On January 30, 2014,the California Court of Appeal for the Fifth Appellate District ruled that California State courts have concurrent jurisdiction over retaliation claims under the federal False Claims Act (FCA) in Driscoll v. Superior Court (Spencer). The following addresses the basis for that ruling and its implications.
Radiologist Scott Driscoll worked for physician Todd Spencer and his medical practice, the Todd Spencer, M.D., Medical Group, Inc. On behalf of himself and the Medical Group, Spencer sued Driscoll for defamation and various other contract and tort-based claims. Driscoll subsequently filed a cross-complaint, alleging retaliation in violation of 31 U.S.C. § 3730(h), the FCA whistleblower protection provision. Driscoll asserted that he was demoted, and eventually discharged, because he complained about billing practices he believed defrauded Medicaid and Medi-Cal. Spencer moved to dismiss, arguing that California courts lacked subject matter jurisdiction over FCA retaliation claims because the provision of the FCA creating a cause of action for retaliation authorizes a person to bring an action “in the appropriate district court of the United States.” The trial court granted Spencer’s motion with respect to the FCA retaliation claim, and Driscoll petitioned for a writ of mandate directing the trial court to vacate its order.
The Appellate Court’s Ruling
The Court of Appeal granted Driscoll’s petition for a writ of mandate. The court began its analysis by recognizing that the “deeply rooted presumption in favor of concurrent state court jurisdiction” is rebutted only where Congress “ousts” the state courts of jurisdiction over a particular federal claim by: (1) explicit statutory directive; (2) “unmistakable implication from legislative history”; or (3) “clear incompatibility between state-court jurisdiction and federal interests.” The court concluded that the FCA’s authorization of an action “in the appropriate district court of the United States” did not constitute an “explicit statutory directive” precluding state court jurisdiction because the FCA said nothing about state court jurisdiction. In addition, in response to Spencer’s argument the federal government’s status as “true party in interest” implicitly created exclusive federal jurisdiction over an FCA claim, the court highlighted the fact that FCA whistleblower retaliation claims are not brought in the federal government’s name. The court also disagreed with Spencer’s argument that permitting state courts to hear FCA claims would be incompatible with federal interests. In this regard, it noted that the California False Claims Act was modeled after the federal FCA and contained comparable whistleblower protections, such that state court judges would not be “unsympathetic” to FCA retaliation claims. The court added that state court judges presumably have great expertise in FCA matters since the FCA involves claims originally based in common law.
As a result of Driscoll, employers may now be subject to federal FCA whistleblower litigation in California state court, which some may view as a fairly employee-friendly forum in the employment retaliation context. Moreover, when coupled with the recent amendments to the California whistleblower statute that took effect on January 1, 2014, Driscoll creates the conditions for whistleblower litigation to increase by an order of magnitude in California state court in the next few years.