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Smith v. LHC Group, Inc.

United States District Court, E.D. Kentucky, Central Division, Lexington

December 9, 2019

SUE SMITH, Plaintiff,
v.
LHC GROUP, INC., and KENTUCKY LV, LLC, Defendants.

          OPINION AND ORDER

          KAREN K. CALDWELL, UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on Defendants' motion for summary judgment. Plaintiff Sue Smith brought suit under the False Claims Act, 31 U.S.C. § 3730, alleging that she was constructively discharged in violation of that statute's anti-retaliation provision, and under state law, alleging that she was wrongfully constructively discharged for her refusal to violate federal and state law. (DE 1.) The Court granted Defendants LHC Group, Inc. and Kentucky LV, LLC's motion to dismiss the complaint. (DE 13; DE 14.) The United States Court of Appeals for the Sixth Circuit then reversed that judgment and remanded the case for further proceedings. (DE 17.) Defendants subsequently moved for summary judgment. (DE 49.) For the reasons stated below, the Court grants Defendants' motion.

         Background

         I. Factual Background

         Defendants are home healthcare providers who obtain patients through referrals from physicians, hospitals, assisted care living centers, nursing homes, and other providers. (DE 1 at 4.) Defendants are paid for the services that they provide through Medicare, Medicaid, and private insurers. (DE 1 at 4-5.) Referrals are usually submitted to Defendants with a physician's order specifying the type of home healthcare services that the patient needs. (DE 1 at 4.) These referrals are typically handled, at least initially, by a “patient care representative, ” or “PCR.” (DE 49-1 at 3-4; DE 57 at 3.) Defendants' staff analyze the physician's order and determine if the provider “ha[s] available staff and if available clinical staff possess[] the skill and expertise necessary to provide the care needed for the referred and potential patient.” (DE 1 at 4.) If Defendants initially authorize the referral, healthcare staff - typically either a nurse or physical therapist - visit with and examine the patient. (DE 1 at 5.) Following this initial, in-home assessment, the healthcare staff would sometimes determine that the patient needs more care than the original physician's order sought, and sometimes that one or more of the services indicated in the order “did not appear to be necessary, were not feasible to provide given the patient's living condition, had been rejected or declined by the patient, ” or for some other reason could not be provided. (DE 1 at 5.) Such determinations were reported to the patient's physician, “so that the doctor can decide whether the orders for the patient should be modified accordingly.” (DE 1 at 6.) According to Plaintiff, if healthcare staff had determined that there was not sufficient staff available to provide the services recommended in the physician's order, some other “agents of defendants” maintained the “final decision-making authority as to whether the patient would be accepted by defendants.” (DE 1 at 6.)

         Defendants describe the process with some additional detail. According to Defendants, if none of the LHC-affiliated agencies in the local area had sufficient clinicians for all of the services originally ordered, the PCR handling the referral would contact the patient's physician, and the physician might revise the referral order by either removing or delaying one or more of the services. (DE 49-1 at 4-5.) According to Defendants, final plans of care for patients would often differ from initial referral orders “and, in all cases, it is the physician who has the final say on the plan of care.” (DE 49-1 at 5-6.)

         Plaintiff worked for Defendants as a Registered Nurse and Director of Nursing, beginning with their predecessor-in-interest, from “prior to 2010” until October 26, 2016. (DE 1 at 3.) Plaintiff supervised the assessment and implementation of patient care, which included making determinations as to the availability of clinical staff and recommending to her superiors whether or not Defendants could or should take on a referral. (DE 1 at 4.) As part of her job, Plaintiff also completed the forms necessary to secure payment through Medicare, Medicaid, and private insurers. (DE 1 at 4.) At some point in her tenure, Plaintiff learned of what she supposedly believed to be a fraudulent scheme. (DE 1 at 6.) Defendants were allegedly altering patient orders prior to the evaluation by clinical staff so that “the services and care needed for the patient would be consistent with defendants' available clinical staff.” (DE 1 at 6-7.) According to Plaintiff, a particular PCR, Cindy Sisler, originated most of these allegedly problematic changes to patient orders. (DE 57 at 5.) Defendants claim that “Smith and Sisler both have strong personalities and there was conflict between them about a range of issues.” (DE 49-1 at 6.) Plaintiff also determined that some of Defendants' employees “admitt[ed] patients without adequately documenting either the patient's need for home healthcare services or the type of home healthcare services that the patient needed.” (DE 1 at 8-9.) Apparently wary of potential illegality, Smith declined to participate in this conduct and purportedly “informed on many occasions defendants' [sic] senior management personnel of instances in which it had occurred.” (DE 1 at 9.) Management allegedly ignored Smith and her whistleblowing efforts. (DE 1 at 11.) Unwilling to work amongst such allegedly unethical business practices, Smith decided to quit. (DE 1 at 11-12.)

         II. Procedural History

         Plaintiff filed suit in this Court on January 9, 2017. (DE 1.) She seeks lost pay and benefits, compensatory and punitive damages, and other costs and fees, and alleges three claims: (1) that she was constructively discharged in violation of the anti-retaliation provision of the False Claims Act; (2) that she was wrongfully constructively discharged under Kentucky state law for her refusal to violate “Title 31, Chapter 37, Subchapter III of the United States Code;” and (3) that she was wrongfully constructively discharged under Kentucky state law for her refusal to violate KRS § 314.091(1)(d) and/or (h), statutes that regulate the licensure of registered nurses in Kentucky. (DE 1.) On June 30, 2017, the Court granted Defendants' motion to dismiss the complaint under Fed.R.Civ.P. 12(b)(6). (DE 13.) The Court found that Plaintiff's complaint failed to allege facts showing that Defendants “deliberately created intolerable working conditions” so as to state a proper claim of constructive discharge. (DE 13 at 6.) This Court ruled that “a prima facie case of constructive discharge requires that an employer… act with an intention to force an employee to quit his or her job, ” and that Plaintiff had “not alleged that Defendants perpetrated the alleged fraud… with the specific intention of forcing her” to quit her job. (DE 13 at 6.) Regarding her state law claims, this Court noted that the exception to Kentucky's treatment of employment as at-will is limited to terminations contrary to a fundamental public policy, as evidenced by a constitutional or statutory provision. (DE 13 at 8.) As the Court explained, under Kentucky law, a discharge is actionable only where the reason for the discharge was, either, the employee's failure or refusal to violate a law in the course of employment, or, the employee's exercise of a right conferred by well-established legislative enactment. (DE 13 at 8.) As to her first state law claim, the Court disagreed with Plaintiff that “federal constitutional provisions and statutes may support a wrongful discharge claim” because “it is well-established that Kentucky public policy cannot be premised on a violation of federal law such as the FCA.” (DE 13 at 9.) Finally, as to her second state law claim, the Court found that Plaintiff did not properly allege that Defendants requested that she violate KRS § 314.091. (DE 13 at 10.)

         On March 2, 2018, the Sixth Circuit reversed the Court's judgment and remanded the case for further proceedings. (DE 17.) The Sixth Circuit held that constructive discharge under § 3730(h), the False Claims Act's anti-retaliation provision, requires only “general intent” that an employee resign, and not a “conscious ‘specific intention.'” Smith v. LHC Group, Inc., 727 Fed.Appx. 100, 102 (6th Cir. 2018). The Circuit “clarif[ied] that the standard described by Held [v. Gulf Oil Co., 684 F.2d 427 (6th Cir. 1982)] is ultimately an objective one… the Held intent requirement can be satisfied so long as the employee's resignation was a reasonably foreseeable consequence of the employer's actions.” Id. at 106. That court concluded that “a jury could find that LHC created intolerable conditions by ignoring Smith's complaints of illegal activity.” Id. at 104. Regarding Plaintiff's state law claim of wrongful discharge premised on Defendants having requested that she violate KRS § 314.091, the Sixth Circuit found that, “[a]lthough district courts have consistently held that a Kentucky wrongful discharge claim requires proof of an affirmative request, no authoritative Kentucky case has created such an element.” Id. at 107. The court reaffirmed its holding from Alexander v. Eagle Mfg. Co., LLC, 714 Fed.Appx. 504 (6th Cir. 2017) that “Kentucky Supreme Court case law ‘did not create an additional element - an explicit request from the employer that the employee violate the law.'” Id. (quoting Alexander). Plaintiff did not appeal the dismissal of her state law claim of wrongful discharge premised on her refusal to violate the False Claims Act. Id. at 107 n. 4.

         The case then proceeded to discovery on the two remaining claims (DE 31; DE 33), and on July 29, 2019, Defendants filed a motion for summary judgment under Fed.R.Civ.P. 56. (DE 49.) Regarding the federal law claim, Defendants argue, inter alia, that Plaintiff cannot establish a prima facie case of retaliation under the False Claims Act because Plaintiff did not engage in any protected activity and because Plaintiff was not constructively discharged as a result of any protected activity. (DE 49-1 at 1-2, 10-20.) On the state law claim, Defendants argue, inter alia, that Plaintiff cannot establish a genuine issue of material fact that there was illegal activity at Defendants' agencies (DE 49-1 at 2, 23-24), that she either participated, or was asked to participate in illegal activity, or that her job required her complicity in any illegal activity (DE 49-1 at 2, 25).

         Analysis

         I. Standard

         Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The moving party bears the initial burden and must identify “those portions of the [record] which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (citation omitted). All evidence, facts, and inferences must be viewed in favor of the non-moving party. United States v. Diebold, Inc., 369 U.S. 654, 655 (1962). In order to defeat a summary judgment motion, “[t]he nonmoving party must provide more than a scintilla of evidence, ” or, in other words, “sufficient evidence to permit a reasonable jury to find in that party's favor.” Van Gorder v. Grand Trunk W. R.R., Inc., 509 F.3d 265, 268 (6th Cir. 2007) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986)). Summary judgment must be entered if, “after adequate opportunity for discovery, ” a party “fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Tolton v. American Biodyne, Inc., 48 F.3d 937, 940 (6th Cir. 1995) (quoting Celotex, 477 U.S. at 322) (internal quotation marks omitted).

         II. False Claims Act Claim

         “For a defendant to be liable under the False Claims Act, it must knowingly present, or cause to be presented, ‘a false or fraudulent claim for payment or approval.'” United States ex rel. Williams v. Renal Care Group, Inc., 696 F.3d 518, 528 (6th Cir. 2012) (quoting 31 U.S.C. § 3729(a)(1)(A)).[1] Under 31 U.S.C. § 3730(h), “[a]ny employee, contractor, or agent shall be entitled to all relief necessary to make” that person “whole” if that person “is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts done by” that person in furtherance of some effort to stop a violation of the False Claims Act. This provision serves to “protect[] employees who pursue, investigate, or otherwise contribute to an action exposing fraud against the government.” Yuhasz v. Brush Wellman, Inc., 341 F.3d 559, 566 (6th Cir. 2003). “In order to establish a claim for retaliatory discharge, a plaintiff must show: (1) he engaged in a protected activity; (2) his employer knew that he engaged in the protected activity; and (3) his employer discharged or otherwise discriminated against the employee as a result of the protected activity.” Id.[2] “Protected activity” as used in the standard means “efforts to stop” violations of the FCA and, accordingly, “to plead protected activity, [a plaintiff] must allege conduct directed at stopping what he reasonably believed to be fraud committed against the federal government.” Fakorede v. Mid-South Heart Ctr., P.C., 709 Fed.Appx. 787, 789 (6th Cir. 2017) (quoting § 3730(h)) (emphasis removed).[3]

         Plaintiff alleges that Defendants have failed to uphold appropriate professional standards and that their conduct may have put patients at risk. But the False Claims Act is not intended to enforce professional standards or punish regulatory violations, it is intended to protect the government coffers from fraud. On summary judgment, Plaintiff must come forward with evidence of fraud. The law provides an avenue to argue that billing the government for services that violate contractual provisions or regulations amounts to fraud, but Plaintiff makes no clear attempt to address this approach. Because Plaintiff has no colorable argument that Defendants' conduct constitutes fraud against the government, she has failed to show that she engaged in any protected activity, or that she was constructively discharged as a result of any protected activity. Therefore, the Court grants Defendants' motion for summary judgment on Plaintiff's False Claims Act claim.

         A. Protected activity

         Defendants argue that Plaintiff's claim for retaliatory constructive discharge fails because “the record is clear that Plaintiff did not engage in protected activity under the FCA.” (DE 49-1 at 12.) Further, Defendants argue that “it is undisputed that the patient referral process is separate from the patient admission process, that Medicare does not regulate or otherwise apply to the referral process and LHC does not bill Medicare (or any other payor) for any activities relating to the referral process.” (DE 49-1 at 13-14.) Defendants also argue that “even if there was somehow a connection between the patient referral process and Medicare, Plaintiff cannot establish any reasonable basis to conclude that any of Sisler's referrals were somehow improper (much less rose to the level of fraud on the government.)” (DE 49-1 at 14.) Plaintiff argues in response that “[t]he more patients referred, the more patients admitted, the more money a PCR makes” and, thus, “defendants' PCRs have a strong financial incentive to get a referred patient enrolled as a patient.” (DE 57 at 3.) Plaintiff concedes that “[a]ccepting a referral is not the same as admitting or enrolling a patient, ” but claims that ...


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