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E.D. Virginia Allows FCA Whistleblower Retaliation Claim To Proceed

Background.  Plaintiff worked with the Senior Advisor for Veteran Employment for the Department of Veteran Affairs (“Senior Advisor”) to develop an online veterans’ employment assistance program.  The Senior Advisor’s husband had a company that sold software to help veterans transition to new careers.  In 2014, certain incidents allegedly caused Plaintiff to become concerned regarding the alleged overlap between the Senior Advisor’s husband’s software and the Senior Advisor’s employment program initiative.  Plaintiff sent an e-mail to the Deputy City Manager expressing his concern and subsequently e-mailed the Senior Advisor to ask whether her husband was associated with employment assistance program’s operations.  The next week, Plaintiff’s employment was terminated by the City Manager, who allegedly stated that “[t]his is just not a good fit.”

Procedural History.  On November 23, 2016, Plaintiff filed a complaint against the City of Norfolk, Virginia, the City Manager, and Interim City Manager for, among other things, whistleblower retaliation in violation of the False Claims Act (“FCA”).  He alleged that he was discharged for investigating a potential FCA claim—i.e., that the Senior Advisor’s husband was pursuing a business relationship with the City that would result in inappropriate financial benefit to the Senior Advisor.

Ruling.  Defendants moved to dismiss, arguing that Plaintiff failed to engage in protected activity because Defendants themselves did not engage in any acts that potentially violated the FCA, there was no pending “claim” for government money (since the City of Norfolk had not yet contracted with the Senior Advisor’s husband), and there was no “false or fraudulent conduct”—only speculation that such conduct may occur in the future.  Plaintiff responded that Defendants did not have to commit any fraud themselves to be liable for retaliation under the FCA, and that the Senior Advisor’s financial interest in her husband’s software foreseeably tainted her husband’s ability to certify that his software was free from conflicts of interest, which would later result in a claim for government funds.  Denying the motion to dismiss the FCA claim, the court ruled that Defendants themselves did not have to engage in the underlying fraud to be liable for retaliation under the FCA.  The court also found that Plaintiff could have formed a good-faith belief that the Senior Advisor and her husband intended to perpetuate fraud upon the government based on the facts alleged, that such a belief was objectively reasonable, and that Plaintiff acted in furtherance of that belief.  The court also ruled that Plaintiff took reasonable actions to prevent an FCA violation by attempting to investigate the extent of any potential fraud and raising his concerns to government officials.

Implications.  Plaintiffs can be expected to rely on this case for the proposition that an employer need not be involved in the alleged fraud to be liable for a FCA violation and that complaints regarding alleged future fraudulent acts can amount to protected activity under the FCA.

© 2019 Proskauer Rose LLP.

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About this Author

Steven J Pearlman, Labor Employment Law Firm, Proskauer Law firm
Partner

Steven Pearlman is a partner in the Labor & Employment Law Department and co-head of the firm's Whistleblowing & Retaliation Group, resident in the Chicago office. Steven’s practice focuses on defending complex employment litigation involving claims of discrimination and harassment, wage-and-hour laws and breaches of restrictive covenants (e.g., non-competition agreements). He has successfully tried cases to verdict before judges and juries in Illinois, Florida and California, and defended what is reported to be the largest Illinois-only class action in the history of the U.S....

312-962-3545
Elaine Lee, Proskauer Law Firm, Labor and Employment Attorney
Associate

Elaine Lee is an associate in the Labor & Employment Law Department. Her practice focuses on representing and counseling management on all aspects of employment law.

Elaine’s litigation work includes defending employers and supervisors against single-plaintiff claims for unlawful discrimination, harassment, whistleblowing, retaliation, and wrongful termination, as well as class action wage and hour disputes. In addition, Elaine advises clients on compliance with state and federal employment laws and develops company policies ranging from hiring to firing and everything in between. She counsels clients from a wide variety of industries, including telecommunications, entertainment, retail, health care and finance.

Prior to attending law school, Elaine was a Certified Public Accountant and worked at a Big Four accounting firm for four years.

310-284-5694