When Relators Steal Corporate Documents: Northern District Of Illinois Dismisses Counterclaim For Breach Of Contract

The issue is one that various courts have addressed over the years: what recourse does a corporation have when a relator steals confidential information and discloses it to his or her attorney and to the government? The answer is . . . it depends. It depends on the scope of the materials taken, their relationship to the relator's claim, and the breadth of the disclosure.

On May 13, 2016, the Northern District of Illinois added another to the list of cases on this issue when it dismissed a counterclaim filed by LifeWatch Services, Inc. (LifeWatch). In its counterclaim, LifeWatch alleged that the relator stole confidential information and then disclosed it to the government and his lawyer. United States ex. Rel. Cieszyski v. LifeWatch Services Inc., No. 13-CV-4052 (N.D. Ill. May 13, 2016). In a brief, 11-page, opinion, the court dismissed LifeWatch's counterclaim, holding that public policy protects whistleblowers from retaliation when they investigate and report allegations of fraud to the government. Id. at 6-10.

At issue in the case were two agreements signed by the relator. In April 2003, when he started working at the company, the relator signed a "Confidentiality Agreement." Id. at 3. That agreement prohibited the relator from taking and disclosing to another "Confidential Information" of the company, such as financial data, pricing information and customer data. A few years later, in September 2006, the relator received the Company's "Privacy Policy," a document that stressed "the need to secure PHI [Protected Health Information]" and that further set forth the relator's obligation to comply with the Health Insurance Portability and Accountability Act of 1996 (HIPAA). Id. at 4. The relator signed that he had read and understood his obligations under the Privacy Policy. Id.

Within a few years of signing these agreements, however, the relator took certain information from the company that he then provided to his lawyer and the government. These materials were the basis of the relator's complaint that the company violated the False Claims Act (FCA) when it submitted certain claims to Medicare.

In response to this complaint, LifeWatch filed a counterclaim that the relator had breached the Confidentiality Agreement and the Privacy Policy. Without question, the materials taken fell within the scope of the Confidentiality Agreement. Even the relator conceded as much. Id. at 3 n.3. And, at least one spreadsheet taken contained PHI regarding...