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Media Alerts - Carlson v. Dyncorp Int'l LLC -- Fourth Circuit
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November 10, 2016
  Carlson v. Dyncorp Int'l LLC -- Fourth Circuit
Whistleblower Friendly: Fourth Circuit Introduces "Objectively Reasonable Belief" Standard

Areas of Law: Whistleblower Law, Civil Procedure

Issue Presented: Whether a court should apply an "objectively reasonable belief" standard in determining if an employee made efforts to stop a False Claims Act violation under the whistleblower provision of that statute.

Brief Summary: The United States Court of Appeals for the Fourth Circuit held that the district court should have applied an "objectively reasonable belief" standard, instead of a "distinct possibility" standard, in determining whether the plaintiff engaged in a protected activity by making efforts to stop an FCA violation. Nevertheless, the Fourth Circuit affirmed the district court's dismissal of the plaintiff's claim. The Fourth Circuit noted that the plaintiff's belief that his employer (the defendant) was violating the FCA was not objectively reasonable, because the defendant's under-billing of the government was not an FCA violation.

Extended Summary: The False Claims Act (FCA)'s whistleblower provision, 31 U.S.C 3730(h)(1), protects a government contractor's employee from the contractor's retaliatory conduct as a result of "lawful acts done by the employee . . . in furtherance of an action under this section" (the first prong) or "other efforts to stop [one] or more violations of this subchapter" (the second prong). In other words, the two kinds of protected activity are: 1) activity that supports an FCA action against the employer alleging a fraud on the government, and (2) activity that is part of an effort to stop an FCA violation. To establish a prima facie case under this provision (and thus survive a motion to dismiss), the employee must plausibly allege that he engaged in one of these two kinds of protected activity.

Carlson, a Director of Stabilization and Governance at government contractor DynCorp International, LLC (DynCorp), raised concerns with his supervisors about lower-than - average indirect costs that DynCorp included in its bid for a government contract. Carlson also informed his supervisors about DynCorp's other irregular accounting and billing practices. The supervisors did not address his concerns. Carlson was soon fired by DynCorp and was told his termination was due to a reorganization.

In the district court, Carlson filed a lawsuit against DynCorp under the FCA whistleblower provision for retaliatory termination. Carlson claimed that his questioning DynCorp's accounting and billing practices constituted an effort to stop an FCA violation, the second prong of the whistleblower provision. He also claimed that he was terminated by DynCorp in retaliation for engaging in his protected activity. The U.S. District Court for the Eastern District of Virginia dismissed Carlson's complaint without prejudice under Rule 12(b)(6) for failure to state a claim. Carlson re-filed, and the district court dismissed his amended complaint with prejudice for the same reason. In reaching its decision, the district court applied a "distinct possibility" standard established by Eberhardt v. Integrated Design & Const., Inc. Under this standard, an employee engages in protected activity "when the conduct reasonably could lead to a viable FCA action." 167 F.3d 861 (4th Cir. 1999).

The Fourth Circuit held that the "distinct possibility" standard did not apply to the second prong for three reasons. First, because the second prong specifically states "other efforts," applying the "distinct possibility" standard renders the second prong "nonsensical." Second, the "distinct possibility" standard no longer existed once Congress excised the relevant language from the provision in 2009. Third, applying the "distinct possibility" standard to both the old and the new language would render the latter a nullity, in contradiction to a canon that courts engaged in statutory interpretation must "give each word some operative effect."

The Fourth Circuit then "assume[d], without deciding," that Carlson's proposed "objectively reasonable belief" standard applied. Under this standard, efforts to stop an FCA violation constitute protected activity where "those efforts are motivated by an objectively reasonable belief that the employer is violating, or soon will violate, the FCA." In adopting the "objectively reasonable belief standard," the court noted that the 6th, 7th, 8th, and 9th Circuits have already adopted this standard. Second, the "objectively reasonable belief" standard aligns with the Fourth Circuit's treatment of similarly structured whistleblower provisions in Title VII, the Age Discrimination in Employment Act, and the Americans with Disability Act.

Applying the "objectively reasonable belief" standard, the Fourth Circuit held that Carlson failed to show that his belief that DynCorp was violating the FCA was objectively reasonable. The court found that all Carlson accused DynCorp of doing was under-billing the government on existing contracts. Noting that the intent of the FCA was to "reach all types of fraud . . . that might result in financial loss to the Government," the court held that under-billing would not cause such loss and was, thus, not an FCA violation.

To read the full opinion, click here.

Panel: Chief Judge Gregory, Circuit Judges Motz and Thacker

Argument Date: 03/01/2016

Date of Issued Opinion: 08/22/2016

Docket Number: No. 14-1281

Decided: Affirmed by unpublished opinion.

Case Alert Author: Ziyi He, Univ. of Maryland Carey School of Law

Counsel: Jacob Madison Small, J. MADISON PLC, McLean, Virginia, for Appellant. Edward T. Ellis, LITTLER MENDELSON, P.C., Philadelphia, Pennsylvania, for Appellee. ON BRIEF: Andrew B. Rogers, LITTLER MENDELSON, P.C., McLean, Virginia, for Appellee.

Author of Opinion: Chief Judge Gregory

Case Alert Supervisor: Professor Renée Hutchins

    Posted By: Renee Hutchins @ 11/10/2016 01:04 PM     4th Circuit  

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