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11 May 2018

DOJ Defends Use of Statistical Sampling To Prove FCA Liability

In a case in which it chose not to intervene, DOJ has stepped in to defend the relator’s attempt to use statistical sampling to prove FCA liability.  The relators allege that Select Medical Corporation, a related entity in Evansville, Indiana, and a physician violated the FCA by making medically unnecessary admissions to long term care facilities and increasing reimbursements by manipulating patients’ lengths of stay and falsifying diagnoses.  The relators contend that their claims encompass Select’s facilities nationwide, and advised the Court that they intended to propose a plan to use statistical sampling to establish FCA liability based on evaluation of a subset of medical records from facilities throughout the country.  The defendants contend that the claims should be limited to the named facility in Evansville. (more…)

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03 April 2012

Sanction for Relator’s Counsel Who Engaged in “Abusive Behavior”

Posted by Lauren K. Roth and Kristin Graham Koehler

The public disclosure bar is meant to prevent or cut short the life of the “parasitic” lawsuit. In short, if a relator’s allegations are substantially the same as claims have been publicly disclosed already, and the relator is not the “original source” of the information, then a court generally must dismiss the suit. But as defendants know all too well, getting to dismissal can be a long and costly process. Moreover, enticed by the prospect of sharing in settlement proceeds, relators—and relators’ counsel—have an incentive to reprocess public allegations and “see what sticks.” Last week, however, a district court in Indiana sent a strong message by penalizing such conduct and demonstrating that it, too, may be costly for relators and their lawyers.

In U.S. ex rel. Leveski v. ITT Educational Services, Inc., the court—having earlier dismissed relator’s case—granted (in part) ITT’s Motion for Attorneys Fees and Sanctions and ordered relators’ counsel to pay nearly $400,000 in fees. U.S. ex rel. Leveski v. ITT Educational Services, Inc., 1:07-cv-0867 (D. Ind. March 26, 2012). Moreover, in a 30+ page opinion, the court took Leveski and her lawyers to task for filing such a contemptible, blatantly frivolous lawsuit, which reportedly cost ITT over $13 million to litigate. “Common sense,” the court opined, “suggests that Leveski is worlds apart from the type of genuine whistleblower contemplated by the FCA.”

The facts in the case were as follows: Leveski had worked at ITT for approximately 11 years, during which time she filed an unrelated employment suit against ITT that settled. In May 2007, after Ms. Leveski had ended employment with ITT, she was contacted by an investigator for Timothy Matusheski, her would-be FCA counsel. Matusheski had learned of Leveski through a public records search for former employees of for-profit educational institutions who had sued their former employer. Soon after their introduction, Leveski became convinced that ITT had violated an incentive compensation provision of Title IV of the Higher Education Act and she filed her FCA suit. (“Matusheski plucked a prospective plaintiff out of thin air and tried to manufacture a lucrative case,” the court wrote.) She was, apparently, not alone. The court’s decision cites to four other lawsuits against for-profit educational institutions that were filed by plaintiffs who had been recruited by Matusheski. All of the suits had been dismissed. Indeed, in one instance, Matusheski—”in consultation with his client, who was fearful of the potentially devastating financial impact of an attorney’s fees award” formally apologized to the court, the Department of Justice, and the Defendant after the dismissal.

In Leveski’s case, the court dismissed her suit for lack of subject matter jurisdiction, based on a public disclosure bar analysis. In support of its subsequent Motion for Attorney’s Fees and Sanctions, ITT identified several significant events in the case and argued that it was entitled to attorney’s fees incurred from the date of those events. Ultimately, the court found the triggering event to be Leveski’s deposition, in which she had revealed an extensive lack of knowledge about the substance of her allegations, undermining any argument that she was original source of the information. Although ITT reported having incurred approximately $2.6 million in legal expenses since the deposition, the court decreased its award to $394,998.33 for two reasons: (i) ITT’s delay in deposing Leveski, and (ii) the court’s application of Rule 11’s instruction that sanctions be limited to “what suffices to deter repetition of the same conduct or comparable conduct by others similarly situated.” See Fed. R. Civ. P. 11(c)(4). “In light of these considerations, the Court finds that 15 percent of the amount of attorney’s fees actually spent [from the date of the deposition onward] is an appropriate figure.”

Ultimately, ITT recovered only a tiny fraction of the attorney’s fees that it incurred defending a wholly unmeritorious lawsuit. Nevertheless, the mere fact of the award should provide a stronger deterrent effect to specious FCA suits than the public disclosure bar alone.

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