Opinion
Case No. 13-cv-348-JPG-DGW
07-24-2013
MARY RUSSO, Plaintiff, v. BRONCOR, INC. and BRIAN J. LARSON, Defendants.
MEMORANDUM AND ORDER
This matter comes before the Court on defendants Broncor, Inc. ("Broncor") and Brian J. Larson's (collectively "Defendants") motion to dismiss (Doc. 11) Counts One, Two and Four of plaintiff Mary Russo's complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). Russo filed her response (Doc. 15) to which Defendants replied (Doc. 21). For the following reasons, the Court grants in part and denies in part Defendants' motion to dismiss.
1. Background
Accepting allegations in the complaint as true, see Erickson v. Pardus, 551 U.S. 89, 94 (2007), the following are the relevant facts. Broncor is a corporation that provides medical services, including intraoperative neurophysiologic monitoring ("IOM"), for several hospitals. Broncor hired Russo, a licensed audiologist, in July 2009 to perform, among other duties, IOM services. During the course of her employment, Russo became concerned that Broncor's billing practices were in violation of Medicare regulations. She expressed this concern to other Broncor employees and to Larson. Larson is the president of Broncor and the president and secretary of Reliant Billing, Inc., the company that bills private health insurers and Medicare for Broncor's IOM services. Specifically, Russo complained that the hours billed for time spent performing or interpreting baseline electrophysiologic studies was inappropriate. Broncor employees, however, told Russo this matter was properly handled by the billing department.
IOM is an electrical test performed during surgery to assess nerve integrity. According to the American Society of Neurophysiological Monitoring's website, IOM's purpose is the "protection of the patient's nervous system. Neurophysiologic signals are monitored continuously during surgery for adverse changes, detection of which enables corrective action. Risk of postoperative neurological deficit, such as weakness, loss of sensation, hearing loss and impairment of other bodily functions is thereby reduced." The American Society of Neurophysiological Monitoring, www.asnm.org (last visited July 23, 2013).
In August 2011, Russo accepted a new position from Larson in which she began to remotely monitor IOM services. Medicare regulations require remote IOM monitoring be performed by a physician. Larson represented to Russo that Broncor would not bill Medicare for Russo's remote monitoring of Medicare cases. However, in Spring 2012, Russo became suspicious that Broncor was in fact billing her IOM monitoring to Medicare in violation of law. She brought her suspicions to the attention of Broncor employees. Then, on August 28, 2012, Russo asked Sarah Raddatz, Broncor's Director of Patient Accounts and Reliant Billing, Inc.'s Director, about the company's IOM billing practices for Medicare cases. Raddatz told Russo that she had been billing Medicare for Russo's IOM services under Russo's National Provider Identifier ("NPI") number. If Medicare did not accept Russo's NPI number, Raddatz would resubmit the bill under Dr. Susan Anderson's NPI number. Later that day, Russo told Larson about Raddatz's unlawful billing practices.
Russo left for a previously-planned vacation on August 31, 2012. Upon her return in early September, Broncor's human resources manager informed Russo that she had been terminated. Russo maintains that her investigation of and refusal to participate in the improper Medicare billing practices were contributing factors in her dismissal.
On April 10, 2013, Russo filed her four-count complaint alleging as follows: (1) Count One - Retaliatory Discharge against Broncor under the False Claims Act ("FCA"); (2) Count Two - Retaliatory Discharge against Larson under the FCA; (3) Count Three - Common Law Retaliatory Discharge against Broncor; and (4) Count Four - Negligence against Broncor.
Presently before the Court is Defendants' Rule 12(b)(6) motion to dismiss in which Defendants ask this Court to dismiss Counts One, Two and Four and permit Broncor to file an answer to Count Three within fourteen days of this Court's order. Specifically, Defendants' motion to dismiss argues (1) Counts One and Two must be dismissed because Russo fails to allege she engaged in a protected activity under the FCA or that Defendants had knowledge she was engaged in a protected activity; (2) Count Two must be dismissed because the FCA does not provide for individual liability; and (3) Count Four must be dismissed because Russo erroneously premises her negligence claim on an intentional decision to terminate her and does not allege Broncor breached a duty to her. The Court will consider Defendants' arguments in turn.
2. Analysis
When reviewing a Rule 12(b)(6) motion to dismiss, the Court accepts as true all allegations in the complaint. Erickson v. Pardus, 551 U.S. 89, 94 (2007) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). To avoid dismissal under Rule 12(b)(6) for failure to state a claim, a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). This requirement is satisfied if the complaint (1) describes the claim in sufficient detail to give the defendant fair notice of what the claim is and the grounds upon which it rests and (2) plausibly suggests that the plaintiff has a right to relief above a speculative level. Bell Atl., 550 U.S. at 555; see Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009); EEOC v. Concentra Health Servs., 496 F.3d 773, 776 (7th Cir. 2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S. Ct. at 1949 (citing Bell Atl., 550 U.S. at 556).
In Bell Atlantic, the Supreme Court rejected the more expansive interpretation of Rule 8(a)(2) that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief," Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Bell Atlantic, 550 U.S. at 561-63; Concentra Health Servs., 496 F.3d at 777. Now "it is not enough for a complaint to avoid foreclosing possible bases for relief; it must actually suggest that the plaintiff has a right to relief . . . by providing allegations that 'raise a right to relief above the speculative level.'" Concentra Health Servs., 496 F.3d at 777 (quoting Bell Atl., 550 U.S. at 555).
Nevertheless, Bell Atlantic did not do away with the liberal federal notice pleading standard. Airborne Beepers & Video, Inc. v. AT&T Mobility LLC, 499 F.3d 663, 667 (7th Cir. 2007). A complaint still need not contain detailed factual allegations, Bell Atl., 550 U.S. at 555, and it remains true that "[a]ny district judge (for that matter, any defendant) tempted to write 'this complaint is deficient because it does not contain . . .' should stop and think: What rule of law requires a complaint to contain that allegation?" Doe v. Smith, 429 F.3d 706, 708 (7th Cir. 2005) (emphasis in original). Nevertheless, a complaint must contain "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl., 550 U.S. at 555. If the factual detail of a complaint is "so sketchy that the complaint does not provide the type of notice of the claim to which the defendant is entitled under Rule 8," it is subject to dismissal. Airborne Beepers, 499 F.3d at 667.
a. FCA-Protected Activity
Counts One and Two are retaliatory discharge claims under the FCA against each defendant. Defendants first allege these two counts fail because Russo failed to allege she was engaged in an activity protected by the FCA.
The FCA provides for a civil penalty and treble damages against a person who presents false or fraudulent claims to the United States Government. 31 U.S.C. § 3729(a); see also Fanslow v. Chicago Mfg. Ctr., Inc., 384 F.3d 469, 478-79 (7th Cir. 2004). The FCA also provides for qui tam actions brought by private individuals on behalf of the government. 31 U.S.C. § 3730(b); see also Fanslow, 384 F.3d at 479.
In addition to civil penalties and qui tam actions, the version of the [FCA] in effect during the relevant time period provides for whistleblower protection as follows:
Any employee, contractor, or agent shall be entitled to all relief necessary to make that employee, contractor, or agent whole, if that employee, contractor, or agent 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 the employee, contractor, agent or associated others in furtherance of an action under this section or other efforts to stop 1 or more violations of this subchapter.31 U.S.C. § 3730(h). In a 2004 case, the Seventh Circuit explained that to state a claim for retaliation under this statute a plaintiff must allege as follows:
(a) [her] actions were taken "in furtherance of" an FCA enforcement action and were therefore protected by the statute; (b) [her] employer had knowledge that [s]he was engaged in this protected conduct; and (c) [her] discharge was motivated, at least in part, by the protected conduct.Fanslow, 384 F.3d at 479 (citing Brandon v. Anesthesia & Pain Mgmt. Assocs., Ltd., 277 F.3d 936, 944 (7th Cir. 2002)). Since Fanslow, Congress broadened the statute in 2009, as quoted above, "to protect employees from being fired for undertaking 'other efforts to stop' violations of the Act, such as reporting suspected misconduct to internal supervisors." Halasa v. ITT Educ. Servs., Inc., 690 F.3d 844, 847-48 (7th Cir. 2012). Specifically, the language "other efforts to stop 1 or more violation of this subchapter" encompasses more protected activity than did the statute in place at the time of Fanslow. Id.
For instance, in Halasa, the Seventh Circuit concluded that the plaintiff's activities were protected under this newly-added language. Id. at 848. The defendant college recruited students and altered test scores to qualify students for financial aid in violation of federal law. Id. at 848. The plaintiff investigated this fraud and reported his findings "presumably to ensure [the defendant] ended these practices and to prevent [the defendant] from making any false certifications to the U.S. Department of Education . . . ." Id. Based on this evidence, the Seventh Circuit concluded "a trier of fact [could] find [the plaintiff] engaged in 'efforts to stop' potential FCA violations." Id.
Similar to the plaintiff in Halasa, Russo took efforts to investigate whether defendants were billing in violation of Medicare regulations when she mentioned her concerns to Larson and other Broncor employees and asked Raddatz to explain the billing procedures for IOM services. When Raddatz confirmed that she was billing Medicare for Russo's remote monitoring in violation of Medicare regulations, she relayed this information to Larson presumably in an effort to stop the FCA violations. Accepting these allegations as true, a trier of fact could find that Russo engaged in "efforts to stop" FCA violations. Accordingly, Russo sufficiently alleged she was engaged in an activity protected under the FCA.
b. Defendants' Knowledge of Protected Activity
Defendants next argue that Counts One and Two must be dismissed because Russo failed to allege that Defendants had knowledge that Russo was engaged in a protected activity. Specifically, Defendants maintain Russo failed to allege she engaged in an activity that put Defendants on notice that an FCA claim was a distinct possibility, and nothing in the complaint suggests Broncor was aware Russo was investigating fraud on the government.
The second element of a retaliation claim requires that a plaintiff show that the defendant had knowledge of the protected activity. Fanslow, 384 F.3d at 483. "[A] complaint must be dismissed if the employer did not know about the whistleblower's protected conduct before it discharged him." Id.
Defendants cite to Brandon in support of their argument that the expression of mere concern over billing practices does not constitute a protected activity. Brandon, 277 F.3d at 944-45. Brandon, however, discussed the heightened notice standard required of "fraud-alert" employees who monitor fraud as part of their ordinary job duties. Fanslow, 384 F.3d at 483-84. In Brandon, one of the plaintiff's job duties was to ensure his employer complied with Medicare regulations. Brandon, 277 F.3d at 945. As such, his reports of fraud to the company's shareholders did not put the defendant on notice of a 'distinct possibility' of a qui tam action. Id. at 944.
Russo's job requirements did not entail monitoring fraud. As such, she was not required to use buzz words such as "illegal" or "unlawful" when she discussed her billing concerns with Defendants. See id. at 484. She only had to allege Defendants were aware of her investigation. See id. Russo has alleged that she expressed her concern over Defendants' billing practices during her employment between July 2009 and August 2011 and was never given an explanation. She investigated this issue by asking Raddatz to explain the billing procedures. She then reported to Larson that she believed the company's practice was unlawful. She never received an explanation from Larson and was terminated when she came back from vacation, only a few weeks after she reported the unlawful activity to Larson. Thus, a jury could conclude that Russo's expression of her concerns to other Broncor employees and her discussion with Larson about the illegal practices put Defendants on notice of her protected activity and met the notice requirement of the FCA.
c. Individual Capacity
Next, Larson argues Count Two, the individual-capacity FCA retaliation claim, must be dismissed because the statutory language only allows claims in which an employee was discriminated against "by his or her employer." Larson, however, cites to a prior version of 31 U.S.C. § 3730(h) which read as follows:
[a]ny employee who is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment by his or her employer because of lawful acts . . .In 2009, Congress amended this portion of the statute, eliminating "by his or her employer." Weihua Huang v. Rector and Visitors of Univ. of Va., 896 F. Supp. 2d 524, 548 n.16 (W.D. Va. 2012) (citing Pub. L. No. 111-21, § 4(d), 123 Stat. 1617, 1624 (2009)). This 2009 amendment applies to conduct on or after its date of enactment on May 20, 2009. Pub. L. No. 111-21, § 4(f), 123 Stat. 1617, 1625 (2009).
Prior to this amendment, Larson is correct that Russo's individual capacity claim would fail. See Pollak v. Bd. of Trs. of Univ. of Ill., No. 99 C 710, 2004 WL 1470028, at *3 (N.D. Ill. June 30, 2004) ("Although the Seventh Circuit has never addressed this issue, our sister courts have uniformly held that supervisors, such as the Individual Defendants, do not qualify as 'employers' subject to liability under the FCA."). There is no Seventh Circuit authority on the impact of this 2009 amendment and other district courts have come to conflicting conclusions. One district court has suggested in dicta that Congress's elimination of the term "employers" from the statute provides for individual liability because the statutory change "left the universe of defendants undefined and wide-open." Id. Another district court refused to grant an individual defendant's motion to dismiss on the same issue because all authority on the matter only considered the pre-2009 statute and there was no circuit holding that individual liability does not exist subsequent to the 2009 amendment. Laborde v. Rivera-Dueño, 719 F. Supp. 2d 198, 205 (D.P.R 2010). Accordingly, under this interpretation, Larson could be a proper defendant.
Another Court declined to characterize this decision as persuasive authority because
the Laborde court did not advance any affirmative reason to interpret the amended statute as providing for individual liability. Rather, the court merely held that it would deny the motion to dismiss '[i]n the absence of specific First Circuit guidance holding that individual liability does not exist in FCA retaliation claims, and in light of the fact that the persuasive authority on the issue relies upon an outdated version of the statute.Aryai v. Forfeiture Support Assocs., LLC, 10 Civ. 8952 (LAP), 2012 U.S. Dist. LEXIS 125227, at *20 n.5 (S.D.N.Y. Aug. 27, 2012).
Another district court, however, granted an individual defendant's motion to dismiss after it concluded that the 2009 amendment to the FCA did not provide for individual liability. Aryai v. Forfeiture Support Assocs., LLC, 10 Civ. 8952 (LAP), 2012 U.S. Dist. LEXIS 125227 (S.D.N.Y. Aug. 27, 2012). The Aryai court acknowledged that "it is less clear that the statute still applies only to employers now that Congress has removed the statute's reference to retaliation 'by [an] employer.'" Id. at *20. However, after undertaking a thorough statutory analysis, the Aryai court ultimately concluded that Congress did not intend to create individual liability in the 2009 amendment. Id. at *19-27.
The Aryai court first noted that the 2009 amendment's primary purpose was to expand the category of individuals who could bring this cause of action from an "employee" to an "employee, contractor, or agent." Id. at *23. The House Report contained no indication that it intended to also expand the class of individuals who could be liable under the statute. Id. Further, because Congress was aware that courts had rejected individual liability, it could have replaced "employer" with "any person" as it had done in other anti-retaliation statutes to compel individual liability. Id. at *25 (citing 29 U.S.C. § 215(a)(3) (stating "it shall be unlawful for any person" to retaliate against employees engaging in protected activity under the Fair Labor Standards Act)); 29 U.S.C. § 2615(b) (stating that "[i]t shall be unlawful for any person to discharge or in any other manner discriminate against any individual because such individual" has exercised rights under the Family and Medical Leave Act)). The Aryai court found a plausible explanation for the deletion of "employer" from the statute was to avoid confusion in cases where an action was brought by the newly-added protected classes of "contractor or agent" rather than just "employee." Id. at *25. Finally, Congress did not alter the remedy portion of the statute that provides that "[r]elief under [this section] shall include reinstatement." Id. at *-25-26 (emphasis added). This mandatory language provides for a remedy that only an employer, not an individual, could provide. Id. (citing Yesudian ex. rel. United States v. Howard Univ., 270 F.3d 969, 972 (D.C. Cir. 2001)).
This Court finds the reasoning of Aryai persuasive and adopts it herein. The Court finds that Congress did not intend to impose liability on individuals when it removed the phrase "by his or her employer" in the 2009 amendment. Rather, as Aryai explains, the more likely reason for omitting "employer" from the statute is to avoid confusion when an action is brought by a contractor or agent, the newly-added classes to be protected under the statute. Retaliation against these two classes would not be by an "employer." In light of numerous courts' rejection of individual liability in the pre-2009 cases, Congress could have used the words "any person" to make its intent clear that the statute now imposed liability on individuals. The retention of the mandatory remedy of reinstatement further suggests Congress did not intend to add individual liability in the 2009 amendment. Accordingly, the Court dismisses Count Two of Russo's complaint that alleges an FCA retaliation cause of action against Larson. Because this is the only claim against Larson, the Court dismisses Larson from this case.
d. Negligence
Finally, Broncor alleges Count Four must be dismissed because Russo has premised a negligence claim on Broncor's intentional act of terminating her and has failed to plead the elements of a negligence claim. In her response, Russo explains that
Count [Four] clearly alleges the relationship between [] Raddatz'[s] negligent billing and [Russo]'s ultimate termination because of that negligent conduct. [Broncor] has admitted that Broncor owed a duty to submit accurate bills to Medicare. Because Raddatz, as Broncor's agent, breached that duty, [Russo] brought this negligence to [Broncor]'s attention and was ultimately fired.Doc. 15, p. 7.
Under Illinois law, a negligence claim must establish "'that the defendant owed a duty to the plaintiff, that defendant breached that duty, and that the breach was the proximate cause of plaintiff's injuries." Blood v. VH-1 Music First, 668 F.3d 543, 546 (7th Cir. 2012) (quoting First Springfield Bank & Trust v. Galman, 720 N.E.2d 1068, 1071 (1999)). Russo fails to correctly plead the first element of a negligence claim. In her response, Russo admits she is premising her negligence claim an alleged duty Broncor owed to Medicare. Russo, however, can only bring a negligence claim against Broncor if she alleges Broncor owed a duty to her. For that reason, the Court dismisses Count Four of Russo's complaint.
3. Conclusion
For the foregoing reasons, the Court GRANTS in part and DENIES in part Defendants' motion to dismiss (Doc. 11). Specifically, the Court
• GRANTS Defendants' motion to the extent it dismisses Counts Two and Four of Russo's complaint;
• DISMISSES Larson from this case; andCounts One and Three of this complaint shall proceed against Broncor. Broncor shall file its answer to Russo's complaint within fourteen days of the date of this order.
• DENIES Defendants' motion with Respect to Count One of Russo's complaint.
IT IS SO ORDERED.
DATED: July 24, 2013
s/ J. Phil Gilbert
J. PHIL GILBERT
DISTRICT JUDGE