Richardson et al v. Golden Gate National Senior Care LLC et al

Filing 65

MEMORANDUM OPINION AND ORDER re (doc. 39 in 2:12-cv-02264-KOB) MOTION to Intervene Partially for Good Cause filed by United States of America Ex Rel ; For the reasons as stated within, the court GRANTS the Governments Motion to Intervene. Signed by Judge Karon O Bowdre on 10/24/12. Associated Cases: 2:12-cv-00245-KOB, 2:09-cv-00627-KOB, 2:12-cv-02264-KOB(SAC )

FILED
2012 Oct-24 AM 10:30
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
United States of America, et al.
Plaintiffs
vs.
Aseracare, Inc, et al.
Defendants
United States of America, et al.
Plaintiffs
vs.
GGNSC Holdings, LLC, et al.
Defendants

Dawn Richardson, et al.
Plaintiffs
vs.
Golden Gate National Senior Care, LLC,
et al.
Defendants

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Case 2:12-cv-0245-KOB
(LEAD)

Case 2:12-cv-2264-KOB
(CONSOLIDATED)

Case #2:09-cv-0627-KOB
(CONSOLIDATED)

MEMORANDUM OPINION AND ORDER

This matter comes before the court on the United States of America’s “Motion to
Partially Intervene for Good Cause” in U.S. v. GGNSC Holdings, LLC (“Micca”). (Doc. 39). The
Government argues that the court should allow intervention “for good cause” under the False
Claims Act because of the discovery of new evidence after the initial intervention deadline. See
31 U.S.C. 3730(c)(3). The Defendants argue that the Relator’s claims are barred by the “First to
File Rule” and that the court does not have subject matter jurisdiction over the case to grant the

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Government’s motion to intervene. The Defendants also argue that even if the court does have
subject matter jurisdiction over the case, the Government has not shown sufficient good cause to
warrant intervention. For the following reasons, the court GRANTS the Government’s Motion to
Intervene. (Doc. 39).
I.

Subject Matter Jurisdiction

The Defendants argue that (1) the first-to-file rule is a jurisdictional bar to the continuing
of this action; (2) jurisdiction is a prerequisite to considering a motion to intervene; (3) the
Relator’s claims are jurisdictionally barred by the first-to-file rule because U.S. v. Aseracare, Inc.
(“Paradies”) is based on the same facts as this action; (4) the Government’s intervention does
not create jurisdiction; and thus (5) the court does not have subject matter jurisdiction over any of
the claims and should deny the Government’s motion to intervene and dismiss the case. The
court will address each of these propositions in turn.
The first to file rule is a jurisdictional bar even though the statute itself does not make it
explicit. U.S. ex rel. Branch Consultants, LLC v. Allstate Ins. Co., 782 F. Supp. 2d 248, 258
(E.D. La. 2011) ; see 31 U.S.C. 3730(b)(5) (“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.”).
While courts have consistently recognized that jurisdiction is a prerequisite to considering
intervention, the cases cited by the Defendants are not False Claims Act cases and do not discuss
the Government’s motion to intervene in a qui tam action, which is an exceptional circumstance.
Even though a relator’s claims may be barred by the first-to-file rule, the government’s
intervention in a qui tam action “may change the claims that are currently asserted.” United
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States ex rel. Roberts v. Sunrise Senior Living, 2009 WL 499764, at *2 (D. Ariz. 2009). In
Sunrise Senior Living, the court deferred ruling on whether it had subject matter jurisdiction on
the relators’ claims when it granted the government’s motion to intervene:
[I]t would not be prudent to base such an assessment on a complaint that may
ultimately prove irrelevant to this litigation. Only after the government has
decided which claims it will purse (and the Relators have framed their own claims
if any in light of the government's complaint) will it make sense for this Court to
evaluate whether the Relators are original sources for any of the newly-framed
claims. It may well be that many of the same issues are present; however, this
Court declines to decide this question when the government's complaint is not yet
before it.
Id. This court agrees with the court’s reasoning in Sunrise Living and will defer ruling on the
matter of subject matter jurisdiction until after the Government has intervened.
Additionally, the Government can intervene in a suit regardless of the jurisdictional
defects in the underlying suit, including a relator’s suit barred by the first-to-file rule. “In Federal
Recovery Services, the court held that the ‘United States may properly intervene in a suit by a
putative source regardless of jurisdictional failures in the underlying suit.’ Federal Recovery
Services, Inc. v. U.S., 72 F.3d 447, 452 (5th Cir. 1995). Thus, even if [the court] were to find
subject matter jurisdiction lacking over the qui tam claims of the Relator, that would not require
[the court] to dismiss the Government's claims as well.” U.S. ex rel. Cosens v. Yale New-Haven
Hosp., 233 F. Supp. 2d. 319, 326 (D. Conn. 2002) (internal citations omitted) (emphasis added).
This court can allow Government intervention despite whatever, if any, jurisdictional defects
exist in the Relator’s claims, including the first to file jurisdictional bar the Defendants assert
applies in this case.
Thus, even if the court does not have subject matter jurisdiction over the Relator’s

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claims, Government intervention is appropriate at this point if the Government has shown “good
cause” for its intervention.
II.

“Good Cause”

As will come as no surprise to the parties to this action, the court finds “good cause” for
the Government’s intervention for the same reasons it found “good cause” in the Paradies action,
but those reasons bear repeating.
Under the False Claims Act, when the government declines to intervene in a qui tam case
initially, it may intervene at a later time upon a showing of good cause under 31 U.S.C. §
3730(c)(3). The Act does not define “good cause,” but courts have found good cause in cases
where the government realized the magnitude of the alleged fraud was much larger than it had
originally anticipated; where the government received additional and new evidence about the
case; and where intervention would protect the interests of the relators. See U.S. ex rel. Hall v.
Schwartzman, 887 F. Supp. 60, 62 (E.D. N.Y. 1995) (granting government intervention when the
government had “uncovered information suggesting that the scope of the alleged fraud [was]
more extensive than originally anticipated”); U.S. ex rel. Stone v. Rockwell Intern. Corp., 950 F.
Supp. 1046, 1049 (D. Colo. 1996) (“Even if good cause requires a showing of new evidence, the
government has sustained that burden”); Id. (“Such reading leads us to the conclusion that the
‘good cause’ requirement of § 3730(c)(3) was intended to protect the interests of the relator.”
(quoting 29 U.S.C. § 3730(c)(3))).
In addition, the legislative history of the False Claims Act suggests that Congress
intended for the government to be able to intervene upon the discovery of new information. See
S. Rep. No. 99-345, at 26 to 27 (1986) (discussing that the discovery of new evidence “could
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escalate the magnitude or complexity of the fraud, causing the Government to reevaluate its
initial assessment or [make] it difficult for the qui tam relator to litigate alone”).
The Government argues that the Corridor Reports show that the Defendants knowingly
submitted false claims to Medicare for hospice care; when the Government received the Reports,
they provided new evidence of fraud sufficient to show good cause for intervention under the
FCA. The Defendants argue that the Corridor Reports do not provide the new evidence
necessary to allow intervention for good cause because the Government already had evidence of
the alleged fraud contained in the Corridor Reports when they received the Reports.
The Government discussed the importance of the Corridor Reports in its Reply brief:
The Corridor Reports are evidence that AseraCare knowingly submitted
false claims to Medicare for hospice care. Without unnecessarily delving into a
discussion of the merits of the case, the United States believes that the Corridor
Reports put AseraCare on notice as early as 2004 of the very conduct alleged in
the complaint.
In its reviews, Corridor assessed the capacity of the organization and staff
to support compliance with the Medicare requirements and provided
recommendations to improve compliance. The Corridor Reports informed
AseraCare not only that documentation did not support eligibility in significant
percentages of the medical records of patients reviewed, but also that AseraCare
did not have an infrastructure that supported compliance and needed to, among
other things, educate its staff on the eligibility criteria and involve the medical
directors (physicians) in the eligibility determination. The 2007-2008 Corridor
Report found continued problems with staff’s knowledge of the eligibility criteria.
The Corridor Reports are evidence of scienter, as the FCA imposes
liability on those who ignore obvious warning signs.
(Doc. 63, at 8-9) (footnotes and internal citations omitted).
The Corridor Reports were also the Government’s basis for its Motion to Intervene in
Paradies, which the court granted and then affirmed on September 24, 2012. The Government
claims that the Reports were crucial to its investigation leading up to its decision to intervene in

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all three cases, now consolidated in this court. The court finds the Corridor Reports sufficient to
support a showing of good cause for Government intervention in this case.
The Defendants also argue that the Government’s intervention in this case would create
unnecessary confusion. Due to the recent consolidation of Paradies, Richardson, and this action,
the Defendants’ concerns about confusion and delay are moot; the court will address the
Defendants’ concerns by consolidating the scheduling of all three cases at a later date.
DONE and ORDERED this 24th day of October, 2012.

____________________________________
KARON OWEN BOWDRE
UNITED STATES DISTRICT JUDGE

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