274 F.3d 687 (2nd Cir. 2001), 00-6269, Mikes v Straus

Docket Nº:Docket Nos. 00-6269, 00-6270
Citation:274 F.3d 687
Case Date:December 19, 2001
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

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274 F.3d 687 (2nd Cir. 2001)




Docket Nos. 00-6269, 00-6270

United States Court of Appeals, Second Circuit

December 19, 2001

Argued: May 23, 2001

This appeal is taken from a judgment entered August 7, 2000 in the United States District Court for the Southern District of New York (McMahon, J.). Plaintiff appeals the district court's grant of summary judgment dismissing her complaint under the federal False Claims Act, which alleged that the defendants requested Medicare reimbursement for medical procedures performed in a substandard manner. Plaintiff also appeals the district court's award of attorneys' fees to defendants, while defendants cross-appeal the amount of the award.


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Harold R. Burke, Greenwich, Connecticut (Holland Kaufmann & Bartels, Llc, Greenwich, Connecticut, of counsel), for Plaintiff-Appellant Patricia S. Mikes, M.D.

Barry B. Cepelewicz, White Plains, New York (David J. Meiselman, Arthur G. Larkin, Meiselman, Denlea, Packman & Eberz, P.C., White Plains, New York, of counsel), for Defendants-Appellees Marc J. Straus, M.D., Jeffrey M. Ambinder, M.D. and Eliot L. Friedman, M.D.

Gideon A. Schor, Assistant United States Attorney, New York, New York (Jeffrey Oestericher, Assistant United States Attorney, Mary Jo White, United States Attorney for the Southern District of New York, New York, New York, of counsel), for Amicus Curiae United States of America.

Jessie K. Liu, Washington, D.C. (Paul M. Smith, Robert M. Portman, Jenner & Block, Llc, Washington, D.C., of counsel), for Amici Curiae American Medical Association, Medical Society of the State of New York, American Academy of Family Physicians, American Academy of Orthopaedic Surgeons, American Association of Neurological Surgeons-Congress of Neurological Surgeons, American College of Chest Physicians, American Society of Cataract and Refractive Surgery, and Association of American Medical Colleges.

Anthony L. DeWitt, Jefferson City, Missouri (Bartimus, Frickleton, Robertson & Obetz, PC, Jefferson City, Missouri, of counsel), filed a brief for the American Association for Respiratory Care as Amicus Curiae.

Amy M. Wilken, Washington, D.C. (Dylan G. Trache, Taxpayers Against Fraud, The False Claims Act Legal Center, Washington, D.C.; Bruce J. Terris, Terris, Pravlik & Millian, Llp, Washington, D.C., of counsel), filed a brief for Taxpayers Against Fraud, The False Claims Act Legal Center as Amicus Curiae.

Before: Cardamone, F.I. Parker, Circuit Judges, and SPATT[*], District Judge.

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Cardamone, Circuit Judge

On this appeal we review a complaint asserting violations of the False Claims Act (Act), 31 U.S.C. § 3729 et seq. (1994), brought by a plaintiff employee against her former employers, who are health care providers. The appeal raises issues of first impression in this Circuit concerning the applicability of medical standards of care to the Act.

Congress enacted the False Claims Act after disclosure of widespread fraud during the War-Between-The-States revealed that the union government had been billed for nonexistent or worthless goods, had been charged exorbitant prices, and had its treasury plundered by profiteering defense contractors. See United States v. McNinch, 356 U.S. 595, 599 (1958). In 1986 the Act was substantially amended to combat fraud in the fields of defense and health care. See S. Rep. No. 99-345, at 2-4, 8 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5267-73. As of February 2000 over half of the $3.5 billion recovered since that amendment derived from cases alleging fraud against the Department of Health and Human Services. See Shelley R. Slade & Thomas A. Colthurst, Health-Care Fraud and the False Claims Act: The Supreme Court Supports a Federal Weapon, 10 Bus. L. Today, Sept.-Oct. 2000, at 24, 27.

The Act contains a qui tam provision designed to encourage private individuals to file suit by offering them a percentage of any money recovered. Those persons bringing a qui tam suit are known colloquially as whistle-blowers. The plaintiff in this case purports to blow the whistle on those practices of her employers she believes violate the Medicare statute, payment for which would defraud the government. Regardless of whether such suit is successful or unsuccessful (and here it is unsuccessful), a tale-bearer stands out, and risks being thought as bad as those alleged to be the tale-makers.


A. Facts

In 1991 defendants Dr. Marc J. Straus, Dr. Jeffrey Ambinder and Dr. Eliot L. Friedman, physicians specializing in oncology and hematology, formed a partnership called Pulmonary and Critical Care Associates to extend their practice to include pulmonology, the branch of medicine covering the lungs and related breathing functions. In July of that year defendants hired plaintiff Dr. Patricia S. Mikes, a board-certified pulmonologist, to provide pulmonary and critical care services in defendants' offices in Westchester and Putnam Counties, New York. In September 1991 Mikes discussed with Dr. Straus her concerns relating to spirometry tests being performed in defendants' offices. Three months later, plaintiff was fired.

The parties dispute the reason for Mikes' termination. Plaintiff says she was fired because she questioned how defendants conducted their medical practice. Defendants declare that Mikes' employment agreement provided she was terminable-at-will, and that plaintiff had difficulty procuring privileges at area hospitals.

On April 16, 1992 Mikes commenced the instant litigation against defendants in the United States District Court for the Southern District of New York, asserting not only causes of action for retaliatory discharge and unlawfully withheld wages, but also a qui tam suit under the False Claims Act. She served the complaint on the United States Attorney who, on April 19, 1993, notified the district court that it declined its statutory right to substitute for Mikes in the prosecution of this litigation. See 31 U.S.C. § 3730(b)(2), (b)(4)(B).

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B. Prior Proceedings

Plaintiff's qui tam cause of action under the Act alleged that defendants had submitted false reimbursement requests to the federal government for spirometry services. Plaintiff contended that defendants' failure to calibrate the spirometers rendered the results so unreliable as to be "false" under the Act. In addition, Mikes averred that spirometry is an eligible service under the Medicare statute, and that defendants submitted Medicare claims for reimbursement during the period relevant to this dispute -- now said to be 1034 claims from 1986 through 1993 -- for a total Medicare payout of $28,922.89.

After the government declined to take over as plaintiff, Mikes served defendants with her complaint on December 22, 1993. District Court Judge Vincent L. Broderick, before whom the complaint was then pending, dismissed it in May 1994 finding fraud had not been pleaded with particularity as required by Fed. R. Civ. P. 9(b). See United States ex rel. Mikes v. Straus, 853 F.Supp. 115, 118 (S.D.N.Y. 1994).

Mikes then filed an amended complaint repeating the spirometry, retaliation and withholding wages claims, and also asserting that defendants improperly received Medicare reimbursement for referrals to Magnetic Resonance Imaging (MRI) facilities in which they held a financial interest. It was Mikes' contention that receipt of these referral fees violated the anti-kickback provision of the Medicare statute, 42 U.S.C. § 1320a-7b(b)(1) (1994), and thus defendants' claims for reimbursement for the MRIs also violated the False Claims Act. District Court Judge William C. Conner, now assigned to the case, denied a motion to dismiss the False Claims Act causes of action, and ordered arbitration of the employment-based claims. See United States ex rel. Mikes v. Straus, 889 F.Supp. 746, 751-57 (S.D.N.Y. 1995).

Mikes then filed in March 1996 a second amended complaint that eliminated the claim for improperly withheld wages, and on July 20, 1999 filed a three count supplemental complaint -- the pleading relevant to the present appeal -- containing only the spirometry claims brought under the False Claims Act. The case was again reassigned, this time to District Court Judge Colleen McMahon.

Defendants moved for summary judgment on August 13, 1999, and the government again chose not to intervene. In granting defendants' motion on November 18, 1999, the district court ruled that submitting a claim for a service that was not provided in accordance with the relevant standard of care does not make that claim false or fraudulent for False Claims Act purposes. United States ex rel. Mikes v. Straus, 84 F.Supp.2d 427, 433 (S.D.N.Y. 1999). Defendants' submission of claims for reimbursement, the court continued, did not implicitly certify that their performance of spirometry conformed to any qualitative standard. See id. at 436-38. And, it concluded, that even were the Medicare claims objectively false, plaintiff had not shown defendants submitted the claims with the requisite scienter. See id. at 438-39. Plaintiff's motion for reconsideration was denied. United States ex rel. Mikes v. Straus, 78 F.Supp.2d 223, 224 (S.D.N.Y. 1999).

After plaintiff's complaint had been dismissed, defendants asked for attorneys' fees pursuant to § 3730(d)(4) of the Act. The district court conducted a two-day bench trial and found plaintiff's withdrawn MRI claims were vexatious, but that her...

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