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State of New Jersey, Through Leslie A. Hayling, Jr., D.D.S v. Correctional Medical Services

October 11, 2011

STATE OF NEW JERSEY, THROUGH LESLIE A. HAYLING, JR., D.D.S., PLAINTIFF-APPELLANT,
v.
CORRECTIONAL MEDICAL SERVICES, INC., ALLCARE DENTAL GROUP, L.L.C., VICKIE BYBEE, DAVID MEEKER, JANICE BELL, D.M.D., AND LIONEL ANICETTE, M.D., DEFENDANTS-RESPONDENTS.



On appeal from Superior Court of New Jersey, Law Division, Mercer County, L-2114-08.

The opinion of the court was delivered by: Payne, P.J.A.D

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Argued September 13, 2011

Before Judges Payne, Reisner and Hayden.

The opinion of the court was delivered by PAYNE, P.J.A.D.

The New Jersey False Claims Act (NJFCA), N.J.S.A. 2A:32C-1 to -15 and N.J.S.A. 2A:32C-17 to -18, was enacted on January 13, 2008. Section 19 of that Act provided: "This act shall take effect on the 60th day after enactment." See L. 2007, c. 265, § 19. This appeal raises the issue whether, despite that language, the NJFCA should be given retroactive effect.

I.

The issue arises in the following factual context. From 1996 through March 31, 2005, Correctional Dental Associates (CDA), a New Jersey corporation founded by Leslie A. Hayling, Jr., D.D.S., furnished dental services to inmates of New Jersey's prisons as a subcontractor pursuant to a contract between the State and defendant Correctional Medical Services, Inc. (CMS). In anticipation of the expiration of that contract, in 2004, the Department of Corrections, through the Division of Purchase and Property of the State Department of the Treasury, solicited bids for a new two-year combined health and dental services contract with two one-year optional extensions. CMS responded, submitting a bid with two options: either for CMS to directly provide all services or for it to subcontract with CDS for the provision of the dental service part of the contract. The contract was awarded solely to CMS, effective April 1, 2005. Thereafter, CMS was granted a one-year extension, and then an extension for a "transition period" to September 30, 2008.*fn1 The medical aspect of the contract was performed by CMS; the dental portion was performed by defendant AllCare Dental Group, L.L.C., a subcontractor that was closely allied with CMS. Defendant Vickie Bybee was Senior Vice President and David Meeker was Regional Vice President of CMS; defendants Janice Bell, D.D.S. and Lionel Anicette, M.D. were co-owners and co-founders of AllCare.

In 2005, Hayling commenced investigating CMS and AllCare. That investigation led him to conclude that AllCare was submitting false claims for payment under the dental service portion of the contract. In May 2008, Hayling informed the Office of the Attorney General of his intention to file a qui tam*fn2 action, pursuant to N.J.S.A. 2A:32C-5b, against CMS and AllCare alleging violations of the NJFCA. A pre-filing copy of the complaint was furnished to the Attorney General. Thereafter, in response to its request, Hayling provided the Office of the Attorney General with documents in support of that complaint. On August 25, 2008, Hayling filed the complaint under seal and served it upon the Attorney General as required by N.J.S.A. 2A:32C-5d.

Separately, the State, after investigation, determined that the performance by CMS of its contract for provision of medical and dental services did not meet performance standards, and it assessed liquidated damages, which were deducted from amounts due under the contract. On November 10, 2008, CMS filed an action in lieu of prerogative writs against the State to contest that assessment. However, the suit was dismissed without prejudice to CMS's right to pursue claims against the State arising from the same facts under the Contractual Liability Act, N.J.S.A. 59:13-1 to 10. On April 8, 2010 we affirmed the dismissal in an unpublished opinion. Correctional Med. Servs, Inc. v. State, Dep't of Treasury, No. A-3820-08 (App. Div. April 8, 2010). On May 5, 2009, CMS instituted a second civil action against the State. That action remains pending.

On September 23, 2009, the State declined to exercise its right, pursuant to N.J.S.A. 2A:32C-5d and e, to intervene in the qui tam litigation, but it permitted the case to proceed.*fn3 The complaint, alleging violations of the NJFCA, unjust enrichment and fraud, was therefore unsealed and served upon defendants. Following service, defendants moved to dismiss the complaint, arguing that Hayling's claims involved alleged conduct occurring prior to the effective date of the NJFCA, and thus not subject to that Act. Additionally, defendants argued that Hayling lacked standing to bring claims of unjust enrichment and fraud on the State's behalf. The State filed a statement of interest in defendants' motions, and it was granted leave to appear as amicus.

Following a hearing, the motion judge granted defendants' motions, ruling that because the events alleged in the underlying complaint as violating the NJFCA occurred from April 1, 2005 through March 31, 2007, but the NJFCA did not become effective until March 13, 2008, the Act was inapplicable. In doing so, the judge gave the Act a wholly prospective application, determining that none of the exceptions to the general rule that a statute is to be applied prospectively was applicable. Additionally, the judge dismissed Hayling's common-law causes of action for lack of ...


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