by Stephen Kohn
Second, figuring out the filing deadlines for qualifying for a reward is somewhat tricky. All of the reward laws place an emphasis on being the “first to file.” This means, whoever files a reward claim first may be the only person who qualifies to obtain compensation. The False Claims Act has a strict “first to file” rule. Whoever raises a claim first is the only person who has standing to pursue that claim. Thus, regardless of the actual statute of limitations for filing a case, you may lose your rights if you do not act quickly and secure your position as “first to file.” Whether or not you are the “first to file,” False Claims Act cases generally must be filed within six years after the fraud is committed. Securities cases generally need to be filed within five years of the violation.
Take the case of Vera English. For twelve years English worked as an hourly employee at the General Electric (GE) Chemet Laboratory in Wilmington, North Carolina. She was responsible for the quality control of dangerous radioactive materials. After witnessing, time and again, hazardous practices within the laboratory, English began to document and report various improper practices. These hazards included contamination, defective equipment, the failure of employees to be tested for radiation before leaving the “controlled” areas, leaks of radioactive materials, employee exposure to dangerous fumes, and spills of radioactive materials left unmarked by the responsible parties. Her complaints led to a work stoppage in the contaminated areas. They also caused the Nuclear Regulatory Commission to cite GE for a number of nuclear safety violations, including a “Severity Level IV violation” due to the failure of employees to use radiation-detection equipment to monitor their exposures and/or to prevent radioactive materials from escaping without detection from the controlled areas.
English’s reward for exposing these violations and unsafe conditions could have been predicted: GE barred her from the lab and gave her ninety days to find a new position within the GE facility. When she could not find another position, she lost her job. Under the federal nuclear whistleblower law in existence at the time, she was required to file her wrongful discharge claim within thirty days of the adverse action. She filed her claim within thirty days of her termination—her last day of work. Her case went to trial, and GE was found guilty of illegal retaliation. She was ordered reinstated with full back pay and benefits, she was awarded $70,000 for emotional distress damages, and she was awarded compensation to cover her attorney fees and costs. English’s case seemed to have a fairy-tale ending.
However, GE was not finished, and they had not given up. GE fought English’s case every step of the way, hiring major corporate law firms to carry its water. Numerous legal technicalities were raised, and they were finally able to get one to stick: failure to file a timely complaint. They argued that English had failed to file her claim under the thirty-day statute of limitations.
How could this be? She filed her claim within thirty days of losing her job. GE argued that because she was told that she had ninety days to find a new position within the company, her thirty-day filing period commenced to run even before her last day of work. The courts agreed, and her case was thrown out. GE got away with violating the nuclear whistleblower law based on this technicality. English lost her job and career. She collected not one dime in damages. The fairy-tale ending was not to be.
The courts created precedents for strictly interpreting the statutes of limitations, even those as short as thirty days. Somehow courts have reasoned that employees such as English should know, right from the start, that GE’s offer to permit her to find a new position in the company was bogus, and that her mandatory obligation to file a claim within thirty short days commenced when she was told her position was being eliminated, not when GE actually terminated her employment. With few exceptions, these interpretations remain the law of the land.
A few years after English’s case was thrown out, Congress amended the nuclear whistleblower law and increased the statute of limitations under that law to 180 days. Unfortunately, other laws (most notably the federal environmental whistleblower protection laws) still have radically short thirty-day limitations periods.
Timing is also very important under whistleblower reward laws. Laws such as the False Claims Act have a “first to file” rule that awards monetary benefits to the whistleblower who is the “first” to file a rewards claim. Likewise, the Dodd-Frank Act’s corporate rewards program has a similar incentive for being the first to file a claim, as do all other reward laws. Under the rules of the Securities and Exchange Commission, delaying filing a claim can result in the SEC’s lowering the amount of reward for which you may be entitled, or even disqualifying you from a reward if another whistleblower files the same claim before you filed yours.
The bottom line? Don’t delay. Deadlines are easily missed but rarely forgiven.
PRACTICE TIPS
Major Court rulings on how to determine when a statute of limitations commences to run:
• Nat’l R.R. Passenger Corp. v. Morgan, 536 U.S. 101 (2003); Lewis v. City of Chicago, 130 S.Ct. 2191 (2010) (continuing violations) (must show present violation within statutory filing period)
• Delaware State College v. Ricks, 449 U.S. 250 (1982) (when the clock starts ticking on your filing deadline)
• Turgeau v. Administrative Review Board, 446 F.3d 1052 (10th Cir. 2006); School District of Allentown v. Marshall, 657 F.2d 16 (3rd Cir. 1981); Bonham v. Dresser Indus., 569 F.2d 187 (3rd. Cir. 1977) (cases explaining potential “equitable” justifications for enlarging the statute of limitations)
• KBR v. U.S. ex rel. Carter, 135 S.Ct. 1970 (2015) (clarifying “first to file” rule and statute of limitations under the False Claims Act)
The SEC rule on qualifying for a reward if you contribute to an ongoing investigation for which you are not the original source is located at 17 Code of Federal Regulations § 240.21F-4(c)(2).
The SEC rules explaining the benefits of being the “first to file” are published at 17 C.F.R. Part 240.21F-4(b)(5) and (c) and are explained at 76 Federal Register 34300, 34321-23. Handbook Rule 6 sets forth the “first to file” rule under the False Claims Act.
RULE 23Conduct Discovery
Don’t be fooled; modern civil lawsuits have nothing in common with the courthouse dramas portrayed on television shows such as Law & Order. The case is not won as a result of a dramatic admission during a trial. There are no sobbing confessions, nor are there admissions of guilt. Friends forget, coworkers get scared, and witnesses lie. Jurors can be skeptical, and judges can be cynical. Whistleblowers’ motives will be under scrutiny, and their performance will be challenged.
Whistleblowers do not win cases because justice is on their side, and they do not win because of luck. Cases are won and lost on hard evidence, usually obtained through the extraordinary efforts of the whistleblower before he or she is fired or his or her attorneys during the pretrial discovery process.
In other words, simply being right is not enough. Whistleblowers have to prove they are right. Contemporaneous documentation is key. If a report was falsified, where is the original? If a quality assurance standard was not met, where are the test evaluations? If a concern is raised with a supervisor, where is the e-mail documenting these disclosures? Was a log kept? Were incriminating conversations lawfully taped? The hard and often tedious work of collecting evidence, saving documents, and engaging in extensive discovery is the foundation of a good case. The foundation must be strong, and there are no shortcuts.
Begin “Discovery” Ahead of Time and Be Thorough
Discovery can and should start well before a lawsuit is filed, because documentary evidence makes or breaks a case. When someone is lying, a simple e-mail can prove a claim or demonstrate the pretext used to justify the discharge.
As important as collecting documentation is, be sure efforts at “self-help” do not cross the line. As explained more fully in Rule 20, an employee should not sneak into his or her boss’s office at night and steal company documents. Stealing confidential person
nel files about other employees usually results in a severe sanction against the whistleblower. If an employee breaks the law to prove a case, he or she probably has already lost. In extraordinary circumstances there may be some plausible justification for violating rules (such as removing company documents in violation of policy if and only if it can be proven that they would have been destroyed). However, generally speaking, whistleblowers will be held to higher performance and higher conduct standards than other employees.
When companies learn that an employee may have stolen “confidential” information from work, their high-priced attorneys often jump with glee, not out of concern for the previous but out of joy, as they may have stumbled upon a way to discredit the whistleblower. They sometimes use that fact to justify a termination (if the employee still works for the company) or to severely limit damages (if the employee was already fired). In evaluating how to deal with improper document removals, courts apply a “balancing test.” One federal district court described the test as follows: “Employee conduct must be reasonable in light of the circumstances and must be balanced against the employer’s right to run his business.”
Another court set forth six factors that should be considered when weighing this balance:
1. How were the documents obtained? Did the employee have proper access to the documents, or did the employee obtain them in an innocent manner? Did the employee rifle through company files and surreptitiously copy the material?
2. To whom did the employee show the documents? Were they shown to coworkers and friends, or were the documents just provided to government investigators?
3. What was in the documents? Was the information the type that should be kept strictly confidential and that clearly should not have been copied?
4. Why were the documents obtained and why were they produced?
5. What was the employer’s privacy or confidentiality policy?
6. Could the employee have obtained the material in a manner that did not violate company policy?
The best practice clearly is very simple: Don’t break the law to expose the boss.
Documentary Evidence Is Vital
Examples of the critical role the right documents play in any whistleblower case are endless. Performance records of the whistleblower are crucial in establishing the employee’s credibility. E-mails can substantiate employer knowledge of protected activity and document animus against the whistleblower. Safety records can prove that the company lied. Applications for government contracts can demonstrate false statements used to illegally obtain a grant or contract, and financial records can prove tax fraud. The list goes on and on, and the need for the records is obvious.
If a case enters active litigation, the company must respond to informational requests filed by the whistleblower. Under the rules of Federal Civil Procedure (which are consistent with the rules of practice under state laws and within the Department of Labor), a party to a lawsuit can engage in “discovery.” This permits a whistleblower to submit broad document requests, requiring the company to produce thousands of pages of potentially relevant documents, such as performance records, personnel records of other comparable employees, internal investigative reports and audits, e-mails, and records related to the whistleblower allegations. In addition to document requests, witnesses can be questioned, under oath, in pretrial depositions, and subpoenas can be served on persons who have information relevant to the case.
Discovery is the single most important part of the pre-trial process. It creates the factual record necessary to defeat a motion for summary judgment (an attempt by the employer to have a case thrown out of court by a judge) and permits the whistleblower to “test” all the material evidence prior to trial. There are major tools at the disposal of a whistleblower during the discovery process.
DEPOSITIONS
Attorneys from each side can question relevant witnesses under oath prior to the trial. This gives an employee the opportunity to question all the company employees identified as having participated in the adverse action. These employees may confirm that the whistleblower engaged in protected activity and that the company knew of these activities. They may have information about causation, hostility against the employee’s whistleblowing, or pretext. All the deciding officials can be questioned about the case.
DOCUMENT REQUESTS
A company can be required to produce documents relevant to a whistleblower case, including e-mails, personnel files, and internal investigatory files. To prevent companies from destroying evidence, it is a good practice to compile a detailed list of materials that should be subpoenaed while still working. If a company obtains a detailed request for documents, it may suspect that you already have the materials and consequently will produce them, without a big argument, or you may be able to find evidence that it improperly destroyed documents, and use these facts as a basis to seek sanctions.
INTERROGATORIES AND REQUESTS FOR ADMISSIONS
Interrogatories are written questions that the company must answer under oath. Admissions are similar to interrogatories in that the company must admit or deny various facts, under oath. These can be used to force a company to explain specific actions in order to eliminate surprise at trial. For example, if an employee is fired, the company may be asked to explain the precise grounds for the termination and identify all persons responsible for the adverse action. In this manner an employee can conduct further discovery in order to disprove the justifications for the firing. Furthermore, the employee can act without the worry that the company will change its story at trial once the weaknesses in the case are documented.
THIRD-PARTY SUBPOENAS
If evidence is not in the control or possession of the employer, third party subpoenas can be filed. These subpoenas permit a party to conduct discovery (such as depositions and requests for production of documents) on former employees, government investigators, and other nonparty witnesses.
Discovery tends to be far more important for the employee than the employer. The company usually possesses most of the relevant records, such as the employment files of other employees (to determine whether the whistle-blower was subjected to “disparate treatment”) and documentation related to the underlying whistleblower allegations. However, the company can conduct discovery against the employee as well.
Common areas of company discovery are: psychological records if the employee is alleging emotional distress; an employee’s prior work history (in an attempt to either argue that the employee engaged in résumé fraud to get his or her job, or argue that the employee had a history of poor performance); and a fishing expedition in an attempt to find derogatory information to use in cross examination.
What to Look for in Discovery
There are a number of important goals of discovery that an employee whistle-blower needs to identify in planning. Many of these goals are unique to a specific case, but some are predictable, such as:
• Learn precisely what the company’s case is against the employee to prevent any “surprises” at trial.
• Start building a defense. Learn the company’s case, both its strengths and weaknesses. If the whistleblower doesn’t know what the company witnesses are going to say, how can he or she prepare a solid impeachment?
• Prove that the underlying whistleblower allegations were true. This can bolster an employee’s credibility, while impeaching the company’s motives. Although the company may argue that evidence of misconduct is irrelevant, this is simply not the case. If the company did in fact engage in misconduct, that misconduct is highly relevant to proving the true reason for retaliation.
• In a False Claims Act case, prove the fraud.
• Verify “disparate treatment.” Disciplining a whistleblower for offenses for which other employees are regularly given a “pass” constitutes strong evidence of discrimination and pretext. Under a disparate treatment analysis, even if the whistleblower did have performance problems, the employee can prevail in the case if the employee exp
erienced harsher treatment than other workers who never engaged in protected activity. That is the classic definition of discrimination: treating two similarly situated employees differently solely because one engaged in protected activities and the other did not. The primary method for proving disparate treatment is to engage in discovery concerning how other employees are treated, including obtaining access to disciplinary records and personnel files.
• Obtain e-mails and other computer-generated files. This type of contemporaneous documentation is often highly relevant to a case, as it contains confirmation that various managers knew or suspected that an employee was a whistleblower and often documents how these managers reacted to the protected activities of their subordinate.
• Obtain evidence of pretext. In order to demonstrate weaknesses in the company’s case against the employee, each manager responsible for the adverse action can be questioned under oath. Did the company thoroughly investigate the allegations against the employee? Did the company give the employee a fair shot in disproving those allegations? Are there conflicts regarding the reasons given by the managers for taking the adverse action? Did anyone lie about the employee? Is the oral testimony of the managers consistent with the documentary evidence? Proving that a company lied about an employee is never an easy task, but without discovery it is usually an impossible one.
During the discovery process a whistleblower should gather all the evidence that may help prove his or her case, or disprove the company’s case. Discovery is an opportunity to find out the other team’s weaknesses and adjust strategy accordingly. Hunting for weaknesses in the company’s case, contradictory testimony, harmful admissions, and incriminating documents are all examples of weaknesses that a whistleblower can use to his or her advantage.