U.S. OFFICE OF SPECIAL COUNSEL CRITICIZES DECISION FINDING IT LIABLE FOR ATTORNEY FEES IN DISCIPLINARY ACTION CASE

FOR IMMEDIATE RELEASE - 5/15/00
CONTACT: JANE MCFARLAND
(202) 653-7984

    Special Counsel Elaine Kaplan, the head of the United States Office of Special Counsel (OSC), today expressed her “serious concerns” about the impact that a May 9th decision of the Merit Systems Protection Board could have on OSC’s ability to seek the discipline of agency officials who violate the Whistleblower Protection Act. In a 2-1 decision, the Board held that OSC could be held liable to pay attorney fees, even in cases where its decision to prosecute was a reasonable one, if the accused agency officials were ultimately found “substantially innocent” of the charges brought against them. Over a vigorous dissent by now Acting Chairman Beth Slavet, the Board majority further ruled that two supervisors in the Internal Revenue Service (IRS) were “substantially innocent” of retaliation, notwithstanding an earlier finding by an MSPB administrative law judge that their subordinates’ whistleblowing was a contributing factor in four personnel actions the supervisors took against them.

    The case arose when OSC filed a petition for disciplinary action with the MSPB, charging two IRS supervisors with retaliating against subordinate employees who had made allegations to IRS’ Assistant Commissioner for Investigations regarding one of the supervisors’ alleged associations with organized crime figures, use of IRS staff to perform tax research for an acquaintance, acceptance of gratuities from taxpayers, and other alleged financial improprieties. According to OSC’s petition, the supervisors recommended the demotion of one of the whistleblowers and downgraded their performance appraisals in retaliation for these protected disclosures.    

    After a hearing, the then Chief Administrative Law Judge (CALJ) sustained all of OSC’s charges against the supervisors, ordering as penalties that one of the supervisors be fined and the other demoted. The CALJ found that OSC had proven that the whistleblowers’ protected disclosures played a contributing role in the personnel actions the supervisors had taken against them.

    On appeal by the supervisors, the Board reversed the CALJ’s decision. In its decision, the Board changed the legal standard that OSC was required to meet in order to prove retaliation in a disciplinary action case; it held for the first time that OSC must demonstrate that protected disclosures played a significant as opposed to contributory role in a personnel action. A new Chief Administrative Law Judge applied this new heightened burden of proof on remand, and found that the charges could not be sustained. His decision was affirmed in a second appeal.

    Thereafter, the supervisors filed a petition with the CALJ requesting an award reimbursing them for the attorney fees they had incurred in connection with the MSPB proceedings. The CALJ granted the petition over OSC’s objection. He found that—in light of the new standard—the supervisors were “substantially innocent” of the charges OSC had filed against them, and awarded them some $33,000 in attorney fees to be paid by OSC.

    OSC filed a petition for review with the full Board. In its petition, OSC argued that because its decision to prosecute the supervisors was a reasonable one and based upon then-existing law, an award of fees would not be in the interests of justice. In fact, OSC contended, sanctioning an award of fees under these circumstances would be counter to the public interest and contrary to Congressional intent that OSC vigorously enforce the Whistleblower Protection Act by seeking the discipline of supervisors who violate the Act. OSC also argued that, in the alternative, if the supervisors were entitled to be reimbursed for their attorney fees, then their employing agency, the IRS, should be found liable.

    The Board majority rejected OSC’s arguments. It held that OSC, and not IRS should be liable for any award of fees. It further found that—because the supervisors had ultimately prevailed in the case under the Board’s more stringent burden of proof—they were “substantially innocent” of the charges, and reimbursement of their fees would be in the interests of justice.

    Then Vice Chair, now Acting Chairman Slavet dissented. She observed that OSC had presented “direct evidence of retaliatory animus on the part of one of the [supervisors] and circumstantial evidence of retaliation supporting all the charges.” Further, she noted, “the majority opinion simply does not grapple with the fact that the controlling law changed midstream. OSC proved its charges to the satisfaction of the ALJ under the law as it existed when the action was commenced, but lost when the test was revised and made harder to meet in the course of the litigation.” Under these circumstances, then Vice Chair Slavet observed, OSC’s pursuit of the case was reasonable and an award of fees was not in the interests of justice.

    Special Counsel Elaine Kaplan expressed, “alarm at the Board majority’s decision in this case.” “OSC,” she said, “has a statutory mandate to promote the public interest in good government by protecting whistleblowers against retaliation and preventing the commission of prohibited personnel practices. Our disciplinary action authority,” she stated, “is a powerful weapon in our arsenal. But OSC is a small agency with a relatively limited budget. If the MSPB majority’s decision stands, it could effectively take that weapon away and gravely threaten OSC’s ability to deter retaliation against whistleblowers.” Kaplan said, “While OSC would never seek to prosecute an agency manager without possessing a well-founded belief that they had violated the law, the Board’s decision would require us to predict to a certainty that we will prevail. In fact, it requires us to go further, and predict the unpredictable: changes in the law that might affect our original assessment of a case’s merit. This standard, she said, is unworkable and one that we cannot abide.” Special Counsel Kaplan vowed to pursue all possible avenues for obtaining a reversal of the MSPB majority’s decision—both judicial and legislative.  (MSPB Docket Numbers CB-1215-91-0007-A-1 and CB-1215-91-0008-A-1.)

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