Helping Government Investigate Alleged “Fraud” Is Insufficient To Support Retaliation Claim

By on December 10, 2015
Posted In Retaliation

Retaliation claims under the False Claims Act (FCA) by purported whistleblowers are a dime a dozen. Sometimes, they are coupled with claims for FCA violations.  Other times, retaliation claims are brought by themselves. But no matter how these claims appear, given that whistleblowers are oftentimes disgruntled former employees of a defendant, keeping tight limits on when a retaliation claim can be brought under the FCA is crucial, as one district court implicitly recognized on Tuesday.

The U.S. District Court for the Eastern District of Tennessee dismissed a retaliation claim under the FCA in an order dated December 8, 2015, in Verble v. Morgan Stanley Smith Barney, LLC. The claim was brought alongside other retaliation claims under Sarbanes-Oxley and Dodd-Frank. The court held that the plaintiff’s pleading was deficient under the FCA’s retaliation statute, 31 U.S.C. § 3730(h), which requires that to state a claim for retaliatory discharge, the plaintiff must have been terminated either (1) because of lawful acts done … in furtherance of and FCA action, or (2) because of efforts to stop an FCA violation.

The plaintiff’s claim in Verble was based on the latter of the two theories. The court roundly rejected the plaintiff’s claim, holding that “[t]o constitute an effort to stop a specific (or potential) violation of the FCA, an employee’s conduct must be aimed at stopping specific fraudulent claims against the government.” (emphasis added).

The plaintiff failed to satisfy this standard. The plaintiff’s complaint alleged that he observed fraud upon the United States, and assisted federal authorities with respect to investigating purported fraud perpetrated on the United States. However, the court held that not only were plaintiff’s allegations wholly conclusory and without underlying, specific factual support, whatever specific factual allegations the plaintiff did offer concerned purported fraud on parties other than the government. The court did not provide leave to amend.

Laura McLane
Laura McLane serves as head of McDermott's Boston Litigation Practice Group. Laura represents national and international clients in health care, securities and other government enforcement matters, both civil and criminal. She also represents clients in professional and products liability cases and in complex commercial disputes. A significant part of Laura's practice is devoted to representing health care and other companies, as well as individuals, in government investigations and qui tam litigation based on the False Claims Act (FCA) and related statutes, including the Anti-Kickback Statute and the Stark Law. Read Laura McLane's full bio.