Halasa v. ITT Educational Services, Inc., 2012 WL 3290217 (7th Cir. 2012)

Facts: Halasa was a campus manager of ITT for six months in 2009. He reported many unethical or unlawful practices, such   as altering students’ grades and misreporting job placement statistics, which many employees engaged in when ITT was in a vacuum of leadership, to his direct supervisor. However, Halasa himself was also reported  to have engaged in some other unethical practices, such  as smoking pipes during the orientation. Unimpressed by Halasa’s management, ITT’s vice presidents and CEO fired him in September 2009.

Procedural history: Halasa commenced a lawsuit against ITT on the ground of retaliation under the False Claims Act in the U.S. District Court for the Southern District of Indiana. The district court granted summary judgment in favor of ITT, Halasa appeals.

Issue: Whether Halasa’s employment with ITT was terminated due to his protected conduct under FCA?

Holding: Even if Halasa’s conduct was protected under FCA, he failed to prove his employment termination resulted from his reporting of unethical or unlawful conducts which other ITT employees were engaging.

Reasoning: The False Claims Act protects employee from being fired for conduct that is “in furtherance of an action under this section” or for undertaking “other efforts to stop” violations of the Act. In this case, ITT employees’ conducts were clearly in violation of the Act. Therefore, Halasa’s report would be deemed as an “effort to stop” under the amended Act. However, assuming his conduct was protected by the FCA, Halasa failed to prove that the discharge was because of his protected conduct. He was fired by vice presidents and CEO of ITT, not his direct supervisor whom he reported his findings to. No evidence shows those VPs and CEO were aware of his protected conduct under FCA. Nor there is evidence showing his direct supervisor let VPs know of his protected conduct. Halasa’s report had never been put into a formal complaint to make ITT management know. Halasa could not prove ITT’s decision makers fired him for reasons beyond his unimpressive management.

Further, Halasa’s constructive knowledge theory was erroneously used in corporate setting under FCA. Under FCA, the company was not liable for every piece of information known by someone in or outside the company.

Judgment: Affirmed.

Briefed By: Victor You

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