United States v. Zulli

• Decision Date: 02 October 1975
• Docket Number: Civ. A. No. C.A. 74-306.
• Citation: 418 F. Supp. 252
• Parties: UNITED STATES of America v. Dr. Louis P. ZULLI.
• Court: U.S. District Court — Eastern District of Pennsylvania

418 F. Supp. 252

UNITED STATES of America v. Dr. Louis P. ZULLI.

Civ. A. No. C.A. 74-306.

United States District Court, E. D. Pennsylvania.

October 2, 1975.

Victor L. Schwartz, Asst. U. S. Atty., Philadelphia, Pa., for plaintiff.

David R. Scott, Philadelphia, Pa., for defendant.

MEMORANDUM AND ORDER

CLIFFORD SCOTT GREEN, District Judge.

As a result of defendant having been found guilty by a jury in a criminal proceeding of ten (10) counts of Medicare fraud¹ in violation of 42 U.S.C. § 408(b) and (c)², and the said judgment entered on the guilty verdict having been affirmed³, the Government now brings an action to collect damages from the defendant. This action for damages is brought pursuant to factual allegations identical to the factual allegations of the ten (10) counts of which defendant was found guilty in the prior criminal proceeding and is based upon a violation of 31 U.S.C. § 231, commonly known as the False Claims Act, which makes one accountable in money damages for any knowing and false claim upon the United States. This Court has jurisdiction pursuant to 31 U.S.C. § 232(A)⁴.

Presently pending before the Court is defendant's motion for default judgment in his favor on his counterclaim, plaintiff's motion to dismiss defendant's counterclaim, plaintiff's motion for summary judgment on his action and defendant's answer thereto. We deal with those motions pertaining to the counterclaim first and then the motion for summary judgment and answer thereto. Defendant's motion is denied and both of plaintiff's motions are granted for the reasons hereinafter stated.

Defendant's motion for a default judgment in his favor on his counterclaim is based on his argument that the Government's response to his counterclaim was filed beyond the 60 day requirement of F.R.Civ.P. 12(a). However, F.R.Civ.P. 55(e) states that "no judgment by default shall be entered against the United States . . unless the claimant establishes his claim or right to relief by evidence satisfactory to the court." Failure of the Government to respond within the 60 day rule does not constitute adequate evidence for entry of a default judgment against it. Fedor v. Ribicoff, 211 F.Supp. 520 (E.D.Pa.1962); 6 Moore ¶ 55.12 (1974 ed.). Accordingly, we deny defendant's motion for a default judgment.

In regard to the merits of the counterclaim, it is significant to note that defendant does not allege that he has obtained a final decision from the Secretary of Health, Education and Welfare (HEW) made after a hearing on the claims set out in the counterclaim. We must, therefore, conclude that defendant has failed to exhaust his administrative remedies. Congress has stated that where the Secretary of HEW has determined that a person supplying services has knowingly and willfully made, or caused to be made, any false statement or representation of a material fact in order to obtain payment from the United States, judicial review must await final decision of the Secretary made after a hearing. 42 U.S.C. §§ 405(b), (g), 1395y(d)(1), (d)(3)⁵.

However, defendant argues, relying on Comprehensive Group Health Services Board of Directors v. Temple University of the Commonwealth System of Higher Education, 363 F.Supp. 1069 (E.D.Pa.1973), that exhaustion of administrative remedies is not required if it would be futile and contends in regard to his counterclaim it would be futile. It is clear that Comprehensive Group Health Services Board of Directors is distinguishable from defendant's action in that the basis for not requiring exhaustion there was the fact that exhaustion of administrative remedies was not a clear prerequisite to judicial review. As the Court stated there, ". . . it is well settled that exhaustion of administrative remedies is required only when the administrative remedy is clearly designed as a mandatory precursor to judicial review." Id., at 1097. Moreover, on the particular facts of that case a finding that exhaustion of administrative remedies would be an exercise in futility was warranted. Here, there is no doubt that exhaustion of administrative remedies is a clear prerequisite to judicial review. See 42 U.S.C. §§ 405(b), (g), 1395y(d)(1), (d)(3). Moreover, no facts appear to justify a finding that exhaustion would be futile. Accordingly, we grant plaintiff's motion to dismiss defendant's counterclaim.

Plaintiff also seeks summary judgment pursuant to F.R.Civ.P. 56(a) as to its action under the provisions of 31 U.S.C. § 231, the False Claims Act, which makes one accountable in money damages for any knowing and false claim upon the United States. The Act also entitles the Government to collect $2,000.00 for each fraudulent claim it establishes, without having to prove damages. In addition, the Government may claim twice the amount of actual damages but waives its right to do so in this action.

It is clear that all of the elements of the crimes charged against defendant in the prior criminal proceeding are identical to the acts necessary for liability under 31 U.S.C. § 231. In the criminal proceeding, the jury conclusively found defendant guilty of knowingly and willfully making false material statements in order to obtain payment from the United States.⁶ This satisfies the requirements in the present civil action that "any person . . . who shall make or cause to be made, . . . for payment or approval, . . . any claim upon or against the Government of the United States . . . knowing such claim to be false, fictitious or fraudulent . . . shall forfeit and pay to the United States the sum of $2,000.00 . . .." 31 U.S.C. § 231. Thus, we have before us a classic case for application of the doctrine of collateral estoppel. The general doctrine of collateral estoppel has been stated in State...