The Clinton Herald, Clinton, Iowa

October 18, 2013

Verdict clears attorney; city gets nothing

By Katie Dahlstrom
Assistant Editor

DAVENPORT —  A Scott County jury on Friday sided with attorney Michael Walker in the city of Clinton's legal malpractice suit against him, awarding the city nothing. Jurors spent 11 hours deliberating before returning a unanimous verdict that Walker and his law firm Hopkins and Huebner were not negligent when representing the city in a 2009 federal False Claims Act case.

Their decision that Walker wasn't negligent meant they did not move on to answer the two other blanks on the verdict form: Was the negligence of the defendants a cause of damages to the city of Clinton and what amount of damages the city sustained because of that negligence. Walker and his firm were retained to represent the city in 2009 after former Clinton firefighter Timothy Schultheis filed a complaint under the federal False Claims Act that the city was knowingly submitting false ambulance claims to Medicare and Medicaid in order to receive higher reimbursement rates. By coding basic life support instead of advanced life support the city was able to get more money from the federal programs, Schultheis alleged.

The case was settled in 2010 for $4.5 million to be paid to Schultheis and the U.S. Department of Justice in annual installments of $450,000 over the course of 10 years, with the money to come from the debt service levy. Schultheis and his attorneys receive 30 percent of the settlement.

The city filed a legal malpractice suit against Walker and his law firm Hopkins and Huebner in March 2012, alleging Walker's negligence caused the city to rush into a settlement. They sought $4.67 million to recoup the costs of the settlement and attorney and expert fees.

"All of us lawyers are extremely disappointed in the jury's verdict, of course," said Mike Hannafan, one of the attorneys the city retained for the legal malpractice case. "We all feel particularly badly for the city of Clinton, especially for the brave firefighters and paramedics."

Lawyers battled in court for nearly three weeks in the legal malpractice case, which was moved to Scott County due to pre-trial publicity. Jury selection started Sept. 30 with opening statements and witness testimony starting the next day. Jurors then listened to 12 days of testimony before closing arguments started Wednesday afternoon.

Jurors retired to the jury room Thursday morning where they spent around six hours deliberating before going home for the day. They returned Friday morning and deliberated for five hours before declaring Walker and his firm were not negligent.

"We are very pleased and grateful with the jury's verdict and hard work in this case," said Walker's attorney, Bob Waterman. "Mike Walker is an outstanding trial lawyer who never should have been sued. This verdict fully vindicates him and his firm."

Waterman said the law does not allow for Walker to take any legal action against the city, such as a defamation of character suit.

The city has 30 days to appeal the verdict, but it is unclear if it will take this course. City Attorney Jeff Farwell said an appeal would still need to be discussed with the City Council and its attorneys Hannafan and Hannafan.

Mayor Mark Vulich did not respond to requests for comment.

THE TRIAL

When they announced the suit in 2012, city officials alleged the trust placed in the advice, counsel and opinions of Walker resulted in members not being properly advised about the extent of the city’s liability in regards to the alleged Medicare fraud.

During the malpractice trial, the city tried to convince the jury of this fact and that if the Schultheis case had gone to trial, the city would have gotten a more favorable outcome than it did in the settlement.

Schultheis testified he had complained to his supervisor Joel Atkinson and EMS director Andrew McGovern a number of times without having his concerns addressed. He also testified he had never seen an ambulance claim from the city before he filed his suit in September 2008 under seal in federal court. The city learned about the suit when it was unsealed in September 2009 after the U.S. government declined to intervene, which prompted the city to hire Walker.

As he represented the city, Walker told the City Council it faced a potential $40 million liability, which was based on a ratio from coding and billing expert retained in the Schultheis case, Douglas Wolfberg. According to Wolfberg, Walker told the council, the national average for ambulance calls is 60 or 70 percent ALS and 30 or 40 percent BLS. At the time, the city's Medicare billings were around 99 percent ALS.

Wolfberg's testimony in the legal malpractice case revealed this ratio was never meant to be construed as the national average and likely was relayed to Walker as a figure based on Wolfberg's experience and not hard, fast facts.

However, the 60 or 70 percent ALS rate was not far from the actual 64 to 68 percent average ALS rate from 2005 to 2008, according to the Centers for Medicare and Medicaid Services. The city now bills 86 percent ALS with billing handled by an outside agency since 2010, a fact the defense used throughout the trial.

The city's attorneys presented a dozen witnesses over the course of nine days. Former Fire Chief Mark Regenwether, Schultheis, Walker, Clinton firefighter Andy McGovern, Vulich, city of Clinton accounting specialist Sarah Nolan, Clinton firefighter Joel Atkinson, former Human Resource Director David Geisler, former Clinton Fire Department Medical Director Dr. Douglas Jergenson, Safety Director Jeff Chapman, firefighter Chris Melvin and False Claims Act expert Ronald Clark testified in the city's case. The firefighters denied the accusations Schultheis made that McGovern had told everyone to code everything at ALS and to give all patients a heart rate monitor, IV and oxygen. McGovern explained why he believed in his method of coding and that there was never any intent to defraud the federal government. They were shocked to learn the city had settled, they said.

If there were any incorrect claims, Hannafan told the jury, it didn't mean they were necessarily false or actionable under the False Claims Act. He argued Walker could have exercised innocent mistakes and negligence if the case had gone to trial.

"I do not believe the verdict of no negligence reflects at all if the city would have won the Schultheis case had it gone to trial," Hannafan said. "I strongly believe the city, the firefighters and paramedics did nothing wrong in their coding and billing. I believe they would have been fully vindicated, but they didn't get that chance because they were rushed into a $4.5 million settlement."

Clinton Fire Chief Mike Brown and McGovern declined to comment on the verdict.

Waterman told the jury about the obstacles Walker saw in his defense of the case, such as the city's budgeting at 100 percent ALS, its failure to train the finance staff that sent bills and duplicate reports that contained different codes. Walker testified too many people knew what was going on and chose to do nothing for the city to prove it wasn't just looking the other way, which is actionable under the False Claims Act.

Walker first proposed the idea of a settlement to the city council on April 13, 2010. A mediation took place in July and the suit was subsequently settled in September 2010.

While he did not address whether or not the city had billed its claims incorrectly, Clark spoke to Walker's negligence. He contended Walker's acceptance of the case was his first breach of the standard of care. Walker admitted he had never heard of the False Claims Act until he started work on the Schultheis case. His inexperience left him unable to properly defend the city against the False Claims Act allegations, Clark said. He detailed all the steps he believes Walker should have taken such as filing motions to dismiss, deposing Schultheis, and keeping track of Wolfberg. In Clark's opinion, Walker also mislead the city council about the potential liabilities. The defense's case consisted of three expert witnesses: coding and billing expert JR Henry, CPA and healthcare consultant Lamar Blount and Des Moines attorney and Iowa State Bar Association president Guy Cook.

Henry and Blount told the jury the city had erroneously upcoded nearly 18 percent of its calls from 2002 to 2009; Henry also called these claims false. Blount testified theses alleged false claims could have resulted in $16 million in civil penalties for the city. Cook testified Walker was not negligent. Walker was qualified to handle the case and landed the city a remarkable and favorable settlement, Cook said.

The settlement allows the city to pay the $4.5 million over 10 years with no interest. The settlement did, however, leave the city open to criminal charges and expulsion from Medicare, actions that have never been taken.