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United States of America, Ex Rel. v. Family Healthcare Network; Harry

February 10, 2011


The opinion of the court was delivered by: Oliver W. Wanger United States District Judge

Discovery Cut-Off: 12/16/11 Non-Dispositive Motion Filing Deadline: 1/3/12 and Hearing Date: 2/3/12 9:00 Ctrm. 8 through 50, Non-Dispositive Motion


Deadline: 1/17/12

Dispositive Motion Filing

Dispositive Motion Hearing Date: 2/27/12 10:00 Ctrm. 3

1/18/12 11:00 Ctrm. 8 Settlement Conference Date:

Pre-Trial Conference Date: 3/26/12 11:00 Ctrm. 3

Ctrm. 3 (JT-14 days) Trial Date: 6/5/12 9:00

I. Date of Scheduling Conference. February 10, 2011.

II. Appearances Of Counsel.

III. Summary of Pleadings. Background.

1. This action was filed by Plaintiff under seal on May 11, 2007, pursuant to the qui tam provisions of the False Claims Act ("FCA"), 31 U.S.C. §§ 3729, et seq., alleging that Defendants defrauded the United States. On January 7, 2009, Plaintiff filed a First Amended Complaint ("Complaint"). The government sought and obtained multiple extensions of the seal period until May 10, 2010, when it filed a Notice of Declination. Thereafter, the complaint was unsealed and served upon the Defendants.

2. Defendants sought an extension of time to respond to the complaint, and then filed a motion to dismiss on August 27, 2010. On December 29, 2010, the Court denied Defendants' motion in its entirety (Docket No. 69).

Summary of Factual and Legal Contentions.

3. Plaintiff's complaint alleges causes of action for violation of the False Claims Act arising from Defendants' grant applications under a Public Health Service Act program providing federal funding for qualified health centers. Specifically, Plaintiff alleges that Defendants violated 31 U.S.C. §§ 3729(a)(1), (a)(2), and (a)(3)*fn1 by knowingly submitting false or fraudulent grant applications; by making, using or causing to be made or used false records or statements to get the applications approved; and by conspiring to defraud the United States by knowingly submitting false and fraudulent grant applications to obtain federal funding.

4. Defendants contend that they are not liable for any of the causes of action alleged, and maintain that they did not violate the False Claims Act. Specifically, Defendants maintain that they did not submit false claims or fraudulent grant applications, did not make, use or cause to be made or used any false records or statements to gain approval of the grant applications. Defendants contend that all grant monies received from the United States have been properly utilized, reported, and accounted for by Defendants in the manner intended by the grants. Defendants contend that they did not defraud or conspire to defraud the United States in any manner.

IV. Orders Re Amendments To Pleadings. Plaintiff's position is as follows.

1. Plaintiff believes that Defendants' Answer to the First Amended Complaint, filed two days before this Joint Scheduling Report is due, is deficient. In numerous instances, in responses to allegations in which Plaintiff quotes the contents of documents, Defendants neither admit nor deny the contents of such documents but instead respond that the documents "speak for themselves." Answer to First Amended Complaint, ¶¶ 42, 43, 44, 45, 46, 47, 48, 49, 50, 52, 53, 54, 58, 60, 63, 65, etc.

2. Moreover, although this action has been on file since 2007, and the complaint has been in Defendants' possession since 2009, Defendants consistently claim that they are "without knowledge or belief sufficient to admit or deny the allegations," including allegations concerning statements in their own grant applications and other grant materials.

3. For example, paragraph 44 of the complaint states: "44. FHCN described the pre-award professional medical staffing at Ivanhoe as 2.25 (FTEs), consisting of 0.9 FTE for a family practice physician, 0.6 for a nurse practitioner (NP), 0.5 for a physician assistant (PA), and 0.25 for a health educator. Id., Local Resources Unable to Meet This Need, page 5. It stated that "[t]he current staff at the Ivanhoe Health Center is operating at full capacity." Id., Currently Operating at Full Capacity, page 16. Operating at full capacity was one of the judging criteria used in evaluating grant applications. BPHC's Expanded Medical Capacity Program Guidance, Readiness and Organizational Capacity, page 19."

4. Defendants' Answer to paragraph 44 states: "44. Answering paragraph 44, Defendants assert that the referenced grant applications speak for themselves. Defendants are otherwise without knowledge or belief sufficient to admit or deny the allegations contained in said paragraph and on that basis deny those allegations."

5. The Federal Rules allow three responses: an admission, a denial, or a statement of lack of knowledge or information necessary to admit or deny. Fed.R.Civ.P. 8(b); In re TCW/Camil Holding L.L.C., 2004 WL 1151562 *5 (D. Del. 2004). A response that a written document "speaks for itself" has been expressly rejected by the courts. Chicago Dist. Council of Carpenters Pension Fund v. Balmoral Racing Club, Inc., 2000 WL 876921 *1 (N.D. Ill. 2000) (court sua sponte issues an order directing counsel to cure "patent" defect when "instead of providing forthright responses to the specific allegations, Balmoral asserts that the documents 'speak for themselves'"); Fusion Capital Fund II, LLC v. Millenium Holding Group, Inc., 2008 WL 719247 *1 (court sua sponte issues an order finding defendants' "document speak for itself" locution improper); State Farm Auto Insurance Co. v. Riley, 199 F.R.D. 276, 279 (N.D. Ill. 2001) ("speaks for itself" is an "unacceptable device used by lawyers who would prefer not to admit something that is alleged about a document in a complaint").

5. Furthermore, a party has a duty to reasonably investigate the factual allegations in a complaint before simply claiming lack of sufficient knowledge or information. United States v. 1866.75 Board Feet, 2008 WL 839792 *3 (E.D. Va. 2008) ("a party may not assert lack of knowledge or information if the necessary facts ... are within his knowledge or easily brought within his knowledge ... or a matter of public record. A denial of knowledge or information in this context casts doubt upon the good faith of the pleader"); Greenbaum v. United States, 360 F.Supp. 784, 787 (E.D. Pa. 1973) (when party failed to "exert reasonable effort to obtain knowledge of a fact," an insufficient knowledge claim deemed "an admission"); see Harvey Aluminum (Inc.) v. N.L.R.B., 335 F.2d 749, 757 (9th Cir. 1964) (facts concerning labor policy were "necessarily within the knowledge of General's managing officers," and answer claiming lack of knowledge will result in the "facts alleged in the complaint [to] stand admitted").

6. Plaintiff believes she has the right to an appropriate admission or denial regarding the contents of the documents and other facts alleged in the complaint, so that the parties can focus discovery on matters legitimately in dispute.

Defendants' position is as follows:

7. Defendants have agreed to amend their responses to paragraphs 43, 45, 46, 47, 48, 49, and 50. With regard to the balance of the responses wherein Defendants responded, in part, by noting that the document speaks for itself, Defendants contend that their responses are sufficient. See Answer, paragraphs 26, 32, 52, 53, 58, 60, 66 and 67. In each of those instances, Defendants either admit, deny, or allege insufficient information to admit or deny the allegations in those paragraphs, in addition to asserting that the document speaks for itself. This is sufficient. As the Northern District Court in Barnes v. AT&T Pension Benefit Plan, 718 F.Supp.2d 1167, 1175 (N.D. Cal. 2010) explained, by indicating that the document speaks for itself and admitting or denying the factual allegations in the paragraphs, the defendant is "simply admitting the factual allegations pertaining to the referenced documents to the extent that the documents actually say what [the plaintiff] alleges they say, and denying the factual allegations to the extent that they are contradicted by the actual documents." (Holding that in such instances, the conditional denial was a functional equivalent of a general denial that satisfied the requirements of 8(b)(1)). See also, Sykes v. Cina Life Ins. Co., 2010 U.S. Dist. LEXIS 94047 (N.D. Cal. 2010) (holding that defendants' "the documents speak for themselves" responses were acceptable where defendants also made admissions and conditional and general denials as deemed necessary given the substance and extent of the allegations in each paragraph"). Defendants will file a First Amended Answer, but reserve the right to respond in accordance with the above.

8. In light of the timing by which the Answer was to be filed, Defendants have not had a full opportunity to address these issues. However, Defendants welcome the opportunity to consider these issues in full, but do not believe that the scheduling conference is the appropriate forum within which to address these issues.

9. The parties have agreed to further discuss these matters in an attempt to resolve them ...

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