Court Dismisses Counterclaim Against FCA Whistleblower for Disclosing Confidential Information

On May 9, in United States ex rel. Cieszynski v. LifeWatch Servs., the U.S. District Court for the Northern District of Illinois dismissed the defendant health care company’s counterclaim against a former employee, ruling that Matthew Cieszynski’s disclosure of protected patient information fell within the public policy protections for whistleblowers.  In the underlying False Claims Act (FCA) suit, Cieszynski alleged that LifeWatch violated the FCA by submitting claims for reimbursement for heart monitoring services that it knew violated Medicare regulations because LifeWatch was allegedly sending some of the heart monitoring work offshore to technicians based in India.

In its counterclaim, LifeWatch argued that Cieszynski violated his confidentiality agreement, as well as the LifeWatch privacy policy, when he took and disclosed a spreadsheet containing information protected by the Health Insurance Portability and Accountability Act.  To support its argument that the disclosure was not entitled to whistleblower protections, LifeWatch cited United States ex rel. Wildhirt v. AARS Forever, Inc., 2013 WL 5304092 (N.D. Ill. September 19, 2013), in which the court allowed a counterclaim to proceed against an FCA whistleblower for disclosure of the defendant's confidential information.

But in Cieszynski, the court rejected LifeWatch’s argument holding that: (1) The disclosure fell within public policy protections for whistleblowers because the disclosure didn’t go beyond what was necessary for Cieszynski to support his FCA claims—unlike in Wildhirt where the whistleblowers took HIPAA-protected documents home with them “haphazardly and for no particular purpose,” and (2) although Cieszynski disclosed more PHI than necessary as his disclosure included privately insured patient information, it is “unrealistic” for a whistleblower to bear the burden of knowing precisely how much information the government needs to uncover false claims.

In recent years, there has been increase in FCA defendants raising counterclaims based on breaches of confidentiality agreements.  Such counterclaims have forced courts to grapple with competing policy interests, and the law is unsettled regarding what documents a whistleblower can take in support of FCA allegations and what a whistleblower can do with those documents.  Indeed, in reaching his decision in Cieszynski, U.S. Magistrate Judge Sidney I. Schenkier acknowledged that courts must “balance the need to protect whistleblowers and prevent chilling their attempts to uncover fraud against the government against an employer’s legitimate expectations that its confidential information will be protected.”  (A recent article by C&M attorneys, available here, discusses the tension that companies face when drafting confidentiality agreements.)  For defense counsel, the distinction between Wildhirt and Cieszynski makes apparent that they must attack the nexus between the confidential documents and the false claim allegations rather than reflexively launching breach of confidentiality counterclaims.  Still, until courts more fully define the contours of the public policy exception for “self-help” discovery—in which a whistleblower takes documents they believe relevant to their claims—counterclaims for breach of confidentiality agreements will remain an area of active litigation.