United States of America ex rel. et al v. D.S. Medical LLC et al

Filing 465

MEMORANDUM AND ORDER re: 429 MOTION for Judgment filed by Plaintiff United States of America. IT IS HEREBY ORDERED that Plaintiff's motion (ECF No. 429) for entry of judgment is GRANTED in part, as follows: Judgment is entered on Count I in favor of Defendants. Judgment is entered on Court II in favor of Defendants Debra Seeger and D.S. Medical, LLC; and against Defendants Dr. Sonjay Fonn and Midwest Neurosurgeons, LLC, jointly and severally in the amount of $303,529.50. Civil penalties are assessed against Defendant Dr. Sonjay Fonn in the amount of $27,500, and against Defendant Midwest Neurosurgeons, LLC, in the amount of $16,500. Judgment is entered on Count III against the four Defendants, jointly and several ly, in the amount of $5,495,931.22. IT IS FURTHER ORDERED that on or before October 3, 2018, Plaintiff shall file a notice of its intent to proceed with its claims of payment by mistake and unjust enrichment. IT IS FURTHER ORDERED that on or be fore October 8, 2018, the parties shall file a proposed schedule for submissions on the question of attorney's fees and costs, and any other matter left for the Court's determination. Signed by District Judge Audrey G. Fleissig on 9/25/18. (CSG)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISOURI
SOUTHEASTERN DIVISION

UNITED STATES OF AMERICA,
ex rel. PAUL CAIRNS, et al.,
Plaintiff,
vs.
D.S. MEDICAL, L.L.C., et al.,
Defendants.

)
)
)
)
)
)
)
)
)
)

Case No. 1:12CV00004 AGF

MEMORANDUM AND ORDER
This qui tam action under the False Claims Act (“FCA”) is before the Court on
the motion of Plaintiff the United States for Entry of Judgement with Treble Damages
and Penalties on Counts II and III of the three-count complaint, following a jury trial
and a verdict by the jury. (ECF No. 429). Defendants oppose the motion. The parties
agree that judgment should be entered in favor of all four Defendants on Count I. For
the reasons set forth below, judgment will be entered in favor of all four Defendants on
Count I. On Count II, Judgment will be entered in favor of two Defendants, and against
two Defendants in the amounts set forth below. Judgment will be entered on Count IV
against all Defendants.
There are four Defendants in this action—two individuals and two limited
liability corporations: Dr. Sonjay Fonn (“Fonn”) and Midwest Neurosurgeons, LLC
(“Midwest”); and Debra Seeger and D.S. Medical, LLC. Fonn is alleged to be the
single member and agent of Midwest, and Seeger is alleged to be the single member

and agent, of D.S. Medical. The many memoranda and orders issued by the Court in
this case set forth the claims, defenses, and legal and factual issues involved in the case.
Briefly, the Government claimed that Defendants violated the FCA by submitting or
causing to be submitted to the Medicare and Medicaid programs false claims for
reimbursement for Fonn’s services in performing spinal surgeries at St. Francis Medical
Center (“SFMC”) between December 2008 and March 2012, and for the purchase of
implant devices through D.S. Medical, a distributor of medical devices, used in those
surgeries. The claims for reimbursement were allegedly false because they were the
result of kickbacks that violated the federal criminal Anti-Kickback Statute (“AKS”).
The three claims submitted to the jury, corresponding to the three counts of the
complaint, were that:
(1) Seeger and D.S. Medical gave kickbacks to Fonn and Midwest in exchange
for Fonn and Midwest arranging the purchase of spinal implants (used by Fonn
in his surgeries) through D.S. Medical;
(2) all four Defendants solicited or received kickbacks from two implant
manufacturers (Amedica and Verticor) in exchange for arranging the purchase of
Amedica’s and Verticor’s products by SFMC, with respect to 53 claims for
reimbursement; and
(3) all four Defendants conspired to violate the FCA by entering into an
agreement that involved Defendants soliciting or receiving kickbacks from six
implant manufacturers (including Amedica and Verticor) in exchange for
arranging the purchase of those companies’ products by SFMC, with respect to
223 claims for reimbursement.
The jury was instructed on agency, as follows:
Two of the Defendants in this case, Midwest Neurosurgeons, LLC
and DS Medical, LLC are "limited liability companies." I will refer to these
as “LLCs.”
2

An LLC acts only through its agents or employees. Any agent or
employee of an LLC may bind the LLC by acts or statements made while
acting within the scope of the authority delegated to the agent by the LLC,
or within the scope of his or her duties as an employee of the LLC.
If you find Ms. Seeger liable and you find she was acting on behalf
of, or within the scope of her duties with, DS Medical, you must also find
DS Medical liable. If you find Dr. Fonn liable and you find he was acting
on behalf of, or within the scope of his duties with, Midwest
Neurosurgeons, you must also find Midwest Neurosurgeons liable.
The jury was also instructed on joint and several liability, as follows:
Under the False Claims Act, defendants are jointly and severally
liable. That means that the United States can recover the total sum of
damages only once from any or all of the Defendants whom you find have
violated the False Claims Act. Thus, if you find that the Defendants
violated the False Claims Act, you should determine the amount of
damages for which each individual Defendant may be responsible as to
each question posed in the verdict form. If you find that more than one
Defendant is responsible for the same damages, you should not concern
yourself with how the damages are apportioned among the Defendants or as
to each question on the verdict form; that is the Court’s job.
And with respect to the conspiracy claims, the jury was instructed that:
a conspiracy is a kind of “partnership” so that under the law each
member is an agent or partner of every other member and each member is
bound by or responsible for the acts of every other member done to further
their scheme. . . . [and] a person who knowingly, voluntarily and
intentionally joins an existing conspiracy becomes responsible for all of the
conduct of the coconspirators.
* * *
If liability for conspiracy to violate the False Claims Act is
established, each conspirator is liable for each of the acts taken for the
purpose of carrying out or carrying forward the agreement or understanding
and for damages arising from the conspiracy even if he or she did not
personally commit all of the acts that may take place under the conspiracy.
Counts I and II
On Count I, the jury found in favor of all four Defendants, and judgment can be
3

entered accordingly.
On Count II, the jury found in favor of Seeger and D.S. Medical; against Fonn in
the amount of $101,177.10, and against Midwest in the amount of $6,442.14. This
verdict is supported by the evidence, and the parties agree that the $6,442.14 is subsumed
by the $101,177.10 (which the parties agree should be $ .60 lower, or $101.176.50).
Plaintiff thus asks for entry of judgment of $101,176.50, before any trebling and/or
penalties against Fonn and Midwest, jointly and severally, on Count II. Defendants do
not independently challenge this. Plaintiff also asserts that, pursuant to 31 U.S.C.
§3729(a), the $101,176.50 should be trebled to $303.529.50, and that the Court should
assess a statutory penalty of $5,500 against Fonn for each of the five false claims the jury
found he submitted or caused to be submitted (for total penalties of $27,500), and a
statutory penalty of $5,500 against Midwest for each of the three false claims the jury
found it submitted (for total penalties of $16,500).
Section § 3729(a) provides that for each violation of the FCA, a defendant “is
liable to the United States Government for a civil penalty of not less than [$5,500] and
not more than [$11,000] . . . plus 3 times the amount of damages which the Government
sustains because of the act of that person.” 31 U.S.C. § 3729(a) (as adjusted for
inflation). Defendants argue that trebling is improper because (1) Plaintiff offered no
evidence of “but for” causation which is required by the “because of” language in §
3729(a); and (2) only actual damages sustained by Plaintiff may be trebled. Defendants
contend that means that the fair market value of the surgeries at issue must be subtracted
from any pre-treble damages figure, and Plaintiff never argued that any surgeries were
4

not medically necessary.
The Court previously rejected a similar “but for” argument advocated by
Defendants in support of their interpretation of the statutory phrase “resulting from” in
the AKS. 1 The Court believes that, similarly, trebling damages is appropriate in an
implied-false-certification FCA case such as this, in which the lack of medical necessity
was not claimed or proven. Defendants’ supplemental authority on this issue, Husted v.
A. Philip Randolph Inst., 138 S. Ct. 1833, 2018 WL 2767661 (June 11, 2018), a case
seeking injunctive and declaratory relief related to the state’s process for removing
inactive registrants from the state’s registered voter rolls, does not persuade the Court
otherwise. The Court also rejects Defendants’ “actual damages” argument against
trebling, and will enter judgment on Count II accordingly.
Count III
The more substantial dispute at this stage of the case relates to the jury’s verdict
on Count III, claiming conspiracy. The jury found against all four Defendants on Count
III, but awarded $0 damages against Fonn and Seeger, while it awarded damages of
$150,000 against Midwest, and damages of $1,652,557.35 against D.S. Medical. On a
chart submitted to the jury listing 228 claims for reimbursement, the jury found, and
affirmatively indicated, that all 228 claims listed on the chart were false. Plaintiff
concedes it is only seeking damages and penalties as to the 223 of these claims that were
subject to the conspiracy alleged in Count III. The amount of damages awarded by the
1

The AKS provides that “a claim that includes items and services resulting from a
violation of [the AKS] constitutes a false or fraudulent claim for purposes of [the FCA].”
42 U.S.C. § 1320a-7b(g)
5

jury on Count III was lower than the total amount that Medicare and Medicaid paid for
those 223 claims, which was $5,275,287.29. With respect to the five claims that should
not have been included on Chart C, the total amount the government paid was
$128,240.61.
The parties differ on what the Court should do with respect to the fact that the jury
found all four Defendants liable for conspiracy, but assessed damages only against the
LLCs. Plaintiff essentially argues that the damages amount must be assessed against all
four Defendants, jointly and severally, consistent with the law and jury instructions on
liability of co-conspirators. Defendants contend that judgment should be entered in favor
of the individual Defendants, consistent with the jury’s award of no damages against the
individual Defendants.
A verdict must be read to harmonize the jury’s findings and verdicts whenever
possible; “where there is a view of the case that makes the jury’s answers to special
interrogatories consistent, they must be resolved that way.” Corpus v. Bennett, 430 F.3d
912, 915 (8th Cir. 2005). Where the jury finds a particular quantum of damages, a court
“must be certain indeed that the award is contrary to all reason before reversing the jury.”
U.S. ex rel. Miller v. Bill Harbert Int'l Const., Inc., 608 F.3d 871, 905 (D.C. Cir. 2010).
Here, in light of Defendants’ arguments at trial, the Court cannot say that the
amount of damages awarded by the jury is against all reason. The jury’s finding that
there were damages associated with the claims resulting from the conspiracy comports
with the evidence, arguments, and instructions. Further, Defendants made several
arguments to the jury as to why the damages amounts associated with the claims should
6

be substantially reduced. It would perhaps have been better had the verdict form asked
the jury to find a single damages amount in Count III, if the jury found liability, but
neither party requested that. The jury clearly found all four Defendants liable for a
conspiracy to submit 223 false claims for reimbursement. All four Defendants are
legally responsible, jointly and severally, for the damages caused by the conspiracy in
which they participated. 2 See Kelsoe v. Fed. Crop Ins. Corp., 724 F. Supp. 448, 453
(E.D. Tex. 1988) (holding that an individual who conspired to submit false claims to
government was jointly and severally liable for damages assessed against
coconspirators under the FCA, although the jury did not assess damages against that
party individually).
Several adjustments are called for. First, the Court accepts Defendants’ argument
that the $150,000 award is included in the $1,652,557.35. Second, Plaintiff concedes that
$101,173 must be deducted from its damages award in light of a settlement with SFMC
in that amount, for a resulting in an interim total of $1,551,384.35. 3 Third, as there is no
way to know whether the jury included any or all of the $128,240.61 associated with the
five claims that should not have been on Chart C, the Court will err on the side of caution
and reduce the award under Count III by this amount, for an award of $1,423,143.74,
2

The Court notes that Midwest and D.S. Medical were single-member LLCs and only
the entities billed Medicare and Medicaid. In addition, damages is not an element of a
FCA claim. See U.S. ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 189 (5th Cir. 2009);
see also U.S. ex rel. Bunk v. Gosselin World Wide Moving, N.V., 741 F.3d 390 (4th Cir.
2013) (holding that relators seeking solely civil penalties and not damages enjoy standing
to sue under the FCA).
3

The Court rejects Plaintiff’s argument that this amount should be deducted after
trebling, not before.
7

before trebling. The Court notes that the jury affirmatively indicated that these five
claims were part of the conspiracy, and it was Plaintiff that improperly included the
claims on Chart C; thus it is Plaintiff that should bear the adverse consequences on this
matter. Trebling $1,423,143.74 pursuant to 31 U.S.C. § 3729(a) results in damages of
$4,269,431.22.
The Court agrees with Plaintiff that Plaintiff is entitled to one penalty for each
false claim that was part of the conspiracy. See U.S. ex rel. Bunk v. Gosselin World Wide
Moving, N.V., 741 F.3d 390, 406 (4th Cir. 2013). The Court will impose a civil penalty
of $5,500 per each of the 223 false claims, for a total of $1,281,500 in penalties. The
total amount for which the four Defendants are jointly and severally liable under Count
III is $5,495,931.22. See Kelso, 724 F. Supp. at 453-54 (holding that coconspirators are
jointly and severally liable under the FCA for statutory civil penalties) (citing cases).
Given the nature of Defendants’ conduct here, the Court does not believe that the
trebling of damages in combination with the total penalty violates the Excessive Fines
Clause. See United States v. Aleff, 772 F.3d 508, 512-13 (8th Cir. 2014). The damages
under Count II would be duplicative of the damages under Count III. Thus although the
Court will enter judgment on each count, Plaintiff will be limited to recovering
$5,495,931.22.
Accordingly,
IT IS HEREBY ORDERED that Plaintiff’s motion (ECF No. 429) for entry of
judgment is GRANTED in part, as follows:
Judgment is entered on Count I in favor of Defendants.
8

Judgment is entered on Court II in favor of Defendants Debra Seeger and D.S.
Medical, LLC; and against Defendants Dr. Sonjay Fonn and Midwest Neurosurgeons,
LLC, jointly and severally in the amount of $303,529.50. Civil penalties are assessed
against Defendant Dr. Sonjay Fonn in the amount of $27,500, and against Defendant
Midwest Neurosurgeons, LLC, in the amount of $16,500.
Judgment is entered on Count III against the four Defendants, jointly and
severally, in the amount of $5,495,931.22.
IT IS FURTHER ORDERED that on or before October 3, 2018, Plaintiff shall
file a notice of its intent to proceed with its claims of payment by mistake and unjust
enrichment.
IT IS FURTHER ORDERED that on or before October 8, 2018, the parties
shall file a proposed schedule for submissions on the question of attorney’s fees and
costs, and any other matter left for the Court’s determination.

AUDREY G. FLEISSIG
UNITED STATES DISTRICT JUDGE
Dated this 25th day of September, 2018.

9