By R. Scott Oswald

Many grocery stores nowadays use a special “Free From” label to promote products that contain no trace of shady ingredients such as high-fructose corn syrup.

Last week the U.S. Supreme Court gave us a new reason to seek out “Free From” phrasing — as a marker of pure anti-discrimination statutes that enjoin all bias, rather than only those actions that provably change an outcome.

With this new roadmap, the U.S. Congress now should start adding its own “Free From” text to civil-rights laws that need stronger enforcement.

The court’s April 6 decision in Babb v. Wilkie concerns the federal-sector provision of the Age Discrimination in Employment Act (ADEA), which requires that “personnel actions affecting [federal] employees or applicants for employment who are at least 40 years of age … shall be made free from any discrimination based on age” (emphasis added).

The law’s text means what it plainly says, Justice Samuel Alito writes in an 8-1 opinion: Covered personnel actions — which includes “most employment-related decisions” in the federal sector — must be “untainted by any consideration of age.”

On the one hand, this is the height of obviousness: The whole point of an anti-discrimination law such as the ADEA, after all, is to prohibit discrimination.

On the other hand, it’s nice to know that the high court isn’t in complete thrall to the notion that the only way to prevail in a discrimination case these days is to prove “but-for” causation of an adverse action — a strict standard that offers no legal relief to employees who can show that they faced real bias but who, for instance, would have lost a certain promotion anyhow.

In Babb, Justice Alito still distinguishes between these two scenarios — discrimination in the process and discrimination affecting the outcome — and offers differing levels of redress for each. But his general two-tier approach, along with a helpful concurrence from Justice Sonia Sotomayor and a related concurrence last month from Justice Ruth Bader Ginsburg in Comcast Corp. v. National Association of African American-Owned Media, sketches a path forward for legislators and lower-court judges who truly wish to root out bias.

Shared Aspects of Babb and Comcast

Justice Alito’s opinion in Babb mentions the earlier Comcast decision only in passing, but the two cases offered variations on a theme: How much discrimination is tolerable under a law that purports to level the playing field for a disadvantaged class — older workers under the ADEA for Babb, or non-white people under 42 U.S.C. § 1981 for Comcast?

In his unanimous Comcast opinion on March 23, Justice Neil Gorsuch punted on that question: Section 1981 plaintiffs must prove that race was the “but-for” cause of their injuries, he said — but he left for another day whether such injuries may arise only from a discriminatory outcome, or whether it’s also unlawful to discriminate along the way.

Section 1981 is a civil-rights law dating back to 1866, guaranteeing all persons the “same” right to make contracts “as is enjoyed by white citizens.” On its surface this admonition is just as absolute as the federal-sector provision of the ADEA: For non-white people to enjoy the “same” rights, their experience must be “free from” discrimination.

Comcast was a uniquely messy case, however, placing Section 1981 far outside its normal context of employment disputes. November’s oral argument was a botched affair, without clarity even on what the plaintiff sought, and Justice Gorsuch’s instinct to limit his opinion to the law’s initial pleading standard may have been wise.

“We need not and do not take any position on whether § 1981 as amended protects only outcomes or protects processes too,” he wrote, sealing a 9-0 vote by reserving judgment on an issue close to the heart of Justice Ginsburg — and perhaps others, too.

Ginsburg Sets the Table for Babb

In her Comcast concurrence, Justice Ginsburg was not so shy: Section 1981’s guarantees are “an empty promise without equal opportunities to present or receive offers and negotiate over terms,” she said — and any interpretation that “countenances racial discrimination so long as it occurs in advance of the final … decision” cannot be squared with the law’s sweeping civil-rights purpose.

Specifically in the employment realm, noted Justice Ginsburg, an employer violates Section 1981 if it imposes extra costs or requirements on Black job applicants because of their race — even if a plaintiff who complained of such discrimination wouldn’t have won the job anyhow.

It’s puzzling that her liberal colleagues didn’t join the Comcast concurrence, but in any case Justice Ginsburg needed to wait only two weeks for an even plainer statement of her principles — from Justice Alito, of all people.

In Babb, Justice Alito offers a simplified example of illegal “process discrimination” as it might occur under the federal-sector provision of the ADEA. His hypothetical is worth quoting in full, since it illustrates perfectly the manifest injustice of a “but-for” standard that is now being applied as a default to other employment statutes — and, indeed, to non-federal employees under the ADEA itself:

Suppose that a decision-maker is trying to decide whether to promote employee A, who is 35 years old, or employee B, who is 55. Under the employer’s policy, candidates for promotion are first given numerical scores based on non-discriminatory factors. Candidates over the age of 40 are then docked five points, and the employee with the highest score is promoted. Based on the non-discriminatory factors, employee A (the 35-year-old) is given a score of 90, and employee B (the 55-year-old) gets a score of 85. But employee B is then docked 5 points because of age and thus ends up with a final score of 80. The decision-maker looks at the candidates’ final scores and, seeing that employee A has the higher score, promotes employee A.

This decision is not “made” “free from any discrimination” because employee B was treated differently (and less favorably) than employee A (because she was docked five points and A was not). And this discrimination was “based on age” because the five points would not have been taken away were it not for employee B’s age.

It is true that this difference in treatment did not affect the outcome, and therefore age was not a but-for cause of the decision to promote employee A. … But under the language of [the federal-sector provision of the ADEA] this does not preclude liability.

Exactly so. But let’s ask the obvious follow-up: Why would such a blatant scheme be allowed under any provision of a law that purports to fight age discrimination? Justice Alito struggles to explain that, in the case of the private-sector provision of the very same law, “the syntax … is critically different from that of [the federal provision], where, as noted, the but-for language modifies the noun ‘discrimination.'”

Of course this is hypertechnical nonsense — but for the moment we must accept the “syntax” explanation as the price of distinguishing Babb from Gross v. FBL Financial Services, Inc., a wrongly decided case from 2009 in which Justice Clarence Thomas set the ball rolling on “but-for” standards in discrimination cases.

Unsurprisingly Justice Thomas is the lone dissenter in Babb, which he asserts will do “serious damage to our interpretation of antidiscrimination statutes.” The “sweeping” effect of last week’s decision, he warns, may be felt most immediately in cases involving the federal-sector provision of Title VII: Since that measure shares the “free from” text, he observes, Babb “presumably applies to claims alleging discrimination based on sex, race, religion, color, and national origin as well.”

I know plenty of plaintiff attorneys who hope to prove him right.

Justice Thomas also notes — correctly, it would seem — that affirmative action programs for government employees may fall afoul of a broadly applied Babb rule. Such complications can be easily addressed, however.

Remedies for ‘Process Discrimination’

Justice Alito’s opinion in Babb leaves a crucial question up in the air: For victims of process discrimination — those docked five points in his hypothetical scenario — what redress is available if, as all the justices seem to agree, plaintiffs can’t demand an employment action that they wouldn’t have won on a level playing field?

Justice Thomas observes that the ADEA itself does not provide an answer. Justice Alito is wishy-washy on the matter: “Remedies should not put a plaintiff in a more favorable position than he or she would have enjoyed absent discrimination, [but] plaintiffs can seek injunctive or other forward-looking relief.” District courts, he suggests, should take the first crack at fashioning such remedies — and he doesn’t directly rule out damages.

Justice Sotomayor goes further in her concurrence. Joined by Justice Ginsburg, she sensibly suggests that the ADEA should allow any monetary damages that would be required to make a plaintiff whole, such as out-of-pocket costs for taking a “discriminatorily administered aptitude test.” In her Comcast concurrence, meanwhile, Justice Ginsburg notes that the plaintiff’s pleadings under Section 1981 allege a six-figure cost for jumping through hoops that weren’t required of similarly situated white-owned businesses, which presumably would require damages if liability were allowed.

The reasoning of Babb, in short, provides a framework for plaintiffs who can demonstrate real injustice and wish to hold a discriminator to account for wrongdoing that falls short of a provably biased result. At least for federal employees facing discrimination, and perhaps also for race plaintiffs under Section 1981, there now exists a tool for fixing a broken system — even if their personal upside is limited.

For everyone else, we have the inexorable logic of Justice Alito’s hypothetical in Babb. Can our highest court truly believe it was Congress’ design to forbid the discriminatory docking of points from older employees — or Black employees, or female employees, or Muslim employees — under some civil-rights provisions only to permit it under others, depending solely on “syntax”?

And if the answer is “yes,” isn’t it time to start fixing the lesser statutes so that everyone can benefit from the purity promised by an Alito-endorsed “Free From” label?

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R. Scott Oswald is managing principal of The Employment Law Group, P.C.

(Note: This version has been edited slightly from the version published by Law360, and carries a different headline.)

By R. Scott Oswald

 

INTRODUCTION

On March 18, 2020, President Trump signed the Families First Coronavirus Response Act (FFCRA), a bipartisan law that aims to cushion the negative effects of the COVID-19 pandemic on U.S. society. Among other things, the new statute tells employers to pay employees who take family and medical leave for coronavirus-related reasons — but with exclusions and limitations. The FFRCA is a positive step for some employees, but it leaves plenty of others without assistance.

This article summarizes the key leave provisions of the FFCRA and offers some high-level guidance for employees. Bear in mind, however, that the new law supplements and interacts with the existing federal Family and Medical Leave Act (FMLA); with other federal, state, and local leave laws; with other coronavirus emergency measures at all levels, including laws and orders yet to be instituted in a fast-changing environment; and with employer policies that may, in some cases, be more generous than the law requires.

To understand your individual situation, please consult an employment attorney. Much will depend on your employer’s location and its pre-existing leave policies.

 

KEY TAKEAWAYS

We’ll start, alas, with a bit of confusion: There’s some debate about when the paid-leave requirements of the FFCRA became (or will become) operative. On March 24, the U.S. Department of Labor stated that the provisions don’t take effect until April 1, 2020. We disagree: In our opinion, the provisions went into effect on March 18 upon the President’s signature of the FFCRA, meaning that employees can invoke them right now.

Admittedly the FFCRA’s phrasing is unusual. We believe that previous U.S. Supreme Court opinions point at just one valid interpretation, but employers will likely rely on government guidance. If you would qualify for paid leave now and fear being laid off before April 1, you may want to consider preserving your rights by making an immediate claim — even if your employer is likely to reject it.

The FFCRA has two sub-laws that require employers to provide paid leave. Both provisions expire on December 31, 2020. The first, the Emergency Family and Medical Leave Expansion Act (EFMLEA), amends the FMLA and is aimed at employees who must care for children under 18 years old because of coronavirus-related restrictions such as school closures. The second, the Emergency Paid Sick Leave Act (EPSLA), applies to employees who must take leave for themselves or to take care of a family member — not just a child — for specified coronavirus-related reasons.

The EFMLEA and EPSLA apply only to employers with fewer than 500 employees, which eliminates a huge chunk of the economy. In addition, the laws may not apply to certain employers with fewer than 50 employees or to certain healthcare workers or first responders, based on circumstances and regulations yet to be issued by the U.S. Department of Labor. Depending on your employment details, then, the new laws may not be relevant to you.

Under EFMLEA, qualifying employees are guaranteed 12 weeks of leave to care for their children, with employers required to pay all but the first two weeks. For the first two weeks you can use any paid leave that your employer already supplies — such as vacation leave — or you might invoke the EPSLA, or a combination of the two, at your option. Once your first two weeks of EFMLEA leave have passed, your employer must pay you at least two-thirds of your regular pay for the remaining 10 weeks. This legal requirement has a cap of $200 per day, although employers may choose to pay more. Unlike the “regular” FMLA, the EFMLEA doesn’t require employees to have worked for 12 months at their employer before taking qualified leave; the requirement here is only 30 days.

Under EPSLA, meanwhile, qualifying employees are guaranteed two weeks of paid leave if they are unable to work (including remotely) for coronavirus-related reasons. The law makes a distinction between employees who can’t work because they are isolated or sick themselves, and employees who can’t work because they are taking care of a family member. If you are isolated or sick yourself, your employer must pay your regular pay rate up to a limit of $511 per day. If you take leave to care for someone else, your employer need pay you only two-thirds of your regular pay, up to a limit of $200 per day.

If your company’s policy already allows you to take paid sick or other leave, you can invoke the EPSLA before exhausting such leave, at your option. Employers can’t require employees to take this leave in a certain order. Unlike the EFMLEA, the EPSLA has no minimum tenure requirement — you can invoke it regardless of how long you have worked for your employer.

 

COMPARISON OF NEW LAWS TO ‘REGULAR’ FMLA

If you need to take leave because you’re unable to work yourself because of COVID-19, or if you must care for family members who are not your children, you will likely invoke some combination of EPSLA paid leave and the “regular” FMLA, which requires only unpaid leave (and which has different eligibility requirements than EPSLA). If you’re taking leave to care for your children, it may be a combination of EPSLA and EFMLEA — which could allow you to be paid throughout the entire 12-week period if you qualify. Bear this in mind as you communicate with your employer about your reason for taking leave.

Below is a chart that compares the three relevant federal leave provisions in simplified form. Remember that all three laws contain exceptions and niggly definitions, which you may want to discuss with an attorney. Also remember that the new federal laws may not be your only path to get paid if you can’t work: Your company’s regular policies may allow such pay; or you may have insurance that covers it; or some other form of payment may be available via new state or local laws — for instance, by allowing you to collect unemployment benefits while on hiatus.

 

	‘Regular’ FMLA	EFMLEA	EPSLA
Effective date	1993	3/18/2020†	3/18/2020†
Effective through	No expiry	12/31/2020	12/31/2020
Type of leave covered
Medical leave for self	Yes	No	Yes
Leave to care for family	Yes	Childcare only	Yes
Key provisions
Leave is required if conditions are met?	Yes	Yes	Yes
Leave period covered by law	12 weeks	12 weeks	2 weeks
Leave must be paid?	No	After 2 weeks	Yes
Required rate of leave pay	N/A	2/3	Full‡
Maximum required leave pay	N/A	$200/day	$511/day‡
Discrimination/retaliation forbidden?	Yes	Yes	Yes
Job protection?	Yes*	Yes*	Yes*
Part-time employees covered?	24+ hrs/wk	Yes**	Yes**
Employers covered
Private employers
0-49 employees	No	Yes***	Yes***
50-499 employees	Yes	Yes	Yes
500+ employees	Yes	No	No
Government employers	Yes††	Mostly no††	Yes
Other
Minimum period of employment for coverage	12 months	30 days	None
Employee can sue employer for violation?	Yes	Yes	Yes

 

† In our firm’s opinion. However, guidance from the U.S. Department of Labor sets the date as April 1, 2020.

‡ Applies to leave taken for self. If leave is taken to care for family member, rate is 2/3 of regular pay with cap of $200/day.

* Exceptions may apply, including under EFMLEA for companies with fewer than 25 employees. EPSLA leave-taking is protected via the Fair Labor Standards Act.

** In proportion to their average hours.

*** Exceptions may apply; pending regulation.

†† Subject to complex rules/procedures. EFMLEA paid leave is available only to “Title I” FMLA employees such as U.S. Postal Service workers and D.C. government workers; ask your agency whether it falls under Title I.

 

GUIDANCE FOR EMPLOYEES WHO WANT TO TAKE COVID-19 LEAVE

To start, remember that we are in a fast-changing situation — and that all cases are different. This article provides a general framework for thinking about your leave situation as of March 25, 2020, but it is not individualized legal advice. If you are unclear about how the factors below will interact in your specific situation, please seek advice from an employment attorney.

With that said, here are some things you should weigh before making a leave request:

• Whether your employer is bound by the regular FMLA and/or the new federal leave laws. Depending on your employer, the size of its workforce, and your tenure there — and possibly on Labor Department exceptions yet to be created — you may be covered by none of these laws, all of them, or any combination in between. The laws define company size in somewhat technical ways; if you’re in doubt about your employer’s size category, ask your H.R. person.
• Your employer’s specific leave policies. Now is the time to dust off the employee manual you probably received on your first day of work. Study the section about leave-taking very closely. Some employers are more generous than the law requires, which may affect your decision about whether/when to claim, for instance, EPSLA paid leave.
• Your insurance situation. Some employees may be able to claim short- or long-term disability pay or other contingent insurance benefits, either via a company-sponsored plan or possibly via self-paid supplemental insurance from companies such as Aflac. If you have such a plan, review it carefully to see if it will help you. If it will, you must still decide when to trigger it.
• Your employer’s financial situation. Some employers may survive or even thrive through the pandemic, making your job relatively secure, but other companies already are curtailing work or shutting down operations. Emergency leave may not help you if your employer can’t make payroll anyhow — but on the other hand, your right to such leave disappears entirely after you’re lawfully terminated. If your employer seems unstable and you already have a valid reason to take leave, an early claim may offer you some protection for a period of time. And because of anti-retaliation provisions, a valid leave request may force even a shaky employer to be more cautious about firing you.
• State and local laws. Depending on your location — and, frankly, on legislators whose priorities change daily — you may already have, or soon could have, more options than federal law demands. In Washington, D.C., for instance, many employees who are laid off, furloughed, unable to work, or even have work hours reduced due to COVID-19 may claim unemployment benefits under more lenient terms than previously. An unemployment check may be less than your regular pay, but it’s likely better than completely unpaid FMLA leave. As the COVID-19 crisis escalates, more state legislatures may offer such measures to protect employees.
• Possibly competing reasons to claim leave. If you’re a qualifying employee who already has young kids who need care due to the pandemic, the EPSLA/EFMLEA combination offers you 12 weeks of paid leave, albeit at a reduced rate of pay. Even if you feel you can continue working, 12 weeks of protected leave may be starting to look attractive — especially as economic conditions worsen. You should never request leave in bad faith, but neither should you blindly wait until you become sick yourself. If you end up claiming leave based on your own condition, you may end up being paid less overall, depending on all the factors above.

Once you have considered these factors and decided what to do, the next step is easy: Make your coronavirus leave request in writing — e-mail should be fine — to the person who is specified for such requests in your employee manual. It may be your immediate boss, for example, or an H.R. person, or someone else. Specify your reason for requesting leave: We have uploaded the text of the EFMLEA and EPSLA to help you, highlighting the valid reasons for leave in yellow. You don’t need to name the law(s) under which you’re making your request, but it may be helpful to do so.

Your employer may respond by granting the leave if it’s obvious that you qualify. Alternatively, it may request some documentation of your situation, or it may say why it believes you don’t qualify. Regardless, it should notify you of your rights, outline next steps, and specify a period for your response. A plain refusal, without more, is not adequate under the law.

Things to bear in mind:

• Everyone is under extraordinary pressure right now, including your boss, your company’s H.R. people, and anyone else who may handle your leave request. Assume good faith and treat everyone with respect, even if you run into trouble.
• The EFMLEA and EPSLA are brand new laws, and your employer may not fully understand all their provisions. In particular, as noted above, your employer may believe the laws don’t become effective until April 1. Legal misconceptions won’t affect your rights, but they may take some time to resolve.
• Also, the interactions between the EFMLEA and EPSLA and other laws, including new local laws, haven’t yet become clear. Complications may emerge, and your employer may need to seek legal advice along the way. As long as it’s a good faith process, this is likely OK.
• Regardless of the outcome of your leave request, your employer may not retaliate against you for making the request. In normal times, retaliation might mean denying you a promotion, changing your work conditions, or even firing you. Amid a pandemic, your employer may be terminating people anyway — but if you’re singled out somehow, that could be retaliation (or, indeed, discrimination if it’s done on another forbidden basis).
• You may find it valuable to consult with an employment lawyer at any stage of this process, including in the formulation of your request, but a consultation may be especially useful if you hit a stone wall with your employer.

We hope this (mostly!) non-technical guidance is helpful to you in this stressful time. The good news is that employees have more leave rights now than they did on March 17 — and pressure is mounting on Congress and local governments to add even more. This is not a normal situation by any means, but it is not without hope.

If you would like to discuss your individual circumstances, our attorneys are available to you.

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R. Scott Oswald is managing principal of The Employment Law Group, P.C.

 

 

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(Transcribed and edited lightly by The Employment Law Group)

R. Scott Oswald: [Addressing camera] Our first panel at this year’s Qui Tam Conference on February 27-28, 2020 is the “Year in Review” — and moderating the panel is John Thomas, who is with us today.

[Turning to Thomas] John, you have started a new firm, right, in Roanoke? Tell us a little bit about the firm.

John R. Thomas, Jr.: Absolutely. Yeah, I’ve joined up with a couple of Marines that I served with, John Hafemann and Brian Magee. Our firm is Hafemann, Magee and Thomas. John and Brian are in Savannah, Ga., and I’m in Roanoke, Va., and we focus on — I focus on qui tam. We also do some federal criminal litigation, federal civil litigation. So it’s been fun.

Oswald: Terrific. Tell us a little about the panel. It’s our first panel, Year in Review, on the first day of the annual conference. If I’m in the audience, what can I expect?

Thomas: Well, this is, I guess, the third year we’ve done the Year in Review panel. I think what we’ve tried to do is provide a panel at the very start of the day, when we can look at the past year in a broad, big-picture way. A lot of the [later] panels will obviously drill into some specific areas with a lot of detail, but I think there’s value — particularly as we get started for the day — to really look at what are some of the broader patterns that we can see in qui tam practice over the past year.

Oswald: And who do we have on the panel?

Thomas: This year we’re very fortunate to have two returning panel members: We have Claire Sylvia and Stuart Delery, both of whom obviously need no introduction. Claire authors probably one of the most important treatises out there. She’s with Phillips & Cohen. Stuart Delery obviously served as associate attorney general under President Obama.

We’re also very excited to have Tejinder Singh join us this year as well. He focuses on appellate practice within the False Claims Act, and he was on another panel last year. Everybody really enjoyed his perspective, and we’re really excited to have him this year.

Oswald: We’re now a few years after Escobar, and two years after the Brand Memo. What are some of the big issues that are percolating out there that you might touch on in the panel?

Thomas: I think you’re exactly right about Escobar and materiality. We’re still continuing to see district courts, and at the circuit court level, Escobar applied, so we’re still seeing the after-effects. We have [a separate] panel on AseraCare, but we see that especially in the medical necessity arena. So that’s an important area we’ll talk a little bit about.

We’ll also talk a bit about the Granston Memo and what we’ve seen in some of the different circuit courts on the government’s ability to dismiss qui tam actions. We obviously have two different standards that are out there, and I think it’ll be interesting to hear our panelists’ perspective on where that is heading between the Swift standard and the Sequoia standard.

I think another important decision this year that we’ll spend a little bit of time talking about is the Cochise Consultancy case, which of course dealt with the statute of limitations for relators — I think that is a pretty interesting and important development over this past year.

So I think those are a couple of the big wavetops, but I think we’ll also be looking at other notable settlements for the year, as well as some of the other policy coming out of DOJ.

Oswald: Now you were involved in a big case this year against Duke University and it dealt with grant fraud. Tell us a little bit about the case and maybe some lessons learned?

Thomas: Absolutely. So the Duke University case was a pretty important case this past year dealing with fabricated or falsified data in grant applications — in N.I.H. grant applications. It dealt with a particular laboratory within Duke University, where fabricated, falsified data appeared in a number of grant applications over the course of years.

I think it’s an important case for a couple of reasons. One was its size. Although we’ve seen the N.I.H. deal with — and of course the Department of Justice working with the N.I.H. — we’ve seen them deal with grant fraud in the past, but not on this scale. And I think that was important.

I think it’s also important, post-Escobar, to have had a case dealing with the materiality aspects of scientific data and grant applications, and shining a light on what is important for the government in terms of these funding decisions.

Oswald: John, thank you.

Thomas: Thank you!

Oswald: [Turning to camera] We look forward to seeing you on February 27-28, 2020 here in Washington for the Qui Tam Conference. You can find us at fedbar.org.

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R. Scott Oswald is managing principal of The Employment Law Group, P.C. John R. Thomas, Jr. is a partner at Hafemann Magee Thomas.

 

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(Transcribed and edited lightly by The Employment Law Group)

R. Scott Oswald: [Addressing camera] Welcome, everyone. We are here with Mike Paulhus, who is a partner at King & Spalding’s Atlanta office.

[Turning to Paulhus] And Mike, tell us about your panel at this year’s Qui Tam Conference. It’s on ethics.

Michael E. Paulhus: It is! So we’re pulling together a panel. I’m going to have the defense bar’s perspective. We have Jennifer Verkamp, who’s going to join us and provide the whistleblower perspective. And then we have a surprise guest, soon to be determined. We’ve invited someone from Civil Frauds [at the U.S. Department of Justice], who we think will be an excellent addition. So we’ll have a government perspective on the panel as well.

We’ll cover a swath of topics but we’re going to be pivoting for everyone in the audience to have a perspective from where they’re coming from. So you’ll hear the relator’s perspective, the government perspective, and the defense bar’s perspective.

Oswald: And that’s so important because you know get siloed — especially under the False Claims Act, where these cases are under seal for so very long. We sometimes don’t realize what’s going on on the other side. What are the common ethical issues that we might cover at least a little bit in the panel?

Paulhus: Sure. Well, one thing that was part of the genesis of this program is, Jennifer and I were on a panel last year at the [conference] relating to mediation and settlement. The most interesting [debate] — and it wasn’t contentious, it was it was contentious in a fun way, we were exploring a dialogue — was about settlement quandaries.

So, for example: Defense counsel putting a bundled settlement offer on the table and hearing back from Jennifer, “That creates serious ethical quandaries for me.” She’s saying, “I’ve got to figure out how much to recommend to my client for the retaliation claim versus attorney fees.” And then [I’m] explaining, from my client’s perspective, “Money is fungible — I don’t really care how you allocate it.”

And so we’re having this really good dialogue about, How does that affect the ethics of going through settlements in these cases that have all these different permutations of the government piece, and the relator piece, and the attorney fee piece, and how different ethical quandaries can arise.

Oswald: Just from the relator side, one of the debates we have is when to [name] individuals —

Paulhus: Right.

Oswald: — [as defendants] in a complaint. My guess is that, for us, we might look at that very differently [than] defense counsel, who might have a whole host of ethical issues that come up, right?

Paulhus: Well, exactly. And that’s something that we’re going to talk about at some length on the panel, and that’s a particular defense bar issue, right? When can I have a joint client? When should I have a joint client? How do I plan ahead if there is a separation between the company and the individual? Especially if you have an individual named, I might have a different perspective — or, if the individual who’s maybe in harm’s way is a much more junior person, then I might be able to work with that person. So there’s a lot of ethical issues that you’re dealing with on the defense side.

Also, appreciating the Upjohn warning; and why do we give Upjohn warnings; and why are we trying to make sure people understand who’s their lawyer; and how you can trip into a representation if you’re not being thoughtful about it. Those issues are even more important as we have had the focus of individual accountability that DOJ has been focused on [lately].

Oswald: And so for our government lawyers — and there are a lot of them that’ll be in the audience — maybe understanding the unique ethical issues that each side has in their cases: That might give a window into what to do, and what not to do, even from a government perspective?

Paulhus: Absolutely. I have dialogues with government lawyers at times where I’m trying to explain. And sometimes it can get lost — the back end implications of pursuing individuals, and why I need a release for individuals, and the fact that we may well be obligated to indemnify individuals. So you can say you need an individual payment for an individual, but we may have statutory or contractual obligations to indemnify that individual. So we may get to the same place, [but] we get some interesting interactions where it’s enjoyable to have that dialogue with the government folks to explain, you know, in my world, the business rationale that we’ve got to sort through, and the ethical implications of me representing or working on behalf of that individual.

Oswald: So last year we had interactive software that we used to get folks in the audience into the panel. Anything like that this year?

Paulhus: Absolutely. We’re planning to do that. It’s an interactive — you can use your smartphone and we’re going to bake in questions, and hopefully we’ll be able to project on the screen how people are responding to the specific questions to really make it interactive.

Oswald: It sounds terrific.

Paulhus: Yeah, absolutely, it’ll be fun.

Oswald: Tell us a little bit about yourself. Lawyers are people, too. Other than faith and family, give us a sense: What’s your passion? What gets you up in the morning?

Paulhus: Sure. Well, I’m passionate about the arts. I sit on the board of the Atlanta Opera in Atlanta. I guess there’s a certain performance art to being a lawyer and standing up in court, so I like to see other people perform. That’s where I spend a good bit of my time.

Oswald: Mike, thank you.

Paulhus: Absolutely!

Oswald: [Turning to camera] And we look forward to seeing each of you on February 27-28, [2020] here in Washington. To register, you can find us at fedbar.org.

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NOTE: Since this interview was recorded, Mr. Paulhus’ panel has added its government representative — David Wiseman, assistant director of the Civil Fraud Section at the U.S. Department of Justice.

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R. Scott Oswald is managing principal of The Employment Law Group, P.C. Michael E. Paulhus is a partner at King & Spalding LLP.

 

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(Transcribed and edited lightly by The Employment Law Group)

R. Scott Oswald: [Addressing camera] We are here with Scott Gilbert. He is counsel at Watkins and Eager in Jackson, Miss., and he is moderating a panel at this year’s Qui Tam Conference on February 27-28, 2020.

[Turning to Gilbert] Scott, tell us a little bit about the panel and, if I’m in the audience, what I can expect to see on the panel.

J. Scott Gilbert: Great. Well, thank you: It’s a great honor to be included, Scott. I appreciate the opportunity.

Oswald: Aw, you’re welcome.

Gilbert: So our panel is going to address the interplay of asset forfeiture with qui tam actions — and there are two intersections that are of significant interest to practitioners both in the relators’ bar and the defense bar.

The first intersection is, if you are a relator or relators’ counsel, what does it mean for you and for your ability to recover if the government seizes and then ultimately perfects a forfeiture of the same money that the government is recovering as the proceeds of the fraud?

The second major intersection is for defense counsel and for defendants: What does it mean for you as a defendant and defense counsel if, somewhere in the pre-trial process, the money that’s being used to fund your defense is ultimately seized and restrained by the government in a pre-trial context?

And so, along those lines, we’re very fortunate to have three very experienced litigators in this area join us on the panel. The first is Silvija Strikis, who’s with Kellogg Hansen here in D.C. She is an experienced relators’ counsel. One of her more prominent cases that the people who are interested in the conference may know about is U.S. ex rel. Westmoreland v. Amgen. She was relator’s counsel in that case, where the government recovered about $700 million in fraud proceeds and penalties. She clerked for former Supreme Court Justice O’Connor and she will bring a phenomenal perspective, I think, from the relators’ perspective here.

Our defense counsel is also here from D.C.: Ralph Caccia. He’s with Wiley Rein. Ralph was a former AUSA in DC and he is one of the stalwarts of the white-collar defense bar. He does both civil and criminal defense work, focusing on False Claims cases, where he’s represented corporations and their executives for years. Ralph has frequently run into the circumstance where the government either threatens to or does, in fact, seize money from clients in the pretrial setting.

And then our government representative is the deputy civil chief in the Eastern District of California, Colleen Kennedy. Colleen’s been with DOJ for about ten years, where she handles affirmative civil enforcement — specifically False Claims Act and qui tam cases for the US Attorney’s Office. She has the unique experience of being one of the few federal prosecutors, I think, that have actually dealt with the logistics of facilitating relators receiving their payment from funds that have been forfeited by the government.

Oswald: How common is this? How often does this happen in the False Claims arena, where there may be this parallel civil asset forfeiture action?

Gilbert: Well, in a previous life as an Assistant U.S. attorney, and as the program manager for the forfeiture program here in Washington, we taught AUSAs [to] follow up in every fraud case with a civil forfeiture component. So it’s something they’re taught to do very early on in their evolution, when they join the department and begin to learn about how the Department of Justice pursues fraud cases. And so you see it more and more over the last several years, as it’s really become ingrained in the culture of U.S. Attorneys offices to seize the money early and to preserve it for restitution for both government and individual or private victims. So we’ve seen a major uptick over the last decade.

Now the other side of that coin is we’ve got, of course, the right to due process. I mean, this is America, right? And so defendants have a Sixth Amendment right to fund and pay for their defense. Two of the major cases that are at loggerheads that we’re going to deal with are [U.S. v. Monsanto], which is fairly well-established. And that says, you know: Listen, if the government can show probable cause that a certain asset is, in fact, sufficiently connected to a criminal offense, they can hold that — and the defendant can’t use that to pay for counsel.

Now we’ve got another case that’s much more recent, Luis v. U.S., that says, Well, that’s fine, but the government can’t hold and restrain assets that it can’t connect to the offense. And where this sort of comes up is this notion of substitute assets or unconnected assets to the offense under investigation.

And so we’ve got a rather robust playing field of issues to deal with here both for relators — who’d like to know, Can I still recover my share if the assets are forfeited to the government? — and for defense counsel and defendants, who are saying, Well, wait a minute, what is it that’s there for me to retain to fund my defense to demonstrate that I’m not guilty of what I’m accused with?

Oswald: So give me some of the advice that you’re giving to your clients right now, who might be facing a situation where they have assets that might be seized. What kind of advice you giving to your clients?

Gilbert: This really boils down to an accounting matter, because this is going to be about ledgers and spreadsheets and transactions. The forfeiture law, and the law that deals with what is it that the government actually can seize and restrain under a proceeds theory, or an involved-in property theory, money laundering theories of forfeiture, actually can be quite confusing because of the evolution of the case law. And so it’s not really so clear-cut as just to say, well, this money came from Pot A or this money came from Pot B. It’s a situation where you really have to bring more than just legal acumen to the table: It’s something that you’re going to have to involve CPAs, forensic accountants, and other sorts of professionals and experts to really drive your point home and fill out your defense.

Oswald: So Scott, tell us a little bit about you personally. When you’re not practicing law, not with your family, what’s your passion? What gets you up in the morning?

Gilbert: Well, you know, I’m from Mississippi — which some folks who are watching the video probably could glean from my lack of an accent, that I’m from the South. So I enjoy outdoors things: Hunting, fishing, sports. Things like that that I can do with the family and so I just — those types of things that you would guess that a guy from the South would be involved in.

Oswald: Wonderful. Scott, thank you.

Gilbert: [Nods]

Oswald: [Turning to camera] We look forward to seeing each of you on February 27-28, [2020] here in Washington at the Qui Tam Conference. You can find us at fedbar.org.

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R. Scott Oswald is managing principal of The Employment Law Group, P.C. J. Scott Gilbert is counsel at Watkins & Eager PLLC.

 

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