A long-running dispute between the Indiana Department of Environmental Management and a terminated employee has been partially revived after a panel of appellate judges agreed the former worker could have been held personally liable for misuse of state funds.
In a Friday memorandum decision, the Indiana Court of Appeals reversed the grant of partial summary judgment in favor of IDEM, finding the Indiana False Claims Act does not exempt state employees from personal liability. Moreover, the court ruled, the state agency did not present sufficient evidence that the staff member was fired for reasons other than her allegation that she refused to break the law.
The decision in Suzanne E. Esserman v. Indiana Department of Environment Management, 18A-PL-2375, continues an employment feud that began when Esserman was terminated Jan. 17, 2014, after nearly 25 years with IDEM.
She appealed her termination to State Employees’ Appeals Commission in March 2014. The administrative law judge ruled in IDEM’s favor, finding the agency did not, as Esserman claimed, retaliate against her because she declined to disregard the law.
Esserman then turned to the state court. Along with filing a petition for judicial review of the SEAC order, she also filed a separate complaint against her former employer in Marion Superior Court.
The Indiana Court of Appeals allowed her separate claim to go forward but a split Indiana Supreme Court found for IDEM in Esserman v. Ind. Dep’t of Envtl. Mgmt., 84 N.E.3d 1185, 1193 (Ind. 2017). The majority decided the state was immune to nontort claims made under the Indiana False Claims and Whistleblower Protection Act.
About 10 months after the Supreme Court handed down its ruling, Marion Superior Judge P.J. Dietrick affirmed the SEAC ruling and granted IDEM summary judgment.
Appealing that decision, Esserman argued, in part, that under the Indiana False Claims Act, Indiana Code section 5-11-5.5, she, as a state employee, could be held personally liable for misuse of state funds. She asserts that had she followed her supervisors’ instructions, turning a blind eye to the documents before her and paying the claims submitted to the Excess Liability Trust Fund, she could have been found at fault.
IDEM countered that Esserman could not have been held personally liable. It argued that IFCA applies to a person who knowingly or intentionally presents a false claim to the state for payment or who conspires with another person to do the same. Esserman, IDEM continued, does not establish that she knowingly or intentionally presented a false claim nor does she assert she gave false information to obtain payments from the state.
The Court of Appeals agreed with Esserman’s reading of the false claims act.
“However, the relevant provision of the IFCA applies to persons who ‘present a false claim to the state for payment or approval,’” Judge Margret Robb wrote for the court. “Nothing in Indiana Code section 5-11-5.5-2 exempts state employees from personal liability under the statute and, had the legislature so intended, it certainly knew how to do so. Furthermore, nothing in the statute requires the person presenting the claim for payment or approval to be the beneficiary of the claim. In the absence of these two limitations, we are unaware of any reason state employees knowingly or intentionally approving claims with ‘fraudulent charges,’ and then presenting those claims for payment, would not be subject to personal liability under the statute.”
Next, the Court of Appeals turned to the question of whether the designated evidence offered by IDEM to the administrative law judge affirmatively negated Esserman’s claim. In particular, the appellate panel noted while the termination letter contained a legitimate reason for Esserman’s firing, the letter failed to affirmatively negate her claim.
Although it found the state agency’s evidence unconvincing, the Court of Appeals did outline what IDEM could have presented to make its case.
“Indeed, the very essence of Esserman’s claim was that IDEM’s proffered explanation for her termination was duplicitous of its true motivation, i.e., that she was terminated for refusing to break the law,” Robb wrote. “IDEM could have designated evidence in the form of an affidavit, Esserman’s employment records, or other evidence that tended to prove Esserman was not terminated for such a reason.”
The appellate court concluded the trial court erred in affirming the SEAC’s grant of partial summary judgment. It reversed the lower court and remanded for proceedings.
However, the Court of Appeals affirmed the trial court’s finding that SEAC’s determination that Esserman’s termination was unrelated to her disabilities, accommodations or sexual harassment complaint was supported by substantial evidence.
Esserman, who worked just shy of 25 years for IDEM, became concerned over payment practices in the agency’s Excess Liability Trust Fund program. The ELTF division, which is primarily funded through a state tax on gasoline sales, reimburses for the cleanup of spills and leaks from underground storage tanks.
Esserman’s job was to review the claims for reimbursement from outside contractors remediating the contamination. She contends when she asked questions about charges and requested invoices, time sheets and receipts, her supervisors stopped her from making inquiries and disciplined her for working too slowly.