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U.S. ex rel. Tullio Emanuele v. Medicor Associates

United States District Court, W.D. Pennsylvania

August 25, 2017

U.S. ex rel. Tullio Emanuele, Plaintiff/Relator,
v.
Medicor Associates, et al. Defendants.

          MEMORANDUM OPINION

          Joy Flowers Conti Chief United States District Judge.

         I. Introduction

         Pending before the court is a motion for reconsideration filed by defendants The Hamot Medical Center of the City of Erie ("Hamot") and Medicor Associates, Inc. ("Medicor", and together with Hamot, "defendants") (ECF No. 357). Defendants' motion challenges rulings made by this court in a memorandum opinion issued on March 15, 2017 ("Memorandum Opinion") (ECF No. 345) in which the court denied defendants' motions for summary judgment (ECF Nos. 280, 286).

         The underlying action seeks damages pursuant to the False Claims Act, 31 U.S.C. § 3729(a)(1)(A)-(C) (the "FCA"), based upon the allegations by U.S. ex rel. Tullio Emanuele ("plaintiff) that defendants submitted false claims for payment to the United States. The alleged false claims were for referrals that violated the Stark Act, 42 U.S.C. § 1395nn, and the Anti-Kickback Act, 42 U.S.C. § 1320a-7b. To prevail on his FCA claim, plaintiff must ultimately demonstrate that the alleged misrepresentations to the government were "material to the Government's payment decision." Universal Health Servs. v. United States ex rel. Escobar, 136 S.Ct. 1989, 2002 (2016). In their summary judgment motions, defendants argued, inter alia, that plaintiff had failed to adduce sufficient proof of materiality. The court disagreed. (Memorandum Opinion (ECF No. 345) at 32-35.) Defendants seek reconsideration of this determination in light of the Third Circuit Court of Appeals' recent decision in United States ex rel. Petratos v. Genentech, Inc., 855 F.3d 481 (3d Cir. 2017).

         Because defendants did not adduce a proper ground for reconsideration, defendants' motion will be denied.

         II. Standard of Review

         The purpose of a motion for reconsideration is "to correct manifest errors of law or fact or to present newly discovered evidence." Max's Seafood Cafe v. Quinteros, 176 F.3d 669, 677 (3d Cir. 1999). A motion for reconsideration under Federal Rule of Civil Procedure 59(e) must therefore rely on one of three grounds: (1) an intervening change in the law; (2) the availability of new evidence; or (3) the need to correct clear error of law or prevent manifest injustice. N. River Ins. Co. v. CIGNA Reinsurance Co., 52 F.3d 1194, 1218 (3d Cir. 1995). A motion for reconsideration is not properly grounded in a request for a district court to rethink a decision it has already rightly or wrongly made. Williams v. Pittsburgh, 32 F.Supp.2d 236, 238 (W.D.Pa. 1998). Litigants are cautioned to '"evaluate whether what may seem to be a clear error of law is in fact simply a point of disagreement between the Court and the litigant.'" Wave v. First Citizen's Nat'l Bank, 846 F.Supp. 310, 314 n.3 (M.D.Pa. 1994) (quoting Atkins v. Marathon LeTourneau Co., 130 F.R.D. 625, 626 (S.D.Miss. 1990). Motions for reconsideration should not relitigate issues already resolved by the court and should not be used to advance additional arguments which could have been made by the movant before judgment. Reich v. Compton, 834 F.Supp. 753, 755 (E.D.Pa. 1993), aff'd in part, rev'd in part, 57 F.3d 270 (3d Cir. 1995).

         III. Discussion

         Defendants seek reconsideration of this court's summary judgment decision with respect to the FCA's requirement that a misrepresentation must be "material to the Government's payment decision" in order to be actionable. Escobar, 136 S.Ct. at 2002. As more fully discussed in the Memorandum Opinion, the statutes giving rise to the FCA claims in this case, the Stark Act and the Anti-Kickback Statute, each generally prohibit a health care entity from submitting payments to Medicare based upon referrals from physicians who have a "financial relationship" with the health care entity. 42 U.S.C. §§ 1395nn(a)(1); 1320a-7b(b). Each statute also contains a number of statutory exceptions (or safe harbors) that permit those referrals if certain statutory requirements are satisfied. 42 U.S.C. § 1395nn(b)-(e); 42 C.F.R. § 1001.952(d). Several of the statutory exceptions invoked in the instant case require that the pertinent financial arrangements be "in writing" and "signed by the parties." 42 C.F.R. §§ 411.357(1)(1); 42 C.F.R. § 411.357(d)(1); 42 C.F.R. § 1001.952(d)(1).

         Plaintiffs claims in this action focus, in part, on the written documents governing the financial arrangement between Hamot and Medicor physicians, which were occasionally allowed to lapse or terminate before being renewed. (Memorandum Opinion (ECF No. 345) at 13.) Plaintiff contends that any submissions to Medicare for payments based on referrals that occurred while those contracts had lapsed do not satisfy the writing requirements of the pertinent statutory exceptions and safe harbors. (Id.) Defendants counter that these "technical" violations of the statutory writing requirement are not "material" within the meaning of the FCA. (Id. at 32.)

         At summary judgment, the parties (and the court) agreed that the United States Supreme Court's decision in Escobar supplied the standard for evaluating the materiality requirement in an FCA case. Escobar, 136 S.Ct. at 2002. The Supreme Court described the materiality standard as follows:

The materiality standard is demanding. The False Claims Act is not "an all-purpose antifraud statute, " Allison Engine, 553 U.S., at 672, 128 S.Ct. 2123 or a vehicle for punishing garden-variety breaches of contract or regulatory violations. A misrepresentation cannot be deemed material merely because the Government designates compliance with a particular statutory, regulatory, or contractual requirement as a condition of payment. Nor is it sufficient for a finding of materiality that the Government would have the option to decline to pay if it knew of the defendant's noncompliance. Materiality, in addition, cannot be found where noncompliance is minor or insubstantial. See United States ex rel. Marcus v. Hess, 317 U.S. 537, 543, 63 S.Ct. 379, 87 L.Ed. 443 (1943) (contractors' misrepresentation that they satisfied a non-collusive bidding requirement for federal program contracts violated the False Claims Act because "[t]he government's money would never have been placed in the joint fund for payment to respondents had its agents known the bids were collusive"); see also Junius Constr., 257 N.Y., at 400, 178 N.E., at 674 (an undisclosed fact was material because "[n]o one can say with reason that the plaintiff would have signed this contract if informed of the likelihood" of the undisclosed fact).
In sum, when evaluating materiality under the False Claims Act, the Government's decision to expressly identify a provision as a condition of payment is relevant, but not automatically dispositive. Likewise, proof of materiality can include, but is not necessarily limited to, evidence that the defendant knows that the Government consistently refuses to pay claims in the mine run of cases based on noncompliance with the particular statutory, regulatory, or contractual requirement. Conversely, if the Government pays a particular claim in full despite its actual knowledge that certain requirements were violated, that is very strong evidence that those requirements are not material. Or, if the Government regularly pays a particular type of claim in full despite actual knowledge that certain requirements were violated, and has signaled no change in position, that is strong evidence that the requirements are not material.

Escobar, 136 S.Ct. at 2003-04. Based upon a careful reading of Escobar, this court deduced that the following factors warranted consideration in evaluating materiality: whether compliance with a statute is a condition of payment; whether the violation goes to "the essence of the bargain" or is "minor or insubstantial"; and whether the government consistently pays or refuses to pay claims when it has knowledge of similar violations. (Memorandum Opinion (ECF No. 345) at 33 (citing Escobar, 136 S.Ct. ...


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