United States ex rel. Vainer v. Davita, Inc., No. 1:07-CV-2509-CAP (N.D. Ga. Aug. 12, 2014)

A judge decided to reopen discovery and punish the defendants in the wake of a series of discovery disputes in a False Claims Act matter. In this case, two whistleblowers alleged that their former employer defrauded the government by illegally maximizing Medicare reimbursements for drugs. The whistleblowers (called “relators” since they sued the defendants on behalf of the U.S. government) argued that the defendants manipulated their dosing protocols and policies for certain drugs using a computer program called Snappy.

The defendants’ doctors and nurses used Snappy to input, retrieve, and code drug dosages used in its kidney dialysis clinics. During discovery, the relators asked the defendants for information regarding Snappy that would support their theory that the defendants used the program to generate doses that would create “medically unnecessary waste” that, in turn, would manipulate “the reimbursement they would get for the waste or discarded portion of the drugs left over in a vial after administration.”

The defendants’ Rule 30(b)(6) corporate representative with knowledge as to how Snappy worked claimed that the software suggested dosages for two of the three drugs at issue in the case but not for a third; for that drug, it only provided a range of dosages. Meanwhile, several other witnesses testified during their depositions that Snappy suggested dosages of the third drug; however, later they would change their testimony—either during a break in the deposition or in an errata sheet submitted afterward—to match the corporate representative’s testimony. One year later, the deponent filed a declaration admitting that his testimony was false: the program did indeed recommend dosages of all three drugs. The deponent’s newfound understanding of how Snappy actually worked came only after the defendants’ computer expert had rebuilt a working version of the Snappy system that was in use during the relevant time period.”

Once the corporate representative amended his testimony, the relators filed a motion seeking sanctions and asked the court to enter a default judgment. The relators argued that the defendants had “pervasively and intentionally manipulated evidence and tampered with witnesses in an attempt to hide the truth about what functions Snappy performed during the relevant time period.” The court found that “at best,” the defendants’ “false testimony led the defendants and their counsel astray” during discovery, while “at worst,” the “defendants purposely manipulated the evidence and witnesses to hide the truth.” After evaluating the “highly suspect evidence,” the court found the relators could not “unequivocally” demonstrate that the defendants “committed this more nefarious level of discovery practice.” Accordingly, the defendants’ conduct merited sanctions. The relators asked the court to strike the defendants’ answer, but the court refused to do so. Instead, the court reopened discovery and awarded the relators their attorneys’ fees, which would be determined later and could include the fees and costs for “prior discovery that was impeded or spoiled because of the defendants’ actions in the Snappy-related discovery,” the entire body of new discovery, and the motion for sanctions.

Takeaway

Had the evidence of “unacceptable” conduct in this case been unequivocal, the result would likely have been different. Instead of reopening discovery and awarding the costs of discovery and attorneys’ fees, the case probably would have been dismissed. However, because the judge could not conclusively determine that the defendants purposely manipulated the evidence, the defendants were able to avoid the harsher sanction. It is surprising that circumstances like these did not raise a red flag that further investigation was required. The pattern of confusion among witnesses should have triggered an inquiry. Furthermore, once the defendants’ counsel became aware of contradictions in testimony, they should have taken immediate steps to rectify them. Here, the defendants failed to correct several errors that persisted in discovery until the relators filed their motion for sanctions, casting even greater suspicion over their motives.

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