CIVIL FALSE CLAIMS ACT: Here They Go Again, Round III: Financial Reform Bill Contains More FCA Amendments

It seems that Congress cannot let any opportunity to amend the False Claims Act go to waste, and this month's legislative frenzy brings with it yet another amendment to the FCA, the third amendment in a little over a year. The House-Senate Conference Committee for the financial reform bill has approved two amendments to the so-called "whistleblower protection" provision of the FCA, 31 U.S.C. § 3730(h). See H.R. 4173, 111th Cong. (2010). After Congress completely botched the amendment of this section in the FERA amendments in 2009, see FraudMail Alert No. 09-05-21, the Committee has approved amendments that will (1) once again revise the definition of "protected conduct," and (2) provide, for the first time, a three-year statute of limitations for actions brought under Section 3730(h), resolving the issue the Supreme Court addressed in Graham County Soil & Water Conservation District v. United States ex rel. Wilson, 545 U.S. 409 (2005) ("Graham County I"). See FraudMail Alert No. 05-06-20. A redline comparison of the Committee's and FERA's retaliation amendments is attached.

Because the Committee's amendments redefining "protected conduct" would remove defenses to retaliation suits, if enacted, these amendments should only apply prospectively to conduct occurring after their date of enactment. Even applying the amendments prospectively introduces new terms and issues for interpretation that will add to the thicket of alternatives already facing litigants and judges in this fast-changing area of the law.

"Protected Conduct" Amendments

Prior to the FCA amendments in the Fraud Enforcement and Recovery Act of 2009 ("FERA"), a retaliation claim under Section 3730(h) required three basic elements: (1) the employee engaged in "protected conduct," defined as lawful acts in furtherance of an FCA action, (2) the employer knew about the protected conduct, and (3) the employer retaliated against the employee because of the protected conduct. See John T. Boese, Civil False Claims and Qui Tam Actions §4.11[B] (Aspen Publishers, Wolters Kluwer Law & Business) (3d ed. 2006 & Supp. 2010-1). FERA expanded the group of protected persons to "any employee, contractor, or agent," and it removed the reference to discrimination by an "employer." The reason for these changes was to eliminate the requirement that an employee-employer relationship was necessary for a retaliation violation―a requirement that excluded independent contractors from bringing retaliation...