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United States v. Berkeley Heartlab, Inc.

United States District Court, D. South Carolina, Charleston Division

June 26, 2017

United States of America, et al., Plaintiffs,
Berkeley Heartlab, Inc., Defendants. ex rel. Scarlett Lutz, et al., Plaintiffs-Relators,



         This matter is before the Court on the United States' motion to exclude the testimony of Daniel Mulholland, III, an expert proffered by BlueWave Healthcare Consultants, Inc., Floyd Calhoun Dent, III, and Robert Bradford Johnson (collectively, "the BlueWave Defendants"). (Dkt. No. 442.) The BlueWave Defendants have filed a response in opposition to the Government's motion. (Dkt. No. 474). For the reasons set forth below, the motion to exclude is granted.

         I. Background

         The Government has filed a complaint in intervention against the BlueWave Defendants and Latonya Mallory alleging violations of the Anti-Kickback Statute ("AKS"), 42 U.S.C. § l32Oa-7b(b), and the False Claims Act ("FCA"), 42 U.S.C. § 3729(a). (Dkt. No. 75.) The alleged FCA violations arise from BlueWave's marketing of laboratory tests for two laboratory companies, Health Diagnostic Laboratory, Inc. ("HDL") and Singulex, Inc. ("Singulex"), between 2010 and 2014. The Government has alleged that Defendants violated the FCA when they engaged in multiple kickback schemes to induce physicians to refer blood samples to HDL and Singulex for large panels of blood tests, many of which were medically unnecessary. The Government alleges that the kickback schemes violated the Anti-Kickback Statute, resulted in false claims submitted to the Medicare and TRICARE programs, and caused the Government to pay HDL more than $330 million.

         The Blue Wave Defendants have proffered Daniel Mulholland, III, as an expert witness. Mulholland is an attorney who "has advised clients for over 30 years whether the relevant federal healthcare programs allow or disallow certain practices." (Dkt. No. 474 at 1.) The Blue Wave Defendants say Mulholland will "apply an accepted methodology in his field-review of relevant executive guidance documents-to opine whether such documents would have put [the BlueWave Defendants] and/or their attorneys on notice that the relevant federal healthcare authorities considered a specific practice-process and handling fees paid by a laboratory- implicated or violated the Anti-Kickback statute." (Dkt. No. 474 at 1.) Mulholland will opine that the BlueWave Defendants had "no reason to know that" their conduct violated the AKS which they claim is a "factual issue" relevant to whether they had the necessary scienter to violate the FCA. (Dkt. No. 474 at 5-6.)

         The Government seeks to exclude Mulholland's testimony based on Federal Rules of Evidence 104(a), 401, 402, 403, 702, and 703, arguing that Mulholland's testimony would "usurp the role of the Court to instruct on the law and the jury's role to apply the facts to the law, " and is based on unreliable methods and insufficient facts. The Government further argues that Mulholland's opinion, "that the BlueWave Defendants would have no reason to know that paying compensation to physicians for laboratory process and handling fees would violate the Anti-Kickback Statute until 2014, " is based on unreliable methodology because Mulholland limited the evidence he reviewed to reach his opinion to a limited class of documents rather than the full range of information available to the Blue Wave Defendants. (Dkt. Nos. 442 at 5-10; 442-1 at 2.)

         II. Legal Standard

         A. Daubert

         Under Rules 104(a) and 702, "the trial judge must ensure that any and all scientific testimony or evidence admitted is not only relevant, but reliable." Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 589 (1993). The trial court must ensure that (1) "the testimony is the product of reliable principles and methods, " (2) "the expert has reliably applied the principles and methods to the facts of the case, " and (3) the "testimony is based on sufficient facts or data." Fed.R.Evid. 702(b), (c), (d). "This entails a preliminary assessment of whether the reasoning or methodology underlying the testimony is scientifically valid, " Daubert, 509 U.S. at 592-93, and whether the expert has "faithfully appl[ied] the methodology to facts." Roche v. Lincoln Prop. Co., 175 F.App'x 597, 602 (4th Cir. 2006). To make this determination, Courts consider several factors, including "whether a theory or technique . . . can be (and has been) tested, " "whether the theory or technique has been subjected to peer review and publication, " the "known or potential rate of error, " the "existence and maintenance of standards controlling the technique's operation, " and whether the theory or technique has garnered "general acceptance." Daubert, 509 U.S. at 593-94; accord United States v. Hassan, 742 F.3d 104, 130 (4th Cir. 2014). However, these factors are neither definitive nor exhaustive, United States v. Fultz, 591 F.App'x 226, 227 (4th Cir. 2015), and "merely illustrate[] the types of factors that will bear on the inquiry." Hassan, 742 F.3d at 130. Courts have also considered whether the "expert developed his opinions expressly for the purposes of testifying, " Wehling v. Sandoz Pharms. Corp., 162 F.3d 1158 (4th Cir. 1998), or through "research they have conducted independent of the litigation, " Daubert v. Merrell Dow Pharms., Inc., 43 F.3d 1311, 1317 (9th Cir. 1995) (on remand), and whether experts have "failed to meaningfully account for . . . literature at odds with their testimony." McEwen v. Bait. Wash. Med. Ctr. Inc., 404 F.App'x 789, 791-92 (4th Cir. 2010).

         Rule 702 also requires courts "to verify that expert testimony is 'based on sufficient facts or data.'" EEOC v. Freeman, 778 F.3d 463, 472 (4th Cir. 2015) (quoting Fed.R.Evid. 702(b)). Thus, "trial judges may evaluate the data offered to support an expert's bottom-line opinions to determine if that data provides adequate support to mark the expert's testimony as reliable." Id. The court may exclude an opinion if "there is simply too great an analytical gap between the data and the opinion offered." Id. "The proponent of the [expert] testimony must establish its admissibility by a preponderance of proof." Cooper v. Smith & Nephew, Inc., 259 F.3d 194, 199 (4th Cir. 2001).

         The Court is mindful that the Daubert inquiry involves "two guiding, and sometimes competing, principles." Westberry v. Gislaved Gummi AB, 178 F.3d 257, 261 (4th Cir. 1999). "On the one hand, . . . Rule 702 was intended to liberalize the introduction of relevant expert evidence, " id., and "the trial court's role as a gatekeeper is not intended to serve as a replacement for the adversary system." United States v. Stanley, 533 F.App'x 325, 327 (4th Cir. 2013) cert. denied, 134 S.Ct. 1002 (2014). On the other hand, "[b]ecause expert witnesses have the potential to be both powerful and quite misleading, it is crucial that the district court conduct a careful analysis into the reliability of the expert's proposed opinion." United States v. Fultz, 591 F.App'x 226, 227 (4th Cir. 2015).

         B. False Claims Act Liability

         The test for False Claims Act liability is (1) whether there was a false statement or fraudulent course of conduct; (2) made or carried out with the requisite scienter; (3) that was material; and (4) that involved a "claim, " because it caused the government to pay out money or to forfeit moneys due. 31 U.S.C.A. § 3729 et seq.; Harrison v. Westinghouse Savannah River Co., 176 F.3d 776 (4th Cir. 1999). Claims that include items or services resulting from a violation of the AKS are false or fraudulent under the FCA. 42 U.S.C. §1320a-7b(g). The Government bears the burden of showing that Defendant acted with the requisite scienter which, under the FCA, is "knowingly, " meaning with actual knowledge, deliberate ignorance, or reckless disregard of the truth or falsity of the information. 31 U.S.C. § 3729(a).

         III. ...

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