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December 15, 2004.


The opinion of the court was delivered by: MARILYN PATEL, Chief Judge, District


Re: Plaintiff's Motion for Partial Summary Judgment

On June 2, 2000, the United States brought this civil action against defendants St. Luke's Subacute Hospital and Nursing Centre, Inc. and Guy Seaton (collectively "defendants"), alleging violations of the False Claims Act ("FCA"), 31 U.S.C. §§ 3729-33, and of the common law in connection with cost reports that defendants submitted to Medicare. Now before the court is the United States' motion for summary adjudication as to the issue of defendants' liability under the FCA. Having considered the arguments presented and for the reasons stated below, the court enters the following memorandum and order.


  This action arises out of a scheme to defraud Medicare by inflating reimbursable nursing hours at defendants' care facility and providing falsified documentation to federal auditors in order to support such false claims. At all times relevant to the allegations in the United States' complaint, defendant St. Luke's Subacute Hospital and Nursing Centre, Inc. ("St. Luke's") operated a nursing facility located in San Leandro, California. Defendant Guy Seaton served as St Luke's chief executive officer ("CEO"). As a "subacute facility," St. Luke's provided care to patients with severe illness or injury who required more intensive services than ordinary nursing care could provide but did not require hospital acute care. See Cal. Admin. Code Title 22, § 51124.5. St. Luke's received compensation from the Medicare program for some of the cost of providing services to certain Medicare-eligible patients. In 1995, the Department of Health and Human Services ("DHS") Office of the Inspector General began an investigation into allegations that St. Luke's was fraudulently inflating the cost of the nursing services that it provided to Medicare beneficiaries. This investigation revealed evidence of an unusually high allocation of nursing costs to Medicare patients and fabricated nursing schedules to support defendants' fraudulent claims for reimbursement.

  A. The Related Criminal Action

  Based on the finding of the DHS investigation, a grand jury returned a six count indictment against both defendants on May 8, 2002. Winslow Decl., Exh. 2 (hereinafter "Indictment"). The indictment charged defendants with conspiracy to defraud the Medicare program in violation of 18 U.S.C. § 371 (Count 1), three counts of submitting false Medicare claims in violation of 18 U.S.C. § 287 (Counts 2-4), knowingly and willfully making false statements to Medicare auditors in violation of 18 U.S.C. § 1001 (Count 5), and obstructing a federal audit in violation of 18 U.S.C. § 1516 (Count 6). Among other things, the indictment alleged that defendants misrepresented the level of nursing care provided to Medicare patients in support of false claims for direct nursing services costs incurred in 1996, 1997, and 1998. Indictment ¶¶ 10, 14(a)-(c). These claims were subsequently paid by Mutual of Omaha, a fiscal intermediary acting on behalf of the Medicare program. See Winslow Decl., Exh. 1 at 1277-78 (Testimony of Charles Potter). The United States also alleged that defendants fabricated payroll reports and time cards by designating certain employees as working exclusively with Medicare patients when in fact these employees also provided care to non-Medicare eligible patients. Id. ¶¶ 11-12.

  On December 19, 2002, a jury found defendants guilty on all counts charged. Winslow Decl., Exh. 6. The court entered judgments of conviction against both defendants on June 9, 2004. Id., Exhs. 3-4. Defendants' appeal of their conviction is currently pending before the Ninth Circuit. Defendants also continue to be involved in proceedings before the Medicare Provider Reimbursement Board ("PRRB") for the purpose of determining the amount of damages sustained by the United States.

  B. The United States' Civil Claims

  On June 2, 2000, the United States filed the instant civil action against defendants under the FCA, 31 U.S.C. § 3730(a). The allegations, now set forth in the United States' amended complaint filed on April 21, 2000, arise from the same series of transactions that led to defendants' criminal convictions. As in the criminal action, the United States alleges that defendants fraudulently inflated labor costs incurred in caring for Medicare patients and that in seeking reimbursement for these costs, they submitted false and fraudulent claims to the Medicare program. Pl.'s First Amended Compl. (hereinafter "FAC") ¶ 19. Based on these allegations, the amended complaint pleads three violations of the FCA, asserting that defendants: (1) knowingly submitted false claims for payment to the United States in violation of 31 U.S.C. § 3729(a)(1); (2) conspired to defraud the United States in violation of 31 U.S.C. § 3729(a)(3); and (3) knowingly made false statements to the United States in violation of 31 U.S.C. § 3729(a)(2). Id. ¶¶ 23-28. The complaint also alleges state law causes of action for payment by mistake, unjust enrichment, and breach of contract. Id. ¶¶ 29-34.

  On March 6, 2001, the court ordered that proceedings in the civil action be stayed pending the resolution of the criminal proceedings against defendants. The stay remained in place until October 12, 2004, when the court granted the United States' motion to lift the stay in order to allow the United States to move for summary adjudication on the issue of defendants' liability under the FCA. That motion is now before the court. The United States argues that the entry of a final judgment in the criminal action estops defendants from denying that they are liable for civil damages and statutory penalties under the FCA. The court addresses this argument below.


  Summary judgment is proper when the pleadings, discovery, and affidavits 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). Material facts are those which may affect the outcome of the proceedings. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. Id. The party moving for summary judgment bears the burden of identifying those portions of the pleadings, discovery, and affidavits that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). On an issue for which the opposing party will have the burden of proof at trial, the moving party need only point out "that there is an absence of evidence to support the nonmoving party's case." Id.

  Once the moving party meets its initial burden, the nonmoving party must go beyond the pleadings and, by its own affidavits or discovery, "set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). Mere allegations or denials do not defeat a moving party's allegations. Id.; see also Gasaway v. Northwestern Mut. Life Ins. Co., 26 F.3d 957, 960 (9th Cir. 1994). The court may not make credibility determinations, Anderson, 477 U.S. at 249, and inferences drawn from the facts must be viewed in the light most favorable to the party opposing the motion. Masson v. New Yorker Magazine, 501 U.S. 496, 520 (1991). Nonetheless, even if summary adjudication of an entire claim is not warranted, Federal Rule of Civil Procedure 56(d) allows a court to ...

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