United States of America et al v. Senior Home Care, Inc.

Filing 134

ORDER adopting Report and Recommendations re 132 to the extent they are amended by the supplemental Report and Recommendations 133 . The Settlement Agreement is APPROVED. Signed by Judge Elizabeth A. Kovachevich on 8/1/2017. (IJD)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
UNITED STATES OF AMERICA
ex rel., SUZANNE BALKO, Relator,
v.

Case No.: 8:13-cv-03072-EAK-TBM

SENIOR HOME CARE, INC.,

ORDER
This cause comes before the Court pursuant to the Reporl and Recommendation
(Doc. No. 132) (the "R&R") and the Supplement to the Reporl and Recommendation
(Doc. No. 133) (the "Supplement") entered by United States Magistrate Judge Thomas
B. Mccoun, Ill on May 2, 2017 and May 4, 2017, respectively. 1 Pursuant to the R&R and
Supplement, the Magistrate Judge recommends that the proposed settlement agreement
(Doc. No. 114) filed by the United States be approved. Thus, for the reasons set forth
below, the R&R, as amended by the Supplement, is ADOPTED AND INCORPORATED

BY REFERENCE.

I.

Background
The Relator, Suzanne Balko, commenced this case by filing a qui tam action under

the False Claims Act ("FCA"), 31 U.S.C. § 3729, against the Defendant, Senior Home
Care, Inc. ("SHC") on December 5, 2013. (Complaint, Doc. No. 1). On October 23, 2014,
the United States filed a Notice of Election to Decline Intervention (Doc. No. 10) and the
file was unsealed (Doc. No. 11 ). This Court, having reviewed the Defendant's Motion to

The Court also reviewed the audio recording of the February 9, 2017 hearing
before Judge McCoun, and the transcript of the supplemental fairness hearing that took
place on March 24, 2017. See Transcript, Doc. No. 130.
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Dismiss (Doc. No. 16) and Plaintiff's Memorandum in Opposition (Doc. No. 18), denied
the Defendant's motion on March 6, 2015. Order, Doc. No. 28.
In February 2016, the Relater, a registered nurse field clinician for SHC, filed an
Amended Complaint, alleging that the SHC defrauded the United States by presenting
false claims for payment of wound care treatment through a scheme that fraudulently
identified all surgical wounds less than three days old as "not healing." (Amended
Complaint, Doc. No. 44 at 1). On June 27, 2016, the parties filed a Joint Notice of

Settlement stating that the parties had reached a settlement in principle and notified the
United States of the same. (Joint Notice of Settlement, Doc. No. 84). The Settlement also
asked that the action be stayed or administratively closed for sixty days pending approval
of a written settlement agreement. Id.
On that basis, the Court entered an order (Doc. No. 85) directing administrative
closure. On September 16, 2016, the United States sought leave to intervene and filed
a Notice of Settlement. (Doc. No. 97, 98). Over the Relator's objections, the Court granted
the Motion to intervene for purposes of settlement. (Doc. No. 103, 122). After reviewing
the proposed settlement and the docket, Judge Mccoun determined that the proposed
settlement agreement should be adopted. (Doc. No. 132, 134). As of the entry of this
order, the Defendant has not responded to the R&R or the Supplement or objected to any
of its findings.
II.

Legal Standard

Under the Federal Magistrate's Act (the "Act"), Congress vested Article Ill judges
with the power to "designate a magistrate judge to hear and determine any pretrial matter
pending before the court," subject to various exceptions. 28 U.S.C. § 636(b)(1)(A). The

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Act further vests magistrate judges with authority to "submit to the judge of the court
proposed findings of fact and recommendations for the disposition" by an Article Ill judge.
28 U.S.C. § 636(b)(1)(8). "Within fourteen days after being served with a copy [of a
magistrate's report and recommendation], any party may serve and file written objections
to such proposed findings and recommendations." 28 U.S.C. § 636(b)(1). On review by
the district court, "the court shall make a de nova determination of those portions of the
report ... to which objection is made." Id. When no timely and specific objections are
filed, case law indicates the court should review the findings using a clearly erroneous
standard. Gropp v. United Airlines, Inc., 817 F.Supp. 1558, 1562 (M.D. Fla. 1993). Here,
neither the Plaintiff nor the Defendant objected to the R&R or Supplement within the time
permitted. As a result, the Court deems the R&R to be unopposed and shall review the
findings under the clearly erroneous standard. Upon due consideration, the Court concurs
with the R&R and Supplement.

Ill.

Discussion

The United States "may settle [an] action with the defendant notwithstanding the
objections of the person initiating the action if the court determines, after a hearing, that
the proposed settlement is fair, adequate, and reasonable under all the circumstances."
31 U.S.C. § 3730(c)(2)(8) (emphasis added). Until recently, the standard to determine
whether a settlement is fair, adequate, and reasonable was unclear. However, on May 3,
2017, the Eleventh Circuit decided the proper standard in United States, et al. v.

Everglades College, Inc., 855 F.3d 1279 (2017) 2 .

On July 27, 2017, the Eleventh Circuit denied the petition for rehearing en bane
in the Everglades case. The Court waited to issue a ruling on the R&R and the
Supplement thereto until our appellate court ruled on the pending petition for rehearing.
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A.

Proper standard for evaluating FCA settlements

In Everglades College, the plaintiffs brought a qui tam action against Everglades
College, Inc., d.b.a. Keiser University ("Keiser") under the FCA. Id. at 1282. The plaintiffs
alleged that Keiser falsely certified compliance with a federal law that prohibited
admissions personnel from receiving incentive payments based on their success in
securing enrollments. Id. The United States initially declined to intervene, but the plaintiffs
continued to pursue the case on behalf of both themselves and the United States as they
are allowed to do under 31 U.S.C. §3070(b)(4)(B). Id. at 1283. In a bench trial, the district
court found that the plaintiffs suffered no financial damages but still awarded $11,000 in
statutory penalties. Id. at 1284.
The plaintiffs appealed to the Eleventh Circuit Court of Appeals. Id. But the United
States, believing an appeal was risky, struck a tentative settlement agreement with
Keiser. Id. The agreement provided that if Keiser paid the United States $335,000, the
United States would release Keiser from any additional administrative or civil claims. Id.
Since the plaintiff's merit appeal was still pending in the Eleventh Circuit, the district court
did not have jurisdiction to enter any orders. Id. Still, on the United States' motion, the
district court entered an indicative order that if it reacquired jurisdiction on remand, it
· would permit the United States to intervene and would approve the proposed settlement
as fair and reasonable. Id. The Eleventh Circuit then remanded the case back to the
district court, which ultimately granted the government's motion. Id. The plaintiffs again
appealed, and the Eleventh Circuit was presented with the issue of whether the proposed

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settlement was "fair, adequate, and reasonable" under 31 U.S.C. § 3730(c)(2)(8). Id. at
1285.
In determining how to resolve the issue, the court first looked at the standard used
to evaluate proposed class settlement between private parties under Fed. R. Civ. P. 23.
It held that such a standard was not the proper framework for evaluating FCA settlements
because a qui tam FCA suit is materially different from a class action suit between two
private parties. Id. at 1288. First, members of a class action typically suffer a legally
cognizable injury themselves, while a relator in a qui tam action does not. Id. at 1287-88.
The United States is the real party in interest to FCA actions; therefore, the relator is
simply bringing the claim as an assignee of the United States. Id. at 1288. Therefore,
when the United States agrees to settle, it does so only with respect to its own injuries.
Id.

Second, the interest of members in class actions is confined to maximizing
recovery against defendant; the United States' interests in a qui tam action, however, are
not. Id. The United States may consider public policy consequences, political
ramifications, and the limited amount of prosecutorial resources that are available. Id.
Thus, in concluding that the Rule 23 standard for reviewing class settlements is not the
proper framework, our appellate court held that the proper standard is to determine
"whether the government has advanced a reasonable basis for concluding the settlement
is in the best interests of the United States, and whether the settlement unfairly reduces
the relator's potential qui tam recovery." Id. at 1289.

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B.

The proposed settlement is "fair, adequate, and reasonable"

The Court, having reviewed the R&R (Doc. No. 132), Supplement (Doc. No. 133),
and the record, including the oral and written arguments of the parties, concludes that the
United States has advanced a reasonable basis for concluding that the proposed
settlement furthers its best interests without unfairly reducing Relaters' qui tam recovery.
It is thus "fair, adequate, and reasonable."
As the Everglades panel noted, the Government's decision to settle can be based
on several factors including the desire to avoid expending further resources. Id. at 1288.
Here, the Government argues that the Relator's case is tenuous, maintaining that there
are legal and factual flaws in Relator's theory of liability that could result in a defense
verdict if the case was taken to trial. Furthermore, although the Relator estimates that the
potential recovery of $20,000,000.00 dwarfs the $325,000.00 settlement figure, this
argument does not hold much weight. In Everglades, the plaintiffs made a similar
argument, but the Eleventh Circuit sided with the government and its interest in "preferring
the certainty of a settlement to the uncertainty of an appeal." Id. at 1289. This case is
similar in that the Government seeks the certainty of the settlement over the potential
defense verdict at trial. Therefore, the $325,000 sum, a figure originally agreed to by the
Relator, does not unfairly reduce the relator's potential qui tam recovery.

Finally, as

Judge Mccoun wrote in the Supplement:
The findings regarding Relator's likelihood of success at trial and that the
proposed settlement is within range of possible recovery support the
conclusion that the proposed settlement is fair, adequate, and reasonable
in the circumstances under the new standard. Moreover, the analysis under
the more deferential Sequoia standard as set forth in Section Ill.A. of the
Report and Recommendation sets forth a fair assessment of the
Government's and the Relator's respective interests consistent with the new
standard.

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Supplement, Doc. No. 133 at 3. The Court's review of the arguments presented by the
parties demonstrate to the Court that the settlement agreement should be approved under
the standard enunciated in Everglades.

IV.

Conclusion

Accordingly, it is
ORDERED that the R&R, as amended by the Supplement, is ADOPTED AND
INCORPORATED BY REFERENCE. The Court APPROVES the settlement agreement

as fair, adequate and reasonable.
DONE and ORDERED at Tampa, Florida, this 1st day of August, 2017.

COPIES FURNISHED TO:
Counsel of Record

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