December 29, 2022

Third Circuit Addresses Congress’s 2009 FCA Amendment and its Effect on Retaliation Claims for First Time in New Opinion

The False Claims Act (“FCA”) has long included protections from retaliation for whistleblowers who engage in conduct in furtherance of a lawsuit under the qui tam provision of the Act. Section 3730(h) of the FCA, the “Relief from retaliatory actions” provision, entitled an employee to relief if that employee was retaliated against by their employer for “investigation for, initiating of, testimony for, or assistance in” a qui tam lawsuit.

However, in 2009, Congress amended the FCA to expand protections for whistleblowers who attempt to prevent violations of the FCA without acting in furtherance of an FCA lawsuit. Section 3730(h) now protects “lawful acts done by the employee, contractor, agent or associated others in furtherance of an action under this section or other efforts to stop 1 or more violations of this subchapter.” This “other efforts” prong was added as a preventative measure aimed at remedying misconduct and stopping violations of the FCA.

Prior to the 2009 amendment, plaintiffs asserting a retaliation claim under Section 3730(h) of the FCA were required in all cases to show that their employer had notice of the “distinct possibility” that the plaintiff was contemplating an FCA suit. This requirement is known as the “distinct possibility” standard. Since the amendment, the majority of federal circuit courts have found that the “distinct possibility” standard is inapplicable to cases brought under the “other efforts” prong because the activity protected is not tied to an FCA lawsuit.

Until recently, the United States Court of Appeals for the Third Circuit had not weighed in on the “distinct possibility” standard, causing the Third Circuit District Courts to inconsistently apply the standard to retaliation claims without consideration of the protected conduct at issue. However, the Third Circuit recently joined the majority of circuit courts with their November 30, 2022 opinion in United States ex rel. Ascolese v. Shoemaker Construction Co., 55 F.4th 188 (3d Cir. 2022).

Ascolese involved a former employee of a public housing project who claimed his employer retaliated against him for attempting to prevent a construction manager from falsely certifying compliance with relevant contractual standards. Ascolese reported numerous deficiencies in the construction project and specifically advised his employer that, because of the deficiencies, it would be fraudulent to certify contract compliance and accept payment from the government. Ascolese was fired as a result. Thereafter he initiated a qui tam suit which also asserted illegal retaliation claims. The District Court for the Eastern District of Pennsylvania initially dismissed the suit for failure to satisfy the “distinct possibility” standard. On appeal, the Third Circuit reversed the District Court, holding that the “distinct possibility” standard is inapplicable to retaliation suits brought under the “other efforts” prong and that Ascolese sufficiently pled a claim for retaliation.

With this new opinion, the Third Circuit Court has ended over a decade of confusion and inconsistent rulings in FCA retaliation cases. The opinion also makes way for more plaintiffs to bring claims under the “other efforts” prong of Section 3730(h) in courts within the Third Circuit.



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