In an unusual and eye-catching case, a hospital facing a whistleblower lawsuit from a former senior executive under the False Claims Act (“FCA”) has brought suit against that individual, alleging he breached his fiduciary duty by failing to report the unlawful conduct internally and instead using that information as the basis for a whistleblower claim.  Wheeling Hospital, Inc. v. Louis Longo, No. 19-cv-000032 (N.D. W. Va. Mar.13, 2019).

The Whistleblower’s Complaint

Longo, an accountant and former senior executive at Wheeling Hospital (the “Hospital”), was discharged in August 2015.  In December 2017, he brought a complaint in the U.S. District Court for the Western District of Pennsylvania under the qui tam provisions of the FCA (the “FCA Lawsuit”).  He alleged the Hospital and its CEO defrauded Medicare and Medicaid through a scheme of inflated payments to physicians with high patient volumes in return for referrals to the Hospital, in violation of the Stark Law and the Anti-Kickback Statute.  The United States intervened in the FCA Lawsuit in December 2018 and filed its Complaint in Intervention on March 25, 2019.

The Hospital’s Complaint

On March 13, 2019, the Hospital filed suit against Longo in the U.S. District Court for the Northern District of West Virginia, alleging he breached his fiduciary duty and abused the legal process.  The Hospital’s breach of fiduciary duty claim asserts Longo had a fiduciary duty to report internally any illegal conduct, and that he instead capitalized on his alleged knowledge of the conduct to “extort a settlement” through a “false and frivolous” whistleblower action.  It further alleged that Longo misleadingly failed to disclose in the FCA Lawsuit that the IRS had previously audited the compensation paid to the same physicians named in his complaint.  According to the Hospital, “Longo’s threats and the legal action he filed [under the FCA] are consistent with a concerted effort to contort the legal process to his own personal advantage and wealth.”    In support of its abuse of process claim, the Hospital asserts that Longo “willfully and maliciously misused and misapplied a legal process … to obtain a pecuniary award and to inflict harm” on the Hospital.

Implications

The Hospital’s lawsuit is a novel reaction to a whistleblower complaint, and the court’s ruling could have significant implications, particularly in instances where an individual does not report unlawful conduct despite a duty to do so, and brings a whistleblower action premised on that information.  We will be monitoring this case and will report on future developments.

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Steven J. Pearlman Steven J. Pearlman

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular…

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular focus on defending companies against claims of employment discrimination, retaliation and harassment; whistleblower retaliation; restrictive covenant violations; theft of trade secrets; and wage-and-hour violations. He has successfully tried cases in multiple jurisdictions, and defended one of the largest Illinois-only class actions in the history of the U.S. District Court for the Northern District of Illinois. He also secured one of only a few ex parte seizures orders that have been issued under the Defend Trade Secrets Act, and obtained a world-wide injunction in federal litigation against a high-level executive who jumped ship to a competitor.

Reporting to boards of directors, their audit committees, CEOs and in-house counsel, Steven conducts sensitive investigations and has testified in federal court. His investigations have involved complaints of sexual harassment involving C-suite officers; systemic violations of employment laws and company policies; and fraud, compliance failures and unethical conduct.

Steven was recognized as Lawyer of the Year for Chicago Labor & Employment Litigation in the 2023 edition of The Best Lawyers in America. He is a Fellow of the College of Labor and Employment Lawyers.  Chambers describes Steven as an “outstanding lawyer” who is “very sharp and very responsive,” a “strong advocate,” and an “expert in his field.” Steven was 1 of 12 individuals selected by Compliance Week as a “Top Mind.” Earlier in his career, he was 1 of 5 U.S. lawyers selected by Law360 as a “Rising Star Under 40” in the area of employment law and 1 of “40 Illinois Attorneys Under Forty to Watch” selected by Law Bulletin Publishing Company. Steven is a Burton Award Winner (U.S. Library of Congress) for “Distinguished Legal Writing.”

Steven has served on Law360’s Employment Editorial Advisory Board and is a Contributor to Forbes.com. He has appeared on Bloomberg News (television and radio) and Yahoo! Finance, and is regularly quoted in leading publications such as The Wall Street Journal.

The U.S. Chamber of Commerce has engaged Steven to serve as lead counsel on amicus briefs to the U.S. Supreme Court and federal circuit courts of appeal. He was appointed to serve as a Special Assistant Attorney General for the State of Illinois in employment litigation matters. He has presented with the Solicitor of the DOL, the Acting Chair of the EEOC, an EEOC Commissioner, Legal Counsel to the EEOC and heads of the SEC, CFTC and OSHA whistleblower programs. He is also a member of the Sedona Conference, focusing on trade secret matters.

Photo of Pinchos Goldberg Pinchos Goldberg

Pinny Goldberg is a senior counsel in the Labor & Employment Law Department. Pinny represents employers in a broad array of matters before federal and state courts, FINRA and other arbitration panels, and administrative agencies, including the EEOC and its state equivalents, and…

Pinny Goldberg is a senior counsel in the Labor & Employment Law Department. Pinny represents employers in a broad array of matters before federal and state courts, FINRA and other arbitration panels, and administrative agencies, including the EEOC and its state equivalents, and in pre-litigation negotiations. Matters he works on include discrimination and harassment, wage and hour, wrongful discharge, whistleblowing and retaliation, covenants not to compete, breaches of fiduciary duty, unjust enrichment, and tort and contract claims.

In addition to handling litigation and dispute resolution, Pinny regularly advises clients on a wide variety of employment issues, including drafting, reviewing and revising handbooks and workplace policies. He also addresses questions and concerns related to hiring, wage and hour issues, employee leave, performance problems, terminations of employment, and separation agreements and releases.