U.S. ex rel. Riley v. St. Luke's Episcopal Hosp.

• Decision Date: 09 January 2004
• Docket Number: No. 02-20825.,02-20825.
• Citation: 355 F.3d 370
• Parties: UNITED STATES of America, ex rel. Joyce RILEY, Plaintiff-Appellant, v. ST. LUKE'S EPISCOPAL HOSPITAL, et al., Defendants, St. Luke's Episcopal Hospital; Branislav Radovancevic, Dr.; O. Howard Frazier, M.D.; Surgical Associates of Texas, P.A.; Baylor College of Medicine; Texas Heart Institute; Edward K. Massin, Dr., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

355 F.3d 370

UNITED STATES of America, ex rel. Joyce RILEY, Plaintiff-Appellant, v. ST. LUKE'S EPISCOPAL HOSPITAL, et al., Defendants St. Luke's Episcopal Hospital; Branislav Radovancevic, Dr.; O. Howard Frazier, M.D.; Surgical Associates of Texas, P.A.; Baylor College of Medicine; Texas Heart Institute; Edward K. Massin, Dr., Defendants-Appellees.

No. 02-20825.

United States Court of Appeals, Fifth Circuit.

January 9, 2004.

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Russell Stanley Post (argued), Beck, Redden & Secrest, Jim M. Perdue, Sr., Jim Mac Perdue, Jr., The Perdue Law Firm, Kevin Hampton Dubose, Alexander, Dubose, Jones & Townsend, Houston, TX, for Plaintiff-Appellant.

Michael Warren Mengis (argued), Gary W. Eiland, L. Boyd Smith, Jr., Stephen Douglas Pritchett, Jr., Vinson & Elkins, Houston, TX, for St. Luke's Episcopal Hosp. and Radovancevic.

Solace Kirkland Southwick, Andrews & Kurth, Houston, TX, for Frazier, Surgical Associates of Texas and Texas Heart Institute.

William Joseph Boyce, Warren S. Huang (argued), Nancy June Locke, Fulbright & Jaworski, Houston, TX, for Baylor College of Medicine.

Brian Patrick Johnson, Eileen L. Wilson, Tamnara Marie Madden, Johnson, Spalding, Doyle, West & Trent, Houston, TX, for Massin.

Peter Rolf Maier (argued), Douglas N. Letter, Kathleen A. Kane, U.S. Dept. of Justice, Civ. Div.-App. Staff, Washington, DC, for U.S., Amicus Curiae.

Appeal from the United States District Court for the Southern District of Texas.

Before DAVIS, SMITH and DUHÉ, Circuit Judges.

DUHÉ, Circuit Judge:

Plaintiff Joyce Riley, a former nurse at St. Luke's Episcopal Hospital, sued Defendants under the qui tam provisions of the False Claims Act ("FCA"), 31 U.S.C. §§ 3729 & 3730(b). The district court dismissed the complaint under Rule 12(b)(6) for failure to state a claim. We hold that dismissal was inappropriate at this stage of the litigation and accordingly reverse and remand for further proceedings.

I. BACKGROUND

Riley alleges that Defendants filed false claims with Medicare and the Civil Health and Medical Program of the Uniformed Services (CHAMPUS) for services that were either medically unnecessary or rendered by an unlicensed physician. Defendants Surgical Associates of Texas, St. Luke's Episcopal Hospital, and Drs. Edward Massin and O. Howard Frazier allegedly sought Medicare or CHAMPUS reimbursement for false claims. Defendant Baylor College of Medicine allegedly trained or employed residents, students, and fellows who worked at St. Luke's and who aided the filing of false claims. Defendants Dr. Branislav Radovancevic and his employer, the Texas Heart Institute (THI), allegedly aided the filing of false claims. THI is an organization of doctors at St. Luke's who specialize in treating heart conditions and performing heart transplants. Dr. Radovancevic earned a medical degree in Belgrade, and has not passed the medical licensing exam in Texas.¹

Riley asserts essentially that Radovancevic, despite being unlicensed, performed physician services for patients whose bills were submitted to and paid by Medicare or CHAMPUS. Her complaint also asserts that, in apparent pursuit of prestige by being industry leaders in terms of number of heart transplants performed, Defendants performed unnecessary heart transplants paid for by Medicare or CHAMPUS. The complaint also charges a civil conspiracy to file false claims.

The district court dismissed Riley's claims against all Defendants. United States ex rel. Riley v. St. Luke's Episcopal Hosp., 200 F.Supp.2d 673 (S.D.Tex. Apr.3, 2002), amended 2002 WL 32116882 (S.D.Tex. June 27, 2002). The district court wrote that the FCA is not a vehicle for regulatory compliance, and that materiality and a knowing falsehood are required to implicate the FCA. Id. 200 F.Supp.2d at 679. The court held that Medicare payments are made according to the patient's Diagnosis-Related Group, regardless of who provides treatment; therefore, Dr. Radovancevic's participation was immaterial to billing and could not provide the basis for an FCA claim. Id. at 680. On the question of medical necessity, the court dismissed the claims as challenging scientific judgment about which reasonable minds may differ, holding that such an opinion cannot be "false" for purposes of the FCA. Id. at 679. Finding no illegal activity, the court found no conspiratorial conduct. Id. at 680.

II. DISCUSSION

A. Appellate Jurisdiction

The Hospital Defendants contend that we lack jurisdiction because Riley's notice of appeal was untimely. When the United States is not a party in an FCA suit, Rule 4(a)(1) allows sixty days from the entry of the judgment appealed to file a notice of appeal. United States ex rel. Russell v. Epic Healthcare Mngt. Group, 193 F.3d 304, 308 (5th Cir.1999).

Riley noticed her appeal July 16, 2002. The district court entered a "Final Judgment" on April 1, 2002, providing that "plaintiff shall take nothing" and referencing reasons given in a memorandum opinion which granted only St. Luke's motion to dismiss. An "Amended Final Judgment" entered April 3 provided that "defendants will take nothing" and referenced reasons in an "amended" memorandum opinion dismissing in favor of all Defendants. On April 5 the district court vacated the April 3 defendants-take-nothing judgment and reinstated the April 1 plaintiff-take-nothing judgment.

Plaintiff and Defendants both filed post-judgment motions. After rulings, the district court issued the following "Amended Final Judgment," entered June 26:

Pursuant to the Amended Memorandum Opinion and Order dated April 2, 2002, as modified by this Court's order of June 25, 2002 [entered June 27], Plaintiff will take nothing by this suit. This Court's Judgments [entered April 1 and April 3] are hereby vacated.

This is a Final Judgment.

The Hospital Defendants characterize the foregoing judgment as a mere clerical correction that followed their post-judgment Motion for Correction of Minor Mistakes. Thus they argue this judgment would not interrupt or restart the time for appealing the real underlying judgment, the one entered April 1, from which Plaintiff's appeal is untimely. They argue that Plaintiff's post-judgment motion was also ineffective to extend the appellate deadline because it addressed a judgment that was vacated.

We disagree. Federal Rule of Appellate Procedure 4(a)(4) specifies several post-judgment motions which must be disposed of before a notice of appeal can be effective. One is a timely filed motion to alter or amend the judgment under Rule 59. Plaintiff moved to alter or amend judgment on April 5, which was timely and thus effected a tolling of the time for appeal under Rule 4(a)(4)(A). Plaintiff's post-judgment motion was timely because it was "filed no later than 10 days after the judgment [was] entered." Fed.R.Civ.P. 59(b).²

Nor was Plaintiff's post-judgment motion moot because of the vacatur of the April 3 judgment. Because her motion (except one part addressing the defendants-take-nothing error in the April 3 judgment) addressed the merits underlying the judgment as reflected in the memorandum opinions, it was not mooted by the district court's vacatur of the April 3 judgment, which corrected only the clerical error.

Since Plaintiff's motion to alter or amend judgment was timely, the time for filing an appeal ran from the entry of the order denying her motion or granting or denying any of the other motions listed in Rule 4(a)(4). Fed. R.App. P. 4(a)(4)(A). Thus by any count,³ her notice of appeal was timely and sufficient to confer appellate jurisdiction.

B. Legal Standards for Motion to Dismiss

A district court should dismiss for failure to state a claim only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). We review such ruling de novo. United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 901 (5th Cir.1997). The complaint must be liberally construed in favor of the plaintiff, and all well-pleaded facts accepted as true. Kaiser Aluminum & Chem. Sales v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir.1982), cert. denied, 459 U.S. 1105, 103 S.Ct. 729, 74 L.Ed.2d 953 (1983).

Riley urges us to reverse the district court, because it made assumptions about "evidence" rather than accepting the well-pled allegations as true. Indeed the district court's opinion made several references to the evidence and few, if any, to the pleadings. The exhibits attached to the complaint, however, are part of the complaint "for all purposes." Fed.R.Civ.P. 10(c). Thus it is not error to consider the exhibits to be part of the complaint for purposes of a Rule 12(b)(6) motion.⁴

To the extent that the district court held that the fraud claims failed "as unsupported by the evidence," and noted that there was "no evidence" or "no credible evidence" on certain issues, however, the court was not applying the correct standard for a Rule 12(b)(6) motion. See Rubinstein v. Collins, 20 F.3d 160, 166 (5th Cir.1994); Thompson, 125 F.3d at 901.

A Rule 12(b)(6) dismissal is not warranted just because the district court "believes the plaintiff is unlikely to prevail on the merits." Clark v. Amoco Prod. Co., 794 F.2d 967, 970 (5th Cir.1986). "Even if it seems `almost a certainty to the court that the facts alleged cannot be proved to support the legal claim,' the claim may not be dismissed so long as the complaint states a claim." Id. (quoting Boudeloche v. Grow Chem. Coatings Corp., 728 F.2d 759, 762 (5th Cir.1984)).

C. Stating a Claim under the FCA

To state a claim under the FCA, subsection (a)(1), a relator must allege that the defendant "knowingly" made "a false or fraudulent claim" to the United States Government. 31 U.S.C. § 3729(a)(1) (West 1999). Similarly, to state a claim under subsection (a)(2), the relator must allege...