A recent decision out of a California district court rejected an attempt by a former employee of a provider organization with nationwide operations to obtain nationwide discovery based on alleged misconduct occurring at the particular facility where the former employee worked.  The court’s thorough analysis is a model for other courts being asked to allow relators to subject defendants to expensive nationwide discovery based on generalized allegations that purported wrongdoing at a particular location was part of a nationwide pattern or practice.

The relators in Dalitz v. Amsurg Corp., No. 2:12-cv-2218-TLN-CKD, 2015 U.S. Dist. LEXIS 167788 (E.D. Cal. Dec. 14, 2015) allege that defendants violated the federal and California False Claims Acts when they falsely certified that they performed medical assessments and obtained comprehensive histories and physicals before performing surgical procedures at Redding Endoscopy Center (“REC”), an ambulatory surgery center (“ASC”) owned and operated by defendants.  The relators were former employees of REC. After the court denied the defendants’ motion to dismiss, the relators sought discovery and eventually filed a motion to compel on two issues.  First, relators sought to compel discovery relating to all of the ASCs owned and operated by defendant AmSurg Corp. nationwide, or alternatively, to all AmSurg ASCs in California.  Second, relators sought to compel discovery from January 1, 2008 through the present, while defendants argued that discovery should be limited to the time period during which relators were employed at REC.

Geographic Scope of Discovery

In the amended complaint, relators focused their allegations on the practices of physicians at REC.  However, they also alleged that AmSurg had issued a national directive to its ASCs to increase patient volume, which supported a “reasonable inference” that similar practices were occurring at other AmSurg locations throughout the country.  Relators argued that these allegations justified expansive, nationwide discovery.  The court determined that relators’ conclusory allegations of AmSurg’s national directive did not plausibly suggest that the alleged unlawful conduct had occurred outside of REC.  The court noted that the fact that the complaint alleged “facts showing the submission of false claims from only a single ASC more strongly implies that such practices were not widespread.”  Further, the court cited testimonial evidence that decisions about whether to obtain histories or other required assessments were made locally by the individual ASC, not by AmSurg national directives.  The court therefore rejected the relators’ attempts to expand the scope of discovery beyond the allegations against REC, finding that relators had failed to demonstrate the relevance of discovery relating to other ASCs.  The court also relied on the recently revised FRCP 26(b)(1), which requires that discovery be “proportional to the needs of the case.”  Given that each ASC separately maintains its own information, the burden on defendants to conduct an individualized collection from each ASC outweighed any tangential relevance of information from other AmSurg facilities.

Temporal Scope of Discovery

The court rejected defendants’ argument that discovery should be limited to the time period during which relators were employed by REC, finding that such a limitation would undermine the purpose of qui tam actions under the False Claims Act—to vindicate the government’s rights with regard to the defendants’ fraudulent conduct—and that relators’ allegations demonstrated that their claims concerned alleged fraudulent practices that occurred prior to, during, and after their employment at REC.  However, the court did not grant relators’ motion to compel discovery back from January 1, 2008 through the present, but rather limited discovery to a time period that was supported by the allegations in the complaint.  The amended complaint plausibly indicated that the alleged conduct began on December 5, 2008, the date on which REC began its operations, but did not suggest that the alleged activity continued beyond the date of that the action was filed.  The court therefore limited discovery to the period of December 5, 2008 through August 27, 2012.

A copy of the court’s opinion can be found here.