Share:
The government brought an FCA action. The defendants asserted various equitable affirmative defenses. The court struck the defenses, finding equity cannot grant a remedy that Congress has not authorized.
Osniek et al. V. Permanente Medical Group, Inc., et al., N.D. Cal. No. 13-cv-03891
- Affirmative Defenses – The government sued various defendants under the FCA. The government alleged the defendants submitted false diagnosis codes to Medicaid/Medicare. The defendants filed an answer asserting affirmative defenses. The government moved to strike the affirmative defenses.
- Equitable Defenses – The defendants asserted three equitable defenses: ratification, failure to mitigate damages, and estoppel. Citing U.S. Supreme Court precedent, the government argued the Constitution gives authority over Treasury funds to Congress—that is, Congress must authorize the payment of funds. Allowing equitable claims against the government violated this provision by giving power to the court to pay federal funds. As a result, the government argued, an equitable claim cannot be asserted against the government. The defendants conceded this point. But they argued they were not asserting equitable claims, but rather equitable defenses against the government in a statutory action.
- Defendants Cannot Assert Equitable Defenses – The court sided with the government striking the equitable defenses. The court reasoned the distinction between equitable claims and equitable defenses was immaterial. In a claim, someone seeks money from the Treasury; in a defense, they’re trying to keep money from the Treasury. In either case, public funds are impacted. To assert an equitable defense, the defendants must show some intent by Congress to allow an equitable defense to FCA claims. But the defendants had not made that showing.
- Excessive Fines – The defendants asserted excessive fines as a defense. They argued that under the government’s complaint, they would be subject to civil penalties that violated the Eight Amendment’s prohibition on excessive fines. The government argued the defendants had not adequately pleaded this defense. But the court found that at this juncture, the defendants had pled enough. They could not make a more specific showing of fines at this stage because they did not know what fines the government would impose.
- Voluntary Disclosure – The FCA will allow for reduced damages when a defendant voluntarily discloses the violation to the government and cooperates in the investigation. One of the defendants asserted voluntary disclosure as a defense. The court said the provision did not apply because the defendant did not disclose the fraud until two other FCA cases had been filed. The court, however, dismissed the defense without prejudice. The defendant could argue the previous cases did not involve the same diagnosis codes.
—Case summary by Craig LaChance, Senior Editor
Share:
