Date: September 11, 2017

Reuters reported on a victory for TELG whistleblower client Mary Kaye Welch: A federal appeals panel ruled that her former employer can't force her fraud lawsuit—which she had filed on behalf of U.S. taxpayers—into private arbitration based on the boilerplate text of her hiring agreement. In a 3-0 decision the judges said the language of Ms. Welch's hiring agreement doesn't cover this dispute, allowing her case to resume in a lower court.

"With this ruling, the Ninth Circuit puts a stop to employers' inappropriate efforts to push False Claims Act cases into arbitration."

R. Scott Oswald

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Court says therapy service can’t arbitrate whistleblower case

» Read the court’s opinion here

A U.S. appeals court ruled on Monday that a Las Vegas-based children’s therapy service could not force a former employee to arbitrate a whistleblower lawsuit alleging that it defrauded federal healthcare programs.

The 9th U.S. Circuit Court of Appeals in San Francisco ruled that the plain text of Mary Kaye Welch’s arbitration agreement with My Left Foot Children’s Therapy LLC did not encompass her lawsuit.

U.S. District Judge Miranda Du in Reno, Nevada had in June 2016 denied the motion on the grounds that because her lawsuit was brought on behalf of the United States and Nevada, which had not agreed to arbitrate the claims.

The three-judge 9th Circuit panel affirmed the decision but on different grounds, citing the language in Welch’s arbitration agreement itself, which said it did not cover a False Claims Act lawsuit.

“Though the question of the enforceability of a relator’s agreement to arbitrate FCA claims is interesting, our holding rests on a rather unremarkable textual analysis,” U.S. Circuit Judge Raymond Fisher wrote.

R. Scott Oswald, a lawyer for Welch at Employment Law Group, in a statement said although the ruling was based on her specific contract, Fisher also made clear the court would have nullified an agreement that covered False Claims Act claims.

“With this ruling, the Ninth Circuit puts a stop to employers’ inappropriate efforts to push False Claims Act cases into arbitration,” he said.

Rex Heinke, a lawyer for My Left Foot at Akin Gump Strauss Hauer & Feld, did not respond to a request for comment.

Welch, who is a speech therapist, filed the lawsuit in 2014 under the False Claims Act, which allows whistleblowers to sue companies on the government’s behalf to recover taxpayer money paid out based on fraudulent claims.

The government may intervene in the cases. If successful, whistleblowers receive a percentage of the recovery.

In her case, the Justice Department did not, leaving Welch to litigate on her own claims that My Left Foot and its co-owners violate the False Claims Act and a similar Nevada law by presenting fraudulent claims to Medicaid and Tricare, which provides benefits to military service members.

She claims that My Left Foot treated patients who could not benefit from therapy and billed for those unnecessary services, leading to false claims for reimbursement to be submitted to government healthcare programs.

In October 2015, My Left Foot and its co-owners, Ann Marie and Jonathan Gottlieb, moved to compel Welch to arbitrate her claims pursuant to an agreement she signed during the course of applying for a job with the company in 2013.

On appeal, My Left Foot had cited a clause broadly covering “all disputes, whether they be based on the state employment statutes, Title VII of the Civil Rights Act of 1964, as amended, or any other state or federal law or regulation.”

But Fisher wrote that section was “irrelevant” and said only a separate section of the contract that the court held limited the disputes to being related to her employment or association with My Left Foot.

» Read the court’s opinion here

» View on Reuters