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January 3, 2018

District Court Rules Individuals Are Not Liable Under the False Claims Act Anti-Retaliation Provision

By Jesse A. Witten, Lynne Anne Anderson and Katlyn M. Moseley

In a December 2017 ruling, a United States District Court held that the anti-retaliation provision of the federal False Claims Act (FCA) does not provide for individual liability. In Diffley v. Bostwick, No. 1:17-CV-1410, 2017 U.S. Dist. LEXIS 201967 (S.D.N.Y. Dec. 6, 2017), the former Chief Operating Officer and Compliance Officer of a clinical laboratory alleged that he suffered retaliation for providing information to the government during an FCA investigation. He brought suit under the FCA anti-retaliation provision, 31 U.S.C. § 3730(h), against his employer and the Chief Executive Officer. The District Court granted the CEO’s motion to dismiss, ruling that supervisory employees are not subject to liability under the FCA anti-retaliation provision.

District Courts within the Second Circuit are divided as to whether the FCA anti-retaliation provision provides a cause of action against supervisory employees. A 2012 decision of the District of Connecticut held that a supervisory employee can be liable for retaliation. See United States ex rel Moore v Cmty. Health Servs., Inc., No. 3:09-CV-1127, 2012 U.S. Dist. LEXIS 43904 (D. Conn. Mar. 29, 2012).

The differing interpretations result from a 2009 amendment to the False Claims Act. Before 2009, the anti-retaliation provision prohibited retaliation against a whistleblowing employee “by his or her employer.” Courts across all jurisdictions agreed that this language precluded individual supervisor liability because a supervisor was not an “employer” under the statute. See Brach v. Conflict Kinetics Corp., 221 F. Supp. 3d 743, 747 (E.D. Va. 2016).

In 2009, Congress amended the statute to extend its reach to include a cause of action for non-employee agents and contractors. The amendment also deleted the “by his or her employer” language, such that the anti-retaliation provision now states in part:

Any employee, contractor, or agent shall be entitled to all relief necessary to make that employee, contractor, or agent whole, if that employee, contractor, or agent is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts done by the employee, contractor, agent, or associated others in furtherance of an action under this section or other efforts to stop 1 or more violations of [the False Claims Act].

31 U.S.C. §3730(h). Some plaintiffs have argued that the 2009 amendment opened the door to anti-retaliation claims against individual supervisors.

In Diffley, the District Court rejected the argument that the 2009 amendment opened the door to claims against supervisors. Relying on legislative history, the District Court concluded that Congress intended to widen the class of potential plaintiffs to include contractors and agents, but that there was no indication that Congress intended to widen the scope of potential defendants to include individuals. The court concluded that if Congress had also intended to widen the class of potential defendants, it would have included explicit language to that effect. It further reasoned that the words “by his or her employer” were dropped as a matter of grammatical necessity in light of other changes to the statute, not in order to open the door to lawsuits against supervisors.

The Diffley decision follows what has emerged as the majority rule. Numerous District Courts and one circuit court have also held that the 2009 amendment to the FCA anti-retaliation provision did not create personal liability on the part of supervising employees. See Howell v. Town of Bell, 827 F.3d 515, 529-30 (5th Cir. 2016). Nonetheless, a minority of District Courts have reached the opposite conclusion and there has so far been only one circuit court that has addressed the issue.

Regardless of whether there is individual liability, employers should continue to stress the importance of compliance with anti-retaliation policies through training, and hold supervisory employees accountable for conduct that violates those policies. Doing so not only reduces the risk of liability under the anti-retaliation provision but ensures that compliance concerns will be aired internally so that they can be properly addressed and resolved.

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