Kinetic Concepts defeats False Claims Act case

After a case brought under the False Claims Act lingered for more than 11 years, a federal judge has granted summary judgement to a medical company accused of defrauding the government by altering insurance billing codes.

The ruling seemingly would bring the saga to a conclusion but U.S. District Judge Christina Snyder of the Central District of California wasn't so sure.

"One thing I am clear about is that however I rule in this case, grant or deny summary judgment, there will be an appeal," she said at a hearing in March.

Filed in 2008 by former employee Steven J. Hartpence, the suit alleges Kinetic Concepts Inc. and KCI USA Inc. defrauded Medicare programs by altering medical billing codes relating to its vacuum wound therapy.

The case has persisted through multiple challenges. It was dismissed in 2012 after another federal judge ruled the allegations brought by the accuser were based on information already publicly disclosed.

In 2013, previous counsel for the whistleblower, Mark Allen Kleiman, failed to abide by California Bar standards for "privileged documents" and was disqualified from further proceedings. U.S. et al., v. Kinetic Concepts Inc., 08-CV01885 (C.D. Cal., filed March 20, 2008).

However, in 2015, after attorney Mark I. Labaton of Glancy Prongay & Murray LLP took over the case and filed an appeal, an en banc panel of the 9th U.S. Circuit Court of Appeals reversed the district court's decision, narrowing the reach of two significant bars to bringing qui tam lawsuits under the False Claims Act.

The "original source" exception does not require the "whistleblower" to have played a role in the public disclosure, the panel ruled.

In March, Snyder issued a tentative order granting summary judgment in KCI's favor.

At the hearing, Labaton argued the tentative order missed certain material facts. Snyder allowed Labaton leave to file a supplemental brief, identifying what he believed she overlooked.

After receiving the supplemental brief, Snyder said Labaton included several exhibits that were not before the court in either party's earlier briefs and that, "In contravention of the Court's explicit directions at the hearing, Hartpence included new legal arguments in his supplemental brief."

She subsequently granted summary judgment in KCI's favor.

"We are disappointed and will be discussing with our client how to proceed in the near future," Labaton said Tuesday in a phone interview.

A spokesperson for Gregory M. Luce, a partner at Skadden Arps Slate Meagher & Flom LLP and Affiliates who represented Kinetic Concepts, said Tuesday the attorney was unable to comment on the ruling.

-- Blaise Scemama