Court Rejects Claim that Employee Loses Whistle Blower Protection

A federal court in Illinois recently shot down an employer’s claim that having signed a HIPAA “privacy policy” deprived an employee of whistleblower protections.

In United States ex rel. Cieszynski et al. v. Lifewatch Services, Inc. (2016 WL 2771798), Matthew C. brought a qui tam action accusing his employer, LifeWatch Services Inc., of violating the False Claims Act by billing the government for heart monitoring services in violation of Medicare rules. Matthew had signed a confidentiality agreement when he was hired by LifeWatch in 2003, which prevented him from disclosing certain documents. Three years later he was asked to sign a “privacy policy” concerning HIPAA regulations.

In a counterclaim, LifeWatch alleged that Matthew breached his employment contract when he accessed certain confidential information and HIPAA-protected materials that he did not need to carry out his job duties, and that he disclosed the information to “third parties outside LifeWatch,” presumably the government and his own attorney, to support his allegations.

Federal and Illinois law recognize a public policy that protects whistleblowers from retaliation by their employers for investigating and reporting fraud to the government. At the heart of LifeWatch’s counterclaim was whether Matthew’s retention and disclosure of documents went beyond what he needed to support his suspicions, thus depriving him of public policy protections. A major issue was whether the “privacy policy” Matthew signed constituted a binding contract. Matthew argued that the confidentiality agreement was overbroad and unenforceable, and that the privacy policy invoked by LifeWatch was not a contract that supports an allegation of breach.

In his opinion dismissing LifeWatch’s counterclaim, U.S. District Court Magistrate Judge Sidney Schenkier concluded that LifeWatch failed to substantiate how the privacy policy Matthew signed three years into his job had become part his original employment agreement or why disclosure of HIPAA-protected information should be treated as confidential information. The judge noted that the only “confidential material” LifeWatch identified that Matthew had accessed and provided to third parties was a spreadsheet containing information about approximately 52,000 patieants who received heart monitoring services from LifeWatch in 2012.

Schenkier concluded that LifeWatch had failed to plausibly claim that Matthew’s actions deprived him of the public policy protections afforded qui tam relators who must collect and disclosettac documention to support their suspicions of fraud, and thus failed to state a claim for breach of contract.

“We must balance the need to protect whistleblowers and prevent chilling their attempts to uncover fraud against the government against an employer’s legitimate expectations that its confidential information will be protected,” Schenkier wrote, noting that courts have focused on the “reasonableness and scope” of the plaintiff’s disclosure in determining whether to permit counterclaims in an FCA action.

Matthew’s “limited and narrow disclosure” of documents to the government was entitled to public policy protection that barred a counterclaim by LifeWatch, the judge ruled.

“It is unrealistic to impose on a relator the burden of knowing precisely how much information to provide the government when reporting a claim of fraud, with the penalty for providing what in hindsight the defendant views as more than was needed to be exposure to a claim for damages. … To allow a counterclaim based on the barest allegation that a relator took more documents than absolutely necessary would gut the strength and purpose of the public policy exception, which protects relators from retaliation.”

The judge rejected LifeWatch’s comparisons to U.S. ex rel. Wildhirt v. AARS Forever, Inc., 2013 WL 5304092 (N.D. Ill. 2013), in which a similar counterclaim was allowed to proceed, because LifeWatch had not alleged Matthew took documents for any reason other than to support his FCA claim, or that the documents were made public or given to any third party other than the government and his counsel.

“LifeWatch does not allege that relator was acting with anything other than a good faith belief that LifeWatch had violated the FCA.”The consumer and tax payer rights law firm of Lubin Austermuehle represents whistleblowers who are pursing qui tam lawsuits at any level of government or for violations of the securities laws and IRS code, including claims under the Illinois Whistleblower Act, the Chicago whistleblower ordinance, the Dodd-Frank Act and the federal False Claims Act. Based in Chicago and Oak Brook, Ill., our Lisle and Wheaton area qui tam and False Claims Act lawyers stand ready to represent whistleblowers throughout the United States — regardless of whether prosecutors have decided to join the lawsuit. If you know about fraud against a government agency and you’re ready to speak up, you can learn more about whistleblower lawsuits at a free, confidential consultation. To set one up, please contact Lubin Austermuehle online or call 630-333-0333 today.

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