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Heightened Notice Presumption Still Applicable After Amendments to FCA Retaliation Statute

May 22, 2015

Authors: Jason M. Crawford and Robert T. Rhoad.

Several commentators have cited the recent decision in Mikhaeil v. Walgreens (E.D. Mich. Feb. 24, 2015) as suggesting that the amendments to the anti-retaliation provision of the False Claims Act (FCA) may preclude a defense previously available in FCA retaliation cases. But any reports about the demise of the “heightened notice presumption” are greatly exaggerated.

Under certain circumstances, the heightened notice presumption makes it more difficult for a plaintiff to make out a prima facie FCA retaliation claim which requires a plaintiff to prove the following:

  • The employee engaged in protected activity;
  • the employer had notice that the employee was engaged in protected activity;
  • the protected activity could lead to FCA litigation; and
  • the employer retaliated against the employee because of the protected activity.

The majority of the Circuits have found that a heightened notice presumption applies in cases where the employee’s job responsibilities include fraud prevention. For example, in the Yuhasz v. Brush Wellman, Inc., 341 F. 3d 559 (6th Cir. 2003), the Sixth Circuit held that individuals whose jobs entail investigation of fraud must make clear their intention to bring or assist in an FCA action in order to overcome the presumption that they are merely acting in accordance with their employment obligations. In other words, if an employer thinks that the employee is simply doing his or her job, an employer cannot possess the retaliatory intent necessary to establish a violation of the FCA anti-retaliation statute. Ultimately, the application of the heightened notice presumption is a fact-specific inquiry, but defendants have had the most success utilizing the presumption in cases where the scope of the plaintiff’s employment clearly involved fraud detection, such as compliance officers and contract auditors. See, e.g., Fanslow v. Chicago Mfg. Center, Inc., 384 F.3d 469, 484 (7th Cir. 2004) (referring to such positions as “fraud-alert” employees).

The 2009 and 2010 amendments to the FCA’s anti-retaliation provisions broadened the definition of protected conduct by no longer requiring that the protected conduct be in furtherance of an FCA suit. Rather, a plaintiff engages in protected conduct so long as he or she takes steps to prevent the alleged underlying FCA violations. In Mikhaeil, the court concluded that a pharmacist put Walgreens on notice of protected activity when she reported potential Medicare fraud to her employer.  In denying the defendant’s motion for summary judgment as to the FCA retaliation claim, the court rejected Walgreen’s attempt to invoke the heightened notice presumption, writing “[e]ven assuming Plaintiff’s job requirements are similar to those of the employee in Yuhasz, Yuhasz no longer appears to be correct in light of the amendment to § 3730(h)) [the FCA anti-retaliation statute].” The Mikhaeil court’s reasoning, however, is based on a far too expansive reading of the amendments to § 3730(h). The amendments make clear that the employer does not need to be on notice that the employee is furthering an FCA case, but in order to make out a prima facie case, the employee must still demonstrate that the employer is on notice of protected conduct – even if that protected conduct is now broader under the amendments.

The Mikhaeil court’s interpretation of the amendments would eliminate the heightened notice presumption entirely – a conclusion not reached by any other court that has considered the presumption in the wake of the amendments to § 3730(h). On the contrary, courts continue to hold that – when an employee engages in reporting activities that could be mistaken for routine actions in accordance with her employment obligations – there is a heightened standard in order to meet the notice prong of the prima facie case for retaliatory discharge. See, e.g., Frett v. Howard Univ., 24 F. Supp. 3d 76 (D.D.C. 2014); Gronemeyer v. Crossroads Community Hospital, 2013 U.S. Dist. LEXIS 121143 (S.D. Ill. 2013). Indeed, even within the Sixth Circuit, the case law suggests that Yuhasz is alive and well. In Jones-McNamara v. Holzer Health Sys., Inc. (S.D. Ohio Apr. 28, 2014) – a case cited in Mikhaeil – the court found that “the relevant takeaway from Yuhasz remains the need for notice of the protected activity to the employer.”

As noted above, the application of the heightened notice presumption is a fact-specific inquiry. Even if the Mikhaeil court had analyzed the case under the Yuhasz presumption, it is unlikely that the court would have accepted the defendant’s argument that the nature of the plaintiff’s position required the plaintiff to report fraud. Indeed, few people would classify their neighborhood pharmacist as a “fraud-alert” employee. The outcome arguably should have been different if plaintiff had been a compliance officer rather than a pharmacist. In sum, under the right circumstances, the heightened notice presumption is still available as a viable defense in §3730(h) cases and, depending on the plaintiff’s former position in the company, the presumption can be a valuable arrow in the quiver for defense counsel.

Jason M. Crawford
Counsel – Washington, D.C.
Phone: +1 202.624.2562