FCA Alert

On September 13, 2010, the Third Circuit in Lytle v. Capital Area Intermediate Unit, upheld a district court's dismissal of claims brought under the retaliation provision of the False Claims Act, holding that recent amendments to the FCA did not have retroactive effect.

Plaintiffs, a bus company and its individual owners, operated as an independent contractor for defendant Capital Area Intermediate Unit (CAIU), an organization that provides transportation for special needs children. In 2004, plaintiffs notified the FBI that they believed CAIU had been committing fraud. In 2005, Plaintiffs brought suit alleging, among other things, that CAIU violated the employee retaliation provision of the FCA by harassing Plaintiffs and by reducing the amount it paid Plaintiffs for their services following plaintiffs' communications with the FBI.

Defendants subsequently moved for summary judgment, “arguing that Sec. 3730(h) provides a cause of action only to ‘employees,’ and that plaintiffs lacked statutory standing because they were independent contractors of CAIU.” The district court agreed and dismissed the claims. In May of 2009, with the enactment of the Fraud Enforcement and Recovery Act, Congress expanded the scope of this provision to include contractors and agents. On appeal, plaintiffs argued that, under the amended FCA, they had a viable retaliation claim under the FCA. The Third Circuit rejected this argument, noting that Congress had expressly provided that the 2009 amendment should not apply retroactively, and that the only wrongdoing alleged by Plaintiff took place long before the 2009 amendment.