Sharon Lang v. NORTHWESTERN UNIVERSITY and NORTHWESTERN MEDICAL FACULTY FOUNDATION

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 06-1515
S HARON L ANG ,
Plaintiff-Appellant,
v.
N ORTHWESTERN U NIVERSITY and
N ORTHWESTERN M EDICAL
F ACULTY F OUNDATION ,
Defendants-Appellees.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 04 C 3290—Matthew F. Kennelly, Judge.
____________
A RGUED S EPTEMBER 22, 2006—D ECIDED D ECEMBER 28, 2006
____________
Before E ASTERBROOK , Chief Judge, and K ANNE and
S YKES , Circuit Judges.
E ASTERBROOK , Chief Judge. Sharon Lang called the
FBI to proclaim that executives of the Northwestern
Medical Faculty Foundation were lying to the Federal
Reserve in order to obtain a “gold bond rating” plus a
federal loan on easy terms. The FBI was unimpressed—if
only because the Fed does not extend credit to private
foundations or rate their bonds. Lang’s story had been
based on nothing other than office gossip, apparently
having its genesis in stories in Crain’s Chicago Business

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2 No. 06-1515
relating that the Foundation was burdened by debt. From
this tidbit, the office scuttlebutt leapt to federal bail-
outs secured by fraud. Yet neither Lang nor anyone who
passed the gossip on to her knew about any concrete false
statement made to the Federal Reserve or any other
federal agency, and neither a federal prosecution nor a
qui tam action under the False Claims Act, 31 U.S.C.
§3730, ensued.
What did occur is that Lang lost her job. She maintains
that the Foundation retaliated against her for speaking
to the FBI; the Foundation responds that Lang was laid
off when the grant that paid for her position ended. Lang’s
belief that she is a victim of retaliation, the Foundation
insists, has no better grounding than her report to the
FBI. The district court did not resolve this dispute. Instead
it assumed that the Foundation had considered Lang’s
report and held that doing this did not offend 31 U.S.C.
§3730(h), which gives employees a civil remedy should
retaliation occur on account of “lawful acts done by the
employee on behalf of the employee or others in further-
ance of an action under this section, including investiga-
tion for, initiation of, testimony for, or assistance in an
action filed or to be filed under this section”. “This section”
is §3730, which deals with fraudulent claims submitted
to federal agencies. There was no “action filed or to be
filed under” the False Claims Act, the judge observed, so
there could be no remedy under §3730(h). 2006 U.S. Dist.
L EXIS 8549 (N.D. Ill. Feb. 13, 2006).
The other defendant, Northwestern University, con-
tends that it was Lang’s employer and that it had no
reason to discourage anyone from reporting potential
fraud at the Foundation. Although the Foundation is an
organization of physicians who serve on the faculty of
Northwestern’s Feinberg School of Medicine or work at
Northwestern Memorial Hospital, both the Foundation
and the University insist that the organizations operate

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No. 06-1515 3
independently. The district court indulged the assump-
tion that Northwestern and the Foundation were joint
employers, but this did Lang no good: once the Foundation
prevailed, the University won automatically. For conve-
nience, we disregard the University’s role.
Section 3730(h) protects employees who are investigat-
ing claims “to be filed,” and we held in Neal v. Honeywell
Inc., 33 F.3d 860 (7th Cir. 1994), that the statute covers
investigations that, although reasonable in prospect, do
not pan out and thus do not lead to actions under the
False Claims Act. “The statute expressly covers investiga-
tory activities preceding litigation.” 33 F.3d at 864. Neal
concluded that litigation need not ensue for this protec-
tion to continue. But we added that the statute “limits
coverage to situations in which litigation could be filed
legitimately—that is, consistently with Fed. R. Civ. P. 11.
Then an employee who fabricates a tale of fraud to ex-
tract concessions from the employer, or who just imagines
fraud but lacks proof, legitimately may be sacked. No
action is ‘to be filed’ in either case, and employees who use
reports of fraud to better their own position, or who
behave like Chicken Little, impose costs on employers
without advancing any of the goals of the False Claims
Act.” 33 F.3d at 864. See also Fanslow v. Chicago Manu-
facturing Center, Inc., 384 F.3d 469 (7th Cir. 2004).
The district court concluded that Lang had played the
part of Chicken Little. She imagined fraud but lacked any
objective basis for that belief; the people who fed her the
rumors also lacked proof. There was no fire; there was
not even smoke; there was just imagination run amok,
and with no legitimate action “to be filed” no protection
from §3730(h). That assessment is spot on. Lang may
have been a thorn in management’s side, but the statute
is not designed to protect pests, who are more trouble
than they are worth. The statute protects genuine
private attorneys general from the sort of employers
who do not take kindly to having their crimes nosed out.

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4 No. 06-1515
Lang concedes that her beliefs lacked any footing other
than the articles in Crain’s Chicago Business, which do
not hint at skullduggery. (Lang, a histologist, had no
access to any of the Foundation’s financial records.)
Crain’s observed that the Foundation had incurred about
$87 million in debt to pay for a medical office building; as
a result of the debt-service obligations it had begun to
operate in the red, and morale had deteriorated. To say
that “X is suffering under heavy debt” does not imply
that X has committed fraud—or for that matter that X
has violated the antitrust laws, robbed banks, perpe-
trated arson to collect insurance money, smuggled
untaxed cigarettes into the state, or used any other
illegal means to raise funds. Lang’s beliefs were fantasies.
The Federal Reserve does not rate bonds or extend credit
to private foundations; Lang might as well have re-
ported that the Foundation was trying to deceive the
United Federation of Planets so that it would dispatch the
Starship Enterprise to assist the Foundation with a
delivery of 23d Century quatloos. If this comes within
§3730(h), then the statute has no bounds and protects tall
tales as well as legitimate investigations. Neal and
Fanslow foreclose such a position.
Denouncing other persons as criminals—which is what
Lang did—is serious business; considerable trouble and
expense may be required to set things straight, if the stain
ever can be erased. It was irresponsible to make such an
accusation on no basis other than rumor that someone
must be “cooking the books” to cope with what Crain’s
called “numbing debt.” What Lang actually believed is
irrelevant, for people believe the most fantastic things
in perfect good faith; a kind heart but empty head is not
enough. The right question is whether her belief had a
reasonable objective basis, and sensible jurors could not
find that it did. Section 3730(h) is not unique in this
respect. Other anti-retaliation statutes, such as the one

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No. 06-1515 5
in Title VII of the Civil Rights Act of 1964, see 42 U.S.C.
§2000e-3(a), also are limited to the protection of objec-
tively reasonable reports and do not prevent employers
from discharging workers who enter fantastic realms. See
Clark County School District v. Breeden, 532 U.S. 268
(2001); Mattson v. Caterpillar, Inc., 359 F.3d 885, 890-92
(7th Cir. 2004).
Illinois law likewise protects only objectively reason-
able reports, so the district judge properly dismissed
Lang’s state-law claim of retaliatory discharge. State law
protects employees whose reports of criminal activity
are supported by probable cause. See Palmateer v. Interna-
tional Harvester Co., 85 Ill. 2d 124, 132-33, 421 N.E.2d
876, 880 (1981). Lang did not have probable cause to
believe that anyone at the Foundation had committed a
crime. Contrast Brandon v. Anesthesia & Pain Manage-
ment Associates, 277 F.3d 936 (7th Cir. 2002), in which
the employee (who had personal knowledge of overbilling)
not only obtained corporate records establishing the
existence of fraud but also verified with public officials
that these documents had been used to obtain payments
to which the employer was not entitled. Lang had nothing
of the sort.
A FFIRMED
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—12-28-06

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