Search
In recent years, some recoveries from whistleblowers’ private claims (which are not shared with the government) have dwarfed the typical relator share, the portion of the government’s settlement or jury verdict paid to successful whistleblowers. The prevalence of corporations, their executives, and/or associates as whistleblowers, have increased the potential damages for conventional retaliation claims pursuant to 3730(h) and various state analogs.
Creativity in representing whistleblowers has also woven clear and expansive federal and state whistleblower protections with state-based statutory and tort claims, resulting in a strong, yet elastic fabric for significant, even eight-figure recoveries by injured whistleblowers. In 2023, the Department of Justice (DOJ) recovered a total of $2.3 billion in settlements and judgments from FCA lawsuits filed by whistleblowers, for which the government paid $349 million to the whistleblowers who exposed the fraud.1 However, the average relator share received by whistleblowers the year before was just over $748,000.2 Whistleblowers are often also victims of retaliation and other injuries related to their refusal to participate in fraud. When filing qui tam actions on behalf of the government, whistleblowers are increasingly pursuing a wide range of private causes of action in the same lawsuit, filed under seal.
These private causes of action by whistleblowers can result in recoveries that far exceed the average relator share. However, most defendants do not take the opportunity to resolve private causes of action in advance of the settlement with the government. In treating these private causes of action as an afterthought, defendants lose an opportunity to resolve substantial claims early and are likely exposing themselves to significant damage awards based on egregious conduct meted out against these whistleblowing heroes.
The same conduct that feeds a FCA case brought for damages to government payors also acts as an accelerant to significant claims and substantial recoveries by whistleblowers. FCA claims are brought on behalf of the government to recover funds fraudulently obtained from government payors. In these cases, the beneficiaries who are exploited by parasitic healthcare providers are largely faceless victims. In contrast, when a whistleblower comes forward and engages in protected activity, they are presented at deposition and then at trial, providing the defendant, mediator, and eventually a jury with a very real and poignant story of personal anguish and often professional injury as a result of doing the right thing.
Creative whistleblower attorneys have looked broadly at the potential theories of recovery for the sophisticated whistleblower. The anti-retaliation provisions of the federal FCA and state analogs provide the bedrock for recovery. This is largely due to expansive language which Congress employed to protect employees, contractors, and associated others from retaliation for engaging in protected activity:
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 this section or other efforts to stop 1 or more violations of this subchapter.3
The use of the term “associated others” has been interpreted to allow a professional corporation to bring a claim against a hospital and its parent corporation for retaliation.4
Many states, including North Carolina, have state FCAs employing this same language. When whistleblowers bring both federal and state law retaliation claims, they often have the benefit of interpretation of state FCA provisions in keeping with the federal statute.5 The crux of a claim under both federal and state FCA anti-retaliation provisions is suffering “any manner” of discrimination “in the terms and conditions of employment” because of engaging in protected activity. Courts, citing the “all relief necessary” language in federal and state anti-retaliation provisions, have held that “special damages…are mandatory under the FCA.”6
However, not all potential defendants who have contributed to a whistleblower’s harm are amenable to a statutory claim for FCA retaliation. A FCA defendant, for example, a competitor of the whistleblower, may be in a position to harm the whistleblower, but not in a position to victimize the plaintiff in the terms and conditions of their employment, and therefore they are outside the reach of federal and state FCA retaliation provisions. Recent cases in emergency medicine demonstrate that there are significant state law statutory and tort-based claims against defendants whose conduct lies both inside and outside the reach of ordinary FCA retaliation provisions and should encourage attempts to resolve private causes of action sooner, rather than dealing with them as an afterthought to resolving the government’s claims.
Over the past several years, two cases have highlighted the potential for multi-million dollar trial verdicts or confidential civil settlements in private causes of action brought by whistleblowers. In the healthcare industry, the ER is referred to as the front door to the hospital. It is no surprise that this results in schemes to increase hospital admissions at the lowest cost. Most ERs are staffed by contractors, emergency medicine practices contracted by hospitals to provide medical care for patients who enter a hospital through the ER (as opposed to being admitted directly by their primary care provider or specialist physician).
These contracted emergency medicine groups are often subjected to extreme pressure to provide medical care in a way that maximizes hospital revenues, either by admitting patients or ordering diagnostic tests without regard to medical necessity. Allegations have also been brought that hospitals cut staff, including ER staff, to maximize profits. The escalating presence of private equity in the healthcare industry and the dominance of for-profit hospital systems have fanned the flames.
Because many patients who enter the ER are elderly and/or poor, this atmosphere of profits over patients has led to litigation against both hospital systems and emergency physician staffing companies for fraud committed against government healthcare programs. An emergency medicine practice based in North Carolina and an emergency physician practicing in the Midwest for a large emergency medicine staffing company have recently demonstrated that defendants who participate in the victimization of whistleblowers face verdicts or settlements many times the $740,000 average relator share.
MEMA, a group of board-certified emergency providers based in North Carolina, held longstanding ER contracts at two hospitals owned by a national hospital chain. When a new CEO took over in 2008, he ushered in a set of corporate practices which were based on pressuring emergency physicians to provide care without regard for medical necessity. A large national staffing company held many ER contracts and was engaged in a campaign to increase their contracts by cooperating with these initiatives. The MEMA physicians resisted and refused to participate in the fraud. In mid-2010, their contracts at the two hospitals were terminated and they were replaced by the national emergency medicine staffing giant. These contracts represented two of the five ER contracts then staffed by MEMA. The damage to MEMA was immediate and not merely economic. Medical careers and personal lives were upended.
In late 2010, MEMA and two of its leading physicians, Drs. Mason and Folstad sued the hospital operator, Health Management Associates (HMA), then one of the country’s largest hospital systems, and EmCare, a behemoth national physician staffing company, for, among other claims, violations of federal FCA and state FCAs for conspiring to admit emergency patients without regard to medical necessity. MEMA was among seven whistleblowers who brought similar cases against HMA and one of two whistleblowers who sued EmCare. Although HMA’s and Emare’s conduct impacted dozens of ERs and their related emergency medical groups, MEMA was the only emergency medical practice to file private causes of action against HMA and EmCare.
Surprisingly, neither HMA nor EmCare attempted to resolve MEMA’s claims short of litigation. After the government’s case was resolved, the emergency physicians pursued their private causes of action, which included: retaliation under federal and state FCAs, tortious interference with a contract, violations of North Carolina’s Unfair and Deceptive Trade Practices Act (UDTPA), and defamation and slander per se.
During the same time that MEMA was litigating their claims against HMA and EmCare, Dr. Brovont, a lone emergency physician was complaining about low staffing in HCA hospitals in Kansas and Missouri, where emergency doctors were being called to leave the ER unstaffed to respond to Code Blue calls on hospital floors.7 When EmCare fired Dr. Brovont in order to silence his complaints about HCA’s low staffing and the danger it posed to patients, Dr. Brovont sued. As with MEMA, the case proceeded through motions practice, and Dr. Brovont’s case went to trial.8
These cases by ER physicians demonstrate that, while the whistleblowers benefit from the expansive language of the FCA’s anti-retaliation provisions, competitors who are defendants in FCA cases are ordinarily not in a position to engage in retaliatory conduct against whistleblowers. For example, a competitor who unlawfully incentivizes a healthcare company to terminate the whistleblower’s contract, for example, would likely be a proper defendant for a claim for violations of the anti-kickback statute and related federal and/or state FCAs, which may result in a recovery for the government, and perhaps a relator’s share. However, creative counsel have successfully secured significant recoveries for violations of state claims, both statutory and tort-based, on behalf of the whistleblower plaintiff. Competitors who tortiously interfere with the whistleblower’s contract, i.e., by offering inducements in cash or in kind, may face both economic damages and potential special damages for associated non-economic harm.
Defendants who engage in healthcare fraud may also face claims by private citizen whistleblowers for violations of state Unfair and Deceptive Trade Practices Acts.9 The North Carolina Unfair and Deceptive Trade Practices Act (NC UDTPA), for example, provides a cause of action for damages where a defendant commits and unfair or deceptive trade practice that affects commerce and causes injury to the plaintiff.10 Deceptive acts have “a tendency or capacity to deceive” and unfair practices are those which violate public policy or are “immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers.”11 Healthcare providers who contract to provide services for healthcare systems can be engaged in commerce within the meaning of the UDTPA.12
Defendants who engage in retaliatory conduct and proffer non-retaliatory reasons for their actions may find themselves the subject of state-based claims for defamation and/or slander per se. These claims can be particularly injurious where the plaintiffs are medical professionals and the statements at issue were critical of the care provided by the plaintiffs.
While federal FCA and state analogs allow for economic and special damages, private causes of action under state laws may also allow whistleblowers to pursue punitive damages. Only a few states prohibit the recovery of punitive damages,13 and an additional 27 limit punitive damages to double or treble the amount of compensatory damages. The remaining 20 states do not limit the amount of punitive damages that can be awarded. While the United States Supreme Court has suggested that a ratio of four-to-one between punitive and compensatory damages would be acceptable, state courts have permitted punitive damage awards of 16-to-1.14 Some industry experts have commented that punitive damages are awarded more often than previously thought.15
In October 2018 (just before HMA settled with the DOJ in MEMA’s case), a jury returned a verdict in favor of Dr. Brovont for $29 million, including $3 million in economic damages, $6 million in pain and suffering, and $10 million in punitive damages against each of the defendants – HCA and the two EmCare subsidiary defendants. 16 After the trial judge reduced the jury award to $13 million based on punitive judgment caps under Kansas law, Dr. Brovont appealed, arguing the EmCare subsidiary was based in Missouri, so Missouri law (which did not cap punitive damages) should apply.17 The Missouri Court of Appeals agreed with Brovont, largely reinstating the jury verdict, which ultimately amounted to $26 million including interest. In early 2021, the Missouri Supreme Court refused to review the case.18
Although the defendants in MEMA’s case were made aware of their private claims simultaneously with the government’s claims (or even before), these personal claims are often treated as an afterthought, a nuisance to be resolved long after the defendants have settled the fraud case with DOJ. For example, in 2010, when MEMA sued HMA and EmCare on behalf of the government, there was no attempt to resolve their private causes of action in 2017 when EmCare (a subsidiary of Envision) or in 2018 when HMA (then a wholly-owned subsidiary of Community Health Systems, “CHS”) resolved the government’s claims. Instead, both defendants charged headlong into litigation. When their motions to dismiss were denied, 19 both engaged in scorched earth litigation. Facing plaintiffs’ claimed damages of $100 million,20 EmCare settled confidentially in the midst of discovery. HMA’s parent, CHS, continued to litigate, but ultimately also entered into a confidential settlement after being defeated at summary judgment on all counts.21
Both the MEMA litigation and Dr. Brovont’s trial demonstrate that private causes of action can yield recoveries many times larger than the average FCA relator share award. Rather than being treated as tag along claims, these private causes of action should be treated as substantial stand-alone cases deserving of the same energy and attention as the FCA claims brought by whistleblowers on behalf of the government. The price of litigation is not just a potential multi-million dollar settlement or jury award, but also claims for counsel fees, which are available under the FCA22 as well as many state law claims, including most UDTPA statutes.23
Recent efforts by creative counsel have resulted in recoveries for their whistleblower clients which significantly exceed the average relator’s share award of just under $750,000. As whistleblowers continue to be more sophisticated and highly-compensated, the breadth and value of private claims they are bringing expands, Defendants would do well to treat the whistleblower’s claims as serious and significant in their own right, not as an afterthought to settlement with DOJ.
23See, e.g., North Carolina Unfair or Deceptive Trade Practices Act, N.C. Gen. Stat. § 75-16.