SHELDON CHO, MD, Relators and on behalf of the States of Florida, Colorado, Georgia, North Carolina and Texas, DAWN BAKER, Relators and on behalf of the States of Florida, Colorado, Georgia, North Carolina and Texas v. SURGERY PARTNERS, INC., et al.
No. 20-14109
United States Court of Appeals For the Eleventh Circuit
April 1, 2022
[PUBLISH]
versus
SURGERY PARTNERS, INC., et al.,
Defendants,
Defendants-Appellees-Cross Appellants.
Appeals from the United States District Court for the Middle District of Florida
D.C. Docket No. 8:17-cv-00983-VMC-AEP
Before WILSON, LAGOA, Circuit Judges, and MARTINEZ*, District Judge.
WILSON, Circuit Judge:
The False Claims Act (FCA) allows private parties, known as qui tam relators, to bring suit on behalf of the United States against persons who submitted false claims to the government. In this case, Dawn Baker and Dr. Sheldon Cho (the Relators) allege that H.I.G. Capital, LLC and H.I.G. Surgery Centers, LLC (collectively,
* Honorable Jose E. Martinez, United States District Judge for the Southern District of Florida, sitting by designation.
After careful review and with the benefit of oral argument, we hold, first, that the FCA‘s plain language makes the original complaint—not the amended complaint—the proper point of reference for the first-to-file analysis. Second, we hold that this action is related to an earlier-filed action that alleged the same material elements of fraud. Therefore, we affirm the district court‘s dismissal of the complaint without prejudice pursuant to the first-to-file bar. Finally, we deny H.I.G.‘s cross-appeal. Even assuming we could enlarge H.I.G.‘s relief based on grounds the district court did not reach, we decline to do so.
We begin with an overview of the facts and procedural background of this case. Because this is an appeal from a motion to dismiss, we take as true the facts pleaded in the complaint and construe them in the light most favorable to the Relators. Belanger v. Salvation Army, 556 F.3d 1153, 1155 (11th Cir. 2009).
In 2009, H.I.G., an international private equity firm, purchased Surgery Partners, Inc., along with its subsidiaries and affiliates (collectively, Surgery Partners). Surgery Partners owned and operated a network of surgery and pain-management centers. At the time of the acquisition, an H.I.G. affiliate entered into a management contract with Surgery Partners, giving H.I.G. control over Surgery Partners’ operation. Shortly thereafter, H.I.G. placed three of its representatives on Surgery Partners’ Board of Directors. In 2011, H.I.G. and Surgery Partners formed a diagnostic testing business called Logan Laboratories, LLC (Logan Labs), which specialized in urine drug testing (UDT).
There are two types of UDT: qualitative, which can detect the presence of drugs in a patient‘s system, and quantitative, which can detect how much of a drug is in a patient‘s system. While quantitative UDT has the advantage of providing more information, it is often not medically necessary. And because it must be performed in a laboratory, by laboratory professionals, it is more expensive than qualitative UDT.
In April 2017, the Relators—a pain management specialist and a physician recruiter—filed a complaint under the FCA and several state fraud statutes alleging that dozens of defendants had engaged in a fraudulent scheme. The Relators amended their complaint as of right in January 2019. A year later, the United States intervened as to some defendants named in the action, but declined to intervene as to H.I.G.
Importantly, however, a separate group of relators had also filed an FCA action (hereinafter, the Ashton Action) under seal against Surgery Partners and Logan Labs in connection with the same fraudulent scheme, though they did not name the H.I.G.
Subsequently, the Relators in this case filed a second amended complaint narrowing their allegations to focus on H.I.G.‘s conduct. The second amended complaint brought causes of action against the H.I.G. entities for violation of the FCA,
The district court granted the motion, finding that the second amended complaint was barred by the FCA‘s first-to-file rule. Although the Relators filed the second amended complaint at a time when the Ashton Action was no longer pending, the district court held that the relevant question was whether the Ashton Action was pending at the time the Relators filed their initial complaint. Because the Ashton Action was pending at that time, the district court concluded that it barred the Relators’ action so long as the two actions were related. The district court held next that the two actions were related because “they allege the same essential facts regarding the UDT fraud against the Government committed by Surgery Partners and Logan Labs.” Accordingly, the district court dismissed the claim without prejudice.1 The Relators appealed the district court‘s grant of the motion to dismiss.
II.
We review de novo a district court‘s grant of a motion to dismiss. Wiersum v. U.S. Bank, N.A., 785 F.3d 483, 485 (11th Cir. 2015). Likewise, we review de novo a district court‘s interpretation of a statute. Id.
We split our discussion into two parts. First, we address whether the FCA bars a complaint that is (a) filed while a related action is pending, but (b) amended after the related action is dismissed. Second, we determine the proper standard for analyzing whether a claim is related to a previously-filed action, and we apply that standard to the facts before us.
A.
The Relators’ first argument on appeal is that the FCA‘s first-to-file bar is inapplicable because the Ashton Action was no longer pending at the time the Relators filed the second amended complaint. Under the first-to-file bar, “[w]hen a person brings an action under [the FCA], no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.”
Here, there is no dispute that the Ashton Action was still pending when the Relators filed their original complaint. But when the Relators filed their second amended complaint, the
We begin our analysis, as always, with the statutory text. In this case, it happens to be fairly straightforward: a person may not “bring a related action” while the first-filed action is pending.
Applying that settled definition here, the statutory prohibition turns on the moment the Relators initiated legal
The Relators offer two counterarguments. First, they argue that the purpose of the FCA is to encourage more private enforcement, and that we should interpret the first-to-file bar narrowly in furtherance of that purpose. As we have explained, however, “[w]e interpret and apply statutes, not congressional purposes.” In re Hedrick, 524 F.3d 1175, 1188 (11th Cir. 2008). And in any event, the FCA does not pursue a singular purpose. It pursues the “twin goals” of rewarding whistleblowers for bringing fraud to the
Second, the Relators argue that their interpretation of the first-to-file bar finds support in Supreme Court precedent and our own precedent. At the Supreme Court level, the Relators point to Rockwell International Corp. v. United States, 549 U.S. 457 (2007), a case that involved the FCA‘s public-disclosure bar and its original-source exception. Under the then-applicable version of the statute, courts lacked jurisdiction over qui tam suits that were “based upon the public disclosure of allegations or transactions ‘unless . . . the person bringing the action [was] an original source of the information.‘” Id. at 460 (quoting
What we can take from Rockwell is that where the analysis turns on the substance of a relator‘s allegations in the public-
As to our own precedent, the Relators cite to Makro Capital of America, Inc. v. UBS AG, 543 F.3d 1254 (11th Cir. 2008), but that decision too is distinguishable. In Makro, the original complaint was not a qui tam action under the FCA; it alleged non-FCA fraud and tort claims. Id. at 1256. After the plaintiff amended its complaint, restyling it as an FCA qui tam action, the district court granted dismissal based on the then-applicable government knowledge bar,
B.
Having determined that the first-to-file bar applies to the filing of the original complaint, we now address the Relators’ argument that, in any event, their complaint is unrelated to the Ashton Action.
We have not yet adopted a test for determining whether two qui tam actions are related. Both parties suggest that we follow our sister circuits in adopting the “same material elements” test, also called the “same essential elements” test, which the district court applied below. See United States ex rel. Chovanec v. Apria Healthcare Grp. Inc., 606 F.3d 361, 363 (7th Cir. 2010) (collecting cases). Under this test, two actions are related if they “incorporate ‘the same material elements of fraud.‘” Wood, 899 F.3d at 169. That is, “to be related, the cases must rely on the same ‘essential facts.‘” Id. In applying this test, several circuits have compared the two complaints “side-by-side” and asked “whether the later complaint ‘alleges a fraudulent scheme the government already would be equipped to investigate based on the first complaint.‘” United States ex rel. Heath v. AT&T, Inc., 791 F.3d 112, 121 (D.C. Cir. 2015) (alterations adopted); see also Wood, 899 F.3d
As these courts have emphasized, this test finds support in the text of the FCA. Under
Our next task is to determine whether the district court correctly applied this test to conclude that the Relators’ original complaint alleged the same essential facts as did the original complaint in the Ashton Action, which was pending at the time.4 The Relators contend that it did not for two reasons. First, the Relators named the H.I.G. entities as defendants, whereas the Ashton Action did not. Second, in addition to the Relators’ substantive FCA claim, they alleged a conspiracy, which the Ashton relators did not allege.
In Hampton, the earlier-filed action was brought against one corporate entity, HCA, alleging a “corporate-wide” fraudulent scheme that HCA carried out through its subsidiaries in thirty-seven states. 318 F.3d at 218. A later-filed action alleged that an additional HCA subsidiary perpetrated the same fraudulent scheme in six other states. Id. The court held that merely adding another corporate subsidiary did not amount to a difference in the material elements of the alleged fraud. Id. Therefore, the later-filed action was barred. At the other end of the spectrum is Heath. In that case, the earlier-filed action alleged that Wisconsin Bell, Inc., a subsidiary of AT&T, Inc., engaged in a scheme to defraud the government. Heath, 791 F.3d at 118. That scheme, according to
These cases help illustrate that there is no bright-line rule as to whether naming an additional defendant states a different essential claim. We must determine whether the introduction of a new defendant amounts to allegations of a “different” or “more far-reaching scheme” than was alleged in the earlier-filed action. See id.
The Relators argue that their allegations are indeed broader than those in the Ashton Action. Specifically, they argue that their complaint puts the government on notice that the scheme “involved a unique breed of healthcare fraud, designed and directed by outside capital.” But when comparing the Relators’ complaint side-by-side with the Ashton complaint, the Relators’ allegations do not meaningfully expand the scope of the UDT scheme or suggest that it was more pervasive than the Ashton Action indicated.5 See id. Both complaints allege that: (1) Surgery Partners and Logan
Taken as a whole, both complaints allege the same essential UDT scheme carried out by Surgery Partners and Logan Labs. Based on the Ashton Action, the government was already alerted to that scheme, and would have been equipped to investigate whether any corporate affiliates or investors connected to Surgery Partners and Logan Labs were participants. The Relators did not allege different material facts by naming H.I.G. as a defendant without making any allegations that would meaningfully magnify the scope or pervasiveness of the scheme.
In urging that we reach the contrary conclusion, the Relators analogize a case in the public-disclosure context: Cooper v. Blue Cross & Blue Shield of Florida, Inc., 19 F.3d 562 (11th Cir. 1994) (per curiam). In Cooper, the question was whether public disclosure of industry-wide insurance fraud, as well as allegations against Blue Cross Blue Shield of Georgia (BCBSG) amounted to public disclosure of fraud by BCBSG‘s sister corporation—Blue Cross Blue Shield of Florida. Id. at 566-67. We held that it did not,
We find, however, that Cooper is distinguishable. To be sure, a public disclosure that one of a company‘s subsidiaries engaged in fraud may not alert the government to a parallel, distinct scheme by another subsidiary. But our facts are different. A comparison of the two complaints at issue here belies any notion that the Relators are alleging a fraudulent scheme distinct from the one alleged in the Ashton Action. The Relators allege that an additional player who was affiliated with Surgery Partners and Logan Labs had its hands in the same fraudulent scheme. The government would have been equipped, based on the Ashton Action, to investigate this matter. Therefore, the Relators’ claim is related to the Ashton Action for purposes of the first-to-file bar.
Finally, the Relators’ raise a separate argument that their FCA conspiracy claim under
IV.
In conclusion, when relators file a qui tam action that is related to an already-pending action, that claim is incurably flawed from the moment it is filed. Here, the Relators’ claims focus on the same fraudulent scheme at issue in the Ashton Action, which was pending when the Relators brought this action. Therefore, the Relators’ claim is barred under the FCA‘s first-to-file rule. We affirm the district court‘s dismissal without prejudice.
AFFIRMED.
Notes
Though we acknowledge that the First Circuit reached the contrary conclusion, it did not explain how its reading comports with the plain language of the first-to-file bar. See United States ex rel. Gadbois v. PharMerica Corp., 809 F.3d 1, 3-4 (1st Cir. 2015). Therefore, we find that decision unpersuasive.