United States Ex Rel. Black v. Health & Hospital Corp. of Marion County
494 F. App'x 285
4th Cir.2012Background
- Relator Black filed a False Claims Act qui tam action Feb 12, 2008 against Health & Hospital Corp. (HHC); government declined to intervene; Black proceeded under 31 U.S.C. §3730(b)(4)(B).
- Black amended his complaint on Aug 23, 2010 alleging a scheme to obtain federal Medicaid reimbursement for nursing home expenditures actually not made by HHC, involving UP L/IGT/CPE financing mechanisms.
- The Amended Complaint asserts four FCA counts against HHC: false claims (a)(1), false records (a)(2), and conspiracy (a)(3).
- The district court dismissed the Amended Complaint Mar 28, 2011 for lack of subject-matter jurisdiction under the FCA public disclosure bar (31 U.S.C. § 3730(e)(4)) and, alternatively, for failure to state a claim; Black sought leave to file a Second Amended Complaint, which the court denied.
- On appeal, the Fourth Circuit addresses jurisdiction under the public disclosure bar, holds that public disclosures occurred and the relator is not an original source, and affirms dismissal without reaching alternate grounds; it also affirms the denial of leave to amend.
- The key financing issues involve UPL, IGTs, and CPEs used to maximize federal matching funds for Medicaid, which CMS publicly critiqued beginning in 2000 and proposed new regulations in 2007.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the public disclosure bar divests the court of jurisdiction | Black argues the Amended Complaint is independent of public disclosures. | HHC contends the public disclosures render the action non-justiciable under §3730(e)(4) | Yes; public disclosure occurred, divesting jurisdiction. |
| Whether Black’s allegations are based upon public disclosures | Amended Complaint asserts independent FCA theories not solely relying on disclosures. | Allegations largely mirror public CMS/GAO concerns about UPL/IGT schemes. | Yes; the allegations are based on public disclosures. |
| Whether Black is an original source with direct and independent knowledge | Black relied on his own investigations and communications with insiders. | Black did not have direct, independent knowledge; information largely from public sources. | No; Black failed to establish original source status. |
| Whether the district court abused its discretion in denying leave to amend | Black sought to cure deficiencies via amendment. | Amendment would be futile after multiple prior amendments. | No abuse of discretion; leave to amend denied. |
Key Cases Cited
- Graham Cnty. Soil & Water Conserv. Dist. v. United States ex rel. Wilson, 130 S. Ct. 1396 (2010) (public disclosure bar supports dismissal when government on notice of potential fraud)
- Vuyyuru v. Jadhav, 555 F.3d 337 (4th Cir. 2009) (public disclosure bar extends to partly based disclosures; original source analysis)
- Grayson v. Advanced Mgmt. Tech., Inc., 221 F.3d 580 (4th Cir. 2000) (definition of original source; direct and independent knowledge)
- Mann v. Heckler & Koch Def., Inc., 630 F.3d 338 (4th Cir. 2010) (FCA framework and relator procedure; public disclosure context)
- United States ex rel. Wilson v. Graham Cnty. Soil & Water Conserv. Dist., 528 F.3d 292 (4th Cir. 2008) (original source analysis and public disclosure interplay)