Opposition Brief — Sandersonson v. HCA-The The Healthcare Healthcare Co Co (No. 06-220)

Supreme Court, U.S.

Q) “FILED

-

No. 06-220 ‘AUG 25 2006

CLERK

IN THE ‘

Supreme Court of the United States

PHILIP H. SANDERSON,

Petitioner,

v.

HCA-THE HEALTHCARE COMPANY;

COLUMBIA HEALTH CARE CORPORATION;

HOSPITAL CORPORATION OF AMERICA;

and HEALTHTRUST INC.,

Respondents.

On PETITION FOR A Writ OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

anton

BRIEF IN OPPOSITION

ROBERT J. WALKER WALTER P. LOUGHLIN

KATHRYN Hays SASSER Counsel of Record

WALKER, Tipps & MALONE KIRKPATRICK & LOCKHART

2300 One Nashville Place §NicHoLSON GRAHAM LLP

150 Fourth Avenue North 599 Lexington Avenue

Nashville, TN 37219-2424 New York, NY 10022-6030

(615) 313-6000 (212) 536-3900

Joun R. HELLOwW

Hooper, LUNpy & Bookman, INc.

Watt Plaza, Suite 1600

1875 Century Park East

Los Angeles, CA 90067-2799

(310) 551-8111

Attorneys for Respondents

203104 ce

COUNSEL PRESS

(800) 274-3321 + (800) 359-6859

QUESTIONS PRESENTED FOR REVIEW

1. Whether the heightened pleadings requirement of

Rule 9(b) requires a qui tam plaintiff to specifically describe

more than the fraudulent accounting scheme underlying a

series of continuous and ongoing false hospital cost reports

which inflate the defendants’ opening claims for

reimbursement from the government?

2. Whether false claims submitted within the period of

limitations, but based upon a fraudulent accounting scheme

developed outside the limitations, but still in use, are time

barred?

il

“STATEMENT PURSUANT TO

SUPREME COURT RULE 29.6

Respondents HCA — The Healthcare Company, Columbia

Health Care Corporation, and Hospital Corporation of

America are predecessor companies to the company now

known as HCA Inc., which does not have a parent

corporation. There is no publicly held corporation that owns

10% or more of the stock of HCA Inc. Respondent

Healthtrust, Inc., a Delaware corporation, is a wholly owned

subsidiary of HCA Inc.

|

STATEMENT OF THE CASE

Petitioner, a qui tam relator, filed his original complaint

on June 28, 2001, on behalf of the United States as the real

party in interest, alleging that respondents had submitted false

claims to government healthcare programs in violation of

the False Claims Act, 31 U.S.C. § 3729, et seq. On July 1,

2003, following the decision of the Department of Justice

not to intervene in the action, respondents moved to dismiss

the complaint on the following grounds: (i) it was time-barred

by the applicable six-year statute of limitations, 31 U.S.C.

§ 3729(b), (ii) it failed to plead fraud with particularity as

required by Fed. Rule Civ. Proc. 9(b), and (iii) it failed to

state a claim upon which relief can be granted under Fed.

Rule Civ. Proc. 12 (b)(6). On July 27, 2003, the district court

- entered an order allowing petitioner to amend the initial

complaint. The amended complaint was filed on February

26, 2004. Respondents renewed the motion to dismiss. On

September 28, 2004, the district court granted the motion

and dismissed the amended complaint with prejudice.

Petitioner appealed to the Court of Appeals. On May 12,

2006, the Court of Appeals affirmed the judgment of the

district court. (Pet. App. la-21a)

REASONS FOR DENYING THE PETITION

I. The Petition Fails to Satisfy Any of this Court’s

Criteria for a Grant of Certiorari

The petition seeks review by this Court of the question

whether Rule 9(b)’s requirement that averments of fraud be

pleaded with particularity should apply to complaints alleging

violations of the False Claims Act but does not contend that

the decision of the circuit court on this issue is in conflict

with prior decisions of this Court or with any other circuit.

In the decision below, the circuit court held that the district

court’s dismissal of petitioner’s amended complaint “was

2

fully in conformity with existing Sixth Circuit precedent,”

ciling two recent decisions where it had applied Rule 9(b) to

complaints alleging violations of the False Claims Act. See,

e.g., United States ex rel. Bledsoe v. Cmty. Health Sys., Inc.,

342 F.3d 634 (6th Cir. 2003); Yuhasz v. Brush Wellman, Inc.,

341 F.3d 559, 563 (6th Cir. 2003). (Pet. App. 10a). The

decision below also cites to United States ex rel. Karvelas y.

Melrose-Wakefield Hospital, 360 F.3d 220 (1st Cir. 2004),

where the First Circuit observed that, “every circuit court

that has addressed this issue has concluded that the

heightened pleading requirements of Rule 9(b) apply to

claims brought under the [False Claims Act].” /d. at 228

(colleeting cases from the Third, Fourth, Fifth, Sixth, Ninth,

Eleventh, and District of Columbia circuits).

Petitioner also docs not contend that the decision below

is inconsistent with this Court’s precedents. Instead, the

petition effectively invites this Court to overrule the unbroken

line of precedent sct forth above by reference solely to Dura

Pharmaceuticals v. Broudo, 544 U.S. 336 (2005). Yet in Dura

Pharmaceuticals, this Court reversed as unduly permissive

a Ninth Circuit decision on the pleading standard with respect

to the clement of loss causation in a securities fraud complaint

— an issue irrelevant to the False Claims Act. /d.

In sum, the petition presents no “compelling reasons” in

support of the grant of certiorari. See S. Ct. R. 10.

il. The Petition Mischaracterizes the Decisions Below

The petition asserts that the court below affirmed the

dismissal of the amended complaint on the sole ground that

it failed to comply with the pleading requirement of Rule

9(b), and “indicated in dicta that the trial court was correct

in its determination that the claims were time barred and did

not state a claim under Rule 12(b)(6).” (Pet. 2). This ts a

misleading characterization of the record below.

The circuit court had no doubt that the amended

complaint was legally insufficient on multiple grounds,

stating that: “The district court granted the motion on all

three grounds... .” (Pet. App. 4a-5a) (emphasis added). Far

from being dicta, the circuit court found that the district court

had correctly decided each of these issues on the merits,

Stating:

om

’

~ We conclude that the-district court was likewise

correct in determining that the complaint was not

timeiy filed and did not state a cause of action on

which relief could be granted, both grounds for

dismissal under Rule 12(b)(6). Because the basis

for the Rule 9(b) determination is so clearly

indicated, however, we find it unnecessary to

discuss the remaining tssucs raised under Rule

12(b)(6).

(Pet. App. ila).

The petition’s apparent purpose in mischaracterizing the

record relates to the second of the questions presented

whether the courts below applied the statute of iimitations

crroneously. However, the circuit court held that it was the

failure of the amended complaint to allege any facts or law

or regulation in support of its theory — and not any allegedly

erroneous application of the statute of limitations — which

required dismissal. (Pet. App. 9a). Petitioner tried below to

cure the statute of limitations defect by alleging “on

information and belief” that conduct occurring in 1981-86

continued into the limitations period, but this effort failed

because, according to the circuit court, petitioner alleged no

“factual basis for such belicf.” Jd. Allowing such a pleading

to go forward would amount to “a license to base claims of

fraud on speculation and conclusory allegations.” /d., citing

United States ex rel. Thompson v. Columbia/HCA Healthcare

4

Corp., 125 F.3d 899, 903 (Sth Cir. 1997) (quoting Tuchman

v. DSC Commc’n Corp., 14 F.3d 1061, 1068 (Sth Cir. 1994)).'

Turning to the merits, the courts below correctly

determined that the amended complaint was time barred. The

district court held that the amended pleading failed to “set

forth specific allegations of fraudulent conduct in violation

of the False Claims Act within six years of the filing date of

the action.” (Pet. App. 19a). Even though the court had

allowed petitioner to amend the initial complaint, and he was

therefore “on notice that the statute of limitations was at

issue,” petitioner failed to cure that deficiency. /d. Indeed,

as the circuit court stated, “the amended complaint was

virtually unchanged fromthe original. . . .” (Pet. App. 3a).

1. The petition relies upon United States v. Bornstein, 423 U.S.

303 (1976), in support of the grant of certiorari on this point.

Bornstein, however, neither involved the issue of the legal sufficiency

of a False Claims Act pleading nor the application of the applicable

statute of limitations, but rather how the Act should be interpreted

for purposes of determining the proper measure and calculation of

damages following its violation. /d. at 306-07.

5

CONCLUSION

The petition for a writ of certiorari should be denied.

Rosert J. WALKER

KATHRYN Hays SASSER

WALKER, Tipps & MALONE

2300 One Nashville Place

150 Fourth Avenue Nosth

Nashville, TN 37219-2424

(615) 313-6000

Respectfully submitted,

WALTER P. LOUGHLIN

Counsel of Record

KIRKPATRICK & LOCKHART

NICHOLSON GRAHAM LLP

599 Lexington Avenue

New York, NY 10022-6030

(212) 536-3900

JouHn R. HELLOw

Hooper, LUNDY & Bookman, INc.

Watt Plaza, Suite 1600

1875 Century Park East

Los Angeles, CA 90067-2799

(310) 551-8111

Attorneys for Respondents