Lestage v. Coloplast Corp.

• Decision Date: 09 December 2020
• Docket Number: No. 19-2037,19-2037
• Citation: 982 F.3d 37
• Parties: Amy LESTAGE, Plaintiff, Appellee, and United States and the State of California, ex rel., Kimberly Herman, Amy Lestage and Kevin Roseff, Plaintiffs, v. COLOPLAST CORP., Defendant, Appellant, and Coloplast A/S; Convatec, Inc.; Hollister, Inc.; 180 Medical, Inc.; A-Med Health Care, Inc.; Byram Medical Supplies, Inc.; CCS Medical Supplies, Inc.; Liberty Medical Supplies, Inc.; Liberator Medical Supply, Inc.; Shield Medical, Inc.; Uromed, Inc.; RGH Enterprises, Inc.; Shield California Healthcare Center, Inc., Defendants.
• Court: U.S. Court of Appeals — First Circuit

982 F.3d 37

Amy LESTAGE, Plaintiff, Appellee,

and

United States and the State of California, ex rel., Kimberly Herman, Amy Lestage and Kevin Roseff, Plaintiffs,

v.COLOPLAST CORP., Defendant, Appellant,andColoplast A/S; Convatec, Inc.; Hollister, Inc.; 180 Medical, Inc.; A-Med Health Care, Inc.; Byram Medical Supplies, Inc.; CCS Medical Supplies, Inc.; Liberty Medical Supplies, Inc.; Liberator Medical Supply, Inc.; Shield Medical, Inc.; Uromed, Inc.; RGH Enterprises, Inc.; Shield California Healthcare Center, Inc., Defendants.

No. 19-2037

United States Court of Appeals, First Circuit.

December 9, 2020

Elisabeth S. Theodore, Washington, DC, with whom Samuel F. Callahan and Arnold & Porter Kaye Scholer LLP were on brief, for appellant.

Rachel M. Wertheimer, Portland, ME, with whom Paul W. Shaw, Boston, MA, Tawny L. Alvarez, Portland, ME, and Verrill Dana, LLP were on brief, for appellee.

Before Lynch, Selya, and Lipez, Circuit Judges.

LYNCH, Circuit Judge.

This case under the anti-retaliation provision of the False Claims Act raises an issue of first impression in this circuit as to the proper causation standard. 31 U.S.C. § 3730(h)(1). Amy Lestage filed suit against her employer Coloplast Corporation ("Coloplast") in 2016 alleging that Coloplast had retaliated against her in violation of the False Claims Act after it learned that she had filed a qui tam action against it and one of its largest customers. Lestage was placed on indefinite administrative leave four days after that customer requested that Lestage stop serving its account. When she returned from leave after the qui tam suit against Coloplast was settled, Lestage says she was given an inferior slate of account assignments.

After a five-day trial, the jury concluded that both the leave and the account assignment were adverse employment actions taken because of Lestage's involvement in the qui tam suit and awarded Lestage $762,525 in compensatory damages.

The district court denied Coloplast's subsequent motions for judgment as a matter of law and a new trial. Fed. R. Civ. P. 50, 59. Coloplast appeals from the denials of these motions, challenging the sufficiency of the evidence to support the verdict, whether plaintiff's expert testimony as to damages was properly admitted, and whether the jury instructions, to which it had consented, were error.

We reject Coloplast's claims of error and affirm. In doing so, we hold under Supreme Court precedent that the causation standard for retaliation claims under the False Claims Act is a "but-for" standard. We join the Third, Fourth, Fifth, and Eleventh Circuits in doing so. See DiFiore v. CSL Behring, LLC, 879 F.3d 71, 73 (3d Cir. 2018) ; U.S. ex rel. Cody v. ManTech Int'l, Corp., 746 Fed. App'x 166, 176-77 (4th Cir. 2018) (unpublished opinion); U.S. ex rel. King v. Solvay Pharms., Inc., 871 F.3d 318, 333 (5th Cir. 2017) ; Nesbitt v. Candler Cnty., 945 F.3d 1355, 1359 (11th Cir. 2020).

I. Factual Background

In reviewing the denial of Coloplast's motion for judgment as a matter of law, we examine all evidence in the light most favorable to the jury verdict. See ITYX Sols. AG v. Kodak Alaris, Inc., 952 F.3d 1, 9 (1st Cir. 2020).

Coloplast is a medical device company that develops ostomy

, continence, wound, and skin care products. Coloplast has between 12,000 and 16,000 sales accounts. Just forty to fifty of these, called key accounts, provide over 95% of Coloplast's sales. Key accounts vary in size, but most have at least $1 million in sales per year or substantial growth potential.

Key account managers ("KAMs") are responsible for making sales to and managing Coloplast's relationship with key accounts. KAMs receive a base salary and a bonus, but the bonus makes up a large percentage of their compensation. The bonus is based on the growth in sales in the accounts they manage. If a KAM achieves his or her "target" growth in sales, the KAM receives 100% of a set commission ($80,000 in the relevant time period). If growth exceeds the target, the KAM is paid more, and if growth falls short of the target, the KAM is paid less. Management sets the individualized growth targets each year.

Lestage began working as a salesperson for Coloplast in 2004. In 2010, she became Coloplast's first key account manager.¹ In 2013 and 2014, she was the highest-performing KAM at Coloplast. Among her key accounts was Byram Health Care ("Byram"), which is one of Coloplast's largest accounts. Byram made up approximately 80% of her sales portfolio by volume.

In December 2011, Lestage and others filed a qui tam action under the False Claims Act against Coloplast and several Coloplast competitors and clients, including Byram. The qui tam complaint alleged that Coloplast had paid kickbacks to clients, including Byram. The complaint was filed under seal as required by law. See 31 U.S.C. § 3730(b)(2). This meant that neither Coloplast nor Byram was notified of the suit during this period of sealing. The US Department of Justice ("DOJ") investigated the allegations and ultimately decided to pursue them. The complaint was unsealed on August 21, 2014. Near the end of November 2014, Lestage noticed that Byram had stopped replying to her emails and phone calls.

On December 19, 2014, Byram's CEO sent an email to Edmond Veome, then Coloplast's Senior Vice President of the North America region, with an attached letter stating that Byram "no longer wish[ed] to work with Amy Lestage regarding our business together" and would like to be assigned to a new KAM.

Veome asked Byram why it wished to remove Lestage from its account. The Byram representative told Veome to contact Byram's attorneys with any questions. Veome reached out to Coloplast's in-house counsel as well as Thomas Beimers, the lawyer representing Coloplast with respect to the DOJ qui tam suit. Veome, Beimers, Nick Pederson (Coloplast's human resources director), and Mort Hansen (Lestage's direct supervisor) met several times in the following days. The content of those conversations was not disclosed under claims of attorney-client privilege.

On December 23, 2014, Hansen and Pederson called Lestage and told her she was being placed on indefinite paid administrative leave. Pederson sent a follow-up letter later that day which stated that "as a result of Byram's demand, we are placing you on an indefinite, paid administrative leave effective as of December 23, 2014, while we investigate this matter further." Coloplast did not ask her to continue managing her other key accounts with four other customers. Coloplast presented no evidence that anyone at Coloplast performed any investigation during the period Lestage was placed on leave.

During the administrative leave, Coloplast continued to pay Lestage her base salary, as well as 100% of her target incentive bonus. Coloplast also gave her the standard annual 2.5% raise and allowed her to keep her company car and gas card. Coloplast cut her off from use of her Coloplast email account while she was on leave. Coloplast presented no evidence that it had promptly notified her other key accounts that she had been placed on leave.

Lestage was not asked to return until January 2016, after Coloplast had agreed to settle the qui tam action. Veome testified at trial that the decision to bring Lestage back to work was somewhat independent of the resolution of the qui tam action, but at his deposition he had stated that when the qui tam action was "moving toward resolution" was "the time to bring her back to work because there was no longer going to be the pending investigation. There was an outcome that was being delivered, and so it would be okay for her to return."

In December 2014, when she was placed on leave, Lestage was managing five key accounts: ABC Home Medical ("ABC"), Byram, Home Care Delivered, Claflin, and Buffalo Hospital Supply ("Buffalo"). Upon her return, she was given the Claflin, Home Care Delivered, and Buffalo accounts along with four new accounts: Geriatric, AmerisourceBergen, Blackburn's, and Concordance. Lestage had asked not to be reassigned to the Byram account but told Coloplast she wanted the ABC account. She was not assigned the ABC account at any time after her return, even when the person who handled the account during her leave left that job.

While Lestage was on leave, the ABC account was managed by Henrik Wurgler, a non-KAM employee. At the time of Lestage's return, ABC was in the process of selling its business. Hansen gave as a reason why Lestage did not receive the ABC account that in July 2015, when ABC was told that Lestage would be returning from leave, ABC requested that Wurgler remain on the account because he had been "an outstanding supporter of ABC Medical and [was] always timely in his response, unlike his predecessor."² Hansen also testified that Coloplast "had internal knowledge at the time [of the merger] at the management level that there's a high likelihood that [the account ABC merged with] was somehow financially tied to ... one of the qui tam action accounts."³

Wurgler left in early 2016 and Timothy Townson was assigned the ABC account, not Lestage. Hansen testified that Townson was assigned the account because he was located in California, where the ABC point-of-contact would be located after the merger. The only explanation for why her location in New England was a barrier to her handling this account was testimony that Coloplast was trying to reduce costs and ease of travel for KAMs. The account was transferred again to Yvonne Battistini, not to Lestage, in late 2018 or early 2019.

Lestage also asked to be assigned to the Cardinal account when its existing KAM was promoted to director of key accounts in 2019. Cardinal is located in the Northeast, near Lestage's other accounts. She was denied the Cardinal account.

The parties dispute whether the four new accounts assigned to Lestage were high-performing accounts which would allow Lestage to meet her growth targets.

Lestage testified that Blackburn's had "some" but not "substan...