Court: District Court, E.D. Michigan; March 31, 2016; Federal District Court
The Court issued an opinion and order partially granting and partially denying Defendants’ motion for summary judgment in the case of JoAnne Ickes against NexCare Health Systems L.L.C. and South Lyon Senior Care and Rehab Center. Ickes was terminated from her position as a physical therapist after reporting alleged illegal practices at her workplace, prompting her lawsuit filed on October 7, 2013. She later amended her complaint to include South Lyon on April 21, 2015.
The procedural history indicates that Defendants filed for summary judgment on June 1, 2015, and after a full briefing and oral argument on December 15, 2015, the Court made its ruling.
Key facts reveal that Ickes had nearly 30 years of experience as a licensed physical therapist and was initially employed by Integrity Rehab Services, which contracted with South Lyon to provide therapy services. Although separately incorporated, Integrity and NexCare shared operational ties, including a common office, ownership, and interrelated reporting structures. Ickes received her paycheck from Integrity, but NexCare managed her retirement and health benefits. All employees at South Lyon, regardless of their direct employer, were subject to NexCare’s compliance program, allowing for reporting of compliance violations directly to the facility's administrator.
Ickes first identified potential compliance issues at South Lyon regarding the availability of long-term care beds in 2008, when she learned that employees were misinforming patients about bed availability.
Medicare Part A provides coverage for up to 100 days of therapy services for short-term patients, after which patients must utilize Medicaid or private payment options. Nursing homes with dual-certified beds must accommodate patients regardless of their payment source, even though Medicaid typically reimburses at a lower rate than Medicare. At South Lyon, all beds were dual-certified, meaning once a patient was admitted, they could not be removed due to a change in payment source. Concerns were raised when South Lyon staff informed patients that no long-term beds were available. An elder law attorney confirmed that it was illegal under federal law to discharge patients solely due to a change to Medicaid.
The situation was reportedly resolved with the arrival of new administrator Harry Slater, but issues resurfaced when C. Berryman took over in June 2012, aiming to increase the number of short-term patients to 50% for financial reasons. She restricted admissions to those expected to require short-term rehabilitation. In July 2012, a co-worker reported that a patient was told by a social worker that no long-term beds were available after their insurance changed. This prompted further discussions among staff, leading to a claim that other patients were similarly discharged under questionable circumstances. The plaintiff noted these incidents and expressed concern over the legality and ethics of the practices at South Lyon.
Two patients, H-2 and M-1, were transferred from South Lyon nursing home, causing distress among the therapists. Plaintiff raised concerns about potential miscommunication regarding the availability of long-term care beds, prompting her to contact Patricia Milgrom, the President of Integrity. During a meeting on August 3, 2012, Plaintiff accused South Lyon staff of discharging patients under false pretenses, specifically alleging they claimed no long-term beds were available. Milgrom agreed to investigate but cautioned that Plaintiff's inquiries could raise patient privacy issues. Milgrom admitted uncertainty about the legality of informing patients regarding bed availability and expressed discomfort over the tension created by Plaintiff's concerns within the rehab department.
On August 21, 2012, Plaintiff emailed Milgrom to confirm with an attorney that Medicare patients were entitled to remain in their beds if they required long-term care. She also requested a meeting with Berryman to discuss discharge rules. Milgrom preferred to meet with Plaintiff first. During another meeting on August 22, Milgrom advised Plaintiff to refrain from discussing patient rights to remain in the facility, stating that this responsibility fell to social workers. Discontented with Milgrom's lack of documentation regarding her concerns, Plaintiff reiterated her request for a meeting with Berryman. On August 24, she sent another email asserting that it was illegal to inform patients in Medicare Part A beds that no long-term beds were available, emphasizing that patients were misled about their eligibility for continued care.
Ineligibility is not a concern for the Plaintiff, who asserted that misleading patients about the availability of long-term beds was not an option. During a conversation with Amy Mills, the Oakland County Ombudsman, the Plaintiff learned that individuals in dually certified beds could remain if they required long-term care, met eligibility criteria, and agreed to private payment or Medicaid if necessary. Following additional meetings, the Plaintiff was assured that patients would not be misinformed about long-term bed availability.
On August 27, 2012, the Plaintiff informed Berryman that South Lyon could not state that long-term beds were unavailable. Berryman clarified that patients were informed they were admitted for short-term rehabilitation only, implying a policy to discharge patients after their rehab period. Berryman planned to reorganize the facility into separate halls for short-term and long-term patients and indicated that patients needing long-term care would be told no long-term beds were available.
Berryman expressed uncertainty about the legality of this practice and intended to consult Carolyn Anderson, NexCare's compliance director. Anderson later confirmed that it was not permissible to inform patients that long-term beds were unavailable. Berryman subsequently instructed staff not to convey this information to patients. Anderson noted that if such claims were made, it would raise compliance concerns, highlighting that Berryman's lack of awareness stemmed from inadequate training.
On August 31, 2012, the Plaintiff attended a meeting with NexCare HR representatives where she received compliance program documents and was advised to report any compliance issues. On September 3, 2012, the Plaintiff began drafting a letter to corporate compliance. The following day, she encountered Berryman, who allegedly indicated a willingness to allow patients to stay before departing quickly.
On September 5, 2012, the Plaintiff met with Berryman, who confirmed the possibility of long-term stays for patients, prompting the Plaintiff to inform Milgrom that she would not file a complaint with NexCare’s corporate compliance. Milgrom subsequently communicated this to Sturtevant and others, appreciating their efforts.
In the fall of 2012, a patient of the Plaintiff, DB, faced challenges securing a long-term bed, with the social worker, Camps, stating none were available. The Plaintiff encouraged the patient’s family to advocate for DB's stay, and after confirming with Camps that Berryman had assured them of a possible stay, the Plaintiff refrained from filing a compliance complaint.
In December 2012, an incident occurred involving the admissions coordinator, Shelby Green, who claimed the Plaintiff was irritated during a therapy session. The patient's family perceived the Plaintiff as rude, but she believed she was courteous and did not receive any formal reprimand for the incident.
On January 8, 2013, another patient, FD, was reportedly told by South Lyon staff that no long-term beds were available, causing distress. Following advice from Whalen, FD's daughter sought clarity from the front office regarding bed availability.
The next day, Berryman called an urgent meeting with all therapists, interrupting ongoing therapy sessions. The Plaintiff's supervisor was absent, and no Integrity management was present. Berryman expressed her significant anger during this meeting.
Therapists were instructed to focus on providing therapy rather than advising patients on how to prolong their stay at the facility, with an emphasis that they did not have full knowledge of discharge decisions. Plaintiff raised concerns about whether patients were informed that long-term beds were unavailable. Berryman, in a heated exchange, denied any wrongdoing and asserted that they were not accepting long-term patients. During the meeting, Berryman admitted to advising a patient, FD, that she could remain, contradicting the Plaintiff's position. Berryman demanded that the Plaintiff align with the facility's direction, threatening that if she disagreed, she should seek employment elsewhere. Following the meeting, Berryman reported the incident to Milgrom, asserting her authority to manage issues in her facility and characterizing the Plaintiff's behavior as insubordinate, which resulted in her yelling at the Plaintiff. The day after the meeting, the Plaintiff was suspended with pay, and Milgrom communicated this decision to Berryman. Subsequently, letters from several staff members were collected, reflecting on the meeting, with mixed accounts of the Plaintiff's conduct and Berryman's anger. On January 14, 2013, another therapist reported that the Plaintiff expressed concerns about the treatment of residents and her intention to inform patients of their rights.
On January 17, 2013, Integrity's HR manager, Kaulbars, summoned the Plaintiff to a meeting at their Brighton, Michigan office, attended by Area Manager Rankin, Sturtevant, and Kaulbars. During the meeting, Rankin presented a termination memorandum to the Plaintiff, which she refused to sign. The memorandum, allegedly authored by Sturtevant, accused the Plaintiff of advising residents on discharge matters outside her expertise, citing a prior December 2012 incident where she was deemed unprofessional and rude. It stated that her behavior constituted insubordination and resulted in her immediate termination.
Sturtevant, the Plaintiff’s direct supervisor, claimed she was not involved in the investigation or termination decision, did not have issues with the Plaintiff, and considered her a good therapist. Although Sturtevant’s name appeared as the memorandum's author, she testified that she did not write it and was unaware of the termination prior to the meeting. She expressed regret over signing the memorandum, feeling pressured to do so to protect her job, and disagreed with its claims about the Plaintiff's conduct.
Subsequently, the Plaintiff filed a lawsuit against NexCare on October 7, 2013, alleging retaliation for raising compliance concerns. The court denied NexCare's motion to dismiss on October 4, 2014. The Plaintiff amended her complaint on April 21, 2015, raising two counts: retaliation under the False Claims Act and tortious interference. Defendants filed a motion for summary judgment on June 1, 2015, which led to oral arguments on December 15, 2015. The legal standard for summary judgment requires the absence of genuine issues of material fact, with evidence viewed in favor of the non-moving party.
The defendants, as moving parties, bear the initial burden of demonstrating a lack of evidence supporting the plaintiff's claims, as established in Selby v. Caruso and Celotex Corp. v. Catrett. If they meet this burden, the non-moving party must present specific facts indicating a genuine issue for trial, as per Ellington v. City of E. Cleveland and Moldowan v. City of Warren.
In the case concerning the False Claims Act (FCA) claim, the plaintiff alleges retaliation under 31 U.S.C. § 3730(h)(1). The defendants argue they are entitled to summary judgment on two grounds: they are not proper parties, and the plaintiff has not demonstrated a triable issue regarding retaliation. The court will evaluate these arguments sequentially.
The defendants assert that the plaintiff has named the wrong parties, claiming she can only sue her employer, Integrity Rehab Services, which is now defunct. The plaintiff counters that the defendants are properly included under the FCA's anti-retaliation provision. The court agrees with the plaintiff. The 2009 amendments to § 3730(h) expanded the scope to include "any employee, contractor, or agent," thereby broadening protections beyond traditional employment relationships. The purpose of these amendments was to include individuals such as independent contractors or those in non-traditional employment contexts.
In this case, both defendants are correctly named under § 3730(h)(1), as the plaintiff, a contractor providing services to South Lyon, falls within the protection offered by the statute. Therefore, South Lyon may be liable for any retaliatory actions against the plaintiff for her protected conduct.
NexCare is considered to have an "employment-like relationship" with Integrity employees, as it managed their 401(k) accounts and health benefits. The Plaintiff was subject to NexCare's rules and compliance program, and NexCare played a significant role in the actions leading to her dismissal. Specifically, NexCare's HR director addressed the Plaintiff's concerns about South Lyon's practices, and subsequent communications indicated NexCare's involvement in her suspension and termination decisions.
Additionally, the Plaintiff's common law theories suggest that NexCare and South Lyon acted as joint employers with Integrity, as defined by the ability to influence essential employment terms and conditions. The evidence indicates that South Lyon's manager had significant authority over the Plaintiff, including the ability to interrupt her work and threaten her employment, which contributed to her termination. Although some Defendants deny South Lyon's authority to fire the Plaintiff, the record suggests that the manager's actions were crucial in the termination process.
Moreover, there are factual questions regarding NexCare's role as a joint employer. Berryman, who was hired by NexCare and reported to its executive, acted within her authority to enforce NexCare's employment rules, further affirming the connection between NexCare and the Plaintiff's employment status. Overall, the record supports the assertion that both NexCare and South Lyon may be liable under federal and state anti-discrimination laws due to their joint employer status with Integrity.
NexCare was likely responsible for preventing South Lyon from retaliating against employees who raised legitimate compliance issues. A factual question exists regarding whether NexCare and Integrity were alter egos, as both companies shared common ownership, operated in the same location, and served similar clients despite offering different services. The plaintiff has raised sufficient evidence to suggest a prima facie case of retaliatory discharge, following the standards applicable to employment-related retaliation claims under the FCA. The plaintiff can establish retaliation through direct or circumstantial evidence. If direct evidence is presented, the employer must prove that termination would have occurred regardless of any discriminatory motive. If circumstantial evidence is used, the McDonnell Douglas framework applies, requiring the plaintiff to demonstrate that they engaged in a protected activity, the employer was aware of this activity, and that adverse actions were taken as a result. The defendants challenge these elements, arguing that the plaintiff did not engage in protected conduct based on claims of regulatory violations and a lack of good faith. However, the court previously determined that the nature of the conduct alleged by the plaintiff does not need to meet the standard for a prima facie FCA violation to qualify as protected conduct.
If Plaintiff's internal reporting of Defendant’s practices qualifies as protected activity under the False Claims Act (FCA), Plaintiff has established a valid claim for retaliation. The FCA protects employees from retaliation for efforts to address suspected violations, regardless of whether these suspicions are ultimately proven true. This interpretation is critical to safeguarding whistleblowers who may lack expertise in the FCA but report suspected misconduct. The Sixth Circuit has clarified that the FCA does not require that protected conduct must lead to a viable FCA action.
The evidence shows that Plaintiff aimed to prevent violations of the FCA by reporting concerns about South Lyon allegedly misinforming patients about the availability of long-term beds, particularly when patients’ payment sources shifted from Medicare Part A to less lucrative options. Plaintiff’s actions were grounded in good faith and a reasonable belief that fraud was occurring. Defendants' assertion that Plaintiff's beliefs were based on gossip is unsupported; the record reflects that Plaintiff received credible information from distressed colleagues and patients indicating that the practice was indeed occurring. Additionally, management acknowledged the goal of increasing short-term patients for financial gain, revealing a potential conflict with legal obligations. When Plaintiff initially raised her concerns, management took the issue seriously enough to address it directly with the implicated employees.
Plaintiff consulted with an elder law attorney and an ombudsman regarding the legality of Defendants' practices. On January 8, 2013, Plaintiff witnessed FD's daughter inform Whalen that her mother had been told no long-term beds were available, supporting a belief that Defendants misled patients about bed availability. In contrast to cited cases where plaintiffs lacked evidence, Plaintiff's concerns were based on multiple reports from co-workers, patients, and families. The concept of good faith, defined as honesty in belief or purpose, applies here, as Plaintiff had reasonable grounds for her belief.
Defendants were aware of Plaintiff's protected conduct, evidenced by her communications with Nex-Care, Integrity, and South Lyon employees regarding her concerns. Plaintiff argues that her termination was a result of this protected activity. Although Defendants refer to a "but for" causation standard, the relevant legal precedent in the Sixth Circuit requires only a causal connection between the protected activity and the adverse action. Other courts similarly reject a strict "but for" standard, emphasizing that retaliation can be motivated in part by protected activity. Defendants claim Plaintiff's termination was due to various reasons, including insubordination. However, Plaintiff was terminated shortly after raising concerns about bed availability in a meeting, suggesting a connection between her protected activity and her discharge.
Plaintiff has established a prima facie case that her termination was retaliatory, as her firing occurred shortly after her reporting of an alleged violation. Defendants claim legitimate reasons for the termination, citing Plaintiff’s actions outside the scope of her employment, alleged unprofessional behavior toward an admissions coordinator, and argumentative conduct during a meeting with Berryman. However, substantial evidence contradicts these claims.
Regarding the assertion that Plaintiff advised patients to remain at the facility, it was actually Whalen who made such comments, and Defendants failed to identify any specific instance where Plaintiff advised a patient to stay. Concerns raised about the availability of long-term beds were factual inquiries, not unprofessional conduct.
The incident with Green, claimed to be rude, was not formally reported at the time, and Plaintiff faced no disciplinary action for it. Additionally, there was no evidence from other therapists that she was argumentative during the meeting; instead, reports indicated she respectfully questioned Berryman’s statements.
Even if Defendants presented a legitimate business reason for the termination, Plaintiff has raised sufficient evidence to suggest that this reason may be a pretext for retaliation. She has questioned the factual basis of the reasons given, argued they were not the actual motivations for her firing, and demonstrated that they are insufficient to justify the adverse employment action taken against her.
Defendants' rationale for terminating Plaintiff is detailed in a termination memorandum, which raises doubts about its reliability as Plaintiff's supervisor, Barb Sturtevant, denies authoring it and claims she signed it under duress. Plaintiff contests the legitimacy of her termination grounds, alleging unprofessional behavior and inappropriate patient advisement, with no evidence supporting these claims during the relevant period surrounding her January 16, 2013 termination. Specifically, interactions involving a patient, FD, indicate Plaintiff was not involved, as the communication was between FD and another employee, Whalen. Additionally, the nature of Plaintiff's alleged rudeness towards another employee, Green, is disputed. Sturtevant characterized Plaintiff as a good staff therapist and had never disciplined her for unprofessional conduct during her management tenure. Sturtevant was unaware of the termination decision at the time it was communicated and disagreed with any characterization of Plaintiff's behavior as insubordinate. These factors lead to questions regarding the validity of Defendants' stated reasons for termination, resulting in the denial of their motion for summary judgment on Count I.
Regarding the tortious interference claim, which is presented as an alternative argument in case the involved companies are not deemed joint employers, Plaintiff must demonstrate four elements under Michigan law: existence of a valid business relationship or expectancy, defendant's knowledge of this relationship, intentional interference causing termination of the relationship, and resultant actual damage. Although Plaintiff had a valid economic expectancy with Integrity, she lacked such expectancy with South Lyon, where she was a contractor and could be reassigned by Integrity.
Plaintiff cannot maintain a tortious interference claim against South Lyon if she had a valid economic expectancy in her relationship with them, as South Lyon would not be considered a third party to that relationship. For a tortious interference claim, the defendant must be a third party. In this case, the Plaintiff only had a valid expectancy with Integrity. The second element of tortious interference requires the defendant to have knowledge of the relationship or expectancy. Evidence suggests that both South Lyon and NexCare were aware of Plaintiff's role as a therapist with Integrity.
The third element necessitates intentional interference that causes termination of the relationship or expectancy. Intentional interference must be more than purposeful behavior; it requires either a per se wrongful act or a lawful act done with malice, unjustified by law. Defendants' actions were not inherently wrongful, as terminating an employee for insubordination or unprofessionalism can be justified. To prove that a lawful act was done with malice, the Plaintiff must provide specific affirmative acts demonstrating improper motive.
The evidence does not indicate that NexCare's employees acted with malice or engaged in affirmative acts supporting such intent. However, there is a question of fact regarding whether Berryman acted with malice leading to Plaintiff's termination. The record indicates Berryman expressed significant anger toward Plaintiff during a meeting and threatened her job, which coincided with Plaintiff's subsequent suspension by Integrity.
Plaintiff has established a factual question regarding Berryman's actions, raising potential malice and lack of justification. She has provided evidence of damages resulting from her termination, including difficulty in finding work, lost wages, and harm to her professional reputation. The court granted summary judgment in favor of NexCare but denied it for South Lyon regarding Count II. Defendants also sought to limit Plaintiff's lost wages, arguing she failed to mitigate her damages; however, the court ruled that the reasonableness of her job-seeking efforts is a matter for the jury, denying this request. Summary judgment for Count I was denied entirely. The document mentions the complex relationships among the parties involved, highlighting issues of authority and insubordination. Sturtevant's claims of insubordination against Plaintiff are questionable due to her employment status and Berryman's purported lack of disciplinary authority over her. The court noted the high standard for proving malice in tortious interference differs from establishing a joint employment relationship with NexCare.
