Court Opinion

ID: 2708635
Source: CourtListenerOpinion
Date Created: 2014-08-05 15:02:55.079597+00
Date Added: 2024-06-11T12:58:37.702369
License: Public Domain

In the

        United States Court of Appeals
                      For the Seventh Circuit
No. 12-1870

KURT FUQUA,
                                                         Plaintiff-Appellant,

                                        v.

SVOX AG, SVOX USA, INC., NUANCE
COMMUNICATIONS, INC., VOLKER
JANTZEN, EUGEN STERMETZ, MARTIN
REBER, ERIC LEHMANN, AND THOMAS
SOSEMAN,
                                                     Defendants-Appellees.

             Appeal from the United States District Court for the
               Northern District of Illinois, Eastern Division.
              No. 1:11-cv-05376 — Ronald A. Guzmán, Judge.

        ARGUED JANUARY 21, 2014 — DECIDED MAY 16, 2014

   Before KANNE and SYKES, Circuit Judges, and GILBERT,
District Judge.*

*
    Of the Southern District of Illinois, sitting by designation.
2                                                   No. 12-1870

    KANNE, Circuit Judge. Kurt Fuqua sued his former employer
alleging retaliation for whistleblowing regarding “covered
funds” in violation of the American Reinvestment and Recov-
ery Act of 2009. Fuqua also asserted a claim under state law.
The district court granted the defendants’ 12(b)(6) motion to
dismiss for failure to state a federal claim and declined to
exercise supplemental jurisdiction over the state claims. For the
following reasons, we affirm.
                         I. BACKGROUND
    Defendant SVOX USA, Inc. is a wholly owned subsidiary
of SVOX AG, a Swiss company (collectively “SVOX”). Both
companies were acquired by defendant Nuance Communica-
tions, Inc. (“Nuance”) after Fuqua’s termination.
    Fuqua is a computational linguist who was hired by SVOX
on January 28, 2009 to help market linguistic products. Soon
thereafter, SVOX asked Fuqua to travel to Zurich, Switzerland
to work on a short term project. As part of the agreement to
travel to Zurich, SVOX agreed to pay for Fuqua’s monthly
transit passes in the city. The cost of these monthly passes was
offset by a tax credit to SVOX of $230.00 per month, which was
taken against payroll taxes.
    On June 22, 2009, SVOX approached Fuqua with a new
employment contract that contained an inventions assignment
clause. The clause required Fuqua to disclose and assign to
SVOX intellectual property that the employee had made,
conceived, or developed in the past. The new agreement also
required assignment of his rights to patents, copyrights,
trademarks, trade secrets, and royalties to SVOX. Fuqua
believed that the disclosure required by the new agreement
No. 12-1870                                                   3

would violate various state and federal laws and refused to
sign the contract. He made his objections to the new contract
known to various SVOX officers.
   SVOX and Fuqua continued discussions regarding the new
contract, but Fuqua refused to sign anything containing the
inventions assignment clause. Finally, on October 22, 2009, five
months after the initial contract proposal, SVOX terminated
Fuqua’s employment.
    After his termination, Fuqua filed a complaint with the
Office of Inspector General of the Department of Defense
(“OIG”). The complaint alleged that SVOX’s termination of
Fuqua violated section 1553 of the American Recovery and
Reinvestment Act of 2009 (“ARRA”), which prohibits reprisals
for disclosures of wrongdoing relating to covered funds under
the act. The OIG performed a comprehensive inquiry into the
allegations and found that there was “insufficient evidence to
warrant further inquiry into your reprisal allegation and have
closed your case … . We found that SVOX did not receive
Recovery Act funds (‘covered funds’), and for Section 1553 to
apply, the nonfederal employer must be the recipient of
covered funds.” The OIG also found that Fuqua’s complaint
did not relate to covered funds and declined to investigate
further.
    Fuqua then filed a complaint in the district court, alleging
violations of both section 1553 of the ARRA and state law.
SVOX filed a motion to dismiss under Federal Rule of Civil
Procedure 12(b)(6), which was granted. The district court
found, like the OIG, that SVOX did not receive covered funds
as defined by the ARRA and was therefore not liable under the
4                                                    No. 12-1870

act. Furthermore, the court held that Fuqua’s allegations were
not related to covered funds as required by the ARRA. The
district court also found that, even if his claim were actionable,
Fuqua nonetheless failed to exhaust his administrative reme-
dies by filing with the wrong administrative agency—the
Department of Defense—when the complaint should have
been filed with the Commerce or Treasury Departments, which
govern the National Institute of Standards and Technology
(“NIST”) and the Internal Revenue Service, respectively.
Finally, following the dismissal of the only federal claim, the
court declined to exercise supplemental jurisdiction over the
remaining state claims.
                            II. ANALYSIS
    We review a district court’s granting of a 12(b)(6) motion to
dismiss de novo. McCready v. eBay, Inc., 453 F.3d 882, 888 (7th
Cir. 2006). In order to survive a 12(b)(6) motion to dismiss, a
complaint must allege facts that “state a claim to relief that is
plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007). In resolving a 12(b)(6) motion, we take all well-pled
facts as true, but after assuming the veracity of all these facts,
the court must assess whether those factual assertions “plausi-
bly give rise to an entitlement to relief.” Ashcroft v. Iqbal, 556
U.S. 662, 679 (2009).
   Fuqua’s complaint centers around the whistleblowing
provisions contained in section 1553 of the ARRA. Under that
section, an “employee of any non-Federal employer receiving
covered funds may not be discharged, demoted, or otherwise
discriminated against” for disclosing information relating to
the abuse of covered funds. ARRA, Pub. L. 111-5, § 1553(a)
No. 12-1870                                                                 5

(2009). Covered funds are defined as any contract, grant, or
other payment the federal government provides to a non-
federal employer that is at least partially made available by the
ARRA. Id. § 1553(g)(2). Fuqua contends that SVOX received
covered funds—and is therefore liable for retaliation under
section 1553—in the form of licensing data through NIST as
well as payments made under the Consolidated Omnibus
Budget Recovery Act (COBRA), 29 U.S.C. §§ 1161 et seq1.
    A. NIST Contracts
   Fuqua first claims that he, SVOX, and Nuance have each
received covered funds by licensing government-sponsored
data from NIST competitions that were sponsored with money
provided under the ARRA. Fuqua vaguely asserts that both
SVOX and Nuance received covered funds by participating in
the competitions, but fails to identify any money that would
qualify under the definition provided in the ARRA section
1553(g)(2). In his complaint, Fuqua does not allege that SVOX
or Nuance received “funds … appropriated or otherwise made
available by [the ARRA].” § 1553(g)(2). Fuqua’s complaint
“must actually suggest that [he] has a right to relief, by provid-
ing allegations that raise a right to relief above the speculative
level.” Windy City Metal Fabricators & Supply, Inc. v. CIT Tech.
Fin. Servs., 536 F.3d 663, 668 (7th Cir. 2008) (quotation omitted).
Simply reciting the elements of a cause of action is insufficient

1
  Fuqua does not challenge the district court’s finding that the monthly
public transit passes and accelerated depreciation tax credits do not serve
as covered funds under the ARRA; it is therefore forfeited. See Bass v. Joliet
Public School Dist. No. 86, No. 13-1742, 2014 WL 1229578 at*4 (7th Cir. Mar.
26, 2014).
6                                                      No. 12-1870

to state a claim for relief. Iqbal, 556 U.S. at 679. Fuqua has failed
to plead how any of the NIST licensing data received by SVOX
or Nuance constituted covered funds as defined by the ARRA.
The fact that a party licensed data from a third party, i.e. NIST,
that received covered funds does not qualify as receiving a
“contract, grant, or other payment” from the federal govern-
ment. ARRA § 1553(g)(2).
    Moreover, even if the NIST licensing data were somehow
considered covered funds under the ARRA, Fuqua’s complaint
fails to provide a nexus between his alleged disclosures and the
misuse of these funds as required under section 1553. See id. §
1553(a) (protection for employee who informs the federal
government of inappropriate use of “covered funds”). Fuqua
refused to sign the new employment contract with
SVOX—which required assignment of his licensing
data—because he felt that disclosing the linguistic data he
licensed from NIST would violate the confidentiality agree-
ment that he signed with NIST. In other words, Fuqua was
worried that his own licensing agreement would be compro-
mised should he sign the new employment contract with
SVOX. As noted already, the ARRA only protects an employee
who discloses information regarding an abuse of covered
funds received from the government by a “non-Federal
employer.” Id.; see Williams v. N.Y. City Dep’t of Educ., No. 12
Civ. 8518, 2013 WL 5226564 at *15 (S.D.N.Y. Sept. 17, 2013)
(Section 1553 “permits suit only where a recipient of grants
under the ARRA … retaliates against an individual for
disclosing to the authorities a violation ‘relating to covered
funds’—that is, a violation relating to funds disbursed pursu-
ant to the statute.” (citing ARRA section 1553(a)(5)). In this
No. 12-1870                                                      7

case, Fuqua—not SVOX or Nuance—received the data. Thus,
the protections provided in the ARRA do not apply.
   B. COBRA Payments
    Fuqua also alleges that Nuance was the recipient of COBRA
payments that qualified as covered funds since they were
made available under the ARRA. Yet these COBRA payments
were not the subject of Fuqua’s allegedly protected disclosures;
they therefore cannot qualify as “covered funds” entitling
Fuqua to whistleblower protection under the ARRA. See ARRA
§ 1553(a) (the purpose of section 1553 is to protect disclosures
“relating to covered funds”). While Fuqua states in his com-
plaint that Nuance received COBRA payments, he fails to
allege any mismanagement with respect to these payments.
Accordingly, he fails to state a ground for which relief might
be granted under the ARRA.
   C. State Law Claims
    As the only federal claim in this case has been dismissed,
the district court properly relinquished supplemental jurisdict-
ion over the remaining state law claims pursuant to 28 U.S.C.
§ 1367(c)(3). See Hansen v. Bd. of Trs. of Hamilton Se. Sch. Corp.,
551 F.3d 599, 607 (7th Cir. 2008) (“When all federal claims have
been dismissed prior to trial, the principle of comity encour-
ages federal courts to relinquish supplemental jurisdiction
pursuant to § 1367(c)(3).”)
                          III. CONCLUSION
   For the foregoing reasons, we AFFIRM the district court’s
decision to grant the defendants’ motion to dismiss and its
8                                                 No. 12-1870

decision to decline supplemental jurisdiction on the remaining
state law claims.