Source: https://openjurist.org/469/f3d/263/united-states-v-the-baylor-university-medical-center-g-05-2951
Timestamp: 2018-12-15 21:58:43
Document Index: 622834539

Matched Legal Cases: ['§ 3730', 'art, 125', '§ 405', '§ 3731', '§ 3731', '§ 3731', '§ 3731', '§ 3730', '§ 3730', '§ 3730', '§ 3733', '§ 3730', '§ 4', '§ 3730', '§ 1497', '§ 3730', '§ 3731', '§ 1395', '§ 3731', '§ 3731', '§ 3730', '§ 3730', '§ 3730', '§ 4']

469 F3d 263 United States v. The Baylor University Medical Center G 05-2951- | OpenJurist
469 F. 3d 263 - United States v. The Baylor University Medical Center G 05-2951-
469 F.3d 263
THE BAYLOR UNIVERSITY MEDICAL CENTER, Brigham and Women's Hospital, Cedars-Sinai Medical Center, Cleveland Clinic, Crawford Long Hospital of Emory University, Deaconess Medical Center, Duke University Health System, Inc., Emory University Hospital, Florida Hospital Medical Center, Foster G. McGraw Hospital, Good Samaritan Hospital and Medical Center, Harper Hospital, Hospital of the Good Samaritan, Hospital of the University of Pennsylvania, Jewish Hospital of St. Louis, Johns Hopkins Hospital, Lahey Clinic Hospital, Inc., Loma Linda University Medical Center, Massachusetts General Hospital, The Methodist Hospital, Methodist Hospital, Lubbock, Texas, Methodist Hospital of Indiana, Methodist Hospital of Memphis, Montefiore Medical Center of Pennsylvania, Providence Medical Center, Sacred Heart Medical Center, St. Francis Hospital, Roslyn, St. Joseph's Hospital of Atlanta, St. Joseph Mercy Hospital, St. Louis University Hospital, St. Luke's Medical Center, Inc., St. Thomas Hospital, St. Vincent Hospital
and Health Care Center, St. Vincent Hospital and Medical Center, Sentara Norfolk General Hospital, Sequoia Hospital District, Seton Medical Center, Stanford University Hospital, University Hospital of Cleveland, Washington Hospital Center, William Beaumont Hospital, Yale-New Haven Hospital, Aurora Sinai Medical Center f/k/a Sinai Samaritan Medical Center, Defendants-Appellants.
Docket No. 05-2951-cv.
Ira Feinberg, Stephen J. Immelt, Therese M. Goldsmith, Hogan & Hartson L.L.P., Baltimore, MD; Lorane F. Hebert, Dirk C. Phillips, Hogan & Hartson L.L.P., Washington, DC, for Defendants-Appellants Crawford Long Hospital of Emory University, Emory University Hospital, Massachusetts General Hospital, The Brigham and Women's Hospital, Inc., Hospital of the University of Pennsylvania, Presbyterian Medical Center of the University of Pennsylvania Health System, The Johns Hopkins Hospital.
Frederick Robinson, Caroline M. Mew, Fulbright & Jaworski, L.L.P., Washington, DC, for Defendant-Appellant Duke University Health System, Inc.
Ray M. Shepard, Leonard C. Homer, Ober, Kaler, Grimes & Shriver, Baltimore, MD, for Appellants-Defendants Cedars-Sinai Medical Center, Loma Linda University Medical Center, Northwestern Memorial Hospital, Yale-New Haven Hospital, St. Francis Hospital, Roslyn, St. Joseph's Hospital of Atlanta, Inc., St. Joseph Mercy Hospital, Washington Hospital Center, Florida Hospital Medical Center.
Before JACOBS, Chief Judge, POOLER and GIBSON,* Circuit Judges.
* In March 1994, Kevin Cosens filed a qui tam complaint (the "original complaint") in the United States District Court for the Western District of Washington against 132 hospitals from thirty states; the complaint also named thirty "John Doe" defendants. As required by the FCA, the original complaint was filed under seal and served on the Government. See 31 U.S.C. § 3730(b)(2). The original complaint alleged, inter alia, that the Hospitals had defrauded Medicare by seeking and obtaining reimbursement for hospital services provided to patients participating in clinical trials involving investigational cardiac devices that had not received Food and Drug Administration ("FDA") pre-market approval.1 According to the complaint, reimbursement for such services contravened a provision in the manuals that Medicare issued to its fiscal intermediaries (the "Manual Provision").2 In December 1995, Cosens filed an amended complaint, also under seal.3 The original and amended pleadings both alleged a single omnibus cause of action; neither pleading linked individual hospitals to specific fraudulent acts or alleged that the individual hospitals had conspired or collaborated in perpetrating the fraud.
Beginning in 1995, a series of external events transpired that had bearing on the course of the litigation: (i) In May 1995, twenty-five of the hospitals filed suit in the Central District of California, seeking to have the Manual Provision declared invalid, see Cedars-Sinai Med. Ctr. v. Shalala, 939 F.Supp. 1457 (C.D.Cal. 1996), aff'd in part and remanded in part, 125 F.3d 765 (9th Cir. 1997), appeal after remand, 177 F.3d 1126 (9th Cir. 1999) (the "Cedars-Sinai litigation");4 (ii) In September 1995, the Secretary of the Department of Health and Human Services ("HHS") promulgated new regulations governing the investigational cardiac devices at issue in Cosens's qui tam action, see Medicare Program; Criteria and Procedures for Extending Coverage to Certain Devices and Related Services, 60 Fed. Reg. 48417 (codified at 42 C.F.R. §§ 405 & 411); under the new regulations, Medicare arguably covered treatments involving those devices; (iii) In February 1996, the United States Permanent Subcommittee on Investigations held hearings (at which Cosens testified) to investigate whether hospitals were defrauding Medicare by billing for services involving non-covered devices, see Improper Medicare Billing by Hospitals Nationwide for Investigational Devices and Procedures: Hearing Before the Perm. Subcomm. On Investigations of the Comm. On Gov't Affairs, 104th Cong. 32 (1996), available at 1996 WL 713556-7135563; see also In re Cardiac Devices Qui Tam Litig., 221 F.R.D. 318, 325 (D.Conn. 2004). The Government's motions to extend the seal period cited these developments, as well as the need to evaluate the claims and pursue settlement discussions with the hospitals. See Cardiac Devices Qui Tam Litig., 221 F.R.D. at 325-26. During this period, the Government and Cosens sought and obtained a partial lifting of the seal, with the result that some of the hospitals received limited information about the FCA suits.
Beginning in June 1999, the Government—asserting that it was the real party in interest without formal intervention—filed ex parte motions for severance and transfer of venue as to particular hospitals, in each instance seeking transfer to the district where the hospital was located. These motions were all granted by the Western District of Washington. See id. at 326. At the same time, the Government negotiated settlements with a number of the hospitals, and voluntarily dismissed others.
We review de novo the district court's denial of a motion to dismiss under Fed. R.Civ.P. 12(b). See Sweet v. Sheahan, 235 F.3d 80, 83 (2d Cir. 2000). A motion to dismiss should not be granted unless "it appears beyond doubt, even when the complaint is liberally construed, that the plaintiff can prove no set of facts which would entitle him to relief." Jaghory v. New York State Dep't of Educ., 131 F.3d 326, 329 (2d Cir. 1997) (internal quotation marks omitted). We "must accept all factual allegations in the complaint as true and draw inferences from those allegations in the light most favorable to the plaintiff." Id.
A. Timeliness of Government's Complaints-in-Intervention
31 U.S.C. § 3731(b). The earliest violations alleged in this case date from 1986, and the Government filed its complaints-in-intervention in 2002-2003.5
We conclude that the date the Government's actions commenced (for statute of limitations purposes) was the date on which the complaints-in-intervention were filed, and that the Government's claims are therefore time-barred. The Government's complaints-in-intervention allege that the Hospitals made their last false claims in 1995. So, the six-year statute of limitations in 31 U.S.C. § 3731(b)(1) had expired for all claims by 2002, when the complaints-in-intervention were filed. Nor could the three-year tolling provision of § 3731(b)(2) save the claims: If the allegations in Cosens's original complaint sufficiently pled "facts material to the right[s] of action"—i.e., so that the Government should reasonably have had knowledge of such facts (a premise unchallenged by the parties)—the three-year toll under § 3731(b)(2) (even if applicable) expired in 1997.
The district court determined that the date on which the relator files the qui tam complaint constitutes the relevant date for determining the timeliness of the government's subsequent complaint-in-intervention if the government's complaint-in-intervention satisfies the requirements governing relation back under Rule 15(c)(2). See Cardiac Devices Qui Tam Litig., 221 F.R.D. at 357 ("Rule 15(c)(2) may apply to a complaint-in-intervention filed by the United States in a qui tam proceeding, even though it is not technically an amended complaint by the original party."); accord United States ex rel. Purcell v. MWI Corp., 254 F.Supp.2d 69, 75 (D.D.C. 2003); cf. United States ex rel. Vosika v. Starkey Labs., 2004 WL 2065127, *3 (D.Minn. Sept. 8, 2004); United States ex rel. Costa v. Baker & Taylor, Inc., 1998 WL 230979, at *3 (N.D.Cal. Mar. 20, 1998); United States v. Templeton, 199 F.Supp. 179, 184 (D.Tenn. 1961). We disagree, and hold that—in light of the scheme created by 31 U.S.C. § 3730(b)—Rule 15(c)(2) does not allow complaints-in-intervention filed by the government to relate back to a relator's qui tam complaint.
Section 3730(b), which authorizes relators to pursue actions on a qui tam basis "in the name of the Government," is distinctive for the secrecy that it affords the relator's qui tam complaint. 31 U.S.C. § 3730(b)(1).6 The qui tam complaint must be filed in camera and must remain under seal for at least sixty days, see id. § 3730(b)(2), unless the government decides to intervene, see S.Rep. No. 99-345, at *24 (1986) ("Nothing in the statute . . . precludes the Government from intervening before the sixty-day period expires, at which time the court would unseal the complaint and have it served upon the defendant pursuant to [Fed.R.Civ.P. 4]."). The government may conduct discovery during the seal period (i.e., require the production of documents, answering of interrogatories, and giving of oral testimony). See 31 U.S.C. § 3733. After the sixty-day seal period expires, the government has various options, of which three are relevant here; the government may:
[iii] "notify the court that it declines to take over the action," in which case the relator has the "right to conduct the action," id. § 3730(b)(4)(B).7
If the government decides to intervene, the intervention will almost always involve an amended complaint. See 1 John T. Boese, Civil False Claims and Qui Tam Actions § 4.05[B], at 4-173 (3d ed. 2006).
The secrecy required by § 3730(b) is incompatible with Rule 15(c)(2), because (as is well-settled) the touchstone for relation back pursuant to Rule 15(c)(2) is notice, i.e., whether the original pleading gave a party "adequate notice of the conduct, transaction, or occurrence that forms the basis of the claim or defense," Wright et al., supra, § 1497; see also Wilson v. Fairchild Republic Co., 143 F.3d 733, 738 (2d Cir. 1998) ("The pertinent inquiry . . . is whether the original complaint gave the defendant fair notice of the newly alleged claims.") overruled on other grounds by Salyton v. American Exp. Co., 460 F.3d 215 (2d Cir. 2006); Stevelman v. Alias Research Inc., 174 F.3d 79, 86 (2d Cir. 1999) ("Under [Rule] 15(c), the central inquiry is whether adequate notice of the matters raised in the amended pleading has been given to the opposing party within the statute of limitations `by the general fact situation alleged in the original pleading.'" (quoting Rosenberg v. Martin, 478 F.2d 520, 526 (2d Cir. 1973))). "The rationale of Rule 15(c) is that a party who has been notified of litigation concerning a particular occurrence has been given all the notice that statutes of limitations were intended to provide." Baldwin County Welcome Ctr. v. Brown, 466 U.S. 147, 159 n. 3, 104 S.Ct. 1723, 80 L.Ed.2d 196 (1984). By design, the seal provision of § 3730(b) deprives the defendant in an FCA suit of the notice usually given by a complaint.8 Because any relation back of subsequent filings to the original complaint is incompatible with the core requirement of notice under Rule 15(c)(2), continued running of the statute of limitations is warranted.
However, Fed.R.Civ.P. 15(c)(1) provides that "[a]n amendment of a pleading relates back to the date of the original pleading when . . . relation back is permitted by the law that provides the statute of limitations applicable to the action." There is a colorable argument that the FCA implicitly "permit[s]" a form of relation back that dispenses with the requirement of notice.9 But the parties do not argue that the FCA's statute-of-limitations provision, 31 U.S.C. § 3731(b), creates its own relation-back doctrine. Of course, we have discretion to consider this question sua sponte. In light of our holding that the seal provision of the FCA deprives the defendant of notice, which is the touchstone of Rule 15(c)(2) relation-back, we exercise our discretion not to do so. Even if we were to consider it, moreover, we would be faced with the substantial question of whether the relator's qui tam complaint, as drafted and filed, could serve as a sufficient placeholder to achieve relation back in the qui tam context.10
The regulatory details and history at issue here are recounted in the opinion inYale-New Haven v. Leavitt, 2006 WL 3317691, which is being issued in tandem with this opinion.
Fiscal intermediaries are private entities, usually insurance companies, that contract with Medicare to pay Medicare reimbursement claims,see 42 U.S.C. § 1395h.
The amended complaint added two hospitals as defendants, but otherwise did not materially change the original complaint
TheCedars-Sinai litigation is discussed in greater detail in Yale-New Haven Hosp. v. Leavitt, 2006 WL 3317691.
The Hospitals argue that some of the Government's claims are time-barred because the FCA's statute of limitations expired prior to Cosens's filing of his complaint in 1994. This argument reads the tolling provision in § 3731(b)(2) as inapplicable to claims alleged by a relator in aqui tam complaint, even if the government ultimately intervenes in the action. Because we conclude that the Government filed its complaints-in-intervention outside of the statute-of-limitations period provided for by 31 U.S.C. § 3731(b), we need not address this question.
(b) Actions by private persons.—(1) A person may bring a civil action for a violation of [the FCA] for the person and for the United States Government. The action shall be brought in the name of the Government. . . .
(3) The Government may, for good cause shown, move the court for extensions of the time during which the complaint remains under seal under paragraph (2). . . .
Even if the government notifies the court that it declines to take over the action, it may still "intervene at a later date upon a showing of good cause." 31 U.S.C. § 3730(c)(3)
Between 1994 and the Government's filing of its complaints-in-intervention, some of the hospitals in this case received partial (and largely informal) notice of the existence and substance of Cosens'squi tam complaint.
The Eighth Circuit has held that a complaint that is egregiously defective does not commence an action for statute-of-limitations purposesSee Biby v. Kansas City Life Ins. Co., 629 F.2d 1289, 1294 (8th Cir. 1980). The proper standard for evaluating the sufficiency of a relator's complaint must be derived from the FCA itself, its structure and purposes. See Campbell v. Redding Med. Ctr., 421 F.3d 817 (9th Cir. 2005).
As described in text, the FCA allows a relator to keep a claim under seal for sixty days to allow the government to determine whether or not to intervene. 31 U.S.C. § 3730(b). In the "vast majority" of cases, sixty days will be sufficient for the government to make this determination, S.Rep. No. 99-345, at *24-25 (1986); however, on "good cause" shown ex parte, the government may obtain extensions. 31 U.S.C. § 3730(b)(3). No limit is set to the number or length of such extensions. Boese, supra, § 4.04[B][2], at 4-165.