Labor & Employment Law Daily Wrap Up, REMEDIES, DAMAGES—D. Ariz.: Whistleblower awarded over $2M default judgement against former employer, (May 14, 2025)

By Leah S. Poniatowski, J.D.

While the former employee met default factors, the judgment award was reduced.

A recently-hired Chief Information Officer (CIO), who had been terminated after expressing concern about the company participating in an alleged kickback scheme, presented sufficient evidence that he was entitled to a default judgment against the company, but the original amount he requested was reduced to $2.285 million, the federal district court in Arizona ruled (Nguyen v. Embry Health of Arizona LLC, No. CV-23-00422-PHX-KML (D. Ariz. May 8, 2025)).

Background. The CIO had been hired by a healthcare company group and within several weeks of his hire, he began reporting to the CEO and other managing members that companies were violating federal and state anti-kickback laws by performing excessive COVID-19 testing in order to increase revenues. He was fired minutes after making another report to the CEO. The CIO filed a lawsuit for unlawful termination for whistleblowing. Initially, the former employers appeared and challenged the claims, but their counsel later withdrew. Consequently, the employers stopped participating in the claim and defaults were entered against them. The CIO sought an award of roughly $10 million.

Factor test. As an initial matter, the court evaluated the applicable seven factor test to determine whether a default judgment could be entered against the healthcare companies. First, the possibility of prejudice to the CIO factor weighed in his favor because he would likely be without recourse for recovery otherwise. The second and third factors, merits of the claim and sufficiency of the complaint, also favored the CIO. The court explained that he met the elements of a valid False Claims Act under federal law, 31 U.S.C. § 3730, and state law prohibiting unlawful termination, A.R.S. § 23-1501.

With respect to the federal law violation, he showed that he, in good faith, reported activities that he believed were in violation of federal law. His reporting to the managers and CEO met the element of employer knowledge, and that he was fired within minutes of the CEO “[losing] his temper” after being informed met the final element to state a valid claim of retaliation under the False Claims Act. Similarly, he met the requirements of the state unlawful termination statute.

The fourth element evaluates whether the recovery sought is proportional to the harm. The CIO sought over $10 million, which was composed of 30 months of backpay, $1,137,500.10; liquidated damages equal to back pay; emotional distress, $460,500; and punitive damages, $7,990,000.50. The court explained that the amount the CIO was seeking was large, and although it was tied directly to his annual compensation, it was sizable to slightly weight against a default judgment.

The fifth element, disputes over material facts, weighed in favor of the CIO because the companies stopped participating in the litigation, indicating that there was no dispute. The sixth factor, excusable neglect, weighed in favor of the CIO because the companies had been properly served, were represented by counsel, and initially participated in the litigation. The companies stopped cooperating with their attorneys, who withdrew from the case, and the companies did not update their address to receive notices from the court. Thus, the companies’ intentional conduct was not excusable neglect.

The final factor, preference for resolving matter on the merits always weighs against a default judgment, but the court explained that it is not dispositive and it did not weigh against entry of the default judgement in the case at bar. Therefore, default judgment was granted.

Damages. The court explained that the CIO had the burden to prove his damages claim. He showed that he could not find replacement employment and that there had been 30 months from his termination until the date the clerk entered the default. Based on his salary and 31 U.S.C. § 3730(h)(2), he was entitled to twice his backpay, which totaled $2,275,000.20. The CIO also sought damages for emotional distress based on the anguish from losing his employment and supporting his family members through serious health issues, resulting in several mental and physical ailments.

The court stated that there was legal support for awarding emotional damages, but the amount the CIO sought was excessive. The court agreed to award $100 per day, totaling $10,000 in damages. The court could not find any authority to grant punitive damages based on the facts of the case. Accordingly, no punitive damages were awarded. Thus, the total amount of damages the CIO was awarded was $2,285,000. The court also stated that he could apply for attorney fees as well.

The case is No. CV-23-00422-PHX-KML.

Judge: Lanham, K.

Attorneys: Jeffrey A. Silence (Silence Law Group) and Richard James Harris (Richard J. Harris & Associates) for Khanh Nguyen. Raymond Embry, pro se. Zachary Travis, pro se. Joellen Embry, pro se.

Companies: Embry Health of Arizona LLC; Apollo Healthcare & Diagnostics LLC

Cases: RemediesDamages Whistleblowers Retaliation Discharge ArizonaNews