Whistleblower gets $22M punitives after wrongful termination. $25.1M. Los Angeles County.
Sales manager reports illegal sale activity, claims he was retaliated against.
- Case Name: Steven Babyak v. Cardiovascular Systems Inc.
- Court and Case Number: : Los Angeles Superior Court / BC601259
- Date of Verdict or Judgment: Tuesday, April 25, 2017
- Date Action was Filed: Monday, November 16, 2015
- Type of Action: Employment, Whistleblower, Wrongful Termination
- Judge or Arbitrator(s): Hon. Michael Stern
- Plaintiffs: Steven Babyak, 54, sales manager.
- Defendants: Cardiovascular Systems Inc.
- Type of Result: Jury Verdict
- Gross Verdict or Award: $25,142,120
- Economic Damages:
Lost past and future earnings: $2,742,120
- Punitive Damages:
- Trial or Arbitration Time: 5 days.
- Jury Deliberation Time: 1 day for compensatory damages, 2 hours for punitive phase.
- Jury Polls: 12-0 compensatory and liability, 10-2 punitive.
- Attorney for the Plaintiff:
Workplace Justice Advocates PLC by Tamara S. Freeze and Robert A. Odell, Irvine.
- Attorney for the Defendant:
Gordon & Rees LLP by Michael A. Laurenson, Oakland.
Gordon & Rees LLP by Stacey Cooper, San Diego.
- Plaintiff's Technical Expert(s):
Mark Falkenhagen, economics, Los Angeles.
- Defendant's Technical Expert(s):
Brian P. Brinig, economics, San Diego.
Facts and Background
- Facts and Background:
Plaintiff Steven Babyak was employed as a sales manager for defendant Cardiovascular Systems Inc. ("CSI"). He was terminated in June 2015 following his internal whistleblower complaints concerning illegal kickbacks to doctors, and FDA policy violations, as well as violations of the Sarbanes-Oxley Act (SOX).
- Plaintiff's Contentions:
Plaintiff Steven Babyak was retaliated against and terminated from his job at Cardiovascular Systems Inc. ("CSI") in June 2015 following his internal whistleblower complaints concerning illegal kickbacks to doctors, FDA policy violations, and violations of the Sarbanes-Oxley Act (SOX). Plaintiff had worked for defendant from October 2012 to June 2015.
Plaintiff complained directly to CSI's upper management about the above violations and was immediately retaliated against by his supervisor, Todd Goldberg, who raised Mr. Babyak's sales quota by 41%, took away and reassigned his most valuable sales territories and also began to create a hostile environment for Mr. Babyak and the other sales reps who reported the issue.
Plaintiff reported the retaliation to CSI's upper management, who conducted an investigation. Although two other employees corroborated Mr. Babyak's concerns, CSI found "no evidence of retaliation" or wrongdoing by the company. The retaliation increased against Mr. Babyak following the investigation, ultimately culminating in a March 25, 2015 meeting at CSI headquarters where he was confronted by his supervisor and VP of Sales and told that all of these issues were "just a personality difference" between himself and Mr. Goldberg. The meeting became heated and CSI chose to reassign Mr. Babyak to work directly underneath the VP of Sales.
Several weeks after the reassignment, Mr. Babyak began working his new territory in Fresno (which had been assigned by Goldberg as part of the previous retaliation). Babyak then discovered new and additional legal violations which he reported to CSI's regulatory department as a possible SOX violation. Upon hearing Mr. Babyak's new complaint about possible SOX violations, CSI management became extremely displeased and even told plaintiff to stop reporting violations and to "get on the bus and move on."
Plaintiff then submitted a formal complaint outlining the SOX issue - namely that he had discovered a fake sales transaction in Fresno whereby a CSI sales associate made a large sale on the last day of the third quarter (so that the company could make its sales quota). The problem, however, was that the sales rep entered into an agreement ahead of time with the customer that they could simply return all the product as soon as the quarter was over and the sales numbers were reported.
CSI is a publicly traded company and reports its financial information to the shareholders, which is why Mr. Babyak correctly identified it as a possible SOX issue. Just weeks after Mr. Babyak's formal SOX complaint, CSI made the decision to terminate Mr. Babyak. In litigation and at trial, CSI claimed that they were "forced" to terminate Mr. Babyak because he could no longer work for Mr. Goldberg or the VP of Sales and that there was "no other person" that Babyak could report to and no other job in the company where he could be placed or offered.
At the time, CSI had over 500 employees and was hiring 11 other sales managers just like Mr. Babyak to work in various other locations across the country. Additionally, CSI never approached Mr. Babyak's old supervisor, Richard Roberts, who gave testimony that he absolutely would have been able to supervise Mr. Babyak again starting in 2015, as the two of them had previously worked together for over two years, got along and performed extremely well despite the fact that they worked remotely. Most all of CSI's sales reps work remotely from assigned sales territories and report to their sales managers in different states.
- Defendant's Contentions:
Throughout trial, CSI maintained it did nothing wrong and that it was virtually "impossible" for them to find any other solution for Mr. Babyak aside from termination.
- Special Damages Claimed - Past Lost Earnings: $384,937.00
- Special Damages Claimed - Future Lost Earnings: $2,357,183.00
Demands and Offers
- Plaintiff Final Demand before Trial: $1,500,000
- Defendant §998 Offer: $275,000