Labor & Employment Law Daily Wrap Up, WHISTLEBLOWERS—S.D. Ind.: Healthcare system’s argument regarding relevancy of requested discovery fails, (May 13, 2025)

By Susan L. Smith, JD, MA

A physician, who brought a False Claims Act retaliation claim against his former employer after he was terminated from his position allegedly in retaliation for expressing his concerns about the legality of a Proposed Agreement between his employer, a hospital healthcare system, and a sleep center, successfully argued to compel his former employer to provide the discovery documents he requested.

The District Court of Indiana granted a physician’s request to compel his former employer, a hospital healthcare system (healthcare system), to provide complete responses and answers, and produce all nonprivileged documents in response to his discovery requests. The physician contended that the healthcare system he worked for terminated him from his position for expressing his concerns that a proposed under arrangement agreement (Proposed Agreement) between the healthcare system and a sleep center would violate the Stark law. The physician brought a retaliation claim under the False Claims Act (FCA), which prohibits an employer from terminating an employee because of lawful acts done by the employee related to the provisions of the FCA. The healthcare system argued that the information the physician requested was not relevant in this case. Although the court found that the hospital system's relevancy argument was not unreasonable, the court concluded that the argument was too narrow of a view of relevancy, especially in the discovery context. Thus, the court granted the physician’s request to compel the healthcare system to provide his discovery requests, but allowed the healthcare system to produce the documents after it deposes the physician (Kinsella v. Franciscan Alliance, Inc., No. 1:24-cv-01548-RLY-MJD (S.D. Ind. May. 6, 2025)).

Background. The physician, who specialized in pulmonary and sleep medicine, alleges that his employment contract with the healthcare system was terminated the day after he expressed his concerns regarding the legality of the Proposed Amendment to the healthcare system’s Chief Executive Officer (CEO). According to the physician, the plan arose out of a broader plan to merge a sleep center with the sleep disorder center of which the physician was the Medical Director. The physician alleges that the healthcare system partially owns the sleep center through a joint venture with Indiana Internal Medicine Sleep Consultants/Center for Respiratory & Sleep Medicine.

Allegations regarding the Proposed Agreement. The physician alleges that under the Proposed Agreement, the hospital network would bill patients of the sleep center and the sleep center would receive a flat fee for services. The physician contends that if the under arrangement violated the Stark Law and/or the Anti-Kickback Statute (AKS), the healthcare system would be highly likely to violate the FCA when submitting claims to the federal government for Medicare or Medicaid payments because it must affirmatively represent that it is complying with all federal laws when submitting claims.

Healthcare systems’ argument. The healthcare system objected to all of the physician’s discovery requests on relevancy grounds, arguing that the categories of information the physician seeks about the Proposed Agreement, the proposed merger between the sleep center and the Sleep Disorders Center, and the healthcare systems relationship with the activities involved in the Proposed Agreement are not relevant to the claims or defenses in this case and, therefore, are not discoverable. The relevancy argument is based on the healthcare system’s contention that the former employee has to prove that he engaged in protected conduct and was fired because of that conduct. The physician does not have to prove that the Proposed Amendment would have violated the law. to prevail on his retaliation claim. Further, the healthcare system contended that the physician may not use any information he did not have at the time he raised concerns about the Proposed Agreement to show that his concerns were objectively reasonable, thus, the information the physician seeks is not relevant.

Court’s analysis. The court found that although the hospital system's argument was not unreasonable, the argument depended on too narrow of a view of relevancy, especially in the discovery context. The court agreed that, in a retaliation case, the Plaintiff does not carry the burden of proving that a fraud occurred, nor does the defense rest on the fact that no fraud occurred, but concluded that does not make the actual legality of the Proposed Agreement irrelevant. The court found that whether the physician’s professed concerns were objectively reasonable and cannot be decided in a vacuum and the facts that the physician seeks in discovery will likely provide context that is relevant to the core issues in the case. Thus, the court concluded that the categories of documents sought by the physician to be relevant and discoverable and granted the physician’s motion to compel.

The court also granted the healthcare system’s request to depose the physician regarding his knowledge at the time he raised his concerns about the Proposed Agreement prior to producing the documents at issue knowing that the physician’s memory has not been tainted by the document production.

The case is No. 1:24-cv-01548-RLY-MJD.

Judge: Dinsmore, M.

Attorneys: Christopher S. Stake (DeLaney & DeLaney LLC) for Charles Kinsella. Chloe Nicole Craft (Krieg Devault LLP) and Hillary Buchler (Johnson, Stracci & Ivancevich, LLP) for Franciscan Alliance, Inc. d/b/a Franciscan Physician Network.

Companies: Franciscan Alliance, Inc. d/b/a Franciscan Physician Network

Cases: Whistleblowers Retaliation Discharge IndianaNews