United States v. Compassionate Care Hospice of the Midwest, L.L.C., CIV. 09-4039-KES

CourtUnited States District Courts. 8th Circuit. United States District Courts. 8th Circuit. District of South Dakota
Writing for the CourtKAREN E. SCHREIER
PartiesUNITED STATES OF AMERICA, ex rel. Barbara Kappenman, and BARBARA KAPPENMAN, individually, Plaintiffs, v. COMPASSIONATE CARE HOSPICE OF THE MIDWEST, L.L.C., Defendant.
Docket NumberCIV. 09-4039-KES
Decision Date23 February 2012

UNITED STATES OF AMERICA, ex rel. Barbara Kappenman,
and BARBARA KAPPENMAN, individually, Plaintiffs,

CIV. 09-4039-KES


Dated February 23, 2012.


Defendant, Compassionate Care Hospice of the Midwest, L.L.C. (CCH), moves for summary judgment and alleges that plaintiff United States of America, ex rel. Barbara Kappenman cannot maintain a cause of action under the False Claims Act (FCA) when the conduct consists of regulatory noncompliance. Docket 40. CCH also alleges that it is entitled to summary judgment on plaintiff Barbara Kappenman's retaliation and state-law claims. Kappenman1 resists the motion. Docket 45. For the following reasons, summary judgment is granted on the § 3729(3) claim under the FCA, the intentional infliction of emotional distress claim, and the tortious interference with a business relationship claim. The motion is denied in all other respects.

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Viewing the facts in a light most favorable to Kappenman, the nonmoving party, the record establishes that CCH is an entity that offers hospice services to the terminally ill in South Dakota. CCH is licensed and certified as a participant in federal health care programs, including Medicare. Kappenman was an employee of CCH from 2007 to 2008 as a case manager and eventually as a patient quality of care coordinator. Docket 41 at 3. Her duties in 2008 included reviewing and auditing patient medical files to assist coordination of care activities, and to assess documentation of hospice eligibility depending on the specific Medicare regulations. Id. While doing routine audits, Kappenman found a number of regulatory concerns in patient charts that she brought to the attention of her direct supervisor in South Dakota, Julie Phillips. Kappenman specifically identified at least three patient files uncovered during the course of her employment that she believed had insufficient documentation to show that the patients were eligible for Medicare services.

Kappenman reported her discoveries to other CCH employees. After determining that CCH employees in the Sioux Falls office were not taking the matter seriously, Kappenman prepared a letter of her concerns and eventually traveled to CCH corporate headquarters in New Jersey. In December of 2008, Kappenman met with two of CCH's corporate officers and relayed her findings.

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When she returned to Sioux Falls, she found the office to be in chaos. Phillips had moved her desk into the corner of a different room, had removed her computer and phone, and held a private staff meeting that excluded Kappenman. On January 9, 2009, Kappenman was terminated from CCH. Docket 42 ¶ 11. Kappenman's termination followed a tumultuous exchange of text, email, and phone messages between many CCH employees about the current work situation at CCH.

In February of 2009, Kappenman began working for a competitor of CCH, Asera Care, and she earned approximately $20,000 more in this new job than she had at CCH. Following Kappenman's termination, CCH believed that Kappenman was making defamatory statements about CCH and discussing her alleged fraudulent findings with other people. Through its attorney, CCH sent a letter to Kappenman and her new employer and requested that Kappenman cease and desist making any defamatory comments about CCH. Docket 41 at 5.

On April 2, 2009, Kappenman brought this action as a relator under the qui tam provision of the False Claims Act to recover treble damages and penalties that arose from a series of false claims made by CCH to the government through Centers for Medicare & Medicaid Services (CMS). Docket 1. Kappenman also brought state-law claims in her personal capacity that stem from her discharge from CCH. The United States chose not to intervene

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and filed a Notice of Declination in September of 2009. Docket 8. Kappenman now proceeds on behalf of the United States for the FCA liability and on her own behalf on the state-law claims.


Summary judgment is appropriate in a case where the moving party can show that "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A mere factual dispute does not prevent summary judgment, rather, only if there is a genuine issue of material fact "such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

Whether a fact is material depends on the substantive law of the case and whether that fact's resolution affects the outcome. Anderson, 477 U.S. at 248. The facts are viewed in the light most favorable to the nonmoving party and all reasonable inferences are drawn in his or her favor. Vette Co. v. Aetna Cas. & Sur. Co., 612 F.2d 1076, 1077 (8th Cir. 1980). The nonmoving party " 'may not rest upon the mere allegations or denials of his pleading, but . . . must set forth specific facts showing that there is a genuine issue for trial.' " Anderson, 477 U.S. at 248. "The court should deny summary judgment if there is sufficient evidence for a jury to return a verdict for the non-moving

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party." Young-Losee v. Graphic Packaging Int'l, Inc., 631 F.3d 909, 911 (8th Cir. 2011) (citation omitted).

While this case is before the court under the False Claims Act, South Dakota substantive law applies to the ancillary state-law claims involving wrongful termination, intentional infliction of emotional distress, wrongful discharge, defamation, tortious interference with a business relationship, and punitive damages because those causes of action arise under South Dakota law. See Witzman v. Gross, 148 F.3d 988, 990 (8th Cir. 1998) (citing United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 726 (1966)).


I. False Claims Act

"Congress enacted the FCA to protect government funds and property from fraudulent claims." Costner v. URS Consultants, Inc., 153 F.3d 667, 676 (8th Cir. 1998) (citation omitted). The Supreme Court stated that "the Act was intended to reach all types of fraud, without qualification, that might result in financial loss to the Government." United States v. Neifert-White Co., 390 U.S. 228, 232 (1968). An FCA cause of action may be brought by either the government or by a person who brings a qui tam action on behalf of the government. 31 U.S.C. § 3730.

Congress amended the FCA in May of 2009 when it enacted the Fraud Enforcement and Recovery Act of 2009 (FERA). United States ex rel. Vigil v.

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Nelnet, Inc., 639 F.3d 791, 796 n.4 (8th Cir. 2011); United States ex rel. Wilkins v. United Health Grp., Inc., 659 F.3d 295, 303 (3d Cir. 2011) (citing Pub. L. No. 111-21, 123 Stat. 1617 (2009)). Specifically, FERA amended certain language in the statute and redesignated 31 U.S.C. § 3729(a)(1) as 31 U.S.C. § 3729(a)(1)(A) and 31 U.S.C. § 3729(a)(2) as 31 U.S.C. § 3729(a)(1)(B). Wilkins, 659 F.3d at 303. Although this cause of action was filed prior to the enactment of FERA, there is a retroactivity provision that specifically applies the amended § 3729(a)(1)(B) retroactively to all claims that were pending on or after June 7, 2008. Id. at 303-04. Because this claim was filed in April of 2009, the court will assume without deciding that the pre-FERA law applies to this claim except when applying § 3729(a)(1)(B). Id. Regardless, the court finds that the result on summary judgment would be the same under either the FCA or FERA.

"Liability for a violation of § 3729(a)(1) requires proof that a materially false or fraudulent claim was 'presented' to the Government." Vigil, 639 F.3d at 797 (citation omitted). For a claim under § 3729(a)(1)(B), liability is imposed upon "any person who knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim[.]" The word "material" is defined as "having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property." 31 U.S.C. § 3729(b)(4). To make out a prima facie case under the FCA, a litigant must

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show: "(1) the defendant made a claim against the United States; (2) the claim was false or fraudulent; and (3) the defendant knew the claim was false or fraudulent." United States ex rel. Quirk v. Madonna Towers, Inc., 278 F.3d 765, 767 (8th Cir. 2002) (citation omitted).

A. Claim Against the Government

Kappenman claims that CCH presented false claims to the government by providing hospice services to ineligible patients and then knowingly submitting false claims for reimbursement. CCH asserts that Kappenman only alleges regulatory noncompliance issues and cannot show that the alleged regulatory violations are conditions of government payment or point to any specific claim that was submitted falsely. Kappenman disagrees and alleges that because CCH's regulatory noncompliance directly relates to reimbursements to CCH from Medicare, there is a causal link between CCH's failure to report ineligibility and the government's payment.

"Claim" is defined as "any request or demand, whether under a contract or otherwise,...

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