Labor & Employment Law Daily Wrap Up, WHISTLEBLOWERS—N.D.N.Y.: Affirmative defenses in FCA suit withstand challenge, (Apr 30, 2025)

By Donielle Tigay Stutland, J.D.

A court denied a motion to strike with respect to almost all affirmative defenses, but did strike equitable affirmative defenses under the False Claims Act.

A federal district court in New York granted in part and denied in part a relator’s motion to strike affirmative defenses in a qui tam action on behalf of the United States of America and the State of New York asserting that University OB/GYN Associates, Crouse Health Hospital and Crouse Health System, and a physician (collectively "defendants") submitted, or caused to be submitted, materially false bills for medical services which were not performed. The court granted the relator’s motion to strike certain affirmative defenses asserting equitable defenses, finding that laches and estoppel are inapplicable to the government’s False Claims Act claims. The court upheld all other affirmative defenses (U.S. ex rel. Bernstein v. Silverman, No. 5:20-cv-630 (MAD/PJE) (N.D.N.Y. Apr. 24, 2025)).

Background. The whistleblower suit was brought by physician on behalf of the United States of America and the State of New York in a qui tam capacity under the False Claims Act (FCA) and the New York False Claims Act (NYFCA). The relator also asserted personal claims for retaliation. The complaint alleged that the defendants submitted or caused to be submitted materially false bills for medical services that were not performed, violating the FCA (31 U.S.C. §3729) and the NYFCA (New York Finance Law §189). Additionally, the relator claimed the defendants retaliated against her for reporting, attempting to stop, and refusing to participate in what she describes as "dangerous and fraudulent patient care."

The defendants moved to dismiss the relator’s complaint. The court granted the motions to dismiss as to the following claims: (1) relator's reverse false claims and conspiracy claims against University OB/GYN; (2) relator's reverse false claims, conspiracy claims, and New York Labor Law claims against Crouse; and (3) relator's reverse false claims and conspiracy claims against the defendant physician. The court denied the motion to dismiss the remaining claims, allowing the case to proceed on the remaining FCA, NYFCA, and retaliation claims.

The defendants filed answers with affirmative defenses and the relator moved to strike the affirmative defenses.

Affirmative defenses. The court began its analysis by looking at the relator’s contention that the defendants had made a blanket request. The relator asserted that "all of the affirmative defenses raised by Defendants are mere recitations of legal concepts which plead no facts much less facts sufficient to establish the plausibility of the defense or provide Relator with sufficient notice of the defense and facts at issue.” The court denied this request, finding that the relator failed to provide arguments or analysis as to the specific affirmative defenses.

The court next reviewed three affirmative defenses that asserted damages caused by others. The relator asserted that the lack of fraudulent intent portion of this defense is legally meaningless because proving an FCA violation "'require[s] no proof of specific intent to defraud.’” The court rejected the relator’s argument indicating that she would not be prejudiced by such an affirmative defense and ending that the relator had misconstrued this affirmative defense as one asserting lack of fraudulent intent, wherein it actually is claiming that the damages were caused by others.

The court next addressed the affirmative defenses related to third party action and lack of control. The relator argued that this affirmative defense must be struck because "[i]t is no defense to a False Claims Act case that a particular defendant had no direct interaction with the government and therefore cannot be responsible for any claims made to the government.” The court rejected this argument finding that the defenses claiming defendants did not cause false claims or retaliation are valid and the relator did not show such a defense would cause prejudice.

With respect to equitable defenses, each of the defendants have asserted that the relator's claims are barred by the equitable doctrines of waiver, laches, and/or equitable estoppel. The court partially struck the defenses of waiver, laches, and estoppel, finding that laches and estoppel are inapplicable to the government’s FCA claims. The court did allow these defenses to survive for relator’s personal and state law claims. Waiver remained for all claims, as discovery may reveal governmental waiver. The relator's motion was granted as to the affirmative defenses asserting laches and estoppel as to the government's claims.

The court upheld the affirmative defenses which asserted a statute of limitations affirmative defense. The court indicated that the statute of limitations may bar some of the relator's claims under the FCA and the New York Labor Law and the relator is not prejudiced by the assertion of this defense at this early stage of litigation.

With respect to the defendants’ affirmative defense claiming that the relator's qui tam claims must be dismissed because the United States did not suffer any damages as a result of the alleged conduct, the court upheld these defenses, noting that the Second Circuit has explicitly "declined to decide whether damage to the United States [is] a required element of the FCA."

The court also upheld the defendants’ affirmative defense contending that the relator is not entitled to attorney fees and costs because there is no basis for the relator's claims and that they are each entitled to attorney fees and costs because the relator's claims are frivolous. The court indicated that as no discovery has taken place in this case, it has yet to be determined whether the relator's claims are of merit or whether they could be considered frivolous.

The court also upheld affirmative defenses arguing that the claims are barred, in whole or in part, and any recovery should be diminished, reduced, or offset, due to the comparative and/or contributory negligence, fault, responsibility, or causation of others should be struck because (1) the defenses are inapplicable to intentional tort cases, and (2) there is no contribution defense to FCA claims. The court found such affirmative defenses challenge defendants’ liability without expanding discovery or prejudicing the relator.

The court upheld the remaining affirmative defenses asserting unjust enrichment, denying underlying violations, reservation of rights and failure to state a claim. The court also upheld an affirmative defense of the physician alleging offset from a prior settlement as discovery may confirm overlap of the cases, and no prejudice was shown to the relator.

The case is No. 5:20-cv-630 (MAD/PJE).

Judge: D’Agostino, M.

Attorneys: Darth M. Newman (Law Offices of Darth M. Newman) for Helene Bernstein, M.D., PhD. David G. Burch, Jr. (Barclay Damon) for Robert Silverman.

Cases: Whistleblowers Retaliation TortClaims CoverageLiability NewYorkNews