United States ex rel. Stinson, Lyons, Gerlin & Bustamante v. Prudential Insurance Co. of America

736 F. Supp. 614, 1990 U.S. Dist. LEXIS 14362
District Court, D. New Jersey·Decided May 4, 1990·No. Civ. A. No. 90-526·Published·Cited by 1 cases

Opinion

OPINION

WOLIN, District Judge.

Plaintiff, the law firm of Stinson, Lyons, Gerlin & Bustamante (“the law firm”), has commenced this suit under the qui tam1 provisions of the False Claims Act, (“the FCA”) 31 U.S.C. § 3730(b) et seq. The law firm seeks damages and civil penalties arising from alleged false statements and claims made by defendant, The Prudential Insurance Company of America (“Prudential”) in violation of the FCA. Defendant has moved for dismissal of the complaint, or in the alternative, for summary judgment. For the following reasons, the Court will dismiss the complaint for lack of subject matter jurisdiction. See Fed.R. Civ.P. 12(b)(1).

I. BACKGROUND

Plaintiff is a private law firm seeking to act on behalf of the United States. The law firm alleges that Prudential, a provider of medical health insurance and group policies, defrauded the Government by shifting responsibility for the payment of insurance claims to Medicare2 despite Prudential’s knowledge and understanding of its obligations under section 116(a) of the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”). TEFRA was the result of Congressional efforts to reduce federal spending; it amended the law to make Medicare the secondary payor to employer group health plan coverage for persons age 65 to 69 (the “working aged”) who were employed at the time services were rendered.3

In its complaint, plaintiff alleges that Prudential engaged in a scheme to defraud the Government by allowing Medicare to pay as primary payor and by avoiding or decreasing its obligation to reimburse Medicare or its beneficiaries. Plaintiff learned of the alleged fraud during its representation of Mr. Armlon Leonard in a previous lawsuit. Bustamante Aff., Def. Exh. E., ¶ 8. In that lawsuit, Provident Life & Accident Insurance Company v. Leonard, No. 85-10113 CA(15) (Fla. Dade Co.Cir.Ct. March 1985) rev’d, 526 So.2d 721 (Fla.Dist.Ct.App.1988) (the “Leonard” litigation), plaintiff represented Leonard after he was in an automobile accident in 1983. During that representation, the law firm reviewed the health insurance policy Leonard had with carrier Provident Life & Accident Insurance Company (“Provident”) and after further investigation, concluded that Provident’s claims handling practices violated federal law by paying secondary to Medicare instead of primary. A lawsuit almost identical to this one ensued. See United States ex rel. Stinson v. Provident Life & Accident Ins. Co., 721 F.Supp. 1247 (S.D.Fla.1989) (the “Provident ” litigation).

Through the discovery process in the Leonard litigation, plaintiff obtained internal memoranda from Provident. Bustamante Aff., Def.Exh. E., ¶ 8. One memorandum related to Provident’s current method of processing claims for the working aged recommended changing the company’s claims procedures to comply with new Medicare regulations. Pltf.Exh. I; Def.Exh. 6, 6A. A second document, entitled “Medicare Reimbursement,” is alleg[616] edly the tabulated results of a telephone survey Provident had conducted of other insurance carriers claims processing procedures. Pltf.Exh. J; Def.Exh. 6A. That document includes a list of the 24 carriers supposedly contacted by Provident; next to the names of 7 carriers are handwritten annotations. Prudential is one of the 7 carriers and next to the name Arthur M. Wood, Vice President, is written, “Left message — Same as us”. With that document in its possession, plaintiff initiated this law suit against Prudential in March 1989.

Under the FCA, a qui tam suit must first be served on the United States, rather than a defendant. It is filed in camera and remains under seal for at least sixty days. 31 U.S.C. § 3730(b)(2) (Supp. V 1987). Within that sixty day period, the Government has the option to intervene and assume prosecution of the case. Id. If the Government chooses to intervene, it becomes the primary responsible party, although the qui tam plaintiff, the “relator,” may continue as a party. 31 U.S.C. § 3730(c)(1) (Supp. V 1988). If the Government chooses not to intervene, the relator may proceed to seek recovery of damages and penalties. 31 U.S.C. §§ 3730(c)(3), (d)(2) (Supp. V 1988).

The law firm properly filed this suit with the Government which ultimately chose not to intervene. Pltf.Exh. C. As a result of the Government’s declination, the law firm is given standing to sue provided it meets the jurisdictional requirements of the FCA.

Those jurisdictional requirements are at issue here, for Prudential seeks dismissal of the complaint pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure, on the grounds that plaintiff does not qualify as a proper qui tam plaintiff under the express terms and intent of the FCA. See 31 U.S.C. § 3730(e)(4)(A), (B) (Supp. V 1988). Prudential has also moved for dismissal pursuant to Fed.R.Civ.P. 9(b) and 12(b)(6), for failure to plead fraud with sufficient particularity and failure to state a claim upon which relief can be granted.

II. DISCUSSION

A. Standard of Review

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United States ex rel. Stinson, Lyons, Gerlin & Bustamante v. Prudential Insurance Co. of America, 736 F. Supp. 614, 1990 U.S. Dist. LEXIS 14362 (D.N.J. 1990).

736 F. Supp. 614 (United States ex rel. Stinson, Lyons, Gerlin & Bustamante v. Prudential Insurance Co. of America) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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