Opinion
No. CIV97-4049
July 24, 1998
SUMMARY JUDGMENT FOR DEFENDANT
The above-entitled matter having come on before the Court on briefs and oral arguments and the Court having entered its Memorandum Opinion and Order, it is hereby
ORDERED, ADJUDGED AND DECREED that defendants Medical X-Ray Center and Central Plains Clinic Motions For Summary Judgment, be and the same is hereby granted; and, it is further
ORDERED, ADJUDGED AND DECREED that judgment is entered for the defendant on plaintiffs complaint and plaintiffs complaint is hereby dismissed with prejudice.
MEMORANDUM OPINION AND ORDER
Defendant Medical X-Ray Center, P.C. ("MXC") filed a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(1) and (6) or, in the alternative, for summary judgment. Doc. 26. Defendant Central Plains Clinic ("CPC") joined MXC's motion to dismiss. Doc. 29. Plaintiff filed a motion pursuant to Fed.R.Civ.P. 56(f) requesting additional discovery in the event the Court considers defendants' motion as one for summary judgment. Doc. 37. Defendants filed two requests for judicial notice. Docs. 28 and 42. The motions were heard by the Court on June 29, 1998, with Ralph Read appearing pro se, with CPC appearing by its attorney Thomas J. Welk and with MXC appearing by its attorney William P. Fuller. The Court took the motions under advisement.
I. Background
Ralph Read, M.D., filed this gui tam action on behalf of the United States under the False Claims Act, 31 U.S.C. § 3729 et seq. (the "FCA"), alleging that defendants submitted false claims to Medicare for radiological services dating back to 1981. The allegations in the complaint are based upon written contracts which allowed CPC to retain the majority of fees charged to patients for radiological services in exchange for CPC's guarantee to refer all patients to MXC for radiological services. Read characterizes this agreement as a "kickback" to CPC for referring patients to MXC. Read alleges the claims submitted to Medicare were false because the fees for radiological services were inflated due to the compensation agreement between MXC and CPC.
II. Decision
An action is properly dismissed where the Court lacks subject matter jurisdiction. Fed.R.Civ.P. 12(b)(1).
A. Statute of Limitations
Read's complaint alleges defendants submitted false claims to Medicare for radiological services dating back to 1981. The complaint in this action was filed on March 10, 1997. Defendants contend any allegations regarding false claims submitted prior to March 10, 1991 are barred by the six-year statute of limitations set forth in 31 U.S.C. § 3731 (b)(1). The Court agrees that such claims are barred by the statute of limitations.
B. Subject Matter Jurisdiction
Defendants contend the Court lacks subject matter jurisdiction because this action is based upon publicly disclosed information within the meaning of 31 U.S.C. § 3730 (e)(4)(A) and Read is not an "original source" of the information within the meaning or 31 U.S.C. § 3730 (e)(4)(A) and (B). These statutes state that:
(4)(A) No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing audit, or investigation, or 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.
(B) For purposes of this paragraph, "original source" means an individual who has direct and independent knowledge of the information on which the allegations are based and has voluntarily provided the information to the Government before filing an action under this section which is based on the information.31 U.S.C. § 3730 (e)(4)(A) and (B)
The allegations in Read's complaint not barred by the statute of limitations are based upon a contract between MXC and CPC dated January 1, 1991 ("the 1991 contract"). Read admits the 1991 contract was disclosed during a jury trial in an action entitled Read v. Medical X-Ray Center, et al., Civil No. 92-4095, United States District Court, District of South Dakota, Southern Division ("antitrust action"). This action was based upon Read's allegations or violations of the antitrust laws by MXC. The Court will grant defendants' request to take judicial notice, Docs. 26 and 42, which includes portions of the trial transcript and trial exhibits from the antitrust action. See United States v. Jackson, 640 F.2d 614, 617 (8th Cir. 1981), cert. denied, 454 U.S. 1057 (1981) (stating a court can take judicial notice of "its own records and files, and facts which are part of its public records . . . Judicial notice is particularly applicable to the court's own records of prior litigation closely related to the case before it.") Read argues the Court's ruling in the antitrust action prohibiting any evidence to the effect that the 1991 contract violated the FCA or Medicare Fraud and Abuse statutes resulted in limited disclosure which was insufficient to meet the "public disclosure" rule in 31 U.S.C. § 3730 (e)(4)(A).
The Eighth Circuit Court of Appeals explained that "mere disclosure of the "subject transactions" reads the jurisdictional bar too broadly. . . . the essential elements exposing the transaction as fraudulent must be publicly disclosed as well." United States ex rel. Rabushka v. Crane Co., 40 F.3d 1509, 1512 (8th Cir. 1994). During discovery and the jury trial in the antitrust action, several references were made to the 1991 contract and the compensation terms of that contract. Read exposed the compensation terms and suggested that the 1991 contract resulted in CPC patients being overcharged for radiological procedures. See Request for Judicial Notice, Doc. 28, tabs 9, 11-14, pp. 056-060, 063-067, 071-088, 103-106, 109-117, 120-132. It was undisputed that CPC and MXC submitted claims to Medicare for procedures performed pursuant to the 1991 contract. Id. at tabs 11, 13, 14, pp. 056-060, 109-117, 127-132. The Court finds that Read's allegations that the 1991 contract and the resulting submission of claims to Medicare thereunder were fraudulent were publicly disclosed as part of the antitrust action.
Despite the public disclosure of the relevant information in this action, Read could survive a motion to dismiss if he was the "original source" of such information. 31 U.S.C. § 3730 (e)(4)(A). The definition of original source is set forth in 31 U.S.C. § 3730 (e)(4)(B) (quoted above). "A relator is said to have direct knowledge of fraud when he "saw it with his own eyes." U.S. ex rel. Barth v. Ridgedale Elec., Inc., 44 F.3d 699, 702 (8th Cir. 1995) (quoting Wang v. FMC Corp., 975 F.2d 1412, 1416 (8th Cir. 1992)). "[T]he [FCA] seeks to encourage persons with "first-hand knowledge of fraudulent misconduct," or those "who are either close observers or otherwise involved in the fraudulent activity" to come forward." Id. (emphasis in original and citations omitted).
Read ended his employment with MXC in 1988. He worked as an independent contractor for MXC for a short period of time thereafter. Read was not a member of the MXC staff when the 1991 contract was negotiated with CPC. Therefore, Read could not be the original source of any information regarding a kickback payment which Read alleges was included in the 1991 contract.
Based upon the Court's findings that the 1991 contract was publicly disclosed and that Read was not the original source of the information upon which his claims are based, the Court lacks jurisdiction over the subject matter of this lawsuit pursuant to 31 U.S.C. § 3730 (e)(4)(A). Defendants' motion to dismiss pursuant to Fed.R.Civ.P. 12 (b)(1) for lack of jurisdiction will be granted.
The allegations of false claims prior to March 10, 1991 set forth in Read's complaint will be dismissed because such allegations are barred by the applicable statute of limitations. The remainder of the complaint will be dismissed for lack of subject matter jurisdiction under 31 U.S.C. § 3730 (e)(4)(A). Read's Rule 56(f) motion will be denied as moot in light of the Court's ruling on defendants' motion to dismiss.
Now, therefore,
IT IS ORDERED:
(1) That defendant Medical X-Ray Center's Motion to Dismiss, Doc. 26, joined by defendant Central Plains Clinic, Doc. 29, is granted.
(2) That plaintiff's Rule 56(f) Motion, Doc. 37, is denied as moot.
(3) That the Clerk of Courts shall dismiss this action with prejudice.