USA et al v. Community Health Systems, Inc. et al

Filing 101

ORDER DENYING 77 Motion to Dismiss for Failure to State a Claim and DENYING 89 Motion to Dismiss for Failure to State a Claim. Plaintiff Brian Carnithan has thirty days -- until January 19, 2016 -- to show cause why his common law retaliatory discharge claim (Count 3) should not be dismissed with prejudice. Signed by Judge Nancy J. Rosenstengel on 12/18/15. (klh2)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
BRYAN CARNITHAN,

)
)
Plaintiff,
)
)
vs.
)
)
COMMUNITY HEALTH SYSTEMS, INC., )
)
MARION HOSPITAL CORPORATION,
)
and
)
COMMUNITY HEALTH SYSTEMS
)
PROFESSIONAL SERVICE
)
CORPORATION,
)
Defendants.
)
)

Case No. 11-CV-312-NJR-DGW

MEMORANDUM AND ORDER
ROSENSTENGEL, District Judge:
Defendant Community Health Systems, Inc. (“CHS Inc.”) owns over one hundred
subsidiary companies that in turn own and operate hospitals around the country. All of the
hospitals are managed and operated by another subsidiary company, Community Health
Systems Professional Services Corp. (“CHSPSC”). The hospital at the heart of this matter is
Heartland Regional Medical Center in Marion, Illinois, which is owned by CHS Inc.’s subsidiary
company, Marion Hospital Corp. (“MHC”).
Plaintiff Bryan Carnithan previously worked at Heartland as the EMS coordinator in the
emergency department. In that position, he became aware of the hospital’s practice of

admitting all Medicare and Medicaid recipients who came to the emergency room
regardless of whether it was reasonable or necessary. Carnithan was concerned that the
admission practice was fraudulent, and he took his concerns to the CEO of the hospital.
Following that conversation, Carnithan was moved into a much smaller office, and he

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believed that he was ultimately going to be terminated based on the actions and comments
of others. In order to avoid having a termination on his employment record, Carnithan
resigned from his position in September 2006.
In April 2011, Carnithan filed this lawsuit under seal on behalf of the United States and
fourteen states alleging that Heartland, and over one hundred other hospitals affiliated with
CHS Inc., submitted false claims or statements to the federal Medicare program and various state
Medicaid programs (“the qui tam claims”) (Docs. 1, 12). Carnithan also alleged that he was
constructively discharged from his job at Heartland in retaliation for questioning the fraudulent
admission practice (“the retaliatory discharge claims”) (Docs. 1, 12). Over three years later, the
United States elected to intervene in part, and the complaint was unsealed (Doc. 40, 41). Shortly
thereafter, the Government notified the Court that the parties had reached a settlement on the
qui tam claims (Docs. 42, 46).
In order to clarify what claims and parties remained in this action, the Court directed
Carnithan to file a second amended complaint (Doc. 46). What is left are Carnithan’s claims
against CHS Inc., CHSPSC, and MHC for retaliatory discharge in violation of the federal False
Claims Act (“federal FCA”), the Illinois False Claims Act (“Illinois FCA”), and Illinois

common law (Doc. 56). This matter is currently before the Court on the motion to dismiss the
second amended complaint filed by CHSPSC and MHC (Doc. 77), as well as the motion to
dismiss filed by CHS Inc. (Doc. 89).
DISCUSSION
The purpose of a motion to dismiss under Rule 12(b)(6) is to address the legal
sufficiency of the plaintiff’s claim for relief; it does not look at the merits of the plaintiff’s
claim or decide whether the plaintiff will ultimately prevail. Gibson v. City of Chi., 910 F.2d
1510, 1520 (7th Cir. 1990). In ruling on a motion to dismiss, the court must construe the

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complaint in the light most favorable to the plaintiff, accept as true all well-pleaded facts,
and draw all possible inferences in the non-moving party’s favor. See, e.g., Hecker v. Deere &
Co., 556 F.3d 575, 580 (7th Cir. 2009) (quoting Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th
Cir. 2008)). To survive a motion to dismiss, plaintiffs need only allege enough facts to state a
claim to relief that is plausible on its face. Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).
I.

Count 3—Retaliatory Discharge Under Illinois Common Law
The Court will begin its discussion with Carnithan’s claim for retaliatory discharge

under the common law of Illinois. Defendant CHS Inc. argues this claim should be
dismissed because the only proper defendant for a common law retaliatory discharge claim
is the employer, but CHS Inc. was not Carnithan’s employer; according to the second
amended complaint, Marion Hospital was Carnithan’s employer (Doc. 90).
The Court sees a much more fundamental problem with Carnithan’s claim that
Defendants did not bring up. Carnithan has not alleged that he was actually terminated
from his position at Marion Hospital because he questioned the hospital’s fraudulent
admission procedures (see Doc. 56). Instead, he has alleged that he was constructively
discharged (Doc. 56, ¶¶22, 33). Illinois law, however, does not recognize a cause of action for
retaliatory constructive discharge. Bannon v. Univ. of Chi., 503 F.3d 623, 630 (7th Cir. 2007)
(citing Fisher v. Lexington Health Care, Inc., 722 N.E.2d 1115, 1121 (Ill. 1999)); Thomas v.
Guardsmark, Inc., 381 F.3d 701, 708 (7th Cir. 2004) (collecting cases).
It is well-settled that a court can sua sponte dismiss a claim for failure to state a claim
upon which relief can be granted. See, e.g., Dawson v. Newman, 419 F.3d 656, 660 (7th Cir.
2005). Before doing so, however, the plaintiff should be given notice and an opportunity to
respond. Id. Accordingly, Carnithan has thirty days to respond and explain to the Court why

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Count 3 should not be dismissed with prejudice for failure to state a claim.
II.

Counts 1 and 2—Retaliatory Discharge Under Federal FCA and Illinois FCA

A.

Statute of Limitations

Defendants first argue that Carnithan’s claims for retaliatory discharge under the
federal False Claims Act (Count 1) and the Illinois False Claims Act (Count 2) are barred by
the statute of limitations (Doc. 78, pp. 4–5; Doc. 90, pp. 3–4). Defendant point out that the
federal FCA and Illinois FCA have three-year limitation periods for retaliation claims, and
they argue that because Carnithan’s claims accrued in September 2006 and suit was not filed
until April 2011, his claims are time-barred (Doc. 78, pp. 4–5; Doc. 90, pp. 3, 4). Defendants’
truncated arguments are woefully inadequate, however, because the issue of whether the
limitations periods apply to Carnithan’s claims is far less cut and dry than Defendants made
it seem.
Both of the three-year limitations periods were enacted mid-stream, so to speak. This
timing matters. A lot. But Defendants simply failed to acknowledge it. They did not mention
that, at the time Carnithan’s claims accrued in September 2006, neither the federal FCA nor
the Illinois FCA supplied a limitations period for retaliatory discharge claims, and so his
claims were subject to the five-year catch-all statute of limitations in 735 ILL. COMP. STAT.
5/13-205. See Graham Cnty. Soil & Water Conservation Dist. v. United States ex rel. Wilson, 545
U.S. 409, 415–16, 422 (2005); Teumer v. Gen. Motors Corp., 34 F.3d 542, 548 (7th Cir. 1994)
(citing Henon v. Lever Brothers Co., 449 N.E.2d 196 (Ill. App. Ct. 1983); Webb v. Gardner, Carton
& Douglas LLP Long Term Disability Plan, 899 F. Supp. 2d 788, 798 (N.D. Ill. 2012)). It wasn’t
until July 2010 that the federal FCA was amended to add the three-year limitations period.
And the Illinois FCA was not amended until August 2012. MHC and CHSPSC at least

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informed the Court of these dates, while CHS Inc. did not mention them (Doc. 78, pp. 4, 5; see
Doc. 90).
None of the Defendants, however, addressed that when the three-year limitations
period was added to the federal FCA, Carnithan’s claims had already accrued, but the old
limitations clock had not yet expired. More egregiously, Defendants did not acknowledge
that when the three-year limitations period was added to the Illinois FCA, not only had
Carnithan’s claims accrued, but he had already filed suit. And Defendants did not bother to
provide any explanation, let alone citations to any legal authority, showing that the new
limitations periods should apply retroactively in either situation. Simply put, Defendants
wholly ignored nuances crucial to their statute of limitations argument.
The lack of explanation and supporting legal authority is particularly problematic
because the answer to whether the new limitations periods apply under these circumstances
“is by no means self-evident,” as another district court stated. Saunders v. District of Columbia,
789 F. Supp. 2d 48, 53 (D.D.C. 2011). It is not the Court’s job to navigate the thicket of
legislative materials and applicable case law to supply the research that Defendants omitted.
United States v. Holm, 326 F.3d 872, 877 (7th Cir. 2003) (“It is not the obligation of this court to
research and construct the legal arguments open to parties, especially when they are
represented by counsel.”) (citation omitted). Accordingly, the Court declines to address the
merits of Defendants’ abbreviated and unsupported statute-of-limitations argument, and
finds that it has been waived. See, e.g., id. (“We have repeatedly warned that “perfunctory
and undeveloped arguments, and arguments that are unsupported by pertinent authority,
are waived . . . .”) (citation omitted).

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B.

Failure to State a Claim

Defendants next argue that Carnithan failed to state a claim for retaliatory discharge
under the federal False Claims Act (Count 1) and the Illinois False Claims Act (Count 2) for a
number of reasons (Doc. 78, pp. 5–11; Doc. 90, p. 5). These arguments, however, disregard
controlling precedent.
In order to state a claim for retaliation under the federal FCA or the Illinois FCA, the
plaintiff must allege: (1) that he was engaged in protected conduct under the statute; (2) that
defendants knew he was engaged in protected conduct; and (3) that defendants were
motivated, at least in part, to terminate him because of the protected conduct. See United
States ex rel. Ziebell v. Fox Valley Workforce Dev. Bd., Inc., No. 14-1780, 2015 WL 7567016, at *5
(7th Cir. Nov. 25, 2015); Fanslow v. Chicago Mfg. Ctr., Inc., 384 F.3d 469, 479 (7th Cir. 2004);
Brandon v. Anesthesia & Pain Mgmt. Assoc., Ltd., 277 F.3d 936, 944 (7th Cir. 2002). 1
Defendants first argue Carnithan failed to sufficiently plead that he engaged in any
protected activity (Doc. 78, p. 6). The statutes provide that an employee may not be
retaliated against “because of lawful acts done by the employee . . . in furtherance of an
action under this section or other efforts to stop one or more violations of [the federal or
Illinois False Claims Act].” 31 U.S.C. § 3730(h)(1); 740 ILL. COMP. STAT. 175/4(g)(1). Here,
Carnithan alleged that he reported to Marion Hospital’s CEO his concerns regarding the
1 “Courts analyzing claims under the FCA and Illinois FCA treat the statutes equally because of the similarity of
the language.” United States ex rel Helfer v. Associated Anesthesiologists of Springfield, Ltd., No. 10-3076, 2014 WL
4198199, at *9 (C.D. Ill. Aug. 25, 2014). See also McDonough v. City of Chi., 743 F.Supp.2d 961, 987 (N.D.Ill. 2010)
(applying Seventh Circuit standard for claim under federal FCA to Illinois FCA claim); State ex rel. Beeler, Schad
& Diamond, P.C. v. Burlington Coat Factory Warehouse Corp., 860 N.E.2d 423, 426 (Ill. App. Ct. 2006) (“The [Illinois
False Claims Act] ‘closely mirrors’ the federal False Claims Act.” (quoting Scachitti v. UBS Fin. Serv., 831 N.E.2d
544, 557 (Ill. 2005))); People ex rel. Levenstein v. Salafsky, 789 N.E.2d 844, 849 (Ill. App. Ct. 2003) (“We presume that,
when our legislature passed the [Illinois FCA], it was aware of federal court opinions that had construed the
False Claims Act. Thus, we also give weight to federal court opinions that interpreted the federal law before the
Act was passed.” (internal citations omitted)).

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practice of admitting all Medicare and Medicaid emergency room patients for inpatient
services (Doc. 56, ¶¶18, 19). Lodging an internal complaint with one’s employer constitutes a
protected activity. United States ex rel. Grenadyor v. Ukrainian Vill. Pharm., Inc., 772 F.3d 1102,
1108 (7th Cir. 2014), cert. denied, 136 S. Ct. 49 (2015) (“[R]etaliation for fling an internal
complaint (that is, a complaint with one’s employer, as distinct from a lawsuit) is
forbidden.” (citing Fanslow v. Chi. Mfg. Ctr., Inc., 384 F.3d 469, 481 (7th Cir. 2004))). Thus
Carnithan has sufficiently pleaded that he was engaged in a protected activity. See
Grenadyor, 772 F.3d at 1108–09 (holding that pharmacist stated an FCA retaliation claim
when he alleged he was fired after relaying concerns to his superiors about kickbacks to
customers and other unlawful acts he claimed to have observed).
Defendants next argue Carnithan failed to sufficiently plead that Defendants knew
he was engaged in protected conduct (Doc. 78, p. 7). This argument is of no moment. As
previously mentioned, Carnithan alleged that he went directly to Marion Hospital’s CEO to
report his concerns. Therefore, Defendants quite obviously knew that Carnithan was
engaged in protected activity.

C.

Basis of Liability for CHS Inc. and CHSPSC

CHSPSC and CHS Inc. argue that they cannot be liable to Carnithan for retaliatory
discharge because he did not allege that he was employed by them; instead, he alleged that
he was employed by MHC (Doc. 56, ¶5; Doc. 78, pp. 9–10; Doc. 90, pp. 6–7). The Court is
unpersuaded.
As originally enacted, the federal FCA’s anti-retaliation provision prohibited
retaliation against “any employee . . . by his or her employer.” False Claim Amendments
Act, Pub.L. 99–562, 100 Stat. 3153 (1986). The federal FCA was amended in 2009, however, to

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expand the scope of the anti-retaliation provision to “[a]ny employee, contractor, or agent”
and eliminated the word “employer.” Fraud Enforcement and Recovery Act of 2009, Pub. L.
111–21, 123 Stat. 1617, 1624–25. The purpose of this amendment was intended to “assist
individuals who are not technically employees within the typical employer-employee
relationship, but nonetheless have a contractual or agent relationship with an employer.” S.
REP. 110-507, at p. 27 (2008), available at 2008 WL 4415147. In other words, “the 2009
amendment to § 3730(h) was a device to accommodate . . . the broader group of potential
defendants who are in employer type roles but may not technically be employers.” United
States ex rel. Abou-Hussein v. Sci. Applications Int'l Corp., No. CIV.A. 2:09-1858-RMG, 2012 WL
6892716, at *3 n.4 (D.S.C. May 3, 2012), aff'd, 475 Fed.Appx. 851 (4th Cir. 2012). Accord Tibor v.
Michigan Orthopaedic Inst., 72 F. Supp. 3d 750, 759 (E.D. Mich. 2014) (“[I]t is clear that the
purpose [of the 2009 amendment] was to ensure that the protections of the Act extended
beyond a traditional employment relationship.”). See also Vander Boegh v. EnergySolutions,
Inc., 772 F.3d 1056, 1062 (6th Cir. 2014) (“[A]fter Congress amended the FCA to include
contractors and agents . . . Congress still intended to limit the FCA to employment-like
relationships.”); Wichansky v. Zowine, No. CV-13-01208-PHX-DGC, 2014 WL 289924, at *3 (D.
Ariz. Jan. 24, 2014) (“Cases that examine the legislative history have concluded that the 2009
amendments were intended to retain the requirement that an FCA defendant have
some employer-type relationship with the plaintiff.”)
So the question for the Court is whether Carnithan had an employment-like
relationship with CHS Inc. and CHSPSC. 2 Carnithan argues that “on paper he was

According to Carnithan, both CHS Inc. and CHSPSC can be held liable for retaliatory discharge as his “joint
employers” (Doc. 83, p. 16; Doc. 96, p. 8). Carnithan further argues that CHS Inc. can be held liable under the
“direct participant” theory of liability (Doc. 96, p. 8, 9). The Court is not sure whether either theory applies in
this matter. Carnithan did not discuss the potential application of either theory in the context of retaliation

2

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employed by MHC,” but CHSPSC “held significant control over his employment and the
conditions under which he worked,” and CHS Inc. in turn “controlled the operations of
CHSPSC.” (Doc. 83, p. 16; Doc. 96, p. 8). Put differently, according to Carnithan, he was not
technically employed by CHS Inc. or CHSPSC, but he had an employment-like relationship
with each. To that end, Carnithan specifically alleged that CHSPSC provided management
services and controlled the daily operations of MHC (Doc. 56, ¶11). And CHS Inc. was the
parent company of CHSPSC and directed its operations (Doc. 56, ¶24, 35). The CEO of
Marion Hospital was an employee of CHSPSC (Doc. 56, ¶13). CHSPSC issued the fraudulent
admissions directive to Marion Hospital, and hospital employees had to answer to the CEO
when Medicare or Medicaid beneficiaries were released from the emergency room instead of
being admitted to the hospital (Doc. 56, ¶¶12, 14, 15). After Carnithan relayed his concerns
about the fraudulent admission practice to the CEO, he was retaliated against (Doc. 56,
¶¶19, 20).
Based on these allegations, the Court can reasonably infer that CHSPSC and CHS Inc.
had some control over the conditions and terms of his employment, including the power to
demote

or

discharge

him.

Accordingly,

Carnithan

has

sufficiently

alleged

an

employment-like relationship with CHSPSC and CHS Inc. for purposes of the retaliation
provisions of the federal False Claims Acts and the Illinois False Claims Acts. Although
Carnithan ultimately may not be able to set forth evidence necessary to survive summary
judgment against these Defendants, he has alleged enough at this point to survive their

claims under the federal False Claims Act or the Illinois False Claims Act, or cite to any case law where the
theories were actually applied in that context (see Doc. 83, Doc. 96). At any rate, the essence of the test employed
by the Court—whether CHS Inc. or CHSPSC had an employment-like relationship with Carnithan—is largely
the same as the “joint employer” theory and the “direct participant” theory. They all look at whether the
companies had any element of control over the terms, conditions, and operation of Carnithan’s job.

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motions to dismiss.
CONCLUSION
The motion to dismiss filed by Defendants Marion Hospital Corp. and Community
Health Systems Professional Services Corp. (Doc. 77) and the motion to dismiss filed by
Defendant Community Health Systems, Inc. (Doc. 89) are DENIED.
Plaintiff Brian Carnithan has thirty days—until January 19, 2016—to show cause why
his common law retaliatory discharge claim (Count 3) should not be dismissed with
prejudice.
IT IS SO ORDERED.
DATED: December 17, 2015
_____________________________
NANCY J. ROSENSTENGEL
United States District Judge

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