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False Claims Act Retaliation Verdict Upheld

December 28, 2020

It’s no secret that blowing the whistle comes with risks.  Sadly, our clients have faced retaliation simply because they tried to correct their company’s fraud.  They have been fired, demoted, pushed out, and “blackballed.”  But they fight back.  And thanks to the anti-retaliation provisions of the federal and state False Claims Acts, they often win.

Ms. Lestage Files a Qui Tam Alleging Kickbacks

Fighting back is exactly what Amy Lestage did.  Ms. Lestage was a top salesperson for Coloplast, a medical device company that develops products for incontinence, wounds, and skincare.  In 2011, she and two other salespeople filed a qui tam action that named Coloplast and one of its clients (Byram Health Care) as defendants.  (There were other defendants too, but Coloplast and Byram are most relevant to the retaliation.)

Ms. Lestage and the other whistleblowers alleged that Coloplast paid illegal kickbacks to its clients, including Byram.  As is typical, the case was under seal for several years while the government investigated.  The case was unsealed in August 2014.  In 2015, Coloplast agreed to pay over $3 million to settle with the government.  In 2016, Byram paid over $9 million to do the same.

The Case is Unsealed and Ms. Lestage is Placed on Leave

Just a few months after the case was unsealed – and Ms. Lestage’s identity as a whistleblower became known – Byram told Coloplast that it no longer wanted Ms. Lestage on its account.  Coloplast obliged and removed Ms. Lestage from the account.  But that is not all.  Coloplast placed Ms. Lestage on indefinite paid administrative leave.  The leave continued for over a year until January 2016 – after Coloplast had settled the qui tam action brought by Ms. Lestage.

When Ms. Lestage was finally allowed to return, things were not the same.  Coloplast gave her inferior accounts and denied her opportunities to work with clients that she requested.

Ms. Lestage Wins an FCA Retaliation Claim 

Ms. Lestage sued, arguing that Coloplast violated the False Claims Act’s anti-retaliation provisions in its treatment of her.

At trial, the jury agreed that Ms. Lestage had been the victim of unlawful retaliation and awarded her $762,525.  On appeal, Coloplast tried to overturn the award.  Coloplast argued:

(1) the court gave the jury the wrong legal instructions,

(2) the jury’s verdict was so contrary to the evidence that it had to be overturned, and

(3) Ms. Lestage’s expert testimony was unreliable.

“But-for” Causation

The federal False Claims Act prohibits any discrimination “in the terms and conditions of employment because of actions taken by a person trying to bring violations to light or to an end.  31 U.S.C § 3730(h) (emphasis added).  At trial, the judge told the jury that they could find for Ms. Lestage if they believed that her status as a whistleblower was “a substantial motivating cause” of the negative employment actions taken by Coloplast.  Though Coloplast did not object to that instruction at the time, on appeal it argued that a stricter “but for” causation standard should have been applied.

The First Circuit agreed that the stricter “but for” standard is the correct one for an FCA retaliation claim.  The court noted that the Supreme Court has twice held that the “but for” test applied in arguably analogous statutes (the Age Discrimination in Employment Act and the anti-retaliation provision of Title VII).  It also pointed out that several other appeals courts relied on this Supreme Court precedent to hold that the FCA anti-retaliation provisions also carry a “but for” standard.

That said, the First Circuit did not reverse the jury verdict because the instruction was not “plain error.”  At the time of trial, the law was not settled in the First Circuit. Also, many other courts continued to apply the “substantial motivating cause” test for FCA retaliation claims.  Finally, the defendants did not even object to the instruction at trial.  So, while from now on the standard will be “but for” causation, the judgment against Coloplast stands.

“More Than Sufficient Evidence” to Support the FCA Retaliation Claim

Coloplast next asked the appeals court to rule that the evidence did not support the jury’s verdict.  The First Circuit, however, firmly rejected the defendant’s plea, holding that there was “more than sufficient evidence” that Lestage would never have been put on leave but for her filing of the qui tam suit.  The court also shut down Coloplast’s contention that its changing of Lestage’s accounts was not a negative employment action.  It detailed the various lengths Coloplast went to in order to avoid giving Lestage those key accounts.  Finally, the court emphasized and embraced the core purpose of the FCA’s anti-retaliation provisions:

“There are many reasons Congress decided to protect persons who file qui tam actions from retaliation for doing so.  Such protection encourages individuals to expose fraud.”

The Expert’s Testimony was Reasonable

Finally, the First Circuit quickly disposed of Coloplast’s complaint about Lestage’s expert’s testimony.  Coloplast argued that the opinion rested on “flawed methodology and unrealistic assumptions.”  The First Circuit, however, flatly rejected this argument.  The court reminded litigants that, so long as an expert’s model is reasonable and cross-examination is allowed, a post hoc complaint about the expert will be viewed as an impermissible “quarrel . . . with the jury’s assessment of the evidence.”

Takeaways for False Claims Act Retaliation Claims

The verdict stands and this case remains an important symbol of the strength of the FCA’s anti-retaliation provision.  Notably, Ms. Lestage prevailed even though Coloplast paid her while on administrative leave and did not fire her.  Too often, whistleblowers find themselves pushed to the edges of their company but unsure whether they will be able to prove “retaliation.”  This case offers a reminder that the law can provide some protection.

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