United States of America, ex rel. Andre Petras v. Simparel, Inc., et al.

Andre Petras appeals the District Court’s dismissal of

his reverse False Claims Act suit against his former employer,

Simparel, Inc.; David Roth, Simparel’s founder and Chief

Technology Officer; and Ron Grilli, Simparel’s Chief

Executive Officer (collectively, “the Simparel defendants”).2

Petras initially alleged a reverse FCA claim3 and

retaliation claim4 under the False Claims Act against the

Simparel defendants, as well as a conspiracy claim5 against

all of the defendants. The District Court dismissed the

reverse FCA claim without prejudice, but the remaining

conspiracy and retaliation claims were dismissed with

prejudice. Petras reasserted the reverse FCA claim against

the Simparel defendants in a Second Amended Complaint,

which the District Court again dismissed.

2 In his First Amended Complaint, Petras also sued Log

Logistics, another company Roth founded; and MontERP

Enterprises, f/k/a Ron Cacchione LLC, a Canadian consulting

company.

3 31 U.S.C. § 3729(a)(1)(G).

4 Id. § 3730(h).

5 Id. § 3729(a)(1)(C).

3

On appeal, Petras challenges the District Court’s

dismissal of both Complaints. For the reasons that follow, we

will affirm.

I.

A. Background

Simparel sells proprietary software to apparel

manufacturing companies. Simparel’s original investor was

L Capital, a venture capital firm licensed by the Small

Business Administration, a federal agency. The SBA

provided over $90 million to L Capital through the purchase

of certain securities, over $4 million of which was invested in

Simparel. In return, L Capital received preferred shares of

Simparel representing 50.1% of that entity. That amount was

later reduced to 37.88% after the firm sold some shares.



The Amended and Restated Certificate of

Incorporation (“the Certificate”) specified two conditions that

would require Simparel to pay preferred shareholders, such as

L Capital, accrued dividends. The Certificate provided for

such payments if Simparel’s Board exercised its discretion to

pay the dividends or if Simparel underwent an involuntary or

voluntary liquidation, dissolution, or windup.



From 2007 to 2012, Petras was Simparel’s Chief

Financial Officer, David Roth was CTO, and Ron Grilli was

its CEO. The SBA was appointed as receiver of L Capital in

2012 after Simparel failed to comply with its SBA funding

agreement. Petras contends that this failure resulted in the

SBA becoming a preferred shareholder in Simparel, thus

triggering the Certificate’s provisions and entitling the SBA

to accrued dividends as a direct shareholder.



Petras does not allege that the Simparel Board ever

declared that dividends would be paid, or that Simparel

underwent liquidation, dissolution, or windup. He instead

claims that the Simparel defendants engaged in certain

fraudulent conduct—to which he objected—in order to avoid

paying the SBA these contingent dividends. For example, he

contends that the Simparel defendants engaged in tactics such

as hiding Simparel’s deteriorating financial condition from

the SBA, failing to hold board meetings to review quarterly

results, and neglecting to send Simparel’s financial statements



4



to the SBA, as well as other tactics. According to Petras, the

Simparel defendants did this to prevent the SBA from placing

Simparel into involuntary liquidation, which would have

triggered the accrued dividends payment. Petras also alleged

that the Simparel defendants avoided dividend payments by

diverting customers and technology from Simparel to Log

Logistics, which is a company Roth had formed, and

MontERP, a Canadian consulting company formed to provide

computer programming services to aid Simparel’s software

development.



After Petras was terminated from employment with

Simparel, he filed this suit under the FCA in District Court.

B. The District Court’s Dismissal Orders

Generally, an FCA action under 31 U.S.C. §

3729(a)(1) targets fraudulent efforts to obtain money from the

United States Government.6 A “reverse” FCA suit under §

3729(a)(1)(G), however, arises from fraudulent efforts to

reduce or avoid an obligation to pay the Government.7 More

specifically, § 3729(a)(1)(G) imposes liability on anyone who

“knowingly conceals or knowingly and improperly avoids or

decreases an obligation to pay . . . money . . . to the

Government.”



6 See Hutchins v. Wilentz, Goldman & Spitzer, 253 F.3d 176,

182 (3d Cir. 2001) (stating that a plaintiff must show that:

“(1) the defendant presented or caused to be presented to an

agent of the United States a claim for payment; (2) the claim

was false or fraudulent; and (3) the defendant knew the claim

was false or fraudulent”); United States ex rel. Customs

Fraud Investigations, LLC. v. Victaulic Co., 839 F.3d 242,

247 (3d Cir. 2016) (observing that FCA actions “[t]ypically . .

. allege that a person or company submitted a bill to the

government for work that was not performed or was

performed improperly, resulting in an undeserved payment

flowing to that person or company”).



7 See United States ex rel. Atkinson v. Pa. Shipbuilding Co.,

473 F.3d 506, 514 n.12 (3d Cir. 2007) (explaining that a

reverse FCA claim is “centered around an alleged fraudulent

effort to reduce a liability owed to the government rather than

to get a false or fraudulent claim allowed or paid”).



5



The District Court first dismissed with prejudice all of

the claims against the Simparel defendants and former

defendants (Log Logistics and MontERP) except for the

reverse FCA claim, which the District Court dismissed

without prejudice. The court held that Petras had not

adequately pled that the Simparel defendants had an

obligation to pay money to the Government because the

“obligations” Petras identified in his First Amended

Complaint were “outside the scope of the FCA’s definition of

an obligation.”8 The dismissal of those substantive claims

resulted in dismissal of Petras’s conspiracy claim. The

District Court also dismissed the retaliation claim, concluding

that Petras could not establish the required causal nexus

between the alleged retaliatory conduct and his FCA claim

because he had not pled that the defendants knew of his claim

or the related conduct.9



Petras responded by filing a Second Amended

Complaint in which he reasserted a reverse FCA claim

against the Simparel defendants and attempted to support it

with additional allegations.10 The attempt was unsuccessful,

as the District Court again dismissed the FCA claim against

the Simparel defendants. The District Court concluded that

the alleged obligation to pay the Government that was the



8 J.A., 0024.



9 The District Court also declined to find that Roth or Grilli

were “de facto employers” of Petras to hold them liable for

Petras’s retaliation claim. J.A., 0031.



In dismissing the claims against former defendants

Log Logistics and MontERP, the District Court first observed

that Petras withdrew his reverse FCA claim against the two

parties and accordingly dismissed that claim. The District

Court determined that with no underlying FCA claim,

Petras’s conspiracy claim could not stand. It also separately

concluded that it lacked personal jurisdiction over MontERP

anyway. Moreover, Petras’s conspiracy claim, according to

the District Court, did not meet Fed. R. Civ. P. 9(b)’s

pleading requirements.



10 In his Second Amended Complaint, Petras did not reassert

claims against Log Logistics and MontERP.



6



basis of the FCA claim was too “speculative” to give rise to

an obligation under the FCA.11



Petras now appeals the District Court’s dismissal of

both his First Amended Complaint and his Second Amended

Complaint.12



II.



A. Legal Standards



Our review of the District Court’s dismissal is

plenary.13 We have previously explained that a private

individual, known as a “relator,” may bring a civil action in

the name of the United States to enforce the FCA.14

Nevertheless, a relator’s action survives a motion to dismiss

11 J.A., 0049 –50. The District Court specifically rejected

Petras’s three central allegations as to how Appellees

prevented the dividend payout. The District Court, for

example, noted that Petras had not alleged that Simparel was

unable to pay the full value of accrued dividends if they ever

came due, or that had the shareholders known the information

about which he speculated, they would have dissolved

Simparel. It also observed that the shareholders had not

sought dissolution even after Petras’s allegations came to

light by way of this lawsuit. Finally, the District Court cited

the lack of factual allegations to support a conclusion that had

the Board meetings occurred, dividends would have been

declared. The District Court therefore concluded that Petras

did not state a claim under the FCA.



12 Petras does not appeal the dismissal of his retaliation

claims as against Roth and Grilli, individually, and we

therefore do not consider them. While Petras did not reassert

claims against Log Logistics and MontERP in his Second

Amended Complaint, he nonetheless now attempts to revive

the conspiracy claim against Log Logistics and MontERP that

he pled in his First Amended Complaint.



13 Customs Fraud Investigations, F.3d 242 at 248 (“We

review a District Court’s judgment of dismissal pursuant to

Federal Rule of Civil Procedure 12(b)(6) de novo.” (citing

Bronowicz v. Allegheny Cnty., 804 F.3d 338, 344 (3d Cir.

2015)).



14 U.S. ex rel. Wilkins v. United Health Grp., Inc., 659 F.3d

295, 305 (3d Cir. 2011) (citing 31 U.S.C. § 3730(b) & (d)).



7



under Rule 12(b)(6) of the Federal Rules of Civil Procedure

only if the factual allegations “raise a right to relief above the

speculative level.”15 Thus, the complaint must state a

“plausible claim for relief.”16



Beyond this general standard, we have also explained

that FCA claims in particular must be pled with particularity

under Rule 9(b).17 Under Rule 9(b), “the circumstances

constituting fraud or mistake shall be stated with

particularity,”18 and a party must plead his claim with enough

particularity to place defendants on notice of the “precise

misconduct with which they are charged.”19



With these standards in mind, we will proceed to

evaluate the District Court’s dismissal of each of Petras’s

claims.20



B. Petras’s Reverse FCA Claim



Petras’s reverse FCA claim alleges that the Simparel

defendants knowingly and improperly avoided a contingent

obligation to pay the accrued dividends to L Capital after L

Capital had been placed into receivership and was being

operated by the SBA. On appeal, Petras argues that the

District Court ignored the plain meaning of the FCA’s

definition of “obligation” and that the court’s ruling

contravenes Congress’s intent to broadly construe that term,



15 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).



16 Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).



17 Customs Fraud Investigations, 839 F.3d at 258 (assessing

the sufficiency of a reverse FCA claim using Fed. R. Civ. P.

9(b)); United States ex rel. Schmidt v. Zimmer, Inc., 386 F.3d

235, 242 n.9 (3d Cir. 2004).



18 In re Rockefeller Ctr. Props., Inc. Sec. Litig., 311 F.3d 198,

216 (3d Cir. 2002) (quoting Fed. R. Civ. P. 9(b)).



19 Lum v. Bank of Am., 361 F.3d 217, 223–24 (3d Cir. 2004),

abrogated in part on other grounds by Twombly, 550 U.S. at

557.



20 The District Court had jurisdiction over Petras’s FCA

claims under 31 U.S.C. § 3732(a) and 28 U.S.C. § 1331. We

have jurisdiction to review the District Court’s final order

under 28 U.S.C. § 1291.



8



as evidenced by recent amendments to the FCA.21 Petras also

challenges the District Court’s finding that the obligation he

alleged was too “speculative.”22 On that specific issue,

according to Petras, the standard is not whether it is “possible

that the triggering events for payment of accrued dividends

may never occur,” but rather simply whether it is “plausible”

under his Second Amended Complaint’s well-pleaded facts

that the contingencies “could reasonably occur.”23



We begin our analysis with the relevant statutory text.



For Petras to assert a viable reverse FCA claim, he must show

that the Simparel defendants “knowingly and improperly

avoid[ed] or decrease[d] an obligation to pay or transmit

money or property to the Government.”24 The Simparel

defendants reiterate their argument on appeal that Petras’s

reverse FCA claim fails because the SBA was not the

“Government” when it was acting as the receiver for L

Capital, a private entity. The District Court did not address

this issue. However, since it is an issue of first impression

before this court, we will take this opportunity to address it.



We conclude that the SBA, when acting as a receiver

under the circumstances here, was not acting as the

Government. In the absence of controlling precedent, we find

the decisions of our sister circuit courts of appeal helpful. In

United States v. Beszborn, for example, the Court of Appeals

for the Fifth Circuit held that the Resolution Trust

Corporation, an entity the Federal Government created to

handle failed financial institutions’ affairs, was not a

Government actor when operating as receiver of a failed

bank.25 As receiver, the RTC sued the former officers and

directors of the failed bank and obtained a judgment that

included punitive penalties.26 When the Government later

criminally charged the officers and directors for the same

conduct, the Fifth Circuit rejected the defendants’ double

jeopardy defense.27 The Fifth Circuit concluded that the



21 Appellant’s Br., at 28–29.



22 Id. at 29.



23 Id.



24 31 U.S.C. § 3729(a)(1)(G) (emphasis added).



25 21 F.3d 62, 68 (5th Cir. 1994).



26 Id. at 67.



27 Id. at 67–68.



9



RTC, as receiver, was not a Government entity because it had

merely stood in the failed bank’s shoes.28



More recently in United States ex rel. Adams v. Aurora

Loan Servs., Inc., the Court of Appeals for the Ninth Circuit

applied a similar principle under the FCA.29 There, relators

brought a traditional FCA suit against lenders and loan

servicers, alleging that they had submitted false certifications

to the mortgage entities, the Federal National Mortgage

Association (“Fannie Mae”) and the Federal Home Loan

Mortgage Corporation (“Freddie Mac”), by selling loans to

those companies.30 The relators argued that the false

certifications to Fannie Mae and Freddie Mac constituted

“claims” under the FCA because they were requests for

payment “‘presented to an officer, employee, or agent of the

United States.’”31 The court rejected the relators’ argument,

concluding that the mere fact of the Federal Housing Finance

Agency’s conservatorship of Fannie Mae and Freddie Mac

did not mean those companies had become “federal

instrumentalities.”32 The Ninth Circuit explained that the

Federal Housing Finance Agency, as conservator, assumed all

of Fannie Mae’s and Freddie Mac’s rights, titles, powers, and

privileges, “plac[ing] [the] FHFA in the shoes of Fannie Mae

and Freddie Mac, and giv[ing] the FHFA their rights and

duties, not the other way around.”33

The same logic applies here. As a general matter,

when a federally chartered—but private—entity is placed into

28 Id. at 68. See also Herron v. Fannie Mae, 857 F. Supp. 2d

87, 94–95 (D.D.C. 2012) (dismissing the plaintiff’s claim

under Bivens v. Six Unknown Named Agents of Fed. Bureau

of Narcotics, 403 U.S. 388 (1971) against the Federal

National Mortgage Association (“Fannie Mae”) and

emphasizing that it “was not converted into a government

entity when it was placed into conservatorship; instead, [the

Federal Housing Finance Agency] stepped into the shoes of

Fannie Mae”).

29 813 F.3d 1259, 1260 (9th Cir. 2016).

30 Id.

31 Id. (quoting 31 U.S.C. § 3729(b)(2)(A)(i)).

32 Id. at 1260–61.

33 Id. at 1261–62 (affirming the district court’s dismissal of

the relators’ FCA claim).

10

receivership, the relevant federal agency, acting as receiver,

“takes over the day-to-day operations and assumes the powers

of shareholders, board of directors, and management.”34 In

other words, the agency usually “steps into the private status

of the entity” 35 and does not retain any federal authority.

A governmental entity acting in its capacity as receiver

thus does not necessarily qualify as the “Government” for

purposes of the FCA. Here, the SBA, as the receiver of L

Capital, an indisputably private entity, assumed “all powers,

authorities, rights and privileges heretofore possessed by the

general partner, managers, officers, directors, investment

advisors and other agents of L Capital.”36 The SBA did so

“for the purpose of marshalling and liquidating in an orderly

manner all of L Capital’s assets and satisfying the claims of

creditors thereof in the order of priority as determined by

[the] Court.”37 The SBA thus temporarily “stepped into” L

Capital’s private shoes for the sole purpose of winding up the

firm. The authority for doing so was purely contractual in

nature. Accordingly, the SBA did not qualify as the

Government for purposes of the FCA.

We realize, of course, that the Ninth Circuit’s decision

in Adams concerned the FDIC and a traditional FCA claim.

However, that is a distinction without a difference. We see no

reasoned basis for reaching a different result for the reverse

FCA action before us. Indeed, the SBA’s own internal

operating procedures support the conclusion that the SBA

was not acting as a governmental actor for purposes of

Petras’s reverse FCA claim:

34 Herron, 857 F. Supp. at 93; see also, e.g., United States ex

rel. Todd v. Fid. Nat’l Fin., Inc., No. 1:12-CV-666-REBCBS,

2014 WL 4636394, at *9 (D. Colo. Sept. 16, 2014).

35 Herron, 857 F. Supp. 2d at 94; see also O’Melveny &

Myers v. FDIC, 512 U.S. 79, 86 (1994) (“[T]he FDIC as

receiver ‘steps into the shoes’ of the failed [financial

institution].”); Beszborn, 21 F.3d at 68 (“The RTC as receiver

of an insolvent financial institution stands in the shoes of the

bank assuming all debts of the bank.”).

36 J.A. 0210.

37 J.A. 0209.

11

After SBA is appointed as Receiver (SBAReceiver),

SBA is a fiduciary, responsible to the

court and to all creditors, including SBACreditor,

and parties in the interest of the proper

operation and/or liquidation of the debtor. The

Receiver is a separate legal entity and, as such,

its funds, records, claims, assets, and liabilities

are not the funds, records, claims, assets, and

liabilities of SBA or the Government. SBAReceiver’s

decisions must be made for the

benefit of the entire Receivership estate.38

Accordingly, Petras’s reverse FCA claim must fail at the

outset.39

Moreover, even if the SBA could qualify as the

Government, Petras’s reverse FCA claim would nevertheless

fail for the reasons set forth by the District Court.

The FCA defines “obligation” as “an established duty,

whether or not fixed, arising from an express or implied

contractual, grantor-grantee, or licensor-licensee relationship,

from a fee-based or similar relationship, from statute or

38 SBA, SBIC Liquidation SOP 10 07 1, at 52,

available at

https://www.sba.gov/sites/default/files/sops/serv_tool

s_sops_1007_1_0.pdf (first and third emphases in

original and remaining emphases added).

39 Despite Petras’s suggestion, our conclusion does not

conflict with dicta we provided in Hutchins, 253 F.3d at 176.

In Hutchins, a paralegal notified the United States Trustee

that his law firm employer was submitting fraudulent billing

statements to the United States Bankruptcy Court for payment

from the U.S. Treasury. As Petras notes, we stated in

Hutchins—with no additional analysis—that it was

“undisputed that the United States Trustee and the United

States Bankruptcy Courts are government agents for purposes

of the False Claims Act.” Id. at 182. The U.S. Trustee and

U.S. Bankruptcy Courts were not implicated as receivers in

that case, and neither party otherwise challenged whether

those entities were governmental actors. Thus, this Court’s

statement in Hutchins regarding those entities is of little

guidance on the specific issues here.

12

regulation, or from the retention of any overpayment.”40

Petras argues that the Simparel defendants’ obligation to pay

accrued dividends, while contingent on either the Board’s

declaration of dividends or the company’s liquidation,

nonetheless satisfies the FCA’s definition of an “obligation.”

To support his argument that this FCA definition includes

contingent obligations, Petras asks us to focus on “an

established duty, whether or not fixed.”41 According to

Petras, such qualifying language demonstrates that the term,

“obligation,” includes instances in which a legal duty did not

exist at the time of the FCA-prohibited conduct.

The FCA provision does not define “established duty;”

nor does it explain the meaning of the phrase, “whether or not

fixed.” Given the statute’s ambiguity, we will address the

parties’ arguments regarding legislative history.42

That legislative history confirms the District Court’s

conclusion that the contingent nature of the “obligations” at

issue here precludes a finding that they are sufficiently

definite to be included within the provisions of the FCA. The

current definition of “obligation” for reverse FCA claims

resulted from the 2009 amendments to the FCA that were part

of the Fraud Enforcement and Recovery Act of 2009

(“FERA”).43 The FERA Senate Report states that the new

definition of “obligation” was intended to address “confusion

among courts that have developed conflicting definitions.”44

The legislative history, as discussed below, reveals that an

“established duty” more likely refers to one owed at the time

that the alleged improper conduct under the FCA occurred.

Contrary to Petras’s argument, the term does not include a

duty that is dependent on a future discretionary act.

As originally proposed by United States Senators

Leahy and Grassley, the FCA provision defined obligation as

40 § 3729(b)(3).

41 Id.

42 See United States v. Kouevi, 698 F.3d 126, 133 (3d Cir.

2012) (“Legislative history is only an appropriate aid to

statutory interpretation when the disputed statute is

ambiguous.”).

43 Pub. L. No. 111–21, 123 Stat. 1617 (2009).

44 S. Rep. 111-10, at 14 (2009).

13

“a fixed duty, or a contingent duty arising from an express or

implied contractual . . . or similar relationship.”45 Senator

Kyl suggested revising the definitional language, “a fixed

duty, or a contingent duty,” to instead state: “an established

duty, whether or not fixed.”46 Senator Kyl was concerned

that under the original language Senators Leahy and Grassley

had proposed, relators would feel emboldened to sue to

enforce fines before the Government had “formally

established” the duty to pay them.47 For example, if a

corporation had falsely claimed compliance with a regulation,

a relator could then bring a reverse FCA suit based on this

conduct and assert that the corporation was improperly

avoiding an obligation to pay discretionary fines that the

Government might levy for this conduct. Senator Kyl

proposed his revision to prevent relators from bringing such

speculative FCA claims, and his proposal for the alternative

language was ultimately adopted.

Again, although the factual circumstances here are

different, the difference is without a distinction. The same

basic principle animating Senator Kyl’s concern applies.

Petras should not be able bring a reverse FCA claim alleging

that the Simparel defendants improperly avoided an

obligation to pay the Government because the obligation did

not exist when the defendants’ alleged misconduct occurred.

Even if we assume Petras’s allegations that the Simparel

defendants withheld financial information from the SBA and

diverted resources to other entities are true, the allegations do

not make out an FCA claim under the circumstances here.

The two events that would trigger an actual obligation to pay

dividends—either the Board’s declaration of the dividends or

Simparel’s liquidation—had not yet materialized, and Petras

does not allege that they had or that he even knew when they

would have materialized. Indeed, the obligation technically

would never materialize if the Board never exercised its

discretion to declare the dividends or if Simparel never

liquidated.

45155 Cong. Rec. S. 4539 (2009) (daily ed. Apr. 22, 2009)

(statement of Sen. Kyl).

46 Id.

47 Id.

14

Moreover, the legislative history of the statute’s other

relevant language—“whether or not fixed”—suggests a

reference to “whether or not the amount owed” was fixed at

the time of the violation, not “whether an obligation to pay

was fixed.”48 In discussing the meaning of “obligation,” the

Senate Judiciary Report explained that an “obligation arises

across the spectrum of possibilities from the fixed amount

debt obligation . . . to the instance where there is a

relationship between the Government and a person that

results in a duty to pay the Government money, whether or

not the amount owed is yet fixed.”49 This understanding of

the phrase conflicts with Petras’s argument that the “whetheror-

not-fixed” phrase refers to the contingent obligation in this

case—that is, the obligation to pay accrued dividends that

arises when the Board declares dividends, or if Simparel is

liquidated.

We conclude then that for a reverse FCA claim, the

definition of an “obligation” refers to one existing at the time

of the improper conduct to pay the Government funds, the

amount of which may not be fixed at the time of the improper

conduct.50 Our rationale accords with other appellate courts’

similar conclusions in other contexts.51

48 See United States ex rel. Boise v. Cephalon, Inc., No. 08-

287, 2015 WL 4461793, at *1 n.1 (E.D. Pa. July 21, 2015)

(internal quotation marks omitted) (quoting 1 John T. Boese,

Civil False Claims and Qui Tam Actions § 2.01[L], 2–83

(2014)).

49 S. Rep. No. 111-10, at 14 (2009) (emphases added)

(citations omitted) (internal quotation marks omitted).

50 In our recent consideration of whether a failure to pay

marking duties on imported products could give rise to a

reverse FCA claim, we consulted the history of the 2009

FERA amendments and observed that the amendments’ new

definition of obligation “favor[ed] a more broadly inclusive

definition” of the FCA’s reverse-false claim provision. See

Customs Fraud Investigations, 839 F.3d at 254. In that case,

the plaintiff had alleged that the defendant company,

Victaulic, neglected to notify the United States Bureau of

Customs and Border Protection (CBP) of its pipe fittings’

non-conforming status. This failure to notify resulted in the

pipe fittings being released into the stream of commerce in

the United States and, consequently, owed marking duties not

15

being paid. Id. at 254–55. The district court concluded that

Victaulic’s conduct was not grounds for false claims liability

because such duties “were too attenuated and contingent to

qualify as the types of obligations to pay money to the

government covered by the FCA.” Id. at 248. We rejected

the district court’s rationale. We explained that because the

duty accrued at the time of importation, “without

exception,”—which the plaintiff alleges Victaulic knew—all

the plaintiff had to prove to hold Victaulic liable under the

FCA was that Victaulic knew of its obligation under federal

law to properly mark its goods (or otherwise notify the CBP)

and that Victaulic failed to do so before its goods cleared

customs. Id. at 254–55 (observing that the 2009 United

States Senate Report “discussed customs duties for

mismarking country of origin, and how such duties would be

covered by the amended reverse false claims provision”

(internal quotation marks and citation omitted)).

Here, by contrast, the District Court’s concern about

the accrued dividends being too “speculative” to implicate

FCA liability is justified. For one, Petras has not alleged

either of the two conditions under which the Simparel

defendants’ obligations would have arisen. Petras never

alleges that the Board declared the dividends or had an

inclination to do so; nor had Simparel entered into

liquidation, and Petras does not allege as much. The District

Court did not, as Petras suggests, conflate the terms

“contingent” and “speculative.” Instead, the District Court

properly concluded that regardless of the proper definition of

“contingent,” the scenarios Petras advanced were so

speculative that they could not be considered a contingent

obligation. J.A., 0047. We agree with that conclusion.

51 In United States ex rel. Simoneaux v. E.I. duPont de

Nemours & Co., for example, a relator sued his former

employer under a reverse FCA action, alleging that his

employer had failed to report chemical leaks to the EPA, as

the Toxic Substances Control Act requires. 843 F.3d 1033,

1034 (5th Cir. 2016). The plaintiff claimed that the

employer’s failure to do so allowed it to avoid government

penalties, which, under the TSCA, the EPA has the discretion

to assess. Id. at 1040. The plaintiff argued that after the 2009

FCA amendments, the definition of “obligation” covered

“contingent” penalties. But the Fifth Circuit clarified that the

16

In sum, under the FCA provision’s plain language, the

Simparel defendants could not have “knowingly and

improperly avoid[ed] or decrease[d] an obligation”52 to pay

the accrued dividends at the time of their alleged misconduct

because the obligation did not yet exist. Accordingly, even if

the SBA qualified as the Government for purposes of Petras’s

FCA action, we would still affirm the District Court’s

dismissal of Petras’s reverse FCA claim.

C. Petras’s Conspiracy and Retaliation Claims

Petras’s remaining claims are (1) that Log Logistics,

MontERP, and the Simparel defendants all conspired to

violate the reverse FCA provision; and (2) that the Simparel

defendants unlawfully retaliated against him by terminating

him after they became aware that he might file a FCA suit.

Our explanation of why the District Court was correct in

dismissing the FCA claim applies with equal force to the

dismissal of Petras’s conspiracy claim.53

The District Court dismissed Petras’s FCA retaliation

claim because Petras had failed to sufficiently plead that the

Simparel defendants knew that he would file an FCA claim

before they terminated him. In order to properly plead a FCA

retaliation cause of action, Petras needed to show that “(1) he

engaged in ‘protected conduct,’ (i.e., acts done in furtherance

of an action under [31 U.S.C.] § 3730) and (2) that he was

discriminated against because of his ‘protected conduct.’”54

Petras also was required to show that the Simparel defendants

were “on notice of the ‘distinct possibility’ of False Claims

Act litigation and retaliated against him because of his

‘protected conduct.’”55 Petras claims that the District Court

erroneously concluded that he had not made clear that he had

“new definition resolved uncertainty regarding whether the

amount of an obligation needs to be fixed” and “did not upset

the widely accepted holding that contingent penalties are not

obligations.” Id. at 1036.

52 31 U.S.C. § 3729(a)(1)(G).

53 See Pencheng Si v. Laogai Research Found., 71 F. Supp.

3d 73, 89 (D.D.C. 2014) (“[T]here can be no liability for

conspiracy where there is no underlying violation of the

FCA.”).

54 Hutchins, 253 F.3d at 186.

55 Id. at 191.

17

alerted the Simparel defendants of his intention to file an

FCA action.

Even if Petras had sufficiently alleged such notice—an

issue we do not address here—“the whistleblower protections

apply only to actions taken in furtherance of a viable False

Claims Act case,” though it need not be a “winning FCA

case.”56 Here, for the reasons already explained, Petras’s

reverse FCA action is not viable. Therefore, Petras’s

retaliation claim fails as well.

56 Dookeran v. Mercy Hosp. of Pittsburgh, 281 F.3d 105,

107–08 (3d Cir. 2002) (explaining that “courts . . . require

that there at least be a distinct possibility that a viable FCA

action could be filed . . . . If there is no way that [a plaintiff’s]

conduct of informing [his employer] about the allegedly

fraudulent application could reasonably lead to a viable FCA

action, then the whistleblower provision provides him no

protection.”); see also Hutchins, 253 F.3d at 188.

For the reasons set forth above, we will affirm the

District Court’s dismissal of Petras’s complaint.