In a recent False Claims Act (“FCA”) case interpreting amendments to the FCA’s anti-retaliation provision, the Fourth Circuit Court of Appeals held that an employee who alleges that he or she was terminated for trying to stop an employer from violating the FCA must demonstrate that his or her efforts were based upon an objectively and subjectively reasonable belief that an FCA violation had occurred.
The FCA has long provided an anti-retaliation provision for the protection of whistleblowers. This provision entitles an employee to relief where “lawful acts done by the employee” in furtherance of an action brought under the FCA, or the employee’s “efforts to stop 1 or more violations” of the FCA, result in retaliatory conduct by the employer. Thus, in order to survive a motion to dismiss, an employee-whistleblower must demonstrate that: (1) he or she engaged in a protected activity; (2) the employer knew about the activity; and (3) the employer retaliated against the employee in response to undertaking the protected activity. Importantly, the “other efforts to stop 1 or more violations” clause was added after amendments to the FCA in 2009 and 2010.
The Fourth Circuit interpreted the anti-retaliation provision amendments as establishing two kinds of “protected activity”: (1) “that which supports an FCA action against the employer alleging a fraud on the government (whether brought by the government itself or in a qui tam suit on the government’s behalf);” and (2) “that which is part of an effort to stop an FCA violation.” In the case before it, the employee-whistleblower, filed a retaliation suit under the FCA alleging that his employer, DynCorp, fired him for continually raising issues pertaining to the way in which DynCorp reported its overhead costs to the government.
The district court dismissed the complaint for failure to state a claim, noting that the plaintiff’s claims only showed that DynCorp under-billed the government, and that under-billing did not amount to an FCA violation. In reaching this conclusion, the district court applied the Fourth Circuit’s pre-2009 standard, stating that in a viable FCA anti-retaliation, “a plaintiff must be investigating matters that reasonably could lead to a viable FCA action.”
Although the Fourth Circuit ultimately upheld the district court’s dismissal, the appellate court agreed with the plaintiff that, due to the 2009 and 2010 amendments to the anti-retaliation provision, the district court had applied an out-of-date standard. Because the plaintiff had brought his suit under the second prong of the anti-retaliation provision (i.e., for his “efforts to stop 1 or more violations” of the FCA), the Fourth Circuit stated that the relevant inquiries were “does [the employee] allege facts sufficient to show that he believed [the 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.”
The Fourth Circuit held that, because the plaintiff’s suit still amounted to a claim that DynCorp was under-billing the government even under the new standard, the plaintiff failed to show that his belief of an FCA violation was objectively reasonable. The appellate court’s ruling establishes a new standard by which to evaluate certain anti-retaliation claims brought under the FCA. Although this holding applies only in courts within the Fourth Circuit’s jurisdiction, the case may provide persuasive authority for other federal courts interpreting the anti-retaliation amendments. The case is Carlson v. DynCorp Int’l, LLC, No 14-1281 (4th Cir. Aug. 22, 2016).
The attorneys at Chilivis Grubman represent companies of all types and sizes in connection with FCA litigation, as well as employment-related litigation, including suits brought under the FCA’s anti-retaliation provision. For any questions, or if we can assist you in connection with such a matter, please contact us at (404) 262-6505 or sgrubman@cglawfirm.com.