Labor & Employment Law Daily Wrap Up, CONTRACT CLAIMS—D.N.M.: Pre-suit mediation clause in Employment Agreement did not apply to FCA retaliation claim, (Jul 16, 2026)

By Jeffrey H. Brochin, J.D.

Pre-suit mediation provision in employment contract was to be narrowly construed such that a collateral matter—including an FCA retaliation claim—was deemed to be beyond the provision’s purview.

A federal District Court in New Mexico has granted the motions to dismiss filed by Otero County Hospital Association, Inc. d/b/a Gerald Champion Regional Medical Center (GCRMC or Employer) in an FCA Retaliation lawsuit filed by an Employee who alleged she was terminated after complaining of fraudulent billing practices in violation of the False Claims Act (FCA). Although her lawsuit was not proscribed by her employment contract’s pre-suit mediation clause, and, she satisfied the protected activity element of an FCA Retaliation claim, her claim ultimately failed due to the absence of the causation element after it was determined that her termination was not in close temporal proximity to her complaints to her Employer (Nwosu v. Otera County Hospital Association, Inc., No. 23-119 JFR/KRS (D.N.M. July 8, 2026)).

Alleged misuse of credentials. The Employee was employed as a Board-Certified Nurse Practitioner with the Employer from March 15, 2019, through August 21, 2020. On September 13, 2019, she discovered that other unnamed GMRMC employees in the pain management clinic--none of whom were licensed healthcare providers--were performing History & Physicals (H&P”) for patients and using her electronic signature and National Provider Identifier (NPI) number without her knowledge or authorization. She alerted the Employer’s Compliance Officer, Danielle Bynum, about the unauthorized use of her signature on H&Ps and stated that it constituted ‘Medicare/Medicaid fraud.’ She also notified Dr. Brett Butz, Medical Director of the Chronic Pain Clinic about the H&Ps. On September 16, 2019, CEO Heckert met with the Employee about the H&Ps and assured her that GMRMC would investigate and remedy the matter. However, she did not receive any follow-up information.

On March 16, 2020, the Employee emailed Chief Compliance Officer Bynum about four cases in which GMRMC had ordered surgical procedures for her patients where the performing physician unbundled the procedures by not operating on all areas of the patient as ordered. She again wrote to Ms. Bynum pointing out that the unbundling of procedures was causing more operating room bills being submitted to payors, including upon information and belief Medicare and Medicaid, and she stated this was ‘obvious fraud and needs to be addressed.’ Ms. Bynum responded that the cases would be referred to Quality for review.

Employee’s termination. On June 18, 2020, Dr. Esparsen emailed to the Employee that she had to respond to Risk Management concerning a report from CVS Pharmacy that had been received and was deemed problematic. The CVS Pharmacy report was a standard notification about an opioid prescription, and it was subsequently determined that the report was not in fact ‘problematic,’ rather, the pharmacy notification was a “common form” and did not require review by GCMC Risk Management. Although the Employee followed up with Dr. Esparsen three separate times asking for more information and did not receive a response, and the New Mexico Board of Pharmacy never contacted the Employee.

On August 20, 2020, two weeks after the Employee’s last email to Dr. Esparsen regarding the CVA Pharmacy report, CEO Heckert wrote to the Employee that GMRMC was terminating her employment effective August 21, 2020. Notably, after terminating her employment, GMRMC withheld her prescription pads and did not respond to her requests to return them. After contacting the New Mexico Board of Pharmacy regarding her withheld prescription pad she learned the Employer had continued to use her prescriptive authority and that 269 prescriptions for controlled substances were written after terminating her employment. She subsequently filed the instant lawsuit for FCA Retaliation and state law wrongful termination claims.

‘Mandatory’ pre-suit mediation clause. The Employer pointed out that the Employment Agreement contained a pre-suit mediation clause which essentially read ‘All PARTIES to this Agreement mutually agree that they shall submit to non-binding mediation in the event there shall be a claim, dispute or disagreement pertaining to provisions contained in this employment Agreement prior to making any claim against either PARTY.’ The Employee argued that the clause did not apply to her FCA Retaliation claim nor her state wrongful discharge claim because neither one ‘pertained to provisions contained in the agreement,’ rather it was limited to disputes pertaining to provisions of the Employment Agreement.

The court ruled that such provisions are to be narrowly construed, and that in the absence of language such as “any or all” or “in connection with,” or a reference to the “employment relationship” more broadly, the provision was lacking in the language the Employer sought to implicitly insert, i.e., “any dispute with a factual connection to the contract or arising from the employment relationship, including statutory claims.” Accordingly, the court concluded that the pre-suit mediation clause did not bar her FCA Retaliation claim nor state law wrongful discharge claim from proceeding.

Elements of an FCA Retaliation claim. The court next turned to the question of whether the substantive elements for an FCA Retaliation claim had been met. As to the Employee having engaged in protected activity, the court observed that ‘protected activity’ includes (1) acts taken in furtherance of a substantive False Claims Act lawsuit, and (2) other efforts to stop one or more FCA violations. To establish notice, the Employee’s actions must have conveyed to the Employer that she was attempting to stop the Employer from: (1) engaging in fraudulent activity to avoid paying the government an obligation or, (2) claiming unlawful payments from the government.

Here, the court found that the Employee’s Complaint contained allegations sufficient to demonstrate protected activity and notice in September 2019: she alleged that on September 13, 2019, she discovered that her electronic signature was being used by unlicensed healthcare providers in the pain management clinic for H&Ps on patients she had not seen. She further alleged that she believed this was being done to support claims being submitted for reimbursement to government payors. Accordingly, the protected activity element was satisfied.

Failure to establish causation. Notwithstanding the foregoing finding, the court further found that the Employee’s Complaint failed to sufficiently allege causation, a deficiency which was fatal to her FCA Retaliation claim. She conceded that eleven months passed from her protected activity to the termination of her employment—a period of time insufficient on its own to establish causation. She attempted to persuade the court that, based on two subsequent events, she had pleaded sufficient facts demonstrating a pattern of escalating antagonism from the Employer towards her during those eleven months sufficient to support an inference of causation between her protected activity and her termination. However, the court was not persuaded.

As to the first event, the Complaint alleged that on March 16, 2020, she emailed Ms. Bynum about four cases of purported unbundling of procedures, but the Complaint further alleged that Ms. Bynum responded the following day and told her the cases would be referred to “Quality for review.” As to the second event, the Complaint alleged that on June 18, 2020, or three months later, Dr. Esparsen emailed her that she had to respond to Risk Management concerning a report from CVS Pharmacy that he had deemed problematic. However, Dr. Esparsen later admitted he had “misspoken” about it being problematic and she did not have to respond to Risk Management. Because the Complaint failed to allege facts sufficient to demonstrate temporal proximity or to offer evidence from which to infer a retaliatory motive, the Employee’s FCA Retaliation claim necessarily failed for lack of causation.

Based on the foregoing, the court granted the Employer’s motion to dismiss.

The case is No. 23-119 JFR/KRS.

Judge: Robbenhaar, J.

Attorneys: Bryan J. Davis (Bryan J. Davis, Attorney at Law) for Marcellina Nwosu. Tiffany L. Roach Martin (Harris & Sisk) for Otero County Hospital Association Inc.

Companies: Otero County Hospital Association Inc.

Cases: ContractClaims StateLawClaims CoverageLiability Discharge Retaliation NewMexicoNews