The False Claims Act and its qui tam provisions allow whistleblowers to alert the Federal Government to undiscovered fraud and false claims for public money and to file lawsuits to recover these lost funds on the Government’s behalf.1 The Act allows whistleblowers to enhance Government efforts by bringing in lawyers who can investigate the wrongdoing, assist the Government’s own investigative and litigation efforts, and even litigate qui tam cases on behalf of whistleblowers for the ultimate benefit of the Government.2 In return, the whistleblowers are awarded a portion of the recovery.3 Whistleblower-initiated qui tam cases were responsible for over 75% of the Federal Government’s $2.2 billion dollars in civil False Claims Act recoveries in FY 2020.4 It’s no surprise that the False Claims Act is the Government’s primary fraud-fighting tool5 and that amendments to keep the Act strong have met with bipartisan support in Congress.6 The mere existence of the Act is a deterrent, leveling the playing field for honest and fair competition. But whistleblowers often provide this valuable public service at great personal expense.
Blowing the whistle is not an easy road. Employment prospects, industry reputation, and the mental well-being of whistleblowers are all too often unfairly and irrevocably damaged. Providing some measure of protection, the False Claims Act’s anti-retaliation provision affords relief from discrimination against whistleblowers for their efforts to stop False Claims Act violations or for actions taken to further a False Claims Act case.7 When a whistleblower has an actionable retaliation claim, they are entitled to specific remedies, including reinstatement, double back pay, interest on the backpay, compensation for special damages, litigation costs, and reasonable attorney’s fees.8
Enforcement of the Act’s anti-retaliation provision is vital to protecting whistleblowers and compensating them for the harm they endure due to their efforts to protect the public fisc.9 In a pair of recent decisions, federal Courts of Appeals ruled in favor of two such whistleblowers.
In a December 9, 2020 opinion, Lestage v. Coloplast, the First Circuit recognized that actionable retaliation extends to adverse employment actions other than termination.10 Following a five-day trial, a jury found that placing a whistleblower on paid leave after learning of her qui tam suit and then reassigning her to inferior client accounts on her return to work were both adverse actions.11 The jury awarded her over $760,000 in damages.12 The First Circuit affirmed the verdict, ruling that the jury could conclude that both adverse employment actions were made in retaliation for filing a qui tam False Claims Act action.13 The Lestage decision rightfully recognizes that retaliation extends beyond termination, explaining: “an employment action is materially adverse when it would dissuade a reasonable worker from engaging in protected activity.”14 Thus, retaliation that primarily harms an employee’s reputation, career prospects, and mental well-being is properly deemed actionable retaliation.
A few weeks later, the Sixth Circuit ruled in United States ex rel. Dorsa v. Miraca Life Sciences that it lacked jurisdiction to hear an interlocutory appeal of an order denying a motion to dismiss for failure to initiate arbitration of a retaliation claim.15 The employment agreement required that “any dispute, claim or disagreement arising out of or in connection with this Agreement” would be submitted to binding arbitration.16 The district court held that this arbitration clause did not cover the False Claims Act retaliation claim because while the claim was connected with the employment relationship, it did not arise from or have a connection with the employment agreement.17
Declining to accept the appeal (over a dissent), the Sixth Circuit explained that the some statutes do allow interlocutory appeal of orders refusing to stay an action pending arbitration or denying a petition for arbitration.18 However, no statute authorizes jurisdiction over a denial of a motion to dismiss for failure to initiate arbitration.19
The Dorsa appellate and trial court decisions are important precedents to ensure preservation of whistleblowers’ remedies. To protect ongoing Government investigations in sealed qui tam cases, whistleblowers commonly chose to file their retaliation claims under seal with their qui tam False Claims Act claims. 20 While this strategy allows the Government time to investigate False Claims Act allegations before any active legal proceedings ensue, it necessarily delays compensation of whistleblowers who have suffered retaliation. Nevertheless, by filing their retaliation claim under seal, whistleblowers often still put public interest before their own. Enforcement of mandatory arbitration of retaliation claims would upset this balance. Defendants should not be permitted to obtain dismissal of retaliation claims for failure to initiate arbitration at the time the retaliation claim arose.
The False Claims Act is not the only whistleblower statute with retaliation protection. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act,21 whistleblowers can be rewarded for anonymously submitting original information to the Securities & Exchange Commission (“SEC”) or the Commodity Futures Trading Commission (“CFTC”) when their tip results in recovery.22 Retaliation against SEC and CFTC whistleblowers who provide this information or assist with a related proceeding is prohibited.23 These whistleblowers may bring a private retaliation enforcement action.24 Many state, city, and county False Claims Act statutes and ordinances also allow private retaliation actions.25
Campbell is a shareholder at Helmer, Martins, Rice & Popham Co., L.P.A. She represents whistleblowers and other clients in commercial litigation disputes.
1 31 U.S.C. § 3730(b)(1).
2 31 U.S.C. § 3730(c)(1), (c)(3).
3 31 U.S.C. § 3730(d). The False Claims Act also provides for payment by the defendants of reasonable attorney’s fees, expenses, and costs to a whistleblower. Id.
4 Civil Division, U.S. Department of Justice, “Fraud Statistics – Overview” (Oct. 1, 1986 to Sept. 30, 2020), available at https://www.justice.gov/opa/press-release/file/1354316/download
5 Arthurs v. Glob. TPA LLC, 208 F. Supp. 3d 1260, 1263–64 (M.D. Fla. 2015) (“The False Claims Act (‘FCA’), 31 U.S.C. §§ 3729-33, has been the federal government’s primary tool for combatting fraud perpetrated against it for over 150 years.”).
6 See James B. Helmer, Jr., False Claims Act: Whistleblower Litigation Ch. 2.VII. & n. 264 (7th ed. 2017).
7 31 U.S.C. § 3730(h)(1).
8 31 U.S.C. § 3730(h)(2).
9 See Lestage v. Coloplast, 982 F.3d 37, 49 (1st Cir. 2020) (citing S. Rep. No. 110-507, 6–7, 26 (2008).
10 Id. at 40–41.
11 Id.
12 Id.
13 Id. at 47–49.
14 Id. at 48 (cleaned up) (citing Rodríguez-Vives v. Puerto Rico Firefighters Corps of Puerto Rico, 743 F.3d 278, 284 (1st Cir. 2014), Burlington N. & Santa Fe Ry. Co. v. White, 548 U.S. 53, 68 (2006)).
15 United States ex rel. Dorsa v. Miraca Life Sciences, 983 F.3d 885, 886 (6th Cir. 2020).
16 Id. at 887.
17 Id. Accord United States ex rel. Paige v. BAE Sys. Tech., 566 F. App’x 500, 502–05 (6th Cir. 2014).
18 Id. (citing 9 U.S.C. § 16 (a)(1)(A), (a)(1)(B)).
19 Id. at 887–89.
20 See 31 U.S.C. § 3730(b).
21 Public Law 111-203, 124 Stat. 1376 (2010).
22 15 U.S.C. § 78u–6 (SEC); 7 U.S.C. § 26 (CFTC).
23 15 U.S.C. § 78u–6(h) (SEC); 7 U.S.C. § 26(h) (CFTC).
24 15 U.S.C. § 78u–6(h)(1)(B)(i) (SEC); 7 U.S.C. § 26(h)(1)(B)(i) (CFTC).
25 E.g. Texas, Hum. Res. Code § 36.115; New York City, N.Y., Admin. Code § 7-805; Allegheny County, Pa., Code § 485-4. Currently, the State of Ohio, Hamilton County, and the City of Cincinnati have neither False Claims Acts nor corresponding retaliation protection.