Court Opinion

ID: 2717294
Source: CourtListenerOpinion
Date Created: 2014-08-12 05:04:54.525149+00
Date Added: 2024-06-11T15:27:02.930935
License: Public Domain

Case: 13-41088   Document: 00512729546    Page: 1   Date Filed: 08/11/2014

        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT     United States Court of Appeals
                                                                         Fifth Circuit

                                                                        FILED
                                No. 13-41088                        August 11, 2014
                                                                     Lyle W. Cayce
                                                                          Clerk
UNITED STATES OF AMERICA, ex rel; M.D. DAKSHESH KUMAR
PARIKH; M.D. HARISH CHANDNA; M.D. AJAY GAALLA,

                                         Plaintiffs–Appellees

UNITED STATES OF AMERICA,

                                         Intervenor–Appellee

v.

DAVID BROWN; DR. WILLIAM CAMPBELL,

                                         Defendants–Appellants

                Appeal from the United States District Court
                     for the Southern District of Texas

Before SMITH, WIENER, and PRADO, Circuit Judges.
EDWARD C. PRADO, Circuit Judge:
      In this False Claims Act (“FCA”) qui tam suit, relators Drs. Dakshesh
Parikh, Harish Chandna, and Ajay Gaalla (collectively, the “Relators”) sued
Citizens Medical Center (“CMC”), David Brown (“Brown”), and Dr. William
Campbell, Jr. (“Campbell”). Brown and Campbell (collectively, “Appellants”)
moved to dismiss the complaint based upon qualified immunity, and the
district court denied the motion. We affirm.
    Case: 13-41088    Document: 00512729546     Page: 2      Date Filed: 08/11/2014

                                 No. 13-41088
         I.   FACTUAL AND PROCEDURAL BACKGROUND
      Relators are cardiologists who formerly practiced at CMC. CMC is a
county-owned hospital in Victoria, Texas.           Brown is the hospital’s
administrator, and Campbell is a cardiologist employed by the hospital. As
Brown and Campbell are the only defendants in this appeal, we briefly
summarize the facts and proceedings that pertain to them.
      In their complaint, Relators alleged Appellants committed numerous
FCA violations concerning improper incentives for patient referrals.           The
alleged FCA violations fall into three general categories.
      First, Relators alleged that CMC, at Brown’s direction, knowingly and
willfully paid bonuses to emergency room physicians in exchange for referral
of Medicare and Medicaid patients to CMC’s chest pain center. Specifically,
the bonuses were paid by way of an equal split, between CMC and the referring
emergency room physicians, of the chest pain center revenues. The bonuses
were thus tied to the “volume, value, and revenue generated” from these
referrals, which made up the entirety of the chest pain center’s patients.
Brown “personally designed” this bonus system and was in charge of
implementing and administering it.
      Second, Relators alleged that Brown offered, and Campbell accepted, an
above-market guaranteed salary and discounted office space rental in
exchange for Medicare and Medicaid patient referrals to CMC. CMC paid
Campbell “many times more in salary than [he] earned in private practice” and
rented office space to Campbell “at a significantly reduced rate below the fair
market value.” Prior to this arrangement, Campbell transferred Medicare and
Medicaid patients out of CMC to other hospitals for treatment.            Once he
entered this arrangement, however, he began referring “nearly all Medicare
and Medicaid heart surgery patients to CMC and its exclusive cardiac
surgeon.”
                                       2
     Case: 13-41088         Document: 00512729546     Page: 3   Date Filed: 08/11/2014

                                       No. 13-41088
      Third, Relators alleged that Brown implemented a bonus system
wherein gastroenterologists who participated in CMC’s colonoscopy screening
program received bonus compensation for referring patients to CMC.
Specifically, CMC operated a program offering insured patients, including
Medicare and Medicaid patients, colonoscopy screenings. A gastroenterologist
would be assigned to a screening day and would perform the screenings for
that day. The gastroenterologist would then be compensated by billing any
charges to the patients’ insurer, and CMC would be compensated by billing
separately      for   its   hospital   charges.       CMC    also   compensated    the
gastroenterologist an additional $1,000 “directorship” fee for each day the
gastroenterologist participated in the screening program. But Relators alleged
that the gastroenterologist did not assume any “additional work or oversight”
to   receive    the    directorship    fee—“[t]here    are   absolutely   no   director
responsibilities or duties for participating physicians.”            Because Brown
awarded more screening days to physicians who referred more patients to
CMC, screening gastroenterologists received bonuses tied to the number of
patients referred to CMC.
      Based upon these allegations, Relators asserted causes of action under
the FCA. According to Relators’ complaint, Appellants submitted, or conspired
to submit, claims for payment from Medicare and Medicaid for these services
in violation of the FCA because such claims were knowingly falsely certified to
be in compliance with healthcare laws and regulations. Relators alleged that
Appellants knew that these quid pro quo arrangements violated the Anti-
kickback Statute (“AKS”) for federal health care programs, 42 U.S.C. § 1320a–
7b, and the Stark Law, 42 U.S.C. § 1395nn, which prohibits submitting claims
to federal health care programs if the services were furnished pursuant to
referrals from physicians with whom the servicing entity has a financial
relationship.
                                            3
    Case: 13-41088     Document: 00512729546      Page: 4   Date Filed: 08/11/2014

                                   No. 13-41088
      Brown and Campbell moved to dismiss the complaint based upon
qualified immunity. The district court denied the motion, finding qualified
immunity categorically unavailable against FCA claims. Brown and Campbell
timely appeal.
         II.     JURISDICTION AND STANDARD OF REVIEW
      To the extent an order denying qualified immunity turns on an issue of
law, this court has jurisdiction to consider an interlocutory appeal of that order.
Cantrell v. City of Murphy, 666 F.3d 911, 918 (5th Cir. 2012). We review de
novo the denial of a motion to dismiss based upon qualified immunity grounds.
Id. In so doing, we accept all well-pleaded facts as true and draw all reasonable
inferences in favor of the nonmoving party. Id.
                            III.   DISCUSSION
      The parties largely dispute the categorical availability of qualified
immunity against FCA suits, but we expressly decline to resolve this dispute.
Instead, assuming arguendo that qualified immunity is an available defense,
we hold on the merits that Brown and Campbell are not entitled to qualified
immunity against these FCA claims.
      The FCA permits the United States, or a private person on the
government’s behalf (a “relator”), to sue a person who has presented a false
claim for payment from the United States. 31 U.S.C. §§ 3729(a), 3730(b).
Liability attaches to any person who, inter alia, “knowingly presents, or causes
to be presented, a false or fraudulent claim for payment or approval,” or
“knowingly makes, uses, or causes to be made or used, a false record or
statement material to a false or fraudulent claim.”         Id. §§ 3729(a)(1)(A),
3729(a)(1)(B). The FCA defines “knowingly” to mean that the defendant “has
actual knowledge of the information” underlying the claim, “acts in deliberate
ignorance of the truth or falsity of the information,” or “acts in reckless
disregard of the truth or falsity of the information.” Id. § 3729(b)(1)(A). A
                                        4
      Case: 13-41088   Document: 00512729546    Page: 5   Date Filed: 08/11/2014

                                 No. 13-41088
defendant found liable may be subject to civil penalties and treble damages.
Id. § 3729(a)(1). See generally United States ex rel. Spicer v. Westbrook, 751
F.3d 354, 364 (5th Cir. 2014).
       Qualified immunity shields from suit all but the “plainly incompetent or
those who knowingly violate the law.” Brumfield v. Hollins, 551 F.3d 322, 326
(5th Cir. 2008) (citation and internal quotation marks omitted). The plaintiff
must bear the burden of proving, in two familiar steps, that a government
official is not entitled to qualified immunity. See Atteberry v. Nocona Gen.
Hosp., 430 F.3d 245, 253 (5th Cir. 2005). First, a plaintiff must show that he
“plead[ed] facts showing . . . that the official violated a statutory or
constitutional right.” Ashcroft v. al–Kidd, 131 S. Ct. 2074, 2080 (2011) (citing
Harlow v. Fitzgerald, 457 U.S. 800, 818 (1982)); Atteberry, 430 F.3d at 253. If
the plaintiff makes this first showing, then the second step is to determine
whether “the defendants’ actions were objectively unreasonable in light of the
law that was clearly established at the time of the actions complained of.”
Atteberry, 430 F.3d at 253. Courts have discretion to decide which of the two
prongs of qualified immunity to tackle first. Pearson v. Callahan, 555 U.S.
223, 236 (2009). Both steps are met here.
 A.    Statutory Violation
       Relators have born their burden on the first step of the qualified
immunity analysis. As the district court found, Relators sufficiently pleaded
that Appellants violated the FCA by submitting, or conspiring to submit,
claims for payment while knowingly falsely certifying compliance with the
AKS and Stark Law. Brown and Campbell do not dispute the sufficiency of the
complaint in this regard. We take these well-pleaded facts as true—including
the well-pleaded fact that Appellants knowingly falsely certified compliance
with the AKS and Stark Law—and inquire next whether it was clearly
established at the time that such a claim for payment violated the FCA.
                                       5
      Case: 13-41088   Document: 00512729546       Page: 6   Date Filed: 08/11/2014

                                   No. 13-41088
 B.    Objectively Unreasonable
       The courses of conduct allegedly taken by Brown and Campbell were
objectively unreasonable in light of clearly established law. A defendant’s
conduct is objectively unreasonable when, at the time of the challenged
conduct, the contours of the violated right were “sufficiently clear that every
reasonable official would have understood that what he is doing violates that
right.” al–Kidd, 131 S. Ct. at 2083 (citation and internal quotation marks
omitted). Although “the term clearly established does not necessarily refer to
commanding precedent that is factually on all-fours with the case at bar,”
Atteberry, 430 F.3d at 256 (citation and internal quotation marks omitted),
“existing precedent must have placed the statutory or constitutional question
beyond debate,” al–Kidd, 131 S. Ct. at 2083 (citation omitted).
       Appellants argue that the alleged violations of the AKS and Stark Law
were not clearly established at the time of the instant offenses. However, such
an argument presumes that Relators asserted causes of action under the AKS
and Stark Law, but they have not. Although AKS and Stark Law violations
underlie Relators’ FCA claims, we do not focus on these underlying violations.
After all, “the [FCA] attaches liability . . . to the claim for payment,” “not to the
underlying fraudulent activity.” United States ex rel. Longhi v. Lithium Power
Techs., Inc., 575 F.3d 458, 467 (5th Cir. 2009) (citation and internal quotation
marks omitted). Properly focused on the claim for payment here, the relevant
pleading that we have taken as true is that Appellants knew their compliance
certification was false. The key question, then, is whether the contours of the
FCA were sufficiently clear at the time such that every reasonable official
would have understood that—as Relators pleaded in their complaint—
presenting claims for payment, while knowingly falsely certifying compliance

                                         6
     Case: 13-41088        Document: 00512729546          Page: 7     Date Filed: 08/11/2014

                                        No. 13-41088
with the AKS and Stark Law, violated the FCA. 1 Based on circuit precedent,
we answer in the affirmative.
       In United States ex rel. Thompson v. Columbia/HCA Healthcare Corp.,
125 F.3d 899 (5th Cir. 1997), this court considered whether a claim for services
rendered in violation of the AKS and Stark Law constituted a false claim
within the purview of the FCA. Id. at 901–03. We first noted that “claims for
services rendered in violation of a statute do not necessarily constitute false or
fraudulent claims under the FCA.” Id. at 902 (emphasis added). However,
under a false certification theory, the FCA may be implicated “where the
government has conditioned payment of a claim upon a claimant’s certification
of compliance with, for example, a statute or regulation.” Id. In this scenario,
“a claimant submits a false or fraudulent claim when he or she falsely certifies
compliance with that statute or regulation.” Id. We then found that the relator
had alleged (1) “as a condition of their participation in the Medicare program,
defendants were required to certify in annual cost reports that the services
identified therein were provided in compliance with the laws and regulations
regarding the provision of healthcare services,” and (2) “defendants falsely
certified that the services identified in their annual cost reports were provided
in compliance with such laws and regulations.” Id. This, we held, stated a
cognizable cause of action under the FCA. Id. at 902–03.
       In light of our decision in Thompson, every reasonable official would
understand that the FCA is violated when (1) “the government has conditioned

       1   We also note that, to the extent Appellants wish to maintain their argument,
qualified immunity is unnecessary. They can effectively make the same assertion—that the
AKS and Stark Law was not clearly established—by claiming that they did not “knowingly”
falsely certify compliance with the AKS and Stark Law because those laws were unclear.
That is precisely what the district court observed toward the end of its opinion: “[T]he scienter
requirement—which, at the very least, requires a defendant to recklessly disregard the truth
or falsity of the claim presented, see 31 U.S.C. § 3729(b)(1)—serves to eliminate the prospect
of liability in cases where the legality of the defendant’s actions is open to debate.”
                                               7
    Case: 13-41088      Document: 00512729546      Page: 8    Date Filed: 08/11/2014

                                   No. 13-41088
payment of a claim upon a claimant’s certification of compliance with, for
example, a statute or regulation,” and (2) the official “falsely certifies
compliance with that statute or regulation.”           Id. at 902.      This clearly
established statutory right is precisely what Relators alleged Appellants to
have violated.
      Accordingly, we hold that as a matter of law Brown and Campbell are
not entitled to qualified immunity. 2
                            IV.    CONCLUSION
      We AFFIRM the district court’s denial of Brown and Campbell’s motion
to dismiss based upon qualified immunity.

      2  Relators also alleged that Brown and Campbell violated the FCA “directly” by
providing unnecessary or worthless medical services. Because Brown and Campbell do not
assert qualified immunity as to these claims, we need not address the matter.
                                          8