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U.S. EX REL. ORTEGA v. COLUMBIA HEALTHCARE

January 15, 2003

UNITED STATES OF AMERICA EX REL. SARA ORTEGA, PLAINTIFF,
V.
COLUMBIA HEALTHCARE, INC., ET AL. DEFENDANTS.



The opinion of the court was delivered by: Lamberth, District Judge.

  MEMORANDUM OPINION

This case comes before the Court on motions practice seeking the dismissal of Relator's complaint. The United States filed a motion to dismiss [40], Relator opposed [122] and sought leave to file under seal [125] (which HCA opposed [172]), and the United States replied [142].*fn1 Relators in other cases pending before this Court filed statements of interest. Relator Thompson filed a memorandum in support of the government's motion [133], as did Relator King [148]; Relator Ortega responded [182], and Thompson replied [190]. King sought leave to respond to Thompson's reply [369]; Thompson then sought leave to respond [412] to King's statement. Defendant HCA also filed a motion to dismiss [82], Relator responded [145] and sought leave to file her opposition under seal [151], HCA replied [183], and the United States filed a statement of interest [202]. After a settlement was negotiated with respect to various cases in this MDL, the United States filed a motion to expedite consideration of pending suggestions of dismissal [739] on first-to-file grounds in four cases, to assist in apportioning the settlement proceeds.

Upon consideration of the case, the parties' motions and responses, and the law, the United States' motion to dismiss will be granted; its motion to expedite will be granted as to this case. HCA's*fn2 motion to dismiss will be granted. Thompson and King will be granted leave to file responses. Relator's motions to file under seal will be denied.

I. Background

This case is part of the multi-district litigation of False Claims Act qui tam suits against HCA and various related entities. The United States seeks dismissal of kickback allegations in this case under the first-to-file bar of the False Claims Act (FCA), 31 U.S.C. § 3730(b)(5). Once a qui tam suit has been filed under the FCA, the first-to-file bar prohibits any subsequent would-be relator from filing a case based on the same underlying facts.

Relator filed this suit under seal June 8, 1995 in the Western District of Texas, alleging that HCA-owned Columbia Medical Center West, an El Paso hospital, fraudulently procured certification from the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) and that such fraud excluded it from participation in Medicare, rendering claims submitted for Medicare reimbursement false. The original complaint also contained a brief allegation that defendants engaged in fraudulent accounting practices by booking costs from the Rehabilitation Center to the Back Care Center to raise the base for Medicare funding. On December 18, 1997, Relator filed a first amended complaint, which added two additional allegations. First, Relator outlined a scheme of illegal kickbacks to physicians for referrals. Second, she alleged improper upcoding of treatments to inflate the compensation received from Medicare; the upcoding allegations have been settled and Relator will receive $250,194 from the settlement.

After reviewing the complaints, the United States intervened in the kickback, cost shifting, and upcoding claims of the first amended complaint on September 30, 1998, leaving Relator to pursue the JCAHO certification claim on her own. As noted, the upcoding claims were settled. The United States withdrew its intervention as to the specific allegation of cost shifting, and Relator and HCA subsequently stipulated to a dismissal of the cost shifting claim. The United States filed a suggestion of dismissal of the kickback claims on the ground that complaints predating Relator's first amended described alleged the same kickback scheme. HCA filed a motion to dismiss, asserting in addition to the first-to-file bar that the complaint does not plead fraud with particularity, and that JCAHO accreditation is not a prerequisite to participation in Medicare and therefore the allegedly fraudulently procured certification would not have affected the government's decision to pay claims submitted to it.

II. First-to-File Bar of 31 U.S.C. § 3730(b)(5)

A. Legal Analysis of § 3730(b)(5)

In crafting the FCA, Congress prohibited certain suits, divesting courts of jurisdiction over them. At issue here is the provision in 31 U.S.C. § 3730(b)(5), which states in its entirety: "When a person brings an action under this subsection, no person other than the Government may intervene or bring a related action based on the facts underlying the pending action." If an action "based on the facts underlying" a pending case comes before a court, it must dismiss the later-filed case for lack of jurisdiction. See United States ex rel. Lujan v. Hughes Aircraft Co., 243 F.3d 1181, 1186 (9th Cir. 2001) (referring to a § 3730(b)(5) challenge as "jurisdictional"); United States ex rel. Capella v. United Techs. Corp., 1999 WL 464536 at *8 (Conn. 1999) ("Section 3730(b)(5) acts as a jurisdictional bar to a qui tam action."); see also Capella, 1999 WL 464536 at *4 ("[A]n action must be dismissed for lack of subject matter jurisdiction when a federal court lacks the . . . statutory authority to adjudicate the case.").*fn3

Section 3730(b)(5) sets up an "exception-free, first-to-file bar." Lujan v. Hughes Aircraft Co., 243 F.3d at 1183; see also Erickson ex. rel. United States v. Am. Inst. of Biological Sci., 716 F. Supp. 908, 918 (E.D.Va. 1989) ("The qui tam complaint filed first blocks subsequent qui tam suits based on the same underlying facts."). The question turns, then, on what constitutes a § 3730(b)(5) proscribed "related action based on the facts underlying the pending action." Litigants have advanced to the courts, and this case is no exception, two different theories on the meaning of this provision. Hopeful would-be relators urge that the test should be whether the later-filed complaint relies on facts identical to those asserted in the first complaint, while defendants advocate a broader "material facts" analysis.

The "identical facts" test fails under both the language and the policy the FCA. Section 3730(b)(5) refers to "related" actions and "underlying" facts, language inconsistent with the rigid precision of an identical facts test. Further, permitting infinitely fine distinctions among complaints has the practical effect of dividing the bounty among more and more relators, thereby reducing the incentive to come forward with information on wrongdoing. This is inconsistent with the FCA's purpose of encouraging whistleblowers to approach the government and file suit as early as possible. United States ex rel. LaCorte v. SmithKline Beecham Clinical Labs., Inc. 149 F.3d 227, 234 (3d Cir. 1998). Therefore, courts have rejected the identical facts test and held that the later-filed case is barred if it relies on the same underlying facts as the first case.

While no material facts test has been uniformly adopted among the courts, most courts agree on the same basic elements. Some courts have approached the comparison between two cases as a search for "the same material facts." LaCorte, 149 F.3d at 234; Lujan, 243 F.3d at 1189. Another court expressed the standard as barring claims that "the defendant engaged in the same type of wrongdoing as that claimed in a prior action," Capella, 1999 WL 464536 at *9. The Erickson court adopted this two-part test: "A subsequently filed qui tam suit may continue only to the extent that it is (a) based on facts different from those alleged in the prior suits and (b) gives rise to separate and distinct recovery by the government." Erickson ex rel. United States v. Am. Inst. of Biological Sci., 716 F. Supp. 908, 918 (E.D.Va. 1989). The court in United States ex rel. Capella v. United Technologies Corp., 1999 WL 464536 at *9 (Conn. 1999), adopted a similar test, holding that a later claim is barred unless "(1) it alleges a different type of wrongdoing, based on different material facts than those alleged in the earlier suit; and (2) it gives rise to a separate recovery of actual damages by the government."*fn4

The Court will not adopt either the Erickson or Capella tests wholesale, but will combine them into the following test: A later-filed qui tam complaint is barred unless (1) it alleges a different type of wrongdoing, based on different material facts than those alleged in the earlier suit; and (2) it gives rise to separate and distinct recovery by the government. Capella supplies the first element. The Court does not adopt Capella's second element because its use of the phrase "actual damages" clouds rather than clarifies the issue. Under the False Claims Act, the government may recover a civil penalty of not less than $5,000 or more than $10,000 for each false claim submitted to it, in addition to three times the damages it sustained. 31 U.S.C. § 3729(a). Thus, actual damages are only one element of the government's recovery, and an examination of whether the government will have a separate recovery under a later-filed suit should take all possible forms of recovery into account.*fn5 The first ...


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