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    US Ex Rel Bennett v. Genetics & IVF Inst, 4th Cir. (1999)

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    This document is an unpublished opinion from the United States Court of Appeals for the Fourth Circuit regarding a qui tam action brought under the False Claims Act. The relator alleged that the defendant knowingly submitted false claims under a federal contract for paternity testing services. The district court granted summary judgment for the defendant. The appellate court affirmed, finding that undisputed facts showed the defendant lacked fraudulent intent because the state was aware and approved of the defendant's testing methodology. The court also held that the district court did not abuse its discretion in refusing to allow amendment of a defective count that was raised too late in the proceedings.

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    US Ex Rel Bennett v. Genetics & IVF Inst, 4th Cir. (1999)

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    This document is an unpublished opinion from the United States Court of Appeals for the Fourth Circuit regarding a qui tam action brought under the False Claims Act. The relator alleged that the defendant knowingly submitted false claims under a federal contract for paternity testing services. The district court granted summary judgment for the defendant. The appellate court affirmed, finding that undisputed facts showed the defendant lacked fraudulent intent because the state was aware and approved of the defendant's testing methodology. The court also held that the district court did not abuse its discretion in refusing to allow amendment of a defective count that was raised too late in the proceedings.

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    Filed: 1999-10-28 Precedential Status: Non-Precedential Docket: 98-2119

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    US ex rel Bennett v. Genetics & IVF Inst, 4th Cir. (1999)

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    This document is an unpublished opinion from the United States Court of Appeals for the Fourth Circuit regarding a qui tam action brought under the False Claims Act. The relator alleged that the defendant knowingly submitted false claims under a federal contract for paternity testing services. The district court granted summary judgment for the defendant. The appellate court affirmed, finding that undisputed facts showed the defendant lacked fraudulent intent because the state was aware and approved of the defendant's testing methodology. The court also held that the district court did not abuse its discretion in refusing to allow amendment of a defective count that was raised too late in the proceedings.

    Copyright:

    Public Domain
    Download as PDF or read online from Scribd
    Download as pdf
    58 views7 pages

    US Ex Rel Bennett v. Genetics & IVF Inst, 4th Cir. (1999)

    Uploaded by

    Scribd Government Docs
    This document is an unpublished opinion from the United States Court of Appeals for the Fourth Circuit regarding a qui tam action brought under the False Claims Act. The relator alleged that the defendant knowingly submitted false claims under a federal contract for paternity testing services. The district court granted summary judgment for the defendant. The appellate court affirmed, finding that undisputed facts showed the defendant lacked fraudulent intent because the state was aware and approved of the defendant's testing methodology. The court also held that the district court did not abuse its discretion in refusing to allow amendment of a defective count that was raised too late in the proceedings.

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    of 7

    UNPUBLISHED

    UNITED STATES COURT OF APPEALS


    FOR THE FOURTH CIRCUIT
    UNITED STATES OF AMERICA EX REL
    DAVID D. BENNETT,
    Plaintiff-Appellant,
    v.

    No. 98-2119

    GENETICS & IVF INSTITUTE,


    INCORPORATED,
    Defendant-Appellee.
    Appeal from the United States District Court
    for the District of Maryland, at Baltimore.
    J. Frederick Motz, Chief District Judge.
    (CA-95-1620-JFM)
    Argued: March 3, 1999
    Decided: October 28, 1999
    Before TRAXLER, Circuit Judge,
    VOORHEES, United States District Judge
    for the Western District of North Carolina, sitting by designation,
    and FABER, United States District Judge
    for the Southern District of West Virginia, sitting by designation.
    _________________________________________________________________
    Affirmed by unpublished per curiam opinion.
    _________________________________________________________________
    COUNSEL
    ARGUED: John Stephen Simms, GREBER & SIMMS, Baltimore,
    Maryland, for Appellant. Ronald Henry Clark, ARENT, FOX, KINT-

    NER, PLOTKIN & KAHN, Washington, D.C., for Appellee. ON


    BRIEF: W. Charles Bailey, Jr., GREBER & SIMMS, Baltimore,
    Maryland; Robin Page West, LAW OFFICES OF ROBIN PAGE
    WEST, Baltimore, Maryland, for Appellant. Robert E. Wanerman,
    ARENT, FOX, KINTNER, PLOTKIN & KAHN, Washington, D.C.,
    for Appellee.
    _________________________________________________________________
    Unpublished opinions are not binding precedent in this circuit. See
    Local Rule 36(c).
    _________________________________________________________________
    OPINION
    PER CURIAM:
    This is a qui tam action filed by David D. Bennett ("Bennett") on
    behalf of the United States under the Federal False Claims Act
    ("FCA"), 31 U.S.C. 3730(b). The district court granted the motion
    for summary judgment of the defendant, Genetics & IVF Institute,
    Inc. (the "Institute"). Bennett appealed. Finding no error, we affirm.
    I.
    In 1991, 1994 and 1997, through contracts bid competitively under
    the procurement laws of Virginia, the Institute undertook to provide
    services for federally-funded paternity testing. Federal funding was
    provided pursuant to the Child Support and Establishment of Paternity Program under the Social Security Act, 42 U.S.C. 651, et seq.
    The purpose of this program is to decrease the number of fathers who
    refuse to support their children because paternity has not been conclusively established.
    The request for proposal ("RFP"), which became part of the contract, obligated the Institute to: (1) draw two tubes of blood from
    each person tested -- the mother, child and putative father -- for a
    total of six tubes of blood for each group or case; (2) perform a pater2

    nity test for each group; and (3) perform a second paternity test for
    each group in which the first test indicated the man was not the father.
    The contract allowed a twenty-one-day window in which to complete the initial test and any retest. Each test takes thirteen to fifteen
    days to complete; therefore, in order to meet the time frame under the
    contract, a second test would have to be run simultaneously with the
    first in every case. Instead of providing six tubes of blood and two
    tests, the Institute provided only three tubes of blood and one test.
    The operative pleading before the district court was Bennett's third
    amended complaint, filed on August 18, 1997. The third amended
    complaint had three counts. Count I charged that the Institute knowingly submitted false claims under the paternity testing contract.
    Count II alleged that the Institute paid illegal kickbacks to a military
    employee of the Bethesda Naval Hospital who later joined the Institute staff. The third count charged that the Institute had violated the
    Stark law, 42 U.S.C. 1395nn, in connection with its internal laboratory testing of tissue samples submitted by staff physicians.
    Both Bennett and the Institute filed motions and cross-motions for
    summary judgment. On July 10, 1998, the district court, ruling from
    the bench at oral argument, granted summary judgment for the Institute on Counts I and II of the third amended complaint. As to Count
    I of the amended complaint, the court ruled that undisputed facts of
    record showed that the Institute lacked the requisite fraudulent intent
    for liability to attach under the False Claims Act. With regard to
    Count II, the court held that Bennett had raised the claim too late in
    the proceedings. At oral argument, Bennett admitted that Count II as
    originally filed was defective. He attempted to salvage this count by
    asserting, in his brief in opposition to the Institute's motion for summary judgment, a new theory to support it. He did not move to amend
    Count II under Rule 15(a); he simply argued that the court should permit him to amend to conform to the evidence as permitted by Rule
    15(b). The trial court rejected this argument finding that Bennett was
    asserting an entirely new theory. While the trial court did not
    expressly say the Institute would be prejudiced by the proposed
    amendment, the implication is clear. The new theory, said the court,
    would require new discovery and a different focus of the litigation.
    As such, the court held, it came "simply too late" in the case. Bennett
    3

    voluntarily moved to dismiss Count III under Federal Rule of Civil


    Procedure 41(a). The Institute opposed that motion and, at oral argument, the district court dismissed Count III with prejudice as to the
    relator, Bennett, but not as to the United States. Bennett immediately
    filed this appeal which seeks review of the district court's order granting summary judgment upon Counts I and II.
    We apply a de novo standard of review to the trial court's grant of
    summary judgment on Count I. Helm v. Western Md. Ry. Co., 838
    F.2d 729, 734 (4th Cir. 1988). An abuse of discretion standard applies
    to the trial court's refusal to permit amendment of Count II. Gladhill
    v. General Motors Corp., 743 F.2d 1049, 1052 (4th Cir. 1984).
    II.
    Qui tam suits predate the Republic. A discussion of the long history
    of the practice is found in Marvin v. Trout, 199 U.S. 212 (1905). The
    relator in a qui tam action is essentially a self-appointed private attorney general, and his recovery is analogous to a lawyer's contingent
    fee. The relator has no stake in the damages sought, all of which have
    been incurred by the government. United States v. Univ. of Tex. M.D.
    Anderson Cancer Center, 961 F.2d 46, 49 (4th Cir. 1992).
    The False Claims Act was originally passed during the Civil War
    as a response to abuses by defense contractors. Congress hoped that
    the act, and the qui tam actions it provided for, would help the government uncover fraud and abuse. The Act allows a private action on
    behalf of the government against anyone who knowingly presents, or
    causes to be presented, a false or fraudulent claim for payment or
    approval, or 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.
    In order to prevail in an action brought under the False Claims Act,
    a litigant is required to show the following: (1) that the defendant
    made a false statement or engaged in a fraudulent course of conduct;
    (2) that such action was taken with the requisite scienter; (3) that the
    false claim was material; and (4) that the false claim caused, or could
    have caused, the government to incur expenses or to forfeit monies
    due. Harrison v. Westinghouse Savannah River Co. , 176 F.3d 776,
    4

    778 (4th Cir. 1999). The False Claims Act establishes that actions
    must be taken "knowingly" in order to meet the requisite scienter, and
    the term has a special meaning within the context of the False Claims
    Act. Under the False Claims Act "knowing" and"knowingly" mean
    that a person with respect to pertinent 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 of
    the truth or falsity of the information. No proof of specific intent to
    defraud is required.
    Liability under the False Claims Act is subject further to the judicially imposed requirement that the false statement or claim be material. Materiality depends on "whether the false statement has a natural
    tendency to influence agency action or is capable of influencing
    agency action." United States ex rel. Berge v. Bd. of Trustees of Univ.
    of Ala., 104 F.3d 1453, 1460 (4th Cir.), cert. denied, 118 S. Ct. 301
    (1997).
    The district court held, and we agree, that the evidence showed
    there was no intent to defraud. The Commonwealth of Virginia was
    completely aware from the inception of the contract that the Institute
    was taking and testing only one sample of blood from each person.
    Virginia willingly acquiesced in this practice. Before the contract was
    awarded and, again before performance began, the Institute spoke
    with officials in Virginia's Division of Child Support Enforcement
    who administered the paternity testing program and contract. The
    Institute explained to these employees that the method they proposed
    to use, DNA testing, would not scientifically require the collection
    and analysis of two tubes of blood because it was much more accurate
    than serology testing, the previously used method. Taking additional
    tubes would only slow down the receipt of the results and both parties
    to the contract knew this. Additionally, DNA testing, in contrast to
    serology testing, could be performed on a child at a much younger
    age, thereby allowing the test to be concluded at a time when it is easier to locate the reputed father. Virginia officials fully approved of the
    Institute's proposed approach. Additionally, Virginia was apparently
    pleased with the Institute's performance under the contracts. The
    1991 contract was extended several times. The new contract in 1995
    was awarded to the Institute. In 1996, after this litigation was filed,
    Virginia again awarded the Institute the same contract containing a
    5

    two-tube requirement, although everyone knew that the two-tube


    requirement was not being satisfied.
    On this state of the record, the district court was correct in holding
    that the evidence conclusively established that the Institute did not
    possess the requisite intent to deceive. The district court's basis for
    its decision was that no reasonable jury could conclude that the Institute had the requisite scienter. At a minimum, the False Claims Act
    requires that the defendant act with reckless disregard as to the falsity
    of the claim. The evidence shows that the Institute was not reckless
    in its belief that Virginia had agreed to modify the contract and allow
    testing of one tube, with retesting only upon request. The evidence
    shows that before the contract was awarded, and after the contract
    was awarded but before the performance began, the Institute specifically informed state officials of how it intended to perform under the
    contract. The evidence also shows that state officials knew that the
    Institute was not taking two tubes and automatically retesting, and
    that these officials were nonetheless happy with the Institute's performance.
    Additionally, it is doubtful that Bennett could establish that the
    Institute's claims, even if false, were material under the standard
    enunciated in Berge. Under Berge, in order for a false claim to be
    material, it must have a "natural tendency to influence agency action"
    or be "capable of influencing agency action." Id. at 1460. Here, everyone involved knew that the Institute was not taking two tubes of blood
    or automatically retesting. None of them cared because all were satisfied with the Institute's performance under the contract as it was. The
    number of tubes and the automatic retesting requirements of the contract were obviously immaterial to Virginia's decision to renew the
    contract with the Institute and to pay for the services rendered since
    such renewal and payment were made with full knowledge of the
    method under which the Institute was performing.
    III.
    The relator also appealed from the district court's refusal to allow
    him to amend Count II of his complaint to offer new theories of Federal Claims Act liability. Bennett first raised his claims in his opposition to the Institute's motion for summary judgment. The court held
    6

    that the time in which the claims should have been asserted had long
    since passed and denied the motion to amend.
    Our inquiry here is whether the district court abused its discretion
    in denying Bennett's motion to amend. Gladhill v. General Motors
    Corp., 743 F.2d 1049, 1052 (4th Cir. 1984).
    A district court has wide discretion in determining whether to permit amendments of pleadings. United States ex rel. Joslin v. Community Home Health of Maryland, Inc., 984 F. Supp. 374, 381 (D. Md.
    1997); Deasy v. Hill, 833 F.2d 38, 40 (4th Cir. 1987). Amendments
    should normally be allowed if there is no unfair prejudice to the
    opposing party and the motion is not unduly delayed. Bennett offered
    no justification for the substantial delay in seeking to amend his complaint. He had already been permitted to amend twice and he does not
    contend that additional evidence supporting his new theory was
    revealed during discovery. The new theory was an obvious attempt to
    salvage a defective count at a late hour in the case. The trial court
    held correctly that Bennett's new claim was not a new theory, but an
    entirely different claim. The facts underlying these two claims are
    substantially different. Discovery in the case had been completed,
    much time had elapsed, and the plaintiff was asserting a new claim
    that involved new facts, new legal theories and probably new discovery. Under an abuse of discretion standard, we cannot say that the
    court's decision to deny the amendment was error.
    For all these reasons, the decision of the district court is affirmed.
    AFFIRMED
    7

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