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First Circuit Establishes Pleading Standard for FCA Whistleblower Retaliation Claims

Published by and on April 25, 2019

In January, the First Circuit ruled that a plaintiff sufficiently alleges protected activity under the FCA whistleblower protection provision where he or she claims to have reported concerns about an employer’s conduct that could reasonably lead to a viable FCA action.

In Guilfoile v. Shields, Sr, a former executive of the Shields Health Solutions pharmacy company expressed concerns to the company’s owner, John Shields, regarding quarterly payments of $35,000 to a consulting firm for each hospital contract the firm referred to Shields Health Solutions, which Guilfoile believed violated the federal Anti-Kickback statute. Shields waived a payment to the consulting firm for one of two referrals, but Plaintiff believed his response was insufficient and the board of directors should be notified, which Shields refused to do.

Subsequently, the company terminated Guilfoile’s employment without explanation. After Guilfoile sent a letter to the board of directors regarding his concerns, he received a letter from the company stating that he was terminated for cause. Guilfoile filed suit against Shields and the company for allegedly retaliating against him for attempting to stop FCA violations and that he reasonably believed the payments to the consulting violated the Anti-Kickback Statute. The Massachusetts district court granted Shields’ motion to dismiss because Guilfoile failed to adequately plead protected activity under the statute.

On appeal the First Circuit reversed the dismissal of Guilfoile’s retaliation claim and decided that protected activity under the FCA should be interpreted broadly and a plaintiff’s pleading is sufficient when he or she alleges retaliation based on conduct that reasonably could lead to a viable FCA action. Therefore, a plaintiff is not required to plead the existence of the actual submission of a false claim to the government or meet the heightened pleading standards of the Federal Rules of Civil Procedure 9(b).

Welter Insight

Employers within the First Circuit’s jurisdiction should keep in mind of the circuit’s less stringent pleading standard for FCA retaliation claims. All employers should ensure that they are compliant with the federal Anti-Kickback statute and other applicable law.

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