Stein v. Tri-City Healthcare Dist. (Summary)

FALSE CLAIMS ACT – RETALIATION

Stein v. Tri-City Healthcare Dist., No. 3:12-CV-2524-BTM-BGS (S.D. Cal. Aug. 27, 2014)

The United States District Court for the Southern District of California denied a hospital’s motion to dismiss its former in-house counsel’s False Claims Act (“FCA”) retaliation, civil rights violation, and intentional infliction of emotional distress claims. Plaintiff, former in-house counsel for the defendant government hospital, was allegedly terminated after he warned upper management and the hospital’s Board about potential FCA violations. The hospital asked counsel for his resignation and counsel refused. Instead, counsel requested time off and stopped going to work. Soon after, the hospital terminated him without offering him a hearing. Counsel claimed this incident caused him physical and emotional distress.

The hospital argued that counsel’s warnings about potential FCA violations were actually part of his job and not protected activity that would trigger FCA whistleblower protection. The hospital also argued that any information counsel offered about potential FCA violations was protected by the attorney-client privilege. Next, the hospital argued that counsel’s civil rights were not violated because he quit his position, so a due process hearing was not required. Finally, the hospital argued that its conduct was not outrageous and counsel did not suffer severe or extreme emotional distress.

The court held that for counsel’s conduct to be protected under the FCA, he must have done more than his normal job. The court held that counsel proffered enough evidence to show that he acted outside his normal duties and chain of command so that a reasonable jury could find that he put the hospital on notice that his activities qualified for whistleblower protections under the FCA. Furthermore, the court held that counsel could potentially prove his claims without disclosing the content of privileged communications and, if he could not, the court will seal the courtroom and transcripts. Next, the court held that a material issue of fact existed as to whether counsel actually quit his job, or he was terminated. Finally, the court held a jury could find that the hospital’s conduct was outrageous and counsel experienced severe or extreme emotional distress.

The court also stated that the hospital potentially violated counsel’s civil rights and right to a due process hearing and would not let him work part-time or have a flexible schedule. According to the court, this conduct could be found to be so outrageous “that it is beyond the bounds of a civilized society.” The court also ruled that counsel alleged severe and emotional distress that was “beyond the stress of everyday life” because counsel suffered anxiety and panic attacks after being allegedly terminated.