COURT OF APPEALS OF VIRGINIA
Present: Judges Huff, Ortiz and Raphael PUBLISHED
Argued at Norfolk, Virginia
ELISABETH ARNOLD OPINION BY v. Record No. 2048-23-1 JUDGE DANIEL E. ORTIZ JANUARY 7, 2025 CITY OF NORFOLK
FROM THE CIRCUIT COURT OF THE CITY OF NORFOLK Mary Jane Hall, Judge
Matthias J. Kaseorg (Joel White; Pierce Jewett, PLLC, on briefs), for appellant.
Kristopher R. McClellan, Assistant City Attorney (Andrew Fox, Deputy City Attorney, on brief), for appellee.
Elisabeth Arnold alleges that she was terminated from her employment at the City of
Norfolk after complaining about potential and ongoing fraudulent claims by City employees.
She brought this retaliation action under the Virginia Fraud Against Taxpayers Act (“VFATA”),
Code §§ 8.01-216.1 through 8.01-216.19. The trial court sustained the City’s demurrer, finding
that Arnold failed to allege that she engaged in protected activity under the VFATA and
therefore failed to state a claim for retaliation. Because the trial court erred in sustaining the
demurrer with respect to some of Arnold’s allegations, we affirm in part and reverse in part.
Judge Huff participated in the hearing and decision of this case prior to the effective date
of his retirement on December 31, 2024. BACKGROUND
I. Factual Allegations1
Elisabeth Arnold was an employee of the City of Norfolk for roughly twenty years,
beginning in 2001. During her tenure, her performance was “immaculate,” earning her several
promotions. In 2017, Arnold was promoted to programs manager. Her responsibilities included:
“budgeting, accounting, and payroll for the operations division of the City’s Utilities
Department; overseeing large projects for the operations division; and managing a storehouse
that procured and provided materials for the Utilities Department.”
Beginning in late 2020 and continuing through June 2021, however, Arnold was
pressured by City employees to take actions that she believed would “cause false reports to be
generated regarding transfers of City property and/or money.” Specifically, Arnold alleges five
incidents of City misconduct.
First, around November 2020, Arnold alleges that she was pressured by Bob Carteris
(Assistant Director of City Utilities) to issue tools from the storehouse in whatever quantities
requested by field employees. This would have been in contravention of the City’s internal
policy limiting employees to one item per visit. Arnold alleges that, had the storehouse complied
with this demand “without Arnold’s knowledge,” it would have “caused Arnold to issue a false
report regarding the number of tools issued and costs incurred.” Arnold “notified the then-
operations manager, Mary Keough,” about this demand “in an effort to prevent fraud and/or
waste of City funds and avoid filing a false report.”
1 When reviewing a trial court’s decision sustaining a demurrer, an appellate court “accepts as true all facts properly pled” in the complaint, “as well as reasonable inferences from those facts.” Steward v. Holland Family Props., LLC, 284 Va. 282, 286 (2012). -2- Second, in January 2021,2 Arnold alleges that she was pressured by Keough to order
navy-blue uniforms that would have contravened relevant safety regulations. Because they
violated regulations, the navy-blue uniforms had been “entirely removed from the Utility
Department’s inventory system.” Arnold alleges that, had she complied with Keough’s request,
it “would have required Arnold to order the equipment under a false designation, thereby
creating a false report.” Arnold “objected” to Keough’s request and provided her with the City’s
updated uniform policy. Nonetheless, Keough “continued to demand” that Arnold purchase the
navy-blue uniforms.
Third, in early 2021, Arnold learned that City employees were adding unauthorized
“special pay” to their time sheets. Some employees were adding 30 minutes to their time sheets
“for receiving calls regardless of time spent on the call.” Others were double-counting time by
adding call time on top of their clock time. In March 2021, Arnold emailed Operations Manager
Larry Grant (her direct supervisor), as well as David Speer (Assistant Superintendent of
Wastewater), to advise them about these violations.
Fourth, in June 2021, Arnold alleges that Sid Lowe (Assistant Superintendent of Water
Distribution) asked Arnold “to transfer a large volume of damaged and obsolete materials . . .
into the storehouses” and to classify these materials as “stock.” A “stock” classification
represents that materials are in “new condition.” Had Arnold done so, Lowe’s department would
have received an $80,000 credit into its operating budget. Arnold refused to create the necessary
documentation, reported Lowe’s actions to her supervisor, and filed a formal grievance against
Lowe.
2 The complaint states “January 2020,” but this appears to be a scrivener’s error. Earlier, the complaint alleges that the City’s improper actions generally began in “late 2020.” And this section of the complaint refers to actions occurring in “November 2020” having preceded in time the January incident. -3- Fifth, “a few weeks after” Lowe’s classification request, Lowe and Speer “demanded that
Arnold issue water meters while the City’s financial system was down and therefore unable to
properly log such a transaction.” In such circumstances, the storehouse could only issue
materials required for emergency repairs, and “proper documentation of emergency need must be
provided by the requesting party.” Speer and Lowe wanted Arnold to issue the meters without
documentation in order to “cover-up” various failures on their part. Had Arnold complied, she
would have had “to create a written report that was materially false in that it would have lacked
the corresponding written authorization required by City policy for emergency need transfers.”
Arnold refused to provide the meters and “objected” to the request.
Following these instances, Arnold alleges that she experienced “harassment” and
“retaliatory response[s]” from her fellow employees. Specifically, “Lowe and Speer openly
harassed Arnold in front [sic] her store employees.” Another employee “directed his staff to
move a large dumpster from its permanent location and drop it on top of the storehouse parking
spaces.”
Soon after, on June 21, 2021, Arnold met with Mary Keough to discuss her experiences.
Keough “declined to take meaningful action” and informed Arnold: “while you have processes,
we need to make sure that they are not getting in the way of supporting operations, which is the
reason we’re all here.” Arnold responded, “I would rather resign my position than be fired for
breaking written policies.”
On June 29, “Arnold submitted a grievance to the City detailing many of her
experiences.” On June 30, Arnold met with Keough again, who “apologized for having
dismissed Arnold’s concerns.” Arnold “expressed relief and advised Keough that she was
rescinding her desire to resign.” She “memorialized this recension in writing” on July 2.
-4- Notwithstanding that retraction and Arnold’s “protest[],” on July 8, the City told Arnold
that it was “‘accepting’ her previous resignation,” ending her employment with the City. Arnold
subsequently brought this action.
II. Procedural History
Arnold alleged only one count in her complaint, retaliation under the VFATA, Code
§ 8.01-216.8. The City demurred.3
Code § 8.01-216.8 states, as relevant here:
Any employee . . . shall be entitled to all relief necessary . . . , if that employee . . . is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts done by the employee . . . in furtherance of an action under this article or other efforts to stop one or more violations of this article.
The trial court first expounded on “an action under this article,” acknowledging that the
Act
creates an action by which the Attorney General may recover civil penalties and damages against persons who commit the types of fraud proscribed in § 8.01-216.3, as well as an action brought by a private person who may be entitled to a percent of the proceeds of the action or the settlement of the claim—a so-called qui tam action.
The trial court also acknowledged that an employee alleging retaliation must allege acts that
“constitute protected activity” to state a claim. The court defined “protected activity” as “acts
done in furtherance of a VFATA action,” including “assist[ing] the City or the Commonwealth
in bringing a false claim action” or “pursu[ing] a qui tam action.”
Analyzing Arnold’s claim, the court first held that, under the VFATA, Arnold must have
alleged a “predicate VFATA violation” by City employees. The court considered “whether the
3 The trial court overruled the City’s plea in bar based on sovereign immunity. That ruling is not before us, and we offer no opinion on its merits. -5- various incidents that [Arnold] described relate[d] to anybody filing a false claim for payment by
the City or creating a false record to get a false claim paid by the City.” The court found that
only “one of the five activities that [Arnold] describe[d] . . . , the complaint about employees
who were paid twice for the same work,” could “potentially form the basis for a qui tam action.”
Nonetheless, in the trial court’s estimation, because Arnold failed to allege that “she had
any plans to pursue a qui tam action, that she was investigating matters that reasonably could
lead to a viable suit, or that she was planning to assist the City or the Commonwealth in bringing
a false claim action,” Arnold “fail[ed] to identify a predicate VFATA violation and for that
reason fail[ed] to state a claim for relief.” Thus, although the court also found that the City’s
purported acceptance of Arnold’s resignation was “a retaliatory action,” Arnold failed to allege
that any adverse employment action against her was “causally linked to” protected activity.
Arnold filed a motion for reconsideration and written objections to the order sustaining
the City’s demurrer. In sum, Arnold objected to aspects of the trial court’s analysis limiting the
scope of protected activity to only “acts done in furtherance of a VFATA action” because, she
argued, the VFATA also protects acts done in furtherance of “other efforts to stop one or more
violations.” Code § 8.01-216.8. Arnold further objected to the trial court’s finding that “the
Complaint fail[ed] to identify a predicate VFATA violation.”
The trial court denied the motion to reconsider, finding that “[a]ll of the grounds raised as
points for reconsideration, were carefully considered when the [c]ourt decided the demurrer” and
did not “support changing its decision.” Arnold appealed.
STANDARD OF REVIEW
A demurrer tests “the legal sufficiency of the facts properly alleged in the challenged
pleading and the inferences fairly drawn from those facts, all of which are accepted as true.”
Murayama 1997 Tr. v. NISC Holdings, LLC, 284 Va. 234, 245 (2012). “Because the decision
-6- whether to grant a demurrer involves issues of law, we review the circuit court’s judgment de
novo.” Dreher v. Budget Rent-A-Car Sys., Inc., 272 Va. 390, 395 (2006).
ANALYSIS
On appeal, Arnold’s assignments of error raise three fundamental issues: (1) whether the
trial court erred by limiting the scope of protected activity under the VFATA’s retaliation
provision to acts “done in furtherance of a VFATA action”; (2) whether Arnold sufficiently
pleaded that she engaged in protected activity; and (3) if so, whether Arnold otherwise
sufficiently pleaded the remaining elements of retaliation. Neither this Court nor our Supreme
Court has construed Code § 8.01-216.8 to determine the scope of protected “lawful acts.” For
the reasons that follow, we hold that the trial court erred because Arnold sufficiently pleaded that
she engaged in protected activity and stated a claim for retaliation under the VFATA.
I. The trial court erred when defining the scope of protected activity under Code § 8.01-216.8.
A. Structure of the VFATA
The VFATA was enacted as a state analog to the federal False Claims Act (“FCA”), 31
U.S.C. §§ 3729-3733. See Lewis v. City of Alexandria, 287 Va. 474, 479 n.4 (2014). At bottom,
the VFATA prohibits any person from presenting or making a false claim for payment to a state
or local government entity, and thereby defrauding Virginia taxpayers. See Code § 8.01-216.3.
Section 8.01-216.3 specifically prohibits nine types of conduct. As relevant to this case, it states:
Any person who:
1. Knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;
2. Knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim;
....
7. Is authorized to make or deliver a document certifying receipt of property used, or to be used, by the Commonwealth and, intending
-7- to defraud the Commonwealth, makes or delivers the receipt without completely knowing that the information on the receipt is true; [or]
9. Knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Commonwealth or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Commonwealth;
shall be liable to the Commonwealth . . . .
Code § 8.01-216.3(A).4 To put it simply, a “central question” in all false claims cases is
“whether the defendant ever presented a false or fraudulent claim to the government, resulting in
a ‘call upon the government fisc,’” or treasury. United States ex rel. Grant v. United Airlines
Inc., 912 F.3d 190, 196 (4th Cir. 2018) (quoting United States ex rel. Harrison v. Westinghouse
Savannah River Co., 352 F.3d 908, 913 (4th Cir. 2003)).
If someone violates the VFATA, the VFATA provides two causes of action that a private
citizen may bring: (1) a “qui tam” action, in which a person directly asserts a violation of
§ 8.01-216.3 on behalf of both herself and the Commonwealth, see Code § 8.01-216.5; or (2) a
whistleblower/retaliation action if a state or local government employee suffers adverse
employment consequences because she engaged in certain protected activities in an attempt to
stop the violation, see Code § 8.01-216.8.
In this case, Arnold brings only a retaliation cause of action under Code § 8.01-216.8.
The trial court sustained the City’s demurrer based solely on its finding that Arnold failed to
4 “Commonwealth” under the VFATA means not only the Commonwealth of Virginia and its agencies, but also any of its “political subdivision[s].” Code § 8.01-216.2. “Claim” means “any request or demand . . . for money or property . . . that . . . is presented to an officer, employee, or agent of the Commonwealth.” Id. -8- allege protected “lawful acts” under the retaliation provision. We next examine the scope of
relief provided in Code § 8.01-216.8.
B. Scope of Protected Activity Under Code § 8.01-216.8
Code § 8.01-216.8 protects certain “lawful acts” taken by Commonwealth or local
government employees to stop a VFATA violation, and is worth restating in relevant part here:
Any employee . . . shall be entitled to all relief necessary . . . , if that employee . . . is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts done by the employee . . . in furtherance of an action under this article or other efforts to stop one or more violations of this article.
Code § 8.01-216.8 (emphasis added). “Employee” means any employee or officer of the
Commonwealth or its political subdivisions. Code § 8.01-216.2.
Virginia appellate courts have not yet construed the scope of protected “lawful acts”
under the VFATA’s retaliation provision. In Lewis v. City of Alexandria, our Supreme Court
noted that the relief provided in Code § 8.01-216.8 is identical to its analogue in the FCA. See
287 Va. at 479 n.4; compare Code § 8.01-216.8, with 31 U.S.C. § 3730(h)(1)-(3). The Court
accordingly stated that federal FCA cases “provide guidance for our review on appeal.” Lewis,
287 Va. at 479 n.4; see also Reedy v. Commonwealth, 77 Va. App. 81, 103 n.11 (2023)
(“[F]ederal court decisions can be considered persuasive authority for this Court . . . .”). Justice
Mims in concurrence further emphasized that amendments to § 8.01-216.8, close on the heels of
identical FCA amendments, “indicate[d] that the General Assembly intended state courts to
construe the [VFATA] as the federal courts had then construed the [FCA].” Lewis, 287 Va. at
487 (Mims, J., concurring).
Under the FCA, to establish a prima facie case of retaliation, an employee must allege
that: (1) she engaged in protected activity; (2) the employer knew about the activity; and (3) the
employer retaliated against her in response. Grant, 912 F.3d at 200; accord United States ex rel. -9- Reed v. Keypoint Gov’t Sols., 923 F.3d 729, 764 (10th Cir. 2019). In this case, the trial court
dismissed Arnold’s claim based solely on the first element, finding that Arnold did not allege
protected activity.
To understand the scope of “protected activity” under the VFATA, it is instructive to
examine the history of amendments to it and the FCA. Prior to 2009, the FCA confined
protected activity only to “measures taken in furtherance of” a qui tam suit. Grant, 912 F.3d at
200. But, in 2010, Congress amended the FCA to “broaden[] the scope of protected activity.”
Id. at 201. Today, the FCA covers not only acts done “in furtherance of” a qui tam suit, but also
“other efforts to stop” violations of the acts, 31 U.S.C. § 3730(h)(1) (emphasis added); the
VFATA was amended to add identical language in 2012. 2012 Acts ch. 479; Code § 8.01-216.8.
Thus, the possibility of qui tam litigation is no longer a strict requirement to state a claim for
retaliation under either statute because an employee may also allege “efforts to stop” a VFATA
or FCA violation, “such as reporting suspected misconduct to internal supervisors.” Halasa v.
ITT Educ. Servs., 690 F.3d 844, 847-48 (4th Cir. 2012); see also Grant, 912 F.3d at 201 (“Where
Congress expands the scope of activity protected by a statute, we cannot restrict ourselves to
applying a narrower old standard that the expansion was intended to eschew.”); Reed, 923 F.3d
at 766.5 “To put it simply, the focus of the second prong is preventative—stopping
5 Only the First Circuit still cabins the definition of “protected activity” to “activities that reasonably could lead to an FCA action.” See United States ex rel. Booker v. Pfizer, Inc., 847 F.3d 52, 59 (1st Cir. 2017) (quoting Karvelas v. Melrose-Wakefield Hosp., 360 F.3d 220, 237 (1st Cir. 2004)). But even the First Circuit in Booker acknowledged the 2009/2010 amendments to the FCA and held that its definition covers actions that “might not be taken in direct furtherance of an actual lawsuit” but could lead to a lawsuit down the line, like “internal reporting or objecting to employer directives.” See id. at 59 n.8. Thus, while the First Circuit nominally retained its pre-2009 test, it simply incorporated “other efforts” into its already-existing definition, rendering its approach functionally the same as those of other circuits. - 10 - ‘violations’—while the first prong is reactive to an (alleged) actual violation of the statute.”
Singletary v. Howard Univ., 939 F.3d 287, 296 (D.C. Cir. 2019).
In this case, Arnold is correct that the trial court erred in its interpretation of protected
activity under the VFATA. In its opinion sustaining the demurrer, although the court quoted the
retaliation provision in full, it analyzed Arnold’s claim only under the first prong, examining
whether Arnold “intended to pursue or assist on” a qui tam action. The court found that Arnold’s
actions did not “constitute protected activity” because Arnold did not allege “that she had any
plans to pursue a qui tam action, that she was investigating matters that reasonably could lead to
a viable suit, or that she was planning to assist the City or the Commonwealth in bringing such a
false claim action.” Although the court correctly noted that federal FCA cases provide guidance,
it relied on pre-2009-amendment federal cases to support its construction of protected activity.
Thus, the trial court failed to effectuate the will of the General Assembly when it “appl[ied] a
narrower old standard that the [statute’s] expansion was intended to eschew.”6 Grant, 912 F.3d
at 201.
In sum, following the 2012 amendment to the VFATA, Code § 8.01-216.8 protects not
only “lawful acts” done “in furtherance of” a qui tam action, but also acts done “in furtherance of
. . . other efforts to stop one or more [VFATA] violations.” In this case, the trial court erred by
applying a pre-amendment construction of the VFATA’s retaliation provision. We turn next to
our de novo review of Arnold’s allegations under the proper standard.
6 In the trial court’s one-paragraph order denying Arnold’s motion for reconsideration, the court again provided a cursory reference to the “other efforts” prong, stating, “The Complaint fails to allege any acts by Plaintiff done in furtherance of an action pursuant to the VFATA or in an effort to stop one or more violations of the VFATA . . . .” (Emphasis added). But the court made clear that its order denying the motion for reconsideration rested on the same grounds as its original opinion sustaining the demurrer, finding that the motion contained “no grounds therein to support changing its decision” and that “[a]ll of the grounds raised as points for reconsideration[] were carefully considered when the [c]ourt decided the demurrer.” - 11 - II. Arnold sufficiently pleaded, in part, that she engaged in protected activity.
Although the trial court erred in its construction of Code § 8.01-216.8, the next question
is whether its judgment should nevertheless be affirmed because Arnold failed to sufficiently
plead that she engaged in protected activity under the VFATA.
A. Pleading Standard
Because neither this Court nor our Supreme Court has construed the scope of protected
activity under the VFATA’s retaliation provision, Virginia appellate courts also have never
identified the proper standard for pleading “lawful acts done by the employee . . . in furtherance
of . . . other efforts to stop one or more violations of [the VFATA].” Code § 8.01-216.8. In
United States ex rel. Grant v. United Airlines Inc., the Fourth Circuit set forth its standard under
the FCA. See 912 F.3d at 201.
In the Fourth Circuit, to successfully plead protected activity, the employee must allege
“an objectively reasonable belief that the employer is violating, or soon will violate the FCA.”
Id. Specifically, “[a] belief is objectively reasonable when the plaintiff alleges facts sufficient to
show that he believed his employer was violating the FCA, that this belief was reasonable, that
he took action based on that belief, and that his actions were designed to stop one or more
violations of the FCA.” Id. at 201-02. At least the D.C., Ninth, Eighth, Seventh, Sixth, and
Second Circuits, and several federal district courts, have adopted either Grant or a similar
objective-reasonableness analysis.7 Additionally, while a plaintiff bringing a direct qui tam
7 See Singletary, 939 F.3d at 296 (applying the Grant test); United States ex rel. Campie v. Gilead Scis., 862 F.3d 890, 908 (9th Cir. 2017) (requiring an “objectively reasonable, good faith belief” of an FCA violation); Wilkins v. St. Louis Hous. Auth., 314 F.3d 927, 933 (8th Cir. 2002) (allowing for an employee’s “objectively reasonable belief” that “he was acting to prevent” fraud to constitute “protected activity”); United States ex rel. Absher v. Momence Meadows Nursing Ctr., Inc., 764 F.3d 699, 715 (7th Cir. 2014) (“[T]he employee must undertake the protected conduct with the actual and reasonable belief ‘that the employer is committing fraud against the government.’” (quoting Fanslow v. Chi. Mfg. Ctr., Inc., 384 F.3d 469, 480 (7th Cir. 2004))); Jones-McNamara v. Holzer Health Sys., 630 F. App’x 394, 399 (6th Cir. 2015) - 12 - action under the FCA is subject to heightened requirements for pleading fraud, a plaintiff
alleging retaliation need only satisfy basic notice-pleading requirements. See id. at 200 (citing
Fed. R. Civ. P. 8(a), 9(b)).
As we noted above, the relief provided in Code § 8.01-216.8 is identical to the relief
provided in the FCA’s retaliation provision. Additionally, our Supreme Court has instructed
that, in reviewing claims under § 8.01-216.8, federal caselaw “provide[s] guidance.”8 Lewis, 287
Va. at 479 n.4. We see no reason to deviate from the weight of this federal caselaw and thereby
subject Virginians to a different standard when pleading identical statutory language under the
VFATA. We accordingly adopt the Fourth Circuit’s Grant test into our review of whether a
claimant has sufficiently pleaded protected activity in a retaliation action under Code
§ 8.01-216.8.
B. Arnold’s Complaint
Applying Grant to this case, the question presented is whether (1) Arnold “alleges facts
sufficient to show that [s]he believed [her] employer was violating” the VFATA, (2) “that this
(confirming that the “reasonable belief” requirement set forth in McKenzie v. BellSouth Telecommunications, Inc., 219 F.3d 508 (6th Cir. 2000), “survives the amendment” to the FCA); United States ex rel. Chorches v. Am. Med. Response, Inc., 865 F.3d 71, 96 (2d Cir. 2017) (analyzing whether efforts “reasonably could be expected to prevent the submission of a false claim”); e.g., Miniex v. Houston Hous. Auth., 400 F. Supp. 3d 620, 640-41 (S.D. Tex. 2019) (“[T]he employee’s actions must be motivated by a ‘good faith’ and objectively reasonable belief—i.e., ‘a reasonable employee in the same or similar circumstances might believe’—that her ‘employer is committing fraud against the government.’” (quoting United States ex rel. George v. Bos. Sci. Corp., 864 F. Supp. 2d 597, 604-05 (S.D. Tex. 2012))); Armstrong v. Arcanum Grp. Inc., No. 16-CV-1015, 2017 U.S. Dist. LEXIS 156346, at *12 (D. Colo. Sept. 25, 2017) (applying Fourth and Sixth Circuit tests). 8 The Lewis Court also found “guidance in cases addressing other statutory schemes containing anti-retaliatory relief,” such as Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e through 2000e-17. 287 Va. at 479 n.4. Federal courts construing Title VII’s anti-retaliation provision have similarly required a claimant to plead an objectively reasonable belief that an employer’s opposed conduct violated Title VII. See, e.g., Reznik v. Incontact, Inc., 18 F.4th 1257, 1260 (10th Cir. 2021); Moore v. City of Philadelphia, 461 F.3d 331, 341 (3d Cir. 2006); Summa v. Hofstra Univ., 708 F.3d 115, 126 (2d Cir. 2013). - 13 - belief was reasonable,” (3) “that [s]he took action based on that belief,” and (4) “that [her]
actions were designed to stop one or more violations of” the VFATA. Grant, 912 F.3d at
201-02. In other words, Arnold must allege both a reasonable belief of a predicate VFATA
violation under Code § 8.01-216.3 and that she took action to stop that violation. Additionally,
because the aim of Code § 8.01-216.8’s second prong is preventative, it is sufficient for Arnold
to allege a reasonable belief that the City “soon will violate” the VFATA; she need not allege an
already-existing violation. Id. at 201.
Arnold alleges five instances of conduct that she argues demonstrate both predicate
VFATA violations by the City and actions to stop them. We examine each in chronological
order, the same way they are presented in the complaint.
1. Issuance of Tools—Insufficiently Pleaded
Arnold first argues that Carteris’s demand to issue tools in whatever quantities City
employees requested would have forced her to “make[] or deliver[] [a] receipt without
completely knowing that the information on the receipt is true” and “cause[] to be made or used,
a false record or statement material to an obligation to pay or transmit money or property to the
Commonwealth” in contravention of Code § 8.01-216.3(A)(7) and (9). Arnold argues that,
because the City had a one-tool policy in place, if she had complied with the demand “while also
abiding by the one-tool policy, she would have been forced to create . . . documents falsely
certifying that only one of each item was charged to the appropriate City department’s operating
budget.” She also claims that, if “the storehouse [had] complied with Carteris’s demand without
Arnold’s knowledge, it would have caused Arnold to issue a false report regarding the number of
tools issued and costs incurred.”
Both the City on brief and the trial court in its opinion argue that Atchariyakornchai v.
Frederick County Sanitation Authority, No. 5:18-cv-00036, 2018 U.S. Dist. LEXIS 168897
- 14 - (W.D. Va. Sept. 30, 2018), is generally applicable to Arnold’s complaint. In Atchariyakornchai,
plaintiff worked for the Frederick County Sanitation Authority (“FCSA”) at a water treatment
plant. Id. at *2. The complaint alleged that FCSA was required by the Department of
Environmental Quality (“DEQ”) to take creek data samplings. Id. at *4. Plaintiff alleged that
FCSA employees falsified one such sampling and that these falsified records “may have led to
the avoidance of fines from the DEQ.” Id. at *9 (emphasis added). The district court found that
plaintiff failed to allege a “claim” under the VFATA because his argument was “speculative”;
false internal records that merely could lead to regulatory fines were “not a request or demand
for money or property from the Commonwealth,” as required by Code § 8.01-216.3. Id.
Accordingly, the court found that plaintiff failed to allege a predicate VFATA violation and thus
failed to allege “protected activity.” Id.
The City is correct that, in this instance, Arnold’s allegations are “speculative.” Arnold
alleges that she would have issued a false report if the storehouse had issued excess quantities of
tools “without [her] knowledge.” But, even drawing inferences in Arnold’s favor, these
allegations do not establish that such a scenario in fact occurred or soon would occur—she
merely alleges that tool issuance could have occurred at an unspecified point, which then would
have caused her to unknowingly issue a false report. Thus, like Atchariyakornchai, Arnold
merely alleges that Carteris’s demand “may have led” to a false report and increased costs for the
City. U.S. Dist. LEXIS 168897, at *9. We similarly agree in this case that, because Arnold’s
allegations are speculative, Arnold failed to “allege[] facts sufficient to show that [s]he believed
[her] employer was violating” or soon would violate the VFATA with respect to the issuance of
tools. Grant, 912 F.3d at 201. We accordingly affirm the judgment of the trial court with
respect to those allegations.
- 15 - 2. Uniform Ordering—Insufficiently Pleaded
Arnold next alleges that Keough’s “request”/“demand[]” of Arnold to purchase navy blue
uniforms for City staff would have similarly required her to violate Code § 8.01-216.3(A)(7) and
(9). Arnold alleges that navy-blue uniforms “had been entirely removed from the Utility
Department’s inventory system” and replaced with a new uniform to comply with relevant DOT
and OSHA safety regulations. Because these uniforms were erased from the system, “Arnold’s
compliance with Keough’s request would have required Arnold to order the [uniforms] under a
false designation.”
The City argues that Arnold’s allegations are “speculative” because there are no facts in
her complaint to show either why she would have had to create a false report or why she could
not add the uniforms back into the system. Arnold counters that details concerning the operation
of the City’s inventory system and Arnold’s reasons for not adding the uniforms are not
necessary to survive demurrer and should instead “be explored via discovery and deposition.”
Although Arnold is correct that she need not explain the mechanics of the City’s
inventory system to satisfy notice-pleading requirements, her allegations nevertheless fail
because the described conduct is not a violation of Code § 8.01-216.3.
To reiterate, a “central question” in any false claims case is “whether the defendant ever
presented a false or fraudulent claim to the government, resulting in a ‘call upon the government
fisc.’” Grant, 912 F.3d at 196 (quoting Harrison, 176 F.3d at 785-86); see also Carlson v.
DynCorp Int’l LLC, 657 F. App’x 168, 173 (4th Cir. 2016) (affirming dismissal of FCA
retaliation claim because plaintiff failed to establish that defendant’s conduct “might result in
financial loss to the Government” (emphasis added) (quoting United States v. Neifert-White Co.,
390 U.S. 228, 232 (1968))). Here, Arnold’s compliance with the City’s request to order navy
blue uniforms could not have resulted in a fraudulent “call upon the [City] fisc” because the City
- 16 - knew of and authorized those exact expenditures. In other words, the City was prepared to order
the uniforms regardless of how they were categorized, so an incorrect designation would not
“result in” additional “financial loss.” Carlson, 657 F. App’x at 173.
To be sure, Code § 8.01-216.3(A)(9) applies broadly to any false record that is “material
to any obligation to pay or transmit money or property to the Commonwealth.” But the Code
defines “material” as “having a natural tendency to influence . . . the payment or receipt of
money or property.” Code § 8.01-216.2 (emphasis added). Arnold ordering the uniforms under
an incorrect designation could not have “influence[d]” any payment or receipt because, again,
the City had already agreed to pay for the uniforms regardless of their designation.9 Thus, while
Arnold alleges a potential “false record or statement” in the form of an incorrect inventory
designation, she fails to allege the record would be “material to an obligation to . . . transmit
money or property” to the City. Code § 8.01-216.3 (emphasis added).
Lastly, Arnold alleges that ordering the uniforms “would have required Arnold to
willfully violate City policy as well as DOT and OSHA safety regulations.” Arnold may be able
to seek redress for such grievances elsewhere, but claimants under the VFATA must allege more
than mere “concern about regulatory noncompliance”—they must allege “specific . . . fraudulent
conduct against the government” covered by Code § 8.01-216.3. Grant, 912 F.3d at 202. Here,
for the reasons already discussed, Arnold has failed to do so.
In sum, Arnold’s allegations concerning ordering uniforms do not state a predicate
violation of Code § 8.01-216.3. We accordingly affirm the judgment of the trial court with
9 Contrast this allegation with the storehouse classification allegations, discussed infra. That portion of the complaint alleges that an incorrect designation would have fraudulently caused new, unauthorized expenditures of City funds. - 17 - 3. Employee Time Sheets—Sufficiently Pleaded
Arnold next alleges that she learned of City employees adding to and double-counting on
their time sheets by including “call time” on top of actual “clock time.” As a result, she alleges
that City employees were “paid twice for the same hours while other employees were completing
the same work without receiving additional pay.” For its part, the City does not dispute that
double-counting time would be a VFATA violation. It instead argues that Arnold states “[n]o
predicate violation” of the VFATA because it believes the allegations merely establish that
Arnold “suspected” there was an issue with the payroll. The City’s argument is unavailing.
Code § 8.01-216.3(A)(1) sets forth the core prohibition against “knowingly present[ing]”
a “false or fraudulent claim for payment or approval.” Recall that Code § 8.01-216.2 defines
“claim,” in relevant part, as “any request or demand . . . for money or property . . . that . . . is
presented to an officer, employee, or agent of the Commonwealth.”10
Here, Arnold “learned that additional pay . . . was being added to employee timesheets
without authorization.” She thus directly alleges that employees made fraudulent “request[s] . . .
for money,” and we easily draw the additional inference that the time sheets were presented to
the City “officer, employee, or agent” in charge of payroll. Code § 8.01-216.2. In short, City
employees requesting compensation for work they did not do is a “false . . . claim,” therefore
10 Notably, the definition of “claim” specifically excludes “requests or demands for money or property that the Commonwealth has paid to an individual as compensation for employment with the Commonwealth.” Code § 8.01-216.2 (emphasis added). In other words, the definitional carve-out exempts requests for money that the Commonwealth “has” already “paid to an individual as compensation”; it does not extend to requests by individuals for future compensation from the Commonwealth, which is what Arnold alleges here. See The Chicago Manual of Style ⁋ 5.136 (18th ed. 2024) (explaining that “have or has” is used “with the principal verb’s past participle” to form the present-perfect tense, which “denotes an act, state, or condition that is now completed” or “a past action that comes up to and touches the present” (third emphasis added)). - 18 - Arnold has alleged an objectively reasonable belief that City employees were violating the
VFATA.
Turning to the latter part of the Grant test, Arnold alleges that she emailed Operations
Manager Larry Grant, her direct supervisor, as well as Assistant Superintendent of Wastewater
David Speer “to prevent fraud” by “advis[ing] them about” the false time sheets. Arnold has
thus sufficiently pleaded that she took action designed to stop a VFATA violation. See Grant,
912 F.3d at 202 (finding that plaintiff sufficiently alleged “efforts to stop” a potential FCA
violation when he “raised concerns about [the violation] to management in an email”). We
accordingly reverse the judgment of the trial court with respect to these allegations.
4. Storehouse Materials Classification—Sufficiently Pleaded
Arnold next alleges that Sid Lowe, Assistant Superintendent of Water Distribution, asked
her to transfer a “large volume of damaged and obsolete materials purchased from third party
vendors into the storehouses,” and to falsely classify these materials as “stock.” A “stock”
designation represents that the materials are in “new condition,” ready to be utilized by other
departments. Arnold alleges that such a designation would have allowed Lowe’s department to
receive an $80,000 credit for the materials from the City. She argues that this would have
violated Code § 8.01-216.3(A)(7) and (9) by forcing her to “make[] or deliver[] [a] receipt
without completely knowing that the information on the receipt is true” and “cause[] to be made
or used, a false record or statement material to an obligation to pay or transmit money or
property to the Commonwealth.”
To determine if Arnold has alleged a predicate VFATA violation, we again ask whether
Arnold has alleged a false record “resulting in a ‘call upon the [City] fisc’” or “financial loss” to
the City. Grant, 912 F.3d at 196 (quoting Harrison, 176 F.3d at 785-86); Carlson, 657 F. App’x
at 173 (quoting Neifert-White Co., 390 U.S. at 232). Unlike Arnold’s uniform-ordering
- 19 - allegations discussed supra—which described a transaction that was already authorized and
would have resulted in uniforms simply having an incorrect designation—here, as alleged, the
false classification would cause a transaction. In other words, while the uniform allegations
contained nothing “resulting in,” or causing, a “call upon the [City] fisc,” here, Arnold has
alleged that a false “stock” classification would trigger an $80,000 credit to Lowe’s department.
On brief, the City does not dispute that a fraudulent internal “shift[ing]” of funds from
one City department to another, such that the money could not be allocated elsewhere, would
violate Code § 8.01-216.3; we therefore assume without deciding that it does.11 Instead, the City
once again argues that Arnold’s allegations are “speculative,” despite Arnold’s concretely
alleging that Lowe asked her “to classify the[] materials as ‘stock’” and that such a classification
would trigger a “credit for $80,000.” For the same reasons discussed supra concerning the
employee time sheets, we reject that argument.
Turning to whether Arnold “took action . . . designed to stop” the violation, Grant, 912
F.3d at 202, Arnold alleges that she “refused to create the documentation Lowe wanted,”
“reported Lowe’s request to her supervisor,” and “filed a formal grievance” against Lowe.
Accordingly, Arnold has sufficiently alleged “other efforts to stop one or more violations” of the
VFATA, Code § 8.01-216.8, and we reverse the judgment of the trial court with respect to these
allegations.
5. Issuance of Water Meters—Insufficiently Pleaded
Lastly, Arnold alleges that Speer and Lowe “demanded that Arnold issue water meters
while the City’s financial system was down and therefore unable to properly log such a
transaction.” Under those circumstances, Arnold could only issue materials for “emergency
11 For her part, Arnold asserts that the proposed classification would violate Code § 8.01-216.3 because it “would effectively and fraudulently transfer $80,000 of taxpayer money” to Lowe’s department. - 20 - repairs,” which required “proper documentation,” but Speer and Lowe requested that Arnold
issue the water meters without necessary documentation. As alleged, they sought to avoid
documenting the transaction “in order to cover up Lowe’s mishandling of a third-party
contracting process (leading to its lapse), failure to appropriately recycle old meters,” and
“failure to order new meters through the appropriate channels in a timely manner.” Had she
provided the meters without documentation, “it would have resulted in an unanticipated shortage
within the storehouse, causing delay in other City projects and further waste of City resources.”
Like Arnold’s tool-issuance allegations and Atchariyakornchai, discussed supra, these
allegations are speculative. Arnold generally alleges that Lowe and Speer’s request would have
caused “unanticipated shortage” and led to “waste.” But we are left to speculate as to the causal
connection between these two things—in other words, it is unclear how the issuance of water
meters would trigger a “call upon the [City] fisc.” Grant, 912 F.3d at 196 (quoting Harrison,
176 F.3d at 785-86). Without more, allegations of Lowe’s department receiving meters and any
resultant storehouse shortages, while perhaps showing a contravention of internal policy, do not
state a false claim for payment or financial loss to the City. Like Atchariyakornchai, we can
only infer that the issuance of the water meters “may have led” to financial loss down the line.
U.S. Dist. LEXIS 168897, at *9 (emphasis added). Arnold has thus failed to state an objectively
reasonable belief of a predicate VFATA violation, and we affirm the judgment of the trial court
with respect to these allegations.
III. Arnold sufficiently pleaded the remaining elements to state a claim for retaliation under the VFATA.
The trial court granted the City’s demurrer based solely on its finding that Arnold failed
to satisfy the first element of a VFATA retaliation claim, engaging in protected activity. Having
established that the trial court erred in that finding, the next question in our de novo review is
whether Arnold sufficiently alleged the remaining two elements: that her employer knew about - 21 - her protected activity and that her employer took adverse action against her in response. Grant,
912 F.3d at 200; accord Reed, 923 F.3d at 764.
A. Notice
Arnold has amply alleged that the City had notice of her protected actions. We have
already identified some of the ways Arnold notified the City of perceived unlawful conduct,
including emailing Grant and Speer about the time sheets and reporting Lowe to her supervisor
after the requested storehouse misclassification. In addition, shortly after the final incident
concerning the water meters, on June 21, 2021, Arnold “emailed Mary Keough” to inform her
about the above-discussed instances. Then, on June 29, Arnold “submitted a grievance . . .
detailing many of her experiences.” Finally, the next day, Arnold “met with Keough,” where
they discussed the “City’s actions” and Keough apologized to Arnold. Accordingly, Arnold has
satisfied the second element to state a claim for retaliation. See Grant, 912 F.3d at 200.
B. Adverse Action
The VFATA provides relief for an employee “if that employee . . . is discharged,
demoted, suspended, threatened, harassed, or in any other manner discriminated against in the
terms and conditions of employment because” the employee engages in protected activity. Code
§ 8.01-216.8. Turning again to on-point federal FCA caselaw, “[a]n employer undertakes a
materially adverse action opening it to retaliation liability if it does something that well might
have dissuaded a reasonable worker from making or supporting a charge of discrimination.”
Grant, 912 F.3d at 203 (quoting Smith v. Clark/Smoot/Russell, AJV, 796 F.3d 424, 434 (4th Cir.
2015)). “Termination from employment, ‘following close on the heels of [a plaintiffs] [sic]
numerous complaints, represents the ultimate action that an employer can take against a
reasonable worker for whistleblowing.’” United States ex rel. Fortunatè v. NDUTIME Youth &
- 22 - Fam. Servs., No: 3:16cv653, 2020 U.S. Dist. LEXIS 166879, at *59 (E.D. Va. Sept. 11, 2020)
(first alteration in original) (quoting Grant, 912 F.3d at 203).
Here, Arnold has sufficiently alleged adverse action. She alleges that the City
“terminated” her on July 8, 2021 by purportedly “accepting” her “resignation.” But, as alleged,
Arnold did not resign; she merely told Keough, “I would rather resign my position than be fired
for breaking written policies.” (Emphasis added). This hypothetical indication of preference
does not amount to a resignation. Moreover, even if it did, the resignation was no longer
effective because Arnold told Keough on June 30, prior to the City “accepting” her resignation
on July 8, “that she was rescinding her desire to resign,” and Arnold further “memorialized this
recension in writing on July 2, 2021.” See Bunting v. Willis, 68 Va. (27 Gratt.) 144, 155 (1876)
(“[A] prospective resignation may be withdrawn at any time before it is accepted . . . .”); cf.
Freeman v. Spencer Gifts, Inc., 333 F. Supp. 2d 1114, 1130-31 (D. Kan. 2004) (finding that
employer “terminated” employee when it “accept[ed] her resignation” after employee had
“withdraw[n]” it).
Additionally, Arnold has alleged that her termination was “close on the heels” of her
“numerous complaints.” Grant, 912 F.3d at 203. Arnold emailed Mary Keough on June 21,
2021, filed a formal grievance on June 29, and met with Keough on June 30, all for the purpose
of informing the City of her numerous “experiences” with the “City’s actions.” Eight days after
the June 30 meeting, the City terminated her. Accordingly, Arnold sufficiently pleaded adverse
action by her employer, the third and final element necessary to allege retaliation under the
CONCLUSION
The trial court erred when it limited the scope of an employee’s protected activity under
Code § 8.01-216.8 to a pre-amendment definition, considering merely whether Arnold acted “in
- 23 - furtherance of a VFATA action.” Under the newer “other efforts” prong, Arnold sufficiently
pleaded, in part, retaliation under the VFATA. We accordingly affirm in part and reverse in part
the trial court’s judgment sustaining the City’s demurrer, and we remand for proceedings
consistent with this opinion.
Affirmed in part, reversed in part, and remanded.
- 24 -