Former research analyst didn't prove Merck engaged in fraud, Third Circuit rules

By Nicholas Malfitano | Jul 6, 2018

PHILADELPHIA – A federal appellate court upheld a summary judgment ruling for the Merck pharmaceutical company in opposition to the claims of one of its former research analysts, who claims she was unlawfully terminated after alleging the company engaged in fraud.


PHILADELPHIA – A federal appellate court upheld a summary judgment ruling for the Merck pharmaceutical company in opposition to the claims of one of its former research analysts, who claims she was unlawfully terminated after alleging the company engaged in fraud.

In a ruling reached June 27, U.S. Court of Appeals for the Third Circuit judges Thomas L. Ambro, Anthony J. Scirica and U.S. Court of Appeals for the Sixth Circuit Judge Eugene E. Siler Jr. (appointed by designation) affirmed a ruling from the U.S. District Court for the Eastern District of Pennsylvania, against plaintiff Joni Westawski and in favor of defendant Merck & Co, Inc.

“Westawski was a Merck research analyst assigned to oversee a study of low-income Hispanic diabetics who successfully manage their disease. The study was completed for grocery store chain H-E-B and its health insurance benefits administrator, Blue Cross Blue Shield of Texas. Merck hired an outside market research firm, DrTango, Inc., as the researcher,” the Third Circuit outlined.

Westawski claimed there were problems in the professional relationship between Merck and Blue Cross Texas, and that DrTango was only hired for the diabetes study because one of its scientists had close relationships with Blue Cross executives.

“Westawski repeatedly complained to her supervisor and other managers about procedural irregularities concerning Merck’s contracting with DrTango, including that her supervisor directed her not to conduct Merck’s usual bidding process for the contract, Merck paid nearly double the standard amounts for DrTango’s work, Merck broadened the study to collect potentially unnecessary data to meet its internal cost guidelines without reducing DrTango’s fees, DrTango got several extensions to complete the study, and it received payment for presentations to H-E-B that were outside the scope of Merck’s original contract. In response to Westawski’s complaints, Merck conducted an investigation but found no violation of its internal policies,” the Third Circuit continued.

Though Merck conducted an investigation in response to the alleged issues Westawski cited, it found no violation of its internal policies.

“After Westawski informed management that she could no longer work with her immediate supervisors, Merck transferred her to another department. It terminated her employment eight months later when it underwent a company-wide restructuring. Westawski argues she was terminated in retaliation for engaging in Sarbanes-Oxley Act of 2002 (SOX)-protected activity, as she claims she believed Merck sought to use the DrTango project fraudulently to gain access to executives at Blue Cross, Texas,” per the Third Circuit.

Per Section 806 of the SOX Act, it “protects whistleblowing employees from retaliation by their employers…regarding any conduct which the employee reasonably believes constitutes a violation of Section 1341 (Mail Fraud), 1343 (Wire Fraud), 1344 (Bank Fraud) or 1348 (Securities Fraud), any rule or regulation of the Securities and Exchange Commission, or any provision of federal law relating to fraud against shareholders.”

In the instant case, Westawski was required to show evidence she engaged in protected activity, through a “subjective and an objective belief that the conduct that is the subject of [her] communication relates to an existing or prospective violation of one of the federal laws referenced in Section 806.”

“Westawski conceded before the District Court that she has no claim rooted in bank or securities fraud, which leaves only mail, wire, or shareholder fraud as possible bases for her claim. The Court concluded that she failed to show she had engaged in ‘protected activity’ because it was not objectively reasonable for a person of her training and experience to believe Merck had committed any of those three forms of fraud,” the Third Circuit stated.

When Westawski appealed the case, the Third Circuit concurred.

“We agree that Westawski failed to show she objectively believed Merck was committing one of Section 806’s enumerated forms of fraud. She argues her belief need not be ‘objectively reasonable only within the strictly limited context of mail fraud, wire fraud, and shareholder fraud,’ and to require otherwise would contravene the whistleblower statute’s broad purposes,” the Third Circuit said.

“This ignores both Section 806’s plain text and our binding precedent in Weist v. Lynch (Weist I). Although a plaintiff is not required to show “a reasonable belief that each element of a listed anti-fraud law is satisfied,” she must still “have an objectively reasonable belief of a violation of one of the listed federal laws.”

The Third Circuit added that even assuming Merck selected DrTango and paid it a premium to conduct a study for H-E-B so Merck could improve its business relationship with Blue Cross Texas, Westawski fails to explain how that is fraud.

The federal appellate court stated, “As the District Court noted, she ‘identifies no prohibition on pharmaceutical companies networking with employers and health plan providers’ like H-E-B and Blue Cross Texas, let alone a prohibition within the scope of mail fraud, wire fraud or shareholder fraud. In an effort to satisfy her burden, Westawski vaguely asserts the payments to DrTango were some form of ‘bribe’, ‘inducement’ or ‘quid pro quo.’ She claims she ‘had an objectively reasonable belief that there was a fraudulent scheme taking place.’

“Without reference to any theory of fraud, and indeed citing no law at all, Westawski asserts that ‘anyone in the pharmaceutical industry…would understand that the buying of access to executives at a large managed care organization would be illegal.’ This falls short of showing her complaints regarding the DrTango project ‘relate in an understandable way’ to any of Section 806’s enumerated forms of fraud. We therefore affirm,” the Third Circuit concluded.

The plaintiff is represented by Aaron J. Freiwald and Glenn A. Ellis of Freiwald Law, in Philadelphia.

The defendant is represented by Michael J. Ossip, Sarah E. Bouchard and Sarah M. Edelson of Morgan Lewis & Bockius, also in Philadelphia.

U.S. Court of Appeals for the Third Circuit case 16-4075

U.S. District Court for the Eastern District of Pennsylvania case 2:14-cv-03239

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nickpennrecord@gmail.com

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