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

Background

Kipp Fesenmaier brought a qui tam action, meaning a private person sued on behalf of the government, against Precision Lens, Paul Ehlen, Sightpath Medical, Inc., TLC Vision Corporation, and others. The United States later filed its own complaint against Precision Lens and Ehlen. The government alleges that Precision Lens and Ehlen offered unlawful payments or other benefits to physicians to obtain or retain their business, causing false claims to be submitted to federal health-care programs, including Medicare, in violation of the False Claims Act.

The order addressed four motions filed by the United States, three by Fesenmaier, four by Precision Lens, and three by Ehlen. These were motions in limine, which ask the court to admit or exclude evidence before trial.

False Claims Act theories and causation

The court applied the Eighth Circuit’s decision in United States ex rel. Cairns v. D.S. Medical LLC. Under the 2010 amendment to the Anti-Kickback Statute, a plaintiff must prove but-for causation when relying on the theory that claims included items or services resulting from illegal kickbacks. But the court held that Cairns did not require but-for causation for the plaintiffs’ separate material-falsity theory.

Under that theory, the plaintiffs must prove the False Claims Act’s elements, including that the alleged Anti-Kickback Statute violations were material to the government’s payment of the claims. The court stated that the plaintiffs need not prove but-for causation if they establish their material-falsity theory without relying on the 2010 amendment. The court further stated that the plaintiffs must show that the kickbacks proximately caused physicians to use the defendants’ lenses in cataract surgeries billed to Medicare.

Damages

The court held that the proper measure of damages for the alleged kickback-tainted claims is the full amount the government paid for each fraudulent claim. It rejected the defendants’ proposed calculation based on the amount paid minus what would have been paid if the claims had been truthful. The court also held that the cost of surgical supplies, the value of medical services, facility fees, and professional fees could not be used to reduce damages, although evidence about supply costs could be admitted for non-damages issues such as intent.

United States’ motions

The United States’ motion to exclude evidence about surgical-supply costs and the value of services was granted. Evidence about whether particular surgeries included the defendants’ lenses remained permitted, and supply-cost evidence could be used for non-damages issues.

The United States’ motion for clarification of prior discovery sanctions was granted in part and denied in part. The medical-necessity sanction allowed evidence about physicians’ choices of lens and viscoelastic brands, but barred evidence about choices between premium and standard lenses because that evidence implicated medical necessity. The claims-identification sanction did not automatically bar all evidence about items of value that had not been identified as kickbacks, but the court declined to rule that unspecified evidence was admissible. That portion was denied without prejudice, meaning the court left the issue open for a later, specific evidentiary objection.

The United States’ motion concerning leading questions was granted in part and denied in part. The plaintiffs could ask leading questions of current Precision Lens employees on direct examination. The court declined to issue a blanket advance ruling for former employees, independent contractors, or physicians alleged to have received kickbacks; the plaintiffs could seek permission for particular witnesses during trial.

The United States’ motion concerning the government’s investigation and discovery sanctions was granted in part and denied in part. Evidence about the court’s discovery sanctions was excluded for both sides. Evidence from an Office of Inspector General hotline could be admitted, subject to other evidence rules, because it could bear on whether the alleged violations were material. The court declined to rule in advance on the admissibility of Fesenmaier’s recordings or other unspecified evidence about the investigation; those portions were denied without prejudice.

Fesenmaier’s motions

Fesenmaier’s motion concerning his prior bankruptcy was granted in part and denied in part. If he testified, the defendants could ask about his alleged failure to disclose his financial interest in the case in bankruptcy filings because that conduct could bear on truthfulness. The court excluded unrelated references to his bankruptcy.

Fesenmaier’s motion concerning the defendants’ potential financial harm was granted in part and denied in part. Evidence about the defendants’ present ability to pay a judgment was excluded. Evidence about what the defendants understood, between 2006 and 2015, about the consequences of violating the False Claims Act and Anti-Kickback Statute could be relevant to their conduct and was not categorically excluded.

Fesenmaier’s motion concerning mandatory monetary entitlements under the False Claims Act was granted in part and denied in part. Specific evidence about treble damages, statutory penalties, and attorney-fee shifting was excluded from the jury trial, although a general reference to the existence of statutory penalties was allowed. If Fesenmaier testified, the defendants could cross-examine him about his financial interest in the case. They could not introduce the specific statutory percentages of any recovery, but they could make reasonable characterizations about the size of his potential award.

Precision Lens’s motions

Precision Lens’s motion to exclude inflammatory language and references to wealth was denied. The court declined to impose a blanket ban on words such as “bribes,” “gifts,” “luxury,” or “lavish,” but directed the plaintiffs to rely on facts and not improper references to the defendants’ financial status.

Precision Lens’s motion to exclude the report and testimony of Medicare-claims expert Ian Dew was denied. The plaintiffs represented that Dew would not establish causation. Instead, he could identify sets of allegedly false cataract-related Medicare claims after the plaintiffs established causation through other evidence.

Precision Lens’s motion concerning settlements, unrelated litigation, and the alleged rebate fund was granted in part and denied in part. The court allowed limited evidence that Sightpath and Dr. Jitendra Swarup had settled, without allowing the settlement amount or agreement itself, to avoid confusing the jury. Evidence about litigation between Sightpath and Precision Lens was excluded as irrelevant. Evidence about the alleged rebate, slush, or secret fund was not excluded because it could bear on the defendants’ knowledge and intent.

Precision Lens’s motion to exclude evidence concerning Medicare claims for which the plaintiffs lacked but-for causation evidence was denied. The court held that but-for causation was not the applicable standard for the plaintiffs’ material-falsity theory.

Ehlen’s motions

Ehlen’s motion to exclude the plaintiffs’ late-disclosed Rule 1006 spreadsheets was denied. Rule 1006 allows summaries of voluminous records when the underlying materials are admissible, available for review, and accurately summarized. The court found the plaintiffs’ disclosures sufficient but did not find the spreadsheets automatically admissible. The plaintiffs could try to establish the required foundation at trial.

Ehlen’s motion seeking admission of Scott Van Meter’s testimony about causation was denied. Van Meter was precluded from testifying about causation or directly about the defendants’ intent because his proposed opinion did not make a fact in the case more or less likely under the material-falsity theory.

Ehlen’s motion concerning defense expert David Gregory was denied. The court maintained its ruling that damages are based on the full amount paid for fraudulent claims. Gregory’s opinions relying on but-for causation or excluding claims based on whether they directly reimbursed the defendants’ products were excluded as irrelevant and inconsistent with the applicable damages standard. His rebuttal opinions concerning Dew’s analysis remained admissible under the court’s prior order.

Disposition

The court ordered that the parties’ motions were granted in part and denied in part. More specifically, the United States’ motion concerning surgical supplies and service values was granted; its three other motions were granted in part and denied in part. Each of Fesenmaier’s three motions was granted in part and denied in part. Precision Lens’s motions concerning inflammatory language, Ian Dew’s testimony, and claims lacking causation evidence were denied; its motion concerning settlements, unrelated litigation, and the rebate fund was granted in part and denied in part. Ehlen’s three motions were denied.