U.S. ex rel. Hochman v. Nackman, 96-56790

• Decision Date: 27 May 1998
• Docket Number: No. 96-56790,96-56790
• Citation: 145 F.3d 1069
• Parties: 98 Cal. Daily Op. Serv. 3981, 98 Daily Journal D.A.R. 5497 UNITED STATES ex rel. Robert A. HOCHMAN, Dr.; United States ex rel. Susan Deschenes, Dr., Plaintiffs-Appellants, v. Lee M. NACKMAN; Shri K. Mishra, Dr.; Byron V. Whitney; Mohamed N. Rashad, Dr.; Gary Anthone, Dr.; Steven Stain, Dr., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1069

145 F.3d 1069

98 Cal. Daily Op. Serv. 3981, 98 Daily Journal

D.A.R. 5497

UNITED STATES ex rel. Robert A. HOCHMAN, Dr.; United States ex rel. Susan Deschenes, Dr., Plaintiffs-Appellants, v. Lee M. NACKMAN; Shri K. Mishra, Dr.; Byron V. Whitney Mohamed N. Rashad, Dr.; Gary Anthone, Dr. Steven Stain, Dr., Defendants-Appellees.

No. 96-56790.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Feb. 2, 1998.

Decided May 27, 1998.

Robert Berke, Santa Monica, California, for plaintiffs-appellants.

Michael P. Stone and Marc Berger, Pasadena, California, for defendants-appellees.

Appeal from the United States District Court for the Central District of California Edward Rafeedie, District Judge, Presiding. D.C. No. CV-94-04971-ER.

Before: FLETCHER, MAGILL, ^* and T.G. NELSON, Circuit Judges.

MAGILL, Senior Circuit Judge:

Dr. Robert Hochman and Dr. Susan Deschenes, employees of the Los Angeles Veterans Administration Outpatient Medical Clinic (Clinic), brought this qui tam action under the False Claims Act, 31 U.S.C. §§ 3729-33 (1994), against Clinic administrators and against physicians who were affiliated with both the Clinic and the University of Southern California School of Medicine (USCSM). Hochman and Deschenes alleged, inter alia, that the defendants submitted and approved inaccurate attendance records for Clinic physicians, thereby charging the government for time that the physicians did not spend at the Clinic. The district court granted summary judgment in the defendants' favor, and Hochman and Deschenes now appeal. We hold that the False Claims Act's statutory bar to claims based on publicly disclosed information did not prevent the district court from exercising jurisdiction over this case. Because the qui tam plaintiffs failed to present evidence upon which a reasonable factfinder could conclude that the defendants knowingly presented false claims, we affirm the district court's grant of summary judgment to the defendants. We also hold that the district court did not abuse its discretion in denying the plaintiffs' motion to recuse.

I.

The Clinic is the largest freestanding ambulatory care facility in the Veterans Health Administration (VHA) system. Its purpose is "to deliver efficient, competitive, quality care" complemented by "patient-centered education and research." U.S. Dep't of Veterans Affairs, VA Outpatient Clinic: L.A. at 3 (1996).

In 1987, the Clinic entered into an affiliation agreement with USCSM "for the purpose of research, education and training." Memorandum of Affiliation Between the Veterans Admin. Outpatient Clinic L.A. and the Univ. of S. Cal. at 1 (Dec. 24, 1987) (Affiliation Agreement). The Affiliation Agreement stated:

The university accepts responsibility for the integrated education and training programs conducted with the VA [Veterans Administration] facility. The responsibility for cooperative research programs, will be shared jointly. The Veterans Administration retains full responsibility for the care of patients, including all administrative and professional functions pertaining thereto.

Id. ¹ The Affiliation Agreement also provided that the Clinic's full-time and part-time staff members "[w]ill participate in the education and training programs within their respective services." Id. at 3.

Medical schools and VHA facilities have entered into similar affiliations ever since the end of World War II. Currently, there are approximately 120 medical school affiliations with VHA institutions, and over half of the nation's physicians have received a portion of their training at VHA medical facilities.

In 1992, the Department of Veterans Affairs Inspector General (IG) investigated a confidential informant's allegations of misconduct at the Clinic, including the allegation now raised by Hochman and Deschenes that certain doctors were paid for time that they did not spend at the Clinic. In March 1994, the IG issued a final report of the investigation. The report concluded that the allegations could not be substantiated and that further action against the Clinic physicians and administrators was not justified.

On July 25, 1994, Hochman and Deschenes, both full-time Clinic surgeons who had no affiliation with USCSM, filed suit under the False Claims Act against a number of defendants. ² The named defendants included the Clinic's director, Lee Nackman. As the director, Nackman served as a liaison between the Clinic and the VHA. Nackman also authorized the creation of new positions at the Clinic and approved recommendations to appoint chiefs of specialized practice areas.

Hochman and Deschenes also named as a defendant Dr. Shri Mishra, who taught clinical neurology at USCSM and served as the Clinic's chief of staff. Mishra was responsible for supervising the clinical staff and the chiefs of specialized practice areas. Defendant Dr. Mohamed Rashad held a teaching position at USCSM and served as the Clinic's chief of anesthesiology. Defendant Dr. Byron Whitney, the Clinic's chief of surgery, was responsible for overseeing physicians working in surgery. Defendants Dr. Gary Anthone and Dr. Steven Stain were assistant professors of surgery at USCSM and part-time surgeons at the Clinic.

Hochman and Deschenes sought to hold the defendants liable for four types of alleged misconduct, the details of which are set forth more fully in the analysis below. They first contended that the defendants erroneously authorized bonus pay for anesthesiologist Rashad. Second, they contended that the defendants created jobs and hired physicians that the Clinic allegedly did not need. Third, they contended that the defendants' method of compensating residents effectively paid residents who no longer worked at the Clinic. Finally, they contended that certain physicians and residents were overpaid because their attendance records stated that they were at work when they were not present at the Clinic.

On July 31, 1996, the defendants filed a motion for summary judgment. The district court first held that the bar under 31 U.S.C. § 3730(e)(4) against claims based on publicly disclosed information did not prevent the district court from hearing this case. The district court then held that the plaintiffs did not present evidence showing that any of the defendants had knowingly submitted false or fraudulent claims. The district court granted the defendants' summary judgment motion on August 30, 1996.

One week after the district court formally granted the motion, the plaintiffs, who learned that the district judge was a graduate of USC's law school, requested that the district judge disclose his affiliation with USC. On October 24, 1996, the district judge disclosed that he had graduated from USC's law school, that he was a member of Legion Lex, the law school's alumni association, and that he contributed $250 annually to Legion Lex. The district judge found no basis for recusing himself on these grounds.

Hochman and Deschenes now appeal, raising three issues: whether the district court properly exercised jurisdiction over this claim; whether the district court properly granted summary judgment to the defendants; and whether the district court abused its discretion in finding no grounds for recusal. We affirm.

II.

We first address the defendants' contention that the district court lacked subject matter jurisdiction over this case because the suit was based on publicly disclosed information. The False Claims Act's "public disclosure" jurisdictional restriction prevents district courts from hearing private actions "based upon the public disclosure of allegations or transactions ... in a congressional, administrative, or Government Accounting Office report, hearing, audit or investigation, or from the news media, unless ... the person bringing the action is an original source of the information." 31 U.S.C. § 3730(e)(4)(A) (1994). We review the exercise of jurisdiction de novo, and we accept the district court's factual findings on jurisdictional questions unless they are clearly erroneous. United States v. Northrop Corp., 5 F.3d 407, 409 n. 5 (9th Cir.1993).

The defendants' public disclosure argument relies on the operation of the Inspector General Act, which requires IGs to provide Congress and agency heads with semiannual statements summarizing their investigations and recommendations, and allows, but does not require, IGs to provide summaries of reports that find no improper expenditures have been made. See Inspector General Act of 1978 § 5(a), (b), 5 U.S.C. app. § 5(a), (b) (1994). Because this Circuit has held that information contained in an IG's semiannual statement to Congress is publicly disclosed, see United States ex rel. Fine v. Chevron, U.S.A., Inc., 72 F.3d 740, 743 (9th Cir.1995) (en banc), the defendants assert that the allegations in the March 1994 report on the Clinic "had ostensibly been made public" by the IG's semiannual statement to Congress. ³ Resp'ts' Br. at 14.

We disagree. In Fine, the plaintiff conceded that the contents of the report at issue were detailed in the IG's publicly disclosed semiannual statement. Fine, 72 F.3d at 743. Here, the district court found that the IG's publicly disclosed semiannual statement did not contain the information gathered in the IG's March 1994 report. See Tr. of Proceedings at 6 (Aug. 27, 1996) ("There is no evidence to suggest that the contents of the investigation report prepared in March of 1994 by the Inspector General's office was actually included in that office's semi-annual report release[d] on April 30, 1994." (capitalization omitted)). Because the district court did not err in finding that the allegations in this case were not part of the IG's publicly disclosed statement, we hold § 3730(e)(4)(A) does not bar jurisdiction over this case. ⁴

III.

We now turn to the district court's grant of summary judgment to the defendants on the merits of the plaintiffs' False Claims Act claims. We review a grant of...