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Klee v. Mchenry County College

United States District Court, N.D. Illinois, Eastern Division

July 26, 2017

DANE KLEE, Plaintiff,
v.
MCHENRY COUNTY COLLEGE Defendant.

          MEMORANDUM OPINION AND ORDER

          JOHN J. THARP, JR. UNITED STATES DISTRICT JUDGE.

         Plaintiff Dane Klee alleges he was fired from his employment with defendant McHenry County College for reporting fraudulent federal financial aid claims to his supervisors. The College has moved to dismiss both of his claims: a retaliation claim under the False Claims Act and a state law retaliatory discharge claim. The College has also moved to strike the claim for punitive damages and certain exhibits attached to the complaint. For the reasons explained below, the motion to dismiss is granted in part and denied in part, while the motion to strike is granted by agreement.

         BACKGROUND

         All factual allegations in the complaint are accepted as true for the purpose of this motion to dismiss. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The College moved to strike Exhibits A and C from the complaint and the plaintiff stated he had no objection to that portion of the motion. Therefore, the motion to strike is granted and the Court will not consider those exhibits in assessing the motion to dismiss.[1] The defendants also moved to strike Klee's request for punitive damages, to which he has no objection, so the motion to strike is granted as to the request for punitive damages.

         McHenry County College (“the College”) is a community college located in Crystal Lake, Illinois. First Am. Compl. (“Compl.”) ¶ 7. From November 7, 2011 to May 30, 2013, plaintiff Dane Klee was the Director for the Office of Financial Aid and Veteran Services at the College. Id. at ¶ 15. Klee's job included advising the College's Executive Council on “all matters related to student financial aid, ” monitoring the College's portfolios, and developing scholarship programs to attract students. Id. at ¶ 16. Before the incidents giving rise to this case, Klee had never received any reprimand or other adverse action from a supervisor. Id. at ¶ 15.

         In early 2013, Klee “became aware” (the complaint does not explain how) that the College was awarding federal student aid to students who were not enrolled in the minimum number of credits over the summer. Compl ¶ 17. Klee verbally informed his immediate supervisor, Marianne Devenny (her position or title are not identified), that these students were receiving federal aid even though they were not eligible. Id. at ¶18. Seeing no action taken by late February 2013, Klee requested a report from the College's IT department of all students who had received federal student loans, and found numerous students who did not meet the eligibility criteria for such loans. Id. at ¶ 19. Klee then asked the IT department to run a second report regarding students going as far back as 1995, which found similar errors totaling nearly a million dollars in aid. Id. at ¶ 20. Klee then emailed his findings regarding the second report to Devenny and Juletta Patrick, Devenny's supervisor (Ms. Patrick's position or title are not provided). Id. at ¶ 21. Devenny responded she would “take care of it.” Id. at ¶ 22.

         On April 19, 2013, Klee was informed that the College's administration recommended that his appointment not be renewed for the following school year. Compl. ¶ 23. On May 30, 2013, Klee was terminated, effective immediately, for misuse of the College's computer systems. See Compl. Ex. B. at 1. The termination notice, attached to the complaint, states that Devenny and several other administrators met with Klee on May 28 after he deleted his social security number from his employee record, causing an error in the payroll system that caused the entire system to crash. See id. Klee alleges this reason for his termination was pretextual (and, although unstated, presumably the true reason is his whistleblowing activity). Compl. ¶ 25. Klee filed this action on June 1, 2015.

         DISCUSSION

         Klee raises two claims: first, that he was terminated in violation of the False Claims Act's protection against retaliation, 31 U.S.C. § 3730(h) and second, that he was subject to a retaliatory discharge in violation of state law.[2] The College moved under Federal Rule of Civil Procedure 12(b)(6) to dismiss both counts of the complaint. First, it argues Klee has failed to state a plausible claim for any of the elements of a retaliation claim under the FCA. Second, the College argues that Klee's state law claim is time-barred and that the College is immune under the Illinois Tort Immunity Act (TIA), 745 ILCS 10/8-101.

         In order to survive a motion to dismiss, Klee must allege enough facts to state a plausible claim. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007). A complaint may proceed even if “it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely.” Id. However, “a formulaic recitation of the elements of a cause of action will not do.” Id. at 555. The Court addresses Klee's two claims separately.

         I. FCA Retaliation

         Klee's only federal claim is that he was terminated in violation of 31 U.S.C. § 3730(h), which provides that an employee may not be “discharged. . . because of lawful acts done by the employee. . . in furtherance of an action under this section or other efforts to stop 1 or more violations of this subchapter.” In order to prove a claim under this section, Klee must allege facts supporting three findings: (1) that his actions were taken in furtherance of an action or to stop one or more violation of the FCA, (2) that his employer knew he had engaged in such actions, and (3) that his discharge was motivated, “at least in part, ” by the protected activity. Fanslow v. Chi. Mfg. Ctr., Inc., 384 F.3d 469, 479 (7th Cir. 2004). The College argues that Klee cannot prove any of these elements, but the Court finds he has set forth sufficient (if barely) allegations at this stage.

         A. Protected Activity

         As an initial matter, the College argues Klee did not take actions “in furtherance” of an FCA action because his lawsuit was not filed until two years after the activities in question. See United States ex rel. Batty v. Amerigroup Ill., Inc., 528 F.Supp.2d 861, 877 (N.D. Ill. 2007). However, the FCA was amended in 2009 to add a second category of protected activity, namely “other efforts to stop” violations of the FCA. See Halasa v. ITT Educ. Servs., 690 F.3d 844, 847-48 (7th Cir. 2012). Klee reported the College's fraud to his supervisor and later followed up with both his supervisor and the supervisor's supervisor. The Seventh Circuit has acknowledged that a reasonable trier of fact could find reports to supervisors were “efforts to stop potential FCA violations.” Id. at 848. Reports to supervisors are a natural first step to stopping fraudulent activity and, depending on the employee's position and the employer's response, may be the only activity they can engage in before filing their lawsuit. See United States ex rel. Rockey v. Ear Inst. of Chicago, LLC, 92 F.Supp.3d 804, 828 (N.D. Ill. 2015) (reports to supervisor sufficient to state ...


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