February 11, 2021 / Law Alert

First Circuit wades into circuit split and decides the ‘but-for’ causation standard applies to False Claims Act retaliation actions

In a case of first impression in that circuit, the U.S. Court of Appeals for the First Circuit held that the causation element of the False Claims Act’s (FCA) anti-retaliation provision is a “but-for” standard. In Lestage v. Coloplast Corp., the First Circuit joined the Third, Fourth, Fifth and Eleventh Circuits in the current 5-3 split among the federal appellate courts.

The language of the FCA forbids employers from discriminating against an employee “because of” lawful acts undertaken under the FCA to protect the government’s interest. The FCA’s anti-retaliation provision protects employees from being “discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts done by the employee.” Courts assess FCA retaliation claims under a burden-shifting framework that requires the employee to prove:

  1. She engaged in protected conduct under the FCA;
  2. That the employer knew she engaged in such conduct; and
  3. That the employer retaliated against her “because of” such conduct. 

Once this is shown, the employer must come forward with evidence of a non-retaliatory reason for the adverse employment action.

Analyzing this framework, the First Circuit rejected the district court’s “substantial motivating cause” jury instruction and affirmed the district court by finding an employer, Coloplast Corporation, liable for damages under the anti-retaliation provision of the FCA.

Lestage’s qui tam action and Coloplast’s alleged retaliation

In Lestage, the plaintiff, Amy Lestage, began working for Coloplast, a medical device development company, in 2004. In 2010, she became the company’s first key account manager, making her responsible for making sales to, and managing Coloplast’s relationship with, key accounts. One key account was Coloplast’s largest customer, Byram Health Care. At the time, Byram made up around 80% of Lestage’s sales. 

In December 2011, Lestage and others filed a qui tam action under the FCA, naming Coloplast and several Coloplast competitors and clients, including Byram. A qui tam action is a type of whistleblower lawsuit in which complainants assist the government in prosecuting cases of fraud against the government. The action was filed under seal and alleged that Coloplast violated the FCA by paying kickbacks to Byram and other customers. On Aug. 21, 2014, the U.S. Department of Justice decided to take over the case as its own and unsealed the complaint. 

On Dec. 19, 2014, Byram sent an email to Coloplast’s senior vice president stating that Byram “no longer wish[ed] to work with Lestage.” In response, on Dec. 23, 2014, Coloplast placed Lestage on indefinite paid administrative leave. Only after Coloplast settled the qui tam action in January 2016 did the company ask that Lestage return. 

Upon her return to Coloplast, Lestage claimed she was not reassigned to some of her previous accounts. Instead, she was assigned to inferior accounts without much growth potential that arguably did not allow Lestage to meet her growth targets, a fact the parties disputed. 

Lestage then filed suit against Coloplast, alleging that the company unlawfully retaliated against her in violation of the FCA by putting her on administrative leave and reassigning her accounts.  The FCA prohibits employers from discriminating against an employee “because of” his or her protected conduct, including filing a qui tam lawsuit (emphasis added).

At trial, the district court instructed the jury that the words “because of” in the FCA meant that the jury must find that Lestage’s protected conduct was “the substantial motivating factor” in Coloplast’s actions against her. The jury ultimately returned a verdict in Lestage’s favor, concluding that both the forced administrative leave and the account assignments were adverse employment actions taken “because of” Lestage’s involvement in the qui tam suit and awarded Lestage $762,525 in compensatory damages. The district court denied Coloplast’s motions for judgment as a matter of law and a new trial. Coloplast then appealed to the First Circuit. 

First Circuit rejects Coloplast’s arguments

The First Circuit affirmed the jury’s verdict for Lestage. First, the court rejected Coloplast’s argument that the action of placing Lestage on leave in response to Byram’s request to have her removed from its accounts foreclosed Lestage from proving causation. The First Circuit concluded there was more than sufficient evidence that Lestage would not have been placed on leave “but-for” her protected action (that is, filing the qui tam suit).

Second, the First Circuit rejected Coloplast’s justifications for putting Lestage on leave instead of removing her from the Byram account. According to the court, Coloplast offered no evidence that it actually did any investigation into Lestage’s work performance and did not bring Lestage back to work until after the qui tam suit was resolved.

Third, the First Circuit found that Coloplast took an adverse employment action against Lestage by failing to reassign one of her previously-assigned accounts upon her return from administrative leave. The court reached this conclusion because Coloplast failed to reassign the account several times after Lestage’s replacement’s departure.

Finally, the First Circuit found no error in the district court’s jury instructions. The court of appeals rejected the district court’s interpretation of the FCA that “because of” means “substantial motivating cause,” finding instead that the FCA imposes a “but-for” standard. But the First Circuit held that the error was not plain as this was a question of first impression in the circuit. According to the First Circuit, the “substantial motivating cause” jury instruction of the district court and the “but-for” standard achieved the same result. The First Circuit, therefore, affirmed the jury’s verdict and awarded costs to Lestage.

Handling the split

The First Circuit’s reading of the anti-retaliation provisions of the FCA is consistent with rulings from the Third, Fourth, Fifth and Eleventh Circuits. The District of Columbia, Sixth and Seventh Circuits, however, apply the less-stringent “motivating factor” standard of causation in FCA retaliation claims. While five of the thirteen circuit courts have adopted the “but-for” causation standard, a split among the circuits exists. Practitioners should be aware of the standard adopted in their circuit court and the potential opportunity to use the split to their advantage. Most often it is wise to engage legal counsel with FCA and government investigation response experience to ensure compliance with the FCA and the proper state of the law regarding FCA retaliation claims. 

For more information, contact David Kelch or Carrie Garrison.