UNITED STATES OF AMERICA ex rel. VANESSA ABSHER, et al., Plaintiffs-Appellees, Cross-Appellants,
MOMENCE MEADOWS NURSING CENTER, INC. and JACOB GRAFF, Defendants-Appellants, Cross-Appellees
Argued January 9, 2014
[Copyrighted Material Omitted]
Appeals from the United States District Court for the Central District of Illinois. No. 04-CV-02289 -- Harold A. Baker, Judge.
For VANESSA ABSHER, individually, and as relator on behalf of the United States of America and the State of Illinois, LYNDA MITCHELL, individually, and as relator on behalf of the United States of America and the State of Illinois, Plaintiffs - Appellees (13-1886): Michael Timothy Anderson, Attorney, Murphy Anderson Pllc, Boston, MA; Gale D. Pearson, Pearson, Randall, Schumacher & Labore, Minneapolis, MN.
For Momence Meadows Nursing Center, Incorporated, Jacob Graff, Defendants - Appellants (13-1886): William James Brinkmann, Attorney, Richard R. Harden, Attorney, Thomas, Mamer & Haughey Llp, Champaign, IL; Theodore B. Olson, Attorney, Gibson, Dunn & Crutcher Llp, Washington, DC.
For United States of America, Party-in-Interest - Amicus Curiae (13-1886): Mark R. Freeman, Attorney, Department of Justice, Civil Division, Appellate Staff, Washington, DC; Gail L. Noll, Attorney, Office of The United States Attorney, Springfield, IL.
For VANESSA ABSHER, individually, and as relator on behalf of the United States of America and the State of Illinois, LYNDA MITCHELL, individually, and as relator on behalf of the United States of America and the State of Illinois, Plaintiffs - Appellants (13-1936): Michael Timothy Anderson, Attorney, Murphy Anderson Pllc, Boston, MA; Robin B. Potter, Attorney, Potter & Associates, Chicago, IL; Gale D. Pearson, Pearson, Randall, Schumacher & Labore, Minneapolis, MN.
For Momence Meadows Nursing Center, Incorporated, Jacob Graff, Defendants - Appellees (13-1936): Theodore B. Olson, Attorney, Gibson, Dunn & Crutcher Llp, Washington, DC; William James Brinkmann, Attorney, Richard R. Harden, Attorney, Thomas, Mamer & Haughey Llp, Champaign, IL.
For United States of America, Party-in-Interest - Amicus Curiae (13-1936): Gail L. Noll, Attorney, Office of The United States Attorney, Springfield, IL.
Before MANION and SYKES, Circuit Judges, and GRIESBACH,[*] District Judge.
Manion, Circuit Judge.
This appeal and cross-appeal arise from jury verdicts and a judgment against Momence Meadows Nursing Center, Inc., and its president and part owner, Jacob Graff. The plaintiffs and cross-appellants are two nurses who were formerly employed by Momence. The nurses alleged that, during their employment at Momence, they uncovered evidence that Momence knowingly submitted " thousands of false claims to the Medicare and Medicaid programs" in violation of the False Claims Act (" FCA" ) and the Illinois Whistleblower Reward and Protection Act (" IWRPA" ). The nurses filed this qui tam action on behalf of the government. They also sued in their personal capacities and alleged that Momence retaliated against them for reporting evidence of Momence's fraud.
Following trial, a jury reached verdicts against Momence on both the qui tam claims and the retaliation claims. The jury awarded the United States over $3 million in compensatory damages and imposed about $19 million in fines for the qui tam claims. Pursuant to the FCA, the compensatory damages were trebled to over $9 million. However, the district court set aside the fines on the grounds that they violated the Excessive Fines Clause of the Eighth Amendment. The jury also awarded the nurses $150,000 and $262,320, respectively, on their retaliation claims.
On appeal, Momence contends that the district court lacked jurisdiction over the qui tam claims, and that the qui tam and the retaliation claims fail as a matter of law. With support from the United States as amicus curiae, the nurses cross-appeal the set-aside of the fines. For the reasons discussed below, we vacate the judgment, and remand with directions that judgment be entered for the defendants.
The FCA prohibits any person from knowingly submitting a false or fraudulent claim to the United States for payment or approval or knowingly making any false statement material to such a false or fraudulent claim. 31 U.S.C. § 3729(a). Civil penalties and treble damages are available remedies for each violation. Id.
The Attorney General may bring actions under the FCA directly in the name of the United States. Id. Alternatively, a private person--known as a " relator" --may bring a qui tam action " for the person and for the United States Government." 31 U.S.C. § 3730(b)(1); see U.S. ex rel. Eisenstein v. City of N.Y., 556 U.S. 928, 932, 129 S.Ct. 2230, 173 L.Ed.2d 1255 (2009). If such a qui tam action results in a recovery for the government, the relator shares in the award. See 31 U.S.C. § 3730(d).
During the time period relevant to the instant action (1998-2006), Momence owned a 140-bed long-term care facility located in Kankakee County, Illinois. Jacob Graff, Momence's president and part owner, was the " designated person functioning as [Momence's] governing body." See 42 C.F.R. § 483.75(d); A-913. Thus, he was legally responsible " for establishing and implementing policies regarding the management and operation of the facility." 42 C.F.R. § 483.75(d). He also appointed the administrators who were responsible for managing the facility. Id.
At the time, almost all of Momence's residents were supported by Medicare or Medicaid. Both programs reimbursed Momence on a " per patient day" basis, meaning that the programs paid Momence a flat per diem amount for each resident and did not reimburse the facility separately for specific services provided. A-257-59. To receive reimbursement, Momence was required to provide government regulators with a completed Minimum Data Sheet (" MDS" ) form on behalf of each resident. A-257, 734-43. The form is both a billing document and a care assessment certification for Medicare and Medicaid, and had to be submitted at 5-, 14-, 30-, 60- and 90-day intervals after admission. A-258, 891. The MDS forms used by Momence were lengthy and contained sections for inputting health assessment and tracking information for the patient, including disease diagnoses and health conditions, inter alia. A-734-40. Each form contained the following text:
I certify that the accompanying information accurately reflects resident assessment or tracking information for this resident and that I collected or coordinated collection of this information on the dates specified. To the best of my knowledge, this information was collected in accordance with applicable Medicare and Medicaid requirements. I understand that this information is used as a basis for assuring that residents receive appropriate and quality care and as a basis for payment from federal funds. I further understand that payment of such federal funds and continued participation in the government funded health care program is conditioned on the accuracy and truthfulness of this information and that I may be personally subject to or may subject my organization to substantial criminal, civil, and/or administrative penalties for submitting false information.
A-734; see also A-952.
Momence (as a long-term care facility caring for Medicare or Medicaid patients) also was required to comply with a wide variety of regulations and standards of care that are part of Medicare and Medicaid's complex regulatory scheme. See 42 C.F.R. pt. 483; Ill. Admin. Code tit. 77, subch. C, pt. 300. This regulatory scheme is enforced by the Centers for Medicare & Medicaid Services (" CMS" ), a federal agency, and the Illinois Department of Public Health (" IDPH" ). Under the regulations,
a facility provides deficient or non-compliant care when the care does not meet a participation requirement specified in the controlling statutes or regulations. See 42 C.F.R. § 488.301. The provision of non-compliant care can result in a variety of remedies or sanctions, including fines or even termination from the Medicare and Medicaid programs. See 42 C.F.R. § § 488.406, 488.408. Additionally, payments may be suspended if there are credible allegations of fraud against a facility. 42 C.F.R. § 405.371. To ensure that Momence was providing adequate care, the facility was subject to inspection (" surveys" ) by government regulators. See A-712-16. Between 1998 and 2006, government regulators surveyed Momence 117 times. A-551. When deficiencies were discovered, the regulators required Momence to take remedial action, which involved completing and implementing plans of correction, and to pay administrative fines.
Vanessa Absher and Lynda Mitchell--the " relators" --are nurses who were formerly employed at Momence's nursing facility. Absher, a licensed practical nurse, worked for Momence from December 1997 to February 2003 (with some breaks in between). A-297. On February 8, 2003, Absher resigned her position with Momence. A-372. Mitchell, a registered nurse, worked for Momence from the beginning of 2001 to 2003. A-93. In February 2003, Momence terminated Mitchell's employment. A-93.
On September 29, 2004, the relators filed this action and alleged that Momence knowingly submitted " thousands of false claims to the Medicare and Medicaid programs" in violation of the FCA, 31 U.S.C. § 3729 et seq., and the IWRPA, 740 ILCS 175/1 et seq. (1993, amended and re-codified 2010). Relators alleged that Momence also violated these statutes by retaliating against them by terminating Mitchell and constructively terminating Absher for reporting evidence of Momence's fraud. Pursuant to the FCA, the relators' complaint was filed under seal to allow the government the opportunity to intervene. 31 U.S.C. § 3730(b)(2). The United States and Illinois declined to intervene, and so the district court unsealed the relators' complaint and allowed the lawsuit to proceed. Thereafter, Momence moved for summary judgment, but the district court denied that motion.
At trial, the relators presented evidence of numerous instances of non-compliant care provided at Momence and harm that resulted therefrom. Specifically, they presented evidence of problems relating to infection and pest control (including scabies
outbreaks), pressure sore management, medication, food and water temperatures, the facility's cleanliness, wheelchairs and other medical equipment, accidents such as falls, and patient trust accounts. The relators also offered evidence of incidents where an administrator struck a resident, a resident wandered away from the facility, a resident was scalded in a bath, and a resident died from malfunction of his colostomy bag. Additionally, the relators offered expert witness testimony that Momence systemically violated Medicare and Medicaid regulations concerning the duties of personnel at the facility, the protocols for addressing patient care issues, and the standard of care provided. A-907-21 (Arbeit); A-988-1003 (Warner-Maron).
The relators also presented evidence that Momence actively concealed the extent of its non-compliant care from government regulators. Specifically, the relators offered testimony at trial that Momence supervisors directed employees not to chart symptoms of scabies or pressure ulcers (or, at least, to chart the symptoms as something other than scabies or pressure ulcers), and hid any charts where such symptoms had been documented. See A-206; A-227; A-898, at pp. 9-10. The relators also offered testimony that Momence generally was under-staffed and did not use proper blankets, pajamas, nightgowns, diapers, or briefs, yet would increase staffing levels and temporarily use new linens and nightgowns while government surveyors were ...