United States of America ex rel. et al v. ERMI, LLC et al
Filing
79
OPTION AND ORDER granting in part and denying in part 69 Motion to Dismiss for Failure to State a Claim. Signed by Judge Thomas W. Thrash, Jr. on 11/02/2023. (jkb)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
UNITED STATES OF AMERICA ex
rel.
ELIZABETH A. COOLEY,
Plaintiff,
v.
CIVIL ACTION FILE
NO. 1:20-CV-4181-TWT
ERMI, LLC f/k/a ERMI, INC., et al.,
Defendants.
OPINION AND ORDER
This is an action brought under the False Claims Act. It is before the
Court on Relator Elizabeth Cooley’s Motion to Dismiss [Doc. 69] the Defendant
ERMI, LLC’s counterclaims. For the following reasons, the Relator Elizabeth
Cooley’s Motion to Dismiss [Doc. 69] is GRANTED in part and DENIED in
part.
I.
Background 1
This case involves alleged fraudulent claims for reimbursement for
durable medical equipment. The Defendant ERMI manufactures and leases
equipment that assists orthopedic patients with regaining their range of
motion. (Countercls. ¶ 2). The Relator Cooley worked for ERMI as its Chief
Compliance Officer from November 2018 until October 2019. (Id. ¶ 5). Based
The Court accepts the facts as alleged in the Complaint as true for
purposes of the present Motion to Dismiss. Wildling v. DNC Servs. Corp., 941
F.3d 1116, 1122 (11th Cir. 2019).
1
on allegedly fraudulent actions that ERMI engaged in while she was an officer,
Cooley filed the present qui tam action under the False Claims Act. (See
generally Third Am. Compl.). After the Court’s most recent Order on the
Defendants’ Motion to Dismiss, there are three claims remaining. United
States ex rel. Cooley v. ERMI, LLC, 2023 WL 3587543, at *8 (N.D. Ga. May 22,
2023). The first two allege that ERMI engaged in unlicensed and fraudulent
activity in Florida that constituted making or using false records and
statements material to false claims. (Third Am. Compl. ¶¶ 442-85) The third
count maintains that ERMI retaliated against Cooley because of her efforts to
bring ERMI into compliance with the law and because she threatened to bring
a whistleblower suit against ERMI if it did not let her do her job. (Id. 486-92).
The Court’s previous orders in this case spell out in more detail the Relator’s
allegations. See, e.g., United States ex rel. Cooley v. ERMI, LLC, 2023 WL
3587543 (N.D. Ga. May 22, 2023); United States ex rel. Cooley v. ERMI, LLC,
2022 WL 4715679 (N.D. Ga. Sept. 30, 2022); United States ex rel. Cooley v.
ERMI, LLC, 2022 WL 1185155 (N.D. Ga. Apr. 21, 2022).
In response to these claims, the Defendants ERMI and End Range of
Motion Improvement, Inc. filed an answer, and ERMI filed counterclaims
against Cooley. (Answer at 1; Countercls. ¶ 1). 2 ERMI’s counterclaims allege
one count of breach of fiduciary duty, one count of negligence per se, and one
The Answer and Counterclaims are part of the same document [Doc.
68], but the paragraphs of each are separately counted.
2
2
count of breach of contract in addition to a claim for litigation expenses.
(Countercls. ¶¶ 27-52). The breach of fiduciary duty count alleges that Cooley
owed ERMI a fiduciary duty as a corporate officer and breached that duty in
several ways. (Id. ¶¶ 28, 31-33). First, she allegedly provided legal analysis and
interpretation and led ERMI to believe it was receiving legal advice. (Id. ¶ 31).
Second, ERMI contends that Cooley falsely suggested to ERMI that the
renewal process for Florida’s Agency for Health Care Administration (AHCA)
was going smoothly, that she was working with outside counsel who would
submit the renewal to AHCA, and that ERMI was going to receive its license
renewal quickly. (Id. ¶ 32). Finally, ERMI alleges that Cooley breached her
fiduciary duty by preparing to become and becoming a qui tam relator in the
present action, “including by negligently or intentionally creating the very
licensure situation that she now seeks to capitalize upon as a whistleblower.”
(Id. ¶ 33).
Regarding the negligence per se claim, ERMI asserts that Cooley
practiced law in violation of O.C.G.A. § 15-19-51. (Id. ¶ 37-39). Despite not
having a license to practice law, Cooley is alleged to have “repeatedly provided
ERMI with legal opinions and advice as to numerous matters including legal
matters relating to: (a) regulatory compliance; (b) corporate formation and
conversion; (c) litigation strategy; (d) intellectual property due diligence; and
(e) other similar matters.” (Id. ¶ 14).
3
Lastly, ERMI claims that Cooley breached a confidentiality agreement
that she had signed stating that she would immediately deliver all ERMI
property in her possession or control upon termination of her employment. (Id.
¶ 43-44). ERMI alleges that Cooley breached this agreement by failing to
return confidential information upon her termination and by disclosing
confidential information to others, including by attaching such information as
exhibits in her Third Amended Complaint. (Id. ¶ 44-45). Cooley has filed a
Motion to Dismiss stating all of these counterclaims should be dismissed either
on public policy grounds or for failure to state a claim upon which relief may
be granted. (See generally Pl.’s Br. in Supp. of Mot. to Dismiss).
II.
Legal Standard
A complaint should be dismissed under Rule 12(b)(6) only where it
appears that the facts alleged fail to state a “plausible” claim for relief. Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009); Fed. R. Civ. P. 12(b)(6). A complaint may
survive a motion to dismiss for failure to state a claim, however, even if it is
“improbable” that a plaintiff would be able to prove those facts; even if the
possibility of recovery is extremely “remote and unlikely.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 556 (2007). In ruling on a motion to dismiss, the court
must accept the facts pleaded in the complaint as true and construe them in
the light most favorable to the plaintiff. See Quality Foods de Centro Am., S.A.
v. Latin Amwi. Agribusiness Dev. Corp., S.A., 711 F.2d 989, 994-95 (11th Cir.
1983); see also Sanjuan v. American Bd. of Psychiatry & Neurology, Inc., 40
4
F.3d 247, 251 (7th Cir. 1994) (noting that at the pleading stage, the plaintiff
“receives the benefit of imagination”). Generally, notice pleading is all that is
required for a valid complaint. See Lombard’s, Inc. v. Prince Mfg., Inc., 753
F.2d 974, 975 (11th Cir. 1985). Under notice pleading, the plaintiff need only
give the defendant fair notice of the plaintiff’s claim and the grounds upon
which it rests. See Erickson v. Pardus, 551 U.S. 89, 93 (2007) (citing Twombly,
550 U.S. at 555).
III.
Discussion
Cooley argues that ERMI’s counterclaim for breach of fiduciary duty is
void as a matter of public policy and that ERMI failed to state a claim. (Pl.’s
Br. in Supp. of Mot. to Dismiss, at 4-6). She further contends that ERMI has
failed to state a claim for its negligence per se counterclaim. (Id. at 6-8). Lastly,
she asserts that ERMI’s breach of contract claim is void as a matter of public
policy. (Id. 8-10). The Court considers each of these arguments in turn.
A. Breach of Fiduciary Duty
Cooley maintains that public policy prohibits ERMI’s breach of fiduciary
duty claim from proceeding because permitting such a counterclaim would
discourage whistleblowers from coming forward and thereby undermine the
FCA. (Id. at 4-6). Several cases have held that at least some counterclaims are
barred by the FCA under this public policy rationale. See, e.g., Mortgs., Inc. v.
U.S. Dist. Court for Dist. Of Nev. (Las Vegas), 934 F.2d 209 (9th Cir. 1990);
United States ex rel. Vainer v. DaVita, Inc., 2013 WL 1342431, at *4 (N.D. Ga.
5
Feb. 13, 2013); United States ex rel. Rodriquez v. Wkly. Publ’ns, 74 F. Supp.
763 (S.D.N.Y. 1947). ERMI belittles this public policy rule as “judge-invented”
and points to the fact that the Eleventh Circuit has not actually decided this
issue. (Def.’s Br. in Opp’n to Mot. to Dismiss, at 5-6).
While ERMI is correct that the Eleventh Circuit’s reference to this rule
was mere dicta, Israel Discount Bank Ltd. v. Entin, 951 F.2d 311, 315 n. 9
(11th Cir. 1992), “[t]he unavailability of contribution and indemnification for a
defendant under the False Claims Act now seems beyond peradventure.”
United States ex rel. Miller v. Bill Harbert Intern. Const. Inc., 505 F. Supp. 2d
20, 26 (D.D.C. 2007) (compiling cases) (“Miller”). Moreover, “there can be no
right to assert state law counterclaims that, if prevailed on, would end in the
same result” as an indemnification or contribution counterclaim. Mortgs., Inc.,
934 F.2d at 214. On the other hand, a qui tam defendant can bring
counterclaims if they are based on “independent damages.” United States ex
rel. Head v. Kane Co., 668 F. Supp. 2d 146, 153 (D.D.C. 2009) (“Head”). In fact,
it would violate procedural due process to dismiss a defendant’s compulsory
counterclaim based on independent damages. United States ex rel. Madden v.
Gen. Dynamics Corp., 4 F.3d 827, 830-31 (9th Cir. 1993). There are two types
of counterclaims that are based on independent damages: (1) counterclaims in
which “the conduct at issue is distinct from the conduct underlying the FCA
case” and (2) counterclaims in which “the defendant's claim, though bound up
in the facts of the FCA case, can only prevail if the defendant is found not liable
6
in the FCA case.” Head, 668 F. Supp. 2d at 153 (citation omitted). While
nothing in the breach of fiduciary duty counterclaim limits its success to a
finding of nonliability for Cooley’s FCA claim, the Court finds that ERMI’s
claim falls, at least in part, in the first category.
A counterclaim will fall under the first category “if none of the elements
of [the counterclaim’s] caus[e] of action implicate Defendant's liability under
the FCA.” Id. at 154. For example, a counterclaim asserting a breach of a
non-disparagement provision was allowed to proceed because liability for that
counterclaim depended on whether the relator “made disparaging or critical
statements to third parties in violation of his contractual obligations after this
suit was filed and completely apart from this proceeding.” Id. at 153. By
contrast, the same court dismissed a claim for contractual indemnification
even assuming there had been willful misconduct and a breach of contract
because it was attempting to shift liability for the FCA violations to the relator.
Id. at 154.
ERMI’s claim for breach of fiduciary duty relies on three alleged
wrongful acts: (1) leading ERMI to believe that it was receiving legal advice
from her, (2) relaying incorrect information about how the AHCA renewal
process was going, and (3) becoming a relator in this action regarding the
AHCA licensure. (Countercls. ¶¶ 31-33). Going in reverse order, the third
allegation expressly relies on Cooley bringing this lawsuit as a relator and is
therefore not distinct from Cooley’s claims. The second allegation does the
7
same, albeit in a more subtle way. The FCA claims remaining in Cooley’s Third
Amended Complaint deal mostly with ERMI’s activity in Florida either
without a license issued by AHCA or based on a license obtained because of
intentional misrepresentations made on AHCA license applications. (Third
Am. Compl. ¶¶ 442-92). Claiming that Cooley should have to pay ERMI
because her actions caused this problem and cost ERMI money is nothing more
than a dressed-up (but still barred) claim for contribution or indemnification.
This leaves the allegation that Cooley was misleading ERMI into
thinking she was providing legal advice. By contrast to the other allegations,
this involves conduct that is entirely separate from Cooley’s FCA claim. ERMI
alleges that Cooley was “continually providing interpretation and analysis of
laws and regulations.” (Countercls. ¶ 31). The legal advice Cooley “repeatedly
provided ERMI” is alleged to include “(a) regulatory compliance; (b) corporate
formation and conversion; (c) litigation strategy; (e) intellectual property due
diligence; and (f) other similar matters.” (Id. ¶ 14). This qualifies as an
independent ground for damages. Whether Cooley breached her fiduciary duty
by improperly giving legal advice on issues such as corporate formation is not
going to stand or fall based on the result of Cooley’s FCA claims. As such, the
breach of fiduciary duty counterclaim is not void for public policy reasons. 3
If the allegations that ERMI makes are sufficient to state a claim as a
whole, “[t]he fact that some of [its] allegations may not contribute to” a breach
of fiduciary duty “does not doom an otherwise sufficiently pled claim.” Larkin
Cmty. Hosp. v. Intuitive Surgical Inc., 2022 WL 18544, at *1 (N.D. Cal. Jan. 3,
8
3
Yet, Cooley also argues that ERMI has failed to allege facts showing how
it was harmed. (Reply Br. in Supp. of Mot. to Dismiss, at 5-6). In its
counterclaims, ERMI alleges that “[a]s a direct and proximate result of
Cooley’s breaches of her fiduciary duty to ERMI, ERMI was harmed” and “is
entitled to an award of compensatory damages in an amount to be proven at
trial.” (Countercls. ¶¶ 34-35). Relying on Desai v. Tire Kingdom, Inc., 944 F.
Supp. 876 (M.D. Fla. 1996), ERMI asserts that it is not required to “spel[l] out
the exact damages it contends it is entitled to.” (Def.’s Br. in Opp’n to Mot. to
Dismiss, at 9). While ERMI is correct that it need not comply with the
heightened pleading requirements of Rule 9(b), “an allegation that defendant
‘suffered damages’ without particular facts as to how she was damaged does
not satisfy Twombly and Iqbal.” Int’l Bus. Machs. Corp. v. Dale, 2011 WL
4012399, at *2 (S.D.N.Y. Sept. 9, 2011) (citation omitted). ERMI only provides
specific facts showing damages related to the failure to renew the AHCA
license. However, for the reasons described above, that amounts to a claim for
contribution or indemnification and cannot proceed.
Additionally, ERMI’s reliance on Desai is misplaced. That case involved
an Americans with Disabilities Act claim and a similar state law claim; both
of which required the plaintiff to show that his injury substantially limited his
ability to, e.g., walk, work, or perform manual tasks. Desai, 944 F. Supp. at
2022). This is because “a court dismisses claims, not allegations.” Surgical Inst.
Serv. Co., Inc. v. Intuitive Surgical, Inc., 571 F. Supp. 3d 1133 (N.D. Cal. 2021).
9
879. The court there rejected a challenge that the plaintiff failed to state a
claim by not specifically alleging his knee injury impaired his abilities to do
those tasks. Id. The court found that such an allegation could be inferred from
other specific facts the plaintiff alleged, such as being told his injury was
permanent, needing to reduce his working hours, being forced to give up tennis
and jogging, and experiencing great pain and being unable to bend his leg after
a twelve-hour shift. Id. By contrast, the Court cannot infer any independent
damages from ERMI’s specific allegations. As a result, ERMI has failed to
properly state its breach of fiduciary duty counterclaim. The Court will dismiss
this count without prejudice to provide ERMI with the opportunity to restate
its allegations.
B. Negligence Per Se
ERMI has alleged that Cooley is liable under a negligence per se theory
based on her engaging in the unauthorized practice of law in violation of
O.C.G.A. § 15-19-51. (Countercls. ¶¶ 36-41). Cooley challenges this
counterclaim by arguing that ERMI has failed to state a negligence per se
claim. (Pl.’s Br. in Supp. of Mot. to Dismiss, at 6). More specifically, she argues
that ERMI has neither alleged a violation of O.C.G.A. § 15-19-51 nor a causal
connection between any violation and the alleged harm. (Id., at 6-8). The Court
finds that ERMI has stated a violation of the statute but has failed to
sufficiently allege causation.
10
Georgia law deems it unlawful for a person not licensed to practice law
to, inter alia, “hold himself out to the public or otherwise to any person as being
entitled to practice law; [t]o render or furnish legal services or advice;…[or] [t]o
assume or use or advertise the title of ‘lawyer,’ ‘attorney,’ ‘attorney at law,’ or
equivalent terms in any language in such manner as to convey the impression
that he is entitled to practice law or is entitled to furnish legal advice, services,
or counsel.” O.C.G.A. § 15-19-51. To support its counterclaim, ERMI has
alleged that Cooley was “continually providing interpretation and analysis of
laws and regulations, leading ERMI and its employees to believe that they
were receiving legal advice from Cooley.” (Countercls. ¶ 39). Namely, “Cooley
repeatedly provided ERMI with legal opinions and advice as to numerous
matters including legal matters relating to: (a) regulatory compliance;
corporate formation and conversion; (c) litigation strategy; (d) intellectual
property due diligence; and (f) other similar matters.” (Id. ¶ 14). Furthermore,
this all occurred after Cooley had “touted her law degree as part of her
credentials” when she applied for the job. (Id. ¶ 6). Her resume not only lists
that she has a law degree and a specialization in health law, but it also states
that she had “[t]wo years of experience as a compliance and claims attorney
with a third party [litigation] and [i]nvestigation [c]ompany.” (Id. ¶ 7, Ex. F).
It further states that she had “[t]hree years of experience in a boutique law
firm providing life cycle solutions to healthcare clients from corporate
formation, contracting, business association agreements, compliance program
11
structuring, HIPAA and other compliance training, negotiations, litigation,
and professional defense.” (Id.). These allegations state a plausible violation of
O.C.G.A. § 15-19-51 by alleging that Cooley furnished legal advice and held
herself out as authorized to practice law, including through use of the word
“attorney.”
Cooley’s arguments to the contrary are not persuasive. First, she relies
on cases from other jurisdictions to argue that “generalized advice to the
public” and “general information about the law” do not fall within the definition
of the practice of law. (Pl.’s Br. in Supp. of Mot. to Dismiss, at 7) (quoting
Upsolve, Inc. v. James, 604 F. Supp. 3d 97, 105 (S.D.N.Y. 2022) and State v.
Yishmael, 195 Wash. 2d 155, 169 (2020)). However, even assuming that that
case law can be reliably applied to the Georgia statute, ERMI did not allege
that Cooley spoke about the law generally or to the public. Rather, it alleges
that Cooley “provided ERMI with legal opinions and advice.” (Countercls.
¶ 14).
This brings us to the next issue that Cooley raises, namely that ERMI’s
allegations are not specific enough to assert a plausible claim. In support of
this argument, Cooley quotes Head, 146 F. Supp. 2d at 155, stating that
counterclaims based on statements made by the relator “at some unspecified
point in time to unspecified third-parties” do not nudge a counterclaim “across
the line ‘from conceivable to plausible.’” (Pl.’s Br. in Supp. of Mot. to Dismiss,
at 8). However, in this case, the statements were not made to “unspecified third
12
parties;” they were made to ERMI itself. (Countercls. ¶ 14). Accordingly, unlike
the defendant in Head, 146 F. Supp. 2d at 155-56, who did “not claim to have
knowledge of any evidence of such statements having been made,” ERMI has
direct knowledge of what Cooley said to it during her employment with ERMI.
Moreover, ERMI is not required to plead with particularity the statements that
Cooley made because this counterclaim does not fall under Rule 9(b)’s
heightened pleading standard.
Finally, Cooley asserts that she never assumed the title of attorney
while she was employed by ERMI and did not list on her resume that she was
a member of a state bar. (Pl.’s Br. in Supp. of Mot. to Dismiss, at 7-8). These
may ultimately provide a basis for finding that Cooley did not engage in the
unauthorized practice of law, but at this stage in the proceeding, the Court
must accept ERMI’s allegations as true and view the facts in the light most
favorable to ERMI. Doing so, the fact that Cooley’s resume states that she has
“[t]wo years of experience as a compliance and claims attorney” and “[t]hree
years of experience in a boutique law firm” along with the fact that she has a
law degree that she “touted…as part of her credentials” are sufficient to make
a plausible claim that she held herself out as a licensed attorney (Countercls.
¶ 6, Ex. F). All in all, ERMI’s allegations are sufficient to put Cooley on notice
as to her alleged violation of O.C.G.A. § 15-19-51.
Notwithstanding that, ERMI fails to sufficiently state how that alleged
violation caused it injury. ERMI generally alleges that “[a]s a direct and
13
proximate result of Cooley’s violations of O.C.G.A. § 15-19-51, ERMI was
harmed.” (Countercls. ¶ 40). This alone is nothing more than a “formulaic
recitation” of an element. Iqbal, 556 U.S. at 678 (citation omitted). The only
specific example of injury allegedly caused by this violation is the delay
associated with receiving the ACHA license renewal. (Countercls. ¶¶ 16-19,
32). ERMI maintains that Cooley “dropped the ball in failing to obtain the
license, misled ERMI about the status of the renewal along the way, and
caused ERMI significant delay and expense in the process.” (Def.’s Br. in Opp’n
to Mot. to Dismiss, at 23). ERMI’s allegations state, at most, that Cooley
engaged in the unauthorized practice of law, performed her role as Chief
Compliance Officer incompetently, and caused ERMI injury. “However, even
that argument does not explain how the violation of the statute caused the
harm.” Turner v. Moody Bible Inst. of Chicago, Inc., 2016 WL 7839105, at *10
(N.D. Ga. March 9, 2016) (emphasis in original).
ERMI fails to describe in its counterclaims or in its briefs how her
alleged dropping the ball on the license or misleading ERMI about the
application’s status has any relation to her alleged violation of O.C.G.A.
§ 15-19-51. The ACHA license application does not require a licensed attorney
to sign it; a duly authorized officer of the company will suffice. (Reply Br. in
Supp. of Mot. to Dismiss, at 15). Thus, the Court cannot infer that Cooley’s role
overseeing the license renewal, in and of itself, involved the unauthorized
practice of law. Similarly unavailing is the allegation that “Cooley falsely
14
suggested that the renewal process was going smoothly, that she was working
with outside counsel at King & Spalding who would submit the renewal to
AHCA, and that ERMI should get the renewal of the license in short order.”
(Countercls. ¶ 17). Neither Cooley saying she was working with King &
Spalding nor her indication that the application was going well and about to
be approved involve “applying legal principles and judgment.” In re UPL Adv.
Op. 2003-1, 280 Ga. 121, 121 (2005). The same can be said about the fact that
“a proper renewal application was never submitted to AHCA during this time
period by King & Spalding or by Cooley.” (Countercls. ¶ 18). Simply put, Cooley
allegedly portraying herself as a licensed attorney does not convert every act
of incompetence into a negligence per se claim.
Since ERMI fails to state how the alleged harm of delays and associated
expenses is connected to Cooley’s alleged unauthorized practice of law, this
counterclaim must be dismissed. 4 The Court will dismiss the counterclaim
without prejudice to allow ERMI a chance to restate it with a proper allegation
of causation.
Furthermore, to the extent that ERMI is only seeking damages
associated with the failure to get a proper AHCA license, it is possible that this
counterclaim would also be void as a matter of public policy. However, because
Cooley did not raise a public policy defense with respect to the negligence per
se count, the Court does not reach this issue.
15
4
C. Breach of Contract
Cooley claims that allowing ERMI’s breach of contract claim regarding
the confidentiality agreement she signed violates public policy and that the
claim should consequently be dismissed. (Pl.’s Br. in Supp. of Mot. to Dismiss,
at 8-10). First, she argues that the statutory requirement to serve to the
government in writing “substantially all material evidence and information
the person possesses” bars this counterclaim. (Id., at 9) (quoting 31 U.S.C.
§ 3730(b)(2)). She further argues that the purpose of the FCA would be
undermined by permitting this type of counterclaim to move forward,
especially given Rule 9(b)’s heightened pleading requirement. (Id., at 10).
As a general matter, “[i]n the absence of an expression of Congressional
intent to the contrary, a private agreement is unenforceable on grounds of
public policy if its enforcement is clearly outweighed by a public policy against
such terms.” Head, 668 F. Supp. 2d at 152. While there appears to be no
binding precedent on this specific issue, there are several cases that provide
guidance as to when a counterclaim for breach of a confidentiality agreement
may be raised against a relator in an FCA case. When an FCA defendant’s
breach of confidentiality agreement counterclaim only involves the failure to
return evidence that is material to the relator’s FCA claim, that counterclaim
is prohibited by public policy. Id.; United States ex rel. Grandeau v. Cancer
Treatment Ctrs. of America, 350 F. Supp. 2d 765, 773 (N.D. Ill. 2004) (agreeing
that a “confidentiality agreement cannot trump the FCA’s strong policy of
16
protecting whistleblowers who report fraud against the government.”). If,
however, the relator goes beyond what is reasonable to pursue their qui tam
claim in maintaining and disclosing such information, that will constitute a
permissible counterclaim. United States ex rel. Ruscher v. Omnicare, Inc.,
2015 WL 4389589, at *5 (S.D. Tex. July 15, 2015); Walsh v. Amerisource
Bergen Corp., 2014 WL 2738215, at *7 (E.D. Pa. June 17, 2014); see also
Cafasso ex rel. United States v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047,
1062 (9th Cir. 2011) (stating that if a public policy exception exists in these
circumstances, “those asserting its protection would need to justify why
removal of the documents was reasonably necessary to pursue an FCA claim”).
This dichotomy makes sense in light of the case law discussed supra, in
subsection A., regarding independent damages. If a counterclaim for breach of
a confidentiality agreement is challenging the retention or dissemination of
information unrelated to the FCA case, then it will in no way resemble a
disguised claim for indemnification or contribution. Furthermore, permitting
a counterclaim for retention and dissemination of documents not reasonably
related to the FCA claims will not leave whistleblowers unprotected.
Information unrelated to the relator’s FCA claims will not be needed to comply
with 31 U.S.C. § 3730(b)(2) or to meet the Rule 9(b) pleading standards.
Additionally, since a counterclaim cannot be raised involving the retention of
anything reasonably related to the FCA action, innocent relators will not be
punished. Cf. Miller, 505 F. Supp. 2d at 28.
17
Here, ERMI has alleged that Cooley retained, disclosed, and failed to
return confidential information in violation of a confidentiality agreement she
signed. (Countercls. ¶¶ 44-45). To the extent that these allegations are related
to Cooley’s FCA claims, ERMI will not be able to recover. However, the
allegations are not explicitly limited to Cooley’s preparation for and pursuit of
her FCA claims. (Id. ¶¶ 42-46). Additionally, ERMI does not have the burden
to specifically name which non-FCA-related documents the relator wrongfully
retained or disclosed. Siebert v. Gene Sec. Network, Inc., 2013 WL 5645309, at
*8 (N.D. Cal. Oct. 16, 2013). “Because it is too early for the Court to” determine
whether the documents Cooley has retained are reasonably necessary to her
FCA claims, “it cannot conclude that the counterclaim in its entirety should be
dismissed on public policy grounds.” United States ex rel. Notorfransesco v.
Surgical Monitoring Assoc., Inc., 2014 WL 7008561, at *5 (E.D. Pa. Dec. 12,
2014). The Court will thus deny Cooley’s Motion to Dismiss with respect to the
breach of contract claim.
IV.
Conclusion
For the forgoing reasons, Relator Elizabeth Cooley’s Motion to Dismiss
[Doc. 69] is GRANTED in part and DENIED in part.
SO ORDERED, this
2nd
day of November, 2023.
___________________________ __
THOMAS W. THRASH, JR.
United States District Judge
18
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