
TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN






NO. 03-02-00578-CV



Rhonda Lane, Appellant



v.



Texas Department of Health, Appellee






FROM THE DISTRICT COURT OF TRAVIS COUNTY, 353RD JUDICIAL DISTRICT
NO. GN102473, HONORABLE F. SCOTT MCCOWN, JUDGE PRESIDING


M E M O R A D U M   O P I N I O N


	This is an appeal from a summary judgment in a Texas Whistleblower Act case.  Tex.
Gov't Code Ann. §§ 554.001-.010 (West 1994 & Supp. 2003).  Rhonda Lane sued her former
employer, the Texas Department of Health, for wrongfully terminating her employment because she
alleges the discharge resulted from her report of a violation of law by the Department.  Although the
violation that she reported amounted to only a breach of an internal agency policy, she argues that,
at the time of the report, she had an objectively reasonable, good faith belief that the violation
constituted a breach of federal law, entitling her to protection under the Act.  Finding her arguments
without merit, we will affirm. 

FACTUAL BACKGROUND

	Lane began working for the Department in 1984 as its Program Director for the
Women, Infants & Children Program ("WIC"), which was federally funded.  In February 1987, Lane
was promoted to Special Project Director of the Nutritional Education Cancer Prevention Program,
and when that program failed to receive funding she became the nutritionist for the WIC Program. 
In May 1988, Lane went into the private sector where she acted as a nutritional consultant, the
program director for the weight control program at Austin Regional Clinic, and instructor in nutrition
and chemistry at Austin Community College and San Antonio Community College.
	Lane went back to work for the Department in May 1991 and served as a Health
Program Specialist in the Division of Chronic Disease Prevention, then Assistant Bureau Chief for
Administration in the Bureau of Chronic Disease Prevention, and eventually Staff Services Officer
in the Grants Management Division.  In July 1999, she was promoted to Program Administrator of
the Clinical Resources Division, Bureau of HIV/STD Prevention.  Up to that time, Lane had not been
reprimanded or suffered any adverse employment action at the Department.  However, on May 17,
2001, after some sixteen years with the Department, she was fired for what she claims were
pretextual reasons.
	Lane's responsibilities in the Clinical Resources Division included administering the
Texas HIV Medication Program and the AIDS Drug Assistance Program, both programs were
primarily funded with federal grants.  Her responsibility included applying for and administering the
federal grant associated with the HIV program. (1)  Lane's first grant application to prepare for the HIV
medication program was for fiscal year 2000.  In reviewing grant applications from previous years,
Lane noticed that the HIV medication program had not paid its allotted "indirect costs" to the
Department. (2)  Lane knew that Department operating policy required that all federal grant programs
pay "indirect costs" to the Department, unless a particular grant specifically prohibited such charges. 
	Lane went to her supervisor, Linda Moore, and inquired about the failure to pay
"indirect costs" for the HIV medication program.  Lane alleges that Moore and another manager,
Patty Melchior, advised her that they believed that the Department had received a waiver from
paying "indirect costs."  Moore then instructed Lane to "leave the matter alone."  Lane continued
pressing the issue as to why no documentation of a "waiver" could be found.
	In early May, 2000, Lane went to Mary Alexander, in the Grants Management
Division, who was responsible for monitoring the Department's grant applications and reports to the
federal government.  Alexander confirmed Lane's suspicions that the HIV medication program
should have paid "indirect costs" to the Department.  As a result of Lane's pressure, the HIV
medication program had to refund $2.9 million of its grant money to the Department as "indirect
costs" for the 1999 fiscal year.
	Lane argues that at the time of her report she had formed a belief "that the Indirect
Costs Policy was based upon federal laws governing the receipt of funds from federal grants."  She
concluded that if the Department failed to pay "indirect costs" from grant monies it would "violate
federal grant laws" which could affect whether Texas would receive future grants should DHHS or
OMB audit the Texas program.  Lane contends that her underlying concern was the risk that the
violations posed to the continuation of the HIV and AIDS medication programs in Texas.
	The parties do not dispute that after Lane's report to the Department's Grants
Management Division that Lane's relationship with the other members of the Department, including
her supervisor, sharply deteriorated.  Lane received reprimands and her authority was repeatedly
reduced and supervision over her increased.  She was eventually terminated by Moore on May 17,
2001.  Lane pursued an internal grievance procedure, then filed suit under the Whistleblower Act.

DISCUSSION

	The parties appear to agree that the Grants Management Division was the appropriate
authority within the Department to address the "violation" reported by Lane.  The question in this
case is whether she reported a violation of law protected by the act.

Standard and Scope of Review
	The Department challenged Lane's cause of action with a no evidence motion for
summary judgment.  See Tex. R. Civ. P. 166a(i).  The test for granting a "no evidence" motion for
summary judgment is whether there is evidence presented supporting each of the essential elements
of the claims on which the responding party would have the burden of proof at trial.  Id.  A movant
of a no evidence motion does not have the burden of establishing its right to judgment as a matter
of law, unlike the traditional motion.  Duvall v. Texas Dep't of Human Servs., 82 S.W.3d 474, 477
(Tex. App.--Austin 2002, no pet.).  Rather, a no evidence motion puts the opposing party to its
burden of producing more than a scintilla of probative evidence on each element of each claim or
defense challenged in the motion.  Tex. R. Civ. P. 166a(i).
	The responding party is not required to marshal its proof, but it must present enough
evidence to raise a genuine fact issue on the challenged elements.  Southwestern Elec. Power Co.
v. Grant, 73 S.W.3d 211, 215 (Tex. 2002).  Summary judgment will be granted if the opposing party
fails to produce more than a scintilla of evidence on the matters challenged in the motion.  Duvall,
82 S.W.3d at 478.  Evidence amounts to more than a scintilla when it "rises to the level that would
enable reasonable and fair-minded people to differ in their conclusions."  Merrell Dow Pharm., Inc.
v. Havner, 953 S.W.2d 706, 711 (Tex. 1997) (quoting Transportation Ins. Co. v. Moriel, 879 S.W.2d
10, 25 (Tex. 1994)).  If the evidence produced by the opposing party is "so weak as to do no more
than create a mere surmise or suspicion," it is only a scintilla and cannot withstand a no evidence
motion for summary judgment.  See Tex. R. Civ. P. 166a(i) and cmt.; Duvall, 82 S.W.3d at 478
(quoting Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex. 1983)).
	On the other hand, when reviewing no evidence summary judgments, just as with
traditional motions for summary judgment, appellate courts construe the evidence, indulge all
reasonable inferences, and resolve any doubts in favor of the opposing party.  Grant, 73 S.W.3d at
215; see also Nixon v. Mr. Prop. Mgmt Co., 690 S.W.2d 546, 548-49 (Tex.1985). 
	Here, the Department specified in its motion that Lane failed to make the requisite
showing that she reported a violation of law in good faith.  The district court agreed and the order
granting summary judgment clearly and concisely set forth the court's reasoning for its decision.  It 
noted that all of Lane's evidence involved the Department's failure to charge indirect costs to the
federal HIV program grant, which violated the Department's internal policies, but did not violate
state or federal law.  The court concluded there was no evidence that Lane reported a violation of
law, therefore, her report did not satisfy the good-faith requirement of the act.  We agree.

Texas Whistleblower Act
	The Texas Whistleblower Act protects public employees from adverse retaliatory
employment actions when an employee in good faith reports a violation of law by the employing
governmental entity or another public employee to an appropriate law enforcement authority.  Tex.
Gov't Code Ann. §554.002(a) (West Supp. 2003).  The purpose of the Act is to enhance openness
in government and compel government's compliance with the law by protecting those who report
wrongdoing.  Hill v. Burnet County Sheriff's Dept, 96 S.W.3d 436, 440 (Tex. App.--Austin 2002,
pet. denied); see Castaneda v. Texas Dep't of Agric., 831 S.W.2d 501, 503 (Tex. App.--Corpus
Christi 1992, writ denied).
	To prevail on a whistleblower claim, one must show that: (1) a public employee; (2)
acting in good faith made a report; (3) the report involved conduct violating law by the agency or a
public employee; (4) the report was made to an appropriate law enforcement authority; and (5) the
public employee suffered retaliation for making the report.  Tex. Gov't Code Ann. § 554.002; (3)
Duvall, 82 S.W.3d at 478.  The act is remedial in nature and should be liberally construed to effect
its purpose.  Duvall, 82 S.W.3d at 478; Stinnett v. Williamson County Sheriff's Dep't, 858 S.W.2d
573, 575 (Tex. App.--Austin 1993, writ denied).
	"Good faith" is not defined in the act, but the supreme court has interpreted it to have
both a subjective and an objective component.  Wichita County v. Hart, 917 S.W.2d 779, 784 (Tex.
1996).  In Hart, the supreme court held that "good faith" means that "(1) the employee believed that
the conduct reported was a violation of law (4) and (2) the employee's belief was reasonable in light
of the employee's training and experience."  Id.
	To meet the objective prong of the "good faith" test, one must establish that a
reasonably prudent public employee in similar circumstances, with similar training and experience,
would have believed that the facts as reported amounted to a violation of law.  See Hart, 917 S.W.2d
at 784-85; Donlevy v. City of The Colony, 8 S.W.3d 754, 757 (Tex. App.--Fort Worth 1999, no
pet.); Duvall, 82 S.W.3d at 482. (5)  The mere fact that the public employee has considerable
experience and training by itself does not transform the employee's subjective belief into an
objective conclusion.  See Duvall, 82 S.W.3d at 483; Texas Dep't of Criminal Justice v. Terrell, 18
S.W.3d 272, 277 (Tex. App.--Tyler 2000, pet. denied).  Objectiveness is a fact-intensive question
determined on a case-by-case basis.
	Courts have determined that the act does not protect reports of violations of internal
agency policy not promulgated pursuant to a statute or ordinance.  Harris County Precinct Four
Constable Dep't v. Grabowski, 922 S.W.2d 954, 956 (Tex. 1996); Ruiz v. City of San Antonio, 966
S.W.2d 128, 130 (Tex. App.--Austin 1998, no pet.).  Here, the district court concluded that Lane's
report involved merely a report about the violation of internal agency policy and not a statute or
ordinance.
	On appeal, Lane argues that her subjective belief that the conduct she reported was
a legal violation was reasonable under the circumstances and satisfied the objective prong of the
good-faith test.  We disagree.  The supreme court addressed this argument in Grabowski.  There, the
reporting employee argued that his subjective belief that a law had been violated, if reasonable, could
satisfy the objective prong of the good-faith test.  The supreme court concluded that it did not. 
Grabowski, 922 S.W.2d at 955-56; see also Donlevy, 8 S.W.3d at 757-58 ("Even if Donlevy
subjectively believed a law had been violated, this belief was not reasonable.") (footnote omitted).
	Grabowski presented summary judgment proof that he honestly believed that his
supervisor's conduct violated the law.  Nevertheless, the Court found that his subjective belief "fails
to satisfy the second prong because his belief was not reasonable in light of his experience as a peace
officer."  Grabowski, 922 S.W.2d at 956.  The court noted that it would carefully scrutinize a law
enforcement officer's assessment of legal violations because they have considerably more experience
and training to assess whether conduct is illegal.  Id. 
	Although Lane is not a law enforcement officer, she did have considerable experience
in applying for and administering federal grant programs.  Between 1984 and 1987, she worked for
the Department as Program Director for the WIC Program, a federally funded program for women,
infants and children.  She also worked for the Grants Management Division of the Department from
February 1998 through July 1999.  Lane judicially admitted in her pleadings that she had extensive
experience applying for and administering federal grants.  Based on this record, the district court was
authorized to closely scrutinize the reasonableness of her belief. 
	In addition, Lane admitted in her pleadings that her report was about a violation of
agency policy.  Her Plaintiff's Original Petition alleged in paragraph 12 that:

Based on her prior work experience, Lane had extensive knowledge of grant
application procedures and requirements and, as a result, noted that THMP [Texas
HIV Medication Program] had not paid "indirect costs" during fiscal years 1999 and
2000.  Based on Lane's experience, apparently in accordance with federal law, the
Department had implemented a policy which required that programs within state
agencies (including the Department itself) that received federal grants must pay
"indirect costs" at the rate approved by the [DHHS] to the Department's Budget
Office, in order to cover administrative and other expenses. 


She alleged that she told Alexander that the grants "did not meet the Department's policy regarding
'indirect costs.'" (6) 
	In describing the retaliation she suffered, Lane's petition alleges that the retaliation
was "done to retaliate against Lane because she had reported a potential violation of Department
policy (and possibly federal law)."  In paragraph 26, Lane refers to her termination as "retaliation
for her report of policy violations (and potential illegal activity)."  In her affidavit, submitted in
response to the Department's motion for summary judgment, Lane averred that:

TDH has written policies which require that all programs receiving federal grants
must earmark a percentage of its funds to be recouped as "indirect costs" by
TDH. . . .  I believed in good faith, that this policy was based upon federal rules or
requirements governing the receipt of federal funds, in part because "indirect costs"
are calculated by applying rates set by the [DHHS], which controls TDH's receipt of
funds.

Additionally, I believed, in good faith, that it was a violation of law to submit a false,
inaccurate or misleading document-such as a grant application or financial report-
to the federal government.  My belief was based in part on having seen news reports
concerning people who have been held liable under both civil and criminal laws for
providing false information to state or federal government [sic]. . . .  I believed, in
good faith, that THMP's grant applications were false, inaccurate or misleading
because they failed to note that, under TDH policies, approximately 8.1% of the
THMP budget could be used to pay "indirect costs" rather than purchasing
medication for program participants.

Lane's amended pleadings contain virtually the same allegations.  The statements in Lane's
pleadings that the "violation" could "possibly" or "potentially" involved federal law only highlight
the lack of a federal statute requiring that indirect costs be deducted from the HIV medication grant.
	The deposition testimony of both the fiscal manager of the Department's HIV
program and Mary Alexander established that "indirect costs" was money that the state insisted on
collecting, rather than the federal government.  The federal government limited the states to charging
only 8.1% of the amount of the grants for recouping administrative costs.

Federal Claims Act
	Lane does not affirmatively identify a statue or ordinance the violation of which her
report could have arguably addressed.  She does cite to and intimates that the False Claims Act
("FCA") could have covered the conduct in question, but she does not affirmatively assert that the
FCA actually covers the conduct in question.  See 31 U.S.C.A. § 3729 (West 2003).
	The FCA creates liability against any person who, among other things, knowingly
presents a false or fraudulent claim to be paid or approved, or knowingly makes or uses a false record
or statement to get a false or fraudulent claim paid or approved by the federal government.  The
liability created by the FCA is in qui tam, meaning that it creates a private cause of action by which
a private party may sue, as "relator," on behalf of the government for restitution and to recover
damages against anyone involved in defrauding the federal government.  However, the United States
Supreme Court held that a state bears no qui tam liability under the FCA by virtue of sovereign
immunity.  Vermont Agency of Natural Res. v. United States, 529 U.S. 765, 784-85 (2000); Bly-Magee v. California, 236 F.3d 1014, 1017 (9th Cir. 2001).  Also, even if individual state officials
or employees are sued in their individual capacities, no FCA liability arises unless there is evidence
that the official or employee converted the federal funds or property to their own personal use or
benefit.  See Alexander v. Gilmore, 202 F. Supp.2d 478, 481-82 (E.D. Va. 2002).  There is no
indication in this case that any public monies were converted to anyone's personal use.
	Finally, regardless of whether the $2.9 million of federal funds had been paid to the
Department as "indirect costs" or spent on HIV/AIDS medication, the federal government was not
deprived of any money or property.  The federal government was not deprived of money it otherwise
would have kept but for the reported conduct.  Without monetary deprivation, no liability arises
under the FCA.  See Hutchins v. Wilentz, 253 F.3d 176, 184 (3d Cir. 2001) ("The False Claims Act
seeks to redress fraudulent activity which attempts to or actually causes economic loss to the United
States government. . . .  It was not intended to impose liability for every false statement made to the
government."); Costner v. URS Consultants, Inc., 153 F.3d 667, 776 (8th Cir. 1998) ("Only those
actions . . . which have the purpose and effect of causing the United States to pay out money it is not
obligated to pay, . . . " are considered "claims" within the meaning of the FCA).  As a matter of law,
the FCA could not have been the legal basis of Lane's report regarding "indirect costs."
	While we agree that a reporting employee's objective belief need not be correct and
that a non-law enforcement employee need not prove up each element of the legal violation allegedly
reported, we hold that there must be some actual legal basis to support the employee's subjective
belief that a violation of law occurred.  See Grabowski, 922 S.W.2d at 955; Llanes, 64 S.W.3d at
642-43 ("Otherwise, every complaint, grievance, and misbehavior could support a claim under the
Act."); Ruiz, 966 S.W.2s at 130.
CONCLUSION

	For the reasons set forth above, appellant's issues on appeal are overruled.  The
judgment of the district court is affirmed.


  
					Mack Kidd, Justice
Before: Justices Kidd, Yeakel and Patterson 
Affirmed
Filed:   July 30, 2003
1.   The federal grant program was established in the Ryan White CARE Act.  See 42 U.S.C.A.
§§ 300ff-300ff-111 (West 2003).  The grants were limited in number and were awarded among the
states on a competitive basis.  There were detailed application and periodic reporting requirements
associated with these grants, and recipient state agencies were subject to potential audits by the
United States Department of Health and Human Services ("DHHS") or the Office of Management
and Budget ("OMB").  In fiscal year 1999, Texas received grants of approximately $50 million for
its HIV program.
2.   "Indirect cost" is a percentage of a federal grant which a state agency charges for
administering a federal program; its purpose is to cover the cost of administrative overhead incurred
by the agency in administering the program.
3. 	The act provides:

(a)	A state or local government entity may not suspend or terminate the
employment of, or take other adverse personnel action against, a public
employee who in good faith reports a violation of law by the employing
governmental entity or another public employee to an appropriate law
enforcement authority.

(b)	In this section, a report is made to an appropriate law enforcement authority
if the authority is a part of the state or local governmental entity or of the
federal government that the employee in good faith believes is authorized to:

	(1)	regulate under or enforce the law alleged to be violated in the report; or

	(2)	investigate or prosecute a violation of criminal law.
 
Tex. Gov't Code Ann. § 554.002 (West Supp. 2003)
4.   Section 554.001(1)(a) defines "law" as: "(A) a state or federal statute; (B) an ordinance of
a local governmental entity; or (C) a rule adopted under a statute or ordinance."  Tex. Gov't Code
Ann. § 554.001(1)(a) (West Supp. 2003).
5.   On the other hand, the reporting employee does not ultimately have to have been correct
about the violation of law.  For instance, if an investigation reveals that there was no actual legal
violation, the employee is still protected if the report was objectively reasonable considering the
circumstances.  See, e.g., Llanes v. Corpus Christi Indep. Sch. Dist., 64 S.W.3d 638, 642 (Tex.
App.--Corpus Christi 2001, pet. denied); Lastor v. City of Hearne, 810 S.W.2d 742, 744 (Tex.
App.--Waco 1991, writ denied).  Moreover, an employee need not identify the specific law when
making the report, but there must be a law prohibiting the conduct being reported.  Llanes, 64
S.W.3d at 643.
6.   Apparently, the failure to pay "indirect costs" to the Department meant that there was $2.9
million more of grant monies to be spent on HIV and AIDS medication.  Likewise, when the HIV
medication program was forced to repay "indirect costs" to the Department, as a result of Lane's
action, it meant that those funds could not be spent on medication.

