Monday, January 11, 2010
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Court Throws Out Fee Award for Frivolous Prosecution
By STEVEN M. ELLIS, Staff Writer
The Ninth U.S. Circuit Court of Appeals Friday overturned a district court order awarding over $279,000 in attorney fees to a Nevada doctor following the dismissal of criminal charges against him.
In a decision by specially appointed U.S. District Court Judge David G. Trager of the Eastern District of New York, the panel ruled that the government had not taken a frivolous position in prosecuting otorhinolaryngologist Mark Capener based on its expert’s erroneous interpretation of the doctor’s pathology reports.
The government launched an investigation into Capener after his insurer reported that his insurance claims appeared to reveal a pattern of excessive procedures and suspicious claims. During the investigation, the government consulted with Dr. Dale Rice, who reviewed Capener’s patient files, pathology reports and other records, and concluded that many of the surgeries that Capener had billed for were either unnecessary or were not performed.
Rice told investigators that his conclusions had been supported in part by the fact that no bone fragments had been reported by the pathologist who had examined tissue taken from Capener’s patients following surgery.
Some of the pathology reports specifically mentioned the presence of bone fragments, but others did not, and Rice said he concluded that such an omission indicated that there were no fragments in those samples.
Capener was indicted in July 2005 and the grand jury charged him with 38 counts of health care fraud, 13 counts of mail fraud and one count of making false statements.
At trial, the pathologist who had processed the samples from Capener’s patients testified that there had been bone fragments in most, if not all of the pathology samples he examined, and explained that he included bone fragments within the more general category of sinonasal mucosa in some of his reports.
In addition, Capener presented pathology slides from patients he treated on which bone fragments were plainly visible.
Following the close of the evidence, U.S. District Court Judge Robert C. Jones of the District of Nevada dismissed all 21 health care fraud and mail fraud counts alleging that Capener had performed unnecessary surgery, but sent to the jury the remaining 25 counts. After a single day’s deliberation, the jury acquitted.
Capener moved for an award of fees pursuant to 18 U.S.C. § 3006A, claiming that the prosecution’s case was vexatious, frivolous and in bad faith. He also requested production of documents to support his motion.
Jones denied Capener’s request for documents, finding that he had not raised sufficient suspicion to justify an order to produce documents, but awarded partial relief, determining that the government had pursued frivolous claims as to the fraud-related counts based on the alleged lack of bone fragments in the pathology reports.
On appeal, the government contended that Jones had abused his discretion by considering the alleged flaws in the prosecution’s case piecemeal, rather than asking whether the case—viewed as a whole—met the requirements for an award of fees.
Trager declined to reach this issue, concluding that even if a piecemeal approach were permissible, the district court’s finding of frivolousness was clearly erroneous. He noted that the government had interviewed the pathologist, but failed to discover that the samples at issue contained bone fragments.
“This was a regrettable mistake—a clear failure by the prosecution to do its homework,” he said.
But the judge said the government’s decision to cease its investigation in reliance on its expert did not constitute misconduct absent some affirmative reason for the government to know that such reliance was misplaced.
He reasoned there was no basis to believe the government was not acting in reliance on its expert’s inference regarding the pathology reports which did not specifically indicate the presence of bone fragments when it prosecuted Capener because Rice never indicated any need for additional information regarding the absence of fragments and because the interpretation of pathology reports is “a technical matter not a legal one.”
Trager concluded the record “simply does not substantiate the assertion that the government knew or had reason to believe that its lack of bone fragments theory was false” and that the district court’s finding of frivolousness was unsustainable.
He added that the district court did not err in declining grant discovery on Capener’s fee claim absent a showing of good cause to require the government to produce evidence, and that Capener was not entitled to fees for the entire case.
Judges Kim McLane Wardlaw and William C. Canby Jr. joined Trager in his decision.
The cases are United States v. Capener, 07-10359 and 07-10372.
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