Case: Document: 23 Filed: 09/12/2006 Pages: 36. No IN THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT

Transcription

1 No IN THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT CHRISTINE CHOVANEC, Plaintiff-Appellant, v. UNITED STATES OF AMERICA, Plaintiff-Appellee ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION Case No. 04-C-4543, Judge Charles P. Kocoras BRIEF FOR THE APPELLEE UNITED STATES OF AMERICA AND SUPPLEMENTAL APPENDIX PETER D. KEISLER Assistant Attorney General MICHAEL F. HERTZ POLLY A. DAMMANN DOUGLAS LETTER ALLIE PANG Attorneys, Civil Division U. S. Department of Justice P.O. Box 261, Ben Franklin Station Washington, D. C Telephone: (202)

2 No IN THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT CHRISTINE CHOVANEC, Plaintiff-Appellant, v. UNITED STATES OF AMERICA, Plaintiff-Appellee ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION Case No. 04-C-4543, Judge Charles P. Kocoras BRIEF FOR THE APPELLEE UNITED STATES OF AMERICA AND SUPPLEMENTAL APPENDIX STATEMENT REGARDING ORAL ARGUMENT Appellant Chovanec has requested oral argument on her appeal. If the Court believes that oral argument would be helpful in this case, the United States respectfully requests the opportunity to participate in the argument.

3 TABLE OF CONTENTS TABLE OF AUTHORITIES... iii STATEMENT REGARDING ORAL ARGUMENT JURISDICTIONAL STATEMENT...2 STATEMENT OF THE ISSUES PRESENTED FOR REVIEW STATEMENT OF THE CASE...3 STATEMENT OF THE FACTS...3 SUMMARY OF THE ARGUMENT...9 ARGUMENT...9 I. The District Court Properly Dismissed the Chovanec Complaint...9 A. The False Claims Act Bars a Second-in-time Relator from Bringing a Related Action Based on the Facts Underlying a Pending Action...9 B. Every Appellate Court to Address the Issue has Held that a Relator is Barred Under 31 U.S.C. 3730(b)(5) From Proceeding With a Second-in-Time Complaint Even if it is Not Identical to the Prior Complaint C. The Allegations in the Chovanec Complaint are Substantially Similar to the Allegations in the Costa and Wickern Complaints...13 D. Contrary to Chovanec s Assertions, and as the District Court Held, the Costa and Wickern Complaints Allege Nationwide, Ongoing FCA Violations i-

4 E. Reinstating Chovanec s Complaint Will Provide No Additional Value to the Government and Will, in Fact, Dilute the Government s Recovery and Create Disincentives to Future Whistleblowers F. Even Under the District Court Analysis Advocated By Chovanec, the Complaint Must be Dismissed II. The District Court Did Not Abuse its Discretion by Denying A Motion for Reconsideration that Was Based on Facts Irrelevant to the First-to-File Analysis under 31 U.S.C. 3730(b)(5)...22 A. A Motion for Reconsideration Should Only be Granted if There Has Been Either a Manifest Error of Law or Newly Discovered Evidence...22 B. The Government s Settlement of a Subset of Claims Presented in the Costa and Wickern Complaints is Irrelevant to the Court s First-to-File Analysis CONCLUSION...27 CERTIFICATE OF COMPLIANCE...28 CERTIFICATE OF SERVICE...29 DESIGNATION OF SUPPLEMENTAL APPENDIX CONTENTS ii-

5 TABLE OF AUTHORITIES Federal Deposit Ins. Corp. v. Meyer, 781 F.2d 1260 (7th Cir. 1986)...23 LB Credit Corp. v. Resolution Trust Corp., 49 F.3d 1263 (7th Cir. 1995)...23 In re Prince, 85 F.2d 314 (7th Cir. 1996)...23 Publishers Res., Inc. v. Walker-Davis Publ'ns, Inc., 762 F.2d 557 (9th Cir. 1985)...22 United States ex rel. Lujan v. Hughes Aircraft Co., 243 F.3d 1181 (9th Cir. 2001),... 12, 18, 26 United States ex rel. Bledsoe v. Community Health Sys., Inc., 2005 WL (M.D. Tenn., Dec. 13, 2005) United States ex rel. Grynberg v. Koch Gateway Pipeline Co., 390 F.3d 1276 (10th Cir. 2004)...12 United States ex rel. Hampton v. Columbia/HCA Healthcare Corp., 318 F.3d 214 (D.C. Cir. 2003)...12 United States ex rel. LaCorte v. SmithKline Beecham Clinical Lab., Inc., 149 F.3d 227 (3d Cir. 1998)... 11, 12, 19, 26 United States ex rel. Merena v. SmithKline Beecham Corp., 205 F.3d 97 (3d Cir. 2000)...12 United States ex rel. Ortega v. Columbia Healthcare, Inc., 240 F. Supp.2d 8 (D.D.C. 2003) , 21, 22, 26 -iii-

6 United States ex rel. Palladino v. VNA of Southern New Jersey, Inc., 68 F. Supp. 2d 455 (D. N.J. 1999)... 12, 22 United States ex rel. Pratt v. Alliant Tech. Systems, Inc., 50 F. Supp. 2d 942 (C.D. 1998)...15 United States ex rel. S. Prawer & Co. v. Fleet Bank of Maine, 24 F.3d 320 (1st Cir. 1994)...20 United States ex rel. Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645 (D.C. Cir. 1994)...9 Wang v. FMC Corp., 975 F.2d 1412 (9th Cir. 1992)...11 RULES Fed. R. App. P. 32(a)(5)...28 Fed. R. App. P. 32(a)(7)(B)...28 Fed. R. Civ. P. 59(e)...2, 22, 23 STATUTES 28 U.S.C U.S.C U.S.C (FCA) U.S.C. 3730(b) U.S.C. 3730(b)(5)... passim 31 U.S.C U.S.C. 3739(b)(5)...8, 12 -iv-

7 CONGRESSIONAL th 62 Cong. Globe, 37 Cong. 3d Sess (1863) v-

8 JURISDICTIONAL STATEMENT The United States agrees that Appellant Chovanec s jurisdictional statement is correct except that the United States does not agree that 31 U.S.C confers subject matter jurisdiction on the district court. The district court also possessed subject matter jurisdiction pursuant to 28 U.S.C STATEMENT OF THE ISSUES PRESENTED FOR REVIEW 1. Whether the district court properly concluded that Chovanec s False Claims Act qui tam complaint was sufficiently similar to prior complaints to trigger the jurisdictional, first-to-file bar of 31 U.S.C. 3730(b)(5), where the court held that the prior complaints alleged broadly that the misconduct was occurring on an ongoing, nationwide basis, and Chovanec s complaint merely specified that the same misconduct occurred after the prior complaints were filed and in a limited geographical area. 2. Whether the district court abused its discretion when it denied Chovanec s motion for reconsideration, holding that the Government s settlement of the earlier filed qui tam suits that did not include a release of Government claims submitted during the period alleged in Chovanec s complaint did not constitute the type of newly discovered evidence that would warrant relief under Rule 59(e). 2

9 STATEMENT OF THE CASE This case concerns a qui tam complaint filed by Relator Christine Chovanec (Chovanec) against Apria Healthcare Group, Inc. (Apria), a national provider of durable medical equipment (DME), pursuant to the False Claims Act, 31 U.S.C (FCA). The FCA states that a person who knowingly presents a false claim to the United States is liable for treble damages and civil penalties for each such false claim or false statement used in support of such a false claim. Although the FCA generally permits a private person (known as a relator ) such as Chovanec to file a qui tam action on behalf of the United States and to receive a share of the Government s recovery against a defendant through settlement or judgment, the FCA expressly bars a relator from bringing a related action based on facts underlying an already pending action. 31 U.S.C. 3730(b)(5). 1 STATEMENT OF THE FACTS This case concerns qui tam complaints filed by three sets of relators, all filed against Apria. On July 9, 2004, Chovanec, who was employed by Apria for seven years at various Apria regional offices in Illinois, filed a complaint in which she alleged, in 1 31 U.S.C. 3730(b)(5) states that [w]hen a person brings an action under this subsection, no person other than the Government may intervene or bring a related action based on the facts underlying the pending action. 3

10 relevant part, that Apria violated the FCA by: (1) altering Certificates of Medical 2 Necessity (CMN)(A-5 at Ex. 1, Chovanec Cmpl ); (2) changing a doctor's diagnosis or other information to satisfy the requirements for a CMN or coaching doctors how to satisfy the requirements for a CMN (A-5 at Ex. 1, Chovanec Cmpl ); (3) miscoding the products billed to Medicare (A-5 at Ex. 1, Chovanec Cmpl ); (4) billing for equipment not received by patients (A-5 at Ex. 1, Chovanec Cmpl ); (5) forging signatures of patients on work orders showing that they received the equipment (also known as Assignment of Benefits or AOBs) (A-5 at Ex. 1, Chovanec Cmpl ); and (6) providing patients with oxygen and other equipment based on a verbal request from a referral source without a written prescription ( A-5 at Ex. 1, Chovanec Cmpl ). Prior to the filing of Chovanec s qui tam complaint against Apria in the Northern District of Illinois on July 9, 2004, two other sets of relators had filed qui tam complaints against Apria. Relators Cynthia Costa and Ken Kostanecki had filed United States ex rel. Costa and Kostanecki v. Apria Healthcare Group, Inc. (C.D. Cal.), Case No. 2 A-5 refers to the United States July 7, 2006 Suggestion of Dismissal and accompanying exhibits, attached hereto as Supplemental Appendix No. 5. 4

11 SACV MMM (Rcx)(C.D. Cal.)(Costa Complaint) on March 9, 1998 in the Central District of California. The Costa Complaint alleged that Apria: (1) falsified prescriptions and CMNs by altering diagnosis codes (A-5 at Ex. 2, Costa Cmpl ); (2) improperly coached physicians on the completion of diagnosis information on prescriptions and CMNs (A-5 at Ex. 2, Costa Cmpl ); (3) sought payment from Medicare by falsely representing that it had a hard copy of the CMN on file (A-5 at Ex. 2, Costa Cmpl ); and (4) miscoded oxygen and semi-electric beds (A-5 at Ex. 2, Costa Cmpl ). In addition, Relator Catherine Wickern had filed a qui tam complaint against Apria in the District of Kansas on August 4, 1999, and had filed an amended complaint on March 13, United States ex rel. Wickern v. Apria Healthcare Group, Inc. (C.D. Cal.), Case No. SACV MMM (Rcx)(C.D. Cal.)(Wickern Complaint). This Wickern Complaint was subsequently transferred to the Central District of California for joint handling and investigation after Relators Costa/Kostanecki and Wickern entered into a joint prosecution agreement. In any event, both the Costa and Wickern Complaints must be considered for the purpose of analyzing whether the Chovanec Complaint is a related action based on the facts underlying a pending action under the first-tofile analysis of 31 U.S.C. 3730(b)(5). 5

12 The Wickern Complaint alleged, in relevant part, that on a nationwide basis Apria: (1) modified its computer system to reduce accountability of Apria employees, including deleting the identification of the employees who enter AOB and CMN information electronically into Apria's computer system and the identity of the person who "route-clears" work orders (A-5 at Ex. 3, Wickern Am. Cmpl. 12(a))(emphasis added); (2) provided its customer service representatives with "cheat sheets" of examples of CMNs for each item sold by Apria and instructed the customer services representatives to input the "cheat sheet" data into its computer system rather than the information initially provided by a physician in a verbal order or a subsequent written CMN (A-5 at Ex. 3, Wickern Am. Cmpl. 12(c)-(d), (f)); (3) pressured employees to bill the Government without having received properly completed CMNs or Written Orders Prior to Delivery (WOPD) from the physicians (A-5 at Ex. 3, Wickern Am. Cmpl. 12(g)); (4) falsified diagnosis information on CMNs or coached physicians on the diagnosis codes that would qualify for payment (A-5 at Ex. 3, Wickern Am. Cmpl. 13(b)-(d), (f), (g)); (5) billed the Government without first obtaining an AOB from the patient. (A-5 at Ex. 3, Wickern Am. Cmpl. 13(h)); and (6) billed the Government without first obtaining a WOPD from the treating physician where a WOPD was required (A-5 at Ex. 3, Wickern Am. Cmpl. 13(j)). 6

13 When Chovanec declined to voluntarily dismiss her complaint, which was second-in-time to both the Costa and Wickern Complaints, the United States filed a suggestion of dismissal of the Chovanec Complaint on July 7, A-5. The relevant portion of the suggestion of dismissal requested dismissal of Chovanec s complaint under 31 U.S.C. 3730(b)(5), which states that no person other than the Government may intervene or bring a related action based on the facts underlying a previously filed qui tam complaint. 3 On September 26, 2005, the district court granted the United States suggestion of dismissal. In dismissing Chovanec s entire complaint, the district court rejected Chovanec s attempt to distinguish her complaint from the previously-filed complaints and held, [t]hus, though Chovanec claims that her complaint is removed in time and location such to make it a separate action, we conclude that her allegations are sufficiently similar to the prior complaints to 3 The Government also sought dismissal of the allegations in Chovanec s complaint that were not barred by 31 U.S.C. 3730(b)(5) for failure to state a claim under the FCA. A-5. Chovanec did not appeal the district court s order regarding Chovanec s failure to state a claim as to these other allegations. See A- 2, district court s denial of Chovanec s motion for reconsideration (referencing the motion of the relator to alter or amend the September 26, 2005 order of dismissal with regard to the jurisdictional bar of 31 U.S.C. 3730(b)(5) only); Brief of the Appellant (discussing the grounds for Chovanec s appeal of the district court s order dismissing her complaint under 31 U.S.C. 3730(b)(5) and denying her motion for reconsideration). 7

14 trigger the 31 U.S.C. 3739(b)(5) bar. A-1 at 5. On September 30, 2005, the United States entered into a settlement agreement with Apria to resolve the allegations in the Costa and Wickern Complaints. A-3 at In exchange for payment of $17.6 million, the Government agreed to release Apria from FCA and common law liability for specified conduct relating to CMNs, WOPDs, capped rental equipment, and date of service issues from June 1995 to December 31, Also pursuant to the settlement agreement, the relators who filed the Costa and Wickern Complaints agreed to dismiss their qui tam complaints in their entirety with prejudice in exchange for payment of a relator share by the United States and payment of expenses and attorney s fees and costs by Apria. A-3 at 5. Chovanec then moved on October 11, 2005 for reconsideration of the dismissal of her complaint, citing the Government s settlement agreement with Apria as the basis for her motion. The district court, however, denied Chovanec s motion for reconsideration on January 24, 2006, holding, [t]hough the fact of the settlement is something that was not and could not be known at the time we rendered our prior decision, it does not offer a basis for altering or amending the judgment rendered. A-2 at 2. 8

15 SUMMARY OF THE ARGUMENT The district court correctly held that the Chovanec Complaint overlaps with the previously-filed Costa and Wickern Complaints as to all material elements. Accordingly, Chovanec was jurisdictionally barred from proceeding with her case under 31 U.S.C. 3730(b)(5). The district court s dismissal of Chovanec s duplicative complaint was consistent with the primary purpose of the qui tam provisions of the False Claims Act: to encourage prospective whistleblowers to come forward as soon as possible with information likely to assist the Government in reducing fraud. The district court acted properly and did not abuse its discretion in denying Chovanec s motion for reconsideration because the Government s settlement agreement with Apria was legally irrelevant to the district court s holding that the Chovanec Complaint was jurisdictionally barred by 31 U.S.C. 3730(b)(5). ARGUMENT I. The District Court Properly Dismissed the Chovanec Complaint. A. The False Claims Act Bars a Second-in-time Relator from Bringing a Related Action Based on the Facts Underlying a Pending Action. The FCA is the federal Government's primary tool for recovering money lost from the United States Treasury due to fraud and false claims. United States 9

16 ex rel. Springfield Terminal Ry. Co. v. Quinn, 14 F.3d 645, 649 (D.C. Cir. 1994). 31 U.S.C defines a FCA "violation" to include, among other things, knowingly presenting or causing to be presented a false or fraudulent claim to the United States for approval. Under the FCA s qui tam provisions, a private person may file suit on behalf of the United States for a specific violation of section 3729, 31 U.S.C. 3730(b), and may receive, in turn, a bounty of up to thirty percent of the government s recovery for that particular violation, plus reasonable expenses, attorneys fees, and costs. 31 U.S.C. 3730(d). As Congress explained when it first enacted the FCA, the qui tam provisions are designed to induce those with actual knowledge of fraud to break the code of silence that often exists due to loyalty, fear, or complicity: The effect [of the qui tam provision] is simply to hold out to a confederate a strong temptation to betray his coconspirator, and bring him to justice. The bill offers, in short, a reward to the informer who comes into court and betrays his coconspirator... based upon the oldfashioned idea of holding out a temptation, and "setting a rogue to catch a rogue...." 62 Cong. Globe, 37th Cong., 3d Sess (1863). The FCA, as amended in 1986, has proven very successful at ferreting out fraud and providing recovery for losses that would otherwise remain hidden. The monetary incentive for relators to bring claims has proven so successful that often 10

17 more than one relator brings a false claims action based on the same underlying facts. See, e.g., United States ex rel. LaCorte v. SmithKline Beecham Clinical Laboratories, Inc., 149 F.3d 227 (3d Cir. 1998). The FCA, however, bars multiple relators from recovering a relator share based on duplicative complaints that allege substantially similar allegations, in part, based on the sound policy that a percentage of any government recovery should go only to the person who first sounded the alarm, not to the person who echoed it. Wang v. FMC Corp., 975 F.2d 1412, 1419 (9th Cir. 1992) (qui tam provisions meant to encourage insider whistleblowers, privy to fraud, to come forward; little point in rewarding a second blower of the whistle); see also LaCorte, 149 F.3d at 234 (incentives to bring fraud to the Government's attention would be reduced if dozens of subsequent relators alleging the same conduct could claim a share of any recovery). B. Every Appellate Court to Address the Issue Has Held that a Relator is Barred Under 31 U.S.C. 3730(b)(5) From Proceeding With a Second-in-Time Complaint Even if it is Not Identical to the Prior Complaint. In order to assess whether a later filed qui tam contains claims that are based on the facts underlying certain claims in a pending multi-count complaint, the court must conduct a claim-by-claim analysis in order to determine if section 11

18 3730(b)(5) applies. United States ex rel. Merena v. SmithKline Beecham Corp., 205 F.3d 97, 102 (3d Cir. 2000). If the later filed claim states the same elements of fraud described in an earlier suit, the later claim is barred under section 3730(b)(5). See United States ex rel. Palladino v. VNA of Southern New Jersey, Inc., 68 F. Supp. 2d 455, 478 (D. N.J. 1999) citing LaCorte, 149 F.3d at 233 (second qui tam alleging the same claim based on separate factual details of similar events in a different geographical area barred under section 3730(b)(5)). Although this Court has not addressed this issue previously, the four federal appellate courts that have considered the question the Tenth Circuit, D.C. Circuit, Ninth Circuit, and Third Circuit have all held that a second-in-time complaint need not be identical to a prior complaint to be barred under 31 U.S.C. 3739(b)(5). United States ex rel. Grynberg v. Koch Gateway Pipeline Co., 390 F.3d 1276 (10th Cir. 2004); United States ex rel. Hampton v. Columbia/HCA Healthcare Corp., 318 F.3d 214 (D.C. Cir. 2003) U.S. ex rel. Lujan v. Hughes Aircraft Co., 243 F.3d 1181, 1189 (9th Cir. 2001), cert. denied, 534 U.S (2001); United States ex rel. Merena v. SmithKline Beecham Corp., 205 F.3d 97, 102 (3d Cir. 2000). As the district court noted in dismissing the Chovanec Complaint, all of the circuit courts that have addressed this issue have concluded that the statute, by referring to actions that are related and based on the facts of 12

19 prior complaints, bars complaints that are similar to prior suits as well as those that are identical. A-1 at 4. Furthermore, the district court concluded that the statutory analysis set forth in those cases was sensible and consistent with the plain language of 3730(b)(5), and their reasoning and conclusions are accordingly persuasive. A-1 at 4. In the instant case, as a comparison of the relevant complaints shows, Chovanec brought no new essential, material facts to the Government that were separate and apart from the basic, core facts and allegations that were brought to the Government s attention by the previously-filed Costa and Wickern Complaints. While Chovanec provided the United States with additional color to the general facts and allegations already known to the Government prior to the filing of her complaint, variations in some of the details in her complaint are not sufficient to overcome the absolute bar of 31 U.S.C. 3730(b)(5), which prevents a second-in-time relator from proceeding with a qui tam action that contains the same general causes of action as a prior complaint. C. The Allegations in the Chovanec Complaint are Substantially Similar to the Allegations in the Costa and Wickern Complaints. The material facts alleged in the Chovanec Complaint were in significant measure raised in the prior Costa and Wickern Complaints. As Chovanec 13

20 implicitly concedes, the basic allegations in the Chovanec Complaint are also in the Costa and/or Wickern Complaints: (1) false CMNs (compare A-5 at Ex. 1, Chovanec Cmpl to A-5 at Ex. 2, Costa Cmpl and A-5 at Ex. 3, Wickern Cmpl. 12(a), (c), (d), (f), 13(b)-(d), (f), (g)); (2) miscoding allegations (compare A-5 at Ex. 1, Chovanec Cmpl to A-5 at Ex. 2, Costa Cmpl (miscoding oxygen and semi-electric beds)); (3) falsification of AOBs and other documents indicating delivery of equipment to patients (compare A-5 at Ex. 1, Chovanec Cmpl to A-5 at Ex. 3, Wickern Cmpl. 13(h)(billing without AOBs); and (4) delivery of equipment based on a verbal order and no written prescription (compare A-5 at Ex. 1, Chovanec Cmpl to A-5 at Ex. 3, Wickern Cmpl. 12(g)(claims submitted without CMNs, WOPDs, or AOBs), 13(h)(claims submitted without AOBs), 13(i)(claims submitted without WOPDs), 13(j)(claims submitted without a prescription signed by a physician). The details of the complaints vary to a degree, but the lack of absolute coincidence does not change the fact that the Chovanec Complaint stated the same elements of fraud described in earlier suits, i.e., the earlier suits provided all the information necessary for the Government to identify and investigate the fraud on a nationwide and ongoing basis. Although Chovanec claims that her complaint is removed in time and location such to make it a separate action, the district court correctly 14

21 concluded that Chovanec s allegations were sufficiently similar to the prior complaints to trigger the 3730(b)(5) bar. A-1 at 5. United States ex rel. Pratt v. Alliant Tech. Systems, Inc., 50 F. Supp. 2d 942, 950 (C.D. 1998), a case cited by Chovanec, Br. Of Appellant at 16 n. 8, is inapposite. The critical issue before that court was whether the relator and defendant could settle a qui tam action, notwithstanding the Government s objection to the settlement agreement, where the Government had declined intervention and had not participated in the litigation or settlement of the case. The court determined that it need not decide the issue whether certain claims of the relator were precluded by a prior qui tam complaint because the complaint at issue also asserted allegations against a new defendant and involved a contract that was not named in the prior complaint. Such is not the case here, where the Government alleged, and the district court agreed, that all of Chovanec s FCA claims echoed and therefore were precluded by the Costa and Wickern Complaints. D. Contrary to Chovanec s Assertions, and as the District Court Held, the Costa and Wickern Complaints Allege Nationwide, Ongoing FCA Violations. Chovanec asserts only that her complaint can be distinguished from the Costa and Wickern Complaints because it asserted FCA violations in different 15

22 Apria locations and for different periods. Br. Of Appellant at 5. Chovanec s contentions must fail because, as the district court correctly concluded, neither the Costa nor Wickern Complaint was drafted as narrowly as to time or place as Chovanec contends. The Costa Complaint alleges FCA allegations during the time from 1995 through at least October 1997" (A-5 at Ex. 2, Costa Cmpl. 2, 23, 31, 37)(emphasis added) and identifies the defendant in the complaint as Apria Healthcare Group, Inc., a company headquartered in Costa Mesa, California, servicing all 50 states with approximately 350 offices nationwide. A-5 at Ex. 2, Costa Cmpl. 13. The Costa Complaint does not limit its fraud allegations to any single Apria office, although many of the identified schemes were allegedly the result of problems associated with Apria s computer billing systems which were centralized in Costa Mesa, California. A-5 at Ex. 2, Costa Cmpl. 13. The Wickern Complaint is more explicitly inclusive as to both time and place. Specifically, it states, [c]ommencing on or about the time of the Abbey/Homedco merger in June, 1995, Apria began a fraudulent and systematic scheme with the intent to defraud the Government. A-5 at Ex. 3, Wickern Cmpl. 10. The Wickern Complaint further alleges that Apria on a nationwide basis, purposely created and fostered a practice of... by creating false documentation to 16

23 support a fraudulent bill (A-5 at Ex. 3, Wickern Cmpl. 14)(emphasis added); Apria, on a nationwide basis, knowingly, intentionally, directly and indirectly obtained payment, (A-5 at Ex. 3, Wickern Cmpl. 15)(emphasis added); and the FCA violations occurred during the period from at least mid-1995 through at least January, 1997 (A-5 at Ex. 3, Wickern Cmpl. 13(a)-(k) (emphasis added)). The district court expressly rejected Chovanec s assertion that her complaint was not barred because it asserted FCA violations during a different time frame for a different geographic region than was alleged in the prior qui tam complaints. The court held that [t]he latter [Costa and Wickern] complaints allege nationwide practices contributing to this alleged wrongdoing, which would certainly encompass Apria s Illinois offices. In addition, the latter [Costa and Wickern] complaints give open-ended time frames, allege that illegal conduct continued at least through a certain date but not identifying a definitive endpoint to the scheme 4 described. A-1 at 4-5. These allegations sufficed to put the Government on notice regarding allegedly continuing and widespread fraud. E. Reinstating Chovanec s Complaint Will Provide No Additional Value to the Government and Will, in Fact, Dilute the 4 For the reasons discussed, above, the relators who filed the Costa and Wickern Complaints were not required to amend their complaints, which allege ongoing, nationwide fraud, in order to encompass the substantially similar allegations in the Chovanec Complaint. 17

24 Government s Recovery and Create Disincentives to Future Whistleblowers Chovanec contends that reinstating her complaint would benefit the Government because the settlement agreement with Apria did not release the conduct alleged in her complaint, and the Government may seek a further recovery from Apria for those claims and periods not specifically released by the settlement agreement. 31 U.S.C. 3730(b)(5), however, does not provide for such an exception. U.S. ex rel. Lujan v. Hughes Aircraft Co., 243 F.3d 1181, 1187 (9th Cir. 2001), cert. denied, 534 U.S (2001). In addition, Chovanec fails to acknowledge that the purpose of the FCA s qui tam provisions is to alert the Government to fraud, but the Government had already been put on notice of the FCA violations alleged by Chovanec by virtue of the filing of the Costa and Wickern Complaints. The Costa and Wickern Complaints identified the general fraud schemes that Chovanec later repeated in her complaint. Morever, having excluded post-1998 claims in its settlement release, the United States can pursue these claims irrespective of whether the Chovanec Complaint is reinstated. Allowing Chovanec to proceed with her complaint, which differs from the first-in-time complaints only as to minor factual details, will provide no benefit to the Government and will only encourage other potential whistleblowers to wait 18

25 until someone else comes forward first, then file additional qui tam complaints that differ only slightly as to specific facts. This is inconsistent with the FCA s purpose of encouraging whistleblowers to approach the Government and to file suit as early as possible. LaCorte, 149 F.3d at 234. Permitting second-in-time complaints that are not identical, but are substantially similar to prior complaints, will also have the practical effect of dividing the potential relator share among more and more relators, thereby reducing the incentive for whistleblowers to come forward with information on wrongdoing. Id. Finally, duplicative qui tam complaints such as Chovanec s do not help reduce fraud or return funds to the federal fisc because once the Government knows the essential facts of a fraudulent scheme, it has enough information to discover and pursue related frauds. United States ex rel. Ortega v. Columbia Healthcare, Inc., 240 F. Supp.2d 8, 13 (D.D.C. 2003) (citing LaCorte, 149 F.3d at 234). Indeed, under such circumstances, second-in-time complaints only dilute the Government s recoveries without providing any benefit. Moreover, Chovanec s reading of the statute would waste Government resources by requiring it to consider and analyze the newly-filed, late complaint to determine how the relator share should be divided between the relator who filed the prior complaint and the relator who filed the second-in-time complaint. 19

26 For the foregoing reasons, this Court should reject Chovanec s assertion that the Costa and Wickern Complaints were no longer pending when the Apria settlement agreement was executed on September 30, 2005, after the district court dismissed the Chovanec Complaint on September 26, 2005 (but prior to the court s denial of Chovanec s motion for reconsideration on January 24, 2006), and therefore that the Chovanec Complaint should not have been dismissed. Br. Of 5 Appellant at 19. Reinstatement of Chovanec s second-in-time complaint would therefore serve no purpose other than to legitimize a parasitic complaint that receives support, advantage, or the like from the host complaint without giving any useful or proper return. United States ex rel. S. Prawer & Co. V. Fleet Bank st of Maine, 24 F.3d 320, (1 Cir. 1994). The Chovanec Complaint has not assisted the Government in identifying new fraud; rather, it has merely echoed information already received by the United States from other relators. Therefore, the district court properly concluded, [b]ecause the initial complaints in this action put the government on notice of the conduct that could have continued through the time of relator s allegations, her information did not notify the 5 In any event, the Costa and Wickern Complaints were literally pending when Chovanec filed her complaint. Moreover, the Costa and Wickern Complaints were not settled and dismissed, and were therefore pending, until after the date the district dismissed the Chovanec Complaint. 20

27 government of anything to which they had previously been unaware as a possible fraud. A-2 at 2. F. Even Under the District Court Analysis Advocated By Chovanec, the Complaint Must be Dismissed. The first-to-file rule of 31 U.S.C. 3730(b)(5) is an issue of first impression for this Court. Chovanec requests that this Court adopt the district court s analysis in United States ex rel. Ortega v. Columbia Healthcare, Inc., 240 F. Supp.2d 8 (D.D.C. 2003), in the mistaken belief that the Ortega decision supports a narrow application of the first-to-file bar. In fact, the Ortega court rejected the very identical facts test which Chovanec indirectly champions by asking this Court to draw narrow distinctions between her complaint and the Costa and Wickern Complaints. The Ortega court stated that permitting infinitely fine distinctions among complaints has the practical effect of dividing the bounty among more and more relators thereby reducing the incentive to come forward with information on wrongdoing. This is inconsistent with the FCA s purpose of encouraging whistleblowers to approach the government and file suit as early as possible. Ortega, 240 F.Supp.2d at 12 (citing Lacorte, 149 F.3d at 234). As the Ortega court also observed, a second-in-time complaint is barred even if it described a 21

28 different period or geographic location that could theoretically lead to a separate recovery if the later-filed complaint alleges the same type of wrongdoing as the first, and the first adequately alleges a broad scheme encompassing the time and location of the later filed complaint. Ortega, 240 F.Supp.2d at 13; see also Palladino, 68 F. Supp. 2d at (finding a broad allegation in a complaint describing misconduct in Philadelphia sufficient to preempt a later complaint focusing on Runnemede, New Jersey). Thus, the primary case cited by Chovanec undercuts, rather than supports, her assertion that her complaint is not second-intime to the Costa and Wickern Complaints. See Br. Of Appellant at II. The District Court Did Not Abuse its Discretion by Denying a Motion For Reconsideration that Was Based on Facts Irrelevant to the First-to- File Analysis under 31 U.S.C. 3730(b)(5). A. A Motion for Reconsideration Should Only be Granted if There Has been Either a Manifest Error of Law or Newly Discovered Evidence. Chovanec filed her motion for reconsideration pursuant to Fed. R. Civ. P. 59(e), which permits parties to file, within ten days of the entry of a judgment, a motion to alter or amend the judgement. Motions for reconsideration under rule 59(e) are designed to correct manifest errors of law or fact or to present newly discovered evidence. Publishers Res., Inc. v. Walker-Davis Publ ns, Inc., 762 th F.2d 557, 561 (9 Cir. 1985). A Rule 59(e) motion must clearly establish either a 22

29 manifest error of law or fact or must present newly discovered evidence in order to be successful. LB Credit Corp. V. Resolution Trust Corp., 49 F.3d 1263, 1267 th (7 Cir. 1995)(quoting Federal Deposit Ins. Corp. V. Meyer, 781 F.2d 1260, 1268 th (7 Cir. 1986)). The decision whether to grant or deny a Rule 59(e) motion is, therefore, entrusted to the sound judgment of the district court and will be reversed only upon a showing of an abuse of discretion. In re Prince, 85 F.2d th 314, 324 (7 Cir. 1996). After the district court dismissed her complaint, Chovanec filed a motion for reconsideration, citing the Government s settlement agreement with Apria as newly discovered evidence relevant to the court s dismissal of her complaint on first-to-file grounds. The settlement agreement, however, was legally irrelevant to the first-to-file analysis, and the district court properly held that the settlement agreement did not provide a basis for altering or amending the prior dismissal of Chovanec s complaint under rule 59(e). B. The Government s Settlement of a Subset of Claims Presented in the Costa and Wickern Complaints is Irrelevant to the Court s First-to-File Analysis. On September 30, 2005, the United States executed a settlement agreement with Apria and the relators who filed the Costa and Wickern Complaints, in which the United States agreed to release certain FCA claims for the period of June

30 to December 31, 1998, for the following subjects: CMNs, WOPDs, capped rental equipment, and documentation of delivery dates. A-3 at D and 2. As a part of the agreement, these prior relators agreed to a broader release and to a dismissal with prejudice of the Costa and Wickern Complaints. A-3 at 4. The United States and these prior relators subsequently filed notices of dismissal consistent with the settlement agreement, and the Court unsealed the Costa and Wickern Complaints on October 26, Unable to directly challenge the district court s findings in the September 26, 2005 order of dismissal, Chovanec attempted to rehash her old arguments in the motion for reconsideration by asserting that the narrow release in the Apria settlement agreement was evidence that her complaint did not overlap with the first-in-time complaints and should therefore not have been dismissed. The scope of a settlement release, however, says nothing about the scope of the underlying complaint. Depending on the substantive, tactical and policy decisions of the settling parties, the release may be more narrow, coextensive with or even broader than the complaint. As the district court observed, [t]he nature of a settlement is such that one party can release claims that it could have pursued in return for a faster resolution of the dispute, so the mere fact of the settlement and the specified time period does not negate the notion that the earlier complaints covered the same 24

31 period of time as relator s complaint. A-2 at 2. Thus, the scope of a settlement release may not precisely reflect what was alleged in the complaint, but that fact does not allow a second-in-time complaint to proceed if it would otherwise be barred by 31 U.S.C. 3730(b)(5). United States ex rel. Bledsoe v. Community Health Systems, Inc., 2005 WL (M.D. Tenn., Dec. 13, 2005), the case cited by Chovanec, Br. Of Appellant at 17-18, to support her argument that the Apria settlement agreement is relevant to the jurisdictional analysis of the Chovanec Complaint under section 3730(b)(5), stands for the unremarkable proposition that a relator is not entitled to share in the proceeds of the Government s settlement with a defendant when the relator s qui tam complaint has not alleged the FCA violations covered by the settlement agreement. Since neither the United States nor Chovanec contends that the Apria settlement agreement settled any of the claims alleged in the Chovanec Complaint, the Bledsoe decision has no relevance to the case at bar. As the Chovanec district court noted [citing the Government s contentions approvingly], the documents to be compared must be the complaints, not the settlement agreement and the complaint... the mere fact of the settlement and the specified time period does not negate the notion that the earlier complaints covered the same period of time as the relator s complaint. A-2 at 2. 25

32 Accordingly, the decision of the Government to settle with a defendant for all or a portion of the allegations in a qui tam complaint has no bearing on whether the settled qui tam complaint was first-in-time to another qui tam complaint. Indeed, even a first-in-time qui tam complaint in which the Government declines intervention and which is subsequently dismissed prevents a second-in-time complaint from proceeding, as long as a Court determines that the second-in-time complaint is sufficiently similar to the first-in-time complaint to trigger 31 U.S.C. th 3730(b)(5). U.S. ex rel. Lujan v. Hughes Aircraft Co., 243, F.3d 1183 (9 Cir. 2001), cert. denied, 534 U.S (2001). The only evidence needed to determine if a second-in-time complaint is barred by the first-to-file rule are the complaints themselves. Ortega, 240 F.Supp.2d at 15; LaCorte, 149 F.3d at 235 n. 6. No background evidence is relevant to the inquiry. Ortega, 240 F.Supp.2d at 15. Although the fact of the Government s settlement agreement was something that was not known at the time the district court rendered its September 26, 2005 decision dismissing the Chovanec Complaint, the district court properly held that such fact does not offer a basis for altering or amending the judgment rendered. A-2 at 2. / / / / 26

33 CONCLUSION For the foregoing reasons, the district court s September 26, 2005 order of dismissal and January 24, 2006 denial of Chovanec s motion for reconsideration should be affirmed. Respectfully submitted, PETER D. KEISLER Assistant Attorney General /s/ MICHAEL F. HERTZ POLLY A. DAMMANN DOUGLAS LETTER ALLIE PANG Attorneys, Civil Division U. S. Department of Justice P.O. Box 261 Ben Franklin Station Washington, D. C Telephone: (202) September 11,

34 CERTIFICATE OF COMPLIANCE 1. This brief complies with the type-volume limitation of Fed. R. App. P. 32(a)(7)(B) because this brief contains 6263 words, excluding the parts of the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii) 2. This brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type style requiremetns of Fed. Rp. App. 32(a)(6) because this brief has been prepared in a proportionally spaced typeface using WordPerfect 12 in Times New Roman Regular font and has a typeface of 14 points. Dated: September 11, 2006 /s/ Counsel for the United States 28

35 CERTIFICATE OF SERVICE th I hereby certify that on this 11 day of September, 2006, I filed the foregoing Brief for the Appellee, the United States of America, and served it upon the following persons by causing 15 copies and a diskette with a digital version of the brief to be delivered via Federal Express to: Clerk of the Court U.S. Court of Appeals for the Seventh Circuit Everett McKinley Dirksen United States Courthouse 219 S. Dearborn Street, Room 2722 Chicago, IL and by causing two copies and a diskette to be delivered via Federal Express to: Clinton A. Krislov Kenneth T. Goldstein Krislov and Associates 20 N. Wacker Drive, Suite 1350 Chicago, IL Richard Loritz LORITZ & ASSOCIATES 1100 Ravinia Place Orland Park, Illinois Thomas L. Murphy PETTI, MURPHY, DONNELLY & O CONNELL 1100 Ravinia Place Orland Park, Illinois /s/ Counsel for the United States 29

36 DESIGNATION OF SUPPLEMENTAL APPENDIX CONTENTS The United States hereby incorporates Chovanec s designation of appendix contents, and in addition, also designates the following item from the district court s docket for inclusion in the Supplemental Appendix: Description of Entry Date Filed Docket No. A-5 United States Suggestion of Dismissal 7/7/