District Court Rejects Default Judgment Based on Assumption That All Claims Submitted By Defendants Were False, Orders New Trial on Damages

Posted by Jaime L.M. Jones and Emily Van Wyck

A Florida federal district court granted a motion for a new trial on damages after an $89.6 million default judgment was entered for False Claims Act violations by a doctor and cancer treatment center. See United States ex rel. McBride v. Makar, No. 8:12-cv-792-T-27MAP, 2014 WL 5307469 (M.D. Fla. Oct. 15, 2014). The court entered a default judgment against the defendant physician and American Cancer Treatment Centers, Inc. (“ACTC”) after defendants failed to respond to the complaint. In calculating damages, the court relied on data compiled by the relator from Medicare records reflecting the total amount paid in reimbursement by the government for all claims submitted by defendants during the time period at issue.

In the order granting a new trial, the court concluded that the damages award was calculated based on allegedly fraudulent claims that were outside the scope of the original complaint. The complaint alleged that the defendant physician submitted false claims for radiation therapy services performed at ACTC that were unnecessary, never performed, or improperly administered. The court noted that these allegations did not support the conclusion that all claims made during this period were false because the existence of some fraudulent billing practices “does not necessarily taint each claim for every patient.” Makar, 2014 WL 5307469, *4. Indeed, as the court recognized, some of the procedures submitted during this period may have been properly supervised and administered.

In reaching its decision, the court distinguished the fraudulent claims submitted in this case from those addressed in United States v. Rogan, 517 F.3d 449 (7th Cir. 2008). In Rogan, the court awarded damages for all claims submitted for patients referred to the defendant through an illegal kickback scheme even if those patients received medical services. Id. at 453. By contrast, the Makar defendants were not alleged to have engaged in illegal conduct that would necessarily taint all claims submitted by the defendants. Therefore, the court ruled that the damages calculation must be based only on those claims determined to be false; specifically, those claims submitted for unnecessary, never performed, or improperly administered services. The court’s order requires additional discovery and a new trial to establish the amount of damages associated with such fraudulent claims.