Stewart v. Golden Victory Medical LLC

Background

Bryan Stewart sued Golden Victory Medical LLC under the False Claims Act for retaliation and for breach of contract. Stewart alleged that, while serving as Golden Victory’s first chief executive officer, he discovered widespread coding and billing problems involving Medicare and Medicaid services. He authorized an independent audit, warned the company’s owners about possible civil and criminal liability, proposed pausing billing, recommended ending the relationship with a third-party billing company, and directed the preparation of a remediation plan.

Stewart alleged that Golden Victory terminated him shortly afterward, citing accusations of racism, sexism, and falsified timekeeping records. He alleged that those reasons were pretextual and that Golden Victory stopped the remediation efforts after firing him. He also alleged that Golden Victory’s employment agreement required six months of base-salary payments for a termination without cause, but the company offered only approximately eight weeks of pay.

Golden Victory’s attorney withdrew in September 2023. A magistrate judge ordered the company to retain substitute counsel within thirty days. Golden Victory did not retain counsel, explain its failure to comply, or respond to Stewart’s motion. Because an organization cannot represent itself in court, the clerk entered default against Golden Victory. Stewart then moved for default judgment.

Liability

The court explained that an entry of default means the complaint’s factual allegations, other than allegations about damages, are treated as true. Legal conclusions are not automatically admitted, so the court separately examined whether the allegations stated valid claims.

For the False Claims Act retaliation claim, the court concluded that Stewart’s alleged efforts to stop improper billing were protected activity. The allegations also showed that Golden Victory’s owners knew about his concerns and remediation efforts, that the company discharged him, and that the discharge was motivated solely by those efforts. The court found that the alleged timing of the termination, the owners’ rejection of Stewart’s proposals, the end of the remediation efforts, and the alleged pretext supported the claim.

For the contract claim, the court found that the employment agreement was valid and that the allegations established a breach. The court treated the termination as one without cause because Golden Victory terminated Stewart unilaterally, invoked a provision concerning mutual written agreement, and allegedly relied on pretextual misconduct accusations. Although the agreement conditioned severance on Stewart’s signing a severance agreement, the court found that Golden Victory’s offer of $38,461 instead of the required $125,000 repudiated its payment obligation and excused Stewart from that condition. The court concluded that Golden Victory materially breached the agreement.

Damages and fees

The court granted Stewart’s request for backpay in part. Rather than using his requested amount or his maximum possible compensation, it calculated backpay using an annual compensation rate of $400,000, taking account of his $250,000 base salary, incentive compensation, limited compensation history, and the uncertainty about whether he would have earned all incentives. The court awarded $725,000 in backpay and doubled that amount under the False Claims Act, for $1,500,000 in total backpay.

The court granted in part Stewart’s request for prejudgment interest and awarded $45,598.33. It granted the request for $250,000 in emotional-distress damages based on Stewart’s testimony and supporting evidence. It granted in part the attorney-fee request, awarding $23,487.50 under the lodestar method and an additional $1,788.45 for certain expenses ordinarily billed to clients, for $25,275.95 in attorney fees.

The court granted in part the request for costs. It awarded $746.40 in taxable costs for filing-related fees and a transcript. It denied the remaining requested costs because Stewart had not shown that they fell within an allowable category of costs or reimbursable attorney-fee expenses. The court rejected Stewart’s separate request for $125,000 in severance because awarding both severance and backpay would create a double recovery.

Disposition

The court granted in part and denied in part Stewart’s motion for default judgment. It entered judgment for Stewart and against Golden Victory in the total amount of $1,821,620.68, consisting of $1,500,000 in backpay, $45,598.33 in prejudgment interest, $250,000 for emotional distress, $25,275.95 in attorney fees, and $746.40 in taxable costs. The judgment bears interest at the statutory rate from the date of judgment.

The court also dismissed Golden Victory’s counterclaims with prejudice for failure to prosecute. Judge Eric C. Tostrud found that Golden Victory persistently failed to retain counsel, failed to communicate with the court about that failure, and did not respond to the motion for default judgment.