IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
January 4, 2008
No. 06-51386 Charles R. Fulbruge III
Clerk
UNITED STATES OF AMERICA ex rel, MARGARET TAYLOR-VICK
Plaintiff-Appellant
v.
MEDICAL DOCTOR J. SCOTT SMITH; MEDICAL DOCTOR DONALD W.
FLOYD; MEDICAL DOCTOR DAVID J. POWER; MEDICAL DOCTOR
DANIEL G. NELSON; ORTHOPAEDIC CENTER OF MIDLAND,
PROFESSIONAL LLC, doing business as Southwest Orthorpaedic and Spine
Center
Defendants-Appellees
Appeal from the United States District Court
for the Western District of Texas
Before KING, GARZA, and BENAVIDES, Circuit Judges.
EMILIO M. GARZA, Circuit Judge:
Relator-Appellant Margaret Taylor Vick (“Vick” or “Relator”) appeals the
decision of the District Court, which granted summary judgment in favor of
Defendants-Appellees: J. Scott Smith, MD; Donald W. Floyd, MD; David J.
Power, MD; Daniel G. Nelson, MD (collectively, “Doctors”); and the Orthopedic
Center of Midland Professional LLC d/b/a Southwest Orthopedic and Spine
Center (“Southwest”). The District Court finally disposed of all Vick’s claims
under the False Claims Act, 31 U.S.C. §§ 3729-33 (“FCA”). We affirm.
I
No. 06-51386
Southwest is a medical facility that provides orthopedic care. Vick was
Southwest’s officer manager from January 1997 until she was terminated in
June 2002. Defendants Smith, Floyd, Power, and Nelson are medical doctors
who specialize in orthopedics and provide medical care at Southwest. This
appeal arises from allegedly improper Medicare billing practices at Southwest.
During the course of her employment at Southwest, Vick came to suspect
that the Doctors, in particular Smith, were “up-coding” their patient visits to
obtain higher Medicare payments for the services provided during those visits.1
According to Vick, the codes used by Smith required that he spend fifteen
minutes with each patient. This, however, would have been impossible because,
according to Vick, Smith saw 50 to 80 patients each day. Vick further alleged
that Power and Floyd were made aware of Smith’s allegedly improper billing
practices and that, in response, they instructed Southwest staff to “down-code”
some of his claims.
In June 2002, Vick took her concerns about the billing practices at
Southwest to the FBI. Vick spoke with the FBI and provided certain information
and documents, which she claimed substantiated her allegations. Later that
month, Southwest placed Vick on a trial separation from her position as office
manager; Southwest ultimately terminated her. During her trial separation,
Vick remained employed by Southwest but no longer had access to the
documents that she had been providing to the FBI.
In August 2002, Vick filed this lawsuit. The United States declined to
intervene on March 31, 2003. Because she had no direct knowledge of actual
instances of “up-coding,” Vick sought to make her case through circumstantial
1
To obtain Medicare payments for their services, physicians must submit claims, which
use codes to identify the services provided. The amount of a Medicare payment due a physician
is determined by the particular code(s) specified in a claim. “Up-coding” is the practice of
submitting claims that are erroneous because they specify codes for higher-paying services
than those that a physician actually provided.
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No. 06-51386
evidence. Specifically, Vick employed an expert witness (“Britton”) to analyze
Defendants’ billing records and determine whether there was a pattern of “up-
coding” from which the Court could draw an inference of scienter under the FCA.
Defendants likewise employed an expert (“Ellis”) to analyze their billing records.
After analyzing Defendants’ billing records, Britton testified repeatedly
that she “did not know what the intent of the physicians was,” but that she
believed there was a pattern sufficient to indicate that false claims may be
occurring. Ellis, in contrast, did not find “a pattern of billing improprieties” or
“any fraudulent claims.” Ellis did, however, determine that the Defendants had
“some documentation issues that need improvement,” but that, “in general,” they
“undercode[d]” more often than they “upcode[d]” thereby “costing the practice
revenue” and actually undercharging Medicare rather than overcharging
Medicare. Britton, too, found evidence of “undercoding” during her analysis of
Defendants’ records.
After three and a half years of discovery, the District Court granted
summary judgment in favor of Defendants. Specifically, the District Court found
that “Relator has not produced any evidence which creates a fact issue
concerning the . . . scienter element” of her FCA claim, and that, “[a]t the most,
Relator has shown innocent mistakes and negligence,” which are not FCA
violations. Accordingly, the District Court held that summary judgment was
proper because Vick had “presented no evidence . . . to sustain the scienter
element of her claim.”
II
Summary judgment is proper “if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that the moving party
is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). The moving
party “bears the initial responsibility of informing the District Court of the basis
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No. 06-51386
of its motion, and identifying those portions of ‘the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the affidavits,
if any,’ which it believes demonstrates the absence of a genuine issue of material
fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (citing Fed. R. Civ. P.
56(c)). Once the moving party fulfills this responsibility, the non-moving party
must “go beyond the pleadings and by her own affidavits, or by ‘depositions,
answers to interrogatories, and admissions on file,’ designate ‘specific facts
showing that there is a genuine issue of material fact for trial.’” Id. at 324
(quoting Fed. R. Civ. P. 56(e)). A genuine issue of material fact exists “if the
evidence is such that a reasonable jury could return a verdict for the non-moving
party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). We review a
grant of summary judgment de novo, viewing all evidence in the light most
favorable to the nonmoving party and drawing all reasonable inferences in that
party’s favor. See Crawford v. Formosa Plastics Corp., Louisiana, 234 F.3d 899,
902 (5th Cir. 2000).
A
The first issue is whether Defendants had the requisite knowledge or
scienter to be liable under the FCA. The FCA provides for civil liability against:
Any person who -- (1) knowingly presents or causes to be presented,
to an officer or employee of the United States Government . . . a
false or fraudulent claim for payment or approval; (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; [or] (3) conspires to defraud the Government by
getting a false or fraudulent claim allowed or paid . . . .
31 U.S.C. § 3729(a) (emphasis added). For the purposes of the FCA, the term
“knowingly” means:
that a person, with respect to information -- (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
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No. 06-51386
of the truth or falsity of the information, and no proof of specific
intent to defraud is required.
31 U.S.C. § 3729(b). With respect to the scienter issue, the District Court found
that Vick “had no actual knowledge of false claims knowingly presented by the
Defendants” and that, instead, her claim “relie[d] on the review of patient
medical records by her expert witness, Wendy Britton.” Taking into
consideration “the review of records by her expert, Ms. Britton,” the District
Court concluded that the “Relator has presented no evidence . . . to sustain the
scienter element of [her] claim.” Accordingly, the District Court held that “the
Relator has failed to show any evidence supporting the requisite scienter on the
part of Defendants . . . necessary to bring a claim under the False Claims Act.”
Vick raises several arguments in support of her contention that there is
a genuine issue of material fact as to whether Defendants had the requisite
scienter. First, Vick contends that this Court disfavors granting summary
judgment on an issue that turns on a state-of-mind determination, like scienter.
Second, Vick contends that, although she has no direct evidence of scienter, she
has provided adequate circumstantial evidence of scienter. Specifically, Vick
contends that the evidence analyzed by her expert, Ms. Britton, shows a pattern
of erroneous billing, which, when combined with Vick’s testimony that the
Doctors were aware of certain billing anomalies, adds up to an inference of
scienter. Finally, Vick argues that unless the Defendants can point to evidence
establishing the absence of scienter, then the summary judgment standard
requires that we draw an inference of scienter in her favor.
Defendants counter that Vick has no knowledge or direct evidence of
scienter and that, at most, she could identify only negligent billing errors and
mistakes which are not offenses under the FCA. Defendants further contend
that neither Vick nor her expert Britton presented circumstantial evidence
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No. 06-51386
sufficient to support an inference of scienter.2 Finally, in the alternative,
Defendants argue that Vick did not even allege, let alone prove, scienter on the
part of Defendants Floyd, Power, and Nelson. Because we find that there is no
genuine issue of material fact suggesting that the Doctors had the requisite
scienter to create FCA liability, we need not address this alternative argument.
It is indeed well-settled, as Vick points out, that we hesitate to grant
summary judgment when a case turns on a state of mind determination. See
International Shortstop, Inc. v. Rally’s Inc., 939 F.2d 1257, 1265 (5th Cir. 1991)
(“we have emphasized repeatedly that cases which turn on the moving party’s
state of mind are not well-suited for summary judgment”). It also is possible for
an FCA relator, like Vick, to establish the scienter element of her claim through
circumstantial evidence. See Financial Acquisition Partners LP v. Blackwell,
440 F.3d 278, 287 (5th Cir. 2006) (“Circumstantial evidence can support a
scienter inference.”). Nevertheless, these principles do not control the outcome
of this case. Reviewing the record in the light most favorable to Vick and
drawing all reasonable inferences in her favor, see Hockman v. Westward
Communications, LLC, 407 F.3d 317, 325 (5th Cir. 2004), we find that she
cannot prevail.
It is a long-established rule of this Circuit that to show a violation of the
FCA, the evidence must demonstrate “‘guilty knowledge of a purpose on the part
of [the defendant] to cheat the Government,’” United States v. Aerodex, Inc., 469
F.2d 1003, 1007 (5th Cir. 1972) (quoting United States v. Priola, 272 F.2d 589,
594 (5th Cir. 1959)), or “‘knowledge or guilty intent,’” Aerodex, 469 F.2d at 1007
(quoting United States v. Ridglea State Bank, 357 F.2d 495, 498 (5th Cir. 1966));
2
Defendants spend much of their argument pointing out the putative flaws in Britton’s
methodology, as though this were a Daubert hearing, rather than arguing that,
notwithstanding Britton’s conclusions, summary judgment was proper. We need not consider
these arguments.
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No. 06-51386
see also United States v. Hangar One, Inc., 563 F.2d 1155, 1157 (5th Cir. 1977).
The Aerodex Court found the requisite intent because the defendants contracted
with the government to supply a particular type of aircraft bearings, but, when
the defendants could not procure them, they falsely labeled other bearings and
substituted them for those specified in the contract. 469 F.2d at 1008. The
plaintiffs in Hangar One survived summary judgment by submitting affidavits
of workers attesting that they had personally facilitated frauds on the
Government by failing to inspect artillery shells before shipping them and, in
some cases, by including defective artillery shells in shipments bound for the
government. 563 F.2d at 1157-58. But in Priola, the Court held that the
defendant lacked the requisite intent, even though she signed certain purchase
orders underlying the false claims, because the Government could not establish
that she had “guilty knowledge” of a plan to cheat the Government. 272 F.2d at
592-94. Under these precedents, a relator, like Vick, cannot survive summary
judgment merely by submitting evidence of false claims; she must have evidence
that the defendants knowingly or recklessly cheated the government.
Neither Vick nor Britton have adduced evidence which creates a genuine
issue of material fact as to whether Defendants knowingly or recklessly cheated
the government. Neither has personal knowledge of whether Defendants had
the intent necessary to be liable under the FCA. Indeed, Vick cannot point to a
single instance in which Defendants submitted a false claim to Medicare, let
alone an instance in which Defendants knowingly or recklessly submitted such
a claim. For her part, Britton did identify what she believed to be a pattern of
erroneous billing that might support an inference of scienter, but at the same
time Britton acknowledged that this erroneous billing included not only over-
billing but also under-billing))showing that Defendants were merely negligent
billers, which does not offend the FCA. Based on the evidence adduced, we
cannot find a genuine fact issue that would preclude summary judgment.
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No. 06-51386
B
The second issue is whether Vick’s lack of evidence concerning scienter is
due to Defendants’ non-compliance with her discovery requests. The District
Court found no such non-compliance, specifically observing that “over the past
three and a half years in which this case was pending before the Court, the
Relator has had sufficient time and opportunity to obtain evidence from
Defendants . . . [and] ample opportunity to inspect documents and other
potential evidence . . . .”
Vick argues that summary judgment was premature because the District
Court did not permit full discovery of the medical records necessary to
substantiate her claims. Specifically, Vick argues that she would have survived
summary judgment had the District Court ordered Defendants to produce paper
documents rather than only electronic copies. In response, Defendants assert
that they fully complied with all Vick’s discovery requests, that electronic copies
of documents are the equivalent of photocopies, and that Vick did not even
bother to review many of the documents provided to her.
We review the discovery decisions of a District Court for abuse of
discretion, including a decision, as here, to forego additional discovery and rule
on a summary judgment motion. See Moore v. Willis Independent School Dist.,
233 F.3d 871, 876 (5th Cir. 2000) (holding that the District Court did not abuse
its discretion in granting summary judgment against the plaintiffs without first
allowing them leave to depose the defendants) (citations omitted). We will
affirm unless the discovery decision is arbitrary or clearly unreasonable. See id.
In affirming the grant of summary judgment against the plaintiffs in
Moore, we observed that the lawsuit had been pending for fourteen months
before the summary judgment ruling and that the plaintiffs made only a
“conclusional argument” that they should have been allowed further discovery,
but did not state “what relevant evidence they expected to uncover with
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No. 06-51386
additional discovery.” Vick has even less ground to stand on than did the Moore
plaintiffs: her case had been pending for three and a half years when summary
judgment was granted; there is no indication in the record that Defendants have
withheld documents improperly; and Vick cannot cogently explain how paper
records would succeed in proving her case where electronic records have failed.
The District Court has no obligation to placate Vick by continuing discovery
indefinitely. All good things, including discovery, must come to an end. The
District Court did not abuse its discretion in granting summary judgment after
three and a half years of discovery.3 See id.
III
For the foregoing reasons, we affirm the judgment of the District Court.
AFFIRMED.
3
Because we reject all of Vick’s arguments, we need not reach Defendants’ alternative
argument that the original source doctrine bars this suit.
9