Whistleblower loses federal case, can proceed with retaliation claim in Calif. court

By John O'Brien | Feb 11, 2014

FRESNO, Calif. (Legal Newsline) - A state court should hear certain claims arising from the federal False Claims Act, a California appeals court has ruled.

On Jan. 30, the California 5th District Court of Appeal ruled that a state court has jurisdiction over Dr. Scott M. Driscoll's retaliation claim that was brought under the FCA. Driscoll, a radiologist, is alleging he was fired for complaining that M.D. Medical Group was committing fraud against the Medicare and Medi-Cal programs with its billing practices.

Driscoll filed a whistleblower complaint against Dr. Todd Spencer and two hospitals in 2011 in federal court, but it was recently dismissed.

Spencer, meanwhile, has filed a lawsuit in Madera County Superior Court against Driscoll. It alleges defamation, corporate disparagement, interference with contract, interference with prospective economic advantage, fraud, slander, breach of contract and breach of the implied covenant of good faith and fair dealing.

In the Madera County lawsuit, Driscoll filed a cross-claim alleging whistleblower retaliation under the FCA and argued the claim should remain in state court, to which Spencer disagreed. The trial court and the 5th District sided with Driscoll.

The 5th District was tasked with answering whether state courts have concurrent jurisdiction over retaliation claims brought under the FCA. Judge Gary Hoff, a Superior Court judge assigned to the case, authored the opinion.

"Real parties in interest provide no authority for the proposition that we should assume Congress always implicitly intends federal courts to have exclusive jurisdiction over matters involving the federal government," Hoff wrote.

"In any event, whatever Congress may implicitly intend for cases in which the federal government is a party, that implicit intention would not apply to whistleblower retaliation claims such as Driscoll's.

"Retaliation claims are personal to the individual asserting the claim and are not brought in the name of the federal government. Accordingly, we find no unmistakable implication from legislative history that Congress ousted state court jurisdiction over FCA retaliation claims."

Driscoll's allegations claimed Spencer, the Spencer Group and Madera Community Hospital were billing Medicare and Medi-Cal for unnecessary medical procedures and inflated bills.

Specifically, Driscoll said the defendants performed CT scans of the abdomen and pelvis without contrast even though medical scholars say there is no useful information from such scans without contrast.

He also alleged other unnecessary CT scans were routinely performed.

U.S. District Judge Lawrence J. O'Neill granted the defendants' motion to dismiss in December. Both the original complaint and first amended complaint filed by Driscoll were deficient, he ruled.

Both complaints failed to specify the details of the alleged overbilling scheme, O'Neill wrote. When he gave Driscoll a chance to amend the original complaint, Driscoll did not correct the deficiencies when filing his amended complaint, O'Neill wrote.

Driscoll has appealed the dismissal of his whistleblower suit to the U.S. Court of Appeals for the Ninth Circuit.

Driscoll is represented by Daniel R. Bartley of Bartley Law Offices in San Rafael, Calif.

According to the appeal's docket, the two sides are currently deciding if their case could be helped to a resolution through mediation.

From Legal Newsline: Reach editor John O'Brien at jobrienwv@gmail.com.

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