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Attorney Scott R. Shepherd on WhistleBlowers, Securities, and Consumer Class Action

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Philadelphia, PAScott R. Shepherd is a founding partner in Shepherd, Finkelman, Miller and Shah, LLC, a national law firm with offices in Pennsylvania, New Jersey, Florida, Connecticut, and Wisconsin. A 1985 graduate of the University of Chicago Law School, Shepherd founded the firm in 1998.

LawyersandSettlements (LAS): What are the main areas of your firm's and your own practice?
Scott R. Shepherd (SRS): We do primarily class actions on behalf of consumers and shareholders, antitrust class actions, wage and hour and other employee actions, and whistleblowers, as well as some corporate contingent fee litigation. Everything we do is contingency fee; we don't do any hourly work.

I represent consumers and shareholders in class actions as well as whistleblowers in false claims cases. The federal False Claims Act provides what's called a qui tam incentive for whistleblowers. Under the False Claims Act, if you initiate an action on behalf of the US government and the Department of Justice chooses to intervene and recover money for the government, you are entitled to a percentage of the proceeds, between 15 and 30 percent, which can be quite a lot of money.

LAS: Can you talk about some of your whistleblower cases? Has retaliation against whistleblowers been a problem

SRS: Actually, I can't say a lot. The trick with whistleblower cases is that they're filed under seal and they stay under seal until the government decides whether to intervene, so many of my current whistleblower cases are still under seal. Most of the cases have involved improper pricing to the government or improper claims by health care companies against the Medicare program for drugs and durable medical equipment like wheelchairs and beds.

Somebody in a company will come forward and reveal what their company is doing to defraud the government. There's a statute that purports to protect whistleblowers from retaliation and provides for fines and penalties against the company if they do retaliate.

Initially, the company doesn't know about the action, but when it comes out from under seal, the statute is supposed to protect the whistleblower. Typically that person has already left the company by then, so we haven't had much trouble with retaliation. Often these are people who have participated in the fraudulent activity themselves, so they want to be the ones who rat out everybody else—it's not necessarily a patriotic impulse.

LAS: Do you have any securities work under way?

SRS: I'm engaged in a securities class action case against Faro Technologies that's been certified and settled. Faro makes very sophisticated measuring devices. They're based in Orlando, Florida, and the case was recorded in the Middle District of Florida; it involved misrepresentations to the market that caused buyers to buy, sell, or hold Faro stock with inadequate information. The principal allegations against Faro included failure to disclose inadequate business controls and allegations of violations of the Foreign Corrupt Practices Act. That settled recently for $6.85 million.

I can't say a lot about the FCPA allegations because we're in a settlement posture; I can say generally that they were about improper practices to get business in China.

LAS: What are some of your recent consumer class actions?

SRS: We've done one case against Rexall in Florida involving their Cellasene anti-cellulite pill and one against Dr. Phil in Los Angeles for a product called Shape Up! that was a bunch of BS—you had to decide whether you were pear-shaped or apple-shaped! Dr. Phil settled for about $12 million and Rexall for about $16 million.

Another case is against a Boston company called Kadant, Inc., that used to manufacture a composite decking product called GeoDeck as Kadant Composites, LLC. Between April 2002 and October 2003, there was a production error that they eventually discovered that caused decks that were built with GeoDeck and were under a 20-year warranty to start falling apart within a couple of years. Kadant Composites sold GeoDeck in 2005 and ceased operations—and warranty payments—in 2007. Kadant, Inc. is still in business, however. The class in this case is anyone whose deck uses Geodeck manufactured within that 2002-2003 time frame—you'll know it does if it starts to deteriorate.

LAS: What brought you to these areas of law?

SRS: Well, like all these things, you start doing it, you get experienced at it, and eventually it becomes your speciality. Early in my career, I worked at big defense firms defending these kinds of cases, but it's more fun to represent plaintiffs in these cases than it is trying to come up with ways to prevent them getting their recovery.

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