Split appeals panel reverses lower court's dismissal of whistleblower action against People's Gas

By Jonathan Bilyk | Sep 30, 2013

A former service supervisor for People’s Gas can proceed with his whistleblower action against the utility company, an appellate court ruled.

In an unpublished order issued Sept. 26, a split panel of the First District Appellate Court overturned Cook County Circuit Judge Raymond W. Mitchell’s decision to dismiss with prejudice the suit former People’s Gas employee Joseph Pusateri brought against the utility.

The majority of the appeals panel determined that Pusateri’s claim that People’s Gas knowingly falsified gas leak response reports submitted to state regulators could have led those regulators to approve a rate increase under false pretenses and, thus, needlessly caused the state and all the utility’s customers to overpay for natural gas.

The order was delivered by Justice Nathaniel R. Howse Jr., with Justice William Henry Taylor II concurring. Justice Stuart E. Palmer dissented.

The decision stems from an action Pusateri brought in 2009 against the utility under the state’s Whistleblower Act.

In that suit, Pusateri alleged that management within People’s Gas had “instructed” him to “falsify response times” on official gas leak response reports to make it appear the utility had responded to leaks within 60 minutes.

If a utility does not respond to such leaks within one hour of learning of them, the company is required by law to submit reports to the Illinois Commerce Commission (ICC) explaining what happened and why.

Pusateri asserts in his suit he was first ordered to falsify the response times on official company records beginning shortly after he was promoted to service supervisor in 2001.

He further alleged that those false response time reports were then submitted to the ICC to be used to justify a rate increase request from People’s Gas.

Pusateri argued that those actions violated the Whistleblower Act, as it caused the state to approve the rate increase and then caused the state to overpay for the purchase of natural gas under false pretenses.

In 2011, the court ordered that, should the case proceed, Pusateri’s claims required him to stand as a “relator,” essentially arguing his case on behalf of the state, as well.

In response, People’s Gas claimed the case should be dismissed because, despite the rate increase request, the utility never “submitted a false claim for payment to the state.”

It also argued that there was no connection between any alleged falsified response time reports and the rate increase, as state law does not list such safety records as a criteria by which the ICC must evaluate a utility rate increase.

Further, People’s Gas argued that Pusateri’s claims did not originate with him, as is required to receive whistleblower status. Rather, it claimed, the ICC previously had stated concerns publicly regarding People’s Gas’ leak-related response times.

The trial judge agreed with People’s Gas, and dismissed the case on Feb. 29, 2012.

On appeal, Palmer, the dissenting justice on the appeals panel, also sided with People’s Gas’ contention that the rate increase, even if granted under potentially false pretenses, did not constitute “the presentation of a claim as contemplated by the Whistleblower Act.”

Palmer wrote in his dissent that a judgment for Pusateri would stand as “an unwarranted expansion” of the Whistleblower Act to “the ICC’s legislative process.”

The majority of the appeals panel, however, found otherwise. They noted that while Illinois law does not require the ICC to consider safety reports when evaluating a rate increase request, People’s Gas did submit the reports to justify the rate increase, and the ICC did include the reports in its evaluation.

They further determined that, if those reports had been falsified, they “would be sufficient on their own” to create a connection to the rate increase.

And they held that such a rate increase could constitute a “false claim for payment” to the state because “when People’s Gas submitted the falsified records to obtain the fraudulent rate it did so knowing it would later charge the rate it achieved to the state.”

The majority of the panel also found that People’s Gas’ offering of a 2009 report stemming from an ICC audit of the utility’s response times did not back the company’s claims that the ICC could have believed the response times reports were false.

Rather, the panel found, the ICC audit report merely expressed concerns with People’s Gas’ policies.

“There is nothing in the record to indicate that the ICC was aware that the reports People’s Gas submitted were fraudulent,” the majority of the panel held.

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