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U.S. Court In Illinois Holds Relator Not Required To Arbitrate Qui Tam Action Brought Against Her Former Employer


HLD, v. 31, n. 1 (January 2003)

U.S. Court In Illinois Holds Relator Not Required To Arbitrate Qui Tam Action Brought Against Her Former Employer

Relator Jacqueline Schultz brought a qui tam action under the False Claims Act (FCA) in federal district court against Cancer Treatment Centers of America and others (collectively defendants), alleging defendants acted together to fraudulently bill for services paid for by Medicare. Relator worked as a licensed accredited records technician at one of the cancer centers that defendants operated from 1997 until she was terminated in May 2000. After filing the action, relator amended her complaint to add claims for wrongful termination. Defendants moved to dismiss or to stay the action pending arbitration.

The U.S. District Court for the Northern District of Illinois granted in part and denied in part defendants' motion. As to the claims that defendants defrauded Medicare, the court found that the arbitration provision in relator's employment contract clearly did not require arbitration of her qui tam action. The employment contract only required arbitration of disputes that arose between the parties, the court noted. The qui tam action, however, arose from allegedly false claims that defendants submitted to the government. The court acknowledged that the arbitration provision's application to relator's wrongful termination claims was "a closer call," but concluded that these claims were outside the scope of the agreement. According to the court, "the intent of the parties when signing this agreement was to protect confidential information acquired by relator during her employment, not to establish blanket terms to define relator's employment." Although resolving relator's claims may ultimately require disclosure of such confidential information, "relator's claims neither arise under nor concern the agreement or its terms." Thus, the court denied defendants' motion for the majority of relator's claims.

The court granted the dismissal motion, however, as to relator's claims alleging wrongful termination in violation of public policy and breach of contract for terminating her medical benefits. Relator failed to show that her discharge contravened a clear mandate of public policy. "Both the False Claims Act and the Illinois Whistleblower Reward and Protection Act provide relator with protection and act to deter the alleged wrongdoings," the court said. In addition, the court held that the Employee Retirement Income Security Act of 1974 pre-empted relator's state law breach of contract claims.

United States ex rel. Schultz v. Cancer Treatment Ctrs. of Am., No. 99 8288, 2002 WL 31497338 (N.D. Ill. Nov. 4, 2002) (7 pages).

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