U.S. ex rel. Tyson v. Amerigroup Illinois, Inc.

• Decision Date: 13 March 2007
• Docket Number: No. 02 C 6074.,02 C 6074.
• Citation: 488 F.Supp.2d 719
• Parties: UNITED STATES of America, ex rel. Cleveland TYSON; the State of Illinois, ex rel. Cleveland Tyson; and the People of the State of Illinois, Plaintiffs, v. AMERIGROUP ILLINOIS, INC. and Amerigroup Corporation, Inc., Defendants.
• Court: U.S. District Court — Northern District of Illinois

488 F.Supp.2d 719

UNITED STATES of America, ex rel. Cleveland TYSON; the State of Illinois, ex rel. Cleveland Tyson; and the People of the State of Illinois, Plaintiffs, v. AMERIGROUP ILLINOIS, INC. and Amerigroup Corporation, Inc., Defendants.

No. 02 C 6074.

United States District Court, N.D. Illinois, Eastern Division.

March 13, 2007.

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Frederick H. Cohen, David Joel Chizewer, Chad A. Blumenfield, Ann Chen, Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz, Ltd., Chicago, IL, David Jamison Adams, Anne Renee Kuper Reader, Illinois Attorney General's Office, Michele Marion Fox, Samuel B. Cole, United States Attorney's Office, Chicago, IL, for Plaintiffs.

Daniel John Voelker, Catherine A. Miller, Garry L. Wills, Gia Fonte Colunga, Hillard M. Sterling, Jeffrey Lawrence Dorman, Kellye L. Fabian, Freeborn & Peters, LLP, Chicago, IL, Daniel J. Riley, Robert J. Wagman, Jr., Baker Botts LLP, Theodore B. Olsen, Tulumello S. Andrew Gibson, Dunn & Crutcher, LLP, Washington, DC, for Defendants,

MEMORANDUM OPINION AND ORDER

LEINENWEBER, District Judge.

Relator Cleveland Tyson (hereinafter, "Tyson") filed this qui tam action under the False Claims Act (the "FCA"), 31 U.S.C. § 3729(a)(1) & (2), and the Illinois Whistleblower Reward and Protection Act (collectively, "the FCAs"), 740 ILCS 175/1, et seq., against Defendants Amerigroup Illinois, Inc. (hereinafter, "AI") and Amerigroup Corporation, Inc. (hereinafter, "AC"). Tyson alleged that Defendants defrauded the United States and the State of Illinois by engaging in discriminatory marketing practices in the course of conducting a Medicaid HMO. After several weeks of trial, a jury found for Plaintiffs.

I. BACKGROUND

Only a very basic factual background will be set forth here. Additional facts will be provided as necessary.

A. The False Claims Acts

The FCA permits private persons to file a form of civil action against, and recover damages on behalf of the United States, from any person who:

(1) knowingly presents or causes to be presented, to an officer or employee of the Unites States Government ... a false or fraudulent claim for payment or approval;

(2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government.

31 U.S.C. §§ 3729(a)(1)-(2). To state a claim under the FCA, plaintiffs must show that (1) defendants presented a claim for payment; (2) the claim was false; and (3) defendants knew the claim was false. 31 U.S.C. §§ 3729(a)(1)-(2). The Illinois Whistleblower Act is virtually identical. 740 ILCS 175/1 et seq.; see also U.S. ex rel. Humphrey v. Franklin-Williamson Human Services, Inc., 189 F.Supp.2d 862, 867 (S.D.Ill.2002).

B. Facts

At trial, Plaintiffs presented two liability theories. Under the first theory, Plaintiffs argued that Defendants fraudulently induced the IDPA to enter into contracts by promising not to discriminate based on the need for health services, even though it had no intention of keeping that promise. This misrepresentation made Defendants ineligible to contract with the IDPA and receive Medicaid funds. As such, all contracts at issue violated the FCAs.

Under the second theory, Plaintiffs argued that Defendants submitted false claims for payment, the enrollment applications (containing implied certifications), causing the State of Illinois to submit forms CMS-37 and CMS-64 (containing false express certifications) to the Federal Government. Because capitation rates were based on Defendants' promise that they would not discriminate, Defendants' discrimination undermined the actuarial basis for the capitation rates that IDPA paid to Defendants. By misrepresenting that it would not discriminate, Defendants knew that it would receive inflated capitation payments. As such, each enrollment form constituted a false claim because it sought the payment of capitation rates that Defendants knew were inflated. When the IDPA submitted the CMS-37 and CMS-64 forms, it certified that the expenditures were in compliance with federal laws and regulations; these certifications were likewise false.

The jury found for Plaintiffs in the amount of $48 million in government damages. Additionally, the jury's responses to special verdict forms evidenced agreement with both liability theories. The jury also found that there were 18,130 false claims; this interrogatory was asked purely for purposes of determining the applicable civil penalties. This interrogatory was not "upon one or more issues of fact the decision of which is necessary to a verdict," as the jury need not determine the number of false claims to return a verdict under the FCA. See FED. R. CIV. P. 49(b). Thus, it was not a special interrogatory. Id.

II. STANDARD

Judgment as a matter of law must be granted where "no reasonable jury could have found for [plaintiffs] on each essential element of their claim." Harper v. Albert, 400 F.3d 1052, 1061 (7th Cir.2005). This is a stringent standard, Christie v. Foremost Ins. Co., 785 F.2d 584, 586 (7th Cir.1986); "any conflicts in the evidence must be resolved in favor of the resisting party, and every permissible inference favoring that party which can be drawn from the evidence must be drawn." Pieczynski v. Cerda, 1988 WL 67646 at *1 (N.D.Ill. June 20, 1988).

When a motion for judgment as a matter of law is based on an insufficient evidence argument, a court must decide whether the jury was presented with a "legally sufficient amount of evidence from which it could reasonably derive its verdict." Massey v. Blue Cross-Blue Shield of Illinois, 226 F.3d 922, 924 (7th Cir.2000). The motion must be denied if "the evidence presented, combined with all reasonable inferences permissibly drawn therefrom, is sufficient to support the verdict when viewed in the light most favorable to the party against whom the motion is directed." Mathur v. Board of Trustees of Southern Illinois University, 207 F.3d 938, 941 (7th Cir.2000). If a rational, jury could have found for the plaintiff, then the court must uphold the verdict. Id. at 941.

This Court must grant a new trial where "the clear weight of the evidence is against the jury verdict, the damages are excessive or for some other reason the trial was not fair." Scaggs v. Consolidated Rail Corp., 6 F.3d 1290, 1293 (7th Cir.1993). This standard requires a court to accord "the jury's verdict great deference." Calusinski v. Kruger, 24 F.3d 931, 936 (7th Cir.1994). A jury's verdict cannot be overturned if a reasonable basis exists in the record to support the verdict, viewing the evidence in the light most favorable to the prevailing party, and leaving issues of credibility and weight to the jury. Kapelanski v. Johnson, 390 F.3d 525, 530 (7th Cir.2004). Where a jury instruction is at issue, a party is entitled to a new trial if the Court finds that "(1) the instruction inadequately states Seventh Circuit law; and (2) the error likely confused or misled the jury causing prejudice to the movant." Gile v. United Airlines, Inc., 213 F.3d 365, 375 (7th Cir.2000).

III. AMERIGROUP ILLINOIS' MOTION FOR JUDGMENT AS A MATTER OF LAW/MOTION FOR NEW TRIAL

A. Fraudulent Inducement Theory

Under their first liability theory, Plaintiffs contended that AI fraudulently induced the IDPA to enter into a contract by (1) signing the 2000 MCO Contract (which included a marketing restriction against health-based discrimination) and (2) stating in a letter that "AMERICAID will not discriminate against clients with health issues which includes pregnant women."

1. Actionable False Statements

Initially, AI asserts that its express (but false) assurances that it would comply with the non-discriminatory marketing requirements are not actionable under the FCA. As this Court held in the summary judgment opinion, U.S. ex rel. Main v. Oakland City University, 426 F.3d 914, 917 (7th Cir.2005) precludes AI's argument. Under Oakland City, Plaintiffs must show that (1) the non-discrimination provisions were prerequisites to participation in the Medicaid HMO program under federal law; (2) AI knew when it signed the 2000 MCO Contract with the IDPA that discriminatory marketing practices were forbidden; and (3) AI planned to utilize discriminatory marketing practices. AI argues that Plaintiffs attempt to premise FCA liability on the mere breach of contract or violation of regulations, but this is not the case (as made perfectly clear in Oakland City). "[M]aking a promise that one intends not to keep is fraud" and actionable under the FCA; an after-the-fact breach of a contract — that was not planned at the time the contract was entered into — is just that: a breach. Oakland City, 426 F.3d at 917. AI's attempts to distinguish Oakland City are likewise misguided.

AI also asserts that the false statement needed to have been a "condition to payment" and that this Court should read a "directness" requirement into the FCA which "demand[s] some direct relation between the injury asserted and the injurious conduct alleged," Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 268, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992). A condition to participation is a condition to payment, U.S. ex rel. Hendow v. University of Phoenix, 461 F.3d 1166, 1174 (9th Cir.2006) (reasoning based on Seventh Circuit's opinion in Oakland City), and Plaintiffs presented sufficient evidence for a reasonable jury to have found that the non-discrimination provisions were conditions to participation. "If a false statement is integral to a causal chain leading to payment, it is irrelevant how the federal bureaucracy has apportioned the statements among layers of paperwork." Oakland City, 426 F.3d at 916. The requested "directness" requirement, furthermore, has been drawn by AI from case law outside the FCA context. See, e.g., Anza v. Ideal Steel Supply Corp., ___ U.S. ___, ___, 126 S.Ct. 1991, 1996, 164 L.Ed.2d 720 (2006) (RICO). The mere...