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United States v. Compassionate Home Care Services, Inc.

United States District Court, E.D. North Carolina, Southern Division

March 15, 2017

UNITED STATES OF AMERICA, and STATE OF NORTH CAROLINA, Plaintiffs,
v.
COMPASSIONATE HOME CARE SERVICES, INC., et. al., Defendants.

          ORDER

          JAMES C. DEVER III Chief United States District Judge

         On March 15, 2017, the court heard oral argument on two pending motions: plaintiffs' motion for partial summary judgment against defendants Compassionate Home Care Services, Inc., Carol Anders, and Ryan Santiago ("defendants") [D.E. 116] and defendants' motion to release sequestered, frozen, and garnished funds for payment of defense attorney fees and costs [D.E. 124]. As explained in open court, the court grants in part plaintiffs' motion for partial summary judgment on liability against defendants Compassionate Home Care Services, Inc., Carol Anders, and Ryan Santiago and denies without prejudice defendants' motion to release sequestered, frozen, and garnished funds for payment of defense attorney fees and costs.

         I.

         The United States of America and the State of North Carolina ("plaintiffs") seek partial summary judgment against defendants Compassionate Home Care Services, Inc., Carol Anders, and Ryan Santiago ("defendants"). See [D.E. 116]. Specifically, plaintiffs contend that there are no genuine issues of material fact regarding whether defendants violated the federal and North Carolina false claims acts by submitting false claims for payment to the government for services that Compassionate Home Care Services, Inc., did not render or rendered in violation of applicable Medicaid policy. See |d (citing 31 U.S.C. § 3729 et sea,; N.C. Gen. Stat. § 1-605 et seq,). In support, plaintiffs note that defendants falsified documents to conceal their obligation to repay the government and used false documents to support false claims that Compassionate Home Care Services, Inc., submitted to the government for payment. See [D.E. 118] (plaintiffs' statements of uncontroverted facts under Local Civil Rule 56.1(a)(1), which are "deemed admitted for purposes of the motion unless it is specifically controverted by a correspondingly numbered paragraph in the opposing statement" pursuant to Local Civil Rule 56.1(a)(2)).[1]

         In granting partial summary judgment to plaintiffs on liability, the court does so as to counts one through three and counts seven through nine in the complaint. See Compl. [D.E. 1] ¶¶ 72-80, 90-98; 31 U.S.C. § 3729(a)(1)(A) (providing liability for any person who "knowingly presents, or causes to be presented, a false or fraudulent claim for payment"); 31 U.S.C. § 3729(a)(1)(B) (providing liability for any person who "knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim"); 31 U.S.C. § 3729(a)(1)(G) (providing liability for any person who "knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government");N.C. Gen. Stat. § 1-607(a)(1), (a)(2), & (a)(7). The term "obligation" includes "an established duty, whether or not fixed, arising from an express or implied contractual, grantor-grantee, or licensor-licensee relationship, from a fee-based or similar relationship, from statute or regulation, or from retention of any overpayment." 31 U.S.C. § 3729(b)(3); N.C. Gen. Stat. § 1-606(6). The term "knowing" and "knowingly" mean that a person, with respect to information, "has actual knowledge of the information; acts in deliberate ignorance of the truth or falsity of the information; or acts in reckless disregard of the truth or falsity of the information" and "requires no proof of specific intent to defraud." 31 U.S.C. § 3729(b)(1); see N.C. Gen. Stat. § 1-606(4). The term "material" means "having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property." 31 U.S.C. § 3729(b)(4); N.C. Gen. Stat. § 1-606(5).

         To prove a reverse-false-claims-act claim under 31 U.S.C. § 3729(a)(1)(G), the government "must prove that the defendant did not pay back to the government money or property that it was obligated to return." United States ex rel. Qninn v. Omnicare. 382 F.3d 432,444 (3d Cir. 2004); see United States ex rel. Kelly v. Serco. Inc.. 846 F.3d 325,335-36 (9th Cir. 2017); United States ex rel. Prather v. Brookdale Senior Living Cmtys.. Inc.. 838 F.3d 750, 774-75 (6th Cir. 2016). The government may establish liability in a reverse-false-claims-act claim by showing that the defendant "knowingly conceal[ed]... an obligation to pay or transmit money or property to the Government." Scott v. E.I. du Pont de Nemours & Co.. No. 13-741-SDD-SCR, 2014 WL1689601, at *2(M.D. La. Apr. 29,2014) (unpublished) (quotation omitted). The Medicaid program requires the provider to return any overpayment to the government within 60 days after the overpayment was identified. See 42 U.S.C. § 1320a-7k(d)(2). A person who knowingly retains a government overpayment is liable under the federal and North Carolina false claims acts. See 31 U.S.C. § 3729(a)(1)(G); N.C. Gen. Stat. § l-607(a)(7).

         Summary judgment is appropriate if the moving party demonstrates "that there is no genuine dispute as to any material fact" and the moving party "is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The party seeking summary judgment must initially show an absence of a genuine dispute of material fact or the absence of evidence to support the nonmoving party's case. Celotex Corp. v. Catrett. 477 U.S. 317, 325 (1986). If a moving party meets its burden, the nonmoving party must "come forward with specific facts showing that there is a genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp.. 475 U.S. 574,587 (1986) (quotation and emphasis omitted). A genuine issue for trial exists if there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. Anderson v. Liberty Lobby. Inc.. 477 U.S. 242, 249 (1986). "The mere existence of a scintilla of evidence in support of the plaintiffs position [is] insufficient" Id. at 252; see Beale v. Hardy. 769 F.2d 213, 214 (4th Cir. 1985) ("The nonmoving party, however, cannot create a genuine issue of material fact through mere speculation or the building of one inference upon another."). Only factual disputes that might affect the outcome under substantive law preclude summary judgment. Anderson. 477 U.S. at 248. In reviewing the factual record, the court views the facts in the light most favorable to the nonmoving party and draws reasonable inferences in that party's favor. Matsushita. 475 U.S. at 587-88.

         Even viewing the record in the light most favorable to defendants, defendants knowingly violated 31 U.S.C. § 3729(a)(1)(G) and N.C. Gen. Stat. § l-607(a)(7), and defendants Compassionate Home Care Services, Inc., and Carol Anders knowingly violated 31 U.S.C. § 3729(a)(1)(A) and § 3729(a)(1)(B) and N.C. Gen. Stat. § l-607(a)(1) and § l-607(a)(2). Here, defendants knowingly billed for services not rendered, knowingly billed for certain services provided to patients by unlicensed, non-certified aids, and knowingly billed for services provided to patients by close family members. See, e.g.. [D.E. 118] ¶¶ 1-230. Furthermore, Compassionate Home Care Services, Inc., Carol Anders, and Ryan Santiago falsified documents to conceal their obligation to repay the government and used false documents to support false claims previously submitted. See Id. Moreover, the falsity of the claims was material to the Medicaid Program's decision to pay Compassionate Home Care Services, Inc. See, e.g.. Universal Health Servs.. Inc. v. United States ex rel. Escobar. 136 S. Ct. 1989, 2003-04 (2016); [D.E. 146-1] (affidavit of Patricia Meyer); cf Glynn v. EDO Corp.. 710 F.3d 209,217-18 (4th Cir. 2013). As such, defendants Compassionate Home Care Services, Inc., Carol Anders, and Ryan Santiago violated the federal and North Carolina false claims acts. See, e.g, Universal Health Servs.. Inc.. 136 S. Ct. at 2003-04; Omnicare. 382 F.3d at 444: United States v. Mackby. 261 F.3d 821.828-29 f9th Cir. 20011: United States v. Krizek. 111 F.3d 934,942 (D.C. Cir. 1997); United States v. Speqtrum. Inc.. 47 F. Supp. 3d 81,90-96 (D.D.C. 2014); Scott. 2014 WL 1689601, at *2.

         In opposition, defendants argue that genuine issues of material fact exist concerning Carol Anders's knowledge because of her inability to recall events due to her limited education, limited role in the business, mental illness, and physical illness. See [D.E. 140] 1, 5-7. As for Ryan Santiago, defendants argue that he had little to do with Compassionate Home Care Services, Inc., before 2014. See Id. at 7; see also [D.E. 141] (affidavit of Ryan Santiago).

         The court rejects defendants' argument concerning Carol Anders. A fact is not in dispute under Rule 56 simply because a witness at her deposition cannot remember whether alleged events happened. See Cox v. United States. No. 1:12CR245-1.2015 WL 1040577. at *3 (M.D.N.C. Mar. 10, 2015) (unpublished). Rather, Rule 56 requires the nonmoving party to come forward "with evidence that negates the version of events alleged by the moving party." Id. (quotation omitted); see Matsushita Elec. Indus. Co.. 475 U.S. at 587 (if a moving party under Rule 56 meets its burden, the nonmoving party must "come forward with specific facts showing that there is a genuine issue for trial"). In light of Carol Anders's admissions during her deposition and the other record evidence, there is no genuine issue of material fact concerning Carol Anders's knowledge. See, e.g.. [D.E. 118] ¶¶ 32-194,199-230.

         As for defendants' argument concerning Ryan Santiago, Santiago's affidavit regarding damages is not based on his personal knowledge. See [D.E. 144] 6-9. Thus, the court does not consider it. See Fed. R. Civ. P. 56(c)(4); Evans v. Techs. Applications & Serv. Co.. 80 F.3d 954, 962 (4th Cir. 1996); Caldwell v. Leavitt. 378 F. Supp. 2d 639,643 (M.D.N.C. 2005). Furthermore, Santiago's affidavit does not create a genuine issue of material fact as to his knowledge. Compare [D.E. 141] (Santiago affidavit), with [D.E. 118] (plaintiffs' statement of uncontroverted facts).

         In opposing partial summary judgment, defendants also cite the statute of limitations. See [D.E. 140] 4. Plaintiffs' claims, however, fall comfortably within the applicable statute of limitations. See 31 U.S.C. § 3731(b); N.C. Gen. Stat. § 1-615(a); see also [D.E. 144] 9-10. Thus, the court rejects the argument.

         The parties shall engage in a mediation with United States Magistrate Judge James E. Gates. If the parties are unable to resolve the issue of damages at mediation, the ...


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