HLD, v. 33, n. 2 (February 2005)
U.S. Court In California Finds Defendants Collaterally Estopped From Denying
Liability Under FCA After Criminal Conviction
St. Luke's is a subacute nursing
facility located in California.
In 1995, the Department of Health and Human Services (DHHS) Office of Inspector
General began an investigation into St. Luke's and found that it was inflating
the cost of nursing services that it provided to Medicare beneficiaries and
fabricated nursing schedules to support the false claims. Based on the
investigation, a grand jury returned a six-count indictment against St. Luke's
and its CEO charging defendants with conspiracy to defraud the Medicare
program, submitting false Medicare claims, knowingly and willfully making false
statements to Medicare auditors, and obstructing a federal audit. A jury found
defendants guilty on all counts. The United States then filed a civil
action under the False Claims Act (FCA). The action was stayed pending the
outcome of the criminal charges. Once the stay was lifted, the United States
moved for partial summary judgment on the issue of defendants' liability under
The U.S. District Court for the Northern District of
California granted the summary judgment motion. The court first addressed the
government's first argument that collateral estoppel
precludes the defendants from denying their liability for civil damages and
penalties under the FCA. The issue, said the court, "is whether the 'essential
elements' of the offense of which defendants have been convicted are sufficient
to establish their liability in the civil action."
In order to prove its first allegation of an FCA violation,
the United States must prove
"(1) a false or fraudulent claim; (2) which was presented, or caused to be
presented, by the defendant to the United States for payment or
approval; (3) with knowledge that the claim was false." In its verdict, the
jury found each of those allegations to be true, therefore the FCA's collateral estoppel
provision has been met and precludes the defendants from denying their
liability in the civil action, said the court. The defendants next argued that
it would be unfair to rely on collateral estoppel
while their appeal of their criminal conviction is pending. The court
disagreed, finding fairness not an issue "absent a degree of unfairness that
rises to the level of a due process violation."
The court went on to find that defendants were estopped from denying their liability on the remaining
civil charges based on the verdict in the criminal case. Accordingly, the court
granted partial summary judgment to the United States.
United States v. St. Luke's Subacute Hosp. and Nursing
Ctr., No. C 00-1976
MHP, 2004 WL 2905237 (N.D. Cal.
Dec. 16, 2004).