United States of America, et al. v. D.S. Medical, LLC, et al.

Cape Girardeau, Missouri qui tam lawyers represented Plaintiffs, who sued Defendant on a False Claims Act violation theory.



There are several ways to prove that a claim is "false or fraudulent” under the

False Claims Act. 31 U.S.C. § 3729(a)(1). One of them is to show that it "includes

items or services resulting from a violation” of the anti-kickback statute. 42 U.S.C.

§ 1320a-7b(g) (emphasis added). This case requires us to determine what the words

"resulting from” mean. We conclude that it creates a but-for causal requirement

between an anti-kickback violation and the "items or services” included in the claim.



* * *



Sonjay Fonn is a neurosurgeon in Cape Girardeau, Missouri. To treat

degenerative-disc disease and other spinal disorders, he uses spinal implants. The

implants, which stabilize the spine, are made by multiple manufacturers. Deciding

which to use has important economic consequences for implant distributors, who

earn hefty commissions with every sale. This puts Dr. Fonn and his practice,

Midwest Neurosurgeons, in a powerful position.



Dr. Fonn chose to use implants distributed by DS Medical, a company wholly

owned by his fiancée, Deborah Seeger. The arrangement was lucrative, even though

Dr. Fonn was her only large customer. In just a single year, she made $1.3 million

in commissions from one manufacturer alone. For his part, Dr. Fonn received an

offer to purchase company stock from the same manufacturer. Once the sale went

through, he ordered more implants.



Physicians in other practices grew suspicious of Dr. Fonn's high implant use,

not to mention his cozy financial relationship with Seeger. They filed complaints

against him, Midwest Neurosurgeons, Seeger, and DS Medical under the False

Claims Act, 31 U.S.C. § 3729 et seq., and other laws. The United States then

intervened and filed its own complaint. See 31 U.S.C. § 3730(a), (b)(2), (b)(4)

(providing that the government may intervene and conduct the litigation).



The complaint consisted of five claims. The first three, which arose under the

False Claims Act, alleged that the couple and their businesses submitted false or

fraudulent Medicare and Medicaid claims after violating the anti-kickback statute,

42 U.S.C. § 1320a-7b(b), (g). The last two claims, which were equitable in nature,

alleged unjust enrichment and payment under a mistake of fact.



A jury heard the first three claims. After each side presented its case, the

district court instructed the jury that the government could establish falsity or fraud

once it proved, by a preponderance of the evidence, "that the [Medicare or Medicaid]

claim failed to disclose the [a]nti-[k]ickback [s]tatute violation.” The jury returned

a verdict for the government on two of the three claims. The district court then

awarded treble damages and statutory penalties in the amount of $5,495,931.22.



Following the verdict, the government moved to dismiss its two remaining

claims without prejudice, see Fed. R. Civ. P. 41(a)(2), on the ground that any

recovery would be "smaller and duplicative of what the [c]ourt ha[d] already

awarded.” Unfortunately, the district court "inadvertently failed to rule on the

government's motion” before the defendants filed an appeal, so we remanded. The

government got its wish the second time around—a dismissal without prejudice—

and the defendants have appealed again.

Reversed.