United States: Managing Employee Whistleblowers In The Age Of Qui Tam And Retaliation Lawsuits

As its business affairs and expenses have grown, there has been an increased alert on the part of the government to protect its interests against false claims filed in various fields and disciplines across the country. The health care industry is one sector of particular focus. The United States Department of Justice ("DOJ") has increasingly recognized the important role played by whistleblowers in the fight against false claims in the health care industry. In recent years, whistleblowers, their counsel and DOJ have recovered billions of dollars in taxpayer money as a result of the provisions of the False Claims Act ("FCA"). Medicare and Medicaid reimbursement protocols create a ripe source of exposure for health care professionals and health care facilities alike in this regard. Review of court dockets demonstrate that the number of qui tam actions filed has steadily increased over the past several years. These cases consume enormous amounts of corporate, governmental, legal and judicial resources, whether or not they prove to be meritorious.

Qui Tam Litigation

The FCA is a statutory scheme created to forestall fraud against the federal government by proscribing the presentment of any "false or fraudulent claim for payment or approval" to the United States. 31 U.S.C. § 3729(a)(1)(A). One enforcement mechanism permits an employee to bring a civil action, a so-called qui tam action, in the name of the United States. Id. § 3730(b)(1). The FCA allows an employee with information that shows an individual, company or corporation has knowingly submitted or caused the submission of false or fraudulent claims to the government to bring a lawsuit on behalf of the government. The government has the right to intervene and assume control of the action, but it need not do so. Id. § 3730(b)(2). A unique facet of qui tam litigation is that the complaint is filed under seal – and remains under seal for months (at least 60 days by statute) or even years. The purpose of the seal is to give the United States time to evaluate the case to see if it wants to prosecute the action.

If the qui tam action is ultimately successful (regardless of who prosecutes it), the employee, known as a relator, gets a percentage of the funds recovered. Id. § 3730(d). Qui tam lawsuits enable whistleblowers to earn rewards in lawsuits filed which secure recoveries by or on behalf of the government. In general, a qui tam whistleblower under the FCA is entitled to between 15 and 30 percent of the government's recovery, plus an award of attorneys' fees. The percentage ultimately received, if the case is successful, is dependent upon the type and amount of meaningful assistance that the whistleblower renders to the government for purposes of the investigation.

Current employees are often at the center of qui tam lawsuits. These individuals typically have firsthand knowledge regarding claims and the billing process. Many times "close observers" or participants in the wrongdoing may serve as relators. A whistleblower who did not plan or initiate the fraud may expect to share in the proceeds of a qui tam action to a certain extent.

Anti-Retaliation Protections for Whistleblowers

In an effort to prevent companies from discouraging potential employees/relators from coming forward, Congress amended the FCA to include an anti-retaliation provision. The current version of the statute reads:

Id. § 3730(h)(1). This provision prohibits any action taken by an employer which has a negative effect on the terms, conditions or privileges of employment. This includes termination, demotion, suspension, harassment and any other act that would dissuade a reasonable person from reporting violations of the FCA. The whistleblower must file the retaliation claim within three years of the date on which the retaliation occurred.

The FCA provides that a prevailing whistleblower will be made whole, i.e., will be returned to the same position that whistleblower would have been in absent the retaliation. In particular, the FCA authorizes reinstatement or front pay, double back pay, interest on back pay, litigation costs, reasonable attorney fees and damages for emotional distress.

In order to sustain a claim for retaliation under the FCA, a plaintiff must prove that: (1) he/she was engaged in conduct protected under the Act; (2) the employer knew he/she was engaged in such conduct; and (3) the employer retaliated against him/her because of such conduct. The analysis of a retaliation claim also follows the McDonnell Douglas burden-shifting framework, common to Title VII retaliation claims. The employer must offer a legitimate, non-discriminatory reason for the employee's termination, which the employee must then refute by demonstrating pretext. In short, the employee must show that the employer's proffered reason was not the actual reason or was an insufficient reason for the employee's discipline, suspension or termination.

Temporal proximity between the time the employer learned of the employee's protected activity (i.e., internal complaint or qui tam action) and the adverse employment action is always the focal point of evidence in a retaliation claim. Furthermore, a cause of action for retaliation is not dependent upon the success of any related suit; a retaliation claim may be pursued regardless of whether a FCA violation is ultimately proven.

Representative Verdicts

United States of American ex rel Maxwell v. Kerr-McGee Oil & Gas Corp., 793 F. Supp. 2d 1260 (D. Col. 2011)

• Defendant was ordered to pay $7.56 million (trebled to approximately $23 million) following a jury verdict in favor of the government and relator on claims that the defendant submitted false royalty statements concerning oil and gas leases on government land. In addition, following the trial, the court awarded plaintiff attorneys' fees and expenses totaling approximately $2.2 million.

Thompson v. Quorum Health Resources, LLC, 2010 U.S. Dist. LEXIS 45767 (W.D. Ky. 2010)

• A former CEO of a hospital prevailed at trial on his whistleblower retaliation claims against his former employer and was awarded $400,644 in back pay, $70,000 in front pay and $30,000 in pain and suffering. In addition, the court doubled plaintiff''s back pay amount. The plaintiff grew concerned over the company's control of decisions that were normally reserved to hospital boards, including the selection of vendors. In addition, the plaintiff responded to an audit questionnaire wherein he indicated that he had suspicions of fraud within the company. The plaintiff was ultimately suspended and terminated. Following his termination, the plaintiff initiated a qui tam action that was voluntarily dismissed with prejudice (and the government declined to intervene in the action). However, the plaintiff thereafter filed a retaliation claim, and the jury found that plaintiff was terminated in retaliation for engaging in protected activities under the False Claims Act.

Kakeh v. United Planning Org., Inc., 655 F. Supp. 2d 107 (D. D.C. 2009)

• A former controller informed the company of improper expenditures that were billed to D.C. agencies, including cell phones, luxury cars and vacations for employees and their families. After the employee was advised that he would be subject to a layoff, he filed a retaliation lawsuit. After a 14-day jury trial, the jury found in favor of the employee. Ultimately, the employee was awarded $419,314 in damages.

Eberhardt v. Integrated Design & Construction, 167 F.3d 861 (4^th Cir. 1999)

• The Fourth Circuit Court of Appeals upheld a jury verdict in favor of a former employee of the defendant, who reported advanced billing practices by the company done to relieve the company's cash flow problems. Shortly after the issues were reported to the government, the plaintiff alleged that his salary was decreased, he was demoted and he was ultimately terminated. Following his termination, the plaintiff (along with the government) filed a qui tam action (which was settled out of court). The plaintiff proceeded with his whistleblower retaliation claim. The jury found in favor of the plaintiff and awarded him $417,700.99.

Conclusion

While there is no sure way for a company faced with an FCA violation to ensure that it will not become the subject of a whistleblower lawsuit, it can minimize the risk of a whistleblower making a first report to the government by communicating a strong, ethical tone from the top and creating an environment of mutual trust and respect with employees in which a "culture of compliance" is more than just a slogan. The best way to manage whistleblowers is to have an effective compliance program. It is important that effective reporting systems are put into place, are well publicized and easy to use, and provide company personnel the ability to communicate concerns about potential wrongdoing to the company. The company must be clear to provide assurances that employees will not suffer adverse consequences for reports made in good faith, even if they are erroneous, and with procedures to address any concerns the individual may have that he or she will later become the subject of retaliation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.