UNITED STATES OF AMERICA EX REL. MICHAEL S. SURDOVEL v. DIGIRAD IMAGING SOLUTIONS, INC.
MEMORANDUM. SIGNED BY HONORABLE LAWRENCE F. STENGEL ON 11/25/2013. 11/26/2013 ENTERED AND COPIES E-MAILED.(amas)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
UNITED STATES OF AMERICAL
ex rel. MICHAEL SURDOVEL
DIGIRAD IMAGING SOLUTIONS,
November 25, 2013
Michael Surdovel brings this purported qui tam action on behalf of the United
States based on allegedly fraudulent applications for payment submitted by Digirad
Imaging Solutions to Medicare in violation of the False Claims Act. The government has
moved to dismiss the action pursuant to 31 U.S.C. §3730(c)(2)(A) because relator has
failed to serve the United States with the complaint and disclosure of all material facts
pursuant §3730 (b). For the reasons that follow, I will grant the government’s motion to
Mr. Surdovel, relator, filed this qui tam action against Digirad Imaging Solutions,
his former employer, pursuant to the False Claims Act 31 USC §3730(b). Defendant
specializes in portable medical imaging. Compl. ¶ 3. Relator began working for
defendant as a medical imaging technician in 2001. Id. at ¶ 7. During the course of his
employment, relator alleges that he witnessed defendant make false applications for
payment to Medicare in violation of the False Claims Act. Id. at ¶ 9. Relator complained
to his superiors about these billing practices, which relator alleges led to his wrongful
termination in September 2005. Id. at ¶ 12.
Relator’s counsel filed the complaint under seal on February 2, 2007. While the
complaint makes reference to the false claims submitted by the defendant to the United
States, it does not make a single claim for damages on behalf of the United States.
Rather, its sole count is for retaliatory discharge pursuant to §3730(h). During oral
argument, counsel confirmed that this is a claim for wrongful termination only.
Despite an allegation in the complaint to the contrary, relator’s counsel admits that
he never served the complaint and disclosure of material facts on the United States
Attorney for the Eastern District of Pennsylvania as required by §3730(b). Although he
claims he served the materials on Attorney General John Ashcroft, he did not send the
materials by certified mail return receipt requested, and has no proof that service was
actually made. As a result, the United States had no notice of the action.
Two years later in August 2009, relator’s counsel called the United States
Attorney’s office to determine the status of the complaint. At this time, AUSA
Hutchinson advised counsel that he had not served the required documents on the United
States. She instructed counsel to perfect service or dismiss the action and pursue a claim
in state court for wrongful termination. The Assistant U.S. Attorney confirmed the
telephone conversation by letter dated August 6, 2009. Mot. to dismiss, doc. no. 3 ex. A.
Nonetheless, counsel did not serve the documents.
In 2010, counsel sent a letter to the United States Attorney’s office again inquiring
about the status of the action. AUSA Hutchinson intercepted the letter, called counsel
and informed him that she had not received a copy of the complaint and disclosure which
she requested the prior year. Despite this phone call, counsel did not serve the complaint
An additional two years elapsed before counsel thought to take any action on this
case. On March 19, 2012, relator filed a motion to lift seal.1 This was the first activity
on the court’s docket in the five year history of the complaint. Counsel never served a
copy of the motion on the government. AUSA Hutchinson was unaware of the motion
until I contacted her to request a response. At that time, AUSA Hutchinson informed me
that counsel had not served the complaint and disclosure. Indeed, counsel still had not
perfected service as of the date of oral argument.
In lieu of responding to the motion to lift seal, the government moved to dismiss
pursuant to §3730(c)(2)(A). Relator’s counsel responded on August 28, 2012, but failed
to timely serve the government. I scheduled oral argument as required by the False
Claims Act. In my order, I instructed counsel to be prepared to discuss the applicable
standard of care to which I now turn.
As I am dismissing this case, the policies supporting the qui tam seal provisions are no longer applicable. Having
heard no opposition from the government, I will grant the motion to lift seal.
Standard of Review
The government filed its motion to dismiss pursuant to §3730(c)(2)(A). This
section defines the rights of the parties to a qui tam action: the government, the relator
and the defendant. Pursuant to this section, the United States may dismiss the action if
the relator is given notice and an opportunity to be heard. Thus, the statute directs the
district court to schedule a hearing when the government moves to dismiss. Three Courts
of Appeals have addressed what implications the hearing has on the standard of review
for a §3730(c)(2)(A) motion. Although the Third Circuit has not weighed in, both parties
agree that the two tests adopted by the other circuits are extremely deferential to the
The District of Columbia Circuit has held that the government has the unfettered
right to dismiss a qui tam action. Swift v. U.S., 318 F.3d 250, 253 (D.C. Cir. 2003).
According to Swift, a qui tam action is truly the government’s action, and the government
has absolute discretion to decide what suits go forward in the name of the United States.
Id. at 252. In the view of the D.C. Circuit, the hearing merely gives the relator an
opportunity to convince the government not to dismiss the case. Id. at 253. It does not
permit the judge to consider the merits of the government’s motion. Id.
In contrast, the Ninth and Tenth Circuits have found that the hearing permits
limited review of the government’s motion. Ridenour v. Kaiser-Hill Co., L.L.C., 397
F.3d 925, 940 (10th Cir. 2005); U.S. ex rel Sequoia Orange Co. v. Baird Neece Packing
Corp., 151 F.3d 1139, 1147 (9th Cir 1998). Known as the Sequoia test, the government
must first identify a valid government purpose. 151 F.3d at 1145. Next, the government
must show that dismissal is rationally related to the accomplishment of that purpose. Id.
As explained by the Ninth Circuit¸ this standard is nonetheless extremely deferential to
the government. Id. at 1146. The government need only show that its decision to dismiss
the case is neither arbitrary nor irrational. Id. (citing United States v. Redondo–Lemos,
955 F.2d 1296, 1298–99 (9th Cir.1992)).
I find that the government has satisfied both standards, so I will not predict which
standard the Third Circuit would adopt. At the conclusion of oral argument, relator’s
counsel did not persuade the government to withdraw its motion to dismiss; therefore,
dismissal is appropriate under Swift. The government also met its burden under Sequoia
by convincing me that dismissal was rationally related to the government’s interest in
investigating qui tam claims. Since Sequoia entails further analysis, I will discuss its
application to this case.
Under the False Claims Act, persons who submit fraudulent applications for
payment to the United States are liable to the government in a civil action for treble
damages. 31 U.S.C. § 3729(a)(1). The Qui Tam provisions of the act empowers private
individuals to file lawsuits on behalf of the United States seeking damages sustained by
the government for the payment of false claims. § 3730(b). To protect qui tam plaintiffs,
the statute authorizes retaliatory termination claims for “employees who assist the
government in the investigation and prosecution of violations of the False Claims Act.”
§3730(h); Hutchins v. Wilentz, Goldman & Spitzer, 253 F.3d 176, 185-6 (3d Cir. 2001)
(citing Neal v. Honeywell, Inc., 33 F.3d 860, 861 (7th Cir. 1994)).
Relators must file their complaints under seal and serve the government with a
copy of the complaint and disclosure of all material evidence. § 3730(b)(2). Relator
must serve the complaint and disclosure pursuant to Fed. R. Civ. P. 4(i). Id. The
complaint remains under seal for 60 days, and for good cause, the government may move
to extend the time the complaint remains under seal. §3730(b)(2)-(3). The court cannot
lift the seal until the government investigates the claims and either decides to take over
the action or notifies the court that it declines to intervene in the action. §3730 (b)(4). In
the alternative, the government may move to dismiss the complaint §3730(c)(2)(A).
The United States points to its need to investigate qui tam claims to satisfy the
government purpose prong of the Sequoia test. In 1986, Congress amended the False
Claims Act with the intent of encouraging more qui tam actions. U.S. ex rel. Pilon v.
Martin Marietta Corp., 60 F.3d 995, 999 (2d Cir. 1995) (discussing the legislative
history). However, the Department of Justice raised concerns that many of the qui tam
actions would overlap ongoing federal investigations and potentially tip-off defendants of
criminal charges. Id. In response, Congress added the sealing and service prerequisites.
Id. The purpose of the procedures is to afford the government with an opportunity to
investigate a claim in order to determine if the government was already pursuing the
claim or wished to take over the qui tam action. Id. Thus, serving the complaint and
disclosure on the government is essential to the proper functioning of the False Claims
Here, relator’s counsel’s egregious procedural errors completely frustrated the
government’s ability to investigate the relator’s claims. Over the past six years, AUSA
Hutchinson has repeatedly advised counsel that she did not have a copy of his complaint
and disclosure. Nonetheless, counsel has been unable to complete this very basic task
making investigation impossible. Having been given ample opportunity to conform with
the mandates of the statute, there is no reason to believe that counsel will ever complete
service. As this case cannot move forward until relator delivers the complaint and
disclosure to the government, the only rational way to protect the government’s interest is
to grant the motion to dismiss.
Dismissing this action for failing to comply with the procedural requirements is in
accord with the vast majority of courts to address the issue. U.S. ex rel. Summers v. LHC
Grp., Inc., 623 F.3d 287, 296 (6th Cir. 2010) (“[V]iolations of the procedural
requirements imposed on qui tam plaintiffs under the False Claims Act preclude such
plaintiffs from asserting qui tam status.”); U.S. ex rel. Pilon, 60 F.3d at 1000 (dismissing
complaint with prejudice because “failure to comply with the filing and service
provisions [of § 3730(b)(2) ] irreversibly frustrates the congressional goals”); U.S. ex rel.
Mailly v. Healthsouth Holdings, Inc., 2010 WL 149830 (D.N.J. Jan. 15, 2010)
(dismissing qui tam action for failing to file complaint in camera); Burns v. Lavender Hill
Herb Farm, Inc., 2002 WL 31513418 (E.D. Pa. Oct. 30, 2002) (dismissing complaint for
failing to file in camera); Friedman v. F.D.I.C., 1995 WL 608462 (E.D. La. Oct. 16,
1995) (finding the in camera filing requirement is jurisdictional); Erickson ex rel. U.S. v.
Am. Inst. of Biological Sciences, 716 F. Supp. 908, 911 (E.D. Va. 1989) (citing United
States ex rel. Texas Portland Cement Co. v. McCord, 233 U.S. 157 (1913)) (“A party
pursuing a statutory remedy must comply with all the procedures the statute mandates.”)
contra U.S. ex rel. Lujan v. Hughes Aircraft Co., 67 F.3d 242, 247 (9th Cir. 1995)
(holding that before dismissing qui tam complaint for violation of the seal requirements, a
district court should consider 1.) the actual harm to the government, 2.) nature of the
violation, 3.) and bad faith or willfulness of relator); United States v. Fiske, 968 F. Supp.
1347, 1352 (E.D. Ark. 1997) (holding that failure to file under seal is not jurisdictional).
Counsel correctly notes that his case is distinguishable. In the above cited
authority, the relators did not file their suit in camera. Here, relator filed his suit under
seal, but neglected to serve the United States with the complaint and disclosure. This
distinction is unavailing. The authority supports the proposition that ignoring the
procedural dictates of the statute frustrates the valid government purpose of investigating
qui tam claims and is grounds for dismissal. In this case, failure to provide notice robbed
the government of its opportunity to investigate the claim. Thus, these cases are
Further justifying dismissal is that counsel’s failure to serve the government has
caused the intractable delays in this case. As noted previously, the seal cannot be lifted
until the government investigates the claim and decides how to proceed. Since counsel
never served the government, the government could not make this determination which
would allow the complaint to move forward. Since AUSA Hutchinson advised counsel
on multiple occasions to perfect service or dismiss the action, she understandably
assumed that counsel had dismissed the action when the complaint and disclosure were
not forthcoming. Indeed, AUSA Hutchinson was surprised to learn that the litigation was
still pending when counsel filed the motion to lift seal. This action stalled because
counsel kept the United States in the dark. 2
Counsel blames his shortcomings on the fact that he was not able to access the
case on the court’s electronic docket, but I am not at all persuaded that his inability to
view the case on ECF should absolve his inaction. First of all, any attorney who files a
complaint under seal should know that the case will not be available on the court’s
electronic docket and should be prepared to handle accordingly. However, if he was truly
confused as to why the government was not acting, counsel could have filed a motion to
lift seal after the expiration of the original 60 day period. I cannot comprehend why he
waited five years to file such a motion. Nonetheless, his excuse does not explain why
counsel overlooked the statutory procedures especially when AUSA Hutchinson verbally
advised him twice to perfect service. Counsel should not need to check ECF when the
Assistant United States Attorney explains why the government has not responded.
In the alternative, counsel argues that there is no precedent for the government to
dismiss a case seeking damages for retaliatory termination. While this may be true,
counsel chose to file this case as a qui tam action and was required to abide by the
dictates of the statute. U.S. ex rel. Texas Portland Cement Co. v. McCord, 233 U.S. 157,
Counsel’s extreme failures to prosecute this case also supports dismissal. I may dismiss a case sua sponte for
failure to prosecute. Link v. Wabash Railroad Co., 370 U.S. 626, 630-1 (1962) (“…the authority of the court to
dismiss sua sponte for lack of prosecution has generally been considered an ‘inherent power,’ governed not by rule
or statute but by the control necessarily vested in courts to manage their own affairs so as to achieve the orderly and
expeditious disposition of cases.”). Since dismissal with prejudice is an extreme sanction, I must first weigh the
following factors.: “(1) the extent of the party's personal responsibility; (2) the prejudice to the adversary caused by
the failure to meet scheduling orders and respond to discovery; (3) a history of dilatoriness; (4) whether the conduct
of the party or the attorney was willful or in bad faith; (5) the effectiveness of sanctions other than dismissal, which
entails an analysis of alternative sanctions; and (6) the meritoriousness of the claim or defense.” Parks v. IngersollRand Co., 380 F. App'x 190, 194 (3d Cir. 2010)(citing Poulis v. State Farm Fire & Cas. Co., 747 F.2d 863, 868 (3d
Cir.1984)). Since the Sequoia test supports dismissal, I will not weigh the Poulis factors.
162 (1914) (“The statute thus creates a new liability and gives a special remedy for it, and
upon well-settled principles the limitations upon such liability become a part of the right
conferred, and compliance with them is made essential to the assertion and benefit of the
liability itself.”). I am not convinced that counsel’s mistake in filing a retaliation claim as
a qui tam action excuses his ignorance of the service provision.
The United States responds that filing a retaliation claim under seal turns the False
Claims Act on it head. I agree. The policy supporting in camera filing is wholly absent
when the plaintiff is not seeking any damages on behalf of the United States. Permitting
relator to spring this claim against defendant after counsel allowed the suit to linger under
seal for five years would abuse the sealing provisions. The defendant terminated Mr.
Surdovel eight years ago and is completely unaware of the pendency of this action. Thus,
the only purpose the seal will have achieved is to prejudice the defendant. This is not
why congress mandated in camera filing, and counsel may not seek shelter in the seal
provision to take refuge from his own inaction.
Counsel’s alternative defense exposes yet another error. He likely should have
filed this action as stand-alone retaliation claim. 3 A plaintiff does not need to file a qui
tam action in order to bring a §3730(h) retaliation claim against his former employer.
Hutchins, 253 F.3d at 188. A complaint solely alleging wrongful discharge does not need
to be filed under seal. Pilon, 60 F.3d at 1000; Odoms v. YWCA of Bucks Cnty, No. 12cv-7146, 2013 WL 321335, *2 (E.D. Pa. June 25, 2013). Therefore, counsel could have
To make out a claim for retaliation, a plaintiff must show that he “(1) engaged in ‘protected conduct,’ (i.e., acts
done in furtherance of an action under §3730) and (2) that he was discriminated against because of his ‘protected
conduct.’” Hutchins, 253 F.3d at 186 (citing United States ex rel. Yesudian v. Howard Univ., 153 F.3d 731, 736
(D.C. Cir. 1998)).
avoided the procedural hurdles which he found so befuddling by filing a retaliation
lawsuit in the proper forum.
The United States has established that there is a valid government purpose to
investigate qui tam claims. Counsel’s failure to comply with the procedural requirements
has completely frustrated this purpose. After remaining dormant under seal for six years,
the only rational remedy to protect the government’s interest is to dismiss the case with
prejudice. While counsel has offered a litany of defenses and excuses, his inattention to
this case and disregard for the rules precipitated this drastic result.
An appropriate order follows.
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?