United States District Court, D. Massachusetts
UNITED STATES OF AMERICA, ex rel. CHRISTOPHER DRENNEN, Relator,
v.
FRESENIUS MEDICAL CARE HOLDINGS, INC., d/b/a FRESENIUS MEDICAL CARE NORTH AMERICA, Defendant.
OPINION AND ORDER
George
A. O'Toole, Jr. United States District Judge
The
relator, Christopher Drennen, filed an original complaint
under seal in February 2009, asserting violations by the
defendant of the False Claims Act, 31 U.S.C. § 3729,
et seq. The complaint alleged that Fresenius had
billed the federal government for tests that were not
reasonable or medically necessary under applicable
guidelines. The government moved three times to extend the
time within which it could decide whether to elect to
intervene in the case as a plaintiff, and the three
extensions were granted. However, in granting the third
extension, the Court noted that there would be “[n]o
further continuances.” (Order Granting United
States' Mot. for Ext. of Time to Intervn. (dkt. no. 19).)
Nevertheless, a few months later the government asked for a
further extension of time to decide whether to elect to
intervene, which the Court denied. The complaint was unsealed
in February of 2011, and later amended the following July.
On
October 2, 2015, more than six and a half years after the
relator filed his original complaint and one year after the
completion of fact discovery, the government moved to
“partially” intervene in “both
counts” of the relator's first amended complaint
“to the extent that relator alleges that, between
February 10, 2003, and December 31, 2010, defendant Fresenius
filed false claims with Medicare for medically unnecessary
hepatitis B surface antigen (BsAG) tests.” (United
States' Mot. for Leave to Part. Intervn. 1 (dkt. no.
178).). On March 31, 2017, the Court granted the
government's motion, allowing it to intervene, but added
that the government would not be afforded an opportunity for
additional discovery. Two weeks later, the government filed
its complaint in intervention, which purported to add new
claims to the realtor's complaint. The newly proposed
complaint is the subject of Fresenius' motion to strike
or dismiss.
The
magistrate judge to whom this case was referred has issued a
Report and Recommendation (“R&R”) (dkt. no.
269) recommending that the defendant's Motion to Strike
or Dismiss Portions of the United States' Complaint in
Intervention (dkt. no. 214) be denied. Pending before the
Court are Fresenius' objections to that R&R.
Fresenius
first objects to the R&R's recommendation that the
government's newly asserted claims be permitted to
survive because they were not expressly precluded by any
prior order of this Court.[1] Fresenius argues that, as a late
intervenor the government may not unilaterally widen the
scope of the litigation at this late stage, but must take the
case as it stands.
The
False Claims Act contemplates government intervention in two
circumstances: the government “may elect” to
intervene while the relator's complaint is yet under
seal, see 31 U.S.C. § 3730(b), et
seq., and a court “may . . . permit” the
government to intervene at a later date despite not having
previously made a timely election, see id. §
3730(c)(3).[2] The statutory language is plain. The
former section provides for government intervention as of
right at its sole option (“may elect”), while
later intervention after the case has been unsealed requires
the court's permission and a showing of “good
cause.” See § 3730(c)(3).
Both
sections address “intervention, ” which is a
legal term of art in the context of civil litigation. As
such, it invites reference to Rule 24 of the Federal Rules of
Civil Procedure and the body of case law that accompanies it.
See Rockwell Int'l Corp. v. United States, 549
U.S. 457, 478 (2007) (referencing general intervention
principles in considering intervention under the False Claims
Act); United States ex rel. Precision Co. v. Koch Indus.,
Inc., 31 F.3d 1015, 1017 (10th Cir. 1994) (using Rule 24
to guide analysis of intervention under the False Claims
Act); see also United States ex rel. Hall v.
Schwartzman, 887 F.Supp. 60, 62 (E.D.N.Y. 1995) (looking
to Rule 24 in qui tam case).
Rule 24
authorizes both intervention of right, when a court
“must permit” a party to intervene in an existing
civil action, Fed.R.Civ.P. 24(a), and permissive
intervention, when a court “may permit” it under
certain circumstances, including when the proposed intervenor
“is given a conditional right to intervene by a federal
statute.” Fed.R.Civ.P. 24(b)(1)(A). The False Claims
Act is similar. Under § 3730(b)(2), the government has a
right, at its election and without the need for judicial
permission, to intervene while the complaint filed by the
relator remains under seal. Under § 3730(c)(3), after
the government has originally elected not to intervene, the
court “may nevertheless permit [it] to intervene at a
later date upon a showing of good cause.” Intervention
under this provision is not of right, but literally
permissive. Because of the similarity of the authorities, it
is appropriate in considering intervention under § 3730
to take account of relevant guidance from cases decided under
Rule 24.
Under
Rule 24, it is clear that in cases of both permissive
intervention and intervention of right “courts have
broad authority to limit the ability of the parties to expand
the scope of a proceeding beyond the issues litigated by the
original parties.” Johnson v. Bd. of Regents,
263 F.3d 1234, 1269 (11th Cir. 2001) (citations omitted).
This holds true even when a party intervenes of right.
Stringfellow v. Concerned Neighbors in Action, 480
U.S. 370, 383 (1987) (Brennan, J., concurring)
(“[R]estrictions on participation may also be placed on
an intervenor of right and on an original party.”)
(citing Advisory Committee Notes on Fed.R.Civ.P. 24(a));
Beauregard, Inc. v. Sword Servs., LLC, 107 F.3d 351,
352-53 (5th Cir. 1997) (“[I]t is now a firmly
established principle that reasonable conditions may be
imposed even upon one who intervenes as of right.”);
Newport News Shipbuilding & Drydock Co. v. Peninsula
Shipbuilders' Ass'n, 646 F.2d 117, 122 (4th Cir.
1981) (“Even intervention of right may properly be made
conditional by the exigencies of the particular
case.”); Shore v. Parklane Hosiery Co., 606
F.2d 354, 356-57 (2d Cir. 1979) (noting that the 1966
amendment to Rule 24(a) allowing restrictions on intervention
as of right “was not an innovative suggestion but was
instead the recognition of a well-established
practice”). Stated differently, courts recognize a
presumption of sorts that intervenors take the case as it
stands unless permitted otherwise.
The
objection by Fresenius correctly notes that the R&R did
not recognize such a presumption. The R&R's finding
that there was “nothing in the District Judge's
decision to indicate that he intended to limit the
Government's authority [to bring additional
claims]” may or may not be an accurate observation, but
it proposes the wrong standard. (R&R 6.) The question is
not whether this court expressly precluded expanded claims,
but rather whether permission to add those claims was either
requested or given. Indeed, the magistrate judge found it to
be “undisputed that the addition of common law claims
was never discussed by any party in connection with the
Government's request to intervene.” (Id.
at 5.) The government's motion to intervene was rather,
in its own characterization, a motion to “partially
intervene” in “both counts” of the
relator's complaint. (United States' Mot. for Leave
to Part. Intervn. 1.) There was no suggestion that the
government was seeking permission to add new claims. The
plain language of the motion referred to the existing counts
in the relator's amended complaint only.
The
government sought to justify its late intervention by
emphasizing the existence of “new and significant
evidence” showing “fraud on the
government.” (Id. at 21: 13-15.) It explained
to the Court: “We're not trying to play hide the
ball . . . that's not our goal here. Our goal is to be
given a chance to prove this fraudulent scheme.” (Tr.
of Mot. to Intervn. Hr'g 47: 8-13 (dkt. no. 204).)
Reference to “this fraudulent scheme” is fairly
understood as a reference to the allegations of the existing
complaint. Its current argument to the contrary-that it
“pleaded common law claims within the scope of this
Court's leave for the Government to intervene, ”
(United States' Opp'n to Def.'s Obj. to R&R 5
(dkt. no. 273).)-is simply untenable, as leave could not have
been granted for claims that were never discussed.
The
government, however, avoids discussing whether these claims
were permitted by the Court. Perhaps this is because the
R&R concluded that § 3731(c) entitles the government
to add additional claims under § 3731(c) without
specific permission regardless of whether its intervention is
elective, see § 3730(b)(2)-(4), or permissive,
see § 3730(c)(3). The principal problem with
that proposition is that it divorces the request for
permission from what is sought to be permitted. It would
allow the government to get permission for a kind of
placeholder pleading, with the actual pleading to be revealed
later. How that approach could jibe with the requirement to
show “good cause” is hard to conceive.
When
the government elects to intervene under § 3730(b), it
does so while the complaint is yet under seal. See
§ 3730(b)(2)-(4). Intervention under this section thus
entitles the government to the authority of §
3731(c)(1)-(2), giving it an “editor's
privilege” that allows it to revise the complaint
freely before its existence has ever been disclosed to the
defendant. This editor's privilege, however, is lost if
the government does not intervene before the complaint is
unsealed. This is evident from the prefatory phrase of §
3731(c) explicitly conditioning its application to instances
when “the Government elects to intervene and
proceed with an action brought under § 3730(b).”
(emphasis added).
It is a
different matter when a court permits the government
to intervene under § 3730(c)(3).[3] In that circumstance the
government is getting on a moving train. The claims in the
case are already defined, and as here, extensive discovery
related to those claims has taken place. When this
Court granted the government's motion to intervene, a
motion that was vigorously contested, the Court also ruled
that the government would not be allowed further discovery.
(General discovery had been closed for more than a year.) How
the ...