Trio of False Claims Act Retaliation Rulings from September

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The False Claims Act (FCA) prohibits employers from retaliating against whistleblowers who report FCA violations. 31 U.S.C. § 3730(h). To plead a claim under this anti-retaliation provision of the FCA, an employee must show the following three elements:

  • The employee engaged in protected activity.
  • The employer knew the employee engaged in protected activity.
  • The employer took an adverse action against the employee as a result of the employee’s protected activity.

Courts state and apply these basic elements slightly differently, and this post examines three rulings from district courts across different circuits at the end of last month.

Vaughn v. Harris County Hospital District

On September 29, the District Court for the Southern District of Texas adopted the memorandum and recommendation of the magistrate judge denying the motion to dismiss a former employee’s retaliation claim, holding he satisfied his pleading requirements.

The public hospital district employed the relator to oversee a contractual program between the public hospitals, an organization of private hospitals, and medical schools. He claimed that he was terminated for raising repeated internal complaints that the program was actually a scheme to divert Medicaid funds for the financial benefit of all three parties via a “three-way trade of cash” involving above fair market value payments from the private hospitals to the medical schools to staff the public hospitals, giving the appearance of donations for indigent care and ultimately leading to higher Medicaid reimbursements for the private hospitals.

The magistrate judge’s August memorandum and recommendation outlined how the relator sufficiently pleaded each of the three elements of his retaliation claim.

  • First, under Fifth Circuit precedent, for internal complaints to constitute protected activity, the complaints must specifically concern false or fraudulent claims for payment, not just concerns about general misconduct. Here, the relator satisfied this requirement by pleading that he sent an email and a letter that specifically cited FCA concerns, as well as two more letters complaining that he had been retaliated against for raising FCA concerns.
  • Second, the court explained that notice of protected activity can include any action that puts the employer on notice that litigation is a reasonable possibility but does not include activity consistent with the employee’s job duties. The relator adequately pleaded this element by alleging that his role in overseeing the program did not involve investigating above-market payments to the medical schools or analyzing FCA compliance, that he made his complaints outside his typical chain of command, and that he characterized his complaints explicitly in terms of fraud on the government.
  • Third, to prove that the employer’s retaliation was motivated by the employee’s protected activity, the relator need only show facts supporting a causal connection at the pleading stage, not but-for causation. Here, the relator alleged a “back-and-forth pattern” of his complaints and adverse employment actions, culminating in his termination. That temporal proximity between his protected activity and the adverse actions was in some instances lacking from his allegations was not fatal when the context was considered as a whole.

U.S. ex rel. Raney v. Amedisys, Inc.

In contrast, the same day, the District Court for the Northern District of Alabama granted the defendant home health providers’ motion to dismiss a former employee’s retaliation claim for failure to state a claim upon which relief can be granted.

The relator, a former administrator at multiple of defendants’ locations, alleged that the defendants fraudulently maximized billing to government programs by falsely representing the type and severity of patients’ medical conditions in order to claim the patients as eligible for home healthcare. After voluntarily dismissing the rest of her FCA claims, the relator pursued her retaliation claim, alleging that the defendants gave her a poor review and then terminated her in retaliation for reporting and trying to rectify and prevent these improper patient evaluations and other misconduct.

Under Eleventh Circuit precedent, to qualify as protected conduct, the relator must show that her complaints of the illegal activity occurred when there was a distinct possibility that she or the government might sue the defendants under the FCA. The district court held that the relator failed to plead this first element of her retaliation claim, reasoning that the defendants could not have feared the relator was contemplating filing a whistleblower lawsuit or reporting them to the government. Although the relator made allegations about a specific patient being certified for home healthcare inappropriately, her complaint did not indicate that she informed her supervisors that this or other incidents were resulting in false claims to Medicare or that they were engaging in illegal activity. In contrast to the relator in Vaughn above, the relator here only reported “general misconduct” and not the submission of false claims.

The district court likewise held that the relator failed to plead her retaliation claim’s second and third elements. For the same reasons described above, the court held she did not allege that her employer knew she believed the company was engaged in fraudulent billing. And, the court held that “mere proximity” between her protestations about the certification of the identified patient and the adverse employment action was not sufficient to plead a claim without alleging more details around what she perceived as pretextual reasons for her termination.

Guilfoile v. Shields Pharmacy, LLC

In this case, also decided on September 29, a former executive brought various claims against affiliated entities and their owner that provide “specialty pharmacy solutions” to hospitals.

Broadly, the plaintiff alleged that he uncovered a kickback scheme under which the defendants were inappropriately compensating a consultant who “introduced” the defendants to hospitals with which they executed contracts. The plaintiff alleged he raised concerns about the arrangement when he was tasked with approving the payments to the consultant and was terminated shortly after that, allegedly to prevent him from disclosing the arrangement. The district court initially dismissed the plaintiff’s FCA retaliation claim, but the First Circuit reversed in part and remanded, holding he had plausibly pleaded that he engaged in protected activity.

Allowing the defendants’ motion for summary judgment on the plaintiff’s FCA retaliation claim, the District Court for the District of Massachusetts held that he failed to prove even the first element of his claim—that he engaged in “conduct that could reasonably lead to an FCA action based on the submission of a false claim.” The district court held that the plaintiff here failed to satisfy his burden for at least three reasons, even though a plaintiff need not know that his actions could specifically lead to an FCA qui tam case:

  • Payments to the consultant could not have led to an FCA action because he did not have the authority to, and did not, refer federal healthcare program business to the defendants.
  • The defendant entities that engaged with the hospitals did not cause any claims to be submitted to the government within the meaning of the FCA; the defendants did not own or operate specialty pharmacies at the hospitals and did not submit claims for the services provided to the hospitals, as their services were not reimbursable.
  • The concerns the plaintiff raised related to conflict of interest and ethics questions, not false claims.

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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