Seventh Circuit Rejects Constructive Knowledge As Basis For FCA Retaliation Claim

In Halasa v. ITT Educational Services, Inc., No. 11-3305 (8/14/12), the Seventh Circuit affirmed the dismissal of the plaintiff’s FCA retaliation claim, finding that he had failed to present an issue of material fact that he was fired “because of” actions protected under the FCA. The undisputed evidence showed that the individuals who made the decision to terminate Halasa’s employment were unaware of his protected conduct. Halasa argued the Seventh Circuit should nevertheless “find causation as a matter of law,” imputing to ITT and its agents any knowledge of the ITT employee to whom Halasa did report potential violations.

The Seventh Circuit rejected this argument, which it said “seriously misunderstands the way liability rules work in the corporate setting.” “Apart from narrow exceptions like the one that has come to be called the ‘cat’s paw’ theory,” the court concluded, “companies are not liable under the False Claims Act for every scrap of information that someone in or outside the chain or responsibility might have.”