Jose Antonio Caban v. United States

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 00-4056
___________
United States of America, *
Ex rel.; Lowell Quirk, *
*
Appellants, *
*
Attorney General of the United States, *
*
Intervenor on Appeal, * Appeal from the United States
* District Court for the District of
v. * Minnesota.
*
Madonna Towers, Inc.; Madonna *
Towers of Rochester, Inc., *
*
Appellees. *
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Submitted: October 18, 2001
Filed: February 4, 2002
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Before MURPHY, BEAM, and BYE, Circuit Judges.
___________
BEAM, Circuit Judge.

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1 The Honorable Michael J. Davis, United States District Judge for the District
of Minnesota.
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Lowell Quirk appeals from a final order entered in the district court1 granting
summary judgment in favor of Madonna Towers, Inc. and Madonna Towers of
Rochester, Inc. ("Madonna Towers") and dismissing his claims under the False
Claims Act, 31 U.S.C. § 3729 et seq. ("FCA"). For the reasons discussed below, we
affirm the order of the district court.
I. BACKGROUND
This case is a qui tam action brought on behalf of the government under the
FCA. 31 U.S.C. § 3730(b). Qui tam plaintiff Lowell Quirk ("Appellant") claims that
Madonna Towers violated the FCA by fraudulently submitting claims to Medicare for
skilled nursing services provided to Appellant's aunt, Alice Quirk ("Quirk"), during
the first ninety days of her stay in the skilled nursing facility.
Madonna Towers is a non-profit corporation that operates a combined
residential and skilled nursing facility for the elderly. Upon entering the residential
apartments in 1985, Quirk signed a Continuing Care Agreement ("CCA"), which
required Quirk to pay an up-front fee in addition to monthly rent for the residential
apartment. The CCA provided that if Quirk was ever transferred from her residential
apartment into the skilled nursing facility, she would only be required to pay the
residential fee for the first ninety days of occupancy, instead of the higher skilled
nursing facility fee. Specifically, the CCA provided:
When occupying Infirmary space, a Resident is entitled to the nursing
care and housekeeping services provided for occupants of the Infirmary.
During such occupancy the Resident shall continue to pay the applicable
monthly care charge under the Resident's Agreement. Ninety days after
a Resident has been certified as permanently transferred to the Infirmary

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. . . the Resident shall be responsible for and pay the charges then in
effect for Infirmary space and Infirmary services. These charges shall
be in place of the applicable monthly care charge under the Resident's
agreement.
In the summer of 1995, Quirk fell ill and was transferred from her residential
unit to the skilled nursing facility. As the CCA provided, Quirk paid the lower
residential rate during the first ninety days of her occupancy in the skilled nursing
facility. Madonna Towers submitted claims for payment to Medicare for the services
it provided during those ninety days. Appellant argues that it was illegal for
Madonna Towers to submit those claims for payment because Medicare law provides,
among other things, that no payment may be made for services provided if the person
receiving such services "has no legal obligation to pay." 42 U.S.C. § 1395y(a)(2).
Appellant contends that under the terms of the CCA Quirk was under no legal
obligation to pay for the first ninety days of her stay in the skilled nursing unit, and
therefore it was fraudulent for Madonna Towers to submit claims for payment to
Medicare.
Madonna Towers, on the other hand, argues that the CCA did not provide
Quirk with ninety "free" days in the skilled nursing facility, but that it provided for
ninety "benefit" days, which the facility agreed to treat as pre-paid in consideration
for the up-front fee and the monthly rent paid by Quirk. Under this reading of the
contract, Madonna Towers argues, Quirk was legally obligated to pay for the first
ninety days of her stay in the skilled nursing facility, and it was proper for it to submit
the claim for payment to Medicare.
II. DISCUSSION
We review a grant of summary judgment de novo. The question before this
court is whether the record, when viewed in a light most favorable to the non-moving

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party, shows that there is no genuine issue as to any material fact and that the moving
party is entitled to judgment as a matter of law. United States ex rel. Glass v.
Medtronic, Inc., 957 F.2d 605, 607 (8th Cir. 1992).
The FCA prohibits any person from knowingly presenting a false or fraudulent
claim for payment or approval by the federal government. 31 U.S.C. § 3729(a)(1).
A prima facie case under the statute requires that (1) the defendant made a claim
against the United States; (2) the claim was false or fraudulent; and (3) the defendant
knew the claim was false or fraudulent. United States ex rel. Norbeck v. Basin Elec.
Power Coop., 248 F.3d 781, 803 (8th Cir. 2001). Both parties concede that Madonna
Towers made a claim against the United States. It is not necessary for us to resolve
whether the claim Madonna Tower's submitted was false or fraudulent, because we
conclude that the claim was not knowingly false or fraudulent.
"Knowingly" is defined by the FCA as meaning that a person, with respect to
information:
(1) has actual knowledge of the information;
(2) acts in deliberate ignorance of the truth or falsity of the
information; or
(3) acts in reckless disregard of the truth or falsity of the information.
31 U.S.C. § 3729(b). No proof of specific intent to defraud the government is
required. Id. However, "innocent mistakes and negligence are not offenses under the
Act." United States ex rel. Oliver v. Parsons Co., 195 F.3d 457, 464-65 (9th Cir.
1999) (internal quotations and citations omitted); see also Hindo v. University of
Health Sciences/The Chicago Med. Sch., 65 F.3d 608, 613 (7th Cir. 1995) ("The
requisite intent is the knowing presentation of what is known to be false. In short, the
claim must be a lie.") (internal quotation and citations omitted).

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Viewed in a light most favorable to Appellant, the record simply does not
support the argument that Madonna Towers knowingly submitted a false or fraudulent
claim when it billed Medicare for Quirk's first ninety days in the skilled nursing
facility. As evidence that Madonna Towers knowingly submitted false claims,
Appellant points us to the deposition testimony of the current administrator of
Madonna Towers, Mr. Cairns, and the chief financial officer, Mr. Troska. However,
these depositions merely reveal that Cairns and Troska did not seek legal advice, or
an opinion from Medicare, concerning the practice of billing Medicare for the first
ninety days of a patient's stay in a skilled nursing facility. This testimony does not
demonstrate that the two men had "actual knowledge" of fraudulent billing practices.
31 U.S.C. § 3729(b)(1). This testimony also does not demonstrate that Cairns and
Troska acted in "reckless disregard of the truth or falsity" of the submitted claims.
Id. at § 3729(b)(3). At most, the failure to secure a legal opinion concerning the
billing practices might be characterized as acting in "deliberate ignorance of the truth
or falsity" of the submitted claims. Id. at § 3729(b)(2). However, failing to secure
a legal opinion, without more, is not the type of deliberate ignorance that can form
the basis for a FCA lawsuit. Cairns and Troska's declarations and depositions make
it clear that neither of them had any reason to pursue a legal opinion concerning the
billing practices because both of them considered the practice acceptable standard
procedure.
For instance, Cairns testified that his previous employer administered its CCAs
and billed Medicare in the same fashion as Madonna Towers. In addition, Cairns
testified that it was his understanding that the up-front fee that the residents paid as
part of the CCA operated as a form of insurance that allowed the resident to pay the
lower residential rate during the first ninety days of residence in the skilled nursing
facility. Under this view of the CCA, the first ninety days in the skilled nursing
facility is not being provided free, but instead is provided in exchange for earlier
payments made by the resident. In other words, it was Cairns' understanding that
Quirk did have an obligation to pay for her first ninety days in the skilled nursing

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2 This does not mean that Cairns' understanding of the CCA was legally correct.
We are not deciding the issue of whether the submitted claims were in fact false or
fraudulent. Our decision today is simply that Madonna Towers did not knowingly
submit false or fraudulent claims.
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facility, and he pointed to the up-front fee and her monthly residential rent payments
as evidence of that obligation.2 There is nothing in the record to suggest that anyone
at Madonna Towers considered Quirk's initial stay in the skilled nursing facility to
be gratuitous. The evidence in the record indicates that the employees at Madonna
Towers considered the billing practice at issue here to be the generally accepted
practice, akin to the way MediGap or long-term care insurance contracts are billed.
There is no evidence to suggest anyone was lying to the government. See Hindo, 65
F.3d at 613.
In addition to the deposition testimony, Madonna Towers submitted the
declarations of three of its administrators, the director of finance, the assistant
administrator, the chief financial officer, and the nursing care accounts receivable
clerk, all of whom declared that they did not have any knowledge that any false or
fraudulent claims were submitted to Medicare. Appellant did not offer any evidence
to refute these declarations.
In sum, the only evidence offered by Appellant that Madonna Towers
knowingly submitted false claims to the government is the deposition testimony by
facility officials that they did not seek legal advice concerning the propriety of their
billing practices. Furthermore, Appellant has not submitted any evidence suggesting
that anyone at Madonna Towers suspected something wrong but deliberately avoided
learning more so that a fraudulent scheme could continue.

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III. CONCLUSION
For the reasons stated, the decision below is affirmed.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

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