Appeals court says reporting compliance problems alone doesn’t shield whistleblowers

The employee led product development at Olympus, US subsidiaries of a Japanese device maker and a major federal contractor. One of its US entities takes in more than $85 million in federal awards a year, with the Department of Veterans Affairs its largest domestic customer.

Over two weeks in early 2024, the executive raised concerns with several senior leaders that the company was, according to the complaint, violating U.S. Food and Drug Administration (FDA) rules on design and product testing. He believed, the filing says, that selling a product as it stood would mean “misrepresenting data to the FDA to obtain approval, as it had done in the past.”

The day after his final meeting on the issue, he was told his position had been eliminated. No other roles were cut at the time, the complaint says. He sued, alleging retaliation under the False Claims Act.

The court did give employees one procedural point: FCA retaliation claims need only ordinary notice pleading, not the strict standard used for fraud claims.

But another holding, the Third Circuit’s first on the question, decided the case. To be protected under the law’s “other efforts” prong, the court said, an employee must hold “an objectively reasonable belief” that the employer “has submitted, or will submit, false or fraudulent claims for payment to the federal government.” Reporting regulatory or safety problems, on its own, does not clear that line.