United States of America, ex rel. v. Sightpath Medical, Inc.

Background

Relator Kipp Fesenmaier filed a qui tam complaint in November 2013 against, among others, The Cameron-Ehlen Group, Inc., doing business as Precision Lens, and Paul Ehlen. The United States later intervened and filed its own complaint. It alleged that Precision Lens and Ehlen provided kickbacks to physicians in violation of the Anti-Kickback Statute. It further alleged that the kickbacks caused false claims to be submitted to federal health care programs, including Medicare, in violation of the False Claims Act. The complaint also asserted claims for unjust enrichment and payment by mistake.

In August 2019, the defendants served the United States with a deposition notice under Federal Rule of Civil Procedure 30(b)(6). The relevant topic asked for the factual basis and methodology supporting the government’s determination that each identified false claim resulted from an alleged kickback. The United States objected and refused to provide a witness on that topic.

Magistrate Judge’s Discovery Order

At a September 12, 2019 discovery conference, the defendants argued that the topic sought information about whether particular surgeries occurred because of kickbacks and whether physicians would have used the defendants’ products without the kickbacks. The United States argued that the applicable standard did not require proof of that kind of factual causation. It maintained that, once a kickback occurred, claims submitted during a presumptive one-year “taint period” were tainted.

The defendants responded that, if the government relied only on a legal presumption, it could say so. But if it relied on factual support for its causation or taint-period determinations, the defendants argued that the government should disclose those facts and provide a witness. The magistrate judge ordered the government to give a clear written statement addressing two matters: whether it knew of separate evidence of actual causation involving additional surgeries or use of the defendants’ products, and why it selected a one-year taint period, including the factors supporting any period longer than one year.

District Court Review

The United States appealed the magistrate judge’s ruling. Because the discovery ruling was a nondispositive issue, the district court could modify or set it aside only if it was clearly erroneous or contrary to law. “Clearly erroneous” means that the reviewing court is firmly convinced a mistake was made; “contrary to law” means that the ruling failed to apply or misapplied a relevant statute, case, or procedural rule.

The United States argued first that the order effectively required an inefficient and disfavored “contention deposition.” The court rejected that argument because the government cited no controlling authority showing that the order was clearly erroneous or contrary to law. The United States also argued that the order used an incorrect causation standard.

The court noted that the Anti-Kickback Statute provides that a claim including items or services resulting from a statutory violation is a false or fraudulent claim. The parties agreed that causation was an element but disagreed about the precise causation standard. The court expressly declined to resolve that disagreement. It held that the requested information could be relevant and discoverable even if it would not by itself decide the case, because discoverable information need not be admissible at trial. The court also observed that the magistrate judge’s order was at least partly consistent with the causation standard proposed by the United States.

Disposition

The district court held that the magistrate judge’s ruling on the third deposition topic was neither clearly erroneous nor contrary to law. It therefore affirmed the September 12, 2019 order of United States Magistrate Judge David T. Schultz. Judge Wilhelmina M. Wright did not decide the parties’ dispute over the proper causation standard.