In an important decision for providers facing a lawsuit alleging violations of the False Claims Act, the U.S. District Court for the Middle District of Florida, in U.S. ex rel. Pelletier v. Liberty Ambulance Service, Inc., Case No. 3:11-cv-587-J-32MCR (Middle District of Florida, Jacksonville Division), dismissed the government’s complaint intervening in a qui tam action that alleged that Liberty Ambulance Service, among other providers that settled with the government prior to the dismissal, submitted false claims to Medicare and Medicaid for ambulance services that were never provided, on the basis that the government’s complaint failed to satisfy the heightened pleading requirements under Federal Rules of Civil Procedure 8 and 9.
The Court’s decision is significant because the government attached to its complaint affidavits of current and former employees of Liberty and a dispatcher, along with other materials, suggesting that falsified reports were submitted to Liberty that would be payable by Medicare and Medicaid, but, as the Court found, “the allegations stop short of describing what happened once the run reports were submitted to the Liberty office for processing.” The Court’s decision hinged on the lack of any evidence pertaining to the actual billing process employed by Liberty. In fact, the affidavit of the person who claimed the most familiarity with that process, did not claim to have witnessed the submission to the government of any actual false claims.
Although the dismissal was without prejudice to the government amending the complaint to provide greater particularity, the decision is an important example for providers facing False Claims Act claims of how the heightened pleading requirements under FRCP 8 and 9 may strengthen their defense.
The Federal False Claims Act (and many similar state false claims acts) allow an individual—called a “relator”—to file a lawsuit on behalf of the United States Government. If successful, the relator stands to collect a portion of the amount collected. Since the False Claims Act provides for treble damages and statutory penalties of up to $11,000 per false claim, the reward to the relator can be considerable.
Complaints by relators must filed under seal. This allows the Government time to investigate the relator’s allegations before deciding whether to intervene in the case. Cases in which the Government intervenes tend to have higher judgments or settlements. Once the Government makes this decision, the complaint is unsealed and the case can move forward.
Earlier this week, an Alabama judge ruled that the relators could not keep their identities secret, even though they voluntarily dismissed their lawsuit against Great Bend Regional Hospital. Frank Coyle and Randy Bruce argued that their careers in health care may be damaged if their identities are revealed. However, the court agreed with the Government, that the reason for sealing the complaint is for the limited purpose of protecting the Government’s investigative process.
It may have been a bad choice for Coyle and Bruce to ask for anonymity. If they had merely dismissed their case, the dismissal may have been a mere footnote or back page news item. By seeking anonymity and losing, it is front page news. When filing a case, relators may think that they will no longer have to work once they win millions of dollars. As these relators have learned, you don’t always win. And there are consequences to your actions.
A recent decision in the U.S. District Court for the Southern District of New York provides fair warning to qui tam relators who assert erroneous claims under the False Claims Act (“FCA”) that they could be hit with legal fees and expenses pursuant to 31 U.S.C. § 3730, which permits such an award “upon a finding that the . . . claims were objectively frivolous, irrespective of plaintiff’s subjective intent.” Mikes v. Straus, 274 F.3d 687, 705 (2d Cir. 2001).
On December 1, 2014, in U.S., et al., ex rel. Fox Rx, Inc., 1:12-cv-00275, defendant Managed Health Care Associates Long Term Care Network, Inc. (“MHA”), was awarded attorneys’ fees and expenses because the relator’s, Fox Rx, Inc.’ (“Fox”), claim that MHA, which negotiates reimbursement rates, among other things, on behalf of a network of pharmacies, allegedly (i) failed to substitute generic drugs for named brand drugs, and (ii) dispensed drugs beyond their termination date, was objectively frivolous given that the plain language of the very agreement Fox attached to its second amended complaint demonstrated that MHA did not itself dispense drugs, and exercised no control or supervision of its network pharmacies’ dispensing. Continue reading Fees and Costs Awarded to False Claims Act Defendant
On January 2, 2015, the U.S. District Court for the Central District of California threw out claims that Walgreens pharmacy violated the federal and California false claims acts on the basis that the plaintiff failed to meet the applicable stringent pleading requirements.
In Irwin v. Walgreens, 2:13-cv-08473, a whistleblower/Relator contended that Walgreens cheated Medicare and Medi-Cal out of millions of dollars by establishing schemes to bill those government healthcare programs for prescriptions that were never picked up by patients, rather than restocking the drugs and reversing any associated charges to the government payers. Among other things, the complaint asserted that, as demonstrated by the fact that they were not picked up by the patients, the prescriptions were not medically necessary, and therefore should not have been billed. The complaint sought money damages, including a penalty of up to $11,000 for each violation and treble damages. In September 2014, the government declined to intervene in the qui tam action. Continue reading Another Win for a False Claims Act Defendant