USA v. Community Health Systems, Inc.
Filing
323
MEMORANDUM OPINION AND ORDER: Relators' claims for attorneys' fees are barred by 31 U.S.C. § 3730(b)(5), since none of the remaining Relators was first-to- file within the meaning of the False Claims Act on the relevant claims. The D oghramji relators' claims are also barred by 31 U.S.C. § 3730(e)(4), because the allegations contained with the complaint were already publicly disclosed at the time the Doghramji complaint was filed. Therefore, Relators' claims for attorneys' fees are denied and this matter is terminated. Signed by Judge Marvin E. Aspen on 4/1/2020. (DOCKET TEXT SUMMARY ONLY-ATTORNEYS MUST OPEN THE PDF AND READ THE ORDER.)(am)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION
UNITED STATES OF AMERICA ex rel.
JAMES DOGHRAMJI, SHEREE COOK,
and RACHEL BRYANT,
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Plaintiffs,
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v.
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COMMUNITY HEALTH SYSTEMS, INC., et al., )
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Defendants.
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UNITED STATES OF AMERICA and
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STATE OF TEXAS ex rel.
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AMY COOK-RESKA,
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Plaintiffs,
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v.
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COMMUNITY HEALTH SYSTEMS, INC., et al., )
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Defendants.
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UNITED STATES OF AMERICA
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ex rel. NANCY REUILLE,
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Plaintiffs,
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v.
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COMMUNITY HEALTH SYSTEMS
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PROFESSIONAL SERVICES CORP., et al.,
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Defendants.
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No. 3:11 C 442
Hon. Marvin E. Aspen
No. 3:14 C 2160
Hon. Marvin E. Aspen
No. 3:15 C 110
Hon. Marvin E. Aspen
UNITED STATES OF AMERICA ex rel.
KATHLEEN A. BRYANT,
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Plaintiffs,
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v.
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COMMUNITY HEALTH SYSTEMS, INC., et al., )
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Defendants.
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No. 3:14 C 2195
Hon. Marvin E. Aspen
MEMORANDUM OPINION & ORDER
MARVIN E. ASPEN, District Judge:
Relators in the above-captioned cases (collectively “Relators”) seek reasonable attorneys’
fees from defendants, Community Health Systems, Inc. and many of its subsidiaries (collectively
“CHS”), following the parties’ execution of a settlement agreement that resolved this False
Claims Act lawsuit. 31 U.S.C. § 3729 et seq. We previously ruled that CHS’s interpretation of
the settlement agreement prevails such that the agreement does not preclude CHS from
challenging Relators’ entitlement to attorneys’ fees. We now consider whether any of the
Relators are entitled to attorneys’ fees. For the following reasons, we hold that all remaining
Relators claims for attorneys’ fees are barred.
ANALYSIS
Relators claim they are entitled to reasonable attorneys’ fees under the False Claims Act
(FCA) because the Government settled their claims for a significant recovery. Defendants argue
Relators’ fee claims are barred under the terms of § 3730(d), the first-to-file bar, and the public
disclosure bar. We review each of these arguments in turn.
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I.
Statutory Requirements of 31 U.S.C. § 3730(d)
Relators believe that they are entitled to reasonable attorneys’ fees under the False
Claims Act because the Government intervened and settled their claims causing each relator to
receive a portion of the the settlement. Defendants argue the sharing agreement between the
parties prevents the Relators from qualifying for attorneys’ fees.
The False Claims Act only entitles relators to attorneys’ fees under certain circumstances
laid out in 31 U.S.C. § 3730(d):
If the Government proceeds with an action brought by a person under subsection
(b), such person shall, subject to the second sentence of this paragraph, receive at
least 15 percent but not more than 25 percent of the proceeds of the action or
settlement of the claim, depending upon the extent to which the person substantially
contributed to the prosecution of the action. . . . Any such person shall also receive
an amount for reasonable expenses which the court finds to have been necessarily
incurred, plus reasonable attorneys' fees and costs. All such expenses, fees, and
costs shall be awarded against the defendant.
31 U.S.C. § 3730(d)(1). Actions brought under subsection (b) are actions by private persons
brought on behalf of the Government, rather than actions brought by the Attorney General. 31
U.S.C. § 3730(b).
The parties’ arguments fall into two categories: (1) whether the Government proceeded
with each Relator’s case and (2) whether each Relator must receive a direct payment from the
Government to receive attorneys’ fees.
A.
The Government “proceeded with” each case
The False Claims Act does not define the phrase “[i]f the Government proceeds with an
action” directly, but for the purposes of this dispute the meaning is facially unambiguous. The
Government proceeds with an action when it intervenes in the action. See, e.g., 31 U.S.C. §
3730(b)(2) (“The Government may elect to intervene and proceed with the action. . . .”); id.
(b)(4)(2) (“[P]roceed with the action, in which case the action shall be conducted by the
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Government . . .”). The Government intervened in and settled all four of the consolidated cases.
Thus, the Government “proceeded with” each case consolidated before us.
B.
Each Relator was paid a share of the fee
Section 3730(d) contains two “shall” statements that form the backbone of the parties’
dispute: (1) “If the Government proceeds with an action brought by a person under subsection
(b), such person shall . . . receive at least 15 percent but not more than 25 percent of the proceeds
of the action or settlement . . . ”; (2) “Any such person shall also receive an amount for
reasonable expenses which the court finds to have been necessarily incurred, plus reasonable
attorneys' fees and costs.” 31 U.S.C. § 3730(d)(1). Defendants argue the phrase “any such
person” could refer to either “a person under subsection b,” meaning it could also incorporate the
requirement that a qui tam plaintiff receive the relator’s statutory share of any recovery in order
for its fees to be assessed against the defendant.
Several statutory clues indicate that there is no requirement that a relator receive the
statutory share in order to receive her attorney’s fees. First, the phrase “such person” appears in
both designations of eligibility for the relator’s share and attorney’s fees. See U.S. ex rel.
Taxpayers Against Fraud v. General Elec. Co., 41 F.3d 1032, 1045 (6th Cir. 1994). In the
relator’s share phrase, “such person” is modified by a reference to § 3730(b), “[a]ctions by
private persons.” 31 U.S.C. § 3730(b). Thus, the repetition of “such person” conveys the same
requirement for attorney’s fees as for the relator’s share: the requesting party must qualify as a
private person who can bring a qui tam claim under § 3730(b). See Taxpayers Against Fraud, 41
F.3d at 1045 (describing the parallel structure of the two sections). Second, there is a single
enumerated condition that spells out the requirements for relator’s recovery of both her share
and her fees: “If the Government proceeds with an action. . . .” No other conditional phrasing
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appears in this section. In other words, when Congress wanted to create a condition, it knew how
to do it. There is no reason to believe Congress implicitly required receipt of the relator’s share
in order to receive a recovery for attorney’s fees. Finally, the fact that relators contracted to
reduce their share of the recovery below the statutory threshold to encourage settlement does not
vitiate their interest in recovering their costs. See Taxpayers Against Fraud, 41 F.3d at 1047.
Holding otherwise would discourage settlement and frustrate the goal of reducing protracted
litigation implicit in the assignment of attorney’s fees and costs to FCA defendants.
II.
First-to-File Bar
The FCA's first-to-file rule provides that “[w]hen a person brings an action under this
subsection, no person other than the Government may intervene or bring a related action based
on the facts underlying the pending action.” 31 U.S.C. § 3730(b)(5). 1 By its own terms, this
statutory provision “unambiguously establishes a first-to-file bar, preventing successive plaintiffs
from bringing related actions based on the same underlying facts.” U.S. ex rel. Poteet v.
Medtronic, Inc., 552 F.3d 503, 515 (6th Cir. 2009) (quoting Walburn v. Lockheed Martin Corp.,
431 F.3d 966, 971 (6th Cir. 2005)). “In order to determine whether a relator's complaint runs
afoul of the § 3730(b)(5)'s first-to-file bar, a court must compare the relator's complaint with the
allegedly first-filed complaint.” Id. at 516. The key question is whether both complaints allege
“all the essential facts” of the underlying fraud; if they do, then the first complaint precludes the
later complaint, even if the later-in-time complaint incorporates different details. Id. Poteet
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Despite Relators’ claims to the contrary, there is no fair reading that the text “by a person under
subsection (b)” excludes the first-to-file limitation in subsection (b)(5). 31 U.S.C. § 3730(b).
Although it is true that both subsections (b) and (d) include separate qualifications, this is
because subsection (b) describes who has standing to act as a relatorwhile subsection (d)
describes who may financially benefit from relating fraud. In other words, a person convicted of
perpetrating the fraud she relates could serve as a relator, but not receive the relator’s share under
our reading of §3730(d) and (b).
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demonstrates that identifying additional defendants standing alone does not remove the first-tofile bar, at least where the complaints both identify the “same general fraudulent scheme.” Id. at
517. In other words, even if the second complaint gives additional information that suggests a
broader scope of fraud than the initial complaint, “once the government knows the essential facts
of a fraudulent scheme, it has enough information to discover related frauds, and the rationale
behind allowing private plaintiffs to bring qui tam suits is fulfilled.” Id. (quotation omitted).
None of Relators’ complaints allege fraud beyond the initial widespread fraud allegations
contained in Dr. Plantz’s complaint, with the apparent exception of the Laredo-specific
allegations in the Cook-Reska complaint. Dr. Plantz’s complaint alleges widespread Emergency
Department fraud, including significant specific detail. While it is true that a hospital-specific
claim like the Laredo claim does not bar a later-in-time allegation of a nationwide fraud scheme,
Dr. Plantz’s complaint details a nationwide fraudulent scheme. See U.S. ex rel. Hutcheson v.
Blackstone Medical, Inc., 694 F. Supp. 2d 48, 59 (D. Mass. 2010). 2 As a result, the difference in
scope between the various complaints and the Plantz complaint cannot remove the first-to-file
bar as to any of the remaining Relators. We analyze each consolidated relator separately below.
“[I]n order to preclude later-filed qui tam actions, the allegedly first-filed qui tam
complaint must not itself be jurisdictionally or otherwise barred.” Poteet, 552 F.3d at 516. For
example, if the first complaint is “legally incapable of serving as a complaint” under Federal
Rule of Civil Procedure 9(b), then the first complaint does not bar subsequent relators from
filing. Id. Rule 9(b)'s requirement that fraud be pleaded with particularity applies to complaints
2
Relators point to this out-of-circuit district court case as support for their argument. This is
neither binding authority, nor factually similar to our case. The relator in Blackstone occupied a
similar position to Dr. Plantz, in that he was not the first to file any complaint, but he was the
first to file a nationwide complaint. Thus, at best Blackstone supports Defendants’ reading of the
first-to-file rule.
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alleging violations of the False Claims Act, because “defendants accused of defrauding the
federal government have the same protections as defendants sued for fraud in other contexts.”
United States v. Brookdale Senior Living Communities, Inc., 892 F.3d 822, 830 (6th Cir. 2018).
A.
Doghramji, Cook, and Bryant
The Doghramji group of relators claim their complaint contains factual allegations that
do not appear in Plantz’s complaint. They claim they alleged “new, material facts” including a
“company-wide scheme affecting CHS hospitals across the country.” (Doghramji Supp. Mem.
(Dkt. No. 306) at 4.) This precise allegation appears in Plantz’s complaint. (Plantz Compl. ⁋⁋
193, 195, 211, 214.) The Doghramji relators also claim to have the only complaint focused on a
nationwide scheme that would survive Rule 9(b)’s heightened pleading standard, because only
their complaint “contained particularized allegations that CHS used ProMed, the Blue Book,
financial incentives, and the threat of termination (and or [sic] incentives) to encourage
physicians to increase Emergency Room admissions. . . .” (Doghramji Supp. Mem. at 4.) These
allegations are included in significant detail in the Plantz complaint. (Plantz Compl. ⁋⁋ 227–233,
239–243, 246–249, 262–266.) Plantz’s complaint was filed prior to the Doghramji relators, and
includes all of the purportedly unique contributions of these relators. As a result, the Doghramji
relators are not entitled to attorneys’ fees, because their claim for fees is barred under the first-tofile rule.
B.
Amy Cook-Reska
Plaintiff Cook-Reska alone among the remaining relators should recover reasonable
attorneys’ fees for her initial contribution. Cook-Reska did receive fees and a relator’s share for
the claims she raised at the Laredo facility. (Cook-Reska Supp. Briefing (Dkt. No. 314) at 3.)
Her argument that the lack of official designation between the Laredo and national components
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of the settlement entitles her to recover attorneys’ fees for all claims against Defendants (Id. at
4–5) has neither legal nor factual support.
First, the structure of the Settlement Agreement’s payout of the relator’s share
predominately to Dr. Plantz, with a specific amount reserved for Cook-Reska, supports
Defendant’s split between national emergency department claims and Laredo claims. (Def. Supp.
Opp. Brief (Dkt. No. 316) at 2; Dkt. No. 115–15; Dkt. No. 115–16.) This split tracks the intuitive
difference between a fraud claim involving a single medical provider and a company-wide
scheme of fraud reflected. Nothing in Cook-Reska’s complaint alleges a broader pattern of fraud
beyond Laredo.
Given the facts do not favor Cook-Reska’s complaint, she argues that reporting a single
instance of fraud involved in a broader web of fraudulent activity bars all other relators from
recovery. (Cook-Reska Supp. Briefing (Dkt. No. 314) at 5.) She is wrong. Her complaint would
need to be able to independently survive a Rule 9(b) motion as to all 117 other facilities to
qualify her complaint as the first-to-file on all ED claims. See Walburn, 431 F.3d at 973. Her
complaint would only survive as to Laredo, so she only bars recovery for the next-to-file as to
the Laredo facility. Since Cook-Reska already recovered fees and costs associated with that
claim, she is entitled to no further relief.
C.
Kathleen Bryant
Bryant claims she is entitled to attorneys’ fees because her complaint alleged significant
specific information about fraud at Heritage Medical Center. (Bryant Supp. Mem. at 5.) Dr.
Plantz named Heritage Medical Center as one location implicated in the nationwide scheme of
fraud in his complaint. (Plantz Compl. ⁋ 171.) Although Bryant might be able to recover as an
insider if the Government had specifically recovered for her allegations about Heritage Medical
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Center, as they did for Cook-Reska’s Laredo allegations, Byrant’s allegations were encompassed
within the broad national Emergency Department settlement. As such, she did not provide any
unique information in her complaint beyond the extant scheme alleged in Plantz’s complaint,
other than reiterating that a named defendant in the initial complaint had, in fact, done as
specified.
Bryant’s citation to Walburn are inapposite, because her situation is far afield from the
Walburn relator’s. Walburn, 431 F.3d at 973. In Walburn the relator recovered despite an earlier
complaint laying out a very general allegation of fraud, because the initial complaint standing
alone “fail[ed] to provide adequate notice to a defendant of the fraud it allege[d].” Id. The Court
pointed to Rule 9(b) as the guidepost for insufficient notice to a defendant, along with the FCA’s
goal of bringing fraud to the government’s attention. Id. Plantz’s complaint not only
theoretically, but actually did, satisfy both of these goals. The Government began coordinating
the national investigation after Plantz filed his complaint. Dr. Plantz’s complaint also alleges the
specifics of the scheme of fraud, including senior executives’ knowledge of the scheme. (Plantz
Compl. ⁋⁋ 262–269.) Byant identifies no particular component of the fraudulent scheme outside
the ambit of Plantz’s complaint, instead resting on the specificity of her knowledge of Heritage
Medical Center. This is not enough. Byrant’s request for attorneys’ fees is barred by the first-tofile rule.
D.
Nancy Reuille
Reuille, like Cook-Reska, filed her complaint before Dr. Plantz, but did not allege the
scheme that was ultimately the source of the settlement in these cases. Reuille filed her
complaint in 2009, while Plantz filed his complaint in 2010. (Reuille Supp. Briefing (Dkt. No.
315) at 2.) Unlike Plantz, Reuille only alleged fraud at a single hospital. (Id. at 2–3.) She also did
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not specifically identify the pattern of fraud as emanating from the Emergency Department,
which was ultimately a key component of the settlement. (Id. at 3.) In fact, the pattern of
payments for the claims supports Defendants’ arguments that the government and Defendants
identified two categories of claim: the Laredo claims and the Emergency Department claims. It
would be difficult to argue Reuille was the first to file the ED complaint, rather than Plantz,
given that no allegations regarding an Emergency Department specifically emerged until Plantz’s
complaint. (See id. at 3.) Instead, Reuille argues she identified issues in her area’s caseload. (Id.)
In other words, Reuille seeks to recover attorneys’ fees for a settlement impacting 118 other
hospitals because her complaint mentioned fraud at a single hospital first. Allowing Reuille to
recover for fraud she was not the first to report in any material sense as to the national
emergency department claims would fly in the face of the design of the False Claims Act’s
attorneys fee bar.
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III.
Public Disclosure Bar
“Generally, unless the relator was an ‘original source’ within the meaning of the statute,
the FCA bars a claim based on publicly disclosed information.” U.S. ex rel. Ibanez v. BristolMyers Squibb Co., 874 F.3d 905, 918 (6th Cir. 2017). “[P]ublic disclosure occurs ‘when enough
information exists in the public domain to expose the fraudulent transaction.’” Id. (quoting U.S.
ex rel. Antoon v. Cleveland Clinic Found., 788 F.3d 605, 614–15 (6th Cir. 2015)). “To decide
whether a claim has been publicly disclosed, courts look at the essential elements of alleged
fraud to determine if enough information exists in the public domain to expose the fraudulent
transaction.” Id. “Thus, the public disclosure bar is not implicated—even if one or more of a
claim's essential elements are in the public domain—unless the exposed elements, taken
together, provide adequate notice that there has been a fraudulent transaction.” Id. at 918–19.
The Doghramji complaint cannot survive the public disclosure bar, because it restates
information in the public eye at the time the complaint was filed. The Doghramji relators point to
their unique statistical analysis as a rationale for their entitlement to attorneys’ fees. They were
not themselves the source of any information contained in the statistical analysis. While the
statistical evidence may have proven helpful, it is akin to expert testimony on extant information.
As such, treating it as “new information” for the purpose of excepting these relators’ complaint
from the first-to-file bar would allow parasitic suits brought by any number of statistical experts
after a widespread fraud is disclosed. In other words, the elements of the unique statistical
analysis were already in the public domain at the time the Doghramji relators filed their
complaint. It is thus barred under the public disclosure rule.
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CONCLUSION
Relators’ claims for attorneys’ fees are barred by 31 U.S.C. § 3730(b)(5), since none of
the remaining Relators was first-to-file within the meaning of the False Claims Act on the
relevant claims. The Doghramji relators’ claims are also barred by 31 U.S.C. § 3730(e)(4),
because the allegations contained with the complaint were already publicly disclosed at the time
the Doghramji complaint was filed. Therefore, Relators’ claims for attorneys’ fees are denied
and this matter is terminated.
____________________________________
Marvin E. Aspen
United States District Judge
Dated: April 1, 2020
Chicago, Illinois
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