United States of America v. Porifera Inc

Background

Joseph Mendelssohn filed a sealed whistleblower lawsuit in February 2019 under the federal False Claims Act. The United States did not join the case, and it was later unsealed. Mendelssohn worked for Porifera from 2011 until the company terminated him in 2018. He was Porifera’s Vice President of Business Development and Administration, helped with bookkeeping, and submitted invoices for state and federal government projects.

Mendelssohn claimed that Porifera’s chief executive, Olgica Bakajin, directed senior managers in May 2018 to charge time to a California Energy Commission project called the “Recycler,” including time employees had actually spent on other projects. He said Bakajin asked him to change his March and April 2018 timesheets, and he did so because he felt his job was at risk. Mendelssohn later reviewed timesheets, questioned employees and the company Controller about the billing practices, and refused to sign invoices that he believed did not accurately reflect the work performed. He said Bakajin then terminated him, citing “issues of trust” and a breakdown of trust.

Mendelssohn asserted claims for retaliation under the federal False Claims Act and California False Claims Act, whistleblower retaliation under California Labor Code section 1102.5, and wrongful termination in violation of public policy. Porifera contended that Mendelssohn’s performance had declined and that the company fired him because of a dispute over his salary. Porifera also argued that Mendelssohn had not engaged in legally protected activity and that the company was unaware of such activity.

Evidence objections

Porifera objected to evidence Mendelssohn offered in opposing summary judgment, including evidence about whether timesheet changes were fraudulent and accounts of conversations with other employees. The court explained that at the summary-judgment stage, evidence may be considered if its contents could be presented in an admissible form at trial, such as through live testimony. Because the record suggested that the employees could testify about their conversations and timesheets, Judge Gilliam overruled Porifera’s objections at that time. The court stated that Porifera could renew objections at trial if authentication or hearsay problems could not be corrected.

Summary-judgment ruling

Summary judgment is allowed only when the record shows no genuine dispute about a fact that could affect the result and the moving party is entitled to judgment under the law. The court must view reasonable inferences in favor of the party opposing the motion and may not weigh evidence or decide witness credibility at this stage.

For the federal and California False Claims Act retaliation claims, the court identified the relevant questions as whether Mendelssohn engaged in protected activity, whether Porifera knew about it, and whether Porifera took adverse action because of it. For the California Labor Code claim, the questions were whether he engaged in protected activity, suffered an adverse employment action, and showed a causal connection between the two.

The court found enough evidence for a reasonable factfinder to conclude that Mendelssohn investigated and objected to possible fraudulent billing on government contracts, that Porifera knew about those activities, and that Porifera fired him because of them. The court noted that the law does not require an employee to use specific words such as “fraud” or “illegality.” It also rejected, at this stage, Porifera’s argument that Mendelssohn’s ordinary job duties necessarily meant that his investigation was not protected activity. The court acknowledged that the evidence was not overwhelming but found at least one genuine dispute of material fact that prevented summary judgment on the retaliation claims.

The court applied the same conclusion to Mendelssohn’s wrongful-termination claim because that claim also depended on evidence that he was fired for complaining about potentially false billing practices.

Disposition

Judge Gilliam denied Porifera’s motion for summary judgment. The court also overruled Porifera’s evidentiary objections at that time and directed the parties to meet and file a joint status report about whether a settlement conference would be useful. The opinion stated that the scheduled pretrial conference and trial dates remained in effect.