Palladino ex rel. U.S. v. Vna of Southern N.J.

• Decision Date: 30 June 1999
• Docket Number: Civil Action No. 96-2252 (JBS).
• Citation: 68 F.Supp.2d 455
• Parties: Joann PALLADINO, on behalf of the UNITED STATES of America, and individually; and Darlene Keegan, on behalf of the United States Of America, Plaintiffs, v. VNA OF SOUTHERN NEW JERSEY, INC., Southern New Jersey Visiting Nurse Service System, Inc., M. Kelly Cooke, Judy Demby, Julie Melendez, Christine McCullough, Wayne Whelan, And Maryanne Czoch, Defendants.
• Court: New Jersey Supreme Court

68 F.Supp.2d 455

Joann PALLADINO, on behalf of the UNITED STATES of America, and individually; and Darlene Keegan, on behalf of the United States Of America, Plaintiffs, v. VNA OF SOUTHERN NEW JERSEY, INC., Southern New Jersey Visiting Nurse Service System, Inc., M. Kelly Cooke, Judy Demby, Julie Melendez, Christine McCullough, Wayne Whelan, And Maryanne Czoch, Defendants.

Civil Action No. 96-2252 (JBS).

United States District Court, D. New Jersey.

June 30, 1999.

COPYRIGHT MATERIAL OMITTED

Carlo Scaramella, H. Thomas Hunt, III, Anthony L. Marchetti, Jr., Cherry Hill, NJ, for Plaintiffs.

Steven W. Suflas, Nicholas C. Harbist, Peter L. Frattarelli, Archer & Greiner, Haddonfield, NJ, for Defendants VNA of Southern New Jersey, Inc., Southern New Jersey Visiting Nurse Service System, Inc., Judy Demby, Julie Melendez, Christine McCullough, and Maryanne Czoch.

Patricia Smith, Constance Petroni Lahoda, Pepper, Hamilton LLP, Cherry Hill, NJ, for Defendant M. Kelly Cooke.

Faith S. Hochberg, United States Attorney by Joseph Braunreuther, Assistant United States Attorney, Newark, NJ.

OPINION

SIMANDLE, District Judge.

                                             TABLE OF CONTENTS
                Introduction ...........................................................  458
                I. BACKGROUND ..........................................................  458
                II. DISCUSSION .........................................................  461
                    A. Motion to Dismiss Standard.......................................  461
                    B. Count I — Liability Under §§ 3729(a)(1), (2), & (3) .............  462
                    C. Count II — Individual Liability Under Whistleblower Provision
                       § 3730(h) .......................................................  464
                    D. Count III — CEPA Liability ......................................  465
                        1. Whether CEPA is Preempted as a Matter of Federal Law ........  465
                           a. The English Categories of Preemption .....................  466
                           b. Precedents ...............................................  469
                        2. Whether CEPA is Preempted as a Matter of State Law ..........  470
                        3. Whether there is Individual Liability Under CEPA ............  471
                    E. Count IV — Defamation ...........................................  474
                        1. Amended Complaint ...........................................  474
                        2. Proposed Amendment ..........................................  475
                    F. Count V — Plaintiff Keenan's Qui Tam Claim ......................  477
                

                III. CONCLUSION ........................................................  479
                

This case involves allegations of fraud against the federal government by a nursing service, its subsidiary, and various of its employees. Plaintiff Joann Palladino filed a qui tam complaint under the Federal False Claims Act ("FCA"), 31 U.S.C. § 3729(a) against the various defendants, as well as claims of defamation and claims of retaliation for her "whistleblowing" under § 3730(h) of the FCA and under New Jersey's Conscientious Employee Protection Act ("CEPA"), N.J.S.A. 34:19-1, et seq. Plaintiff Darlene Keegan also brings a qui tam claim as a relator within the same action.

This opinion must decide several issues of first impression, including whether the federal False Claims Act preempts an action by the plaintiff-employee arising from the same circumstances under the New Jersey Conscientious Employee Protection Act, and whether CEPA permits an action for individual liability against supervisors who allegedly precipitated plaintiff's retaliatory discharge.

Various motions are currently before the Court, including the motion of defendants VNA of Southern New Jersey, Inc. ("VNA"), Southern New Jersey Visiting Nurse Service System, Inc. ("VNSS"), Judy Demby, Julie Melendez, Christine McCullough, and Maryanne Czoch¹ for partial dismissal of the Amended Complaint, upon defendant M. Kelly Cooke's separate motion to dismiss the Amended Complaint against her in its entirety, and upon plaintiff Joann Palladino's motion to amend Count IV of the Amended Complaint. For the reasons stated herein, Ms. Palladino's motion to amend will be granted, and all defendants' motions to dismiss will be granted in part and denied in part.

I. BACKGROUND

The facts as alleged are as follows. For the purposes of this motion, the facts as alleged are taken as true. Plaintiffs Joann Palladino and Darlene Keegan are licensed and registered nurses who were formerly employed by defendant VNA of Southern New Jersey, Inc. ("VNA"), a home health agency operated out of its headquarters in Runnemede, New Jersey. (Amended Compl. ¶¶ 4, 12, 60.) Visiting Nurse Service System, Inc. ("VNSS") is the parent company of VNA, and it provides VNA with management and support services. (Id. at ¶ 5.) According to Ms. Palladino and Ms. Keegan, VNA, VNSS, and various VNA corporate officials and supervisors, including M. Kelly Cooke, Judy Demby, Julie Melendez, Christine McCullough, and Maryanne Czoch, engaged in a scheme of billing for unnecessary and improper home health services for patients who were not home bound and who did not require skilled nursing care, thus receiving overpayments from the United States government. (Id. at ¶¶ 6-10.)

Ms. Palladino worked for VNA from 1991 until February 13, 1996, when she was fired. (Id. at ¶¶ 13, 41.) On December 19, 1994, Ms. Palladino left the Runnemede office to become a Collaborative Practice Nurse in VNA's Philadelphia branch office. (Id. at ¶ 14.) In May of 1995, defendant Cooke was transferred to the Philadelphia office and became Ms. Palladino's supervisor. (Id. at ¶ 15.) At about that time, VNA formed a business relationship with Dr. Eric Paul Rosen, whose medical license had previously been suspended in 1983 after he was convicted of fifteen counts of fraud and one count of arson, whereby Dr. Rosen would refer home-care patients to VNA. (Id. at ¶¶ 16, 17.) VNA would bill Medicare or Medicaid for these services pursuant to Medicare/Medicaid rules and regulations, which require that the patients: (a) be homebound; (b) be in need of skilled nursing services; and (c) be in need of intermittent, short-term nursing care. (Id. at 16, 18.)

Shortly after Dr. Rosen began referring patients to VNA, Ms. Palladino noticed that many of the patients did not meet one or more of the Medicare/Medicaid eligibility requirements, and she allegedly complained of this to Cooke. (Id. at ¶¶ 19-20.) Cooke allegedly informed Ms. Palladino that ineligible patients would continue to be seen by the staff and that nurses would have to "find a reason" to make the patient eligible if the nurse's note did not reflect that the patient was eligible. (Id. at ¶ 20.)

In August of 1995, Ms. Palladino began assisting Cooke and another co-worker in reviewing patient charts for audit purposes. (Id. at ¶ 21.) While doing so, Ms. Palladino allegedly discovered that nurses were not documenting skilled visits, that patient charts were not properly completed, and that many visits (particularly for Dr. Rosen's patients) did not require skilled nursing services — making those patients ineligible for Medicare and Medicaid benefits. (Id.) Ms. Palladino allegedly raised a concern about the charts to Quality Assurance, to the Vice-President of Customer Service, to the Director of Admissions, and to defendant Demby, VNA's Director of Patient Services. (Id. at ¶ 7, 22.) In October of 1995, Palladino also allegedly complained to the Vice President of Customer Service that the Philadelphia office was violating Medicare/Medicaid rules, but nothing was done. (Id. at ¶ 23.)

Also in October of 1995, Cooke allegedly instructed Palladino to "fix" the charts of Dr. Rosen's patients and to resubmit them to Medicare/Medicaid so that VNA could be paid, but Palladino told Cooke that while Palladino would audit the charts, she would not "fix" or alter them because to do so would be illegal. (Id. at ¶ 24.) According to the Amended Complaint, Cooke responded by saying that VNA had to get paid. (Id.)

On October 21, 1995, Palladino was officially promoted to the position of Nursing Supervisor, the duties of which included supervising the nurses to ensure adherence to VNA standards and procedures. (Id. at ¶ 25.) Near the end of that month, Cooke designated Palladino as the sole employee responsible for obtaining Medicaid authorizations and instructed Palladino to lie to Medicaid, if necessary, by falsifying patient information in order to obtain all authorizations for Medicaid visits. (Id. at ¶ 26.) Palladino refused to do so. (Id.)

Towards the end of that month, Palladino informed VNA's Director of Admissions, that many of Dr. Rosen's patients did not qualify for VNA's services, and, in November, Quality Assurance Employees from the Runnemede office began to make visits to the Philadelphia offices, allegedly confirming Palladino's complaints. (Id. at ¶¶ 27-28.) In mid-November, Palladino complained again to defendant Demby about Dr. Rosen, and Demby asked Palladino to give her some of Dr. Rosen's patient names. (Id. at ¶ 29.) Demby allegedly entered those names into the computer and discovered that all of the patients had the same diagnosis, the same medication, and the same length of stay. (Id.)

In mid-November of 1995, Cooke allegedly hired two other nurses to handle Dr. Rosen's patients, despite the fact that no additional nurses were needed, in order to allow for the replacement of nurses who had complained about Dr. Rosen's referral practices. (Id. at ¶ 30.) In the beginning of December, Palladino allegedly learned that two case managers had been instructed to "fix" charts and alter records, and Palladino informed defendant Demby of this. (Id. at ¶ 32.) Palladino also told Demby that Cooke was treating a black employee in a discriminatory fashion. (Id. at ¶ 33.)

In January of 1996, Cooke allegedly instructed Palladino to sign time sheets giving hours to employees who did not work those hours. (Id. at ¶ 34.) Palladino complained to ...