On August 18, 2016, then Deputy Attorney General, Sally Yates, issued a memorandum directing the Bureau of Prisons (BOP) to begin to reduce – with an eye toward eliminating – the use of private prisons. Yates directed “that, as each contract reaches the end of its term, the Bureau should either decline to renew the contract or substantially reduce its scope in a manner consistent with law and the overall declines in the Bureau’s inmate population.”
The US presidential election campaign has created a national dialogue about what it takes to create a hostile work environment and could change judges’ perspectives on the issue, writes trial lawyer Reuben Guttman.
Title VII of the 1964 Civil Rights Act generally proscribes employment discrimination based on an individual’s “race, color, religion, sex, or national origin.” The breadth of the law’s proscriptions, the burdens of proof and the facts needed to prove a violation have, over the years, been the subject of much litigation.
Twenty two years after Title VII’s passage, the United States Supreme Court issued its opinion in Meritor Savings v. Vinson, 477 US 57 (1986). In Meritor, the Court established a cause of action under Title VII for gender discrimination where an employee has been subject to a “hostile work environment.” In issuing its Opinion, the Court quoted the decision of the United States Court of Appeals in Henson v. Dundee, 682 F.2d 897, 902 (11th Cir. 1982):“Sexual harassment which creates a hostile or offensive environment for members of one sex is every bit the arbitrary barrier to sexual equality in the workplace that racial harassment is to racial equality. Surely, a requirement that a man or a woman run a gauntlet of sexual abuse in return for the privilege of being allowed to work and make a living can be as demeaning and disconcerting as the harshest of racial epithets.” In Meritor, the Court noted that the alleged conduct was “not only pervasive but also criminal conduct of the most serious nature.”
While Meritor established the doctrine of “hostile work environment,” it failed to establish a bright line test for liability and even today’s guidance by the Equal Employment Opportunity Commission – the Agency charged with enforcing Title VII – is ambiguous. The guidance states that “petty slights, annoyances, and isolated incidents (unless extremely serious) will not rise to the level of illegality.” The guidance also says that “to be unlawful, the conduct must create a work environment that would be intimidating, hostile, or offensive to reasonable people.”
If this guidance is ambiguous, think about its application when juxtaposed against the pleading standards established by the Supreme Court in Bell Atlantic v. Twombly, 550 US 554 (2007) and Ashcroft v. Iqbal, 556 US 662 (2009). Those cases allow a trial court judge to look at the facts and determine whether a claim is “plausible.” In Iqbal, the Court explained that in determining plausibility, the “reviewing court” may draw upon its “judicial experience” and “common sense.” The Court also explained that “the plausibility standard is not akin to a “probability standard,” but it asks for more than a sheer possibility that a defendant has acted unlawfully.”
Common sense? The plausibility standard is subjective and undoubtedly may be influenced by a judge’s experiences and personal environment. And yet, as subjective as the standard is, it is the standard that allows judge’s to be the gatekeepers for the procession of claims of discrimination to proceed to discovery and perhaps trial.
Over the past several weeks neither the courts not Congress have issued an opinion or passed any law changing the way hostile work environment cases are viewed. Yet, it may be that events outside of the court room and the legislative arena have changed forever our perspective on these claims and perhaps – maybe perhaps – provided judges with a new perspective when evaluating the “plausibility” of a claim.
The release of a tape of presidential candidate Donald Trump extolling his sexual exploits, a dialogue about this same subject during a Presidential debate watched by 80 million people and news reports of women who were allegedly groped or kissed by Mr Trump has led to a national dialogue about sexual harassment. Weighing in on the subject, First Lady Michelle Obama captured the attention of the nation when she told New Hampshire voters: “And I have to tell you that I can’t stop thinking about this. It has shaken me to my core in a way that I couldn’t have predicted.”
Whether each allegation is true, the 2016 election will go down to the wire with a national dialogue about how much – or rather how little – it takes to poison an environment with hostile language or unwanted contact. It is a dialogue tantamount to an education campaign given by alleged victims, commentators and advocacy group leaders. For those judges who are tuned into their TV sets, perhaps their perspective on the plausibility of a claim of hostile work environment will forever be changed.
Reuben Guttman is a trial lawyer and one of the founding partners at Washington, DC-based firm Guttman, Buschner & Brooks PLLC.
Saturday 13 February, 2016 was a biting cold day in the nation’s capital that seemed like it would go down in history only for its frigid temperature. By mid-afternoon, news flashed across TV and computer screens reporting the passing of Antonin Scalia, an Associate Justice of the Supreme Court.
With three branches of government, including 535 voting members of Congress, hundreds of federal judges and countless members of the Executive Branch, it is a rare occasion when the passing of a single individual can change the course of American governance. The death of Justice Scalia was one of those occasions. In a court split sharply, five votes to four, along ideological lines, Justice Scalia was not just a part of the conservative majority; he was an outspoken leader. His ‘voice’ was heard in sometimes caustic dissents, in aggressive questioning during oral arguments when he seemingly took the role of advocate, and through his writings and interviews.
He supported efforts to restrict the court’s decision in Roe v Wade, protecting a women’s ‘right to choose’; he rejected constitutional protection of same sex marriage; he voted with the majority in Bush v Gore, effectively deciding the presidency in favour of George Bush; he voted to strike down voting rights laws and he wrote the majority opinion in District of Columbia v Heller, striking down a law banning hand guns while protecting, under the Second Amendment, the right to own firearms. He was an ‘originalist,’ meaning he said the Constitution should be interpreted from only the words written by the ‘Founding Fathers.’ This logic led him to question the court’s intervention that resulted in the de-segregation of the nation’s public schools through the 1954 decision in Brown v Board of Education. Justice Scalia’s ‘originalist’ view also meant he disregarded the contemporary context (such as the wave of shootings in public schools or the attempted assassination of President Reagan, who had appointed him) that caused legislators to press for laws banning guns. At a time when the massive wealth of corporations and a few individuals has been channelled to influence federal elections, Justice Scalia sided with the majority in Citizens United v FEC, striking down provisions of Bi-partisan Campaign Reform legislation regulating the expenditures of corporations and unions in support of political candidates.
As a part of the court’s majority, he was a key vote in procedural changes that have had a sweeping impact on American jurisprudence. Court decisions re-defining pleading standards, restricting class actions and compelling arbitration have fundamentally altered the ability of consumers, and those impacted by pervasive workplace discrimination, to bring cases and do so in an open court of law.
My colleagues across the US have, of course, spent the weekend contemplating the tenure of Justice Scalia and the impact of his passing. Nancy Gertner, a former federal judge in Boston and currently a professor at Harvard Law School, sent me the following thought after writing her own insightful piece on Justice Scalia in The Boston Globe: ‘He was at once principled, trying to see everything through the lens of originalism, and at the same time, rigid, unwilling to admit that his constitutional interpretation was distorted by his own conservative calculus.’
Robert Ahdieh, vice dean and K.H. Gyr professor of private international law at Emory University School of Law in Atlanta, noted: ‘There have been few, if any, more forceful writers among justices of the Supreme Court than Justice Scalia. Combined with his sharp intellect and his deep sense of conviction, and his service on the court will long be remembered.’
Jon Karmel, a Chicago based attorney who is one of the nation’s preeminent union-side labour lawyers, drew specific attention to the impact of the Justice’s passing on labour unions in the US: ‘Public sector unions in the United States, which enjoy a membership rate nearly five times that of private sector unions, were sure to suffer a death blow by the Supreme Court. Until yesterday.
‘In Harris v Quinn, a seemingly small case out of Illinois, the Supreme Court last year held in a decision of five votes to four that a discrete group of public employees, non-union home healthcare workers, could not be charged fair share fees because they were not ‘full-fledged’ public employees. That narrow holding was used as an invitation by the conservative majority to overrule a 1977 decision, Abood v Detroit Board of Education – a precedent that is vital to the very concept of public employee unionism. In paragraph after paragraph, page after page, the main Harris opinion written by Justice Alito sought to undermine the legitimacy of Abood.
‘The vehicle for destroying Abood is Friedrichs v California Teachers Association, a ginned up case that rocketed out of the Ninth Circuit on the plaintiff’s consent that judgement was appropriate against her based on Abood. Oral arguments were heard last month and a decision in favour of Ms Friedrichs by five votes to four was expected in June. No more. Labour unions and working people dodged a nuclear bomb. Friedrichs would have bankrupted public sector unions, as Scott Walker did in Wisconsin, and political money spent in favour of workers and their issues would have dried up. That is the point of Right to Work and other dues attacks on unions. Until money is taken out of politics, and maybe a new Supreme Court will do just that, the political playing field cannot be one sided.’
President Obama has committed to nominating a replacement for Justice Scalia. Republican Senate Majority Leader Mitch McConnell has threatened to block the Senate confirmation process until the next president has been sworn in. The Majority Leader’s threat is perhaps the litmus test for the significance of what happened this past Saturday.
At year’s end, here in the nation’s capital there is the ritual they call “credit claiming.” Legislators claim credit for everything from corn and soy subsidies, programs or pieces of legislation. Credit claiming is not limited to elected officials — even government agencies do it.
At the U.S. Department of Justice, its press office, pointing to nearly $6 billion in 2014 recoveries under the False Claims Act, is spinning claims of success. The FCA, a law dating back to Lincoln’s presidency, allows the government to seek redress from individuals or entities that have in some way caused false statements to be used in the process of securing payment of government monies. The FCA is mostly known for its “qui tam” provisions that allow private citizens — commonly called whistleblowers — to bring suit in the name of the government, and to be paid a bounty from recovered funds. Once these suits are brought, the DOJ may intervene and pursue the case with or without the help of the whistleblower and his or her counsel.
For its part, the media has trumpeted the DOJ’s claim to success as have public interest groups and even some whistleblower lawyers. No doubt, the $5.69 billion in recoveries is a high water mark for FCA recoveries; but is there more to the story?
It turns out that of the $5.69 billion, $2.3 billion was recovered from healthcare providers, including the pharmaceutical industry, and $3.1 billion was recovered from the financial services industry including the big banks. This means that $5.4 billion was recovered from entities that had no direct procurement relationship with the federal government or the states. How does this work? The FCA makes it unlawful to file a false claim or to “cause”one to be filed. Marketing drugs for purposes not approved by the Food and Drug Administration, and provision of healthcare that is not medically necessary are just some examples of conduct that cause the Medicare and Medicaid systems —and state and federal health plans — to pay out dollars that should not have been paid.
That only a fraction of the $5.69 billion was recovered from direct procurement contractors, including Boeing and Hewlett Packard, is telling. It is a statistic that has remained a constant year in and year out as most FCA recoveries have come from entities — particularly healthcare providers — where the accused culprit does not have a direct government procurement relationship. Indeed, the top fifteen FCA recoveries of all time are with entities, including Abbott, Bank of America, and GlaxoSmithKline, that have no direct procurement relationship with the government.
Does this mean there are more indirect relationships than direct procurement relationships? Of course not. The Department of Energy, the Department of Defense, the Department of Education, the Environmental Protection Agency, and the Department of Transportation, spend billions of dollars each year on direct procurement contracts. But with these agencies spending so much money on private contractors, why is it that only a fraction of the 2014 FCA recoveries can be attributed to contractors working with these mammoth government agencies? Is it that these agencies do such a stellar job of managing their contractors?
Not a chance. These agencies are undoubtedly rife with contractors who skimp on standards, violate specifications, and overbill for their work. In 2011, the bi-partisan Commission on Wartime Contracting estimated that the military efforts in Iraq and Afghanistan resulted in $31-60 billion in contractor waste and fraud. Commission Co-Chair, Michael Thibault, former Deputy Director of the Defense Contractor Audit Agency, noted at the time that while large numbers of contractors were used in these military efforts, the government had no effective management and oversight of contractor spending.
One looming question is whether the agencies themselves are so in need of their contractors that they are willing to overlook derelictions. Are these agencies protecting rogue contractors and, if so, does it make a difference when it comes to civil prosecution under the FCA?
First, the statistics seem to point in this direction. Second, absent agency cooperation, the Department of Justice is — to some degree — unable to secure relief under the FCA. Think of it this way: the DOJ is the law firm for the government, and its clients are government agencies. If the client says it has not been harmed, it is hard for the lawyer to pursue litigation. Naturally an agency cannot waive requirements that are matters of law or regulation, but it is still no easy task to pursue a case when the client is not cooperative.
Now what about this $5.69 billion figure? While we know this was the amount recovered, what we do not know is whether it represents single, double, or treble damages, and whether civil penalties — between $5,000 and $11,000 for each false claim —were waived or collected. In settling cases, the government has made a practice of waiving penalties and not imposing the full three times damages provided by law. But does this really make sense, particularly when — despite the optics of large FCA sanctions — some accused culprits are undeterred with repeat violations of the FCA?
No doubt the $2.3 billion in healthcare fraud recoveries is a large chunk of change. Yet by whose standards? In 2010, Acting Deputy Attorney General, Gary Grindler, projected that healthcare fraud accounted for between 3 and 10 percent of total government healthcare spending, or between 27 and 80 billion dollars, in that year alone. By these lights, accused fraudsters can still walk away with exponentially more than they are being required to put back.
The point of all this is that it is time to ask hard questions of our government credit claimers. And maybe the media should take a lesson from whistleblowers, who make their mark by questioning norms and claims that are commonly accepted.
Yesterday, the 3rd Circuit issued an opinion regarding direct and independent knowledge requirement of the original source exception to the public disclosure bar. It found that, among other things, “knowledge of a scheme is not direct when it is gained by reviewing files and discussing the documents therein with individuals who actually participated in the memorialized events.”
The relator, Karl Schumann, was the VP of contracting for Medco. He alleged that Bristol-Myers Squibb (BMS) paid Medco sham data fees and rebates relating to the drug Coumadin, and that the BMS failed to include those amounts when calculating the price thereby inaccurately reporting an incorrect best price to the government. He made the same allegations regarding AstraZeneca and its Prilosec and Nexium drugs. The trial court dismissed the case on public disclosure grounds as he was not an original source. In the lower court, he argued that “he had learned of BMS’s conduct by reviewing existing agreements and internal documents in Medco files, discussing them with Medco colleagues, negotiating rebate and data fee agreements with BMS, and comparing the terms of those agreements with others he had seen in his years in the pharmacy-benefits industry.”
Upon appeal, the third circuit addressed the standard for having direct and independent knowledge under the FCA. Citing and quoting from prior cases it said that:
- Direct and independent are separate requirements that have to be met;
- “Direct knowledge” is “knowledge obtained without any intervening agency, instrumentality, or influence: immediate” and is “first-hand, seen with the relator’s own eyes, unmediated by anything but [the relator’s] own labor, and by the relator’s own efforts, and not by the labors of others, and . . . not derivative of the information of others.” (Slip opinion at 16, citations omitted); and
- Independent knowledge means that “knowledge of the fraud cannot be merely dependent on a public disclosure”, it means the relator “must possess substantive information about the particular fraud, rather than merely background information which enables a putative relator to understand the significance of a publicly disclosed transaction or allegation.” (Slip opinion at 16-17, citations omitted).
In applying the law to the case before it, the Court agreed with the lower court that Relator’s knowledge was not direct and independent. The key section states:
First, knowledge of a scheme is not direct when it is gained by reviewing files and discussing the documents therein with individuals who actually participated in the memorialized events. See Paranich, 396 F.3d at 335-36; Stinson, 944 F.2d at 1160-61. Second, Schumann’s description of his involvement in Medco’s business with BMS, including negotiating rebate and data fee agreements and recognizing that BMS was aware of its best-price reporting obligations, does not evince direct and independent knowledge of any improper kickback or inaccurate best-price report. See Paranich, 396 F.3d at 336 & n.11 (noting such knowledge gained when relator’s involvement constituted filing false claims on defendant’s behalf); Houck on behalf of the United States v. Folding Admin. Comm., 881 F.2d 494, 505 (7th Cir. 1989) (finding relator’s knowledge direct when he was involved by helping others file false claims); see also In re Pharmacy Benefit Mgrs. Antitrust Litig., 582 F.3d at 434 (explaining PBMs negotiate discounts and rebates from drug makers). Finally, Schumann’s conclusions that BMS intended to pay kickbacks to Medco and to submit false claims to the government, based on his experience in and understanding of the PBM industry, do not qualify as independent knowledge under the FCA.
Here is a copy of the opinion: Schumann v BMS.