Reporting Fraud Outweighs Privacy Agreement, Court Rules

June 21, 2016
Murat Kayali

The U.S. District Court for the Northern District of Illinois handed down a favorable decision for whistleblowers in qui tam cases that weighed confidentiality agreements against the importance of reporting fraud. [See United States ex rel. Cieszynski Lifewatch Servs., Inc., No. 13 CV 4052, 2016 WL 2771798 (N.D. Ill. May 13, 2016)]

The Case

Plaintiff-relator Matthew Ciezynski filed a qui tam claim against Lifewatch Services Inc. (“LIfewatch”) under the False Claims Act (“FCA”), alleging that Lifewatch had “submit[ted] to the government claims for reimbursement for heart monitoring services that it knew violated the laws and regulations of Medicare and other government health insurance programs.” Lifewatch filed a counterclaim against Cieszynski alleging that Cieszynski had breached a confidentiality agreement and a privacy policy by providing confidential information to the government and his attorneys as he pursued his qui tam claim against the company. Neither party argued that the information divulged by the plaintiff-relator was not covered by the confidentiality agreement and privacy policy.

The Issue

Lifewatch alleged that Cieszynski had divulged to the government and his attorneys more information than was necessary to his claim, namely, Cieszynski supplied the government and his attorneys with a spreadsheet containing HIPAA protected information for 52,000 patients, only some of whom were insured by the government. The court spoke to the balance needed to protect whistleblowers and incentivize their attempts to uncover fraud against employers’ “legitimate expectation that [their] confidential information will be protected.”

Ultimately, the court granted Ciezynski’s motion to dismiss Lifewatch’s counterclaim, stating that “It is unrealistic to impose on a relator the burden of knowing precisely how much information to provide the government when reporting a claim of fraud, with the penalty for providing what in hindsight the defendant views as more than was needed to be exposure to a claim for damages. Given the strong public policy encouraging persons to report claims of fraud on the government, more is required before subjecting relators to damages claims that could chill their willingness to report suspected fraud.”

The Takeaway

The court’s ruling in Cieszynski is a positive development for relators in qui tam cases as it recognizes the importance of protecting whistleblowers and incentivizing employees to uncover fraud against the government. However, the court does indicate that whistleblowers are limited in the types of disclosures they can make. Cieszynski took documents that he believed to be related to his qui tam case and only shared the documents with his attorneys and the government. Had he taken documents unrelated to his qui tam and disclosed them to third parties or the public, his disclosures would likely not have been protected.

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