USA v. Schena

• Docket Number: 5:20-cr-00425-EJD-1
• Decision Date: 23 July 2022
• Parties: USA, Plaintiff, v. MARK SCHENA, Defendant.
• Court: U.S. District Court — Northern District of California

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USA, Plaintiff, v. MARK SCHENA, Defendant.

No. 5:20-cr-00425-EJD-1

United States District Court, N.D. California, San Jose Division

ORDER RE MOTIONS IN LIMINE

Re: Dkt. Nos. 107, 108, 109, 110, 111, 112, 113, 114 115, 116, 117, 118, 119, 120, 121, 122

EDWARD J. DAVILA United States District Judge

On May 18, 2021, a federal grand jury returned a Superseding Indictment, charging Defendant Mark Schena with one count of conspiracy to commit health care fraud (Count 1) in violation of 18 U.S.C. § 1349, one count of conspiracy to pay kickbacks (Count 4) in violation of 18 U.S.C. § 371, two counts of health care fraud (Counts 2 & 3) in violation of 18 U.S.C. § 1347 and 18 U.S.C. § 2, two counts of illegal kickbacks (Counts 5 & 6) in violation of 18 U.S.C. § 220(a)(2)(A) and 18 U.S.C. § 2, and three counts of securities fraud (Counts 7-9) in violation of 15 U.S.C. §§ 78j & 78ff, 17 C.F.R. 240.10b-5, and 18 U.S.C. § 2. Superseding Indictment (“SI”), Dkt. No. 53. Defendant is charged with submitting false and fraudulent allergy test claims to the Medicare Program, Medicaid Program, TRICARE program, and private health insurance companies.

In anticipation of trial, Defendant and the Government filed motions in limine (“MIL”). See United States' Motions in Limine (“Govt MIL”), Dkt. No. 107; Defendant's Motion in Limine (“Def. MIL”), Dkt. Nos 108-22.^[1] Both Parties timely opposed and replied in support of their respective motions. See Defendant's Opposition to the Government's Motions in Limine (“Def. Opp.”), Dkt. No. 142; United States' Replies in Support of Motions in Limine (“Govt. Reply”), Dkt. No. 168; United States' Opposition to Defendant's Motion in Limine (“Govt. Opp.”), Dkt. Nos. 150-65; Defendant's Consolidated Reply in Support of Defendant's Motions in Limine (“Def. Reply”), Dkt. No. 169. Having considered the Parties' arguments, the relevant law, and the record in this case, the Court GRANTS in part and DENIES in part the following motions in limine, as set forth below.

I. BACKGROUND

Defendant Mark Schena, the president of Arrayit Corporation (“Arrayit”), is charged with a scheme to commit health care fraud, securities fraud, and to offer and pay illegal kickbacks. Arrayit was a publicly traded medical technology company based in Sunnyvale, California. Arrayit claimed to employ “microarray technology” for allergy and COVID-19 testing. As alleged by the SI, Defendant claimed that the “microarray technology” allowed for laboratory testing of a finger-prick drop of blood placed on a paper card and sent by mail to Arrayit's laboratory. SI ¶ 37. The SI alleges that this conspiracy involved (1) the submission of claims for services that were procured through the payment of kickbacks and bribes; (2) patients receiving medically unnecessary treatment; (3) services that were not eligible for reimbursement; and (4) services that were not provided as represented. SI ¶ 35.

In or around May 2018, Defendant and others announced that Arrayit had developed revolutionary technology that allowed Arrayit to test for exposure to 120 common food and environmental allergens with only a single drop of blood from a finger stick sample. SI ¶ 37. Arrayit billed insurance for the allergy testing that it conducted. Though Medicare's rules and regulations limit blood-based allergy testing to situations where (1) skin testing is not possible or is not reliable and (2) the number of allergens tested is reasonable, Arrayit allegedly paid kickbacks and bribes to recruiters and doctors to run a multiallergen blood screening test on every patient, even if not “medical necessary” within the meaning of the relevant statutes.

At the same time, Defendant and others allegedly made misrepresentations to potential investors about Arrayit's allergy test sales, financial condition, prospects, and business relationships. Defendant used various modes of communication, including press releases, Twitter, and email to communicate with investors and potential investors. Defendant made statements about:

• The status of Arrayit's financial reports;

• The health of Arrayit's business, including the amount of revenue Arrayit was receiving and the degree to which Arrayit was billing insurance; and

• Arrayit's relationships with public companies and government agencies, including Sutter Health and the Palo Alto Medical Foundation and the U.S. Department of Veteran Affairs. In March 2020, Defendant and others allegedly began making misrepresentations about Arrayit's ability to provide accurate, fast, reliable, and affordable COVID-19 tests in compliance with applicable regulations. SI ¶ 32. In early March 2020, Arrayit began promoting a test for COVID-19 on its website and claimed that it could test dried blood samples for both allergens and COVID-19. Arrayit also allegedly instructed its patient recruiters and clinics to add on or bundle Arrayit's allergy test and COVID-19 test regardless of medical necessity. SI ¶ 32.

II. LEGAL STANDARD

Motions in limine are a “procedural mechanism to limit in advance testimony or evidence in a particular area.” United States v. Heller, 551 F.3d 1108, 1111 (9th Cir. 2009). Like other pretrial motions, motions in limine are “useful tools to resolve issues which would otherwise clutter up the trial.” City of Pomona v. SQM N. Am. Corp., 866 F.3d 1060, 1070 (9th Cir. 2017). Accordingly, “a ruling on a motion in limine is essentially a preliminary opinion that falls entirely within the discretion of the district court.” Id.; see Luce v. United States, 469 U.S. 38, 41 n.4 (1984) (explaining that a court may rule in limine “pursuant to the district court's inherent authority to manage the course of trials”).

In many instances, however, rulings “should be deferred until trial, so that questions of foundation, relevancy, and potential prejudice may be resolved in proper context.” United States v. Pac. Gas & Elec. Co., 178 F.Supp.3d 927, 941 (N.D. Cal. 2016). For example, in order to exclude evidence on a motion in limine, “the evidence must be inadmissible on all potential grounds.” McConnell v. Wal-Mart Stores, Inc., 995 F.Supp.2d 1164, 1167 (D. Nev. 2014). Thus, denial of a motion in limine to exclude certain evidence does not mean that all evidence contemplated by the motion will be admitted, only that the court is unable to make a comprehensive ruling in advance of trial. Id. at 1168. Moreover, even if a district court does rule in limine, the court may “change its ruling at trial because testimony may bring facts to the district court's attention that it did not anticipate at the time of its initial ruling.” City of Pomona, 866 F.3d at 1070; see also Ohler v. United States, 529 U.S. 753, 758 n.3 (2000) (“[I]n limine rulings are not binding on the trial judge, and the judge may always change his mind during the course of a trial.”).

A. Federal Rule of Evidence 401

Under Federal Rule of Evidence 401, evidence is relevant if “it has any tendency to make a fact more or less probable than it would be without the evidence . . . and the fact is of consequence in determining the action.” “Relevancy simply requires that the evidence logically advance a material aspect of the party's case.” United States v. Ruvalcaba-Garcia, 923 F.3d 1183, 1188 (9th Cir. 2019) (internal quotations omitted).

B. Federal Rule of Evidence 403

Even if evidence is relevant, it must be excluded if its “probative value is substantially outweighed by a danger of . . . unfair prejudice, confusing the issues, [or] misleading the jury.” Fed.R.Evid. 403. Evidence is unfairly prejudicial when it has “an undue tendency to suggest decision on an improper basis, commonly, though not necessarily, an emotional one.” Old Chief v. United States, 519 U.S. 172, 180 (1997). Unfair prejudice can result from evidence that makes it more likely for a juror “to defer to findings and determinations relevant to credibility made by an authoritative, professional factfinder rather than determine those issues for themselves.” United States v. Sine, 493 F.3d 1021, 1033 (9th Cir. 1992).

C. Federal Rule of Evidence 802

Hearsay evidence is inadmissible unless provided for under a federal statute, the Federal Rules of Evidence, or “other rules prescribed by the Supreme Court.” Fed.R.Evid. 802. Hearsay is a statement “the declarant does not make while testifying at the current trial or hearing” and which “a party offers in evidence to prove the truth of the matter asserted in the statement.” Fed.R.Evid. 801. “Hearsay within hearsay” is only admissible “if each part of the combined statements conforms with an exception to the rule.” Fed.R.Evid. 805.

III. THE GOVERNMENT'S MOTIONS IN LIMINE

A. The Government's MIL to Preclude Defendant from Offering Evidence of Any Legitimate Medical Billing or Other Good Conduct as a Defense to the Charges in the SI

The Government argues that Defendant should be precluded from arguing, eliciting on direct or cross examination, or offering any evidence at trial of specific acts of good conduct, including evidence of: (1) legitimate billing and (2) the provision of legitimate services. Govt. MIL at 8. The Government contends that this evidence is irrelevant to Defendant's alleged health care and securities fraud schemes, and argues that if the evidence is admitted, it will confuse and mislead the jury. In the Government's view admission of this evidence would also violate Federal Rule of Evidence 404 because it constitutes inadmissible character evidence.

Defendant argues that he should be permitted to introduce evidence of specific acts of good conduct, namely that certain claims submitted for reimbursement by Arrayit were valid and legitimate. Def. Opp. at 3. Defendant maintains that this evidence is relevant to show that he did not...