United States of America et al v. AseraCare Inc et al

Filing 99

ORDER signed by Judge J P Stadtmueller on 1/23/12: granting in part and denying in part 98 relators' Motion to Strike or for Leave to Reply; granting 62 relators' Motion to Transfer Venue; and TRANSFERRING this action to the Northern District of Alabama for further proceedings. (cc: all counsel) (nm) [Transferred from Wisconsin Eastern on 1/24/2012.]

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
UNITED STATES OF AMERICA,
Plaintiff,
and

Case No. 08-CV-384-JPS

DEBORA PARADIES, LONDON
LEWIS, ROBERTA MANLEY,
Relators,
v.
ASERACARE, INC., and GGNSC
ADMINISTRATIVE SERVICES,
d/b/a Golden Living,
f/k/a Beverly Enterprises, Inc.

ORDER

Defendants.

On December 16, 2011, relators Debora Paradies, London Lewis, and
Roberta Manley filed a Rule 7(h) expedited Motion to Transfer Venue
(Docket #62), requesting the court transfer this action to the Northern District
of Alabama. By letter of January 4, 2012 (Docket #72), counsel for defendants
AseraCare, Inc. and GGNSC Administrative Services (collectively,
“AseraCare”) requested leave to file an oversized Rule 7(h) brief. The court
grants that leave and will consider the complete brief submitted. In turn, the
relators filed a Motion to Strike or For Leave to Reply (Docket #98) asking
that the oversize brief be struck or that it be granted leave to file a reply.
That motion is granted so far as allowing a reply, and denied as to striking
AseraCare’s brief. The court will consider the contemporaneously filed reply
brief. As to the substance of the motion to transfer, because this action could

otherwise have been brought in that district, and because convenience and
the interests of justice support doing so, the court will grant the motion and
transfer this action.
Underlying this dispute is the existence of two similar False Claims
Act (“FCA”) actions, one in the Northern District of Georgia, and one in the
Northern District of Alabama, both of which have been unsealed at this
juncture. The FCA operates by allowing a private person to bring an action
against another who commits a fraud against the United States. 31 U.S.C.
§§ 3729, 3730(b)(1). When a private person brings such a suit, that person
(the “relator”) brings the action in the name of the government. 31 U.S.C.
§ 3730(b)(1). After such filing, the government has an opportunity to
intervene in the action and proceed. 31 U.S.C. § 3730(b)(2). The instant case
was filed by the relators against AseraCare for alleged Medicare fraud. The
Georgia and Alabama actions were also brought against AseraCare, by
different relators, for at least similar Medicare fraud claims. The United
States has intervened in the Alabama action and filed its complaint against
AseraCare.
A district court may transfer a civil action to another district, where
it otherwise could have been brought, “[f]or the convenience of parties and
witnesses, in the interest of justice.” 28 U.S.C. § 1404(a). The authority to
transfer is placed within the discretion of the district court, though it is to be
exercised in light of “individualized, case-by-case consideration[s] of
convenience and fairness.” Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29
(1988). Considerations of convenience often include witness availability and
access, access to and distance from resources, and location of events and
access to proof. Research Automation, Inc. v. Schrader-Bridgeport Int’l, Inc., 626

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F.3d 973, 978 (7th Cir. 2010). The interests of justice are often reflected by
considerations of efficient judicial administration: docket congestion, likely
speed to trial, relative familiarity of each court with the relevant law,
desirability of resolution in each locale, and relationship of each community
to the controversy. Id.
The relators and government argue for transfer under the § 1404(a)
standard. AseraCare makes two general arguments against a transfer. First,
that such a transfer would be futile and, second, that a transfer would not
satisfy the § 1404(a) standard. These two arguments ultimately blend into
each other. There is case law indicating that a transfer ought to be denied
where it would be futile. Coffey v. Van Dorn Iron Works, 796 F.2d 217, 219, 221
(7th Cir. 1986). Essentially, futility bears on the interests of justice factor, and
logically so. Id. at 221. More specifically, AseraCare argues that a transfer
would be futile due to the “first-to-file” bar on later suits under the FCA,
which states that “[w]hen 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.” 31 U.S.C. § 3730(b)(5).
This related factual basis means “only the materially similar situations that
objectively reasonable readings of the original complaint, or investigations
launched in direct consequence of that complaint, would have revealed.”
United States ex rel. Chovanec v. Apria Healthcare Grp. Inc., 606 F.3d 361, 365
(7th Cir. 2010).
The court finds that a transfer would not be futile. AseraCare argues
that a transfer would be futile because the first-to-file bar will lead to
dismissal of both the Georgia and Alabama actions. However, even if that
were true, it would not make a transfer futile. Given that, in AseraCare’s
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view, the instant action is the only one which should proceed, there is
nothing inherent about a transfer to the Northern District of Alabama that
would prevent adjudication of this suit. As such, there is no futility that
might otherwise obviate the need to closely examine the other factors under
§ 1404(a).
On the other hand, the first-to-file rule still bears on the arguments
made as to convenience and the interests of justice, as the dismissal of both
the Georgia and Alabama suits would significantly alter some of the
arguments in favor of transfer. Thus, the court will further examine the
application of the first-to-file rule before proceeding to the transfer analysis.
To begin, as the relators point out, the FCA prevents later-filed cases by
private parties through the provision that “no person other than the Government
may intervene or bring a related action.” 31 U.S.C. § 3730(b)(5) (emphasis
added). Thus, the plain text of the FCA permits the United States to bring a
related action, though it might be filed after the first-to-file relators. That,
however, raises a question as to how to classify the case in the Northern
District of Alabama (the United States has not intervened in the Georgia
action). As originally filed, the Alabama action was certainly a later-filed
action by private persons when compared to this case. Assuming arguendo
that the Alabama action is materially similar such that it would have been
barred, it was nonetheless not dismissed before the United States’
intervention. So did the government’s intervention suddenly change the
classification of that case, or would it still be subject to dismissal under the
first-to-file bar?
The U.S. Supreme Court appears to have provided the answer in an
FCA case where it wrote that “an action originally brought by a private

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person, which the Attorney General has joined, becomes an action brought
by the Attorney General once the private person has been determined to lack
the jurisdictional prerequisites for suit.” Rockwell Int’l Corp. v. United States,
549 U.S. 457, 478 (2007). In that case, a relator brought suit under the FCA
related to a contract to manage a nuclear weapons plant that his former
employer held with the U.S. Department of Energy. Id. at 460-64. The
United States ultimately intervened in the suit and, after trial, a jury found
in favor of the government on a portion of the asserted claims. Id. at 464-66.
The defendant former employer filed a post-verdict motion to dismiss the
relators’ claims under § 3730(e)(4). Id. at 466. That subsection limits those
who can bring suit after public disclosure of information substantially
similar to the allegations asserted in the post-disclosure FCA claim. 31 U.S.C.
§ 3730(e)(4). The provision allows suit at that point only by the Attorney
General or a relator who is an “original source.” 31 U.S.C. § 3730(e)(4)(A).
The Tenth Circuit ultimately held the relator was an original source, and the
Supreme Court granted certiorari. 549 U.S. at 466. The Court concluded the
relator was not in fact an original source. Id. at 475-76. The relator then
argued alternatively that the government’s intervention provided an
independent basis of jurisdiction over his claims. Id. at 476-77. The Court
disagreed, holding that the statute drew a sharp distinction between suits
brought by the Attorney General under § 3730(a) and those by a private
person under § 3730(b), thus, an action brought by a private person “does not
become one brought by the Government just because the Government
intervenes and elects to ‘proceed with the action.’” Id. at 477. This raised the
question, important here, of whether the district court had jurisdiction over
the Government’s claims, given that § 3730(e)(4)(A) barred jurisdiction unless
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the suit was brought by the Attorney General or an original source, and the
Court had just found neither to be the case. Noting that it would be a
“bizarre” result to set the government’s judgment aside, the Court held, as
quoted above, that where a private person is determined to lack the
jurisdictional prerequisites for suit and is dropped out, the action is then
transformed into one brought by the Attorney General. Id. at 478.
After reading Rockwell, the court is convinced that, should the
Alabama relators be barred from proceeding on the basis of the first-to-file
rule, the United States’ complaint would survive. While Rockwell analyzed
the question within the confines of the bar on suits after public disclosure, the
basic question remained the same: when a relator’s claims are dismissed as
barred, and the government has intervened, is the action considered to have
been brought by the government? The Court answered that question
affirmatively, and thus the same conclusion applies here. The text of
§ 3730(b)(5) supports this conclusion given that at no time is the government
barred from bringing a related suit after the first-filed suit by a relator.1 Thus,
even if the Alabama relators are ultimately dismissed from the action, the
government’s complaint would survive. Accordingly, as will be discussed
below, AseraCare’s arguments regarding convenience and the interests of
justice are weakened as the Alabama action, at least, will remain in existence.
Moving on to the transfer analysis itself, this action could otherwise
have been brought in the Northern District of Alabama. Filed under the

1

As such, this would not create an anomaly when compared to a situation
in which the Alabama court had dismissed the action prior to intervention. As
noted, under § 3730(b) the government would have remained allowed to file suit
in the Northern District of Alabama despite the relators’ first-filed action here in
Wisconsin.

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FCA, the relators could have brought this action in any judicial district in
which a defendant, inter alia, transacts business. 31 U.S.C. § 3732(a). The
defendants operate their business nation-wide, including in the Northern
District of Alabama, thus venue would have been otherwise proper there.
Next, convenience supports such a transfer. The defendants are
headquartered in Texas and operate primarily in the Southeast. While some
potential witnesses reside in Wisconsin (four by relators’ count), a number
of others are more closely situated to Alabama (at least seven by relators’
count, with others being relatively equidistant to Alabama and Wisconsin).2
AseraCare argues that two of the three relators are also located in Wisconsin,
but the relators state a willingness to travel. Thus, the location of witnesses
leans in favor of transfer. The physical evidence in this case will primarily
consist of electronic records, for which no preference inheres for one forum
over another. Moreover, some counsel for both the defendants and relators
are located in Birmingham, Alabama. AseraCare disputes the relevance of
this, indicating that lead counsel for it has always been Whyte Hirschboeck
Dudek S.C. of Wisconsin. It is accurate that attorneys are employed in both
locations and, in any event, attorneys are often no strangers to travel. Thus,
the location of counsel does not weigh heavily on the court’s decision. More
importantly, there are the two other FCA cases involving the defendants that
are pending in or about that region; in fact, the Georgia relators have already
moved to transfer that case to the Northern District of Alabama. What’s

2

AseraCare points to the fact that there are more witnesses in Wisconsin
than any other state, but that ignores the relative distance of the other witnesses to
Wisconsin versus Alabama. That would be similar to arguing that the existence of
two witnesses in Hawaii make Hawaii more convenient because there is only one
witness in each of ten states along the eastern seaboard.

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more, as the court determined previously, the Alabama action, at least, ought
to survive so far as the government is concerned. Thus, the defendants will
already be litigating a relatively similar set of core facts in the Northern
District of Alabama, requiring witnesses, proof, and other resources be
brought into that forum regardless of whether the instant action proceeds in
Wisconsin or Alabama. In light of these considerations, convenience points
toward transfer, and certainly not against transfer.
As to the interests of justice, the simple fact that a similar action, and
potentially two, will be adjudicated in the Northern District of Alabama
counsels heavily in favor of a transfer. Not only will it likely be more
efficient to proceed before one district, but relators are correct in their
statement that duplicative discovery and overlapping issues support such a
transfer. Further, discovery is only in the early stages in the instant action,
thus there would be little prejudice to the current progress of this case.
Additionally, because the United States has chosen to intervene in the
Northern District of Alabama, whereas it has not chosen to do so in this
district, the interests of the United States will be furthered by a transfer. The
government in the instant case supports the transfer, appealing to many of
the same reasons presented by the relators. Though the government has not
intervened in this action, it did not explicitly state that it had decided against
intervention, rather asserting that it simply had not made the decision and
thus placing the case within the relators’ control. (Docket #33, #34). Among
the government’s reasons for supporting a transfer include its wish to
consolidate all three cases subsequent to transfer. A plaintiff’s choice of
forum is typically entitled to deference and, though the relators filed the
instant action in Wisconsin, the real party in interest in a qui tam action is the

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government. United States ex rel Westrick v. Second Chance Body Armor, Inc.,
771 F. Supp. 2d 42, 47 (D.D.C. 2011). As the government has chosen to
intervene in the Alabama action, and supports the transfer of both this action
and the Georgia action, the government’s support of the motion carries a
good deal of weight as well, given the common claims raised among all three
actions. As such, the interests of justice heavily support a transfer.
AseraCare’s only argument that carries weight concerning the
interests of justice is that it might be prejudiced because it has “been waiting
almost four years” for resolution of the case. That would seem to overstate
the case slightly as the earliest, in this action, that AseraCare might have
become apprised of the suit was August 24, 2009, when the government
served a subpoena on it for records. (Docket #18 at 3). More realistically, the
complaint was only unsealed for the purpose of providing a copy to
AseraCare on November 23, 2010, when the court so ordered. (Docket #25).
In any event, the court finds no particular prejudice, at least none sufficient
to outweigh the important interests in avoiding duplicative discovery and
the government’s interest in choice of forum. This is bolstered by the fact
that under § 3730(b) the government could have independently brought suit
in Alabama. In sum, both convenience and the interests of justice support a
transfer, and the court finds it the wiser exercise of discretion to grant the
motion and transfer this action.
Accordingly,
IT IS ORDERED that the relators’ Motion to Strike or For Leave to
Reply (Docket #98) be and the same is hereby GRANTED in part and
DENIED in part;

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IT IS FURTHER ORDERED that the relators’ Motion to Transfer
Venue (Docket #62) be and the same is hereby GRANTED; and
IT IS FURTHER ORDERED that this action shall be TRANSFERRED
to the Northern District of Alabama for further proceedings pursuant to
28 U.S.C. § 1404(a).
The Clerk of Court is directed to take all appropriate steps to
effectuate this transfer.
Dated at Milwaukee, Wisconsin, this 23rd day of January, 2012.
BY THE COURT:

J.P. Stadtmueller
U.S. District Judge

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