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Costello v. Office of Special Counsel

July 16, 1999


Before Plager, Circuit Judge, Friedman, Senior Circuit Judge, and Schall, Circuit Judge.

The opinion of the court was delivered by: Friedman, Senior Circuit Judge.

Peter B. Broida, of Arlington, Virginia, argued for the petitioner. Todd M. Hughes, Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, argued for the respondent. With him on the brief were David M. Cohen, Director, and Kirk T. Manhardt, Assistant Director. Of counsel on the brief were Elaine Kaplan, Special Counsel, William E. Reukauf, Bruce D. Fong, and Joseph E. Siegelman, Attorneys, U.S. Office of Special Counsel, of Washington, DC. Stephanie M. Conley, Attorney, Office of the General Counsel, Merit Systems Protection Board, of Washington, DC, argued for the intervenor. With her on the brief were Mary L. Jennings, General Counsel and Martha B. Schneider, Assistant General Counsel.

Appealed from: Merit Systems Protection Board United States Court of Appeals for the Federal Circuit



(reformed caption)

This appeal challenges the decision of the Merit Systems Protection Board (Board) that the appellant Michael Costello violated the Whistleblower Protection Act by transferring a subordinate employee (and refusing to transfer him to a location he preferred) in retaliation for the employee's disclosure of his supervisor's misconduct. We reverse.


The underlying facts are largely undisputed. The following statement is based upon the facts found by the Board's administrative law Judge and by the Board, and facts in the record.

A. At the time of the events in this case, the Inspector General's Office of the Department of Veterans Affairs (Department) had a field office in Los Angeles and a regional office in Seattle, Washington, which was subordinate to the Los Angeles office. James Steen was a special agent in the Seattle office, and George Strehle was the special agent in charge of the Los Angeles office. Strehle supervised Steen and the other agents in the Seattle office.

In 1989, apparently because of complaints about Strehle from the Seattle agents, James Cole, another agent with the Inspector General's office, investigated employee morale in the Seattle office. In January 1990, Cole interviewed Steen who, under a promise of confidentiality, alleged that Strehle (1) used profanity regularly, a violation of the Department code of conduct, and (2) abused his authority by harassing and intimidating employees.

Cole submitted a written report, concluding that the accusations made by Steen (and the other Seattle agents) were true. The Department took no action, however, and in April 1990 so informed Steen and the other Seattle agents.

B. In August of 1990, Stephen Trodden was appointed the new Inspector General. In November, the appellant Costello was hired as the Assistant Inspector General for Investigations. Costello was based in Washington, D.C.

In January, 1991, Costello received a letter from Steen and the other Seattle agents asserting that "the Seattle office is now a victim of micromanagement and retaliation" from Strehle. The letter, which summarized the Cole investigation, closed as follows:

"Strehle stated that he knows everything that was said about him [in the Cole report], and he knows who provided that information. Another comment that Strehle has made is that he can take action against us at any time, because we are only human and we make mistakes."

"Strehle has carried through with his threats and initiated retaliatory action against the Seattle staff in various forms. We are now asking that you intervene and redress this matter."

After discussing the Cole investigation with his staff and reviewing the Cole report, Costello met with Strehle and told him about the complaints. Strehle responded that he was often critical of the Seattle Office's performance and that this criticism may have caused the agents' complaints. Costello told Strehle that while he had no problem with hard taskmasters, if Strehle was "a ranting raving lunatic that screams and yells and demeans and curses. . . . I don't tolerate that."

In April 1991, Costello met with the agents in Seattle and discussed their complaints about Strehle. Costello told Steen and the others that he would take action against Strehle for any incidents that occurred after he took office - after November of 1990 - but that he would not take action for anything occurring before that time, including the incidents described in the Cole report. After listening to the agents' complaints about Strehle's alleged retaliation for their cooperation in the Cole investigation, Costello concluded that Steen and the others "didn't provide me with anything that smelled of retaliation, as far as I was concerned. They gave me specifics which you might term micromanagement."

Costello then proposed to mediate the dispute between the Seattle agents and Strehle. He concluded that all the agents except Steen approved the proposal, stating in his meeting notes that "Steen is [the] most disgruntled," but he left the meeting believing that "if the whole office decided to [go for the mediation], Jim Steen would probably come around."

In early May, however, the agents wrote Costello that while they "appreciate[d his] efforts and concern in addressing this matter," they rejected the proposed mediation because "any meeting of this type would only result in Mr. Strehle increasing his retaliation against the staff of the Seattle office."

C. In January 1992, Peter Baci and Walter Burleson, both with the Washington, D.C. Inspector General's staff, performed an annual review of the Los Angeles and Seattle offices (and of the other field offices). Their report - a draft of which Costello received by March 22 1992, and which was released a month later - concluded that the Seattle Office was overstaffed and the Los Angeles office understaffed. It recommended "that two [Seattle] positions, the GM-13 [Steen's position] and the recently vacated secretarial position, be reassigned to Los Angeles."

Five days after receiving the draft, Costello wrote Steen "to advise [him] that [he was] transferred from the Seattle Resident Agency to the Los Angeles Field Office," effective June 30, 1992. In the letter, Costello informed Steen of the Conclusions and recommendations of the Baci and Burleson report and told Steen that he was chosen for reassignment because his "position [was] listed as one designated as a reassignment position."

Steen called Jon Wooditch, Inspector General Trodden's executive assistant, and complained that if thus transferred, he would be subject to retaliation from Strehle. Wooditch informed Trodden, who suggested that a location other than Los Angeles be found for Steen, because Steen "could be considered a whistle-blower." Wooditch instructed Costello to do so and Costello found only one other vacancy at ...

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