Two recent decisions by district courts illustrate some of the issues that continue to arise in claims under Sec. 3730(h) of the False Claims Act (“FCA”), for retaliatory conduct against those who report or might report false claims.
Terminating an Employee Based on the Fear of FCA Claims Can Support a Retaliation Claim
In Hull v. Restore Management Co., LLC, 2017 WL 2797141, (N.D.Ala. June 28, 2017), the court made clear that retaliation claims do not need to be pled with particularity, but must only meet the usual standards for federal pleading under Fed. R. Civ. P. 8(a) — “a short and plain statement of the claim showing that [the pleader] is entitled to relief.” This is a significant point for whistleblowers because substantive fraud claims under the FCA have to meet a more demanding standard by pleading the circumstances of fraud with “particularity.”
Additionally, the court evaluated plaintiff’s allegations that she had complained about the allegedly illegal conduct by her employer, convened an internal team to investigate her concerns, been directed to terminate the employees who worked on that team, and been instructed to delete all emails concerning the suspected conduct. Based on this pattern, plaintiff claimed that she was terminated as a result of her investigation and internal reporting. The court held those allegations were sufficient to plead a claim that her employer feared the possibility of a qui tam action and discharged plaintiff as a result.
This decision seems to be in line with the 2009 amendments to the FCA that broadened the reach of the anti-retaliation provisions:
“This language is intended to make clear that this subsection protects not only steps taken in furtherance of a potential or actual qui tam action, but also steps taken to remedy the misconduct through methods such as internal reporting to a supervisor or company compliance department and refusals to participate in the misconduct that leads to the false claims, whether or not such steps are clearly in furtherance of a potential or actual qui tam action.”
See Fraud Enforcement And Recovery Act Of 2009, Speech Of Hon. Howard L. Berman Of California In The House Of Representatives, Monday, May 18, 2009, Congressional Record.
Other courts have reached similar conclusions: “It should be noted that an employee does not need to have necessarily filed a qui tam action in order to have engaged in protected activity.” Eberhardt v. Integrated Design & Constr., Inc., 167 F.3d 861, 867 (4th Cir.1999).
The language of 31 U.S.C. § 3730(h) “manifests Congress’ intent to protect employees while they are collecting information about a possible fraud, before they have put all the pieces of the puzzle together.” United States ex rel. Yesudian v. Howard Univ., 153 F.3d 731, 740 (D.C.Cir.1998
Individuals Accused of Retaliatory Conduct Cannot Be Sued Under the FCA If They Are Not Actual Employers
Turning from the whistleblowers to the employers, the U.S. District Court for the Eastern District of New York dismissed a retaliation case against the individual owners of an ophthalmology practice where the plaintiff had been employed.
In McKoy v. Uliss, 2017 WL 2963456 (E.D.N.Y. July 11, 2017), plaintiff alleged that she had been fired in retaliation for her complaints against defendants’ allegedly unlawful billing practices. The court rejected plaintiff’s argument that because the named individuals owned and controlled the practice and hired, supervised, and fired her, they qualified as her employer. Although her claims against the practice itself were sustained, the claims against the individual defendants were dismissed based on the court’s statutory interpretation of the FCA.
The question arose in part from the 2009 amendments to Section 3730, which eliminated the word “employer” from the anti-retaliation provision. The majority of courts, however, like the court in Uliss, have found themselves “not convinced that when Congress deleted the word employer from the statute Congress was expressing its intent to dramatically widen the scope of potential defendants in retaliation claims filed under the FCA.” Aryai v. Forfeiture Support Assocs., 25 F. Supp. 3d 376, 387 (S.D.N.Y. 2012) (“[S]ection 3730(h) does not provide a cause of action against individual defendants….”). See also Monsour v. N.Y. State Office for People with Developmental Disabilities, 2014 WL 975604, at *10 (N.D.N.Y. March 12, 2014) (“[A]n individual may not be sued under § 3730(h) or Section 191, either in an individual or official capacity; liability may only be imposed on employers.”); Fisch v. New Heights Acad. Charter Sch., 2012 WL 4049959, at *4 (S.D.N.Y. Sept. 13, 2012) (“Section 3730(h) imposes liability only on employers.”). But see U.S. ex rel. Moore v. Community Health Services, Inc., 2012 WL 1069474, at *9 (D. Conn. Mar. 29, 2012) (“The current Section 3730(h) following the 2009 amendments, however, conspicuously omits the word “employer.” Therefore, [plaintiff’s] allegations … regarding post-May 2009 conduct, primarily her termination, do give rise to a retaliation claim against these Defendants.”) The Uliss court also noted that “where Congress intended to impose individual liability, it used the phrase ‘it shall be unlawful for any person’.” McKoy v. Uliss, 2017 WL 2963456, at *3.
Further, the Uliss court found that imposing personal, individual liability on persons who have incorporated their practices or businesses would frustrate the purpose of incorporation – to avoid individual liability. Id. at *4.
Given the heavy line-up of courts that have refused to hold individuals personally liable under the False Claims Act, it would appear that any change in that position will need to come from Congress.