Posts Tagged ‘Breach of Contract’

Confidentiality Agreement Does Not Curb Former Employee’s Whistleblower Suit

Thursday, May 12th, 2016

A whistleblower’s retention and disclosure of confidential documents did not amount to breach of his employment contract, according to the U.S. District Court for the Northern District of Illinois.

In United States ex rel. Cieszyski v. LifeWatch Services, Case No. 13-cv-4052 (N.D. Ill.), relator and one-time LifeWatch salesperson Matthew Cieszyski alleges that his former employer violated federal and state False Claims Acts (“FCAs”) by submitting for government reimbursement claims for heart monitoring services that violated relevant Medicare and Medicaid regulations. LifeWatch counterclaimed that Cieszyski had breached a confidentiality agreement and privacy policy – both of which, it contended, were components of his employment contract – by retaining and disclosing to the government confidential company documents.

Breach of Contract Must Be Independent from Any Fraud Investigation

The court held that LifeWatch failed to state a claim for breach of contract and thus dismissed the counterclaims. There was no dispute that Cieszyski had signed a confidentiality agreement as a condition of his employment, or that he removed documents from the company’s premises, contrary to the agreement’s terms. But, according to the court, enforcing the agreement would undermine the protections against retaliation afforded relators by the federal and state FCAs.

At root of the dismissal was the court’s conclusion that LifeWatch’s counterclaims derived completely from the FCA claims lodged against it. LifeWatch did not contend that Cieszyski had retained or disclosed the information for any reason other than alleging the company’s FCA violations. There was no evidence that he shared the documents with anyone other than his attorneys or the government. Nor did LifeWatch claim harm beyond its exposure to the FCA suit or damages beyond the fees and costs associated with bringing the counterclaims – “a self-inflicted wound,” in the court’s parlance. Cieszyski had not, for example, revealed trade secrets that could have jeopardized LifeWatch’s standing in the market.

Interest in Confidentiality Subordinate to Anti-Retaliation Protections

Finally, the court rejected LifeWatch’s argument that Cieszyski had collected and shared more information than was needed to support his allegations of fraud. The court declined to burden relators with the obligation to know the precise quantum of evidence necessary to make their FCA cases and to limit their disclosures accordingly. The key question is whether the relator has gathered the evidence for a reason other than furthering an investigation of possible FCA violations. LifeWatch could not persuasively attribute an ulterior motive to Cieszyski. Accordingly, his statutory right to be free from retaliation overwhelmed LifeWatch’s interest in having its confidential information protected.