Brunelle v. PeaceHealth

[5] UNITED STATES DISTRICT COURT 6 WESTERN DISTRICT OF WASHINGTON AT TACOMA [7] JESSICA BRUNELLE, and CASE NO. 3:22-cv-05499-BHS 8 JONATHAN ADELSTEIN, ORDER 9 Plaintiffs, v. [10] PEACEHEALTH, and ROBERT 11 AXELROD, 12 Defendants. [13] This matter is before the Court on Defendant Robert Axelrod’s Federal Rule of [14] Civil Procedure 12(b)(6) Motion to Dismiss. Dkt. 16. Axelrod moves to dismiss Plaintiffs [15] Jessica Brunelle and Jonathan Adelstein’s whistleblower retaliation claims advanced [16] against him under the False Claims Act (“FCA”). Because the FCA does not authorize [17] such claims to be advanced against individual supervisors like Axelrod, the motion to [18] dismiss is granted. [19] I. BACKGROUND [20] Defendant PeaceHealth, a Washington-based nonprofit healthcare provider, [21] employed Plaintiff Brunelle, contracted with Plaintiff Adelstein to work as a locum [22] 1 tenens psychiatrist, and currently employs Defendant Axelrod. See Dkt. 1, ¶¶ 5, 6, 7, 9, 2 11, 28. Brunelle was a manager at the Behavioral Health Department at PeaceHealth’s St. 3 John Medical Center. Id. ¶ 5. Adelstein worked primarily at St. John Medical Center. Id. 4 ¶ 6. Axelrod is a psychiatrist who is the Systems Medical Director of Behavioral Health 5 for all of PeaceHealth’s hospitals and clinics. Id. ¶ 9, 11. 6 When Brunelle and Adelstein worked at St. John Medical Center, they raised 7 various concerns about the conduct of another PeaceHealth employee, Jerad Shoemaker, 8 who held a leadership position in the Behavioral Health Department at St. John Medical 9 Center. See id. ¶ 36. For instance, Brunelle met with Axelrod and discussed an incident 10 during which Shoemaker billed for services performed on a patient that he had not seen. 11 Id. ¶¶ 65–67. During this meeting, Axelrod “took steps to insulate Dr. Shoemaker from 12 culpability by insisting on meeting with Dr. Shoemaker without anyone else present.” Id. 13 ¶ 68. At a subsequent meeting, Axelrod accused Brunelle of “attempting to ‘entrap’” 14 Shoemaker. Id. ¶ 72. 15 Adelstein separately reported to PeaceHealth’s Office of Organizational Integrity 16 that Shoemaker had been billing for patients that he had not seen. Id. ¶ 73. Brunelle and 17 Adelstein requested an audit into Shoemaker’s billing practices to stop violations of the 18 FCA. Id. ¶¶ 74, 75. However, PeaceHealth and Axelrod refused to conduct such an audit. 19 Id. ¶ 75. Thereafter, Brunelle and Adelstein discovered that Shoemaker submitted false 20 claims to the Centers for Medicare and Medicaid Services. Id. ¶ 76. 21 Brunelle and Adelstein allege that both Axelrod and PeaceHealth retaliated against 22 them for raising concerns about Shoemaker’s conduct. They allege that, after Adelstein 1 reported this conduct, Axelrod “moved to discontinue Dr. Adelstein’s presence on the 2 unit.” Id. ¶ 79. Specifically, Axelrod informed Adelstein that, because PeaceHealth hired 3 a new locums nurse practitioner, Adelstein was no longer needed for inpatient coverage. 4 Id. Axelrod stated this even though the nurse was less experienced than Adelstein. Id. 5 Axelrod then cancelled Adelstein’s shifts that were scheduled during the months of 6 September and October 2021. Id. 7 Adelstein subsequently planned to see only one patient per shift during the months 8 before September 2021. Id. ¶ 82. After learning of this plan, Axelrod ordered him to see 9 eight patients per day. Id. Adelstein reminded Axelrod of when he stated that Adelstein 10 was no longer needed for inpatient coverage, and Axelrod responded that Adelstein was 11 “imagining things.” Id. Adelstein stated that he thought that Axelrod was “covering up” 12 for Shoemaker. Id. ¶ 83. Axelrod then accused Adelstein of “blackmailing” him and 13 stated that he would “file a grievance against [him] that will haunt [his] record forever.” 14 Id. ¶ 84. Axelrod told others at PeaceHealth that Adelstein would no longer be working 15 there and that he was not a physician in good standing with the institution. Id. ¶ 98. In 16 November 2021, a PeaceHealth employee informed Adelstein that “PeaceHealth ha[d] 17 made the decision to no longer utilize [his] services.” Id. ¶ 143. 18 Plaintiffs allege that Axelrod retaliated against Brunelle by “actively working to 19 diminish [her] position in the department, and taking steps to keep [her] out of essential 20 conversations.” Id. ¶ 115. For example, Axelrod did not include Brunelle in some email 21 messages regarding certain policies or practices at St. John Medical Center, he stopped 22 sharing information with Brunelle from meetings that he attended, and he “removed” 1 Brunelle from invitations to various meetings. Id. ¶¶ 116, 125, 167. Axelrod also directed 2 Brunelle to not discuss any concerns about him with anyone other than her supervisor and 3 stated that, if she did not follow this directive, he was “prepared to take action against 4 her.” Id. ¶ 117. Brunelle subsequently resigned from PeaceHealth. Id. ¶ 177. 5 Brunelle and Adelstein sued PeaceHealth and Axelrod, alleging against each 6 claims for whistleblower retaliation under the FCA, 31 U.S.C. § 3730 (h), whistleblower 7 retaliation under RCW 49.60.210, breach of contract, wrongful discharge in violation of 8 Washington public policy, and aiding unfair practices in violation of RCW 49.60.220. Id. 9 ¶¶ 183–236. Axelrod moves under Fed. R. Civ. P. 12(b)(6) to dismiss only the FCA 10 whistleblower retaliation claims. Dkt. 16. 11 II. DISCUSSION 12 Axelrod moves to dismiss the FCA whistleblower retaliation claims against him, 13 asserting that 31 U.S.C. § 3720 (h) does not authorize such claims to be advanced against 14 individual supervisors like himself. Dkt. 16 at 5. Brunelle and Adelstein oppose this 15 motion, contending that (1) the Court should interpret the FCA to allow for whistleblower 16 retaliation claims to be brought against individual supervisors like Axelrod, (2) summary 17 judgment would be a more appropriate stage to evaluate Axelrod’s arguments, (3) they 18 properly advance an FCA retaliation claim against Axelrod because he “had power over 19 their employment relationship,” and (4) the Court should look to the definitions of 20 “employer” in both the Fair Labor Standards Act and the Washington Law Against 21 Discrimination to determine whether Axelrod was an employer under the FCA. Dkt. 17 at 22 3–8. 1 Dismissal under Fed. R. Civ. P. 12(b)(6) may be based on either the lack of a 2 cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal 3 theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988). A 4 plaintiff’s complaint must allege facts to state a claim for relief that is plausible on its 5 face. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A claim has “facial plausibility” 6 when the party seeking relief “pleads factual content that allows the court to draw the 7 reasonable inference that the defendant is liable for the misconduct alleged.” Id. Although 8 the Court must accept as true the complaint’s well-pleaded facts, conclusory allegations 9 of law and unwarranted inferences will not defeat an otherwise proper Rule 12(b)(6) 10 motion to dismiss. Vazquez v. Los Angeles Cnty., 487 F.3d 1246 , 1249 (9th Cir. 2007); 11 Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). “[A] plaintiff’s 12 obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than 13 labels and conclusions, and a formulaic recitation of the elements of a cause of action will 14 not do. Factual allegations must be enough to raise a right to relief above the speculative 15 level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations and footnotes 16 omitted). This requires a plaintiff to plead “more than an unadorned, the-defendant17 unlawfully-harmed-me accusation.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 18 555). 19 “The False Claims Act was enacted ‘with the purpose of [combating] widespread 20 fraud by government contractors who were submitting inflated invoices and shipping 21 faulty goods to the government.’” Moore v. Cal. Inst. of Tech. Jet Propulsion Lab'y, 275 22 F.3d 838, 844 (9th Cir. 2002) (alteration in original) (quoting United States ex rel. 1 Hopper v. Anton, 91 F.3d 1261 , 1265–66 (9th Cir. 1996)). To this end, it “protects 2 ‘whistle blowers’ from retaliation by their employers.” Id. at 845. Specifically, the FCA 3 provides: 4 Any employee, contractor, or agent shall be entitled to all relief necessary to make that employee, contractor, or agent whole, if that employee, 5 contractor, or agent is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and 6 conditions of employment because of lawful acts done by the employee, contractor, agent or associated others in furtherance of an action under this 7 section or other efforts to stop 1 or more violations of this subchapter. [8] 31 U.S.C. § 3730 (h)(1). 9 In 2009, the FCA was amended to expressly provide relief for contractors and 10 agents in addition to employees. Irving v. PAE Gov't Servs., Inc., 249 F. Supp. 3d 826 , 11 830–31 (E.D. Va. 2017). The key linguistic differences from the pre-2009 version of this 12 statute are emphasized below: 13 Any employee who is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms or 14 conditions of employment by his employer because of any lawful acts done by the employee on behalf of the employer or others in furtherance of an 15 action under this section . . . shall be entitled to all relief necessary to make the employee whole. [16] Id. (emphasis in original) (quoting 31 U.S.C. § 3730 (h) (2003)). [17] The parties agree that the Ninth Circuit has not addressed whether the 2009 [18] amendment to this statute authorized whistleblower retaliation claims against individual [19] supervisors like Axelrod. Dkt. 16 at 7; Dkt. 17 at 1–2. They also agree that the majority [20] of courts to have analyzed this issue have concluded that it did not. Dkt. 16 at 7–9 [21] (collecting cases); Dkt. 17 at 3; Dkt. 18 at 2. [22] 1 For several reasons, the cases concluding that § 3730(h)(1) does not provide for 2 individual supervisory liability are more well-reasoned than the cases concluding 3 otherwise. First, as explained by the court in Irving, “by omitting the phrase ‘by his 4 employer,’ Congress simply meant to recognize the fact that agents and contractors, 5 which were added to the class of potential plaintiffs in 2009, are not entities controlled or 6 directed by an ‘employer.’” 249 F. Supp. 3d at 831 . As a result, “the omission of the 7 phrase ‘by his employer’ was a grammatical necessity, not a substantive revision,” and 8 this omission was “not for the purpose of permitting a plaintiff to sue his fellow 9 employees and supervisors, but to ensure that an agent can bring an FCA action against 10 his principal and a contractor can bring an FCA action against the entity with whom the 11 contractor contracted.” Id. at 831–32. 12 Second, this interpretation is supported by the statute’s legislative history, which 13 reflects that the 2009 amendment was intended to “remedy fraud and abuse arising out of 14 the conflicts in Iraq and Afghanistan” where “the federal government found it 15 increasingly necessary to rely on the use of independent contractors, who in turn, often 16 hired subcontractors and agents to perform necessary governmental tasks.” Id. at 832 17 (citing H.R. Rep. No. 111–97 (2009); S. Rep. No. 110–507, 110th Cong., 2nd Session 18 (Sept. 25, 2008)). “Notably, . . . the legislative history includes no reference to, nor any 19 discussion of, expanding the class of potential defendants under § 3730(h) to include a 20 corporation’s directors or employees, and consistent with this, the House and Senate 21 Reports are wholly silent as to any policy reason for doing so.” Id. [22] 1 Third, this reading of the statute is supported by the caselaw in existence prior to 2 the 2009 amendment. See Zuress v. Donley, 606 F.3d 1249, 1253 (9th Cir. 2010) (“We 3 presume that Congress is familiar with controlling precedent and expects that its 4 enactments will be interpreted accordingly.”). “At the time of the 2009 amendment, 5 several courts had held that the use of the term ‘employer’ in the predecessor statute 6 precluded liability for individuals who were not employers of the whistleblower.” United 7 States v. Kiewit Pac. Co., 41 F. Supp. 3d 796, 814 (N.D. Cal. 2014) (collecting cases); 8 accord Howell v. Town of Ball, 827 F.3d 515, 530 (5th Cir. 2016) (“Before the passage of 9 the 2009 amendments, federal courts uniformly held that the FCA created a cause of 10 action against only a plaintiff’s employer.”). As such, the Court declines to rule that 11 “Congress overturned this precedent, not by the insertion of express language expanding 12 liability, but only by mere implication.” Id. 13 Brunelle and Adelstein cite Laborde v. Rivera-Dueno, 719 F. Supp. 2d 198 14 (D.P.R. 2010), in support of their claim that the FCA authorizes whistleblower retaliation 15 claims against individual supervisors. Dkt. 17 at 4. In that case, a defendant moved to 16 dismiss an FCA retaliation claim, asserting that the statute did not authorize such claims 17 against individual supervisors. Laborde, 719 F. Supp. 2d at 205 . The court initially 18 denied the motion, reasoning that there was an absence of First Circuit guidance on the 19 issue and that the cases relied upon by the defendant analyzed an outdated version of the 20 statute. Id. However, Brunelle and Adelstein fail to acknowledge that the court 21 subsequently granted the defendant’s motion for reconsideration on the issue, in part 22 because the defendant was not an “employer” under the FCA. Laborde v. Rivera-Dueno, 1 No. 09-1368 (JP), 2011 WL 814965 , at *1–2 (D.P.R. Mar. 4, 2011). Thus, Laborde does 2 not support Brunelle and Adelstein’s argument. 3 Brunelle and Adelstein next cite to Weihua Huang v. Rector & Visitors of the 4 University of Virginia, 896 F. Supp. 2d 524 (W.D. Va. 2012), and United States of 5 America ex rel. Moore v. Community Health Services, Inc., No. 3:09cv1127 (JBA), 2012 6 WL 1069474 (D. Conn. Mar. 29, 2012). Dkt. 17 at 4–5. In both cases, the courts 7 concluded that the elimination of the term “employers” in § 3730(h) through the 2009 8 amendment authorized retaliation claims against supervisors in their individual 9 capacities. Weihua Huang, 896 F. Supp. 2d at 548 n.16; Moore, 2012 WL 1069474 , at 10 *9. 11 However, both Weihua Huang and Moore contain cursory interpretations of 12 § 3730(h)(1) that have been properly rejected by other courts. See Monsour v. New York 13 State Off. for People with Developmental Disabilities, No. 1:13-CV-0336 (TJM) (CFH), [14] 2014 WL 975604 , at *11 (N.D.N.Y. Mar. 12, 2014) (declining to follow Moore because 15 it “contains a ‘one sentence analysis’ that has been rejected both within and outside this 16 Circuit”); Elkharwily v. Mayo Holding Co., 955 F. Supp. 2d 988, 995 (D. Minn. 17 2013), aff'd, 823 F.3d 462 (8th Cir. 2016); United States ex rel. Karvelas v. Tufts Shared 18 Servs., Inc., 433 F. Supp. 3d 174 , 180–81 (D. Mass. 2019) (declining to follow both 19 Weihua Huang and Moore because the plain language of the statute and the legislative 20 history demonstrate “that FCA retaliation claims do not lie against defendants in their 21 individual capacities”). [22] 1 Brunelle and Adelstein additionally cite to McKenna v. Senior Life Management, [2] 429 F. Supp. 2d 695 (S.D.N.Y. 2006). Dkt. 17 at 5. In that case, the court denied as 3 premature an individual defendant’s motion to dismiss a relator’s FCA retaliation claim 4 because “questions of fact” existed as to whether the defendant could “be viewed as 5 relator’s de facto employer, as alleged in the amended complaint.” McKenna, 429 F. 6 Supp. 2d at 700. Relying on this language, Brunelle and Adelstein assert that “[s]ummary 7 judgment would be a more appropriate stage to evaluate Defendant Axelrod’s 8 arguments.” Dkt. 17 at 5. 9 But as Axelrod persuasively asserts, McKenna predates the 2009 amendment to 10 § 3730(h); “[t]he term ‘de facto employer’ is found nowhere in the text of the former (or 11 current) statute, and the [McKenna] court declined to engage in any statutory 12 interpretation or examination of the statute’s legislative history.” Dkt. 18 at 6. For these 13 reasons, McKenna is of no aid to Brunelle and Adelstein. 14 Brunelle and Adelstein also assert that they properly advance an FCA retaliation 15 claim against Axelrod because he “had power over their employment relationship.” Dkt. 16 17 at 6. Yet they do not cite to any factual allegations plausibly showing that either of 17 them was an employee, contractor, or agent to Axelrod—a showing that is required to 18 advance a claim under § 3730(h)(1). 19 Brunelle and Adelstein finally contend that Axelrod is, in fact, an employer under 20 the FCA, relying on the definitions of “employer” under both the Fair Labor Standards 21 Act and the Washington Law Against Discrimination. Dkt. 7–8. It goes without saying 22 that these definitions have no bearing on the meaning of the term as it is used in the FCA. 1 To survive Axelrod’s motion to dismiss, Brunelle and Adelstein must show that 2 they advanced a “cognizable legal theory” against him. Balistreri, 901 F.2d at 699 . As 3 explained, the FCA does not authorize retaliation claims against supervisors in their 4 individual capacities. Therefore, they fail to meet their burden. Accordingly, Axelrod’s 5 motion for summary judgment on this issue is GRANTED and Brunelle and Adelstein’s 6 FCA whistleblower retaliation claims against him are DISMISSED with prejudice. 7 III. ORDER 8 Therefore, it is hereby ORDERED that Axelrod’s Federal Rule of Civil Procedure 9 12(b)(6) Motion to Dismiss, Dkt. 16, is GRANTED. Brunelle and Adelstein’s FCA 10 whistleblower retaliation claims against him are DISMISSED with prejudice. 11 Dated this 6th day of January, 2023. A [13] BENJAMIN H. SETTLE 14 United States District Judge