Liebman et al v. Methodist Le Bonheur Healthcare et al
Filing
232
MEMORANDUM OPINION OF THE COURT. Signed by District Judge William L. Campbell, Jr on 3/11/2022. (DOCKET TEXT SUMMARY ONLY-ATTORNEYS MUST OPEN THE PDF AND READ THE ORDER.)(kc)
IN THE UNITED STATES DISTRICT COURT FOR THE
MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION
UNITED STATES OF AMERICA and the
STATE OF TENNESSEE ex rel.
JEFFREY H. LIEBMAN and DAVID
STERN, M.D.,
Relators,
v.
METHODIST LE BONHEUR
HEALTHCARE, et al.,
Defendants.
)
)
)
)
)
)
)
)
)
)
)
)
)
Case No. 3:17-cv-00902
JUDGE CAMPBELL
MAGISTRATE JUDGE HOLMES
MEMORANDUM
Pending before the Court is the United States’ Motion to Intervene for Good Cause. (Doc.
No. 193). If permitted to intervene, the United States intends to assert claims against Defendants
Methodist Le Bonheur Healthcare and Methodist Healthcare – Memphis Hospitals for violation of
the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b), and the False Claims Act, 31 U.S.C. §§ 37293733. The United States stated that it also intends to assert claims against West Clinic, which was
previously dismissed from this action after reaching a settlement with Relators. (Doc. No. 193 at
1 n.1). The Government states that it is not seeking to intervene to assert claims against two current
defendants – Gary Shorb and Chris McLean. (See Doc. No. 202 at 1 n.1).
Relators Jeffrey Liebman and David Stern consent to the Motion and expressed their
support for intervention. Defendants Methodist Le Bonheur Healthcare, Methodist Healthcare –
Memphis Hospitals, Chris McLean, and Gary Shorb (“Methodist”) filed a Response in Opposition
(Doc. No. 195). The United States filed a Reply to Methodist’s Response in Opposition (Doc. No.
202). Methodist filed a Sur-reply. (Doc. No. 210).
The West Clinic, PLLC (“West”), which was dismissed from the case following settlement
with Relators and is no longer a party, intervened for purposes of opposing the Motion. (Order
Granting West’s Motion to Intervene, Doc. No. 215). West filed a Response in Opposition to the
United States’ Motion to Intervene. (Doc. No. 216). Relators and the United States replied to
West’s Response (Doc. Nos. 217, 219), and West filed a Sur-reply (Doc. No. 230).
Counsel for the United States, Methodist, West, and Relators each filed declarations in
support of their respective positions. (See Declaration of Kara F. Sweet (United States), Doc. No.
205; Declaration of Brian D. Roark (Methodist) Doc. No. 196; Declaration of Andrew Solinger
(West), Doc. No. 216-1; and Declaration of Jerry Martin (Relators), Doc. No. 218).
The Court held a hearing on the Motion on February 16, 2022. Following the hearing, the
Court Ordered the United States to submit to the Court for in camera review all internal and
external communications related to “review, assessment, and/or approval of the West Settlement.”
(Order, Doc. No. 224). The Government has complied with that Order.1
For the reasons discussed herein, the Motion to Intervene will be GRANTED.
I.
BACKGROUND
Relator Jeffrey Liebman initiated this case in May 2017 alleging that the West Cancer
Center affiliation violated the Anti-kickback statute because Methodist was overpaying West
Clinic for management and professional services and was sharing with West the profits generated
by its referrals. (Doc. No. 1). As required by the False Claims Act, Relator filed the complaint
under seal to allow the Government to investigate the claims and decide whether to intervene. See
1
The documents submitted for in camera review confirmed what was already known from Court
filings: the Government reviewed the West settlement before it was executed, did not object to the
settlement, and consented to West’s dismissal from the case with prejudice as to Relators and without
prejudice as to the United States.
2
31 U.S.C § 3730(b)(2). The seal was extended several times, ultimately allowing the Government
over two years to investigate and decide whether to intervene. On September 3, 2019, after the
Court denied further extension, the United States entered a “Notice [ ] That It Is Not Intervening
at This Time,” explaining that it had not completed its investigation and would continue to
investigate. (Doc. No. 45).
Thereafter, Relator Jeffrey Liebman and a second Relator, Dr. David Stern, filed a Second
Amended Complaint, which was unsealed and made available to Methodist and West on December
19, 2019. (Doc. Nos. 59, 61). Methodist and West filed motions to dismiss. (Doc. Nos. 79, 81).
In December 2020, Relators informed the Court that they had reached an agreement with
West, but were awaiting approval from the Government before executing the agreement. (See Doc.
No. 119 at 5; see also, Doc. No. 126 (stating that as of Jan. 26, 2021, the Government had not
finalized approval of the settlement agreement)).
On January 28, 2021, after receiving
Government approval for the settlement, Relators and West executed the Settlement Agreement
and shortly thereafter moved to voluntarily dismiss claims against West. (Doc. No. 132 (granted
at Doc. Nos. 133 and 192); see also, Settlement Agreement, Doc. No. 216-2).
As part of the settlement, West paid $2.6 million (divided among the United States,
Tennessee, and Relators’ counsel) and agreed to cooperate with the Relators’ investigation “fully,
truthfully, and forthrightly” in exchange for dismissal from the action. (See Settlement Agreement,
Doc. No. 216-2). The United States was not a party to the Settlement Agreement. (Id., ¶¶ 13,
15(e)). It did, however, approve the settlement payments and consent to dismissal of West with
prejudice as to Relators and without prejudice as to the United States. (Id. at ¶¶ 7, 15(e); see also,
Doc. Nos. 132, 191).
3
Pursuant to the terms of the settlement, West provided additional documents to Relators
and made witnesses available for Relators to interview. (Solinger Decl., Doc. No. 216-1, ¶ 13).
Relators sought leave to file the Third Amended Complaint, adding allegations based on
information learned as a result of West’s cooperation. (Doc. No. 154). Relators filed the Third
Amended Complaint on May 12, 2021. (Doc. No. 169). Among other things, the Third Amended
Complaint adds the allegation that members of West Clinic admitted they performed no inpatient
management services during its affiliation with Methodist.2 (Doc. No. 169, ¶ 20) (“In recent
interviews under the terms of the Settlement Agreement, West’s senior leadership has confirmed
that West did not perform inpatient management services at Methodist hospitals between 20122018.”). Methodist moved to strike allegations in Third Amended Complaint that are based on
post-pleading discovery and to dismiss the Third Amended Complaint.3 (Doc. No. 174). That
motion remains pending.
Upon learning of the allegations in the Third Amended Complaint, the United States
informed Methodist and West that it was investigating the new allegations. (Sweet Decl., Doc. No.
205, ¶ 5). In June and July 2021, the United States conducted its own interviews of three West
witnesses that Relators had previously interviewed, interviewed former Methodist executives
(current Defendants) Gary Shorb and Chris McLean, and obtained additional information and
documents from Methodist. (Id., ¶¶ 12-16; Roark Decl., Doc. No. 196, ¶¶ 6-7). The United States
2
Both Methodist and West dispute the veracity of these allegations. The United States clarified that,
during follow-up interviews, the West witnesses “did not indicate that absolutely nothing was done in terms
of inpatient management, West was very clear that it did not perform any management services at two of
the six locations required by the MSA … and did very little management at [two other locations] for most
of the contractual period.” (Doc. No. 219 at 4).
3
Methodist’s Motion to Dismiss the Second Amended Complaint (Doc. No. 79) was mooted by the
Third Amended Complaint.
4
claims that during these interviews, West witnesses “confirmed that [West] did not perform
management services at all locations in the [services agreement].” (Sweet Decl., Doc. No. 205, ¶¶
12, 15; Doc. No. 219 at 2). The Government states that when invited to provide exculpatory
information, Methodist provided documents and witnesses that “raised more questions, including
whether the payments [from] Methodist to [West] under the Professional Services Agreement also
constituted illegal kickbacks.” (Sweet Decl., Doc. No. 205, ¶ 16).
In August 2021, counsel for the Government informed Methodist that it would seek
authority to intervene and informed the Court of the same during a telephone conference on
September 17, 2021. (See Sweet Decl., Doc. No. 205, ¶ 17; Doc. No. 189). The parties jointly
requested to postpone depositions pending resolution of the Government’s motion to intervene and
agreed to proceed with written discovery with a focus on issues in common to the theories expected
to be raised by the Government in a potential Complaint in Intervention.4 (See Doc. No. 189).
The Government filed the Motion to Intervene for Good Cause on October 8, 2021. As
stated above, the Motion has been fully briefed, and the Court conducted a hearing on the Motion.
II.
ANALYSIS
Under the False Claims Act, a private person, known as a relator, may file a civil action on
behalf of the United States. 31 U.S.C. § 3130(b)(1). After the relator files the complaint, the
Government has 60 days, subject to extensions for good cause, to decide whether it wishes to
intervene. Id. § 3730(b)(2). If the Government elects to intervene, the Government will conduct
the action; and if the Government elects not to intervene, the relator conducts the action. Id. §
3730(b)(4)(A), (B). However, if the Government initially elects not to intervene, the court “may
4
The United States indicates that it intends to pursue narrower theory of fraud than that alleged in
the Third Amended Complaint.
5
nevertheless permit the Government to intervene at a later date upon a showing of good cause.”
31 U.S.C. § 3730(c)(3).
The False Claims Act does not define “good cause.” In considering what constitutes “good
cause” for purposes of intervention, this Court has noted that good cause is “a uniquely flexible
and capricious concept” defined as a “legally sufficient reason.” U.S. ex rel. Hinds v.
SavaSeniorCare, LLC, No. 3:18-cv-1202, 2021 WL 1663579, at *11 (M.D. Tenn. Apr. 28, 2011)
(citing U.S. ex rel. CIMZNHCA, LLC v. UCB, Inc., 970 F.3d 835, 846 (7th Cir. 2020)); see also,
Polansky v. Executive Health Resources, Inc., 17 F.4th 376, 392 (3d Cir. 2021) (good cause for
intervening requires a “legally sufficient reason”) (citing CIMZNHCA, 970 F.3d at 846).
This is not an extraordinarily high bar. At a minimum, “it must require the government to
provide some justification for its untimely intervention.” Griffith v. Conn, No. 11-157-ART-EBA,
2016 WL 3156497, at *3 (E.D. Ky. Apr. 22, 2016). Court have generally considered whether the
Government has discovered new evidence, potential prejudice to the relator and defendants, and
the public interest and balanced the government’s justifications for intervention against any
prejudice to defendants and relators. Id. (finding good cause where new evidence was uncovered,
the government had remained an active participant in the case and continued to investigate, and
the relator consented); U.S. ex rel. Ross v. Indep. Health Corp., No. 12-cv-299S, 2021 WL
3492917, at *3 (W.D.N.Y. Aug. 9, 2021) (finding good cause where there is additional information
relating to the magnitude of the alleged fraud and relator consented to intervention). The Court
notes that these considerations are not conditions for finding good cause, they are merely relevant
considerations. See Griffith, 2016 WL 3156497 at *2 n.1 (finding the “FCA requires the
government to show only good cause for untimely intervention, not new and significant
evidence”).
6
Pointing to this Court’s recent decision in U.S. ex rel. Odom v. SouthEast Eye Specialists,
PLLC, No. 3:17-cv-689, ECF No. 104 (M.D. Tenn. Feb. 24, 2021) (Crenshaw, J.) (hereinafter
“SEES”), Methodist and West argue the Court should require the Government to provide evidence
of newly obtained information that was not readily available during the initial sealed investigation.
Although the SEES decision did discuss whether certain information was available to the
Government during the sealed investigation, the Court did not require the Government to show
that it could not have obtained the information relevant to its decision to intervene during that time.
As articulated by Judge Crenshaw during the hearing, the Court considered whether the
Government presented new and sufficient evidence to establish good cause to intervene. See Feb.
24, 2021 Hearing Trans. at 37, SEES, Case No. 3:17-cv-689, ECF No. 1055 (“The United States
and Tennessee acknowledge that it has the burden to present [ ] new and sufficient evidence [ ] to
establish good cause for their motions to intervene.”)). In SEES, the Court concluded that the
Government did not establish that there was new evidence to justify a finding of good cause and
denied the motion to intervene. (Id. at 41).
Unlike in SEES, here, the United States unquestionably points to new evidence obtained as
a result of West’s cooperation pursuant to its settlement agreement with Relators. Specifically,
the Government states that West representatives admitted in post-settlement interviews that West
did not provide inpatient management services that Methodist paid for under the services
agreements.6 The United States also notes that, following the West settlement, it obtained
5
The transcript of the Feb. 24, 2021 Hearing in SEES, Case No. 3:17-cv-689 (M.D. Tenn.) is filed
on the record in this case at docket entry 195-2.
6
The United States identifies additional information relevant to its decision to seek intervention. For
example, new evidence to counter an advice of counsel defense, though it’s unknown whether Methodist,
which has not yet answered the complaint, will assert the defense. However, it appears the primary impetus
for the United States’ renewed interest in this matter were the new allegations in the Third Amended
7
thousands of additional documents from Methodist and interviewed Methodist witnesses. That
there was likely evidence related to the provision of inpatient management services in Methodist’s
voluminous document production during the sealed investigation does not negate the significance
of witness statements (characterized by the United States as “admissions”) disclosing that the
services contracted for were not provided.
Moreover, the Court notes that the interviews
conducted after the settlement were likely more fruitful that any interviews during the sealed period
would have been. Not only was West under an obligation to cooperate with the Relators’
investigation “fully, truthfully, and forthrightly,” but also, at that point, it was neither a defendant
in the case nor a target of the investigation.
Methodist and West also argue the Government has not shown good cause because it does
not offer any evidence that the magnitude of the alleged fraud has been expanded as a result of the
information obtained from West. They point to numerous courts that have identified “new
evidence that escalates the magnitude or complexity of the fraud” as grounds for finding good
cause for late intervention. See e.g., Contra ex rel. Hall v. Schwartzmann, 887 F. Supp. 60, 62
(E.D.N.Y. 1995) (finding good cause when newly discovered evidence expanded the possible
fraudulent activity); Ross, 2021 WL 3492917, at *2 (finding good cause when defendants produced
additional information relating to the magnitude of alleged fraud).
The Court is unpersuaded that good cause requires new evidence as to the magnitude of
fraud. As discussed above, the statute does not define “good cause.” In considering whether the
Government has provided a “legally sufficient reason” or “some justification” to intervene, the
Court notes that new evidence can bring value to a case in myriad ways. Maybe the alleged fraud
Complaint that, although Methodist paid West significant sums for inpatient management services, West
did not provide any such services.
8
becomes so large it is impossible to ignore. Maybe the scope of the alleged fraud remains the same
but the evidence proving the claims becomes stronger. Either of these developments affect the
assessment of a case. It appears that here the Government believes the new evidence reduces the
complexity of the claims, potentially makes certain fraud claims easier to prove, and will allow it
to streamline the case such that the cost-benefit analysis, from the Government’s perspective, now
favors intervention.
The United States argues that intervention serves the public interest in protecting Federal
health care programs from fraud. In addition, the Government asserts that it has significant
resources and expertise in this area of law and may reduce judicial resources by narrowing the
scope of the claims and streamlining the litigation.
The Court next turns to consideration of the potential prejudice to the parties in allowing
the United States to intervene and change the scope of the claims at this stage in the litigation.
Relators, who have been conducting the litigation on behalf of the United States and Tennessee,
consent to the intervention. Accordingly, there is no prejudice to Relators in allowing the United
States to intervene. However, as counsel for Relators noted during the hearing, although it is
speculative to assume that if not permitted to intervene the Government would opt to pursue these
claims through a separate action, such simultaneous litigation would prejudice Relators.
Methodist contends it will suffer prejudice in the form of additional delay, the burden of
having to respond to another amended complaint, and the virtual certainty of additional discovery
on the Government’s new fraud theory. There is no doubt that Methodist has expended significant
resources defending these claims. However, it does not appear that allowing the Government to
control the litigation will significantly prolong the case. Although the parties were nearing the end
of discovery when the United States moved to intervene, discovery to date has consisted primarily
9
of document production, which should include documents related to the narrowed claims.
Additional document production, if any, should be minimal. The parties have not yet conducted
any depositions, so there is not duplication of effort in that respect. In addition, the Government
has remained involved in reviewing the discovery provided to date and had already initiated its
own investigation into the new allegations, which further serves to minimize additional delay.
On the whole, the prejudice to Methodist is principally that of allowing what is undoubtedly
a burdensome litigation to proceed. Other than the obligation to respond to a new narrowed
complaint post-intervention, the additional burden on Methodist is minimal. In and of itself, this
burden does not outweigh the Government’s interest in controlling the litigation.
With regard to West – it is not currently a defendant in this case. Following settlement
with Relators, West was dismissed from this action with the consent and approval of the United
States. The United States has stated that, if allowed to intervene, it will seek to assert claims
against West, noting that the dismissal of West was without prejudice to the United States. There
is no question that West would be prejudiced by being reinserted into this case from which it has
been dismissed. Not only is the evidence that serves the basis for the United States’ good cause to
intervene the direct result of West’s cooperation pursuant to the settlement agreement, West argues
that it proceeded with settlement discussions based, in part, on repeated assurances from the United
States that it was not actively investigating the claims.
In addition to the obvious prejudice of going from “dismissed” to “defendant,” reinsertion
of West would unquestionably delay the proceedings. West states that it has been more than a
year since it was dismissed from the case, and, because of the settlement discussions, it was not
actively involved in discovery. Reinserting West as a defendant would cause unnecessary
additional delay in the case.
10
III.
CONCLUSION
The Court finds that the United States has established good cause to intervene based on the
new evidence obtained as a result of the West settlement. Accordingly, the United States Motion
to Intervene for Good Cause will be GRANTED. However, the United States will be permitted to
Intervene only as to the current Defendants. The Court is fully cognizant that the West settlement
was only with Relators and that West was dismissed from this action without prejudice as to the
United States. Nevertheless, West has been dismissed from this action. The Court does not find
good cause to reinsert West at this stage of the case – to do so would not only prejudice West, but
would cause undue delay in the proceedings. The United States shall file an amended complaint
in intervention – limited to claims against only current defendants – within 30 days.
An appropriate Order will enter.
_________________________________
WILLIAM L. CAMPBELL, JR.
UNITED STATES DISTRICT JUDGE
11
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?