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4th Circuit Reverses Dismissal of False Claims Act Retaliation Claim

Published by on August 27, 2009

In US ex rel Elms v. Accenture LLP, the U.S. Court of Appeals for the Fourth Circuit reversed the dismissal of a retaliation claim under the Federal False Claims Act (“FCA”), 31 U.S.C. §§ 3729-3733.  Plaintiff Peter Elms had appealed from the district court’s dismissal of his qui tam action under the FCA.  Elms’ case […]

In US ex rel Elms v. Accenture LLP, the U.S. Court of Appeals for the Fourth Circuit reversed the dismissal of a retaliation claim under the Federal False Claims Act (“FCA”), 31 U.S.C. §§ 3729-3733.  Plaintiff Peter Elms had appealed from the district court’s dismissal of his qui tam action under the FCA.  Elms’ case alleged that his former employer, Accenture, submitted false claims to the government regarding a cost-plus contract and that his employment was terminated in retaliation for engaging in protected activity under the FCA.  A copy of the court’s unpublished opinion is here.  More after the break.

Elms discovered that Accenture paid its subcontractor, Avanade, in full while receiving a fifty percent rebate for these payments from the government.  This scheme boosted Accenture profits significantly.  When Elms approached management, they promised to provide an explanation that never came.  As one of the project managers, Elms also complained that several Avanade employees were unqualified for their positions.  His supervisors refused to address these claims because they felt firing these employees would result in a low profit margin.  Elms protested and accused Accenture of “short-changing” the government.  His employment was terminated soon thereafter.

Elms’ second claim arose under the FCA’s ban on retaliation for employees harassed, threatened, or terminated due to a protected activity (31 U.S.C. § 3730 (h)).   Elms’ employment was allegedly terminated “as a result of action taken in the course of investigating a fraud against the United States.”  The court noted that other courts have interpreted the FCA’s protected activities broadly to include filing a qui tam suit and various other actions aimed at determining whether a fraud has been committed that would give rise to a possible FCA suit.  Elms alleged that he took action in furtherance of a qui tam suit, “that his employer knew of these actions, and that he was terminated as a result.”

The FCA’s statutory ban on retaliation provides a cause of action for

[a]ny employee who is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment by his or her employer because of lawful acts done . . . in furtherance of an action under this section, including investigation for, initiation of, testimony for, or assistance in an action filed or to be filed under this section.

31 U.S.C. § 3730(h).

The court affirmed the dismissal of the fraud claim under the FCA, but reversed the dismissal of the retaliation claim.  In the former, plaintiff failed to meet the heightened pleading standard of Rule 9(b), while in the latter, he properly alleged a retaliation claim against his employer under the statute.  The case was remanded to the district court for discovery.

Contributed by K.C. Osuji

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