When Congress amended the whistleblower protection provisions of the False Claims Act in 2009, it added “contractors” and “agents” to the ambit of protected whistleblowers. The purpose of these amendments was to ensure that whistleblowers disclosing or opposing fraud on the government would be protected. Recently a Tennessee federal judge held in Munson Hardisty LLC v. Legacy Pointe Apartments that the False Claims Act’s anti-retaliation provision protects a general contractor on a construction project funded by the U.S. Department of Housing and Urban Development (HUD) from retaliation for opposing fraudulent misrepresentations to HUD.
Munson Hardisty’s False Claims Act Retaliation Claim
Munson Hardisty served as a general contractor on Legacy Pointe Apartments, an apartment complex financed through a loan offered and insured by HUD. Pursuant to HUD regulations, Legacy Pointe and its investors were barred from entering into private secondary financing or receiving any distributions during the term of the construction financing. When Munson Hardisty learned that Legacy Pointe was refinancing the project, it refused to consent to the financing because it believed that the financing was being obtained under false pretenses that were fraudulent and wrongful. Legacy Pointe retaliated against Munson Hardisty by divesting the company of its ten percent membership in the project and refusing to pay for approximately $2M in work that Munson Hardisty performed building the apartment complex.Read more here.