for related billing (August 7, 2013). The relator argued that the investigation underlying the indictment concerned the neurosurgeon ’s conduct rather than the hospital’s alleged conduct, and thus, the August 2013 indictment date did not hold significance for purposes of the second prong of § 3731(b). The district court rejected this argument, holding that because both the neurosurgeon and GSH allegedly participated in the same fraudulent scheme, the government reasonably should have known of the facts underlying the hospital’s role in the scheme once it uncovered enough evidence to indict the neurosurgeon in August 2013. 163
The district court reached the same conclusion to stay discovery pending resolution on the motions to dismiss in Fernandez v. Freedom Health, Inc. , noting its “preliminary peek” at the merits of the motions to determine whether a stay was warranted “suggests that the pending motions to dismiss may result in dismissal of the Complaint as currently pleaded.” 165 In U.S. ex rel. Williams v. Medical Support Los Angeles, Inc. , the district court also exercised its inherent authority to stay discovery pending resolution of a motion to dismiss, adopting the reasoning that while in most cases postponing discovery when a motion to dismiss is pending “does not make sense,” “False Claims Act cases are different.” The district court noted that staying discovery pending resolutions of motions to dismiss in the FCA context supports one of the purposes of Rule 9(b)’s particularity requirement, which is to inhibit the filing of a complaint as a pretext for the discovery of unknown wrongs. In U.S. ex rel. Zafirov v. Florida Med. Assocs. LLC , the district court’s rationale for staying discovery until a ruling on the pending motion to dismiss was more straightforward than philosophical. The district court simply noted, “a stay will allow the undersigned to better manage this inherited case.” 166 By contrast, in United States v. Insys Therapeutics, Inc. , the district court refused to issue a stay pending resolution of the defendants’ respective motions to dismiss, finding the burden to the defendants did not outweigh considerations related to the inconvenience and expense inherent in requiring a revised 26(f) report and amending the scheduling order in the case. The district court reasoned that the defendants had not offered any specific, non-stereotypical statements in support of a stay and stated it was not convinced that the plaintiff would be unable to state a claim against the relevant defendants. 167 In U.S. ex rel. Bell v. Cross Garden Care Center, LLC , the district court denied the relator’s request to stay any ruling on the defendants’ pending motion for summary judgment before resolving discovery-related litigation between the government and a former defendant and the government’s final intervention decision. While the case was under seal, the United States brought an action to enforce a Civil Investigative Demand (CID) seeking documents from a former defendant, Cross Senior Care. The Eleventh Circuit affirmed the district court’s order requiring production of documents and remanded to the district court to set a timeframe for production. At the time of the relator’s request for a stay, the mandate still had not been issued. The relator argued that a stay was appropriate because: (1) the CID documents would “bolster [her] summary judgment motion or at least establish material issues of fact that could defeat the motion against her,” and (2) the United States’ notice of declination noted it would only make its final intervention decision after its investigation, so she would not be able to participate in any eventual reward should the summary judgment motion be decided in the defendant’s favor and the government later intervene. The district court rejected the motion for stay, reasoning: (1) the defendants’ summary judgment motion was filed after the parties completed discovery and not premature; (2) the relator had not diligently pursued the documents subject to the CID during discovery or sought to extend the discovery deadline; and (3) the relator’s vague assertions that additional discovery would
DISCOVERY
Motions to Stay Because of heightened pleading standards in FCA cases, courts often face motions to exercise their discretion to stay discovery pending resolution of pending motions to dismiss. In such circumstances, courts weigh the harm in delaying discovery with the possibility that the motion will be granted and significantly narrow the issues in dispute, dispose
of the entire case or enable the filing of an amended complaint. In the FCA context, many courts recognize that the pleading requirements imposed by Rule 9(b) will be a “nullity” if the relators receive a ticket to the discovery process without identifying a single claim, and will grant motions to stay based on this consideration when the pending motions challenge the legal sufficiency of the underlying complaint on particularity grounds. In one such case, U.S. ex rel. Ernst v. College Park Ancillary, LLC , the magistrate judge granted the defendants’ motion for a stay of discovery pending ruling on the defendants’ motion to dismiss. Recognizing the general rule that discovery is not stayed based merely on the pendency of dispositive motions, the magistrate
Because of heightened pleading standards in FCA cases, courts often face motions to exercise their discretion to stay discovery pending resolution of pending motions to dismiss.
judge nevertheless found that the defendants established that a stay was appropriate by “set[ting] out in detail” why the complaint suffered from the same pleading deficiencies as the original and first amended complaint. The magistrate judge agreed that the dispositive motion “very possibly could finally conclude the case” or at least narrow the issues. The magistrate judge acknowledged that a stay of discovery supported the purposes of Rule 9(b), because “allowing non-particular fraud claims to proceed to discovery defeats Rule 9(b)’s purposes of bringing an early end to frivolous claims which bring reputational damage.” 164
165 2021 WL 2954309 (M.D. Fla. Mar. 25, 2021). 166 2021 WL 2401937 (M.D. Fla. June 11, 2021). 167 2021 WL 4307404 (C.D. Cal. Apr. 14, 2021).
163 2021 WL 4262342 (S.D. Ohio Sept. 19, 2021). 164 2021 WL 533830 (D. Kan. Feb. 12, 2021).
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