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United States, ex rel Landsberg v. Levinson


May 29, 2008


The opinion of the court was delivered by: Amy Reynolds Hay United States Magistrate Judge


Hay, Magistrate Judge

Marc A. Landsberg, M.D., and Sharon L. Burke, hereinafter collectively referred to as the "Relators," commenced this qui tam action pursuant to the federal False Claims Act ("FCA"), 31 U.S.C. §§ 3729-3732, as amended.*fn1 The Relators allege that the defendants perpetrated a scheme to defraud the United States of America, billing Medicare and Medicaid for unnecessary medical tests and procedures.*fn2

Specifically, the Complaint charges that defendant Serhat Erzurum, M.D. ("Erzurum"), conspired with others and devised the scheme to defraud the government.*fn3 The Relators claim that defendants Dr. Levinson ("Levinson") and Lake Erie Women's Center, P.C. ("LEWC") entered into agreements with Erzurum's company, 3 Dimensional Imaging, Inc. ("3DI"), to implement fraudulent billing protocols and to pay 3DI commissions of 25% to 40% of the increased revenues generated.*fn4 Further, it is alleged that Levinson, applying the techniques and lessons learned from Erzurum, (1) instructed his ultrasound technicians to perform ultrasound tests, frequently without regard to medical necessity, in order to maximize revenues;*fn5 (2) designated obstetric patients as "high risk" when they were not, for purposes of justifying tests that were not necessary;*fn6 (3) instructed his employees and billing company to bill multiple codes for each test performed, thus billing the government several times for a single test;*fn7 (4) instructed his employees to schedule patients for multiple repeat tests far in excess of what could be medically necessary or justified;*fn8 and (5) instructed his employees to mis-code ultrasound tests under a code for CAT scan tests.*fn9

Levinson and LEWC subsequently filed a motion to dismiss or, in the alternative, a motion for a more definite statement, arguing that the complaint is devoid of specific allegations of fraud as required by Rule 9(b) of the Federal Rules of Civil Procedure.*fn10 See [Dkt. 11]. Specifically, defendants argued that the Relators had not identified a single false claim, the date of any such claim or the contents of any such claim nor had they identified a single instance when Dr. Levinson or any LEWC practitioner performed a medically unnecessary test or billed the United States for any unnecessary or unperformed procedure.

Finding that the Third Circuit Court of Appeals has rejected a strict application of Rule 9(b), requiring only that plaintiffs plead with particularity the "circumstances" of the alleged fraud in order to place the defendants on notice of the precise misconduct with which they are charged, and that the Relators had sufficiently identified the scheme of fraudulent behavior in which the defendants allegedly engaged, the Court denied defendants' motion. See [Dkts. 44, 50]. Citing to United States of America v. Kensington Hospital, 760 F. Supp. 2d 1120, 1125 (E.D. Pa. 1991), the Court also noted that full particulars will have to be revealed during discovery. [Dkt. 44, p.8].

Now, in the throws of discovery, Levinson and LEWC have filed another motion to dismiss, this time pursuant to Fed. R. Civ. P. 12(b)(1), arguing that subject matter jurisdiction in a qui tam action is dependent on the plaintiff-relators having actual and direct knowledge that the defendants submitted at least one false claim to the government.*fn11 Because the Relators in this case testified at their deposition that they have no independent knowledge that defendants submitted a false claim to the government, defendants conclude that the Court is without jurisdiction.*fn12

Defendants' argument is premised on § 3730(e)(4)(A) of the FCA, which provides that:

No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or actions in a criminal, civil or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action in an original source of the information.

31 U.S.C. § 3730(e)(4)(A). The FCA goes on to define "original source" as "an individual who has direct and independent knowledge of the information on which the allegations are based and has voluntarily provided that information to the Government before filing an action under this section which is based on the information." 31 U.S.C. § 3730(e)(4)(B). Because the Relators in this case do not have direct and independent knowledge of the information upon which their claims are based and, thus, are not "original sources," defendants contend that jurisdiction is lacking under § 3730(e)(4).*fn13

We disagree.

As the Court of Appeals for the Third Circuit has explained,

The jurisdictional requirements of the FCA involve assessing whether the allegations and transactions constituting the bases of the claims were publicly disclosed and whether, if they were , the relator is an original source -- meaning that he has direct and independent knowledge of the information.

Atkinson v. PA. Shipbuilding Co., 473 F.3d 506, 515 (3d Cir. 2007) ("Atkinson") (emphasis supplied). Thus, for the jurisdictional bar to apply, the complaint must be based on material that was publicly disclosed in the first instance. Id. at 513. Section 3730(e)(4)(B) merely creates an exception to the public disclosure bar where the realtor is nevertheless an "original source" of the information. Id. As such, the question of whether the relator is an original source is only reached if it has already been determined that the relator's claims are based upon allegations that were publicly disclosed. Id. at 519 ("To determine whether a plaintiff is barred by the FCA's public disclosure provisions, we must first assess whether the relator's claim is based on publicly disclosed allegations or transactions"). See U.S. ex rel. Rost v. Pfizer, Inc., 507 F.3d 720, 728 (1 st Cir. 2007) (Finding that because there had been no public disclosure the court need not address whether the relator falls within the original source exception); U.S. v. Bank of Farmington, 166 F.3d 853, 859 (7 th Cir. 1999) ("Whether the plaintiff is an original source is immaterial unless there has been such public disclosure"); U.S. ex rel. Barth v. Ridgedale Elec., Inc., 44 F.3d 699, 703 (8 th Cir. 1995) ("A court reaches the original source question only if it finds the plaintiff's suit is based on information that has already been publicly disclosed"); Wang v. FMC Corp., 975 F.2d 1412, 1416 (9 th Cir. 1992) ("Where there has been no 'public disclosure' within the meaning of section 3730(e)(4)(A), there is no need for a qui tam plaintiff to show that he is the 'original source' of the information").

The instant defendants, however, have not argued or pointed to any evidence to support a finding that the Relators' claims are based on information that was publicly disclosed before the instant complaint was filed. Indeed, although Levinson and LEWC filed a reply brief in this matter, they have not addressed the Realtors' argument in this regard or otherwise disputed the Realtors' argument that public disclosure is the lynch-pin to § 3730(e)(4)'s jurisdictional bar. See U.S. ex rel. Doe v. John Doe Corp., 960 F.2d 318, 322 (2d Cir. 1992) ("Public disclosure of the allegations upon which the qui tam complaint rests is the bedrock of § 3730(e)(4)(A)'s jurisdictional bar").*fn14

Thus, public disclosure does not appear to be at issue here and the Court need not reach the question of whether the Relators are the "original source" of the information upon which their claims are based.*fn15

Indeed, as pointed out by the Relators, defendants have not pointed to one case in which a court has found jurisdiction lacking because the relator was not an original source without first finding that there had been public disclosure. See Rockwell International Corp. v. United States, ___ U.S. ___, ___, 127 S.Ct. 1397, 1405, rehearing denied, ___ U.S. ___, 127 S.Ct. 2300 (2007)("As this case comes to the Court, it is conceded that the claims on which [the relator] prevailed were based upon publicly disclosed allegations within the meaning of § 3730(e)(4)(A)"); Atkinson, 473 F.3d at 531 (Concluding that "[a]ll of the allegations and transactions involved in each of the counts were publicly disclosed under § 3830(e)(4)(A)"); U.S. ex rel. Barth v. Ridgedale Elec., Inc., 44 F.3d at 703 ("Because public disclosure has been conceded on appeal in the present case, our analysis turns on whether Barth or the Union is an "original source" under the Act").

Defendants' reliance on U.S. ex rel. Feingold v. Palmetto Government Benefits Administrators, 477 F. Supp. 2d 1187 (S.D. Fla. 2007), aff'd, 2008 WL 2097615 (11 th Cir. 2008) ("Feingold"), is also misplaced as even a cursory review of that case demonstrates that the Court declined to address whether the FCA's jurisdictional bar applied, finding the argument "was more properly addressed in a motion for summary judgment due to numerous issues of fact raised by the pleadings." Id. at 1191. Instead, the Court's decision to dismiss the case rested on its finding that the relator had failed to plead fraud with the requisite specificity under Rule 9(b). In so finding, the Court relied on cases emanating from the Court of Appeals for the Eleventh Circuit which, unlike the Third Circuit, employs a strict interpretation of Rule 9(b). Id. at 1193-1196.

Here, however, the issue is not whether the Relators have pled fraud with the requisite specificity under Rule 9(b). Indeed, this Court has already addressed and rejected defendants' argument that the Relators failed to comply with Rule 9(b) as that rule is applied by the Court of Appeals for the Third Circuit, and, in so doing, expressly rejected the Eleventh Circuits' strict application of the Rule.*fn16 See [Dkts. 44, 50]. Rather, the issue here is whether the public disclosure bar to jurisdiction under § 3730(e)(4) applies, which the Court in Feingold declined to address.

In this manner, defendants' assertion that the Feingold Court relied on the Third Circuit's holding in Atkinson, does not accurately portray the Court's findings. While the Feingold Court cited to Atkinson -- in a footnote -- as support for the proposition that the FCA is designed to prohibit lawsuits by relators who have had past financial success bringing claims under the FCA and who seek to repeat that success by filing claims based on the mere supposition that other entities are engaged in the same fraudulent activities, it did so in dicta in an effort to bolster its Rule 9(b) analysis. Feingold 477 F. Supp. 2d at 1196-97 n.10. At no time did the Court engage in any discussion of Atkinson, § 3730(e)(4) or public disclosure. Moreover, the mere fact that courts have found that the FCA is designed to prohibit "parasitic" lawsuits does not negate the fact that there has been no public disclosure in this case and that § 3730(e)(4)(A)'s jurisdictional bar is inapplicable.

Further, unlike in Feingold, there is no evidence that the instant Realtors have filed this action in order to repeat past financial successes. Their claims against Erzurum, who no one appears to dispute engaged in the fraudulent schemes at issue, are all part of this same suit. As well, the Relators' report to the government was based not only on their personal knowledge of Erzurum's fraudulent practices but their knowledge that LEWC entered into a contract with 3DI, that 3DI promoted the fraudulent practices at seminars with LEWC, and that 3DI subsequently received monthly compensation from LEWC based upon an increase in revenue -- revenue which the fraudulent practices were designed to generate. See Burke Depo., pp. 43-46, 48-53.*fn17

As such, the facts of this case appear to go beyond the "mere supposition" that the Feingold Court found wanting.

Having found that the FCA's public disclosure bar does not apply in this case, we need not address defendants' argument that the Relators are unable to cure the jurisdictional defect through discovery since there is no defect to cure. We note, however, that defendants' assertion that under Third Circuit law any discovery conducted in this case would necessarily constitute public disclosure barring jurisdiction under § 3730(e)(4) because the Relators are not an original source, is misplaced. As argued by the Relators, the cases upon which defendants rely merely hold that information revealed in discovery in a prior suit constituted a public disclosure in a subsequent qui tam action, and not that evidence revealed during the discovery phase of a qui tam action was barred from use in that suit under § 3730(e)(4)(A). See U.S. ex rel. Mistick PBT v. Housing Authority of the City of Pittsburgh, 186 F.3d 376, 385 (3d Cir. 1999), cert. denied, 529 U.S. 1018 (2000) (Finding that because the facts had been disclosed during discovery in a previously filed state court action they were publicly disclosed under § 3730(e)(4) for purposes of the qui tam action presently before the court); U.S. ex rel. Stinson, Lyons, Gerlin & Bustamante, P.A. v. Prudential Insurance Co., 944 F.2d 1149, 1151-52, 1157-60 (3d Cir. 1991) (Finding that the information upon which the relator's qui tam action was based was publicly disclosed as it had been obtained during discovery in a previously filed lawsuit). See also Wang v. FMC Corp., 975 F.2d at 1416, citing LeBlanc v. Raytheon Co., 913 F.2d 17, 20 (1 st Cir. 1990), cert. denied, 499 U.S. 921 (1991) ("Evidence publicly disclosed for the first time during the discovery phase of a qui tam suit is not barred from use in that same suit by section 3730(e)(4)(A)").

For these reasons, IT IS HEREBY ORDERED that the motion to dismiss filed on behalf of defendants Levinson and LEWC [Dkt. 89], and the motion to dismiss filed on behalf of the Diesfeld defendants [Dkt. 92], are DENIED

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