Lestage v. Coloplast Corp.: A Key Qui Tam Retaliation Scam Slam
On December 9, 2020, the Court of Appeals for the First Circuit affirmed a jury verdict awarding an employee more than $760,000 in compensatory damages resulting from her employer’s retaliation against her for filing a qui tam action against the employer and one of its key customers. The decision in Lestage v. Coloplast Corp. makes the first circuit the latest to hold that retaliation under the False Claims Act (“FCA”) requires a “but for” showing of causation.
Plaintiff Amy Lestage had a job managing accounts for important customers of Coloplast, a company that develops medical devices. In December 2011, she and others filed a qui tam action against Coloplast and several of its customers, including Byram Health Care, a key Coloplast customer whose account Lestage managed. Qui tam actions are brought under the FCA by individuals against defendants who are alleged to have defrauded the federal government. Lestage and the other plaintiffs alleged that Coloplast had paid kickbacks to some of its customers in a scheme designed to inflate Medicare and Medicaid reimbursements, thereby defrauding the federal government. If the government elects to do so, it can step into the shoes of the plaintiffs in a qui tam action (called “relators” in qui tam jargon) and prosecute the case itself. Qui tam complaints are always filed under seal, meaning that the defendants are not aware of the details of the case until the seal is broken. Here, the DOJ elected to pursue the case against Coloplast, Byram and the other defendants, and the complaint was unsealed in late August, 2014.
Filing a lawsuit against both your employer and one of your employer’s key customers, whose account you manage, must be a daunting proposition. Put yourself in Amy Lestage’s shoes for a moment and you can understand why the FCA protects people in her position from retaliation by their employer. So when, in December 2014, Byram told Coloplast that it no longer wanted Lestage to be its account representative, Coloplast must have known that it needed to proceed with caution to avoid doing anything that might be perceived as an adverse employment action against Lestage. Coloplast opted to place Lestage on an indefinite leave, during which she would be paid 100% of her salary and 100% of her target bonus, and pledged to investigate “this matter further.” Lestage was not asked to return to work until January 2016, a full year later, after Coloplast had reached a settlement with the DOJ in the qui tam action.
When she came back to work, Lestage asked to not be returned to the Byram account, but she did want to be reinstated as account manager for another lucrative key customer, ABC Home Medical. While Coloplast offered a variety of reasons for doing so, it never reinstated Lestage to the ABC account (at least as of early 2019, around three years after she had filed her retaliation claim).
At trial the judge instructed the jury that it could find for Lestage if it determined that her filing of the qui tam action was a “substantial motivating cause” of the adverse employment actions. In April 2019, the jury awarded Lestage more than $762,000, finding that Coloplast had retaliated against her by placing her on leave, and by reinstating her to inferior accounts upon her return. After the trial, Coloplast filed motions for a new trial and for judgment as a matter of law, arguing in both instances that the jury verdict was not supported by the evidence. Both motions were denied.
Probably the most significant takeaway from the first circuit’s opinion in Lestage is its acceptance of Coloplast’s argument that the proper standard of causation in FCA retaliation cases is the “but for” standard, not the “substantial motivating cause” standard that the district court judge instructed the jury to follow. Like the third, fourth, fifth and eleventh circuits before it, the first circuit read the FCA’s prohibition against taking adverse employment actions against employees “because of” their engagement in protected conduct (e.g. filing a qui tam action) as requiring a plaintiff to show that they would not have suffered the adverse action “but for” the protected conduct.
While the first circuit’s adoption of the “but for” standard might at first blush appear to be a victory for defendants in general, and Coloplast in particular, at the end of the day the court of appeals came to the same conclusion as the district court: the evidence at trial supported the jury’s finding that Coloplast retaliated against Lestage because she filed the qui tam action. The court noted that this evidence included that Coloplast never conducted the investigation that it promised at the time that it placed Lestage on leave, and that Coloplast did not end her leave until after it had settled the qui tam case. The court was also persuaded by evidence that when Lestage finally returned to work, Coloplast assigned her to a less lucrative slate of customers than she had before she was placed on leave, and made no effort to remedy the situation. The court found that the jury could have reasoned, based on the evidence before it, that the non-retaliatory justifications that Coloplast offered for the adverse employment actions were merely pretextual.
There are several interesting takeaways from Lestage. The most obvious is that this opinion established that the standard of causation in FCA retaliation cases in the first circuit is the “but for” standard, not the “substantial motivating cause” standard. But beyond that headline, it is worth considering whether there is much daylight between those two seemingly different standards. The defendants spent a lot of money (I imagine) arguing for the “but for” standard, and it turned out to not make any difference in the result. Another interesting takeaway from Lestage is that a year off of work at 100% salary and 100% bonus is an “adverse employment action.” No doubt the legal minds advising Coloplast had concluded that they could avoid a retaliation claim by paying Lestage at 100% of her expected compensation during her leave, but the jury disagreed, and the first circuit took no issue with the jury’s reasoning. Finally, this case seems to show that the FCA anti-retaliation measures work. It takes a lot of courage to sue your current employer for defrauding the government, and it takes a lot of faith in the power of the law to protect your job if you decide to take that step. A quick search on LinkedIn shows that Amy Lestage is still employed as a key account manager at Coloplast. If the goal of the FCA is to encourage employees to shine a light on fraudulent activity by their employers by safeguarding their jobs if they decide to take action, Lestage goes a long way towards accomplishing that goal.