Sue Smith v. LHC Group, Inc.

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 18a0105n.06
Case No. 17-5850
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
FILED
Mar 02, 2018
SUE SMITH, ) DEBORAH S. HUNT, Clerk
)
Plaintiff-Appellant, )
) ON APPEAL FROM THE UNITED
v. ) STATES DISTRICT COURT FOR
) THE EASTERN DISTRICT OF
LHC GROUP, INC., a Delaware Corporation; ) KENTUCKY
KENTUCKY LV, LLC, a Kentucky limited )
liability company, dba Deaconess – Lifeline )
Home Health, )
)
Defendants-Appellees.
____________________________________/
Before: MERRITT, MOORE, and BUSH, Circuit Judges.
I. Introduction
MERRITT, Circuit Judge. This case under the False Claims Act, 31 U.S.C. §§ 3729–
31, arises from plaintiff Sue Smith’s allegations against the defendants, her employers, LHC
Group, Inc., and Kentucky LV, LLC, for perpetrating health care fraud on the federal
government by seeking and receiving fraudulent reimbursements. Rather than participate in the
fraud, she quit her job as Director of Nursing with the defendants. She apparently did so as a
matter of conscience and to avoid suspicion in any future investigation by the government. She
then sued her employers for damages under a theory of “constructive discharge,” or
Case No. 17-5850, Sue Smith v. LHC Group, Inc., et al.
discrimination “in the terms and conditions of employment because of lawful acts done by the
employee . . . to stop 1 or more violations” of the False Claims Act by her employers.1
The district court dismissed Smith’s case as failing to state a valid cause of action as
follows:
Even accepting all of Smith’s claims as true, as the Court must, and assuming
arguendo that such a theory could constitute “intolerable working conditions” . . .
her claim must fail. Smith’s theory focuses solely on the allegedly insufferable
working conditions she faced, but it ignores that a prima facie case of constructive
discharge requires that an employer also act with an intention to force an
employee to quit his or her job. . . . Smith’s complaint tells the story of an
employee who unwittingly became trapped working for a company who adopted a
business model based on fraud, and despite efforts to follow protocol, had no real
control over the decisions being made. Quite reasonably, Smith felt like she had
to quit her job. But where her claims fails is that she has not alleged that
Defendants perpetrated the alleged fraud . . . with the specific intention of forcing
her to do so.
On this point, Smith contends that Defendants, by virtue of their allegedly
fraudulent scheme, acted intentionally by sanctioning practices that violated the
law. By supporting such behavior, Smith argues, Defendants essentially presented
her with a choice, which she argues meets the intentionality requirement: to go
along and get along or quit. The problem is that Smith does not allege facts that
show Defendants did anything directly toward her to make her quit her job. In
other words, she does not tether her employer’s actions to the necessary
requirement that the employer’s actions were done with the intent to have Smith
quit her job.
Smith v. LHC Grp., Inc., No. CV 5:17-15-KKC, 2017 WL 2838048, at *3–4 (E.D. Ky. June 30,
2017) (emphasis added) (citations omitted).
1
The False Claims Act provides for a statutory tort action in favor of employees who resist fraud against the
government by an employer at 31 U.S.C. § 3730(h), as follows:
(1) In general.--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.
(2) Relief.--Relief under paragraph (1) shall include reinstatement with the same seniority status
that employee, contractor, or agent would have had but for the discrimination, 2 times the amount
of back pay, interest on the back pay, and compensation for any special damages sustained as a
result of the discrimination, including litigation costs and reasonable attorneys' fees. An action
under this subsection may be brought in the appropriate district court of the United States for the
relief provided in this subsection.
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The meaning of the federal statute is not clear on the question of interpretation before us.
The federal question before us is whether under § 3730(h) the district court is correct that an
employer like the LHC Group, Inc., here must have a conscious “specific intention,” or a
subjective intent, for the employee to resign. We conclude that the intent required by the statute
is a more general intent that takes into account all of the circumstances in addition to the
employer’s “specific intention.” The case must therefore be remanded for trial not limited to the
defendant corporation’s “specific” or subjective intent but including all of the factors that led to
the plaintiff’s resignation.
If the employee is left to think she may be charged with fraud by the government if she
remains as Director of Nursing, a jury may find that her employer’s fraudulent behavior is
imposing on her fear that would cause a reasonable employee to resign. The jury may find that
the employer’s alleged fraudulent behavior plus the employee’s moral conscience and reasonable
fear of being accused of participating in the employer’s fraud is enough to justify quitting.
Whether we call her resignation a “constructive discharge,” “harassment” or a form of
discrimination, the employee should be made “whole” under the statute and accorded the “relief”
set out in section (2) of § 3730(h) if the jury finds in her favor.
II. Factual Background
Sue Smith worked as the Director of Nursing for home healthcare providers LHC Group,
Inc., and Kentucky LV, LLC, at LHC’s home health office in Lexington, Kentucky. Smith
claims that she had to quit her job because defendants LHC and Kentucky LV engaged in
healthcare fraud and endangered patients.
LHC Group receives new patients when another healthcare provider—such as a
physician, hospital, or nursing home—refers a patient to defendants for a specific home
healthcare service, such as physical therapy. As Director of Nursing, Smith reviewed these
patient referrals and determined whether LHC had the available staff on-hand to fulfill the
doctor’s orders and adequately care for the patient. Smith had the authority to either accept the
new patient or recommend that management decline the referral.
If Smith accepted a patient, the enrollment process began with a clinical assessment of
the patient’s medical needs to determine whether the home healthcare plan should deviate from
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the doctor’s orders. Clinical staff might find that the prescribed services were not feasible for the
patient or that the services needed to be supplemented by additional services. If the provider
believed that modification was needed, the doctor was to be given the opportunity to make the
final decision as to whether the change was appropriate. After accepting a referral, Smith
completed paperwork necessary to secure payment from Medicaid, Medicare, or private
insurance.
Smith alleges that she discovered that other employees regularly bypassed the proper
procedure and admitted patients without the requisite clinical evaluation or documentation.
When LHC could not accommodate a patient’s medical needs, other employees allegedly
admitted the patient regardless and changed the doctor’s orders to match the availability of their
clinical staff. In other instances, LHC employees allegedly admitted patients without the proper
documentation from a medical doctor.
Smith states that she reported the scheme to senior management personnel on numerous
occasions, but management invariably ignored her complaints. According to Smith, LHC not
only tolerated the fraud but in fact welcomed its profitability. One senior manager allegedly told
her that the fraudulent scheme brought in $6 million annually.
Smith claims that she had to choose between resignation and turning a blind eye to the
fraud. Although Smith did not manipulate the patient enrollment process herself, Smith’s duties
as Director of Nursing required her to allocate clinical staff to new patients and fill out payment
paperwork from Medicare, Medicaid, and private insurers. Smith felt that continuing to fulfill
these duties would inevitably require her to facilitate fraud and also violate the Kentucky
licensing provisions for registered nurses. See KRS 314.091(1). Faced with the dilemma of
losing her job or being party to an illegal and unethical scheme, Smith resigned.
Subsequently, Smith sued LHC Group, Inc., and Kentucky LV, LLC, claiming that they
violated the False Claims Act by constructively discharging her in retaliation for her reports and
violated Kentucky state law by wrongfully discharging her based on her refusal to violate
Kentucky law. Defendants (“LHC”) filed a motion to dismiss under Federal Rule of Civil
Procedure 12(b)(6). The district court granted the motion with respect to all counts. Smith v.
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LHC Grp., Inc., No. CV 5:17-15-KKC, 2017 WL 2838048, at *1–7 (E.D. Ky. June 30, 2017).
Smith now appeals the dismissal of these claims.
III. False Claims Act Claim
We review de novo a district court’s grant of a motion to dismiss. Handy-Clay v. City of
Memphis, Tenn., 695 F.3d 531, 538 (6th Cir. 2012). A complaint must include “a short and plain
statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). “To
survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true,
to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
The question in this appeal is whether the plaintiff, Smith, adequately alleged that she
suffered a discharge or adverse employment action when she felt it necessary to resign her job as
Director of Nursing because her employer continued to defraud the government. LHC did not
fire or demote Smith. LHC claims that it did not seek her resignation and took no adverse
employment action that could constitute a discharge, demotion, or other action for which it
should be held liable under § 3730(h). Smith alleges that her employer ignored her complaints
and required her to continue working as she had prior to her report while LHC continued
defrauding the government. Smith quit to avoid being implicated in what she perceived to be an
illegal and unethical scheme and because she could not in good conscience remain an employee.
Smith acknowledges that she was not fired but argues that her claim survives because
LHC “constructively discharged” her. Constructive discharge occurs when “working conditions
would have been so difficult or unpleasant that a reasonable person in the employee’s shoes
would have felt compelled to resign.” Held v. Gulf Oil Co., 684 F.2d 427, 432 (6th Cir. 1982)
(quoting Bourque v. Powell Elec. Mfg., 617 F.2d 61, 65 (5th Cir. 1980)).
The district court found that Smith’s complaint fails to allege the elements of intolerable
working conditions and employer intent to force the employee to quit. LHC Grp., 2017 WL
2838048, at *4. We disagree. First, taking Smith’s allegations as true, we find that a jury could
find that LHC created intolerable conditions by ignoring Smith’s complaints of illegal activity.
Her conditions must be analyzed “from the perspective of a reasonable person in the position
that [the plaintiff] was in at the time of her discharge.” Williams v. Caterpillar Tractor Co.,
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770 F.2d 47, 50 (6th Cir. 1985). A jury may conclude that it is damaging to a professional to
require her to engage in activity she considers illegal and immoral with the threat of prosecution
and loss of her nursing license looming in the background.
The defendants analogize Smith’s case to U.S. ex rel. Absher v. Momence Meadows
Nursing Ctr., Inc., 764 F.3d 699, 716 (7th Cir. 2014), in which the Seventh Circuit decided in
favor of a healthcare facility which had been sued for retaliation on a theory of constructive
discharge. In that case, a nurse’s supervisors responded with hostility when she complained
about substandard, unhygienic conditions at the facility. Id. The nurse quit, believing that the
conditions had led to a patient’s death. Id. The Seventh Circuit found that no constructive
discharge occurred because, despite the regulatory violations, the facility had done nothing to
make the plaintiff’s employment sufficiently unbearable to constitute a constructive discharge.
Id. We find that Absher is distinguishable from Smith’s case. The nurse in Absher was not
required to provide substandard care or otherwise entangled in her coworkers’ failure to provide
proper healthcare. Smith, in contrast, pleads that her administrative role required her to
supervise and implement patient orders and complete paperwork necessary to secure Medicaid
and Medicare funding. Smith’s knowledge of her coworker’s scheme to improperly change
patient orders prior to clinical evaluation could have exposed her to investigation and
prosecution. The jury may conclude that if the employee is left to worry about whether she will
be charged with fraud by the government if she remains on the job, her employer’s fraudulent
behavior is imposing on her a state of mind that would cause a reasonable employee to resign.
Whether a constructive discharge occurred “depends upon the facts of each case.” Held,
684 F.2d at 432.
The next question before us is whether the district court is correct in the opinion quoted
above that the constructive discharge doctrine requires that the employer must have a conscious
“specific intention,” i.e., a subjective intent, for the employee to resign. See LHC Grp., 2017
WL 2838048, at *3–4 (emphasis added) (citations omitted).
We disagree with the district court’s narrow reading of intent because it focuses only on
the outcome LHC specifically desired—profits from the scheme—and fails to take into account
the foreseeable consequences of their actions. The Restatement (Second) of Torts § 8A cmt. b
(Am. Law Inst. 1965), states:
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Intent is not . . . limited to consequences which are desired. If the actor knows
that the consequences are certain, or substantially certain, to result from his act,
and still goes ahead, he is treated by the law as if he had in fact desired to produce
the result.
This circuit has adopted a similarly broad definition: in constructive discharge cases, an
employer’s “[i]ntent can be shown by demonstrating that quitting was a foreseeable consequence
of the employer’s actions.” Moore v. KUKA Welding Sys. & Robot Corp., 171 F.3d 1073, 1080–
81 (6th Cir. 1999). Our constructive discharge case law is rooted in the “well recognized rule in
labor relations law that ‘a man is held to intend the foreseeable consequences of his conduct.’”
Held, 684 F.2d at 432.
A number of other circuits in constructive discharge cases reject the intent requirement
entirely and apply only the objective test of whether the working conditions became so
intolerable that a reasonable person would feel compelled to resign.2 The U.S. Supreme Court
has also omitted employer intent from its definition of constructive discharge. See Pennsylvania
State Police v. Suders, 542 U.S. 129, 153 (2004) (Thomas, J., dissenting) (disagreeing with the
absence of any discussion of intent or “deliberate[ness]” in the majority’s opinion).
The history of constructive discharge doctrine in our circuit closely mirrors its
development in the Tenth Circuit. As in our circuit, the Tenth Circuit originally limited
constructive discharge to cases where (1) “a reasonable man would view the working conditions
as intolerable,” and (2) the employer deliberately created the conditions “to force the employee
to quit.” Irving v. Dubuque Packing Co., 689 F.2d 170, 172 (10th Cir. 1982). The Ninth Circuit
commented on the confusion which had resulted from the Tenth Circuit “purport[ing] to embrace
the reasonable employee standard as well as the employer’s-subjective-intent standard.”
Satterwhite v. Smith, 744 F.2d 1380, 1383 n.4 (9th Cir. 1984). The Tenth Circuit subsequently
2
For examples of circuits applying an objective test, see, e.g., Wiest v. Tyco Electronics Corp., 812 F.3d 319, 331
(3d Cir. 2016); E.E.O.C. v. Kohl’s Dep’t Stores, Inc., 774 F.3d 127, 134 (1st Cir. 2014); Knappenberger v. City of
Phoenix, 566 F.3d 936, 940 (9th Cir. 2009); Stover v. Hattiesburg Pub. Sch. Dist., 549 F.3d 985, 991 (5th Cir.
2008); Sandoval v. City of Boulder, Colo., 388 F.3d 1312, 1325 (10th Cir. 2004); Poole v. Country Club of
Columbus, Inc., 129 F.3d 551, 553 (11th Cir.1997); Saxton v. Am. Tel. & Tel. Co., 10 F.3d 526, 536 (7th Cir. 1993).
But see Shultz v. Congregation Shearith Israel of City of New York, 867 F.3d 298, 308 (2d Cir. 2017) (requiring
“evidence of the employer’s intent to create an intolerable environment that forces the employee to resign”); Lisdahl
v. Mayo Found., 633 F.3d 712, 718–19 (8th Cir. 2011) (requiring proof “demonstrating that the resignation was a
reasonably foreseeable consequence of the employer’s actions”); James v. Booz-Allen & Hamilton, Inc., 368 F.3d
371, 378 (4th Cir. 2004) (quoting Bristow v. Daily Press, Inc., 770 F.2d 1251, 1255 (4th Cir. 1985)) (requiring “a
calculated effort to pressure [plaintiff] into resignation through the imposition of unreasonably harsh conditions”).
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clarified its unwieldy standard in Derr v. Gulf Oil Corp., 796 F.2d 340, 343 (10th Cir. 1986),
with an “unqualified adoption of th[e] objective standard” set out by the Fifth Circuit in Bourque
v. Powell Elec. Mfg. Co., 617 F.2d 61 (5th Cir. 1980).
In Bourque, the Fifth Circuit had found that a rule focused on the employer’s intent is
“inconsistent with . . . the realities of modern employment” and stated that its test would not
“attempt to divine the state of mind of the employer.” Bourque, 617 F.2d at 65. Thus, Bourque
found constructive discharge any time conditions become “so difficult or unpleasant that a
reasonable person in the employee’s shoes would have felt compelled to resign.” Id. Under this
objective standard, the “employer’s subjective intent is irrelevant; [the employer] must be held to
have intended those consequences it could reasonably have foreseen.” Derr, 796 F.2d at 344(emphasis omitted) (quoting Clark v. Marsh, 665 F.2d 1168, 1175 n. 8 (D.C. Cir. 1981)).
The Fifth Circuit Bourque case is important because our circuit joined the Tenth Circuit
in applying the Bourque approach. Held v. Gulf Oil Co., 684 F.2d 427, 432 (6th Cir. 1982)
(describing our standard as “in accord with the [Bourque] rule in the Fifth Circuit”). Indeed,
some Sixth Circuit cases from that period conform to the purely objective Bourque approach and
omit any discussion of employer intent altogether. See, e.g., Williams v. Caterpillar Tractor Co.,
770 F.2d 47, 50 (6th Cir. 1985). However, as demonstrated by the district court’s conclusion
that “specific intent” is required, this circuit’s subsequent case law may have failed to
sufficiently clarify what we meant in Held.
We therefore clarify that the standard described by Held is ultimately an objective one.
The employee alleging constructive discharge need not prove that his or her employer undertook
actions with the subjective intention of forcing the employee to quit. Rather, the Held intent
requirement can be satisfied so long as the employee’s resignation was a reasonably foreseeable
consequence of the employer’s actions. Held, 684 F.2d at 432; Moore, 171 F.3d at 1080.
Taking the facts of the complaint as true and drawing all reasonable inferences in favor of Smith,
her repeated complaints to management concerning illegal activity should have enabled LHC to
foresee that failure to take action against the fraudulent scheme would compel Smith to leave.
The defendants support the district court’s requirement of subjective intent also by
arguing that the statute itself, § 3730(h)(1), requires the employer to have a “retaliatory” motive
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when it says that the employer must take adverse employment action “because of lawful acts
done by the employee” to counteract the employer’s fraud. But the statute also states that a court
adjudicating such a fraud claim should provide “all relief necessary to make that employee . . .
whole” if she is “discriminated against in the terms and conditions of employment.” Here the
jury may find that the employee is seriously harmed when the defendant continues its fraud and
subjects the plaintiff to possible prosecution as Director of Nursing and to the loss of her nursing
license and reputation. This court can hardly be said to provide “all relief necessary” if it should
impose a subjective intent requirement.
IV. Wrongful Discharge Claim under Kentucky State Law
Smith additionally appeals the district court’s dismissal of her wrongful discharge claim
under Kentucky law. The district court dismissed for failure to state a claim. Smith v. LHC
Grp., Inc., No. CV 5:17-15-KKC, 2017 WL 2838048, at *6–7 (E.D. Ky. June 30, 2017). We
reverse.
Generally, Kentucky law permits an employer to discharge an employee at-will for any
reason: “for good cause, for no cause, or for a cause that some might view as morally
indefensible.” Firestone Textile Co. Div. v. Meadows, 666 S.W.2d 730, 731 (Ky. 1983).
However, the Commonwealth carved out a narrow exception for employees who are “wrongfully
discharged,” i.e., terminated for reasons “contrary to a fundamental and well-defined public
policy as evidenced by existing law.” See Grzyb v. Evans, 700 S.W.2d 399, 401 (Ky. 1985).
There are “only two situations” where the grounds for discharge “are so contrary to
public policy as to be actionable absent explicit legislative statements prohibiting the discharge”:
(1) when “the alleged reason for the discharge of the employee was the failure or refusal to
violate a law in the course of employment” and (2) “when the reason for a discharge was the
employee’s exercise of a right conferred by well-established legislative enactment.” Id. at 402(internal quotations omitted).
Smith’s claim arises under the first situation.3 The Kentucky licensing statute for
registered nurses makes it unlawful for a nurse to act in a manner inconsistent with the practice
3
As explained by the district court, Smith has no claim under the second situation—referred to as the “protected
activity” exception—because this exception only applies when the employee reports illegal activity to public
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of nursing, see KRS 314.091(1)(d), or to falsify an essential record, see KRS 314.091(1)(h).
Smith’s complaint asserts that she was wrongfully discharged because her only options were to
violate KRS 314.091(1) or resign.4
The district court dismissed her claim on the theory that Smith failed to allege a refusal to
violate the law because Smith did not allege that her employer first specifically asked her to do
so. On appeal, we must determine whether Smith’s claim can survive despite the absence of any
allegation that LHC affirmatively requested that Smith violate the law. Cf. LHC Grp., 2017 WL
2838048, at *6.
Although district courts have consistently held that a Kentucky wrongful discharge claim
requires proof of an affirmative request,5 no authoritative Kentucky case has created such an
element. The Kentucky Supreme Court has stated in dicta that a “request” is necessary to
provide the basis for a wrongful discharge claim, but the Court did not discuss what such a
request must entail. Hill v. Kentucky Lottery Corp., 327 S.W.3d 412, 422–23 (Ky. 2010), as
modified on denial of reh’g (Dec. 16, 2010). One Kentucky Court of Appeals decision held that
a plaintiff “must show an affirmative request to him/her by the employer to violate the law,” but
the Kentucky Supreme Court ordered that this case not be published. See Welsh v. Phoenix
Transp. Servs., No. 2007-CA-001231-MR, 2009 Ky. App. LEXIS 137, at *13 (Ky. Ct. App.
Aug. 14, 2009) (unpublished); Welsh v. Phoenix Transp. Servs., 2010 Ky. LEXIS 547 (Ky., Mar.
10, 2010) (denying review).
We recently called the affirmative request requirement into question in Alexander v.
Eagle Mfg. Co., LLC, No. 16-6604, 2017 WL 4900457, at *3 (6th Cir. Oct. 31, 2017). In
Alexander, we found that the Kentucky Supreme Court case law “did not create an additional
element—an explicit request from the employer that the employee violate the law” and that
authorities, which Smith did not do. LHC Grp., 2017 WL 2838048, at *7 (citing Zumot v. Data Mgmt Co., No.
2002-CA-002454-MR, 2004 WL 405888, at *1 (Ky. Ct. App. March 5, 2004)).
4
Smith’s complaint additionally alleged a separate theory of “wrongful discharge” based on Smith’s refusal to
violate the federal False Claims Act. The district court dismissed this claim because Kentucky courts limit “well-
defined public policy” to Kentucky statutes or constitutional provisions. LHC Grp., 2017 WL 2838048, at *5.
Smith does not appeal the dismissal of this claim.
5
See, e.g., Alexander v. Eagle Mfg. Co., LLC, No. CV 15-127-DLB-JGW, 2016 WL 5420573, at *3–4 (E.D. Ky.
Sept. 27, 2016), aff’d, No. 16-6604, 2017 WL 4900457 (6th Cir. Oct. 31, 2017) (citing Hill v. Kentucky Lottery
Corp., 327 S.W.3d 412, 421–22 (Ky. 2010)); Charles Print Fulfillment Servs., LLC, No. 3:11-CV-00553-TBR, 2015
WL 5786817, at *7 (W.D. Ky. Sept. 30, 2015) (citing Welsh v. Phoenix Transp. Servs., No. 2007-CA-001231-MR,
2009 Ky. App. LEXIS 137, at *12 (Ky. Ct. App. Aug. 14, 2009)).
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Welsh is less compelling because it is unpublished. 2017 WL 4900457, at *3. We concluded
that the reasoning behind the exception suggested a broader construction of the word “request”:
Presumably, the policy behind this exception is to prevent an employee from
having to choose between losing his job and breaking the law. That policy is
implicated, of course, when an employer affirmatively requests that the employee
violate the law. But it is also implicated when an employee learns of illegal
activity and, although not directly invited to participate by his employer, knows
he will inevitably become complicit in the illegality by performing his normal
work responsibilities. We think it likely that the Kentucky Supreme Court would
apply this exception to not only the former situation, but also the latter.
Id. at *4 (citations omitted).
We agree with the analysis in Alexander. Taking the facts alleged in her complaint as
true, Smith found herself in exactly such a situation, knowing—even in the absence of direct
instructions to violate the law—that her continued employment would inevitably lead to
authorizing fraudulent patient orders and other fraudulent entanglements. LHC responded with
indifference to Smith’s concern that her duties as Director of Nursing would make her complicit
in the fraud. According to Smith, LHC even endorsed the fraud’s profitability. We agree with
the district court that, according to her complaint, “Smith felt she had no option but to comply
with allegedly fraudulent business practices of [d]efendants,” that this left Smith with no option
but “to go along and get along or quit,” and that “[q]uite reasonably, Smith felt like she had to
quit her job.” LHC Grp., 2017 WL 2838048, at *3–4, 6. Unlike the district court, we do find
that Smith’s situation as described in the complaint states each element of constructive discharge
under Kentucky law.
For the foregoing reasons, the judgment of the district court is REVERSED and the case
remanded for further proceedings consistent with this opinion.
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JOHN K. BUSH, Circuit Judge, concurring in part and concurring in the judgment.
I agree with the majority’s discussion of Smith’s wrongful discharge claim under Kentucky law.
I write separately to emphasize the dispositive allegation as to her FCA retaliation claim:
potential liability. Smith has sufficiently alleged that her working conditions were intolerable
because she has alleged that her duties created a substantial risk that she would lose her nursing
license and subject herself to the risk of criminal prosecution. Given this risk, a reasonable
employer in LHC’s position would have foreseen that its failure to act would force Smith to quit.
From this, a jury could find that LHC constructively discharged her.
To show constructive discharge in this circuit, a plaintiff must prove that her employer
“deliberately create[d] intolerable working conditions . . . with the intention of forcing” her to
quit. Moore v. KUKA Welding Sys. & Robot Corp., 171 F.3d 1073, 1080 (6th Cir. 1999). This
requires proof of “both the employer’s intent and the employee’s objective feelings.” Ibid.Working conditions are intolerable when they “would have been so difficult or unpleasant that a
reasonable person in the employee’s shoes would have felt compelled to resign.” Goldmeier v.
Allstate Ins. Co., 337 F.3d 629, 635 (6th Cir. 2003). “The test deliberately sets a high bar, as the
law generally expects employees to remain on the job while pursuing relief.” McKelvey v. Sec’y
of U.S. Army, 450 F. App’x 532, 535 (6th Cir. 2011) (internal quotation marks omitted).
A plaintiff can prove an employer’s intent by showing that “quitting was a foreseeable
consequence of the employer’s actions” or failure to act. Moore, 171 F.3d at 1080; see West v.
Tyson Foods, Inc., 374 F. App’x 624, 640 (6th Cir. 2010) (upholding jury’s finding of
constructive discharge where employer knew of many incidents of harassment against employee
and failed adequately to address them).
A jury could find Smith’s working conditions were intolerable because the alleged fraud
in her workplace put her at risk of liability. Smith’s job required her to assign nurses to LHC
patients and issue invoices to those patients’ insurers. These duties required her to rely on
paperwork submissions that her coworkers provided to her. According to her complaint, she
discovered that many times these submissions had been unlawfully altered by her coworkers, the
results of which were improper staffing assignments and flawed bills. Because Smith had to rely
on her coworkers’ submissions, and because she had knowledge of her coworkers’ past practices,
even if she did not willfully assign staff incorrectly or submit fraudulent bills, her job would
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expose her to negligence liability. Indeed, the Kentucky nurse-licensing statute that Smith
identified in her complaint provides for the suspension or revocation of a nurse’s license when
she “[h]as negligently . . . acted in a manner inconsistent with the practice of nursing,” KRS
§ 314.091(1)(d), or “in a negligent manner made incorrect entries . . . on essential records,” id.
§ 314.091(1)(h).
Smith alerted LHC management to her coworkers’ practices, but they allegedly did
nothing to stop the fraud and suggested that they would continue to tolerate it. Based on LHC’s
choice to tolerate its employees’ fraud and not to protect Smith from liability, a jury could find
that LHC created Smith’s intolerable working conditions.
And finally, Smith’s liability risk also provides a sufficient basis for a jury to find that
LHC allowed the fraud in her workplace to fester with the intent that Smith quit. A reasonable
employer in LHC’s position would have foreseen the professional-licensing and criminal-
prosecution risks to Smith. But LHC allegedly sat idly by, while its employees’ fraud exposed
Smith to this liability. LHC knew Smith’s predicament, and a reasonable employer would have
foreseen that her quitting was a foreseeable consequence of its decision to not act. From this, a
jury could infer that LHC tolerated its employees’ fraudulent conduct with the intent that Smith
quit. Cf. West, 374 F. App’x at 640 (concluding that because an employer was aware of several
instances of harassment against an employee and refused to address them, the harassed
employee’s quitting was a foreseeable consequence of that failure so that a jury could find that
the employer intended to force her to quit).
* * *
I note in addition that another element a jury would need to address is causation.
Although I agree with the majority that Smith has adequately alleged that LHC constructively
discharged her, I have my doubts as to whether her allegations show that LHC did so because of
her complaints. This is ultimately what an FCA retaliation claim requires. The Act does not
proscribe all constructive discharges, only those taken in retaliation against an employee who
attempts to stop a company from engaging in practices that defraud the government. As the
statute provides, an employee is entitled to relief if she is “discharged . . . because of lawful
acts . . . in furtherance of an action under [the FCA] or other efforts to stop 1 or more violations
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Case No. 17-5850, Sue Smith v. LHC Group, Inc., et al.
of [the FCA].” 31 U.S.C. § 3730(h)(1) (emphasis added). Our court has held that this “because
of” language requires the employee to show “a causal connection between the protected activity
and the adverse action.” Scott v. Metro. Health Corp., 234 F. App’x 341, 346 (6th Cir. 2007).
The Supreme Court has interpreted identical language to require a showing of “but for”
causation. Gross v. FBL Fin. Servs., Inc., 557 U.S. 167, 176 (2009) (holding that the ordinary
meaning of “because of” in the Age Discrimination in Employment Act required a plaintiff to
prove that age was the “but-for” cause of the employer’s adverse action); Univ. of Texas Sw.
Med. Ctr. v. Nassar, 570 U.S. 338, 362 (2013) (“[A] plaintiff making a retaliation claim under
[Title VII] must establish that his or her protected activity was a but-for cause of the alleged
adverse action by the employer.”). And based on this Supreme Court precedent, the Third
Circuit recently concluded that “retaliation claims under the FCA require proof of ‘but-for’
causation.” DiFiore v. CSL Behring, LLC, 879 F.3d 71, 78 (3d Cir. 2018).
Both in the district court below and on appeal, the defendants focused solely on the
sufficiency of Smith’s allegations that LHC constructively discharged her. They did not develop
an argument as to whether Smith adequately alleged a causal connection between her complaints
to management and the constructive discharge. Although I do not read the majority’s opinion as
concluding that Smith has shown such a causal connection, I write to clarify that she must make
such a showing to prevail.
Smith must show that she was constructively discharged “because of” her alleged
protected activity—i.e., her complaints to LHC management. 31 U.S.C. § 3730(h). Stated
another way, if she would have been constructively discharged even had she not complained,
then she cannot show “but for” causation. She must allege and prove that LHC engaged in some
action or inaction such as failing to eliminate the alleged fraud or screen her off from the
allegedly fraudulent activity, which resulted in constructive discharge, “because of” her
complaints.
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