Appeals Court rules in favor of Wisconsin whistleblower in legal battle with AT&T

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One of the National Security Agency’s top trusted private sector partners, AT&T, is once again making headlines for its alleged overcharging of Wisconsin school districts.

On Jan. 16, the 7th Circuit Court of Appeals issued an opinion regarding a lengthily ongoing legal battle with AT&T over allegations a company subsidiary spent years overcharging Wisconsin school districts for their telecommunications services.

As previously reported by the Wisconsin Law Journal, in August 2023, a three-judge panel in the 7th Circuit has ruled unanimously to send to trial a False Claims Act case alleging Wisconsin Bell submitted and led other to submit false federal subsidy claims under a government program intended to ensure affordable telecom services for schools and libraries.

The case, Todd Heath v. Wisconsin Bell Inc., was originally filed in 2008 and focuses on the Schools and Libraries Universal Service Support program, or E-rate program. Whistleblower attorney David Chizewer, of Chicago-based Goldberg Kohn, serves as counsel for Heath.

When AT&T petitioned the 7th Circuit for a rehearing, the legal strategy focused on a key issue in U.S. ex rel. Todd Heath v. Wisconsin Bell, whether funds used to reimburse schools under the federal E-Rate Program are considered government funds, and therefore subject to the False Claims Act.

“But in a rare move, the court returned an opinion that left AT&T in a worse position than it had been in prior to the petition. AT&T’s petition for rehearing had claimed a jury decision on the government funds issue was unnecessary, and should be decided by the court in favor for AT&T. The Court agreed no jury was necessary, but then decided the issue in favor of Heath,” said Chizewer.

During an interview with the Wisconsin Law Journal, Chizewer noted the significance of the court’s decision.

“The Court’s ruling in favor of a Wisconsin whistleblower will have national implications,” said Chizewer, noting there is a companion case currently on hold that includes the rest of the country.”

Chizewer also noted that Wisconsin Attorney Doug Dehler with O’neil Cannon Hollman Dejong & Laing, S.C. serves as co-counsel for Heath who assisted with the case.

During an interview with the Wisconsin Law Journal, Dehler noted how he was pleased the Chicago appeals court reversed the federal court’s ruling in Milwaukee to dismiss case.

“We are grateful the 7^th Circuit Court of Appeals looked at the entire record and concluded we presented evidence demonstrating there were overcharges,” Dehler said.

According to court documents obtained by the Wisconsin Law Journal, “Heath identified enough specific evidence of discriminatory pricing to allow a reasonable jury to find that Wisconsin Bell, acting with the required scienter, charged specific schools and libraries more than it charged similarly situated customers.”

Court documents further noted, “Despite being aware of the E-rate program and its pricing rule, Wisconsin Bell did not train its sales representatives on the rule, nor did it put into place any mechanism to comply with it, until 2009.”

According to court documents, in 2009, Wisconsin Bell developed a plan for complying with the rule. It did so after its parent company settled a Department of Justice and FCC investigation of its E-rate practices in Indiana through a monetary payment and a compliance agreement.

Also according to court documents, Wisconsin Bell admits that, beginning in 2009, it used “interim policies and processes for at least two years” and that these policies did not reach a “steady state” until 2011. Wisconsin Bell also admits that it considered the prices charged to similarly situated customers “as just one factor among many in deciding what price” to charge an E-rate customer even after 2009.

The appeals court’s analysis further noted, “A company violates the False Claims Act if it ‘knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval” that is material to the government’s decision on the use of federal funds.'”

The appellate court concluded, “the judgment of the district court is REVERSED and the case is REMANDED to the district court for further proceedings consistent with this opinion.”

“Although we are disappointed with this ruling, we maintain that there is no merit to the underlying claims being raised in this lawsuit,” an AT&T spokesperson said.