      IN THE UNITED STATES COURT OF APPEALS
               FOR THE FIFTH CIRCUIT United States Court of Appeals
                                              Fifth Circuit

                                                                                 FILED
                                                                              August 19, 2008

                                 No. 03-11297                            Charles R. Fulbruge III
                        Cons. w/06-10393 and 07-10414                            Clerk




UNITED STATES OF AMERICA

                                         Plaintiff - Appellant

v.

MEDICA RENTS COMPANY LTD, Etc; ET AL

                                         Defendants

MEDICA RENTS COMPANY LTD, a Texas Partnership

                                         Defendant - Appellee

                 ----------------------------------------------------------

United States of America, ex rel,
RAMON B CARTER; MICHAEL STOCKHAM

                                         Plaintiffs - Appellants

v.

RICHARD F WALSH, doing business as Medica-Rents Company Ltd, an
individual; MEDICA-RENTS COMPANY LTD, a Texas for profit partnership
Richard F Walsh General Partner; MED-RCO INC, a Texas for profit
corporation Richard F Walsh President

                                         Defendants - Appellees

              ----------------------------------------------------------------
                            No. 03-11297
                   Cons. w/06-10393 and 07-10414


                            Cons. w/06-10393

UNITED STATES OF AMERICA

                                     Plaintiff - Appellant

v.

MEDICA-RENTS COMPANY LTD, A Texas Partnership; RICHARD F
WALSH; ANNA JEAN KING WALSH; THE AMY SUZANNE WALSH 1987
TRUST; THE ELLEN KING WALSH 1987 TRUST; THE HOLLAND
FLEMING WALSH 1987 TRUST; MED-RCO INC, A Texas for profit
corporation

                                     Defendants - Appellees

              -------------------------------------------------------

                            Cons. w/07-10414

UNITED STATES OF AMERICA

                                     Plaintiff - Appellant

v.

MEDICA RENTS COMPANY LTD, A Texas Partnership; RICHARD F
WALSH; ANNA JEAN KING WALSH; THE AMY SUZANNE WALSH 1987
TRUST; THE ELLEN KING WALSH 1987 TRUST; THE HOLLAND
FLEMING WALSH 1987 TRUST; MED RCO INC, A Texas for profit
corporation

                                     Defendants - Appellees

               -----------------------------------------------------


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                                     No. 03-11297
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RAMON B CARTER, United States of America, ex rel

                                            Plaintiffs

UNITED STATES OF AMERICA, EX REL

                                            Plaintiff - Appellant

v.

RICHARD F WALSH, an individual doing business as Media-Rents Co Ltd;
MEDICA-RENTS CO LTD, a Texas for profit partnership Richard F Walsh
General Partner; MED-RCO INC, a Texas for profit corporation Richard F
Walsh President

                                            Plaintiffs - Appellees


                   Appeal from the United States District Court
                        for the Northern District of Texas
                              USDC No. 4:00-CV-483



Before HIGGINBOTHAM, DAVIS, and BARKSDALE, Circuit Judges.
PER CURIAM:*
       Individual relators and the government appeal the district court’s grant
of summary judgment to Medica-Rents Co. (“Medica-Rents”) on claims under the
False Claims Act, 31 U.S.C. § 3729 et seq. (“FCA”), and judgment for Medica-
Rents after a bench trial on common-law claims, along with the award of


       *
        Pursuant to 5TH CIR. R. 47.5, the Court has determined that this opinion should not be
published and is not precedent except under the limited circumstances set forth in 5TH CIR. R.
47.5.4.

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attorneys’ fees. Appellants’ action, both under the FCA and for mistaken
payment and unjust enrichment, arose from their contention that Appellees
made unjustifiable and fraudulent claims for reimbursement from Medicare for
rentals of durable medical equipment. We affirm the district court’s orders
rejecting Appellants’ FCA and common-law claims. However, we reverse the
district court’s award of attorneys’ fees.
                                        I.
      Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395–1395gg,
establishes the Health Insurance for the Aged and Disabled Program, commonly
known as Medicare. Medicare provides, among other things, federal government
funds to help pay for durable medical equipment for Medicare beneficiaries. The
United States provides reimbursement for Medicare claims for these goods
through the Health Care Financing Administration (“HCFA”), which contracts
with private insurance carriers to administer, process, and pay claims. In 1993,
the HCFA delegated responsibility for standardizing reimbursement into four
regional carriers, called Durable Medical Equipment Regional Carriers
(“DMERCs”).     Additionally, HCFA created the Statistical Durable Medical
Equipment Regional Carrier (“SADMERC”) to coordinate the coding decisions
of the four DMERCs such that there is country-wide consistency. HCFA made
the DMERC for Region C—Blue Cross/Blue Shield of South Carolina, doing
business under the name Palmetto Government Benefits Administrators
(“Palmetto”)—the SADMERC, as well.
      In order for a supplier to obtain reimbursement from HCFA, the supplier
must identify its products using a coding system known as the Healthcare
Common Procedure Coding System (“HCPCS”). The HCPCS is maintained by

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the HCPCS Alpha-Numeric Editorial Panel (the “Panel”), which decides whether
a new code should be created for a product or whether the product fits within an
existing code. Each HCPCS code used to identify rented durable medical
equipment is assigned a monthly reimbursement amount. Each HCPCS code
describes a category of products, and each product fitting the description is billed
to Medicare under that code. Durable medical equipment that does not match
the description of a specific HCPCS code is billed using code E1399, for
miscellaneous products, a code that is processed by hand rather than computer.
       Medica-Rents rented special mattress overlays called ROHO Dry Flotation
Mattress Systems (“ROHOs”). ROHOs are non-powered static surfaces designed
to be laid on top of typical hospital mattresses to prevent or relieve patients’
bedsores or pressure ulcers.          Before HCFA centralized Medicare’s durable
medical equipment claims by establishing the four regional DMERCs and the
SADMERC, Medica-Rents submitted reimbursement claims to the local
Medicare carriers in each state where it did business. In November 1992, the
Panel determined that ROHOs should be billed under the miscellaneous code
E1399. The local Medicare carrier for Louisiana, however, sent Medica-Rents
several letters with guidance to bill under code E0277, a more lucrative code that
typically applies to more expensive powered mattresses, not mattress overlays.
At the same time, other states told Medica-Rents it could not use code E0277 for
the ROHOs. At other points multiple contradictory instructions were given to
Medica-Rents regarding which code to use.1


       1
         The record is replete with examples of contradictory guidance. By way of example, a
Medicare provider in Tennessee advised that ROHOs should be billed under code E0197, the
Florida carrier advised using code E0184, Blue Cross/Blue Shield of Arkansas advised using code

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       After the reorganization, beginning in approximately December 1993,
Medica-Rents submitted its claims to Palmetto, the DMERC for Region C. As
stated, Palmetto was also the SADMERC responsible for, among other things,
pulling together various HCPCS codes used by local carriers for the same
products and making them consistent.               Just as there had been confusion
regarding which code to use before the reorganization, there was confusion
regarding which code to use in the transition to the new system and thereafter.
For example, Palmetto paid claims submitted under code E0277 until early 1995.
At that time, HCPCS was determining whether a new code was necessary for the
ROHOs. On February 21, 1995, an HCPCS coordinator for the SADMERC
indicated that code E1399 should be used to bill for the ROHO. Medica-Rents
complied with this guidance, but continued to lobby for a new code. For the next
few months, the claims submitted by Medica-Rents were unpaid. Then, in April
1995 Medica-Rents received contradictory guidance regarding whether it should
use code E1399; this confusion culminated when Sharietta Thompson, the
Region C DMERC ombudsman for Texas suppliers, informed Medica-Rents that
Palmetto was processing the unpaid claims and that “everything should be ok”
with code E1399. On June 13, 1995, Medica-Rents followed up with Thompson
because the claims submitted under code E1399 remained unpaid. On June 15,
1995, representatives of the SADMERC and the HCPCS coordinators for the
DMERCs held a conference call regarding code E0277, and the next day the
SADMERC issued a memorandum regarding that call that allowed limited use


E0190, Blue Cross/Blue Shield of Alabama advised using code E0197, and Louisiana Medicare
Services initially advised using code E1399 and later authorized billing under code E0277 in
October 1993.

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of code E0277.2 Then, on June 23, 1995, the SADMERC told Medica-Rents that
E1399 was the correct code. On July 11, 1995, the Region C DMERC had a
policies-and-procedures meeting to resolve billing and claims processing issues.
At that meeting the Region C DMERC decided that low-airloss overlays billed
under the code E1399 should be changed to code E0277 to try to determine if
there were duplicates in the system. Over the next few days, there were
multiple emails between the Region C DMERC and SADMERC regarding
whether the ROHOs should be billed under code E0277. Finally, on July 18,
1995, Thompson sent a letter instructing Medica-Rents to use code E0277. A
copy of this letter was sent to Sue Pearcy, who worked at the Dallas Regional
Office of HCFA. On August 4, 1995, Thompson sent a second letter to Medica-
Rents reiterating that the ROHO should be billed under code E0277. The letters
were never corrected, altered, withdrawn, or amended.
       In 1998, individual relators filed a qui tam action under the FCA against
Medica-Rents as well as other named defendants (together, with Medica-Rents,
the “Defendants”), alleging that the Defendants had defrauded the federal
Medicare program by knowingly over-billing for the ROHOs. The claim was
based on the argument that code E1399 should have been used instead of code
E0277, and that excess reimbursement had been issued due to improper coding.
Two years later, the United States filed a federal common-law action against
Medica-Rents for mistaken payment and unjust enrichment based on many of
the same underlying facts. The United States then intervened in the FCA case


       2
         The memorandum stated, in relevant part, that SADMERC had decided to allow
suppliers filing low-air-loss products under code E0277 to continue to do so and to allow
suppliers filing under code E1399 to begin to file under code E0277 for new claims.

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and the two actions were consolidated in the Northern District of Texas for
discovery and trial. In September 2003, the district court granted summary
judgment for the Defendants on the FCA claims. In January 2006, after a bench
trial, the district court ruled in favor of the Defendants on the common-law
claims. In January 2007, the district court issued a final order granting the
Defendants over $4.8 million in attorneys’ fees pursuant to the Equal Access to
Justice Act (“EAJA”), 28 U.S.C. § 2412.
                                        II.
      We review a grant of summary judgment de novo, viewing all evidence in
the light most favorable to the non-moving party and drawing all reasonable
inferences in that party’s favor. See Crawford v. Formosa Plastics Corp., 234
F.3d 899, 902 (5th Cir. 2000). “Summary judgment is proper when the evidence
reflects no genuine issues of material fact and the non-movant is entitled to
judgment as a matter of law.” Id. (citing FED. R. CIV. P. 56(c)). “A genuine issue
of material fact exists ‘if the evidence is such that a reasonable jury could return
a verdict for the non-moving party.’” Id. (quoting Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986)). “The standard of review for a bench trial is well
established: findings of fact are reviewed for clear error and legal issues are
reviewed de novo.” Kona Tech. Corp. v. S. Pac. Transp., 225 F.3d 595, 601 (5th
Cir. 2000) (citations omitted). We review a district court’s decision to award
attorneys’ fees for bad faith under the EAJA for abuse of discretion. See Perales
v. Casillas, 950 F.2d 1066, 1071 (5th Cir. 1992) (citation omitted).
                                        III.
                                        A.
      Appellants argue first that the district court erred in granting summary

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judgment in favor of the Appellees on the FCA claims. To recover under the
FCA the plaintiff must demonstrate: (1) the claimant presented, caused to be
presented, or conspired to have presented to an agent of the United States a
claim for payment; (2) the claim was false or fraudulent; and (3) the claimant
knew the claim was false or fraudulent. 31 U.S.C. § 3729. The government
argues that Medica-Rents knowingly submitted false or fraudulent claims for
payment based on the fact that Medica-Rents used the E0277 code instead of the
E1399 code.
      Medica-Rents may have used an incorrect billing code, but if it did, it did
so at the direction and in compliance with at least one directive from Palmetto,
a DMERC and the acting SADMERC. We agree with the district court that
there was substantial confusion created by contradictory instructions and
guidance before, during, and after the transition to the new DMERC and
SADMERC system. In these circumstances, it is unclear that the Defendants’
use of code E0277 was erroneous, and we agree with the district court that the
evidence does not support a reasonable inference that they knowingly submitted
false or fraudulent claims.
                                       B.
      Appellants next argue that the district court erred in rejecting their
common-law claims. Under the common-law theory of payment by mistake, the
government may “recover money it mistakenly, erroneously, or illegally paid
from a party that received the funds without right.” LTV Educ. Sys., Inc. v. Bell,
862 F.2d 1168, 1175 (5th Cir. 1989). “[R]ecovery under unjust enrichment is
justified when one person obtains a benefit from another by fraud, duress, or the
taking of an undue advantage.” Heldnefels Bros., Inc. v. City of Corpus Christi,

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832 S.W.2d 39, 41 (Tex. 1991).
        The government argues that Medica-Rents received higher payments than
it deserved for the ROHOs because it submitted claims for payment under code
E0277 instead of code E1399. Upon our review of the record, however, and as
stated above, Medica-Rents utilized a billing code specifically authorized by
Palmetto. Palmetto was the DMERC for Region C and the SADMERC, and we
are convinced that the district court did not clearly err in determining that
Palmetto had appropriate authority to give this guidance on July 18, 1995. Also,
a copy of the July 18, 1995 letter was sent to the regional office of HCFA, which
took no steps to correct the guidance. The district court did not err in finding
that, under these circumstances, where there was no misconception or
misunderstanding regarding the facts and where the government specifically
authorized use of code E0277, there can be no mistaken payment. Additionally,
because Palmetto specifically authorized use of E0277, there was no fraud,
duress, or the taking of an undue advantage necessary to find unjust
enrichment.
                                       C.
        The government also challenges the district court’s award of attorneys’
fees.   Section 2412(b) of the EAJA permits an award of fees against the
government “to the same extent that any other party would be liable under the
common law.” 28 U.S.C. § 2412(b). “Section 2412(b) incorporates the ‘American
rule’ for fee-shifting, which permits a fee award only when the losing party acted
‘in bad faith, vexatiously, wantonly, or for oppressive reasons.’” Perales, 950
F.2d at 1071 (quoting F.D. Rich Co. v. United States ex rel. Indus. Lumber Co.,
417 U.S. 116 (1974)) (emphasis omitted).

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      The district court awarded attorneys fees in part because the “government
was aware of the tenuous nature of the case,” and “brought claims that were
either wholly without evidence (False Claims Act) or could not withstand even
a cursory review of the admitted evidence (common-law claims).” United States
v. Medica-Rents Co., 2006 WL 3635416, *3 (N.D. Tex. 2006). Upon our review
of the record, we are not convinced that the government brought claims that
were either wholly unsupported or that were easily dispatched by cursory review
of the evidence. The record reflects legitimate confusion on the part of both
Medica-Rents and the government before, during, and after the transition to the
DMERC and SADMERC system. Although we today affirm the district court’s
summary judgment and dismissal after bench trial, respectively, the record does
not establish bad faith on the part of the government. The district court did not
agree with Appellants’ arguments, but Appellants did have a nonfrivolous
argument regarding which code should have been used and which entities had
the authority to issue guidance. We therefore conclude that the district court
abused its discretion in awarding attorneys’ fees and we must reverse that
award.
                                       IV.
      For the foregoing reasons, we affirm the district court’s grant of summary
judgment on the FCA claim and the district court’s judgment in favor of the
Defendants in the common-law claims following a bench trial. However, we
reverse the award of attorneys’ fees and remand this case to the district court to
enter judgment consistent with this opinion.


AFFIRMED in part, REVERSED in part, and REMANDED.

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