Last week, the United States Department of Justice and Tuomey Healthcare System announced a settlement of the $237 million verdict against Tuomey. As we previously reported (see here, here, and here), the suit involved allegations that Tuomey violated the Stark Law and, after a trial by jury, the district court entered judgment in October 2013 for $237,454,195 plus post-judgment interest. The Fourth Circuit affirmed the judgment in July 2015. According to DOJ’s and Tuomey’s press releases last week, Tuomey will pay the United States $72.4 million and will become part of Palmetto Health, which is a multi-hospital healthcare system based in Columbia, South Carolina.
It appears from related court filings that, absent a settlement involving a substantial reduction in the award, Tuomey was prepared to file for bankruptcy. The United States had recently requested a delay in payment of the $40 million appeal bond posted by Tuomey, stating that “Tuomey has informed the United States that if a settlement is not reached, it intends to file for protection in the Bankruptcy Court.”
The DOJ press release can be found here.
The Fourth Circuit has agreed to hear an interlocutory appeal from a case in the District of South Carolina (discussed here), regarding the now hotly-debated role of statistical sampling in establishing liability and damages in FCA cases. See United States ex rel. Michaels v. Agape Senior Cmty., Inc., No. 15-238 (4th Cir. Sept. 29, 2015). The Fourth Circuit will be the first appellate court to weigh in on the issue. The district court initially ruled that the relator could not use sampling for purposes of extrapolating damages, but it ultimately certified the question for interlocutory appeal, alongside a second question as to whether the government has unfettered veto authority over settlements resolving non-intervened qui tam suits. As we discussed here, the government and the defendant in the qui tam suit both filed briefs opposing appellate review of the district court’s ruling on statistical sampling, while the relator urged the Fourth Circuit to rule on the question. We will continue to monitor and provide updates on the appeal.
A copy of the Fourth Circuit’s order can be found here.
As we previously reported here, a district court in South Carolina recently certified to the Fourth Circuit two questions for interlocutory appeal: 1) whether courts can review and reconsider the government’s rejection of a settlement in a non-intervened qui tam suit, and 2) whether and when statistical sampling can be used to prove liability and damages in FCA actions. Both the government (which did not intervene in this case, but which has opposed settlement) and the defendant hospice chain, Agape, recently filed briefs urging the Fourth Circuit to pass on the statistical sampling question. The government also argued that the Fourth Circuit should adopt the majority rule recognizing the government as having unfettered veto authority.
A judge in the District of South Carolina has invited the Fourth Circuit to become the first appellate court to rule on when statistical sampling can appropriately be used to establish FCA liability. The district court also certified for interlocutory appeal the question of whether the Attorney General’s decision in a non-intervened qui tam suit to reject a proposed settlement is subject to judicial review, an issue on which the circuit courts are split. See United States ex rel. Michaels v. Agape Senior Cmty., Inc., No. 12-3466 (D.S.C. June 25, 2015). Both issues became intertwined in this case when the government rejected a $2.5 million settlement agreed to by the defendants and the relator, citing its own extrapolated calculations (based on an undisclosed statistical sampling) as the basis for concluding that damages to the government were $25 million, and that the settlement was therefore inadequate. The resolution of these questions has the potential to significantly impact bargaining dynamics when investigating and negotiating resolutions to qui tam suits.