A defense contractor fired an employee after he complained about overbilling of the government. The employee’s counsel knows that numerous anti-retaliation protections may apply, with the False Claims Act (FCA) and the National Defense Authorization Act (NDAA) being two strong candidates. But which should they assert? A recent decision from the Eastern District of Virginia, which conducted an instructive analysis of the scope of the FCA and NDAA, demonstrated that it may be better not to choose. (See Nifong v. SOC, LLC., No. 1:16-CV-63, --- F.3d ----, 2016 WL 3406415 (E.D. Va. June 6, 2016.)
Nifong v. SOC Background
In 2013, Kenly Nifong, a deputy project manager assigned to a contract with the State Department to provide security services for the U.S. embassy in Baghdad, learned that his employer, SOC, maintained a practice of promoting and keeping employees in positions with the highest billable rates. This was the case even if the people in these lucrative positions were unqualified or actually performed the duties of positions with lower billable rates. Nifong objected to this practice to various people, including his supervisor, the State Department Contracting Officer Representative and to SOC’s parent company. He was fired shortly after the latter complaint, allegedly for providing ammunition to Iraqi Special Forces in exchange for the use of an Iraqi shooting range.
After his termination, Nifong filed a complaint with the Inspector General for the Department of Defense, which found after an investigation that SOC had shown that it had fired him for poor performance and improper conduct. Nifong filed complaints under the NDAA and the FCA. The company moved to dismiss the claims.
Nifong’s NDAA Whistleblower Claim
The NDAA anti-retaliation provision at issue is part of a four-year pilot program that began on July 1, 2013, and was designed to provide a right of action to defense contractors who report various kinds of fraud, waste and abuse by government contractors. This provision only applies to contracts, grants, task orders and modifications entered into after that date. The court concluded that regardless of whether Nifong properly pled the elements of an NDAA claim, that claim was barred because the contract predated the statute’s effective date.
Nifong’s FCA Whistleblower Claim
In analyzing Nifong’s FCA claim, the court confronted a key issue – namely whether a plaintiff must show that a qui tam claim was a “distinct possibility” in order to be protected from retaliation. Qui tam claims are suits brought on behalf of the government against individuals or entities who submit false claims for payment. Under the “distinct possibility” standard, a plaintiff must show that his reports or objections to certain conduct would lead his employer to conclude that there was an objectively reasonable possibility of a qui tam action. For years, this was the generally accepted analysis of FCA retaliation claims, but many courts have questioned that standard in the wake of major amendments to the FCA, especially in the 2009 Fraud Enforcement and Recovery Act (FERA). FERA added key language to the FCA, making clear that efforts to stop violations of the FCA were protected, in addition to efforts in furtherance of a qui tam.
The Nifong court noted that the Court of Appeals for the 4th Circuit, whose precedents are binding on the Eastern District of Virginia, had concluded that the amended FCA broadened the law’s scope. But the court also noted that the 4th Circuit has not yet clarified what it means to take “other efforts to stop” violations of the FCA. Without clear guidance from the Court of Appeals on a new standard of analysis, several district courts have continued to apply the “distinct possibility” standard.
FCA Protections Post-FERA
Ultimately, the Nifong court punted on whether the “distinct possibility” standard had changed. The court concluded that Nifong had clearly complained to various supervisory and government individuals about potential false claims – indeed he had even characterized the billing practice as something that “could easily be construed as fraud.” For that reason, the court concluded that it was not necessary to decide whether to apply a lower standard of proof, and it allowed Nifong’s FCA retaliation claim to go forward.
The district court’s decision in Nifong leaves open the question of what FCA-protected activity means after the FERA amendments. But Nifong is instructive in two respects. The case shows that the NDAA pilot program is truly time-limited and that plaintiffs should not count on being covered if the relevant contract – or some portion of it – came into existence within the past three years. Second, the case demonstrates that courts recognize the expanded scope of the FCA but continue to struggle to define the contours. Plaintiffs should be mindful of this uncertainty and should consider all available claims when they face retaliation.