Author: JGL Law

At the recent Federal Bar Association Annual Meeting and Convention in Salt Lake City, Utah, Jay Holland was appointed to the Executive Board of the Qui Tam Section. The FBA Sections provide networking opportunities where lawyers can discuss current issues in their particular area of law. 

Jay Holland is chair of Joseph, Greenwald & Laake’s Qui Tam Whistleblower and Labor & Employment practices. He is a well respected qui tam litigator, known for taking on tough cases and achieving exceptional results.

Former Employee’s Qui Tam Lawsuit Leads to Convictions and Jail for Individuals who Created Sham Companies, and Recovery For Taxpayers Against PAE, Inc. and R.M. Asia for Allegedly Falsely Billing U.S. for Vehicle Parts for Afghanistan

ALEXANDRIA, Va. – Sept. 15, 2015 – PAE Government Services, Inc. and R.M. Asia Ltd. have settled a whistleblower lawsuit for $1.45 million, resolving allegations that company employees created fictitious entities and set up a bid-rigging scheme to falsely bill the United States for supplies intended for the Afghan National Army. Steven Walker, a former project manager for PAE in Afghanistan, brought forward the complaint after he discovered the scheme and reported it to government investigators. 
 
The lawsuit, United States ex rel. Walker v. PAE, et al., was filed in federal court in Alexandria, Va., by attorneys Jay P. Holland and Brian J. Markovitz, partners at the Greenbelt, Md.-based law firm Joseph, Greenwald & Laake, P.A., and Scott Oswald and David Scher of The Employment Law Group in Washington, DC
 
“Mr. Walker’s acts in ferreting out the fraud in this case were extensive and brave,” said Holland, who served as lead counsel in the case. “Kick-backs and collusive bidding can be very difficult to uncover in a war zone, like in Afghanistan, and the wrong-doers would never have gone to jail, and the companies would not have been held responsible, if it were not for Mr. Walker’s sense of duty and loyalty to his country.” 
 
The U.S. Army awarded a contract to PAE on Dec. 19, 2007. The contract required PAE to provide the Afghanistan National Army with vehicle-fleet maintenance and an apprenticeship/training program. The contract also required PAE to order vehicle parts and perform supply-chain management. PAE then awarded a subcontract to R.M. Asia to provide warehousing services for vehicle parts and to perform supply-chain management. 
 
In his complaint, Walker contended that PAE and R.M. Asia submitted false claims under the contract as a result of a bid-rigging scheme to steer subcontracts to companies owned by a PAE manager and his relatives, as well as an R.M. Asia manager and his relatives from May 2007 through June 2010. The complaint also alleged that defendants PAE and R.M. Asia either knew or should have known of the fraud and failed to take appropriate measures to stop it or report it. Walker’s complaint led to an intensive criminal investigation against the individuals responsible for the bid-rigging and kickbacks, and ultimately to guilty pleas, conviction and prison sentences for the schemers.  
 
The following individuals pled guilty in the bid-rigging scheme: Keith Johnson (United States v. Keith Ashley Johnson, No. 1:13cr-305 [EDVA]); John Eisner (United States v. John E. Eisner, No. 1:13-cr-344 [EDVA]); Angela Johnson (United States v. Angela Gregory Johnson, No. 1:13-cr-305 [EDVA]); and Jerry Kieffer (United States v. Jerry Kieffer, No. 1:13-cr-343 [EDVA]). All received prison sentences.   
 
Prior to accepting a position with PAE in Afghanistan, Walker was a professor at Oklahoma State University in engineering and diesel mechanics. He initially was hired as a training manager, and then quickly promoted to program manager. Walker learned of the fraud both while he was employed, and after he came back to the United States. Walker traveled throughout the most dangerous areas of Afghanistan without military escorts to inspect warehouses at forward military bases to confirm his suspicions, and when he returned to the United States he drove to Nashville, Tenn., from his Oklahoma home to inspect marriage records to confirm the family relationship between Keith Johnson and Angela Johnson, and the companies they controlled.  
 
“The Anti-Kickback Act and conflict of interest rules are in place to prevent this type of fraud,” said co-counsel Markovitz. “The complaint alleged that the defendants formed a conspiracy which they called ‘The Network,’ where they set up the bid process to assure that one of their own companies would bid against an unqualified company, and therefore made sure the bids were awarded to themselves.”
 
The False Claims Act is “a powerful tool to protect the taxpayer from this type of fraud,” Holland added. “The False Claims Act complaint clearly got the attention of the federal authorities and enabled the criminal and civil prosecution of this case.”

 

In my October blog post, I discussed the recent rash of class actions by former unpaid interns in New York state against high-profile employers like Saturday Night Live, Conde Nast Publications, Viacom Inc., and many others. While many employers choose to settle rather than risk litigation (like Sirius XM which recently agreed to a settlement to pay $1.3M to some 1,800 former interns),[1] Fox Searchlight Pictures, Inc. continued to litigate its case and gamble a potentially large, and very public, loss. At first it looked bad for Fox and other big employers. On June 11, 2013, the lower court in the Fox case sided with the interns,[2] who argued that they were unlawfully denied payment since they were “employees” under the Fair Labor Standards Act (“FLSA”). Fox appealed, hoping to reverse not only the lower court, but also the tide of unpaid intern class action lawsuits. Fox’s bet seems to have paid off.

In what has to be seen as a big win for employers and a blow to interns, the Second Circuit issued its opinion in Glatt et al. v. Fox Searchlight Pictures, Inc. et al. last month, reversing the lower court and issuing a new test for employment status in that Circuit.[3] In doing so, the appeals court sent the case back to the lower court to apply a new, “primary beneficiary test.” This test minimizes, if not largely rejects, the Department of Labor’s published and widely followed guidance on this topic.

This issue was new for the Second Circuit. It had never before grappled with the question of when an unpaid intern is entitled to compensation as an employee under the FLSA. The Supreme Court has also never squarely delineated the difference between unpaid interns and paid employees under the FLSA and has never issued a cohesive test for determining employment under that statute. However, the parties and the Fox Court all had to reconcile their positions with the only Supreme Court case discussing interns and the FLSA at all – Walling v. Portland Terminal Co., 330 U.S. 148 (1947). Without providing a test, the Portland Terminal Court held that unpaid railroad brakemen trainees should not be treated as employees under the FLSA. This opinion – 68 years ago – is the last time the Supreme Court spoke on this topic.

From the Portland Terminal opinion, the Department of Labor developed its own interpretation and guidance of when an unpaid intern is an employee for FLSA purposes. It published DOL Fact Sheet #71, providing the agency’s guidance on the definition of “employee” under the FLSA. The interns relied heavily on the six factors in the DOL Fact Sheet, but argued that not all need be satisfied. They pushed the Second Circuit to adopt a less rigid test whereby interns would be deemed employees whenever the employer receives an immediate advantage from an intern’s work.[4] The DOL, itself,[5] advocated that its factors lay out the proper test and its agency opinion is worthy of judicial deference.

The court rejected both of these approaches, siding instead with the employers.

It first refused to grant deference to the DOL’s guidance, stating that it was merely the agency’s interpretation of case law, and not of a statute or regulation. “Because the DOL test attempts to fit Portland Terminal’s particular facts to all workplaces, and because the test is too rigid for our precedent to withstand,” the Court said, “we do not find it persuasive, and we will not defer to it.”[6]

It then rejected the tests advanced by both the interns and DOL, instead agreeing with the employers that “the proper question is whether the intern or the employer is the primary beneficiary of the relationship.”[7] This primary beneficiary test, the court explained, has two “salient features.” First, in a nod to Portland Terminal, it “focuses on what the intern receives in exchange for his work.”[8] Second, in an apparent attempt to modernize the analysis, the primary beneficiary test “accords courts the flexibility to examine the economic reality as it exists between the intern and the employer.”[9]

While the primary beneficiary test is necessarily fact specific and has to be taken on a case-by-case basis, the Second Circuit did provide a roadmap of sorts in the form of the following seven, non-exhaustive considerations:

1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.[10]

In explaining its “flexible approach,” the court refused to set hard parameters. It said, “applying these considerations requires weighing and balancing all of the circumstances. No one factor is dispositive and every factor need not point in the same direction for the court to conclude that the intern is not an employee entitled to the minimum wage. In addition, the factors we specify are non-exhaustive—courts may consider relevant evidence beyond the specified factors in appropriate cases.”[11]

However, despite the court’s insistence that no one factor was dispositive, it is clear that the court afforded great weight to the fact that all of the interns in the Fox case were students. Appearing to want to break from the antiquated test borne by the Portland Terminal paradigm of the 1940’s intern, the Fox Court noted that its new approach “reflects a central feature of the modern internship—the relationship between the internship and the intern’s formal education.”[12] The court contrasted the student interns in the Fox case to the non-student brakeman in Portland Terminal. It said, “by focusing on the educational aspects of the internship, our approach better reflects the role of internships in today’s economy than the DOL factors, which were derived from a 68–year old Supreme Court decision that dealt with a single training course offered to prospective railroad brakemen.”[13] While perhaps not a dispositive factor, the fact that the Fox interns were students was obviously an important one.

This case should be studied by employers and employment lawyers not only in the Second Circuit, but also in Maryland and the rest of the Fourth Circuit in which Maryland resides.[14] In a recent case that did not garner national attention like the Fox case, the federal court in Maryland quietly reiterated that the Fourth Circuit unequivocally applies a “primary beneficiary” test[15] for interns, like that discussed in Fox. This Circuit also refuses to defer to the DOL Fact Sheet, preferring instead to rely on the “clear precedent” and “principles stated in” its own 1964 opinion in Wirtz v. Wardlaw.[16] In the Fourth Circuit, the test focuses on “the nature of the training experience”—what interns do, what they learn, and what guidance they receive.[17]

Observers of the Supreme Court might see it tackle this issue in the not-so-distant future. There are now varying tests out there depending on the circuit,[18] a different test advanced by the Department of Labor, and 68-year-old Supreme Court precedent lacking clarity. This issue might be ripe for resolution by the High Court soon.

Until there is a definitive ruling covering all states, consult with an employment lawyer in your state if you use interns or other non-traditional classes of employees to make sure you are not running afoul of the Fair Labor Standards Act or similar state acts.

Two days before his 15th birthday, Samuel Metler visited a radiologist, who diagnosed him with walking pneumonia. After receiving treatment, Samuel still experienced symptoms, which grew so severe that he was rushed to the emergency room. After examination, the doctors determined that Samuel was actually suffering from heart failure.

Yet, despite the diagnosis of heart failure, the doctors continued to administer fluids to Samuel that allegedly exacerbated the issue and, within a day, he was airlifted to Baltimore’s “XYZ” Medical Center. While doctors there further altered his diagnosis, they did not discontinue administering fluids, which Samuel’s parents now allege caused his heart to swell, resulting in irreversible damage that required a heart transplant.

Although Samuel is fortunately alive, his parents allege that he will likely need additional heart transplants in the future. They also believe that, if the various medical professionals attending to Samuel had acted properly and discontinued administering fluids, the extent of damage to his heart could have been avoided.

In May 2015, Samuel’s parents filed suit against his medical providers, alleging medical malpractice caused by the providers’ negligence. Joseph Greenwald & Laake is not involved with Samuel’s lawsuit and does not represent any parties in the matter.

There is no question that Samuel’s case is tragic – a teenage boy at the pinnacle of health suddenly faces a life-threatening health crisis. However, a question that remains to be determined as the case winds its way through the legal system is whether Samuel’s physicians were actually negligent in providing medical care.

What is Medical Negligence in Maryland?

The act of proving negligence in Maryland medial malpractice lawsuits rests at the center of every case. That is because proving negligence is one of the key components required to win medical malpractice cases. However, while proving negligence in personal injury cases outside the medical field can be fairly straightforward, it often presents a great challenge in the context of medical malpractice claims.

The reason proving negligence in Maryland medical malpractice lawsuits is difficult is because medicine is not an exact science. This might sound surprising, but the fact is that the law allows for imperfection in the diagnosis and treatment of patients. Doctors are not expected to act flawlessly.

That said, there are still parameters that all medical professionals in Maryland must meet to avoid performing what would be deemed negligent care. This is what Courts refer as the “standard of care.”

What is the Standard of Care in Maryland?

“Standard of care” is the legal term used to refer to the threshold for what constitutes negligence in medical malpractice claims. If a Court or Jury determines that a medical provider breaches the standard of care, then his or her actions were negligent.

What exactly is the standard of care? That is a difficult question that does not have a simple answer. The answer depends on a many factors, including:

• The medical condition in question
• The patient’s age
• The patient’s overall health history
• The health care provider’s specialty,

The point is that what is considered an appropriate standard of care for a 15-year-old with a heart condition might be drastically different for a 60-year-old with an identical heart condition. That is because the standard of care is defined as that which a reasonable medical practitioner would do under the same or similar circumstances.

Proving Standard of Care in Maryland

Proving the appropriate standard of care that should have been observed when treating a patient is one of the most important factors that can affect the outcome of a medical malpractice claim. This is also one of the greatest challenges and requires the testimony of medical experts.

In Maryland, expert witnesses whose testimony is used to determine the standard of care in a particular case must have the same or similar training and experience as the defendant in the case. This expert provides testimony that is intended to establish the standard of care that the defendant – the medical provider – should have used. It is then up to the attorney for the plaintiff – the injured party who filed the lawsuit – to prove the following:

• What the standard of care in in the particular setting
• The ways in which the medical provider breached the standard of care
• How the breach caused injury to the patient
• The extent of the patient’s injuries

For Samuel and his family, this means they will first have to establish what the standard of care should be for medical providers who treat similar patients who also suffer from the same condition. They will then have to show how his medical providers failed to adhere to this standard, which his parents claim was the continued administration of fluids under  circumstances in which no fluid should have been given so as to avoid damage to his heart. They then will have to prove that it was the administration of fluids that caused Samuel’s condition to worsen. Finally, they will have to prove the extent of the damage to Samuel’s health.

Proving medical malpractice cases is not easy. That is why it requires the knowledge of experienced medical malpractice lawyers who are familiar with the nuances of Maryland law. If you have any questions about Maryland medical malpractice law, the standard of care in Maryland or the Maryland medical malpractice claims process, contact Burt M. Kahn at bkahn@jgllaw.com. 

Law 360 recently reported on a False Claims Act (FCA) case that has reached the U.S. Supreme Court.

Erlanger Medical Center, a Tennessee hospital accused of knowingly submitting fraudulent claims for reimbursement to Medicaid, Medicare and other federal healthcare programs, has asked the U.S. Supreme Court to reverse a Sixth Circuit ruling on a False Claims Act case. Last year, the Sixth Circuit rejected the argument that the FCA complaint filed by a whistleblower, Robert Whipple, was invalid because disclosures made to government auditors and consultants did not constitute public disclosures – a condition that would have killed a False Claims Act suit. 

The Second and Seventh circuit courts would have ruled in the defendant’s favor, but the Sixth Circuit refused to reconsider the case en banc, citing a Ninth Circuit precedent. The Supreme Court has been petitioned to resolve the circuit, split which is critical to litigating FCA cases. 

JGL’s Jay Holland and Brian Markovitz represent Whipple. Commenting on the petition to the high court, Markovitz said, “We believe that the Sixth Circuit en banc got the decision right, and we’re hopeful that the Supreme Court will see the matter as we do, which is that this is something that should now be handled by the trial court on the merits.” 

The case is Chattanooga-Hamilton County Hospital Authority v. USA ex rel. Robert Whipple, case number 15-96 in the U.S. Supreme Court.

Lawsuit Accused NuVasive of Marketing Spinal Device for Uses Not Approved by the FDA and Paying Unlawful Kickbacks to Physicians to Induce the Use of NuVasive Devices

GREENBELT, MD – July 30, 2015 – Spinal device company NuVasive, Inc. has agreed to pay the federal government and state governments $13.5 million to settle a whistleblower lawsuit brought under the federal and numerous state False Claims Acts. The lawsuit alleged off-label marketing of NuVasive’s CoRoent™ spinal device and payment by NuVasive of prohibited kickbacks to induce doctors to use that device. 

The lawsuit, filed by Greenbelt, Md.-based law firm Joseph, Greenwald & Laake, P.A., alleged that NuVasive marketed the CoRoent device to physicians for uses not approved by the Federal Drug Administration (FDA). The FDA approved the device for limited use in only one spinal level in the lumbar and thoracic regions of the spine and for specific, relatively mild, spinal conditions. According to the Amended Complaint filed in the United States District Court for the District of Maryland, NuVasive knowingly marketed the CoRoent device from 2008 to 2013 for non-approved uses, including for use in more than one spinal level, for use in the thoracic region of the spine, and to treat more serious spinal conditions like scoliosis.

“A medical device company cannot market its products for uses that have not been approved by the FDA. Doing so can put patients at risk of harm,” said Jay P. Holland, a partner at Joseph, Greenwald & Laake and one of the attorneys representing the whistleblower in the case.  

The lawsuit alleged that marketing the CoRoent device for these non-approved uses could lead to patient harm, and that these uses marketed by the company were not reasonable or not medically necessary for the treatment of these conditions. Under these circumstances, the lawsuit claimed, the device should not have been covered by Medicare, Medicaid and other government insurance programs.   

Allegations also focused on the NuVasive-created organization known as the Society of Lateral Access Surgery (SOLAS). NuVasive was accused of using SOLAS, thinly veiled as a physician association, to offer and illegally pay physicians to induce them to use the CoRoent device in violation of the Federal Anti-Kickback Act. NuVasive paid physicians to author CoRoent-friendly articles and it paid speaker fees, entertainment, expenses and honoraria to doctors to attend events sponsored by SOLAS, according to the lawsuit. In addition, the lawsuit alleged that NuVasive created an outward appearance of independence for SOLAS, despite the fact that SOLAS was created, funded and operated solely by NuVasive.

The whistleblower lawsuit alleged that, as a result of off-label marketing and kickback schemes, physicians and hospitals were misled or induced into wrongly billing Medicare, Medicaid and other health care programs, resulting in millions of dollars improperly paid from the coffers of the federal and state governments.  

“The Anti-Kickback Act was enacted to avoid conflicts of interests for physicians,” explained Veronica B. Nannis, partner at Joseph, Greenwald & Laake who also represented the whistleblower in this case. “Physician independence is critical. Physicians should use medical devices because they are the best option for their patient, not because the physician has an economic incentive to choose one device over all others.” 

Holland and Nannis worked closely with the U.S. Attorney’s Office in Baltimore, led by Assistant U.S. Attorneys Thomas Barnard and Jason Medinger, who investigated the claims and resolved the case before litigation. The National Association of Medicaid Fraud Control Units participated by advancing the states’ interests. In addition, Colin M. Huntley, senior trial counsel in the U.S. Department of Justice Civil Division, played a key role in the early resolution.

“Participation from the private bar, the federal government and the states made this case an exemplar of the kind of private-public partnership the False Claims Act is meant to foster,” Holland said. “We are grateful for the hard work put in by all of the government attorneys and agents who brought about this resolution,” Nannis added.   

We all realize the internet has caused paradigm shifts in the market place – possibly in ways never imagined.

Who are the movers and shakers? The winners and losers? One big question can only be answered after the roll out of the “Uber revolution”. As protesting cabbies revolted in the streets of France, French prosecutors arrested French Uber executives, which some believe was done to placate the longtime respected taxi drivers industry. Other countries are handling the estimated 50 billion dollar “service app” company with crisis responses as well.

As the legal battles continue, this note suggests that once the issue of legal status of the parties is “redefined” with respect to all, that the “Uber Factor” may be seen as one of the most ingenious inventions of our changing global economy in enhancing financial interests of those on the top as well as the bottom.

Redefinition of legal roles to conform to these global shifts will allow all to benefit while interacting in a civil forum. The “service app” may be a prototype for other service areas such as cleaning services, handyman services, and other contractual industries.

As we trial lawyers commonly do, I attend conferences and am often reminded how antiquated our State of Maryland is – where contributory negligence will still bar a negligence case if the Plaintiff is one percent (1%) at fault. However, I am not only impressed, but proud that Maryland has tried to get ahead of the “Uber Factor”. Governor Hogan signed the bill the General Assembly presented to him this 2015 session regulating Uber activity.

Many issues still remain, but, for now, the new statute appears to have at least satisfied both Uber fans and traditional cab drivers. The Maryland legislature came together on this bill and was able to preempt all the municipalities and counties who were attempting to regulate the issue themselves. The Public Service Commission will now regulate Uber and its drivers.

The Governor, by signing Senate Bill 868, an Act titled Public Utilities – Transportation Network Services and For–Hire Transportation, provided, in part, who is responsible for insurance, to what extent, coverages, licensing, prerequisites such as background checks, and many other regulations.

Let’s recall another agency: The Maryland Workers’ Compensation Commission, which regulates one of the largest economic engines in our state, constantly determines who is an employer and upon whom the financial liability falls. These definitions are not similar to tax definitions, and are based on the statutory scheme and many years of case law. The Commissioners listen to the facts and apply the law on a case by case basis. The case can be appealed to the Circuit Court for a trial de novo (a new trial), and further to the appellate courts.

Interesting questions arise: Are Uber drivers employees or independent contractors?  How will the Uber factor be decided?

Two states have made headlines in rulings on Uber cases, Florida and California. Just like FedEx, which fought for years to keep drivers as independent contractors, it could take a while to define these roles. As one article has predicted, “Uber may be making itself more and more attractive as a target with a very deep pocket.”

The California Labor Commissioners ruled recently on the side of the driver and against the “service app” company, Uber. The driver was determined an employee and not an independent contractor. (See McBride & Levine, Reuters Technology, June 18, 2015). This, of course, forces Uber to appeal since the ramifications could be enormous. Along with social security, would Uber be liable for Workers’ Compensation insurance?

A Florida labor decision also came down on the side of the driver as an employee. Meanwhile small Florida jurisdictions, such as Broward County, are trying to grapple with determining rights between taxi cab drivers and Uber drivers.

A turn back to Maryland – could we really be ahead of the nation? Has the new statute allowed the basis for the creation of a new “entity”, not bound by our old concepts of worker vs. employer? Or independent contractor vs. employee? (Could Creating a New Class of Worker Solve the Sharing Economies Labor Problem? Tristan Zier, CEO of Zenn99, June 19, 2015).

Can we imagine a set of legal constructs where both Uber and the driver are winners? We will need to create a new category where all fish learn to swim in the same bowl, large and small, and each party takes on certain responsibilities. In a recent article, Uber, Lyft, secure future in Maryland with passage of ride-share law, Baltimore Sun April 14, 2015, Kevin Rector states;

“This bill places ride-share companies under the oversight of the Maryland Public Service Commissioners, which already regulates taxi companies in much of the State. But it does so under a new regulatory framework for so called ‘transportation network services’ that the companies find less onerous than the structure applied to taxis.”

In Maryland, there is a body of case law that has defined the employer/employee relationship as to workers’ compensation; however, it largely depends on the factor of control. See Injured Workers’ Insurance Fund v. Orient Express Delivery Serv. 190 Md. App 438, 988 A.2d 1120 (2010).  It considers, for example:

1)  Does the Employer have “control” over the employee’s method, manner, and duties?

2)  Whether the parties contemplated an employer-employee relationship?

3)  The structure of the relationship including factors such as 1099, contracts and insurance?

However, with this new third “service app” category – could parties actually exempt themselves from the Commission’s jurisdiction? At present, if an employer has only one employee, he or she must have workers’ compensation insurance, but can officially exempt him or herself as owner. Could the statute or regulations go one step further and state that anyone who joins a “network services app” must exempt themselves from workers’ compensation coverage under the statute?

In Edith A. Anderson Nursing Homes Inc. v. Walker, 232 Md. 442, 194 A.2d 85 (1963), the following functions were listed in consideration of an employer-employee relationship: (a) agreement; (b) wages; (c) power of dismissal; (d) power of control; (e) whether work is regular business of the employer; (f) whether parties believed they created such relation; and (g) whether work is done under direction or without supervision.

For example, an attorney for Uber could argue that in Maryland the legislature has spoken and no employer-employee relationship is recognized. They are basically partially regulated but they remain a “hook up” with absolutely no employer power over whether a driver decides to work.

An advocate for the driver may have to think twice. Does his client really want the Uber industry to be his employer? Perhaps not. However, if he or she wanted to be an employee, the attorney could argue that there are many controlling factors:

(1) Uber sets up rules for obtaining clients
(2) Uber requires a portion of every fee
(3) Uber sets the levels of employee statuses, i.e. X, SUV, Black (Limo or Sedan) 
(4) Uber can terminate drivers
(5) Uber requires the drivers to keep up a certain satisfactory rating by the passengers

In this writer’s imagination, the Uber phenomenon is one we will see replicated in many other areas as a “service app.” Furthermore, after recently interviewing a driver I had hired for functions in Maryland from an established car service, I got the impression that workers’ compensation, pardon the pun, “took a back seat” to anyone’s excitement with the “service app”.

This driver told me, “here’s my card, just call me when you’re ready- I’ll be doing Uber while I wait for you- do you mind?”

As an advocate for the working class for the past 30 years, I was impressed with his work ethic and his enthusiasm in earning perhaps another 120 dollars in his pocket over the next two hours rather than taking a nap!

I’m not the only one who believes a new business prototype has arrived.

Benjamin Franklin once wrote, “[i]n the world nothing can be said to be certain except death and taxes.”  Franklin’s point being that much like Snoop Dogg in the 90’s, before his unnecessary detours under other monikers, the Government gets its money. It’s got its “mind on [its] money and [its] money on [its] mind.” Snoop Doggy Dogg, Gin and Juice (Death Row Records 1993).  So, while you may say “until death do us part” in your wedding vows, not even the Grim Reaper can get you out of paying the Government if you owe it. 

This was the point in the recent decision U.S. ex rel. Robinson-Hill v. Nurses’ Registry and Home Health Corp., 2015 WL 3403054 (E.D. Ky. May 27, 2015).  In Robinson-Hill, two whistleblowers filed a False Claim Act[1] (“FCA”) complaint against Nurses’ Registry, a Kentucky corporation that provides home health care services.  Lennie House, the then-President, Chief Executive Officer, and sole owner of Nurses’ Registry and his wife, Vicki House, the secretary of Nurses’ Registry, were also named as defendants.  The allegations of fraud against the defendants consisted of upcoding the severity of patients’ medical conditions, as well as the length of time and amount of times patients needed treatments, to fraudulently inflate bills to Medicare.  The Government, subsequently after investigating, “intervened,” taking over the prosecution of the case. 

During the pendency of the case, Mr. House died.  The Government sought to substitute Mr. House’s estate in his stead as a defendant.  Defendant Nurses’ Registry and Mr. House’s estate opposed the estate’s substitution, “arguing that all of the claims asserted against Mr. House abate[d] with his death.”  Id. at *1.  This was using what essentially could be described as a “reverse Harold Angel/Johnny Favorite from Angel Heart”[2] defense for Mr. House’s prior, alleged sins.  

The court, while finding that the FCA was silent on whether death abated a claim, held that the appropriately-titled 28 U.S.C. § 2404, Death of defendant in damage action, applied.  28 U.S.C. §2404 states: “[a] civil action for damages commenced by or on behalf of the United States . . . shall not abate on the death of a defendant but shall survive and be enforceable against his estate as well as against surviving defendants.”  Despite such apparently-clear, statutory text, the question before the Court, nonetheless, was “whether the FCA claims asserted against Mr. House [we]re remedial or punitive in nature.”  U.S. ex rel. Robinson-Hill, 2015 WL 3403054 at *1.  If remedial, then 28 U.S.C. §2404 applied, and the estate would be substituted.  Id.

In ruling, the Court noted that “[a] remedial action is one that compensates an individual for specific harm suffered, while a penal action imposes damages upon the defendant for a general wrong to the public.”  Id. at *2.  In finding the FCA “remedial,” such that 28 U.S. §2404 applied, the Court noted a “highlight [of] the remedial nature of the FCA [was that r]ecovery under the FCA does not run to the general public.  Instead, the recovery runs to the United States and to the qui tam relators as compensation for damages.”  Id.  Therefore, the FCA is remedial, and the estate was substituted. 

The take away point here is that, much like Louis Cyphre in Angel Heart, who was simply trying collect upon the personal debt owed to him by Johnnie Favorite (Johnnie’s soul), not even death will allow you to cheat the Government on what it’s owed. 

If you have any questions about the False Claims Act or Medicare fraud, please contact me at bmarkovitz@jgllaw.com or 240-553-1207.

 

Former Employees’ Qui Tam Lawsuit Leads to Recovery For Taxpayers Against LB & B Associates, Inc. for Allegedly Creating a Fraudulent Minority Owned Business to Obtain Set- Aside Contracts

WASHINGTON – July 7, 2015 – LB & B Associates, Inc., a North Carolina-based facility management and maintenance government contractor, has settled a lawsuit for $7.8 million, resolving allegations that the company made false statements to the U.S. Small Business Administration (SBA) in order to obtain and retain Section 8(a) certification as a minority and woman-owned business. The certification resulted in the unlawful award of set-aside contracts for various government agencies to LB & B. The complaint was originally brought by Steven Sansbury and James Buechler, former project managers for LB & B.

The complaint also alleged that LB & B continued to falsely obtain set-aside contracts after it “graduated” from the 8(a) program by making false statements to enter into the “Mentor-Protégé” program of the SBA through fraudulent joint ventures with small businesses. 

The lawsuit, United States ex.rel. Sansbury and Buechler v. LB & B Associates, Inc., was filed in federal court in Washington, DC, by attorneys Jay P. Holland and Brian J. Markovitz, partners at the Greenbelt, Md.-based law firm Joseph, Greenwald & Laake, P.A. Sansbury and Buechler will receive 19.8 percent of the settlement as the relators in the qui tam action.

Sansbury and Buechler’s complaint alleged that LB & B improperly obtained and retained its Section 8(a) certification and the lucrative set-aside contracts by falsely representing that Lily Brandon, the majority owner of LB & B, controlled the day-to-day business operations of the company, when it was her husband, F. Edward Brandon, who had years of experience in government contracting, who actually ran the company. Since F. Edward Brandon was not qualified to receive any benefits under the SBA program, the complaint alleged that Lily Brandon was used so the company could receive set-aside contracts for which it was not eligible to receive.

“The 8(a) program was set up to help minority-owned and minority-operated businesses compete on a level playing field against more established and better financed companies,” said Holland, who served as lead counsel.

“The purpose of the 8(a) program is to help disadvantaged business and not to take opportunities away from businesses that truly need the leg up,” added Markovitz, who served as co-counsel. “Steve Sansbury and Jim Buechler bravely came forward and persevered through years of litigation to remedy the injustice they witnessed.” 

LB & B was required to certify annually to the SBA that it remained eligible for the Section 8(a) program from 1995 to 2004 and that Lily Brandon continued to control the operations of the company. The United States contended that those certifications were false. The government also contended that even after Lily Brandon resigned as president in 2005, LB & B continued to falsely market itself as a women-owned and women-operated business. 

Even after graduating from the 8(a) program, the relators’ complaint alleged that LB & B continued to benefit from SBA set-aside contracts by acting as a “mentor” in the SBA’s Mentor-Protégé program to smaller entities and entering into joint ventures with those companies. The program requires that the joint ventures be staffed and managed by the “protégé” entities, but instead they were staffed by LB & B employees.   

Holland also commented that “both the 8(a) and Mentor-Protégé programs serve vital and important public purposes. Taxpayer dollars are wasted when individuals evade the requirements of the programs to benefit themselves.” Holland praised Assistant United States Attorney Brian P. Hudak and Assistant Attorney General Linda McMahon, the attorneys who handled the case for the government, “for their determined pursuit of justice in this case. Mr. Hudak and Ms. McMahon stuck with us and our clients through years of litigation. They are public servants in the truest sense of the word.”    

Counsel for Sansbury and Buechler filed their complaint in District Court on Feb. 1, 2007, captioned as United States ex. Rel. Sansbury, et. al. v. LB & B Associates, Inc, et. al. Civ. No. 07-0251 (EGS – D.DC). The United States intervened on April 14, 2011, as to the Section 8(a) claims only, and declined to intervene as to the Mentor-Protégé claims. Sansbury and Buechler continued to pursue the Mentor-Protégé claims even though the government declined to intervene in those claims.  Both claims were litigated and the Court denied motions to dismiss both complaints in July 2014; the settlement covers the intervened and declined claims.  
 

Additional information via the Westlaw Journal:

Although a celebrity like Caitlyn Jenner has the status, resources and geographical advantages to overcome potential discrimination concerning healthcare and elective medical procedures, many of the other estimated one million Americas who identify themselves as transgender continue to face obstacles.

Those challenges are apparent in the complaint recently filed with the District of Columbia Office of Human Rights against a DC hospital by a transgender woman who claims a doctor refused to perform breast implant surgery because of her gender identity. The case also could be groundbreaking due to the potential First Amendment/religious liberty issues involved, according to a leading DC civil rights attorney.

“Assuming the accusations are true, this could be a real battleground on the First Amendment,” said Brian J. Markovitz, a partner with Joseph, Greenwald & Laake.

Markovitz said that, if true, Medstar Georgetown University Hospital’s refusal to perform the procedure – as a Catholic hospital, yet open to the public – could be a violation of the DC Human Rights Act that protects against discrimination. In addition, Markovitz says, the case may be unique in its involvement with transgender issues combined with an elective hospital procedure, as well as the potential political influences and possible impact of the Home-Rule Act, which requires U.S. Congressional approval of many laws in DC, which lacks a state legislature.

“If the hospital defends itself on First Amendment grounds, this could get pulled into federal court, and then you might see this interesting debate involving medical procedures and religious exemptions for hospitals,” Markovitz said. “The chances of this case eventually heading to the Supreme Court may be slim, but if the parties involved are diligent enough, I could see it happening.”

The Maryland General Assembly met this past winter for its annual ninety day session and proposed legislation, heard testimony regarding proposed legislation, and enacted new law. 

This year there were 61 proposed bills regarding Family Law and Domestic Violence, 13 of which resulted in enacted legislation (for a full list of proposed Family Law and Domestic Violence bills, see here).

The enacted legislation ranges from merely ceremonial (for example, House Bill 346 which changes all references in the law to a circuit court and juvenile “master” to “magistrate”) to having a serious impact on individuals seeking a divorce (Senate Bill 472 allows individuals, in certain circumstances, to forgo the one year separation period now required for an absolute divorce if the parties mutually consent to the divorce).

MARYLAND’S INSTANT DIVORCE

Many individuals seeking a divorce in Maryland will be happy to learn of the newest ground for divorce, mutual consent, as a result of Senate Bill 472 (available here). However, there are important limitations on those who may obtain a divorce on this ground, which may rule out many prospective litigants.  In order to obtain a divorce based on mutual consent, the parties cannot have any minor children, the parties must have a written agreement resolving all issues relating to alimony and property (and neither party has filed any pleading to set aside the settlement agreement prior to the divorce hearing), and both parties must appear at the uncontested divorce hearing. 

As financial constraints often prevent the parties from physically separating, this ground for divorce, which is silent as to the general requirement of physical separation, will be very attractive to many individuals with limited funds. However, it is not clear exactly how many people will be able to take advantage of this new ground for divorce, as Senate Bill 472 is not clear on whether the parties must be separated at the time of the uncontested divorce hearing or if the parties can obtain a divorce while still residing under the same roof. 

MARYLAND REDUCES ITS RESIDENCY REQUIREMENT

House Bill 1185, available here, will also be of particular interest to individuals seeking a divorce that may have resided in the DMV area for many years, but are new residents to the State of Maryland. Residents of the DMV are so accustomed to crossing state lines on a regular basis that they may not realize that a move just up the street from Tenleytown in the District to Chevy Chase, Maryland will cause the clock to begin ticking in Maryland regarding the residency requirement for the filing of divorce. Previously, an individual had to reside in the State of Maryland for a year before they could file for divorce. House Bill 1185 allows an individual to file for divorce in Maryland after residing in the State for six months. 

LIMITED ATTORNEY’S APPEARANCE RESURRECTED

Maryland Rule 2-131(b), available here, permits a family law attorney to enter his or her appearance on a client’s behalf for a limited purpose. The new rule would allow litigants to hire an attorney to provide limited services, and therefore, at a seemingly limited cost. This may be most enticing to individuals who would normally not be able to afford to retain counsel to represent them in their divorce litigation. For example, in theory, a client could hire a divorce lawyer to argue a certain motion in a case in front of the court, to attend mediation, or, with leave of court, the attorney may act on the client’s behalf with regard to a specific issue or a specific portion of a trial or hearing. 

However, it is not clear how exactly this type of arrangement would work in practice, especially in the area of family law, where so many of the issues are intertwined (for example, the court’s determination of custody directly impacts the court’s decision regarding the use and possession of the marital home). An arrangement for a limited appearance also has the potential to mislead both the attorney or the client regarding the scope of the attorney’s role and may not be the bargain the client anticipated, if expectations are not clearly defined before the commencement of the representation. The rule requires that the client sign an Acknowledgment of Scope of Limited Representation and that this Acknowledgment be filed with the court along with the attorney’s notice of appearance. Although the rule includes an example Acknowledgment, it would behoove both the attorney and client to create a more detailed and comprehensive agreement to prevent confusion down the line. 

While only time will tell how these legislative changes will impact litigants filing for divorce in Maryland, it appears that the legislation is attempting to ease and expedite what is often a difficult and confusing process for many individuals.

Are you thinking about taking the plunge and renovating your home? Have you been looking around the house thinking, “Wow this floor sure is showing its age,” or “This kitchen used to be fabulous… in 1987,” or “Now that we have the money, why don’t we add that sunroom we always dreamed of”? Maybe you are a young contractor, ready to spread your wings and open your own company. If so, to successfully navigate your exciting new undertaking it is important to understand the nuances of the Maryland home improvement laws.

In the first part of this series on the legal implications of home improvement, I will provide an introduction to home improvement law and discuss the initial contract negotiating phase of a renovation project.

To protect homeowners, the Maryland General Assembly created the Maryland Home Improvement Commission (“MHIC”) and gave it the power to regulate home improvement.[1] What exactly is home improvement? Home improvement is defined as:  “the addition to or alteration, conversion, improvement, modernization, remodeling, repair, or replacement of a building or part of a building that is used or designed to be used as a residence or dwelling place or a structure adjacent to that building” and “an improvement to land adjacent to the building.”[2] Thus, “home improvement” may even encompasses certain “improvements” that may not be obvious, such as installing a permanent hot tub, window tinting, storm windows, and even certain types of cleaning and waterproofing. On the other hand, work done to commonly owned areas of condominium complexes or to buildings that contain more than four residences is not considered “home improvement.”[3]

The MHIC has outlined substantial requirements to protect the homeowner from unscrupulous contractors. The MHIC requires that all contractors be licensed[4] and that all home improvement contracts contain certain language. For example, all contracts must contain the contractor’s MHIC license number[5] and the MHIC phone number.[6] One of the MHIC’s newest requirements compels all home improvement contracts presented after July 31, 2013 to state:

(1) Formal mediation of disputes between homeowners and contractors is available through the Maryland Home Improvement Commission;

(2) The Maryland Home Improvement Commission administers the Guaranty Fund, which may compensate homeowners for certain actual losses caused by acts or omissions of licensed contractors; and

(3) A homeowner may request that a contractor purchase a performance bond for additional protection against losses not covered by the Guaranty Fund.[7]

If a home improvement contract contains an arbitration clause, the clause must comply with specific state regulations.[8] 

When negotiating the terms of your project, be sure to remember that a contractor may not accept more than 1/3 of the contract price as a deposit or down payment and may not require or accept any payment until the contract is signed.[9] Depending on the size of the job, the contract may also lay out what is called a draw schedule. A draw schedule provides certain benchmarks or targets for the contractor. As the contractor achieves these benchmarks, he or she is entitled to additional payment. From the contractor’s perspective, draw schedules are a vital mechanism to provide structured funding for jobs that may otherwise be too costly for the average contractor. From the homeowner’s perspective, the draws keep a contractor moving forward by providing immediate incentive to get to the next phase. Negotiate these targets to efficiently get the job done.

Finally, discuss with the contractor whether “time is of the essence.” While a contract must give a general estimate of time for completion[10] there is generally no penalty if the job drags on. A “Time is of The Essence Clause” provides a firm date for completion. It legally signals that if the job is not substantially complete by a certain date, the homeowner will be damaged in some way. Such a contract term often pairs with a “liquidated damages” provision. For home improvement contracts, “liquidated damages” is a predetermined monetary value of the harm caused by the delay.

Home improvement is an exciting and stressful undertaking. It invariably requires significant investments of time, money, and energy. When presented with a home improvement contract take your time, review it in its entirety and even visit the MHIC website. If you have any questions or need advice contact your attorney.