PSD Wins Dismissal for Client in Qui Tam Action in District of Maryland
On March 6, 2018, the United States District Court for the District of Maryland dismissed, in its entirety, a qui tam action brought by a former employee against a PSD client. The relator/plaintiff claimed that she was fired after reporting Form I-9 deficiencies to her supervisor. In a 21-page opinion, the court rejected all claims.
The court dismissed Count I, which attempted to plead a substantive violation of the False Claims Act. The court found a lack of sufficient allegations of falsity and materiality. In doing so, the court agreed with defendants that it could consider the forms at issue, blank versions of which were attached to the motion to dismiss. The court noted: “Because Potter has not contested the authenticity of these forms and they are integral to Potter’s Complaint, the Court considers them.” In its analysis, the court explained that, while allegations of false certifications of compliance can suffice under the FCA, “the compliance at issue must be ‘a prerequisite’ to securing the government funding and the defendant must have ‘certified such compliance,’” citing to a recent Supreme Court decision in Universal Health Servs., Inc. v. U.S. ex rel. Escobar, 136 S. Ct. 1989, 2001 (2016). As a result of the limited items that CASA certified, the court found that Potter failed to allege a false certification. Also, the court held that, “[b]ecause the Complaint does not show how CASA’s failure to disclose its 1-9 noncompliance would have influenced the government’s funding decisions, Potter has not adequately demonstrated materiality.” The dismissal was without prejudice in light of Potter’s complaint predating the Supreme Court’s decision in Universal Health, though the court noted skepticism about Potter’s ability to state a claim given the limited scope of items covered by the forms at issue.
The court dismissed Count II, which attempted to plead a conspiracy to violate the FCA, agreeing with defendants that “Potter’s conspiracy claim turns on the same factual basis regarding CASA’s failure to disclose its 1-9 noncompliance as her substantive FCA claim.”
The court also dismissed Count III, which attempted to plead a retaliation claim under the FCA The court found that Potter’s actual claim appeared to be that she was retaliated against for reporting Form I-9 deficiencies, which did not trigger the statutory protection, rather than for pursuing potential FCA claims. In addition, the court found that Potter’s allegations failed to show an objectively reasonable belief that a claim under the FCA might proceed at the time of any alleged retaliation. Again the court allowed Potter to try to replead, stating: “Potter is advised to plead with specificity the circumstances surrounding the disclosure to the DOJ that, in her view, support an objectively reasonable possibility of FCA litigation.” The court cautioned however, that “according to Defendants’ Reply, Potter’s DOJ disclosure focused on CASA’s supposed violations of immigration law rather than fraud under the FCA” and “to the extent Defendants are correct, Potter cannot cure her FCA retaliation claim based on the DOJ disclosure.”
Finally, the court dismissed Potter’s wrongful termination claim with prejudice, holding that “[b]ecause Potter did not aver that she reported any violations of law to outside authorities before her termination, her wrongful discharge claim on this basis must fail.”
PSD attorneys Barry Pollack and Alex Davidson worked on the motion.