1:18-cv-02600
E.D.N.YApr 30, 2024Background
- Relators (Brandt, Noria, Feliciano, and McGrath) brought a qui tam action under the False Claims Act (FCA) and New York law, alleging that East Coast Orthotic and Prosthetic Corp. (ECOP), Vincent A. Benenati, NYU Langone Health, and Maimonides Medical Center engaged in fraudulent Medicare/Medicaid billing via unlawful DME supply arrangements.
- The complaint alleged that ECOP’s exclusive contracts with hospitals violated the Stark Law and Anti-Kickback Statute, making their reimbursement claims false.
- An earlier, near-identical qui tam action was brought in 2015 (the "J. Doe Complaint"), covering the same allegations and parties, with dismissal following the government's decision to not intervene.
- In the current case, the government and NY State both again declined to intervene, and the relators repeatedly amended their complaint, ultimately filing a Third Amended Complaint (TAC).
- Defendants moved to dismiss, asserting (among other grounds) that the FCA’s "public disclosure bar" applied because the core allegations were previously disclosed in the 2015 suit.
- The court’s decision turned on whether the relators could qualify as "original sources" (i.e., offering information not otherwise public and provided voluntarily to the government), a requirement they had a prior opportunity to address.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| FCA Public Disclosure Bar | Relators are original sources with inside information | Prior complaint disclosed all relevant allegations | Bar applies; relators are not original sources |
| Adequacy of FCA Pleading | Relators possess firsthand, voluntarily disclosed info | Complaint lacks facts showing voluntary, pre-suit disclosure | Relators failed to sufficiently plead "original source" status |
| Leave to Amend Complaint | Should be granted another opportunity to replead | Further amendment is futile due to repeated failures | Denied; repeated failures and conclusory allegations |
| Supplemental Jurisdiction over State Claims | Federal law claims aside, state law claims should proceed | All federal claims eliminated, so state claims should be dismissed | Court declines jurisdiction over state claims |
Key Cases Cited
- Rockwell Int’l Corp. v. United States, 549 U.S. 457 (Supreme Court clarified that FCA’s pre-2010 public disclosure bar was jurisdictional and required independent evaluation of "original source" status).
- Ashcroft v. Iqbal, 556 U.S. 662 (sets pleading standard for sufficient factual allegations).
- Chinniah v. FERC, 62 F.4th 700 (Second Circuit restates that federal courts should ordinarily decline supplemental jurisdiction over state claims once federal claims are dismissed).
- Klein & Co. Futures v. Bd. of Trade of City of N.Y., 464 F.3d 255 (discusses Cohill factors and usual practice against exercising supplemental jurisdiction after dismissal of federal claims).