02 March 2021

District Court Issues Rare Rebuke Denying DOJ’s Belated Motion to Intervene

A federal district court recently issued a rare order denying the Department of Justice’s (DOJ) motion to intervene in a qui tam suit after the government’s initial declination months earlier.  See United States ex rel. Odom v. Southeast Eye Specialists, PLLC, 3:17-cv-00689 (M.D. Tenn. Feb. 24, 2021).  The False Claims Act allows the government to intervene in a case in which it previously declined to intervene upon “a showing of good cause.”  Although DOJ does so not frequently seek to intervene after previously declining to do so, courts are generally deferential to the government’s shift in position.  This decision provides important precedent for defendants in the position of arguing that a late intervention by DOJ is not appropriate.

In the underlying complaint, the relators alleged that the defendant ophthalmologist groups submitted false claims through “a scheme of paying for patient referrals, in the form of kickbacks and improper fee splitting related to eye surgery.”  After granting multiple extensions of the sixty-day seal—resulting in 28 months for the government to investigate—the court ordered DOJ to make its intervention decision by August 9, 2019.  DOJ declined to intervene but explained that its “investigation had not been completed” and that it accordingly reserved the right “to intervene in the action, for good cause, at a later date.”  As discussed further here, DOJ periodically files such “no decision” statements when declining to intervene, as a result of various timing and resource considerations.

Six months later, on February 10, 2020, the government sought to intervene and add two new defendants.  In support of its motion, DOJ cited new information it had learned through witness interviews and continued analysis of documents produced by defendants.  Specifically, the government explained that it had engaged in further data analytics relating to defendants’ referrals and had identified patterns supporting FCA liability.  DOJ’s recent embrace of increasingly sophisticated data analytics in support of FCA investigations is discussed further here and here.

The district court referred the government’s motion to a magistrate judge, who recommended that the district court conclude that the government had shown “good cause” for late intervention because of the presence of new evidence and the absence of prejudice to defendants.  The magistrate judge noted that “courts generally do not closely examine the nature of the newly discovered evidence or whether the information was available to the Government when it initially decided not to intervene.”  Similarly, the magistrate judge pointed out that the caselaw is very deferential to the government in assessing whether defendants would be prejudiced by a belated intervention.

The defendants objected to the Report and Recommendation, arguing that DOJ had not identified new evidence to support its request to intervene and that they would be prejudiced by the late intervention.  Defendants maintained that DOJ’s high-level descriptions of its ongoing investigative work did not provide sufficient detail to identify significant new facts or evidence that would support a belated intervention.  To allow the government to intervene now, they asserted, would be tantamount to finding “good cause” “just because the government says so.” The defendants also argued that permitting the government to intervene would further deplete the defendants’ resources before they could engage in discovery of their own.

The district court held a hearing on September 30, 2020 to consider DOJ’s arguments in favor of intervention and the defendants’ objections.  The court then ordered the government to submit affidavits or declarations describing “in detail the investigation the Government has undertaken in this case,” and discussing “each and every topic identified by the Court in open court on the record.”  DOJ filed the requested affidavits on October 26, 2020.  After a second hearing on February 24, 2021, the court issued an order vacating the Report and Recommendation and denying the government’s motion to intervene.  The order, although brief, is available here, and more information on the judge’s reasoning will be available once the hearing transcript is released.

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