United States E Rel. Phalp v. Lincare Holdings, Inc.
2017 U.S. App. LEXIS 9276
| 11th Cir. | 2017Background
- Relators (former Lincare salespersons) sued Lincare/Diabetic Experts under the False Claims Act (FCA), alleging Medicare claims were submitted without proper beneficiary authorization and following unlawful telemarketing.
- Diabetic Experts sold diabetic testing supplies after calling individuals who had previously received Medicare-covered DME from Lincare; it used generic assignment-of-benefits (AOB) forms given to Lincare rather than AOBs specific to diabetic supplies.
- Relators presented nine exemplar Medicare claims (six in the first round, three later) as representative evidence of the alleged practices.
- District court granted summary judgment for Defendants on both theories: (1) Relators failed to show Defendants had the requisite scienter for FCA liability; (2) telemarketing calls fell within Medicare exceptions (either prior furnishing within 15 months or written consent to contact affiliates).
- Eleventh Circuit affirmed, but clarified the district court applied an incorrect scienter rule (defendant’s reasonable interpretation of an ambiguous regulation does not automatically negate scienter); nonetheless, the relators’ evidence was insufficient under the correct standard.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether claims submitted using generic AOBs gave rise to FCA liability (false certification) | Phalp: Using Lincare AOBs for diabetic supplies rendered claims false because new, specific authorizations were required; thus claims were knowingly false | Lincare: AOBs and regulatory language were ambiguous; defendants reasonably interpreted them as permitting use of existing AOBs, so no knowing submission of false claims | Court: Affirmed summary judgment — relators failed to show defendants acted with actual knowledge, deliberate ignorance, or reckless disregard; ambiguity does not foreclose scienter inquiry, but evidence here was insufficient |
| Whether emails and internal documents established scienter | Phalp: Email exchanges (including November 2008) and other internal communications show Lincare knew or should have known AOB practice was noncompliant | Lincare: Emails are weak — one concerned a different issue, one postdated transactions; no evidence employees believed regulations were violated | Court: Emails insufficient to create genuine dispute of scienter; summary judgment proper |
| Whether telemarketing calls violated Medicare’s unsolicited-contact prohibition | Phalp: Calls to Medicare beneficiaries constituted unlawful unsolicited telemarketing because Diabetic Experts was not the same supplier or lacked consent | Lincare: Calls fit exceptions — (a) beneficiaries had received a Medicare-covered item from Lincare within 15 months; or (b) beneficiaries gave written consent to contact supplier and its affiliates | Court: Affirmed — six exemplars fell within the 15-month exception; the three later exemplars included written consents covering affiliates, so no violation |
| Whether district court abused discretion by ruling before completion of discovery | Phalp: Denial of additional discovery (on AOB consent) prejudiced relators and warranted reversal | Lincare: Outstanding discovery related to damages only and would not affect summary-judgment issues | Court: No abuse of discretion — relators failed to show substantial harm or how further discovery would create a genuine factual dispute |
Key Cases Cited
- United States ex rel. Hixson v. Health Mgt. Sys., Inc., 613 F.3d 1186 (8th Cir.) (discusses need to show no reasonable interpretation of law that would make statement true)
- United States v. R&F Props. of Lake Cty., Inc., 433 F.3d 1349 (11th Cir.) (ambiguity in regulation does not automatically preclude a fact issue on defendants’ understanding/scienter)
- United States ex rel. Minn. Ass’n of Nurse Anesthetists v. Allina Health Sys. Corp., 276 F.3d 1032 (8th Cir.) (scienter may be shown where defendant knowingly disregards proper interpretation of ambiguous regulation)
- United States ex rel. Clausen v. Lab. Corp. of Am., 290 F.3d 130 (11th Cir.) (FCA liability requires that the claimant knowingly seek government payment it is not entitled to; regulatory violations alone are insufficient)
- Urquilla-Diaz v. Kaplan Univ., 780 F.3d 1039 (11th Cir.) (standard for summary judgment and scope of discovery rulings)
- Haynes v. McCalla Raymer, LLC, 793 F.3d 1246 (11th Cir.) (de novo review of summary judgment rulings)