Plaintiff Can’t Show FCA Retaliation When Former Employer Took Reasonable Action on Complaints; United States District Court for the District of Utah, Central Division, No. 2:19-cv-00028-DAO, Rebekah Gatti v. Granger Medical Clinic P.C.

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The district court granted the defendant’s motion to dismiss a lawsuit alleging unlawful employment retaliation. The defendant alleged that her former employer took retaliatory employment actions after she raised concerns about possible fraudulent healthcare billing. The court found the relator had engaged in protected conduct, because she raised concerns about possible qui tam litigation and went outside her normal chain of command to report the issues. However, the court found the defendant had taken reasonable action to address the plaintiff’s concerns. Further, when asked, the plaintiff reported that she had no additional concerns. Rather than retaliation, the court found the plaintiff’s position was eliminated due to a corporate restructuring, with the decision influenced by the plaintiff’s repeated refusal to comply with a management reorganization. The court also granted the plaintiff summary judgment on the defendant’s counterclaims seeking attorneys’ fees and other financial damages, finding them unsupported. However, the court denied summary judgment on the defendant’s counterclaims involving the theft of trade secrets, finding that decision precluded by the dispute over the relevance and value of internal proprietary documents improperly retained by the plaintiff post-employment.

The parties in a lawsuit alleging unlawful employment retaliation under the False Claims Act cross-moved for summary judgment.

Plaintiff Rebekah Gatti alleged that she was unlawfully terminated in retaliation for reporting fraudulent billing practices and threatening to file a qui tam action against Granger. Granger filed counterclaims against Gatti for breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, violation of Utah’s Uniform Trade Secrets Act, and injunctive relief.

Gatti was employed by Granger as a coding auditor, where she was responsible for reviewing, analyzing, and improving medical billing codes entered by medical providers. She was later promoted to manager and was responsible for ensuring Granger submitted the right codes to insurance companies, including Medicare and Medicaid.

After Granger purchased the Vogeler medical practice, Gatti came to believe that the practice had been committing Medicare fraud by over-coding patient encounters and performing unnecessary procedures. Gatti raised her concerns with Vogeler personnel several times and offered various training and counseling sessions. When the conduct did not change, Gatti reported her concerns to her supervisor, Granger CFO Jeff Davis.

At the same time, Vogeler asked that Gatti be removed from reviewing billing and coding for Vogeler. Davis agreed to ask Gatti to not work on Vogeler claims and she had no further interaction with the practice’s staff. However, Davis asked Gatti to audit previously paid claims for potential errors. Granger later launched a full audit into Vogeler’s billing practices, which resulted in Granger directed Vogeler to implement Gatti’s recommendations and to accept training from her team. However, Granger did not resubmit Vogeler’s allegedly overbilled claims with corrected codes or repay insurers for those claims, as Gatti had recommended.

Simultaneously, Gatti filed a grievance with human resources about being removed from her responsibilities reviewing Vogeler claims, and later escalated the issue to the chief operating officer. During this period, Gatti asserted that she could file a qui tam complaint based on the issue. Davis testified to this fact and suggested he believed a lawsuit was possible.

A few months later, Granger restructured the coding department so that it reported to the revenue department, rather than acting independently. Gatti stated that she did not wish to report to the revenue department manager, but was given no other option. In an email regarding the dispute, Gatti stated that she had reported the activity to a “qui tam attorney” and continued to refuse to report to the revenue department manager.

In response to her comments about retaining counsel, Granger reviewed the complaints against Vogeler, as well as the actions taken against the practice, and asked Gatti if there were any outstanding issues or recommendations that had not been addressed. Gatti responded that she had disclosed all her concerns. Gatti was not required to report to the revenue department, but was later terminated due to a corporate reorganization.

Granger asserted that the change was intended to address a systemic problem of dysfunction between coders and claims representatives which resulted in some claims not being processed, and that the change was recommended by a third-party auditor. Gatti claimed she was terminated as retaliation, noting that the third-party audit report did not recommend that her position be eliminated. Granger maintained that the termination was the result of the reorganization, but acknowledged that insubordination was a factor. Without the insubordination, Gatti would have been retained with the same job title and salary, but with a different manager.

In its motion for summary judgment, Granger argued that Gatti failed to show that she was terminated in retaliation for protected activity or that the reason given for her termination was pretextual.

Granger argued that Gatti was not engaged in protected activity when she reported issues with Vogeler’s coding practices, and Granger was not on notice of such activity, because this reporting was part of her job as coding manager. Granger also argued that Gatti’s mention of a qui tam attorney when informed of the corporate restructuring was not protected activity, but a threat to avoid reporting to a different manager.

Gatti argued that she engaged in protected activity sufficient to put Granger on notice because (1) she was not a compliance officer and her reports went beyond typical compliance duties, (2) she was prevented from performing her duties with respect to Vogeler, (3) she went outside the chain of command to report her concerns, and (4) she expressly threatened to file a qui tam lawsuit.

While a different employee held the title of compliance manager, the court noted that Gatti’s responsibilities included reviewing and correcting coding errors and ensuring that Granger submitted correct codes to insurance companies. Therefore, the court looked for actions beyond Granger’s normal job duties that would have put Granger on notice of protected activity under the FCA.

The court concluded that certain actions—including reporting her concerns to human resources and the corporate chief operating officer, and threatening a qui tam lawsuit—went beyond her regular job duties and were sufficient to put Granger on notice of protected activity. The court also found it notable that Gatti was prevented from reviewing Vogeler’s billing after she reported her concerns. Taken as a whole, the court found that Gatti engaged in protected activity and that Granger was aware of it.

However, the court found that Gatti’s later comments about a qui tam attorney—made after she learned of the corporate restructuring—were not protected activity. Notably, when asked if there were any additional concerns that had not been addressed, Gatti stated that she had provided all her information. Further, the court found that she offered no evidence that Granger’s decision to reorganize the coding and revenue cycle departments was connected to the issues she raised regarding Vogeler’s billing practices, or that the order to report to a new supervisor was anything other than a legitimate request. Under these circumstances, the court found the relator’s comments about her attorney were irrelevant to a qui tam action, but were instead an attempt to avoid adverse consequences stemming from her refusal to comply with her employer’s legitimate instruction to report to a new supervisor. In short, the court found that some—but not all—of Gatti’s activities were protected.

Next, Granger argued that Gatti cannot show that she was terminated due to her protected activity. Gatti presented no direct evidence of such a connection, but argued that the temporal proximity suggested a causal relationship. Gatti argued that the CEO decided to eliminate her position “shortly upon learning” of her intent to file a qui tam lawsuit. However, the court noted that more than two months had passed between Gatti’s threats involving her attorney and her termination. The court found the time between those events, on its own, was not sufficient to support an inference of causation.

The court found no other evidence besides temporal proximity to support Gatti’s allegation. The court noted that she was terminated only after she openly and repeatedly refused to comply with Granger’s reorganization plans. While the third-party auditor did not recommend that her position be eliminated, the court found the decision to eliminate Gatti’s job arose from her refusal to report to a new manager. Given her insubordination, the court found this decision reasonable. Without other evidence that her termination arose from her protected activity or that Granger’s reorganization was pretextual, the court found Gatti could not establish her case.

The court therefore granted summary judgment to the defendant on the retaliation claim.

Next, the court considered Gatti’s motion for summary judgment on Granger’s counterclaims, each of which were premised on allegations that Gatti improperly retained confidential documents belonging to Granger after her termination and obtained secret recordings of three company meetings from another former employee.

As part of her employment, Gatti entered into various confidentiality agreements. Nonetheless, she printed or otherwise copied confidential documents, which she retained after her termination. Gatti asserted that the documents were supportive of her retaliation claims. She also obtained recordings of private executive meetings from another Granger employee. Gatti produced those documents and recordings during this litigation. Granger considered each of them to be confidential, proprietary, and a trade secret.

After Gatti produced the recordings she obtained of company executive meetings, Granger filed an action against the employee who recording the meetings and added counterclaims against Gatti seeking damages for the costs of investigations and litigation, as well as punitive damages.

In her motion for summary judgment, GAtti argued that: (1) Granger cannot establish causation or damages for any of its claims; (2) any claim based on use of company information in this case is barred by judicial privilege; (3) Granger cannot show the documents at issue contain trade secrets; (4) as a victim of retaliation, she is immune from Granger’s claims under the Defend Trade Secrets Act; and (5) Granger is not entitled to injunctive relief because she not threatened to use company information for any purpose other than litigation against Granger.

As an initial matter, Granger argued that under Utah law causation and damages are factual issues which generally cannot be resolved as a matter of law. Granger also argued that Gatti presented no evidence that Granger had not incurred damages as a result of her misappropriation. However, the court explained that the burden of proof was Granger’s and that it must present evidence creating a triable issue of fact as to causation and damages.

With its response, Granger submitted declarations as to its litigation and investigation costs, as well as reputational and punitive damages. However, the court found these insufficient to establish that Granger incurred the damages or that the damages were attributable to Gatti’s actions. The disclosure document was merely a description of the damages Granger claimed, which did not, by itself, show that the damages were incurred. The court found the statements about reputational damage merely conclusory. For example, Granger did not provide evidence that Gatti shared any confidential information outside her litigation.

The court also found no evidence that the attorneys’ fees and costs associated with Granger’s defense of the retaliation complaint should constituted damages caused by Gatti’s improper retention of documents. Gatti submitted a declaration stating she would have filed this action regardless of whether she retained any Granger documents or obtained the recordings of internal meetings, and Granger provided no evidence that the retaliation claim could not have been pursued without these materials. Because Granger failed to present evidence supporting its compensatory damages, the court found it had not supported its punitive damages.

For the first time, Granger argued in its opposition brief that it was entitled to costs obtaining relief against the former employee who had secretly recorded its meetings. Granger had won a judgment against that individual in separate proceedings. However, the court explained that it would not consider damages not raised in the initial counterclaims. Further, the court found that Gatti was not a party to the other litigation and Granger identified no authority supporting the concept that Gatti should be liable for a judgement entered against a different individual in separate proceedings.

Because Granger failed to present evidence to support its claimed damages, the court granted Gatti summary judgment on Granger’s counterclaims for breach of contract, breach of the implied covenant of good faith and fair dealing, and breach of fiduciary duty. Additionally, the court found Gatti entitled to summary judgment as to Granger’s claim for damages related to misappropriation of trade secrets under the UTSA.

The final counterclaim was Granger’s claim for injunctive relief under Utah’s Uniform Trade Secrets Act, in which it asked the court to prevent further dissemination and disclosure of trade secrets and for an order to compel Gatti to return all confidential information.

Gatti argued that: (1) Granger failed to show the documents at issue contain trade secrets; (2) any claim based on use of company information in this case was barred by the judicial proceeding privilege; (3) she is immune from Granger’s claims under the Defend Trade Secrets Act; and (4) Granger is not entitled to injunctive relief because she has not threatened to use company information for any purpose other than this litigation.

In short, the court found that Granger provided just enough information to raise a triable issue of fact as to whether the documents at issue contain trade secrets. For example, Granger described specific actions it took to maintain the secrecy of the information in the documents. The court concluded that a factfinder could fairly infer Granger derives value from keeping its billing and coding practices and other aspects of its business operations confidential from competitors.

The court also found that Granger’s misappropriation of trade secrets claim under the UTSA was not barred by the judicial proceeding privilege to the extent it is based on conduct unrelated to judicial proceedings and seeks an injunction prohibiting dissemination and disclosure of its trade secrets outside of judicial proceedings.

Next, the court agreed that Gatti had not previously pleaded immunity under the Defend Trade Secrets Act as an affirmative defense, and therefore she could not avail herself of it now.

Finally, Gatti argued Granger is not entitled to injunctive relief because she has not threatened to use confidential company information for any purpose other than litigation against Granger. Gatti argued Ganger could not prove irreparable harm, while Granger cited case law holding thaat irreparable harm is presumed under UTSA where trade secret misappropriation is found. The court found sufficient factual dispute to preclude summary judgment.

FCA - Gatti v Granger Medical