Alderson

ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT [11]; DENYING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT [17]

I. INTRODUCTION

Plaintiffs seek to obtain a tax refund by characterizing their False Claims Act qui tam award as capital gains rather than ordinary income. Plaintiffs’ Complaint presents a question of first impression

II. FACTS

Plaintiff Jim Alderson was the Chief Financial Officer for the North Valley Hospital in Whitefish, Montana. Beginning in 1990, Quorum Health Group, Inc. (“Quorum”) took over management of the hospital. Quorum instructed Alderson to retain two sets of cost reports: one to submit to the federal government’s Medicare program when seeking reimbursements and another to submit to the hospital’s auditors. Quorum requested that the Medicare books contain more aggressive cost reporting in order to increase the amount of proceeds received from Medicare.

When Alderson refused to maintain the separate sets of books, he was fired. He then brought a wrongful termination action, which settled in late 1993. In the course of discovery during the wrongful termination proceedings, certain Quorum officials’ testimony suggested that Quorum was engaged in…