A suit under the Federal False Claims Act against more than 50 insurance stakeholders filed in the U.S. District Court for the Western District of New York has been dismissed. In 2011, Dr. Kent Takemoto filed this action to recover damages and civil penalties on behalf of the United States of America arising from insurers and self-insured companies for their alleged failure to repay known government obligations in violation of the Federal False Claims Act, 31 U.S.C. §§ 3729 et seq. Specifically, the suit requested damages for failure to comply with the obligations imposed by the Medicare Secondary Payer ("MSP") statute, 42 U.S.C. § 1395y(b)(2).
After an opportunity to amend the complaint and following a hearing on a Motion to Dismiss, in June 2015, Federal Magistrate Judge McCarthy recommended that the case be dismissed with prejudice. Following the ruling, Takemoto requested leave to re-plead his claim to address the Magistrate’s findings.
On Wednesday, January 20, United States District Judge William Skretny issued an order denying Takemoto’s request to re-plead his case concurring with McCarthy’s findings. He found that Takemoto failed to allege plausible causes of action upon which relief could be granted. The Amended Complaint was dismissed with prejudice, meaning that it could not be refiled or alleged further. Significantly, while Judge Skretny dismissed Takemoto’s amended complaint with prejudice, he dismissed the claims without prejudice to the United States, thus allowing the government to pursue the action should it choose to do so.
Based upon the Magistrate’s findings and the hearing on the Motion to Dismiss, it appears that the allegations in the original and amended complaints do not establish enough evidence to satisfy the evidentiary standards of fraud or mistake required to prove a False Claims Act violation successfully. While many of the allegations are detailed, the court found the overall tenor of the complaint does not contain enough factual evidence.
While the United States could certainly elect to proceed against the defendants, it must reinitiate the process. Given the vagueness of the original compliant and the Magistrate’s interpretation of those facts, it seems unlikely that the United States will choose to pursue the case further.
Takemoto may choose to appeal the dismissal, as well. In reviewing the rulings of the Magistrate and Judge Skretny however, it would be difficult to discern a basis for an appeal as deference is typically given to rulings of presiding judges where questions of sufficiency of fact are concerned.
At present, another False Claims Act MSP case, United States, ex. rel. J. Michael Hayes v. Allstate Insurance Company, et al., which contains similar facts and naming over 20 liability insurance carriers and self-insureds, is still pending. Based upon recent procedural motions it would not seem that the case is being pursued actively. With the dismissal of the Takemoto complaint questions regarding the applicability of the False Claims Act to Medicare Secondary Payer compliance have not been answered. While the questions may ultimately be addressed by legislation or regulation, we seemingly will not see them addressed by way of legal precedent in either the Takemoto or Hayes cases.
ECS will continue to monitor cases impacting Medicare Secondary Payer issues along with significant legislative or regulatory activity.