United States Ex Rel. Digital Healthcare, Inc. v. Affiliated Computer Services, Inc.
778 F. Supp. 2d 37
D.D.C.2011Background
- Digital Healthcare, Inc. (relator) sues Affiliated Computer Services, Inc. under the False Claims Act and related state laws for allegedly submitting false Medicaid claims.
- Relator alleges Affiliated, as a Medicaid fiscal agent and pharmacy benefits manager, failed to implement technology to identify third-party coverage, enabling improper Medicaid billing.
- Digital conducted a National Coordination of Benefits Cost Analysis (2000–2002) showing substantial third-party coverage among Affiliated's Medicaid patients and urging remediation with automated software.
- Affiliated allegedly refused to adopt the recommended software in meetings in 2002 and 2004, prompting Digital to file suit in 2006 (amended 2007) under seal.
- The complaint asserts one federal Count under the False Claims Act and seven related state-law FCA counts; the United States elected to decline intervention.
- Defendant moves to dismiss for lack of subject-matter jurisdiction (Rule 12(b)(1)) and for failure to plead fraud with particularity (Rule 9(b)); the court grants in part and denies in part.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether public disclosure deprives the court of jurisdiction over Count I | Relator argues public disclosures do not reveal allegations/transactions against Affiliated. | Affiliated argues public disclosures (GAO reports, hearings) trigger § 3730(e)(4)(A) bar. | Public disclosures did not trigger jurisdictional bar for Count I. |
| Whether the Amended Complaint pleads fraud with particularity under Rule 9(b) | Relator contends the complaint sufficiently pleads fraud and allows amendment. | Affiliated contends 9(b) requires identifying individuals, specific false claims, times, and places. | Count I dismissed for failure to plead with particularity; leave to amend granted. |
| Whether pendent jurisdiction over state-law FCA counts should be exercised | Relator seeks to maintain state-law counts under supplemental jurisdiction. | Affiliated argues discretion to decline jurisdiction over these claims if federal claim is dismissed. | Counts Two–Eight dismissed without prejudice. |
| Whether leave to amend should be granted | Relator requests leave to amend to cure deficiencies. | Affiliated contends amendment would be futile. | Leave to amend to cure deficiencies granted. |
Key Cases Cited
- United States ex rel. Totten v. Bombardier Corp., 286 F.3d 542 (D.C. Cir. 2002) (9(b) pleading requirements in FCA actions apply to fraud claims)
- United States ex rel. Williams v. Martin-Baker Aircraft Co., 389 F.3d 1251 (D.C. Cir. 2004) (Rule 9(b) requires identifying individuals involved in fraud)
- Findley v. FPC-Boron Employees' Club, 105 F.3d 675 (D.C. Cir. 1997) (public disclosures bar FCA action when allegations/transactions are disclosed)
- Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645 (D.C. Cir. 1994) (public-disclosure bar requires allegations/transactions, or their combination)
- Sandia Corp. v. United States Dept. of Energy, 70 F.3d 568 (10th Cir. 1995) (public disclosures detailing mechanics of fraud can trigger bar)
- Baltazar v. Warden, 635 F.3d 866 (7th Cir. 2011) (GAO reports documenting widespread false claims may not block all actions)