In a case decided last week, the U.S. District Court for the Southern District of Ohio illustrated how Congress increased the scope of the anti-retaliation provision of the False Claims Act, 31 U.S.C. § 3730(h), by amending that provision in 2009. In Jones-McNamara v. Holzer Health Systems, Inc., the court provided helpful guidance for Government contractors in dealing with employees who conduct investigations of possible wrongdoing.
The plaintiff was Holzer Health Systems’ Vice President of Corporate Compliance, and as part of her duties she began an investigation in May 2010 into allegations that employees used certain services in exchange for gifts. The plaintiff contended that such behavior violated the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b), and that by certifying on Medicaid reports that it was in compliance with that statute, the defendant submitted false claims under the False Claims Act (“FCA”). The defendant terminated the plaintiff’s employment on June 30, 2010, and the plaintiff filed an action alleging, among other claims, retaliatory discharge in violation of 31 U.S.C. § 3730(h).
The defendant argued that it was entitled to judgment on the pleadings on the retaliation claim because plaintiff failed to allege any facts indicating that she met the FCA requisites of having acted in furtherance of filing a qui tam action and, instead, alleged only that she was performing her duties as a compliance officer. The defendant cited a 2003 Sixth Circuit case, Yuhasz v. Brush Wellman, Inc., which held that employees charged with investigating potential fraud must make clear their intentions of bringing or assisting in an FCA action in order to overcome the presumption that they are merely acting in accordance with their employment obligations. The plaintiff countered that Yuhasz did not control because it applied to a prior version of the FCA. In May 2009, Congress amended § 3730(h). (Congress again amended that provision in July 2010.) The pre-May 2009 version codified an entitlement to relief for any employee retaliated against for lawful acts done by that employee on behalf of the employee or others in furtherance of an FCA action. The May 2009 amendment codified an entitlement to relief for any employee retaliated against for lawful acts done by that employee in furtherance of other efforts to stop 1 or more FCA violations. The court noted that the amendment made a substantive change by using broader language, basing the right to relief not only on pursuit of a qui tam case, but on any conduct by the employee to stop FCA misconduct.
The court agreed with the plaintiff that the 2009 amendment rendered inapplicable Yuhasz’s requirement that an employer knew that the employee was a whistleblower who pursued, investigated, or otherwise contributed to a qui tam action, and that, instead, the defendant only had to know that she was engaged in efforts to stop an FCA violation. The court concluded that there was factual support for the proposition that the defendant was on notice that the plaintiff was engaged in protected conduct regardless of whether she was considering a qui tam action – she was investigating conduct that related to improper, fraudulent reporting, had sent a memo complaining of conduct she indicated needed to be banned, and had advised that reimbursement checks needed to be sent to the Government. The court therefore denied the defendant’s motion for judgment on the pleadings.
The lesson of Holzer Health Systems is clear. Before taking adverse employment actions against employees involved in investigations of possible wrongdoing, contractors should be very familiar with the amended version of § 3730(h), and appreciate that Congress has expanded the scope of that provision.