No Retaliation Claim Plausible When Whistleblower Can’t ID Which Law, Rule, Regulation, or Contract Was Violated; United States District Court for the Eastern District of Virginia No. 1:19-cv-01025, Eugene Ficarra v. SourceAmerica

64

The district court dismissed a complaint alleging the defendant unlawfully retaliated against the plaintiff for activity protected by the Defense Contractor Whistleblower Protection Act and other statutes. The plaintiff alleged his former employer underreported profits on certain commercial contracts, but the court found no connection between this alleged misconduct and any federal contract. Further, despite several opportunities, the plaintiff did not identify what law, rule, or regulation he believed was violated. The court dismissed the case with prejudice, finding that further amendments would be futile, as the plaintiff had failed to correct the deficiencies in his complaint after an earlier dismissal.

Plaintiff Eugene Ficarra sued his former employer SourceAmerica, alleging the company unlawfully retaliated against him after he reported his concerns that the company was underreporting its profits on non-governmental commercial contracts. Ficarra alleged the company acted against him in violation of the Defense Contractor Whistleblower Protection Act. The defendant moved to dismiss.

SourceAmerica is a nonprofit organization that assists other nonprofits that participate in the AbilityOne program, which helps steer federal contracting dollars to companies that employ persons with significant disabilities. The main source of SourceAmerica’s annual budget is fees charged to the company’s business partners. When a partner obtains a federal contract, four percent of the contract value is paid to SourceAmerica. In order to qualify to provide this business partner service, SourceAmerica must demonstrate its financial stability to the AbilityOne program by providing its profit and loss statement, balance sheet, and overall financial information on a regular basis.

The plaintiff was employed by SourceAmerica from March 2007 to October 2018, with his final position being assistant vice president for commercial sales and operations. In that role, Ficarra helped the company create a new business segment focused on electronics recycling and to win both government and commercial contracts for these services. The revenues for these contracts were tracked separately.

Beginning in March 2016, Ficarra questioned whether the profit from this business segment was being reported to AbilityOne accurately. Ficarra believed the income was being under-reported. About one year later, he filed an official internal complaint to the company’s ethics and compliance department. The plaintiff was encouraged to meet with attorneys to discuss the issue and was promised anonymity.

During this time, the plaintiff received an average performance review, even though the commercial sales team exceeded its corporate goals for 2017. His previous reviews had been given ratings of outstanding or exceeds expectations. The plaintiff complained to the ethics and compliance department about retaliation. According to the complaint, ethics officials acknowledged that Ficarra’s concerns were valid. In October 2018, Ficarra’s employment was terminated when his job position was eliminated. Ficarra filed this lawsuit.

The complaint alleged unlawful retaliation in violation of the DCWPA and reprisal in violation of 41 U.S.C. § 4712 of the National Defense Authorization Act. SourceAmerica moved to dismiss, arguing that the plaintiff’s disclosure was not covered by either statute.

The court agreed. First, the court found the plaintiff did not argue—and could not argue—that he reasonably believed his disclosure of SourceAmerica’s alleged underreporting of profits on CyclePoint’s non-governmental commercial contracts amounted to gross mismanagement of a federal contract, an abuse of authority, or gross waste of funds, as the statutes provide. Instead, the plaintiff argued that his disclosure focused on a violation of law or regulation. However, court held that even if the plaintiff alleged a violation of law or regulation, the disclosure still was not connected to a federal contract, as required by the two statutes.

The court found the plaintiff’s disclosure was clearly related only to non-governmental commercial contracts. Specifically, Ficarra allegedly reported to his superiors that SourceAmerica was underreporting profit from certain non-governmental commercial contracts. The only tenuous connection between plaintiff’s disclosure and the federal government is that the complaint alleged that SourceAmerica’s consolidated financial statements included the underreported profit from these commercial contracts and that those consolidated financial statements were submitted to AbilityOne as part of AbilityOne’s evaluation of SourceAmerica’s financial stability. The court found that tenuous connection far too attenuated to meet the plain meaning of the “related to” standard.

Further, the court held that Ficarra failed to identify the law, rule, or regulation that he reasonably believed was violated. The complaint cited to the False Claims Act, False Statements Act, and the FAR, but the court found no explanation of how the alleged under-reporting of certain profits violated any of these statutes or regulations.

The court dismissed the case with prejudice, noting that the plaintiff had previously been given the opportunity to amend his complaint, with instructions on what is required to plead retaliation under the relevant statutes. Because he failed to do so, the court found further amended complaints would be futile.

FCA - Ficarra v SourceAmerica