Jerry E. Smith, Circuit Judge:
The National Defense Authorization Act of 2013 ("NDAA") prohibits any recipient of federal dollars from retaliating against whistleblowers who report an abuse of that money. Laurel Kash filed a complaint with the U.S. Department of Education ("DOE"), alleging that the Texas Education Agency ("TEA") had discharged her in retaliation for whistleblowing; the TEA maintains it did so for legitimate reasons.
The DOE investigated Kash's complaint, credited it, and awarded her damages. The TEA contends that violated Texas's sovereign immunity. Agreeing with the TEA, we grant the petition for review, vacate the offending order, and remand for prompt entry of dismissal.
Congress enacted a broad-based whistleblower protection program as part of the NDAA.
41 U.S.C. § 4712(a)(1). The NDAA, by its terms, applies to any federal contract or grant and is not limited to a particular appropriation or class of grant.
If an employee believes he was subject to unlawful retaliation, he submits a complaint to the Inspector General of the agency responsible for the relevant federal money, at which point that agency investigates the complaint and determines whether the employer unlawfully retaliated. See id. § 4712(b)(1)-(2)(A). Depending on its findings, the agency then issues an order denying or granting relief, which can include reinstating the whistleblower, otherwise abating the adverse employment action, and paying damages that can cover backpay and attorney's fees. See id. § 4712(c)(1)(A)-(C). Any person aggrieved by that order (i.e., a complainant denied relief or an employer ordered to give relief) may petition the appropriate U.S. Court of Appeals for review, which conforms with the provisions for judicial review in the Administrative Procedure Act ("APA"). Id. § 4712(c)(5).
Kash was hired as the TEA's Director of Special Education in the summer of 2017. During the hiring process, the TEA conducted a background check in which it discovered allegations that Kash had kissed a high school student at her previous job in Oregon. Kash explained that the allegations were false, had been made by a disgruntled and discredited colleague, and had been rejected by Oregon state officials. The TEA hired Kash despite the allegations because she had been exonerated.
Kash's employment at the TEA got off to a rocky start. She reported directly to Justin Porter, who observed and received reports of Kash's allegedly unprofessional behavior throughout the early parts of her tenure. He held multiple counseling sessions with her in her first few months.
In October, Kash voiced her concerns about the TEA's data analysis contract with an entity called SPEDx, funded with money granted under the Individuals with Disabilities Education Act ("IDEA"). Kash told Porter she believed the contract was unnecessary and that it was awarded because the SPEDx contractor and a subcontractor were friends of Penny Schwinn, Porter's direct supervisor. Schwinn caught
The following month, Porter issued Kash a formal letter of reprimand that alleged instances of Kash's purported unprofessionalism and inappropriate communications with external stakeholders. The letter also discussed Kash's complaints about the SPEDx contract, saying that, although Kash could report the allegations through appropriate channels, it was inappropriate to voice her complaints in the way that the letter asserted she had. The letter said that voicing those concerns to external stakeholders in particular could undermine Schwinn's reputation and negatively impact the TEA. Shortly thereafter, Kash followed up with Wilson about her concerns with the SPEDx contract and expressed her fear that she would be fired.
A few weeks later, an allegation became public that Kash had "tried to cover up the physical and sexual abuse of a six-year-old special education student and retaliated against the teaching assistants who reported it." The teaching assistants had filed a lawsuit in Oregon detailing those allegations. And the TEA received emails from members of the public concerned about the allegations. Upon learning of the lawsuit, Porter texted Kash that he was going to direct questions about the allegations to the TEA's communications director; Kash responded that she was not liable for anything and that the lawsuit was brought by "that crazy employee I told you about this summer."
Days after the cover-up allegations broke, Kash filed a complaint about the SPEDx contract with the DOE Office of the Inspector General ("OIG"). Before that, the TEA had been discussing whether to terminate Kash's employment. The day after she filed her complaint, the TEA did so.
Kash filed a whistleblower-retaliation complaint with the OIG the following September. She claimed that both her termination and the letter of reprimand she received were retaliation for her reporting legal problems with the SPEDx contract. The TEA maintained that it terminated her because she could no longer effectively do her public-facing job after the cover-up allegations broke. Following a yearlong investigation, the OIG "sustained Kash's allegations of whistleblower reprisal" based
After a full hearing, an ALJ agreed and ordered the TEA to pay Kash damages. The TEA petitions for review, claiming, among other things, that the investigation and award of damages violates Texas's sovereign immunity. Since that is a constitutional issue, our review is de novo.
In general, states
Though states are immune from suits brought by private parties, "[i]n ratifying the Constitution, the States consented to suits brought by ... the Federal Government." Alden v. Maine, 527 U.S. 706, 755, 119 S.Ct. 2240, 144 L.Ed.2d 636 (1999). Kash contends that the NDAA's whistleblower-retaliation provision "reflects Congress's longstanding, but growing recognition of the indispensable role whistleblowers play in revealing waste, fraud, and abuse in federal grantmaking and contracting with a variety of parties, including states." On that basis, Kash theorizes that the DOE's investigation and order advance the United States' "interest in having state grantee compliance with federal law be unhindered by whistleblower retaliation." Therefore, she posits that the proceeding is less like one in which a private complainant hales the state before the administrative agency and more like a suit brought by the United States to defend its own interests.
Whether whistleblower-retaliation investigations into a state are constitutionally permissible because they advance the United States' interests is res nova in this circuit. For three reasons, they, like any
First, the logic of Alden does not apply to whistleblower-retaliation investigations. In Alden, 527 U.S. at 756, 119 S.Ct. 2240, the Court relied on the fact that "[s]uits brought by the United States itself require the exercise of political responsibility for each suit prosecuted against a State, a control which is absent from a broad delegation to private persons to sue nonconsenting States." But the NDAA lacks that control for whistleblower-retaliation investigations of nonconsenting states. Instead, it authorizes any "person who believes that the person has been subjected to a reprisal prohibited" by the NDAA to "submit a complaint," which the Inspector General must
Second, the reasoning in our qui tam caselaw is persuasive and applicable. The False Claims Act authorizes private citizens to sue on behalf of the United States to recover its money from "any person" who falsely claims it. 31 U.S.C. §§ 3729(a)(1), 3730(b)(1). But where that "person" is a state, unless the United States intervenes, the suit is barred by sovereign immunity. United States ex rel. Foulds v. Tex. Tech Univ., 171 F.3d 279, 294 (5th Cir. 1999).
So too here. Kash's contention means, at most, that the United States is a party in interest in the whistleblower-retaliation proceeding. But the United States certainly did not commence the action; Kash, a private citizen, triggered the investigation by filing a complaint with the OIG. Nor did the United States prosecute the action; the OIG investigator played a neutral role in determining whether to recommend ordering or denying relief based on his analysis
Third, "[w]e are always chary to create a circuit split," and accepting Kash's theory would do so. Alfaro v. Comm'r, 349 F.3d 225, 229 (5th Cir. 2003). In Rhode Island Department of Environmental Management v. United States ("Rhode Island"), 304 F.3d 31 (1st Cir. 2002), the court rejected a contention very similar to Kash's. That case involved the whistleblower-protection provision of the Solid Waste Disposal Act, 42 U.S.C. § 6971, which, much like the NDAA, established an administrative scheme for employees who believe they were retaliated against to seek relief. Four complainants brought claims to the Department of Labor, alleging that the Rhode Island agency retaliated against them, and Rhode Island sued to enjoin the administrative proceedings based on sovereign immunity. In finding for the state, the First Circuit rejected the complainants' argument "that the Secretary, rather than the individual complainant, [was] the `true' plaintiff...." Rhode Island, 304 F.3d at 53. The court reasoned that the administrative adjudication was not prosecuted by the Secretary, but, "[i]nstead, the individual complainant trie[d] a case against the employer, and the Secretary (through the ALJ) act[ed] as the neutral arbiter of law and fact." Id. Therefore, unless the Secretary intervened as a party or amicus curiae, sovereign immunity barred the suit. Id.
As in Rhode Island, a private individual —Kash—tried a case against the employer —the TEA—and the Secretary (first through its OIG and then through an ALJ) acted as a neutral arbiter of law and fact. Accepting Kash's argument would require rejecting the First Circuit's holding that this neutral role meant the Secretary was not the true plaintiff.
Kash contends we can distinguish Rhode Island on the ground that the NDAA applies only to states that have a contractual or grantor-grantee relationship with a federal agency, while the Solid Waste Disposal Act applied even without such a relationship. But that distinction is apropos of nothing. The reasoning of Rhode Island does not rely on the lack of a relationship between the state and federal governments, but instead on the role the federal government played in the whistleblowers' claims. And—grantor-grantee relationship or not—the federal government plays that same role in Kash's claim. Nor is there any authority for the proposition that the existence of a contractual or grantor-grantee relationship is relevant to the state's consent to suit. In fact, as discussed above, Foulds is to the contrary.
Though states are immune from suit by private parties, they can waive their immunity for particular types of cases.
A state's waiver of sovereign immunity "must be knowing and voluntary."
The "voluntary" requirement is usually, but not always, met where the "knowing" requirement is. Pace, 403 F.3d at 279. Neither party contends that the NDAA's condition would be coercive, so we express no opinion on the matter and focus our analysis on the "knowing" requirement.
The "knowing" requirement is a "stringent clear-statement rule...." Id.
The DOE asserts that the NDAA unambiguously put the TEA on notice that it would be subject to the remedial scheme of § 4712, including the possibility of damages, should the TEA choose to accept federal funds through any grant, including the IDEA. The TEA counters that the NDAA is inadequately clear because the "statutory text makes no reference to `states' or to `immunity.'" Further, the TEA points out the breadth of the DOE's interpretation, which would mean "that the NDAA—solely by referencing `contractor' and `grantee'—acts as a global waiver of sovereign immunity for any State that enters into any contract with or receives any grant from the federal government." The breadth of the waiver that interpretation invokes, they posit, belies the possibility that the waiver would be knowing.
The TEA is correct. The NDAA lacks the clarity required for a knowing waiver under our and Supreme Court caselaw. Comparing the NDAA to other statutes that we have held are and are not sufficiently clear elucidates this. We have held that the IDEA
Conversely, we have held that statutes lacking an explicit reference to sovereign immunity are not sufficiently clear. For example, the Rehabilitation Act says "Any party aggrieved by a final decision described in subparagraph (I), may bring a civil action for review of such decision. The action may be brought in any state court of competent jurisdiction or in a district court of the United States of competent jurisdiction...." 29 U.S.C. § 722(c)-(5)(J)(i). In Hurst v. Texas Department of Assistive & Rehabilitative Services, 482 F.3d 809, 810-14 (5th Cir. 2007), we held that language did not constitute waiver, based on the holding in Atascadero that general authorizations for suit in federal court are insufficiently clear.
The DOE does not rest its waiver argument solely on the text of the NDAA. It also contends that regulations clarify what the statute may have left ambiguous, thereby making the state's waiver knowing and voluntary. Specifically, 2 C.F.R. § 200.300(b) (2020) clarifies that "the non-Federal entity is responsible for complying with all requirements of the Federal award.... See also statutory requirements for whistleblower protections [including the NDAA]." "Non-Federal entity" is defined to include state governments. Id. § 200.69. And that regulation applies to Department of Education grantees. Id. § 3474.1.
A question of first impression is whether the clarity required for a waiver of sovereign immunity to be "knowing" can be met by regulations clarifying an ambiguous statute. The needed clarity cannot be so provided—it must come directly from the statute, for two reasons.
First, when Congress places conditions on "the States' receipt of federal funds, it `must do so unambiguously....'" Dole, 483 U.S. at 207, 107 S.Ct. 2793 (quoting Pennhurst State Sch. & Hosp. v. Halderman, 451 U.S. 1, 17, 101 S.Ct. 1531, 67 L.Ed.2d 694 (1981)). Regulations that interpret statutes are valid only if they either match Congress's unambiguous command or are clarifying a statutory ambiguity. See Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 843-44, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). Relying on regulations to present the clear condition, therefore, is an acknowledgment that Congress's condition was not unambiguous, so that method of analysis would not meet the requirements of Dole. Given Gruver's acknowledgment
Second, the ability to place conditions on federal grants ultimately comes from the Spending Clause, which empowers Congress, not the Executive, to spend for the general welfare. The Constitution carefully separates the "purse" from the "sword" by assigning to Congress and Congress alone the power of the purse. The Federalist Nos. 78 (Alexander Hamilton), 58 (James Madison). Allowing the Executive to require states to waive immunity to receive federal funds would grant the Executive a power of the purse and thus would be inconsistent with the Constitution's meticulous separation of powers. Therefore, regulations cannot provide the clarity needed to render the state's waiver of sovereign immunity knowing.
The petition for review is GRANTED. The order granting relief to Kash is VACATED; this proceeding is REMANDED to the agency with direction to dismiss the proceedings without delay.
Not pressing this theory was a good choice, because the the NDAA lacks the "unequivocal statutory language" needed to constitute effective abrogation, given that it makes no mention of states or sovereign immunity. And, if it did, the harm the NDAA addresses is unrelated to the Fourteenth Amendment, as required for abrogation. See id. at 1001, 1003-04.
The agency's shifting rationale on appeal raises the specter of Securities & Exchange Commission v. Chenery Corp., 318 U.S. 80, 95, 63 S.Ct. 454, 87 L.Ed. 626 (1943), but is ultimately not a problem. Chenery held that "an administrative order cannot be upheld unless the grounds upon which the agency acted in exercising its powers were those upon which its action can be sustained." Id. But the Court was clear that it was not disturbing "the settled rule that, in reviewing the decision of a lower court, it must be affirmed if the result is correct although the lower court relied upon a wrong ground or gave a wrong reason." Id. at 88, 63 S.Ct. 454 (quotation omitted). Instead, the Chenery principle applies where "an order is valid only as a determination of policy or judgment which the agency alone is authorized to make...." Id. Whether sovereign immunity bars the action is not such a determination, so the DOE theoretically can prevail on its new reasoning despite Chenery.