Health Law Daily Government presence in qui tam litigation deemed ‘independent and derivative’
Monday, September 10, 2018

Government presence in qui tam litigation deemed ‘independent and derivative’

By Vanessa M. Cross, J.D., LL.M.

In an appeal brought by United Biologics, L.L.C. (United), the Fifth Circuit affirmed the district court's grant of a motion to voluntary dismiss with prejudice a qui tam action against United brought by board-certified allergists (relators) licensed to practice medicine in Texas. The grant of the motion against the relators only, and not the Government, makes clear that the non-intervening Government has both an independent and derivative presence in a qui tam action. Based on the ruling, the Government is allowed to continue to pursue its federal investigation against United for alleged False Claims Act (FCA) violations that arose in Georgia (U.S. ex rel. Vaughn v. United Biologics, LLC, September 7, 2018, Clement, E.).

Background. The relators filed their qui tam action on August 16, 2013 against United, the owner and operator of remote allergy centers that provide allergy screenings and treatments. The lawsuit alleged that United improperly billed government health care programs for unnecessary or unapproved medical treatments through non-allergist physicians who referred their patients to United. The relators also alleged that United was permitted to run remote allergy centers in the offices and clinics of these non-allergist physicians and paid them illegal kickbacks for subsequent Medicare reimbursements.

On May 1, 2013, the Government made its initial entry of appearance in the qui tamaction. It petitioned for, and received, five extension to the initial 60-day deadline to make its intervention decision. While the Government would ultimately demur, refusing to intervene in the relators' action, it had been investigating United's practices in Atlanta since January 2013. According to the Government, this investigation was unknown to the relators at the time they filed their qui tam action.

Leading up to the dismissal. The basis of United's appeal lay in its interest in a Georgia qui tam claim that was filed in May 2014. In fact, prior to the district court's grant of the realtors' motion to dismiss, the Government moved to transfer the Texas case to the Northern District of Georgia. In October 2015, United filed a motion to dismiss for failing to state a claim. In November 2015, the next month, the Government gave notice of its decision not to intervene in the relators' action.

On August 24, 2016, the court denied United's motion to dismiss. On September 12, 2016, United filed an answer and a notice to the district court that it had filed a motion to transfer venue in the Georgia qui tam action on grounds that the Texas action was filed first. The Government's motion for the Texas action to be transferred to Georgia based on the ongoing federal investigation there was denied by the court.

On October 24, 2016, the relators notified opposing counsel of its intent to voluntarily dismiss their action with prejudice to themselves but without prejudice to the Government. The next day, without responding to the relators, United filed a motion for summary judgment. Hours later, the relators filed their written motion to voluntarily dismiss the case with prejudice as to themselves but without prejudice to the Government. The relators also responded to United's motions to transfer and for summary judgment. The Government filed a written consent to the relators' dismissal request. The district court granted the relators' motion to dismiss, which was appealed by United.

The appeal. United's appeal raises three challenges: (1) the district court erred when it dismissed the relators with prejudice and the Government without prejudice; (2) the Government's and district court's consent to the realtors' motion to dismiss failed to satisfy FCA requirements; and (3) the district court erred when it granted the realtors' voluntary dismiss under Rule 41(a)(2).

In affirming the district court's grant of the relators' voluntary dismissal, the Fifth Circuit first addressed the issue of whether the non-intervening Government may be dismissed without prejudice when relators voluntarily dismiss themselves with prejudice. The Fifth Circuit held that the Government need not be bound by a qui tam relator's voluntary decision to quit the case because the non-intervening Government has both an independent and derivative presence in a qui tam lawsuit.

As to United's second challenge, the Fifth Circuit disagreed with United's assertion that it was entitled to a more thorough explanation of the Government's or the district court's reasoning in consenting to the dismissal. Lastly, the appellate court found no abuse of discretion in the district court's grant of the motion to dismiss.

The dismissal's effect. The effect of the Fifth Circuit's affirming the district court's grant of the relators' motion to dismiss with prejudice to itself is that the Georgia qui tam action is dismissed. Of greater interest to United, the absence of prejudice to the Government in the dismissal means that the Government will be allowed to pursue its federal investigation in Georgia.

The case is No. 17-20389.

Attorneys: Patrick J. O'Connell (Law Offices of Patrick J. O'Connell, PLLC) for Michael Vaughn. Ronald Casey Low (Pillsbury Winthrop Shaw Pittman, LLP) for United Biologics, LLC.

Companies: United Biologics, LLC

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