The district court denied a motion to compel discovery, finding that the relator had not reasonably connected its request for the defendants’ nationwide joint venture agreements to the agreements it alleged were at the center of healthcare fraud in New York state. The court reasoned the relator could not compel discovery outside this geographic area, merely by alluding to misconduct elsewhere, without facts or details.
In a case alleging a fraudulent healthcare kickback scheme, relator CKD Project LLC moved to compel responses to its first set of interrogatories and to compel production of documents.
The relator alleged that Fresenius gave physicians cash and other consideration in exchange for referrals of dialysis patients to Fresenius’ services. The relator alleged Fresenius engaged in this scheme through a series of illegal joint ventures throughout the United States but its complaint contained details about only a single JV: Apollo Healthcare LLC. Nonetheless, the complaint alleged that the Apollo transactions are merely illustrative of acquisitions of dialysis facilities in New York and elsewhere, and named certain other ventures, but only in New York. On the basis on those allegations, the relator sought all documents related to JV transactions similar to those involving Apollo, for a total of 320 dialysis JVs.
The court boiled the dispute down to this question: may a relator, who identifies and alleges misconduct in one state or location, and merely alludes to misconduct elsewhere “on information and belief,” obtain nationwide discovery to ferret out additional instances of misconduct?
The court concluded that it could not, reasoning that the relator had not demonstrated that the discovery sought was proportional to the needs of the case. Here, the relator had knowledge only of the single Apollo transaction and did not allege it had any knowledge of transactions outside New York, yet it asked the court to infer that the New York transactions are identical to the other joint venture transactions nationwide, and therefore, rule that it may obtain discovery about them.
The court explained that discovery in an FCA case does not proceed in this manner. Rather, discovery is limited to the universe of transactions about which the relator has knowledge or could plausibly allege were similar to known transactions. Absent specific allegations about transactions or entities across the United States, the relator’s discovery scope is limited geographically.
The relator cited to cases stating that Rule 9(b) is satisfied and that a nationwide inference of fraud is established by allegations of specific claims in one state or region, but the court found the reference unavailing, as the relator in that case had identified practices, with specific details, across a bevy of jurisdictions, while the relator here had not.
The relator presented documents it asserted showed that the Apollo and New York transactions are illustrative of nationwide practices, such as certain policies and the use of the same law firm for all the JV transactions. However, the court found that the mere fact that entities used the same attorney did not lead to the inference that all the transactions were identically structured. Further, that the New York transactions were similar did not give rise to the inference that all transactions nationwide were similar, particularly when the relator only had knowledge of the New York activity. The guidance cited by the relator also did not suggest that all transactions were constructed identically.
The court also identified several other considerations that warranted limited discovery, including the relative burdens on the parties. Fresenius presented evidence showing that the relator’s request would cover more ground than a CID from the U.S. Attorney’s office in Colorado, and that the government had agreed to a limit on which JV documents would be searched for responsive documents. The relator’s request contained no such limitation. Without a demonstration of the relevance of the JV transactions nationwide to the case at issue, the court declined to force the defendants to search this volume of documents.
Finally, the court noted that the defendants planned to file a motion to dismiss. The court noted that many of the cases in which nationwide discovery had been permitted, the relator had survived a pleadings-based challenge, while in this case, the relator had not.
