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Topic: Whistleblower Laws (Federal)

Tenth Circuit Court of Appeals Upholds ARB Decision in Favor of Truck Driver Who was Fired After He Abandoned His Disabled Vehicle to Avoid Freezing to Death

In a recent case before the United States Court of Appeals for the Tenth Circuit, the Court upheld an Administrative Review Board (ARB) decision finding that a truck driver was terminated in violation of the whistleblower provisions of the Surface Transportation Assistance Act (STAA).  The truck driver, Alphonse Maddin, unhitched his truck from a trailer and drove away to avoid freezing to death after the brakes on the trailer froze due and roadside assistance failed to respond.  Maddin had reported to his employer, TransAm Trucking, both the condition of the trailer and the threat to his health due to the freezing weather conditions.  The Court held that Maddin had engaged in protected activity under the STAA by reporting the frozen brakes and the threat to his health; and that the driver’s termination for leaving the trailer to seek safety violated the whistleblower protection provisions of the STAA.

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Whistleblower Exposes Hedge Fund for Misleading Investors

Dhir v. Carlyle Group, 3:16-cv-00219, U.S. District Court, District of Connecticut

A hedge fund employee decided to blow the whistle on the company’s misstatements to investors regarding its financial investments in certain derivative products. The plaintiff, Nikhil Dhir, a former portfolio manager at the hedge fund, claims that the firm misstated both the amount of assets the firm had invested in these derivative products, as well as the risk associated with the products. Dhir alleges that Vermillion hedge fund founders, Chris Nygaard and Drew Gilbert, “knowingly and intentionally” advertised the fund has having low risk and volatility, even though freight derivatives are highly volatile and not liquid.

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Michigan Court Upholds Right to Pursue FRSA Cases in Federal Court

In a recent case in the U.S. District Court for the Eastern District of Michigan, the court denied Grand Trunk Railroad’s Motion to Dismiss, holding that a plaintiff may pursue a Federal Railroad Safety Act (FRSA) whistleblower retaliation claim in federal court, even after he has pursued the same claim administratively with the Department of Labor. The court held that pursuing remedies in both venues did not constitute bad faith on the part of the complainant, did not present a res judicata (claim preclusion) issue, and did not violate the due process rights of the defendant railroad. This case is important because it affirms the options available to a whistleblower to fully adjudicate claims of unlawful retaliation.

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ARB Upholds “Reasonable Belief” Standard for Fraud Claims Under SOX

The Department of Labor’s Administrative Review Board affirmed an Administrative Law Judge’s (ALJ) decision that found the following: Timothy Dietz reported violations of the federal mail and wire fraud statutes to his former employer Cypress Semiconductor Corporation and, in retaliation, Cypress placed an undeserved disciplinary memo in his personnel file, and then constructively discharged him, thereby violating the whistleblower provision of the Sarbanes-Oxley Act (SOX).  The ARB’s decision was issued in Dietz v. Cypress Semiconductor Corp., ARB Case No. 15-017, ALJ Case No. 2014-SOX-002

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Supreme Court Is Poised to Endorse ‘Implied Certification’ in FCA Cases

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Connecticut District Court Applies Dodd-Frank Retroactively and Sends SOX Whistleblower Case to Trial

In Richard Trusz v. UBS Realty and UBS AG, Case No. 3:09-cv-00268,  Richard Trusz, a high-ranking executive for UBS, complained that the company followed improper procedures in its real estate valuation. These problems, Trusz claimed, resulted in valuation errors totaling as much as $27 million.

Trusz reported his concerns about these valuation procedures both internally and externally prior to the termination of his employment in 2008. According to UBS, it eliminated Trusz’s position because the company decided to outsource its valuation review duties. Trusz alleged three types of whistleblower retaliation claims, one a federal claim under the Sarbanes-Oxley Act and two state law claims.» Read more

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Whistleblowers Awarded $24 Million in Nursing Home Fraud Settlement

On January 12, 2016, a nursing home company and two subsidiaries agreed to pay $125 million to settle a False Claims Act lawsuit alleging that they caused skilled nursing facilities to submit false claims to the government.  The relators’ combined share of $24 million represents just over 19 percent of the government’s recovery.  The case is United States ex rel. Halpin and Fahey v. Kindred Healthcare, Inc., et al., Case No. 1:11cv12139-RGS, and was filed in the U.S. District Court for the District of Massachusetts.

The qui tam action, in which the government intervened, was originally filed by two relators.  Janet Haplin is a physical therapist and former rehabilitation manager for Rehab Care; and Shawn Fahey is an occupational therapist who worked for RehabCare.

Kindred Healthcare purchased RehabCare Group, Inc. and RehabCare Group East Inc. in 2011.  The government’s complaint alleged that the companies submitted claims to Medicare for “rehabilitation therapy services that were not reasonable, necessary and skilled, or that never occurred,” according to the Department of Justice.» Read more

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Federal Judge in Tennessee Reiterates “Permissive Threshold” of Contributing Factor Standard in Whistleblower Retaliation Cases

In a recent Federal Railroad Safety Act (FRSA) whistleblower retaliation claim, the United States District Court for the Eastern District of Tennessee reiterated the “permissive threshold” standard of the “contributing factor” test under the FRSA. This case demonstrates the importance of this standard in allowing whistleblowers to pursue retaliation claims, and ultimately to protect public safety.

Under the FRSA, an employee claiming that his employer has subjected him to unlawful retaliation for whistleblowing must show that: 1) he engaged in protected activity; 2) his employer had knowledge of his protected activity; 3) that he suffered an unfavorable personnel action; and 4) that his protected activity was a contributing factor in the unfavorable personnel action. After the employee makes out a prima facie case that his protected activity was a contributing factor, the employer must show that it would have taken the same adverse personnel action absent the employee’s protected activity.» Read more

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DOL Administrative Review Board Member Calls for ARB to Determine Whether Mandatory Arbitration Agreements Apply to Whistleblower Cases

In a recent case before the Department of Labor’s Administrative Review Board, which is the appellate body within the DOL that issues final agency decisions, Judge Luis Corchado, in his concurrence, called for the ARB to decide whether whistleblower laws enforced by the DOL, such as AIR 21 (protecting airline employees) or Sarbanes-Oxley (protecting those who disclose securities violations), can be subjected to mandatory arbitration. A holding that definitively determined that all whistleblower anti-retaliation claims could be subjected to mandatory arbitration would likely have detrimental effects in furthering the purposes of those laws.

Under mandatory arbitration provisions, typically seen in employment agreements or settlement agreements after litigation, parties agree that legal claims that could be pursued in court or administrative bodies must instead be submitted to a private arbitrator. The outcomes of such cases are almost always confidential. Further, in most arbitration, the arbitrator’s decision is final and is immune from appeal to a court absent a showing of extraordinary circumstances. Arbitration often serves to promote judicial economy by reducing litigation costs and lessening judges’ caseloads.  But because of its inherently private nature, arbitration can also conceal wrongdoing from public knowledge.» Read more

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District Court, in Case Against Moody’s, Leaves the Door Open for Claims Against Rating Agencies Under the False Claims Act

In United States ex rel. Kolchinsky v. Moody’s Corporation, Case No. 1:12-cv-01399 (S.D.N.Y. 2012), a former employee of Moody’s credit rating agency alleged that the agency engaged in rampant fraud leading up to the financial crisis. On February 4, 2016, the U.S. District Court for the Southern District of New York, in its opinion on Moody’s motion to dismiss, rejected several theories of liability against Moody’s but left open the possibility of liability under the False Claims Act for Moody’s use of an electronic “Ratings Delivery Service.”

Ilya Eric Kolchinsky was Moody’s Managing Director.  His first amended complaint alleges that he repeatedly attempted to raise concerns to his superiors about Moody’s false credit ratings. Moody’s ignored Kolchinsky’s concerns and ultimately terminated him. In 2009 and 2010, Kolchinsky testified at three separate congressional hearings regarding the concerns he raised while at Moody’s.» Read more

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