United States of America et al v. Bluewave Healthcare Consultants Inc et al
ORDER AND OPINION granting 442 the Government's Motion to Exclude the expert testimony of Daniel Mulholland, III. AND IT IS SO ORDERED. Signed by Honorable Richard M Gergel on 6/26/2017.(sshe, )
IN THE UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH CAROLINA
United States of America, et al.,
ex rel. Scarlett Lutz, et al.,
Berkeley Heartlab, Inc. , et al.,
Civil Action No. 9:14-cv-00230-RMG
(Consolidated with 9: l l-cv-1593-RMG and
ORDER and OPINION
This matter is before the Court on the United States' motion to exclude the testimony of
Daniel Mulholland, III, an expert proffered by BlueWave Healthcare Consultants, Inc., Floyd
Calhoun Dent, III, and Robert Bradford Johnson (collectively, "the BlueWave Defendants").
(Dkt. No. 442.)
The BlueWave Defendants have filed a response in opposition to the
Government' s motion. (Dkt. No. 474). For the reasons set forth below, the motion to exclude is
The Government has filed a complaint in intervention against the BlueWave Defendants
and Latonya Mallory alleging violations of the Anti-Kickback Statute ("AKS"), 42 U.S.C. §
1320a-7b(b), and the False Claims Act ("FCA"), 42 U.S.C. § 3729(a). (Dkt. No. 75.) The alleged
FCA violations arise from BlueWave's marketing of laboratory tests for two laboratory
companies, Health Diagnostic Laboratory, Inc. (" HDL") and Singulex, Inc. (" Singulex"),
between 2010 and 2014. The Government has alleged that Defendants violated the FCA when
they engaged in multiple kickback schemes to induce physicians to refer blood samples to HDL
and Singulex for large panels of blood tests, many of which were medically unnecessary. The
Government alleges that the kickback schemes violated the Anti-Kickback Statute, resulted in
false claims submitted to the Medicare and TRICARE programs, and caused the Government to
pay HDL more than $330 million.
The BlueWave Defendants have proffered Daniel Mulholland, III, as an expert witness.
Mulholland is an attorney who "has advised clients for over 30 years whether the relevant federal
healthcare programs allow or disallow certain practices." (Dkt. No. 474 at 1.) The BlueWave
Defendants say Mulholland will "apply an accepted methodology in his field-review of
relevant executive guidance documents- to opine whether such documents would have put [the
BlueWave Defendants] and/or their attorneys on notice that the relevant federal healthcare
authorities considered a specific practice- process and handling fees paid by a laboratoryimplicated or violated the Anti-Kickback statute." (Dkt. No. 474 at 1.) Mulholland will opine
that the BlueWave Defendants had "no reason to know that" their conduct violated the AKS
which they claim is a "factual issue" relevant to whether they had the necessary scienter to
violate the FCA. (Dkt. No. 474 at 5-6.)
The Government seeks to exclude Mulholland' s testimony based on Federal Rules of
Evidence 104(a), 401 , 402, 403 , 702, and 703, arguing that Mulholland' s testimony would
"usurp the role of the Court to instruct on the law and the jury' s role to apply the facts to the
law," and is based on unreliable methods and insufficient facts. The Government further argues
that Mulholland ' s opinion, "that the BlueWave Defendants would have no reason to know that
paying compensation to physicians for laboratory process and handling fees would violate the
Anti-Kickback Statute until 2014," is based on unreliable methodology because Mulholland
limited the evidence he reviewed to reach his opinion to a limited class of documents rather than
the full range of information available to the BlueWave Defendants.
(Dkt. Nos. 442 at 5-10;
Under Rules 104(a) and 702, "the trial judge must ensure that any and all scientific
testimony or evidence admitted is not only relevant, but reliable. " Daubert v. Merrell Dow
Pharm., Inc., 509 U.S. 579, 589 (1993). The trial court must ensure that (1) "the testimony is the
product of reliable principles and methods," (2) "the expert has reliably applied the principles
and methods to the facts of the case," and (3) the "testimony is based on sufficient facts or data."
Fed. R. Evid. 702(b), (c), (d). "This entails a preliminary assessment of whether the reasoning or
methodology underlying the testimony is scientifically valid," Daubert, 509 U.S. at 592-93, and
whether the expert has "faithfully appl[ied] the methodology to facts." Roche v. Lincoln Prop.
Co. , 175 F. App ' x 597, 602 (4th Cir. 2006). To make this determination, Courts consider several
factors, including "whether a theory or technique .. . can be (and has been) tested," "whether the
theory or technique has been subjected to peer review and publication," the "known or potential
rate of error," the "existence and maintenance of standards controlling the technique's
operation," and whether the theory or technique has garnered "general acceptance." Daubert,
509 U.S. at 593-94; accord United States v. Hassan, 742 F.3d 104, 130 (4th Cir. 2014).
However, these factors are neither definitive nor exhaustive, United States v. Fultz, 591 F. App ' x
226, 227 (4th Cir. 2015), and "merely illustrate the types of factors that will bear on the
inquiry." Hassan, 742 F.3d at 130. Courts have also considered whether the "expert developed
his opinions expressly for the purposes of testifying," Wehling v. Sandoz Pharms. Corp., 162
F.3d 1158 (4th Cir. 1998), or through "research they have conducted independent of the
litigation," Daubert v. Merrell Dow Pharms., Inc., 43 F.3d 1311, 1317 (9th Cir. 1995) (on
remand), and whether experts have "failed to meaningfully account for ... literature at odds with
their testimony." McEwen v. Bait. Wash. Med. Ctr. Inc., 404 F. App' x 789, 791-92 (4th Cir.
Rule 702 also requires courts "to verify that expert testimony is 'based on sufficient facts
or data."' EEOC v. Freeman , 778 F.3d 463, 472 (4th Cir. 2015) (quoting Fed. R. Evid. 702(b)).
Thus, "trial judges may evaluate the data offered to support an expert's bottom-line opinions to
determine if that data provides adequate support to mark the expert' s testimony as reliable." Id.
The court may exclude an opinion if "there is simply too great an analytical gap between the data
and the opinion offered." Id. "The proponent of the [expert] testimony must establish its
admissibility by a preponderance of proof." Cooper v. Smith & Nephew, Inc., 259 F.3d 194, 199
(4th Cir. 2001 ).
The Court is mindful that the Daubert inquiry involves "two guiding, and sometimes
competing, principles." Westberry v. Gislaved Gummi AB, 178 F .3d 257, 261 (4th Cir. 1999).
"On the one hand, ... Rule 702 was intended to liberalize the introduction of relevant expert
evidence," id., and "the trial court' s role as a gatekeeper is not intended to serve as a replacement
for the adversary system." United States v. Stanley, 533 F. App'x 325, 327 (4th Cir. 2013) cert.
denied, 134 S. Ct. 1002 (2014). On the other hand, "[b]ecause expert witnesses have the potential
to be both powerful and quite misleading, it is crucial that the district court conduct a careful
analysis into the reliability of the expert's proposed opinion." United States v. Fultz, 591 F.
App ' x 226, 227 (4th Cir. 2015).
False Claims Act Liability
The test for False Claims Act liability is (1) whether there was a false statement or
fraudulent course of conduct; (2) made or carried out with the requisite scienter; (3) that was
material; and (4) that involved a "claim," because it caused the government to pay out money or
to forfeit moneys due . 31 U.S.C.A. § 3729 et seq.; Harrison v. Westinghouse Savannah River
Co., 176 F.3d 776 (4th Cir. 1999). Claims that include items or services resulting from a
violation of the AKS are false or fraudulent under the FCA. 42 U.S.C. §1320a-7b(g). The
Government bears the burden of showing that Defendant acted with the requisite scienter which,
under the FCA, is "knowingly," meaning with actual knowledge, deliberate ignorance, or
reckless disregard of the truth or falsity of the information. 31 U.S.C. § 3729(a).
The proposed Mulholland testimony improperly infringes upon the province
of the Court to define the meaning of the controlling law and the jury's duty
to apply the facts to the law.
The proposed Mulholland testimony is nothing more than a poorly disguised effort to tell
the jury what the law is and how the jury' s verdict should read in this case. It is, of course, well
settled, that it is the duty of the Court, and not a party' s expert, to state the meaning of the law.
United States v. Barile, 286 F.3d 749, 760 (4th Cir. 2002).
"Opinion testimony that states a
legal standard or draws legal conclusion by applying law to facts is generally inadmissible."
United States v. Mciver, 470 F.3d 550, 561-562 (4th Cir. 2006). " It is the Court's duty to
instruct the jury on Defendant's obligations and duties under the law, and the jury's role to
determine whether Defendant has violated a legal duty." Shoemake v. Rental Serv. Corp., 2008
WL 215824 at *1 (S.D. Miss. 2008).
The proposed Mulholland testimony presumes to offer an opinion about "whether or not
the BlueWave Defendants would have had reason to know what the legal obligations were
during a particular period of time. " (Dkt. No. 442-2 at 24). This necessarily requires drawing a
legal standard and applying the law to the facts. As the Fourth Circuit once observed, such
"testimony supplies the jury with no information other than the witness ' s view of how the verdict
should read." United States v. Barile, 286 F. 3d at 760. Such testimony is not helpful to the jury
and invades the well-settled roles of the Court and the jury.
Mulholland's proposed opinion testimony is
methodology and would mislead the jury.
A critical element of the Court's gatekeeping role regarding the admission of expert testimony is
to determine whether the presumed expert's methods are reliable and are based on sufficient
data. Fed. R. Evid. 702(b), (c).
The proposed Mulholland opinion seeks to offer the general
opinion that "the Blue Wave Defendants would have no reason to know that a laboratory paying
compensation to physicians for laboratory process and handling fees would violate or implicate
the Anti-Kickback Statute until July 2014."
(Dkt. No. 442-1 at 2.)
admitted under cross-examination in his deposition that this opinion was based upon a limited
universe of documents potentially accessible to the BlueWave Defendants, and he failed to
consider many other sources of information which had the potential to inform them that their
practices were unlawful. (Dkt. No. 442-2 at 10-11.)
As the Government noted in its memorandum m support of the motion to exclude
Mulholland's testimony, this "expert" failed to review complaints received by Defendants from
physicians or physician practices, including a specific complaint that the BlueWave Defendants'
process and handling fee of "$1 7 that the laboratory is paying would be considered a kickback."
(Dkt. Nos. 442 at 8; 442-4 at 7). Mulholland did not review communications the BlueWave
Defendants received from attorneys, including a December 2011 statement that the process and
handling fees of the Defendants was "as blatantly illegal as anything that I have seen for a long
time. It would be a criminal violation of the federal and state kickback laws ... and could form
the basis for liability under the false claims act." (Dkt. No. 442-5 at 3). Mulholland also did not
review complaints the Blue Wave Defendants received from competitors, including a March 2012
letter in which the competitor warned a physician that BlueWave' s processing and handling fees
"potentially place the laboratory and the physician in violation of the Federal Anti-Kickback
Statute and the False Claims Act." (Dkt. No. 442-6 at 5.) He also did not consider an August
2012 warning in the National Lipid Association newsletter for its members not to enter into
processing and handling agreements or the March 2014 warning letter to the Defendants from the
Department of Justice. (Dkt. Nos. 442-7 at 2; 442-8 at 4-5.)
The failure of Mulholland to review highly material information indicating that the
practices of the Blue Wave Defendants may be violative of federal law before presuming to offer
a general opinion that they had "no reason to know" they were violating the law raises profound
questions in the Court' s mind about Mulholland's methodology and the adequacy of his data.
This Court would be in serious dereliction of its duty as a gatekeeper of expert testimony to
allow the offering of an opinion based on such inadequate data. Furthermore, such opinion
testimony is clearly excludable under Rule 403 of the Federal Rule of Evidence because any
probative value of the testimony would be substantially outweighed by the risk of misleading the
For the reasons set forth above, the Government' s motion to exclude the expert testimony
of Daniel Mulholland, III, (Dkt. No . 442) is GRANTED.
AND IT IS SO ORDERED.
istrict Court Judge
June U- , 2017
Charleston, South Carolina
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