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United States ex rel. Lutz v. Berkeley Heartlab, Inc.

United States District Court, D. South Carolina

August 24, 2017

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


          Richard Mark Gergell, United States District Court Judge.

         This matter is before the Court on a motion filed by the United States of America pursuant to Rule 6(b) of the Federal Rules of Civil Procedure and Local Rule 6.01 seeking an order amending the scheduling order for the sole purpose of extending the deadline to name witnesses to allow the United States to disclose Nicholas Pace as a witness the United States intends to call at trial. (Dkt. No. 582.) Latonya Mallory has filed a motion in opposition. (Dkt. No. 590.) Blue Wave Healthcare Consultants, Inc., Floyd Calhoun Dent, III, and Robert Bradford Johnson (collectively, "the Blue Wave Defendants") have likewise filed a motion in opposition. (Dkt. No. 592). The Government has filed a reply, and the BlueWave Defendants have filed a sur-reply. (Dkt. Nos. 594, 599). For good cause shown, as set forth below, the Government's motion to extend the discovery period to name Nicholas Pace as a witness is granted. The Government is hereby ordered to work diligently with Defendants to arrange for Mr. Pace's deposition immediately.

         I. Background

         The Government has filed a complaint in intervention against the Blue Wave Defendants and Latonya Mallory alleging violations of the Anti-Kickback Statute ("AKS"), 42 U.S.C. § 1320a-7b(b), and the False Claims Act ("FCA"), 42 U.S.C. § 3729. (Dkt. No. 75.) The alleged FCA violations arise from Blue Wave's marketing of laboratory tests for two laboratory companies, Health Diagnostic Laboratory, Inc. ("HDL") and Singulex, Inc. ("Singulex"), between 2010 and 2015. 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 panels of blood tests, many of which were medically unnecessary. For example, the Government alleges that Defendants offered and facilitated the payment of processing and handling ("P&H") fees to physicians to induce referrals in violation of the AKS and FCA.

         II. Facts

         The Government alleges that Pace was hired by HDL in 2013 and has "unique, crucial, and first-hand insight into Defendants' actions and mental state as they continued with the alleged conduct even after Defendants' attorneys advised Defendants to stop the kickback schemes." (Dkt. No. 582-1 at 2.) The Government alleges that Pace cautioned HDL about his compliance concerns with their practices and left HDL in late 2013 due to frustrations with the company's progress in making changes. (Id. at 3.)

         The Government alleges that despite Mr. Pace's connections to this litigation, Defendants failed to disclose Mr. Pace in their initial Rule 26(a) disclosures or list Mr. Pace as an individual with knowledge relevant to their advice of counsel and good faith affirmative defenses. (Id.) The United States claims it only learned of Mr. Pace during the deposition of Derek Kung on May 22, 2017 and did not have the opportunity search for documents related to Mr. Pace until just before defendant Mallory's deposition on June 1, 2017 because of the issues with production related to the HDL bankruptcy estate. Discovery closed on June 2, 2017. The Government represents that it began coordinating to interview Mr. Pace shortly after the close of discovery and notified Defendants of its intent to call Mr. Pace as a witness on July 26, 2017. (Id. at 4.)

         III. Legal Standard

         A. Rule 6(b)

         The standard for a motion to amend a scheduling order to extend the deadline to identify witnesses when that deadline has already expired is as follows:

While the court agrees that it can enlarge time contained in a Pretrial Order for good cause as provided by Rule 16 [it appears that] the more specific requirements of Rule 6(b)(1)(B) apply where, as here, a deadline has already run." Anderson v. Caldwell County Sheriff's Office, No. I:09cv423, 2011 WL 198085, at *1 (W.D. N.C. Jan. 20, 2011); see Colony Apartments v. Abacus Project Mgmt., 197 F.App'x. 217 (4th Cir. 2006). Rule 6(b)(1)(B) of the Federal Rules of Civil Procedure provides in pertinent part: "When an act may or must be done within a specified time, the court may, for good cause, extend the time ... on motion made after the time has expired if the party failed to act because of excusable neglect." Fed. R. Civ. P. 6(b)(1)(B) (emphasis added). In determining whether a party has shown excusable neglect, a court will consider: (1) the danger of prejudice to the non-moving party; (2) the length of delay and its potential impact on judicial proceedings; (3) the reason for the delay; and (4) whether the movant acted in good faith. Colony 197 F.App'x at 223 (citing Thompson v. E.I. DuPont de Nemours & Co., 76 F.3d 530, 534 (4th Cir. 1997)). Merely establishing these elements does not entitle a party to relief; rather, 'whether to grant an enlargement of time still remains committed to the discretion of the district court." Id.

Johnson v. Murphy, No. 4:10-cv-01494, 2011 WL 3099874 at *4 (D.S.C. July 22, 2011).

         IV. Discussion

         The United States argues that it has shown excusable neglect because naming Mr. Pace as a witness at this time: (1) would not prejudice Defendants; (2) need not impact the judicial proceedings; (3) was a result of a reasonable delay due to Defendants' failure to disclose Mr. Pace during discovery. The Government claims that it acted in good faith by moving quickly to investigate Mr. Pace's role in the alleged ...

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