The First Circuit recently revisited the pleading standard for retaliation claims under the False Claims Act, and reiterated its prior position that such claims are not subject to the same heightened pleading standard as direct FCA violation claims.
In Guilfoile v. Shields, 913 F.3d 178 (1st Cir. 2019), a former president for a group of healthcare entities that provided specialty pharmacy services to hospitals alleged the entities offered illegal “referral fees” to a consulting group to induce hospitals to award the entities contracts. Guilfoile also alleged the contracts with hospitals contained a false statement concerning the availability of a 24/7 call center. After sounding the alarm on potential FCA violations, including the kickback scheme, and asking his supervisor to remediate the conduct at issue, Guilfoile was terminated. The district court dismissed the retaliation claim on the basis that Guilfoile failed to adequately plead that he had engaged in protected activity. The First Circuit disagreed.
Retaliation claims typically follow the same model: 1) some form of protected activity; 2) adverse employment action; and 3) some connection between the two. But what sort of “protected activity” is required under the FCA? The court noted a “crucial” distinction: a retaliation plaintiff only has to plead “conduct that could reasonably lead to a viable FCA action.” By contrast, in a standard FCA suit, the plaintiff must plead facts sufficient to show an actual false claim. This is because FCA claims are fraud-based and must satisfy Fed. R. Civ. P. 9(b). Put another way, “rather than plausibly pleading the existence of a fire – the actual submission of a false claim – a plaintiff alleging FCA retaliation need only plausibly plead a reasonable amount of smoke – conduct that could reasonably lead to an FCA action….” Id. at 189.
While the decision is not charting new territory, it does provide some degree of consistency and clarity for FCA retaliation plaintiffs facing a motion to dismiss.