Opinion
2:19-cv-00559-DAD-JDP
06-13-2024
JEFFREY MAZIK, et al., Plaintiffs, v. KAISER PERMANENTE, INC., et al., Defendants.
ORDER DENYING DEFENDANTS' MOTION TO TRANSFER VENUE (DOC. NO. 109)
DALE A. DROZD UNITED STATES DISTRICT JUDGE.
This matter is before the court on the motion to transfer venue filed on April 8, 2024 by defendants Kaiser Foundation Health Plan (“KFHP”), Kaiser Foundation Hospitals, Inc. (“KF Hospitals”), Permanente Medical Groups, Permanente Medical Group, Inc., Southern California Permanente Medical Group, and Colorado Permanente Medical Group, P.C. (collectively, “defendants”). (Doc. No. 109.) On June 4, 2024, the pending motion was taken under submission. (Doc. No. 121.) For the reasons explained below, defendants' motion to transfer venue will be denied.
The court will refer to defendants Permanente Medical Groups, Permanente Medical Group, Inc., Southern California Permanente Medical Group, and Colorado Permanente Medical Group, P.C. collectively as “the PMG Defendants.”
BACKGROUND
On March 26, 2024, relator Jeffrey Mazik filed his operative second amended complaint (“SAC”) on behalf of the United States of America and the states of California, Colorado, Georgia, Hawai‘i, Virginia, and Washington (collectively, “the plaintiff states”) against defendants pursuant to the federal False Claims Act and the corresponding state statutes. (Doc. No. 107.) Previously, on December 1, 2021, the United States had filed a notice informing the court of its decision to decline to intervene; the plaintiff states had filed a similar notice on December 6, 2021. (Doc. Nos. 62, 66.) In his SAC, relator alleges the following.
“Kaiser Permanente” is an “integrated managed care consortium made up of three distinct but interdependent groups of entities”: defendant KFHP, defendant KF Hospitals, and several regional Permanente Medical Groups, including the PMG defendants. (Id. at ¶ 15.) The PMG defendants are groups of physicians that “contract with the other Kaiser entities” to provide medical services. (Id.) Each PMG defendant operates within its individual territory and is funded primarily by reimbursements from its respective regional Kaiser Foundation Health Plan entity. (Id.) Defendant KF Hospitals is a nonprofit corporation headquartered in Alameda County, California that operates hospitals and provides facilities for the benefit of the PMG defendants. (Id.) It also receives its funding from defendant KFHP. (Id.) Defendant KFHP is a nonprofit corporation headquartered in Alameda County, California that enrolls members in health plans and provides medical services for its members through contracts with defendant KF Hospitals and the PMG defendants. (Id.)
Medicare beneficiaries may opt to receive benefits through private health plans instead of the traditional fee-for-service Medicare program. (Id. at ¶ 20.) Under that option, known as Medicare Advantage, the federal government pays Medicare Advantage organizations such as defendants a “capitated” (i.e., per enrollee) amount for the purpose of providing medical benefits. (Id.) The capitated rates vary depending on the health status of the enrollees; less healthy enrollees require more medical care, which necessitates higher capitation reimbursement payments to the Medicare Advantage organizations. (Id. at ¶¶ 21, 22.) Health status in turn depends on the diagnosis codes generated by healthcare providers following encounters with enrollees. (Id. at ¶¶ 23, 24.) In sum, enrollees see doctors such as those in the PMG defendants, who then provide diagnosis codes to defendant KFHP, which then submits the diagnosis codes to the Centers for Medicare & Medicaid Services (“CMS”). (Id. at ¶¶ 2, 23.) CMS uses the diagnosis codes to adjust the capitation rate for each enrollee, a process known as “risk adjustment.” (Id. at ¶ 24.) More severe diagnosis codes lead to higher capitation rates, resulting in greater profits for all defendants-including defendant KF Hospitals and the PMG defendants. (Id. at ¶ 50.) Many government-funded plans other than Medicare Advantage also rely upon “substantially the same model” of risk adjustment for capitation rates, such as state-funded Special Needs Plans and “various state-administered Medicaid programs” such as those in California, Hawai‘i, Virginia, and Washington. (Id. at ¶¶ 35-39.)
Medicare regulations impose certain requirements on Medicare Advantage organizations such as defendants in an effort to curb the potential for organizations to submit unsupported diagnosis codes, which would lead to improperly high capitation rates and inflated revenues to providers. (Id. at ¶¶ 28, 29.) For instance, Medicare Advantage organizations must adopt and implement “an effective compliance program, which must include measures that prevent, detect, and correct non-compliance with CMS' program requirements as well as measures that prevent, detect, and correct fraud, waste, and abuse.” (Id. at ¶ 30) (quoting 42 C.F.R. § 422.503(b)(4)(vi)). Medicare Advantage organizations must also certify the accuracy, completeness, and truthfulness of the data provided to CMS as a condition of receiving payment. (Id. at ¶ 31) (citing 42 C.F.R. § 422.504). Similarly, the organization must submit an annual attestation signed by its Chief Executive Officer or Chief Financial Officer certifying that the risk adjustment data submitted to CMS is “accurate, complete, and truthful,” acknowledging that risk adjustment data “directly affects the calculation of CMS payments,” and recognizing that “misrepresentations to CMS about the accuracy of such information may result in Federal civil action and/or criminal prosecution.” (Id.) CMS also imposes strict requirements on Medicare Advantage organizations' contractual relationships with entities that provide medical services to the organization's members. (Id. at ¶ 32.) Finally, CMS requires organizations to take corrective actions where necessary to ensure compliance with applicable laws and regulations, including the requirement to perform a “root cause analysis” to identify the source of any potential errors or issues. (Id. at ¶ 33) (citing 42 C.F.R. § 422.504). State-funded Special Needs Plans are expected to follow Medicare Advantage compliance regulations such as those listed above. (Id. at ¶ 39.)
Relator, a resident of California, is the former “Senior Practice Leader for Kaiser's National Compliance Office” and has over 25 years of experience in fraud control, auditing, and compliance. (Id. at ¶ 11.) He was employed by defendant KFHP from 2008 to 2017, joining as an “Information Technology Audit Specialist” in May 2008 and transitioning to the role of “Senior Practice Leader in the Fraud Control Program” in March 2012. (Id. at ¶ 12.) Relator's duties included working with regional compliance leadership to implement compliance and fraud control initiatives, using data analytics to improve compliance and fraud-mitigation initiatives, investigating potential fraud, and developing corrective action plans to address fraud risks. (Id. at ¶ 13.)
According to relator, since 2008 at the latest, defendants have schemed to defraud the federal government by allowing external, i.e., “non-Kaiser,” healthcare providers to submit false diagnosis codes, which defendants in turn submit to CMS in order to inflate their capitation rates. (Id. at ¶¶ 45, 49.) In particular, defendants intentionally fail to properly use fraud-detection tools to monitor claims errors. (Id. at ¶¶ 49, 51.) Defendants contract with data analytics vendors to review their external provider claims for each region. (Id. at ¶ 52.) The vendors provide software applications that perform various types of reviews. (Id.) For instance, some programs “detect claims that are incorrectly billed . . . [while] other programs identify intentionally manipulated claims that technically fall within plan rules . . . .” (Id.) However, defendants intentionally misused these programs and used them at minimum capacity, such as by disabling key features, in order to reduce the chances of detecting claims errors. (Id. at ¶¶ 53, 54.) In this way, defendants were actively working to avoid detecting and correcting fraudulent claims. (Id. at ¶ 54.)
In late 2015, relator was tasked with comparing the functionalities offered by two claims analytics vendors, McKesson and Verisk, with which defendants routinely contracted. (Id. at ¶¶ 60, 61.) McKesson offers auditing software called ClaimsXten that detects fraudulent billing practices using “a robust set of rules.” (Id. at ¶ 62.) However, defendants chose to deactivate 25 of the 54 rules used by ClaimsXten-“the principal software program that they were supposedly relying on [to] detect such billing fraud.” (Id.) When a group of employees including relator used a Verisk program to double-check data from “the Georgia region” produced by ClaimsXten, the group found $5.3 million in overpayments stemming from defendants' decision to deactivate nearly half the rules in ClaimsXten. (Id. at ¶ 64.) Defendants neither reactivated the disabled rules nor rectified the $5.3 million in overpayments. (Id. at ¶¶ 65, 66.) Relator presented the group's findings on the Georgia region to several Kaiser executives named in the FAC, but none of those executives took any action. (Id. at ¶¶ 66, 67.)
In February 2016, relator detected significant overpayments due to erroneous diagnosis codes in “all other regions.” (Id. at ¶ 68.) Relator prepared another presentation on the overpayments for his superiors and pointed out that defendants were required by the applicable regulations to review and investigate all identified overpayments within 60 days. (Id. at ¶¶ 68, 69.) His superiors did not request a root cause analysis, did not investigate further, and “even took overt steps to prevent Relator from investigating any further himself.” (Id. at ¶ 71.)
Relator's allegations in the SAC are ambiguous as to whether or not these overpayments were also due to defendants tampering with compliance software.
On June 30, 2016, relator participated in a call with Marita Janiga, “Executive Director of Investigations in Kaiser's National Compliance, Ethics & Integrity Office,” and the U.S. Department of Health and Human Services' Office of the Inspector General (“OIG”). (Id. at ¶¶ 59, 80, 81.) The purpose of the call was to discuss issues surrounding claims accuracy and claims recovered through fraud reduction efforts. (Id. at ¶ 81.) Janiga made several false statements during the call related to compliance issues, such as claiming that “Kaiser and its regional offices were ‘fully integrated,' so there was no need for the OIG to inquire into its claims processes.” (Id. at ¶ 84.) Worried that relator would speak up to correct her or to discuss his overpayment findings, Janiga messaged him “[not] to say a word.” (Id. at ¶¶ 85-86.) Relator obeyed this command and remained silent during the call. (Id. at ¶ 87.)
Defendants “failed to activate (or disabled) the Verisk system” in states including Colorado, Georgia, Hawai‘i, Virginia, and Washington. (Id. at ¶¶ 93-98.)
In September 2016, relator “witnessed” an audit of claims data from all regional offices dating from August 3, 2010 through July 30, 2016. (Id. at ¶ 110.) The audit revealed that unsupported diagnosis codes had led to over $209 million in Medicare Advantage overpayments, $181 million in Medi-Cal overpayments, and $181 million in overpayments relating to “other Medicaid programs during that six-year period.” (Id.)
Again, relator does not specify whether or not the overpayments were allegedly due to defendants tampering with auditing software.
Despite all of relator's findings, defendants certified that their risk adjustment data was accurate and truthful and failed to correct the overpayments. (Id. at ¶¶ 90, 91.) All defendants profited from the overpayments and the inflated capitation rates. (Id. at ¶ 93.)
Eventually, defendants retaliated against relator for his activities. (Id. at ¶ 114.) The more that relator spoke up about unsupported diagnosis codes and overpayments, and the more that he “tried to steer Kaiser in the direction of full compliance,” the more he was “sidelined and closed out from data and documents.” (Id.) On October 12, 2016, relator approached Lauren Sutcliffe, “a Senior Manager in the Special Investigations Unit,” regarding an analysis relator had performed uncovering approximately $380,000 in overpayments. (Id. at ¶¶ 59, 116.) Sutcliffe severely criticized relator for performing the analysis without her approval and placed him on a performance improvement plan. (Id. at ¶ 116.) Several times in October 2016, relator was denied access to “every data repository necessary to perform his compliance job.” (Id. at ¶¶ 117, 118.) Because claims data review was relator's central focus on the compliance team, he was thereby stripped of his duties and responsibilities. (Id. at ¶ 119.) In an attempt to prevent whistleblowing, Sutcliffe also prohibited relator from meeting with anyone above Sutcliffe's level without her prior approval. (Id. at ¶ 120.) On November 3, 2016, Sutcliffe forbade relator from communicating with other employees by phone or instant messaging; he was instructed instead to use only email and to copy Sutcliffe on all outgoing emails. (Id. at ¶ 124.) On January 5, 2017, relator was fired. (Id. at ¶ 129.) Throughout his time working for defendants, relator's performance reviews were consistently “successful” or “excellent,” and it was only after his presentations on overpayments that he received his first “performance needs improvement” review. (Id. at ¶ 130.)
Based on the above allegations, relator asserts the following eleven claims in his SAC: (1) violation of the federal False Claims Act (“federal FCA”), 31 U.S.C § 3279(a)(1); (2) violation of the California FCA, California Government Code §§ 12650, et seq.; (3) violation of the Colorado Medicaid FCA, Colorado Revised Statutes §§ 25.5-4-303.5, et seq.; (4) violation of the Georgia False Medicaid Claims Act, Georgia Code §§ 49-4-168, et seq.; (5) violation of the Hawai‘i FCA, Hawai‘i Revised Statutes §§ 661-21, et seq.; (6) violation of the Virginia Fraud Against Taxpayers Act, Virginia Code §§ 8.01-216.1, et seq.; (7) violation of the Washington Medicaid Fraud FCA, Washington Revised Code §§ 74.66.005, et seq.; (8) unlawful retaliation in violation of the federal FCA, 31 U.S.C. § 3730(h); (9) unlawful retaliation in violation of the California FCA, California Government Code § 12653; (10) unlawful retaliation in violation of California Labor Code § 1102.5(b); and (11) retaliatory common law termination in violation of public policy. (Doc. No. 107 at ¶¶ 131-207.)
On July 13, 2022, defendants filed a motion to dismiss relator's first amended complaint (“FAC”) on the grounds that his federal FCA claims were subject to the first-to-file bar given their similarity to claims being pursued in the Northern District of California. (Doc. No. 78.) The court granted that motion in part, concluding that “relator's FCA claim is barred by the first-to-file rule except to the extent relator alleges that defendants deliberately tampered with compliance software to ensure that it did not identify erroneous diagnosis codes.” (Doc. No. 104 at 12.)
Thereafter, defendants filed their pending motion to transfer venue on April 8, 2024. In that motion, defendants argue among other things that the potential for consolidation of this action with other allegedly related matters currently before Judge Chen in the Northern Districtstrongly weighs in favor of transfer. (Doc. No. 109 at 13-16.) On April 22, 2024, the United States filed a statement of interest opposing transfer. (Doc. No. 111.) Relator filed his opposition to the pending motion on May 14, 2024. (Doc. No. 114.) Defendants filed their reply thereto on May 31, 2024. (Doc. No. 120.)
Six cases were consolidated before Judge Chen: (1) United States ex rel. Osinek v. Kaiser Permanente, No. 3:13-cv-03891-EMC (N.D. Cal.) (“Osinek”); (2) United States ex rel. Taylor v. Kaiser Permanente, No. 3:21-cv-03894-EMC (N.D. Cal.) (“Taylor”); (3) United States ex rel. Aref v. Kaiser Found. Health Plan, Inc., No. 3:16-cv-01558-EMC (N.D. Cal.) (“Aref ”); (4) United States ex rel. Stein v. Kaiser Found. Health Plan, Inc., No. 3:16-cv-05337-EMC (N.D. Cal.) (“Stein”); (5) United States ex rel. Bryant v. Kaiser Permanente, No. 3:18-cv-01347-EMC (N.D. Cal.) (“Bryant”); (6) United States ex rel. Bicocca v. Permanente Med. Grp., Inc., No. 3:21-cv-03124-EMC (N.D. Cal.) (“Bicocca ”). The court will refer to these matters collectively as “the Osinek matters” in this order.
LEGAL STANDARD
Pursuant to 28 U.S.C. § 1404(a), “a district court may transfer any civil action to any other district or division where it might have been brought” for the convenience of parties and witnesses and in the interest ofjustice. “[T]he purpose of [§ 1404(a)] is to prevent the waste of time, energy and money and to protect litigants, witnesses and the public against unnecessary inconvenience and expense.” Van Dusen v. Barrack, 376 U.S. 612, 616 (1964) (internal quotation marks and citation omitted). “Section 1404(a) is intended to place discretion in the district court to adjudicate motions for transfer according to an ‘individualized, case-by-case consideration of convenience and fairness.'” Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988) (quoting Van Dusen, 376 U.S. at 622).
District courts employ a two-step analysis when determining whether to transfer an action. Robert Bosch Healthcare Sys., Inc. v. Cardiocom, LLC, No. 3:14-cv-01575-EMC, 2014 WL 2702894, at *3 (N.D. Cal. June 13, 2014). “A court must first consider the threshold question of whether the case could have been brought in the forum to which the moving party seeks to transfer the case.” Park v. Dole Fresh Vegetables, Inc., 964 F.Supp.2d 1088, 1093 (N.D. Cal. 2013); see also Hatch v. Reliance Ins. Co., 758 F.2d 409, 414 (9th Cir. 1985) (“In determining whether an action ‘might have been brought' in a district, the court looks to whether the action initially could have been commenced in that district.”) “Once the party seeking transfer has made this showing, district courts have discretion to consider motions to change venue based on an ‘individualized, case-by-case consideration of convenience and fairness.'” Park, 964 F.Supp.2d at 1093 (quoting Stewart Org., 487 U.S. at 29). In addition, “Section 1404(a) provides for transfer to a more convenient forum, not to a forum likely to prove equally convenient or inconvenient.” Mainstay Bus. Sols. v. Indus. Staffing Servs., No. 2:10-cv-03344-KJM-GGH, 2012 WL 44643, at *1 (E.D. Cal. Jan 9, 2012) (citing Van Dusen, 376 U.S. at 645-46). The burden is on the moving party to show that transfer is appropriate. Commodity Futures Trading Comm n v. Savage, 611 F.2d 270, 279 (9th Cir. 1979.)
“A motion to transfer venue under § 1404(a) requires the court to weigh multiple factors in its determination whether transfer is appropriate in a particular case.” Jones v. GNC Franchising, Inc., 211 F.3d 495, 498 (9th Cir. 2000). “The primary factors to be considered are convenience of witnesses and parties and concerns for judicial economy (including duplicative effort, waste of time and money).” Cochran v. NYP Holdings, Inc., 58 F.Supp.2d 1113, 1119 (C.D. Cal. 1998), Off'd, 210 F.3d 1036 (9th Cir. 2000). Other factors include plaintiff's choice of forum, administrative considerations, and the respective parties' contacts with the forum. See Jones, 211 F.3d at 498-99; Rubio v. Monsanto Co., 181 F.Supp.3d 746, 759 (C.D. Cal. 2016).
ANALYSIS
At step one of the transfer analysis, relator does not contest that his claims could have been brought in the Northern District of California. Consequently, the court moves to step two and conducts “an ‘individualized, case-by-case consideration of convenience and fairness.'” Park, 964 F.Supp.2d at 1093 (quoting Stewart Org., 487 U.S. at 29.)
A. Choice of Forum
“[G]reat weight is generally accorded plaintiff's choice of forum . . . .” Lou v. Belzberg, 834 F.2d 730, 739. However, the “degree to which courts defer to the plaintiff's chosen venue is substantially reduced where the plaintiff's venue choice is not its residence.” United States v. Academy Mortg. Corp., No. 16-cv-02120-EMC, 2018 WL 4053484, at *5 (N.D. Cal. Aug. 24, 2018) (citation omitted). It is undisputed that relator resides in the Northern District of California, not the Eastern District. (See Doc. No. 114 at 13.)
“[A] plaintiff's forum choice is [also] given substantially less weight when the central dispute in the action occurred primarily in another forum and lacks any significant contact with the forum.” A.F.P. v. United States, No. 1:21-cv-00780-DAD-EPG, 2022 WL 2704570, at *5 (E.D. Cal. July 12, 2022). Defendants argue that relator has not explained why he chose to litigate his case in the Eastern District, and they contend that relator “does not point to any allegation in the SAC that specifically concerns conduct occurring in the Eastern District.” (Doc. No. 109 at 7-8.)
Relator argues in opposition that, the government's decision not to intervene notwithstanding, plaintiff's counsel has conferred with the Assistant U.S. Attorney for the Eastern District, Catherine Swann, throughout the course of this litigation. (Doc. No. 114 at 13.) Relator further argues that Assistant U.S. Attorney Swann “is familiar with the claims and is actively monitoring this action” (id.), though as defendants point out in reply, relator has not filed any declarations or produced any evidence to support this argument (Doc. No. 120 at 7).
The court notes that relator alleges in his SAC that venue in the Eastern District is appropriate because “defendants can be found in, reside in, and/or transact business in the Eastern District of California, and because many of the violations of [the federal FCA] discussed herein occurred within this judicial district.” (Doc. No. 107 at ¶ 10.) While defendants argue that relator has failed to make any allegations regarding conduct specifically occurring in the Eastern District, defendants nowhere argue that venue in the Eastern District is inappropriate. Indeed, while relator could be more detailed in sections of his SAC, he appears to allege a fraudulent scheme occurring throughout the state of California. (See, e.g., Doc. No. 107 at ¶ 110.) However, relator does not point to any allegations in his SAC purporting to show that defendants' interference with compliance software occurred in the Eastern District rather than at defendants' headquarters located in the Northern District, where relator was employed. The court therefore finds that the conduct and parties in this case have some contacts with the Eastern District, but that “the central dispute in the action occurred primarily in another forum.” A.F.P., 2022 WL 2704570, at *5.
The court notes that even if relator's SAC was construed as alleging a fraudulent scheme occurring only in the Northern District of California and not in the Eastern District, the court would still deny the pending motion for the reasons discussed below. Specifically, the court ultimately concludes that defendants' delay in seeking transfer of venue and concerns for judicial economy weigh significantly in favor of denying the pending motion.
Finally, the weight accorded a plaintiff's choice of forum “is diminished . . . when the plaintiff is a qui tam relator asserting the rights of the Government,” because the government is the real party in interest in a qui tam action. United States v. Janssen Biotech, Inc., No. 17-cv-07250-JST, 2019 WL 13175808, at *2 (N.D. Cal. Apr. 29, 2019) (collecting cases).
Because the government is the real party in interest in a qui tam action, district courts considering a motion to transfer often give significant weight to the government's preferences once the government has intervened. See, e.g., United States ex rel. Westrick v. Second Chance Body Armor, Inc., 771 F.Supp.2d 42, 47 (D.D.C. 2011) (“Because the United States is the real party in interest in a qui tam action filed by a relator, the United States' choice of forum is entitled to principal deference.”). Here, the government has declined to intervene, but has nevertheless filed a statement of interest opposing the pending motion. (Doc. No. 111.) At least one district court has found in similar circumstances that “the United States' preferred forum has no bearing” on a motion to transfer when the government has filed a statement of interest but declined to intervene. See United States ex rel. Thomas v. Duke Univ., No. 4:13-cv-00017-JLK, 2017 WL 1169734, at *2 (W.D. Va. Mar. 28, 2017). The court notes that the government nonetheless remains the real party in interest even after declining intervention. See United States ex rel. Polansky v. Exec. Health Res., 599 U.S. 419, 425 (2009). In any event, as discussed below, the court will deny the pending motion even if relator's and the government's choice of forum is afforded only minimal deference. Consequently, and particularly in light of the lack of briefing from the parties on the appropriate level of deference to be accorded under these circumstances, the court need not-and therefore does not-consider whether a greater degree of deference to the government's expressed preference is appropriate here.
Accordingly, the court affords relator's choice of forum some, but very little, weight in this case. See Academy Mortg. Corp., 2018 WL 4053484, at *5 (“Relator is a qui tam plaintiff bringing suit on behalf of the U.S. government, and she does not work or reside in the district. Plaintiff resides in the Eastern District of California, adjacent to this district. Accordingly, her choice of forum is given some, but very limited, weight.”).
B. Convenience of Witnesses
While defendants “recognize that Sacramento, where this Court is located, and San Francisco . . . are not distant,” they nevertheless argue that the convenience of the witnesses favors transfer. (Doc. No. 109 at 16.)
The convenience of the witnesses is often the paramount factor in ruling on a motion to transfer under § 1404(a). A.F.P., 2022 WL 2704570, at *6. “Importantly, while the convenience of party witnesses is a factor to be considered, the convenience of non-party witnesses is the more important factor.” Ironworkers Local Union No. 68 & Participating Employers Health and Welfare Fund v. Amgen, Inc., No. 2:07-cv-05157-PSG-AGR, 2008 WL 312309, at *5 (C.D. Cal. Jan. 22, 2008). Likewise, the convenience of an employee of the party seeking transfer is “entitled to little weight” because that party “will be able to compel [the employee's] testimony at trial.” Jaco Env't Inc. v. Appliance Recycling Ctrs. of Am., Inc., No. 3:06-cv-06601-JSW, 2007 WL 951274, at *4 (N.D. Cal. Mar. 27, 2007). To show inconvenience for witnesses, “the moving party should state the witnesses' identities, locations, and content and relevance of their testimony.” Meyer Mfg. Co. Ltd. v. Telebrands Corp., No. 2:11-cv-03153-LKK-DAD, 2012 WL 1189765, at *6 (E.D. Cal. Apr. 9, 2012) (citing Florens Container v. Cho Yang Shipping, 245 F.Supp.2d 1086, 1092-93 (N.D. Cal. 2002)); see also E. & J. Gallo Winery v. F. & P. S.p.A., 899 F.Supp. 465, 466 (E.D. Cal. 1994) (“[affidavits or declarations are required to identify key witnesses and a generalized statement of their anticipated testimony”).
Defendants argue that “most of the key witnesses” will be located in the Northern District. (Doc. No. 109 at 16.) Defendants also contend that of the 25 current and former employees identified by the parties in their initial disclosures, “13 worked within the Northern District” and only one lived in the Eastern District. (Id. at 17.) In particular, defendants argue that current and former employees such as relator's supervisors and colleagues all worked in the Northern District and are “likely to have important testimony” in connection with both the fraud and retaliation claims. (Id.) (identifying Judy Sarles, Jay Loden, Daren Pursche, Marita Janiga, Sean Kelly, and Laurel Sutcliffe).
The court notes that defendants do not assert that these potential witnesses currently live in the Northern District. Indeed, according to the declaration of Charlotte Tang, a human resources consultant for defendants, these former employees largely do not live in the Northern District, as described below. (See Doc. No. 109-2.) In analyzing the convenience of the witnesses, the court attaches no weight to the location of their former employment, as opposed to their current residence.
The court finds that the convenience of the witnesses weighs minimally, if at all, in favor of transfer. Defendants have provided evidence that two potential witnesses currently live in the Northern District and two live in the Eastern District, balancing the scales equally. (Doc. No. 109-2 at 2-4.) These four potential witnesses are also defendants' current employees (id.), meaning their convenience is given little weight. Jaco Env't Inc., 2007 WL 951274, at *4.
In fact, given that these four potential witnesses live in Alameda, Contra Costa, Solano, and Sacramento Counties, it is likely that Sacramento would be more convenient for them overall than San Francisco.
Defendants have also provided evidence that the last known addresses for three more potential witnesses are in the Northern District. (Doc. No. 109-2 at 2-4.) While these three potential witnesses are all former employees, and thus their presence cannot be compelled by defendants, their last known addresses are in Contra Costa and Alameda Counties, located in the East Bay region between the Sacramento and San Francisco courthouses. (Id.) The court notes that depending on their exact locations within those counties, these potential witnesses might find either courthouse more convenient. See Pratt v. Rowland, 769 F.Supp. 1128, 1132 (N.D. Cal. 1991) (“First, it is unclear whether transfer to the Eastern District would in fact be more convenient for the parties and witnesses. Many defendants reside in distant Kern County. For them, the difference in travel time between this Court and the Eastern District is negligible.”). Moreover, these potential witnesses appear to live within 100 miles of either courthouse and are thus subject to either court's subpoena power. See Galliani v. Citimortgage, Inc., No. 2:12-cv-00411-KJM-KJN, 2013 WL 101411, at *5 (E.D. Cal. Jan. 7, 2013) (“[T]ransfer may be denied when witnesses either live in the forum district or are within the 100-mile reach of the subpoena power.”) (citation omitted); Fed.R.Civ.P. 45(c) (“A subpoena may command a person to attend a trial . . . within 100 miles of where the person resides . . . .”). These potential witnesses therefore provide minimal support for transfer.
Lastly, defendants provide evidence that more than a dozen other witnesses live in various other parts of the country, such as Los Angeles, Oregon, Connecticut, Maryland, and Georgia. (Doc. No. 109-2 at 2-4.) The court does not find the convenience of these witnesses to weigh in favor of transfer. Cf. Bristow v. Lycoming Engines, No. 06-cv-01947-LKK-GGH, 2007 WL 1106098, at *4 n.2 (E.D. Cal. Apr. 10, 2007) (“The court does not consider the convenience of parties and witnesses who are located outside both the current and transferee fora.”).
C. Location of Records and Evidence
Defendants briefly argue that the location of the evidence favors transfer. (Doc. No. 109 at 16.) However, the location of evidence is not a significant consideration “because documentary evidence related to this case can be reproduced and transmitted electronically to this court.” A.F.P., 2022 WL 2704570, at *7; see also Williams v. RobertHaf Int'lInc., No. 4:20-cv-03989-KAW, 2020 WL 12655622, at *3 (N.D. Cal. Sept. 18, 2020) (“[I]n the digital age, the access to records is neutral given the portability of documents.”). Defendants have not argued that, for example, any important evidence cannot be easily transmitted to the Eastern District. See Martinez v. San Diego Cnty., No. 1:16-cv-01140-DAD-SKO, 2017 WL 1273822, at *4 (E.D. Cal. Apr. 4, 2017) (“Defendant San Diego County does not allege that discovery in this case [will] implicate any unique types of information that cannot be easily digitized or that any on-site inspections will be required in San Diego.”).
D. Parties' Contacts with the Forum and Locus of the Action
Relator has no discernible contacts with the Eastern District. As noted above, he argues that an Assistant United States Attorney for the Eastern District is already familiar with this case, but he cites no authority-nor has the court found any-suggesting this supports denial of the pending motion to transfer. Instead, it is undisputed that relator worked and resides in the Northern District, albeit in locations between both courthouses. As also discussed above, relator alleges a fraudulent scheme with some relation to the Eastern District, though the locus of the alleged scheme was in the Northern District. Overall, these factors weigh only slightly in favor of transfer.
E. Judicial Economy and the Interests of Justice
1. Risk of Inconsistent Judgments
Defendants next argue that denying the pending motion would raise the risk of inconsistent rulings on questions of law, specifically their anticipated defense that the diagnosis codes they submitted to CMS are not “claims for payment” within the meaning of 31 U.S.C. § 3729(b)(2). (Doc. No. 109 at 16.) Neither the undersigned nor Judge Chen has expressly considered this precise question. However, both courts have found that the materiality element of the respective relators' federal FCA claims-that is, whether conduct has “a natural tendency to influence . . . the payment or receipt of money,” United States ex rel. Rose v. Stephens Inst., 909 F.3d 1012, 1018 (9th Cir. 2018)-was “supported by allegations that CMS makes risk-adjustment payments based directly on the diagnosis codes submitted by health plans.” (Doc. No. 104 at 1617); United States ex rel. Osinek v. Permanente Med. Grp., Inc., 640 F.Supp.3d 885, 910 (N.D. Cal. 2022); cf. United States ex rel. Silingo v. WellPoint, Inc., 904 F.3d 667, 673 (9th Cir. 2018) (“The importance of accurate data certifications and effective compliance is obvious: if enrollee diagnoses are overstated, then the capitation payments to Medicare Advantage organizations will be improperly inflated.”). The court therefore finds that consideration of the risk of inconsistent judgments does not weigh in favor of transfer.
2. Efficiencies and Judicial Economy
“The feasibility of consolidation is a significant factor in a transfer decision, although even the pendency of an action in another district is important because of the positive effects it might have in possible consolidation of discovery and convenience to the witnesses and parties.” A.J. Indus., Inc. v. U.S. Dist. Ct. for Central Dist. of Cal., 503 F.2d 384, 389 (9th Cir. 1974) (internal citation omitted). However, when transfer would lead to delay, “the district court [does] not abuse its discretion in denying [a party's] motion notwithstanding possible inconvenience to the witnesses.” Allen v. Scribner, 812 F.2d 426, 436 (9th Cir. 1987).
Defendants argue that the potential for consolidation of this action with the Osinek matters strongly weighs in favor of transfer. (Doc. No. 109 at 13-16.) Defendants argue, and relator does not contest, that the present action (hereinafter, “Mazik”) and the Osinek matters both concern an alleged effort by defendants to knowingly submit false diagnosis codes to CMS in an effort to defraud the Medicare Advantage program in violation of the federal FCA. (Id. at 14.) According to defendants, this similarity would permit Judge Chen to coordinate discovery and case management more efficiently in the Northern District. For instance, defendants argue, the Mazik and Osinek matters both involve Medicare Advantage, defendants' risk-adjustment business practices, and defendants' compliance programs, such that transfer would reduce the duplication of discovery. (Id. at 14-15.) Moreover, defendants argue that Judge Chen and Magistrate Judge Sallie Kim are already familiar with “the sort of discovery that is relevant in these types of cases and with this specific group of Defendants,” having already handled several motions to dismiss and discovery motions. (Id. at 16.)
Relator argues in opposition that consolidation of Mazik with the Osinek matters would be infeasible. (Doc. No. 114 at 14-17.) As an initial matter, relator argues that the scopes of the actions are different because he asserts state FCA claims and retaliation claims entirely unrelated to the Osinek matters. (Id. at 14.) This court agrees with relator that the scope of Mazik is different from that of the Osinek matters. However, the court notes that this fact does not necessarily undercut potential efficiencies to be gained from consolidating the federal FCA claims, if the federal FCA claims are in fact similar. To that point, relator argues that the one commonality between the Mazik and Osinek matters, the presence of a federal FCA claim predicated on defendants' Medicare Advantage compliance program, itself conceals a distinction: The FCA claim in Mazik is predicated on defendants' alleged tampering with compliance software, while the FCA claims in the Osinek matters is almost entirely predicated on defendants' providers allegedly adding false diagnostic codes in addenda after patient encounters. (Id.)
The government similarly argues in its statement of interest that the different factual bases render any proposed benefits of consolidation “illusory” and that transfer would only delay the completion of discovery and other pre-trial matters in the Osinek matters. (Doc. No. 111 at 2.) It was these significant factual differences, the government argues, that led it to decline intervention in Mazik and not to seek transfer to the Northern District at the time it moved to consolidate the other six cases into the Osinekmatters. (Id. at 3.) The government further argues that the parties in the Osinek matters are more than two years into fact discovery and that “Judge Chen recently approved a five-page revised pre-trial schedule that required months of negotiations among the parties and motions practice focusing on the highly specific discovery issues presented by” the Osinek matters. (Id. at 10-11.) Both relator and the government highlight this court's prior order granting in part and denying in part defendants' motion to dismiss relator's FAC, which dismissed relator's federal FCA claim to the extent it was predicated on similar “material facts” as the claims presented in the Osinek matters. (See Doc. Nos. 111 at 7; 114 at 16; see also Doc. No. 104 at 10-14.)
The court concludes that the potential for gains in efficiency with consolidation weighs in favor of transfer, though only slightly. As defendants argue and relator does not contest, there are some high-level similarities between Mazik and the Osinek matters. Both involve defendants' alleged violations of the federal FCA via incorrect diagnoses and deficient compliance programs. But, because of defendants' prior motion to dismiss on first-to-file grounds, relator's federal FCA claim survives only to the extent that it does not share a material factual basis with the Osinek matters. As the court discussed in its prior order, nothing in the Osinek matters deals with defendants' intentional misuse of its own compliance software, which is the sole remaining basis of relator's federal FCA claim in this case. Perhaps as a result, as the government points out, defendants have not identified a single witness expected to be deposed both in this action and the Osinek matters (Doc. No. 111 at 9), likely because of the different underlying conduct in Mazik and the Osinek matters. The court finds that the lack of factual similarity between the actions undercuts defendants' claim that consolidation would promote efficiency in discovery and case management. See, e.g., Lexington Ins. Co. v. Scott Homes Multifamily, Inc., No. 12-cv-02119-JAT, 2013 WL 4026883, at *2 (D. Ariz. Aug. 7, 2013) (denying a motion to consolidate where “the cases share a common factual background in a general sense” but “the specific facts in both suits are completely different” because “there is unlikely to be a substantial duplication of effort that would be saved if both cases were being heard by one judge”); cf. In re Acetaminophen -ASD/ADHD Prods. Liab. Litig., MDL No. 3043, 2023 WL 2843771, at *1 (U.S.J.P.M.L. Apr. 7, 2023) (denying the plaintiffs' motion to transfer brought under 28 U.S.C § 1407 in part because of the likely small “extent of overlapping discovery”).
3. Potential for Delay
Relator and the government argue that transfer would result in delay for both Mazik and the Osinek matters. The government points out that the parties in the Osinek matters recently spent nearly five months negotiating a case management order. (Doc. No. 111 at 11); see also Osinek, No. 3:13-cv-03891-EMC, Admin. Mot. to Amend the Case Mgmt. Ord., Doc. No. 327, at 4 (N.D. Cal. Mar. 1, 2024) (“Plaintiffs have worked diligently to conduct an enormous volume of written and document discovery to date in this complex and significant litigation. . . . And further conferral will not be fruitful, as the parties have conferred about amending the current case management order [ ] for the past four months.”); id., Ord. Granting Stipulation to Amend the Case Mgmt. Ord., Doc. No. 332 (N.D. Cal. Apr. 3, 2024). Defendants argue in reply that delay would be negligible because relator's proposed case schedule trails the schedule in the Osinek matters “by a mere three months, and only for certain deadlines.” (Doc. No. 120 at 12.)
This court does not share defendants' optimism regarding the ease with which case management schedules could be aligned were transfer to be granted. Consolidating Mazik with the Osinek matters appears likely to disrupt the laboriously negotiated schedule currently in place in the cases pending before Judge Chen in the Northern District. Moreover, transfer runs the risk of injecting relator into discovery disputes with little relation to his action given the factual dissimilarity of his federal FCA claim. Accordingly, the court concludes that the potential for delay weighs strongly in favor of denying the pending motion. See Allen, 812 F.2d at 436 (“Because the transfer of this case undoubtedly would have led to delay, the district court did not abuse its discretion in denying Allen's motion notwithstanding possible inconvenience to the witnesses.”)
4. Timeliness of the Pending Motion
A district court may consider the timing of a motion to transfer in relation to other developments in the case. See Moore v. Tefon Commc 'ns Corp., 589 F.2d 959, 968 (9th Cir. 1978) (finding that the district court “justifiably found” the convenience of the parties and witnesses “outweighed by other, more compelling, considerations” including “the duration of the pendency of the litigation prior to the motion to transfer”); Savage, 611 F.2d at 279 (finding that the district court did not abuse its discretion in denying the defendant's motion to transfer where the “district court was familiar with the case”); New Show Studios, LLC v. Howe, 696 Fed.Appx. 271, 272 (9th Cir. 2017) (“Denial of Howe's request to transfer venue was not an abuse of discretion because Howe unreasonably delayed in seeking transfer . . . .”) (citing Allen, 812 F.2d at 436).
Citation to this unpublished Ninth Circuit opinion is appropriate pursuant to Ninth Circuit Rule 36-3(b).
Here, relator's original complaint was served upon defendants in February 2021 (Doc. No. 40), the government intervened and sought to consolidate the Osinek matters in July 2021, and yet defendants did not file the pending motion to transfer venue until April 2024 (Doc. No. 109). Moreover, this court has already resolved a motion to dismiss in Mazik (Doc. No. 104), and Judge Chen has resolved eight motions to dismiss in the Osinek matters (see Osinek, 3:13-cv-03891-EMC, Doc. Nos. 171, 223, 224, 225, 226, 275, 276, 277). See Pratt, 769 F.Supp. at 1132 (denying the defendant's motion to transfer because “[t]he fact that a preliminary injunction has already been issued in this action also militates against transfer” and because “this Court [is] knowledgeable about the facts of the case”); Right to Life of Central Cal. v. Bonta, 614 F.Supp.3d 729, 733 (E.D. Cal. July 6, 2022) (denying the defendant's motion to transfer where “the undersigned issued the TRO in this case” and had already “engage[d] with the substantive issues presented”); compare Lixenberg v. Coogi Partners, LLC, No. 17-cv-02537-MWF-MRW, 2018 WL 4850402, at *5 (C.D. Cal. Feb. 27, 2018) (granting the defendant's motion to transfer where “this action ha[d] only been pending for a matter of months, not two years, before the Motion to Transfer was filed” and where “no substantive motions [had been] decided”).
The court also notes that one of defendants' primary arguments in support of the pending motion to transfer is the alleged similarity between Mazik and the Osinek matters, but defendants only filed the pending motion after this court dismissed those of relator's allegations that resembled the allegations in the Osinek matters. Defendants do not satisfactorily explain why they chose to wait three years to file their motion to transfer and only then filed it after the most similar allegations had been stripped out of relator's pleadings. “In light of these case-specific circumstances, the court concludes that a transfer of this action to the Northern District of California at this time is not appropriate.” Right to Life, 614 F.Supp.3d at 733.
CONCLUSION
For all of the reasons explained above, defendants' motion to transfer venue (Doc. No. 109) is denied.
IT IS SO ORDERED.