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United States ex rel. Babalola v. Sharma

United States Court of Appeals, Fifth Circuit

February 14, 2014

UNITED STATES OF AMERICA, ex rel; SAMUEL BABALOLA; KAYODE SAMUEL ADETUNMBI, Plaintiffs - Appellants
v.
ARUN SHARMA, doing business as Allergy Asthma Arthritis & Pain Center; KIRAN SHARMA, doing business as Allergy Asthma Arthritis & Pain Center, Defendants-Appellees UNITED STATES OF AMERICA, Appellee

Appeal from the United States District Court for the Southern District of Texas

Before KING, BENAVIDES, and DENNIS, Circuit Judges.

FORTUNATO P. BENAVIDES, Circuit Judge:

This appeal is from the grant of partial summary judgment in favor of the United States in a qui tam action under the False Claims Act. The two relators filed the instant suit against their former employers, alleging that the defendants had defrauded the Government by filing tens of millions of dollars in fraudulent Medicare and Medicaid claims. Prior to the filing of this qui tam suit, the Government had criminally prosecuted the instant defendants for fraud and obtained a multi-million dollar award of restitution. The sole issue on appeal is a question of first impression in the Fifth Circuit. The question is whether the district court properly held that, because there was no qui tam complaint in existence at the time the Government pursued criminal charges against the defendants, the criminal proceeding did not constitute an "alternate remedy" under 31 U.S.C. § 3730(c)(5), and thus, the relators had no right to share in that recovery. We agree with the district court and hold that because there was no qui tam action pending at the commencement of the restitution proceeding, the restitution proceeding does not constitute an alternate remedy under the statute. We therefore affirm the partial summary judgment and remand for further proceedings.

I. BACKGROUND

The two relators, Samuel Babalola and Kayode Samuel Adetunmbi, had practiced medicine in Nigeria before immigrating to the United States. The relators worked as medical assistants for the defendants, Dr. Arun Sharma and Dr. Kiran Sharma, at the defendants' two medical clinics located in Baytown and Webster, Texas. During their employment, the relators witnessed the Sharmas filing fraudulent claims with Medicare, Medicaid, and private insurance companies. In 2007, based on their observations, the relators drafted an anonymous letter setting forth details of the fraudulent claims the Sharmas submitted to Medicare, Medicaid, and various private insurance companies. The relators sent this letter to various government agencies.

Subsequently, the Government conducted a criminal investigation with respect to the allegations in the letter. On July 16, 2009, a federal grand jury indicted the Sharmas, charging them with 64 counts of conspiracy, healthcare fraud, and other federal crimes. Thereafter, in the course of the investigation, the Government contacted the relators and asked them whether they had worked for the Sharmas and had any information with respect to the allegations of fraud in indictment. The relators met with the representatives from the FBI, DEA, and the United States Attorney's Office regarding the allegations. The relators agreed to testify at trial against the Sharmas. However, on April 26, 2010, the Sharmas both pleaded guilty to conspiracy to commit healthcare and mail fraud and one substantive count of health care fraud in violation of 18 U.S.C. §§ 371 and 1347. In February 2011, at their sentencing, the district court ordered the Sharmas to pay over $43 million in restitution to Medicare, Medicaid, and certain private insurers. The Sharmas appealed, and this Court vacated the restitution order and remanded the case to the district court for a recalculation of restitution because the "amount exceeded the insurers' actual losses by millions of dollars." United States v. Sharma, 703 F.3d 318, 327 (5th Cir. 2012), cert. denied, No. 12-1312, 2013 WL 5507456 (October 7, 2013).

Meanwhile, on November 17, 2011, while the Sharmas' direct criminal appeal was pending, the relators filed the instant suit against the Sharmas under both the False Claims Act ("FCA"), 31 U.S.C. 3729 et seq., and the Texas False Claims Act based on the same fraudulent claims that the relators had set forth in the anonymous letter (and also the basis of the Sharmas' criminal convictions). Both the Government and Texas[1] declined to intervene in the qui tam action. See 31 U.S.C. § 3730(b)(2). Pursuant to statute, the complaint remained under seal until the district court ordered that it be served on the defendants. Id.

On May 1, 2012, the relators filed a motion to compel depositions of certain Department of Justice employees. In this motion, the relators asserted that "discovery on the issue of relator's share is proper at this time because the only dispute before the Court is whether relators are entitled to a share of the criminal forfeiture previously obtained by the United States from Defendants as an alternate remedy under 31 U.S.C. § 3730(c)(5)."

The Government filed a motion for partial summary judgment, arguing that, as a matter of law, the relators were not entitled to a share of the restitution that was awarded in the Sharma's criminal case prior to the filing of the instant FCA action. The district court granted the motion, holding that because there was no valid FCA complaint in existence at the time the restitution was awarded to the Government, the criminal proceeding did not constitute an "alternate remedy" under 31 U.S.C. § 3730(c)(5), and thus, the relators had no right to share in that recovery. The relators then filed a motion to certify a permissive interlocutory appeal, and the district court granted it. 28 U.S.C. § 1292(b). This Court subsequently granted the relators leave to appeal from the interlocutory order on April 5, 2013.

On June 6, 2013, in the criminal proceedings, the district court re-sentenced the Sharmas, and ordered restitution in the amount of $37, 636, 436.39. The Sharmas appealed the amended judgment, including the order of forfeiture and restitution, and that appeal is currently pending before this Court. United States v. Sharma, et al., 13-20325.

II. ANALYSIS

A. Standard of Review

The relators contend that the district court erred in granting the Government's motion for partial summary judgment. This Court reviews a district court's ruling on summary judgment de novo, applying the same standard as the district court. See, e.g., Hirras v. Nat'l R.R. Passenger Corp., 95 F.3d 396, 399 (5th Cir. 1996). Summary judgment is proper if the record reflects "that there is no genuine issue as to any ...


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