UNITED STATES OF AMERICA ex rel. et al v. CALIFORNIA, et al
Filing
430
ORDER granting in part and denying in part 420 Motion in Limine re: HCFA 1500 forms. Briefing schedule - Plaintiff's brief due 10/5/18, Defendant's brief due 10/12/18, Plaintiff's reply brief due 10/17/18, etc. Signed by Judge John Michael Vazquez on 9/24/18. (th, )
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
UNITED STATES OF AMERICA, ex rel.
WENDY A. BAHNSEN, et al.,
F1aintffs,
Civil Action No. 11-1210
v.
OPINION & ORDER
BOSTON SCIENTIFIC
NEUROMODULATION CORPORATION,
Defendant.
John Michael Vazguez, U.S.D.J.
Currently pending before before the Court, in this false Claims Act case, is a motion in
limine filed by Defendant Boston Scientific Neuromodulation Corporation (“BSNC” or
“Defendant”), which seeks to exclude certain evidence regarding claims data. D.E. 420. Plaintiffs
Wendy Bahnsen and Caroline Fuentes (collectively “Plaintiffs”) filed a brief in opposition (D.E.
421), to which Defendant replied (D.E. 422).
The Court reviewed the submissions made in
support and in opposition, and considered this motion without oral argument pursuant to Federal
Rule of Civil Procedure 78(b) and Local Civil Rule 78.1(b).
For the reasons that follow,
Defendant’s motion is GRANTED in part and DENIED in part.
INTRODUCTION
BSNC seeks to exclude certain evidence, such as individual line entries, unprocessable
entries, adjusted line entries, voided line entries, and duplicate submissions. BSNC argues that the
‘In this opinion, BSNC’s brief in support of its motion will be refened to as “BSNC’s Br.”;
Plaintiffs’ brief in opposition will be referred to as “Plfs’ Opp.”; and BSNC’s reply brief will be
referred to as “BSNC’s Reply”.
information does not qualify as “claims” under the False Claims Act (“FCA”), 31 U.S.C.
§ 3729
et al. The infonnation is apparently derived from spreadsheets that were produced in discovery
by a third-party Medicare Administrative Coordinator (“MAC”).
Plaintiffs respond that the
motion is not appropriate because it addresses an issue that should have been resolved by summary
judgment. Alternately, Plaintiff argues that all entries on the spreadsheet are in fact claims under
the FCA, or at a minimum, that a jury should decide whether the relevant entries qualify as claims.
At the outset, the Court does not understand Plaintiffs’ argument concerning summary
judgment because the Court expressly permitted B$NC to raise this issue by way of a motion in
timine rather than deciding it at the summary judgment stage. D.E. 38$ at 30. Consequently,
Defendant’s motion is proper. However, there is additional infonTiation that the Court needs in
order to definitively rule on the motion at hand. In the Court’s view, both parties to some extent
advocate for a definition of claim that is not consistent with the FCA. As a result, the Court will
review the relevant law as to what constitutes a claim for FCA purposes before turning to the
parties’ arguments. In addition, the Court will rule on the motion to the extent possible, given the
information that is curmently available to the Court.
“CLAIM” UNDER THE FCA
The FCA provides, in relevant part, as follows:
[A]ny person who—
(A) knowingly presents, or causes to be presented, a false or
fraudulent claim for payment or approval;
(B) knowingly makes, uses, or causes to be made or used, a false
record or statement material to a false or fraudulent claim;
is liable to the United States Government for a civil penalty of not
less than $5,000 and not more than $10,000,
plus 3 times the
amount of damages which the Government sustains because of the
act of that person.
.
2
.
.
31 U.S.C.
§ 3729(a). Thus, a violation occurs when a claim is “present[ed].” Id. In addition, only
claims that “cause or would cause economic loss to the government” are subject to the FCA.
Hutchins v. Wilentz, Goldman & Spitzer, 253 f.3d 176, 179 (3d
dr. 2001). Accordingly, attempts
are also subject to FCA liability. Id. at 184 (stating that the FCA “seeks to redress fraudulent
activity which attempts to or actually causes economic loss to the United States government”).
The FCA imposes two types of financial liability. First, a submitter of a “false or fraudulent
claim” (or false record/statement vis-ã-vis such a claim) is liable for a civil monetary penalty
between $5,000 to $10,000 per claim. 31 U.S.C.
§ 3729(a); United States v. Bornstein, 423 U.S.
303, 313 (1976). This penalty will be imposed for false claims that are actually paid by the
government, in addition to attempted false claims.
United States ex rel. Schwedt v. Planning
Research Corp., 59 F.3d 196, 199 (D.C. Cir. 1995) (“[E]ven if the claim is rejected, its very
submission is a basis for liability.”). Second, the submitter of the claim is also liable for actual
damages, which are trebled under the FCA. 31 U.S.C.
§ 3729(a)(1)(G); see also United States v.
Anchor Mortg. Corp., 711 F.3d 745, 748 (7th Cir. 2013) (stating that the “statute requires treble
damages”).
The FCA further defines “claim”:
(2) the term “claim”—
(A) means any request or demand, whether under a contract or
otherwise, for money or property and whether or not the United
States has title to the money or property, that—
(i) is presented to an officer, employee, or agent of the
United States; or
(ii) is made to a contractor, grantee, or other recipient, if
the money or property is to be spent or used on the
Government’s behalf or to advance a Government
program or interest, and if the United States
Government3
(I) provides or has provided any portion of the money
or property requested or demanded; or
(II) will reimburse such contractor, grantee, or other
recipient for any portion of the money or property
which is requested or demanded; and
(B) does not include requests or demands for money or property that
the Government has paid to an individual as compensation for
Federal employment or as an income subsidy with no restrictions on
that individual’s use of the money or property[.]
31 U.S.C.
§ 3729(b).
In United States
Bornstein, 423 U.S. 303 (1976), the Supreme Court of the United States
set forth the parameters of a claim under the F CA.2
In Bornstein, Model Engineering &
Manufacturing Corporation (“Model”) had a contract with the United States to provide radio kits.
United National Labs (“United”), Model’s subcontractor, sent twenty-one boxes of misbranded
tubes to Model in three separately invoiced shipments. Model then used 397 of the misbranded
tubes in radio kits that it provided to the United States, and sent thirty-five invoices to the
Government for the kits. Each invoice included claims for payment for the misbranded tubes that
had been supplied to Model by United. Bornstein, 423 U.S. at 307. After the Government
discovered the fraud, it brought suit under the FCA against United and its officer-owners. Using
Model’s invoices to the Government, the district court determined that there were thirty-five
claims.
The circuit court, however, concluded that because there was only one subcontract
involved, there was just one claim. Id. at 308.
The Supreme Court disagreed with both the district court and the circuit court’s
determination of what constituted a claim under the FCA. As for the circuit court’s interpretation,
2
Bornstein addressed a prior version of the F CA in which penalties were deemed forfeitures, and
were limited to $2,000 per claim. In addition, damages were doubled rather than trebled. See
Bornstein, 423 U.S. at 316-17.
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the Supreme Court stated that using the number of contracts to determine the number of claims
“would ignore the plain language of the statute,” as the FCA “focuses on false claims, not on
contracts.” Id. at 311. Next, the Supreme Court determined that the district court erred in finding
thirty-five claims because the district court’s analysis focused on Model’s actions rather than the
actions of United.
The Bornstein Court observed that the FCA “penalizes a person for his own acts, not for
the acts of someone else.” Id. at 312. While United certainly caused Model to submit false claims
to the government, the Court noted, United did not cause Model to submit a specific number of
claims. The fact that Model submitted thirty-five invoices, rather than some other number, was
“wholly irrelevant, completely fortuitous and beyond United’s knowledge and control[,]”
according to the Supreme Court. Id. at 312. Consequently, the Supreme Court concluded as
follows
A correct application of the statutory language requires, rather, that
the foctts in each case be upon the specific conduct of the person
from whom the Government seeks to collect the statutoryforfeitares.
In the present case United committed three acts which caused Model
to subit [sic] false claims to the Government—the three separately
invoiced shipments to Model. If United had not shipped any falsely
branded tubes to Model, Model could not have incorporated such
tubes into its radio kits and would not have had occasion to submit
any false claims to the United States. When, however, United
dispatched each shipment of flasely [sic] marked tubes to Model, it
did so knowing that Model would incorporate the tubes into the
radio kits it later shipped to the Government, ant [sic] that it would
ask for payment from the Government on account of those tubes.
Thus, United’s three shipments of falsely branded tubes to Model
caused Model to submit false claims to the United States, and United
is thus liable for three $2,000 statutory forfeitures representing the
three separate shipments that it made to Model.
Id. at 313 (emphasis added).
In United States v. Krizek, 111 F.3d 934 (D.C. Cir. 1997), the District of Columbia Circuit
also addressed what constitutes a claim for FCA purposes. Krizek involved a psychiatrist’s
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submissions for Medicare reimbursement. The claims were submitted on a form known as the
“HCFA 1500” (“Form 1500”). On each Form 1500, the psychiatrist’s wife (who maintained the
billing records) used a five-digit code from the American Medical Association’s CulTent
Procedures Terminology Manual (the “CPT code”) to identify the services for which
reimbursement was sought. The Form 1500 pertained to a single patient but could include a host
of CPT codes if the patient was treated on several occasions before the Form 1500 was submitted.
Id. at 936. Following the recommendation of a special master, the district court treated each CPT
Code as a unique false claim, despite the fact that multiple CPT codes appeared on the same Form
1500. Id. at 937.
The District of Columbia Circuit deteniiined that the district court erroneously treated each
CPT code as a separate claim when computing penalties under the FCA. Instead, the Krizek court
ruled, each Form 1500 constituted a claim, even if the Fon 1500 included multiple fraudulent
CPT codes. Id. at 938-39 (citing Bornstein, 423 U.S. at 307, 313; United States ex ret. Marcus e.
Hess, 317 U.S. 537, 552 (1943) (finding that a false claim was submitted for each project with the
government although each project involved multiple forms); Miller v. United States, 550 F.2d 17,
24 (Ct. Cl. 1977) (finding that a contractor made five false claims through monthly bills to
government despite fact that the bills included multiple invoices); United States v. Woodbury, 359
F.2d 370, 378 (9th Cir. 1966) (finding that applications and not the individual documents attached
to applications were claims).) The key, the circuit court concluded, was to focus on the defendant’s
conduct and to ask the following: “[w]ith what act did the defendant submit his demand or request
and how many such acts were there?” Krizek, 111 F.3d at 939. The manner in which the
Government chooses to process a claim is irrelevant, according to the court in Krizek, in
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determining whether a defendant in fact submitted a claim. Id. In making this finding, the District
of Columbia Circuit stated the following
Our conclusion that the claim in this context is the HCFA 1500 fonii
is supported by the structure of the fonTi itself. The medical provider
is asked to supply, along with the CPT codes, the date and place of
service, a description of the procedures, a diagnosis code, and the
charges. The charges are then totaled to produce one request or
demand—line 27 asks for total charges, line 2$ for amount paid, and
line 29 for balance due. The CPT codes function in this context as
a type of invoice used to explain how the defendant computed his
request or demand.
Id. at 940. Moreover, the Krizek Court noted, had it adopted the Government’s position that each
CPT code constituted a claim, it would have enabled the govenunent to seek “an astronomical $$1
million worth of damages for alleged actual damages of $245,392.” Krizek, 111 F.3d at 940. See
also United States v. Speqtrum, Inc., No. 10-2111, 2016 WL 5349196, at *4 (D.D.C. Sept. 23,
2016) (following Krizek in concluding that invoices, not the individual false entries in the invoices,
were claims); Cantrell v. New York Univ., 326 F. Supp. 2d468, 470 (S.D.N.Y. 2004) (“One invoice
constitutes one false claim, even thought it contains numerous individual entries, and a false claim
is made when the invoice is presented for payment.” (citing Krizek, 111 F.3d at 93$-40)).
With the statutory language and case law in mind, the Court turns to the parties’ arguments.
ANALYSIS
Individual Line Entries Versus Form 1 500s
Defendant argues that Plaintiffs improperly count every line entry, in the spreadsheet that
was produced by the MAC, as a claim. Defendant continues that the correct measurement of a
claim is the HCFA 1500 form, as was the case in Krizek. BSNC’s Br. at 3-$. The Court agrees.
As Bornstein instructs and as echoed in Krizek, the focus in detennining a claim under the FCA is
on Defendant’s actions, not how a MAC aggregated the information afier it was supplied by BSNC
(or, for that matter, how the MAC produced the information in discovery). Thus, the Form 1500
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represents a claim, regardless of the number of diagnostic codes or line entries included on each
fonm
This case, however, presents a wrinkle. Plaintiffs indicate that B$NC refused to produce
relevant Form 1500s in discovery. Plfs’
Opp.
at 13. BSNC replies that the “production of the
physical HCfA-1500 fonTis is unnecessary for this analysis.” BSNC Reply at 1. The Court does
not have complete information as to what BSNC did or did not produce in discovery. But if BSNC
failed to provide sufficient discovery to enable Plaintiffs to calculate the total number of Form
1 500s at issue, the Court will certainly entertain future arguments as to the appropriate remedy for
BSNC’s failure to produce the very information that it now argues, and with which the Court
agrees, is the appropriate measure to determine the number of claims that it submitted. The Court
will set forth a briefing schedule as to this issue.
Unprocessable, Adjusted or Voided Line Entries & Duplicate Submissions3
Plaintiffs take the position that if, for example, a claim was submitted by 3SNC and then
resubmitted because it was at first unprocessable, and then resubmitted again because it was
voided, then BSNC is liable for three false claims (the initial presentment, the first resubmission,
and the second resubmission). Plfs’ Opp. at 11-20. Of course, if BSNC was not reimbursed for
any of the three submissions then no damages would result. But this would not absolve BSNC of
As noted in the previous section, the Court finds that the proper measure for a claim is the Forni
1500, rather than line entries from a spreadsheet that was produced by the MAC during discovery.
As also noted, however, Plaintiffs contend that Defendant refused to turn over relevant Form 1 500s
in discovery. Consequently, the Court may have to adjust its finding once the Court receives more
inforniation about the issue from the parties.
Further, the Court will refer to line entries in this section because that is the manner in which the
parties’ briefed the issue. The Court refers to line entries to not confuse the issue, but this
nomenclature does not change the Court’s ruling concerning what document or information
constitutes a claim under the F CA.
$
liability under the FCA as to statutory penalty. Yet, it seems that Plaintiffs are attempting to
recover a monetary penalty between $5,000 to $10,000 for each of the three submissions.
Plaintiffs, however, provide no precedent to support their position and are seemingly attempting
to seek the same type of windfall that was frowned upon by the District of Columbia Circuit in
Krizek. See Krizek, 111 F.3d at 940 (stating that had the court accepted the government’s argument
that each CPT code was a claim it would have resulted in an “astronomical” amount of penalties).
The Court also could not find any precedent to support Plaintiffs’ argument. Thus, the Court
concludes that if B$NC was seeking reimbursement for the same item(s), but did so through
several submissions, BSNC is only liable for one claim under the FCA. The reason is that the
government would only, at most, have paid for the item(s) once.
There is one caveat to this ruling. If BSNC sought to have the same item(s) paid for more
than once (i.e. double-billing) then the later submission would constitute a false claim. See
Hutchins, 253 F.3d at 184 (stating that the FCA encompasses each claim that could result in
economic loss to the government). On the other hand, and as noted, if BSNC only sought to have
the Govenm-ient pay for the item(s) once, and made multiple submissions seeking the single
payment, then the multiple submissions would constitute one claim.
Cf Schwedt, 1994 WL
118222, at *2.3 (stating that oral requests for payments and readjustments were not separate claims
as they “merely echo claims that [defendant] had already submitted
.
.
.
or intended to and
eventually did submit”). F or example, BSNC argues that it made eoneous duplicate submissions.
BSNC’s Br. at 13-14. If the facts are clear that BSNC made an honest mistake in submitting the
duplicate submission, and was only seeking a single payment, then the duplicate submission would
not be considered an additional claim. If, however, there is evidence to support a finding that
B$NC was actually seeking a double payment for the same item(s), then B$NC’s state of mind in
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submitting the duplicate submission would be a question of fact for the jury. Krizek, 111 F.3d at
939 (“Whether a defendant has made one false claim or many is a fact-bound inquiry that focuses
on the specific conduct of the defendant.”).
As to unprocessable line entries, B$NC argues that because the government would never
have paid for the item(s), the submissions cannot be considered a claim. B $NC ‘s Br. at 10-11.
The Court disagrees. The fact that the Government did not pay for the item (and never would
have) means that the Government did not suffer any damages. BSNC, however, can still be subject
to a monetary penalty under the F CA if the submission otherwise meets the definition of a claim.
Again, in determining whether a submission constitutes a claim, the Court reviews the issue based
on the action of a defendant and does not consider how the government processed the information.
Bornstein, 423 U.S. at 313. In addition, attempts are subject to liability under the FCA. Hutchins,
253 F.3d at 184. Of course, if the unprocessed claims were later resubmitted properly, then (as
discussed above) the two submissions would nevertheless constitute one claim because BSNC was
only seeking a single payment for the same item(s).
Federal Rule of Evidence Rule 404(b)
Defendant also argues that evidence regarding the individual line entries should also be
precluded under Federal Rule of Evidence Rule 404(b). Defendant contends that the individual
line entries are irrelevant to determining whether it violated the FCA and fail to establish BSNC’s
knowledge or intent to violate the FCA.
BSNC’s Br. at 17.
Rule 404(b)(1) provides that
“[e]vidence of a crime, wrong, or other act is not admissible to prove a person’s character in order
to show that on a particular occasion the person acted in accordance with the character.” Rule
404(b)(2), however, provides that such evidence “may be admissible for another purpose, such as
10
proving motive, opportunity, intent, preparation, plan, knowledge, identity, absence of mistake, or
lack of accident.”
As discussed, Plaintiffs may seek actual damages under the FCA, and are therefore entitled
to prove such damages. Consequently, to the extent that Plaintiffs intend to use individual line
entries to establish the amount of money that the government actually paid as a result of BSNC’s
allegedly false claims, the line entries are admissible. The Court, however, will reserve on the
remainder of Defendant’s Rule 404(b) argument until it receives more information from the parties
regarding Defendant’s production (or lack thereof) of the Form 1500s.
ORDER
F or the foregoing reasons, and for good cause shown
IT IS on this 24th day of September, 201$
ORDERED that Defendant Boston Scientific Neurornodulation Corporation’s motion in
lirnine (D.E. 420) is GRANTED in part and DENIED in part; and it is further
ORDERED that the HCFA 1500 forms shall be used to determine the number of false
claims submitted in this matter unless Defendant did not provide sufficient information during
discovery to enable Plaintiffs to calculate the number of HCFA 1500 forms at issue; and it is further
ORDERED that as to whether Defendant failed to provide sufficient information during
discovery to enable Plaintiffs to calculate the number of HCFA 1500 forms at issue, the following
briefing schedule shall apply. The briefs shall address the substantive issue and the potential
remedy if Defendant did in fact fail to provide sufficient information. Plaintiffs shall submit a
brief no longer than fifteen (15) double-spaced pages by October 5, 2018; Defendant shall submit
an opposition brief no longer than fifteen (15) double-spaced pages by October 12, 2018; and
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Plaintiffs shall submit a reply brief (if they so choose) no longer than five (5) double-spaced pages
by October 17, 201$; and it is further
ORDERED that any unprocessed, voided, adjusted, or duplicate submissions by
Defendant that only sought one payment for the same item(s) in the multiple submissions shall be
treated as a single claim for FCA purposes; and it is further
ORDERED that any unprocessed, voided, adjusted, or duplicate submissions by
Defendant that sought more than one payment for the same item(s) in the multiple submissions
shall each be treated as separate claims for FCA purposes.
John Michael Vazqz .S.D.J.
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