Dismissal of Medline Industries False Claims Act Case Upheld

The Seventh Circuit upheld the dismissal of a suit filed in 2011 under the False Claims Act on January 4, 2016, finding the Relator was merely adding details to a prior kickback suit remarkably similar to his own.  Bogina v. Medline Industries, Inc., No. 15-1867 (7th Cir. 2016).  Thus, Relator Bogina failed the “original source” requirement as he was not “an individual who has direct and independent knowledge of the information on which the allegation [in his complaint] are based.”  31 USC § 3730(e)(4)(B).  Defendant Medline Industries, Inc. had previously settled a 2007 suit brought by Sean Mason, an employee of Medline, where it had been charged with giving bribes and kickbacks to purchasers of its medical equipment who provided services reimbursed by Medicare and Medicaid.  Without admitting liability Medline settled with the government for $85 in compensation.  Judge Posner found the two suits remarkably similar and that the government was on notice of the possibility of a broader bribe kickback scheme before Bogina sued.  Had the government chosen to broaden the case against Medline beyond the settlement with Mason it could have gone after other Medline customers such as those named in Bogina’s claims that allegedly received kickbacks.  As Posner noted, the settlement with Medline released it from some of the very claims alleged in Bogina’s complaint.  Despite Bogina’s claim that the fraud continues to the present day and that other nursing facilities were involved, these allegations were “on information and belief.”  And as Rule 9(b) of the Federal Rules of Civil Procedure require “in alleging fraud  .  .  . a party must state with particularity the circumstances constituting fraud.’’ Allegations based on “information and belief” won’t do in a fraud case for it can means as little as “rumor has it that . . .”

Full decision available for review: http://media.ca7.uscourts.gov/cgi-bin/rssExec.pl?Submit=Display&Path=Y2016/D01-04/C:15-1867:J:Posner:aut:T:fnOp:N:1680761:S:0.

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