Whistleblowers win in important False Claims Act cases

The Eighth Circuit Court of Appeals, which typically has sided with employers and other defendants rather than with whistleblowers and other plaintiffs, recently reversed the district court that had ruled in favor of defendants in a high-profile whistleblower case. In United States ex rel. Simpson v. Bayer Healthcare (In re Baycol Prods. Litig.), the Eighth Circuit rejected the district court’s pro-defendant rationale: that the relator somehow could not pursue a claim because she did not have personal knowledge of each element of the fraud about which she blew the whistle.

In short, In re Baycol Prods. Litig. confirmed that a whistleblower can successfully prosecute claims under the Federal False Claims Act, 31 U.S.C. §§ 3729, et seq., so long as he or she has direct knowledge of the facts showing a defendant defrauded the government. Therefore, the Eighth Circuit rejected the previously successful defense argument that the relator was not an “original source” who can successfully pursue claims as a whistleblower. In so ruling, the Eighth Circuit cited settled precedent that recognizes the pivotal role whistleblowers play in stopping retaliation and other violations of law.

The Ninth Circuit Court of Appeals also recently delivered a key victory for plaintiffs in another whistleblower case, which the relator pursues under both the Federal False Claims Act and the applicable State False Claims Act. In that case, United States and State of Nevada ex rel. Welch v. My Left Foot Children’s Therapy, the Ninth Circuit agreed with the district court that arbitration of the relator’s claims could not be compelled. The defendants sought to compel arbitration to cloak in secrecy the reportedly significant fraud against the government.

The Ninth Circuit’s reasoning in Welch seems to recognize the wisdom of the time-honored saying that sunshine is the best disinfectant. Put more formally, the transparency of public court proceedings helps to ensure accountability for those who would seek to defraud the taxpayers by, for example, billing the government for services not actually provided. The ruling in Welch should help ensure that whistleblowers can hold their employers and other defendants accountable in court more quickly and effectively. To that end, the Ninth Circuit reasoned that broad arbitration agreement terms, such as those declaring a dispute “related to the employment relationship” must be arbitrated, are not enough to force a False Claims Act case into the secrecy of arbitration.