Actual False Claim Not Needed For Viable FCA Retaliation Claim?

By David Warner

Last month, a divided U.S. Court of Appeals for the First Circuit ruled that a plaintiff adequately alleges “protected activity” under the False Claims Act’s whistleblower protection provision. This provision is where individuals report concerns related to conduct, that could reasonably lead to a viable FCA action. The First Circuit reversed the lower court’s prior dismissal of the action, which was based in part on the absence of any allegations of a false claim.

The plaintiff in Guilfoile v. Shields was the former executive of a specialty pharmacy service provider Shields Health Solutions. He alleged that he was fired from his job in retaliation for accusing his employer of violating the Anti-Kickback Statute and making false representations in customer contracts. See 31 U.S.C. § 3730(h); 42 U.S.C. § 1320a-7b(b). After successfully leading the growth of the company over two years, in the fall of 2015, Guilfoile became concerned that the company was violating the law. The concerns explicitly related to a contract providing for a $35,000 per quarter “referral fee” to a consulting firm for referring two hospitals to Shields Health Solutions and whether those fees had “improperly induced [the consultant] to steer the hospital contracts to” the defendant.

The plaintiff raised concerns that the fees violated the federal Anti-Kickback Statute insofar as the contracts would result in the company making claims for payment to federal insurance programs. He also raised concerns with contractual representations that the company purportedly operated a 24/7 call center when it did not do so. Shortly after raising these concerns, Guilfoile was terminated without explanation.

The U.S. District Court for the District of Massachusetts dismissed Guilfoile’s FCA retaliation claim on the basis that he had failed to adequately plead that he had engaged in protected conduct, the first element of such a claim under the statute. On appeal, the First Circuit distinguished the pleading standards for qui tam actions from retaliation claims. Specifically, the court noted that while a qui tam suit required facts supporting the existence of an actual false claim, a retaliation suit need only show “conduct that reasonably could lead to a viable FCA action.” The court reasoned that the broader standard was consistent with the legislative intent that “protected activity for purposes of an FCA retaliation claim should … be interpreted broadly.”

Thus, FCA retaliation protection extends beyond actual submission of false claims. Per Guilfoile, even if no false claim has actually been submitted, an employee’s concerns over conduct that could lead to such a violation in the future might still trigger whistleblower protections.

About the Author:

David Warner Partner David Warner is a seasoned legal counselor with extensive experience in the resolution and litigation of complex employment and business disputes. His practice is focused on the government contractor, nonprofit, and hospitality industries. David leads Centre’s audit, investigation, and litigation practices.