No. 93 C 5456.
November 3, 1993
MEMORANDUM OPINION AND ORDER
The United States, on behalf of the Secretary of Health and Human Services ("HHS"), sues Yvon Nazon, M.D. The United States sues Nazon for: (1) violations of the False Claims Act, 31 U.S.C. § 3729(a)(1); (2) common law payment under mistake of fact; and (3) common law unjust enrichment. Nazon moved to dismiss the complaint; his motion was denied. See Memorandum Opinion and Order, No. 93 C 5456 (N.D.Ill. October 13, 1993). The United States moves for summary judgment.
The following facts are uncontested. HHS administers the Supplementary Medical Insurance Program for the Aged and Disabled, 42 U.S.C. § 1395j, et seq. ("Medicare"). HHS administers the Medicare program in Illinois through a private insurance carrier, Blue Cross/Blue Shield of Illinois ("Blue Cross"). Blue Cross reviews and approves claims submitted for medical reimbursement by Medicare providers and pays the providers for eligible claims. The payments that Blue Cross makes to Medicare providers are wholly from federal funds.
Dr. Nazon is a resident of Illinois, and maintains an obstetrical and gynecological practice with offices in Chicago and in Gary, Indiana. Prior to November 1990, Nazon was a Medicare and Medicaid provider to residents of Illinois and Indiana. On November 22, 1990, HHS barred Nazon from participating in Medicare for seven years. HHS based its decision on Nazon's conviction on seventeen counts of Medicaid fraud. See United States v. Yvon Nazon, M.D., No. HCR 89-00096-001 (N.D.Ind. 1990). HHS informed Nazon that he would be subject to criminal and civil penalties if he submitted, or caused to be submitted, any Medicare claims after November 22, 1990.
Under the Social Security Act, a provider must be excluded from the Medicare program for a program-related crime. See 42 U.S.C. § 1320(a)(1).
The United States contends that after November 22, 1990, Nazon submitted, or caused to be submitted, sixty-one claims for Medicare reimbursement totalling $8,015.00. 12(m) Stmt. ¶ 10. The United States, through Blue Cross, paid Nazon $919.06 in Medicare reimbursements for those sixty-one claims. 12(m) Stmt. ¶ 11. The United States seeks reimbursement for the Medicare funds that it paid Nazon, as well as civil damages and penalties. Nazon responds that he was not directly or indirectly responsible for the submission of the claims. The United States moves for summary judgment, pursuant to Fed.R.Civ.P. 56(c).
The United States originally alleged that Nazon submitted sixty-two claims. The United States amended its complaint to allege that Nazon submitted sixty-one claims. Mot. at 3 n. 4.
1. Summary Judgment
A movant is entitled to summary judgment when the moving papers and affidavits show there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Local 103 v. Babcock Wilcox, 1 F.3d 589, 591 (7th Cir. 1993). A genuine issue of material fact exists when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
In considering a motion for summary judgment, the court must consider all evidence in the light most favorable to the nonmoving party. Local 103, 1 F.3d at 591; Biddle v. Martin, 992 F.2d 673, 675 (7th Cir. 1993). However, once the moving party meets its burden of production, the nonmoving party must go beyond the pleadings and set forth specific facts showing that there is a genuine issue for trial. Fed.R.Civ.P. 56(e); Anderson, 477 U.S. at 248; Hickey v. A.E. Staley Mfg., 995 F.2d 1385, 1388 (7th Cir. 1993). Where the nonmovant fails to make a sufficient showing on an essential element of the case on which it would bear the burden of proof at trial, summary judgment is proper. Celotex, 477 U.S. at 322-23.
2. False Claims Act
Under the False Claims Act, the United States may recover treble damages and civil penalties from any person who "knowingly presents, or causes to be presented to an officer or an employee of the United States Government . . . a false or fraudulent claim for payment or approval." 31 U.S.C. § 3729(a)(1). To be liable under the False Claims Act, a person need not act with specific intent to defraud; rather, deliberate ignorance or reckless disregard of the truth is sufficient to establish knowledge and liability under the act. 31 U.S.C. § 3729(b). The fraudulent claim need not be presented directly to the government. Any claim made to a "contractor, grantee, or other recipient if the United States Government provides any portion of the money or property which is requested or demanded, or if the Government will reimburse such contractor, grantee, or other recipient" comes within the ambit of the False Claims Act. 31 U.S.C. § 3729(c).
Other courts have found that false Medicare claims are actionable under the False Claims Act. See, e.g., Peterson v. Weinberger, 508 F.2d 45, 52 (5th Cir.), cert. denied, 423 U.S. 830 (1975). In addition, it is clear that Congress intended that "all Medicare claims submitted by or on behalf of a physician who is ineligible to participate in the program" should be considered "false and actionable" under the False Claims Act. S.Rep. No. 345, 99th Cong., 2d Sess. 9-10 (1986); see also Peterson, 508 F.2d at 52.
Nazon does not challenge most of the basic facts of the United States' case. However, Nazon contends that the United States fails to establish that he acted with the requisite mental state. To be liable under the False Claims Act, a person must act with knowledge, deliberate ignorance, or reckless disregard of the truth. 31 U.S.C. § 3729(b). The United States does not attempt to establish directly that Nazon acted with deliberate ignorance or with reckless disregard. Rather, the United States asserts that the facts of the case suggest that Nazon had "constructive knowledge" that false claims were filed. It contends that Nazon may be liable under the False Claims Act for the acts of his employees — so it need not establish Nazon's mental state directly. Nazon responds that the government improperly reads the False Claims Act as a strict liability statute.
Nazon's position is meritorious. The United States' use of agency principles under the False Claims Act eviscerates the statute's scienter requirement. The one case that the United States cites for the proposition that "the law of agency has been applied in the False Claims Act context" is United States v. O'Connell, 890 F.2d 563 (1st Cir. 1989). O'Connell is clearly distinguishable from this case. That case involved a corporation's liability for the activities of corporate officials and agents. See O'Connell, 890 F.2d at 568-69. In contrast, this case involves a claim that Nazon is personally liable for false claims that may have been submitted by others. To find Nazon liable with no evidence of his mental state would be to find him strictly liable. The reading advanced by the United States would confound the liability scheme of the False Claims Act. Because there is a genuine issue of material fact concerning Nazon's mental state, summary judgment is denied with respect to Count I.
The other cases cited by the United States concerned the intersection of agency law and federal statutes, but did not involve the False Claims Act. See Motion at 6 n. 3.
3. Common Law Claims
In Counts II and III, the United States seeks to recover the money that it paid Nazon for claims submitted after November 22, 1990. The United States contends that it has a common law right to restitution for funds mistakenly paid or for Nazon's unjust enrichment. See United States v. Wurts, 303 U.S. 414, 415-16 (1938) (United States has common law right to recover "funds which its agents have wrongfully, erroneously, or illegally paid"); Midcoast Aviation, Inc. v. General Electric Credit Corp., 907 F.2d 732, 737 (7th Cir. 1990) (one who has been "unjustly enriched at the expense of another is required to make restitution to the other"). Although Nazon does not respond to the United States' motion with respect to Counts II and III, he raises a factual issue concerning the United States' restitution claims. Nazon contends that HHS notified him that he would be eligible for reimbursement for emergency services despite his exclusion. See Nazon Aff. ¶ 10. At least one of the claims for which the United States seeks restitution may have involved an emergency. Id. Because Nazon may have been entitled to payment for some of the nineteen claims for which the United States seeks restitution, there is a genuine issue of material fact concerning the United States' right to restitution. Accordingly, the United States' motion for summary judgment is denied with respect to Counts II and III.
For the foregoing reasons, the United States' motion for summary judgment is denied. All discovery is to be completed and any dispositive motions are to be filed by January 22, 1994. The parties are directed to present their joint final pretrial order in open court on February 11, 1994 at 9:00 a.m. This case is placed on the court's March trial calendar.