The False Claims Act’s Anti-Retaliation Provision Protects Whistleblowers Who Refuse To Take Part in Fraud

Second Circuit Court of AppealsIn late July, the Second Circuit United States Court of Appeals issued an opinion captioned Fabula v. American Medical Response, Inc. that should provide some comfort for whistleblowers who are contemplating bringing a False Claims Act case in connection with their refusal to take part in a potentially fraudulent scheme.

The Fabula court was presented with two issues:

  1. whether the whistleblower had adequately pled that the defendant had submitted false claims for reimbursement to the Medicare and Medicaid programs; and
  2. whether the whistleblower engaged in protected activity when he refused to violate the False Claims Act.

We’re going to focus on issue number two in this blog, as it pertains to the breadth of whistleblower protected activity covered by the False Claims Act’s anti-retaliation provision.

The Whistleblower in Fabula

First, a little background.  The whistleblower in Fabula was an Emergency Medical Technician, or “EMT” for short, who worked for the defendant American Medical Response, Inc., or “AMR.”  He alleged that AMR defrauded Medicare by falsely certifying ambulance transports as medically necessary, and by submitting claims that it knew were not properly reimbursable by Medicare.

For example, Fabula reported that he once assisted in transporting “an obese patient who ‘had no medical reason to be sent to the hospital, he simply wanted to go there.’ The patient was able to walk himself to the stretcher and climb on unassisted.”  Opinion, page 9 (citations omitted).  Despite the lack of medical need, an “AMR supervisor instructed Fabula to insert information about the patient’s previous surgeries to justify his transport to the hospital.”  Id.

This type of instruction was allegedly part of a routine practice where AMR  required EMTs to revise Patient Care Reports, or “PCRs,” to include false statements as to the medical necessity of the service in order to try to get the claims paid.  The Fabula whistleblower knew that these false statements were being used to seek Medicare reimbursement so he refused to revise the PCRs despite being warned that his failure to revise the reports would result in his termination.  Sure enough, AMR made good on its threat and fired Fabula shortly after a final refusal to alter a PCR.

The False Claims Act’s Anti-Retaliation Provision

The False Claims Act’s anti-retaliation provision provides:

[a]ny employee…shall be entitled to all relief necessary to make that employee…whole, if that employee…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…in furtherance of an action under this section or other efforts to stop 1 or more violations of [the False Claims Act].

To invoke this provision’s protection, whistleblowers generally have to show that:

  1. he or she engaged in activity protected under the statute,
  2. the employer was aware of such activity, and
  3. the employer took adverse action against the whistleblower because he or she engaged in the protected activity

The Legal Impact of Fabula

In Fabula, the issue was whether the EMT’s refusal to alter the PCRs constituted an “activity protected under the statute.”  The trial court said “no,” finding instead that “mere refusal to complete the PCR, without other affirmative acts to stop the alleged fraud, is not protected activity.”  Opinion, page 54.

The Second Circuit reversed the trial court, relying on the plain language of the anti-retaliation provision quoted above.  The Fabula court held that the whistleblower’s “refusal to engage in the fraudulent scheme, which under the facts as pled was intended and reasonably could be expected to prevent the submission of a false claim to the government, can constitute protected activity under the statute.” Opinion, page 55.

The Fabula court explained that the EMT’s allegation that he refused to falsify the PCR as demanded by his

AMR supervisor was plainly in furtherance of an effort to stop a False Claims Act violation.  This wasn’t a case where the whistleblower “did not simply omit, fail, or neglect to fill out” paperwork used in a fraud scheme. Opinion, page 55.  To the contrary, “he verbally refused to alter the document as requested by AMR and, despite AMR’s threat of termination, failed to subsequently ‘arrange a time for reconciliation and transmission of’ that PCR.”  Opinion, pages 55-56.

AMR argued that the EMT could not state a claim because he did not do enough to try to stop the false claims.  The Fabula court overcame that argument by pointing to the provision that only requires that the whistleblower make efforts “to stop 1 or more violations” of the False Claims Act.  Here, the EMT’s conduct made it “difficult, or even impossible, for AMR to file a false claim for that particular run, thus preventing or hindering at least one violation of the [False Claims Act].” Opinion, page 57.

The Second Circuit also looked to Congressman Howard L. Berman’s congressional testimony, which made the point  that § 3730(h) was amended “so that it is clear that it covers . . . retaliation against not only those who actually file a qui tam action, but also against those who plan to file a qui tam that never gets filed, who blow the whistle internally or externally without the filing of a qui tam action, or who refuse to participate in the wrongdoing.”  Opinion, pages 58-59.

The Fabula court further rejected AMR’s argument that the anti-retaliation provision only applies to “complaints to [an] employer’s management or in-house counsel, reports to the media, or a reasoned explanation to supervisors that what they were asking him to do violated the law and should cease.” Opinion, page 60.  As alluded to above, the Fabula court found that the False Claims Act “broadly protects efforts to stop even a single violation of the FCA.”  Opinion, page 61.

Finally, the Second Circuit rejected AMR’s attempt to “draw an arbitrary boundary between efforts that take the form of ‘internal reporting to a supervisor or company compliance department’ and those that amount to ‘refusals to participate in the misconduct that leads to the false claims,’” noting that “[t]here is, at best, a hair’s-breadth distinction between complaining internally that a practice is illegal under the FCA and advising a supervisor of one’s refusal to engage in that illegal practice.” Opinion, page 59.

The Fabula court’s common sense approach to establish a broad False Claims Act anti-retaliation provision should help encourage more whistleblowers to come forward by providing robust protection for when they refuse to engage in potentially fraudulent conduct.

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