Jottings By An Employer's Lawyer

Monday, November 29, 2004

Qui Tam Action Dismissed, But Whistleblowing Claim Survives

The False Claims Act allows an individual to bring a claim against a company alleging that it has made a false statement to get paid by the government. The government can, but is not required to intervene. Since the successful plaintiff can have a substantial percentage of a multi-million dollar award, these can be high stake claims.

The FCA also provides protection against retaliation for an employee because of lawful acts "in furtherance of an action under this section." Like a case where an employer prevails on the substantive discrimination claim, but loses on retaliation, in Williams v. Martin-Baker Aircraft Company, Ltd. (D.C. Cir. 11/26/04) [pdf], the company/employer successfully defeated the qui tam action, but not the whistle blower claim which is remanded to the district court.

Initially, the district court had dismissed both the qui tam action and the whistleblower claim. Finding the qui tam complaint to be both "‘‘simultaneously excessively prolix and equally abstruse,’’ both courts found it failed to meet the heightened pleading requirement for fraud. The district court had also dismissed the whistle blower claim finding that the employee was terminated 18 months before he filed the claim. On appeal, the employer did not seek affirmation on that basis, a wise decision according to the Court because of its prior holding that actions in furtherance of a cause, will often include actions prior to filing suit.

Instead, the employer argued based on a separate line of cases that since the employee did no more than what his job required him to do (in this case reporting errors in pricing data being given to the government) it could not have been on notice that he was engaged in protected activity. While agreeing in principal with the argument, the Court found it inapplicable here holding:

By the same logic, however, when an employee acts outside his normal job responsibilities or alerts a party outside the usual chain of command, such action may suffice to notify the employer that the employee is engaging in protected activity. See Ramseyer, 90 F.3d at 1522-23 (holding that plaintiff failed to satisfy notice prong where plaintiff communicated information about noncompliance to her superiors, but ‘‘gave no suggestion that she was going to report such noncompliance to government officials’’); Neal v. Honeywell Inc., 33 F.3d 860, 861, 864 (7th Cir. 1994) (upholding whistleblower claim where plaintiff told employer’s legal counsel about fraud and counsel informed the government). Williams’s advice to NAVAIR ‘‘to continue to challenge’’ Teledyne’s cost or pricing data—Count III’s sole allegation of protected activity—represents just this type of action. Instead of merely reporting his concerns about Teledyne up Martin-Baker’s management chain, Williams went outside the company and alerted the government—the victim of any FCA violation. Indeed, Williams went well beyond Yesudian’s requirements for employees whose normal job functions include auditing responsibilities. Yesudian makes clear that such an employee need not ‘‘announce he ha[d] gone outside the institution,’’ 153 F.3d at 743, but Williams did precisely that.

So no big payoff from the qui tam action, but the whistle blower claim survives, at least for now.

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