The MSP Act and False Claims Act Grow 1 Step Closer

Michigan Federal Court Compels Settlement Agreement, Orders Relator to Solicit Government's Consent to Dismiss Medicare Secondary Payer Qui Tam False Claim Action Against State Farm

March 8, 2022 by Cattie & Gonzalez, PLLC

Executive Summary: On February 28, 2022, the United States District Court for the Eastern District of Michigan, Southern Division, published its opinion on?State Farm Mutual Automobile Insurance Company v. Angelo, concluding that because the False Claims Act does not provide the court authority to dismiss the Qui Tam Action without the government’s approval, Angelo must solicit the federal government's consent to dismiss the Qui Tam Action based on Medicare Secondary Payer (MSP) Act violations he filed against State Farm, its subsidiaries, affiliates, officers, directors, and employees, and must act on this obligation not later than Monday, March 14, 2022. This case represents the latest attempt to link violations of the MSP Act to the federal False Claims Act.?

Qui Tam False Claims Action Brought After Settlement of Underlying Claim.

State Farm brought this action. It alleged that Michael Angelo, and several entities that he owns or controls, fraudulently submitted bills and supporting documentation for services purportedly rendered to patients who were involved in automobile accidents and thereby qualified for no-fault benefits under State Farm policies. According to State Farm, these services were either not performed or were not medically necessary. State Farm sought compensatory damages as well as a declaratory judgment against Angelo's entities finding that State Farm was not liable for any bills that Angelo had submitted, and caused to be submitted.

After litigating the case for approximately two years, the parties ultimately resolved the matter and entered into a settlement agreement on February 19, 2021. As a result, on March 4, 2021, the court entered a Stipulated Order of Dismissal dismissing Angelo from the action. The order also provided that the court retained jurisdiction to enforce the terms of the settlement agreement.

On April 6, 2021, roughly six weeks after the parties entered into the settlement agreement, a Qui Tam False Claim Act complaint in the Eastern District of Michigan was unsealed. Angelo had filed the action as a relator, naming State Farm as a defendant. The Qui Tam Action, originally filed on July 24, 2019, alleged that State Farm "exploited and circumvented the Medicare Secondary Payer Act, and the Michigan No Fault Act, to avoid paying medical benefits to motor vehicle accident victims it insured, thus causing the federal government to pick up the expenses without being reimbursed by State Farm."

The complaint further indicated, "State Farm had engaged in an elaborate and sophisticated fraudulent scheme that caused the government to sustain significant financial loss by paying out sums of money that should have been paid by State Farm pertaining to motor vehicle injured victims." The Qui Tam Action also asserted that "State Farm knowingly presented, or caused to be presented, false or fraudulent information which caused payment or approval from the United States and/or the State of Michigan." Importantly, the United States and the State of Michigan declined to intervene in the lawsuit on March 9, 2021.

State Farm subsequently brought the present motion to enforce the original settlement before the court, contending that by filing the Qui Tam Action, Angelo is in breach of the parties' settlement agreement. State Farm sought an order requiring Angelo to "immediately cease and desist from taking any further action to prosecute the Quit Tam Lawsuit and take all necessary steps to secure dismissal of the Qui Tam Complaint." Angelo opposed the motion on various grounds.?

Thereafter, Angelo filed an amended complaint in the Qui Tam Action that appeared substantially different from the original as it added a new relator; new qui tam causes of action on behalf of other states; and several new defendants, including other State Farm entities. The parties' submitted supplemental briefs to update the court on the allegations within the amended complaint. The parties disagree as to the implications of the amended complaint on State Farm’s motion to enforce the settlement agreement, particularly as to whether the amended complaint falls within the scope of the agreement's relevant provisions.

Court Finds Qui Tam Action Arises from Medical Services Claim.

The court agrees with State Farm that the original complaint falls squarely within the settlement agreement. The language of the Dismissal and Release Provisions is quite broad, encompassing “any lawsuits, proceedings, claims, actions, and suits of any kind whatsoever arising from MVA Related Health Care Services provided by any Michael Angelo Entity(s) to any State Farm Insured." The original complaint clearly relates to MVA Related Health Care Services provided by Angelo and his entities. While the original qui tam complaint naturally relates to the government recovering lost federal funds, the action arises from Angelo's own experiences with State Farm's handling of his insurance claims.

Even if the court accepted Angelo's position and looked only to the amended complaint, the court concludes the Qui Tam Action appears to stem from allegations "arising from MVA Related Health Care Services provided by Angelo and his entities.” Despite Angelo's assertions to the contrary, the amended complaint still features claims against State Farm that arise from the provision of medical services to individuals insured by State Farm. The amended complaint makes clear that State Farm had "direct knowledge of Medicare and/or Medicaid beneficiaries that are also insureds of State Farm or claimants who are entitled to coverage under Michigan law, who sought treatment at his or other facilities, but for whom the State Farm refused to pay their claims."

To be sure, the particular cause of action alleged against State Farm in the Qui Tam Action is rooted in Medicare and Medicaid fraud. However, the settlement agreement contemplates dismissal or release from “any suits of any kind whatsoever, related to MVA Related Health Care Services.” Thus, the court finds the factual allegations of the amended complaint still fall within the scope of the settlement agreement, as the facts supporting Angelo's claims in the Qui Tam Action "arise from what he learned when he provided medical services to patients suffering accidental bodily injury arising out of the ownership, operation, maintenance, or use of a motor vehicle."

Who Owns the Qui Tam Action? Whistleblower, Government, Both?

Angelo's main argument is that, as a relator in a Qui Tam Action, he is a "mere whistleblower and does not own those claims because they are brought in the name of the government.” He maintains, based on Sixth Circuit case law, that "the government is the real party in interest under the False Claims Act, and that the harms redressed by the FCA belong to the government." Hence, Angelo argues that "a relator is without authority to unilaterally settle a qui tam suit because it would be akin to impermissibly bargaining away the rights of a third party."?

The court here however makes it clear that “even if the government is the real party in interest, the Supreme Court has made clear that the FCA gives the relator himself an interest in the lawsuit, and not merely the right to retain a fee out of the recovery, evinced in part by the fact that the statute permits a civil action for the person and for the United States Government."?31 U.S.C. Section 3730(b). As State Farm notes, “a relator is not a passive witness once the whistle has been blown, the relator has the right to conduct the action."?31 U.S.C. Section 3730(c)(3). In the present case, for example, it was not the government that amended the complaint for itself; rather, it was Angelo as the relator who made the changes and brought additional allegations.

Can the Court Dismiss Angelo’s Qui Tam Action?

Angelo argues that “public policy weighs in favor of non-enforcement of the settlement agreement because Congress, through the FCA, has expressed a strong federal interest in encouraging private citizens to come forward and inform the government of any uncovered fraud. The court finds Angelo is correct to the extent that such an interest exists.

As a result, the court finds that it has the authority to require Angelo “to take all steps necessary to dismiss the Qui Tam Action.” Here, in context and under the language of the Dismissal and Release Provisions, the court indicates that means Angelo “must at least request the government's consent to dismiss the claims against State Farm and its subsidiaries, affiliates, officers, directors, and employees." The court further informs that “if, upon request, the government decides it does not consent to dismissal, then that is the end of the matter, as the court lacks authority under the FCA to mandate anything further.”

I recently chaired the 7th Annual RISE Medicare Secondary Payer Master Class in Washington DC. One of our speakers, Rachel LaMontagne, Esq., a partner at Shutts & Bowen, spoke about this very same issue during her presentation and concluded similarly as the court does here. Ms. LaMontagne indicated in her remarks that “although it is the plaintiff who brings the Qui Tam Action, plaintiff does so on behalf of government. Therefore, government continues to control and have a great deal of say in what happens and transpires throughout the Qui Tam Action.” Ms. LaMontagne explained that “plaintiff can maneuver the Qui Tam Action, provide the factual basis and allegations that provide for the cause of action, but ultimately, it is the federal government which owns the action and has ultimate say as to its continuation and conclusions.”?

Angelo Must Solicit Government's Consent to Dismiss Qui Tam Action.

The FCA makes it clear that the court could not enforce the settlement agreement by mandating dismissal of State Farm from the Qui Tam Action. However, the court finds that the FCA's text and purpose is not offended by requiring Angelo, in accordance with the settlement agreement, "to take all necessary steps to secure the discontinuance of the Qui Tam Action brought by Angelo.” In other words, the court's narrow holding is only that, consistent with the FCA, Angelo must request the federal government's consent to dismiss State Farm.?

If the federal government provides authority to dismiss State Farm from the Qui Tam FCA action, then the court would have statutory authority to dismiss the claim against State Farm. If however, the federal government doesn’t respond, or indicates it will not provide authority to dismiss State Farm from the Qui Tam action, there is nothing further the court can do.

Accordingly, the court here grants State Farm's Motion to Enforce Settlement Agreement and also orders Angelo, “proceeding in good faith and undertaking no contrary or inconsistent acts, must forthwith solicit the government's consent to dismiss the instant Qui Tam Action based on Medicare Secondary Payer Act violations against State Farm, along with its subsidiaries, affiliates, officers, directors, and employees, and must act on this obligation not later than Monday, March 14, 2022.”

About Cattie & Gonzalez, PLLC.

Only lawyers practicing Medicare and Medicaid law in a law firm that devotes 100% of its practice to Medicare and Medicaid compliance can provide a client with legal advice and counsel on what is in the best Interest of the client. Not what maybe in the best interests of Medicare or Medicaid, or in the best interest of the vendor, or in the best interests of the opposing party, but solely what is the best course of action and in the best interest of you, the client. When you hire our law firm to provide you with a legal opinion on mandatory reporting, conditional payments, third party liability liens, or set aside allocations, you can rely on the conclusions of that opinion to settle your case and close your file for good, with no possibility of government recovering anything else from you going forward. You may contact us at?[email protected], visit us at?www.cattielaw.com,?or call us at 844.546.3500.