United States ex rel. Rauch v. Oaktree Med. Ctr., P.C.

United States of America ex rel. Donna Rauch, Muriel Calhoun,and Brandy Knight, Plaintiffs, v. Oaktree Medical Centre, P.C.; Labsource, LLC;Pain Management Associates of North Carolina, P.C.;Pro Care Counseling Center, LLC; Prolab, LLC;FirstChoice Healthcare, P.C.;Medical Management and Design Consultants, LLC;Daniel McCollum, D.C.; Gary Edwards; Dean Banks, D.C.; Bert Blackwell, M.D.;Dwight Jacobus, D.O.; Daniel Sheehan, M.D.;Joe Case; and Myron Moorehead, Defendants.

C/A No. 6:15-cv-01589-DCC

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF SOUTH CAROLINA SPARTANBURG DIVISION

March 5, 2020

OPINION AND ORDER

This matter comes before the Court on Motions to Dismiss filed by Defendants Daniel A. McCollum; Robert Blackwell;¹ Gary Edwards;² Oaktree Medical Centre, P.C. ("Oaktree"); FirstChoice Healthcare, P.C. ("FirstChoice"); Labsource, LLC; Pain Management Associates of North Carolina, P.C. ("PMA"); Dean Banks; Joseph Case;³and Daniel Sheehan. ECF Nos. 157, 166, 170, 172, 175, 195, 241. The Motions have been fully briefed. ECF Nos. 184, 201, 218, 228, 235, 236, 238, 246, 248, 250, 251, 255. In light of the unique nature of the claims in this case, the Court first provides an overview of the statutory scheme underlying this case prior to addressing the merits of the Motions at bar.

STATUTORY BACKGROUND

The False Claims Act ("FCA") provides for the award of treble damages and civil penalties for, inter alia, knowingly causing the submission of false or fraudulent claims for payment to the United States government. 31 U.S.C. § 3729(a)(1). The FCA provides, in pertinent part, that a person who:

(A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;

(B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim;

(C) conspires to commit a violation of subparagraph (A), (B), (D), (E), (F), or (G) [of 31 U.S.C. § 3729(a)(1)]; . . .

is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, as adjusted by the Federal Civil Penalties Inflation Adjustment Act of 1990,⁴ plus 3 times the amount of damages which the Government sustains because of the act of that person.

31 U.S.C. § 3729(a)(1) (internal footnote and citation omitted) (footnote added). For purposes of the FCA, the terms "knowing" and "knowingly,"

(A) mean that a person, with respect to information -- (i) has actual knowledge of the information; (ii) acts in deliberate ignorance of the truth or falsity of the information; or (iii) acts in reckless disregard of the truth orfalsity of the information; and (B) require no proof of specific intent to defraud.

31 U.S.C. § 3729(b)(1). Moreover, "the term 'material' means having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property." 31 U.S.C. § 3729(b)(4). "Importantly, to trigger liability under the [FCA], a claim actually must have been submitted to the federal government for reimbursement, resulting in 'a call upon the government fisc.'" United States ex rel. Nathan v. Takeda Pharms. N. Am., Inc., 707 F.3d 451, 454 (4th Cir. 2013) (quoting Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 785 (4th Cir. 1999)) (citation omitted).

A person—known as a "relator"—"may bring a civil action for a violation of [the FCA] for the person and for the United States Government."⁵ See 31 U.S.C. § 3730(b)(1) ("The action shall be brought in the name of the Government."). Recognizing that relators might face retaliation for acts done in furtherance of the FCA, Congress also included an anti-retaliation provision in the statute. See 31 U.S.C. § 3730(h). This provision states that:

Any employee, contractor, or agent shall be entitled to all relief necessary to make that employee, contractor, or agent whole, if that employee, contractor, or agent is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts done by the employee, contractor, agent or associated others in furtherance of an action under [the FCA] or other efforts to stop 1 or more violations of [the anti-retaliation provision].

31 U.S.C. § 3730(h)(1).

To initiate a qui tam action under the FCA, the relator must serve a copy of the complaint along with a "written disclosure of substantially all material evidence and information the [relator] possesses" on the Government. 31 U.S.C. § 3730(b)(2). "The complaint shall be filed in camera, shall remain under seal for at least 60 days, and shall not be served on the defendant until the court so orders." Id. During this 60-day period, the Government is charged with investigating the allegations and "may, for good cause shown, move the court for extensions of the time during which the complaint remains under seal." 31 U.S.C. §§ 3730(b)(2), (3).

Before the 60-day period (or any extensions obtained) expire, the Government shall either "(A) proceed with the action, in which case the action shall be conducted by the Government; or (B) notify the court that it declines to take over the action, in which case the person bringing the action shall have the right to conduct the action."⁶ 31 U.S.C. § 3730(b)(4). The extent of the relator's involvement and control of the case is dependent on which of these options the Government selects.

If the Government intervenes in the case, "it shall have the primary responsibility for prosecuting the action, and shall not be bound by an act of the person bringing theaction"; however, the relator "shall have the right to continue as a party to the action" subject to four statutory limitations:

1. the Government may dismiss the action over the objections of the relator as long as the relator is notified of the Government's intention to move for dismissal and the Court provides the relator with an opportunity for a hearing;

2. the Government may settle the action notwithstanding the objections of the relator "if the court determines, after a hearing, that the proposed settlement is fair, adequate, and reasonable under all the circumstances";

3. the Government may impose limitations on the relator's participation in the case if it shows that "unrestricted participation during the course of the litigation by the [relator] would interfere with or unduly delay the Government's prosecution of the case, or would be repetitious, irrelevant, or for purposes of harassment"; and

4. the court may limit the relator's participation in the litigation if the defendant makes a showing that the relator's "unrestricted participation during the course of the litigation . . . would be for purposes of harassment or would cause the defendant undue burden or unnecessary expense."

31 U.S.C. §§ 3730(c)(1), (2).

If the Government declines to "proceed with the action, the [relator] shall have the right to conduct the action." 31 U.S.C. §§ 3730(c)(3). However, the court "maynevertheless permit the Government to intervene at a later date upon a showing of good cause." Id. There are, however, several well-established statutory limitations to a relator's ability to pursue non-intervened FCA actions. See 31 U.S.C. §§ 3730(b)(5); (e)(1)-(4). Generally, the relator must be the first person to file an FCA action based on the facts underlying the complaint. 31 U.S.C. § 3730(b)(5). Furthermore, a relator may not bring an FCA action "which is based upon allegations or transactions which are subject of a civil suit or an administrative civil money penalty proceeding in which the Government is already a party." 31 U.S.C. § 3730(e)(3). Similarly, the allegations or transactions alleged in the complaint must not have been publicly disclosed: "(i) in a Federal criminal, civil, or administration hearing in which the Government or its agent is a party; (ii) in a congressional, Government Accountability Office, or other Federal report, hearing, audit, or investigation; or (iii) from the news media," unless the relator is an original source of the information. 31 U.S.C. § 3730(e)(4)(A); see 31 U.S.C. § 3730(A)(5) (defining "original source"). If the allegations or transactions in the complaint have been publicly disclosed, the court "shall dismiss [the] action or claim . . . unless opposed by the Government."⁷ 31 U.S.C. § 3730(4)(A).

Relators who prevail in FCA actions are entitled to a "bounty" on the Government's recovery. See 31 U.S.C. § 3730(d). In cases where the Government intervenes in the action, the relator is generally entitled to between 15 and 25 percent "of the proceeds of the action or settlement of the claim, depending upon the extent to which the personsubstantially contributed to the prosecution of the action."⁸ 31 U.S.C. § 3730(d)(1). When, however, the Government does not intervene in the action, the relator is entitled to between 25 and 30 percent of the proceeds of the action or settlement. 31 U.S.C. § 3730(d)(2). Additionally, a relator who prevails in an FCA action—regardless of whether the Government intervenes—is entitled to "reasonable expenses which the court finds to have been necessarily incurred, plus reasonable attorneys' fees and costs." 31 U.S.C. § 3730(d). Finally, if a relator prevails on her anti-retaliation claim, she is entitled to "reinstatement with the same seniority status that employee, contractor, or agent would have had but for the discrimination, 2 times the amount of back pay, interest on the back pay, and compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorneys' fees." 31 U.S.C. § 3730(h)(2).

PROCEDURAL HISTORY

On April 10, 2015, Donna Rauch, Muriel Calhoun, and Brandy Knight ("Plaintiff-Relators")—all former employees of Defendant Oaktree⁹—filed a sealed Complaint alleging that a large number of individual and corporate defendants violated the FCA and the FCA's anti-retaliation provision. ECF No. 1. For almost...