Cooper v. Pottstown Hospital is another case where a dissatisfied party is attempting to use the federal Anti-Kickback Statute or the Stark Law in litigation arising out of the contracts to which they were willing parties at one time.  Usually, breaching parties have used this argument as a defense, claiming that the contracts were illegal, to justify or defend refusal to perform.

However, Dr. Cooper is using a different tactic.  In Cooper, the relater, A.C. Cooper, M.D., was both an employee of a hospital and a party to a call coverage contract.  Both the employment contract and the call coverage contact contained restrictive covenants.  Dr. Cooper’s employment contract was terminated by the hospital because he had acquired a financial interest in a competing surgical hospital.  Following the termination, Dr. Cooper then became employed by another competing hospital, which allegedly violated the restrictive covenant in the call coverage contract.  Dr. Cooper’s call coverage contract was subsequently terminated.

Cooper then filed a False Claims Act complaint alleging that the termination was evidence that his original contracts were intended to induce referrals and thus violated the False Claims Act.  The government has apparently has declined to intervene.

The District Court granted the hospital’s motion to dismiss for failure to state a claim of action for the following two reasons:

  1. First, Dr. Cooper did not plead facts establishing either a Stark or an Anti-Kickback violation, i.e.,
    • The hospital had no legitimate business need for call coverage, or
    • The compensation was in excess of fair market value
  2. Second, Dr. Cooper had represented while executing the contract that the compensation was fair market value and it was not intended to induce referrals.  Thereby, Dr. Cooper’s prior warranties and representations contradicted his claim.

Furthermore, the court concluded the hospital’s actions in terminating the contracts were legitimate actions based upon the contracts.