Opinion
Civ. A. No. 94-2101-GTV.
July 10, 1996
Ruben J. Krisztal, Overland Park, KS, for U.S.
Richmond M. Enochs, Overland Park, Kansas, for Robert Lahue, D.O. Chartered dba Blue Valley Medical Group, Robert Lahue, D.O. Chartered dba Johnson County Medical Laboratory.
Kirk J. Goza, Steven M. Bledsoe, Kansas City, Missouri, for Christopher Murray, D.O.
MEMORANDUM AND ORDER
This case is before the court on defendants' motion (Doc. 55) to dismiss for failure to plead fraud with particularity pursuant to Fed.R.Civ.P. 9(b), or in the alternative, to dismiss for lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1). Plaintiff has responded (Doc. 74) and opposes the motion. For the reasons stated below, defendants' motion to dismiss for lack of subject matter jurisdiction is granted.
I. Background
This is the second time that defendants have requested dismissal of this action. In its Memorandum and Order dated April 4, 1996, the court denied defendants' original Motion (Doc. 27) to Dismiss based on their failure to comply with the court's order directing service of all pleadings on the United States pursuant to 31 U.S.C. § 3730(c)(3). In their current motion, defendants effected service on plaintiff and the United States.
Ruby Buntin ("Plaintiff") brought this qui tam action under the False Claims Act ("Act"), 31 U.S.C. § 3729 et seq. She asserts that defendants filed false claims with Medicare in violation of 31 U.S.C. § 3729(a). Section 3730(b) of the Act authorizes an individual to bring a civil qui tam action in the name of, and on behalf of, the United States against a person who has submitted a Section 3729(a) false claim to the Government.
In an unrelated proceeding, plaintiff sought to recover for the wrongful death of her mother, Edna Danner, against Robert C. LaHue, D.O. Chartered, d/b/a Blue Valley Medical Group, Ronald LaHue, D.O., and Christopher Murray, D.O. Edna Danner, by and through Michael Gibbons et al. v. Robert C. LaHue, D.O. Chartered, d/b/a Blue Valley Medical Group, Case No. 93-C-189, District Court of Wyandotte County, Kansas ("Edna Danner"). One of the claims in that action was that defendants fraudulently misrepresented that Gladstone Tucker, an employee of Blue Valley and a foreign medical school graduate, was a physician. Plaintiffs also argued that defendants knew or should have known that Mr. Tucker was not licensed to practice medicine in Kansas.
Plaintiff obtained information in that proceeding that forms the basis of her claim against defendants in this case. Through discovery and elicited testimony, information was disclosed that implicated defendants in an alleged scheme to defraud Medicare. The evidence suggested that defendants participated in a practice of billing Medicare for unnecessary laboratory testing and of billing Medicare for physicians' medical services where those services were actually rendered by unlicensed physicians. In this action, plaintiff asserts that defendants' alleged fraudulent billing of Medicare constitutes fraud on the government under the False Claims Act.
Defendants respond that the court lacks subject matter jurisdiction. They assert that this qui tam action is based on information publicly disclosed in the Edna Danner action and that plaintiff is not an "original source" of that information as required under Section 3730(e)(4)(A) of the Act. Additionally, defendants seek dismissal based on plaintiff's failure to plead fraud with particularity as required under Fed.R.Civ.P. 9(b).
II. Subject Matter Jurisdiction
Federal courts are courts of limited jurisdiction. The party seeking the federal forum must establish the basis for the court's jurisdiction. United States ex rel. Precision Co. v. Koch Indus., Inc., 971 F.2d 548, 551 (10th Cir. 1992). United States District Courts have original jurisdiction over actions arising under the laws of the United States. 28 U.S.C. § 1331. Under 31 U.S.C. § 3730(b)(1), Congress provided for federal court jurisdiction in civil qui tam actions brought by private citizens on behalf of the United States to recover from persons who have made false or fraudulent claims against the government. Stinson, Lyons Bustamante, P.A., v. United States, No. 95-5122, 1996 WL 124793 *3 (Fed. Cir. March 21, 1996).
The court's jurisdiction to adjudicate qui tam actions under the False Claims Act is limited by 31 U.S.C. § 3730(e)(4)(A). See United States ex rel. Fine v. Sandia Corp., 70 F.3d 568, 570 (10th Cir. 1995) ( 31 U.S.C. § 3730(e)(4)(A) limits court's subject matter jurisdiction); Koch Indus., 971 F.2d at 551. Section 3730(e)(4)(A) states:
No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office Report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.31 U.S.C. § 3730(e)(4)(A). In order to maintain jurisdiction over plaintiff's qui tam action, the court must strictly construe this statute and resolve any doubts against federal jurisdiction. Koch Indus., 971 F.2d at 552.
The court is required to make three threshold determinations in deciding whether it has subject matter jurisdiction in a civil qui tam action. Federal Recovery Serv., Inc. v. Crescent City E.M.S., Inc., 72 F.3d 447, 450 (5th Cir. 1995). The court first must decide whether there has been a "public disclosure" of allegations or transactions. If so, the court must next ascertain if plaintiff's knowledge of alleged wrongdoing is based upon that public disclosure. Finally, the court must determine if plaintiff is the original source of the information.
Based on the Edna Danner litigation, defendants contend that there has been a public disclosure of allegations or transactions. Information and allegations disclosed in civil litigation and information on file in a court clerk's office fall within the scope of public disclosure under Section 3730(e)(4)(A). Koch Indus., 971 F.2d at 553-54 (allegations in prior civil suit publicly disclosed within meaning of § 3730(e)(4)(A)); United States, ex rel. Kreindler Kreindler, 985 F.2d 1148, 1158 (2d Cir. 1993) (discovery material in prior lawsuit containing information in which qui tam claim based was publicly disclosed because it was available to anyone who wished to consult the court file); Wang v. FMC Corp., 975 F.2d 1412, 1416-17 (9th Cir. 1992) (information revealed through discovery in a civil litigation "publicly disclosed" for purposes of a subsequent qui tam action); contra United States ex rel. Stinson, Lyons, Gerlin Bustamante, P.A. v. Blue Cross Blue Shield of Ga. Inc., 755 F. Supp. 1040, 1048-50 (S.D.Ga. 1990) (information revealed in civil litigation not disclosed "in a . . . civil . . . hearing" within the meaning of § 3730(e)(4)(A)).
In paragraph 20 of her Amended Complaint, plaintiff states that she bases her allegations on "transcripts of testimony provided by Robert LaHue, Ron LaHue, Christopher Murray, and Gladstone Tucker. . . ." The testimony was provided in the Edna Danner litigation. Additionally, plaintiff alleges in her Complaint that discovery in the Edna Danner action led her to uncover defendants' scheme to submit fraudulent claims to Medicare. The court concludes that this information is "publicly disclosed" for purposes of plaintiff's qui tam action.
Because there has been a public disclosure of allegations, the court next must determine if plaintiff's qui tam action is based on that disclosure. In the Tenth Circuit, a qui tam action "even partly based upon publicly disclosed allegations or transactions is nonetheless "based upon" such allegations or transactions." Koch Indus., 971 F.2d at 552.
In her Amended Complaint in this action, plaintiff alleges that defendants developed a system to bill Medicare for services rendered by health care providers that were services actually rendered by non-health care professionals. She also alleges that defendants billed Medicare for unnecessary laboratory testing. As previously noted, Paragraph 20 of plaintiff's Amended Complaint states that transcripts of testimony in the Edna Danner action will support plaintiff's allegations. Plaintiff also alleges that she is "in possession of the names of witnesses who . . . can testify to facts supporting these allegations . . . and can also testify to facts to the extent of the false claims made by these Defendants against the United States of America." It appears to the court that plaintiff's qui tam Complaint is based on publicly disclosed information obtained from the Edna Danner lawsuit.
Because plaintiff's qui tam Complaint is based on publicly disclosed information, the court cannot maintain jurisdiction unless plaintiff qualifies as the original source of that information. To qualify as an "original source," plaintiff must be:
. . . an individual who has direct and independent knowledge of the information on which the allegations are based and has voluntarily provided the information to the Government before filing an action under this section which is based on the information.31 U.S.C. § 3730(e)(4)(B). The plain language of this provision contains two requirements: 1) a qui tam plaintiff must have direct and independent knowledge on which the allegations are based; and 2) a qui tam plaintiff must have voluntarily provided the government such information prior to filing suit. Koch Indus., 971 F.2d at 553.
Plaintiff's Amended Complaint is devoid of allegations that her claims regarding defendants' alleged fraudulent actions are based on direct and independent knowledge. Independent knowledge of the alleged fraudulent activity is such "knowledge that is not dependent on public disclosure." United States ex rel., Barth v. Ridgedale Electric, Inc., 44 F.3d 699, 703 (8th Cir. 1995). Plaintiff argues that she possesses independent knowledge of the allegations because her investigation led to the discovery of defendants' fraudulent activities. The court disagrees.
Plaintiff was a party in the Edna Danner litigation. That litigation resulted in witness testimony regarding defendants' alleged fraudulent activities, and that testimony forms the basis of the instant qui tam action. As previously stated, plaintiff also avers that she possesses the names of witnesses who can testify in support of plaintiff's allegations. It appears to the court that those witnesses are the original source of the information. See Koch Indus., 971 F.2d at 554 (plaintiff made no showing that it had a legitimate claim to information previously gathered by others and could not be considered original source of information); Kreindler, 985 F.2d at 1159 (although he conducted some collateral research and had background knowledge, counsel in litigation that resulted in public disclosure of information did not have direct knowledge regarding the matter); Prudential, 944 F.2d at 1160 (memoranda produced in discovery constituted "public disclosure" and counsel receiving document was not "original source").
Additionally, plaintiff makes no allegations in her Amended Complaint regarding her independent knowledge of defendants' fraudulent claims to Medicare. See Koch Indus., 971 F.2d at 551 (plaintiff has burden to allege in pleading facts essential to show jurisdiction). Plaintiff makes only conclusory assertions regarding the court's jurisdiction in this action. As plaintiff's Amended Complaint illustrates, she relies exclusively on the knowledge of others to establish her claim in this action.
The court finds that plaintiff's qui tam action is based upon the public disclosure of allegations or transactions that she acquired in another action. Additionally, the court finds that plaintiff is not the original source of that information. The court concludes that plaintiff cannot maintain her qui tam action because 31 U.S.C. § 3730(e)(4)(A) prohibits the court from exercising subject matter jurisdiction.
Because the court lacks subject matter jurisdiction, it is not necessary for the court to reach defendants' motion to dismiss for failure to plead with particularity under Fed.R.Civ.P. 9(b).
IT IS, THEREFORE, BY THE COURT ORDERED that defendants' motion to dismiss for lack of subject matter jurisdiction (Doc. 27) is granted. The case is dismissed.
Copies of this order shall be mailed to counsel of record for the parties.
IT IS SO ORDERED.