Defendants in False Claims Act wrongful termination suit not entitled to stay during criminal investigation, Colo. magistrate rules

by bvernia | December 2nd, 2009

D.Colo. Magistrate Judge Kathleen Tafoya issued an opinion on November 25th denying a motion to stay in a civil False Claims Act case where the defendant was also involved in a criminal proceeding.

The plaintiff, a former office manager for the defendants, an individual doctor and a medical practice, filed suit claiming defendants wrongfully terminated her, in violation the False Claims Act’s whistleblower protection provision 31 USC § 3730(h), after she had investigated and reported alleged Medicare billing fraud to the Department of Health and Human Services (“DHHS”). While this civil claim was pending, federal agents from the Drug Enforcement Administration and the Internal Revenue Service began a criminal investigation into the defendant’s distribution of prescription drugs.

Defendants filed a motion for a stay or protective order under F.R.C.P. 26(c), claiming that allowing the case to proceed would result in their being forced to choose between their Fifth Amendment rights and being able to adequately defend themselves by testifying in the civil litigation. Alternatively, the defendants requested that discovery be postponed because the federal agents had seized a “large and significant portion” of the defendants’ documents for the investigation.

The court noted that only “extreme circumstances” warranted a stay in proceedings and that these circumstances were not present in this case. The civil FCA case was not focusing on whether the defendants actually committed Medicare fraud, but rather on whether they had wrongfully terminated an employee who reported the alleged fraud. Furthermore, there was not yet an indictment in the criminal case, which lessened the risk of self-incrimination. Finally, because the plaintiff’s case was for money damages that she may not be able to recover if the criminal investigation resulted in the defendants’ closure of the medical practice, prejudice to the plaintiff resulting from a stay could be significant. Due to these factors, the court denied the defendants’ motions.

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