Relators in False Claims Act ('FCA") cases are always looking for more discovery in order to expand their qui tam claims and put pressure on the defendants, especially in health care qui tam cases where the FCA penalties can easily dwarf any damage claims. Thankfully, courts in FCA cases are increasingly willing to impose reasonable limits for both the geographic scope and time period for discovery. See e.g., here and here.
A recent example of this trend may be found in the case of Douglas Dalitz et al. v. Amsurg Corp., et al, 2:12-cv-2218-TLN-CKD (December 15, 2015, E.D. CA). In Dalitz, the Court refused to permit the relators to conduct nationwide discovery when they had only alleged FCA violations at one California location of the defendants. The Court also rejected the relators' request for 8 years of discovery and confined the scope of discovery to a much shorter period.
The Court based its ruling primarily on three different factors. First, the Court relied on the recent amendment to Rule 26(b)(1) which provides that discovery be "proportional to the needs of the case." Second, the Court limited discovery in large part based upon its reading of the relators' complaint and its "factual" allegations. Third, the Court relied on an affidavit submitted by the defendants which explained that their business was made up of ambulatory surgical centers ("ASCs") throughout the country; that local management operated each ASC; and that there was no central "database" for all locations.
The Court confined relators' geographic discovery to the only ASC alleged in their complaint and denied the relators' request for nationwide discovery or, alternatively to discovery of defendants' 14 California locations. In limiting geographic discovery, the Court observed:
- Relators' factual allegations were confined to the one California location at which they worked and there were no factual allegations to back up their claim that the fraudulentconduct they observed was the "standard practice of the entire . . .corporate enterprise";
- Defendants' affidavit further explained that "clinical management and billing operations" of each their locations was handled locally by the physicians or Board of each ASC and thus not "dictated by [defendants'] national directives";
- Nationwide discovery in the 34 states where defendants operated would be an "extreme burden" on defendants because there was "no central nationwide database from which they can obtain the requested documents from each ASC"; and
- That state-wide discovery of all 14 California locations was "still disproportionate to [relators'] need" because relators' "allegations almost exclusively centered on defendants' actions" at the one location.
The Court also limited the temporal scope of discovery sought by relators. Relators had requested discovery from January 1, 2007 to the present, but the Court confined discovery to the period of December 2008 to August 2012. The Court rejected the defendants' request to limit discovery to the relators' 5 month period of employment from late 2010 to early 2011 because the relators' complaint "demonstrated" that the "alleged wrongful behavior" occurred prior to and continued after the relators had left. Yet, the Court noted that relators had not shown why discovery "relating back to January 1, 2008" was warranted, since the defendants' had not acquired the location until December of that year. In turn, the Court did not permit relators to pursue discovery after the date on which they filed their original complaint because the complaint itself "repeatedly refers to those actions in the past tense, strongly suggesting that [relators] claims are limited to the time frame prior to the date on which this action was initiated."