UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ______________________________________ ) ) UNITED STATES OF AMERICA ex rel ) STEPHANIE SCHWEIZER, et al., ) Plaintiffs, ) ) Civil Action No. 06-648 (RCL) v. ) ) OCE NORTH AMERICA, INC., et al., ) Defendants. ) ) ______________________________________)

MEMORANDUM OPINION

Before the Court is defendants Océ North America, Inc., Océ-USA Holding, Inc., Océ

Imagistics, Inc., and Océ N.V.’s Motion for Summary Judgment. Upon consideration of the

Motion, the Opposition thereto, the Reply brief, applicable law, and the entire record, the Court

will grant the Motion for the reasons that follow.

I. BACKGROUND

Defendant Océ North America, Inc. (“Océ”) hired plaintiff Stephanie Schweizer in

December 2004 as GSA Contracts Manager. Schweizer Dep. 131–34, July 21, 2010, ECF No.

103-4. Schweizer managed Océ’s Schedule 30 and 76 contracts with the U.S. General Services

Administration (GSA), which obligated Océ to supply printers and related products to the federal

government. Beauchamp Dep. 14, Aug. 3, 2010, EFC No. 103-8. Schweizer was responsible for

“daily management and oversight” to “maintain[] the integrity of all contracts” and “assure

contract compliance.” Ex. 2 to Frost Dep. at 2, Aug. 5, 2005, ECF No. 105-1 [hereinafter Job

Description]; Beauchamp Dep. 13–14. Her specific duties included being a point of contact for

salespersons, Schweizer Dep. 131, 150–51, and for government officials, Job Description at 7,

1 negotiating contract modifications, id. at 1, setting up and managing the GSA Advantage

Program (the government electronic buy board), id., supporting the field sales effort by—among

other things—developing price strategy, id. at 2, ensuring accuracy of product specifications and

prices listed in the contracts, Schweizer Dep. 150–51, understanding government contract law

and keeping abreast of new legislation, Job Description at 2, participating in the Coalition for

Government Procurement and other similar associations, id., coordinating with senior

management on GSA and related matters to assure contract compliance, id., and ensuring general

legal and contractual compliance, Schweizer Dep. 131, 171–72.

Schweizer reported directly to Ronald Frost, Océ’s Director of Government Contracting.

Frost Dep. 9. On occasion, Frost’s supervisor and Océ’s Vice President of Business

Development and Federal Sales, Bryan Beauchamp, assigned work to Schweizer directly. E.g.,

Schweizer Decl. ¶ 7, Sept. 20, 2010, ECF No. 105-5.

While performing her job, Schweizer began to suspect that Océ was defrauding the

federal government by deliberately failing to negotiate GSA contract modifications to reflect

commercial price discounts, in violation of the contracts’ price reduction clauses, and by

deliberately certifying that some products were manufactured in the Netherlands despite actually

being manufactured in China, in violation of the Trade Agreements Act, to which the Schedule

36 and 70 contracts were subject. Schweizer Decl. ¶¶ 4, 5, 7, 8.

Schweizer’s suspicions regarding price reduction clause noncompliance developed from

her monitoring the GSA Advantage Program and communicating about prices with coworkers,

including Accounts Managers Nancy Vee and Sue Wohlford, and with her supervisor, Frost. Id.

¶¶ 3-6. Vee told Schweizer that she had offered on several occasions prices different from the

established GSA contract prices, which Schweizer determined were not listed in GSA contract

2 modifications. Id. ¶ 4. Schweizer obtained by email Wohlford’s pre-sale pricing list, which

contained different pricing than was reported to the government or listed in the GSA Advantage

Program. Schweizer Dep. 272–74; Schweizer Decl. ¶ 5. Schweizer also found falsified

documents that Océ’s Contract Administrator, Kathleen Carey, had sent to the GSA. She

reported this to Frost, who told her he “didn’t want to talk about it” and “didn’t want to hear

about any documents that were falsified.” Schweizer Dep. 156–59. In another conversation with

Frost about “the corruption and the fraud in the company,” Schweizer warned Frost of the risk of

noncompliance with a GSA contract. Frost replied, “I know, that is one of the reasons why

you’re not to discuss these issues with anyone outside.” Schweizer Dep. 270–71.

Schweizer’s suspicions regarding Trade Agreements Act noncompliance developed from

her review at Vice President Beauchamp’s direction of Océ’s Security and Exchange

Commission (SEC) reports and product manufacturing information, Schweizer Dep. 228–31, and

conversations with coworkers and Frost, Pl.’s Am. Interrog. Resp. No. 4, July 20, 2010, ECF No.

105-4. Schweizer’s review revealed over three hundred products manufactured in China by

Imagistics, a company that Océ was planning to acquire. Schweizer Dep. 233. Coworkers told

Schweizer that Océ manufactured in China products that were listed on the GSA contract as

being manufactured in the Netherlands. Pl.’s Am. Interrog. Resp. No. 4. Frost told Schweizer

that Océ “had been manufacturing in China for years” and that if Schweizer continued to pursue

these issues, Océ “would ‘destroy’ her.” Id.

Schweizer decided that Océ’s noncompliance constituted illegal fraud and a False Claims

Act violation after speaking with Larry Allen, President of the Coalition for Government

Procurement. Schweizer Dep. 245–46. Allen told Schweizer she “could go to jail” if she placed

products manufactured in China on the GSA schedule. Id.

3 In early December 2005, Schweizer reported the Trade Agreements Act violations to

Vice President Beauchamp, characterizing them as False Claims Act violations. Pl.’s Am.

Interrog. Resp. No. 8. Beauchamp directed her to speak with Gerald Whelan, Océ’s Human

Resources Director. Id. Whelan then directed her to speak with Océ’s in-house counsel, Dan

Harper. Id. Harper directed her to speak with Océ’s outside counsel, Kenneth Weckstein, who

had more experience with government contracting. Id. In each conversation, Schweizer repeated

her belief that Océ was violating the False Claims Act by misrepresenting where its products

were manufactured. Id. On December 8, 2005, Frost notified Schweizer that she was suspended

without pay. Defs.’ Statement of Undisputed Material Facts ¶ 48, Sept. 1, 2010, ECF No. 103-2.

Later that month, Schweizer received a termination letter dated December 15, 2005, ascribing

her termination to unprofessional conduct and poor performance. Schweizer Dep. 300. The letter

explains that Schweizer’s employment was terminated because she “engaged in indecent conduct

(repeated cursing and yelling at other employees) . . . refused to follow orders from [her]

supervisor and acted insubordinately to [her] supervisor . . . [and] failed to maintain necessary

standards of workmanship and productivity.” Letter from B. Beauchamp 1–2, Dec. 15, 2005,

ECF No. 103-15. The letter further lists as grounds for dismissal Schweizer’s unfounded

allegations “that fraud and crimes had been committed by Mr. Frost.” Id.

A few months later, in April 2006, Schweizer filed a qui tam suit against Océ. Count I

alleges that Océ misrepresented its pricing practices, thereby not complying with its GSA

contracts’ price reductions clauses and overcharging the GSA in violation of the False Claims

Act,

(a)(1) and (2). Count II alleges that Océ violated § 3729(a)(1) and (2) by

misrepresenting where Océ manufactured its products and thereby not complying with the

contracts’ Trade Agreements Act clauses. Count III alleges that Océ fired Schweizer in

4 retaliation for her fraud investigation, violating § 3730(h), the FCA’s whistleblower protection

provision. Pl.’s Compl., Apr. 7, 2006, ECF No. 1. In December 2006, Schweizer’s coworker

Nancy Vee joined Schweizer in filing an amended complaint, adding Vee as a plaintiff. In

September 2009, the United States intervened in Counts I and II to request dismissal following

execution of a settlement agreement between the United States, Océ, and plaintiff Vee. In

January 2010, this Court granted the United States’ Motion to Dismiss Counts I and II with

prejudice, over Schweizer’s opposition, leaving only Schweizer’s Count III retaliation claim.

This Court now rules on Océ’s Motion for Summary Judgment on Count III and request for

attorneys’ fees and costs.

II. LEGAL STANDARD

The Court will grant a motion for summary judgment where a party shows “that there is

no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of

law.” Fed. R. Civ. P. 56(c)(2). There is a genuine issue as to a material fact if “reasonable minds

could differ” as to that fact. Anderson v. Liberty Lobby, Inc.,

(1986), cited in

Celotex Corp. v. Catrett,

(1986)). The burden is on the moving party to

demonstrate that there is an “absence of a genuine issue of material fact” in dispute. Celotex,

. The Court will believe the evidence of the non-moving party and will draw all

reasonable inferences from the record in the non-moving party’s favor. Anderson, 477 U.S at

255. In addition, “the court may assume that facts identified by the moving party in its statement

of material facts are admitted, unless such a fact is controverted in the statement of genuine

issues filed in opposition to the motion.” D.D.C. LCvR 7(h)(1). To avoid summary judgment, the

non-moving party cannot merely raise “some alleged factual dispute”: the fact at issue must be

“material.” Id. at 247 (emphasis in original). A material fact is one “that might affect the

5 outcome of the suit under the governing law.” Id. at 248. Thus, summary judgment is appropriate

only where the non-movant fails to offer “evidence on which the jury could reasonably find for

the [non-movant].” Id. at 252.

III. DISCUSSION

A. The Court Will Grant Summary Judgment to Defendants.

1. The Elements of Retaliation Under the False Claims Act

The False Claims Act (FCA) prohibits employers from retaliating against employees

“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 this section.”

(h)(1) (2006). Such retaliation includes being

“discharged, demoted, suspended, harassed, or in any other manner discriminated against in the

terms and conditions of employment.”

An employee may bring an action to enforce this

subsection.

§ 3730(h)(2). As the D.C. Circuit has explained:

[T]o prevail on a whistleblower claim, an employee must demonstrate that: (1) he engaged in protected activity, that is, “acts done . . . in furtherance of an action under this section”; and (2) he was discriminated against “because of” that activity. To establish the second element, the employee must in turn make two further showings. The employee must show that: (a) “the employer had knowledge the employee was engaged in protected activity”; and (b) “the retaliation was motivated, at least in part, by the employee's engaging in [that] protected activity.”

Hoyte ex rel. United States v. Am. Nat’l Red Cross,

(D.C. Cir. 2008)

(citations omitted).

With regard to the second element of a claim under § 3730(h)—that the employer has

knowledge that the employee was engaged in protected activity—the D.C. Circuit has further

explained that “[p]laintiffs alleging that performance of their normal job responsibilities

6 constitutes protected activity must overcome the presumption that they are merely acting in

accordance with their employment obligations to put their employers on notice” that they are

engaged in protected activity. United States ex rel. Williams v. Martin-Baker Aircraft Co.,

(D.C. Cir. 2004) (citations omitted). In other words, to prevail here, plaintiff

must establish that her internal reporting of Océ’s alleged FCA violation was beyond the scope

of her employment responsibilities and was sufficient to put Océ on notice that plaintiff was

engaged in activity protected by statute.

2. Analysis

In this case, the evidence shows that Schweizer failed to put Océ on notice that she had

gone beyond the scope of her employment duties and was engaged in activity protected under the

False Claims Act. In Martin-Baker, the D.C. Circuit’s leading opinion on the application of the

second prong of the Hoyte standard, the plaintiff was the chief contracts negotiator of Martin-

Baker Aircrafts.

. In this position, one of the plaintiff’s central job

responsibilities was to analyze pricing for products sold to the U.S. government.

. In

fulfilling this role, the plaintiff alerted his supervisor and the government that Martin-Baker’s

pricing violated its government contracts (and therefore the FCA).

. After being

terminated by Martin-Baker, the plaintiff brought suit alleging that his firing was in violation of

the FCA’s retaliation provision.

. On appeal, the D.C. Circuit concluded that when an

employee’s employment obligations include reporting potential fraud up the management chain,

that report—without more—does not satisfy the notice requirement.

. On the facts of

Martin-Baker, though, the Court concluded that the plaintiff did satisfy the notice requirement

when he went beyond his employment obligations by reporting his findings to the government

and advising the government to challenge Martin-Baker’s pricing.

Here, though, the evidence

7 demonstrates that—unlike the plaintiff in Martin-Baker—Schweizer took no action that would

have put Océ on notice that she was engaged in protected activity. Accordingly, summary

judgment for defendants is required.

Schweizer was a Contracts Manager responsible for ensuring legal and contractual

compliance. Schweizer Dep. 131, 171–72. In this capacity, every step she took in furtherance of

her “fraud investigation” was an act that fell within her job description or was undertaken at

senior management’s express instruction. For example, when Schweizer initially began to

investigate potential fraud at Océ by comparing Accounts Managers’ pricing with pricing listed

in the GSA contracts and the GSA Advantage Program, she was fulfilling her role in ensuring

the company’s compliance with the Schedules 36 and 70 GSA contracts. Job Description at 1–2;

Schweizer Dep. 150–51. In addition, Schweizer’s job description requires that she report any

suspected pricing issues to her direct supervisor, Job Description at 7, which she did, Schweizer

Dep. 156–58; Pl.’s Am. Interrog. Resp. No. 8. Furthermore, as Schweizer continued to report her

concerns up Océ’s chain of command, to human resources, in-house counsel, and outside

counsel—at management’s request—she acted solely within the context of her employment. Job

Description at 7. At no time did she inform anyone at Océ that she was acting pursuant to the

False Claims Act and or that she intended to file a claim under the Act unless the company

moved to resolve her concerns. 1 Indeed, even when Schweizer shared her concerns about Océ’s

alleged FCA violations to a professional contact at an outside organization, the Coalition for

Government Procurement, she was acting according to her job description, which required her to

1 The Court is well aware that a plaintiff need not state explicitly to her employer or anyone else her intention to file a False Claims Act suit to put her employer on notice. United States ex rel. Yesudian v. Howard Univ.,

(D.C. Cir. 1998) (“Threatening to file a qui tam suit or to make a report to the government . . . clearly is one way to make an employer aware. But it is not the only way.”). The Court merely mentions this to emphasize that Schweizer acted solely to perform her job responsibilities and not to make Océ aware that FCA litigation was a reasonable possibility.

8 “participate in Coalition for Government Procurement” to stay educated on government contract

law. Job Description at 2. Tellingly, Schweizer’s own pleadings characterized her purported

investigation as an attempt to “bring the Océ GSA contracts into compliance.” Pl.’s Am. Compl.

¶ 51, Dec. 22, 2006, ECF No. 10. In sum, Schweizer has failed to produce any evidence

documenting that she acted outside her job description in any manner that should have put Océ

on notice that she was acting in furtherance of an FCA suit.

Rather than point the Court to evidence establishing that Océ was on notice, Schweizer

urges the Court to evaluate the notice requirement under the Fourth Circuit’s formulation of the

elements of a § 3730(h) claim rather than the D.C. Circuit’s standard set forth in Hoyte and

Martin-Baker. Pl.’s Opposition to Defs.’ Motion for Summary Judgment 14–16, Sept. 20, 2010,

ECF No. 105. In Eberhardt v. Integrated Design & Constr., Inc., the Fourth Circuit held that

“characterizing the employer’s conduct as illegal or fraudulent or recommending that legal

counsel become involved” is sufficient to constitute notice.

, 868–69 (4th Cir.

1999). Thus, Schweizer argues, under the Eberhardt construction, 2 her allegations of fraud to

Frost, Beauchamp, Whelan, and Harper would constitute notice because she used the words

“fraud” and “illegal” in addition to “noncompliant.” Pl.’s Opposition to Defs.’ Motion for

Summary Judgment 15.

The Court declines plaintiff’s invitation to broaden the scope of the notice requirement

beyond the clear limits set forth by the D.C. Circuit. In Martin-Baker, the D.C. Circuit declined

to extend whistleblower protection under the FCA to the extent set forth in Eberhardt, and

instead joined the Sixth Circuit in holding that “where plaintiff was ‘simply performing his

ordinary duties’ when he told employer that certifications were illegal and that other companies

2 Schweizer does not argue she satisfies the “recommending that legal counsel become involved” trigger, likely because she did not instigate her meetings with Océ’s in-house or outside counsel; Océ did.

9 had incurred FCA liability for similar acts,” the employer was not on notice that plaintiff was

engaged in protected acts. Martin-Baker Aircraft Co.,

(D.C. Cir. 2004)

(quoting Yuhasz v. Brush Wellman, Inc.,

(6th Cir. 2003)). Indeed, the Sixth

Circuit in Yuhasz squarely considered and rejected the authority on which the Fourth Circuit

relied for its conclusion in Eberhardt that the words “illegal” and “fraudulent” carry a talismanic

power to constitute notice under the FCA.

(citing Robertson v. Bell Helicopter

Textron, Inc.,

(5th Cir. 1994)). The Sixth Circuit held that “[t]he mere fact that

[plaintiff] told [his employer] that its certifications of compliance were ‘unlawful and illegal’

does not establish notice.”

The Court here is bound by the D.C. Circuit’s formulation of the

notice requirement, 3 and holds that Schweizer has not presented sufficient evidence to establish a

material dispute that Océ was on notice of any protected acts she had taken under the FCA when

it terminated her.

In light of the conclusion that there is no reasonable dispute as to whether Océ was on

notice of any protected activity in which Schweizer was engaged, the Court need not reach the

question of whether Schweizer has satisfied Hoyte’s first prong by producing evidence that, in

monitoring Océ’s GSA contracts’ compliance, she was engaged in acts in furtherance of an FCA

action. Nor does the Court need to consider the issue of causation—whether Océ terminated

Schweizer partly because of her protected activity—at this time.

3 In addition to Eberhardt, plaintiff points the Court to an earlier D.C. Circuit case in which the Court of Appeals held that a whistleblower need not “report his allegations to the government--or to anyone outside of the employing institution” to be engaged in acts done in furtherance of an FCA action. United States ex rel Yesudian v. Howard Univ.,

(D.C. Cir. 1998). The facts of Yesudian are distinguished from this case, Eberhardt, and Martin-Baker, because the plaintiff in Yesudian was not responsible for oversight or compliance. The Court here is thus bound by the Court of Appeals’ most recent discussion of the notice requirement in Martin-Baker.

10 B. The Court Will Deny Attorneys’ Fees to Defendants.

The False Claims Act permits a Court to award reasonable attorneys’ fees and expenses if

“the Government does not proceed with the action and the person bringing the action conducts

the action . . . the defendant prevails in the action and the court finds that the claim of the person

bringing the action was clearly frivolous, clearly vexatious, or brought primarily for purposes of

harassment.”

(d)(4) (2006). “The award of fees under the False Claims Act is

reserved for rare and special circumstances.” Pfingston v. Ronan Eng’g Co.,

, 1006–

07 (9th Cir. 2002).

Schweizer’s FCA claim is not “clearly frivolous,” and defendants have not shown that it

was brought “primarily for the purposes of harassment.” Schweizer’s interactions with

coworkers and superiors and her discovery of pricing and manufacturing information while

performing her job made it reasonable—though not correct—to believe that litigation would

reveal evidence of fraud. Moreover, the United States did ultimately intervene in this case after it

reached a settlement with Océ concerning Schweizer’s allegations of fraud. Finally, Schweizer’s

reliance on the Fourth Circuit’s notice standard in pursuit of her retaliation claim—though

mistaken—does not constitute the sort of frivolity necessary to justify attorneys’ fees and

expenses.

IV. CONCLUSION

For the reasons stated herein, the Court will GRANT defendants’ Motion for Summary

Judgment on Count III of plaintiff’s Amended Complaint and will DENY defendants’ request to

award attorneys’ fees and costs.

A separate Order consistent with this Memorandum Opinion shall issue this date.

Signed by Royce C. Lamberth, Chief Judge, on March 25, 2011.

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