The defendants’ motion to dismiss a complaint of unlawful retaliation for protected FCA activity is denied, where the plaintiff sufficiently demonstrated that he engaged in protected activity and that the defendants were on notice. The plaintiff made multiple reports of possible Medicare fraud internally, both to his immediate supervisors and outside the chain of reporting, and reported his concerns to the Department of Justice, which launched its own investigation. The court also found that all the defendants had established an employee-employer relationship with the plaintiff, as one paid his salary, one provided his healthcare and training, and the third employed his direct supervisors. Finally, the court agreed the plaintiff had adequately shown a link between his protected activity and his termination, as he was fired under dubious circumstances only five days after he intensified his efforts to report the possible fraud.
Defendants Highmark Inc., Highmark Health Options, and Gateway Health Plan moved to dismiss plaintiff Alastair Crosbie’s complaint of unlawful retaliation for protected activity under the False Claims Act.
According to the complaint, Highmark and its subsidiary, HHO, contracted with Gateway to run a managed care organization. Crosbie was hired as an external fraud expert to investigate HHO’s health benefits and corporate training as part of a payment integrity program. Highmark provided Crosbie’s training and health benefits, while Gateway provided his paychecks. Gateway and HHO together employed his immediate supervisors.
During his work, Crosbie found defects in HHO’s provider credentialing system and identified a physician who received Medicare/Medicaid reimbursements despite not being an approved provider. Crosbie reported the problem to his supervisors and when he did not receive a satisfactory response, informed upper management at Gateway and Highmark that these reimbursements violated the False Claims Act. Crosbie also made a mandatory referral to DOJ’s Medicare Fraud Control Unit and cooperated with investigators. Crosbie asserted that he told management about his cooperation and that the conduct regarding this physician subject them to FCA liability. Despite this, Crosbie’s concerns were ignored by upper management and the defendants continued paying the physician’s practices.
Crosbie continued raising his concerns until he was terminated hours after a coworker accused him of making insulting comments. Crosbie argued that his swift termination contrasted from the defendants’ treatment of multiple harassment and stalking complaints he had made about the employee who accused him.
Crosbie sued, alleging his termination was unlawful retaliation for his protected conduct.
In their motions to dismiss, the Highmark defendants argued they did not have an employer-employee relationship with Crosbie, although Gateway did. All the defendants argued that Crosbie’s actions did not fall under the definition of protected activity, and if it did, his activity was not protected because his complaint did not allege they would be liable for an FCA action. The defendants argued they were not put on notice of any protected activity and that Crosbie failed to establish any causal connection between his allegedly protected conduct and his termination.
The court wholly disagreed and denied the motions in full. First, the court found that Crosbie had alleged sufficient facts to show an employer-employee relationship with the Highmark defendants. The FCA does not define employee or explain what factors courts should consider when evaluating whether a plaintiff is an employee, so the court applied the test in Darden, in which the Supreme Court instructed that courts should use traditional common-law theories of employment relationships when Congress uses the word “employee” without defining it.
The court explained that the inquiry under Darden is not which of two entities should be considered the employer of a plaintiff. Rather, the factors are applied to each entity separately to determine the relationship. The court noted that the Third Circuit recognizes that an individual can have more than one employer and has applied the Darden test in FCA anti-retaliation claims.
Applying the test, the court reasoned that both the Highmark defendants and Gateway had an employee relationship with the plaintiff. HHO employed managers with the authority to supervise Crosbie and Highmark had the power to terminate his employment with all three defendants, and had recruited and hired him. Further, while Gateway paid his salary, Highmark provided Crosbie’s health benefits and training. Taken as a whole, the court concluded all the defendants acted as Crosbie’s employer in different aspects.
The court also agreed the plaintiff had alleged facts that could reasonably lead to a viable FCA case. Crosbie alleged the defendants violated the FCA by continuing to pay a physician’s practices, despite knowing that he was a prohibited provider, and subsequently billing Medicare and Medicaid for his practices’ services. The defendants argued that even if the allegations are taken as factual, they would not demonstrate they made any misrepresentation to the government. Alternatively, the Highmark defendants argued that any misrepresentation was not material to the government’s decision to pay their organization, because it was paid on a “capitated” basis in which reimbursement amounts remained constant regardless of the amount of services claimed.
The court noted that Crosbie asserted the defendants billed Medicare and Medicaid for services while operating without the required number of adequately-credentialed healthcare providers, and were concerned that if they dropped the physician in question, the state of Delaware would find their provider network inadequate and cancel their contracts. The court found this presented a reasonably viable theory of underlying FCA liability to survive a motion to dismiss. The court noted that the materiality requirement does not ask the cost of a noncompliant item, but focuses on the noncompliance itself in the government’s decision to pay. The fact that the government reimburses the defendants’ approved providers based on a capitation agreement with fixed payments, therefore, did not preclude a false certification from being a material fact.
Next, the court agreed the plaintiff has alleged sufficient facts to show he engaged in protected conduct when he reported his concerns to upper management, outside his normal reporting structure, and when he warned management that he was cooperating with a government investigation. The court also concluded the plaintiff met the heightened burden established by his employment as a fraud prevention specialist, as Crosbie went outside the boundaries of his normal job duties to address the potential fraud and persisted when rebuffed.
The court also concluded the defendants had been put on notice that Crosbie engaged in protected conduct, by dint of his reporting to management and his notice that he cooperated with a government investigation into the matter. While the fraud involved a third party, the court reasoned the defendants were on notice that the potential fraud was possibly inculpatory to them. Finally, the court inferred that whoever terminated Crosbie’s employment had notice of his protected conduct. The defendants argued that Crosbie had not shown that the specific supervisor who decided to terminate him had such notice, but the court found it reasonable to infer that Crosbie’s protected activity was sufficiently known to management, given the number of complaints Crosbie made over the course of a year.
The court also found the plaintiff pleaded sufficient facts to establish a causal connection between his protected activity and his termination. The court reasoned it could infer causation, for the purpose of the motions to dismiss, from the temporal proximity between Crosbie’s protected conduct and his termination. In this case, Crosbie was terminated only five days after he intensified his protected activity. The court found it reasonable to infer the defendants were willing to tolerate his conduct up to a point, but that the intensified reporting exceeded their tolerance.
The questionable grounds for termination also suggested causation. Crosbie argued the alleged incident leading to his termination was reported only hours prior to his termination and that the defendants made little to no investigation prior to firing him, despite his positive performance reviews.
