United States v. Community Health Sys , 342 F.3d 634 ( 2003 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206 2 United States of America, et al. v. No. 01-6375
ELECTRONIC CITATION: 2003 FED App. 0322P (6th Cir.) Community Health Systems, et al.
File Name: 03a0322p.06
Before: MOORE and CLAY, Circuit Judges; LAWSON,
District Judge.*
UNITED STATES COURT OF APPEALS
_________________
FOR THE SIXTH CIRCUIT
_________________ COUNSEL
UNITED STATES OF AMERICA , X ARGUED: Mike Bothwell, MIKE BOTHWELL, P.C.,
ex rel., - Roswell, Georgia, for Appellant. Steve Frank, UNITED
STATES DEPARTMENT OF JUSTICE, CIVIL DIVISION,
Plaintiff-Appellee, - APPELLATE SECTION, Washington, D.C., Michael L.
- No. 01-6375
- Waldman, FRIED, FRANK, HARRIS, SHRIVER &
SEAN BLEDSOE , > JACOBSON, Washington, D.C., for Appellees. ON BRIEF:
,
Plaintiff/ - Mike Bothwell, G. Mark Simpson, MIKE BOTHWELL,
Relator-Appellant, - P.C., Roswell, Georgia, for Appellant. Steve Frank, Douglas
N. Letter, UNITED STATES DEPARTMENT OF JUSTICE,
- CIVIL DIVISION, APPELLATE SECTION, Washington,
v. - D.C., Michael L. Waldman, FRIED, FRANK, HARRIS,
- SHRIVER & JACOBSON, Washington, D.C., John R.
-
COMMUNITY HEALTH Jacobson, BOWEN, RILEY, WARNOCK & JACOBSON,
-
SYSTEMS, INC.; SPARTA Nashville, Tennessee, for Appellees.
-
HOSPITAL CORPORATION - _________________
d/b/a White County -
Community Hospital, - OPINION
Defendants-Appellees. - _________________
-
N CLAY, Circuit Judge. Plaintiff/Relator Sean Bledsoe
Appeal from the United States District Court (“Relator”) appeals from an order entered by the district court
for the Middle District of Tennessee at Cookeville. on September 19, 2001. Relator had brought a qui tam action
No. 00-00083—William J. Haynes, Jr., District Judge. against Defendants Community Health Systems, Inc. (“CHS”)
and Sparta Hospital Corporation d/b/a White County
Argued: March 12, 2003 Community Hospital (“White County Hospital”), alleging
violations of the False Claims Act (“FCA”), 31 U.S.C. § 3729Decided and Filed: September 10, 2003
*
The Honorable David M. Lawson, United States District Judge for
the Eastern District of Michigan, sitting by designation.
1
No. 01-6375 United States of America, et al. v. 3 4 United States of America, et al. v. No. 01-6375
Community Health Systems, et al. Community Health Systems, et al.
et seq. The district court entered an order in which it denied the complaint was filed under seal and served upon the United
Relator’s motion to recognize a settlement agreement reached States, but the government declined to intervene in the action.
between the United States government and CHS, granted Relator thereafter served the complaint on the named
Defendants’ motion for judgment on the pleadings, and defendants in May of 1999.
dismissed Relator’s claims with prejudice.
On July 3, 2000, Relator filed a First Amended Complaint
In this case involving some issues of first impression, we (“amended complaint”). The amended complaint deleted
REVERSE the judgment of the district court for the reasons some defendants, added a defendant, and contained new
discussed below. substantive allegations. CHS and White County Hospital
(collectively “Defendants”) filed separate answers to the
BACKGROUND amended complaint.
Procedural History Relator’s case subsequently was transferred to the Middle
District of Tennessee. Defendants then filed a motion,
On February 17, 1998, Relator filed a qui tam action pursuant to Federal Rule of Civil Procedure 12(c), for
against CHS, as well as other entities and officers of the judgment on the pleadings on November 3, 2000. Relator
various entities, in the United States District Court for the filed a brief in opposition to Defendants’ motion.
Northern District of Georgia.1 The complaint alleged that Additionally, Relator filed a motion to recognize a separate
CHS and others violated the FCA, 31 U.S.C. § 3729 et seq., settlement agreement entered into between the government
by “unbundling services and billing Medicare and Medicaid” and CHS, claiming that he was entitled to a relator’s share of
and “miscoding and upcoding items billed to Medicare and the settlement proceeds.
Medicaid.” (J.A. at 25.) Pursuant to 31 U.S.C. § 3730(b)(2),2
On September 18, 2001, the district court filed a
memorandum opinion, which (1) granted Defendants’ Rule
1 12(c) motion, (2) denied Relator’s motion to recognize the
The other listed defendants in the original complaint were
Forstmann Little & Co. (a privately-owned compa ny that wholly owns settlement, and (3) dismissed Relator’s lawsuit with
CHS ), Cookville Regional Medical Center (a nonprofit corporation), prejudice. An order to this effect was entered on the same
Theod ore Forstmann (chief executive officer (“CEO”) and chief financial day. Relator’s timely appeal followed.
officer (“CFO”) of Forstmann Little & Co.), Thomas H. Lister (general
partner of Forstmann Little & Co.), E. Thoma s Chaney (former president
and CEO of CHS), Ernest Baco n (president and CEO o f CHS), Barry
Stewart (CFO of CHS), and John Does and John Doe corporations 1-99.
2
“A copy of the complaint and written disclosure of substantially all
material evidence and informatio n the person possesses shall be served on
the Government pursuant to Rule 4(d)(4) [now Rule 4(i)] of the Federal
Rules of Civil P rocedure. The com plaint shall be filed in camera, shall
rema in under seal for at least 60 days, and shall not be served on the
defendant until the co urt so o rders. The Government may elect to the com plaint an d the m aterial ev idenc e and information.” 31 U .S.C.
intervene and proceed with the action within 60 days after it receives bo th § 3730 (b)(2).
No. 01-6375 United States of America, et al. v. 5 6 United States of America, et al. v. No. 01-6375
Community Health Systems, et al. Community Health Systems, et al.
Substantive Facts B. Relator’s Original Complaint and Written Disclosure
A. Relator’s and CHS’ Cooperation with the In the meantime, Relator filed his qui tam action in
Government February of 1998. The original complaint alleged that the
Cookville Regional Medical Center (“Cookville”), one of the
In 1995, Relator began working at White County Hospital, original named defendants, “perpetrated a scheme of
which is one of several hospitals owned by CHS. At some defrauding the United States Government by unbundling
point during his tenure at White County Hospital, Relator services and billing Medicare and Medicaid,” and that CHS
became aware of “a serious problem with upcoding and other and other defendants “engaged in a scheme of defrauding the
billing irregularities”3 (J.A. at 167), and he reported these United States Government by miscoding and upcoding items
irregularities to the government between 1996 and 1998. billed to Medicare and Medicaid.” (J.A. at 25.) Count One
of the complaint alleged that the defendants “knowingly
Sometime in the fall of 1997, CHS was approached by the presented, caused to be presented, or conspired to present”
government about possible upcoding at two different CHS false claims in violation of 31 U.S.C. § 3729(a)(1). (J.A. at
hospitals. On December 18, 1997, CHS contacted the Office 25.) Count Two alleged that the defendants “agreed to
of Inspector General of the United States Department of undermine [the Medicare and Medicaid] laws, rules, and
Health and Human Services (“OIG-HHS”), and disclosed regulations” and that they “conspired . . . to defraud the
that it had detected medical coding irregularities at its government by acting collectively to submit or cause to be
hospitals during recent internal audit efforts. CHS informed submitted false and fraudulent claims for payment to the
OIG-HHS of its plans to undertake an audit of its hospitals’ United States in violation of 31 U.S.C. § 3729(a)(3).” (J.A.
coding, disclose the results, and repay any overpayments it at 26.)
had received from Medicare. After lengthy negotiations,
CHS conducted the self-audit, and it presented preliminary With the sealed complaint, Relator also furnished to the
findings to OIG-HHS on December 18, 1998. OIG-HHS government, as required, a “written disclosure of substantially
simultaneously worked with the Department of Justice all material evidence and information [he] possesse[d].” 31
(“DOJ”) to investigate whether a FCA violation might have U.S.C. § 3730(b)(2). In the written disclosure, Relator
occurred. This investigation, of which Relator apparently was indicated, in pertinent part, that he had witnessed first-hand,
unaware at the time, concluded in mid-1999. or learned from others about, (1) unbundling4 of services
while working at Cookville; (2) upcoding of contract services
and disposable equipment, as well as fraudulent inflation of
cost reports, in White County Hospital’s nursing and
3 4
“Upcoding,” a common form of Medicare fraud, is the practice of “Unbundling” occurs when a health provider, who initially issues a
billing Med icare for medical services or equipment designated under a service as one package, breaks down the service into compone nt parts and
code that is more expensive than what a patient actually needed or was finds individual reimbursement codes for those components, so long as
provided. See Bo nnie Schreib er et al., Health Care Fraud, 39 A M . C RIM . the individual rates combined exceed the global rate. See Schreiber et al.,
L. R EV . 707, 750 n.331 (2002 ). supra note 4, at 750 n.331.
No. 01-6375 United States of America, et al. v. 7 8 United States of America, et al. v. No. 01-6375
Community Health Systems, et al. Community Health Systems, et al.
respiratory departments; (3) misuse of a doctor’s medical D. Dr. Adams’ Intervening Lawsuit and Relator’s
provider number in the emergency room; (4) double billing Amended Complaint
and billing for unbillable items; (5) improper changing of
patients’ statuses from an outpatient/observation status to an On January 15, 1999 (after the government declined to
inpatient status; (6) billing for fictitious continuous heart intervene in Relator’s qui tam action but before Relator’s
monitoring; and (7) improperly premature discharging of complaint was served on Defendants), Dr. Robert Adams,
hospital patients when Medicare reimbursement eligibility former medical director of White County Hospital’s
had been exhausted. In support of his allegations, Relator geropsychiatric treatment program, filed a complaint in
also provided a list of hospital employees and asserted his Tennessee state court, alleging wrongful termination.
possession of supporting documents. Specifically, he contended that he was terminated for refusing
to participate in White County Hospital’s policies regarding
C. The Government and CHS’ Settlement Agreement Medicare billings, which included “provid[ing] unneeded
medical services, falsify[ing] patient charts, and [performing]
The government5 and CHS ultimately agreed on a other illegal and unethical activities,” with the goal of
settlement in which CHS would repay to the government producing longer patient stays and, thus, higher hospital
Medicare overpayments in the amount of $30,904,625.56. reimbursement amounts.
The original version of the settlement agreement also
“specifically reserved and excluded from the scope and terms After the filing of Dr. Adams’ Tennessee state court
of this Agreement as to any entity or person (including the lawsuit, Relator filed an amended complaint on July 3, 2000.
Released Parties)” claims asserted in a qui tam action brought The amended complaint, among other things, contained new
by another relator in the Middle District of Tennessee. (J.A. substantive allegations, including fraud in White County
at 354-55.) Relator’s qui tam suit was not referenced in the Hospital’s psychiatric unit. Specifically, the amended
original version of the settlement agreement. On or about complaint asserted that Defendants had engaged in a scheme
March 28, 2000, a revised version of the settlement agreement to defraud the government by admitting to the psychiatric unit
was circulated, including a substituted page 12, which patients who were not Medicare or Medicaid eligible.
included Relator’s claim among the claims specifically Additionally, the amended complaint alleged that Defendants
excluded from the settlement agreement. All the parties then “encourag[ed] physicians to maximize the average length of
signed the revised settlement agreement. The settlement stay [in the psychiatric unit], whether medically necessary or
agreement’s effective date was May 8, 2000. not, . . . [and] terminated Dr. Robert Adams as director of the
psychiatric unit because he declined to increase the average
length of stay of patients unnecessarily.” (J.A. at 48, 49.)
The amended complaint also alleged a variety of other
fraudulent Medicare billing practices, including fraudulent
uses of provider numbers, fraudulent billing for continuous
5 monitoring services, improper payment of bonuses to
Spe cifically, the governm ent was acting through the DOJ and on providers based on hospital admissions, misrepresentation of
behalf of OIG-HH S. Other parties joining the United States in the
settlement agreement were TRICARE Management Activity, various
the employment status of certain physicians recruited for an
states, and relator H ealth Outco me T echnolo gies.
No. 01-6375 United States of America, et al. v. 9 10 United States of America, et al. v. No. 01-6375
Community Health Systems, et al. Community Health Systems, et al.
underserved area in order to obtain federal funds, and penalties and double or treble damages, plus the costs
unbundling of various services. incurred in bringing a FCA lawsuit. Id. § 3729(a).
E. The District Court’s Rulings Additionally, the FCA allows a private individual to bring
a lawsuit alleging FCA violations on behalf of the
On September 18, 2001, the district court granted government, which is known as a qui tam action. Id. § 3730.
Defendants’ motion for judgment on the pleadings, pursuant The private individual bringing the qui tam suit, known as a
to Federal Rule of Civil Procedure 12(c). In doing so, it relator, must first serve the complaint upon the government,
reasoned that Relator’s amended complaint was required to where the complaint then remains under seal for at least sixty
state its FCA claims with particularity, pursuant to Federal days. Id. § 3730(b)(2). During this time period, the
Rule of Civil Procedure 9(b), and that the amended complaint government may elect to intervene. Id. If the government
had failed in this regard. The court then decided to dismiss does not intervene in the action, the relator may proceed with
Relator’s claims with prejudice, reasoning that Relator had the action. Id. § 3730(b)(4)(B), (c)(3). If the relator
enjoyed a sufficient time period in which he could have successfully recovers funds for the government in pursuing
amended his amended complaint to comply with Rule 9(b) the qui tam action, he or she is entitled to 25-30% of the
but had failed to do so. proceeds recovered. Id. § 3730(d)(2). However, there are
restrictions upon a relator’s ability to proceed with a qui tam
The district court also denied Relator’s motion to recognize suit. For instance,
the May 8, 2000 settlement between the government and
CHS, reasoning that Relator was not entitled, under any No court shall have jurisdiction over an action under this
provision of the FCA, to a relator’s share of the settlement section based upon the public disclosure of allegations or
proceeds. Pursuant to these two rulings, the district court transactions in a criminal, civil, or administrative hearing
dismissed the case. . . . unless the action is brought by the Attorney General
or the person bringing the action is an original source of
ANALYSIS the information.
The FCA, 31 U.S.C. § 3729 et seq., is an anti-fraud statute Id. § 3730(e)(4)(A). In other words, a relator may continue
that prohibits the knowing submission of false or fraudulent the qui tam suit based on publicly-disclosed information only
claims to the federal government. Specifically, § 3729 if the relator is the original source of that information.
imposes liability when (1) a person presents, or causes to be
presented, a claim for payment or approval; (2) the claim is If the government intervenes in the action, it takes over the
false or fraudulent; and (3) the person’s acts are undertaken relator’s case and adopts any or all of the allegations
“knowingly,” i.e., with actual knowledge of the information, contained in the qui tam suit. Id. § 3730(c)(1). The relator,
or with deliberate ignorance or reckless disregard for the truth in turn, is entitled to 15-25% of any proceeds of the action or
or falsity of the claim. Id. § 3729(a)(1), (b). Section settlement. Id. § 3730(d)(1). Additionally, “the Government
3729(a)(3) prohibits conspiracies “to defraud the Government may elect to pursue its claim through any alternate remedy
by getting a false or fraudulent claim allowed or paid.” Id. available to the Government, including any administrative
§ 3729(a)(3). Persons who violate the FCA are liable for civil proceeding to determine a civil money penalty.” Id.
No. 01-6375 United States of America, et al. v. 11 12 United States of America, et al. v. No. 01-6375
Community Health Systems, et al. Community Health Systems, et al.
§ 3730(c)(5). If the government elects to pursue an “alternate particularity.” Fed. R. Civ. P. 9(b). We review de novo the
remedy,” the relator “shall have the same rights in such district court’s statutory interpretation of the FCA as requiring
proceeding as such person would have had if the action had Rule 9(b) compliance. United States v. Rapanos, __ F.3d __,
continued under this section.” Id. 2003 WL 21789241, at *2 (6th Cir. Aug. 5, 2003) (citing
United States v. Markwood, 48 F.3d 969, 975 (6th Cir.
On appeal, we must resolve three issues: (1) whether the 1995)).
district court correctly dismissed Relator’s amended
complaint with prejudice for failure to comply with Federal We recently held in a published case that a complaint
Rule of Civil Procedure 9(b); (2) whether certain portions of alleging FCA violations must allege the underlying facts with
Relator’s amended complaint fall outside our subject matter particularity as required by Rule 9(b). See Yuhasz v. Brush
jurisdiction because they are based upon publicly-disclosed Wellman, Inc., __ F.3d __, 2003 WL 21976038, at *2 (6th
information of which Relator was not the original source; and Cir. Aug. 20, 2003). Therefore, the district court correctly
(3) whether the district court correctly determined that Relator required Relator’s complaint to comply with Rule 9(b).
was not entitled to a relator’s share of the May 8, 2000
settlement agreement executed between the government and Although the FCA’s statutory language does not expressly
CHS. require Rule 9(b) compliance, it strongly suggests the
propriety of requiring such compliance. Section 3729(a)(1)
I. imposes liability when a person “knowingly presents, or
causes to be presented, to an officer or employee of the
We first consider whether the district court erred in granting United States Government or a member of the Armed Forces
Defendants’ motion for judgment on the pleadings and of the United States a false or fraudulent claim for payment
dismissing with prejudice Relator’s amended complaint for or approval.” 31 U.S.C. § 3729(a)(1) (emphasis added).
failing to comply with Federal Rule of Civil Procedure 9(b). Moreover, Section 3729(a)(3) prohibits a person from
We will address this issue as a three-part inquiry: (1) whether “conspir[ing] to defraud the Government by getting a false or
a complaint alleging FCA violations must comply with Rule fraudulent claim allowed or paid.” 31 U.S.C. § 37299(b); (2) if so, whether Relator’s amended complaint satisfied (emphasis added). Legislative history further reveals that
the Rule 9(b) requirement; and (3) if the amended complaint Congress views the FCA “[a]s a civil remedy designed to
did not satisfy the requirement, whether the district court make the Government whole for fraud losses.” S. Rep. 99-
properly dismissed it with prejudice. 345, at 6 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5271;
see also United States v. Borstein, 423 U.S. 303, 309 (1976)
A. A Complaint Alleging Violations of the FCA Must (noting that the purpose of the FCA, when originally enacted,
Comply with Federal Rule of Civil Procedure 9(b). was to stop “the massive frauds perpetrated by large
contractors during the Civil War”). In short, “[i]t is self-
Relator argues on appeal that the district court erred in evident that the FCA is an anti-fraud statute.” Gold v.
granting Defendant’s Rule 12(c) motion because a complaint Morrison-Knudsen Co., 68 F.3d 1475, 1476 (2d Cir. 1995).
stating a violation of the FCA need not comply with Rule Thus, when pleading violations of the FCA, a fraud statute,
9(b), which mandates that in “all averments of fraud . . . the one necessarily makes averments of fraud and necessarily
circumstances constituting fraud . . . shall be stated with
No. 01-6375 United States of America, et al. v. 13 14 United States of America, et al. v. No. 01-6375
Community Health Systems, et al. Community Health Systems, et al.
must state with particularity the circumstances constituting legislative intent was to combat fraud and, consequently, to
the fraud. Fed. R. Civ. P. 9(b). hold civilly liable those persons who submit fraudulent
claims. Moreover, as other courts have pointed out, the
Relator disputes our characterization of the FCA as a FCA’s more lenient intent requirement “does not conflict with
“fraud” statute. He points out that Rule 9(b) only applies to Rule 9(b), since ‘[m]alice, intent, knowledge, and other
“averments of fraud” and only requires that the condition of mind of a person may be averred generally.’”
“circumstances constituting fraud” need be stated with Gold, 68 F.3d at 1477 (quoting Fed. R. Civ. P. 9(b)). Relator
particularity, Fed. R. Civ. P. 9(b), whereas the FCA imposes is not required to state with particularity Defendant’s intent to
liability on a person who “knowingly presents, or causes to be defraud; he is only required to state with particularity the
presented . . . a false or fraudulent claim for payment or circumstances (i.e., the time, place, and substance)
approval.” 31 U.S.C. § 3729(a)(1). Therefore, Relator surrounding the fraudulent activity. See id. Application of
observes, a complaint alleging a FCA violation need only Rule 9(b) is appropriate in that it would deter those alleging
show that the person “knowingly,” or with “reckless FCA violations from making “overly broad allegations.”
disregard” or “deliberate ignorance,” presented a false claim, United States ex rel. LaCorte v. SmithKline Beecham Clinical
and the FCA suit is not required to prove many of the other Labs., Inc. 149 F.3d 227, 234 (3d Cir. 1998).7
traditional elements of fraud, such as scienter (intent to
defraud), “actual damages” to the government, or “reasonable Therefore, stating a violation of the FCA constitutes an
reliance” by the government. Relator argues that such a “averment[] of fraud” for purposes of Rule 9(b), and a
lowered level of intent demonstrates that the FCA is not a complaint alleging such a claim must state the circumstances
fraud statute and, consequently, a complaint need not state its surrounding the FCA violation with particularity. Yuhasz,
FCA allegations with particularity. 2003 WL 21976038, at *2.
We are not persuaded by the distinctions Relator has drawn.
The fact that the FCA does not require proof of all the
traditional elements of a fraud claim, such as scienter, does
not mean that the FCA is not an anti-fraud statute. Congress
may have had special reasons for liberalizing the level of
intent needed to prove a FCA violation,6 but its unambiguous
claims submitted by lower-level subo rdinates. This ‘ostrich-like’ conduct
which can occur in large corporations poses insurmountable difficulties
for civil false claims recoveries.” Id. at 6-7, 1996 U.S.C.C.A.N. at 5272.
6
Indeed, Congress clarified the “knowing” standard in 198 6 to 7
emphasize that the government need not prove that the defendant had Mo reover, all the other circuits to have considered the issue have
actual knowledge or a specific intent to submit a false claim, reasoning held that FC A claim s must co mply with Rule 9(b). See Bly-Magee v.
that this high standard was “inappropriate in a civil remedy” and California, 236 F.3d 1 014, 101 8 (9th Cir. 2 001 ); Harrison v.
“prohibit[ed] the filing of many civil actions to recover taxpayer funds Westinghouse Savannah River Co., 176 F.3d 776, 783 -84 (4th Cir. 1999);
lost to fraud.” S. Rep. 99 -345 , at 7, reprin ted at 1986 U.S.C.C.A.N. 5266, LaCorte, 149 F.3d at 234; United States ex rel. Thompson v.
5272. The Committee Report further noted that the “actual knowledge” Columbia/HCA Heathcare Co rp., 125 F.3d 8 99, 903 (5th Cir. 1997 );
standard precluded the government from “hold[ing] respo nsible those Gold, 68 F .3d at 147 6; United States ex rel. Cooper v. Blue Cross & Blue
corp orate officers who insulate themselves from know ledge of false Shield of Florida, 19 F.3d 56 2, 568 (11th Cir. 1994 ).
No. 01-6375 United States of America, et al. v. 15 16 United States of America, et al. v. No. 01-6375
Community Health Systems, et al. Community Health Systems, et al.
B. The Allegations of FCA Violations in Relator’s 1999) (citing Michaels Bldg. Co. v. Ameritrust Co., N.A., 848
Amended Complaint Are Not Stated with Sufficient F.2d 674, 679 (6th Cir. 1988)).
Particularity.
We agree with the district court that Relator’s amended
Our review of whether the district court properly granted complaint failed to state FCA violations with sufficient
Defendants’ motion for judgment on the pleadings under particularity. Notably, the amended complaint failed to set
Federal Rule of Civil Procedure 12(c) is guided by that of a forth dates as to the various FCA violations or any particulars
motion to dismiss under Federal Rule of Civil Procedure as to the incidents of improper billing Relator supposedly
12(b). Ziegler v. IBP Hog Market, Inc., 249 F.3d 509, 511-12 witnessed first-hand. Additionally, the amended complaint
(6th Cir. 2001) (citing Mixon v. Ohio, 193 F.3d 389, 399-400 did not specify the names of any individuals involved in the
(6th Cir. 1999)). Thus, our review of the district court’s improper billing, save for Dr. Adams, who was allegedly
ruling is de novo. Grindstaff v. Green, 133 F.3d 416, 421 terminated in retaliation for refusing to engage in the
(6th Cir. 1998). Our inquiry is whether, based on the fraudulent billing practices. Indeed, the amended complaint
allegations in the amended complaint, Relator can prove any often states that “Defendants” engaged in certain practices,
set of facts that would entitle him to relief. Mixon, 193 F.3d without ever specifying the defendants to which it was
at 400. In undertaking this inquiry, we will construe the referring. A complaint “may not rely upon blanket references
amended complaint in the light most favorable to Relator and to acts or omissions by all of the ‘defendants,’ for each
accept all of its factual allegations as true. Ziegler, 249 F.3d defendant named in the complaint is entitled to be apprised of
at 512. the circumstances surrounding the fraudulent conduct with
which he individually stands charged.” Benoay v. Decker,
In complying with Rule 9(b), a plaintiff, at a minimum, 517 F. Supp. 490, 493 (E.D. Mich. 1981) (internal quotation
must “allege the time, place, and content of the alleged marks and citations omitted), aff’d, 735 F.2d 1363 (6th Cir.
misrepresentation on which he or she relied; the fraudulent 1984); see also Yuhasz, 2003 WL 21976038, at *3 (holding
scheme; the fraudulent intent of the defendants; and the injury that the complaint at issue did not comply with Rule 9(b)
resulting from the fraud.” Coffey v. Foamex L.P., 2 F.3d 157, inasmuch as it failed to “identify specific parties, contracts, or
161-62 (6th Cir. 1993) (internal quotation marks and citations fraudulent acts”). Based on all these deficiencies, we agree
omitted); see also United States ex rel. Branhan v. Mercy with the district court that the allegations in Relator’s
Health Sys. of Southwest Ohio, No. 98-3127, 1999 WL amended complaint have failed to comply with Rule 9(b).
618018, at *1 (6th Cir. Aug. 5, 1999) (affirming dismissal of
a complaint alleging improper billing in violation of the FCA C. The District Court Abused Its Discretion in
because it “failed to allege a single specific incident in which Dismissing Relator’s Amended Complaint with
improper billing occurred and the plaintiff never set forth the Prejudice.
dates, times, or the names of individuals who engaged in the
alleged improper billing”). Essentially, the amended Relator alternatively challenges the district court’s decision
complaint should provide fair notice to Defendants and enable to dismiss his amended complaint with prejudice instead of
them to “prepare an informed pleading responsive to the affording him an opportunity to comply with Rule 9(b) by
specific allegations of fraud.” Advocacy Org. for Patients & amending his amended complaint. We review a district
Providers v. Auto Club Ins. Ass’n, 176 F.3d 315, 322 (6th Cir. court’s decision to dismiss a complaint with prejudice for an
No. 01-6375 United States of America, et al. v. 17 18 United States of America, et al. v. No. 01-6375
Community Health Systems, et al. Community Health Systems, et al.
abuse of discretion. Shepherd v. Wellman, 313 F.3d 963, 971 defects of which he had just been informed, electing instead
(6th Cir. 2002) (citing Grover v. Eli Lilly & Co., 33 F.3d 716, to dismiss the amended complaint with prejudice.
718 (6th Cir. 1994)). We agree with Relator that dismissing
his amended complaint with prejudice was improper. Defendants argue that Relator was sufficiently on notice of
the amended complaint’s defects. Specifically, they point out
In EEOC v. Ohio Edison Co., 7 F.3d 541, 546 (6th Cir. that shortly after the original complaint had been unsealed and
1993), we held that “where a more carefully drafted complaint served upon the named defendants, defense counsel had
might state a claim, a plaintiff must be given at least one contacted Relator’s counsel and informed him that
chance to amend the complaint before the district court Defendants planned to file a motion for dismissal and
dismisses the action with prejudice.” (quoting Bank v. Pitt, sanctions against Relator unless Relator voluntarily dismissed
928 F.2d 1108, 1112 (11th Cir. 1991)); see also Coffey, 2 the complaint. Among defense counsel’s cited reasons for
F.3d at 162 (observing that “‘federal courts must be liberal in dismissal was the complaint’s failure to state its allegations
allowing parties to amend their complaints’”) (quoting with sufficient particularity. The parties subsequently signed
Hayduk v. Lanna, 775 F.2d 441, 445 (1st Cir. 1985)). a stipulation to give Relator time to amend his complaint.
“Denial may be appropriate, however, where there is ‘undue Relator thereafter filed an amended complaint that included
delay, bad faith or dilatory motive on the part of the movant, additional allegations but did not sufficiently particularize its
repeated failure to cure deficiencies by amendments allegations for purposes of complying with Rule 9(b).
previously allowed, undue prejudice to the opposing party by
virtue of allowance of the amendment, futility of the We disagree with Defendants that the communications
amendment, etc.’” Morse v. McWhorter, 290 F.3d 795, 800 between the parties’ counsel about amending the complaint to
(6th Cir. 2002) (quoting Foman v. Davis, 371 U.S. 178, 182 provide for more specificity constituted sufficient notice in
(1962)). The relevant issues in our inquiry are (1) whether this case. At the time Relator had filed his original and
Relator had sufficient notice that his amended complaint was amended complaints, the law was unsettled as to whether a
deficient, and (2) if so, whether Relator had an adequate complaint alleging FCA violations needed to comply with
opportunity to cure the deficiencies. Rule 9(b), and Relator therefore was not definitively on notice
that he had to state his allegations with the specificity
In this case, the district court declined to grant Relator an required by Rule 9(b). Indeed, his first notice that the
opportunity to amend the complaint, reasoning that “[g]iven complaint was deficient came from the district court’s
the Relator's alleged first hand knowledge of these events and September 18, 2001 opinion, which then proceeded to dismiss
the pendency of this action for more than two years, Relator his case with prejudice. Moreover, we do not discern from
has had ample opportunity to cure the cited factual the record any “undue delay, bad faith or dilatory motive on
deficiencies in his pleadings.” (J.A. at 317.) However, we the part of” Relator, or any “undue prejudice to [Defendants]
are not persuaded that Relator was on sufficient notice that his by virtue of allowance of the amendment.” Morse, 290 F.3d
amended complaint was deficient. The district court’s at 800 (quoting Foman v. Davis, 371 U.S. at 182) (internal
September 18, 2001 opinion we now review constituted its quotation marks omitted).
first communication to Relator that (1) he was required to
satisfy Rule 9(b) and (2) he failed to satisfy it. Yet this very Finally, there is some indication from the record that
same ruling denied Relator the opportunity to correct the Relator possessed additional information that could have
No. 01-6375 United States of America, et al. v. 19 20 United States of America, et al. v. No. 01-6375
Community Health Systems, et al. Community Health Systems, et al.
allowed his amended complaint to allege the FCA violations United States ex rel. McKenzie v. Bellsouth Telecomms., Inc.,
and other fraud allegations with sufficient particularity, 123 F.3d 935, 939 (6th Cir. 1997) (‘“Public disclosure’ also
specifically his disclosure to the United States government includes documents that have been filed with a court, such as
when he filed his qui tam suit. For instance, the district . . . a plaintiff’s complaint.”).
court’s opinion noted that Relator failed to name any
individuals who engaged in the FCA violations, but in the Furthermore, Relator’s amended complaint was “based
disclosure filed with the government at the commencement of upon” information publicly disclosed in Dr. Adams’
his qui tam suit Relator did provide some names and asserted complaint. It is true that paragraphs 17-24 of the amended
his possession of supporting documents and additional complaint were not wholly copied from Dr. Adams’
information. complaint. Indeed, only part of the “fraud in the psychiatric
unit” section of Relator’s amended complaint appears to have
Given that “federal courts must be liberal in allowing been “borrowed” from Dr. Adams’ complaint. Most notably,
parties to amend their complaints,” Coffey, 2 F.3d at 162 paragraphs 21, 23, and 24 of the amended complaint, which
(citing Hayduk, 775 F.2d at 445), we will remand the case to discussed the deliberate lengthening of patient stays in the
the district court to allow Relator to comply with Rule 9(b) by psychiatric unit, appear to parallel Dr. Adams’ allegations.
amending his amended complaint. Relator does allege other fraudulent activity in the psychiatric
unit not discussed in Dr. Adams’ complaint, to wit,
II. classifying hospital employees principally stationed in other
units as psychiatric unit employees to charge additional
Defendants contend that even if the district court did not hospital expenses (paragraph 19); scheming to admit patients
properly dismiss Relator’s amended complaint with prejudice not qualifying for Medicare or Medicaid and fraudulently
for failure to comply with Rule 9(b), Relator is barred from billing services to Medicare or Medicaid, and scheming to
proceeding with paragraphs 17-24 of the amended complaint, prolong patient stays until such eligibility expired or was
pursuant to the FCA’s public disclosure doctrine. We agree close to expiring (paragraph 20); and recycling patients
with Defendants. through the psychiatric unit in violation of Medicare and
Medicaid regulations (paragraph 22).
As discussed earlier, the FCA precludes a federal court
from exercising jurisdiction over allegations in a qui tam suit Nevertheless, we have held that “based upon” means
that are based upon publicly-disclosed information, unless the “‘supported by,’ which includes any action based even partly
relator is the original source of that information. 31 U.S.C. upon public disclosures.” McKenzie, 123 F.3d at 940
§ 3730(e)(4)(A). Thus, we must determine the following: (emphasis added). We made it clear that under our
(1) whether there was a public disclosure, (2) whether interpretation of “based upon,” a person who bases any part
paragraphs 17-24 of Relator’s amended complaint were of a FCA claim on publicly disclosed information is
“based upon” that public disclosure, and (3) whether Relator effectively precluded from asserting that claim in a qui tam
was an original source of the information. suit. Id. Thus, although Relator’s amended complaint
contains more detailed allegations about the fraudulent billing
There is little doubt that Dr. Adams’ complaint, filed in practices in White County Hospital’s psychiatric unit, Dr.
Tennessee state court, qualifies as a public disclosure. See Adams’ complaint already effectively alerted the public to the
No. 01-6375 United States of America, et al. v. 21 22 United States of America, et al. v. No. 01-6375
Community Health Systems, et al. Community Health Systems, et al.
fraud occurring therein. Consequently, paragraphs 17-24 of III.
the amended complaint were “based upon” Dr. Adams’
complaint because three of the paragraphs in the amended Finally, we consider the district court’s denial of Relator’s
complaint directly parallel Dr. Adams’ allegations. motion to recognize the May 8, 2000 settlement agreement
executed between the government and CHS. Because the
Finally, it appears that Relator is not an “original source” district court’s decision to deny Relator’s motion to recognize
of the information contained in paragraphs 17-24 of his the settlement was based upon its construction of statutory
amended complaint. “Original source” means that the relator law, our review is de novo. See Heggen v. Lee, 284 F.3d 675,
possesses “direct and independent knowledge of the 679 (6th Cir. 2002) (“We engage in a de novo review because
information on which the [publicly disclosed] allegations are [the pertinent issue to be reviewed] is a question of law.”).
based,” 31 U.S.C. § 3730(e)(4)(B), and voluntarily provided
that information to the government before filing the qui tam The district court denied Relator’s motion, reasoning that
action and prior to any public disclosure. Id.; McKenzie, 123 Relator was not entitled to any of the proceeds of the
F.3d at 943. settlement because the government had not intervened in
Relator’s qui tam action; it instead pursued separate
In the instant case, Relator’s original complaint made no settlement negotiations with CHS, in which Relator did not
mention of fraud in White County Hospital’s psychiatric unit, take part. Relator contends that 31 U.S.C. § 3730(c)(5)
or of Dr. Robert Adams. Relator did not raise allegations of entitles him to a share because the settlement agreement
fraud in White County Hospital’s psychiatric unit until after between the government and CHS constituted an “alternate
Dr. Adams filed his state court lawsuit. Furthermore, the remedy” with respect to the claims in his case. We agree with
record does not reflect any evidence indicating that Relator Relator.
informed the government about allegations of fraud in the
psychiatric unit prior to the public disclosure (i.e., the filing As discussed earlier, § 3730(c)(3) provides that if the
of Dr. Adams’ complaint). The disclosure accompanying government elects not to intervene in a relator’s qui tam
Relator’s original complaint makes no mention of the action, the relator “shall have the right to conduct the action.”
psychiatric unit whatsoever, and Relator points to nothing 31 U.S.C. § 3730(c)(3). Section 3730(c)(5) adds,
else on the record to support his case. Therefore, we find that
Relator was not the original source of the fraud in White
County Hospital’s psychiatric unit. Relator’s allegations
having failed all three parts of the inquiry, no subject matter subsequent events cannot “oust” jurisdiction. We disagree. The fact
jurisdiction lies for paragraphs 17-24 of Relator’s amended remains that Relator did not allege the various billing improprieties in
complaint.8 W hite County Hospital’s psychiatric unit until he filed the amended
com plaint, which occurred after Dr. Adams filed his com plaint in state
court. Barring Relator from pleading these items after the fact is
consistent with Congress’ desire “[t]o prevent ‘parasitic’ qui tam actions
8
in which relators, rather than bringing to light independently discovered
Relator argues that subject matter jurisdiction exists for his entire information of fraud, simply feed off of previous disclosures of
amended complaint because he filed his original complaint in federal government fraud.” McKenzie, 123 F.3d at 94 3 (quoting United States ex
court before Dr. Adams filed his complaint in state court, and because the rel. Siller v. B ecton Dick inson & Co., 21 F .3d 1 339 , 1347 (4 th Cir.
com plaint satisfied jurisdiction at the time the action commenced, 199 4)).
No. 01-6375 United States of America, et al. v. 23 24 United States of America, et al. v. No. 01-6375
Community Health Systems, et al. Community Health Systems, et al.
Notwithstanding subsection (b), the Government may claims by the government. The most logical reading of
elect to pursue its claim through any alternate remedy “alternate remedy” is as the government’s alternative to
available to the Government, including any judicial pursuit of the relator’s claims, i.e., an alternative to
administrative proceeding to determine a civil money intervening in a qui tam action. The government’s
penalty. If any such alternate remedy is pursued in interpretation of § 3730(c)(5) as applying only when the
another proceeding, the person initiating the action shall government has intervened, on the other hand, is less logical.
have the same rights in such proceeding as such person Section 3730(c)(5) seeks to insure a relator’s right to a share
would have had if the action had continued under this of any proceeds obtained through an alternate remedy; yet
section. § 3730(d)(1) already guarantees a relator a percentage of the
proceeds if the government intervenes in the action. Thus,
31 U.S.C. § 3730(c)(5) (emphasis added). Relator argues that limiting “alternate remedy” to situations where the
this means that he is entitled to a share of the settlement government has intervened would render § 3730(c)(5) at least
proceeds, even though the government did not intervene in his partially superfluous, a result we generally avoid in
qui tam suit, because it pursued an “alternate remedy,” i.e., construing a statute. See Ninety-Three (93) Firearms, 330
settlement negotiations. The government contends that F.3d at 420 (“When interpreting the plain language of a
Congress intended the “alternate remedy” provision to apply statute, we ‘mak[e] every effort not to interpret a provision in
only when the government has intervened in the action. The a manner that renders other provisions of the same statute
answer turns on the proper definition of “alternate remedy,” inconsistent, meaningless or superfluous.’”) (quoting
either as an alternative to judicial enforcement of the FCA Cafarelli v. Yancy, 226 F.3d 492, 499 (6th Cir. 2000))
once the government has intervened in a qui tam suit, or an (alteration in Ninety-Three (93) Firearms). Thus, we are
alternative to intervening in the qui tam suit entirely. The persuaded that the plain language of § 3730(c)(5) makes clear
facts of this case present an issue of first impression for our that a relator’s participation rights are preserved when the
circuit. We hold that “alternate remedy” refers to the government pursues the relator’s claims through any means
government’s pursuit of any alternative to intervening in a alternative to intervening in the qui tam action.
relator’s qui tam action.
The government contends that the FCA’s legislative history
We begin our analysis with the plain language of the FCA. supports its interpretation of § 3730(c)(5). It points to the
United States v. Ninety-Three (93) Firearms, 330 F.3d 414, Senate Report accompanying the 1986 amendments to the
420 (6th Cir. 2003) (citations omitted). In so doing, we FCA, which states, in pertinent part, the following:
observe that § 3730(c)(5) does not expressly require the
government’s intervention before the “alternate remedy” Subsection (c)(3) of section 3730 clarifies that the
becomes applicable, nor does it define or discuss “alternate Government, once it intervenes and takes over a false
remedy” within the context of a government’s intervention in claim suit brought by a private individual, may elect to
a qui tam action. Rather, § 3730(c)(5) states that “the pursue any alternate remedy for recovery of the false
Government may elect to pursue its claim through any claim which might be available under the administrative
alternate remedy available to the Government.” 31 U.S.C. process.
§ 3730(c)(5). The FCA contemplates enforcement by the qui
tam relator, or intervention and judicial pursuit of the FCA
No. 01-6375 United States of America, et al. v. 25 26 United States of America, et al. v. No. 01-6375
Community Health Systems, et al. Community Health Systems, et al.
S. Rep. 99-345, at 27, 1986 U.S.C.C.A.N. at 5292 (emphasis this wave of defrauding public funds.” Id. at 2, 1986
added). We are not persuaded. In the first place, the quoted U.S.C.C.A.N. at 5267. It is readily apparent that, under the
passage of the Senate Report refers to § 3730(c)(3), not government’s interpretation of § 3730(c)(5), the government
§ 3730(c)(5), suggesting that it might refer to an earlier draft could decline to intervene in a qui tam suit, then settle that
of the 1986 FCA amendments. The quoted passage is suit’s claims separately and deny the relator his or her share
particularly difficult to reconcile with the plain language of of the settlement proceeds simply because the government
§ 3730(c)(5), which seeks to preserve a relator’s rights in the had not formally intervened in the qui tam action.
event that the government pursues “any alternate remedy” and Consequently, the government would frequently carry the
makes no mention of intervention as a prerequisite to incentive to decline to intervene in an action and, having been
pursuing the “alternate remedy.” apprised of possible FCA violations by a private citizen, to
independently pursue an investigation of the alleged FCA
Indeed, another segment of the same Senate Report tends violator(s). Such a result would not further Congress’
to support our interpretation of “alternate remedy.” legislative intent that the government and private citizens
Specifically, the Senate Report made clear that collaborate in battling fraudulent claims, and it would impede,
not further, Congress’ legislative intent to encourage private
[w]hile the Government will have the opportunity to citizens to file qui tam suits.
elect its remedy, it will not have an opportunity for dual
recovery on the same claim or claims. In other words, Finally, we are not alone in our view of a § 3730(c)(5)
the Government must elect to pursue the false claims “alternate remedy.” The Ninth Circuit has held that an
action either judicially or administratively and if the administrative suspension or debarment proceeding pursued
Government declines to intervene in a qui tam action, it by the government, and a settlement agreement arising
is estopped from pursing [sic] the same claim therefrom, constituted an “alternate remedy” within the
administratively, or in a separate judicial action. meaning of § 3730(c)(5), even though the government had not
intervened in a qui tam suit alleging the conduct contemplated
Id. at 27, 1986 U.S.C.C.A.N. at 5292. Thus, this passage in the settlement. United States ex rel. Barajas v. United
suggests that the government may either proceed judicially States, 258 F.3d 1004, 1010-13 (9th Cir. 2001). Similarly,
(by intervening in the qui tam suit) or pursue an alternative to the Fourth Circuit appears to view § 3730(c)(5) as protecting
judicial enforcement (i.e., an “alternate remedy”). a relator’s rights when the government pursues an alternative
to intervening in the relator’s qui tam action. See LaCorte,
Moreover, interpreting “alternate remedy” as an alternative 185 F.3d at 192 (“Section 3730(c)(5) assumes that the
to intervening in a qui tam action is more consistent with the original qui tam action did not continue. The government
congressional intent expressed in making the 1986 here did not pursue an alternate remedy . . . . It instead
amendments to the FCA. Congress made it clear that its intervened in the action, prosecuted it, and settled it with the
“overall intent in amending [§ 3730] [was] to encourage more plaintiffs’ consent.”) (emphasis added).
private enforcement suits.” Id. at 23-24, 1986 U.S.C.C.A.N.
at 5288-89. It emphasized its belief that “[i]n the face of We therefore hold that a settlement pursued by the
sophisticated and widespread fraud . . . only a coordinated government in lieu of intervening in a qui tam action asserting
effort of both the Government and the citizenry will decrease
No. 01-6375 United States of America, et al. v. 27 28 United States of America, et al. v. No. 01-6375
Community Health Systems, et al. Community Health Systems, et al.
the same FCA claims constitutes an “alternate remedy” for See S. Rep. 99-345, at 27, 1986 U.S.C.C.A.N. at 5292
purposes of 31 U.S.C. § 3730(c)(5). (“While the Government will have the opportunity to elect its
remedy, it will not have an opportunity for dual recovery on
The government argues alternatively that even if the May 8, the same claim or claims.”); id. at 2, 23-24, 1986
2000 settlement agreement operated as an “alternate remedy” U.S.C.C.A.N. at 5267, 5288-89 (emphasizing its intent to
for purposes of § 3730(c)(5), Relator nevertheless is not provide a financial incentive for relators bringing valid qui
entitled to a relator’s share of the settlement proceeds. Its tam suits and its belief that the government and private
principal contention in support is that the language of the citizens must work together to battle FCA violations).
settlement agreement “specifically reserved and excluded”
claims asserted in Relator’s qui tam action from the We therefore hold that the government may not settle a
agreement’s “scope and terms.” We are not persuaded. If the relator’s claims and seek to avoid paying a relator his or her
government has recovered funds lost from conduct asserted in statutory share to the settlement proceeds by excluding the
Relator’s qui tam action, then the government has essentially relator’s claims from the terms of the settlement agreement.9
settled Relator’s claims, regardless of whether it formally
intervened in Relator’s action or not. The FCA provides that Next, the government asserts that because Relator failed to
a relator is entitled to 15-25% of the proceeds when the state a claim with sufficient particularity, as required by Rule
government has settled the claims stemming from a relator’s 9(b), he would not be entitled to a share of the settlement
valid qui tam suit. There is no language in the FCA because his qui tam action was invalid. While it is true that
suggesting that a relator’s statutory right to a share of the a threshold requirement for a relator’s ability to share in the
proceeds from the settlement of claims he or she had asserted proceeds of a FCA lawsuit is to file a valid qui tam action, 31
may properly be abrogated by an agreement to which the U.S.C.. § 3730(b)(1), we already have decided to remand the
relator was not a party. case to allow Relator to restate his allegations to comply with
Rule 9(b). Therefore, Relator’s prior failures in this regard do
Indeed, the government does not provide statutory support not offer a present basis for denying his motion.
for its argument; instead it suggests that the settlement
agreement carefully preserved Relator’s rights by excluding Finally, the government contends that we alternatively
Relator’s claims from the agreement and insuring that Relator could affirm on grounds that the conduct alleged in Relator’s
could pursue his claims separately. However, this approach complaint is unrelated to the FCA violations discussed in the
would lead to consequences unintended by the FCA. If
indeed the government settled Relator’s claims, either
Defendants would assert an accord and satisfaction defense 9
Relator also suggests that there is an open factual issue as to the
(which, if successful, would deny Relator part or all of his validity of the exclusion language in the settlement agreem ent because
rightful share of the recovered funds), or Defendants would be some of the versions circulated to the parties to the settlement did not
forced to pay the civil penalties and double or treble damages con tain the substituted page 12 with the exclusion pertaining to Relator,
associated with the very same claims for which they had and because two of the signatures predated the circulation of the
already paid penalties and damages by way of the settlement. substituted page. Because we hold that the exclusion language in the
settlement agreement does not constitute a proper basis for excluding
Under either result, adverse consequences (to either Relator Relator from sharing in the settlem ent pro ceed s, we do not rea ch this
or Defendants) would ensue that the FCA had not intended. issue.
No. 01-6375 United States of America, et al. v. 29 30 United States of America, et al. v. No. 01-6375
Community Health Systems, et al. Community Health Systems, et al.
settlement agreement.10 According to the settlement the district court, unless “the issue is presented with sufficient
agreement, the relevant conduct pertained to Defendants’ clarity and completeness and its resolution will materially
practice of submitting to Medicare, Medicaid, and TRICARE advance the progress of . . . litigation.” Pinney Dock &
claims with improper diagnostically related group (“DRG”) Transp. Co. v. Penn Cent. Corp., 838 F.2d 1445, 1461 (6th
coding, while Relator’s complaint, on the other hand, Cir. 1988) (citations omitted). In the present case, the
discussed other types of improper coding. Relator insists that original complaint’s allegation that Defendants engaged in
there is overlap between the conduct alleged in his qui tam “miscoding and upcoding items billed to Medicare and
suit and the conduct contemplated in the settlement Medicaid” indicates that there may exist overlap between the
agreement. He points in support to his original complaint, settlement agreement’s contemplated FCA violations and
which alleged that Defendants engaged in “miscoding and Relator’s allegations. However, this statement in itself is too
upcoding items billed to Medicare and Medicaid” (J.A. at 25), broad to support a factual finding of overlap. In other words,
and he also insists that prior to filing his qui tam action he had Relator must provide more concrete evidence that he apprised
provided the government with information relating to various the government of Defendants’ DRG coding violations. We
DRG coding violations. Because the district court held that hold that Relator is entitled to an evidentiary hearing at which
Relator was not entitled, under any interpretation of 31 U.S.C. he may present evidence supporting his assertion that there
§ 3730, to a share of the settlement’s proceeds, it did not exists overlap between the information he provided to the
reach this issue and therefore made no findings of fact as to government and the FCA violations contemplated by the
whether there exists any overlap between the conduct in the settlement agreement. The district court will then be able to
settlement agreement and the conduct in Relator’s qui tam make findings of fact as to whether there exists any overlap
action. between Relator’s allegations and the conduct discussed in
the settlement agreement.
Although the government may be correct that the conduct
contemplated in the settlement agreement does not overlap Because we hold that Relator might be entitled to a share of
with the conduct alleged in Relator’s complaint, we decline the settlement agreement’s proceeds, we remand this issue to
to decide this factual issue on appellate review. We are aware the district court for further proceedings. Specifically,
that we may affirm the district court on any grounds Relator is entitled to an opportunity to amend his amended
supported by the record. Hayes v. Equitable Energy Res. Co., complaint in order to state his FCA claims with sufficient
266 F.3d 560, 569 (6th Cir. 2001) (citing United States v. particularity. Fed. R. Civ. P. 9(b). If the Relator
Allen, 106 F.3d 695, 700 n.4 (6th Cir. 1997)). However, we satisfactorily complies with Rule 9(b)’s particularity
generally do not consider on appeal an issue not discussed by requirement, and the district court is satisfied that it has
subject matter jurisdiction over the FCA claims, see, e.g., 31
U.S.C. § 3730(e), the district court will then determine
10 whether the conduct contemplated in the May 8, 2000
W e refer here to R elator’s complaint, rather than his amended
com plaint, because at the time the May 8, 2000 settlement agreement was settlement agreement overlaps with the conduct alleged by
executed Relator had not yet am ended his comp laint. Therefore, the Relator in bringing his qui tam action. For purposes of
original complaint constitutes the operative document for purposes of the making this determination, the district court will hold an
inquiry of whether overlap exists between the conduct covered in the
settlement agreement and the conduct alleged in Rela tor’s original evidentiary hearing at which Relator and the government may
com plaint. present evidence in support of their positions.
No. 01-6375 United States of America, et al. v. 31
Community Health Systems, et al.
CONCLUSION
For the foregoing reasons, we REVERSE the judgment of
the district court, and remand the case to the district court for
further proceedings consistent with this opinion.