United States of America et al v. RS Compounding LLC et al
ORDER: Defendants RS Compounding LLC and Renier Gobea's Motion to Dismiss Relator's First Amended Complaint (Doc. # 48 ) is GRANTED. Defendant Stephen Caddick's Motion to Dismiss Relator's First Amended Complaint (Doc. # 70 ) is GRANTED. Plaintiff relator McKenzie Stepe's Amended Complaint (Doc. # 39 ) is DISMISSED. Stepe may file a Second Amended Complaint by December 7, 2017. Signed by Judge Virginia M. Hernandez Covington on 11/8/2017. (DMD)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
UNITED STATES OF AMERICA, et al.,
ex rel. MCKENZIE STEPE,
Case No. 8:13-cv-3150-T-33AEP
RS COMPOUNDING LLC d/b/a
ZOE SCRIPTS LABORATORY SERVICES,
LLC and d/b/a WESTCHASE
RENIER GOBEA, STEPHEN M. CADDICK,
Pharm D., and JOHN DOE
CORPORATIONS 1-10, all whose
true names are unknown,
Defendants RS Compounding LLC and Renier Gobea’s Motion to
Dismiss Relator’s First Amended Complaint (Doc. # 48), filed
on September 20, 2017, and Defendant Stephen Caddick’s Motion
to Dismiss Relator’s First Amended Complaint (Doc. # 70),
filed on October 11, 2017. Relator McKenzie Stepe responded
on October 4 and 25, 2017. (Doc. ## 65, 73). For the reasons
that follow, the Motions are granted and Stepe’s Amended
Complaint is dismissed with leave to amend by December 7,
Defendants Renier Gobea and Stephen M. Caddick, Pharm.
D., co-founded Defendant RS Compounding LLC in 2004. (Doc. #
39 at ¶ 35). RS Compounding, which does business as Zoe
Scripts Laboratory Services, LLC, and Westchase Compounding
massive quantities of pre-made compounds for both humans and
animals throughout the country in a fashion similar to a large
pharmaceutical manufacturing company.” (Id. at ¶¶ 5, 7).
Defendants market many types of creams and gels, some of which
contain ketamine. (Id. at ¶ 8). These creams and gels are
peripheral neuropathy, carpal tunnel syndrome, phantom limb
pain, sciatica, and arthritis. (Id. at ¶ 88). “At least 40%
to 50% of Defendants’ sales and revenues are earned from
Medicare and TRICARE reimbursements.” (Id. at ¶ 6).
Caddick is a licensed pharmacist, but Gobea is not. (Id.
at ¶¶ 35-36). Although Gobea at one point sold his ownership
interest to Caddick, Gobea returned and purchased Caddick’s
ownership interest in February of 2014. (Id. at ¶ 35). Thus,
“Gobea is the current owner and director of RS Compounding.”
(Id.). Nevertheless, prior to his departure, Caddick “oversaw
all of RS Compounding’s operations, including the training of
RS Compounding’s sales representatives.” (Id. at ¶ 36).
Compounding as a sales representative in New York and New
Jersey between November of 2011 and February of 2013. (Id. at
¶ 30). Through her work, Stepe alleges she became of aware of
various schemes committed by Defendants in order to increase
reimbursements from the Government.
called the “1, 2, 3 strategy.” (Id. at ¶ 9). This scheme
involved pre-printed script pads, listing RS Compounding’s
various creams and gels, along with sales representatives’
“coaching” physicians to prescribe the most highly reimbursed
drugs. (Id. at ¶¶ 9-10). According to Stepe, “Defendants 
Gobea and/or  Caddick have instructed RS Compounding’s
National Provider Identifier (‘NPI’) number, and to also
write in ‘6’ for the number of refills, regardless of actual
patient need,” on the pre-printed script pad. (Id. at ¶ 10).
prepopulated check marks for the most expensive compounds RS
prescribing physicians to cross out the check mark and check
off another product.” (Id. at ¶¶ 11, 18).
Stepe alleges that, as a result of these pre-printed
physician did not cross out the check mark and check off a
different compound — and seek TRICARE, Medicare, Medicaid,
despite questionable (and unsupervised by a doctor) medical
necessity.” (Id. at ¶ 18).
In addition to the pre-printed script pads, “[u]nder the
‘1, 2, 3 strategy,’ Defendants’ sales representatives ‘coach’
script.” (Id. at ¶ 14). Thus, for pre-printed script pads
that did not include checkmarks by the most expensive drugs,
Stepe alleges “[p]hysicians are coached to choose their top
three preferences for each cream or gel based on the active
ingredients.” (Id. at ¶ 67). Sales representatives “‘coach’
physicians to write number ‘1’ next to either NeuroMax,
reimbursement rate” from the Government or private insurers.
physicians “to write a number ‘2’ next to either NeuroFlex or
rates of Defendants’ drugs, if they are covered” by the
patient’s health plan. (Id. at ¶ 69). “Finally, Defendants
instruct sales representatives to ‘coach’ physicians to write
a ‘3’ next to NeuroGel, which has the lowest reimbursement
rate of Defendants’ drugs.” (Id. at ¶ 70). The importance of
this numbering was emphasized to sales representatives like
Marketing, Jon Taylor. He “instructed [them] to ‘fill out a
sample prescription and highlight how you are suggesting they
fill it out. . . . Repeating your message on this until it
sticks.” (Id. at ¶ 16).
compounds and gels sold by Defendants, in which different
substances. According to Stepe, “the Company charged vastly
different prices for individuals who were uninsured, who had
private insurance, and who were covered by TRICARE, Medicare,
and Medicaid.” (Id. at ¶ 76). For example, Stepe alleges
“Defendants regularly billed TRICARE $1,200.00 for the same
120-gram bottle that they charged uninsured patients between
prices, Stepe and another sales representative spoke with the
Vice President of Sales and Marketing, Mr. Taylor. (Id. at ¶¶
74-79). Mr. Taylor “instructed them to not question it because
prices were set ‘at the top of the Company,’ thereby directly
implicating RS Compounding’s owners Mr. Gobea and/or Dr.
Caddick.” (Id. at ¶ 80).
Also, Stepe alleges Defendants “do not train their sales
potential contra-indications or warnings.” (Id. at ¶ 89).
“Defendants did not offer or provide [Stepe] with any formal
training or educate her or any sales representatives about
the efficacy or proper use of their products while she was
employed.” (Id.). “Defendants also do not sufficiently inform
patients about the proper use of their compounds for these
medical conditions” and the basic instructions provided to
Defendants’ differing compounds.” (Id. at ¶¶ 90-91).
As a result of these various schemes, Stepe alleges
Defendants have submitted fraudulent claims to the Government
and have made false records and statements material to such
claims. (Id. at ¶ 94). According to Stepe, “[u]nder the FCA
creams and gels have been and continue to be fraudulent
because the claims submitted for reimbursement are based upon
illegal marketing.” (Id. at ¶ 95).
On December 16, 2013, Stepe filed her Complaint against
RS Compounding and John Doe Corporations 1-10 under seal,
alleging violations of the False Claims Act (FCA), 31 U.S.C.
§ 3729(a), and Florida’s state equivalent of the FCA. (Doc.
# 1). On April 28, 2017, the Government elected to intervene
in part as to the fraudulent pricing allegations, but not as
to the “remaining allegations (including [Stepe’s] fraudulent
marketing and promotional allegations).” (Doc. # 33). The
Government filed its Complaint in partial intervention on
June 30, 2017, and subsequently filed its Amended Complaint
in partial intervention on September 9, 2017, against RS
Compounding and Gobea. (Doc. ## 36, 42).
Stepe filed her Amended Complaint on July 12, 2017, again
alleging violations of the FCA and various States’ equivalent
statutes against RS Compounding, Gobea, Caddick, and John Doe
Corporations 1-10. (Doc. # 39). Stepe alleges claims under
the state equivalents of the FCA for Florida, Virginia,
Illinois, Indiana, Louisiana, Maryland, Nevada, New Jersey,
New Mexico, Oklahoma, Tennessee, and Texas. (Id.).
RS Compounding and Gobea filed their Motion to Dismiss
Stepe’s Amended Complaint on September 20, 2017. (Doc. # 48).
Caddick filed his Motion to Dismiss Relator’s First Amended
Complaint on October 11, 2017. 1 (Doc. # 70). Stepe responded
on October 4 and 25, 2017. (Doc. ## 65, 73). The Motions are
ripe for review.
On a motion to dismiss, this Court accepts as true all
the allegations in the complaint and construes them in the
light most favorable to the plaintiff. Jackson v. Bellsouth
Telecomms., 372 F.3d 1250, 1262 (11th Cir. 2004). Further,
inferences from the allegations in the complaint. Stephens v.
Dep’t of Health & Human Servs., 901 F.2d 1571, 1573 (11th
Cir. 1990)(“On a motion to dismiss, the facts stated in [the]
complaint and all reasonable inferences therefrom are taken
However, the Supreme Court explains that:
In her response, Stepe argues Caddick’s Motion is untimely
and should be denied on that ground. (Doc. # 73 at 8-9). But
Stepe never properly applied to the Clerk for entry of default
against Caddick, and acknowledged that she had consented to
an extension of time for Caddick to file his response to the
Amended Complaint. Although Caddick should have filed a
motion for extension of time to file his Motion, the Court
declines to deny Caddick’s Motion as untimely.
While a complaint attacked by a Rule 12(b)(6)
motion to dismiss does not need detailed factual
allegations, a plaintiff’s obligation to provide
the grounds of his entitlement to relief requires
more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action
will not do. Factual allegations must be enough to
raise a right to relief above the speculative
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)(internal
citations omitted). Courts are not “bound to accept as true
a legal conclusion couched as a factual allegation.” Papasan
v. Allain, 478 U.S. 265, 286 (1986).
Rule 9(b) of the Federal Rules of Civil Procedure imposes
fraud. Clausen v. Lab. Corp. of Am., Inc., 290 F.3d 1301,
1305 (11th Cir. 2002). The complaint must allege “facts as to
time, place, and substance of the defendant’s alleged fraud,
fraudulent acts, when they occurred, and who engaged in them.”
Hopper v. Solvay Pharm., Inc., 588 F.3d 1318, 1324 (11th Cir.
principally at stopping the massive frauds perpetrated by
large contractors during the Civil War.” Universal Health
Servs., Inc. v. United States ex. rel. Escobar, 136 S. Ct.
1989, 1996 (2016)(internal quotation marks omitted). “Since
then, Congress has repeatedly amended the Act, but its focus
remains on those who present or directly induce the submission
of false or fraudulent claims.” Id. The FCA’s civil penalties
are “essentially punitive in nature” and subject defendants
to treble damages plus penalties of up to $10,000 per claim.
Id. (internal quotation marks omitted).
The FCA may be enforced by the government or by a relator
Government.” 31 U.S.C. § 3730(b). Thus, the FCA permits
private persons to file qui tam actions on behalf of the
United States against any person who:
(a)(1)(A) knowingly presents, or causes to be presented,
a false or fraudulent claim for payment or approval;
(a)(1)(B) knowingly makes, uses, or causes to be made or
used, a false record or statement material to a false or
subparagraph (A), (B), (D), (E), (F), or (G); [or]
(a)(1)(G) knowingly makes, uses, or causes to be made or
used, a false record or statement material to an
obligation to pay or transmit money or property to the
Government, or knowingly conceals or knowingly and
improperly avoids or decreases an obligation to pay or
transmit money or property to the Government.
31 U.S.C. § 3729(a). Stepe alleges violations of these four
Defendants argue that Stepe has failed to state claims
under any of these subsections because her allegations fail
to meet either the Rule 12(b)(6) or Rule 9(b) standards, as
well as failing to establish the allegations were material to
the Government’s decision to pay claims. (Doc. # 48 at 3, 67).
Defendants also argue “the companion state FCA claims
(Fifth through Twenty-Third Claim) should be dismissed for
the same reason since the state FCAs are modeled on the
federal False Claims Act.” (Id. at 3); see, e.g., United
States v. Cypress Health Sys. Fla., Inc., No. 1:09CV137-SPMGRJ, 2012 WL 467894, at *1 (N.D. Fla. Feb. 14, 2012)(“Because
the Florida False Claims Act is modeled after the Federal
False Claims Act, the claims will be analyzed using the same
general standards.”); United States ex rel. Nudelman v. Int’l
Rehab. Assocs., Inc., No. CIV.A. 00-1837, 2006 WL 925035, at
Tennessee Medicaid False Claims Act read similarly and are
substantively the same as the FCA under the United States
Disparate Pricing Allegations are Superseded
Defendants argue that Stepe cannot base her claims on
the alleged disparate pricing scheme because the Government
has intervened as to those allegations. (Doc. # 48 at 7-8).
government has intervened, that portion of the relator’s
complaint effectively ceases to exist because it has been
superseded.” United States v. Pub. Warehousing Co. K.S.C.,
242 F. Supp. 3d 1351, 1357 (N.D. Ga. 2017); see also United
States ex rel. Sansbury v. LB & B Assocs., Inc., 58 F. Supp.
3d 37, 47 (D.D.C. 2014)(“[B]y automatic operation of the
statute, the Government’s complaint in intervention becomes
government has intervened.”). Stepe “does not dispute her
disparate pricing claim against Defendants is superseded by
the Government’s Usual and Customary Price claim in the
Government’s Complaint.” (Doc. # 65 at 19).
The Court need not dismiss Stepe’s disparate pricing
allegations. “[T]he appropriate action for the Court to take
relator’s complaint that have been superseded by government
intervention is to deny the motion as moot as it relates to
the intervened claims.” Pub. Warehousing Co. K.S.C., 242 F.
Supp. 3d at 1357. Still, because these claims have been
superseded by the Government’s claims and have “effectively
cease[d] to exist,” the disparate pricing allegations cannot
serve as a basis for Stepe’s non-superseded claims in her
12(b)(6) standards, the Court will not consider the alleged
disparate pricing scheme.
The Amended Complaint Does Not Satisfy Rule 9(b)
Count I for Presentment of False Claims
In Count I, Stepe alleges “Defendants have knowingly
presented or caused to be presented false or fraudulent claims
3729(a)(1)(A).” (Doc. # 39 at 28). Section 3729(a)(1)(A)
imposes liability on any person who “knowingly presents, or
causes to be presented, a false or fraudulent claim for
payment or approval.” 31 U.S.C. § 3729(a)(1)(A).
The key issue under § 3729(a)(1)(A) is whether the
defendant “presented or caused to be presented” a false claim.
Urquilla–Diaz v. Kaplan Univ., 780 F.3d 1039, 1052 (11th Cir.
‘what,’ ‘where,’ ‘when,’ and ‘how’ of fraudulent submissions
to the government.” Id. at 1052 (internal quotation marks
“Providing exact billing data — name, date, amount, and
services rendered — or attaching a representative sample
claim is one way a complaint can establish” presentment of a
false claim. United States ex rel. Mastej v. Health Mgmt.
“However, there is no per se rule that an FCA complaint must
provide exact billing data or attach a representative sample
claim.” Id. (citing Clausen, 290 F.3d at 1312 & n.21). Rather,
a complaint must contain “some indicia of reliability” that
a false claim was actually submitted. Clausen, 290 F.3d at
1311. “For instance, a relator with first-hand knowledge of
the defendant’s billing practices may possess a sufficient
claims.” United States ex rel Patel v. GE Healthcare, Inc.,
No. 8:14-cv-120-T-33TGW, 2017 WL 4310263, at *6 (M.D. Fla.
Sept. 28, 2017)(citing Mastej, 591 F. App’x at 704).
Defendants argue that the Amended Complaint fails to
plead fraud with particularity as to any false claims being
submitted to the Government. (Doc. # 48 at 3; Doc. # 70 at 67,
Compounding in the New York area, “far from RS Compounding’s
office in Tampa” and that Stepe “lacked any direct, firsthand knowledge of RS [Compounding]’s submission of claims to
federal health care programs.” (Doc. # 48 at 3). As to the
presentation of false claims, Defendants note that “[n]o
actual or example false claims or reverse false claims are
pled” and Stepe “fails to explain the basis for her assertion
that fraudulent claims were actually submitted to federal
health care programs.” (Id.).
Stepe insists the Amended Complaint presents sufficient
indicia of reliability. According to Stepe, her role as a
sales representative for RS Compounding in New York and New
Jersey gave her “first-hand knowledge” supporting her belief
that false claims were submitted to the Government. (Doc. #
65 at 12-13; Doc. # 73 at 12). She argues that her detailed
allegations about the various schemes, which she alleges were
reasonable inference that Defendants’ claims were submitted
to Government healthcare programs, since the sine qua non of
the scheme was to get paid exorbitant amounts for their
compounds.” (Doc. # 65 at 12).
True, Stepe has provided detailed allegations regarding
encouraging sales representatives to “coach” physicians on
how to rank their prescription preferences supports that the
physicians about upset patients receiving superfluous refills
implies that doctors may have mistakenly prescribed a higher
number of refills because of the pre-printed script pads.
Nevertheless, it is not plainly alleged that the physicians
were confused about how many refills they had prescribed, or
whether they would have prescribed a lower number of refills
if they had not been confused by the pre-printed script pad.
And it is unclear whether the patients who complained about
inadequate training of its sales representatives about drug
warnings makes the prescriptions submitted by physicians for
Defendants’ drugs false or fraudulent.
In short, the Court agrees with Defendants. The sine qua
non of an FCA case is the submission of a false claim for
payment to the Government. Clausen, 290 F.3d at 1311. The
Eleventh Circuit has held that the FCA does not allow a
plaintiff “merely to describe a private scheme in detail but
then to allege simply and without any stated reason for his
belief that claims requesting illegal payments must have been
submitted to the Government.” Atkins v. McInteer, 470 F.3d
1350, 1357 (11th Cir. 2006)(citing Clausen, 290 F.3d at 1311).
Although Stepe focuses on her status as an insider of RS
Compounding, that status, without more, does not provide
sufficient indicia of reliability to satisfy Rule 9(b). See,
e.g., Hopper, 588 F.3d at 1325 (requiring employee sales
submission of false claims); Corsello v. Lincare, Inc., 428
representative’s allegation that he was “aware” of billing
practices was neither particular to any specific fraudulent
claim, nor factually supported). Stepe worked as a sales
representative for RS Compounding, rather than as a billing
department employee. Indeed, Stepe does not allege that she
had firsthand knowledge of RS Compounding’s billing practices
— she does not state that she personally billed any false
claims or that she witnessed other employees bill false
claims. See Mastej, 591 F. App’x at 704 (“[A] plaintiffrelator
billing practices is unlikely to have a sufficient basis for
such an allegation.”).
concerning the submission of fraudulent claims because doing
so would strip “all meaning from Rule 9(b)’s requirements of
specificity.” Corsello, 428 F.3d at 1013 (citing Clausen, 290
F.3d at 1312 n.21). Therefore, the Court declines to make the
inferential leap that false claims were actually submitted to
the Government because Defendants maintained schemes (1) to
highest reimbursement rates, (2) to provide doctors preprinted script pads specifying automatic refills, and (3) to
encourage sales of compounds with insufficient warnings and
poor training of sales representatives.
Defendants also argue that the Amended Complaint fails
to show that allegations regarding the “1, 2, 3 strategy,”
the automatic refills, and the failure to warn patients are
material to the Government’s decision to pay claims. (Doc. #
48 at 5-6). Defendants cite Universal Health Services, Inc.
v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016).
There, in the context of an implied-false certification claim
“materiality standard is demanding” and materiality “look[s]
recipient of the alleged misrepresentation.” Id. at 2002-03
Because the Court has already determined that Stepe’s §
3729(a)(1)(A) claim fails to meet the Rule 9(b) standard, the
Court need not address the materiality argument at this
juncture. But Stepe is advised that, in amending this claim,
supporting materiality — i.e. why the “1, 2, 3 strategy,”
inadequate training regarding drug warnings would influence
the Government’s decision to pay such claims. And she should
remember that her disparate pricing allegations, because they
have been superseded, cannot be used to meet the materiality
Count II for False Statements
In Count II, Stepe alleges Defendants made or used, or
caused to be made or used, false records and statements that
were material to false or fraudulent claims in violation of
31 U.S.C. § 3729(a)(1)(B). (Doc. # 39 at 28). These false
representations made or caused to be made by RS Compounding.”
(Id.). “As a result, the Government has suffered damages in
the form of millions of dollars in unearned TRICARE, Medicare,
and Medicaid payments made to Defendants.” (Id.).
Section 3729(a)(1)(B) creates liability for any person
who “knowingly makes, uses, or causes to be made or used, a
false record or statement material to a false or fraudulent
claim.” 31 U.S.C. § 3729(a)(1)(B). Thus, “[t]o prove a claim
under § 3729(a)(1)(B), a relator must show that: (1) the
defendant made (or caused to be made) a false statement, (2)
the defendant knew it to be false, and (3) the statement was
material to a false claim.” United States ex rel. Phalp v.
Lincare Holdings, Inc., 857 F.3d 1148, 1154 (11th Cir. 2017).
“having a natural tendency to influence, or be capable of
influencing, the payment or receipt of money or property.” 31
U.S.C. § 3729(b)(4). “Under this version of the statute, a
relator is not required to allege presentment because the
requirement.” Patel, 2017 WL 4310263, at *8 (citing Hopper,
588 F.3d at 1328).
Defendants argue this claim should be dismissed because
the Amended Complaint “fails to specify what precisely the
Compounding are, as required by Rule 9(b).” (Doc. # 48 at 6;
Doc. # 70 at 7-9). Additionally, they contend the Amended
Complaint “fails to provide a plausible factual basis to
support the allegation that these unidentified certifications
and representations were in fact ‘material’ to payment” and
“does not contain sufficient facts regarding this claim to
meet the Iqbal standard.” (Doc. # 48 at 6).
certified under their provider agreement with TRICARE that
they were charging the Government the same prices they charged
cash buyers.” (Doc. # 65 at 18). But, as the disparate pricing
allegations are superseded, the allegation that Defendants
Stepe’s claims, which may be based only on the fraudulent
marketing and inadequate training allegations. (Doc. # 65 at
The Amended Complaint does not explicitly identify false
statements or certifications made, or caused to be made, by
Defendants relating to the non-superseded allegations. While
medications, Stepe does not explain how those statements are
false. And, although she alleges Defendants placed a number
physicians were free to mark that number out and write the
refill number they believe is appropriate. Essentially, Stepe
has alleged that Defendants pre-filled the refill section of
automatic refills. But, again, Stepe fails to allege with
particularity what part of this action constitutes a false
statement under the FCA. The same is true for the inadequate
training and drug warning allegations – no false statements
or certifications related to these allegations are identified
with particularity. Therefore, this claim is dismissed for
failure to satisfy Rule 9(b).
Because the § 3729(a)(1)(B) claim does not satisfy Rule
9(b) for the false statement requirement, it is unnecessary
to deal with the materiality requirement. Nevertheless, the
Court notes that Defendants argue the Escobar materiality
requirement applies to this § 3729(a)(1)(B) claim, as well as
the § 3729(a)(1)(G) claim. (Doc. # 48 at 6-7). This is not
necessarily so. Escobar deals with the judicially-imposed
materiality requirement for § 3729(a)(1)(A) implied-false
certification claims. See Patel, 2017 WL 4310263, at *9 (“In
an implied-false certification case under § 3729(a)(1)(A),
the materiality requirement is a judicially-imposed doctrine,
which is designed to ensure that only significant omissions
trigger the FCA’s considerable penalties.”). In contrast, the
materiality requirement for §§ 3729(a)(1)(B) and (G) claims
is created by the statute’s language, and thus the definition
of “material” used is that found in the statute. The parties
rigorous materiality standard applies to these claims. See
Id. (“GE cites no case holding that Escobar’s heightened
3729(a)(1)(B). Indeed, the Fourth Circuit has declined to
alter its analysis under § 3729(a)(1)(B) following Escobar.”
(citing United States v. Triple Canopy, Inc., 857 F.3d 174,
179 (4th Cir. 2017))). If Defendants choose to reassert the
same materiality argument, they should address why Escobar’s
heightened materiality definition should apply to the §§
3729(a)(1)(B) and (G) claims.
Count III for Reverse False Claims
3729(a)(1)(G), Stepe alleges
Defendants have knowingly made, used, or caused to
be made or used, false records or false statements
(i.e., the false certification made or caused to be
made by Defendants) material to an obligation to
pay or transmit money to the Government or
knowingly concealed or knowingly and improperly
avoided or decreased an obligation to pay or
transmit money or property to the [G]overnment.
(Doc. # 39 at 29). “As a result, the Government has suffered
TRICARE, Medicare, and Medicaid payments made to Defendants.”
Section 3729(a)(1)(G) creates liability for a person who
“knowingly makes, uses, or causes to be made or used, a false
record or statement material to an obligation to pay or
“knowingly conceals or knowingly and improperly avoids or
decreases an obligation to pay or transmit money or property
to the Government.” 31 U.S.C. § 3729(a)(1)(G). “This is known
as the ‘reverse false claim’ provision of the FCA because
liability results from avoiding the payment of money due to
the government, as opposed to submitting to the government a
false claim.” United States ex rel. Matheny v. Medco Health
Sols., Inc., 671 F.3d 1217, 1222 (11th Cir. 2012).
“Importantly, to establish a reverse false claim cause
of action, a relator must show that the defendant owed a
definite and clear ‘obligation to pay money to the United
States at the time of the allegedly false statements.’” United
States v. Space Coast Med. Assocs., L.L.P., 94 F. Supp. 3d
1250, 1263 (M.D. Fla. 2015)(quoting Matheny, 671 F.3d at
1223)). “Congress has defined a False Claims Act ‘obligation’
as ‘an established duty, whether or not fixed, arising from
licensor-licensee relationship, from a fee-based or similar
retention of any overpayment.’” Id. (quoting 31 U.S.C. §
tendency to influence, or be capable of influencing, the
Defendants argue Stepe “fails to specify precisely what
 both the ‘false certification made or caused to be made by
Defendants’ and the ‘obligation’ was, as required by Rule
9(b).” (Doc. # 48 at 7; Doc. # 70 at 7, 9). They also argue
the Amended Complaint “fails to provide a plausible factual
certifications were in fact ‘material’ to the unidentified
obligations.” (Doc. # 48 at 7). In her response, Stepe insists
obligation owed to the Government: “Defendants were obligated
charging higher prices to the Government and by “ship[ping]
unsuspecting patients six automatic refills of its creams and
gels that were medically unnecessary.” (Doc. # 65 at 18).
The Court finds that Stepe has not identified with
particularity the false certification that was allegedly made
or caused to be made by Defendants. As already discussed, the
allegation that Defendants falsely certified to TRICARE that
“they were charging the Government the same prices they
charged cash buyers” cannot support Stepe’s claims, which may
be based only on the fraudulent marketing, automatic refills,
and inadequate training/warning allegations. (Doc. # 65 at
18). No false certifications related to the non-superseded
allegations, such as the automatic refills, are identified in
the Amended Complaint. Similarly, the Court is unsure what
obligation Defendants had to pay the Government, as Stepe
also fails to identify this beyond stating Defendants “failed
to return their ‘ill-gotten gains’.” (Id.).
Furthermore, because neither the false certification nor
the obligation have been alleged with particularity, the
Court cannot determine whether the false certification was
“material” to the obligation. This claim is dismissed for
failure to comply with the particularity requirement of Rule
In Count IV, Stepe alleges Defendants violated 31 U.S.C.
§ 3729(a)(1)(C), which creates liability for any person who
“conspires to commit a violation of subparagraph (A), (B),
violated this section by “conspir[ing] to make or present
false or fraudulent claims and performed one or more acts to
effect payment of false or fraudulent claims.” (Doc. # 39 at
29). Defendants argue the Amended Complaint fails to allege
the existence of a conspiracy plausibly, as required under
Rule 12(b)(6), or with the particularity required under Rule
9(b). (Doc. # 48 at 7).
Complaints alleging a conspiracy to violate the FCA are
also subject to Rule 9(b)’s heightened pleading standard. See
Corsello, 428 F.3d at 1014 (“The district court correctly
dismissed [the relator’s] [conspiracy count] for failure to
comply with Rule 9(b).”). A relator must establish “(1) that
the defendant conspired with at least one person to get a
false or fraudulent claim paid by the Government; and (2)
that at least one of the conspirators performed an overt act
to get a false or fraudulent claim paid.” United States ex
rel. Chase v. LifePath Hospice, Inc., No. 8:10-cv-1061-T30TGW,
2016)(citing United States ex rel. Bane v. Breathe Easy
Pulmonary Servs., Inc., 597 F. Supp. 2d 1280, 1289 (M.D. Fla.
2009)). “‘Conspire’ in this context requires a meeting of the
minds ‘to defraud the Government.’” Chase, 2016 WL 5239863,
at *8 (citing Bane, 597 F. Supp. 2d at 1289; Allison Engine
Co., Inc. v. United States ex rel. Sanders, 553 U.S. 662, 672
District courts in the Eleventh Circuit — and at least
adequately allege the existence of a false claim is fatal to
a conspiracy claim. See, e.g., Chase, 2016 WL 5239863, at *8–
9; United States ex rel. Marsteller v. Tilton, No. 5:13-cv830-AKK, 2016 WL 1270586, at *7 (N.D. Ala. Mar. 21, 2016);
accord United States ex rel. Vigil v. Nelnet, Inc., 639 F.3d
791, 801 (8th Cir. 2011)(“Because the Complaint fails to state
claims under sections 3729(a)(1) and (2), it likewise fails
3729(a)(3).”). As one district court reasoned:
Because the existence of a false claim — whether
ultimately paid by the Government or not — is an
element of a cause of action for conspiracy to
violate the FCA, the failure of a relator to
necessarily means that, as a matter of law, the
relator cannot prevail.
Chase, 2016 WL 5239863, at *8–9.
Regardless, the Court finds that Stepe has not pled with
particularity that a conspiracy existed between Defendants RS
through and with RS Compounding, to set the disparate prices
at issue, devise and implement the ‘1, 2, 3’ marketing scheme
and automatic refills, and to provide insufficient warnings
to patients and inadequate training to RS Compounding’s sales
representatives.” (Doc. # 65 at 18).
But the allegations she points out are conclusory and
insufficient to support that Defendants entered a specific
agreement to submit fraudulent claims to the Government or
that they took any overt act to fulfill that agreement. See
Corsello, 428 F.3d at 1014 (affirming dismissal where relator
“alleged that ‘Lincare and Varraux conspired to defraud the
Government,’ but this bare legal conclusion was unsupported
by specific allegations of any agreement or overt act”). Count
IV is dismissed for failure to comply with Rule 9(b).
Both Caddick and Gobea argue that the allegations about
their personal involvement in any scheme or submission of
dismissed. (Doc. # 48 at 4-5; Doc. # 70 at 7-8). Indeed, the
Amended Complaint includes numerous conclusory allegations,
such as: “pursuant to  Gobea’s and  Caddick’s directives,
 Defendants instructed their sales representatives to write
in the physician’s name and address, and the number ‘6’ on
each refill line.” (Doc. # 39 at ¶ 63). As Gobea points out,
statements by  Gobea to [Stepe] or any others to direct or
encourage FCA violations.” (Doc. # 48 at 4). Similarly, the
Amended Complaint fails to allege details about Caddick’s
Stepe retorts that she has made specific allegations
about Gobea and Caddick’s personal involvement in the alleged
fraud. (Doc. # 65 at 13-14; Doc. # 73 at 13-14). Stepe
emphasizes that Mr. Taylor, the Vice President of Sales and
Marketing, told her that the disparate pricing decision came
from “the top” of RS Compounding. (Doc. # 65 at 14). Stepe
interprets this statement to mean that Caddick and Gobea
disparate pricing allegations are superseded. Regardless, a
single vague statement that higher-up officials — who are
unnamed — were involved in an allegedly fraudulent scheme is
insufficient to satisfy Rule 9(b). Additionally, as Gobea
notes, it is unclear which actions were allegedly taken by
Gobea or Caddick. (Doc. # 48 at 5). Stepe frequently alleges
that Gobea “and/or” Caddick were involved in the allegedly
Compounding’s marketing scheme.” (Doc. # 39 at ¶ 9).
Lumping two Defendants together without any supporting
factual allegations to suggest the actions were taken jointly
is insufficient. See Brooks v. Blue Cross & Blue Shield of
(concluding that RICO claim did not satisfy Rule 9(b) where
the allegations of fraud “lumped together” all Defendants and
noting that a complaint “should inform each defendant of the
nature of his alleged participation in the fraud” (citation
and internal quotation marks omitted)); United States v.
2011)(“Rule 9(b) does not allow a complaint to merely lump
differentiate their allegations when suing more than one
fraud.” (quotation omitted)).
The lumping together of Caddick and Gobea is especially
problematic because it is unclear if Gobea was even associated
with RS Compounding during Stepe’s employment. The Amended
Complaint states Gobea and Caddick co-founded RS Compounding
in 2004, but Gobea left “[a]t some point after founding the
company,” without a date specified. (Doc. # 39 at ¶ 35). Stepe
interest in February of 2014 — after Stepe’s employment (and,
thus, her insider knowledge about RS Compounding’s practices)
individual Defendants, Gobea and Caddick, is required under
Counts I, II, III, and IV under the FCA, as well as the
parallel claims under the States’ false claims laws, are
dismissed. Stepe requests leave to amend her claims. (Doc. #
65 at 20). Pursuant to Fed. R. Civ. P. 15(a)(2), “[t]he court
should freely give leave [to amend] when justice so requires.”
“In light of the liberal policy favoring amendment, and
because this Court has not previously issued any substantive
ruling in this action, the Court will grant [Stepe] one — and
very likely only one — opportunity to amend.” Patel, 2017 WL
4310263, at *8. Stepe’s Second Amended Complaint is due
December 7, 2017.
Accordingly, it is now
ORDERED, ADJUDGED, and DECREED:
Defendants RS Compounding LLC and Renier Gobea’s Motion
to Dismiss Relator’s First Amended Complaint (Doc. # 48)
Defendant Stephen Caddick’s Motion to Dismiss Relator’s
First Amended Complaint (Doc. # 70) is GRANTED.
Plaintiff relator McKenzie Stepe’s Amended Complaint
(Doc. # 39) is DISMISSED. Stepe may file a Second Amended
Complaint by December 7, 2017.
DONE and ORDERED in Chambers in Tampa, Florida, this 8th
day of November, 2017.
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