United States of America et al v. Wagoner et al
OPINION and ORDER: Defendants Rule 72(a) Objection to Order Denying Motion for Reconsideration 61 is OVERRULED, and the Third Amended Complaint 83 is ACCEPTED. Signed by Judge Theresa L Springmann on 03/31/2021. (edb)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
UNITED STATES OF AMERICA and THE
STATE OF INDIANA,
CAUSE NO. 2:17-CV-478-TLS-JEM
DON J. WAGONER and WAGONER
MEDICAL CENTER, L.L.C.,
OPINION AND ORDER
This matter is before the Court on the Defendants’ Rule 72(a) Objection to Order
Denying Motion for Reconsideration [ECF No. 61]. The Defendants seek review under Federal
Rule of Civil Procedure 72(a) of the October 22, 2019, Opinion and Order denying the
Defendants’ Motion to Reconsider Court’s Order Granting the Plaintiffs’ Leave to Amend the
Complaint [ECF No. 54]. The Plaintiffs filed a Memorandum In Opposition [ECF No. 65]. For
the reasons set forth below, the Court OVERRULES the Defendants’ Objection, and ACCEPTS
the Third Amended Complaint.
This case raises various claims related to an alleged scheme run by the Defendants to
defraud Medicaid. The Plaintiffs filed their original Complaint December 29, 2017 [ECF No. 1].
On December 13, 2018, the Court set June 10, 2019, as the deadline for the Plaintiffs to file any
Motion to Amend the pleadings and July 10, 2019, as the deadline for the Defendants [ECF No.
34]. The Plaintiffs filed the first Amended Complaint on January 18, 2019 [ECF No. 38].
On July 10, 2019, the Plaintiffs moved to file a Second Amended Complaint [ECF No.
43].1 The Motion explained that the Plaintiffs discovered that the Medicaid claims for urine drug
screen tests were false and fraudulent for an additional, as-yet-unpled reason: the screens were
not used for patient care and thus lacked any medical necessity. Mot. for Leave to File the
Second Am. Compl. and Jury Demand of Pls. United States of America and State of Indiana ¶ 1,
ECF No. 43. The Motion did not argue any particular standard but noted that the expert
disclosures explained in detail the basis for the “additional, clarifying allegations” in the Second
Amended Complaint. Id. at 3.
The Defendants opposed the Plaintiff’s Motion [ECF No. 44]. The Defendants argued
that the Plaintiffs had failed to establish good cause under Rule 16(b)(4), because the new theory
of the case was based on an expert whose qualifications the Defendants challenged,2 and whom
the Defendants argued the Plaintiffs had selected specifically to develop this new theory,
describing it as “bought-and-paid for.” Defs.’ Resp. Objecting to Pls.’ Mot. for Leave to File a
Second Am. Compl. 11, ECF No. 44. The Defendants also argued that the evidence had been in
the Plaintiffs’ possession for nearly seven years and was thus not newly discovered. Id. at 10.
The Plaintiffs replied, arguing under Rule 16(b)(4) that their Motion met the standard as
only the expert’s review allowed them to draft the proposed Second Amended Complaint. Pls.’
Subsequent to all the briefing on the Motion for Leave to File the Second Amended Complaint and
Motion to Reconsider, the parties by agreement filed a Third Amended Complaint that addressed a
separate issue. See Joint Mot. of All Parties Regarding Discovery and for Leave for Pls. to File a Third
Am. Compl., ECF No. 81; Jan. 15, 2020 Order, ECF No. 82. However, the Defendants did not waive
“any previous objections.” Joint Mot. 2 ¶ 3. Therefore, the Defendants’ Rule 72(a) Objection to the
Second Amended Complaint remained pending. However, because the Court is overruling the
Defendant’s objection in this Opinion, the Third Amended Complaint will be the operative complaint.
Eventually the Defendants filed their Motion to Exclude Testimony Regarding Clinical Appropriateness
[ECF No. 59], challenging the new expert report under Federal Rule of Evidence 702 and Daubert v.
Merrell Dow Pharms. Inc., 509 U.S. 579 (1993). However, that Motion was not filed until October 31,
2019, and was not on the record at any point during the events described.
Reply Mem. in Support of the Mot. for Leave to File 8–9, ECF No. 45. Specifically, the
Plaintiffs identified an expert’s report, generated on June 28, 2019, as the source of the new
theory; until they had the report, they could not have drafted the proposed Second Amended
Complaint; thus, despite their diligence, the Plaintiffs needed a modification of the Court’s
scheduling order to amend the pleadings after their June 10, 2019 deadline. Id. In explaining why
their initial motion did not request the necessary modification of the scheduling order, the
Plaintiffs explained that they had inadvertently mis-calendared the due date as July 10, 2019, the
Defendants’ deadline, thus failing to move for an extension in their first Motion for Leave—but
noting that they would have done so. Id. at 9 n.10.
On September 12, 2019, the Magistrate Judge granted the Motion for Leave to Amend.
See Sept. 12, 2019 Order 4, ECF No. 46. The Order held that (1) the Plaintiffs acted diligently
such that good cause for modifying the order was shown, as required by Rules 16(b)(4) and
(6)(b)(1); (2) the failure to request an extension before the deadline was due to excusable neglect,
so the Magistrate Judge declined to deny the Motion for untimeliness, pursuant to
Rule 6(b)(1)(B); and (3) under Rule 15(a)(2) and its associated case law, no bad faith or undue
prejudice applied, and thus leave to amend was appropriate.
On September 26, 2019, the Defendants filed a Motion to Reconsider Court’s Order
Granting Plaintiffs’ Leave to Amend the Complaint [ECF No. 51]. The Defendants made three
arguments. First, the Defendants expanded their previous argument that the evidence was not
newly acquired, emphasizing that (i) the criminal case, to which the Plaintiff State of Indiana
was a party, contained the same information and (ii) the subpoena for the records on which the
new expert report is based was issued four months earlier. Defs.’ Mot. to Reconsider 2–3, ECF
No. 51. Second, the Defendants also challenged the Plaintiffs’ failure to move to extend the
scheduling deadline; specifically, the Defendants pointed out that “failing to calendar the
deadline is not sufficient to show excusable neglect.” Id. at 6 (citing Naudv v. City of Rockford,
No. 09 cv 50074, 2013 WL 4447028, at *5 (N.D. Ill. Aug. 16, 2013) (citing Lapsley v. Fries,
1:11‐cv‐99, 2012 WL 2721909 (N.D. Ind. July 9, 2012) (no excusable neglect where counsel
mis-calendared discovery deadline)). Third, the Defendants contend the Magistrate Judge applied
the wrong standard in reaching his conclusion. The Defendants, citing the September 12, 2019,
Order, argued the Magistrate Judge applied the Rule 15(a)(2) bad faith and undue prejudice
analysis instead of the Rule 16(b) analysis. Id. at 6–7.
The Plaintiffs responded. See Mem. of Pls.’ United States of America and State of
Indiana in Opp. to Defs.’ Mot. to Reconsider, ECF No. 52. As relevant, the Plaintiffs argued that
(1) they did not know the expert had reviewed medical records in the criminal case until “a few
days before” receiving his expert report; and (2) having the medical records does not mean the
Plaintiffs knew the information the expert recently provided because an expert was required for
the theory to take shape. Id. at 5. Next, the Plaintiffs addressed the timing of their Motion for
Leave to Amend. Citing Tschantz v. McCann, 160 F.R.D. 568 (N.D. Ind. 1995), the Plaintiffs
articulated that they could not have filed their motion any earlier and thus argued that they had
satisfied good cause. Having met the Rule 16(b)(4) standard, the Plaintiffs observed that the
Magistrate Judge correctly next applied Rule 15(a)(2)—by considering whether the Plaintiffs
acted in bad faith and the Defendants would suffer undue prejudice. Id. 7–10. The Plaintiffs
finally addressed Rule 6(b)(1)(B), identifying it as the Rule under which the Magistrate Judge
allowed the belated Motion for Leave to Amend. Id. at 11–12.
The Defendants replied, arguing again that the Plaintiffs had not acted with diligence
because there was no newly discovered evidence. The Defendants also argued for the first time
that the Plaintiffs were not seeking to amend in good faith and that the Plaintiffs’ amendment
was futile. Defs.’ Reply in Supp. of Mot. to Reconsider 2–13, ECF No. 53.
The Magistrate Judge denied the Motion to Reconsider [ECF No. 54]. The Magistrate
Judge articulated the standard for reconsideration, reaffirmed his conclusion that the Plaintiffs
had shown good cause and that the correct standard was applied, and noted, “Although
Defendants are unhappy that new claims have been added, they have not identified any errors or
change in fact or law requiring reconsideration.” Oct. 22, 2019 Op. & Order 4, ECF No. 54.
The Defendants filed a Rule 72(a) Objection to the Order Denying the Motion for
Reconsideration [ECF No. 61], which is now before the Court. In their Objection, the Defendants
reiterate their arguments that (i) mis-calendaring is not excusable neglect and (ii) the Plaintiffs
did not recently acquire the information. The Plaintiffs filed a Memorandum In Opposition [ECF
No. 65], which similarly reiterates their earlier responses.
Review of a Magistrate Judge’s Decision on Non-Dispositive Motions Under Rule 72(a)
Pursuant to Rule 72(a), a party may file an objection to a magistrate judge’s decision on a
non-dispositive pre-trial matter within fourteen days. Fed. R. Civ. P. 72(a). “The district judge in
the case must consider timely objections and modify or set aside any part of the order that is
clearly erroneous or is contrary to law.” Id.; see also 28 U.S.C. § 636(b)(1)(A). “The clear error
standard means that the district court can overturn the magistrate judge’s ruling only if the
district court is left with the definite and firm conviction that a mistake has been made.” Weeks v.
Samsung Heavy Indus. Co., Ltd., 126 F.3d 926, 943 (7th Cir. 1997).
Motions for Reconsideration
“Motions for reconsideration serve a limited function; to correct manifest errors of law or
fact or to present newly discovered evidence.” Hicks v. Midwest Transit, Inc., 531 F.3d 467, 474
(7th Cir. 2008) (quoting Rothwell Cotton Co. v. Rosenthal & Co., 827 F.2d 246, 251 (7th Cir.
1987)); see also Davis v. Carmel Clay Schs., 286 F.R.D. 411, 412 (S.D. Ind. 2012).
“Reconsideration is not an appropriate forum for rehashing previously rejected arguments or
arguing matters that could have been heard during the pendency of the previous motion.” Caisse
Nationale de Credit Agricole v. CBI Indus., Inc., 90 F.3d 1264, 1270 (7th Cir. 1996); see also
Ahmed v. Ashcroft, 388 F.3d 247, 249 (7th Cir. 2004). “A party may not use a motion for
reconsideration to introduce new evidence that could have been presented earlier.” Oto v. Metro.
Life Ins. Co., 224 F.3d 601, 606 (7th Cir. 2000) (citing CBI Indus., Inc., 90 F.3d at 1269).
Amending the Complaint After the Scheduled Deadline
Under Rule 16(b)(4), “Modifying a Schedule,” “[a] schedule may be modified only for
good cause and with the judge’s consent.” Fed. R. Civ. P. 16(b)(4). In investigating good cause
under Rule 16(b), “the primary consideration for district courts is the diligence of the party
seeking amendment.” Alioto v. Town of Lisbon, 651 F.3d 715, 720 (7th Cir. 2011), cited in Judge
Martin’s September 12, 2019 Order, ECF No. 46. Rule 6(b)(1) similarly provides that “the court
may, for good cause, extend the time: (B) on a motion made after the time has expired if the
party failed to act because of excusable neglect.”
Once good cause is established and the schedule is modified to provide time to amend,
the more usual analysis under Rule 15(a)(2), “Other Amendments,” applies to determine whether
a party may amend: “a party may amend its pleading only with the opposing party’s written
consent or the court’s leave. The court should freely give leave when justice so requires.” Fed. R.
Civ. P. 15(a)(2).
In seeking review of the Magistrate Judge’s October 22, 2019, Order denying the Motion
to Reconsider, the Defendants only object that the Magistrate Judge (i) misapplied the excusable
neglect standard; and (ii) the evidence was not newly acquired. The Court finds that the
Magistrate Judge’s Order was not clearly erroneous or contrary to law.
First, the Order applies the correct standard for a Motion to Reconsider, noting that
a motion to reconsider is only appropriate where a court has misunderstood a
party, where the court has made a decision outside the adversarial issues
presented to the court by the parties, where the court has made an error of
apprehension (not of reasoning), where a significant change in the law has
occurred, or where significant new facts have been discovered.
See Oct. 22, 2019 Op. & Order 2 (citing Broaddus v. Shields, 665 F.3d 846, 860 (7th Cir. 2011)
(overruled on other grounds by Hill v. Tangherini, 724 F.3d 965, 967 n.1 (7th Cir. 2013)) (citing
Bank of Waunakee v. Rochester Cheese Sales, Inc., 906 F.2d 1185, 1191 (7th Cir. 1990)).
The Order denying the Motion to Reconsider properly addresses each of the points the
Defendant raises as objections. First, as to excusable neglect and the appropriate standard, the
Magistrate Judge explains:
The Court accepted Plaintiffs’ explanation that they only calendared Defendants’
July 10, 2019, deadline for moving to amend the pleadings and therefore did not
realize the Motion to Amend was untimely when filed, and so did not realize an
extension was necessary when the motion was filed. Defendants now argue that a
calendaring error cannot be considered excusable neglect under Rule 6, so the
Court erred in finding good cause to allow the late motion to amend under the
heightened standard of Rule 16. However, the Court expressly found that
Plaintiffs had acted diligently and gave its consent to modify the scheduling order
pursuant to Federal Rule of Civil Procedure 16(b). Although Defendants may
disagree with that conclusion, the Court did not misunderstand their argument in
the initial briefing, nor has there been a change in law or facts that would justify
Oct. 22, 2019 Op. & Order 3. The Magistrate Judge applied the correct standard on a Motion to
Reconsider, and the Court cannot conclude he made any decision contrary to law. In the original
Order granting leave to amend, he first concluded the Plaintiffs had demonstrated good cause to
modify the scheduled order, pursuant to Rule 16(b)(4); next considered whether to grant the
leave to amend under Rule 15(a)(2); and only considered whether the Plaintiffs’ late request to
do so was excusable neglect, pursuant to Rule 6(b)(1). See Oct. 22, 2019 Op. & Order 3 (“The
Court concludes that Plaintiffs acted diligently in seeking to amend when they became aware of
the new information, and that the failure to request an extension before the deadline expired was
due to excusable neglect, so will not deny the request for untimeliness.”). This analysis,
conducted in the Order granting the Motion for Leave to Amend, and described in the Order
denying the Motion to Reconsider, is a correct application of the standard. See Alioto, 651 F.3d
at 719; BKCAP, LLC v. Captec Franchise Tr. 2000-1, 3:07-cv-637, 2010 WL 1222187, at *2
(N.D. Ind. Mar. 23, 2010) (citing Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 607–08
(9th Cir. 1992)); see also Murphy v. Eddie Murphy Prods., Inc., 611 F.3d 322, 324 (7th Cir.
2010) (“A motion filed before the deadline may be granted ‘for good cause’[;] a motion made
after the time has expired may be granted only if ‘the party failed to act because of excusable
neglect.’” (quoting Fed. R. Civ. P. 6(b) (1)(A), (B))). To the extent the Defendants argue
particularly that a failure to calendar the appropriate deadline can never be considered excusable
neglect, the case law does not support the argument; thus, the Magistrate Judge’s denial of the
Motion to Reconsider is not contrary to law. See, e.g., Saul v. Prince Mfg. Corp., No. 1:12-CV270, 2013 WL 228716, at *2 (N.D. Ind. Jan. 22, 2013) (“Errors in calendaring deadlines can, but
do not necessarily, constitute good cause or excusable neglect for missing deadlines.”)
(collecting and comparing cases); see also Hanson v. Gladieux, No. 1:16-cv-201, 2017 WL
4385442, at *1 (N.D. Ind. Oct. 2, 2017) (collecting cases finding excusable neglect for
Second, as to whether the expert report constituted new information, the Order on the
Motion to Reconsider notes: “This argument not only could have been made during the prior
motion, but was made, and the Court addressed it in the earlier opinion.” Oct. 22, 2019 Op. &
Order 3. In the Motion to Reconsider, the Defendants expanded their argument that the expert’s
opinion does not constitute new evidence by explicitly linking it to the expert’s involvement in
Defendant Wagoner’s criminal case, but the Magistrate Judge is correct: as early as their original
Response Objecting to the Motion for Leave to Amend, the Defendants were arguing that the
evidence on which the expert predicated his report was nearly seven years old and thus not newly
discovered. See Defs.’ Resp. Objecting to Pls.’ Mot. for Leave to File a Second Am. Compl. 10.
Thus, the Magistrate Judge’s Order denying the Motion to Reconsider on that basis is correct, as
the Defendants did not meet the standard necessary to reconsider a valid order: either the
argument has already been addressed, or should have been raised in the first instance.
For the reasons stated above, the Defendants’ Rule 72(a) Objection to Order Denying
Motion for Reconsideration [ECF No. 61] is OVERRULED, and the Third Amended Complaint
[ECF No. 83] is ACCEPTED.
SO ORDERED on March 31, 2021.
s/ Theresa L. Springmann
JUDGE THERESA L. SPRINGMANN
UNITED STATES DISTRICT COURT
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?