United States ex rel. Drakeford v. Tuomey - 792 F.3d 364 (4th Cir. 2015)

Rule:

The False Claims Act (FCA), 31 U.S.C.S. § 3729 et seq., imposes civil liability on any person who knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval to an officer or employee of the United States Government. 31 U.S.C.S. § 3729(a)(1)(A), (b)(2)(A)(i). Under the FCA, the term "knowingly" means that a person, with respect to information contained in a claim: (1) has actual knowledge of the information; (2) acts in deliberate ignorance of the truth or falsity of the information; or (3) acts in reckless disregard of the truth or falsity of the information. § 3729(b)(1). The purpose of the FCA's scienter requirement is to avoid punishing honest mistakes or incorrect claims submitted through mere negligence.

Facts:

Tuomey Healthcare System, Inc. sought to negotiate part-time employment contract with a number of local physicians, including Dr. Michael Drakeford, an orthopedic surgeon. Drakeford believed that the proposed contracts violated the Stark Law because the physicians were being paid in excess of their collections. Eventually, Drakeford declined to enter into a contract with Tuomey. He later sued the hospital under the qui tam provisions of the False Claims Act ("FCA"), 31 U.S.C. §§ 3729-33 (2012). The government intervened. The jury determined that Tuomey did not violate the FCA. The district court, however, vacated the jury's verdict and granted the government a new trial after concluding that it had erroneously excluded excerpts of a Tuomey executive's deposition testimony. The jury in the second trial found that Tuomey knowingly submitted 21,730 false claims to Medicare for reimbursement. The district court then entered final judgment for the government and awarded damages and civil penalties totaling $237,454,195. On appeal, Tuomey argued that the district court erred in granting the government's motion for a new trial. It also argued that it was entitled to judgment as a matter of law because it did not violate the FCA.

Issue:

1. Did the district court err in granting the government’s motion for a new trial?
2. Under the circumstances, did the hospital violate the False Claims Act?

Answer:

1) No. 2) Yes.

Conclusion:

The Court held that a new trial was properly granted since the testimony of the attorney, who was an undisputed expert, concerning warnings to the hospital in detail that its part-time employment contracts with physicians involved prohibited referrals was strong evidence of the hospital's intent. The Court further held that the evidence was sufficient to find that the hospital violated the False Claims Act, 31 U.S.C.S. § 3729 et seq., since the evidence indicated that the hospital paid aggregate compensation to physicians that varied with or took into account the volume or value of actual or anticipated referrals to the hospital, and that the hospital shopped for legal opinions rather than relying upon the advice of counsel.