Seventh Circuit Issues Ruling Interpreting False Claim Act Whistleblower Amendments

The Seventh Circuit recently issued a decision interpreting the anti-retaliation provisions of the False Claims Act (FCA).  The decision provides important clarifications about how courts may interpret recent amendments to this provision.  Like a recent decision by the Fourth Circuit, the Seventh Circuit finds that courts may inquire whether the employee’s underlying complaint of FCA fraud was objectively and subjectively reasonable.  Using that standard, the Seventh Circuit affirmed a district court’s dismissal of the whistleblower’s claim on a motion for summary judgment. 

The FCA’s two key liability provisions apply to any person (1) who “knowingly presents . . . to an officer or employee of the United States Government . . . a false or fraudulent claim for payment or approval” or (2) who “knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government.” 31 U.S.C. § 3729(a)(1)-(2).  The FCA’s anti-retaliation provision protects employee conduct “in furtherance of an action under this section or other efforts to stop 1 or more violations of this subchapter.”  Thus, an employee potentially can demonstrate “protected activity” either by showing steps taken (1) in furtherance of an FCA action or (2) to stop a violation of the FCA.

In Uhlig v. Fluor Corporation, the Seventh Circuit addressed when an employee has satisfied his burden of establishing that he engaged in protected activity.  Uhlig – an electrician –claimed the company defrauded the government by failing to follow its alleged contractual obligations regarding the qualifications of electricians performing work in Afghanistan and terminated him for complaining about the alleged breach.

In dismissing Uhlig’s claim, the Seventh Circuit explained that protected activity has both a subjective and objective component. Subjectively, an employee must show that he believed in good faith that the company was committing or had committed fraud on the government.  Objectively, the plaintiff must show that a reasonable employee in the same circumstance would have reasonably believed that the employer was committing or had committed fraud against the government.  Important to this analysis, the Seventh Circuit recognized that the “objective” prong was limited to an analysis of the facts known to the plaintiff at the time of the protected activity.

Applying this standard, the Seventh Circuit upheld the district court’s decision granting summary judgment. Uhlig had failed to satisfy the “objective” prong of the test.  Uhlig claimed that the contract required all electrical work to be performed by licensed journeymen.  However, the contract did not require that licensed electricians perform all electrical work.  At the time Uhlig engaged in protected activity, he had no firsthand knowledge of the contractor’s contractual obligations.  Furthermore, Uhlig’s secondhand knowledge of the contract was not sufficient to support his conclusion.  Thus, Uhlig’s claim that the company violated the contract did not have an objective basis.

This case demonstrates a couple of key points. First, in assessing “protected activity,” courts will evaluate what the purported whistleblower knew at the time of the protected activity.  Thus, information regarding the plaintiff’s actual knowledge can become important.  Second, the case shows courts’ reticence to allow FCA whistleblower claims where the plaintiff’s theory does not at least approximate a legitimate FCA fraud claim.  The substantive doctrines of FCA liability will influence the viability of a protected activity claim.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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