Monday, February 4, 2013
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C.A. Partially Revives Whistleblower Suit Against Trash Company
Panel Finds Employee’s Disclosures of Alleged CRV Buyback Fraud Potentially Protected by Statute
By a MetNews Staff Writer
The First District Court of Appeal yesterday reinstated portions of a suit by a former employee of San Francisco’s trash company, who claims he was fired for revealing that the company had received excessive payments from the state’s beverage container recycling program.
Justice Peter Siggins, writing for Div. Three, said Brian McVeigh presented a prima facie case that his former employer, Recology San Francisco, terminated him in violation of the whistleblower provisions of the California False Claims Act, of Labor Code Sec. 1102.5, and of fundamental public policy.
The CFCA allows individuals to bring qui tam suits on behalf of the state, or of a local government agency, against anyone who has filed a false claim for payment by that agency. The whistleblower provision prohibits retaliation against any person having knowledge of such a claim, even if a suit is not filed.
The Labor Code prohibits employers generally from retaliating against employees for reporting illegal activity to law enforcement agencies.
Recology—which has been the city’s exclusive trash hauler for 80 years, though it has changed names several times— hired McVeigh in December 2000. After receiving positive performance evaluations, McVeigh was transferred from the company’s facility at Pier 96 in the city to its Tunnel Road facility in the suburb of Brisbane.
‘Tag Fraud’
Although initially assigned to supervise an industrial material recycling facility there, McVeigh was eventually reassigned to oversee the California Redemption Value Buyback Center at the same location. He claimed that his June 2008 firing was in retaliation for having reported to the police that employees were engaged in “tag fraud” that cost the company and the state more than $1 million.
Tag fraud occurs when an employee inflates the weight of recyclables on the tag given to the customer, who then receives an excessive payment, and presumably gives a kickback to the employee. While this costs the company, rather than the government, money, McVeigh claimed that the state was also being defrauded because Recology was using the tags to add up the weights of materials for which it was claiming reimbursement from the state.
Recology responded that McVeigh was actually fired because he had a “headstrong attitude” and could not get along with other employees. It accused him of stirring up “gossip, arguments, and conflicts on a regular daily basis” and failing to “partner collaboratively with the management.”
Charges Called Unsustainable
The company also said that in investigating alleged tag fraud, McVeigh had made unsustainable charges against a group of African-American employees, whom he also accused of marijuana scavenging, and failed to focus on a group of Hispanic workers whom Recology had long suspected of fraud.
San Francisco Superior Court Judge Ronald Quidachay granted Recology’s motion for summary judgment.
The complaint included two distinct claims for retaliation under the CFCA. McVeigh claimed that he was retaliated against both for complaining about tag fraud by employees, and for disclosing that the falsified weights on the tags were being used to defraud the state.
In rejecting both clams, Quidachay ruled that the first claim was not viable because the victim was the company, not the state, and rejected the plaintiff’s argument that a complaint regarding fraud in the operation of a state program is protected even if the state suffers no financial loss. As for the second claim, the judge found as a matter of undisputed material fact that the company did not rely on the fraudulent weights in submitting its claims, and held that there was no protection under the CFCA because any claim under that statute would have failed on the merits.
The judge rejected the Labor Code claim as well, saying there was no statutory protection because the alleged fraud that McVeigh reported to police was being committed by employees, not by the company.
One Claim Not Viable
Siggins, writing for the Court of Appeal, agreed with the trial judge that the first CFCA claim was not viable because there was no alleged loss to the state. But there are triable issues of fact with respect to the second claim under that statute, he concluded.
As a factual matter, he said, there was conflicting evidence as to whether the state was defrauded. And even if it wasn’t, that did not necessarily mean that McVeigh could not claim protection as a whistleblower.
The statute only requires that the whistleblower have a subjective, good-faith belief that the employer is defrauding the government, Siggins said, concluding that McVeigh presented enough evidence to take that issue to trial.
Because one of the CFCA claims was viable, summary judgment on the claim for termination in violation of public policy should have been denied, Siggins said. As for the Labor Code claim, the justice wrote, that should be reinstated because protecting those who disclose wrongdoing by their co-workers falls within the broad intent of the statute.
The case is McVeigh v. Recology San Francisco, 13 S.O.S. 563.
Copyright 2013, Metropolitan News Company