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United States ex rel. Willette v. University of Massachusetts

United States District Court, D. Massachusetts

January 21, 2015

UNITED STATES OF AMERICA and COMMONWEALTH OF MASSACHUSETTS, ex rel. MICHAEL A. WILLETTE, Plaintiffs,
v.
UNIVERSITY OF MASSACHUSETTS, WORCESTER A/K/A UNIVERSITY OF MASSACHUSETTS MEDICAL SCHOOL, THE ESTATE OF LEO VILLANI, AND JOHN DOES, et al., Defendants

For United States of America, ex. rel, Michael A. Willette, Plaintiff: Christine J. Wichers, United States Attorney's Office MA, Boston, MA.

For Michael A. Willette, ex rel, Plaintiff: Allyson Hope Cohen, LEAD ATTORNEY, Cohen Law Services, LLC, Westborough, MA; Brian J. McCormick, Jr., LEAD ATTORNEY, Ross Feller Casey, LLP, Philadelphia, PA; Matthew C. Monroe, LEAD ATTORNEY, PRO HAC VICE, Sheller, P.C., Philadelphia, PA.

For Commonwealth of Massachusetts, ex. rel, Michael A Willette, Plaintiff: George Zachos, LEAD ATTORNEY, Office of the Attorney General, Insurance & Financial Services, Boston, MA.

For University of Massachusetts, Worcester, also known as University of Massachusetts Medical School, Defendant: Daniel Meron, LEAD ATTORNEY, PRO HAC VICE, Latham & Watkins LLP, Washington, DC; Deirdre K. Heatwole, LEAD ATTORNEY, University of Massachusetts, Office of the General Counsel, Shrewsbury, MA.

For The Estate of Leo Villani, Defendant: Melissa E. Darigan, LEAD ATTORNEY, Partridge, Snow & Hahn LLP, Providence, RI; Deborah H. Dodge, Partridge Snow & Hahn LLP, Westborough, MA.

MEMORANDUM AND ORDER ON DEFENDANT UNIVERSITY OF MASSACHUSETTS MEDICAL SCHOOL'S MOTION TO DISMISS (Docket No. 39) AND PLAINTIFF-RELATOR'S CROSS-MOTION FOR LEAVE TO FILE A THIRD AMENDED COMPLAINT (Docket No. 47)

TIMOTHY S. HILLMAN, DISTRICT JUDGE.

Background

Plaintiff-Relator Michael Willette (" Willette" ) has filed a qui tam lawsuit against the University of Massachusetts Medical School (" UMMS" or " the medical school" ) and the Estate of Leo Villani, alleging that Defendants committed violations of the federal False Claims Act (Counts I, II, III, V, VI and VIII of the Second Amended Complaint) and the Massachusetts False Claims Act (Counts VII and IX).[1] As is relevant here, the False Claims Act imposes civil liability upon " [a]ny person" who (1) knowingly presents a false or fraudulent claim for payment to the United States government, (2) knowingly makes a false record or statement material to such a false claim, and (3) conspires to present such a false claim or make such a false statement. 31 U.S.C. § 3729(a)(1)(A)-(C).[2] The statute further prevents employers from retaliating against employees who engage in whistleblowing activity. 31 U.S.C. § 3730(h). Willette is a former employee of Commonwealth Medicine's Center for Health Care Financing (CHCF). Commonwealth Medicine is the health care consulting division of UMMS. CHCF is the unit of Commonwealth Medicine that is responsible for identifying third-party entities that may be responsible for the cost of health care services provided to certain patients.

The Second Amended Complaint describes two fraudulent schemes. First, the complaint alleges that in 2009, Willette and his friend and colleague Leo Villani discovered an error in the computer system used to allocate payments recovered from third-party entities. Villani took advantage of this computer glitch to divert over $3 million into his personal accounts. Willette discovered the fraud after Villani's death, when he was named personal representative for the Villani estate. Willette claims that upon reporting the theft, UMMS officials restricted his computer access while investigating Villani's fraud, and verbally demeaned Willette in front of coworkers. Second, the complaint alleges Commonwealth Medicine and CHCF falsely inflated the costs of Medicaid-related services for which the federal government provides reimbursement through the " federal financial participation" funding mechanism.

UMMS moves to dismiss on the basis that the medical school is not subject to qui tam liability in federal court, and the complaint fails to state a claim.

Discussion

Whether UMMS is Subject to Liability Under the False Claims Statutes

UMMS asserts that it cannot be sued under the federal False Claims Act (FCA) and the Massachusetts False Claims Act (MFCA) because the statutes do not subject the medical school to qui tam liability. The Supreme Court has held that the FCA does not authorize qui tam suits by private relators, like Willette, against states or state agencies. Vt. Agency of Natural Res. v. United States ex rel. Stevens, 529 U.S. 765, 787-88, 120 S.Ct. 1858, 146 L.Ed.2d 836 (2000). Thus, the question for this Court is whether the UMMS programs at issue are a state or state agency.[3] If so, then the FCA and MFCA claims against UMMS must be dismissed because states cannot be sued by private relators under either statute.[4]

The First Circuit has not yet announced a test for determining whether an entity is a state for purposes of the FCA. However, several circuits have decided that the appropriate test for this inquiry is the same " arm-of-the-state" analysis that courts use for sovereign immunity purposes. See, e.g., U.S. ex rel. Lesinski v. S. Fla Water Mgmt. Dist., 739 F.3d 598, 601-02 (11th Cir. 2014). Since no circuit has adopted a different ...


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