Filed: Jul. 02, 2012
Latest Update: Mar. 26, 2017
Summary: Case: 11-30271 Document: 00511907846 Page: 1 Date Filed: 07/02/2012 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit FILED July 2, 2012 No. 11-30271 Lyle W. Cayce Clerk GEORGE D. STENNETT, Plaintiff-Appellant v. PREMIER REHABILITATION, LLC, SCOTT MARKSTROM, JAMES AARON JOUBERT, JR., PIN MARK ENTERPRISES, LLC, BIONET MEDICAL, LLC, JLM BILLING SOLUTIONS, LLC, JOUBERT MANAGEMENT, LLC, & HOME ORTHOTIC & PROSTHETIC ENTERPRISES, LLC, Defendants-A
Summary: Case: 11-30271 Document: 00511907846 Page: 1 Date Filed: 07/02/2012 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit FILED July 2, 2012 No. 11-30271 Lyle W. Cayce Clerk GEORGE D. STENNETT, Plaintiff-Appellant v. PREMIER REHABILITATION, LLC, SCOTT MARKSTROM, JAMES AARON JOUBERT, JR., PIN MARK ENTERPRISES, LLC, BIONET MEDICAL, LLC, JLM BILLING SOLUTIONS, LLC, JOUBERT MANAGEMENT, LLC, & HOME ORTHOTIC & PROSTHETIC ENTERPRISES, LLC, Defendants-Ap..
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Case: 11-30271 Document: 00511907846 Page: 1 Date Filed: 07/02/2012
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
July 2, 2012
No. 11-30271 Lyle W. Cayce
Clerk
GEORGE D. STENNETT,
Plaintiff-Appellant
v.
PREMIER REHABILITATION, LLC, SCOTT MARKSTROM, JAMES
AARON JOUBERT, JR., PIN MARK ENTERPRISES, LLC, BIONET
MEDICAL, LLC, JLM BILLING SOLUTIONS, LLC, JOUBERT
MANAGEMENT, LLC, & HOME ORTHOTIC & PROSTHETIC
ENTERPRISES, LLC,
Defendants-Appellees
Appeal from the United States District Court
for the Western District of Louisiana
U.S. Dist. Ct. No. 3:08-cv-00782
Before STEWART, CLEMENT and GRAVES, Circuit Judges.
PER CURIAM:*
Relator-appellant, George DeWain Stennett, filed this qui tam case
pursuant to the False Claims Act (“FCA”), 31 U.S.C. § 3729, against defendants-
appellees James Aaron Joubert, Jr., Premier Rehabilitation Hospital, LLC
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
Case: 11-30271 Document: 00511907846 Page: 2 Date Filed: 07/02/2012
No. 11-30271
(“Premier”), Bionet Medical, LLC (“Bionet”), JLM Billing Solutions, LLC (“JLM
Billing”), Joubert Management, LLC (“Joubert Management”), Scott Alan
Markstrom, Pin Mark Enterprises, LLC (“Pin Mark”), and Home Orthotic &
Prosthetic Enterprises, LLC (“HOPE”) (collectively “Hospital”). The magistrate
judge issued a detailed report and recommendation to dismiss Stennett’s causes
of action against the Hospital. After reviewing the magistrate judge’s report and
considering Stennett’s proposed amended complaint, the district court granted
the Hospital’s motion to dismiss Stennett’s complaint with prejudice for failure
to state a claim. For the reasons stated herein, we AFFIRM.
Facts and Procedural History
In March 2007, Stennett commenced his service as the Administrator of
Premier Rehabilitation Center (“PRC”) in Monroe, Louisiana. As the
Administrator, Stennett oversaw Premier’s financial practices, including but not
limited to its billing and reimbursement practices, and its various business
relationships. During his tenure, Stennett claims to have discovered that
Premier’s billing practices allegedly violated various provisions of the Medicaid
Act, 42 U.S.C. §§ 1396 - 1396v, and the Health Insurance for the Aged Act
(“Medicare Act”), 42 U.S.C. §§ 426 and 1395 - 1396d. Stennett also claims to
have subsequently notified Joubert and Markstrom of this discovery.
From June 25 through June 29, 2007, the State of Louisiana conducted an
Annual Licensing Survey, and completed an in-depth site survey, audit,
inspection and examination of Premier’s records and files pursuant to the State
of Louisiana Recovery Audit Contractor program. In the resulting public audit
report dated June 29, 2007 (“Government Audit Report”), the State of Louisiana
noted multiple deficiencies regarding Premier’s operational compliance with the
applicable Medicare and Medicaid regulations. Premier subsequently addressed
these operational deficiencies. In September 2007, Joubert and Markstrom
terminated Stennett.
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No. 11-30271
Stennett served the United States with a copy of his complaint, along with
his written disclosure statement, in this qui tam case.1 The government declined
to intervene. The magistrate judge issued a report, which recommended, inter
alia, that (1) the Hospital’s motion to dismiss for failure to state a claim should
be granted, and (2) Stennett’s claims against the Hospital should be dismissed
with prejudice, subject to Stennett’s right to seek leave of court to amend his
complaint with a proposed pleading that cures the deficient allegations against
the Hospital. Prior to the district court’s judgment, Stennett sought leave to
amend and proposed a more detailed amended complaint. Nonetheless, the
district court ultimately concluded that:
Plaintiff’s amended factual allegations fail to allege, with the specificity
required by Rule 9(b) of the Federal Rules of Civil Procedure, that Plaintiff
is the “original source” of the information forming the basis of the
complaint or that any of the Defendants acted with the requisite scienter
to establish a cause of action under the [FCA], 31 U.S.C. § 3729. Plaintiff’s
Amended Complaint is simply devoid of any detailed allegations
concerning the content of actual bills and/or claims submitted to the
Government, nor are there any allegations sufficient to demonstrate that
any of the defendants knew the alleged falsehoods would be material to
the Government’s decision to pay a claim. See §§ 3729(a)(1)-(3); United
States ex rel. Grubbs v. Kanneganti, 565 F.3d 180 (5th Cir. 2009); United
States ex rel. Rafizadeh v. Cont’l Common, Inc., 553 F.3d 869 (5th Cir.
2008).
Standard of Review
This court reviews a district court’s ruling on a motion to dismiss de novo.
United States ex rel. Marcy v. Rowan Co., Inc., 520 F.3d 384, 388 (5th Cir. 2008);
see also Willard v. Humana Health Plan of Texas, Inc.,
336 F.3d 375, 379 (5th
Cir. 2003).
1
An FCA complaint is first served on the government and remains under seal for sixty
days while the government decides whether to intervene and take over the action. 31 U.S.C.
§ 3730(b)(2).
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No. 11-30271
Analysis
I. False Claims Act
“‘Qui tam’ is an abbreviation for qui tam pro domino rege quam pro se ipso
in hac parte sequitur, which means ‘who as well for the king as for himself sues
in this matter.’” Grubbs, 565 F.3d at 184 n.5 (citing BLACK’S LAW DICTIONARY
1262 (7th ed. 1999)). The FCA “provides for civil suits brought by both the
Attorney General and by private persons, termed relators, who serve as a ‘posse
of ad hoc deputies to uncover and prosecute frauds against the government.’” Id.
(emphasis added). Depending upon the extent of a relator’s contribution to the
complaint, the relator is entitled to receive between a 10 and 30 percent share
of any recovery obtained on behalf of the government. Id.
II. Civil Actions for False Claims
31 U.S.C. 3730(e)(4)(A) directs federal courts to dismiss a qui tam action
or claim ‘if substantially the same allegations or transactions as alleged in the
action or claim were publicly disclosed–
(i) in a Federal criminal, civil, or administrative hearing in which the
Government or its agent is a party;
(ii) in a congressional, Government Accountability Office, or other Federal
report, hearing, audit, or investigation;
(iii) from the news media, unless the action is brought by the Attorney
General or the person bringing the action is an original source of the
information.
The Supreme Court has provided definitive guidance on assessing FCA
complaints. “The [FCA], 31 U.S.C. §§ 3729-3733, eliminates federal-court
jurisdiction over actions under § 3730 of the Act that are based upon the public
disclosure of allegations or transactions ‘unless the action is brought by the
Attorney General or the person bringing the action is an original source of the
information.’” Rockwell Int’l Corp. v. United States, 549 U.S. 457, 460 (2007)
(determining that the Federal Government contractor did not qualify as the
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original source of the information). Likewise, the Supreme Court outlined a
three-prong test: (1) whether there has been a “public disclosure” of allegations
or transactions, (2) whether the qui tam action is “based upon” such publicly
disclosed allegations, and (3) if so, whether the relator is the “original source” of
the information. Graham Cnty. Soil & Water Conservation Dist. v. United States,
130 S. Ct. 1396, 1400 (2010).
Stennett filed his original complaint on June 3, 2008 and his proposed
amended complaint on February 11, 2011. Both complaints state that the
Government Audit Report serves as the primary foundation on which Stennett
admittedly based his allegations. Clearly, the bases of Stennett’s allegations are
derived from public information.
A. Whether there has been a “public disclosure” of allegations or
transactions.
The Hospital contends that Stennett’s allegations in his original complaint
and in his proposed amended complaint were publicly disclosed in the
Government Audit Report regarding Premier’s operations. Stennett does not
dispute that the State of Louisiana conducted a survey in June 2007. In fact, the
Government Audit Report was the product of a periodic inspection done by the
State of Louisiana Survey Agency to gather information about Premier’s
compliance with the applicable Medicare and Medicaid regulations. Portions of
the report are attached to the complaint, and therefore, may be considered by
the court. Dorsey v. Portfolio Equities, Inc., 540 F.3d 333, 338 (5th Cir. 2008)
(when considering a motion to dismiss, courts generally are limited to the
complaint and its proper attachments). Indeed, there already had been a “public
disclosure” of the Hospital’s transactions by the State of Louisiana in the
Government Audit Report. Therefore, here, the answer to the“public disclosure”
prong of the Graham test is a resounding yes. See United States ex rel. Reagan
v. E. Tex. Med. Ctr. Reg’l Healthcare Sys.,
384 F.3d 168, 173 (5th Cir. 2004).
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B. Whether the qui tam action is “based upon” such publicly disclosed
allegations.
This court has “held that if a qui tam action is ‘even partly based upon
public allegations or transactions’ then the jurisdictional bar applies.” United
States ex rel. Fried v. West Indep. Sch. Dist., 527 F.3d 439, 442 (5th Cir. 2008).
The claims alleged in a qui tam suit are deemed “based upon” the publicly
disclosed allegations when both sets of allegations are substantially similar.
United States ex rel. Branch Consultants, LLC v. Allstate Ins. Co., 668 F.
Supp.2d 780, 796-97 (E.D. La. 2009). Here, an application of the first and second
parts of the Supreme Court’s Graham test to Stennett’s claims resulted in the
magistrate judge’s correct finding that Stennett’s claims are barred because the
underlying allegations and transactions on which they are based were publicly
disclosed and were substantially similar to, and admittedly based upon, the
publicly disclosed transactions. Stennett’s complaint and exhibits provide strong
and compelling support for the magistrate judge’s findings and the subsequent
district court order. Therefore, this qui tam action is “based upon” previously,
publicly-disclosed information, and Stennett’s claims are barred unless Stennett
qualifies as an “original source.” See id.
C. Whether the relator is the “original source” of the information.
The issue for this prong of the analysis is whether Stennett had direct and
independent knowledge of the transactions upon which he bases his allegations.
“‘[O]riginal source’ means an individual who either (i) prior to a public disclosure
. . . has voluntarily disclosed to the Government the information on which
allegations or transactions in a claim are based, or (ii) who has knowledge that
is independent of and materially adds to the publicly disclosed allegations or
transactions, and who has voluntarily provided the information to the
Government before filing an action under this section.” 31 U.S.C. §
3730(e)(4)(B). The term “direct” requires “knowledge derived from the source
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without interruption or gained by the relator’s own efforts rather than learned
second-hand through the efforts of others.” Reagan, 384 F.3d at 173-74. Direct
knowledge contemplates knowledge obtained from actually viewing source
documents, or first hand observation of the fraudulent activity that provides the
grounds for the qui tam suit. Branch, 668 F. Supp.2d at 796-797. A relator’s
“independent” knowledge does not derive by the public disclosure. Id. Although
the relator need not show that he knew about the fraud before the public
disclosures, his prior knowledge of the information, upon which he based his
complaint, may help demonstrate that he obtained the information independent
of the public disclosure. Id. at 801-802. “Under this approach, we are required
to ‘look to the factual subtleties of the case before [us] and attempt to strike a
balance between those individuals who, with no details regarding its
whereabouts, simply stumble upon a seemingly lucrative nugget and those
actually involved in the process of unearthing important information about a
false or fraudulent claim.’” Reagan, 384 F.3d at 177.
Here, Stennett provided a copy of his original complaint and written
disclosure statement to the United States, which, in turn, declined to intervene.
The magistrate judge correctly found, and the district court affirmed, that
Stennett’s complaint fails to demonstrate that he was an original source for the
transactions that form the bases for his claims. Stennett alleges that he did not
become aware of the regulations regarding billing practices or their applicability
to Premier and its satellite facilities until after he reviewed the Government
Audit Report. In an undated timeline that Stennett attached to his complaint,
he indicated that he “discovered [on June 16, 2007] that [Intensive Outpatient
Psychiatric (‘IOPs’)] were not operating legally and gave notice to Jimmy Joubert
about this. His remarks were ‘I take care of IOPs.’” However, according to the
Government Audit Report, Stennett stated that he “knew nothing about the
IOPs . . .”
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Finally, Stennett claims that the Hospital improperly billed Medicare for
multiple occupational and physical therapy sessions without the requisite
oversight, but fails to make any factual allegations to show that he was the
original source of this information. Instead, the exhibits provided by Stennett
in his complaint demonstrate that Stennett only became aware of the
irregularities after reviewing the previously publicly-disclosed sources.
Stennett's qui tam action thus fails to satisfy the Supreme Court's Graham
test since: (1) prior to Stennett's actions, there had already been a ‘public
disclosure' of the Hospital's noncompliance with Federal regulations in the
Government Audit Report; (2) Stennett's allegations are ‘based upon' the public
disclosure of the information contained in that Government Audit Report; and,
(3) Stennett was not the ‘original source' of the information contained in that
Government Audit Report.
Conclusion
For the foregoing reasons, we AFFIRM the district court’s judgment in
favor of the Hospital and dismissing Stennett’s claims.
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