Vintage Filings Legal Blog

On May 20, 2009, US District Judge Virginia Hernandez Covington dismissed, with prejudice, the lawsuit styled United States of America ex rel., Greg Westfall and Suzanne Westfall vs. Axiom Worldwide, Inc., Axiom Worldwide, LLC, James J. Gibson, Jr., Nicholas Exarhos, Timothy Exarhos, Peer Review Network, Inc. The details below were distributed by Axiom this past week.  The lawsuit, filed by Greg and Suzanne Westfall on behalf of the United States under the federal False Claims Act, had been pending in the United States District Court for the Middle District of Florida, Tampa Division, since 2006. Lawsuits filed under the False Claims Act are commonly referred to as “qui tam” suits.

Greg Westfall is a former independent sales representative for Axiom Worldwide, and Suzanne Westfall, his wife, served as his assistant. In their complaint, the Westfalls alleged that Axiom’s DRX devices are mechanical traction devices, and that Axiom and others devised a sales scheme to promote the sale of the Axiom products by knowingly, falsely, and fraudulently using misleading representations to physicians which they knew would cause physicians to submit false and fraudulent claims for payment to Medicare and other federal healthcare programs for services rendered with Axiom’s devices.

The Westfalls filed their original sealed complaint on April 5, 2006. A search warrant was executed upon Axiom’s corporate headquarters on March 8, 2007 and the case was subsequently unsealed. Later that year, on August 3, 2007, the United States declined to intervene in the lawsuit. As a result, Axiom Worldwide filed a motion on February 19, 2008 to dismiss the complaint with prejudice. The very next day, the Westfalls and their attorneys filed a motion to amend their original complaint, which was granted. On March 31, 2008, the Westfalls filed their first amended complaint with the Court. In response to the content of the Westfall’s amended complaint, Axiom again filed a motion to dismiss on June 10, 2008.

On March 20, 2009, the court dismissed the first amended complaint without prejudice, noting: “Reading the first amended complaint carefully, this court was not able to connect with any certainty the numerous allegations with the individual defendants.” On April 6, 2009, the Westfalls filed a second amended complaint containing nineteen counts against the defendants. Once again and in response to the content of the Westfalls’ second amended complaint, Axiom filed a motion to dismiss, and on May 20, 2009, the Court granted Axiom’s motion to dismiss with prejudice. In legal terms, a dismissal without prejudice allows for re-filing the complaint in the future. This means that the action is dismissed, but the possibility remains open that the plaintiff may file another complaint. A dismissal with prejudice closes the case, unless the Court’s decision is appealed to the Eleventh Circuit Court of Appeal and the decision is reversed.

The Court’s order noted that qui tam suits “are motivated primarily by prospects of monetary reward, rather than public good” and “raise a high risk of abusive litigation.” In reaching its decision the Court stated, “[i]n an abundance of caution and fairness, this Court allowed Relators [the Westfalls] to amend their complaint to comply with Rule 9(b) as to these bare allegations. Though given ample opportunity, Relators failed to comply with Rule 9(b) and this Court’s Order . . . . Even if this Court were to take judicial notice, as requested by Relators, of the CPT codes and their meanings, this Court could not allow counts one through four and counts nine through eighteen to stand. This is because Relators have provided no reliable basis to support the allegations that claims submitted by these physicians were false.” In regard to counts five through eight, the Court states, “The same analysis applies with equal force…, which concern false records. The breadth of the allegations concerning false records is of particular concern to this court…This vague allegation cannot carry the day in an FCA case concerning false records.” The Court continued, “[t]he allegations concerning conspiracy . . . are merely legal conclusions masquerading as factual allegations, which do not survive the motion to dismiss. . . . The stringent standards imposed by Rule 9(b) safeguard a defendant’s reputation from the injury which can result from fraud allegations. Rule 9(b)’s requirements also rebuff ‘fraud actions in which all of the facts are learned through discovery after the complaint is filed.”

In its conclusion, the Court wrote, “[t]his court roundly refuses to open the door to discovery and litigation when, after three attempts, Relators failed to file a complaint in compliance with Rule 9(b) of the Federal Rules of Civil Procedure. Thus, upon due consideration, this Court dismisses this case with prejudice.”

All of the plaintiffs and all of the defendants in the civil lawsuits stemming from the August 2007 accidents at the Crandall Canyon Mine have reached a comprehensive settlement for a confidential amount.

According to the parties, the settlement brought numerous and widely varying interests together. The parties expressed hope that the settlement would bring a measure of closure and a sense of healing to the families of those who were lost or injured, current and former company employees, company management, the residents of Carbon and Emery Counties, and the coal mining industry in general.

Ultimately, the plaintiffs, the defendants, and their insurers recognized the extent of factual complexities and novel questions of law, and the time and expense of resolving them. Rather than engaging in lengthy, expensive, and unpredictable litigation, the parties decided to work together toward an amicable, reasonable settlement to put these matters in the past, provide for the victims’ and their families’ futures, and allow all concerned to move forward. The parties succeeded in doing so, and the resolution reflects the sincere concerns and very best efforts of everyone involved.

The Consumer Electronics Association (CEA) today delivered to President Barack Obama a letter signed by owners of small consumer electronics businesses from across the nation urging support for policies that preserve small business and entrepreneurship.

The business leaders urged President Obama to support policies that would make America more competitive, innovative and creative in its endeavors. This includes passing the pending trade agreements with Colombia, Panama and South Korea to eliminate costly tariffs on U.S. exports, and rejecting the Employee Free Choice Act, commonly known as “card check”.

Of their opposition to “card check,” the leaders stated: “Small businesses must be nimble and flexible, ready to adapt to unexpected market changes. A law that would allow for the massive coercion of workers to join unions and require government arbitration in the event negotiations over work conditions and wages stalled, would be the end of small business in America.”

The letter also expressed concern over deficit spending and urged a balanced fiscal policy.

The leaders, all members of CEA, will head to Capitol Hill today to meet with members of the U.S. Congress and hand deliver copies of the letter sent to the White House.

To read the full-text of the letter, click here.

Aggressive adoption of new technologies for the production, distribution and use of electricity could lower total U.S. energy consumption by 2030, according to a study released today by the American Council for an Energy Efficient Economy (ACEEE). The study was commissioned by the Semiconductor Industry Association (SIA).

“Technology currently available and under development has the potential to revolutionize America’s energy picture on a scale comparable to the way the Internet is revolutionizing commerce,” said Brian Halla, chairman and chief executive officer of National Semiconductor and member of the SIA board of directors. “Chip-enabled technologies will soon deliver solutions to the complex problems involved in harnessing solar and wind power and integrating electricity from these sources into the nation’s distribution grid. New technologies can also achieve dramatic efficiencies in the use of energy in homes, factories, commercial buildings, and all modes of transportation. With smart policies and aggressive adoption of new technologies, the grim scenarios of living in an energy-starved world will not come to pass,” Halla concluded.

The ACEEE study reported that adoption of semiconductor-enabled technologies could lower electricity demand by 1.2 trillion kilowatt hours in 2030, a consumption level that is 22% less then the Department of Energy’s base case and 11% less than today, even though the economy is about 70 percent larger. Without such technologies, the U.S. would need an additional 296 large electric power plants, and consumers and businesses would need to spend an additional $126 billion.

The National Hockey League team the Phoenix Coyotes filed for Chapter 11 reorganization to implement a court-approved sale of the team under the federal bankruptcy code. The filing included a proposed sale of the franchise to PSE Sports & Entertainment, which would move the franchise to southern Ontario, Canada.

“Extensive efforts have been undertaken to sell the team, or attract additional investors, who would keep the team in Glendale,” said Coyotes’ Chief Executive Officer and Managing Member Jerry Moyes.

“Creating a process under the supervision of a judge assures that anyone wishing to purchase the team will have the opportunity to bid. Likewise, the City of Glendale, which has been very cooperative with efforts to keep the team in Glendale, will be able to provide potential buyers assurances of the City’s willingness to offer incentives to keep the team as a tenant in the Jobing.com arena, the lease for which is subject to rejection in bankruptcy,” Moyes stated. “The process assures that the identities of the new owner and the team’s location will be known by June 30, 2009, thus enabling the NHL to include the team in its 2009-10 schedule.”

It is anticipated that the judge will hold a hearing within several days to establish a sales procedure, which will include authorizing continuance of the selling activity in an effort to attract higher bids. The PSE price is $212.5 million, which provides funds sufficient to pay secured creditors in full (approximately $80 million to SOF Investments, L.P. and $35 million to the NHL) and $97.5 million to unsecured creditors, whereas the owners of the Coyotes would receive nothing for their equity investment, including $206.5 million in preferred and common equity that will not be recovered by Moyes under the current offer.

“As Managing Member of the Coyotes, I have a duty to seek a transaction that will return the most in sale proceeds to the secured and unsecured creditors,” Moyes said. “No other proposal to acquire the team provided nearly as much payment to the creditors as that offered by PSE, with the understanding that the procedure is in place for other parties to offer more, particularly if the City of Glendale provides financial incentives to keep the team in Glendale. Overbids must exceed the PSE proposal by $5 million and must be fully funded at closing without a financing contingency.”

TruePosition announced that the United States Delaware District Court awarded TruePosition approximately $20 million in additional damages, plus attorney’s fees and court costs, in continued patent infringement litigation against Andrew Corporation.

In September of 2007, a Delaware District Court jury determined that Andrew willfully infringed a patent held by TruePosition relating to control channel Uplink Time Difference of Arrival (U-TDOA) location technology. Specifically, the jury found infringement with respect to sales of Andrew’s Geometrix wireless location system to the Saudi Telephone Company (STC). Andrew, however, continued to ship infringing products to STC after trial. Accordingly, the court awarded TruePosition an additional $10.1 million in compensatory damages, $9.6 million punitive damages, pre-judgment and post-judgment interest, as well as costs and attorneys’ fees. This was in addition to a previous award of $23.25 million in compensatory and punitive damages. The Court also issued a final permanent injunction order prohibiting Andrew Corporation from making, using, selling or offering to sell the infringing Geometrix products.

“We are very pleased with the outcome in this case,” said Frederic Beckley, Executive Vice President and General Counsel of TruePosition. “This decision secures the fact that TruePosition has vital intellectual property surrounding U-TDOA and further establishes TruePosition as the global leader in mission-critical wireless location solutions.”

U-TDOA is a wireless location technology that can locate any mobile phone in any environment with high accuracy and reliability. Recently, worldwide demand for high-performance wireless location technologies has been growing rapidly, because of the increasing need of government agencies and private enterprises to locate mobile phones for public safety and national security purposes.

The subject of the U-TDOA patent held by TruePosition involves control channel location techniques, which are crucial in mission-critical applications like border security, critical infrastructure protection and law enforcement.

In a prior case, TruePosition obtained a settlement from Andrew Corporation worth $42 million relating to certain patents not involved in the present case. The prior case is TruePosition, Inc., v. Allen Telecom, Inc. (D. Del. 2001).

Scratch DJ Game announced that the Los Angeles County Superior Court has granted it a preliminary injunction in its lawsuit against Activision Publishing and California 7 Studios and former owner and president, Lewis Peterson.

The judge, following his issuance of a Temporary Restraining Order in favor of Scratch, on May 7, 2009 further granted a preliminary injunction against Activision’s subsidiary, 7 Studios, and ordered the turnover of all Work Product associated with Scratch – The Ultimate DJ game (“Scratch”), including all source code, work-in-progress and all Developer’s Pre-Existing Tool and Technology, including the source code to 7 Studio’s game engine. The Judge further confirmed in his injunction order that both 7 Studios and its new parent company Activision continue to be “walled off” from disclosing any aspect of the Scratch game or technology with each other or with any third party. The Court’s actions on May 7, 2009 dealt with the final materials relating to the game’s development that the defendant was still withholding, including the source code to 7 Studios’ game engine and other Developer’s Pre-Existing Tools and Technology.

Activision bought financially distressed 7 Studios, which was a contract “work for hire” developer for Scratch – The Ultimate DJ game, after Scratch refused to sell Scratch – The Ultimate DJ to Activision in March. Thereafter, 7 Studios, under Activision’s control, refused to turn over the Scratch game code and attempted to prevent Scratch from obtaining the source code for the game engine. The Court found that Scratch has established a material breach of its Developer Agreement by 7 Studios and ordered that 7 Studios must turnover to Scratch all source code to the game engine and all other Developer’s Pre-Existing Tools and Technology.

Jack O’Donnell, Manager of Scratch and Chief Executive Officer of Numark, stated, “We are very excited to finish Scratch – The Ultimate DJ. We hope that this clear victory ends the delay tactics employed by the defendants to date to stop our game from being completed and brought to market. We will continue to vigorously pursue our damages case against Activision, 7 Studios and Peterson resulting from their actions to delay and take over the Scratch game. With the injunction order, we will also now be able to move forward to complete and launch our much anticipated Scratch game.”

Apex Benefits Group has launched a unique program called HEALTHeTrac. HEALTHeTrac is an integrated, electronic-based initiative that provides employers a cost and time-saving health and benefits solution. This new program is designed to connect and share information between the benefits plan, the wellness program and possible on-site clinics utilizing the HEALTHeTrac system, leading to enhanced disease and case management efforts and contributing to improved overall employee health.

“I envision the HEALTHeTrac program playing a key role in helping employers navigate through this tough economic cycle and beyond,” says President John Gause. “Improved data will allow employers to make better decisions regarding the management of their healthcare program.”

HEALTHeTrac is designed to help the employer, their HR department and employees with the following:

• Reducing overall healthcare expenditures and eliminating some out-of-pocket costs
• Readily identifying factors driving healthcare costs
• Assisting in improving benefits plan design
• Creating a healthier workforce
• Analyzing data to track results and return on investment
• Improving the employees’ knowledge of benefits

This innovative program allows all partnering health providers, HR departments, insurance carriers and vendors to receive data in order to better serve the members of the plan while reducing costs. It will change the way companies and organizations look at their employee benefits plan.

“As an alternative to cost shifting, we consider this program as a real solution to potentially offsetting in part the rising costs of healthcare,” says Todd Foushee, Director of Operations at Apex Benefits Group. “That will result in savings for both the members of the health plan and the employer.”

Companies should “lead toward the upturn” rather than getting bogged down in the negative aspects of a down economy, says Thomas Harrison, Chairman and CEO of Diversified Agency Services, a division of the Omnicom Group, Inc. Harrison shared his remarks with leading Utah executives at the annual Utah Technology Council (UTC) Members’ Meeting last week.

Harrison pointed out that in the current business climate “nice guys finish first.” Leaders can get ahead fastest by learning to see themselves in the role they’d like to fulfill, which will consciously and subconsciously keep them perpetually moving toward their ultimate goal.

Harrison has also learned to love and appreciate the word “No:”

“One of my greatest life lessons is that the real translation of the word ‘no’ is ‘not yet,’” he says. “I have heard ‘no’ as many as 23 times without getting discouraged (and I’ve actually counted them),” he says. “I see every ‘no’ as a cause to rejoice because it’s brought me one ‘no’ closer to ‘yes.’”