Punitive Damages Stand Against Walgreens

SACRAMENTO (CN) - A Walgreens employee who was fired after complaining about possible Medicare billing fraud deserves the full jury award of $1.155 million in punitive damages, a federal judge ruled.

The jury in Sami Mitri's wrongful termination lawsuit which awarded Mitri $88,000 in compensatory damages and $1.155 million in punitive damages.

On appeal, the 9th Circuit remanded to determine whether the punitive damages award should be reduced as constitutionally excessive.

U.S. District Court Judge Anthony Ishii ruled on Dec. 3 that Walgreens must pay the entire amount of punitive damages because of its reprehensible conduct.

Ishii noted that it is debatable how much the award will actually "sting" Walgreens, given the size of the corporation.

Viewing the case in the light most favorable to Mitri, Ishii found that the evidence showed that Mitri made multiple complaints about Medicare billing fraud to his supervisors - identified only as Scalzitti and Guillen - and to others higher up in the corporation.

Shortly after his first complaint, Mitri was issued a Final Written Warning, which required him to inform his supervisors or the store manager whenever he had to stay beyond his shift to help a customer. However, the store manager was never told that Mitri had to inform him about staying late.

Market Vice President Robert Hasty met with Mitri about the billing fraud and the warning. Hasty told Mitri that he should continue to stay late to help customers, but that he had to report to Scalzitti and Guillen when he stayed after his shift. Hasty also told Mitri to contact his supervisors regarding any instances of fraudulent billing.

When Mitri later complained about billing issues to Walgreens' prevention officer Lisa Warinner, she told him that he should given evidence of improper billing to her directly and not to Scalzitti and Guillen. Warriner also told him that it was not his job to report suspected billing fraud to the government, according to Ishii's 14-page ruling.

Mitri was fired not long after he complained again about billing fraud. Hasty authorized firing Mitri in a teleconference with Mitri's supervisors, during which they discussed Mitri's working past scheduled hours and his billing complaints.

Hasty agreed, before a full investigation, that the official reason for firing Mitri would be that he had violated the final written warning. Even though the decision to fire him had already been made, Mitri was told only that he was being suspended and investigated, but was not told why.

When Mitri was fired, he was not allowed to give his side of the story or answer to any of the charges against him.

Hasty did not investigate whether there was any billing fraud, despite Walgreens's policy that required an investigation. The supervisors were never disciplined in connection with the billing issues.

The jury found that Walgreens fired Mitri because of his complaints of billing fraud and that he would not have been fired otherwise.

"From the above evidence and express finding, a reasonable jury could have found that Walgreens's conduct towards Mitri was heavy handed, unfair, deceptive, false, harmful to Mitri's reputation, and done in willful disregard to Mitri's right to be free from retaliation," Ishii wrote. "The evidence indicates that Hasty ratified Scalzitti and Guillen's conduct towards Mitri, authorized both the termination and the procedure for terminating Mitri, agreed to terminate Mitri because of the reports of billing fraud, and agreed to use a false reason involving misconduct to justify Mitri's termination."

Therefore, the evidence is sufficient to allow for punitive damages.

Walgreens argued that $1.155 million in punitive damages is excessive because the degree of reprehensibility of the corporation's conduct was low. Among other things, Walgreens claimed that the harm to Mitri was economic only, that there was no concern about the safety of others, and that the disparity between Mitri's actual harm and the punitive damages award was nonsensical.

Ishii disagreed, finding the reprehensibility of Walgreens's conduct to be high.

"The decision makers intentionally terminated Mitri because Mitri was complaining about billing fraud, utilized a false reason for the termination, relied on a dubious final warning, lied to Mitri that he was being investigated, and did not let Mitri defend himself in any way. Neither the termination nor the events leading up to and surrounding the termination were accidental," Ishii wrote.

Ishii added that it is important to note that Mitri was engaged in a protected activity when he complained about possible Medicare fraud.

"Terminating Mitri because of his complaints could well discourage others from bringing Medicare or Medi-Cal fraud claims to the attention of the appropriate people, be they within or outside of Walgreens. The totality of these considerations shows that Walgreens engaged in a process of intentional and dishonest conduct against a vulnerable plaintiff who made protected complaints involving acts of possible Medicare and Medi-Cal fraud, which are serious crimes. Therefore, the degree of reprehensibility is high," the judge stated.

Although the punitive damage award of $1.155 million is 13 times higher than the $88,000 compensatory damages award, punitive damages are intended to sting, Ishii said.

"The jury was informed that Walgreens is a multibillion-dollar publicly traded corporation. It is clear that an $88,000 compensatory damages award would be a trifling amount to Walgreens. Given how large Walgreens is, it is debatable whether a $1.155 million award would be much of a sting," Ishii said.

Furthermore, other cases have awarded punitive damages at a 9:1 ratio and a 500:1 ratio, so the 13:1 ratio in this case is not in and of itself unconstitutional, Ishii found.

"Given the size of Walgreens, and considering the reprehensible nature of Walgreens's conduct, the $1.155 million award is not 'grossly excessive' in light of the interests served by punitive damages, to punish and deter," Ishii said.

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