Friday, March 23, 2012

Court Finds FCA Retaliation Claims Subject to Arbitration

A U.S. District Court in Texas recently held that a False Claims Act  ("FCA") retaliation claim brought pursuant to 31 U.S.C. 3730(h) by a sales representative against his employer was subject to the arbitration clause of his Employment Agreement and dismissed the sales representative's case in favor of arbitration.  James v. Conceptus, Inc., 2012 WL 845122 (March 12, 2012, S.D. Tex).

In that case, the plaintiff, a sales representative for a medical device firm alleged that his employer, Conceptus, Inc., retaliated against by discharging him when he questioned the legality of how a sales representative marketed his employer's medical devices and how physicians billed Medicaid for such devices.  The plaintiff brought a "whistleblower-retaliation action under the False Claims Act, 31 U.S.C. 3730(h), in the Southern District of Texas.  His employer moved to compel arbitration under the plaintiff's employment agreement and to dismiss the suit in favor of arbitration.  The employment agreement specified the application of California law as well as a California forum, and the Court spent much of its opinion evaluating whether California law permitted the arbitration of such claims, finding in the end that such claims may be subject to arbitration.

The Plaintiff also claimed that arbitration provision of his employment agreement did not apply to his FCA retaliation claim on the grounds that the Dodd-Frank Act made such arbitration clauses for whistleblower claims unenforceable.  The Court observed that the Dodd-Frank Act, 7 USC 26(n) and 18 USC 1514A(e) amended the "whistleblower provisions of the Commodity Exchange Act and the Sarbanes-Oxley Act to make unenforceable any predispute arbitration clause of disputes arsing under those whistleblower sections as well as the Dodd-Frank Act itself, 12 USC 5567(d).  The Court, however, found that Dodd-Frank did not apply to the False Claims Act and 31 USC 3730(h) contains no similar provision.  Beyond its discussion of California law, the Court did not cite any other federal law or cases in making its determination that that the antiretaliation provisions of the False Claims Act would be made subject to arbitration.

Section 26(n) of Title 7 also provides that the "rights and remedies provided for" under the Commodities and Exchange Act qui tam provisions may not be waived.  Section 1514A(e) of Title 18 provides for a similar provision as the Sarbanes-Oxley Act.

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