April 4, 2017 - Posts

FAIL: Company Unsuccessfully Attempts to Use Confidentiality Agreement Against Whistleblower

Companies that commit fraud are deathly afraid of two things: their own paper trail and their employees who might take that paper trail and report them to the government. To thwart or otherwise intimidate whistleblowers, companies might try to enforce so called confidentiality agreements. In United States ex rel. Cieszyski v. LifeWatch Services, Case No. 13cv4052 (N.D. Ill.), the court saw through this tactic and threw out claims made by the company that the whistleblower violated a confidentiality agreement by taking documents and then using those documents to build a whistleblower case. While the court recognized the company’s confidential information deserved protection to some degree, ultimately it concluded that the whistleblower’s right to remove the so-called “confidential” information to support his case was justified.

Privacy policies do not apply to documents used solely for exposing fraud

The court determined that the whistleblower’s actions did not justify punishment because he took the documents solely pursuant to the False Claims Act (“FCA”) in order to build his case.  The company did not even argue that the whistleblower had taken the information for any reason other than building his FCA case (also known as a qui tam). Nor did the company allege it had suffered any damages other than the fees and cost associated with pursuing its unfounded claim – a “self-inflicted wound” in the court’s language.  A whistleblower may take documents if he or she intends to use them to build an FCA case.  However, if the intention is to remove the documents in order to share them with a competitor, for example, then the company may very well have a legitimate claim that a confidentiality agreement has been breached.  In this case, the whistleblower disclosed documents only to his attorney and the government with the sole intention of filing a qui tam and exposing the company’s fraud which the court ruled was entirely justified.

The retention and disclosure did not go beyond what was necessary to expose fraud

The court also rejected the company’s argument that the whistleblower had collected and shared more information than was needed to support his allegations of fraud. The court held it was unrealistic to impose the burden of knowing precisely how much information to provide the government on a whistleblower when reporting a claim of fraud. The company provided no ulterior motive to the whistleblower other than exposing its fraud to the government.  As a result, the whistleblower’s legal right to be free from retaliation overwhelmed the company’s interest in having its so called “confidential information” protected.

As lawyers who represent whistleblowers, we are encouraged by this court’s decision to protect whistleblowers who report fraud against the government from retaliation. To learn more about our Whistleblower and Qui Tam practice group, click here. We are always available to answer your questions on a confidential basis.