United States v. Health Possibilities, P.S.C.

207 F.3d 335, 2000 WL 294175
Court of Appeals for the Sixth Circuit·Decided March 22, 2000·No. 99-5259·Published·Cited by 32 cases

Opinion

OPINION

NATHANIEL R. JONES, Circuit Judge.

Raising an issue of first impression in this circuit, this case requires that we determine whether the Attorney General’s consent is required before a private plaintiff may settle or otherwise dismiss an action under the qui tam provisions of the False Claims Act (“FCA”), 31 U.S.C. § 3730(b)(1). The district court concluded that the consent provisions of the FCA apply only to attempts to dismiss qui tam actions prior to the government’s initial intervention decision, and that when the government affirmatively declines to intervene, a private plaintiff can settle a qui tam action notwithstanding the government’s disapproval. We hold, however, that a qui tam plaintiff may not seek a voluntary dismissal of any action under the False Claims Act without the Attorney General’s consent. Accordingly, we VACATE the district court’s judgment and REMAND this case for further proceedings.

I.

Plaintiffs-Appellees Dr. John and Mar-iann Doyle were formerly employed by Defendant-Appellee Health Possibilities, P.S.C. Health Possibilities is a medical services provider that staffed various health clinics in Lexington, Kentucky, including a number of climes owned and operated by Defendants-Appellees Urgent Treatment Centers of Kentucky, Inc. (“UTC”), Dr. Barry Burchett, and Dr. John Langefeld. *337 Dr. Doyle, Mariann’s husband, worked as a physician, while Mrs. Doyle was a physician’s assistant. The Doyles’ dispute with Defendants began in February 1996, when a co-worker allegedly stated that Dr. Doyle had committed adultery and used drugs. In May of that year, Dr. Doyle responded by filing a defamation suit in state court against the co-worker, a supervisor, and Defendants. Around the same time, the Doyles began to believe that Defendants were submitting false Medicare claims to the Department of Health and Human Services. The Doyles eventually filed a separate federal court action under the “qui tam” provisions of the False Claims Act, 31 U.S.C. §§ 8729, 3730(b), which allow private parties to recover damages for fraud committed against the United States. 1 The Doyles claimed that Defendants had violated the FCA by illegally seeking reimbursement for physician assistant services that were not “incident to” physician services. See J.A. 21-28.

As required by § 3730(b)(2) of the FCA, the Complaint and a subsequent First Amended Complaint were filed under seal. The sealed complaint procedure grants the United States sixty days to investigate the claims of a qui tam plaintiff, who is called a “relator,” to determine whether it wants to intervene. See 31 U.S.C. § 3730(b)(2). In January 1997, the government declined to intervene in the Doyles’ suit, and the Complaint was subsequently served on Defendants. See J.A. at 35. 2 After extensive discovery, the Doyles filed a Second Amended Complaint in May 1998. The Second Amended Complaint added new allegations, claiming that Defendants had fraudulently inflated their Medicare bills by “upcoding,” or using billing codes that signified services that were more expensive than the services Defendants actually provided. 3

Shortly after filing the Second Amended Complaint, the Doyles and Defendants reached a settlement agreement. Under the agreement, the qui tam suit was settled in conjunction with Dr. Doyle’s pending state court defamation action. Regarding the qui tam suit, the Doyles agreed to release Defendants from all claims “of any ... kind or nature whatsoever” that related to their submission of Medicare claims, or claims under any other federal health care reimbursement program. J.A. at 204-205. In exchange, Defendants agreed to pay the Doyles $150,000 in attorneys fees and costs, and to implement a corporate compliance program designed to ensure that they prospectively complied with federal and state law governing medical reimbursements. See J.A. at 263-268. While the Doyles did not receive any damages for releasing the FCA claims, Dr. Doyle did receive *338 $150,000 in damages — and $50,000 for attorneys’ fees and costs — for settling the defamation action. See Gov’t Br. at 8; UTC Br. at 9-10; J.A. at 230. While § 3730(d)(2) of the FCA ensures that the United States receives at least 70% of any FCA settlement, the government did not receive any damages here because the FCA suit was settled for fees and injunc-tive relief.

Asserting that the settlement did not protect the interests of the public, the United States objected to the settlement. The government contended that § 3730(b)(1) of the FCA plainly provides that a qui tam action “may be dismissed only if the court and the Attorney General give written consent to the dismissal ...,” and therefore a relator cannot settle an FCA suit without the government’s permission. The United States further asserted that the language of the statute is unambiguous, and that such a veto power is essential to ensuring the vindication of the public interest in qui tam actions. Concerning the merits of the settlement, the United States contended that the compliance program was insufficient consideration for an all-encompassing release, and that the inadequacy of this consideration was exacerbated by the compliance program’s alleged lack of oversight mechanisms. The United States further objected that all monies flowed either to the relators or counsel, and suggested that the relators essentially channeled damages payments to the defamation action to avoid the settlement division requirements of § 3730(d)(2). See J.A. at 229-230.

The district court rejected the government’s argument that § 3730(b)(1) provides the Attorney General with an absolute veto of any proposed qui tam settlement. The district court held that the “consent” provision applies only to attempts to settle or dismiss actions pri- or to the expiration of the 60-day initial intervention period, and that to the extent the United States wanted to challenge a settlement after it had already declined intervention, it had to seek “good cause” intervention under § 3730(c)(3). In so holding, the district court further ruled that the government constructively consents to any prospective dismissal when it decides not to intervene. Finding that the government had “good cause” to object to the breadth of the waiver provisions, the district court allowed the government to intervene to challenge that portion of the settlement, but rejected its challenge to the monetary terms.

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United States v. Health Possibilities, P.S.C., 207 F.3d 335, 2000 WL 294175 (6th Cir. 2000).

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