Why it matters: With the influx of potentially lucrative "whistleblower" cases being brought by individuals reporting perceived corporate wrongdoing, three recent federal court cases provide clarification about exactly who qualifies as a "whistleblower" under the False Claims Act, the Health Insurance Portability and Accountability Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, respectively.
Detailed discussion: Three recent federal court cases provide clarification of who will qualify as a "whistleblower" under the False Claims Act (FCA), the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank), respectively.
FCA: On July 7, 2015, the Ninth Circuit, sitting en banc in U.S. ex rel. Steven J. Hartpence and Geraldine Godecke v. Kinetic Concepts, Inc.; KCI-USA, Inc., reversed the district court's dismissal of the consolidated qui tam suits brought under the FCA which had alleged that the Relators' former employer had submitted fraudulent claims for reimbursement to Medicare. In the case, Relators Steven J. Hartpence and Geraldine Godecke had each informed the government about their former employer's alleged Medicare fraud after the fraud had already been publicly disclosed, and then had proceeded to file separate qui tamcomplaints six months apart in district court (the court also made a "first-to-file" ruling not addressed here). Relying on the precedent established by the Ninth Circuit in Wang ex rel. United States v. FMC Corp., 975 F.2d 1412, 1418 (9th Cir. 1992), the district court had dismissed the complaints, holding that neither Relator was an "original source" so as to constitute a "whistleblower" under the FCA because neither had been involved in the public disclosure of the fraud as Wang would require. The Ninth Circuit en banc panel framed the issue by asking "[i]f a whistleblower informs the government that it has been bilked by a provider of goods and services, and that scheme is unmasked to the public, under what conditions can the same whistleblower recover part of what the guilty provider is forced to reimburse the government?" The court first noted that a qui tam suit is barred under the FCA if there has been a public disclosure of the fraud, unless the qui tam "relator" qualifies as an "original source" of the information. The court then held that there are "two, and only two," requirements for a relator to constitute an "original source" under the FCA: "(1) Before filing the action, the whistleblower must voluntarily inform the government of the facts which underlie the allegations of the complaint; and (2) the whistleblower must have direct and independent knowledge of the allegations underlying the complaint." Specifically overruling Wang, the court held that "it does not matter whether [the relator] also played a role in the public disclosure of the allegations that are part of the suit." The court reversed and remanded the cases to the district court to consider whether the Relators qualified as "original sources" under the two-part test announced in the opinion.
HIPAA: On July 1, 2015, District Court Judge J. Leon Holmes for the Eastern District of Arkansas ruled in the case of Howard v. Arkansas Children's Hospital that Pam and Eben Howard (Relators) constituted whistleblowers under the retaliatory discharge provisions of HIPAA and thus did not violate HIPAA when they shared patients' personal health information in their possession with their attorney. The Relators claimed in their lawsuit against the hospital that they were terminated from their management positions after they expressed concern about the manner in which the hospital was billing the federal government (the Relators had also alleged retaliatory discharge under the FCA, not addressed here). The facts of the case show that, during the course of their employment, the Relators acquired a large amount of personal health information regarding the hospital's patients that they kept after they were terminated. In the course of discovery, the Relators disclosed to the hospital that they were in possession of the personal health information and had shared it with their attorney. The hospital charged that the Relators had violated HIPAA by both retaining the personal health information after they were terminated and sharing it with their attorney, but the Relators claimed that they fell within the HIPAA whistleblower exception. The hospital filed a motion for summary judgment on numerous grounds, and as part of the filing asked the court for a determination that the Relators did not constitute whistleblowers under HIPAA. Judge Holmes declined to do so. The judge first quoted HIPAA's retaliatory discharge provision, which states in relevant part that "[a] covered entity is not considered to have violated the requirements of this subpart if a member of its workforce … discloses protected health information, provided that … [t]he workforce member … believes in good faith that the covered entity has engaged in conduct that is unlawful … and … [t]he disclosure is to … [a]n attorney retained by or on behalf of the workforce member … for the purpose of determining the legal options of the workforce member." Judge Holmes next established that (1) the hospital was a "covered entity" for purposes of HIPAA, (2) the Relators were members of its workforce before they were terminated and acquired the personal health information in the course of their duties, (3) the Relators believed in good faith that the hospital had behaved unlawfully, and (4) the Relators shared the information with their attorney for the purposes of determining their legal options with regard to their concerns. The judge concluded that the Relators had thus "met their burden of showing that they qualify as whistleblowers under the HIPAA regulations."
Dodd-Frank: In a ruling on June 17, 2015, in Wiggins v. ING United States, Inc. et al., District Court Judge Janet C. Hall of the District of Connecticut followed the Fifth Circuit's narrow construction of who constitutes a "whistleblower" under Dodd-Frank and ruled that the Relator failed to state a cause of action under that statute because she did not specifically provide information to the SEC. In the case, Relator Eva Wiggins (Wiggins) had filed a complaint against her employer ING alleging that ING had fired her in retaliation for alerting her supervisors about wrongdoing she had witnessed during the course of her employment and raising claims invoking, among other things, the retaliatory discharge provisions under both Dodd-Frank and the Sarbanes-Oxley Act of 2002 ("SOX"). ING had filed a motion to stay or dismiss pending arbitration proceedings (to which, it argued with mixed success, she was bound) and, in the course of ruling on the motion, the court addressed ING's argument that Wiggins was not a "whistleblower" as defined in Dodd-Frank and thus was unable to state a claim under that statute. The court began its analysis by quoting the relevant definitional provision of Dodd-Frank: "The term 'whistleblower' means any individual who provides … information relating to a violation of the securities laws to the [Securities and Exchange] Commission." Wiggins admitted that, while she reported suspected violations to her supervisors, she did not specifically provide information to the SEC; however, she argued that this was too narrow a reading of the statute and would serve to discourage, not incentivize, the reporting of corporate wrongdoing in defeat of the statutory purpose (the SEC filed an amicus brief to this effect as well). Judge Hall acknowledged that there was a split among the district courts that had considered this question; however, she stated that a "better reading" of the statute and its implications can be found in the only appellate case to date that had addressed the issue, the 2013 Fifth Circuit case of Asadi v. G.E. Energy (USA), L.L.C., which held the "clear language" on the face of the statute required that the report be made to the SEC. Judge Hall concluded that Wiggins failed to state a cause of action as a whistleblower under Dodd-Frank because "from the clear language used in the statute … Congress did not intend to include someone in Wiggins' position within the protections extended under the Dodd-Frank Act." Noting that Wiggins already had a retaliatory discharge cause of action under SOX as a result of reporting the perceived wrongdoing to her supervisors, "the statutory language indicates that Congress concluded that it is persons who report to the SEC who should receive the further protection of a separate cause of action under Dodd-Frank."
See here to read the July 7, 2015, Ninth Circuit decision in the consolidated cases of United States Ex Rel. Steven J. Hartpence and United States Ex Rel. Geraldine Godecke v. Kinetic Concepts, Inc.; KCI-USA, No. 12-55396 (Ninth Cir. en banc 2015).
See here to read the July 1, 2015, District Court (for the Eastern District of Arkansas) opinion in Pam Howard and Eben Howard ex rel. United States of America v. Arkansas Children's Hospital, Ron Robertson, individually; and Jon Bates, individually, No. 4:13CV00301 JLH.
See here to read the June 17, 2015, District Court (for the District of Connecticut) decision in Wiggins v. ING United States Inc., et al., No. 3:14-cv-1089 (JCH).