Justia U.S. 7th Circuit Court of Appeals Opinion Summaries

Mamalakis, a Wisconsin anesthesiologist, filed a qui tam lawsuit (False Claims Act, 31 U.S.C. 3729), alleging that Anesthetix, his former employer, fraudulently billed Medicare and Medicaid for services performed by its anesthesiologists. His central allegation is that the anesthesiologists regularly billed the government using the code for “medically directed” services when their services qualified for payment only at the lower rate for services that are “medically supervised.” A magistrate judge held that the complaint did not provide enough factual particularity to satisfy the heightened pleading standard for fraud claims, FED. R. CIV. P. 9(b). Mamalakis filed an amended complaint that included 10 specific examples of inflated billing, each identifying a particular procedure and anesthesiologist and providing details about how the services did not qualify for payment at the medical-direction billing rate. Six examples included a specific allegation that the anesthesiologist billed the services using that code; the other four relied on general allegations regarding the group’s uniform policy of billing at the medical-direction rate. The judge dismissed the case with prejudice.The Seventh Circuit reversed. Although Rule 9(b) imposes a high pleading bar to protect defendants from baseless accusations of fraud, Mamalakis cleared it. The examples, read in context with the other allegations in the amended complaint, provide sufficient particularity about the alleged fraudulent billing to survive dismissal. View "Mamalakis v. Anesthetix Management LLC" on Justia Law

Joliet condemned a housing complex managed by New West and paid $15 million. HUD rent subsidies for low-income tenants provided almost all of the money for operating the development. A $2.7 million fund had been established by New West and HUD, to cover necessary maintenance and repairs in the event of a default by New West. HUD refused to release that account to New West, contending that it now holds the account to cover Joliet’s obligations.The Seventh Circuit affirmed the summary judgment rejection of New West’s suit to recover the account. New West cannot establish conversion of the fund without first establishing ownership. HUD’s lien on the fund does not establish ownership of the fund and New West has not established its ownership by showing that it treated deposits into the fund as taxable income. View "New West, L.P. v. Fudge" on Justia Law

Molina Healthcare contracted with the Illinois Medicaid program to provide multiple tiers of medical-service plans with scaled capitation rates (fixed per-patient fees that cover all services within the plan’s scope). The Nursing Facility plan required Molina to provide Skilled Nursing Facility (SNF) services. Molina subcontracted with GenMed to cover that obligation. Molina received a general capitation payment from the state, out of which it was to pay GenMed for the SNF component. Molina breached its contract with GenMed. GenMed terminated the contract. After GenMed quit, Molina continued to collect money from the state for the SNF services, but it was neither providing those services itself nor making them available through any third party. Molina never revealed this breakdown, nor did it seek a replacement service provider.Prose, the founder of GenMed, brought this qui tam action under both the state and federal False Claims Acts, 31 U.S.C. 3729, alleging that Molina submitted fraudulent claims for payments from government funds. The district court dismissed the case. The Seventh Circuit reversed. The complaint plausibly alleges that as a sophisticated player in the medical-services industry, Molina was aware that these kinds of nursing facility services play a material role in the delivery of Medicaid benefits. View "Prose v. Molina Healthcare of Illinois," on Justia Law

A False Claims Act, 31 U.S.C. 3729(a)(1)(A), “qui tam” lawsuit against SuperValu claimed that SuperValu knowingly filed false reports of its pharmacies’ “usual and customary” (U&C) drug prices when it sought reimbursements under Medicare and Medicaid. SuperValu listed its retail cash prices as its U&C drug prices rather than the lower, price-matched amounts that it charged qualifying customers under its discount program. Medicaid regulations define “usual and customary price” as the price charged to the general public. The district court held that SuperValu’s discounted prices fell within the definition of U&C price and that SuperValu should have reported them but held that SuperValu did not act with scienter.The Seventh Circuit affirmed, joining other circuits in holding that the Supreme Court’s 2007 “Safeco” interpretation of the Fair Credit Reporting Act’s scienter provision applies with equal force to the False Claims Act’s scienter provision. There is no statutory indication that Congress meant its usage of “knowingly,” or the scienter definitions it encompasses, to bear a different meaning than its common-law definition. SuperValu did not act with the requisite knowledge. SuperValu’s interpretation of “usual and customary price” was objectively reasonable under Safeco. View "Yarberry v. Supervalu Inc." on Justia Law

Companies that tow or recycle used cars alleged that Milwaukee and its subcontractor, engaged in anticompetitive behavior to self-allocate towing services and abandoned vehicles, a primary input in the scrap metal recycling business. They alleged that an exclusive contract the city entered into with one of the area’s largest recycling providers, Miller Compressing, violated the Sherman Act, 15 U.S.C. 1, and that the contract provided direct evidence of an agreement to restrain trade. They cited laws that require a city-issued license to tow vehicles from certain areas, that obligate towing companies to provide various notices, and that cap maximum charges imposed on vehicle owners who have illegally parked or abandoned their vehicles, as having been enacted to squeeze them out of the market.The Seventh Circuit affirmed the dismissal of the suit. The arrangement between the city and Miller is not per se unreasonable on the basis of horizontal price-fixing. The court also rejected a claim of “bid-rigging.” View "Always Towing & Recovery Inc. v. City of Milwaukee" on Justia Law

Jarigese was the vice president of Castle Construction and the president of its successor, Tower, when he signed three contracts for public construction projects. Each contract was designated by Markham’s mayor, Webb, as “design-build” projects, not subject to a public bidding process. Webb invited only one company to submit a proposal for a new city hall, a senior living facility, and the renovation and expansion of a park district building. Webb signed each contract on behalf of Markham. Webb solicited bribes, which were paid to KAT Remodeling. Webb later testified that he had formed KAT years earlier and used its bank account as a repository for bribes. KAT never performed work of any kind. Jarigese hand-delivered bribes, by check and by cash. Webb understood that Jarigese had created an invoice from KAT to disguise the nature of the payment. Evidence at trial showed that Webb solicited bribes from others, using the same pattern.The Seventh Circuit affirmed Jarigese’s convictions for nine counts of wire fraud, 18 U.S.C. 1343 and 1346, and one count of bribery, 18 U.S.C. 666(a)(2). Evidence of Webb’s solicitation of other bribes was not evidence of “other bad acts” but rather was directly relevant to proving the charged scheme. The evidence was sufficient to support the convictions and there was no evidence of unwarranted discrepancy with respect to Jarigese’s 41-month sentence. View "United States v. Jarigese" on Justia Law

Fisk, an LLC formed in 2018, had two members; one is an attorney. Fisk collaborated with the City of DeKalb regarding the redevelopment of a dilapidated property. Under a Development Incentive Agreement, if Fisk met certain contingencies, DeKalb would provide $2,500,000 in Tax Increment Financing. In 2019, Nicklas became the City Manager and opened new inquiries into Fisk’s financial affairs and development plans. Nicklas concluded Fisk did not have the necessary financial capacity or experience, based on specified factors.Fisk's Attorney Member had represented a client in a 2017 state court lawsuit in which Nicklas was a witness. Nicklas considered funding incentives for other development projects with which, Fisk alleged, Nicklas had previous financial and personal ties.The City Council found Fisk’s financial documents “barren of any assurance that the LLC could afford ongoing preliminary planning and engineering fees,” cited “insufficient project details,” and terminated the agreement. Fisk sued Nicklas under 42 U.S.C. 1983, alleging Nicklas sought to retaliate against Fisk and favor other developers. The Seventh Circuit affirmed the dismissal of the claims. Fisk did not exercise its First Amendment petition right in the 2017 lawsuit. That right ran to the client; Fisk did not yet exist. Fisk had no constitutionally protected property right in the agreement or in the city’s resolution, which did not bind or “substantively limit[]” the city “by mandating a particular result when certain clearly stated criteria are met.” Nicklas had a rational basis for blocking the project, so an Equal Protection claim failed. View "145 Fisk, LLC v. Nicklas" on Justia Law

The False Claims Act, 31 U.S.C. 3729–3733, authorizes relators to file qui tam suits on behalf of the U.S. government. If such an action is successful, the relator receives part of the recovery. The Act prohibits presenting to a federal healthcare program a claim for payment that violates the Anti-Kickback Statute, 42 U.S.C. 1320a-7b(b), Venari formed 11 daughter companies, each for the purpose of prosecuting a separate qui tam action, alleging essentially identical violations of the False Claims Act by pharmaceutical companies. CIMZNHCA, a Venari company, filed suit alleging illegal kickbacks to physicians for prescribing Cimzia to treat Crohn’s disease in patients who received federal healthcare benefits. The government did not exercise its right “to intervene and proceed” as the plaintiff but moved to dismiss the action, representing that it had investigated the Venari claims and found them to lack merit. The court denied that motion, finding the government’s general evaluation of the Venari claims insufficient as to CIMZNHCA and that the decision to dismiss was “arbitrary and capricious.”The Seventh Circuit reversed with instructions to dismiss, construing the government’s motion as a motion to both intervene and dismiss. By treating the government as seeking to intervene, a court can apply Federal Rule of Civil Procedure 41, which provides: “The Government may dismiss the action” without the relator’s consent if the relator receives notice and opportunity to be heard. View "United States v. UCB, Inc." on Justia Law

In 2014, Cook Medical entered a five-year agreement for Acheron to serve as the distributor of Cook medical devices and products to VA and Department of Defense Medical Centers. Sales to Defense are primarily made through a Distribution and Pricing Agreement (DAPA); sales to the VA require a Federal Supply Schedule (FSS). Cook already had a DAPA, but not an FSS; the agreement required Acheron to obtain an FSS. Cook refused to submit to a required audit of its commercial sales records as required by 48 CFR 515.408(b)(5) to obtain an FSS and refused to deactivate its DAPA, preventing Acheron from selling Cook products to Defense through Acheron’s own DAPA. Cook sent notice that Acheron was in material breach and terminated the agreement 30 days later due to Acheron’s failure to cure. Acheron filed suit.The district court granted Cook summary judgment; Acheron materially breached its obligation to obtain an FSS but owed no damages because the breach was excused by the force majeure clause. The Seventh Circuit affirmed. The Agreement does not expressly obligate Cook to submit to the VA audit or to deactivate its DAPA. The duty of good faith requires that a party perform its obligations under the contract in good faith but does not require a party to undertake a new, affirmative obligation. Neither party actively sought to sabotage the other party’s performance to escape its own obligations or obtain an unfair advantage. View "Acheron Medical Supply, LLC v. Cook Medical Inc." on Justia Law

HCI, on behalf of the Illinois Department of Aging, coordinates services for low-income seniors in an effort to keep them at home. HCI sometimes referred clients who needed in-home healthcare services to home healthcare companies owned by MPI. Qui tam claims against MPI, its home healthcare companies, and HCI, alleged that they orchestrated an illegal patient referral scheme that violated the Anti-Kickback Statute, 42 U.S.C. 1320a-7b(g), and, by extension, the state and federal False Claims Acts, 31 U.S.C. 3730(b)(1). The district court entered judgment for the defendants.The Seventh Circuit reversed. The evidence showed that MPI made monthly payments to HCI in return for access to the non-profit’s client records and used that information to solicit clients. The Anti-Kickback Statute definition of a referral is broad, encapsulating both direct and indirect means of connecting a patient with a provider. It goes beyond explicit recommendations; the inquiry is a practical one that focuses on substance, not form. The plaintiff’s theory was that MPI’s payments to HCI under the Management Services Agreement constituted kickbacks intended to obtain referrals in the form of receiving access to the HCI files that the defendants then exploited to solicit clients. A factfinder applying an erroneously narrow understanding of "referral "might find those facts, devoid of an explicit direction of a patient to a provider, to fall outside its scope. View "Stop Illinois Health Care Fraud, LLC v. Sayeed" on Justia Law