United States Ex Rel. Vaughn v. United Biologics, L.L.C.
United States Ex Rel. Vaughn v. United Biologics, L.L.C.
Opinion
The plaintiffs-relators initiated a qui tam action under the False Claims Act ("FCA"), Anti-Kickback Statute, and related state statutes, suing on behalf of the United States, the District of Columbia, and twelve states. The Government tarried in deciding whether to intervene, but eventually demurred, leaving the relators to go it alone. The relators persisted a little while longer on their own, but they grew tired of the litigation. They moved to voluntarily dismiss their case with prejudice as to themselves only, so that their decision to quit would not hamstring the Government's efforts against the defendant elsewhere.
The district court consented to the relators' motion. That decision is challenged on appeal. For the reasons set forth, we affirm.
I.
Plaintiffs-relators Michael Vaughn, Theodore Freeman, William McKenna, and Wesley Stafford (collectively, "Vaughn relators") are board-certified allergists licensed to practice medicine in Texas. Defendant United Biologics, L.L.C., ("United") owns and operates remote allergy centers that provide allergy screenings *474 and treatments. 1 United contracted with non-allergist physicians, who permitted United to run its remote allergy centers in their offices or clinics and referred their patients to those services. The Vaughn relators alleged that United improperly billed government healthcare providers for unnecessary or unapproved medical treatments through these clinics. They also alleged that United paid illegal kickbacks to contracting physicians from subsequent Medicare reimbursements. 2
The relators filed suit on April 16, 2013. The Government, which had been investigating United's practices in Atlanta since January 2013 (prior to the filing of the litigation and unbeknownst to the Vaughn relators), made its initial entry of appearance on May 1, 2013. The Government petitioned for, and received, five extensions to the initial 60-day deadline to make its intervention decision.
See
In May 2014, while this case was still under seal, a similar qui tam claim was filed in the Northern District of Georgia, United States and the State of Georgia, et al. ex rel. Nix v. United Biologics et al., 1:14-CV-1486. The relator, Terri Nix, sued on behalf of 21 states. The court partially unsealed the Vaughn relators' case to permit the Government to notify the court, named states, and Nix on August 11, 2014. According to United, the Government did not reveal the Nix lawsuit to the Vaughn relators until after its fifth extension, filed January 13, 2015.
In March 2015, Terri Nix and the Vaughn relators entered into a Sharing Agreement, whereby the parties would "share statutory relator share award(s), if any, ... resulting from the qui tam actions [they had] separately filed." According to the Agreement, 85% would be allocated to the Vaughn relators and the remaining to Nix. The Agreement also noted that the parties "agree that all of the lawyers and law firms identified in this Agreement as representing [Nix and the Vaughn relators] have served and are serving as limited co-counsel for all of them, to the extent of the work they have performed and are continuing to perform to advance the common interests" of the relators. The parties further agreed to "work together and consult with each other" regarding strategy. The existence of this settlement agreement was revealed to the court and the Government at the first conference held on April 1, 2015.
Leading up to the April 1 conference, the Government moved for the case to be *475 transferred to the Northern District of Georgia in light of the ongoing federal investigation there. The court rejected the petition at the subsequent hearing. It noted that the Vaughn relators had sued in Texas, and that this suit was the principal qui tam case. The Nix case was a "tagalong." During a colloquy, the court also expressed its frustration with the Government for taking so long to decide whether to intervene while leaving the Vaughn relators in the dark.
United filed a motion to dismiss for failing to state a claim on October 2015, soon after it discovered the lawsuit. The next month, the Government gave notice that it had decided not to intervene. The court then vacated the sealing order and required the relators to disclose "a list of every case, investigation, inquiry, or process of which they know involving the defendants or relating to this scheme." The court ultimately denied United's motion to dismiss on August 24, 2016. United then filed an answer on September 12, 2016. It also notified the district court that it had filed a motion to transfer venue in the Nix action on the grounds that this was the first-filed.
The first hearing involving United was a scheduling conference held on October 3, 2016. During the colloquy, the court decided to hold off conducting formal discovery. Instead, it required the parties to submit an exemplar contract United used with physicians, highlighting key portions and explaining how the agreements worked in hypotheticals. The ensuing order, entered October 4, 2016, required the submission of the contracts. It also indicated that "discovery is quashed" and that "[t]he parties will talk."
United submitted the modified contract with hypotheticals on October 11, 2016. It also submitted a motion requesting the district court order the Georgia qui tam case be transferred or enjoin the parties. The Vaughn relators filed their response to the hypotheticals one week later.
On October 24, 2016, the Vaughn relators notified opposing counsel that they had "decided to dismiss their case with prejudice as to them but without prejudice as to" the Government. Instead of notifying the relators whether it opposed the motion, United filed a motion for summary judgment the next day. Hours later, the Vaughn relators filed their motion to voluntarily dismiss the case with prejudice as to themselves but without prejudice to the Government. They also responded to the pending issues before the court: the motion to transfer and the motion for summary judgment. 3
Their response to United's motion to transfer explained the reasons for their withdrawal. They noted that the Nix case was ongoing, which ensured that United would still be investigated. They also said that they "decided to voluntarily dismiss their case after being rebuffed in informal discovery, reviewing the transcript of the October 3, 2016 conference, and considering the difficulty of proceeding since the government has declined to intervene."
The Government filed a written consent to the dismissal, "provided the dismissal [was] without prejudice" as to it. United contested the motion. United argued that the court should grant its pending motions (including the summary judgment motion without discovery) first or, in the alternative, deny the motion altogether.
*476 The court then held a hearing on this issue in January 2017. The Vaughn relators' counsel explained that the purpose of the suit was to make the Government aware of United's fraud, which it had achieved, but the Vaughn relators had tired of litigation without the Government's assistance. Counsel noted that his clients had "no intention of ever suing these people again." As evidence of his clients' good faith, counsel further explained that if the court agreed to its terms, the Vaughn relators would waive their claim to the Sharing Agreement.
At the court's request, the Government was summoned to the hearing. The Government explained that it understood the Vaughn relators to have chosen to "step back and then allow for the relators in the Northern District of Georgia to go forward with their action." When pressed by the court to give a reason "why it[] [was] not willing to jump into this" case, the Government replied that "it's typical that the United States does not state a specific reason why." Such a specific reason "could arguably influence any sort of litigation that comes after." Instead, the Government contended that "[w]e have, by granting consent, that shows [sic] by inference that there has been some thoughtful procedure into the decision to consent." The Government did note that it had not yet decided whether to intervene in the Georgia case, however.
Although the court was skeptical, it ultimately seemed to affirm the Government's reasoning, noting that "[t]he proposal here is if the United States has permitted two indictments to persist for seven years collectively, overlapping each other for three years, and has decided to pick one and not the other and then turn it over to somebody else to try.... I'm inferring the choice." Responding to United's concerns, the court affirmed that it was "absolutely clear" the Government simply decided to pursue the same claims against the defendant in Georgia.
On March 31, 2017, the court handed down an order "dismiss[ing the case] with prejudice as to the relators." On April 14, 2017, United filed a Rule 59 motion for clarification, seeking to include the Government and Nix in the dismissal, or require Nix to join this case as a condition of dismissal. The court denied this motion in a "Clarification" order on April 17, 2017, stating, "This case was dismissed with prejudice as to Michael Vaughn, Theodore Freeman, William McKenna, and Wesley Stafford."
United then filed a second Rule 59 motion on April 28, 2017, based on new evidence that the Government had altered its course in the Nix litigation in light of the dismissal of the Vaughn relators. United also filed a motion for fees and costs. On May 11, 2017, the court denied the second motion to amend its order, denied the request for fees, and ordered Vaughn relators to pay court costs. It noted that "[t]he time for the parties to appeal runs from the entry of this order." United timely appealed.
II.
United raises three challenges on appeal: (1) the court erred when it dismissed the relators with prejudice and the Government without prejudice; (2) the Government's and district court's consent to the relators' motion to dismiss failed to satisfy FCA requirements; and (3) the district court erred when it granted the relators' voluntary motion to dismiss under Rule 41(a)(2). We review resolution of a voluntary motion to dismiss for abuse of discretion,
Phillips v. Ill. Cent. Gulf R.R.,
*477 1996). Applying the relevant standards, all three fail.
A.
We begin with a question that has not yet been answered by this court - namely, whether the non-intervening Government may be dismissed without prejudice when relators voluntarily dismiss themselves with prejudice. Its answer implicates the fundamental relationship between a relator and the Government in qui tam actions, so we begin with first principles and build from there. For the reasons set forth, we conclude that the Government need not be bound by a qui tam relator's voluntary decision to quit the case.
The FCA prohibits individuals from "present[ing], or caus[ing] to be presented,... a false or fraudulent claim for payment or approval" to a Government officer or employee.
Once the relator files suit, the Government must investigate the matter and determine whether it will intervene and take "primary responsibility for prosecuting the action," or so decline.
Even when the Government declines to intervene, it remains a distinct entity in the
qui tam
litigation with protected interests. This fact is established by the FCA itself, which affords the Government certain rights in the litigation regardless of its decision not to intervene. For example, it is to be supplied with "all pleadings filed in the action" and "copies of all deposition transcripts."
Yet courts have consistently held that a non-intervening Government does not stand as an independent party in a lawsuit. Instead, we have categorized the non-intervening Government as a mere "passive beneficiary of the relator's efforts."
Searcy v. Philips Elecs. N. Am. Corp.,
So the non-intervening Government has both an independent and derivative presence in a qui tam lawsuit. In light of this complex status, the extent to which the Government's fate should be bound to a relator's is a difficult question. As will be shown, its answer depends on the specific fate of the relator.
On the one hand, it is well-settled that a final judgment on the merits of a relator's claim will have a binding effect on even the non-intervening Government.
See Eisenstein,
And, relevant to the matter at hand, this court has also found that even when the relator's case loses on a motion to dismiss, the Government should not be bound if the dismissal is for reasons not tied to the underlying legal merit. Specifically, in
United States ex rel. Williams v. Bell Helicopter Textron Inc.,
we concluded that it was an abuse of discretion for the district court to dismiss the Government with prejudice based on the relator's dismissal for failing to adequately plead its cause of action.
In
Williams,
we modified the district court's order to provide that the Government was dismissed without prejudice. The
*479
Eleventh Circuit has implemented this remedy in a similar case.
Urquilla-Diaz v. Kaplan Univ.,
Here, the qui tam suit was terminated by the Vaughn relators' voluntary motion to dismiss with prejudice. In light of the foregoing discussion, we discern no error in dismissing the Government without prejudice. Here, the Vaughn relators sought to abandon their claims because they no longer wished to participate in the litigation. In other words, they acted on purely private interests. The Government - even one that chooses not to intervene - should not be bound by this decision, powerless to vindicate the public's interests in other actions that may have a stronger basis or a relator more able to shoulder the burdens of litigation.
United's counterarguments from case law and the FCA are unpersuasive. United tries to distinguish the present case from
Williams
because the relator's claim was dismissed at the pleading stage with little opportunity for the Government to participate.
See, e.g., Williams,
United also cites
Eisenstein
's general statement that the "United States is bound by the judgment in all FCA actions regardless of its participation in the case."
Eisenstein,
Last, relying on the
expressio unius
canon, United argues that FCA does not expressly permit relators "to seek a Rule 41(a)(2) voluntary dismissal ...
with prejudice
as to their case but
without prejudice
as to the Government." But this canon "must be applied with great caution" and generally requires a specific, enumerated list of options. Antonin Scalia & Bryan Garner,
Reading Law: The Interpretation of Legal Texts
107-19 (2012). The complex web of disjointed FCA subsections at issue here does not offer the correct context. More fundamentally, as just noted, there is simply nothing untoward about the nature of this dismissal.
Williams,
B.
United next challenges the Government's and district court's consent to the relators' voluntary dismissal insofar as they (1) were not written down and (2) provided an inadequate explanation. Both fail.
1.
United contends that a written explanation for the Government's and the court's consent is required by both the text of the FCA and the provision's underlying policy concern - namely, to ensure that the dismissal is in the public interest. We disagree.
The relevant FCA provision is found at
But this is an incorrect and awkward reading of the text - one that has never been promoted by courts. The correct and more natural one is to interpret "written consent to the dismissal" and "their reasons for consenting" as two separate requirements. There are occasions, to be sure, in which a single adjective can be used to modify a series of subsequent nouns or verbs. But this principle of interpretation, known as the "Series-Qualifier Canon," applies only when context clearly establishes that it is intended. Reading Law at 147-51. This is usually the case when the nouns and verbs are listed without any intervening modifiers. So for example, in "unreasonable searches and seizures," the adjective "unreasonable" is clearly meant to modify both "searches" and "seizures." The typical way to break the series is to insert a determiner. Reading Law at 148. Here, the possessive determiner, "their," is attached to the second noun in the list, "reasons." This makes clear that "written" was not intended to modify both "consent" and "reasons."
Congress has clearly communicated its intent through the text of the statute. We will not refer to other policy considerations for further guidance. Accordingly, we discern no basis for United's insistence that it is entitled to written explanation for consent under § 3730(b)(1).
2.
United also baldly asserts that it was entitled to a more thorough explanation for the Government's or the district court's reasons for consenting to the dismissal. Here again, we disagree.
The argument, made on the basis of § 3730(b)(1), fails because it is unsupported by the text and contrary to its purpose. Of course, as a general matter, a sufficient "statement of reasons is one of the handmaidens of judging," which assists our review.
See Schwarz v. Folloder,
Here, the Vaughn relators requested dismissal with prejudice because they were tired of litigating the action without the Government's intervention and were satisfied that the other qui tam case against United was sufficient to handle their concerns. The court held a hearing to discuss the matter, and required the Government to attend. The Government explained that its interests were not harmed by the Vaughn relators' decision, noting in part the ongoing litigation in Georgia. It explained that a more specific response would compromise its litigation strategy.
*481 While the court was frustrated by the lack of detail in this response, it is clear that the court - and, notably, the defendants - understood the Government's reasoning: it was consenting to the dismissal of these relators because of the ongoing qui tam litigation elsewhere. The district court's order, by dismissing only the relators with prejudice, clearly reflects an ultimate acceptance of the Government's explanation. 4
In short, there is enough in the record here to discern an adequate basis for the Government's and district court's consent to the relators' dismissal. Even if we were to require some baseline explanation requirement, this would meet it.
C.
Last, United challenges the court's grant of the relators' voluntary motion to dismiss as an abuse of discretion. For the reasons set forth, we discern none.
If a plaintiff moves to voluntarily dismiss after a summary judgment motion has been filed, it must first receive the court's consent. Fed. R. Civ. P. 41(a)(2). This court has explained that, "as a general rule, motions for voluntary dismissal should be freely granted unless the non-moving party will suffer some plain legal prejudice other than the mere prospect of a second lawsuit."
Elbaor v. Tripath Imaging, Inc.,
United attempts to show that such abuse occurred here by citing various factors that this court has found persuasive in finding plain prejudice, but they fail to demonstrate an abuse of discretion. First, United argues that the Vaughn relators were merely seeking to avoid an imminent adverse result on the merits.
Cf. In re FEMA Trailer Formaldahyde Prods. Liability Litig.,
But we discern no evidence of this secret intent. Notably, although United had filed a motion for summary judgment just before, no formal discovery had been conducted at the time of the relators' motion except for the court's request for a sample contract. And, notably, the most recent disposition had been in the relators' favor - the court's denial of United's motion to dismiss on the pleadings. It is unlikely that the relators filed their motion for dismissal out of fear of an adverse result.
Cf. Robles v. Atl. Sounding Co., Inc.,
United also contends significant resources have been expended in this
qui tam
lawsuit.
Cf. Davis v. Huskipower Outdoor
*482
Equip. Corp.,
United's arguments to the contrary are unpersuasive. It is true that the case had been "on file" for a number of years, but the case was largely under seal during that time while the Government conducted its investigation. Whatever burdens imposed by the Government's actions, they are not the sort of "litigation" expenses for which this court has held relators responsible. Nor is United's reference to later burdens it suffered based on the relators' response to its own motion for summary judgment persuasive.
United also argues that the Vaughn relators' motion risks depriving United of a legal defense. This court has consistently found that, when a voluntary dismissal might strip the defendant of a "viable ... defense" in the first action that it might not be able to raise if the plaintiff were to bring the action again, the motion for dismissal must be denied.
See Elbaor,
But these cases all deal with distinguishable circumstances. In each case, the court was concerned that the plaintiff was using a voluntary dismissal to escape from a potentially meritorious defense by filing in a different venue or jurisdiction that avoided that defense. Here, the Vaughn relators sought to dismiss themselves with prejudice. In other words, it cannot be claimed that the relators were using the motion as a means of self-preserving gamesmanship.
United argues that the Vaughn relators are dismissing themselves from this litigation in order to thwart United's defense in the Georgia litigation involving an entirely different relator. But United's invocation of this basis for establishing plain prejudice is inapt and unpersuasive. After all, at the time of the relators' motion, the Government had not yet intervened in Georgia. Moreover, the Vaughn relators are not participating in that litigation, and they severed their settlement agreement with the Georgia relator as a condition of their dismissal. The Vaughn relators have assured this court that they will not receive any benefit from the Nix litigation - an assurance that we will credit here, and that we expect the parties in Nix will no doubt enforce as they deem appropriate. We decline to overturn the district court's discretion on this basis. 5
*483 In sum, United has failed to articulate the sort of plain prejudice required to prove the district court abused its discretion.
III.
AFFIRMED.
The complaint initially included two other such companies, but they were dismissed by the court in response to the Vaughn relators' motion in September 2016.
Record evidence suggests that the Vaughn relators had been concerned about these remote allergy centers for some time. Vaughn himself unsuccessfully petitioned the Texas Medical Board to review the practice, and allegedly threatened United's physicians. In response, United successfully filed a lawsuit against Vaughn, which resulted in an agreed permanent injunction impeding his efforts in 2011. The remaining Vaughn relators are board members of the trade association, Texas Allergy, Asthma and Immunology Society ("TAAIS"), who shared Vaughn's concerns and engaged in similar efforts. United also sued these relators, and was again successful in receiving a favorable agreed injunction in 2013.
The relators contested summary judgment in part by noting that discovery had not yet been conducted. They also filed a motion for continuance to allow for such discovery if the motion for dismissal were denied. The district court allowed for certain discovery on November 30, 2017.
United at times seems to argue that the court's order was unclear regarding the nature of the Government's dismissal. The argument is meritless. Although the order itself could have made the point more explicitly, its intention was plain enough: there is no doubt that the Government was dismissed without prejudice.
United also seems to imply that the motion was made in bad faith because the relators share the same counsel and that the TAAIS may still receive some recovery if the Georgia lawsuit is meritorious. It asserts that the Vaughn relators are trying to "have their cake and eat it too." They provide no legal basis for this assertion, except two cases that are factually distinct from this case. First, in
In re FEMA,
this court
affirmed
a district court's discretion to deny a voluntary dismissal when the plaintiffs sought to withdraw temporarily "from a bellwether trial and then sit[] back to await the outcome of another plaintiff's experience."
Reference
- Full Case Name
- UNITED STATES of America, EX REL. Michael VAUGHN; Theodore Freeman ; William McKenna; Wesley Stafford, Plaintiffs-Appellees v. UNITED BIOLOGICS, L.L.C., Defendant-Appellant
- Cited By
- 1 case
- Status
- Published