Opinion
No. 95 C 1082.
November 12, 1997
MEMORANDUM OPINION AND ORDER
Plaintiff brings this qui tam action on behalf of the United States, alleging (in Count I of his Second Amended Complaint) that defendant IMED, with the assistance of defendant Bradley (an IMED regional sales manager to whom plaintiff reported when plaintiff worked for IMED from December 1989 to May 1990), engaged in a scheme to defraud the United States by conspiring with and causing IMED's customers to submit false claims for Medicare reimbursement, in violation of the False Claims Act, 31 U.S.C. § 3729, et seq. IMED sells intravenous ("IV") pumps and disposable IV equipment such as plastic tubing to hospitals directly or through third party financing intermediaries. The gist of the alleged scheme was to shift the costs of the goods to the pumps, which as "capital" goods were reimbursed by Medicare at their full cost, and away from the disposables, which were reimbursed at a lower rate under a Medicare program known as PPS that groups disposables with other predetermined operating costs.
Plaintiff also alleges personal claims for fraud in the inducement of his employment contract with IMED (Count II), breach of the employment contract (Count III), and common law fraud (Count IV). Plaintiff has dismissed Count IV without prejudice.
Defendant IMED has moved to dismiss the complaint and for summary judgment, alleging: (1) that the court does not have original jurisdiction over Count I because plaintiff was not an "original source" of the False Claims Act claim; (2) that the complaint fails to plead fraud with the particularity required by Fed.R.Civ.P. 9(b); and (3) that the uncontested facts entitle IMED to judgment as a matter of law. Voluminous briefs, affidavits, depositions excerpts and exhibits have been filed in connection with this motion and plaintiff's response to it. In addition, the court heard oral argument with respect to all pending motions, including a motion by IMED to strike certain portions of plaintiff's papers due to alleged inconsistencies between plaintiff's affidavits and his deposition testimony.
Defendant Bradley filed a bankruptcy petition during the pendency of this action, which was then stayed as to him.
During the course of this litigation, the court, at IMED's request, limited discovery by precluding plaintiff from taking third party discovery directed at IMED's customers. Although certain third party discovery has been permitted, those customers have remained off limits to plaintiff.
With respect to IMED's motion to dismiss based upon failure to comply with Rule 9(b), the court finds that the alleged fraudulent conduct is set forth with sufficient particularity. With respect to IMED's motion to dismiss for lack of jurisdiction based on its claim that plaintiff is not the "original source" of the allegations due to a previous lawsuit filed by a different plaintiff, Mr. Grounsell, making substantially similar allegations, it is apparent to the court that plaintiff's initial counsel plagiarized portions of the Grounsell complaint. Plaintiff contends, however, that he acquired the knowledge set forth in his complaint independently through and during his employment with IMED under the supervision of defendant Bradley. This explains the parroting of the language of the Grounsell complaint and raises a genuine issue of fact as to whether plaintiff indeed knew the substance of his claims independently of Grounsell. Accordingly, IMED's motion to dismiss for lack of jurisdiction is denied.
With respect to IMED's motion for summary judgment, the court finds that there are contested material facts that preclude judgment for IMED at this time, particularly in light of the court's restriction of discovery until now. Although IMED presents compelling evidence that contradicts plaintiff's principle allegation that costs were shifted by IMED from disposables to IV pumps, and although IMED is correct in asserting that plaintiff admitted at his deposition that he has no first-hand knowledge of the costs actually paid by IMED's hospital customers, these facts do not compel judgment for IMED for several reasons. First, plaintiff claims that the fraudulent scheme he alleges was outlined to him by Bradley while plaintiff was reporting to Bradley as an IMED employee. Second, plaintiff convincingly argues that the actual pricing information is in the hands of: (1) IMED, which has not produced many records sought by plaintiff; (2) the hospitals, against which discovery has been stayed; and (3) the "financing intermediaries" (which plaintiff alleges were controlled by IMED), which also have failed to produce these records.
Resolving all doubts and drawing all inferences in favor of plaintiff, as required by Fisher v. Transco Services-Milwaukee, Inc., 979 F.2d 1239, 1242 (7th Cir. 1992), the scheme allegedly described by Bradley to plaintiff, if true, would support a claim for Medicare fraud. Of course, summary judgment for IMED might be appropriate if plaintiff fails to come up with any hard evidence that IMED actually charged its customers in the manner alleged by plaintiff. Bradley's alleged admission, however, provides sufficient evidence to preclude such a result at this time.
The court cautions plaintiff that he will likely be called upon to respond to a motion under Rule 11 and/or 28 U.S.C. § 1925 if he fails to discover admissible evidence to support the serious charges he has lodged against defendants. At this stage of the case, however, he must be given that opportunity.
Accordingly, IMED's motion for summary judgment is denied, and the stay of discovery against third parties is lifted. IMED's motion to strike is denied. The parties are directed to confer and draft a written joint discovery plan to be filed with the court on or before November 21, 1997. This matter is set for a report on status and for entry of a discovery schedule by the court on November 26, 1997 at 9:00 a.m.