USA and Dr. Alfred Aflatooni v. Kitsap Physicians Service, et al.

It seems to be a fairly obvious notion that a False Claims
Act suit ought to require a false claim. Yet, the plaintiffappellant
in this case filed his action, proceeded to summary
judgment, and prosecuted this appeal without ever seeing or
presenting to a court a single false claim submitted by the
defendants-appellees. This flaw is fatal to a qui tam1 action
under the False Claims Act.

Dr. Alfred Aflatooni appeals the summary judgment dismissal
of his False Claims Act lawsuit brought against two
physician groups and three doctors. The district court dismissed
Aflatooni's action because he failed to produce a single
false claim submitted by the defendants. Aflatooni
contends that (1) the district court should have given him
more time pursuant to Federal Rule of Civil Procedure 56(f)
to gather evidence because the defendants engaged in spoliation
of the allegedly false documents and (2) the district court
erred in entering summary judgment because Aflatooni demonstrated
by implication that the defendants must have submitted
false medical bills to the government.

* * *

Dr. Aflatooni initiated this action in January 1996, acting
as a qui tam relator under the federal False Claims Act, 31
U.S.C. §§ 3729-3733. Aflatooni named multiple defendants,
including the appellees in this case: Kitsap Physicians Service
("Kitsap"), Pathology Associates of Kitsap County
("PAKC"), Dr. Hallman, Dr. Case, and Dr. Matan. In addition,
Aflatooni named Northwest Diagnostic Imaging as a
defendant. The government later chose not to intervene.2

Aflatooni alleged that more than ten years earlier, from
1985 through 1987, the defendants submitted false bills to
Medicare for medical services provided by defendants. In
February 1997, the defendants moved for dismissal due to
lack of subject matter jurisdiction. The defendants argued that
because any fraud alleged was public knowledge, Aflatooni
could not proceed with his qui tam action. The district court
dismissed Aflatooni's case on this ground. We reversed the
district court as to all the defendants except Northwest Diagnostic
Imaging. United States ex rel. Aflatooni v. Kitsap Physicians
Services, et al., 163 F.3d 516 (9th Cir. 1999). We held
that only the allegations as to Northwest Diagnostic Imaging
had been publicly disclosed. The case was remanded.

The parties conducted sporadic discovery until the defendants
moved for summary judgment on September 6, 2001.
The defendants based their motion on (1) Aflatooni's failure
to produce evidence of a single false claim and (2) his failure to bring the action within the statute of limitation. The district
court heard oral argument on October 17, 2001.

Dr. Aflatooni presented the trial court with limited evidence
relating to his claims. He relied almost entirely on a letter
from Dr. John P. Matan (now deceased), dated April 8,
1987, and later statements made by the recipient of the letter,
Robert Wilson, president of Kitsap. The letter stated in its
entirety:

On 4/4/87, I became aware that many of my anatomic
pathology billings through [PAKC] have been
altered without my knowledge or consent. This was
performed by my partner, Dr. Hallman, and has
apparently gone on since the inception of [PAKC].

This notice is not to be construed in any way as
alleging fraud or any other [illegal] activity by Dr.
Hallman nor is it meant to imply a loss to the carrier.
This notice is meant to disclaim any knowledge or
consent of any possible illegal or unethical activities
resulting from this action and to state that the billings
for this period under my name do not reflect
my personal fee profile or the actual work performed
in many instances.

In response to this letter, Kitsap engaged attorney John
Guadnola to conduct an internal investigation. Guadnola testified
on deposition that his investigation was free from influence
by Kitsap and individual doctors, and Guadnola selected
without interference nearly 1,000 medical records to review
for improper billing. Guadnola concluded that "there was no
fraud," that all adjustments to bills were appropriate, and that
the general trend of any adjustments was to reduce the amount
claimed in the bill. For example, Guadnola found that of the
523 November 1985 bills he reviewed, there were only two
occasions in which the bill upwardly adjusted the number of slides reviewed by a pathologist and there were at least fifty
downward adjustments.

Aflatooni argues on appeal that the entire Guadnola investigation
was a sham, based on a 1997 declaration of a healthcare
administrator, an expert whom Aflatooni engaged to
assess the propriety of the investigation. However, because
Aflatooni failed to present this evidence to the district court
in opposition to the motion for summary judgment, either in
his written briefs and affidavits or at the summary judgment
hearing, he has waived this argument on appeal. See, e.g.,
Carmen v. San Francisco Unified Sch. Dist., 237 F.3d 1026,
1029 (9th Cir. 2001) (a "district court is not required to comb
the record to find some reason to deny a motion for summary
judgment") (quotation omitted); Peterson v. Highland Music,
Inc., 140 F.3d 1313, 1321 (9th Cir. 1998) ("We apply a ‘general
rule' against entertaining arguments on appeal that were
not presented or developed before the district court.").

Aflatooni did present to the district court a memo written
by Wilson after receiving Matan's April 1987 letter. Wilson
met with Matan at that time, and Matan indicated to Wilson
that PAKC submitted about 10,000 bills a year, any of which
could have been altered without Matan's knowledge. Aflatooni
also claimed that Wilson later personally told him that
about a quarter of the 10,000 bills a year may have been
altered to receive more compensation.

Dr. Keith Hallman, the physician who allegedly altered
Matan's bills to defraud Medicare, testified on deposition that
Hallman reviewed Matan's bills in accordance with Hallman's
role as managing partner and exercised his reasonable
professional judgment to sometimes adjust Matan's bills.
Hallman also swore that "I have never knowingly billed for
services that were not provided or inaccurately identified services
to be billed."

Aflatooni also contends on appeal that he presented sufficient
evidence of fraud committed by Northwest Diagnostic Imaging, the party that was dismissed from the case in 1997
on jurisdictional grounds. Aflatooni alleged that Northwest
Diagnostic Imaging was forced to pay a penalty of around
$150,000 for overcharging Medicare. Northwest Diagnostic
Imaging was controlled by Kitsap, which also controls PAKC.
Aflatooni argues on appeal that he has therefore established
a pattern of fraud by Kitsap that also extends to PAKC. Aflatooni's
urging of this evidence for the first time on appeal
cannot create a triable issue of fact because he failed to articulate
this evidence to the district court in opposition to the
summary judgment motion. See Carmen, 237 F.3d at 1029;
Peterson, 140 F.3d at 1321.

At the October 17, 2001, summary judgment hearing, Aflatooni
raised the issue of evidence spoliation and requested
that an evidentiary hearing be conducted on that issue. At no
point did Aflatooni make a Rule 56(f) motion, orally or in
writing, or file a supporting affidavit explaining why additional
time for discovery was needed to respond to the summary
judgment motion.

The district court granted defendants' motion and dismissed
Aflatooni's case. The court found that Aflatooni presented
"no evidence to support the claim that defendants filed
a single claim in violation of the False Claims Act." The district
court rejected defendants' argument that Aflatooni's
claims were barred by the statute of limitation. The court also
rejected Aflatooni's suggestion for an evidentiary hearing to
examine his claims of spoliation, stating that "Defendants
have offered credible reasons for the destruction of the
records, i.e. the retention policy in accordance with both State
and Federal Regulations, and storage accommodation." The
court also rejected Aflatooni's spoliation claims because
"[t]he trial date was scheduled at a date beyond that requested
by [Aflatooni]. [Aflatooni's] failure to seek the documents
basic to his 15 year old claims (or suspicions) and his 6 year
old lawsuit cannot be blamed on the defendants."

* * *

To avoid adverse summary judgment on his qui tam
action, Aflatooni at least must present material questions of
fact as to each of the following elements: (1) defendants made
a claim against the United States (2) that was false or fraudulent
(3) with knowledge of the falsity or fraud. United States
ex rel. Oliver v. The Parsons Co., 195 F.3d 457, 461 (9th Cir.
1999). A failure to raise a triable issue of fact as to any of
these three elements justifies the summary judgment dismissal
of Aflatooni's claims. See Hagood v. Sonoma County Water
Agency, 81 F.3d 1465, 1477-79 (9th Cir. 1996) (affirming
summary judgment in favor of defendants of False Claims
Act suit and analyzing the "falsity" and "knowledge" elements
independently); Wang ex rel. United States v. FMC
Corp., 975 F.2d 1412, 1420-21 (9th Cir. 1992) (affirming
summary judgment in favor of defendants in a False Claims
Act suit solely because the plaintiff failed to establish a triable issue as to the "knowledge" element). As we said in Wang,
"[t]o survive summary judgment, [the relator] must establish
evidence on which a reasonable jury could find for the plaintiff."
Id. at 1420 (emphasis in original).

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Click the case caption above for the full text of the Court's opinion.

The district court’s summary judgment dismissal of
Aflatooni’s action is AFFIRMED.

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