On October 23, 2017, the Eastern District of Virginia rejected a motion to dismiss a former employee’s claim for whistleblower retaliation under the False Claims Act (“FCA”).  Andrews v. City of Norfolk, No. 2:16-cv-681, 2017 WL 4837707 (E.D. Va. Oct. 23, 2017).  The Court ruled on whether the defendants themselves must be involved in the alleged fraud under the FCA’s whistleblower protection provision and whether complaints about future fraudulent acts qualified as protected activity.

Background.  Plaintiff worked with the Senior Advisor for Veteran Employment for the Department of Veteran Affairs (“Senior Advisor”) to develop an online veterans’ employment assistance program.  The Senior Advisor’s husband had a company that sold software to help veterans transition to new careers.  In 2014, certain incidents allegedly caused Plaintiff to become concerned regarding the alleged overlap between the Senior Advisor’s husband’s software and the Senior Advisor’s employment program initiative.  Plaintiff sent an e-mail to the Deputy City Manager expressing his concern and subsequently e-mailed the Senior Advisor to ask whether her husband was associated with employment assistance program’s operations.  The next week, Plaintiff’s employment was terminated by the City Manager, who allegedly stated that “[t]his is just not a good fit.”

Procedural History.  On November 23, 2016, Plaintiff filed a complaint against the City of Norfolk, Virginia, the City Manager, and Interim City Manager for, among other things, whistleblower retaliation in violation of the FCA.  He alleged that he was discharged for investigating a potential FCA claim—i.e., that the Senior Advisor’s husband was pursuing a business relationship with the City that would result in inappropriate financial benefit to the Senior Advisor.

Ruling.  Defendants moved to dismiss, arguing that Plaintiff failed to engage in protected activity because Defendants themselves did not engage in any acts that potentially violated the FCA, there was no pending “claim” for government money (since the City of Norfolk had not yet contracted with the Senior Advisor’s husband), and there was no “false or fraudulent conduct”—only speculation that such conduct may occur in the future.  Plaintiff responded that Defendants did not have to commit any fraud themselves to be liable for retaliation under the FCA, and that the Senior Advisor’s financial interest in her husband’s software foreseeably tainted her husband’s ability to certify that his software was free from conflicts of interest, which would later result in a claim for government funds.  Denying the motion to dismiss the FCA claim, the court ruled that Defendants themselves did not have to engage in the underlying fraud to be liable for retaliation under the FCA.  The court also found that Plaintiff could have formed a good-faith belief that the Senior Advisor and her husband intended to perpetuate fraud upon the government based on the facts alleged, that such a belief was objectively reasonable, and that Plaintiff acted in furtherance of that belief.  The court also ruled that Plaintiff took reasonable actions to prevent an FCA violation by attempting to investigate the extent of any potential fraud and raising his concerns to government officials.

Implications.  Plaintiffs can be expected to rely on this case for the proposition that an employer need not be involved in the alleged fraud to be liable for a FCA violation and that complaints regarding alleged future fraudulent acts can amount to protected activity under the FCA.

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Tags: FCA, retaliation, veterans
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Photo of Steven J. Pearlman Steven J. Pearlman

Steven J. Pearlman is a partner in the Labor & Employment Law Department, where he is Head of the Restrictive Covenants, Trade Secrets & Unfair Competition Group and Co-Head of the Whistleblowing & Retaliation Group.

Employment, Whistleblower, Restrictive Covenant and Trade Secret Practice.…

Steven J. Pearlman is a partner in the Labor & Employment Law Department, where he is Head of the Restrictive Covenants, Trade Secrets & Unfair Competition Group and Co-Head of the Whistleblowing & Retaliation Group.

Employment, Whistleblower, Restrictive Covenant and Trade Secret Practice. Steven’s national practice focuses on defending companies in federal and state courts and arbitration against claims of: discrimination, retaliation and harassment, including claims brought by high-level executives; whistleblower retaliation; restrictive covenant violations; theft of trade secrets; and wage-and-hour violations (including class, collective and PAGA actions).

Illustrating his versatility, Steven has successfully handled bench and jury trials in multiple jurisdictions (e.g., Illinois, California, Florida and Texas); defended one of the largest Illinois-only class actions in the history of the federal courts in Chicago; and prevailed following his oral arguments before the Seventh Circuit and state appellate courts. Steven brings his litigation experience to bear in counseling clients to minimize risk and avoid or prepare for success in litigation.

Investigations. Reporting to boards of directors, their audit committees, CEOs and in-house counsel, Steven conducts sensitive investigations and has testified in federal court. His investigations have involved complaints of sexual harassment involving C-suite officers; systemic violations of employment laws and company policies; and fraud, compliance failures and unethical conduct.

Thought Leadership and Accolades. Steven was named Lawyer of the Year for Chicago Labor & Employment Litigation in the 2023 edition of The Best Lawyers in America. He was also named as One of the Top 10 Impactful Labor & Employment Lawyers in Illinois for 2023 by Business Today. He is a Fellow of the College of Labor and Employment Lawyers. Chambers describes Steven as an “outstanding lawyer” who is “very sharp and very responsive,” a “strong advocate,” and an “expert in his field.” Chambers also reports that “He is someone who can navigate the twists and turns of litigation without difficulty. Steven is great with brief-writing, crafting arguments, and making sure the client is always happy.”

Steven was 1 of 12 individuals selected by Compliance Week as a “Top Mind.” Earlier in his career, he was 1 of 5 U.S. lawyers selected by Law360 as a “Rising Star Under 40” in the area of employment law and 1 of “40 Illinois Attorneys Under Forty to Watch” selected by Law Bulletin Publishing Company. Steven is a Burton Award Winner (U.S. Library of Congress) for “Distinguished Legal Writing.”

Steven was appointed to Law360’s Employment Editorial Advisory Board and selected as a Contributor to Forbes.com. He has appeared on Bloomberg News (television and radio) and Yahoo! Finance, and is often quoted in leading publications such as The Wall Street Journal.

The U.S. Chamber of Commerce has engaged Steven to serve as lead counsel on amicus briefs to the U.S. Supreme Court and federal circuit courts of appeal. He was appointed to serve as a Special Assistant Attorney General for the State of Illinois in employment litigation matters. He has presented with the Solicitor of the DOL, the Acting Chair of the EEOC, an EEOC Commissioner, Legal Counsel to the EEOC, and heads of the SEC, CFTC and OSHA whistleblower programs. He is also a member of the Sedona Conference, focusing on trade secret matters.

In 2024, Steven received the Excellence in Pro Bono Service Award from the United States District Court for the Northern District of Illinois and the Chicago Chapter of the Federal Bar Association.

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