PHILADELPHIA – In adding to a schism among the country’s federal appellate courts, the U.S. Court of Appeals for the Third Circuit ruled Thursday that the U.S. government requires judicial approval to dismiss a whistleblower’s health care fraud case, brought on its behalf.
According to its unanimous opinion in Polansky Et.Al v. Executive Health Resources, Inc. Et.Al, Third Circuit judges Kent A. Jordan, Cheryl Ann Krause and L. Felipe Restrepo decided that a District Court is compelled to consider whether any party involved in a whistleblower lawsuit would be prejudiced by its dismissal.
This ruling stands in direct opposition to findings in similar cases from the U.S. Court of Appeals for the District of Columbia, which found that the federal government can end whistleblower cases at will – as well as findings made by the U.S. Courts of Appeal for the Ninth and Tenth Circuits, which decided the federal government had to show “a rational basis” for ending such cases.
The Third Circuit’s ruling affirmed the dismissal of whistleblower litigation filed by Jesse Polansky, who formerly worked for the U.S. Centers for Medicare and Medicaid Services and then Executive Health Resources, Inc.
In a federal lawsuit filed in the U.S. District Court for the Eastern District of Pennsylvania in 2012, Polansky alleged that his company falsely certified hospital admissions as medically necessary – a mandatory component to having such admissions reimbursed by the federal government. Polansky believed that these irregularities caused false claims to be submitted to the federal government.
Under the tenets of the False Claims Act, private whistleblowers are permitted to sue a company for fraud on behalf of the federal government. Whether the government intervenes in the case is left up to them, and the whistleblower receives a portion of any recovery of financial damages.
In Polansky’s case, the government opted not to intervene, but rather to dismiss the litigation in 2019 – a move made official by U.S. District Court for the Eastern District of Pennsylvania Judge Michael M. Baylson.
Polansky appealed to the Third Circuit, wanting the Court to illustrate a “rational relation” and a “valid government purpose” for dismissal, a viewpoint which had been reached by both the U.S. Courts of Appeal for the Ninth and Tenth Circuits.
In response, the federal government argued it could dismiss whistleblower lawsuits whenever it so chose.
But the Third Circuit’s perspective lay elsewhere, as it found that the federal government was no different than any other party looking to end a case late in the game, which is that motions to dismiss should only be granted if that action were not to prejudice any party in the relevant case.
“The District Court also adequately considered the prejudice to the non-governmental parties, concluding that, even though the litigation was at an advanced stage and significant resources had been expended on it by both the parties and the Court, there was little risk of prejudice to EHR because it supported the Government’s motion,” Krause stated.
“As for Polansky, the District Court considered his argument that, by dismissing the case, the Government was ‘leaving billions of dollars of potential recovery on the table,’ but concluded that there were ‘genuine concerns’that ‘the potential benefits he highlights will be realized,’ both because Polansky maintained he had significantly narrowed his claims and because the prospect of success was doubtful. The Court also noted that Polansky had engaged in potentially sanctionable conduct during the course of discovery, and that this ‘behavior was material and plays a role in the final disposition of this case.’
According to the Third Circuit judges, Baylson’s initial ruling was correct and should stand.
U.S. Court of Appeals for the Third Circuit case 19-3810
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com