Supreme Court declines case on False Claims Act anti-retaliation provisions

The decision Monday comes in response to a petition regarding a March 2021 ruling from the U.S. Court of Appeals for the Sixth Circuit on the case of David Felten. Felten, a neurologist, filed a qui tam lawsuit in 2010 against his former employer, Michigan-based William Beaumont Hospital, for allegedly paying kickbacks for referrals. The hospital eventually settled the lawsuit in 2018 by agreeing to pay $84.5 million.

After he was fired, Felten claimed the hospital attempted to block him from getting another job in his chosen profession. He never made any allegations of on-the-job retaliation. The court ruled the anti-retaliation provisions of the FCA cover former employees like Felten.

“If employers can simply threaten, harass, and discriminate against employees without repercussion as long as they fire them first, potential whistleblowers could be dissuaded from reporting fraud against the government,” the ruling read.

The hospital appealed the decision to the Supreme Court, saying allowing it to stand would permit workers to bring qui tam lawsuits against their former employers years or even decades after they left their job.

The Felten ruling conflicts with a 2018 decision by the U.S. Court of Appeals for the Tenth Circuit that concluded the FCA’s anti-retaliation provisions do not apply to former employees. In that case, Potts v. Center for Excellence in Higher Education, Debbi Potts claimed in an FCA lawsuit the school had “actively deceived” its accreditor to maintain accreditation and access to federal education funding.

Potts notified the accrediting agency. The school sued her for breaching a nondisclosure agreement she signed upon resigning. She claimed the school was harassing her by attempting to enforce the nondisclosure agreement. The court ruled she could not rely on the FCA’s anti-retaliation provisions to protect her from liability in the school’s lawsuit against her.

Clarity around the corner?

The conflicting rulings could be addressed by Congress, if it chooses to amend the False Claims Act.

In July, a bipartisan group of legislators filed the False Claims Amendments Act of 2021 (S.2428). The bill proposes to clarify that post-employment retaliation against any whistleblower, regardless of his or her employment status with the company accused of fraud, would be prohibited. The law would also expand the definition of employee to include “any” employee, which would allow whistleblowers who are contractors or gig workers to receive the FCA’s anti-retaliation protections.

In October, the Senate Judiciary Committee voted to send the bill to the full Senate for consideration.

At the time, the bill’s sponsor, Sen. Chuck Grassley (R-Iowa), said in prepared remarks the bill “makes changes to the government’s most powerful tool in fighting fraud so that it can better protect the taxpayer.”

In November, the bill was officially moved to the full Senate.