IN A DAVID-VERSUS-GOLIATH-LIKE BATTLE, perhaps the most unusual lawsuit in decades involving clinical laboratory operations and compliance is unfolding in a federal courthouse in California. In this case, a multi-billion-dollar in vitro diagnostics (IVD) company is suing a laboratory manager who was once in a leadership position at a lab the plaintiff company operated, and who became a whistleblower against the lab company.
That’s not the only twist in this story. In the court case (PerkinElmer Health Sciences versus Mahnaz Salem), the former lab manager is acting as her attorney.
For these and other reasons, every clinical pathologist serving as a medical director at a CLIA-certified laboratory will want to follow the progress of this case. Given that the core issues in the lawsuit involve control of documents and the rights of a whistleblower versus the employer, the well-known proverb “There, but for the grace of God, go I” can apply to medical directors at other labs.
Contempt of Court Charge
In the latest twist in the case, PerkinElmer has asked the court to find the defendant in contempt of court and to order that she pay monetary damages and attorneys’ fees. The parties will return to court in July.
The clinical laboratory at the center of this dispute is the COVID Valencia Branch Laboratory, which the State of California owns. Under a contract with the California Department of Public Health (CDPH), PerkinElmer built and has operated the lab since it was opened in November. (See TDRs, “State of California’s COVID Lab Producing Inconclusive Results,” Dec. 7, 2020, and “Whistleblowers Disclose Issues in California’s COVID Lab,” March 1, 2021.)
Early Trouble Reported
Since that opening, the Valencia Branch Laboratory experienced numerous problems that California news outlets reported widely. In February, for example, CBS13 TV in Sacramento reported that PerkinElmer filed the lawsuit against Salem, claiming she was a whistleblower, along with 25 other unnamed whistleblowers who were not named but who may be named later.
During a news broadcast on Feb. 8, Julie Watts of CBS13 reported that internal records and quality control reports from the lab—along with interviews of more than half a dozen whistleblowers inside the lab—showed problems ranged from contamination causing inconclusive results and swapped samples to inaccurate results sent to patients.
Also, Watts noted, records indicated that employees handling patient specimens had not been signed off for competency on crucial skills, and that whistleblowers noted some staff were seen sleeping on the job.
In a 12-page complaint PerkinElmer filed in the U.S. District Court for the Central District of California on Feb. 22, the lab company alleged that Mahnaz Salem, PhD, worked for PerkinElmer for 24 days (Jan. 11 through Feb. 2) as the manager of laboratory services at the company’s COVID-19 testing lab in Valencia. During that time, Salem sent proprietary information to herself via email “in violation of her confidentiality agreement,” the lawsuit charged.
Breach of Contractual Duty
“Moreover, Salem accepted a job with a different competitor laboratory, The Testing Co., on Jan. 14, breaching her contractual duty of loyalty to PerkinElmer and fraudulently representing to PerkinElmerthat she intended to devote all of her business time, attention, skill, and effort to the performance of her duties to PerkinElmer,” the company said.
After PerkinElmer named Salem in the lawsuit earlier this year, she decided to represent herself in the case in which PerkinElmer filed six charges in a civil complaint against Salem, including fraud, breach of contract, unauthorized access to computer systems, and negligent misrepresentation.
In Propria Persona
In answering the complaint, Salem used the Latin term, in pro per, a shortened version of in propria persona, meaning a person who represents herself without a lawyer. In response to a question from The Dark Report, Salem confirmed that she has been representing herself in this case. Keep in mind that PerkinElmer is listed on the S&P 500 and reported $3.8 billion in revenue last year.
Chief among Salem’s arguments in her defense are three facts that could serve her well in court. First, she claimed in a 10-page filing that she was wrongfully fired for identifying what she regarded as violations of the Clinical Laboratory Improvement Amendments (CLIA) of 1988. Second, she noted that she had a right to report such violations, and third, she explained that during her employment she devoted much of her time to reviewing issues of CLIA noncompliance.
In its lawsuit, PerkinElmer listed six complaints against Salem: breach of contract, conversion, unauthorized access to computer systems, constructive trust, fraud, and negligent misrepresentation. “As a direct consequence of defendants’ conduct, PerkinElmer is faced with the substantial risk that defendants will disclose and continue to disclose or use PerkinElmer’s proprietary information to PerkinElmer’s competitive disadvantage,” the company said.
In explaining the complaint of conversion, PerkinElmer said, “defendants wrongfully exerted personal control over PerkinElmer’s property,” harming its business, finances, and reputation. “PerkinElmer has demanded that defendants return the property they wrongfully converted and, to this day, have refused to return any converted property,” the complaint said.
Access to Lab’s Computers
Salem and the defendants also “wrongfully and without authorization” accessed PerkinElmer’s computer system, devices, and computer network, the complaint noted.
On the issue of “constructive trust,” PerkinElmer alleged the defendants wrongfully obtained the company’s proprietary information. “Consequently, defendants are involuntary trustees holding PerkinElmer’s property,” the complaint said.
Finally, Salem and the other defendants “negligently mispresented” that they would not copy or remove proprietary information from the premises except in the pursuit of PerkinElmer’s business. Therefore, Salem and the defendants were negligent in using that information and breached their agreement with the company, PerkinElmer noted.
In her response, Salem reported that she did not take any action when she resigned “due to … respect to the CLIA program.” She also claimed in her response that she offered to assist PerkinElmer as a consultant or in a modified position. Still, she was wrongfully terminated, she wrote. Also, she added, “It is not true that the amount in controversy for this claim exceeds $75,000 as alleged by plaintiff. Plaintiff’s unsubstantiated claim is of a zero-dollar value.”
‘Claim Is Untrue’
On the first charge in PerkinElmer’s complaint (that she emailed proprietary infor-
mation), Salem responded that this claim is untrue. She said she “emailed herself and several others (including The Testing Company) upon their request, the information available as ‘public records,’” and that her employment “… was terminated after announcing her intent to resign.”
While she was employed, Salem devoted most of her time at the request of the lab’s management to reviewing “various out-of-compliance records,” she added. Also, she noted, “Plaintiff fraudulently informed Mahnaz Salem that the laboratory was in compliance with all of the applicable laws despite the fact that it had complete knowledge of its non-compliance conditional situation as one of its records entitled: ‘CDPH Branch Laboratory: Pending list, questions and reminders’ clearly showed its non-compliance.’”
Salem also refuted a charge that PerkinElmer alleged she was an agent or employee of the other codefendants and that they conspired and agreed to deprive PerkinElmer of its rights and to cause damages the company described in the complaint. “This is not true,” she wrote. Instead, Salem said she was “informed” that PerkinElmer and others “harassed and retaliated against her.”
Research Lab vs. CLIA Lab
On the issue of proprietary information, Salem made a distinction between the work a lab does as “research-use only” and a lab running tests under CLIA. For example, she noted that PerkinElmer defines its proprietary information as research activities. “Plaintiff was reminded by Mahnaz Salem who upon review and identification of non-compliance issues … documented such issues to draw a line between its research-use-only activities in its [California] state-registered CLIA certified clinical laboratory (provided to plaintiff conditionally) where plaintiff was performing experimental studies at the same time it was reporting patient test results to troubleshoot its ‘Condition Non-Compliance’ situation.”
On this point, she noted that she had a right, “to report the above to governmental agencies, including providing records which are not part of public records.”
She also made a distinction between a lab that PerkinElmer owned and a lab that the state of California owns. “Mahnaz Salem is informed and hereby alleges that the Valencia COVID-19 Testing Laboratory is owned by CDPH according to the disclosure of ownership filed by plaintiff,” she wrote.
‘Efforts to Circumvent’
“Indeed, plaintiff was exercising efforts to circumvent when it was notified about its non-compliance situation upon resignation of CDPH laboratory director who resigned from being the CLIA director,” she noted. When Salem and other defendants reported issues of non-compliance, PerkinElmer “started making threats and published defamatory information” about the whistleblowers, she wrote.
As the case continued in court on June 10, the federal judge heard arguments from PerkinElmer that Salem should be held in contempt of court for what PerkinElmer said was failure to comply with court’s preliminary injunction order, a request for monetary sanctions, and a request for $9,464 in attorneys’ fees.
PerkinElmer’s attorneys said a notice of motion for contempt was sent to Salem via e-mail and bounced back due to an unknown address error and that “the primary e-mail address associated with the party record has been deleted.” The judge in the case granted a motion to allow Salem to be served in the standard manner. The parties will return to court on July 9.
Contact Mahnaz Salem, PhD, at 424-354-6899 or firstname.lastname@example.org.
Why Would California Open a COVID-19 Lab?
SINCE LAST SUMMER, when California officials announced that it was building its own clinical laboratory facility to perform COVID-19 testing, the project has been subject to criticism.
The facility was designed and built by PerkinElmer, which has operated it since testing operations started in November. Known as the COVID Valencia Branch Laboratory and located in Valencia, Calif., the lab was supposed to perform 150,000 COVID-19 PCR tests per day by March 1 and report results within 48 hours.
Under this contract, PerkinElmer could be paid as much as $1.7 billion. Critics have asked why the state would build a new lab during a pandemic and thus compete against existing clinical laboratories for clinical laboratory scientists, automation, analyzers, test kits, and consumables.
From the launch of testing, consumers, local government agencies, and school districts sending samples to the Valencia Branch Laboratory have complained about delayed and inaccurate results, and a higher-than normal rate of positive test results.
On May 24, CBS13 TV of Sacramento reported widespread dissatisfaction with the performance of the lab. “The El Dorado Union School District reported a 1,000% increase in their positivity rate when they switched from a private lab to the state lab for testing. The most recent data provided by the state indicated the lab’s positivity rate was more than 60% higher than California’s overall positivity rate in February and March,” CBS13 said.
Other observers have noted that the California Department of Public Health has been inspecting the lab, which the state government owns, creating a serious conflict of interest.
Lawyer for Whistleblowers Comments on Court Case
ONE QUESTION THAT CLINICAL LABORATORY DIRECTORS MIGHT WANT ANSWERED is how common are cases such as the one PerkinElmer has brought against Mahnaz Salem, PhD, and other unnamed whistleblowers in the case involving California’s Valencia Branch Laboratory.
For an answer, The Dark Report reached out to Justin T. Berger, a partner with the law firm Cotchett, Pitre, and McCarthy. He often represents whistleblowers in qui tam actions under the federal and California False Claims acts.
Berger told The Dark Report that he has not been involved in the dispute between Salem and PerkinElmer and could not comment on the facts of the case. “I can say that it is extremely common for legitimate whistleblowers to be attacked by their former employers for purported violations of confidentiality provisions,” he wrote in an e-mail.
“It is an age-old tactic of intimidation, used to drive up whistleblowers’ legal costs, and send a message to other potential whistleblowers,” he added. “If that is what is happening here, it is especially disappointing, given that we are not just talking about COVID test results, but a massive public contract.” (See TDR, “California Builds Its Own COVID Lab: $25 Million or $1.7 Billion?” Nov. 16, 2020.)
“Moreover, in most situations, there is a public policy exception that allows employees to take confidential documents for purposes of reporting fraud being committed against the government, even if doing so violates a confidentiality provision,” he added.