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Hospital Sues Whistleblower for Failing to Report Information And Choosing Instead to Use As Basis for Claim

In an unusual and eye-catching case, a hospital facing a whistleblower lawsuit from a former senior executive under the False Claims Act (“FCA”) has brought suit against that individual, alleging he breached his fiduciary duty by failing to report the unlawful conduct internally and instead using that information as the basis for a whistleblower claim.  Wheeling Hospital, Inc. v. Louis Longo, No. 19-cv-000032 (N.D. W. Va. Mar.13, 2019).

The Whistleblower’s Complaint

Longo, an accountant and former senior executive at Wheeling Hospital (the “Hospital”), was discharged in August 2015.  In December 2017, he brought a complaint in the U.S. District Court for the Western District of Pennsylvania under the qui tam provisions of the FCA (the “FCA Lawsuit”).  He alleged the Hospital and its CEO defrauded Medicare and Medicaid through a scheme of inflated payments to physicians with high patient volumes in return for referrals to the Hospital, in violation of the Stark Law and the Anti-Kickback Statute.  The United States intervened in the FCA Lawsuit in December 2018 and filed its Complaint in Intervention on March 25, 2019.

The Hospital’s Complaint

On March 13, 2019, the Hospital filed suit against Longo in the U.S. District Court for the Northern District of West Virginia, alleging he breached his fiduciary duty and abused the legal process.  The Hospital’s breach of fiduciary duty claim asserts Longo had a fiduciary duty to report internally any illegal conduct, and that he instead capitalized on his alleged knowledge of the conduct to “extort a settlement” through a “false and frivolous” whistleblower action.  It further alleged that Longo misleadingly failed to disclose in the FCA Lawsuit that the IRS had previously audited the compensation paid to the same physicians named in his complaint.  According to the Hospital, “Longo’s threats and the legal action he filed [under the FCA] are consistent with a concerted effort to contort the legal process to his own personal advantage and wealth.”    In support of its abuse of process claim, the Hospital asserts that Longo “willfully and maliciously misused and misapplied a legal process … to obtain a pecuniary award and to inflict harm” on the Hospital.

Implications

The Hospital’s lawsuit is a novel reaction to a whistleblower complaint, and the court’s ruling could have significant implications, particularly in instances where an individual does not report unlawful conduct despite a duty to do so, and brings a whistleblower action premised on that information.  We will be monitoring this case and will report on future developments.

© 2020 Proskauer Rose LLP.

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About this Author

Steven J Pearlman, Labor Employment Law Firm, Proskauer Law firm
Partner

Steven Pearlman is a partner in the Labor & Employment Law Department and co-head of the firm's Whistleblowing & Retaliation Group, resident in the Chicago office. Steven’s practice focuses on defending complex employment litigation involving claims of discrimination and harassment, wage-and-hour laws and breaches of restrictive covenants (e.g., non-competition agreements). He has successfully tried cases to verdict before judges and juries in Illinois, Florida and California, and defended what is reported to be the largest Illinois-only class action in the history of the U.S....

312-962-3545
Pinny Goldberg Labor and Employment Lawyer Proskauer Rose Law Firm
Associate

Pinny Goldberg is an associate in the Labor & Employment Law Department. Pinny represents employers in a broad array of matters before federal and state courts, FINRA and other arbitration panels, and administrative agencies, including the EEOC and its state equivalents, and in pre-litigation negotiations. Matters he works on include discrimination and harassment, wage and hour, wrongful discharge, whistleblowing and retaliation, covenants not to compete, breaches of fiduciary duty, unjust enrichment, and tort and contract claims. 

In addition to handling litigation and dispute resolution, Pinny regularly advises clients on a wide variety of employment issues, including drafting, reviewing and revising handbooks and workplace policies. He also addresses questions and concerns related to hiring, wage and hour issues, employee leave, performance problems, terminations of employment, and separation agreements and releases.

Prior to joining Proskauer, Pinny was a Labor and Employment associate at Seyfarth Shaw LLP. While in law school, he served as an editor for the Cardozo Law Review.

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