Federal Judge Sandy Mattice on Wednesday questioned the late filing by the federal government in seeking to add Life Care Centers of America chairman Forrest L. Preston as a defendant in its major "false claims" action.
The judge said, "I view this as a very significant potential change in the nature and scope of this lawsuit. I have a feeling that Mr. Preston is not going to lie down about this."
He also told government prosecutors, "You are pretty much asking to relitigate everything that's happened in the case. I have a lot of questions about a motion filed seven years into this case."
Judge Mattice said he expects the defense "will file a massive motion to dismiss."
Roger Dickson, one of the Life Care Center attorneys, said, "We will have a very good response by the end of the week.This is an intervention that should have been made a long time ago."
As to whether Mr. Preston will wind up as a defendant, attorney Dickson said, "I don't think he ever will be, but that's up to your honor."
Government prosecutors said they would file a response to the Life Care response by early September.
The motion says, "Since the filing of its complaint, the United States has uncovered evidence that revealed the extent of Mr. Preston's involvement in the management of Life Care, the degree to which he was aware of complaints from his own employees regarding the conduct at issue in this litigation, and the degree to which he ignored corporate formalities and benefited unjustly from Life Care's unlawful conduct."
The motion also cites "the extent to which Medicare funds paid to Life Care as a result of its submission of false claims have been transferred, directly or indirectly, to Mr. Preston."
It says, "The United States seeks leave to allege a single claim against Preston individually for unjust enrichment."
The 82-year-old billionaire is the founder and sole stockholder of Life Care Centers, which is based in Cleveland, Tn.
The federal action, filed in 2012, asks millions of dollars in reimbursements, plus treble damages, against Life Care Centers as a result of two whistle blower lawsuits filed in federal court in Chattanooga in 2008.
Judge Mattice asked about the possibility of the two sides settling the case, noting they are entering into a period of "uncertainty" regarding whether or not the motion to add Mr. Preston as a defendant will be approved.
He said, "Once I rule the balance of bargaining power is going to shift."
However, attorney Dickson did not indicate that Life Care is ready to mediate, saying it is confident it may prevail on some legal issues.
The two sides indicated they may proceed on some depositions, though Judge Mattice said those individuals may have to be redeposed if Mr. Preston is added to the case and his attorneys have additional questions.
The prosecution had four attorneys at the table and Life Care had attorney Dickson, two new lawyers from California, and three others, including local attorney Leah Gerbitz, in the courtroom.