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Fifth Circuit Holds FCA Amendment Does Not Expand Retaliation Liability beyond Employers

The Fifth Circuit Court of Appeals recently affirmed a district court’s dismissal of a retaliation claim under the False Claims Act (FCA) as to several individual defendants.

In Howell v. Town of Ball, a Ball, Louisiana police officer, Howell, sued the town and several town officials for employment retaliation in violation of the FCA (among other claims).  The officials moved to dismiss, arguing that the FCA creates a cause of action only against a plaintiff’s employer.  The district court agreed, citing the subsection of the FCA that creates a cause of action for those “discriminated against in the terms and conditions of employment . . .”  31 U.S.C. § 3730(h) (emphasis added).

On appeal, Howell argued that a 2009 amendment to the FCA (which removed the reference to “employer” in § 3730(h)) “indicate[d] a legislative intent to broaden the class of viable defendants.” In a July 1 decision, a three-judge panel of the Fifth Circuit disagreed with Howell, holding that “the reference to an ‘employer’ was deleted to account for the broadening of the class of FCA plaintiffs to include ‘contractors’ and ‘agents,’ not to provide liability for individual, non-employer defendants.”

In sum, FCA plaintiffs can only bring retaliation actions against their actual employers, notwithstanding the role that other non-employer individuals may have had in allegedly retaliatory activity.

Fourth Circuit Affirms Dismissal of Ex-Employee’s Retaliation Suit

On August 22, 2016, the US Court of Appeals for the Fourth Circuit issued a decision in Carlson v. DynCorp International LLC, affirming the district court’s dismissal of an ex-employee’s retaliation suit under the False Claims Act’s (FCA) anti-retaliation provision, 31 U.S.C. § 3730(h).  While the Fourth Circuit concluded that the district court applied a standard “rendered erroneous by recent amendments to the statute,” the court nonetheless affirmed the district court’s decision dismissing the case.

Scott Carlson (Carlson) was employed by private military contractor DynCorp International LLC (DynCorp).  Because DynCorp had substantial government contracts, it was subject to certain accounting and billing standards dictated by the Office of Federal Procurement Policy.  Carlson alleged that DynCorp engaged in improper billing practices on existing government contracts, including one with the US Agency for International Development (USAID), by hiding indirect and overhead costs in an unbillable code.  Carlson further alleged that DynCorp fraudulently obtained a new contract from USAID because DynCorp’s bid on the new contract contained a false certification that DynCorp was complying with the accounting and billing standards of the Office of Federal Procurement Policy.  Carlson claims that after raising the issue with management, DynCorp terminated him.  Carlson filed his FCA suit for retaliatory termination in the Eastern District of Virginia.  The district court dismissed Carlson’s case with prejudice for failure to state a claim. (more…)

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

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.