Lapenfeld v. Pyramid Healthcare et al
MEMORANDUM (Order to follow as separate docket entry).Signed by Honorable Matthew W. Brann on 3/4/15. (km)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
MELANIE A. LAMPENFELD,
PYRAMID HEALTHCARE, INC.,
a wholly owned subsidiary of
CLEARVIEW CAPITAL, LLC,
and BRETT L. SCHARF, M.D.,
CIVIL ACTION NO. 3:14-CV-0283
March 4, 2015
Defendants Pyramid Healthcare, Inc. (hereinafter “Pyramid”), Clearview
Capital, LLC (hereinafter “Clearview”), and Brett L. Scharf, M.D. have filed a
partial Motion to Dismiss Plaintiff Melanie A. Lampenfeld’s Complaint for failure
to state a claim upon which relief can be granted pursuant to Rule 12(b)(6) of the
Federal Rules of Civil Procedure. Plaintiff’s Complaint, filed February 17, 2014,
alleges claims for violation of the retaliation provision of the False Claims Act
(hereinafter, the “FCA”), codified at 31 U.S.C. § 3730(h), violation of the
Pennsylvania Whistleblower Law, 43 P.S. § 1423, and public policy wrongful
termination. Pl.’s Compl., Feb. 17, 2014, ECF No. 1 (hereinafter “Pl.’s Compl.”).
Defendants seek to dismiss all claims against Defendant Clearview, all
claims against Defendant Scharf, and all claims except the FCA retaliation claim
against Defendant Pyramid. For the following reasons, Defendants’ partial Motion
to Dismiss is granted in its entirety. Count I is dismissed without prejudice as
against Defendant Scharf and Count II is dismissed without prejudice as against all
Defendants, both with leave to amend in accordance with this Court’s decision.
Count III is dismissed with prejudice as against all Defendants.
This case arises from Plaintiff’s employment, first as a Registered Nurse and
most recently as a “Detoxification Program Director/Nurse Manager,” for
Defendant Pyramid. Pl.’s Compl. ¶ 18, 20. Pyramid is a for-profit corporation
which operates drug and alcohol treatment facilities throughout Pennsylvania. Id. ¶
5. Plaintiff commenced employment with Pyramid in September 2003 and was
promoted three times over the course of her employment, most recently to
Detoxification Program Director/Nurse Manager. Id. ¶ 18-20. In this position,
Plaintiff’s principal accountabilities included ensuring that clients in the
detoxification and inpatient units were provided proper medical care. Id. ¶ 24.
During her employment, Plaintiff alleges that she made four reports of wrongdoing
at Pyramid, for which reports she was ultimately terminated. Id. ¶ 78, 80.
The first of these reports of wrongdoing occurred in the fall of 2012 when it
was brought to Plaintiff’s attention by the Department of Health (hereinafter, the
“DOH”) inspector that numerous patient charts contained the exact same vital sign
entries and the same documentation of patient examinations conducted by
Defendant Brett L. Scharf, M.D. Id. ¶ 29-30. Plaintiff further alleges that federal
and state government reimbursement programs were being billed for patient
assessments and medical examinations that were purportedly, but never actually,
performed by Defendant Scharf. Id. ¶ 36-37. Plaintiff then reported these
inaccuracies to Defendant Pyramid’s Director of Nursing, Bernadette Grove. Id. ¶
Next, in August 2013, upon receiving a patient complaint, Ms. Grove
requested that Plaintiff investigate an issue arising from a medication and charting
error. Id. ¶ 58. After completing this assigned investigation, Plaintiff reported to
Ms. Grove and her direct supervisor, Richard Knab, that the patient complaint
resulted from Defendant Scharf’s professional incompetence and that the “nursing
staff are fed up with him.” Id. ¶ 58-60. Though she did not report her findings to
Defendant Scharf, Ms. Grove informed Defendant Scharf of Plaintiff’s opinions.
Id. ¶ 63. After hearing Plaintiff’s report, Defendant Scharf indicated to Mr. Knab
that he felt that the trust relationship between himself and Plaintiff had been
“irrecvocably broken.” Id. ¶ 64-67. Approximately four days later, Plaintiff was
placed on suspension, apparently for insubordination directed to a supervisor. Id. ¶
Third, on August 28, 2013, Plaintiff sent a letter to Mr. Knab in which she
reiterated her concerns over Defendant’s Scharf’s improper and negligent medical
care and its effect on patient safety, as well as her concerns regarding the
fraudulent billing of insurance providers for patient assessments and medical
services which were never performed. Id. ¶ 72-73. In addition, she mentioned to
Mr. Knab that patients lodged concerns to her that their charts contained specific
references to aspects of physical examinations that Defendant Scharf never
conducted. Id. ¶ 74.
Two days later, Defendant Pyramid terminated Plaintiff’s employment,
allegedly for insubordination and making false or malicious statements regarding
Defendant Scharf, the medical director, and Ms. Grove, the director of nursing. Id.
¶ 78-79. Finally, on September 6, 2013, Plaintiff submitted an appeal of Defendant
Pyramid’s decision to terminate her to Pyramid’s CEO, Jonathan Wolf. Id. ¶ 81.
She again reported the information relating to Defendant Scharf’s conduct and the
inaccuracies in billing. Id. ¶ 82. This appeal was denied by Mr. Wolf on
September 12, 2013. Id. ¶ 86.
As previously discussed, Plaintiff asserts in her Complaint claims for
violations of the FCA as against all Defendants, violations of the Pennsylvania
Whistleblower Law as against all Defendants, and public policy wrongful
termination as against only Pyramid and Clearview. On April 24, 2014,
Defendants filed their partial Motion to Dismiss Plaintiff’s Complaint for failure to
state a claim upon which relief can be granted pursuant to Federal Rule of Civil
Procedure 12(b)(6). 1 This matter is now ripe for disposition.
II. STANDARD OF REVIEW
When considering a motion to dismiss under Federal Rule of Civil
Procedure 12(b)(6), a court must view all allegations stated in the complaint as true
and construe all inferences in the light most favorable to plaintiff. See Hishon v.
King & Spaulding, 467 U.S. 69, 73 (1984); see also Kost v. Kozakiewicz, 1 F.3d
176, 183 (3d Cir. 1993). However, “the tenet that a court must accept as true all of
the [factual] allegations contained in the complaint is inapplicable to legal
conclusions.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal citations
omitted). In ruling on such a motion, the court primarily considers the allegations
of the pleading, but is not required to consider legal conclusions alleged in the
complaint. Kost, 1 F.3d at 183. “Threadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S.
at 678. At the motion to dismiss stage, the court considers whether plaintiff is
entitled to offer evidence to support the allegations in the complaint. See Maio v.
Aetna, Inc., 221 F.3d 472, 482 (3d Cir. 2000).
In their Brief in Support, Defendants argue that Defendant Clearview Capital, LLC must be dismissed as a
defendant because Plaintiffs have failed to plead facts sufficient to establish liability. In response, Plaintiff agrees to
withdraw the action without prejudice as against Clearview Capital, LLC pursuant to Federal Rule of Civil
Procedure 41. Plaintiff’s Brief in Opp. at 2 n.1, May 22, 2014, ECF No. 19 (hereinafter “Pl.’s Opp.”).
A complaint should only be dismissed if, accepting as true all of the
allegations in the amended complaint, plaintiff has not pled enough facts to state a
claim to relief that is plausible on its face. See Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 561 (2007). “Determining whether a complaint states a plausible claim
for relief will . . . be a context-specific task that requires the reviewing court to
draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 663-664.
“In considering a Rule 12(b)(6) motion, we must be mindful that federal
courts require notice pleading, as opposed to the heightened standard of fact
pleading.” Hellmann v. Kercher, No. 07-1373, 2008 WL 1969311 at * 3 (W.D. Pa.
May 5, 2008) (Lancaster, J.). Federal Rule of Civil Procedure 8 "requires only a
‘short and plain statement of the claim showing that the pleader is entitled to relief,'
in order to 'give the defendant fair notice of what the…claim is and the grounds on
which it rests.'" Twombly, 550 U.S. at 554 (quoting Conley v. Gibson, 355 U.S. 41,
47 (1957)). However, even under this lower notice pleading standard, a plaintiff
must do more than recite the elements of a cause of action, and then make a
blanket assertion of an entitlement to relief. See Hellmann, 2008 WL 1969311 at
*3. Instead, a plaintiff must make a factual showing of his entitlement to relief by
alleging sufficient facts that, when taken as true, suggest the required elements of a
particular legal theory. See Twombly, 550 U.S. at 561. “[W]here the well-pleaded
facts do not permit the court to infer more than the mere possibility of misconduct,
the complaint has alleged - - but it has not “shown” - - “that the pleader is entitled
to relief.” Iqbal, 556 U.S. at 679 (quoting Fed. R. Civ. P. 8(a)).
The failure-to-state-a-claim standard of Rule 12(b)(6) “streamlines litigation
by dispensing with needless discovery and factfinding.” Neitzke v. Williams, 490
U.S. 319, 326-27 (1989). A court may dismiss a claim under Rule 12(b)(6) where
there is a “dispositive issue of law.” Id. at 326. If it is beyond a doubt that the
non-moving party can prove no set of facts in support of its allegations, then a
claim must be dismissed “without regard to whether it is based on an outlandish
legal theory or on a close but ultimately unavailing one.” Id. at 327.
A. Individual Liability Under The FCA
Defendants first contend that Plaintiffs’ claim in Count I for retaliation under
the FCA should be dismissed as to Defendant Scharf because, as a matter of law,
there can be no individual liability under §3730(h) of that act. In so arguing, they
acknowledge that courts have split on this issue and cite to several recent district
court opinions from varying jurisdictions. Plaintiff counters by citing to district
court cases which came to the contrary determination.
The FCA imposes liability on any person who “knowingly presents, or
causes to be presented, to an officer or employee of the United States Government
. . . a false or fraudulent claim for payment or approval.” 31 U.S.C. § 3729(a)(1).
Section 3730(h) of the FCA creates “a private cause of action for an individual
retaliated against by his employer for assisting an [FCA] investigation or
proceeding.” Graham Cnty. Soil & Water Conservation Dis. V. U.S. ex rel. Wilson,
545 U.S. 409, 412 (2005). Congress amended this provision in 2009 to read:
Any employee, contractor, or agent shall be entitled to all relief necessary to
make that employee, contractor, or agent whole, if that employee, contractor,
or agent is discharged, demoted, suspended, threatened, harassed, or in any
other manner discriminated against in the terms and conditions of
employment because of lawful acts done by the employee, contractor, agent
or associated others in furtherance of an action under this section or other
efforts to stop 1 or more violations of this subchapter.
31 U.S.C. § 3730(h)(1). In so doing, Congress expanded protection under the FCA
from only employees to employees, contractors, and agents. Moreover, it removed
any reference to retaliation “by his or her employer,” leaving the potential
categories of defendants under this section legally unsettled. 31 U.S.C. § 3730(h)
Prior to this amendment, courts were consistent in finding that § 3730(h) did
not support a claim for individual liability. See Mruz v. Caring Inc., 991 F.Supp.
701, 708-10 (D.N.J. 1998) (determining that, as per the plain meaning of the
statute, the term “employer” did not extend liability to individual supervisors);
Palladino ex rel. U.S. v. VNA of Southern New Jersey, Inc., 68 F.Supp.2d 455,
464-65 (D.N.J. 1999) (“[T]here is no individual liability for non-employers under §
3730(h) . . . .”); United States ex rel. Lamar v. Burke, 894 F.Supp. 1345, 1347-48
(E.D.Mo. 1995) (applying Title VII definition of employer and finding that
“employer” does not extend to corporate supervisors or president of defendant
However, since 2009 courts have split on whether the removal of the word
“employer” from the statute was a calculated means by which Congress intended
to extend liability for retaliation to individual supervisors or officers. Although a
few early cases came to the conclusion that this was a deliberate maneuver and
thereby allowed claims to proceed against individual supervisors, see Laborde v.
Rivera-Dueño, 719 F.Supp.2d 198, 205 (D.P.R. 2010); Weihua Huang v. Rector &
Visitors of University of Virginia, 896 F.Supp.2d 524, 548 n.16 (W.D.Va. 2012);
United States ex rel. Moore v. Community Health Services, Inc., Civil No.
3:09cv1127, 2012 WL 1069474 at * 9 (D.Conn. Mar. 29, 2012), a consensus has
now emerged among the majority of courts to decide this issue that individual
liability does not exist under the amended § 3730(h). See Lipka v. Advantage
Health Group, Inc., No. 13-CV-2223, 2013 WL 5304013 at *9-12 (D.Kan. Sept.
20, 2013); United States ex rel. Abou-Hussein v. Science Applications Int’l Corp.,
Civil Action No. 2:09-1858-RMG, 2012 WL 6892716 at * 3 (D.S.C. May 2, 2012);
Aryai v. Forfeiture Support Associates, LLC., 25 F.Supp.3d 376, 387 (S.D.N.Y.
2012); United States ex rel. Black v. American Society for Engineering Educ., Civil
Action No. 12-1139, 2014 WL 1765337 at *6 (E.D.Pa. May 2, 2014); United
States ex rel. Petras v. Simparel, Inc., Civ. Action No. 13-2415 (FLW) (DEA),
2015 WL 337472 at *11 (D.N.J. Jan. 26, 2015).
In coming to that conclusion, courts have relied primarily on the legislative
history behind the 2009 amendment. Specifically, after discussing this legislative
history, the court in Abou-Hussein v. Science Applications Int’l Corp. found that
Congress only intended to extend protection under the statute to a larger group of
plaintiffs; it did not mean to extend liability to a larger group of defendants as well.
See Abou-Hussein, 2012 WL 6892716 at * 3. Rather, they explained, “Such an
interpretation ignores the fact that by necessity the statute could no longer refer
only to ‘employers’ since it would apply to entities which had an independent
contractor or agency relationship with persons subject to the Act.” Id. at *3 n.4.
Similarly, quoting the House Report, the court in Aryai v. Forfeiture Support
Associates, LLC clarified that:
Congress intended for the amendment to “broaden protections for
whistleblowers by expanding the False Claims Act’s anti-retaliation
provision to cover any retaliation against those who planned to file an action
(but did not), people related to or associated with relators, and contract
workers and others who are not technically ‘employees.’ The Report
contains no similar statement of intent to expand the scope of liability to
include individuals. Where Congress expressly stated its intent to expand
the definition of a whistleblower and add specific language to effectuate that
intent, it strains common sense to read Congress’s silence in the same
sentence of the statute as effectuating an unexpressed intent to expand the
class of defendants subject to liability under the statute.
Aryai, 25 F.Supp.3d at 386 (citing H.R.Rep. No. 111-97, at 14 (2009)). The court
went on to explain:
This is particularly true in light of the aforementioned presumption that
Congress was aware that courts had uniformly rejected individual liability
under section 3730(h). Thus, if Plaintiff is correct, Congress overturned this
line of authority by negative implication. That seems unlikely given that
Congress could have simply replaced “employer” with “any person.” . . .
That Congress chose not to use that phrase . . . in section 3730(h) makes it
more likely that Congress deleted the word “employer” not to provide for
individual liability to but to avoid confusion in cases involving a “contractor
or agent” rather than an “employee.”
Id. at 386-87.
In contrast, the courts that did determine that claims against individual
supervisors could proceed did so based on little analysis and with no consideration
of the legislative history underlying the 2009 amendment. See Laborde, 719
F.Supp.2d at 205 (“In the absence of specific First Circuit guidance holding that
individual liability does not exist in FCA retaliation claims, and in light of the fact
that the persuasive authority on the issue relies upon an outdated version of the
statute, the Court denies Defendant’s motion to dismiss.”); Moore, at *9 (“The
current Section 3730(h) following the 2009 amendments, however, conspicuously
omits the word ‘employer.’ Therefore, Ms. Moore’s allegations . . . regarding postMay 2009 . . . do give rise to a retaliation claim.”); Weihua Huang, 896 F.Supp.2d
at 248 n. 16 (“In the absence of specific guidance from the United States Court of
Appeals for the Fourth Circuit dictating that there can be no individual liability in
FCA retaliation claims after the 2009 amendment, and because Defendants do not
assert in their motion that Dr. Huang’s FCA claims against them are legally
impermissible, I will not dismiss those claims out of hand.”) (emphasis added); see
also FTC v. Jantzen, Inc., 386 U.S. 228, 234-35 (1967) (holding that an act must
be read as a whole, and a court cannot ignore the “common sense, precedent, and
legislative history of the setting that gave it birth.”).
Furthermore, this Court cannot accept Plaintiff’s argument that because the
aforementioned cases discussed only supervisors and managers, independent
contractors like Defendant Sharf are still liable under the statute. As this Court has
already explained, the legislative history behind the 2009 amendment serves only
to highlight that Congress’ purpose was to widen the class of plaintiffs, not the
class of defendants. Consequently, keeping in line with pre-amendment case law,
liability under § 3730(h) of the FCA extends only to “employers.” See U.S. ex rel.
Friddle v. Taylor, Bean & Witaker Mortgage Corp., Civil Action No. 1:06-cv3023- JEC, 2012 WL 1066510 at *5 (N.D.Ga. Mar. 27, 2012) (“Courts that have
interpreted this language have almost unanimously declined to find that 3730(h)
creates liability as to individual defendants who are merely supervisors or
managers.”). The fact that some cases mentioned only supervisors and managers
as the individual defendants not included under this statute does not change this
analysis as to independent contractors; the underlying premise that liability extends
only to “employers” remains the same. In the situation at bar, Plaintiff has made
no allegation that she was in an employee-employer relationship with Defendant
Sharf; she alleges, rather, that she was employed by Pyramid and that Defendant
Scharf was an agent of Pyramid. Pl.’s Compl. ¶ 7-9.
Within this argument, Plaintiff also contends that because Congress widened
the potential group of plaintiffs to include independent contractors, it must
necessarily have widened the potential group of defendants to include independent
contractors. This argument strains the bounds of logic and rationality. As
discussed previously, despite the fact that Congress amended the statute to
explicitly include independent contractors as plaintiffs, there is no evidence either
in the text of the statute or the legislative history behind its implementation that
Congress intended to similarly expand the class of defendants to independent
Therefore, although the United States Court of Appeals for the Third Circuit
has not yet addressed this issue, this Court is persuaded by the majority reasoning
that the legislative intent behind the 2009 amendment had nothing to do with
individual liability or liability of independent contractors. Accordingly, we decide
today that 31 U.S.C. 3730(h) does not support a claim for individual liability and
Defendants’ partial Motion to Dismiss is granted as to Defendant Sharf on Count I
for retaliation under the FCA, with leave to amend to assert that Defendant Scharf
was Plaintiff’s employer for purposes of the FCA.
B. “Public Body” Under Pennsylvania Whistleblower Law
The next question is whether Defendant Pyramid can be considered a
“public body” for purposes of the Pennsylvania Whistleblower Law solely due to
its receipt of Medicaid and TRICARE reimbursements. In their arguments, the
parties once again point to conflicting case law on this issue.
The Pennsylvania Whistleblower Law states in pertinent part:
No employer may discharge, threaten or otherwise discriminate or retaliate
against an employee regarding the employee’s compensation, terms,
conditions, location or privileges of employment because the employee or a
person acting on behalf of the employee makes a good faith report or is
about to report, verbally or in writing, to the employer or appropriate
authority an instance of wrongdoing or waste.
43 P.S. § 1423(a). An “employer” is defined as a “person supervising one or more
employees, including the employee in question; a superior of that supervisor; or an
agent of a public body.” Id. at § 1422. An “employee” is defined as a “person who
performs a service for wages or other remuneration under a contract of hire,
written or oral, express or implied, for a public body.” Id.(emphasis added).
Further, a “public body” includes a “body which is created by Commonwealth or
political subdivision authority or which is funded in any amount by or through
Commonwealth or political subdivision authority or a member or employee of that
body.” Id. (emphasis added). Whether Pyramid can therefore be considered a
public body turns on the meaning of the phrase “funded in any amount by or
through Commonwealth or political subdivision authority,” and whether that
phrase includes funding through Medicaid and TRICARE reimbursements.
The Supreme Court of Pennsylvania has not yet interpreted the phrase
“funded […] by or through.” Consequently, this Court must predict how the
Supreme Court would decide the issue currently before it. See City of Philadelphia
v. Lead Industries Ass’n, Inc., 994 F.2d 112, 123 (3d Cir. 1993) (“When the state’s
highest court has not addressed the precise question presented, a federal court must
predict how the state’s highest court would resolve the issue.”); see also Jewelcor
Inc. v. Karfunkel, 517 F.3d 672, 676 n.4 (3d Cir. 2008). In predicting state law, a
federal court should consider all relevant sources of state law, including “related
decisions of the highest state court, decisions of the intermediate appellate courts,
decisions of lower courts, scholarly treatises, Restatements of laws and germane
law review articles.” Jones & Laughlin Steel Corp. v. Johns-Manville Sales Corp.,
626 F.2d 280, 285 (3d Cir. 1980). Moreover, “[a]lthough not dispositive, decisions
of state intermediate appellate courts should be accorded significant weight in the
absence of an indication that the highest state court would rule otherwise.” Lead
Indus., 994 F.2d at 123.
In support of their argument, Defendants cite to Cohen v. Salick Health
Care, Inc., 772 F.Supp. 1521 (E.D.Pa. 1991). In Cohen, the court predicted that
the Pennsylvania Supreme Court would find that the receipt of Medicaid payments
without more is insufficient to make a private entity a “public body” for purposes
of the Pennsylvania Whistleblower Law. Specifically, the court found that the
legislature intended its definition of “public body” to apply to any entity that
received even one dollar of state funding. See Cohen, 772 at 1526 (citing PA.
LEGIS. J. – HOUSE, June 18, 1985, pp. 1230-32, 1277. However, the court further
noted that the legislature was silent on the precise definition of the word “funded”
as it is used within the statute. Id.
After an evaluation of the nature of Medicaid, the court found that the
“legislature did not intend that the mere receipt of monies from a state source for
services rendered should bring the recipient within the Whistleblower law.” Id. at
1527. Most notably, the court determined that allowing such an interpretation
“would extend the reach of the Whistleblower Law to every hospital, nursing
home, institution for the mentally retarded, institution for the mentally ill, home
health care provider, physician, chiropractor, podiatrist, ambulance company,
dentist and optometrist that treats patients whose medical expenses are reimbursed
by Medicaid.” Id. at 1526. Instead, the court reasoned, the phrase “funded […] by
or through” was meant to denote only funds which were specifically appropriated
by the legislature to bodies in pursuit of public goals. Id. at 1527.
Courts which have followed the holding in Cohen have furthered reasoned
[a] contrary ruling could justify the conclusion that other assistance
programs, such as food stamps, similarly transform private entities into
public bodies. The legislature could not have intended to create a cause of
action under the Whistleblower Law for a former employee of a local
grocery store that accepted food stamps. If we accept Plaintiff’s argument as
to the definition of “funded,” the scope of the Whistleblower Law could be
expanded to include any private business that accepted payment from a
recipient of government assistance. We are satisfied that this is not what the
Tanay v. Encore Healthcare, LLC, 810 F.Supp.2d 734, 744 (E.D.Pa. 2011).
In response, Plaintiff cites to Denton v. Silver Stream Nursing &
Rehabilitation Center, 739 A.2d 571 (Pa. Super. Ct. 1999). Decided eight years
after Cohen, in a matter of first impression, the Superior Court of Pennsylvania
expressly rejected the analysis in Cohen. It relied, in part, on a previous decision
of the Superior Court in Riggio v. Burns, 711 A.2d 497 (Pa. Super. Ct. 1998),
which held that:
[a]n attempt to divine the intent of the legislature by reference to the
common understanding of “public body” is not only unnecessary, it also
begs the question. Notwithstanding the everyday meaning of “public body,”
this term was expressly defined by our legislature for purposes of the
Whistleblower Law. . . . The statute plainly and unequivocally makes any
body “funded in any amount by or through the Commonwealth . . .
authority” a public body for purposes of the Whistleblower Law. 43 P.S. §
1422. Where the language of a statute is unambiguous on its face, we are
bound to give effect to that language.
711 A.2d at 500. Recognizing that Riggio did not have before it the question of
whether Medicaid reimbursements constituted funding “by or through the
Commonwealth,” the court in Denton further reasoned that:
The plain meaning of the language of the statute makes it clear that it was
intended to apply to all agencies that receive public monies under the
administration of the Commonwealth. We do not find that legislatively
appropriated funds are the only monies that will create “public body” status
under the Whistleblower Law. The statutory language differentiates
between appropriated and “pass-through” funds and extends the law to cover
both types . . . The Law clearly indicates that it is intended to be applied to
bodies that receive not only money appropriated by the Commonwealth, but
also public money that passes through the Commonwealth.
Denton, 739 A.2d at 576.
Pennsylvania appellate courts have not addressed this issue since Denton,
and the federal courts that have contemplated the issue have been inconsistent in
their choice of persuasive authority. Several courts have chosen to follow the
reasoning in Cohen, see Tanay v. Encore Healthcare, LLC, 810 F.Supp.2d 734,
744 (E.D.Pa. 2011); Bickings v. NHS Human Services, Civil Action No. 13-2894,
2014 WL 307549 (E.D.Pa. Jan. 27, 2014), while others have followed the analysis
and holding of Denton, see Mayer v. Boys & Girls Clubs of Philadelphia, Inc.,
Civil Action No. 10-7574, 2011 WL 4467669 (E.D.Pa. Sept. 23, 2011); Ellis v.
Allegheny Specialty Practice Network, No. 2:12cv404, 2013 WL 411477 (W.D.Pa.
Feb. 1, 2013).
This Court is persuaded by the analysis of Cohen and Tanay that Medicaid
reimbursements do not, without more, constitute “funding […] by or through the
Commonwealth” within the meaning of the Pennsylvania Whistleblower Law.
Adopting the reasoning of these two cases, this Court opines that Defendant
Pyramid cannot be considered a “public body” and therefore is not subject to the
Whistleblower Law. Consequently, Count II is dismissed without prejudice, with
leave to amend, if Plaintiff can do so, to allege that Pyramid received some other
and more specifically appropriated state funding.
C. Wrongful Discharge
Finally, Defendants argue that Plaintiff’s wrongful discharge claim in Count
III must be dismissed for three reasons: (1) because the FCA already provides
Plaintiff with a remedy for the alleged wrong; (2) because the statutes and
regulations cited by Plaintiff do not represent a “clear mandate of public policy”;
and (3) because Plaintiff cannot identify an affirmative “statutorily imposed duty”
to make the reports that she made. Plaintiff counters first that she does not rely on
the FCA as the source of public policy upon which her wrongful termination claim
is based and, second, that other statutes place upon Plaintiff a statutory duty to act,
namely the Professional Nursing Law, 63 P.S. § 211, et seq. (hereinafter the
“PNL”), its regulations at 49 Pa. Code § 21.1 et seq., and 28 Pa. Code § 709 which
establishes mandatory procedures for the issuance of a license to freestanding drug
and alcohol treatment facilities and inpatient non-hospital residential drug and
alcohol treatment facilities (hereinafter “Treatment Center Regulations”).
It is well-established that Pennsylvania recognizes an employment-at-will
doctrine, whereby an employer may terminate an employee for any reason, with or
without cause. See Shick v. Shirey, 716 A.2d 1231, 1233 (Pa. 1998). A limited
public policy exception to this doctrine exists in the event that the employee’s
discharge “violate[s] a clearly mandated public policy which strikes at the heart of
a citizen’s social rights, duties, and responsibilities.” Ridolfi v. Harrisburg Hosp.,
No. 3957 S 1986, 1989 WL 299240, at * 3 (Pa. C.C.P. 1989) (citing Paul v.
Lankenau Hospital, 543 A.2d 1148, 1155 (Pa.Super. 1988)). As the Pennsylvania
Supreme Court has explained the exception,
It is only when a given policy is so obviously for or against the public
health, safety, morals or welfare that there is a virtual unanimity of opinion
in regard to it, that a court may constitute itself the voice of the community
in so declaring. There must be a positive, well-defined, universal public
sentiment, deeply integrated in the customs and beliefs of the people and in
their conviction of what is just and right and in the interests of the public
Shick, 716 A.2d at 1235-36 (quoting Mamlin v. Genoe, 17 A.2d 407, 409 (1941)).
Although Pennsylvania courts have not explicitly defined the contours of
this public policy exception, its application has been limited primarily to situations
in which an employer (1) requires an employee to commit a crime, (2) prevents an
employee from complying with a statutorily imposed duty, and (3) discharges an
employee even though specifically prohibited from doing so by statute. See
Hennessy v. Santiago, 708 A.2d 1269, 1273 (Pa.Super. 1998). The Supreme Court
of Pennsylvania has indicated that this public policy exception is not to be liberally
construed. See McLaughlin v. Gastrointestinal Specialists, Inc., 750 A.2d 283, 287
(2000) (“An employee will be entitled to bring a cause of action for a termination
of that relationship only in the most limited of circumstances where the termination
implicates a clear mandate of public policy in this Commonwealth.”).
To begin with, because Plaintiff does not rely on the FCA or the
Pennsylvania Whistleblower Law as the source of public policy on which her
wrongful discharge claim is based, the Court will not discuss this theory for
dismissal but rather will evaluate Plaintiff’s claims only to the extent that they are
based on the PNL or the Treatment Center Regulations. In that vein, Defendants
make two separate arguments: first, that these statutes and regulations do not
represent a “clear mandate of public policy” and second, that they evidence no
affirmative statutory duty to report on the part of Plaintiff.
Defendants’ separation of these two arguments is misleading. Rather, the
three enumerated categories to which the public policy exception has most recently
and consistently been applied represent the judicial system’s attempt to more
precisely define what constitutes a “clear mandate of public policy.” A statutory
duty to report is one subset of the circumstances under which the court may find a
clear mandate of public policy; the requirement that Plaintiff have had a statutory
duty to report (or one of the other two categories if they apply), is a surrogate way
to demonstrate that a clear mandate of public policy exists. Though several earlier
cases cited by the Defendants did make their determinations as to the application of
the public policy exception without the guiding principles of these three
enumerated categories, more recent cases have used these categories to delineate
when the exception should be employed. As such, the arguments that Defendants
have advanced in support of their motion are really one in the same, and the more
appropriate question before the Court today is whether Defendants’ conduct fell
within one of those three situations in which the public policy exception has been
applied in recent years.2 Because the Defendants’ conduct does not fall within the
first or the third categories, and neither party argues that it does, the question then
comes down to whether Defendants prevented Plaintiff from complying with a
statutorily imposed duty.
In order to determine whether this case falls within the narrow parameters of
the nebulous public policy exception, this Court must examine the existing case
law in which courts have ruled on the application of the exception to the defendant
employer’s conduct. In Spierling v. First American Home Health Services, Inc.,
the Superior Court of Pennsylvania held that a nurse’s termination based on her
Though, theoretically, this Court could find a clear mandate of public policy outside these enumerated guideline
categories, this would inappropriately broaden the exception and go against the current inclination of case law,
which this Court declines to do.
decision to report suspected evidence of Medicare fraud did not fall within the
public policy exception because she was under no statutorily imposed duty to
search the company’s old and discarded files for evidence of past Medicare fraud
and to report that fraud to federal investigators. See Spierling v. First American
Home Health Services, Inc., 737 A.2d 1250, 1254 (Pa. Super. 1999). More
specifically the court stated, “The Professional Nursing Law, 63 P.S. §§ 211-225.5,
cited by Spierling, affords her no relief . . . nor do the Pennsylvania Code sections,
related to nursing, cited by Spierling since they do not mandate that she report,
under threat of penalty, the sort of past alleged fraud discovered by her when
reviewing First American’s ‘old and discarded’ files.” Id.
In another case decided by the Superior Court of Pennsylvania, Hennessy v.
Santiago, the plaintiff was an employee at a community living facility for the
mentally ill, and she alleged that she had been terminated in retaliation for
reporting to the district attorney the rape of a resident. See Hennessy v. Santiago,
708 A.2d 1269, 1272 (Pa. Super. 1998). In that case, Hennessy argued that
Pennsylvania law, regulations and her profession’s code of ethics all required her
to report the rape to the authorities. See id. at 1273. She argued that these
mandates required “a safe habilitative environment” for mental healthcare patients
and that therefore there existed an affirmative duty upon mental healthcare workers
to investigate and report possible crimes involving their patients. See id. at 1274.
In rejecting her argument, the court held that such an interpretation would be an
improperly expansive reading of the law. Notably, the court determined that:
[N]one of the laws or regulations cited by the [plaintiff] are similar to 23
Pa.C.S.A. section 6311, “Persons required to report suspected child
abuse.” As its title suggests, this section requires certain people, including
mental health professionals, to report suspected child abuse. This section
demonstrates that our legislature has chosen to place affirmative reporting
duties upon mental healthcare professionals in some situations, but not in
others. Unfortunately for [plaintiff], the facts of her case squarely place her
in the latter category. Since no authority required [her] to act as she did, we
find no authority for us to reverse the trial court’s decision [dismissing her
Finally, in Tanay v. Encore Healthcare, LLC., the Eastern District of
Pennsylvania decided to the contrary, finding that the plaintiff, a nursing home
administrator, had set forth sufficient allegations to allow the application of the
public policy exception. See Tanay, 810 F.Supp.2d at 741. In that case, the
plaintiff wrote a letter to his company’s Chief Operating Officer detailing several
incidents at the nursing home facility which he viewed as a danger to the safety of
the residents, and his supervisors’ unresponsiveness to his concerns. See id. at 736.
He argued that he was wrongfully terminated against public policy as embodied in
the Nursing Home Administrators License Act and the regulations implementing
that act. Under the act, the plaintiff was required to do a variety of things,
including enforcing the regulations relative to the level of health care and safety of
the residents and to the protection of their personal and property rights, as well as
maintaining an ongoing relationship with the governing body, medical and nursing
staff and other professional and supervisory staff. See id.at 738. In addition, there
were several guidelines which required the administrator to develop policies to
govern the care provided by the facility and to evaluate the quality of resident care,
among other things. See id. 738-39.
Although these regulations did mandate that the plaintiff carry out some sort
of unspecified affirmative action in order to care for the residents, they were very
similar to those at issue in Hennessy, in the sense that there was no specific
affirmative duty for the plaintiff to act as he did in sending that letter. However,
the court ultimately found that those nonspecific regulatory mandates which
“placed on him the responsibility of ensuring the safety of [the facility’s] residents
and employees,” were sufficient to apply the public policy exception. Id.at 740.
In the case at bar, Plaintiff argues that the PNL, its regulations, and the
Treatment Center Regulations gave her a statutory obligation to report the
company’s fraudulent billing for services never performed and Defendant Scharf’s
medical negligence. As to the former report, Spierling is directly on point. This
Court cannot find anything in any of the statutes or regulations cited by Plaintiff
which required her to report instances of fraudulent billing, and Plaintiff points to
none. Therefore, Plaintiff cannot base her wrongful discharge claim on her report
in this regard.
As to the latter report, Plaintiff points to 49 Pa. Code § 21.18(a)(3) which
states, “A registered nurse shall . . . [a]ct to safeguard the patient from the
incompetent, abusive or illegal practice of any individual.” Moreover, § 21.18(c)
states, “A registered nurse who fails to comply with an obligation or prohibition
under this section is subject to disciplinary and corrective measures under section
14 of the act (63 P.S. § 224).” 63 P.S. § 224, for its part, deals with the refusal,
suspension or revocation of licenses, specifically where the Board finds that “[t]he
licensee has willfully or repeatedly violated any of the provisions of this act or of
the regulations of the Board.” 63 P.S. § 224(a)(3).
Similar to Hennessy, this mandate does not affirmatively direct the Plaintiff
to report the alleged instances of medical negligence. Rather, it is deliberately
vague as to what action it requires the registered nurse to take in order to protect
his or her patients. Though Plaintiff had a duty as a registered nurse to “safeguard
the patient from the incompetent, abusive or illegal practice of any individual,” this
duty does not, of necessity, imply a duty to report Defendant Scharf’s conduct to
her superiors. While undoubtedly slightly more specific than the regulation at
issue in Hennessy, this regulation is still too indefinite in its directive. Despite
what may be considered Plaintiff’s honorable intentions, this mandate cannot
create an exception to the narrowly interpreted public policy exception because
there was no authority which required Plaintiff to act as she did.
In so deciding, this Court recognizes that it is going against the decision in
Tanay despite having followed its holding as it related to the definition of a public
body under the Pennsylvania Whistleblower law. It is true that the facts in Tanay,
like those in Hennessy, are similar to the facts in the matter at hand. However, this
Court declines to follow the reasoning in Tanay because it appears to be against the
current trajectory of case law and the deliberate intention of the Pennsylvania
Supreme Court that the public policy exception be narrowly interpreted so as not to
interfere too greatly with the employment-at-will doctrine. Moreover, given that
Tanay and Hennessy came to opposite conclusions based on similar factual bases,
this Court elects to follow the reasoning in Hennessy, a case from the Pennsylvania
Superior Court, as indicative of the manner in which the Pennsylvania Supreme
Court would rule on the issue. Consequently, this claim is dismissed.
For the foregoing reasons, Defendants’ partial Motion to Dismiss is granted
in its entirety. Count I is dismissed without prejudice as against Defendant Scharf
and Count II is dismissed without prejudice as against all Defendants, both with
leave to amend in accordance with this Court’s decision. Count III is dismissed
with prejudice as against all Defendants.
BY THE COURT:
/s Matthew W. Brann
Matthew W. Brann
United States District Judge
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?