U.S., ex rel. Ramadoss v. Caremark Inc., No. SA-99-CA-00914-WRF.

• Court: United States District Courts. 5th Circuit. Western District of Texas
• Writing for the Court: Royal Furgeson
• Citation: 586 F.Supp.2d 668
• Decision Date: 27 August 2008
• Docket Number: No. SA-99-CA-00914-WRF.
• Parties: UNITED STATES of America, ex rel. Janaki RAMADOSS, et al., Plaintiffs, v. CAREMARK INC., et al., Defendants.

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586 F.Supp.2d 668 UNITED STATES of America, ex rel. Janaki RAMADOSS, et al., Plaintiffs,
v.
CAREMARK INC., et al., Defendants. No. SA-99-CA-00914-WRF. United States District Court, W.D. Texas, San Antonio Division. August 27, 2008.

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Allie Pang, Andrea Jo Larry, Meredith Lynn Burrell, U.S. Department of Justice, Civil Division, Washington, DC, Winstanley F. Luke, Assistant U.S. Attorney, Robert Shaw-Meadow, U.S. Attorney's Office, Marlene M. Martin, Law Office of Marlene M. Martin, San Antonio, TX, Valerie L. Kelly, Office of the Attorney General, Little Rock, AR, Lorinda Holloway, Brown, McCarroll, Bill Ralph Moss, Paul B. Moore, Office of the Attorney General, Antitrust & Civil Medicaid Fraud Division, Linda A. Halpern, Assistant Attorney General, Richard E. Salisbury, Office of the Texas Attorney General, Gaye Lynn Rothman, Kurt H. Kuhn, Thomas H. Watkins, Walter H. Mizell, Brown, McCarroll & Oaks Hartline, L.L.P. Austin, TX, Siobhan Franklin, Bureau of Medi-Cal Fraud and Elder Abuse, California Department of Justice, San Diego, CA, Robert A. Barba, Office of the Attorney General, Chicago, IL, Fred Duhy, Director, Medicaid Fraud Control Unit, James R. Murray, Office of Attorney General of Louisiana, Medicaid Fraud Control Unit, Baton Rouge, LA, Peter M. Coughlan, Office of the Attorney General, Antitrust Division, Nashville, TN, for Plaintiffs.

Charles J. Muller, III, Farley P. Katz, Merritt M. Clements, Strasburger & Price, L.L.P., San Antonio, TX, Charles A. Trost, Jennifer L. Weaver, Manisha S. Desai, Waller Lansden Dortch & Davis, LLP, Nashville, TN, Howard M. Pearl, Winston & Strawn, LLP, Chicago, IL, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART CAREMARK'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND DENYING THE GOVERNMENT'S MOTION FOR PARTIAL SUMMARY JUDGMENT

ROYAL FURGESON, District Judge.

 I. Introduction .............................................................672
                II. Summary..................................................................672
                

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III. Background..............................................................673
                 A. Medicaid............................................................673
                 B. Third Party Liability ..............................................675
                 C. The Role of Caremark................................................676
                 D. Caremark v. Goetz ..................................................678
                 E. Restrictions and Assignment.........................................681
                 F. Brief Procedural History............................................682
                IV. Standard of Review.......................................................683
                V. Applicability of False Claims Act ........................................684
                 A. Presentment.........................................................684
                 B. The False Claims Act................................................685
                 1) Falsity..........................................................685
                 i. A True Statement is not False under the False Claims Act.....687
                 ii. A Claim Cannot Be False When the Law is Unclear and There
                 is a Legitimate Good Faith Disagreement About the
                 Applicable Governing Law....................................688
                 iii. The FCA is a Punitive Statute................................690
                 iv. The FCA is Not a Catchall Provision..........................691
                 2) Obligation........................................................692
                 i. Collateral Estoppel..........................................693
                 ii. Analysis of the "Obligation" Element Under the Sixth, Eighth,
                 and Tenth Circuits .........................................694
                 iii. Analysis of the "Obligation" Element in the Fifth Circuit....697
                VI. Statute of Limitations...................................................699
                 A. Controlling Date for Statute of Limitations Purposes ...............699
                 B. The Core Requirement of Notice......................................700
                 C. Relation Back Under Federal Rule of Civil Procedure 15(c)(1)........701
                 D. Relation Back Under Federal Rule of Civil Procedure 15(c)(2)........703
                 E. Purpose of the FCA and its Limitations..............................705
                 F. Tolling of the Statute of Limitations...............................705
                VII. Recoupment .............................................................706
                VIII. Caremark's Examples of Allegedly False Claims..........................708
                 A. IHS Example: Timely Filing Restriction..............................708
                 B. Oklahoma Medicaid Example: Out-of-Network Restriction ..............710
                IX. The Government's Examples of Allegedly False Claims......................712
                 A. The Government's Paper Claims Examples..............................712
                 1) February 24, 2005 Rejection Letter to Texas Medicaid ............713
                 2) November 4, 2004 Rejection Letter to Illinois Medicaid...........713
                 3) October 11, 2006 Rejection Letter to New Jersey Medicaid.........714
                 4) November 10, 2006 Rejection Letter to Indiana Medicaid...........714
                 5) Letter to the VA.................................................714
                 B. The Government's Reauthorization Example............................715
                 C. The Government's Timely Filing Examples.............................715
                 1) March 19, 2005 statement to Illinois Medicaid....................715
                 2) November 16, 2004 statement to Delaware Medicaid ................716
                 D. The Government's Out-of-Network Examples............................716
                 1) January 1, 2007 statement to Massachusetts Medicaid..............716
                 2) August 19, 2006 statement to Florida Medicaid....................716
                 3) Out-of-Network statements for the VA and IHS.....................717
                 X. Conclusion.............................................................717
                

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I. Introduction

This case is a qui tam action against Defendant Caremark Inc. ("Caremark") alleging violations of the reverse false claims provision of the False Claims Act (the "FCA"), 31 U.S.C. § 3729 et seq. Pursuant to the FCA, a private citizen may commence an action by filing under seal a complaint in the government's name to allege fraud on the Government. Id., § 3730(b). If the government elects to intervene and obtains a judgment, the private citizen, referred to as a "relator," gets a percentage. Id., § 3730(d)(1).

The relator ("Relator") filed the instant case under seal on August 25, 1999. After seeking numerous extensions, the United States (the "Government") elected to intervene six years later and the complaint was finally unsealed. This is a multi-state litigation action that involves the Government, Relator, and several other states that are either parties to the litigation or represented by Relator or the Government. This case is complicated and involves many complex issues. The briefing has been voluminous, but of the highest level. Discovery in this matter has been shepherded by the exceptional and conscientious work of a Special Master. Central to the case are the plaintiffs' allegations that Caremark violated the reverse false claims provision of the FCA by applying restrictions contained in the health plans it administers.

At this state of the litigation, the Court is trying to resolve several preliminary motions and dispose of specific issues brought before the Court through various motions for summary judgment. Before the Court are Caremark's Motion for Partial Summary Judgment Against the Government (Docket No. 318); the Government's Response (Docket No. 395); Caremark's Reply (Docket No. 423); the Government's Motion for Partial Summary Judgment Against Caremark (Docket No. 344); Caremark's Response (Docket No. 388); and the Government's Reply (Docket No. 471). The parties appeared before the Court at a hearing on January 28-29, 2008. After careful consideration of the parties' briefing and arguments at the hearing, the relevant law, and applicable facts, the Court is of the opinion Caremark's Motion for Partial Summary Judgment (Docket No. 318) should be GRANTED IN PART AND DENIED IN PART and the Government's Motion for Partial Summary Judgment (Docket No. 471) should be DENIED.

II. Summary

Caremark moves for summary judgment on four issues: (1) the Government's FCA claims on behalf of state Medicaid agencies fail because Caremark's statements rejecting or denying Medicaid claims were submitted to state Medicaid agencies, not the Government; (2) all of the Government's FCA claims arising six years prior to its unsealed complaint-in-intervention are barred by the statute of limitations in the False Claims Act; (3) the Government's recoupment claims fail because the Government did not pay any money to Caremark in connection with Medicaid reimbursement requests and therefore there is nothing to recoup from Caremark; and (4) two examples of allegedly reverse false claims by the Government are not legally operative: a timely filing denial of a request for reimbursement from Indian Health Services, and an out-of network denial sent to Oklahoma Medicaid. For the reasons stated below, the Court grants in part and denies in part Caremark's Motion.

The Government moves for summary judgment on the following issues: (1) Caremark owes the Government an "obligation" under the FCA and Caremark is collaterally estopped from arguing that plan restrictions defeat obligation; (2) as a matter of law, the statements Caremark

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made to avoid reimbursing the Government were "false" under the FCA; (3) the Government is entitled to recoup the federal share of Medicaid overpayments and the overpayments made by the VA and IHS, and (4) Caremark's "no paper claims," timely filing, out-of-network, and preauthorization denials are false. In response, Caremark cross-moves for summary judgment, asserting that there is no evidence to establish the "falsity" and "obligation" elements of a reverse FCA violation. Caremark also cross-moves for summary judgment on the Government's specific examples of alleged false...