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

Filing 491

MEMORANDUM AND ORDER re: 482 Joint MOTION to Dismiss Case Motion to Dismiss and Rule 50 Motion Based on Texas v. United States and Memorandum in Support Thereof filed by Defendant Deborah Seeger, Defendant D.S. Medical LLC, Defendant So njay Fonn, Defendant Midwest Neurosurgeons, LLC, 468 Joint MOTION for Judgment as a Matter of Law filed by Defendant Deborah Seeger, Defendant D.S. Medical LLC, Defendant Sonjay Fonn, Defendant Midwest Neurosurgeons, LLC. IT IS HEREBY ORDERED that Defendants' motion for judgment as a matter of law or, alternatively, for a new trial is DENIED. ECF No. 468. IT IS FURTHER ORDERED that Defendants' Motion to Dismiss and Rule 50 Motion Based on Texas v. United States, is DENIED. ECF No. 482. Signed by District Judge Audrey G. Fleissig on 4/15/20. (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.

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Case No. 1:12CV00004 AGF

MEMORANDUM AND ORDER
This qui tam action under the False Claims Act (“FCA”) is before the Court on
Defendants’ renewed motion for judgment as a matter of law or, alternatively, for a new
trial (ECF No. 468), and their motion to dismiss or for judgment as a matter of law
based on the position that the U.S. Department of Justice (“DOJ”) took in the Fifth
Circuit in the case of Texas v. United States, 945 F.3d 355 (5th Cir. 2019) (ECF No.
482). For the reasons set forth below, the Court will deny both motions.
BACKGROUND
There are four Defendants in this action—two individuals and two limited
liability corporations of which the individuals were alleged to be the single-members
and agents, respectively: Dr. Sonjay Fonn and Midwest Neurosurgeons, LLC
(“Midwest”); and Debra Seeger and D.S. Medical, LLC (“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, Plaintiff 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 as to Count III’s claim of FCA conspiracy in relevant part
as follows:
INSTRUCTION NO. 12
With respect to the United States’ claims for conspiracy to violate the
False Claims Act, as to each Defendant individually, your verdict must be
for the United States and against the Defendant if you believe, by a
preponderance of the evidence, that:
2

First, from on or around January 2009 through on or before March 31,
2012, two or more people or entities reached an agreement or understanding
to submit or cause the submission of claims for payment to the government
which falsely or fraudulently represented compliance with the AntiKickback Statute, as defined in Instruction No. 13;
Second, the Defendant voluntarily and intentionally joined in the
agreement or understanding, either at the time it was first reached or at some
later time while it was still in effect;
Third, at the time the Defendant joined in the agreement or
understanding, the Defendant knew the purpose of the agreement; and
Fourth, while the agreement or understanding was in effect, a person
or persons who had joined in the agreement or understanding knowingly did
one or more acts for the purpose of carrying out or carrying forward the
agreement or understanding.
INSTRUCTION NO. 13
With respect to the first element of the conspiracy claims as described
in Instruction No. 12 and further defined in Instruction No. 10, the United
States alleges that the agreement or understanding to submit or cause the
submission of claims in violation of the Anti-Kickback Statute involved the
Defendants knowingly and willfully soliciting or receiving remuneration
from spinal implant companies Amedica, Verticor, Life Spine, Genesys,
Ethical Medical, and Omni (aka Spine 360), in exchange for arranging for or
recommending the purchase or ordering of those companies’ products by St.
Francis Medical Center.
The Anti-Kickback Statute is violated if a person:
(1) Knowingly and willfully solicits or receives remuneration, directly or
indirectly; and
(2) At least one purpose for the solicitation or receipt of the remuneration
was in return for arranging for or recommending the purchasing or ordering
of an item or service; and
(3) The item or service may be paid for, in whole or in part, by Medicare or
Medicaid.

3

INSTRUCTION NO. 14
Element One of the conspiracy claims requires that two or more
people or entities reached an agreement or understanding to submit or cause
the submission of claims for payment to the government which falsely or
fraudulently represented compliance with the Anti-Kickback Statute.
The agreement or understanding between two or more people or
entities to submit or cause the submission of false claims does not need to be
a formal agreement or be in writing. A verbal or oral understanding can be
sufficient to establish an agreement or understanding.
It does not matter whether the false or fraudulent claims were actually
submitted or whether the alleged participants in agreement actually
succeeded in accomplishing their unlawful plan.
The agreement or understanding may last a long time or a short time.
The members of an agreement or understanding do not all have to join it at
the same time. You may find that someone joined the agreement or
understanding even if you find that person did not know all of the details of
the agreement or understanding.
*

*

*

INSTRUCTION NO. 17
. . . [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
coconspirator.
*

*

*

INSTRUCTION NO. 19
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.

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ECF No. 422, Jury Instr. Nos. 12, 13, 14, 17 & 19.
On Count I, the jury found in favor of all four Defendants, and the Court entered
judgment accordingly. See ECF No. 465. On Count II, the jury found in favor of Seeger
and D.S. Medical; the jury found against Fonn and Midwest with respect to 5 of the 53
claims and in favor of these Defendants with respect to the remaining 48 claims. For the
reasons explained in its prior Memorandum and Order granting in part Plaintiff’s motion
for entry of judgment, the Court entered judgment on Count II in favor of Seeger and
D.S. Medical, and, after trebling the damages pursuant to the applicable statute, against
Fonn and Midwest jointly and severally in the amount of $303,529.50. The Court also
assessed statutory civil penalties against Fonn in the amount of $27,500, and against
Midwest in the amount of $16,500. Id.
With respect to Count III, the jury found against all four Defendants, but it
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
conceded it was only seeking damages and penalties as to the 223 of these claims that
were subject to the conspiracy alleged in Count III. For the reasons explained in its prior
Memorandum and Order, after reducing the verdict in part based on Plaintiff’s
concessions and Defendants’ arguments, and after trebling the damages and assessing a
civil penalty pursuant to the applicable statute, the Court entered judgment on Count III

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against all four Defendants, jointly and severally, in the amount of $5,495,931.22.1
Defendants now move for judgment as a matter of law or for a new trial as to all
three counts. Defendants separately move to dismiss or for judgment as a matter of law
as to all counts based on the position that DOJ took in the Fifth Circuit in the case of
Texas v. United States, 945 F.3d 355 (5th Cir. 2019). The Court will address each of
Defendants’ arguments in turn.
DISCUSSION
Standard of Review
Judgment as a matter of law under Federal Rule of Civil Procedure 50(a) “is
appropriate only when all of the evidence points one way and is susceptible of no
reasonable inference sustaining the position of the nonmoving party.” Allstate Indem.
Co. v. Dixon, 932 F.3d 696, 702 (8th Cir. 2019), reh’g denied (Sept. 12, 2019). “In
making this decision, the court must draw all reasonable inferences in favor of the
nonmoving party and must not judge credibility or weigh evidence.” White v. Union Pac.
R.R. Co., 867 F.3d 997, 1000–01 (8th Cir. 2017)
Moreover, Federal Rule of Civil Procedure 50(b) “allows the moving party to
renew its Rule 50(a) motion after the jury renders its verdict, but a party may not advance
new arguments in its Rule 50(b) motion that were not properly raised in its Rule 50(a)
motion” made before the case was submitted to the jury. Miller v. Huron Reg’l Med.

1

The Court noted that the damages under Count II would be duplicative of the
damages under Count III. Thus, although the Court entered judgment on each count, the
Court held that Plaintiff would be limited to recovering $5,495,931.22. ECF No. 465.
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Ctr., 936 F.3d 841, 847–48 (8th Cir. 2019).
As for the motion for a new trial, under Rule 59(a)(1)(A), “[a] new trial is
appropriate when the first trial, through a verdict against the weight of the evidence, an
excessive damage award, or legal errors at trial, resulted in a miscarriage of
justice.” Gray v. Bicknell, 86 F.3d 1472, 1480 (8th Cir. 1996). A miscarriage of justice
does not result whenever there are inaccuracies or errors at trial; instead, the party
seeking a new trial must demonstrate that there was prejudicial error. Buchholz v.
Rockwell Int’l Corp., 120 F.3d 146, 148 (8th Cir. 1997). “Motions for new trials are
generally disfavored and will be granted only where a serious miscarriage of justice may
have occurred.” United States v. Petroske, 928 F.3d 767, 774 (8th Cir. 2019).
Defendants’ New Conspiracy Argument (Ground I)
Defendants’ first and primary argument in the current motion is that an FCA
conspiracy claim cannot succeed without a finding of liability for a substantive FCA
offense, so the jury’s verdict in Defendants’ favor as to 48 claims in Count II requires
judgment to be entered in Defendants’ favor as to those claims in Count III. For the same
reason, Defendants argue that the jury’s verdict in Defendants’ favor on Count I and in
Seeger’s and D.S. Medical’s favor on Count II undermine the jury’s verdict in Plaintiff’s
favor on Count III.
Whatever the merit of Defendants’ argument, the Court agrees with Plaintiff that it
has been waived. As an initial matter, Defendants failed to raise this argument in their
Rule 50(a) motion or to otherwise address the issue in jury instructions or at any time
before the jury began deliberations. Defendants maintain that their failure to do so
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should be excused because it was not until after the jury rendered its verdict that the
inconsistency of the jury’s findings became apparent. But this legal issue should have
been apparent well before the jury issued its verdict. Indeed, both Defendants’ own
proposed verdict form (ECF No. 415), and the verdict form actually used at trial with no
objection from Defendants (ECF No. 418), permitted the jury to render such allegedly
inconsistent findings and did not advise the jury that it was required to find in favor of
Defendants on Count III to the extent it did so in Counts I or II. See Miller, 936 F.3d at
848 (8th Cir. 2019) (denying a defendant’s Rule 50(b) attack regarding the legal
sufficiency of one claim based on a jury’s “split verdict” in favor of the defendant on a
related claim where the defendant failed to raise the argument in a Rule 50(a) motion and
failed to object to jury instructions or the verdict form, which permitted such split
findings).
Further, as noted above, Jury Instruction No. 14 provided with respect to the first
element of the FCA conspiracy claim that “[i]t does not matter whether the false or
fraudulent claims were actually submitted or whether the alleged participants in
agreement actually succeeded in accomplishing their unlawful plan.” ECF No. 422 at 16.
Defendants never objected to that instruction, despite objecting to numerous other
instructions.2

Any objection was required to be specific. See Fed. R. Civ. P. 51(c)(1) (“A party
who objects to an instruction or the failure to give an instruction must do so on the
record, stating distinctly the matter objected to and the grounds for the objection.”). “A
general objection to a jury instruction, even when it encompasses a specific objection, is
insufficient.” Bauer v. Curators of Univ. of Missouri, 680 F.3d 1043, 1045 (8th Cir.
2012).
2

8

Defendants cannot now assert that a jury finding in accordance with that
instruction—namely, finding Defendants liable for conspiring to violate the FCA without
necessarily finding that Defendants successfully violated the FCA with respect to all of
the claims at issue—is erroneous. See, e.g., Ruocco v. Hemmerdinger Corp., 711 F.
App’x 659, 663 (2d Cir. 2017) (unpublished) (holding that defendants waived their posttrial argument that a RICO conspiracy claim cannot succeed unless at least one defendant
is found liable for a substantive RICO offense where the defendants did not object to the
trial court’s instruction advising the jury that the two claims (conspiracy and substantive
offense) were independent of one another).
At best, Defendants’ new argument would be subject to plain-error review. See
Miller, 936 F.3d at 848. “Plain error exists if: (1) the district court deviates from a legal
rule; (2) the error is clear under current law; . . . (3) the error affects substantial rights,
which ordinarily means that the error affects the outcome of the proceedings”; and “(4)
[the error] seriously affects the integrity, fairness, or public reputation of judicial
proceedings.” Bauer, 680 F.3d at 1045.
If any error occurred here, it was not plain. The legal issue Defendants raise is far
from clear, Defendants not having cited any binding caselaw addressing this sort of
mixed verdict under the FCA. And even assuming, without deciding, that Jury
Instruction No. 14 were a misstatement of the law, in light of Defendants’ failure to
object to the instruction or propose a correct instruction or verdict form, the error did not
seriously affect the integrity, fairness, or public reputation of the judicial proceedings, or
otherwise result in a miscarriage of justice so as to warrant a new trial. See, e.g., Miller,
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936 F.3d at 848 (finding no manifest injustice under plain-error review in light of
defendant’s failure to raise a defense based on a split verdict earlier); Munson v. Norris,
375 F. App’x 638, 642 (8th Cir. 2010) (unpublished) (“[B]ased on [defendant’s] inaction
at the trial court level and his failure to provide the court with correct jury instructions,
we conclude that the district court's instruction did not rise to the level of plain error.”);
Shade v. Hous. Auth. of City of New Haven, 251 F.3d 307, 313 (2d Cir. 2001) (“Nor do
we see how holding the defendants to a jury verdict that faithfully followed an instruction
and verdict form that they themselves urged upon the court could give rise to a
miscarriage of justice.”).
Further, the jury awarded substantial damages on Count III, far in excess of those
granted in Count II. As such, it is reasonable to conclude that the jury found that the
government paid some of the claims that were false under Plaintiff’s theory of liability
with respect to the commissions paid by the manufacturers.
Remaining Arguments
Ground II
As their second ground, Defendants assert that the verdict in Defendants’ favor as
to 48 of the of the claims in Count II requires that judgment be entered for Defendants
with respect to Count III on those claims. Defendants’ argument relies primarily on the
conspiracy argument discussed above, and to that extent is rejected for the same reason.
In light of the instructions, the jury could have found Defendants liable for conspiracy,
notwithstanding its determination on that transaction in Count II. And inasmuch as the

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damages awarded on Count III is less than the full amount of claims submitted, the Court
cannot say that the jury awarded damages as to any such transactions.
Defendants further argue that the jury’s finding of liability on the five claims
related to Amedica in Count II was based solely to Fonn’s purchase of Amedica stock,
which Defendants characterize as a wholly separate basis from that asserted with respect
to the other Count II claims.3 However, this is speculation on Defendants’ part. The jury
may well have determined that the purchase of stock was but a contributing factor. As
Plaintiff noted in its response, the evidence showed that the commission rate to D.S.
Medical on Amedica purchases increased shortly after a dinner at which the stock
purchase was discussed with Amedica representatives. Thus, for example, the jury could
have determined that the stock was purchased, in part, in order increase the commission
paid to D.S. Medical, which was in turn paid to induce Fonn to order Amedica products.
Ground III
In their third ground, Defendants assert that they are entitled to judgment with
respect to the kickbacks received from the manufacturers other than Verticor and
Amedica because the Plaintiff failed to present sufficient evidence with respect to these
claims. The Court finds no basis for Defendants’ suggestion that the Plaintiff’s case
depended almost entirely on the theory supporting Count I—namely, kickbacks paid to

The Court finds no basis for Defendants’ further argument that Plaintiff failed to
disclose the Amedica stock purchase as illegal remuneration during discovery.
Defendants had fair notice of the evidence prior to trial, did not move in limine to
exclude the evidence prior to trial, and did not object when the evidence was presented at
trial.
3

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Fonn from Seeger and D.S. Medical. Rather, Plaintiff presented more than sufficient
evidence to support that Defendants knowingly and willfully solicited or received
remuneration—in the form of payments to D.S. Medical—from the spinal implant
manufacturers in exchange for Defendants arranging to purchase the manufacturers’
implants.
Ground IV
Defendants’ argument in Ground IV, that they are entitled to judgment on Count
III because a conspiracy between Fonn and Midwest is not actionable, fails for the
reasons stated above. This circular argument depends upon a determination that Seeger
and D.S. Medical cannot be liable on Count III because they were found to have no
liability under Counts I and II, and thus, under Defendants’ new conspiracy theory,
cannot be liable under Count III. As noted above, Defendants waived any such argument
with respect to the conspiracy count and instructions. Moreover, as stated above, it is
reasonable to assume, in light of the damages awarded, that the jury believed that claims
were submitted in violation of the AKS. Indeed, the jury awarded significant damages
against D.S. Medical. And though the jury awarded no damages against the individual
defendants, the jury found all four defendants liable for conspiracy as alleged in Count
III—a finding that this Court finds is more than amply supported by the evidence.
Grounds V and VI
In light of the discussion above, the Court finds no basis for Defendants’ assertion
in Grounds V and VI, that the jury’s verdict on Count I requires the entry of judgment in
Defendants’ favor on Count III. Defendants’ desire to reframe the evidence to depend,
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wholly, on the theory of liability underlying Count I does not make it so. Plaintiff
presented a separate theory of liability with respect to the solicitation and receipt of
commission payments from the manufacturers, and presented sufficient evidence at trial
to support the jury’s verdict.
Likewise, there is more than sufficient evidence in the record to support a finding,
consistent with Instruction Nos. 12 and 13, that Defendants acted knowingly and willfully
in soliciting and receiving remuneration from the spinal implant manufacturers in
exchange for recommending the purchase of their products. Indeed, the record is quite
clear that Fonn controlled what implants were used in his surgeries and purchased
through SFMC; that he would not use any implants that did not pay a hefty commission
to D.S. Medical; that this was part of the Defendants’ agreement and plan from the
inception of D.S. Medical and throughout its existence; and that Seeger was well aware
of and willfully participated in the plan. There is also no doubt that Fonn and Seeger—
the sole members of Midwest and D.S. Medical, respectively—knew of the prohibition in
the AKS and that the government would not pay claims tainted by any such kickbacks.
Grounds VII - XII
Defendants asserted their remaining arguments at earlier stages of the court
proceedings, and this Court rejects them for the same reasons stated in its prior orders.
The Court does not accept that the FCA depends on a “but-for” analysis. Likewise, the
Court continues to hold that a violation of the AKS satisfies the FCA’s materiality
requirement and, in any event, believes the record contains sufficient evidence both that
the government would not pay claims that violated the AKS and that Defendants were
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well aware of this fact. The Court also rejects, for the reasons stated in its prior rulings,
Defendants’ argument that they could not be found liable for causing SFMC to submit
false claims, without a showing that SFMC was aware of the falsity. For the reasons
stated in prior rulings, the Court also rejects Defendants’ argument that Plaintiff must
show that the inducement of the referrals was the “primary purpose” of the remuneration,
as well as the argument with respect to the proper standard of proof.
Motion Based on Texas v. United States
Finally, and more recently, Defendants filed a new Motion to Dismiss and Rule 50
Motion based on the position that DOJ took in the Fifth Circuit in the case of Texas v.
United States, 945 F.3d 355 (5th Cir. 2019). By way of background, on March 23, 2010,
President Barack Obama signed into law the Patient Protection and Affordable Care Act
(the “ACA”), Pub. L. No. 111-148 (March 23, 2010). One key provision of the ACA was
the individual mandate, and the related “shared responsibility payment,” which provided
for the payment of a penalty in many instances in which individuals failed to maintain
minimum health insurance coverage. See 26 U.S.C. § 5000A(b)(1). The Supreme Court,
in National Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012),
determined that the individual mandate was a valid exercise of Congressional taxing
power. Id. at 574.
The ACA also added other, unrelated provisions, including certain provisions
pertaining to the prosecution of healthcare fraud claims. Texas v. United States, 945 F.3d
at 396-97, 401, 418 (King, J., dissenting) (noting, “the ACA contains countless other
provisions that are unrelated to the private insurance market – and many that are only
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tangentially related to health insurance at all”). Among these provisions was the addition
of subsection (g) to the AKS, which provides that “a claim that includes items or services
resulting from a violation of this section constitutes a false or fraudulent claim for
purposes of” the FCA. 42 U.S.C. § 1320a-7b(g).4
In 2017, Congress eliminated any tax penalty for failure to comply with the
individual mandate, effective January 1, 2019. As a result of that change, many new
challenges were brought to the ACA. In 2018, the district court in Texas v. United States,
held that the ACA’s individual mandate was unconstitutional, and further determined that
the individual mandate was “inseverable” from the rest of the of the ACA, rendering the
entire ACA invalid. Texas v. United States, 340 F. Supp. 3d 579 (N.D. Tex. 2018). In
the district court litigation, DOJ did not defend the individual mandate, but argued that
other provisions of the ACA were severable. The district court stayed its decision
pending appeal to the Fifth Circuit.
In March of 2019, when Defendants in this case filed the instant motion, DOJ
informed the Fifth Circuit that it had changed its position with respect to severability, and
agreed with the lower court that the entire ACA was invalidated by Congress’s action in
2017. In their current motion, Defendants herein argue that the government’s actions in
arguing that the ACA is unconstitutional, while seeking to enforce certain provisions of

4

As discussed below, in prior orders issued in this case, this Court ruled that this
2010 amendment was not material to Plaintiff’s claims. Consistent with the vast majority
of other courts to consider the issue, this Court ruled that violations of the AKS in claims
submitted for payment to Medicare or Medicaid were actionable as violations of the
FCA, even before the 2010 amendments to the AKS.
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the ACA against these Defendants, constitutes arbitrary enforcement against Defendants,
rendering the statute unconstitutionally vague. ECF No. 486 at 1,3.
Defendants’ argument must be rejected for several reasons. First, the Fifth Circuit
has since reversed the district court’s decision on the issue of severability, remanding for
further consideration. Texas v. United States, 945 F.3d at 401-402, cert. granted sub
nom. Texas v. California, No. 19-1019, 2020 WL 981805 (Mar. 2, 2020). Moreover,
Defendants’ liability is not dependent on the ACA’s amendments to the AKS in 2010.
This Court held in its prior orders in this case that the language added to the AKS by the
ACA merely codified and clarified existing precedent. See ECF No. 97 at 8; ECF No.
251 at 8. As detailed more fully in Plaintiff’s opposition to Defendants’ motion (ECF
No. 485 at 7-8), this Court’s prior rulings are consistent with the vast majority of the
courts to consider the issue. See, e.g., United States ex rel. Hutcheson v. Blackstone
Medical, Inc., 647 F.3d 377, 391-92 (1st Cir. 2011); United States v. Rogan, 517 F.3d
449, 452 (7th Cir. 2008); United States ex rel. Pogue v. Diabetes Treatment Ctrs. of Am.,
565 F. Supp. 2d 153, 159 (D.D.C. 2008). Thus, liability for Defendants’ actions—which
occurred both before and after the 2010 amendment and well before Congress eliminated
the tax penalty for failing to comply with the individual mandate—were a violation under
the then-existing law, and would remain a violation even if the 2010 amendments to the
AKS were to be invalidated.
But the main reason to reject Defendants’ argument is that it is simply unfounded.
While DOJ changed its position with respect to severability, its briefs before the Fifth
Circuit make clear that its argument did not extend to provisions unrelated to the
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provision of insurance. In its brief, DOJ made clear that that the ruling invalidating the
ACA should be limited only to the provisions of the ACA that actually injure the
plaintiffs, such as the insurance reforms, but not include other provisions, such as the
criminal statutes for health care fraud and the amendments to the anti-kickback statutes.5
Specifically, DOJ argued that the individual plaintiffs had standing to challenge
“the ACA’s injurious insurance reforms,” and could argue that those provisions were
inseverable on the ground that the entire ACA is inseverable from the individual mandate
and related provisions. But DOJ added, plaintiffs “plaintiffs do not have standing to seek
relief against provisions of the ACA that do not in any way affect them.” Brief for the
Federal Defendants, Texas v. United States, 945 F.3d 355 (5th Cir. 2019) (No. 19-10011),
2019 WL 2029722 at *26. DOJ further argued that relief on appeal “should be limited
only to those provisions that actually injure the individual plaintiffs.” Id. at *28. DOJ
referenced the fact that “the ACA amended several criminal statutes used to prosecute
individuals who defraud our healthcare systems,” expressly citing to one provision
defining scienter required for healthcare fraud and anti-kickback violations, and argued:
“It is unlikely that the plaintiff here would have standing to challenge the validity of
those statutes.” Id.
In its supplemental letter brief, filed on July 3, 2019, DOJ made plain its position
that “the district court’s judgment [was] overbroad” and that “the court’s judgment

5

Defendants apparently based their argument on the two-sentence letter DOJ sent to
the Fifth Circuit in March, 2019, notifying the appellate court of DOJ’s changed position,
but Defendants unfortunately did not later advise this Court of DOJ’s actual arguments
before the Fifth Circuit.
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should be affirmed on the merits, except insofar as it purports to extend relief to ACA
provisions that are unnecessary to remedy plaintiffs’ injuries.” Supplemental Letter
Brief for the Federal Defendants, Texas v. United States, 945 F.3d 355 (5th Cir. 2019)
(No. 19-10011), 2019 WL 2912357, at *6 (emphasis in original). Indeed, the district
court’s failure properly to address DOJ’s argument, or consider the impact on unrelated
provisions, such as “the provisions in Title X establishing the level of scienter necessary
to be convicted of healthcare fraud,” was one basis for the Fifth Circuit’s reversal and
remand on the issue of severability. Texas v. United States, 945 F.3d at 400-401.
In the Fifth Circuit, DOJ did not take the position that the criminal health care
amendments of the ACA should be invalidated. As such, with respect to the
enforceability of subsection (g) of the AKS—the provision at issue here—DOJ has not
taken an inconsistent position, and Defendants’ argument fails as unsupported.
CONCLUSION
Accordingly,
IT IS HEREBY ORDERED that Defendants’ motion for judgment as a matter
of law or, alternatively, for a new trial is DENIED. ECF No. 468.
IT IS FURTHER ORDERED that Defendants’ Motion to Dismiss and Rule 50
Motion Based on Texas v. United States, is DENIED. ECF No. 482.

AUDREY G. FLEISSIG
UNITED STATES DISTRICT JUDGE
Dated this 15th day of April, 2020.
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