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United States ex rel. Michaels v. Agape Senior Community, Inc.

United States Court of Appeals, Fourth Circuit

February 14, 2017

UNITED STATES OF AMERICA ex rel. BRIANNA MICHAELS AND AMY WHITESIDES, Plaintiffs-Appellants,
v.
AGAPE SENIOR COMMUNITY, INC.; AGAPE SENIOR PRIMARY CARE, INC.; AGAPE SENIOR SERVICES, INC.; AGAPE SENIOR, LLC; AGAPE MANAGEMENT SERVICE, INC.; AGAPE COMMUNITY HOSPICE, INC.; AGAPE NURSING AND REHABILITATION CENTER, INC., d/b/a Agape Rehabilitation of Rock Hill, a/k/a Agape Senior Post Acute Care Center-Rock Hill, a/k/a Ebenezer Senior Services, LLC; AGAPE SENIOR FOUNDATION, INC.; AGAPE COMMUNITY HOSPICE OF ANDERSON, INC.; AGAPE HOSPICE OF THE PIEDMONT, INC.; AGAPE COMMUNITY HOSPICE OF THE GRAND STRAND, INC.; AGAPE COMMUNITY HOSPICE OF THE PEE DEE, INC.; AGAPE COMMUNITY HOSPICE OF THE UPSTATE, INC.; AGAPE HOSPICE HOUSE OF HORRY COUNTY, INC.; AGAPE HOSPICE HOUSE OF LAURENS, LLC; AGAPE HOSPICE HOUSE OF THE LOW COUNTRY, INC.; AGAPE HOSPICE HOUSE OF THE PIEDMONT, INC.; AGAPE REHABILITATION OF CONWAY, INC.; AGAPE SENIOR SERVICES FOUNDATION, INC.; AGAPE THERAPY, INC.; AGAPE HOSPICE; HOSPICE PIEDMONT; HOSPICE ROCK HILL; CAROLINAS COMMUNITY HOSPICE, INC., Defendants-Appellees,
v.
UNITED STATES OF AMERICA, Party-in-Interest-Appellee. SAVASENIORCARE ADMINISTRATIVE SERVICES, LLC; AMERICAN HEALTH CARE ASSOCIATION; AMERICAN HOSPITAL ASSOCIATION; CATHOLIC HEALTH ASSOCIATION OF THE UNITED STATES, Amici Supporting Defendants-Appellees. UNITED STATES OF AMERICA ex rel. BRIANNA MICHAELS AND AMY WHITESIDES, Plaintiffs,
v.
AGAPE SENIOR COMMUNITY, INC.; AGAPE SENIOR PRIMARY CARE, INC.; AGAPE SENIOR SERVICES, INC.; AGAPE SENIOR, LLC; AGAPE COMMUNITY HOSPICE, INC.; AGAPE NURSING AND REHABILITATION CENTER, INC., d/b/a Agape Rehabilitation of Rock Hill, a/k/a Agape Senior Post Acute Care Center-Rock Hill, a/k/a Ebenezer Senior Services, LLC; AGAPE MANAGEMENT SERVICE, INC.; AGAPE COMMUNITY HOSPICE OF ANDERSON, INC.; AGAPE HOSPICE OF THE PIEDMONT, INC.; AGAPE SENIOR FOUNDATION, INC.; AGAPE COMMUNITY HOSPICE OF THE PEE DEE, INC.; AGAPE COMMUNITY HOSPICE OF THE UPSTATE, INC.; AGAPE COMMUNITY HOSPICE OF THE GRAND STRAND, INC.; AGAPE HOSPICE HOUSE OF LAURENS, LLC; AGAPE HOSPICE HOUSE OF THE LOW COUNTRY, INC.; AGAPE HOSPICE HOUSE OF HORRY COUNTY, INC.; AGAPE REHABILITATION OF CONWAY, INC.; AGAPE SENIOR SERVICES FOUNDATION, INC.; AGAPE HOSPICE HOUSE OF THE PIEDMONT, INC.; AGAPE HOSPICE; HOSPICE PIEDMONT; AGAPE THERAPY, INC.; CAROLINAS COMMUNITY HOSPICE, INC.; HOSPICE ROCK HILL, Defendants-Appellants,
v.
UNITED STATES OF AMERICA, Party-in-Interest-Appellee. SAVASENIORCARE ADMINISTRATIVE SERVICES, LLC; AMERICAN HEALTH CARE ASSOCIATION; AMERICAN HOSPITAL ASSOCIATION; CATHOLIC HEALTH ASSOCIATION OF THE UNITED STATES, Amici Supporting Defendants-Appellants.

          Argued: October 26, 2016

         Appeals from the United States District Court for the District of South Carolina, at Rock Hill. Joseph F. Anderson, Jr., Senior District Judge. (0:12-cv-03466-JFA)

         ARGUED:

          Mario A. Pacella, STROM LAW FIRM, Columbia, South Carolina, for Appellants.

          William Walter Wilkins, NEXSEN PRUET, LLC, Greenville, South Carolina, for Appellees.

          Charles W. Scarborough, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee United States of America.

         ON BRIEF:

          T. Christopher Tuck, Catherine H. McElveen, Mt. Pleasant, South Carolina, Daniel Haltiwanger, Terry E. Richardson, Jr., RICHARDSON, PATRICK, WESTBROOK & BRICKMAN, LLC, Barnwell, South Carolina; Christy M. DeLuca, CHRISTY DELUCA, LLC, Mt. Pleasant, South Carolina; Jessica H. Lerer, STROM LAW FIRM, Columbia, South Carolina, for Appellants.

          Deborah B. Barbier, DEBORAH B. BARBIER ATTORNEY AT LAW, Columbia, South Carolina; Kirsten E. Small, Mark C. Moore, William C. Lewis, NEXSEN PRUET, LLC, Greenville, South Carolina, for Appellees Agape Senior Community, Inc., et al. Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Michael S. Raab, Civil Division, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.; William N. Nettles, United States Attorney, Elizabeth C. Warren, Assistant United States Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Columbia, South Carolina, for Appellee United States of America. James F. Segroves, Kelly A. Carroll, David J. Vernon, HOOPER, LUNDY & BOOKMAN, PC, Washington, D.C., for Amicus SavaSeniorCare Administrative Services, LLC. Melinda Reid Hatton, Maureen Mudron, AMERICAN HOSPITAL ASSOCIATION, Washington, D.C.; Lisa Gilden, THE CATHOLIC HEALTH ASSOCIATION OF THE UNITED STATES, Washington, D.C.; Jessica L. Ellsworth, Washington, D.C., Thomas P. Schmidt, HOGAN LOVELLS U.S. LLP, New York, New York, for Amici American Hospital Association and Catholic Health Association of the United States.

          Colin E. Wrabley, M. Patrick Yingling, REED SMITH, LLP, Pittsburgh, Pennsylvania, for Amicus American Health Care Association.

          Before KING, KEENAN, and DIAZ, Circuit Judges.

         Affirmed in part and dismissed in part by published opinion. Judge King wrote the opinion, in which Judge Keenan and Judge Diaz joined.

          KING, Circuit Judge.

         In this qui tam action under the False Claims Act (the "FCA"), defendant Agape Senior Community, Inc., and the twenty-three other defendants (collectively, "Agape") are affiliated entities that operate elder care facilities throughout South Carolina.[1] The relators, Brianna Michaels and Amy Whitesides, are former Agape employees who allege that Agape fraudulently billed Medicare and other federal health care programs for services to thousands of patients - services that were not actually provided, or that were provided to patients who were not eligible for them. The United States Government was entitled, but declined, to intervene.

         To establish liability and damages, the relators sought to rely on statistical sampling. The district court determined, however, that using statistical sampling to prove their case would be improper (the "statistical sampling ruling"). Additionally, the court rejected a proposed settlement between the relators and Agape, because the Attorney General of the United States objected to it. In so doing, the court concluded that the Government - despite not having intervened in an FCA qui tam action - possesses an unreviewable veto authority over the action's proposed settlement (the "unreviewable veto ruling").

         The district court certified both its statistical sampling and unreviewable veto rulings for these interlocutory appeals under 28 U.S.C. § 1292(b). We thereafter granted the petitions for permission to appeal submitted to this Court by the relators (seeking an appeal from both rulings) and by Agape (requesting an appeal from the unreviewable veto ruling only). As explained below, we affirm the unreviewable veto ruling and dismiss as improvidently granted the relators' appeal as to the statistical sampling ruling.

         I.

         A.

         The FCA, codified at 31 U.S.C. §§ 3729-3733, authorizes a private individual (i.e., a relator) to initiate and pursue an action in the name of the United States Government (a qui tam action) to seek civil remedies for fraud against the Government. See 31 U.S.C. § 3730(b)(1). Pursuant to § 3730(b)(1), the qui tam "action may be dismissed only if the court and the Attorney General give written consent to the dismissal and their reasons for consenting."

         At the outset of the qui tam action, the relator's complaint must be served on the Government, filed in camera, and kept under seal for at least sixty days, with no service of process on the defendant until the court so orders. See 31 U.S.C. § 3730(b)(2). During the sixty-day period after it receives the complaint, the Government may elect to intervene in the qui tam action. Id. Specifically, before the expiration of the sixty-day period - or any extension thereof under § 3730(b)(3) - the Government must either (A) "proceed with the action" by assuming primary responsibility for the action's prosecution, or (B) "notify the court that it declines to take over the action" from the relator, who will then "have the right to conduct the action." Id. § 3730(b)(4)(A)-(B). If the Government declines to intervene during the initial sixty-day (or extended) period, the court may nevertheless permit its intervention "at a later date upon a showing of good cause." Id. § 3730(c)(3).

         Once the Government intervenes, the relator retains the right to continue as a party to the action, subject to certain limitations. See 31 U.S.C. § 3730(c)(1). For example, the Government is authorized to settle the action over the relator's objection, but only "if the court determines, after a hearing, that the proposed settlement is fair, adequate, and reasonable under all the circumstances." Id. § 3730(c)(2)(B).

         When the qui tam action is successful, the relator is entitled to share with the Government in the award. See 31 U.S.C. § 3730(d)(1)-(4). The amount of the relator's share depends on whether the Government intervened in the action. If the Government did not intervene, "the person bringing the action or settling the claim shall receive an amount which the court decides is reasonable for collecting the civil penalty and damages." Id. ยง 3730(d)(2) (specifying that such ...


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