Texas Department of Human Services v. Oliver Okoli

• Court: Texas Supreme Court
• Decided: August 22, 2014
• Docket: 10-0567
• Status: Published

Opinion

IN THE SUPREME COURT OF TEXAS 444444444444 NO . 10-0567 444444444444

TEXAS DEPARTMENT OF HUMAN SERVICES, PETITIONER,

v.

OLIVER OKOLI, RESPONDENT

4444444444444444444444444444444444444444444444444444 ON PETITION FOR REVIEW FROM THE COURT OF APPEALS FOR THE FIRST DISTRICT OF TEXAS 4444444444444444444444444444444444444444444444444444

Argued October 9, 2013

JUSTICE BROWN delivered the opinion of the Court, in which CHIEF JUSTICE HECHT , JUSTICE GREEN , JUSTICE JOHNSON , and JUSTICE GUZMAN joined.

JUSTICE DEVINE filed a dissenting opinion, in which JUSTICE WILLETT and JUSTICE LEHRMANN joined.

JUSTICE BOYD did not participate in the decision.

The Texas Whistleblower Act protects public employees who in good faith report violations

of law to an appropriate law-enforcement authority. TEX . GOV ’T CODE § 554.002(a). In this case, an

employee reported wrongdoing to his supervisor, who was required to forward the report to a part

of the agency with outward-looking law-enforcement authority. We find this case indistinguishable

from our previous cases interpreting the Act that hold reports of wrongdoing to a supervisor are not good-faith reports to an appropriate law-enforcement authority. Therefore, we reverse the court of

appeals and hold the trial court lacks subject-matter jurisdiction over this whistleblower claim.

I

Oliver Okoli was an employee of the Texas Department of Human Services (TDHS) from

1990 to 1998. At the time, TDHS was charged with administering welfare programs, such as the

issuance of Medicaid benefits and food stamps. Okoli’s duties included interviewing clients,

determining benefits, explaining program benefits and requirements, and evaluating clients’

eligibility for continuing services. Okoli was promoted on at least a couple of occasions, but was also

cited several times, as far back as 1994, for faulty documentation.

According to Okoli, TDHS trained its employees in how to report illegal acts by other

employees. Okoli asserts that TDHS instructed him to report such acts first to an immediate

supervisor, and then up the chain of command if the first supervisor’s response was unsatisfactory.

This procedure was re-affirmed for Okoli when he reported a supervisor’s harassment to the regional

director and was told to go back and start with his immediate supervisor. In addition to the training

Okoli received, TDHS also circulated an internal memorandum in 1994 entitled “Work Rule

Violations.” TDHS required Okoli to sign the memorandum, acknowledging that he had received

it and discussed it with his supervisor.

The memorandum provided that TDHS employees are prohibited from making false

statements relating to employment and job assignments, including “falsifying file dates on

applications” and “intentionally making a false alteration of dates or codes on [TDHS] forms.” The

memorandum further provided that any employee or supervisor found to have violated, encouraged

2 a violation of, or failed to report such a violation would “be subject to disciplinary action up to and

including dismissal.” Additionally, the memorandum provided that for any violation amounting to

a crime under the Penal Code, “a referral to [TDHS’s Office of Inspector General] will be made for

possible prosecution.” TDHS’s Office of Inspector General (OIG) is responsible “for the prevention,

detection, audit, inspection, review, and investigation of fraud, waste, and abuse in the provision and

delivery of all health and human services in the state,” and for “enforcement of state law relating to

the provision of those services.” TEX . GOV ’T CODE § 531.102(a). In the memorandum, Okoli was

not given any instruction on whether he should or should not report unlawful conduct directly to the

OIG.

In 1997, Okoli was assigned to a new supervisor. According to Okoli, this new supervisor

often falsified dates on TDHS benefits forms to avoid delinquencies. When Okoli first complained

of the fraudulent activity to the supervisor herself, she allegedly disciplined him, placing him on a

“three-month corrective action plan.” Okoli then reported the wrongdoing to the supervisor’s

supervisor. After receiving another unsatisfactory response, Okoli reported the “illegalities” even

higher up the chain of command, to the Lead Program Manager. After following this course, Okoli

was terminated. Okoli never reported the fraudulent activity to anyone within the OIG. Okoli pursued

an administrative-grievance procedure to contest the termination, but the termination decision was

sustained.

Okoli then sued TDHS under the Texas Whistleblower Act, alleging that he was terminated

for reporting that his supervisor falsified dates and documents. In response, TDHS filed a plea to the

jurisdiction, claiming the trial court lacked jurisdiction because Okoli failed to make a good-faith

3 report of a violation of law to an appropriate law-enforcement authority. See TEX . GOV ’T CODE

§ 554.0035 (“Sovereign immunity is waived and abolished to the extent of liability for the relief

allowed under this chapter for a violation of this chapter.”). The trial court denied TDHS’s plea to

the jurisdiction, and TDHS appealed. See TEX . CIV . PRAC. & REM . CODE § 51.014(a)(8) (permitting

appeal from an interlocutory order that denies a plea to the jurisdiction by a governmental unit). The

court of appeals affirmed, holding that the whistleblower statute did not require Okoli to raise a fact

issue on the merits of the claim in order to show jurisdiction. See Tex. Dep’t of Human Servs. v.

Okoli, 263 S.W.3d 275, 281 (Tex. App.—Houston [1st Dist.] 2007, pet. granted). We reversed the

court of appeals’ decision and remanded the case for consideration under this Court’s holding in

State v. Lueck, 290 S.W.3d 876, 883 (Tex. 2009). Tex. Dep’t of Health & Human Servs. v. Okoli,

295 S.W.3d 667, 668 (Tex. 2009) (per curiam).

On remand, the court of appeals held that because Okoli testified he was required by TDHS

policy to report “up the chain of command,” the supervisors were appropriate law-enforcement

authorities within TDHS, and, alternatively, Okoli had a good-faith belief that he was reporting to

appropriate law-enforcement authorities. Tex. Dep’t of Human Servs. v. Okoli, 317 S.W.3d 800,

809–10 (Tex. App.—Houston [1st Dist.] 2010, pet. granted). The court of appeals again affirmed

the trial court’s order, and TDHS filed a second petition for review with this Court. Here, we

consider whether Okoli made a report “to an appropriate law[-]enforcement authority,” as defined

by the Whistleblower Act, when he followed department policy and reported to his supervisors up

the chain of command. TEX . GOV ’T CODE § 554.002(b).

4 II

The Whistleblower Act prohibits a state or local governmental entity from taking 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.” TEX . GOV ’T CODE § 554.002(a). In 1995, the Legislature amended the statute to define

“appropriate law[-]enforcement authority”:

[A] report is made to an appropriate law[-]enforcement authority if the authority is part of a state or local governmental entity or 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 § 554.002(b).

This Court first interpreted what it means to be an “appropriate law[-]enforcement authority”

under the amended statute in Texas Department of Transportation v. Needham, 82 S.W.3d 314 (Tex.

2002). To satisfy this requirement, a plaintiff seeking the Act’s protection must prove that the report

was made to an appropriate law-enforcement authority, or that the employee had a good-faith belief

that it was. Id. at 320. An employee’s belief is in good faith if: (1) the employee believed the

governmental entity qualified, and (2) the employee’s belief was reasonable in light of the

employee’s training and experience. Id. at 321. While the first element is subjective, the second

element is an objective one: the reporting employee only receives Whistleblower Act protection if

a reasonably prudent employee in similar circumstances would have believed the governmental

entity to which he reported a violation of law was an appropriate law-enforcement authority. Id. at

320–21. Whether an employee has a good-faith belief that the entity is an appropriate law-

5 enforcement authority “turns on more than an employee’s personal belief, however strongly felt or

sincerely held.” Univ. of Tex. Sw. Med. Ctr. at Dallas v. Gentilello, 398 S.W.3d 680, 683 (Tex.

2013) (emphasis in original).

Since Needham, this Court has spoken several more times to what constitutes a good-faith

report to an appropriate law-enforcement authority. In each instance, we have held that reports up

the chain of command are insufficient to trigger the Act’s protections. See Ysleta Indep. Sch. Dist.

v. Franco, 417 S.W.3d 443, 445–46 (Tex. 2013) (per curiam); Canutillo Indep. Sch. Dist. v. Farran,

409 S.W.3d 653, 655 (Tex. 2013) (per curiam); Univ. of Houston v. Barth, 403 S.W.3d 851, 855–58

(Tex. 2013) (per curiam); Tex. A & M Univ.—Kingsville v. Moreno, 399 S.W.3d 128, 130 (Tex.

2013) (per curiam); Gentilello, 398 S.W.3d at 689; Lueck, 290 S.W.3d at 885–86. In Gentilello, we

noted that we had consistently declined on previous occasions “to remove the objective element and

protect internal reports to workplace supervisors who lacked the Act’s specified powers.” 398

S.W.3d at 683. The facts of Okoli’s case do not merit a departure from this precedent.

III

The 1994 memorandum regarding how TDHS employees should report wrongdoing includes

a purported assurance that violations of the Penal Code would be reported to OIG. TDHS does not

dispute that its OIG is an appropriate law-enforcement authority under the Whistleblower Act, as it

is charged with investigating and enforcing violations of law or fraud: “The commission’s office of

inspector general is responsible for the prevention, detection, audit, inspection, review, and

investigation of fraud, waste, and abuse in the provision and delivery of all health and human

services in the state . . . .” TEX . GOV ’T CODE § 531.102(a). However, because Okoli did not make

6 a report directly to the OIG, we must consider whether the reports to Okoli’s supervisors—who work

to administer TDHS programs—satisfy the Act’s requirements.

When an employee reports wrongdoing internally with the knowledge that the report will

have to be forwarded elsewhere for regulation, enforcement, investigation, or prosecution, then the

employee is not reporting “to an appropriate law[-]enforcement authority.” TEX . GOV ’T CODE

§ 554.002 (emphasis added). We have made this clear in previous decisions interpreting the

“appropriate law[-]enforcement authority” requirement. In both Needham and Lueck, for instance,

we denied Whistleblower Act protection to Texas Department of Transportation (TxDOT)

employees who reported violations of law to supervisors within the department because those

supervisors lacked appropriate law-enforcement authority. Lueck, 290 S.W.3d at 885–86 (holding

the head of a division within TxDOT could not regulate or enforce federal traffic data-collection

regulations); Needham, 82 S.W.3d at 320–21 (holding TxDOT could only internally discipline an

employee who violated drunk-driving laws).

Importantly, in both Needham and Lueck, the whistleblowers had been made aware that their

supervisors lacked law-enforcement authority. In Lueck, an e-mail revealed that the whistleblower

knew his supervisor would have to refer the violation elsewhere. We held that this conclusively

established that the employee could not have formed a good-faith belief that his supervisor was an

appropriate law-enforcement authority. Lueck, 290 S.W.3d at 885–86; see also Needham, 82 S.W.3d

at 321 (holding that employee’s participation in TxDOT’s internal disciplinary process was

insufficient to support finding of good faith belief that he reported to proper authority).

7 In this case, for Okoli’s reports of wrongdoing to have reached an appropriate law-

enforcement authority, Okoli’s supervisors would have had to forward them to OIG for prosecution.

Further, like the e-mail in Lueck, the 1994 memorandum in this case spells out for Okoli that his

supervisor would have to refer his report elsewhere. While the TDHS memo requires employees to

report all work-rule violations, it also informs employees that if the violations constitute a violation

of the Penal Code, “a referral to OIG will be made for possible prosecution.” Like the employees in

Needham and Lueck, Okoli did not report to an appropriate law-enforcement authority, nor could he

have had a good-faith belief that he did so.

We reaffirmed our Lueck holding in Barth and Gentilello. See Barth, 403 S.W.3d at 857–58;

Gentilello, 398 S.W.3d at 687. Barth, which we decided less than a year ago, is particularly

analogous to this case. In Barth, a university professor reported violations of law by his college’s

dean to the university’s general counsel, chief financial officer, internal auditor, and associate

provost. 403 S.W.3d at 853. We held that because “none of the four people that Barth reported to

regarding alleged violations of the Penal Code . . . could have investigated or prosecuted criminal

law violations against third parties,” he failed to satisfy section 554.002(b) of the Texas Government

Code. Id. at 857–58. Barth also reported the violations to the university’s police department, but not

until after alleged retaliatory acts against him had already occurred. Id. at 857. We pointed out that

Barth’s report to the police may have been sufficient had it preceded the retaliatory action. Id.

In Gentilello, we held that a medical-school faculty member who oversaw internal

compliance with federal regulations did not have “law-enforcement authority status” for reports of

violations of federal laws. 398 S.W.3d at 686–87 (“A supervisor looking into and addressing

8 possible noncompliance in-house bears little resemblance to a law-enforcement official formally

investigating or prosecuting the noncompliance on behalf of the public, or a regulatory authority

charged with promulgating or enforcing regulations applicable to third parties generally.”). In that

case, the whistleblower acknowledged that the faculty member had only inward-looking authority

and would have to refer suspected illegality “to whoever is in charge of enforcing the law.” Id. at

688.

In spite of this line of authority, Okoli urges us to find his up-the-chain-of-command report

satisfies the Act. This case can be distinguished from Barth and the others, Okoli insists, because

TDHS had developed a process for collecting criminal reports within the agency: employees were

trained to refer wrongdoing to department supervisors up the chain of command, who would then

forward possible criminal violations to the OIG.

As to the training Okoli received, we have rejected the notion that a departmental policy

requiring employees to report wrongdoing to their supervisors is sufficient to form a good-faith

belief. The plaintiffs in Barth, Gentilello, and Needham were complying with similar instructions

when they made their reports. See Barth, 403 S.W.3d at 857; Gentilello, 398 S.W.3d at 688;

Needham, 82 S.W.3d at 314.

We have rejected this argument even when those who receive the report are also

administratively obligated to report the alleged violations to an appropriate law-enforcement

authority. We held that Barth’s reports were insufficient, even though he argued that in reporting the

violations as he did, he was complying with the university’s internal administrative policy, and that

university policy further required all the administrators who received such reports to forward them

9 to the university police. See Barth, 403 S.W.3d at 857–58. Similarly, we did not find a good-faith

belief that the report made in Needham was made to an appropriate law-enforcement authority when

the plaintiff there believed it would be forwarded to another entity that could prosecute the alleged

violation. 82 S.W.3d at 321. Because these arguments are directly analogous to those Okoli makes

in this case, we again hold that a departmental process that channels reports of wrongdoing to

appropriate law-enforcement authorities does not make every report one that is “to an appropriate

law[-]enforcement authority.” See TEX . GOV ’T CODE § 554.002(b) (emphasis added).

The fact that the OIG is an internal division of TDHS does not change the analysis. There is

no reason why a TDHS supervisor is any more likely to pass on a report to OIG than the university

administrators in Gentilello were to pass on reports of violations of federal law to federal authorities,

or the administrators in Barth were to pass on reports of state-law offenses to the police.

In so holding, however, we decline, as we did in Gentilello, to say that no internal report

could ever merit protection under the Act. See 398 S.W.3d at 686. In Gentilello, we posited this

hypothetical:

We do not hold that a Whistleblower Act report can never be made internally. A police department employee could retain the protections of the Whistleblower Act if she reported that her partner is dealing narcotics to her supervisor in the narcotics or internal affairs division. In such a situation, the employee works for an entity with authority to investigate violations of drug laws committed by the citizenry at large. UTSW concedes in its briefing that “some Whistleblower Act reports may be made internally—for instance, a report of a violation of the Texas Penal Code to a supervisor who is also a policeman and, as such, is authorized to investigate violations of criminal law.” But here, as in Needham and Lueck, the supervisor lacked any such power to enforce the law allegedly violated or to investigate or prosecute criminal violations against third parties generally.

Id. (emphasis in original).

10 The whistleblower in the Gentilello hypothetical is reporting a violation of law to a police

officer. Whether a member of the narcotics division or the internal-affairs division, a police officer

is authorized to investigate violations of law and to cite or arrest persons suspected of committing

such violations. Okoli’s supervisors, like the supervisors and administrators in Gentilello, Moreno,

Barth, Needham, and Lueck, have no such authority.

To satisfy the Act’s requirements, a report must be made to (1) an individual person who

possesses the law-enforcement powers specified under the Act, or (2) someone who, like a police-

intake clerk, works for a governmental arm specifically charged with exercising such powers. This

would include someone within an OIG or even an OIG within the same agency as the whistleblower,

so long as the OIG has outward-looking law-enforcement authority. It would not include someone,

like Okoli’s supervisors, who does not work within a governmental arm so charged and would have

to refer the report of wrongdoing to such an arm.

***

Because Okoli neither reported the alleged violations he witnessed to an appropriate law-

enforcement authority nor in good faith could have believed he had, he is not entitled to the

protections of the Whistleblower Act. TEX . GOV ’T CODE § 554.002(a). Therefore, we reverse the

court of appeals’ judgment and dismiss Okoli’s claims for lack of jurisdiction.

_________________________________ Jeffrey V. Brown Justice

OPINION DELIVERED: August 22, 2014