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The Whitestone Group, Inc. v. U.S. Department of Energy

United States District Court, S.D. Ohio, Eastern Division

March 31, 2017

U.S. DEPARTMENT OF ENERGY, et al., Respondents.

          Magistrate Judge, Kimberly A. Jolson



         This matter is before the Court on the cross-motions for summary judgment of Respondents United States Department of Energy and Dr. Ernest Moniz (collectively, the "DOE") and Petitioner The Whitestone Group, Inc. ("Whitestone"). For the following reasons, the DOE's Motion [ECF No. 25] is GRANTED and Whitestone's Motion [ECF No. 29] is DENIED.

         I. BACKGROUND

         Through this action, Whitestone challenges the DOE's final agency decision granting relief to Respondent Denise Hunter under the agency's Contractor Employee Protection Program. Whitestone, a DOE subcontractor, disputes the agency's determination that Whitestone fired Hunter in retaliation for her participation in protected conduct and was, thus, entitled to back pay and attorney's fees. A Hearing Officer in the DOE's Office of Hearings and Appeals ("OHA") made the initial agency decision. That determination was later upheld on appeal to the OHA Director and again on a petition for review by the Secretary of Energy.

         A. The DOE's Contractor Employee Protection Program (Part 708)

         The DOE established its Contractor Employee Protection Program, codified at 10 C.F.R. Part 708, to encourage contractor employees "to come forward with information that in good faith they believe evidences unsafe, unlawful, fraudulent, or wasteful practices" by giving them "protection from consequent discrimination by their employers with respect to compensation, terms, conditions, or privileges of employment." 57 Fed. Reg. 7533 (Mar. 3, 1992). Part 708 establishes the process by which the DOE considers and resolves allegations of retaliation raised by contractor employees. An employee must first file a complaint with the DOE alleging that she faced retaliation by the contractor for engaging in protected conduct. 10 C.F.R. § 708.1. As relevant here, a contractor employee's conduct is protected when she discloses to a DOE official information that she "reasonably believe[s] reveals ... [a] substantial violation of a law, rule, or regulation." Id. § 708.5(a)(1). Participating in an administrative proceeding conducted under Part 708 is also protected conduct. Id. § 708.5(b).

         After an employee has submitted her complaint, she has two options: she can request that the OHA hold a hearing on the complaint without an investigation or she can request that a hearing be held following an investigation. Id. § 708.21(a). At the hearing, the employee has the burden to establish by a preponderance of the evidence that she participated in protected conduct and that such conduct was a contributing factor in the alleged retaliation. Id. § 708.29. Once the employee has met this burden, the burden shifts to the contractor to prove by clear and convincing evidence that it would have taken the same action without the employee's participation in the protected conduct. Id. The hearing is conducted by a Hearing Officer (now known as an "Administrative Judge").[1] Id. § 708.25; see 78 Fed. Reg. 52, 389 (Aug. 23, 2013). The Hearing Officer issues an initial agency decision containing appropriate findings, conclusions, an order, and the factual basis for each finding. 10 C.F.R. § 708.30(c). The initial agency decision either grants or denies the employee's complaint; if the complaint is granted, the decision awards appropriate relief. Id. § 708.30(d)-(e).

         Any party may appeal the initial decision to the OHA Director. Id. § 708.32(a). Any party dissatisfied with the OHA Director's decision may file a petition for review by the Secretary of Energy. Id. § 708.35(a). After receiving a petition, the Secretary (or a delegee)[2] issues the final agency decision on the employee's complaint. Id. § 708.35(d). The Secretary reverses or revises an appeal decision by the OHA Director only under extraordinary circumstances. Id.

         B. Hunter's Part 708 Complaint

         In the spring of 2011, Whitestone succeeded Hunter's previous employer as the contractor providing protective services for Argonne National Labs ("ANL"). (AR 5, at 2055 [ECF No. 21-5].) By that point, Hunter had been employed for around 11 years as the Project Manager overseeing ANL's protective force, which provides physical security for the site and facilities. (Id.) Because of a salary dispute, Whitestone and Hunter's relationship was strained from the beginning. (Id.) Whitestone hired Hunter to continue as the Project Manager, but Whitestone offered her a significantly lower salary than she had received from the prior contractor. (Id.) This strained relationship persisted up until Hunter was fired on April 9, 2012. (See Id. at 2055-58.)

         Hunter filed her Part 708 complaint on February 27, 2012. (AR 5, at 2057.) Hunter argued that she made six protected disclosures, including (1) that Whitestone hired Lyle Headley as Operations Manager without conducting the pre-employment background check required under Whitestone's contract, (2) that Headley had taken protective force uniforms and a DOE security badge from ANL and stored them at his home, and (3) that Whitestone was billing ANL for reimbursement of costs before it had paid those expenses to vendors and sub-contractors. (Id. at 2059.) The Hearing Officer only analyzed these three alleged disclosures because Hunter focused on them during her hearing. (Id.) In her complaint, Hunter next alleged that Whitestone retaliated against her for making the protected disclosures. (Id.) Whitestone purportedly retaliated against her by (i) creating a work environment in which she could not effectively manage her staff, (ii) denying her vacation and sick leave, (iii) placing her on probation, and (iv) terminating her employment without cause. (Id.)

         Hunter requested that the OHA investigate her complaint and then hold a hearing. (AR 5, at 2059.) Accordingly, the OHA Director appointed an investigator to evaluate Hunter's allegations. (Id.) The investigator conducted various interviews and reviewed a large number of documents before issuing a Report of Investigation ("ROI"). (Id.) The investigator concluded that at least one of Hunter's disclosures, as well as the filing of her Part 708 complaint, were likely protected activities. (Id.) The investigator also concluded that these activities were likely contributing factors to Hunter being placed on probation and, later, terminated. (Id.)

         Hunter's complaint proceeded to a hearing. During the two-day hearing, six witnesses testified, Hunter introduced 32 exhibits into the record, and Whitestone introduced 10 exhibits. (AR 5, at 2060.) The Hearing Officer subsequently issued an initial agency decision. He concluded that Hunter had established by a preponderance of the evidence that she engaged in protected conduct (when she filed her Part 708 complaint and when she disclosed Headley's theft of equipment to ANL) and that this conduct was a contributing factor to her termination. (See Id. at 2061-66.)

         Next, the Hearing Officer found that Whitestone did not present clear and convincing evidence that it would have fired Hunter absent her protected conduct. (See AR 5, at 2066-69.) An Employee Corrective Action Statement issued to Hunter provided the official reasons for her termination, the Hearing Officer determined. (Id. at 2066.) The document stated: "An audit and investigation uncovered fraudulent activity and falsification of documents by Denise Hunter. Denise's conduct is unprofessional and her alleged dishonesty for her own personal benefit violated Whitestone Policy." (Id. (internal quotation marks omitted).) As the Hearing Officer explained, the "fraudulent activity and falsification of documents" noted in the Corrective Action Statement referred to a Temporary Employment Adjustment ("TEA") document dated December 22, 2011, on which Hunter had written, in the blank following "Accepted, " the names "Bill Smith, William, Sylvia Rada" in her own handwriting. (Id.) If this document were properly authenticated, it would have authorized a significant hourly rate increase for Hunter, the Hearing Officer noted. (Id.) The Hearing Officer concluded, however, that Whitestone's stated reasons for terminating Hunter were weak and pretextual:

I have considered the context in which Exhibit 22 appears in the record. As discussed above, Ms. Hunter contends that she provided this document to Whitestone at the request of Whitestone officials, and Mr. Conway contends that Whitestone officials first saw the documents as an attachment to Ms. Hunter's Part 708 Complaint. Despite that inconsistency, it is clear that Ms. Hunter communicated in writing with Whitestone officials concerning the temporary pay increase she sought, and that Whitestone never approved it. Exhibit 16 at 1-2; Exhibit 19 at 1. Nothing in the record indicates that Ms. Hunter provided Exhibit 22 to the DOE other than as an attachment to her Complaint. I therefore find that no Whitestone or DOE official took any action on that document, and that Ms. Hunter never submitted the document to the DOE for the purpose of obtaining the pay increase she sought nor in an effort to circumvent Whitestone's decision on that matter or otherwise defraud the company.
Finally, I have reviewed Exhibit 22 and fail to see how a reasonable person could infer that the document was intended to deceive anyone, given the lack of effort to imitate anyone's signature, the fact that Mr. Conway's name is listed only as "William, " and the fact that the three alleged signatures do not appear on the form in the correct place for approving the sought adjustment. I also note that Whitestone filed another report with the local sheriffs department in October 2012, alleging in effect a second forgery by Ms. Hunter, which the local sheriffs department reviewed and administratively closed. Exhibit 29 at 2.
After considering the facts presented in this case, including the allegedly forged documents and the various sheriffs reports, I conclude that the stated reasons for terminating Ms. Hunter, fraudulent activity and falsification of documents, are weak and pretextual.

(Id. at 2067.) The Hearing Officer also concluded that Whitestone had motive to retaliate against Hunter and that the record lacked evidence of similarly situated employees being treated in the same manner as Hunter. (See Id. at 2067-69.) Because Whitestone failed to meet its burden, the Hearing Officer concluded that Hunter was entitled to relief under Part 708. (7c?. at 2069.)

         After obtaining additional briefing from the parties on the issue of remedy, the Hearing Officer issued a Supplemental Decision awarding Hunter $37, 855.95 in backpay, $4, 230.00 in lost retirement benefits, $749.92 in accrued interest, $458.39 in travel expenses, $127, 143.75 in attorney's fees, and $3, 052.38 in costs. (See AR 5, at 2069-70, 2164.)

         Whitestone appealed the Hearing Officer's decision. (AR 5, at 2167.) The OHA Director denied this appeal. (Id. at 2226.) Whitestone then filed a petition for secretarial review. (Id. at 2248.) In what became the final agency decision on Hunter's complaint, the Deputy Secretary of Energy dismissed Whitestone's petition, (Id. at 2283.)

         C. Whitestone's Petition for Judicial Review

         Whitestone subsequently filed its Petition for Judicial Review [ECF No. 1] in this Court. In its Petition, Whitestone highlights several alleged errors.

A. Whitestone contends that the agency's decision is unsupported by substantial evidence and contrary to law in its conclusion that the report of a theft and the Part 708 complaint were contributing factors in Hunter's termination. (Petition at 5 [ECF No. 1].) The agency's decision is, purportedly, also unsupported by evidence and contrary to law in its conclusion that Whitestone failed to offer ...

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