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Employment Cases and False Claims Act Cases: What Happens When They Overlap?

by | Jul 24, 2013 | Whistleblowers

Qui tam attorneys are often approached by potential whistleblowers who have already contacted an employment attorney after being terminated or harassed on the job as a result of blowing the whistle on suspected fraud.  Sometimes the whistleblower has already filed an employment case, and other times he or she is planning to file the employment case at the same times as a False Claims Act (“FCA”) case.  Although every case is unique and must be carefully evaluated by experienced qui tam counsel, there are several potential complications that should be considered when filing parallel cases.

The most significant concern is whether the employment case will jeopardize the FCA’s statutory seal, which requires that the FCA case be filed confidentially and not disclosed to the public or to the defendant company during the initial investigation.  Employment cases often move much more rapidly than FCA cases, so there is a strong possibility that the defendant company may take the employee’s deposition in the employment case while the FCA case is still sealed.  When this situation is unavoidable, there are certain strategies to protect the employee in the deposition, such as claiming a privilege to avoid answering inappropriate questions and then explaining the basis for the privilege in a sealed or ex parte communication to the employment judge.

However, that strategy is far from fool-proof, and risks still exist.

An on-going case in California highlights the potential hazards of parallel cases, though the issue arose in a slightly unique context.  A former employee named Kelly Nelson filed a wrongful termination case against a company called Millennium Laboratories, in which one of Nelson’s colleagues named Ryan Uehling was a witness.  As it turned out, Millennium believed that Uehling had filed an FCA case against the company so, Uehling claims, it sought to use Nelson’s case as an avenue to take an aggressive deposition of Uehling to find out more about the potential FCA case.[1]

Uehling was subjected to a two-day deposition that produced a transcript totaling more than 400 pages.  Notably, Millennium sent its qui tam defense counsel to take the deposition rather than the employment attorney who had been working Nelson’s case.  Millennium’s counsel asked probing questions clearly designed to elicit information about a potential FCA case, such as “Are you familiar with something called the False Claims Act?” and “Do you know what the anti-kickback statute prohibits?”  When Uehling refused to answer certain questions based on an unspecified “statutory privilege,” Millennium asked the court to force him to respond to more than 60 of the questions.  A magistrate judge ordered Uehling to respond, and threatened sanctions for non-compliance, without revieing any sealed documents which might have explained the basis for Uehling’s position.

Uehling’s attorneys have asked the district court judge to reconsider the magistrate’s decision based on several significant errors that they believe the magistrate made.  Not the least among those concerns is the magistrate’s confused holding that sealing the deposition transcript from the public would somehow preserve the goals of the False Claims Act’s seal requirement.

The magistrate’s ruling is a prime example of a court failing to understand the sanctity of the seal in a FCA case and therefore jeopardizing a relator’s confidentiality obligations.  Regardless of how the case is ultimately resolved, the decision is a critical warning of the potential dangers of a FCA relator being deposed in an employment suit while his or her case is under seal.  Although cases like Uehling’s (where he was merely a non-party witness in an unrelated case) may be difficult to avoid, relators should recognize this case as a cautionary tale of why it is important to avoid initiating parallel employment and FCA cases when possible.

This is not to say that relators should simply accept negative employment actions as a result of engaging in protected conduct.  As we have discussed on this blog before, the FCA includes an anti-retaliation provision which protects individuals who bring FCA cases.  The so-called “Section H” claim incorporates the anti-retaliation claim into the FCA case so that both will proceed together and there is no risk of exposure.

If you are a potential relator who is considering bringing an employment case in addition to a FCA case, or if you have already filed an employment case and are now considering a FCA case also, please contact James Hoyer for an evaluation of your claims.  Click here for more information about our firm and to submit your information electronically, or you can contact us by phone at 800-651-2502.

[1] James Hoyer has no knowledge of whether Uehling has actually filed a False Claims Act case against Millennium and, if such a case does exist, the allegations or claims contained therein.

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