A Whistleblower Hidden in Plain Sight:When Does an Employee Termination Risk a False Claims Act Filing?
Scenario One:[1] Sharon had been the new chief HR officer for just the last quarter at NewCo. Everything was going nicely — one of the smoothest transitions she’d ever made. The company was booming with new defense contracts, and she was busy hiring (her favorite). Processes were a little loose, but that was her specialty, right? Everyone in the c-suite was busy working on the quarterly round-up. That’s what made the hush and security officers so unusual on a Wednesday afternoon. Walking toward her in the hall, accompanied by security carrying his belongings, was the long-time director of finance, Richard Dingle. Richard was recently passed over for the CFO role in favor of a younger, “more rounded” outside candidate with merger and acquisition experience. Richard glared at her and said, “This isn’t done. You people….” But why hadn’t the CEO, Roger, spoken to her about this? Sharon headed to Roger’s office, where a mini c-suite meeting was taking place without her. Roger looked at her in the doorway and said, “Sharon, he was threatening our very existence. The damn fool handed me a report he prepared and said we needed to pay the Department of Defense back the entirety of profits from last quarter. Something about how we billed them incorrectly. He said he had more. Well, I’ve made a decision, and that’s all you need to know.”
Scenario Two:[2] Sally really enjoyed the collaborative feel of her new office. Although she’d been an ARNP for a few years, this office really seemed to have it together. Beautiful facilities, great automation, and everyone seemed so nice. The supervisory doctor in the practice was super busy but that was normal for gastrointestinal surgeons. The term for her position was an “extender.” Like the other providers she met during her interviews, her job was to churn out daily office visits with new patients, yearly checkups, and surgical follow-ups. Sally couldn’t imagine why the office manager and one of the other ARNPs she met during her interviews just left the practice. This employer even paid for the fitness club down the street!
One of her repeat patients complained about getting billed for a procedure that wasn’t performed. Sally checked her charts to verify, and the patient was correct. It must be another computer glitch. She caught one a few weeks ago where the medical assistants were cutting and pasting patient information during initial patient work-ups. Sally approached the practice manager about it and was met with a friendly yet totally unhelpful response. Over the next few weeks, Sally noticed more charting concerns and more billing irregularities. There was no compliance officer in this medium-sized, multi-office practice. She finally had enough and sent a few emails copying “everyone.” Nothing, no response, just silence for what seemed like weeks. Surely, they must be working on it. Did I mention that they provided fresh bagels for staff every morning and hot lunch on Fridays? So, Sally was surprised when the practice manager contacted her to schedule her six-month review. Sally was even more surprised at that meeting when she was met with a severance agreement and cardboard boxes instead of a review.
Employment counsel — you’ve just received the phone call. For plaintiff’s counsel, it’s a request for consultation on a wrongful termination. For defense counsel, it’s a consult on a problem employee, a pre-termination checklist conversation, an unemployment appeals request, or perhaps your client received a demand letter of some kind. We know that separation is sometimes unavoidable. But sometimes, the continuing consequences of a separation are also unavoidable if managed poorly. This article discusses the ramifications of workforce management in light of federal fraud and abuse statutes, specifically the False Claims Act (FCA).[3] The article begins with the origins and background of qui tam claims, then reviews the characteristics of a whistleblower claim, and finally examines the risks of a qui tam employment retaliation claim plus (or instead of) a qui tam claim, including details on how those retaliation claims develop.
Qui Tam History/Background
The term “qui tam” is an abbreviation of the Latin phrase qui tam pro domino rege quam pro se ipso in hac parte sequitur meaning, “he who sues in this matter for the king as well as for himself.” In English common law, a private citizen assisting in the prosecution of a matter could receive a portion of the property forfeited by the defendant.
During the Civil War (1861-1865), Congress sought ways to reduce fraud perpetrated by fraudulent vendors of defective merchandise and spavined mules. In 1863, the False Claims Act or “Lincoln Law” was enacted.[4] The law permits private citizens to file actions against government contractors or vendors claiming fraud against the government. If the case is successful, then the relator may share in a percentage of the monetary recovery.[5]
The False Claims Act was strengthened in 1986 in response to reports of price gouging by military defense contractors.[6] The FCA imposes civil liability upon “any person” who “knowingly presents, or causes to be presented, to an officer or employee of the United States government…a false or fraudulent claim for payment or approval.”[7] A defendant may be liable for up to triple actual damages and a civil penalty of up to $10,000 per false claim, false statement, or false bill, plus attorneys’ fees to the relator.[8]
Although an FCA action may be commenced by the government itself,[9] more commonly, it is commenced by the relator filing suit “for the person and for the United States government” against the false claimant “in the name of the government.”[10] When the relator files suit, he must deliver a copy of the complaint and all supporting evidence (i.e., a written relator’s disclosure statement) to the Department of Justice (DOJ), which then has 60 days to intervene in the action. If it does so, then the DOJ assumes primary responsibility for prosecuting the action though the relator may continue to participate through counsel. If the government declines, the relator may continue the action.[11] The government retains the right to intervene later with leave of court.[12]
In the past 30 years, it is estimated that over $48 billion has been recovered from those who have defrauded the U.S. government.[13] In 1986, the U.S. recovered $89 million from detecting and prosecuting fraudulent transactions. In fiscal year 2016, the DOJ obtained more than $4.7 billion in settlements and judgments from civil cases involving fraud and false claims acts; of that amount, $2.5 billion came from the healthcare industry including drug companies, medical device providers, hospitals, and physicians. Significant recoveries have also been obtained from prosecuting fraud in the financial industry including housing and mortgage fraud. Also, in fiscal year 2016, the government paid out $519 million to the individual relators or “whistle blowers” who exposed the fraud by filing qui tam complaints.[14] Former Deputy Assistant Attorney General Benjamin Mizer, head of the DOJ’s Civil Division, explained:
[T]he qui tam provisions provide a valuable incentive to industry insiders who are uniquely positioned to expose fraud and false claims to come forward despite the risk to their careers. This takes courage, for which they are justly rewarded under the [a]ct.[15]
The most recent statistics available show that 2018 closed with $2.8 billion in recoveries under the False Claims Act.[16]
Whistleblower Claims, Characteristics, and Commonalities
The False Claims Act (FCA) imposes civil liability on a person who “knowingly presents or causes to be presented, [to the United States]…a false or fraudulent claim for payment or approval[.]”[17] The “knowingly” requirement may be actual knowledge, deliberate ignorance, or reckless disregard of the truth or falsity of the information submitted.[18] The FCA states that the government may recover damages for false claims dating back six years.[19] However, relators may have up to 10-year look-back based on the recent Supreme Court decision in Cochise Consultancy, Inc. v. United States ex rel. Hunt, ___ U.S. ___, 139 S. Ct. 1507, 1511 (2019).[20]
The relators need not show they were personally harmed by a defendant’s conduct, but they must have personal knowledge and specific evidence of the fraudulent conduct. An unhappy former employee who feels his or her employer has been cutting corners is insufficient. Ideally, the complaint will read like a motion for summary judgment outlining specific evidence of misconduct with supporting invoices or other evidence. For this reason, relators are often former senior executives, bookkeepers, accountants, operations managers, or other employees with first-hand knowledge of, and access to, records on what was promised, what was delivered, and what was billed.
Practical Considerations for Relator’s Counsel
The ideal relator is an employee in a position of responsibility with access to billing and financial information. It is generally insufficient if the employee merely suspects or presumes that fraudulent conduct is occurring. The DOJ requires hard evidence in the form of specific invoices, memoranda, emails, or other material to corroborate the testimony of the relator. An employee’s knowledge or opposition to unlawful acts creates enterprise risk. Similarly, the complaint must be detailed and specific. A complaint under the FCA must meet the heightened pleading standard for fraud or mistake set forth in Federal Rule of Civil Procedure 9(b).[21]
Following the filing of the complaint under seal, certified copies are sent to the U.S. attorney general and the DOJ office where the case is pending. If a state government is named in the matter with the relator, states have specific statutes with required notification processes.[22] The DOJ has 60 days within which to review the matter, but this period is routinely increased to six to 18 months so as to afford the DOJ and related agencies time to conduct a thorough investigation and to communicate with the target of the investigation.
The Interview
Upon initial investigation by the DOJ, a small percentage of qui tam filings rise to the level of an in-person interview with DOJ staff. The assistant U.S. attorney assigned to the case with investigators from the agencies involved will conduct an in-depth interview of the relator. The government will be assessing the relator’s subject-matter knowledge and specific evidence of fraud, as well as evaluating the credibility of the relator as a witness.
The complaint must be kept under seal pending the investigation by the DOJ. Until the seal is lifted by the court, the complaint and the relator’s statement are confidential. The complaint is not served on the defendant, and the relator is instructed to keep the entire matter strictly confidential pending the outcome of the investigation. If confidentiality is breached, or if it is determined that the relator is not the “first to file,” or if the relator is not the original source of the information, the case may be dismissed. If the government concludes its initial investigation and elects to intervene, it will often initiate negotiations with the defendant, which may result in a complete resolution of the case. Obviously, those matters in which the government intervenes have a higher likelihood of successful resolution by settlement.
Relator’s Bounty
Pursuant to the act, the relator in a successful qui tam lawsuit may receive a bounty of up to 30% of the amount recovered by the government. However, the typical amount awarded to the relator, and negotiated by relator’s counsel, may be in the range of 5% to 15% when the government intervenes.[23] Amounts toward the higher end of the scale have been awarded in nonintervened cases in which relator’s counsel makes a significant investment in pursuing litigation in continuation of the qui tam matter.[24] Higher-end amounts have also been awarded in extraordinary cases, such as when the relator returns to the workplace wearing a wire to collect additional evidence of the fraud.[25]
Twin Employer Risks: Claim Plus Retaliation
We have surveyed the history of the qui tam, reviewed how FCA claims progress, and identified characteristics of potential qualified relators. So why is there additional enterprise risk? Because in some cases, relators reported fraud internally first, only to be met by discouragement, discipline, and eventual discharge. In those cases, the corresponding retaliatory discharge claim may be filed in separate counts of the qui tam action. Although employment relationships between employers and employees are contractual in nature,[26] a statutory claim for retaliatory discharge is embedded within the FCA.[27] This enterprise risk can exist in addition to or instead of an underlying whistleblower action. An employee may pursue a standalone retaliation claim based upon protected activity where no actual whistleblower claim would ever be filed.[28] When monitored properly, these §3730(h) claims (commonly called “h” claims) will survive a settlement negotiated by the DOJ and the defendant(s), unless included in that negotiation.
Mechanics of a 3730(h) Claim
To meet their burden under §3730(h) in the 11th Circuit, relators must either establish a prima facie case of retaliation under the FCA or, in the alternative, prove that the employer’s proffered legitimate reasons for termination were merely a pretext to engage in retaliation.[29] In order to establish a prima facie case under this statute, a plaintiff must show 1) [the employee] engaged in protected conduct; 2) the defendant took adverse action against [the employee’s] employment; and 3) the defendant took the adverse action because of [the employee’s] protected conduct.[30] Again, a complaint under the FCA ordinarily must meet the heightened pleading standard for fraud or mistake set forth in Fed. R. Civ. P. 9(b).[31] However, a §3730(h) claim does not depend on allegations of fraud and so need only satisfy Rule 8’s traditional pleading requirements.[32] Congress amended this statute in 2009, expanding both the scope of persons protected by the FCA and the types of activities an employee might use to stop a violation of the FCA.[33] The current statute states:
Any employee, contractor, or agent shall be entitled to all relief necessary to make that employee, contractor, or agent whole, if that employee, contractor, or agent is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts done by the employee, contractor, agent or associated others in furtherance of an action under [the FCA] or other efforts to stop [one] or more violations of this subchapter.[34]
The first element, protected conduct, encompasses conduct by the employee during his or her employment specifically intended to stop a violation of the FCA.[35] The second element, employer awareness, is fact specific. Awareness is also frequently combined in analysis with the third element, causation.[36] As the 11th Circuit’s Reynolds v. Winn-Dixie Raleigh Inc., 620 F. App’x 785, 792 (11th Cir. 2015), case shows, not all enterprise awareness is equal.[37] The employee must prove that the decision-maker responsible for the adverse employment decision was aware of the employee’s protected conduct.[38] The third element, causation, can have multiple facets. The caselaw states that a plaintiff’s showing of causation need only describe how an adverse employment action and the protected conduct are not unrelated.[39] Causation may also be established by evidence of close temporal proximity between protected conduct and an adverse employment action, like termination.[40] Yet, the 11th Circuit does not have a bright-line rule on temporal proximity.[41] Note that these inquiries are generally fact-intensive and involve fact-specific questions for the jury.[42]
Termination as an Invitation to a Qui Tam Suit
A decision to terminate an employee can be a complex one. While some terminations are justified for well-documented reasons, others are less clear. Complexity can arise leading up to a termination, or afterward when an enterprise’s actions and processes are later evaluated by counsel. Additional complexity arises based on the type of business engaged in by the enterprise — perhaps they accept federal reimbursements, perhaps they are otherwise federally regulated. Counsel’s understanding of the underlying business is key to assessing risk to the enterprise.
The (former) employee’s elevation or function in the enterprise is also important to the analysis of enterprise risk. While not determinative, more senior staff tend to have access to greater amounts of confidential, possibly damaging information. Senior staff might be involved in deliberations and direction around the handling of internal inquiries. Staff in key finance, operations, or compliance roles may have greater visibility to inevitable internal errors or worse. An enterprise’s risk profile elevates when a higher number of these factors exist in the workplace.
New Lines of Inquiry
A more direct, simple line of inquiry might hold value — did the employee ever discuss the enterprise’s violation of law or regulation? If yes, despite an employee’s role or elevation, significantly more investigation is warranted to explore a potential exposure. For example, relator Elin Balid-Kunz, in her recent Halifax Hospital qui tam litigation,[43] quoted damning internal communication repeatedly. Her second amended complaint reads like a cautionary tale for defense counsel and a treasure map for the plaintiff’s bar. In practice, the truth lies somewhere between. But when asked to consult on a pending termination, or review a termination that seems rushed or unwise, the workplace characteristics noted herein merit additional inquiry.
In our introductory scenarios, what inquiries you would make if requested to defend or prosecute? Consider:
1) Is/was the termination decision rushed? If yes, why?
2) What was the terminated employee’s role? How senior was that individual?
3) Does the enterprise bill the federal government for goods or services? Is the enterprise otherwise federally regulated?
4) Had the individual made any internal complaints regarding violation of statute or regulation, or incorrect billings to the federal government? If yes, to whom and how?
5) Were any of these notices in electronic form? If yes, let’s review your electronic retention processes and then create a quarantine to preserve any related ESI immediately.
6) Did the individual have access to information of wrongdoing or make disclosure of that information internally?
7) Does the individual possess evidence of wrongdoing today?
8) Is there adequate justification for a termination?
9) Has the enterprise been meticulous with their documented HR processes leading up to this termination?
10) Has the enterprise engaged in careful timing surrounding this termination?
11) If asked, how would you respond to a question about an unemployment hearing or the preparation of a severance agreement (or a review of one tendered)?
The insight gained from these additional lines of question may provide a higher value interaction with a client.
Conclusion
While this article is not intended as a detailed treatise on the FCA, it hopefully has provided a heightened awareness of the FCA for employment lawyers and a roadmap to essential inquiry for both defense and plaintiff counsel when dealing with such issues. A practitioner never wants to hear a client ask, “Why didn’t you discuss that with me?” So, when you receive that next phone call, you won’t miss the whistleblower hiding in plain sight.
[1] The characters, names, and incidents depicted are fictitious and for illustrative purposes only. Any similarity to the name, character, or history of any person is entirely coincidental and unintentional.
[2] Id.
[3] 31 U.S.C. §§3729-3733 (2012).
[4] 31 U.S.C. §3729.
[5] Id.
[6] See False Claims Amendments Act of 1986, P.L. 99-562 (1986).
[7] See note 4.
[8] Id.
[9] 31 U.S.C. §3730(a) (2012).
[10] 31 U.S.C. §3730(b)(1) (2012).
[11] 31 U.S.C. §§ 3730(b)(4)(B), (c)(3) (2012).
[12] Id.
[13] Mary Jane Wilmoth, Today is the Thirtieth Anniversary of the 1986 FCA Qui Tam Amendments, Post to Whistleblower Protection Blog, National Whistleblower Center (Oct. 27, 2016), https://www.whistleblowersblog.org/2016/10/articles/false-claims-qui-tam/today-is-the-30th-anniversary-of-the-1986-fca-qui-tam-amendments/.
[14] Id.
[15] Id.
[16] Department of Justice, Fraud Statistics Overview (Sept. 30, 2018), https://www.justice.gov/civil/page/file/1080696/download?utm_medium=email&utm_source=govdelivery.
[17] See note 4.
[18] 31 U.S.C. §3729(a)(b) (2012).
[19] 31 U.S.C. §3731(b) (2012).
[20] Under the third interpretation, §3731(b)(2) applies in nonintervened actions, and the limitations period begins when “the official of the United States charged with responsibility to act in the circumstances” knew or should have known the relevant facts. The district court rejected the third interpretation and declined to choose between the first two because it found that Hunt’s complaint would be untimely under either. The court of appeals reversed and remanded, adopting the third interpretation. Cochise Consultancy, Inc. v. United States ex rel. Hunt, ___ U.S. ___, 139 S. Ct. 1507, 1511 (2019) (citation omitted).
[21] Hopper v. Solvay Pharm., Inc., 588 F.3d 1318, 1324 (11th Cir. 2009).
[22] For example, Fla. Stat. §68.083 (2018), Civil actions for false claims.— “(2) A person may bring a civil action for a violation of s. 68.082 for the person and for the affected agency. Civil actions instituted under this act shall be governed by the Florida Rules of Civil Procedure and shall be brought in the name of the State of Florida. Prior to the court unsealing the complaint under subsection (3), the action may be voluntarily dismissed by the person bringing the action only if the department gives written consent to the dismissal and its reasons for such consent.
(3) The complaint shall be identified on its face as a qui tam action and shall be filed in the circuit court of the Second Judicial Circuit, in and for Leon County. Immediately upon the filing of the complaint, a copy of the complaint and written disclosure of substantially all material evidence and information the person possesses shall be served on the Attorney General, as head of the department, and on the Chief Financial Officer, as head of the Department of Financial Services, by registered mail, return receipt requested. The department, or the Department of Financial Services under the circumstances specified in subsection (4), may elect to intervene and proceed with the action, on behalf of the state, within 60 days after it receives both the complaint and the material evidence and information.”
[23] 31 U.S.C. §3730(d)(1) (2012).
[24] 31 U.S.C. §3730(d)(2) (2012).
[25] For a discussion of factors that adjust relator’s share up or down, see Jesse Hoyer, How Much Does the Relator Get? Factors That Are Considered In Determining Relator’s Share (Aug. 5, 2013), http://www.jameshoyer.com/how-much-does-the-relator-get-factors-that-are-considered-in-determining-relators-share/.
[26] See Army Air Force Exchange Service v. Sheehan, 456 U.S. 728, 733-36 (1982).
[27] 31 U.S.C. §3730(h) (2012).
[28] Sanchez’s allegations that she complained about the defendants’ “unlawful actions” and warned them that they were “incurring significant criminal and civil liability” would have been sufficient, if proven, to support a reasonable conclusion that the defendants were aware of the possibility of litigation under the False Claims Act. Because her retaliation claim did not depend on allegations of fraud, Sanchez’s complaint only needed “a short and plain statement of the claim showing that [she was] entitled to relief.” Fed. R. Civ. P. 8(a). We conclude that she satisfied this requirement and that the district court, therefore, erred in dismissing her claim for retaliatory discharge. U.S. ex Rel. Sanchez v. Lymphatx, 596 F.3d 1300, 1304 (11th Cir. 2010).
[29] 31 U.S.C. §3730(h) (2012).
[30] Reynolds v. Winn-Dixie Raleigh Inc., 620 F. App’x 785, 791 (11th Cir. 2015) (per curiam); See also United States v. KForce Gov’t Sols., Inc., No. 8:13–CV–1517–T–36TBM, 2014 WL 5823460, at *10 (M.D. Fla. Nov. 10, 2014) (to state a retaliation claim under the FCA, the complaint must contain factual allegations that, if proven, would establish: (1) the plaintiff “was acting in furtherance of an FCA enforcement action or other efforts to stop violations of the FCA” (protected conduct), (2) “the employer knew [the plaintiff] was engaged in protected conduct,” and (3) “the employer was motivated to take an adverse employment action against the [plaintiff] because of the protected conduct”).
[31] See note 21.
[32] United States ex rel. Sanchez v. Lymphatx, Inc., 596 F.3d 1300, 1304 (11th Cir. 2010) (per curiam).
[33] 31 U.S.C. §3730(h)(1) (2012).
[34] Id.; see also Arthurs v. Global TPA LLC, 208 F. Supp. 3d 1260 (M.D. Fla. 2015) for a superb analysis of the changes contained in the 2009 FCA amendments written by Federal District Court Judge Paul Byron.
[35] U.S. ex Rel. Sanchez v. Lymphatx, 596 F.3d 1300, 1304 (11th Cir. 2010) (The first element is satisfied “[i]f an employee’s actions, as alleged in the complaint, are sufficient to support a reasonable conclusion that the employer could have feared being reported to the government for fraud or sued in a qui tam action by the employee, then the complaint states a claim for retaliatory discharge under §3730(h).”).
[36] To establish causation under §3730(h)(1), the plaintiff must show that the final decision-maker who approves or implements the adverse employment action knew about the plaintiff’s protected conduct. It is not enough for other employees, supervisors, or members of the employer’s management to know about the plaintiff’s protected conduct where these individuals have no decision-making authority. Reynolds v. Winn-Dixie Raleigh Inc., 620 F. App’x 785, 792 (11th Cir. 2015) (per curiam) (finding no causation where the only people who knew about the plaintiff’s protected conduct were a supervisor and another employee, neither of whom had the power to take adverse action against the plaintiff’s employment) (emphasis added).
[37] Id.
[38] Id.
[39] Such a showing is “not onerous,” as a plaintiff must “merely…prove that the protected activity and the negative employment action are not completely unrelated.” Holifield v. Reno, 115 F.3d 1555, 1566 (11th Cir. 1997).
[40] “Temporal proximity is sufficient to raise an inference of causation” and “a period of at least two-and-a-half months between the plaintiff’s first complaints to her employer and her layoff…[is] sufficient to raise an inference of causation between the protected conduct and the adverse action.” Reddick v Jones, No. 1:14-CV-0020-AT, 2015 WL 1519810, at *5 (March 11, 2015), citing United States ex rel. Vargas v. Lackmann Food Service, Inc., 510 F. Supp. 2d 957, 967 (M.D. Fla. 2007) ).
[41] “The [11th] Circuit, however, has not established a bright-line rule on what timespans definitively qualify as close temporal proximity for causation purposes. See Thomas v. Cooper Lighting, Inc., 506 F.3d 1361, 1364 (11th Cir. 2007) (holding a three- to four-month disparity insufficient). But see Jefferson v. Sewon Am., Inc., 891 F.3d 911, 925-26 (11th Cir. 2018) (concluding that an employee’s termination within a few days, or up to two weeks, of the protected activity can be circumstantial evidence of a causal connection and is a question for the jury).” Brathwaite v. Sch. Bd. of Broward Cnty., 763 F. App’x 856, 861(11th Cir. 2019).
[42] Id.
[43] Second Am. Compl. at 59, U.S.A. ex rel. Elin Balid-Kunz v. Halifax Hospital, et al., No. 6:09-cv-01002-GAP-DAB, 2011 WL 10885443 (Feb. 18, 2011) (Ms. Balid-Kunz quoted internal communication with Halifax’s compliance officer, paraphrasing — [Halifax doesn’t] have an appetite for reimbursement.).
Robert F. Spohrer is the president of Spohrer Dodd Trial Attorneys in Jacksonville, where he practices complex civil litigation. He is board certified in civil trial and aviation law.
David J. Rodziewicz manages Rodziewicz Law, P.L., in Daytona Beach, where he practices whistleblower and employment law. He is licensed to practice law in Florida and Washington, D.C, Together, Spohrer & Dodd, P.L. and Rodziewicz Law, P.L. prosecute qui tam claims throughout Florida and the Southeastern United States.
This column is submitted on behalf of the Labor and Employment Law Section, David Whitney Scott, chair, and Robert Eschenfelder, editor.
