U.S. EX REL RAHMAN v. ONCOLOGY ASSOCIATES, (D.Md. 1999)

Senior United States District Judge.

Before the Court for a ruling in this False Claims Act ("FCA") case is the motion of plaintiff United States of America for leave to amend its complaint. A memorandum of law in support of that motion has been filed by the government, and defendants have recently submitted a memorandum in opposition. To avoid any further delay in these proceedings, the Court will rule on this motion without awaiting a reply memorandum from the government and without holding a hearing. See Local Rule 105.6. Following its review of the parties' memoranda and plaintiff's proposed First Amended Complaint, this Court has concluded that plaintiff's motion for leave to amend its complaint must be granted.

In its proposed First Amended Complaint, the government seeks to add as defendants fifteen additional entities to which assets of the original defendants have allegedly been fraudulently transferred. In addition, the government seeks to add as defendants Skyline Oncology Associates, P.C. ("Skyline") and Malone Oncology Associates, P.C. ("Malone") which are allegedly controlled by defendants Colkitt and EquiMed, Inc. and which were allegedly involved in defendants' scheme to defraud Medicare. Two new counts would be added by the proposed First Amended Complaint. One new count charges the fifteen new defendants and EquiMed, Inc. with violations of the fraudulent transfer provisions of the Federal Debt Collection Procedures Act (the "FDCPA"), 28 U.S.C. § 3301,et seq. The other new count alleges against twelve of the fifteen new defendants and against defendant EquiMed, Inc. a FCA claim based on a theory of successor liability.

Rule 15(a) of the Federal Rules of Civil Procedure is controlling. An answer has been filed by the defendants in this case, and leave of court is therefore required before the government's complaint may be amended. Id. Rule 15(a) explicitly provides that leave to amend "shall be freely given when justice so requires."

In the leading case of Foman v. Davis, 371 U.S. 178, 182 (1962), the Supreme Court recognized that the granting or denial of a request to amend a pleading is within the discretion of the district court. The Supreme Court further said:

If the underlying facts or circumstances relied upon by plaintiff may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits. In the absence of any apparent or declared reason — such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc. — the leave should, as the rules require, be "freely given."

Applying the above principles to the circumstances here, this Court has concluded that the government should be granted leave to amend its complaint. The government's motion has been timely filed. The Revised Scheduling Order of April 23, 1999 required that motions seeking to join other parties or to amend pleadings should be filed within 30 days of the date of the Order. The government's pending motion was filed within that 30-day period. As the record here indicates, the litigation phase of this case is in its early stages. The Revised Scheduling Order was entered only some two months ago, and the cut-off date for discovery has been set for January 31, 2000. A final pretrial conference has been scheduled for April 20, 2000, and the jury trial is set to commence May 15, 2000.

The new claims alleged in the proposed amended complaint are closely related to the claims asserted by the government in the original complaint. The underlying facts and circumstances relied upon by the government in the proposed amended complaint may be a proper subject of relief, and the government should therefore be afforded an opportunity to test its new claims on the merits.Foman, 371 U.S. at 182. According to the government, it has only recently learned of efforts taken by EquiMed, Inc. and other defendants to transfer assets by way of mergers or reorganizations for the alleged purpose and intent of hiding assets and defrauding creditors. Based on evidence of such activities, the Court entered a Temporary Restraining Order in this case on March 15, 1999. According to the government, assets of the original defendants have been transferred to entities which were newly formed after the government revealed to the defendants the existence of this qui tam suit. It is asserted that these newly formed entities have the same employees, the same supervisors and the same facilities and locations as former EquiMed-owned cancer centers and that these new entities provide the same services and do the same general business.

Under these circumstances, it is entirely appropriate that claims under the FDCPA against these new defendants should be considered in the same FCA suit brought against the original defendants by the government. The Court is also satisfied that additional FCA claims based on a theory of successor liability are closely related to the claims asserted in the original complaint and that they may appropriately be added to the pleadings in this case. Moreover, the new defendants Skyline and Malone may properly be added as parties based on allegations that they participated in the wrongful practices described in the original complaint.

In opposing the government's motion for leave to amend its complaint, defendants contend that the government has unduly delayed in seeking its proposed amendments and that the defendants originally named will be prejudiced if the proposed amendments are permitted. There is no merit to either of these contentions.

Defendants themselves are responsible for much of the delay which has occurred in the early stages of the litigation phase of this civil action. An inordinate number of motions have been filed by the defendants in recent months. Since early April, it has been necessary for the Court to rule on some 14 motions filed by the defendants. With few exceptions, these motions have been denied. On several occasions, counsel for defendants have failed to comply with Local Rule 104.7. As a result, sincere attempts to resolve existing discovery disputes have not occurred, and disputes have been improperly presented to the Court before they were ripe for the Court's consideration. If defendants are genuinely concerned that the addition of new parties and new claims will unduly delay the resolution of this case, their attorneys should refrain from filing meritless motions and should cooperate in good faith with government counsel in attempting to resolve discovery disputes.

In claiming that, if the requested amendment is allowed, the Court and counsel will not be able to meet the schedule adopted in this case for the completion of discovery and for pretrial and trial, defendants advance a number of unsupported in terrorem arguments. They contend that 17 new attorneys will presumably have to enter this action, that these new attorneys will be required to review all previous pleadings and court rulings, that the new defendants must be afforded the opportunity to raise and address issues which the Court has already ruled upon, and that, if the new defendants take as much time as the current defendants did in reaching the present procedural posture of this case, only two months will remain for them to conduct necessary discovery. According to defendants, the inclusion of additional defendants in this case "conjures up a picture of a discovery morass incapable of being untangled by the current discovery cut-off date." The Court would disagree.

As it has done in the past, the Court is prepared to promptly address and resolve discovery and other disputes. To save time, the parties will be expected to provide any new attorneys with the results of discovery undertaken to date. Repetitive interrogatories and requests for documents will not be allowed, nor in the absence of good cause will the Court allow witnesses to be deposed on more than one occasion. The Court is satisfied that there is ample time for the completion of any necessary additional discovery within the deadlines set by the Revised Scheduling Order. For good cause shown, extensions of these deadlines may later be granted. There are more than ten months before the scheduled date of the trial and more than nine months before the date scheduled for the final pretrial conference. Under these circumstances, the Court concludes that undue delay will not result from the granting of plaintiff's pending motion.

The Court is further satisfied that the present defendants will not be unduly prejudiced if the government is now permitted to amend its complaint. The new claims are closely related to the original claims, and it has been alleged that there is a close connection between the new defendants and the original defendants. The parties, their attorneys and the Court itself will all benefit if the new defendants are joined with those originally named and if the new claims are heard at the same time as the original ones. If the requested amendment is denied, defendants Colkitt and EquiMed, Inc. will have to face in a separate suit with a separate discovery and trial schedule the new claims alleged in the proposed amended complaint. Unnecessary time and expense would result if the Court were to deny the government's pending motion to amend.

Defendants have argued in the alternative that if the government is allowed to amend its complaint, the FDCPA and successor liability claims should be bifurcated from this pending FCA action. Defendants' request for bifurcation will be denied as premature. An order of bifurcation at this time would require that duplicative discovery relating to the new claims would have to be undertaken at a later date. Discovery as to all claims should promptly go forward pursuant to the schedule set in the Revised Scheduling Order. If, after all discovery has been completed, it appears that one or more of the defendants would be unduly prejudiced by a joint trial of all claims, the defendant or defendants in question may file a motion to bifurcate the trial. By that time, the facts will have been fully developed by way of discovery, and the Court will be in a better position to determine whether a joint trial would result in undue prejudice to one or more of the defendants named.

For all the reasons stated, it is this ______ day of July, 1999 by the United States District Court for the District of Maryland,

ORDERED:

1. That plaintiff's motion for leave to amend the complaint is hereby granted; and

2. That plaintiff's First Amended Complaint is hereby deemed to have been filed today.