FCA Deeper Dive: FCA Retaliation Claims

by Bass, Berry & Sims PLC
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The FCA provides protections for whistleblowers in connection with their whistleblowing activities.  To establish that an employer retaliated against an employee in violation of 31 U.S.C. § 3730(h), an employee must demonstrate that:

  1. The employee engaged in protected activity.
  2. The employer knew that the employee was engaged in protected activity.
  3. As a result of the above, the employee was discriminated against.

Definition of FCA Retaliation “Protected Activity”

Prior to 2009, “protected activity” was defined as employee conduct “in furtherance of an action under this section, including investigation for, initiation of, testimony for, or assistance in an action filed or to be filed under this section.”

In interpreting this language, many courts have adopted the so-called “distinct possibility” standard, holding that “an employee engages in protected activity when litigation is a distinct possibility, when the conduct reasonably could lead to a viable FCA action, or when . . . litigation is a reasonable possibility.” Eberhardt v. Integrated Design & Const., Inc., 167 F.3d 861, 866 (4th Cir. 1999)   Since the “distinct possibility” standard was adopted, § 3730(h) has been amended on two occasions.  The current definition of “protected activity,” enacted in 2010, covers employee conduct “in furtherance of an action under this section or other efforts to stop 1 or more violations of this subchapter.”  31 U.S.C. § 3730(h)(1).

Examples of Courts Determining FCA “Protected Activity”

Courts have continued to consider the type of conduct that constitutes “protected activity” under the post-2010 FCA’s anti-retaliation provisions at various procedural junctures.

  • For example, in Carlson v. DynCorp International LLC, 2016 WL 4434415 (4th Cir. Aug. 22, 2016), the Fourth Circuit affirmed the dismissal of an FCA complaint for failure to state a claim under the FCA’s anti-retaliation provision. In so doing, the Fourth Circuit “assume[d], without deciding” that the relator’s proposed standard for applying § 3730(h)’s second prong was correct, e., “efforts to stop 1 or more violations” constitute protected activity where those efforts are “motivated by an objectively reasonable belief that the employee’s employer is violating, or soon will violate, the FCA.”In other words, to determine whether a plaintiff has adequately pleaded “protected activity” under the second prong of § 3730(h), the Fourth Circuit asks whether the relator has “allege[d] facts sufficient to show that he believed [his employer] was violating the FCA, that his belief was reasonable, that he took action based on that belief, and that his actions were designed to ‘stop 1 or more violations of’ the FCA[.]”  With respect to the sufficiency of the relator’s allegations, the Fourth Circuit held that the district court properly dismissed the second amended complaint on the ground that the relator “failed to show that his belief that [the defendant employer] was violating the FCA was objectively reasonable.”  Accordingly, the Fourth Circuit deemed the allegations contained in the second amended complaint “entirely speculative[,]” largely due to the relator’s failure “to plausibly allege facts sufficient to show he reasonably believed that” the defendant employer committed a fraud against the government.
  • Similarly, in Fakorede v. Mid-South Heart Center, P.C., 182 F. Supp. 3d 841, 854 (W.D. Tenn. 2016), the district court granted the defendant cardiology clinic’s motion to dismiss on the ground that the relator’s “request for an audit, urgings to comply with the law and challenges relative to attribution of certain expenses to him prior to his termination” were “insufficient, based on caselaw reviewed by the Court, to allege protected activity under [31 U.S.C.] 3730(h).”
  • In Miller v. Abbott Laboratories, 648 Fed.Appx. 555, 555–58 (6th Cir. 2016), the Sixth Circuit affirmed the district court’s grant of summary judgment in favor of Abbott Laboratories (Abbott), in an action alleging that Abbott terminated a sales representative in retaliation for reporting a potential FCA violation. The Sixth Circuit agreed with the district court that the plaintiff “did not present a genuine dispute of material fact whether she engaged in a protected activity” with respect to her FCA retaliation claim, because the plaintiff failed to demonstrate “an objectively reasonable belief that she was acting to stop a violation of the FCA[.]”  Notably, the plaintiff’s allegations regarding the alleged FCA violation failed as a matter of law, because the plaintiff acknowledged that a customer of Abbott “would not be induced by [an] offer of $50 to implement a protocol recommending Abbott’s products[.]”
  • The Seventh Circuit likewise affirmed a district court’s grant of summary judgment in favor of the defendant employer and related entities in U.S. ex rel. Uhlig v. Fluor Corporation, 839 F.3d 628 (7th Cir. 2016). With respect to the relator’s allegations, the Seventh Circuit found no false statements were made under the FCA, because the relator failed to demonstrate that the defendant employer breached its contract with the government.
  • In U.S. ex rel. Johnson v. Kaner Medical Group, 641 Fed.Appx. 391 (5th Cir. 2016), the Fifth Circuit affirmed the district court’s grant of summary judgment in favor of the defendant employer, Kaner Medical Group. Notably, the Fifth Circuit found that “none of . . . [the] arguments raise[d] a genuine dispute of material fact that KMG acted with the requisite mental state required under the” FCA.  Based upon a review of the record, the Fifth Circuit characterized the defendant’s billing practices “negligent,” and therefore, insufficient to meet “the requisite scienter—actual knowledge, deliberate ignorance, or reckless disregard—in submitting reimbursement claims to Medicare and TRICARE[.]”
  • In contrast, in U.S. ex rel. Miller v. Weston Educational, Inc., 840 F.3d 494 (8th Cir. 2016), the Eighth Circuit found that sufficient factual issues precluded a grant of summary judgment in favor of the defendant employer.  The plaintiffs had alleged that Heritage College fraudulently induced the Department of Education “to provide funds by falsely promising to keep accurate student records.” The Eighth Circuit found that the district court erred in granting summary judgment in favor of Heritage with respect to the plaintiffs’ FCA claim on the ground that the plaintiffs raised material issues of fact regarding “how Heritage understood its obligations and whether it intended to comply with the” program participation agreement with the DOE.
  • In Ickes v. Nexcare Health System, L.L.C., 178 F.Supp.3d 578, 596 (E.D. Mich. 2016), the district court partially denied the defendant nursing facility’s motion for summary judgment upon finding that the plaintiff “made a prima facie showing that but for her continued reporting of an alleged violation, she would not have been fired.” Similarly, the district court in U.S. ex rel. Lindersmith v. John Muir Health, 2016 WL 3540954, at *12–13 (N.D. Cal. June 29, 2016), found that the plaintiff’s claims survived the defendant’s motion for summary judgment due to contested issues of fact regarding “whether plaintiff’s difficulties with communication and physician/employee relations issues also related to or stemmed from her unpopular efforts to force [the defendant employer] to investigate and address the alleged fraudulent Medicare billing practices.”

Damages for FCA Retaliatory Acts

A district court decision in U.S. ex rel. Mooney v. Americare, Inc., 2016 WL 1237385 (E.D.N.Y. Mar. 28, 2016) provided clarity as to the proper method of calculating damages for retaliatory acts under the FCA.  Tasked with interpreting the back-pay doubling provision pursuant to  § 3730(h), the district court noted an “inherent tension” in the statutory language, which provides that the victim of unlawful retaliation is to be made “whole” while also receiving an award of double back pay.  The district court found that “doubling damages prior to subtracting mitigation” applied to § 3730(h) because “an employee retaliated against is best made whole by recovering 2 times the amount of back pay” under that statute.  The district court explained that an award of double damages prevented some defendants from: (1) “benefitting from the fortuitous event of their victim finding other employment”; and (2) “avoiding the double-damages provision by tendering the undoubled amount in mitigation prior to judgment.”  Based upon that construction of § 3730(h), the district court held that the relator’s back pay damages would be “doubled prior to subtracting any mitigation.”

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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