False Claims Act Retaliation Allegations Allowed to Proceed Against Rolls-Royce

U.S. District Judge William T. Lawrence for the U.S. District Court of the Southern District of Indiana ruled on June 4, 2012, that Rolls-Royce Corporation (“RRC”) whistleblowers Thomas McArtor and Keith Ramsey could proceed with two of their four theories of liability against the company.  McArtor originally filed a qui tam suit against RRC on February 1, 2008, alleging that the company had violated the False Claims Act (“FCA”).  In 2010, the government notified McArtor of its decision not to intervene in the suit on his behalf.  Subsequently, McArtor amended his complaint to include another former employee of RRC, Keith Ramsey, as a relator, as well as a retaliation claim under the employee-protection provision of the FCA.

RRC is an aircraft engine and parts manufacturer that sells its parts for use in commercial and military aircrafts, including the United States military.  McArtor and Ramsey are both former quality control professionals at RRC.  At the heart of McArtor and Ramsey’s claim is the allegation that RRC fraudulently induced the United States to enter into nearly 200 aircraft engine contracts with the company by knowingly failing to disclose compliance and defect issues with their products.  They assert that these actions – and the company’s subsequent termination of both employees after reporting this conduct – violated the FCA and its corresponding employee-protection provision.

The FCA prohibits an employer from knowingly presenting a false or fraudulent claim to the government for payment or approval.  The employee-protection provision of the Act protects employees from being discharged or otherwise discriminated against because the employee sought to stop the employer from violating the Act.  In addition to the retaliation charge, McArtor and Ramsey allege that RRC violated the Act through:  (1) fraudulent inducement of government contracts by RRC; (2) fraudulent concealment of quality escapes; (3) false certificates of conformance; and (4) fraudulent inducement of contracts following the company’s 2005 recertification.

Although the Court granted RRC’s motion to dismiss Plaintiff’s fraudulent concealment and false certificates of conformance claims, it allowed Plaintiffs to move forward with their remaining claims.  According to David J. Marshall, a partner at the Washington, DC-based whistleblower firm Katz, Marshall  & Banks:  “This ruling is an important step forward for plaintiffs seeking to hold employers accountable for fraud on the government.  The False Claims Act is a valuable tool for policing fraud.  The anti-retaliation provision provides powerful protection against retaliation which individuals should feel secure in utilizing.”