A Tennessee federal judge has taken the highly unusual step of denying the government's request to intervene in a qui tam suit in which it had previously declined intervention. In a complaint filed in April 2017, the relators in United States ex rel. Odom v. SouthEast Eye Specialists, PLLC, alleged that the defendants violated the False Claims Act (FCA) by paying kickbacks to induce optometrists to refer their patients for surgery. After receiving six extensions that dragged out the seal period for over two years, the government (DOJ and the State of Tennessee) declined intervention in August 2019.
Six months later, in February 2020, the government changed its mind and set its sights on joining the suit. In its motion to intervene, the government argued that "good cause" existed for its late request to join the case, pointing to purported "new evidence" discovered in its investigation. The government further argued that the relators had no objection to the intervention and that joining the suit only six months after the declination would not prejudice the defendants because formal discovery had not yet begun. The defendants opposed the government's request, arguing that the government had failed to specify any new facts learned from its investigation, the relators' consent was not enough to establish good cause, and intervention would not only prejudice the Defendants—who had already endured years of one-sided discovery and expended resources on a dismissal motion—it would also undermine congressional intent to establish an intervention deadline.
Siding with the government, the magistrate judge issued a Report & Recommendation (R&R) noting that courts generally interpret the "good cause" provision "broadly" and finding the government had demonstrated it here. United States v. SouthEast Eye Specialists, PLLC, 2020 WL 4431464 (M.D. Tenn. July 31, 2020). The magistrate judge credited the government's assertions regarding "new evidence," and found that the relators' consent "weigh[ed] heavily in [ ] favor of allowing" intervention and that any prejudice to Defendants was not "weighty enough to prevent intervention." Id. at *5. Among other things, the magistrate judge cited the absence of any precedent denying a request to intervene where discovery had not yet begun. The defendants objected to the R&R.
In a one-page order issued on February 24, 2021 and citing to the record of a hearing held two days earlier, the district court vacated the R&R. At that hearing, notwithstanding the government's assertion in its briefing that denial of the motion would be a "wholly unprecedented step," the court found that the government had "not come close to establishing the good cause necessary to intervene and take control of the litigation nearly three years after the original complaint was filed, and more than six months after the court set a final deadline for intervention that was extended six times." (Hearing transcript reported by Law 360, https://www.law360.com/articles/1359646). The court pointedly noted that the government seemed to "simply expect the court to trust them because they say there is, quote, new and sufficient evidence. This, the court will not do." Id.
The denial comes as a welcome surprise to qui tam defendants, who have grown accustomed to a lenient approach by courts to belated intervention requests by the government, often on the heels of resource-draining one-sided discovery over an extended period of time. We at Qui Notes will be watching closely to see whether the government appeals. For now, at least, SouthEast Eye Specialists shows that, where appropriate, defendants shouldn't blink before strongly opposing such motions by the government. Stay tuned for more on this case.
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