Fourth Circuit Clarifies Legal Standard for a FCA Retaliation Claim

While there generally has been no question that the False Claims Act protects employees who suffer retaliation because of reporting suspected fraud by their employer, the Fourth Circuit recently made clear that the FCA whistleblower provisions protect disclosures that could lead to any viable FCA action regardless of whether the target is the employer of the whistleblower.   O’Hara v. NIKA Technologies, Inc., No. 16-1805, _ F.3d. _, 2017 WL 6542675 (4th Cir. Dec. 22, 2017).  This decision raises the bar for employers who learn of employees’ concerns about third-parties allegedly committing fraud on the government in the event the company takes subsequent adverse employment action against the so-called whistleblower.

In O’Hara, an employee sued his former employer, NIKA Technologies, Inc. (NIKA), based on his claim that he was fired for disclosing fraud against the government by another company.  More specifically, the National Institute of Standards and Technology (NIST), an agency in the Department of Commerce, awarded NIKA a contract to provide design and cost-estimating services on a project.  NIST also hired another company, Northern Taiga Ventures, Inc. (NTVI) to perform construction work.  NIKA hired the plaintiff, O’Hara, as a senior cost estimator for the project.  During the course of his employment, O’Hara twice reported to a NIST manager and the Office of Inspector General (OIG) that NTVI had submitted misleading and inaccurate documents to the government (and the briefs make clear that O’Hara similarly raised his concerns with NIKA).  NIST later solicited a “Request for Proposal” (RFP) from NTVI for a protective concrete slab related to the project that O’Hara told the NIST manager was a fraudulent proposal “because the slab was unnecessary.”  The NIST manager disagreed with O’Hara, and the government did not charge NTVI with any misconduct.

NIKA subsequently fired O’Hara for failing to complete cost estimates in a timely manner, and O’Hara thereafter sued his former employer NIKA alleging that it had retaliated against him for reporting NTVI’s fraud, in violation of the FCA’s whistleblower protection provisions.  The district court granted summary judgment in favor of NIKA, reasoning that the FCA “only protects a whistleblower from negative employment action when his employer had reason to know that the whistleblower was contemplating an FCA action against the employer.”  The district court concluded that NIKA only had reason to believe that O’Hara was contemplating an action against NTVI, and thus the FCA did not offer any protection for his claimed retaliation.

Disagreeing with the district court, the Fourth Circuit held that “the plain language of § 3730(h) protects disclosures in furtherance of a viable FCA action against any person or company.”  What matters is “the type of conduct that the whistleblower discloses—i.e., a violation of the FCA—rather than the whistleblower’s relationship to the subject of his disclosures.”  Therefore, the FCA prohibited NIKA from retaliating against O’Hara based on his disclosures involving NTVI, assuming, of course, O’Hara’s disclosures otherwise amounted to protected activity under § 3730.

The Fourth Circuit, however, reasoned that O’Hara’s disclosures did not otherwise qualify as “protected activity” because he “did not disclose any conduct that could have led to a viable FCA action.”  The Court rejected O’Hara’s allegation that NTVI’s bid for a protective concrete slab was for “unnecessary” work because “it [was] undisputed that the government directed NTVI to submit the bid in question,” finding NTVI cannot be “liable for defrauding the government by following the government’s explicit directions.” (internal quotation marks omitted). The Court further concluded that O’Hara’s allegations that NTVI submitted inaccurate reports to the government failed to establish a viable FCA claim because those allegations were conclusory and did not present triable issues.

Other district courts have addressed situations where the alleged retaliation was based on whistleblowing about FCA violations by an entity other than the whistleblower’s employer. See Cestra v. Mylan Inc., et al., No. 14-825, 2015 U.S. Dist. LEXIS 67069 (W.D. Penn. May 22, 2015) (holding that an employer could be liable under the FCA’s retaliation provision for adverse action taken against an employee based on his whistleblowing against a previous employer) (discussed here). O’Hara appears to be the first circuit to weigh in on the issue.

A copy of the court’s opinion can be found here.