UNITED STATES OF AMERICA AND THE STATE OF NEW YORK ex rel. CHRISTOPHER NORIA, FRANK BRANDT, JOHN FELICIANO AND ROBERT McGRATH v. EAST COAST ORTHOTIC AND PROSTHETIC CORPORATION, VINCENT A. BENENATI, NYU LANGONE HEALTH SYSTEM AND MAIMONIDES MEDICAL CENTER
Case 1:18-cv-02600-NG-LB
UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK
April 30, 2024
GERSHON, United States District Judge
OPINION & ORDER; Document 97; PageID #: 1637
I. Introduction
Relators Frank Brandt, Christopher Noria, John Feliciano, and Robert McGrath bring this qui tam action on behalf of the United States and New York State against East Coast Orthotic and Prosthetic Corporation (“ECOP“), Vincent A. Benenati, NYU Langone Health System (“NYU“), and Maimonides Medical Center (“MMC“), alleging violations of the False Claims Act (“FCA“),
For the following reasons, defendants’ motions are granted.
The following facts are drawn from the TAC. Relators allege that ECOP, which supplies durable medical equipment (“DME“), entered into “exclusive contractual joint venture services agreements” with health care providers, including NYU and MMC. TAC ¶ 4. Under such agreements, ECOP supplied DME to Medicare or Medicaid patients, which were referred to them by health care providers. Then, either ECOP or the healthcare provider billed Medicare or Medicaid for the ECOP-provided DME. Relators allege that these “exclusive contractual joint venture service agreements” violated the Physician Self-Referral Law (the “Stark Law“),
III. The 2015 J. Doe Complaint
Before relators filed this action, on March 31, 2015, a qui tam action was filed, under seal, by a “J. Doe” relator on behalf of the United States and New York State against ECOP, Mr. Benenati, and “Healthcare Provider Does 1-30” (the “2015 J. Doe Complaint“). That action raised claims under the FCA and analogous New York State law and alleged the same fraudulent scheme as the TAC. Indeed, many allegations in the TAC are copied verbatim from the 2015 J. Doe Complaint. At a pre-motion conference in anticipation of a motion to dismiss the Second Amended Complaint (the “SAC“) in this action, relators’ former counsel, who also was counsel to the “J. Doe” relator in the 2015 action, explained that the 2015 J. Doe Complaint was filed on behalf of one of the relators in this action, relator Brandt.
On January 10, 2017, the United States declined to intervene in that action. On January 12, 2017, New York State also declined to intervene in that action, and, on that same day, the
IV. This Action‘s Procedural History
On May 2, 2018, the original complaint in this action was filed by “J. Does” relators, on behalf of the United States and New York State, against ECOP, Benenati, and “Healthcare Provider Does 1-30.” On April 2, 2019, relators filed an amended complaint, which named Brandt, Jose Martinez, and Noria as relators, and the same defendants. On December 21, 2020, New York State declined to intervene and, on January 19, 2021, the United States declined to intervene. On May 26, 2021, relators, again, amended their complaint and filed the SAC, which removed Martinez but still named Brandt and Noria as relators and ECOP, Benenati, NYU Langone Health, and MMC as defendants.
At a pre-motion conference in anticipation of defendants bringing motions to dismiss the SAC, the defendants argued, among other things, that the 2015 J. Doe Complaint barred this action under the FCA‘s public disclosure bar and that relators had not sufficiently alleged that they satisfied the public disclosure bar‘s “original source” exception. Hearing Tr. 15:5-6, Nov. 2, 2021. These issues were discussed at length at the pre-motion conference and relators’ former counsel explained that he did not think it would be “a difficult task in showing that [relators] are, indeed, original sources” if given the opportunity to re-plead. Id. 19:13-14. At the pre-motion conference, I granted relators’ request to re-plead to address the deficiencies in the SAC that were identified at the conference.
V. Discussion
A. FCA‘s Public Disclosure Bar
While defendants raise numerous arguments about the inadequacies of the TAC, I address only their argument that the 2015 J. Doe Complaint bars relators’ federal claims under the FCA‘s public disclosure bar and that there are insufficient allegations to show that relators meet the public disclosure bar‘s exception for an “original source of the information,” because that issue is dispositive and, insofar as it involves the court‘s subject matter jurisdiction, is fundamental.
The FCA includes several limiting provisions, including the “public disclosure bar,” which was enacted as part of the 1986 amendments to the FCA, and amended in 2010, as part of the Patient Protection and Affordable Care Act (the “PPACA“). See U.S. ex rel. CKD Project, LLC v. Fresenius Med. Care Holdings, Inc., 2022 WL 17818587, at *3 (2d Cir. Dec. 20, 2022). Relators allege that defendants have been engaged in unlawful conduct from “2009 through the present.” TAC ¶ 2. Accordingly, both versions of the public disclosure bar are relevant. The “pre-2010 version of the public disclosure bar applie[s] to any conduct that occurred prior to the amendment and [] the post-2010 version applie[s] to any conduct that occurred after the effective date of the 2010 amendment.” U.S. ex rel. Patriarca v. Siemens Healthcare Diagnostics, Inc., 295 F. Supp. 3d 186, 195 (E.D.N.Y. 2018) (first and third alterations in original) (collecting cases).
Under both versions, the Second Circuit employs a two-step approach. At step one, “courts look to whether the substance of a relator‘s claim had been disclosed prior to the filing of his suit.” CKD Project, 2022 WL 17818587, at *2. If so, “courts look to whether, if such disclosures had been made,” relator‘s claim may, nonetheless, proceed because he has established that he is an “original source of the information.” Id.
Relators do not contest step one, namely, that the 2015 J. Doe Complaint publicly disclosed the same FCA claims that are alleged in the TAC. At oral argument, relators confirmed that this public disclosure applies to their federal claims against all defendants. They argue only that their federal claims may proceed because they meet the public disclosure bar‘s exception for an “original source of the information.” Accordingly, I proceed to step two, whether relators meet the exception to the public disclosure bar.
The pre-2010 public disclosure bar defined an “original source” as an individual “who has direct and independent knowledge of the information on which the allegations are based” and has “voluntarily provided the information to the Government before filing an action under this section which is based on the information.”
In its original form, after the 1986 amendments, the public disclosure bar was “jurisdictional;” if the bar applied, it deprived the court of its subject matter jurisdiction over an action. Rockwell Int‘l Corp. v. United States, 549 U.S. 457, 467 (2007). As an issue of subject matter jurisdiction, under the pre-amendment public disclosure bar, courts have an independent obligation to determine whether the public disclosure bar applies and, if so, whether the original source exception is satisfied. See id. at 467-470. In Rockwell, for example, the Supreme Court explained that it “must” decide if the relator qualified as an original source, even if the defendant had conceded the issue, and determined that the relator did not qualify as one. Id. at 470. By contrast, the amended version of the public disclosure bar is no longer jurisdictional, but, instead, serves as a ground for dismissal, such “as an affirmative defense or in connection with [a] motion to dismiss.” U.S. ex rel. Chorches v. Am. Med. Response, Inc., 865 F.3d 71, 80 (2d Cir. 2017).
Under the pre- or post-amendment bar, to satisfy the original source exception, two requirements, among others, must be met. First, a relator must allege that information was provided to the government before a specified time period. The pre-amendment public disclosure bar requires that relators provide information to the Government “before filing an action under this section which is based on the information.”
Second, in both the pre- and post-amendment public disclosure bars, the relator must allege that he disclosed the information to the Government “voluntarily.” For example, the voluntariness requirement may be met where, apparently unconnected to the filing of a later qui tam lawsuit, the relator wrote a letter to the Department of Justice requesting an investigation; but it is not met where the relator made the disclosure pursuant to a legal obligation and in return for valuable consideration. See U.S. ex rel. Omni Healthcare Inc. v. U.S. Oncology, Inc., 2023 WL 5831140, at *4-5 (E.D.N.Y. Sept. 8, 2023) (collecting and discussing cases addressing the voluntariness requirement).
Relators bear the burden of proving the existence of subject matter jurisdiction, see Malik v. Meissner, 82 F.3d 560, 562 (2d Cir. 1996), and of pleading sufficient factual matter to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Relators have not met their burden. They do not allege that they meet either of the “original source” exception requirements discussed above. As to these requirements, relators allege only: “Each Relator has personal knowledge of the facts and is an original source of inside information, which they have voluntarily provided to the Government.” TAC ¶ 9. This single, conclusory allegation does not allege when the information was provided to the Government,
B. Dismissal With Prejudice
Defendants urge that any dismissal be with prejudice. While “[l]eave to amend should be ‘freely give[n] ... when justice so requires,‘” CKD Project, 2022 WL 17818587, at *4 (quoting
The TAC is relators’ fourth attempt to plead viable FCA claims (the fifth, if we include the 2015 J. Doe Complaint, which was filed on behalf of relator Brandt). Without offering specifics about how they could amend their complaint to meet the above-discussed “original source” exception requirements, at oral argument, the relators requested leave to file yet a fifth complaint should their original source allegations be found to be insufficient. However, as discussed above, prior to filing the TAC, relators were fully aware that defendants intended to challenge their claims under the FCA‘s public disclosure bar and that they would be required to adequately allege their “original source” status for their claims to survive a motion to dismiss. Indeed, at the pre-motion conference, relators’ former counsel expressly stated that relators would amend their pleading to bolster their “original source” allegations. Yet, regarding the
C. State Law Claims
Having dismissed the relators’ FCA claims, the remaining question is only whether to exercise supplemental jurisdiction over their analogous New York State law claims. See U.S. ex rel. Mohajer v. Omnicare, Inc., 525 F. Supp. 3d 447, 461-63 (S.D.N.Y. 2021). As relevant here,
Considering the Cohill factors, this case falls squarely into the “usual case” in which the factors point toward declining to exercise jurisdiction over the remaining state law claims. Accordingly, I decline to exercise supplemental jurisdiction over the remaining New York State law claims.
VI. Conclusion
For the reasons set forth above, the defendants’ motions to dismiss the TAC are granted. Relators’ FCA claims are dismissed with prejudice, and, as I decline to exercise supplemental jurisdiction over the remaining New York State law claims, they are dismissed without prejudice.
SO ORDERED.
/S/
NINA GERSHON
United States District Judge
April 30, 2024
Brooklyn, New York