Supplemental Appendix — Hays v. Hoffman

Quereere Grad. UE.

FILES

03 -92 yu 7-200

No.

In the

Supreme Court of the United States

Patrick M. H»ys,

Petitioner,

VS.

Luverne Hoffman, et al.,

Respondents,

and

United States of America,

Intervenor.

ON PETITION FOR A_WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

SUPPLEMENTAL APPENDIX TO

PETITION FOR A WRIT OF CERTIORARI

Brian Wojtalewicz

Counsel of Record

139 North Miles, Box 123

Appleton, MN 56208-0123

(320) 289-2363

Attorney for Petitioner

Filed July, 2003

2003 - Bachman Legal Printing @ (612) 339-9518 @ 1-800-715-3582 @ Fax (612) 337-8053

TABLE OF CONTENTS

APPENDIX J: Report and Recommendation

of Chief Magistrate Judge, dated

April 26, 2001 .........:ceesessersesseeeseeeneneens J-1

UNITED STATES DISTRICT COURT

DISTRICT OF MINNESOTA

Patrick M. Hays, et al., Civil. 97-1656 JMR/FLN

Plaintiffs,

REPORT AND

RECOMMENDATION

V.

Luverne Hoffman, et al.,

Defendants.

Brian E. Wojtalewicz, Esq., for Plaintiffs.

Joan Humes, Assistant United States Attorney, for the

Government. Janet Newberg, Esq., for Defendants.

THIS MATTER came for a hearing before the

undersigned United States Magistrate Judge on March 9,

2001, for resolution of a post-trial issue concerning the

number of false claims submitted by Defendants to the

Government.

I. BACKGROUND

The Jury returned a verdict finding Defendants liable for

violations of the False Claims Act, 31 U.S.C. §§ 3729-3733,

as to 11 of the 12 different false claim schemes on the

verdict form. (See Defendants’ Mem. Concerning False

Claims at 1("Defs.' Mem.")). However, the Jury also found

that the Government suffered no actual loss. (Id.). The task

J-1

before this Court is to determine the exact number of false

claims submitted by Defendants to the Government.

Il. CONCLUSIONS OF LAW

A. Standard of Review

Congress passed the False Claims Act ("FCA"), 31

U.S.C. §§ 3729-3733, and its qui tam action to prevent and

prosecute massive frauds perpetrated by large defense

contractors during the Civil war, See United States _v.

Bornstein, et al., 423 U.S. 303, 308 (1976). The FCA allows

private litigants to bring actions on behalf of the Government

against anyone who:

(1) knowingly presents, or causes to be presented,

to an officer or employee of the United States

Government or a member of the Armed Forces

of the United States a false or fraudulent claim

for payment or approval; [or]

(2) knowingly makes, uses, or causes to be made or

used, a false record or statement to get a false or

fraudulent claim paid or approved by the

Government{. ]

31 U.S.C. § 3729(a); see also Harrison_v. Westinghouse

Savannah River Co., 176 F.3d 776, 784 (1999). For purposes

of this section, "knowingly" is defined such that "no proof of

specific intent to defraud is required," and means that the

Defendant: "(1) has actual knowledge of the information; (2)

acts in deliberate ignorance of the truth or falsity of the

information; or (3) acts in reckless disregard of the truth or

falsity of the information." 31 U.S.C. § 3729%(b),

J-2

Damages under the FCA are two-fold, a civil penalty

between $5,000 and $10,000, together with treble actual

damages. See 31 U.S.C. § 3729(a)(7). Accordingly, to recover

under the FCA, Plaintiffs must prove by a preponderance of the

evidence that; (1) Defendants presented false claims for

payment to the Government; and (2) Defendants, at the time

the claims were submitted, knew that the information

submitted in the claims was false, or acted in deliberate

ignorance of the truth or falsity of the information submitted in.

the claims. See 31 U.S.C. § 3729(a) and (b).

B. Legal Analysis

In the instant case, the Jury found that Defendants violated

the FCA by committing 11 different false claim schemes. Upon

determining that Defendants violated the FCA, the Court had

to determine the extent of their monetary liability. As noted

above, the FCA provides for treble actual damages. Since

the Jury found that the Government sustained no measurable

damages, the Court was unable to award actual damages.

The second remedy available to the Government under the

FCA is the $5,000.00 to $10,000.00 civil penalty per false

claim. As a preliminary matter, it is important to note that ©

this Court lacks the discretion or inherent power to impose

penalties below the range set forth in the FCA. See U.S. v.

Killough, 848 F.2d 1523 (11th Cir. 1988). Furthermore, civil

penalties are recoverable under the FCA even in situations

such as the one at bar where Plaintiffs have failed to show

actual damages. See U.S. ex rel. Hagood v. Sonoma County

Water Agency, 929 F.2d 1416, 1421 (9th Cir. 1991) (citing

Rex Trailer Co. v. U.S., 350 U.S. 148, 153 n. 5, (1956)).

As noted earlier, this Court mast determine the exact

number of false claims submitted by Defendants for payment

J-3

An PETITE EE” +=__ Dan eS

by the Government. Plaintiffs contend that the 11 false claim

schemes produced false claim reports that appeared on 28

cost reports, and subsequently led to 336 monthly payment

requests or claims (28 annual cost reports multiplied by 12

monthly payment requests). At the other extreme,

Defendants argue that at most, 50 false claims are

represented by the Jury's verdict. Specifically, Defendants

believe that the claims, for the purpose of measuring

penalties, are either the central office allocations (for those

expenses allocated through the central office) or the cost

reports (for those expenses directly identified to a specific

facility). Defendants also contend that the imposition of civil

penalties in this case would violate the Excessive Fines

Clause of the Eighth Amendment to the United States

Constitution. '

The FCA states that a claim includes any "request or

demand...for money or property" where the Government

provides any portion of the money or property requested. See

31 U.S.C. § 3729(c); see also Westinghouse Savannah River

Co., 176 F.3d at 785. In other words, there must be a call

upon the Government fisc and the Court's focus must be upon

the specific conduct of the person from whom the

Government seeks to collect the penalty. See Bornstein et al.,

423 U.S. at 309-10. Under the FCA, each knowingly false

"claim for payment” constitutes a separate violation. See 31

U.S.C. § 3729(c).

' As the order referring this issue to the Magistrate Judge says

only that the matter is referred for Report and Recommend

"on the number of false claims submitted by defendants to

the government," this Court offers no opinion as to whether

the civil penalties at issue would violate the Excessive Fines

Clause of the Eighth Amendment to the United States

Constitution.

j-4

In the present case, plaintiffs expert witness, Robert Rau,

provided uncontroverted testimony at trial concerning the

number of monthly payment requests or claims submitted by

Defendants. Specifically, Mr. Rau testified that the falsely

claimed expenses of the 12 different schemes were each

within a certain number of the 29 cost reports filed for each of

Defendants’ group homes and subsequently, within a certain

number of the monthly payment requests for Medicaid

submitted by Defendants between 1994 and 1995.

Additionally, both parties' arguments at the March 9, 2001,

hearing #evealed that the monthly payment requests triggered

payment by the Government.’

Consequently, this Court concludes that the submission

of a payment request was the act which caused the false

claims relating to these schemes to be presented to and paid

by the Government. These payment requests were in fact the

"request or demand" on the Government fist. Accordingly,

because the payment requests were made each month

between 1994 and 1995 for each of the 28 cost reports and

each false claim for payment constitutes a separate FCA

violation, the request or demand for payment on the false

expense claims was made to the Government 336 times (28

annual cost reports multiplied by 12 monthly payment

requests).

? The manner in which nursing homes are reimbursed by the

Medicaid systern begins with the submission of an annual

cost report to the Minnesota Department of Human Services

("DHS"). The DHS then takes the information in that cost

report and sets a rate, per patient, per month, that it will pay

the facilities. Once the facilities are notified of the new rate,

they submit a payment request on a monthly basis.

J-5

Ill. RECOMMENDATION

Based upon all the files, records and proceedings herein,

IT IS HEREBY RECOMMENDED that Defendants be

held liable for knowingly presenting 336 false claims for

payment or approval to the Government in violation of the

False Claims Act.

Dated: April 26, 2001

s/FRANKLIN L. NOEL

Chief Magistrate Judge

Pursuant to Local Rule 72.1(c)(2), any party may object to

this Report and Recommendation by filing with the Clerk of

Court and serving on all parties, within ten days of service

of this Report and Recommendation, written objections

which specifically identify the portions of the proposed

findings, recommendations or report to which objection is

being made, and a brief in support thereof. A party may

respond to the objecting party's brief within ten days after

service of the objections. All briefs filed under this rule shall

be limited to ten pages. A judge shall make a de novo

determination of those portions to which objection is made.

This Report and Recommendation does not constitute an

order or judgment of the District Court, and it is therefore

not appealable to the Circuit Court of Appeals.

J-6