MD Tenn denies limitations-based motion to dismiss in home health case

by bvernia | October 20th, 2009

In an opinion issued on October 13, Senior District Judge Thomas A. Wiseman, Jr. in Nashville ruled in favor of the government, denying the motion to dismiss of home health agencies and their owners.

In its suit, the US alleges that, in filing cost reports a decade ago, the home health agencies concealed the ownership relationship between them and their management company. The defendants argued that the FCA and common-law claims were barred by the statute of limitations.

The Court first concluded that, under the FCA, the “official charged with responsibility to act” on information concerning fraud must be a Justice Department official. (The US had argued that the official must also be within the Civil Division, but this was not a material issue in the case before the Court.)

After reaching this conclusion, the Court then reasoned that the Medicare carrier’s knowledge of the related status was insufficient to trigger the running of the limitations period, particularly because that knowledge predated the cost reports of which the US complained.

With respect to common-law claims for unjust enrichment, the Court held that the six-year period for quasi-contractual actions, and not the three-year period for tort cases, controlled the case.

Finally, applying Tennessee state law, the Court held that the US had adequately pleaded allegations that a family trust of the agencies’ owner was an alter ego and could be held liable for the owner’s conduct.

The US is represented by Fraud Section Trial Attorney Susan Lynch, and by Edward Yarbrough and Ellen Bowden of the Middle District’s US Attorney’s office.

William Bridger and Bill Ramsey of Neal & Harwell, James Price of Price, Hill and Kolarich, and Charles Malone, Kathryn Sasser of Walker, Tipps & Malone — all of Nashville, along with John Konvalinka, James McDearman, and Tonya Kennedy Cammon of Chattanooga’s Grant, Konvalinka and Harrison represent the defendants.

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