Cynthia Schuhardt v. Washington Univ. , 390 F.3d 563 ( 2004 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 03-3710
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Cynthia A. Schuhardt; *
Nancy M. Becker, *
*
Plaintiffs - Appellants, *
*
United States of America, *
*
Movant Below, *
*
v. *
* Appeal from the United States
Washington University, * District Court for the
* Eastern District of Missouri.
Defendant - Appellee, *
_____________________ *
*
Taxpayers Against Fraud, The False *
Claims Act Legal Center; National *
Employment Lawyers Association, *
*
Amici on Behalf of *
Appellant, *
*
American Association of Medical *
Colleges, *
*
Amicus on Behalf of *
Appellee. *
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Submitted: September 13, 2004
Filed: December 3, 2004
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Before RILEY, LAY, and SMITH, Circuit Judges.
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SMITH, Circuit Judge.
Cynthia A. Schuhardt and Nancy M. Becker ("Appellants") brought a qui tam
action as relators for the government against Washington University ("the
University") alleging violations of the False Claims Act (FCA), 31 U.S.C. §§ 3729
et seq. Schuhardt, individually, also made a claim for retaliation under 31 U.S.C. §
3730(h). The University moved for summary judgment on all claims and the district
court granted the University's motion. We affirm in part and reverse in part.
I. Background
Washington University's Department of Surgery employed Appellants as
"coders." As coders, Appellants performed an accounting task. Specifically, coders
reviewed patient files and determined the appropriate billing structure. Many of the
bills prepared by Appellants were submitted for payment to various federal entities
including Medicare and Medicaid. In late 1996 and early 1997, the University’s
Department of Surgery conducted a large scale review of patient files. As part of that
review, Appellants checked patient files to ensure proper documentation for billing
purposes. If the file data was incomplete, Appellants contacted the patient's attending
physician and obtained the documentation needed to prepare a bill for the medical
services provided.
According to Appellants, as they reviewed patient files they became concerned
that the University's billing practices could include fraud. Specifically, Appellants
believed that the University's doctors did not properly document their involvement
with patients. Central to Appellants' concern was that the University was billing
federally funded programs for surgical procedures and other medical services as if
they were performed by teaching physicians when the procedures and services were
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actually performed by residents, fellows and nurses in the absence of a teaching
physician.
Schuhardt complained to her supervisor about the billing methods. According
to Schuhardt, the University's billing practice remained unchanged. She told her
advisors that she thought it was "illegal" and "fraudulent" to bill Medicare for
undocumented surgeries, and that "if the OIG [Office of Inspector General] would
come in they would frown upon us and they'd pretty much wipe us out." Schuhardt
alleged that she was humiliated, criticized, demoted, harassed, and eventually
discharged because of her complaints.
After Schuhardt’s termination, Appellants submitted their allegations to the
United States Government pursuant to the qui tam provisions of the FCA. The
government declined to intervene in the matter, explaining that it was unable to verify
any specific allegations of fraud. Appellants pursued the case as relators in the name
of the United States and filed the instant action in the United States District Court for
the Eastern District of Missouri.
In response, the University filed a motion to dismiss contending that Appellants
failed to plead fraud with sufficient particularity. The district court agreed with the
University and ruled that the complaint failed to satisfy the particularity requirements
of Fed. R. Civ. P. 9(b). However, rather than dismiss Appellants' suit, the district
court granted Appellants leave to file an amended complaint. Appellants filed an
amended complaint making specific allegations of fraud in connection with fifteen
separate patients. The University repeated its motion to dismiss for failure to plead
fraud with particularity. The district court denied the motion.
Appellants conducted lengthy discovery related to their fifteen distinct
allegations of fraud. Following discovery, the University sought summary judgment
on two grounds. First, the University argued that appellants failed to provide
sufficient supportive evidence of fraud. Second, the University moved for summary
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judgment on Schuhardt’s claim for retaliation contending that she did not engage in
protected activity within the meaning of 31 U.S.C. § 3730(h). Appellants requested
the district court to grant additional discovery under Fed. R. Civ. P. 56(f) prior to
ruling on Washington University’s motion for summary judgment. The district court
denied Appellants' motion to continue discovery, and granted the University’s motion
for summary judgment. The Appellants' combined complaint and Schuhardt's claim
for retaliation were dismissed.
II. Discussion
A. FCA Claim
On appeal, Appellants make four arguments for reversal of the district court's
summary judgment in favor of the University on their qui tam action. They argue: (1)
that there was sufficient evidence of fraud to survive summary judgment; (2) that the
district court erred by failing to give original medical records proper evidentiary
weight; (3) that the district court erred in deciding issues of credibility; and (4) that
the district court abused its discretion in denying further discovery.
In a sixty-page memorandum and order, the district court comprehensively
detailed the evidence submitted by Appellants. After careful examination of the
record and briefs in this case, we conclude that the district court committed no error
of law or fact as to Appellants' FCA claim. Accordingly, we affirm the dismissal of
Appellants' qui tam action, adopting the reasoning of the district court's thorough
memorandum and order. See Schuhardt v. Washington University, No. 4:99-CV-1202
CEJ (Sep. 29, 2003).
B. Retaliation
The district court also granted summary judgment to the University on
Schuhardt’s retaliation claim. We review grants of summary judgment de novo.
Murphey v. City of Minneapolis, 358 F.3d 1074, 1077 (8th Cir. 2004), and will affirm
the judgment if there is no genuine issue as to any material fact and the moving party
is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c). Furthermore, we
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view all evidence in the light most favorable to the non-moving party, giving that
party the benefit of all inferences. Hammond v. Northland Counseling Ctr., Inc., 218
F.3d 886 (8th Cir. 2000). The moving party is entitled to summary judgment if "the
nonmoving party has failed to make a sufficient showing on an essential element of
her [or his] case with respect to which she [or he] has the burden of proof." Id. at 890
(quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265
(1986)).
The FCA whistleblower statute protects employees who are "discharged . . .
because of lawful acts done by the employee . . . in furtherance of [a civil action for
false claims]." 31 U.S.C. § 3730(h); Wilkins v. St. Louis Hous. Auth., 314 F.3d 927,
932–33 (8th Cir. 2002). In order to prove retaliation under this section, a plaintiff
must prove that (1) the plaintiff was engaged in conduct protected by the FCA; (2)
the plaintiff's employer knew that the plaintiff engaged in the protected activity; (3)
the employer retaliated against the plaintiff; and (4) the retaliation was motivated
solely by the plaintiff's protected activity. Id. The district court determined that
Schuhardt failed to establish the first two elements of her retaliation claim and
dismissed the complaint. According to the district court, Schuhardt was not engaged
in protected activity, and, even if she was, Washington University did not know she
was engaged in the activity. We disagree and hold that Schuhardt presented sufficient
evidence to show that she engaged in protected activity and that the University knew
of such activity.
1. Protected Activity
Protected activity is established when the employee's actions satisfy two
conditions. First, the employee’s conduct must have been in furtherance of an FCA
action. See United States ex rel. Hopper v. Anton, 91 F.3d 1261, 1269 (9th Cir. 1996)
(quoting 31 U.S.C. § 3730(h)).1 Second, the employee's conduct must be aimed at
1
In Wilkins v. St. Louis Housing Authority, 314 F.3d 927, 933 (8th Cir. 2002),
we dismissed an argument that activity was not protected because it was not done in
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matters which are calculated, or reasonably could lead, to a viable FCA action. Id.
This second condition has been clarified as follows:
An employee engages in protected activity where (1) the employee in
good faith believes, and (2) a reasonable employee in the same or similar
circumstances might believe, that the employer is possibly committing
fraud against the government.
Wilkins, 314 F.3d at 933 (quoting Moore v. Cal. Inst. Tech Jet Propulsion Lab, 275
F.3d 838, 845 (9th Cir. 2002)). The protected activity element of a retaliation claim
does not require the plaintiff to have filed an FCA lawsuit or to have developed a
winning claim at the time of the alleged retaliation. United States ex rel. Karvelas v.
Melrose-Wakefield Hosp., 360 F.3d 220, 236 (1st Cir. 2004). Indeed, § 3730(h)
protects internal whistleblowers who make a complaint about fraud against the
government. See Robertson v. Bell Helicopter Textron, Inc., 32 F.3d 948, 951 (5th
Cir. 1994).
According to Schuhardt, she complained to her supervisor that the University’s
billing practice was illegal and fraudulent. To support that complaint, she copied
patient records to expose the potential fraud. After reviewing Schuhardt's deposition
testimony, the district court ruled that Schuhardt did no more than her regular job
duties. Consequently, she was not acting in furtherance of a qui tam action. However,
the district court ignored the fact that Schuhardt copied files and took them home to
substantiate the existence of fraud. This activity was not within her job duties.
Schuhardt's position required her to check the completeness of documentation to the
furtherance of a qui tam action stating, “this argument misses the distinction between
the standards for a successful qui tam suit and those for an anti-retaliation claim.”
There, however, we were focusing on the second prong established by the Ninth
Circuit in Moore v. Cal. Inst. of Tech. Jet Propulsion Lab., 275 F.3d 838 (9th Cir.
2002), and did not supplant the requirement that an employee’s conduct be in
furtherance of an FCA action to be protected activity.
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medical chart and try to obtain any missing documentation needed for billing the
responsible party. Schuhardt’s job duties did not include checking billings for
compliance with federal regulatory requirements.
Viewing the evidence in the light most favorable to Schuhardt, and drawing all
inferences in her favor, we conclude that there is sufficient evidence that Schuhardt’s
activity was in furtherance of a qui tam action. Specifically, Schuhardt perceived a
mass effort to modify patient records months after a procedure had occurred. She
explained that doctors signed reports without reviewing files. She advised her
supervisor that the activity may be fraudulent and illegal. She also mentioned to the
supervisor that a government agency would forbid the practice if it was aware of it.
Schuhardt complained to the University over its confidential hotline. Then, when the
billing practice remained unchanged, she copied files that she believed to be evidence
of fraud.
2. Knowledge
Schuhardt's activity notwithstanding, if the University did not know that she
engaged in protected activity, her claim for retaliation would nonetheless fail.
Wilkins, 314 F.3d 927. "The legislative history [of § 3730(h)] makes clear that a
whistle blower must show the employer had knowledge the employee engaged in
'protected activity.'" Robertson, 32 F.3d at 951 (quoting S.Rep. No. 345, 99th Cong.,
2d Sess. 35 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5300). A plaintiff must
show the employer had actual or constructive knowledge of the protected activity in
order to establish a prima facie case of retaliation. Buettner v. Arch Coal Sales Co.,
Inc., 216 F.3d 707, 715 (8th Cir. 2000). Put simply, an employee has the burden of
presenting enough evidence to demonstrate that the defendant was on notice that
"plaintiff was either taking action in furtherance of a private qui tam action or
assisting in an FCA action brought by the government." United States ex rel.
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Ramseyer v. Century Healthcare Corp., 90 F.3d 1514, 1522 (10th Cir. 1996) (citing
Robertson v. Bell Helicopter Textron, Inc., 32 F.3d 948, 951 (5th Cir. 1994)).2
Schuhardt’s statements to her supervisors that the University’s billing practice
was fraudulent and illegal are sufficient to overcome a motion for summary judgment
based on lack of notice. The Fifth Circuit has indicated that an employee's report of
illegal or unlawful activity is sufficient to put an employer on notice that the
employee is engaged in protected activity. Robertson, Inc., 32 F.3d at 951. Similarly,
the First Circuit held that an employee provided sufficient notice of protected conduct
under the FCA where he notified his employer of its fraudulent Medicare and
Medicaid bills. Karvelas, 360 F.3d 220. For purposes of an FCA retaliation claim, the
employee alleged facts sufficient to support an inference that the employers were on
notice. Id. Likewise, the Ninth Circuit concluded that there was a question of fact
about knowledge when an employee made internal complaints. Moore v. California
Inst. of Tech. Jet Propulsion Lab., 275 F.3d 838 (9th Cir. 2002).
2
Part of Schuhardt's job as a coder involved checking the completeness of
documentation for billing purposes and obtaining additional documentation as
necessary. The district court concluded that Schuhardt’s activity was part and parcel
of her employment obligations. An employee tasked with the internal investigation
of fraud against the government cannot bring a § 3730(h) action for retaliation unless
the employee makes it clear that her actions go beyond the assigned task. See
Eberhardt v. Integrated Design & Constr., Inc., 167 F.3d 861, 868 (4th Cir. 1999);
United States ex rel. Ramseyer v. Century Healthcare Corp., 90 F.3d 1514, 1523
(10th Cir. 1996); Robertson v. Bell Helicopter Textron, Inc., 32 F.3d 948, 951 (5th
Cir. 1994). In this case, Schuhardt’s job did not entail investigating fraud. Instead, her
job was to find portions of patient records that were missing signatures from
attending physicians and get them properly signed. Schuhardt’s job duties did not
involve investigating government payments or billings, and, thus, she need not meet
the heightened requirements for employees whose job descriptions include such
responsibilities in order to establish a § 3730(h) retaliation claim. See United States
ex rel. Karvelas v. Melrose-Wakefield Hosp., 360 F.3d 220, 239 (1st Cir. 2004).
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The record reveals that Schuhardt told her supervisors that the University’s
billing practice was "illegal" and "fraudulent" and that "if the OIG would come in
they would frown upon us and they'd pretty much wipe us out." These facts provide
sufficient notice to the University that Schuhardt was engaged in protected activity.
As such, we reverse the order of summary judgment on Schuhardt’s claim for
retaliation.
III. Conclusion
In sum, we affirm the dismissal of the Appellants' qui tam action and reverse
the order of summary judgment with respect to Schuhardt’s retaliation claim.
Affirmed in part, reversed in part.
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