Labor & Employment Law Daily Wrap Up, RETALIATION—9th Cir.: Court revives FCA and WLAD retaliation claims over alleged Medicaid billing complaints, (Apr 21, 2026)

By Patricia K. Ruiz, J.D.

The court found disputes of fact on causation and pretext after the district court granted summary judgment to employer.

The Ninth Circuit vacated a district court’s grant of summary judgment for an employer and supervisor on retaliation claims brought under the False Claims Act (FCA) and the Washington Law Against Discrimination (WLAD), holding that a reasonable jury could find retaliation and pretext. The court concluded that the relators’ internal complaints about alleged fraudulent billing constituted protected activity and that evidence in the record created genuine disputes as to whether the nonrenewal of his contract was motivated by that activity (Adelstein v. Peacehealth, Inc., No. 25-605 (9th Cir. Apr. 17, 2026, unpublished)).

Background. Two relators, a departmental managing physician and a psychiatrist, sued a nonprofit Washington state healthcare provider known as Peacehealth and one of its medical directors for retaliation. The relators said they had raised concerns with Peacehealth about another Peacehealth physician who allegedly billed for services on a patient not seen. The departmental managing physician reported the alleged false billing, and, with the psychiatrist, requested that Peacehealth audit the billing physician’s practices. The relators further alleged that Peacehealth and the departmental manager refused to audit (see Court explains why 2009 FCA amendment did not permit retaliation claims against non-employing individuals, Jan. 12, 2023).

The relators said they later discovered that the billing physician had submitted false claims to CMS. The relators alleged that Peacehealth and the medical director retaliated against them, by canceling shifts and generally trying to squeeze them out, for having raised their billing concerns. The psychiatrist resigned. Both relators posited claims for retaliation under the FCA, 31 U.S.C. § 3730(h); whistleblower retaliation under Revised Code of Washington (RCW) 49.60.210; breach of contract; wrongful discharge in violation of Washington public policy; and, aiding unfair practices in violation of RCW 49.60.220.

Protected activity under FCA, retaliation. Reviewing the record de novo, the court first agreed with the district court that the relator engaged in protected activity under the FCA. The court pointed to evidence that a colleague admitted billing for a patient he had not seen, that the relator reviewed patient notes he believed reflected a pattern of false reporting, and that a significant portion of the patient population was covered by Medicaid. Based on that evidence, the court concluded there was a genuine dispute as to whether the relator reasonably and in good faith believed the employer was possibly committing fraud against the government.

The dispositive issue, the court explained, was whether the relator had raised a genuine dispute that the employer retaliated against him because of that protected activity. On that point, the court found error in the district court’s conclusion that the relator failed to meet his burden. Deposition testimony, declarations, and email records, the court stated, showed that the supervisor became unwilling to consider retaining the relator to address staffing shortages after learning of the protected activity. The record reflected that the supervisor rejected multiple administrators’ recommendations that the relator continue working at the medical center after his contract was set to expire.

The court emphasized that nonrenewal of an employment contract can constitute a materially adverse action, even where the employee had no entitlement to renewal and the decision was discretionary. It also concluded that a reasonable jury could find that the refusal to allow the relator to fill open shifts was reasonably likely to deter employees from engaging in protected activity under the FCA. On that basis, the court held that a reasonable jury could conclude the relator established a prima facie case of retaliation.

Employer’s arguments. The panel also addressed the employer’s asserted legitimate, nonretaliatory reasons for its actions and concluded that the relator raised a genuine dispute as to pretext. The defendants argued that the relator created a patient care crisis by temporarily refusing to see seven patients on July 12, 2021. The court observed, however, that the relator ultimately saw all assigned patients and that there was no evidence the temporary refusal affected patient care, allowing a jury to find the explanation pretextual.

The defendants further asserted that the supervisor believed the relator was attempting to blackmail him by refusing to see additional patients unless certain future shifts were restored. The court noted that, despite the supervisor’s refusal to restore those shifts, the relator continued to see all scheduled patients and worked the remainder of his shifts in July and August. From that record, the court reasoned, a jury could conclude that by August or September—when the supervisor declined to consider extending the contract—the supervisor did not reasonably believe blackmail had occurred. Having determined that the relator raised triable issues of fact on retaliation and pretext under the FCA, the court vacated the grant of summary judgment on that claim.

WLAD claims. The court reached the same result with respect to the relator’s retaliation claim under the WLAD, explaining that WLAD retaliation claims are analyzed under the same burden-shifting framework. The defendants raised an additional argument on appeal specific to the WLAD claim, contending that reporting billing issues is not protected conduct under that statute. The court declined to address the issue, concluding that the defendants forfeited it by conceding in the district court that there were material disputed facts as to whether the relator engaged in protected activity under WLAD.

The case is No. 25-605.

Judge: Per Curiam.

Attorneys: Damien Munsinger (Klein Munsinger, LLC) for Jonathan Adelstein. Kevin Hisashi Kono (Davis Wright Tremaine, LLP) for PeaceHealth, Inc.

Companies: PeaceHealth, Inc.

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