News & Announcements

Weil Obtains Recommended Dismissal with Prejudice of Industry-Wide Medicare False Claims Act Case

Magistrate Judge Recommends Dismissal of Claims for Hundreds of Millions of Dollars Without Leave to Replead

On June 24, 2015, Weil obtained a major victory for client Farmers Insurance and several of its affiliates when a United States Magistrate Judge issued a decision recommending the dismissal of all claims in an industry-wide whistleblower action alleging violations of the federal False Claims Act. The Judge found that plaintiff failed to state a plausible claim for relief and denied plaintiff leave to replead, concluding that plaintiff lacked a good faith basis for the allegations.

Plaintiff initially filed this qui tam lawsuit on behalf of the U.S. federal government in 2011. He asserted that a number of major insurance companies violated the False Claims Act for allegedly failing to reimburse the government for payments it made to Medicare beneficiaries – as mandated by the Medicare Secondary Payer (MSP) statute. Plaintiff’s claims rested primarily on his allegations that “[e]very year, Defendants issue a settlement, judgment, or award for tens of thousands of claims involving Medicare beneficiaries” while in “only a small fraction of these cases did either the beneficiary or the primary payer make payments to CMS, as required by the MSP statute” – implying that the defendants avoided their obligation to repay the government for a large fraction of beneficiaries who allegedly had not made hundreds of millions of dollars in payments to CMS.

The U.S. District Court for the Western District of New York ordered the plaintiff’s complaint unsealed in April 2014 after the U.S. government elected not to intervene in the proceedings. In October 2014, plaintiff filed an amended complaint naming nearly two dozen insurers, third party claims administrators, self-insured companies, and other risk managers as defendants. After defendants’ motions to dismiss plaintiff’s amended complaint were briefed in full, the Court heard oral arguments in early June, 2015.

The Court found that plaintiff’s lengthy complaint still suffered from a number of pleading deficiencies that violated Rule 8, including failing to make allegations specific to each defendant, since the complaint grouped “related corporations together without differentiating as to the involvement of each.” Moreover, the Court held that the complaint failed to properly allege the basis for a claim against any defendant, since it “does not identify any particular payment obligations which defendants have avoided (knowingly or otherwise).” Finally, the Court questioned the logic of plaintiff’s allegations – even assuming there were factual support for his claim that only a small fraction of Medicare beneficiaries repaid CMS each year – by pointing out that it would “still be unclear as to whether the remaining beneficiaries (who presumably did not repay) had received payments from any particular named defendant, or whether that defendant knew or should have known about the beneficiary’s failure to repay.”

The Weil team was led by David Yohai, co-head of Weil’s Complex Commercial Litigation practice, partner John Mastando, and partner Lori Pines, who argued the joint motion to dismiss before the Magistrate Judge. The team also included associates Jodi Barrow, Luna Ngan, and Tracy Ederer, all in New York.