United States District Court, D. Delaware
UNITED STATES OF AMERICA and THE STATE OF DELAWARE ex rel. RONALD SHERMAN, Plaintiffs,
CHRISTIANA CARE HEALTH SERVICES, INC., CHRISTIANA CARE HEALTH SYSTEM, CHRISTIANA HOSPITAL, and WILMINGTON HOSPITAL, Defendants.
pending before the Court is Plaintiff-Relator's Motion
for Leave to Conduct Jurisdictional Discovery (D.I. 24). The
parties have fully briefed the issues. (D.I. 25, 28, 30).
After full consideration of the briefing, I GRANT the Motion.
a qui tarn action brought by Relator Ronald Sherman
against Defendants Christiana Care Health Services, Inc.,
Christiana Care Health System, Christiana Hospital, and
Wilmington Hospital under the federal False Claims Act
("FCA"), the Delaware False Claims Act, the Federal
Fraud and Abuse Anti-Kickback Law ("Anti-Kickback
Law"), and the Delaware Anti-Kickback Statute. (D.I. 1).
Relator contends that Defendants "knowingly engaged in a
scheme to induce doctors to make referrals of patients to
Christiana." (D.I. 1 ¶ 12). Relator brings the
following claims: violation of 31 U.S.C. § 3729(a)(1)(A)
("Count I"), § 3729(a)(1)(B) ("Count
II"), § 3729(a)(1)(G) ("Count III"), and
§ 3729(a)(1)(C) ("Count IV"). Relator filed
his Complaint under seal on April 12, 2017. (D.I. 1). After
repeated extensions, the Government declined to intervene.
have moved to dismiss all claims pursuant to Federal Rule of
Civil Procedure 12(b)(1), urging that Relator does not have
standing to pursue his claims because he signed an
enforceable "Separation Agreement" when he left his
employment with Defendants, releasing "all his claims
against Defendants." (D.I. 14 at 15). The parties have
stipulated to stay the briefing of Defendants' motion
pending the resolution of Relator's motion for
jurisdictional discovery to respond. (D.I. 27).
Rule of Civil Procedure 12(b)(1) permits a defendant to
assert lack of subject-matter jurisdiction as a defense to
any claim for relief by the plaintiff. There are two types of
attacks on subject matter jurisdiction: facial and factual.
In deciding a Rule 12(b)(1) motion, I must decide whether the
motion "presents a 'facial' attack or a
'factual' attack on the claim at issue, because that
distinction determines how the pleading must be
reviewed." Constitution Party of Penn. v.
Aichele, 757 F.3d 347, 357 (3d Cir. 2014). "A
factual attack ... is an argument that there is no subject
matter jurisdiction because the facts of the case ... do not
support the asserted jurisdiction." Id. at 358.
Where a party files a challenge to subject matter
jurisdiction "before it file[s] any answer to the
Complaint or otherwise present[s] competing facts," then
it is a facial challenge. Id.
26(d)(1) permits a party to seek discovery, including
jurisdictional discovery, before the Rule 26(f) conference by
order of the court. "[W]here issues arise as to
jurisdiction or venue, discovery is available to ascertain
the facts bearing on such issues." Oppenheimer Fund,
Inc. v. Sanders, 437 U.S. 340, 351 n.13 (1978). In the
Third Circuit, "unless a plaintiff s claim is
'clearly frivolous,' jurisdictional discovery should
be allowed." Rocke v. Pebble Beach Co., 541
Fed.Appx. 208, 212 (3d Cir. 2013) (citing Toys
"R" Us v. Step Two, 318 F.3d 446, 456 (3d Cir.
2003)). A plaintiff may not, however, "undertake a
fishing expedition based only upon bare allegations under the
guise of jurisdictional discovery." Eurofins Pharma
U.S. Holding v. BioAlliance Pharma SA, 623 F.3d 147, 157
(3d Cir. 2010). "To show that discovery is warranted, a
party must, at minimum, state a 'non-frivolous' basis
for [subject matter jurisdiction] and do so with
'reasonable particularity.'" Boston Sci.
Corp. v. Cook Grp Inc., 269 F.Supp.3d 229, 250 (D. Del.
motion to dismiss asserts that Plaintiff-Relator does not
have standing to assert his claims because he signed a
release of claims, thus depriving the Court of subject matter
jurisdiction. (D.I. 14 at 6).
provides that a relator may not enter into an enforceable
settlement or release of qui tarn claims after the
filing of an FCA action. 31 U.S.C. § 3730(b)(1).
"However, the FCA does not address whether a
relator's release of qui tarn claims executed
before the filing of a complaint (referred to as a pre-filing
release) is enforceable." United States ex rel.
Class v. Bayada Home Health Care, Inc., 2018 WL 4566157,
at *4 (E.D. Pa. Sept. 24, 2018) (citing United States ex
rel. Radcliffe v. Purdue Pharma L.P., 600 F.3d 319, 326
(4th Cir. 2010)). The Third Circuit has not opined on whether
such pre-filing releases are enforceable to bar subsequent
qui tarn claims. Class, 2018 WL 4566157, at
*5. However, "there is an emerging agreement among other
circuits that such releases bar FCA claims if (1) the release
can fairly be interpreted to encompass qui tarn
claims and (2) public policy does not otherwise outweigh
enforcement of that release." Id; see also
Radcliffe, 600 F.3d at 319; United States ex rel.
Ritchie v. Lockheed Martin Corp., 558 F.3d 1161, 1170
(10th Cir. 2009); United States ex rel. Hall v. Teledyne
Chang Albany, 104 F.3d 230 (9th Cir. 1997).
the public policy prong of that approach, the release of
claims signed by Relator "is enforceable if the
Defendants' disclosures to HHS-OIG were sufficient to
permit the government to investigate the purported fraud
allegations within them." (D.I. 28 at 4 (citing
Ritchie, 558 F.3d at 1170; Radcliffe, 600
F.3d at 322; D.I. 25 at 7)). For the disclosure to be
sufficient, it must be truthful and not misleading, and alert
the government that potential fraud has been alleged.
Class, 2018 WL 4566157, at *7-9 (summarizing case
attached both the release and the purported sufficient
disclosures to their motion to dismiss. (D.I. 17, Ex. 1; D.I.
14-1, Ex. 3-6). Because Defendants' motion provides
"competing facts" and evidence outside of
Relator's Complaint, it is a factual attack on the
Court's jurisdiction. Constitution Party, 757
F.3d at 357. As such, Relator has requested jurisdictional
discovery to aid in establishing subject matter jurisdiction
by demonstrating that the disclosures attached by Defendants
were not sufficient. "Although [the relator] bears the
burden of demonstrating facts that support [subject matter]
jurisdiction, courts are to assist the [relator] by allowing
jurisdictional discovery unless [the relator's] claim is
'clearly frivolous.'" Toys "R"
not convinced that Relator's claim of subject matter
jurisdiction is clearly frivolous. Relator's complaint
alleges concrete and specific reports of fraud, including
initial reports to Defendants, the conduct of internal
investigation by Defendants into those reports, and the
failure of Defendants to disclose the results of those
investigations to the government. (D.I. 1 ¶¶ 89-127
(NICU), 128-41 (Neurology/Cardiovascular), 142-55 (Urology)).
Moreover, Relator has alleged that the disclosures attached
by Defendants amount to less than 500 words in total, do not
disclose fraud by Defendants, and suggest only
"potentially innocent billing violations by [private]
attending physicians." (D.I. 30 at 7). As stated, these
facts indicate that the Court may have subject matter
jurisdiction because the enforcement of the release of claims
may be outweighed by public policy. Relator's allegations
thus "state a 'non-frivolous' basis for [subject
matter jurisdiction] and do so with 'reasonable
particularity.'" Boston Sci. Corp., 269
F.Supp.3d at 250. Relator's request for jurisdictional
discovery is "specific, non-frivolous, and a logical
follow-up based on the information known to" Defendants.
Toys "R" Us, 318 F.3d at 45 8. The Third
Circuit has emphasized that courts should ensure that
plaintiffs have an opportunity to present facts after
jurisdiction is challenged, see Local 336, Am. Fed'n
of Musicians, AFL-CIO v. Bonatz, 475 F.2d 433, 436 (3d
Cir. 1973). Jurisdictional discovery will ensure that Relator
has that required opportunity. Thus, Relator should be
allowed jurisdictional discovery on the limited issue of the
facts related to Relator's allegations that were known to
Defendants at the time they submitted the disclosures to