Acker’s Order begs for Appeal from Qui Tam lawyers IMHO

Judge Acker citation-filled opinion granting the Rigsby sisters partial summary judgment ( re: violation of the Alabama Trade Secrets Law) stands in contrast to the all but total absence of citations supporting his decision to grant Renfroe a partial summary judgment (re: breach of employment contract).

In fact, in a somewhat remarkable act of hubris even for Judge Acker, the only citation noted in support of his decision in favor of Renfroe is the 11th Circuit opinion supporting an earlier decision of his in the case!

E.A. Renfroe & Co., Inc. v. Moran, 249 Fed. Appx. 88, 92 (11th Cir.2007)

However, neither his decision nor the 11th Circuit’s decision on Appeal considered the qui tam claim. Consequently, he devoted a third or more of his Memorandum to justifying his exclusion of the Rigsby sister’s status as relators – and did so with his usual snark and without the expected citations.

The Rigsbys have now added facts that they contend preclude any claim of breach-of-conduct…

This court has already made clear its belief that the pendency of the qui tam case in which the Rigsbys are relators, and which was filed in April 2006 without Renfroe as a defendant, did not authorize the relators, while employed by Renfroe, to steal State Farm documents from Renfroe, whether the documents were thereafter used to enhance their already pending qui tam case, or for litigation in which State Farm insureds were plaintiffs represented by relators’ employer, Scruggs, or for both purposes.

This court has been cited no authority for the proposition that qui tam relators can, while blowing the whistle, conduct a second-story job without subjecting themselves to possible criminal sanctions and/or to civil liability for conversion or for breach of a confidentiality agreement.

Being a self-appointed representative of the United States does not commission the relator to conduct clandestine or illegal operations in furtherance of a pending qui tam action. When this theft occurred, the United States had not intervened in the qui tam case, and, as far as the record reflects, still has not intervened. In other words, these relators assumed considerable risk when they unilaterally decided that their contractual obligation to their employer gave way to a higher obligation to expose fraud and, inadvertently, to get handsomely paid for it under the sharing provisions of the False Claims Act.

If the United States had formally deputized the Rigsbys to steal documents, an entirely different problem would be presented.

I find it difficult to believe Judge Acker is as ignorant of qui tam law as his unsupported opinion and not-at-all subtle directive conclusion suggest:

Although Renfroe has withdrawn any claim for compensatory damages for loss of good will, and has foregone a claim for lost income, it has not given up its claim for the attorneys’ fees and expenses it incurred in the litigation spawned by the Rigsbys “data dump” weekend. Any recovery of Renfroe’s said legal expenditures will, of course, be reduced by the $65,000 already paid by the Rigsbys to compensate Renfroe’s attorneys for obtaining compliance with the preliminary injunction.

Whether Renfroe can recover from the Rigsbys their ill-gotten gains in the form of the substantial consulting fees received from Scruggs need not be determined today. At this juncture, the only question is: “Was there a breach-of-contract that potentially caused Renfroe compensable damage?” The answer to this question is “Yes”, meaning that Renfroe is entitled to summary judgment on the simple question of liability by the Rigsbys for breach-of-contract. The Rigsbys’s counter-motion, making the same arguments they made to this court and to the Eleventh Circuit in defense of the breach-of-contract claim (except for their additional qui tam argument),is due to be denied. Renfroe will be put to the proof on damages.

Judge Acker, reportedly, has a law degree from Yale (1952); practiced law for 30 years; and has spent the last 36 years as a Regan-appointed federal judge.  I find it impossible to believe anything other than he deliberately ignored applicable law –

The gravamen of the tort of conversion is the deprivation of the possession or use of one’s property.(Section 222(A) of the Restatement (Second) of Torts defines conversion as “an intentional exercise of dominion or control over a chattel which so seriously interferes with the right of another to control it. . . .” Thus, an owner generally cannot state a claim for conversion if he or she retains either originals or copies of the documents.

The reason for this rule is that the possession of copies of documents—as opposed to the documents themselves—does not legally rise to an interference with the owner’s property sufficient to constitute conversion. “In cases where the alleged converter has only a copy of the owner’s property and the owner still possesses the property itself, the owner is in no way being deprived of the use of his property…

Even if the confidential documents constitute “property” of a type subject to conversion, holding the relators responsible for engaging in conduct for the purposes of pursuing an FCA claim would undercut a statutorily protected right and further undermine the pivotal purpose of the FCA to uncover false and fraudulent claims on the United States.

– or precedent-setting decisions.

Employers sometime seek to assert claims against an employee who copied or retained confidential documents from the employer. Th e three claims are typically for: 1) breach of a confidentiality agreement; 2) breach of fiduciary duty; and 3) conversion.

In regard to potential qui tam actions under the FCA, courts have held that Congress intended to “protect employees while they are collecting information about a possible fraud, before they have put all the pieces together.”

Moreover, courts have found employees’ activities in collecting information protected although they may not have ultimately filed qui tam suits. Nor is it necessary that the employee “know” that the investigation he or she is pursuing could lead to a FCA suit.

…the court also dealt with the issue of whether a former employee could be compelled to return materials taken from the employer that might demonstrate fraud. The court responded in the negative, finding less onerous ways of preventing this information from being used…

As the title indicates, IMHO, Acker’s decision begs for appeal.  Will it happen? As a non-lawyer, I have no idea; but. I have confidence in the Rigsby’s qui tam legal team and feel certain they will consider every option.

I’m likewise certain, by the way, that I’m not the only one – lawyer or not – who found these statements in Acker’s opinion intriguing:

The means and methods by which State Farm and its contractors went about adjusting claims might be characterized as “trade secrets”, that is, if they are any different from the methods and procedures used in the insurance adjusting industry generally. Renfroe has not satisfied the court by undisputed evidence that the methods and procedures it employed in serving State Farm and/or its other casualty insurance clients, were so unique as to meet the definition “trade secret”.

Renfroe, of course, couldn’t provide this undisputed evidence without proving the qui tam claim – leading me to wonder why their attorneys would file a case Renfroe could only win by revealing their conspiracy with State Farm to adjust claims using methods that meet the legal definition of “Trade Secrets”.