)(6) motion must be denied with respect to Brach's FLSA retaliation claim against defendants CKC and Stanley.
Brach's ERISA retaliation claim is based on the same text messages that gave rise to the FLSA retaliation claim.
In this regard, because Brach has been granted leave to amend the complaint to allege the existence of an ERISA plan with respect to Count III, it is appropriate to grant Brach leave to amend his ERISA retaliation claim, too.
In sum,
Appropriate Orders have issued.
Interestingly, the only other court in this district to have addressed the question declined to answer it at the Rule 12(b)(6) stage. See Fitzsimmons v. Cardiology Assoes. of Fredericksburg, Ltd., No. 3:15cv72, 2015 WL 4937461, at *7-8 (E.D. Va. Aug. 18, 2015) (declining to determine at the Rule 12(b)(6) stage whether § 3730(h) permits individual liability "in the absence of binding precedent" or "specific statutory analysis offered by either [party]"); accord Huang v. Rector & Visitors of Univ. of Va., 896 F.Supp.2d 524, 548 n.16 (W.D. Va. 2012) (declining to dismiss § 3730(h) claim against individual defendants "out of hand" without guidance from the Fourth Circuit and where the defendants did not raise the issue).
31 U.S.C. § 3730(h)(2) (emphasis added); see also Eberhardt v. Integrated Design & Constr., Inc., 167 F.3d 861, 872 (4th Cir. 1999) (holding that relief under § 3730(h) is mandatory).
10 U.S.C. § 2409(a).