On December 26, 2018, the U.S. Court of Appeals for the Fourth Circuit issued an opinion in United States ex rel. Grant v. United Airlines affirming dismissal of the relator’s False Claims Act (FCA) allegations on the grounds that the complaint failed to plead presentment of a false claim with sufficient particularity under Rule 9(b). In the same opinion, however, the court revived the relator’s retaliation claim on the grounds that the relator satisfied the lower standard of Rule 8(a) applicable to retaliation claims, which are not claims of fraud.

Presentment Must Follow from Conduct Alleged in Complaint

The court affirmed dismissal of the relator’s substantive FCA claims because it held that the relator failed to adequately plead presentment under Rule 9(b) in either of the two ways that the Fourth Circuit has recognized as acceptable:

  1. By alleging with particularity that specific false claims actually were presented to the government for payment, including by describing the time, place, and contents of the false representation; the person making the false representation; and what was obtained by making this representation
  2. By alleging a pattern of conduct that would “necessarily have led to a false claim being submitted”

The court focused its analysis on whether the complaint was adequately pleaded under the latter of those two options. The relator was a former maintenance technician of United Airlines who was a second-tier subcontractor on a government contract for the repair and maintenance of military aircraft. His complaint alleged that United Airlines was specifically subcontracted to repair, overhaul and inspect certain airplane engines and was required to do its work in compliance with certain regulations. The complaint alleged that United Airlines violated the FCA by failing to comply with the required regulations in completing work on these airplane engines.

The court held that while the relator did allege the underlying fraudulent conduct with particularity, he failed to “allege how, or even whether, the bills for these fraudulent services were” presented to or paid by the government. The court noted that “[m]erely alleging fraudulent conduct and an umbrella payment, without more, is insufficient particularly where, as [here], United is three levels removed from” the government, which contracted directly with another company as the prime contractor. The court stated that while a relator need not be able to produce documentation or invoices showing presentment at the beginning of the suit, the relator does need to provide allegations linking the alleged false claims to government payment, even if they are not yet supported by precise documentation.

Raising Concerns about FCA Violations Followed by Adverse Action Sufficiently Pleads Retaliation Claim

 The district court dismissed the relator’s retaliation claim on the grounds that he had not sufficiently alleged that he engaged in protected activity. In reversing that dismissal, the Fourth Circuit noted that a relator must allege facts sufficient to support a reasonable inference of the three following elements of a retaliation claim in order to meet the Rule 8(a) notice pleading standard applicable to that claim:

  1. Relator engaged in protected activity
  2. Relator’s employer knew about the protected activity
  3. Relator’s employer took adverse action against the relator as a result of the protected activity

The FCA provides for two different types of protected activity:

  1. Actions taken in furtherance of an FCA action, such as investigation of, initiation of, testimony for, or assistance in an action filed or to be filed under the FCA
  2. Other efforts to stop one or more FCA violations

Under Fourth Circuit precedent, the first category requires that FCA litigation be a distinct possibility, that the conduct reasonably lead to a viable FCA case or that litigation is a reasonable possibility. In granting dismissal, the district court applied the same standard to the second category of protected activity, which was added to the FCA through a 2010 amendment.

The Fourth Circuit rejected the district court’s application of the distinct possibility standard to the second type of protected activity and held that an “objective reasonableness” standard should be applied instead. Specifically, the court held that the complaint sufficiently alleged that the relator was “engaged in protected activity” where he had an objectively reasonable belief that United Airlines was violating the FCA and that his actions were designed to stop at least one violation of the FCA.  Thus, the specific allegations about the relator raising concerns about the alleged fraudulent practices to management and that some of his complaints triggered an investigation, combined with allegations regarding the timeline of events that culminated in his termination, were sufficient to plead a viable retaliation claim under the FCA.

Competing Pleading Standards within an FCA Complaint

The Fourth Circuit’s ruling in Grant emphasizes that allegations relating to fraud on the government must be scrutinized under a more demanding standard than claims of retaliation.  Particularly where an FCA defendant does not submit claims directly to the government, a relator must either plead representative examples of actual false claims or provide allegations that establish that the conduct at issue “necessarily” led to the submission of false claims.  Retaliation allegations, on the other hand, are not subject to the same heightened pleading standard.  Employers should always take care when addressing concerns raised by employees and fully investigate any such concerns. An employee may be able to state a claim for retaliation under the FCA even where he or she may not be able to allege specific facts sufficient to support substantive FCA claims.

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