Office Depot whistleblower case returns $68.5M to California cities and schools

LOS ANGELES, CALIFORNIA, Jan. 14, 2015 – More than 1,000 cities, counties, school districts and other government entities in California – including Los Angeles and Santa Clara County – will share in a $68.5 million settlement of a whistleblower case paid by Office Depot for allegedly overcharging them for office supplies.

The settlement agreement — which has been signed by the parties to the case and was filed in Los Angeles Superior Court late yesterday – resolves a whistleblower (“qui tam”) lawsuit filed by former Office Depot employee David Sherwin that alleged Office Depot failed to give most of its California government customers the lowest price it was offering any government customer as required under its contracts. Other pricing misconduct also was alleged.

“David Sherwin’s insider knowledge and his determination to do the right thing were the most important factors in bringing Office Depot’s alleged misconduct to light,” said Stephen Hasegawa, a San Francisco whistleblower attorney with Phillips & Cohen LLP, which represented Sherwin. “He worked tirelessly on his own and with his lawyers for several years to try to prove Office Depot had overcharged its government customers. Even after he was diagnosed with terminal cancer, he continued to assist in the prosecution of the lawsuit.”

Sherwin died from cancer last year, only a month after testifying in the lawsuit.

The California entities participated in the US Communities purchasing program, which was set up to allow state and local governments across the country to leverage their combined purchasing power by appointing a single public entity to negotiate a contract with a vendor on behalf of all US Communities members.

Participants in the contract are guaranteed to receive Office Depot’s best available prices for government purchasers, according to Sherwin’s complaint. But Office Depot allegedly gave Los Angeles, Santa Clara and the other California entities that are part of the settlement a lower discount rate than other government entities were given.

The qui tam lawsuit was filed under the California whistleblower law (the California False Claims Act) in 2009 in Los Angeles Superior Court. The law rewards whistleblowers 15 percent to 33 percent of the amount recovered when the entity intervenes in the case and 25 percent to 50 percent when the entity doesn’t join. Those amounts are paid by each entity from its share of the recovery and in this case varied by entity. Sherwin’s estate will receive the reward.

Each entity’s share of the settlement is based on the amount purchased from Office Depot under the U.S. Communities contract from 2005 to 2010. The largest shares will go to:

  • The City of Los Angeles ($11.6 million)
  • Santa Clara County ($3 million)
  • Los Angeles County ($3.8 million)
  • San Bernardino Unified School District ($1.3 million)
  • San Bernardino County ($1.2 million)
  • Orange County ($1.3 million)
  • Tulare County ($1.2 million)
  • City of Long Beach ($985,000)
  • Kern County ($960,000)
  • Fresno Unified School District ($886,000)
  • San Mateo County ($883,000)
  • Solano County ($843,000)

Phillips & Cohen thanked in-house counsel for all of the government intervenors who made invaluable contributions, including Laurie Rittenberg and Ronald Whitaker at the City of Los Angeles; Danny Chou, Greta Hansen, and Kavita Narayan at the County of Santa Clara; Phil Sinco and Wendy Stockton (now retired) from the City of Santa Maria; and Dean Derleth and John Higginbotham from the City of Corona.

They also thanked their co-counsel: Robert Nelson and Lexi Hazam at Lieff Cabraser Heimann & Bernstein; Altomease Kennedy at Sanford Heisler; and Mark Kleiman at the Law Office of Mark Kleiman.

Case citation: State of California ex rel. David Sherwin v. Office Depot, Inc., Case No. BC410135 (Los Angeles Superior Court).

Note: Phillips & Cohen whistleblower lawyers Stephen Hasegawa and Edward Arens were finalists for Consumer Attorneys of California’s 2015 “Consumer Attorney of the Year” for their work representing the whistleblower in the case against Office Depot. The group featured Mr. Hasegawa in the below video, where he discusses the whistleblower case that got them nominated.

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