United States: Déjà Vu All Over Again: District Court Nixes Relator's Attempt To Profit Twice Off Of The Same Allegations

If a company settles an FCA suit, does the public disclosure bar preclude any follow-on FCA suits against the same company for the same (or substantially similar) alleged misconduct if it continues or recurs? The handful of courts to address this issue generally agree that the FCA's public disclosure bar does not foreclose a follow-on suit based on the same allegations if the defendant had enough time to, but did not, comply with the terms of the settlement agreement from the prior action. A district court in Tennessee, however, recently reached the opposite conclusion, looking at more than just the "temporal distance" between the prior settlement and the follow-on action.

The court in United States ex rel. Maur v. Hage-Korban¹ applied the public disclosure bar and dismissed a follow-on FCA complaint brought by the same relator alleging the same misconduct he had alleged in a previous FCA case that he (and the government) settled with thesame defendants. The relator originally filed suit in 2007 alleging a kickback arrangement involving two hospitals and a physician (Korban) that resulted in overutilization of cardiac procedures and subsequent overbilling to Medicare. Korban resolved the allegations against him in 2013, settling for $1.15 million and entering into a three-year Integrity Agreement (IA) with the government.² The IA required Korban to engage an Independent Review Organization (IRO) to "evaluate and analyze the medical necessity and appropriateness of interventional cardiac procedures performed," as well as review his coding, billing, and claims submission practices every three months.

Less than four years later, in April 2017, the relator filed a new FCA action against the same defendants, alleging that despite the IA, Korban and the hospitals had continued the same fraudulent scheme. The court granted dismissal under the public disclosure bar, finding: (a) court filings from relator's prior FCA action (coupled with press releases regarding the settlements) constituted public disclosures; (b) the allegations in the second action were "substantially similar" to the allegations in the first; and (c) the relator was not an "original source" because his allegations did not "materially add" to the publicly disclosed allegations.

In so ruling, the Maur court distinguished its facts from those in which courts had determined that the public disclosure bar did not apply in similar situations. The court noted that in other cases, even those in which a corporate defendant's prior settlement had resulted in a Corporate Integrity Agreement (CIA) similar to Korban's IA, it could not be assumed that the government was (or should have been) sufficiently aware that the alleged scheme had continued or restarted post-settlement. Determining that Korban's IA was materially different from even a corporate defendant's CIA for purposes of the public disclosure bar, the Maur court reasoned that Korban's IA required much more oversight of Korban's practices than other such agreements, including the requirement that Korban report to an IRO, which then reported to the government. Indeed, Korban's IA was designed to keep the government apprised of his practices; it therefore "confirm[ed] that the government was on notice of Korban's 'perpetual modus operandi.'" Thus, the relator's "new" allegations did not "materially add" to the allegations from his initial suit.

Although encouraging, we caution that, among the few courts to address this question, Maur currently stands alone in dismissing such a follow-on action under the public disclosure bar. No one in the unfortunate position of having previously resolved an FCA case should assume that they are immune from a follow-on suit regarding the same alleged conduct. Maur is on appeal to the Sixth Circuit. We will monitor the appeal and report back on any new developments.

Footnotes

1. No. 1:17-cv-01079, 2020 WL 912753 (W.D. Tenn. Feb. 25, 2020).

2. The hospital defendants in the original suit, Jackson-Madison County General Hospital and Regional Hospital of Jackson, both settled in 2015, agreeing to pay $1,328,465 and $510,000, respectively.