Magistrate Recommends Takemoto False Claims Case be Dismissed with Prejudice
Roy Franco
June 25, 2015

A couple of weeks back we reported on the Defendant’s Motion to Dismiss this False Claims Act case (click here to see our prior blog).  This lawsuit brought by the former VP and General Manager of PMSI Settlement Solutions, Kent Takemoto, sought damages from casualty insurers, self insurers, and Third Party Administrators for their failure to comply with the Medicare Secondary Payer Act.   Finding the allegations conclusory and without any specificity to individual defendants, the Magistrate felt compelled to recommend dismissal.

During the hearing, Takemoto made an oral motion to reiterate his prior request to amend his pleadings.  This request was denied, primarily for two reasons.   One was because of prior conduct. When his False Claims complaint was unsealed, Takemoto requested leave to amend to add facts and reduce the number of defendants. The First Amended Complaint did not add any specificity and actually instead added more defendants. That appeared to have concerned the Court regarding whether such facts even exist. The second reason, however, was Takemoto’s counsel’s admission in open court that he was uncertain who the responsible defendants were exactly, and that the responsible defendants would be determined during the discovery process. This offended the notions of justice and fair play and was the final nail in the coffin for any opportunity for correction of the pleadings to get to the substantive issues.

Like other cases on which critical Medicare Secondary Payer issues would be determined, the court never gets to the merits. The bottom-line of whether any False Claims exposure exists for Non Group Health Plans is an open issue. We all know the exposures under the Medicare Secondary Payer law, but whether there are additional exposures under the False Claims Act will be left to another day and other litigation.

Conclusionary and general allegations against groups of defendants are not sufficient. Specifics are required if a realtor intends to connect the dots, and then only if the facts demonstrate the liability of the primary plan under the MSP law to avoid or under pay the obligation to Medicare. We will not know from this case whether 42 CFR 411.25, the regulation CMS amended shortly after Section 111 of the Medicare & Medicaid SCHIP Extension Act of 2007, has any consequences. This regulation discusses information a primary plan must send to Medicare (outside of Section 111 data) when liability is demonstrated. The apparent effect of this regulation is to allow CMS to develop conditional payment obligations as early as possible or improve coordination of benefits.  Whether this regulation implicates a False Claims Act will not be addressed by this case.

What is known is that the Parties to this action have until 7/13/2015 to file any objections.  No new facts can be alleged during this period, and at the end, the Magistrate’s report would be presented to the Judge assigned for a final decision.

The report and recommendation does not prejudice the Federal Government’s position in the case.   Conceivably, the Federal Government has the right to amend the pleadings, but that is unlikely considering it chose to not join in the litigation prior to it being unsealed. The takeaway from all of this is the unnecessary expense incurred by everyone.  The False Claims Act is intended to protect our government and the U.S. from fraudulent activities that increase burdens on taxpayers.  Whistleblowers have a role to play in that process, but they must have specific facts of the fraud or concealment.  Making general allegations is harmful to the important purpose of this law, and in our opinion the right decision was made.

It should be noted that another False Claims Act MSP case, United States, ex. rel. J. Michael Hayes v. Allstate Insurance Company, et al., which named over 20 liability insurance carriers and trucking companies that self-insure, is still pending and still not yet resolved. We will be continuing to monitor the Hayes case and any other False Claims Act MSP cases that may arise in the future.


Roy A. Franco

Chief Client Officer

Franco Signor LLC