Michaels et al v. Agape Senior Community Inc et al
ORDER Resolving Two Interrelated Issues and Certification for Interlocutory Appeal Pursuant to 28 U.S.C. § 1292(b) denying 262 MOTION for Damages Computation Disclosure; denying AGAPE's Motion to Enforce Se ttlement, and requesting the parties seek permission from the Fourth Circuit Court of Appeals to review the issues of the the Government's right to reject a settlement in a qui tam action to which it has not intervened and the Plaintiff-Relators' use of statistical sampling to prove liability and damages within ten days from the date of this Order. Signed by Honorable Joseph F. Anderson, Jr. on 06/25/2015.(bshr, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
ROCK HILL DIVISION
United States of America ex rel., Brianna
Michaels and Amy Whitesides,
Agape Senior Community, Inc.; Agape
Senior Primary Care, Inc.; Agape Senior
Services, Inc.; Agape Senior, LLC; Agape
Management Services, Inc.; Agape
Community Hospice, Inc.; Agape Nursing
and Rehabilitation Center, Inc. d/b/a Agape
Rehabilitation of Rock Hill a/k/a Agape
Senior Post Acute Care Center – Rock Hill
a/k/a Ebenezer Senior Services, LLC; Agape
Senior Foundation, Inc.; Agape Community
Hospice of Anderson, Inc.; Agape Hospice
of the Piedmont, Inc.; Agape Community
Hospice of the Grand Strand, Inc.; Agape
Community Hospice of the Pee Dee, Inc.;
Agape Community Hospice of the Upstate,
Inc.; Agape Hospice House of Horry
County, Inc.; Agape Hospice House of
Laurens, LLC; Agape Hospice House of the
Low Country, Inc.; Agape Hospice House
of the Piedmont, Inc.; Agape Rehabilitation
of Conway, Inc.; Agape Senior Services
Foundation, Inc.; Agape Therapy, Inc.;
Agape Hospice; Hospice Piedmont; Hospice
Rock Hill; and Carolinas Community
C/A No. 0:12-3466-JFA
ORDER RESOLVING TWO
) INTERRELATED ISSUES AND
) PURSUANT TO 28 U.S.C. § 1292(b)
On December 7, 2012, this qui tam action was initiated by Brianna Michaels and Amy
Whitesides (the “Plaintiff-Relators”) on behalf of themselves and the United States of
America (the “Government”) claiming damages and other relief under the civil False Claims
Act, 31 U.S.C. § 3729, et seq., the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b, et seq., and
the Health Care Fraud Statute, 18 U.S.C. § 1347. The Government declined to intervene as
a plaintiff in this action on March 5, 2013.
The Plaintiff-Relators were formerly employed at one or more of the institutions
operated by the Defendants. The Defendants (collectively referred to herein as “AGAPE”)
consist of a network of twenty-four nursing homes located throughout South Carolina, each
containing some form of “AGAPE” in their names. The Plaintiff-Relators allege that
AGAPE orchestrated a widespread fraudulent scheme of submitting false claims to the
federal healthcare programs of Medicare, Medicaid, and Tricare, seeking reimbursement for
nursing home-related services.
At the risk of oversimplification, it can be stated that the claims asserted in this action
center primarily on two types of reimbursements sought by AGAPE from the federal
healthcare programs: payments related to hospice care, and payments related to what are
known as “general inpatient services.” As with virtually ever aspect of this case, the
Plaintiff-Relators and AGAPE disagree on the total number of patients involved and the total
number of claims submitted by those patients. Regardless of who is correct on this issue, the
total number of claims involved in the trial will be staggering. AGAPE contends that there
were 19,820 patients admitted to AGAPE’s facilities during the applicable time period for
whom approximately 53,280 claims were submitted. Plaintiff-Relators contend that the
patient population is only 10,166 patients, who filed a total of 61,643 claims. In any event,
Plaintiff-Relators’ counsel represents to the Court that they have retained two experts, each
of whom receives $400 per hour for file review. These experts estimate they spend between
four and nine hours reviewing each patient’s chart. Thus, the review of a single patient’s
services would cost between $1,600 and $3,600 dollars. Using the conservative figure
submitted by Plaintiff-Relators (10,166 patients), this means that the total outlay for expert
file review (not including depositions, trial testimony, and the like) is between $16.2 million
and $36.5 million.1
During discovery, it became necessary for the Court to rule on a pivotal issue
regarding damages in the case. The issue involved the question of whether Plaintiff-Relators
would be able to prove damages by using a statistical sampling method. This particular
method would involve the careful examination of a specified percentage of randomly
selected claims. If it could be proven that a certain percentage of those claims were in fact
fraudulent, then Plaintiff-Relators would project that percentage on the total universe of
claims submitted by AGAPE to the Government. This issue arose during discovery when
the parties became engaged in a controversy regarding the designation of expert witnesses
and the methodology to be used by those witnesses. It appeared to both the Court and the
parties that a ruling on this critical threshold issue would significantly impact the parties’
preparation for trial. Therefore, the Court received briefing on the issue, heard argument
The precise figures are: at $1,600 per patient = $16,265,600; at $3,600 per patient = $36,597,600.
thereon, and concluded that it would not allow the Plaintiff-Relators to use statistical
sampling in determining damages.
Shortly thereafter, the Court suggested that the parties consider conducting a
“bellwether” trial as to 100 of the allegedly false claims. In a bellwether trial, a sample of
cases large enough to yield reliable results is tried to a jury, after which the remainder of the
case is tried to a separate jury. The outcome of the bellwether trial can often be beneficial
for litigants who desire to settle such claims by providing information on the value of the
remainder of the case as reflected by the jury verdict in the bellwether trial.
Use of a bellwether trial is particularly appropriate in this case because unlike large
class actions, which most often involve a significant degree of overlap regarding common
factual issues, each and every claim at issue in this case is fact-dependent and wholly
unrelated to each and every other claim. For this reason, the representative sample of the
claims associated with a smaller number of patients may easily be selected for a separate trial
because those claims, and the claims asserted in the remainder of the case, are independent
of each other.
Both parties agreed to this approach, and claims relating to 95 AGAPE patients were
identified for the bellwether trial. Plaintiff-Relators later voluntarily reduced this number to
38 patients. The bellwether jury trial was scheduled to begin May 5, 2015.
On November 25, 2014, the parties and the Government engaged in mediation efforts.
In early January 2015, shortly before all expert reports were due, the parties again engaged
in mediation, this time before United States Magistrate Judge Mary Gordon Baker. In the
first mediation session, both the Government and the Plaintiff-Relators were allowed to
participate. In the second mediation, the Government was not invited and did not participate.
In mid-January, the parties informed the Court that a settlement had been reached as
to the entire case, with AGAPE paying the sum of $2.5 million in full settlement of all
claims. The Court thereupon stayed all deadlines and cancelled the scheduled trial.
The Government promptly signaled its intention to object to the settlement, relying
upon a statute, 31 U.S.C. § 3730(b)(1), which on its face gives the United States Attorney
General the right to prevent a settlement even in a case where the Government has declined
After the Government objected, the Court conducted several status conferences in an
effort to see if there could be some type of amicable resolution to the matter. When these
conferences proved unsuccessful, AGAPE moved to enforce the settlement. The Court heard
extensive oral argument on AGAPE’s motion (ECF No. 263) on June 16, 2015. The motion
squarely presented the question of whether the Attorney General has an absolute,
unreviewable veto over the settlement of False Claims Act cases for which the Government
has declined to intervene.
During the aforementioned status conferences and during the debate on the motion to
enforce the settlement, it became clear that the basis for the objection by the Government was
its belief that the total potential damages to the Government in this case would be around $25
million. The Government posits that the proposed settlement—representing 10 percent of
what the Government believes is the potential recovery at trial—is insufficient. The
Government arrived at its potential recovery figure by using an “error rate” in the “20–60%
range” derived from an expert review of what the Government refers to as “cherry picked”
claims. While the Government’s methodology for evaluating this case is not altogether clear
to this Court, suffice it to say that the Government has used some form of statistical sampling
extrapolated to the universe of potential claims in its damages calculation.
The Court is thus faced with a unique dilemma: The Government, claiming an
unreviewable veto right over the tentative settlement in this case, objects to a settlement in
a case to which it is not a party, using as a basis of its objection some form of statistical
sampling that this Court has rejected for use at the trial of the case. It thus appears that these
two issues—the question of veto authority of the Government, coupled with this Court’s
rejection of the statistical sampling model—should be certified for interlocutory appeal
before the parties embark upon what could be a trial stretching as long as one year or more.
For the foregoing reasons, the Court will set out in this Order its rationale for denying
AGAPE’s motion to enforce the settlement, thus recognizing the Government’s unreviewable
veto authority, and disallowing statistical sampling as a method of proving liability or
The Government’s Rejection of the Proposed Settlement
The False Claims Act, 31 U.S.C. § 3729 et seq. (“FCA”), provides that “[An FCA qui
tam action] may be dismissed only if the court and the Attorney General give written consent
to the dismissal and their reasons for consenting.” (emphasis added). The unambiguous
language of § 3730(b)(1) thus makes the consent of the Attorney General a prerequisite to
the dismissal of an FCA action pursuant to a settlement between a relator and a defendant.
The statute provides no limitation on the Attorney General’s authority, and no right of this
Court to review the Attorney General’s objection for reasonableness. The Supreme Court
has stated time and time again that “courts must presume that a legislature says in a statute
what it means and means in a statute what it says there.” Dept. of Defense v. FLRA, 510 U.S.
487, 503 (1994).
The only circuit court that has held that the Government’s consent is not required after
the Government declines to intervene in a case is the Ninth Circuit in United States ex rel.
Killingsworth v. Northrup Corp., 25 F.3d 715 (9th Cir. 1994). In Killingsworth, the Ninth
Circuit held that the Government has unreviewable veto authority of a settlement only during
the 60-day period following the filing of a qui tam action, during which the Government has
the opportunity to elect whether to intervene. After that, according to the Ninth Circuit, the
Government’s veto over a qui tam action in which it has not intervened is subject to a
reasonableness review by the court in which the action is pending. Since that decision, every
circuit court to address the issue has expressly rejected Killingsworth.
In United States ex rel Searcy v. Philips Electronics N. Am. Corp., 117 F.3d 154, 159
(5th Cir. 1997), the Fifth Circuit found that “[t]he statutory language relied on by the
government is as unambiguous as one can expect,” and noted that “[u]nlike the Killingsworth
court, we can find nothing in § 3730 to negate the plain import of this language.” Id.
Likewise, in United States v. Health Possibilities, P.S.C., 207 F.3d 335,339 (6th Cir. 2000),
the Sixth Circuit agreed with the Searcy court and held that a qui tam action cannot be settled
without the consent of the Government, even if the Government has declined to intervene.
The Sixth Circuit noted that “[i]f Congress wanted to limit the consent requirement to the
period before the United States makes its initial intervention decision, we presume that it
knew the words to do so.” Id. The court further stated:
“[t]here is absolutely no statutory authority for the proposition that simply
because the government decides not to expend the resources to proceed with
an action itself, it thereby authorizes the relator to settle the government’s
claims in whatever manner he wishes. Indeed, such a construction would only
force the government to unnecessarily intervene in qui tam cases and thereby
frustrate the efficacy of the qui tam framework.”
Id. at 343 n.6.
The state of the law on this issue was concisely summarized in a recent district court
decision, which also sided with the Fifth and Sixth Circuits. United States ex rel. Landis v.
Tailwind Sports Corp., ___ F. Supp. 3d ___, No. 1:10-CV-00976 (CRC), 2015 WL 1623282
(D.D.C. Apr. 9, 2015). In Tailwind, the court declined to enforce a settlement over the
Government’s objection. In doing so, the court stated “[w]hile it might seem unfair for the
Government to be able to force a relator to continue to litigate non-intervened claims that he
would prefer to settle, the broader purposes of the FCA are served, at least to some extent,
by a plain reading of section 3730’s consent provision.” Id. at *2. The court went on to note
that, “Killingsworth has not fared well in the intervening years,” that “[i]ts conclusion and
reasoning have been expressly rejected by both the Fifth and Sixth Circuits,” and that, “while
neither the Supreme Court nor the D.C. Circuit has tackled the question head-on, both have
indicated that the Government’s consent is required for the voluntary dismissal of
non-intervened claims.” Id. (citing United States ex rel. Eisenstein v. City of New York, 556
U.S. 928, 932 (2009), and Hoyte v. Am. Nat’l Red Cross, 518 F.3d 61, 63 n.2 (D.C. Cir.
The qui tam Plaintiff-Relators and AGAPE, former adversaries, have now joined
together to urge the Court to accept the rationale employed in Killingsworth. They argue that
because the Government declined to intervene in this case, any objection lodged by the
Attorney General to the proposed settlement must be reviewed for reasonableness by this
Court. And, according to these two former adversaries, the Government’s position opposing
the settlement is patently unreasonable, especially in light of the forecast by the PlaintiffRelators that expert witness fees necessary to develop this case are between $16.2 and $36.5
million2 for a case in which the potential recovery, according to the Government, is around
$25 million. Furthermore, the parties point out, that the Government has not offered to come
forward to underwrite the cost of these expert witnesses in the forthcoming trial.
Because the statute under consideration is plain on its face and contains no limitation
on the Attorney General’s authority to object to a settlement in a qui tam action, even one in
which the Government has not joined, the Court is constrained to deny the motion to enforce
the settlement. In so doing, the Court adopts the rationale employed by the Fifth and Sixth
Circuits in full and rejects the analysis provided in Killingsworth.
As noted previously, the figures cited involve pretrial file review only; they do not include time for
depositions and trial testimony.
Having made this determination, this Court’s inquiry is at an end. It bears mention,
however, that if this Court did have the authority to review an objection by the Attorney
General for reasonableness in a case of this nature, a compelling case could be made here
that the Government’s position is not, in fact, reasonable.
As noted previously, this action has been pending since 2012. The primary attorneys
for the qui tam Plaintiff-Relators, Terry E. Richardson, Jr., and J. Preston Strom, Jr., are both
seasoned federal litigators, each having extensive experience practicing before this Court
(more than 40 years for Mr. Richardson and more than 30 years for Mr. Strom, during which
Mr. Strom served for several years as the United States Attorney for the District of South
Carolina). They both have handled numerous class actions involving highly complex issues
and national implications. Their firms are large enough to be equipped to handle the
extensive discovery and myriad administrative matters presented by a case of this nature.
To use the vernacular, they have both been around the litigation table long enough to “know
when to hold ‘em, [and] know when to fold ‘em.” For these reasons, the Court should not
cavalierly reject their wise counsel regarding their valuation of this case.
Moreover, as noted above, this case presents between 53,000 and 61,000 individual
non-related claims, each involving a fact intensive examination of the medical charts of
between 10,000 and 20,000 nursing home patients. According to AGAPE, these files contain
opinions of a treating physician and an in-house staff physician attesting to the medical need
for the claim submitted to the Government in this case. AGAPE indicates that it may call as
many as 65 physicians to testify at trial. For this reason, it will be necessary for the Plaintiff10
Relators to counter this expert physician testimony with an expert of their own, and it has
been reported to this Court that the expert retained has estimated that it would require up to
nine hours of review of each individual patient’s file, at the rate of $400 per hour, to
adequately prepare for all of the claims in this case. If this is true, the Plaintiff-Relators
could be looking at an expenditure of between $16.2 million and $36.5 million in pretrial
preparation alone for a case that the Government values at $25 million. The additional time
required for expert depositions and trial testimony would easily push the expenses of the trial
above the Government’s assessment of the value of this case. And, as noted herein, at oral
argument, the Government was steadfast that it should not be required to underwrite any of
the costs of going forward with the trial that it demands take place.
AGAPE points to another factor which, although of less significance, bears mention
Although the Government has not intervened in this case, it has been an active
participant in the litigation from the beginning. On March 12, 2013, shortly after the
Government declined to intervene in this action, a second case—Susan Rush, et al. v. Agape
Senior, LLC, et al., [3:13-666-JFA (D.S.C.)]—was filed in this District asserting many of the
same claims asserted in this action. In Rush, the Government requested and received several
extensions of time within which to investigate the case for the purposes of deciding whether
to intervene. During this period, the Government interviewed numerous employees of
AGAPE, obtained thousands of documents pursuant to Civil Investigative Demands, and
opened a criminal investigation to run parallel to the civil investigation. In the Rush case,
the Government requested permission to unseal the indictment to reveal the existence of the
second qui tam action to Plaintiff-Relators Michaels and Whitesides in this case. That
request by the Government prompted a barrage of motions by the parties in the first and
second cases, each seeking to have the other dismissed on “first to file” and “public
After the Court resolved those disputes by dismissing the Rush case, the Government
remained actively involved in this case, attending court hearings, taking positions on various
procedural matters, filing briefs on substantive issues to be decided by this Court, attending
depositions, and requesting extensions of time.
AGAPE points out that even with the Government’s extensive involvement in this
case as outlined above, when pressed to be more specific as to how the Attorney General
arrived at the potential verdict of $25 million, the Government has declined to provide its
calculations, suggesting that it is not a party to this case and is under no obligation to respond
to discovery requests. The Court has reluctantly agreed with the Government that it should
not be required to respond to AGAPE’s motion for a precise calculation of damages, but it
should be noted that, as indicated above, the Government has admitted that statistical
sampling of the entire universe of claims played a major part in its calculation of the value
of this case.
Plaintiff-Relators’ Use of Statistical Sampling in Proving Liability and Damages
As noted previously, this issue—which in most cases would be a trial-related issue
raised shortly before or during trial—presented itself to this Court when the parties became
embroiled in a controversy regarding the opinions given by their respective expert witnesses.
Because the question presented was a pure question of law, not dependent upon subsequent
discovery, the Court proceeded to receive briefing and heard argument on the use of
statistical sampling. The Court rejected the use of this damages model and held that the
Plaintiff-Relators would be required to prove each and every claim based upon the evidence
relating to that particular claim. The Court’s rationale is as follows.
The question whether to allow the Plaintiff-Relators to prove damages using statistical
sampling that has been recognized by some courts is by far the most difficult one presented
in this case. After carefully canvassing the decisions on each side of the issue, and giving
careful consideration to the nature of the claims asserted here, the Court has ultimately
determined that statistical sampling should not be allowed.
At the outset, it should be noted that this case is not one where the evidence has
dissipated, thus rendering direct proof of damages impossible. Indeed, this Court recently
handled a totally unrelated qui tam action where statistical sampling represented the only
way the plaintiff-relators could prove damages. In that case, the allegations were that a
company employed to move the household belongings of army personnel had submitted
fraudulent claims to the government by artificially bumping the weight of each shipment so
as to fraudulently increase the amount charged for the shipment. Two employees of the
defendant came forward to report the alleged weight bumping, and a quick investigation
revealed some discrepancies with shipments then in process. The problem in that case,
however, was that for the vast majority of the claims, the shipments had been completed and
the belongings unpacked, thus rendering it impossible to determine if weight bumping had
Moreover, the defendant had also packed, shipped, and stored on a long-term basis,
the household belongings of military personnel overseas. This provided the parties with the
opportunity to sample those long-term storage units and, assuming that the sampling was
supported by appropriate expert testimony, extrapolating the percentage of weight bumping
discovered in the sample to the universe of claims filed by the defendant.
That case settled before the Court was given the opportunity to rule on the statistical
sampling question, but it suffices for an illustration of why statistical sampling is sometimes
the only way for a qui tam plaintiff-relator to prove damages. To disallow statistical
sampling in cases of that nature would allow widespread fraud to go unpunished.
By contrast, nothing has been destroyed or dissipated in this case. The patients’
medical charts are all intact and available for review by either party.
In United States v. Friedman, No. 86-0610-MA, 1993 U.S. Dist. LEXIS 21496 (D.
Mass. July 23, 1993), the court declined to allow statistical sampling “based on the existence
at trial of discrete claims that may be analyzed, discussed, and subjected to crossexamination.” This Court agrees with the analysis provided by the District Court in
AGAPE has cited numerous cases where a court refused to allow statistical sampling
and extrapolation to prove damages or liability in an FCA action. See United States ex rel.
Crews v. NCS Healthcare of Illinois, Inc., 460 F.3d 853, 857 (7th Cir. 2006) (rejecting
relator’s attempt to establish FCA liability based upon percentages rather than proof of actual
false claims); United States ex rel. El-Amin v. George Washington Univ., 533 F. Supp. 2d 12,
31 n.9 (D.D.C. 2008) (requiring the relators to set forth specific evidence for each individual
claim); United States ex rel. Hockett v. Columbia/HCA Healthcare Corp., 498 F. Supp. 2d
25, 66 (D.D.C. 2007) (court held that it is “imperative for [R]elator[s] to produce real
evidence to support [their] contention[s]. . . .”); United States v. Medco Physicians
Unlimited, No. 98-C-1622, 2000 U.S. Dist. LEXIS 5843, at *23 (N.D. Ill. Mar. 15, 2000)
(declining to allow statistical sampling and explaining that the parties provided “no case law
or other authority to support such a request”); United States ex rel. Trim v. McKean, 31 F.
Supp. 2d 1308, 1314 (W.D. Okla. 1998) (declining to allow a statistical sample “to find a
percentage of false claims from all claims submitted by [defendant] . . . .”).
In contrast, the Plaintiff-Relators and the Government provided a number of cases
where a court permitted statistical sampling and extrapolation to prove damages (and
sometimes liability) in an FCA action.3 United States v. Rogan, 517 F.3d 449, 453 (7th Cir.
Other cases exist outside the realm of qui tam actions. The Government cites to a number of cases to
support statistical extrapolation for the recoupment of Medicare overpayments; however, the Court is
unpersuaded by the cited recoupment cases because each case involved a Government audit that established
the amount of overpayments. Illinois Physicians Union v. Miller, 675 F.2d 151, 152 (7th Cir. 1982); Webb
v. Shalala, 49 F. Supp. 2d 1114, 1125 (W.D. Ark. 1999).
Health Care Financing Administration Ruling 86-1 “provides for the use of statistical sampling to
project overpayments when claims are voluminous and reflect a pattern of erroneous billing or overutilization and when a case-by-case review is not administratively feasible.” Webb, 49 F. Supp. 2d at 1120
(citing HCFA Ruling 86-1). When a provider receives Medicare reimbursements, the provider agrees to
allow the government to audit these payments in order to “identify and correct Medicare improper payments
through the efficient detection and collection of overpayments made on claims of health care services
provided to Medicare beneficiaries.” Recovery Audit Program, CENTERS FOR MEDICARE & MEDICAID
SERVICES, http://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFSCompliance-Programs/Recovery-Audit-Program/ (last visited June 23, 2015).
2008) (appellate court rejected the argument that the district court had to address each of the
1,812 claims at issue and held that “[s]tatistical analysis should suffice;” however, all 1,812
claims were objectively false); United States ex rel. Ruckh v. Genoa Healthcare, LLC, No.
8:11-CV-1303-T-23TBM, 2015 WL 1926417, at *3 (M.D. Fla. Apr. 28, 2015) (district court
expressed an inclination to allowing statistical sampling and extrapolation by rejecting
Friedman and explaining that Friedman does not stand for the proposition that statistical
sampling cannot be used in large-scale qui tam cases); United States ex rel. Martin v. Life
Care Ctrs. of Am., Inc., Nos. 1:08-cv-251, 1:12-cv-64, 2014 U.S. Dist. LEXIS 142660 (E.D.
Tenn. Sept. 29, 2014) (same); United States v. Fadul, No. CIV.A.DKA 11-0385,
2013 WL 781614, at *2 (D. Md., Feb., 28, 2013) (finding the extrapolation method
acceptable for Medicare and Medicaid claims under common law theory of payment by
mistake); United States v. Chen, No. 2:04-cv-00859, 2009 WL 1683142 (D. Nev. 2009) (jury
found physician liable under the FCA for submitting 3,544 false claims, but parties only
analyzed 37 claims at trial after the physician conceded that the referral request and services
provided were the same for each of these claims); United States ex rel. Loughren v.
UnumProvident Corp., 604 F. Supp. 2d 259, 263 (D. Mass. 2009) (extrapolation is a
reasonable method for determining the number of false claims so long as the statistical
Sampling used in the administrative context of a recoupment case is distinct from using sampling to
prove an FCA claim. In a recoupment action by an administrative agency, the burden is on the recipient to
prove entitlement to monies and recovery is limited to the amount overpaid and interest. The FCA places the
burden of proof on the relator under 31 U.S.C. § 3731(d); the defendant is liable for up to three times the
amount of damages proven by the relator plus civil penalties for each false claim under 31 U.S.C.
§ 3729(a)(1)(G). The bottom line of the relied upon recoupment cases is that the Government audit on the
claims essentially established false claim liability in any subsequent qui tam action.
methodology is appropriate); United States ex rel. Barron v. Deloitte & Touche, LLP, Civil
No. SA-99-CA-1093-FB, 2008 WL 7136869, *2 (W.D. Tex. Sept. 26, 2008) (in a Daubert
hearing, the court excluded the statistician’s testimony, but recognized the relevance of
statistical evidence); United States ex rel. Doe v. DeGregorio, 510 F. Supp. 2d 877, 890
(M.D. Fla. 2007) (court relied on an extrapolated overpayment figure derived from a prior
Government audit when calculating the pre-judgment remedy figure in the subsequent FCA
action); United States v. Cabrera-Diaz, 106 F. Supp. 2d 234, 242 (D.P.R. 2000) (court
entered default judgment against defendants for treble the damages sustained based off the
estimated overpayments that a prior Government audit revealed); United States v. Krizek,
859 F. Supp. 5, 7 (D.D.C. 1994) supplemented, 909 F. Supp. 32 (D.D.C. 1995) aff’d in part
and remanded, 111 F.3d 934 (D.C. Cir. 1997) (physician agreed upon sampling process to
prove liability of the 8,002 potentially false claims, appellate court agreed that physician
consented to sampling).
As can readily be seen, the cases are legion on each side of the issue, and ultimately,
it is this Court’s responsibility to determine the fairest course of action based upon the facts
presented and the claims asserted in this case. Distilled to its essence, each claim asserted
here presents the question of whether certain services furnished to nursing home patients
were medically necessary. Answering that question for each of the patients involved in this
action is highly fact-intensive inquiry involving medical testimony after a thorough review
of the detailed medical chart of each individual patient. As the Court has acknowledged,
some cases are suited for statistical sampling and, indeed, in many cases that method is the
only way that damages may be proved. This civil action, however, is not such a case.4
The Need for Certification of These Two Interrelated Issues
As can be seen from the discussion in this Order, the question of whether the
Government should be allowed to reject a settlement in a case for which it has not
intervened, while relying upon a damages model that this Court has rejected for purposes of
trial, presents a unique development that cries out for interlocutory appeal in this case. If the
Attorney General’s objection is overturned by the Court of Appeals and, upon remand, this
Court determines that the objection is unreasonable, this case will end with an amicable
settlement. If, on the other hand, the Government’s veto is upheld by this Court, and the case
proceeds without the use of statistical sampling in determining damages, the parties in this
action face a trial of monumental proportions, involving a staggering outlay of expenses by
the Plaintiff-Relators and a significant drain of the resources of this Court, which would
possibly be unnecessary if this Court’s determination to reject statistical sampling were to
be reversed. It would be much more judicially efficient to have a ruling on both of the
questions before, rather than after, such a monumental trial.
At oral argument on the motion relating to statistical sampling, Defendants argued that the use of such a
procedure would deprive them of their constitutional right to a jury trial. They also served notice that, even
if the Court allowed statistical sampling, in their case-in-chief, the Defendants would delve into the medical
issues involved in each and every claim for which the Plaintiff-Relators seek recovery, thereby insuring that
the statistical sampling would not significantly shorten the trial.
For the foregoing reasons, the Court will certify its ruling on the two questions
addressed in this order, to wit: (1) the Government’s right to reject a settlement in a qui tam
action to which it has not intervened; and (2) the Plaintiff-Relators’ use of statistical
sampling to prove liability and damages, for interlocutory appeal, pursuant to 28 U.S.C.
§ 1292(b). That statute provides that:
When a district judge, in making in a civil action an order not otherwise
appealable under this section, shall be of the opinion that such order involves
a controlling question of law as to which there is substantial ground for
difference of opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation, he shall so state
in writing in such order. The Court of Appeals which would have jurisdiction
of an appeal of such action may thereupon, in its discretion, permit an appeal
to be taken from such order, if application is made to it within ten days after
the entry of the order.
28 U.S.C. § 1292(b).
Pursuant to the above quoted provision of § 1292, this Court hereby certifies that its
decision on the two issues addressed in this Order involve a controlling question of law as
to which there is substantial ground for difference of opinion, and that an immediate appeal
from this Order may materially advance the ultimate termination of this litigation.
The parties are implored to seek permission from the Fourth Circuit Court of Appeals
to review these two issues within ten days from the date of this Order so as to promote the
wise use of judicial resources and potentially avoid undue cost to the parties.
IT IS SO ORDERED.
June 25, 2015
Columbia, South Carolina
Joseph F. Anderson, Jr.
United States District Judge
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