Polansky v. Exec. Health Res. Inc.

• Decision Date: 28 October 2021
• Docket Number: No. 19-3810,19-3810
• Citation: 17 F.4th 376
• Parties: Jesse POLANSKY, M.D., M.P.H.; the State of California, the State of Colorado, the State of Connecticut, the State of Delaware, the District of Columbia, the State of Florida, the State of Georgia, the State of Hawaii, the State of Illinois, the State of Indiana, the State of Iowa, the State of Louisiana, the State of Maryland, the Commonwealth of Massachusetts, the State of Michigan, the State of Minnesota, the State of Montana, the State of Nevada, the State of New Jersey, the State of New Mexico, the State of New York, the State of North Carolina, the State of Oklahoma, the State of Rhode Island, the State of Tennessee, the State of Texas, the Commonwealth of Virginia, the State of Washington, and the State of Wisconsin v. EXECUTIVE HEALTH RESOURCES INC; UnitedHealth Group Inc; United HealthCare Services Inc; Optum Inc; OptumInsight Inc; OptumInsight Holdings LLC; Community Hospital of the Monterey Peninsula; Yale New Haven Hospital ; United States of America Jesse Polansky, M.D., M.P.H., Appellant.
• Court: U.S. Court of Appeals — Third Circuit

17 F.4th 376

Jesse POLANSKY, M.D., M.P.H.; the State of California, the State of Colorado, the State of Connecticut, the State of Delaware, the District of Columbia, the State of Florida, the State of Georgia, the State of Hawaii, the State of Illinois, the State of Indiana, the State of Iowa, the State of Louisiana, the State of Maryland, the Commonwealth of Massachusetts, the State of Michigan, the State of Minnesota, the State of Montana, the State of Nevada, the State of New Jersey, the State of New Mexico, the State of New York, the State of North Carolina, the State of Oklahoma, the State of Rhode Island, the State of Tennessee, the State of Texas, the Commonwealth of Virginia, the State of Washington, and the State of Wisconsin

v.EXECUTIVE HEALTH RESOURCES INC; UnitedHealth Group Inc; United HealthCare Services Inc; Optum Inc; OptumInsight Inc; OptumInsight Holdings LLC; Community Hospital of the Monterey Peninsula; Yale New Haven Hospital ; United States of America

Jesse Polansky, M.D., M.P.H., Appellant.

No. 19-3810

United States Court of Appeals, Third Circuit.

Argued November 18, 2020

Filed: October 28, 2021

Nicholas C. Carullo, Stephen L. Shackelford, Jr., Susman Godfrey, 1301 Avenue of the Americas – 32nd Fl., New York, NY 10019, Daniel L. Geyser [ARGUED], Haynes & Boone 2323 Victory Avenue – Ste. 700, Dallas, TX 75219, William T. Jacks, Fish & Richardson, 111 Congress Avenue – Ste. 810, Austin, TX 78701, Counsel for Appellant

Tejinder Singh, Goldstein & Russell, 7475 Wisconsin Avenue – Ste. 850, Bethesda, MD 20814, Counsel for Amicus Appellant Taxpayers Against Fraud Education Fund

Ned I. Miltenberg, National Legal Scholars Law Firm, 5410 Mohican Road – Ste. 200, Bethesda, MD 20816, Counsel for Amicus Appellants Erwin Chemerinsky, National Whistleblowers Center, and Project on Government Oversight

Ethan M. Posner [ARGUED], Christopher M. Denig, Matthew F. Dunn, Michael M. Maya, Krysten R. Moller, Covington & Burling, 850 10th Street, NW, One City Center, Washington, DC 20001, Abigail A. Hazlett, Tracy Rhodes, Robin P. Sumner, Troutman Pepper Hamilton Sanders, 3000 Two Logan Square – Ste. 1250, 18th and Arch Streets, Philadelphia, PA 19103, Counsel for Appellee Executive Health Resources Inc.

Jeffrey B. Clark [ARGUED], United States Department of Justice, Environment & Natural Resources Division, 950 Pennsylvania Avenue, NW, Washington, DC 20530, Stephanie R. Marcus, United States Department of Justice, Civil Division, 950 Pennsylvania Avenue, NW – Rm. 7642, Washington, DC 20530, Charles W. Scarborough, United States Department of Justice, Appellate Section, 950 Pennsylvania Avenue, NW – Rm. 7244, Washington, DC 20530, Counsel for Appellee United States of America

Jeffrey S. Bucholtz, Jeremy M. Bylund, King & Spalding, 1700 Pennsylvania Avenue, NW – Ste. 200, Washington, DC 20006, Counsel for Amicus Appellee Chamber of Commerce of the United States of America

Before: JORDAN, KRAUSE, and RESTREPO, Circuit Judges

OPINION OF THE COURT

KRAUSE, Circuit Judge.

The False Claims Act (FCA), 31 U.S.C. § 3729, et seq. , empowers not just the federal government, but also private individuals, to bring claims for fraud on the United States and to do so in the Government's name in exchange for a share of the proceeds. These individuals, known as relators, are generally on the same side as the Government, which has the option early on to either intervene or allow the relator to move forward with the action on her own. But what authority does the Government have when it declined to intervene at the outset and subsequently opposes the relator's suit?

To answer, we must resolve two key questions that have divided our sister circuits: (1) whether the Government in that situation can move for dismissal without first intervening, and (2) if the Government properly moves for dismissal, what, if any, standard must it meet for its motion to be granted? For the reasons that follow, we conclude that the Government is required to intervene before moving to dismiss and that its motion must meet the standard of Federal Rule of Civil Procedure 41(a). Because we also conclude that the District Court here acted within its discretion in granting such a motion by the Government, we will affirm the Court's order of dismissal.

I. BACKGROUND

A. Factual Background

The False Claims Act has its roots in the Civil War, when "a series of sensational congressional investigations" uncovered widespread fraud by wartime contractors that had bilked the federal government by charging for "nonexistent or worthless goods." United States v. McNinch , 356 U.S. 595, 599, 78 S.Ct. 950, 2 L.Ed.2d 1001 (1958). In response, Congress not only prohibited the making of false claims to the Government, 31 U.S.C. § 3729(a)(1), and empowered the United States to seek civil remedies, id. § 3730(a); it also legislated a private enforcement mechanism, not unlike the bounty hunting common in the rough-and-tumble world of the mid-nineteenth century. That is, the statute permits private individuals, acting in the name of the Government, to assert FCA claims "for the person and for the United States Government." Id. § 3730(b)(1). These relator-initiated lawsuits, known as qui tam actions, effectively deputize citizens to act as private attorneys general, compensated with a share of the money recovered.¹ See id. § 3730(d).

This case involves such a qui tam action. Relator-Appellant Dr. Jesse Polansky was an official at the Centers for Medicare and Medicaid Services (CMS) before consulting for Defendant-Appellee EHR, a "physician advisor" company that provides review and billing certification services to hospitals and physicians that bill Medicare.² While employed as a consultant, Polansky became concerned that EHR was systematically enabling its client hospitals to over-admit patients by certifying inpatient services that should have been provided on an outpatient basis. As alleged in the complaint he eventually filed in the District Court, EHR was causing hospitals to bill the Government for inpatient stays that were not "reasonable and necessary" for diagnosis or treatment—a statutory requirement for reimbursement under the Government's Medicare program, 42 U.S.C. § 1395y(a)(1)(A), as explicated by CMS initially in guidance, and as of 2013, in a formal regulation, see 42 C.F.R. § 412.3(d)(1). From at least 2006 until the filing of his amended complaint in 2019, he alleged, EHR's certifications were false and caused the submission of false claims to the Government.

B. Procedural History

In 2012, on the basis of those allegations, Polansky filed this FCA action. His complaint remained in camera and under seal for the next two years while the Government conducted its own investigation and ultimately determined it would not participate in the case. Under the FCA, "[i]f the Government elects not to proceed with the action, the person who initiated the action shall have the right to conduct the action." 31 U.S.C. § 3730(c)(3). So at that point, the complaint was unsealed and Polansky, "for [himself] and for the United States Government," continued as plaintiff. Id. § 3730(b)(1).

Over the next several years, the parties and the District Court invested considerable time and resources in the case. Once EHR's motion to dismiss was denied,³ the District Court divided the case into two segments for case-management purposes: "Phase I" claims, covering EHR's certifications from 2009 to October 1, 2013, and "Phase II" claims, covering its certifications after October 1, 2013, the date that CMS's formal regulation went into effect. Because the complaint implicated hundreds of thousands of allegedly false claims, the District Court also decided to select a small number for a bellwether trial where "the jury would answer interrogatories," and the Court would then "enter judgment on all other claims encompassed by the jury verdict." Polansky v. Exec. Health Res., Inc. , 422 F. Supp. 3d 916, 919 (E.D. Pa. 2019). In anticipation of that trial, the Court designed a procedure for selecting the bellwether claims and appointed a special master, and the parties commenced discovery, focused on Phase I claims.

In February 2019, however, the case took an unexpected turn: The Government notified the parties that it intended to dismiss the entire action pursuant to 31 U.S.C. § 3730(c). Under paragraph (c)(1) of that section, a relator's ability to continue a suit he initiated is limited in various ways "[i]f the Government proceeds with the action." Those limits are spelled in out in paragraph (c)(2), including that "[t]he Government may dismiss the action notwithstanding the objections of the [relator]" so long as the relator receives notice and an opportunity to be heard on the Government's motion. 31 U.S.C. § 3730(c)(2)(A). Here, although the Government had originally opted not to proceed with the action and had not formally intervened, it pointed to § 3730(c)(2)(A) as the source of its authority to dismiss the case over Polansky's objection.

The Court stayed the proceedings while the parties negotiated with the Government. Initially, the Government acceded to Polansky's request not to dismiss his case in exchange for his filing of an amended complaint that substantially narrowed the scope of his Phase I claims. But the Government also reserved the right to reconsider, and a few months later, in August 2019, it invoked that right, and filed a motion to dismiss pursuant to § 3730(c)(2)(A). The District Court accepted that filing and, following briefing and argument, granted the Government's motion.⁴ It recognized the circuit split on the issue of what standard applies to a § 3730(c)(2)(A) dismissal, but because it concluded that the Government had made an adequate showing under any of the prevailing standards, it declined to weigh in. That task now falls to us.

II. JURISDICTION AND STANDARD OF REVIEW

The District Court had jurisdiction pursuant to 31 U.S.C. § 3732(a) and 28 U.S.C. § 1331, and we have...