The opinion of the court was delivered by: WILLIAM C. CONNER
Patricia Mikes brings this action on behalf of the United States and herself against her former employers under the qui tam provisions of the False Claims Act ("FCA"), 31 U.S.C. § 3730, for alleged improper billing of medical procedures to the United States and for retaliatory discharge, and under New York Labor Law § 191, for unpaid wages for a two-week period of employment after her formal termination. In May, 1994 the Court granted defendants' motion to dismiss the complaint, in part for failing to state a claim in light of the fraud pleading requirement of Rule 9(b), Fed. R. Civ. Pro., see United States ex rel. Mikes v. Straus, 853 F. Supp. 115 (S.D.N.Y. 1994) [hereinafter Mikes I], but allowed plaintiff to replead her charges to overcome the noted infirmities of the complaint. After plaintiff filed a First Amended Complaint, defendant again moved to dismiss the action under Rules 12(b)(6) and 9(b) or, in the alternative, to compel arbitration. Converting defendants' motion sua sponte into a motion for summary judgment, the Court reserved decision pending submission by plaintiff of more detailed affidavits to substantiate the allegations of the First Amended Complaint. In accordance with that order, plaintiff has submitted her own affidavit and, in addition, has moved for a continuance under Rule 56(f), Fed. R. Civ. Pro., to allow further discovery prior to our disposition of the court-converted summary judgment motion. Because we find that the First Amended Complaint and plaintiff's affidavit raise genuine issues of fact for trial on plaintiff's qui tam and retaliatory discharge claims, we see no reason to delay this disposition any longer. Therefore, plaintiff's motion for a continuance and defendants' converted motion for summary judgment are both denied. Defendants' motion to compel arbitration is granted in part and denied in part as outlined below. Defendants' motion for a stay pending arbitration is denied.
In May, 1991 plaintiff entered into an employment agreement (the "Agreement") with defendants, doing business as Oxford Medical, Oxford Hematology Associates, and Pulmonary and Critical Care Associates ("PCCA"), to provide pulmonary care to individuals in hospitals located in Westchester and Putnam counties in New York. Plaintiff claims that while she was employed by defendants, defendants regularly misused spirometry and magnetic resonance imaging ("MRI")
tests to overcharge patients, many of which were Medicare recipients, for medical services.
Specifically, plaintiff claims, without citing a specific instance, that over the course of her employment she observed spirometry tests performed incorrectly, performed with uncalibrated instruments, repeatedly administered to patients when unnecessary, and often administered without subsequent interpretation of the test results. Likewise, plaintiff claims that defendants utilized MRIs to the exclusion of often more probative and less expensive x-ray or CT scans, administered MRIs excessively and unnecessarily, and often obtained MRIs of parts of patients' bodies unrelated to the diagnosis and treatment of their ailments. Referring to one instance when an x-ray she ordered revealed a patient's tumor, plaintiff notes that MRIs ordered by defendants, the last as recently as one month prior to her examination, had failed to discover the tumor.
In September, 1991 plaintiff approached defendant Straus and informed him of the misuse of spirometry testing. Around the same time, plaintiff also presented an article to the defendants on the drawbacks of MRI testing of the respiratory system. Plaintiff claims that defendants treated her complaints with indifference and continued their improper use of spirometry and MRI tests. Subsequently, on December 16, 1991, plaintiff received written notice of the termination of her employment agreement. Although the notice cited her failure to maintain admitting privileges at Peekskill Hospital as required in the Agreement as the reason for her discharge, plaintiff claims that the discharge was in response to her complaints about defendants' improper testing and fraudulent billing practices.
In 1992, plaintiff filed suit claiming that defendants are liable under the FCA, 31 U.S.C. § 3729, for submitting claims to the United States through the Medicare program for unwarranted and improperly administered spirometry and MRI tests, under 31 U.S.C. § 3730(h) and New York Labor Law § 740 for retaliatory discharge, and under New York Labor Law § 191 for unpaid wages for work that she performed after defendants terminated the Agreement. Defendants moved to dismiss for, among other things, failing to state a claim on which relief could be granted under Rule 12(b)(6), Fed. R. Civ. Pro., and for failing to meet the heightened pleading requirements for claims based on fraud under Rule 9(b), Fed. R. Civ. Pro. Judge Broderick granted defendants' motion, but also granted plaintiff leave to amend her complaint to comply with Rule 9(b)'s requirements. Mikes I, 853 F. Supp. at 117.
Plaintiff then filed a First Amended Complaint further detailing the defendants' fraudulent practices. That complaint, containing five claims for relief, charged defendants with knowingly presenting false claims to the government in violation of 31 U.S.C. § 3729(a)(1), using false records to facilitate payment of a fraudulent claim in violation of 31 U.S.C. § 3729(a)(2), conspiring to defraud the Government in violation of 31 U.S.C. § 3729(a)(3), discharging plaintiff in retaliation for preparing to file this action in violation of 31 U.S.C. § 3730(h), and failing to pay plaintiff wages for the two-week period that she worked after her termination in violation of New York Labor Law § 191(3).
Defendants again moved to dismiss the action under Rules 12(b)(6) and 9(b). In addition, they renewed a previously undisposed motion to compel arbitration of all of plaintiff's claims pursuant to § 15 of her employment contract and to stay any remaining district court action pending arbitration. Without ruling on any of defendants' motions, Judge Broderick converted the motion to dismiss into a summary judgment motion and instructed plaintiff to provide sufficient proof, without conducting discovery, to demonstrate the existence of a genuine issue of fact for trial. Plaintiff then filed her own affidavit, mirroring the claims outlined in the First Amended Complaint, and requested a continuance of the court-converted motion to conduct extensive discovery. That motion for a continuance, along with defendants' response, the court-converted summary judgment motion, and defendants' motion to compel arbitration and stay district court action pending arbitration are before us now.
The qui tam provisions of the FCA, see generally 31 U.S.C. §§ 3730(b)-(g), which have existed in various incarnations since 1863, empower private plaintiffs, known as relators,
to bring suits on behalf of the government against persons who knowingly present false or fraudulent claims to the government for approval or payment in violation of 31 U.S.C. § 3729.
United States ex rel. S. Prawer & Co. v. Fleet Bank of Maine, 24 F.3d 320, 324 (1st Cir. 1994). Initially designed to encourage citizens to ferret out fraud on the federal government, the statute has been repeatedly amended in light of perceived abuses by relators who have used its provisions as a windfall.
In 1986, however, concerned with sophisticated and widespread fraud depleting the national fisc, Congress expanded the statute's reach somewhat by broadly defining previously undefined terms and increasing the penalties associated with liability. See S. Rep. No. 345, 99th Cong., 2d Sess. 1-2 (1986) [hereinafter S. Rep. No. 345], reprinted in 1986 U.S.C.C.A.N. 5266, 5266-67. Specifically, Congress added § 3729(b) which defined "knowing" and "knowingly" as having actual knowledge of the false or fraudulent information, having deliberate ignorance of the truth or falsity of the information, or acting in reckless disregard of the truth or falsity of the information. Moreover, Congress made clear that plaintiffs need not allege or prove a defendant's specific intent to defraud to recover under the statute. 31 U.S.C. § 3729(b).
Against the backdrop of this most recent amendment, plaintiff predicates her qui tam action on three liability theories: 1) that defendants knowingly presented, or caused to be presented, to the government a false or fraudulent claim for payment; 2) that defendants knowingly made, used, or caused to be used, false records or statements to obtain payment on a false or fraudulent claim; and 3) that defendants conspired to defraud the government. See 31 U.S.C. § 3729(a)(1)-(3). Therefore, to overcome defendants' motion for summary judgment, plaintiff must supply sufficient evidence from which a reasonable jury could conclude that 1) defendants made a claim for payment from the government, and 2) that claim was false or fraudulent. United States ex rel. Glass v. Medtronic, Inc., 957 F.2d 605, 608 (8th Cir. 1992); United States v. Bouchey, 860 F. Supp. 890, 893 (D.D.C. 1994). In addition, to maintain her conspiracy claim, plaintiff must supply sufficient evidence to establish 1) that defendants conspired with one or more persons to have a fraudulent claim paid by the United States, 2) that one or more of the conspirators performed any act to have such a claim paid by the United States, and 3) that the United States suffered damages as a result of the claim. Id. Having examined plaintiff's affidavit filed in opposition to this motion, and in light of our duty to draw all reasonable inferences in favor of the nonmoving party, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986), we hold that plaintiff has met her prima facie burden under each of her liability theories.
At the outset, we must emphasize the procedural posture of this case and Judge Broderick's reasoning for converting defendants' motion from a motion to dismiss into a motion for summary judgment. Attempting to balance the need to root out fraud practiced on the government with the chilling effect that suits such as this may have on "the willingness of qualified personnel to undertake the difficult work required," the Court ordered plaintiff to substantiate her charges through evidence then available to her before allowing the suit to proceed. Mikes, 853 F. Supp. at 118. On the other hand, the Court never expected plaintiff to be able to detail every aspect of defendants' alleged fraudulent scheme prior to conducting any discovery. Instead, the primary concern of the Court was to prevent plaintiff from conducting a fishing expedition through the intricacies of defendants' business in the hopes of uncovering some unlawful conduct on which to base the instant action. While plaintiff's affidavit does not far exceed the "scintilla of evidence" required to defeat a motion for summary judgment, we think it is sufficient, in light of the procedural posture of this case, to overcome defendants' motion.
In her affidavit, plaintiff outlines defendants' overuse and misuse of spirometry and MRI tests. She asserts that many of the patients on which these procedures were performed participated in Medicare, and that either those patients or defendants, through the businesses that they owned, presented claims to Medicare based on those unwarranted tests. In addition, she claims that defendants, joint partners in Oxford, Oxford Hematology Associates, and PCCA, each overbilled the government, each ignored plaintiff's criticisms of their policies, and ultimately decided to fire plaintiff for her whistleblowing. These allegations are sufficient to demonstrate the existence of genuine issues of material fact regarding whether defendants made claims for payment to the government, whether these claims were false or fraudulent, and whether defendants conspired in their efforts to defraud the government. While plaintiff has not at this time supplied documentary proof that these events occurred, we think her affidavit is sufficient to satisfy the Court's concerns articulated above.
Plaintiff also brings a claim for retaliatory discharge under 31 U.S.C. § 3730(h). ...