Labor & Employment Law Daily Wrap Up, WHISTLEBLOWERS—1st Cir.: ‘But for’ standard applied to determine causation in FCA retaliation claim, (Feb 26, 2025)

By Jeffrey H. Brochin, J.D.

The 2009 amendments to the FCA did not alter the requirement that the purported protected conduct must pertain to violations of the FCA, rather, the amendments clarified what the anti-retaliation provision covers.

The United States Court of Appeals for the First Circuit has affirmed the ruling of the District Court that held that an Employee had not proven that her former employer, Therapy Resources Management, LLC (TRM or Employer), had discharged her in violation of the whistleblower protections of the False Claims Act (FCA), and the Rhode Island Whistleblowers' Protection Act (RIWPA.) Rather, the District Court had properly found that although she had engaged in some protected activity which her Employer had knowledge of, she failed to show that ‘but for’ the protected conduct she would not have been discharged (U.S. ex rel., Morgan-Lee v. Therapy Resources Management, No. 23-2070 (1st Cir. Feb. 24, 2025)).

Initial whistleblower action. The Employee worked in a compliance position for the Employer, and on August 19, 2013, filed a qui tam lawsuit against TRM (and various other parties) alleging that they violated the FCA and its Massachusetts and Rhode Island analogs by submitting false and fraudulent claims for payment to the United and Massachusetts, and Rhode Island. She further claimed that TRM unlawfully retaliated against her because of her efforts to stop the alleged fraudulent conduct. Although most of her claims were resolved via voluntary dismissal or settlement, what remained were her FCA and RIWPA claims.

The District Court conducted a 4-day bench trial for the Employee’s retaliation claims pursuant to a joint stipulation, and on November 13, 2023, the court issued its memorandum ruling. The court applied the causation standard cited in Lestage v. Coloplast Corp., 982 F.3d 37, 46 (1st Cir. 2020), that she could ‘prevail on her retaliation claim only if she could demonstrate that, but for her FCA-protected activity, she would have kept her job.’ As per the court’s findings of fact, she did not prove by a preponderance of the evidence that she was fired because she engaged in protected activity, rather, the evidence showed that her termination was due to an escalating pattern of erratic, confrontational, and frequently insubordinate communications by her with superiors and colleagues, and, repeated unexcused absences. The Employee then followed with the instant appeal.

Contradicting her own trial court arguments. On appeal, the Employee made two claims of District Court legal error: one about use of Maturi v. McLaughlin Research Corp., 413 F.3d 166 (1st Cir. 2005), and the second going to causation and burden-shifting. Because the Maturi argument was the opposite of what she argued to the District Court, the Appeals Court found that such argument was barred by estoppel, but in any event, that argument was found to be without merit. In her Maturi argument, she contended that the standard for when an employer is charged with knowledge that an employee is engaged in protected conduct (as cited in Maturi), did not survive the 2009 amendments to the FCA. The Appeals Court noted that this was a reversal of the position she took in the District Court, where she argued that the standard still applied. But regardless of the estoppel, the court had previously held that the 2009 FCA amendments did not alter the requirement that protected conduct "must pertain to violations of the FCA.” In other words, the 2009 FCA amendments did not undercut Maturi, rather, they clarified that the anti-retaliation provision covers not only steps in the litigation process but also measures which might not be taken in direct furtherance of an actual lawsuit. Accordingly, the District Court committed no legal error in applying the Maturi standard as to protected conduct.

‘But for’ causation. The Appeals Court next turned to the Employee’s arguments that the District Court erred as to the causation element. The Appeals Court observed that the Tenth Circuit has similarly held that the rule that compliance employees typically must do more than other employees to show that their employer knew of the protected activity, survived the 2009 FCA amendment, and even under the amendments, an FCA relator’s actions must still convey a connection to the FCA. While an employer might reasonably presume that when a compliance employee reports incidents of fraud, she is just doing her job, such an employee must overcome that presumption by showing that she was engaging in protected activity, and not ‘just doing her job’.

The Employee asserted that the District Court erred in using "but-for" causation, notwithstanding the fact that in the District Court, she in fact urged the use of that standard. Accordingly, she was once again estopped from arguing contrary to her positions at trial. Again, aside from the estoppel, the Appeals Court found that she was wrong in her contention:

The District Court had properly applied the causation standard cited in Lestage, that she could ‘prevail on her retaliation claim only if she could demonstrate that, but for her FCA-protected activity, she would have kept her job.’ In fact, the evidence showed that the cause of her termination was not her engaging in some protected activity, but rather because of an escalating pattern of erratic, confrontational, and frequently insubordinate communications by her with superiors and colleagues, and, repeated unexcused absences. Accordingly, the ‘but for’ requirement of FCA retaliation being dependent upon a firing due to protected conduct was found to fail.

Based on the foregoing, the Appeals Court affirmed the District Court’s ruling, finding it to be well supported.

The case is No. 23-2070.

Judge: Lynch, CJ

Attorneys: Jeremy Loren Friedman (Law Office of Jeremy L. Friedman) for Rosemary Morgan-Lee. Donald Campbell Lockhart, U.S. Attorney's Office, for the U.S. Casey H. Groff, MA Attorney General's Office, for Commonwealth of Massachusetts. Charles D. Blackman (Levy & Blackman) for Therapy Resources Management, LLC. Christine Alexandra Abowitz (Whittier Health Network) for Whittier Health Network, Inc.

Companies: Therapy Resources Management, LLC; Whittier Health Network, Inc.

Cases: Whistleblowers Retaliation Discharge StateLawClaims TortClaims MaineNews MassachusettsNews NewHampshireNews PuertoRicoNews RhodeIslandNews