72 Cal.App.5th 753
Cal. Ct. App.2021Background
- The IFPA permits qui tam suits by private relators to recover penalties for fraudulent insurance claims and contains a first-to-file bar (§ 1871.7(e)(5)) that prevents a later related action based on the facts underlying a pending action.
- Allstate filed a sealed IFPA suit on Sept. 27, 2019 alleging Dr. Sonny Rubin engaged in a billing fraud involving epidural steroid injections and manipulation/unbundling of CPT codes; Allstate sought penalties only for claims presented to Allstate.
- State Farm filed its IFPA suit on Oct. 23, 2019 against Dr. Rubin and related entities, alleging fraudulent billing for (1) fluoroscopy, (2) epidurography, (3) myelography, (4) evaluation & management services (all tied to epidural steroid injections), and (5) largely independent MRI-interpretation charges; it sought penalties for false claims submitted to any insurer.
- Defendants demurred, arguing State Farm’s complaint was barred by Allstate’s earlier suit under the IFPA first-to-file rule; the trial court sustained the demurrer and entered judgment against State Farm.
- The Court of Appeal reversed and remanded, holding the IFPA first-to-file rule requires (1) comparison of the victim pools alleged in each complaint and (2) assessment whether the earlier complaint gave the government sufficient notice of the same fraudulent scheme; result: State Farm is barred only as to penalties for the epidural-related false claims submitted to Allstate, but may pursue penalties for epidural-related claims submitted to other insurers and for the independent MRI charges (including those billed to Allstate).
Issues
| Issue | State Farm's Argument | Defendants'/Allstate's Argument | Held |
|---|---|---|---|
| Does the IFPA first‑to‑file rule bar State Farm’s later IFPA action because Allstate filed first? | State Farm: its complaint alleges a different/distinct fraud and so is not barred. | Defendants: the complaints allege the same fraudulent billing scheme; first‑to‑file bars State Farm. | The court reversed: first‑to‑file requires assessing victim pools and alleged scheme; demurrer improperly sustained in full. |
| Is the identity/scope of insurer‑victims immaterial (as under FCA) or material under the IFPA? | State Farm: it can seek penalties for claims submitted to any insurer; victim identity not controlling. | Allstate: earlier suit covering Allstate’s victims should bar State Farm’s broader action. | Victim identity is material under IFPA; a later suit alleging same fraud is barred only to the extent it seeks penalties for victims already covered by the earlier suit. |
| Did Allstate’s complaint provide sufficient notice to the government of State Farm’s MRI claims (independently billed)? | State Farm: Allstate’s complaint did not put the Commissioner on notice of the independent MRI charges. | Defendants/Allstate: Allstate alleged manipulation/unbundling of CPT codes broadly; government was on notice of the scheme. | Court: Allstate put government on notice as to epidural‑related unbundling but not as to the predominantly independent MRI charges; State Farm may pursue those MRI claims (including against Allstate). |
Key Cases Cited
- People ex rel. Allstate Ins. Co. v. Weitzman, 107 Cal.App.4th 534 (Cal. Ct. App. 2003) (discusses IFPA purpose and that multiple insurer relators can increase recovery)
- State of California ex rel. Metz v. CCC Information Services, Inc., 149 Cal.App.4th 402 (Cal. Ct. App. 2007) (limited California precedent applying IFPA first‑to‑file rule)
- United States v. Millenium Laboratories, Inc., 923 F.3d 240 (1st Cir. 2019) (describes FCA first‑to‑file standard and complaint‑comparison approach)
- United States ex rel. Heineman‑Guta v. Guidant Corp., 718 F.3d 28 (1st Cir. 2013) (FCA: first‑filed complaint bars later suits that duplicate essential facts)
- United States ex rel. Batiste v. SLM Corp., 659 F.3d 1204 (D.C. Cir. 2011) (focus on whether the earlier complaint supplied sufficient notice for government investigation)
- United States ex rel. Lujan v. Hughes Aircraft Co., 243 F.3d 1181 (9th Cir. 2001) (FCA standard: later suits barred if they allege the same material elements of fraud)