Olhausen et al v. Arriva Medical, LLC et al
Filing
74
Order Granting 61 Motion to Dismiss. Closing Case. Signed by Judge Robert N. Scola, Jr on 8/26/2020. See attached document for full details. (jbs)
United States District Court
for the
Southern District of Florida
United States of America ex rel. Troy
Olhausen, Plaintiff,
v.
Arriva Medical, LLC, and others,
Defendants.
)
)
)
)
Civil Action No. 19-20190-Civ-Scola
)
)
)
Order Granting Motion to Dismiss
This matter is before the Court on the Defendants’ motion to dismiss the
Plaintiff’s third amended complaint (“TAC”). (Defs.’ Mot., ECF No. 61; TAC, ECF
No. 58.) The Plaintiff in this qui tam action, Relator Troy Olhausen
(“Olhausen”), alleges that Defendants Arriva Medical, LLC (“Arriva”), Alere, Inc.
(“Alere”), American Medical Supplies, Inc., and Abbott Laboratories, Inc.
(“Abbot”), either submitted or conspired to submit fraudulent Medicare billing
for diabetic and other medical supplies in violation of the False Claims Act, 31
U.S.C. § 3729, et seq. (ECF No. 58 at ¶1.) The Defendants’ motion raises
statutory, procedural, and substantive defenses. Having reviewed the record,
the parties’ exceptional briefs, and the relevant legal authorities, the Court
grants the motion to dismiss (ECF No. 61) for the reasons explained below.
I.
Background
In 2011, Alere purchased Arriva, which sells mail-order diabetic testing
supplies and other medical products. (ECF No. 58 at ¶¶ 44, 46.) In April 2013,
Arriva acquired Olhausen’s diabetic supply company, (id. ¶¶ 50-51), and
Olhausen began to work as a Senior Vice President at Arriva, reporting directly
to Arriva’s president. (Id. ¶ 53.) Arriva also purchased Liberty Medical Supplies’
(“Liberty Medical”) Medicare business, which was previously owned by Express
Scripts, Inc. (“Express Scripts”). (Id. ¶¶ 54–55.) In April 2017, Olhausen
transferred from Arriva to Alere. (Id. ¶ 72.) Later in 2017, Abbott bought Alere
and closed Arriva. (Id. ¶¶ 77, 79.) During his tenure at Arriva, Olhausen
“participated in [Arriva’s] weekly meetings” and “Arriva employees . . .
report[ed] to him.” (Id. at ¶73.)
Olhausen alleges that by virtue of his high-level positions with the
companies, he learned of Arriva, Alere, and Abbott’s allegedly fraudulent
scheme, (id ¶88), to defraud the Government by: (i) improperly billing Medicare
for invalid prescriptions, (id. ¶¶ 89–110); (ii) improperly billing Medicare for
medical supplies without obtaining the required assignments of benefits from
beneficiaries, (id. ¶¶ 111–51); (iii) improperly billing Medicare for medically
unnecessary medical devices, (id. ¶¶ 152–218); (iv) fraudulently certifying their
2013 and 2016 Durable Medical Equipment, Prosthetic, and Orthotic Supplies
(“DMEPOS”) Competitive Bidding contracts with the Centers for Medicare and
Medicaid Services (“CMS”), (id. ¶¶ 219–57); (v) failing to disclose to CMS that
they were using unaccredited locations and subcontractors who did not have
supplier numbers to furnish DMEPOS related services, (id. ¶¶ 258–355); (vi)
making unsolicited telephone contacts to beneficiaries whose names they
obtained from Liberty after the purchase of Liberty’s Medicare assets (patients
who were not Liberty patients but whose names Liberty obtained from Express
Scripts), with whom they had no prior contact in an attempt to sell diabetic
supplies, (id. ¶¶ 356–63); and (vii) conspiring to submit false Medicare claims.
(Id. ¶¶ 439–42.)
II.
Legal Standard
When considering a motion to dismiss under Federal Rule of Civil
Procedure 12(b)(6), the Court must accept all of the complaint’s allegations as
true, construing them in the light most favorable to the plaintiff. Pielage v.
McConnell, 516 F.3d 1282, 1284 (11th Cir. 2008). Under Federal Rule of Civil
Procedure 8, a pleading need only contain “a short and plain statement of the
claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). The
plaintiff must nevertheless articulate “enough facts to state a claim to relief
that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007). “A claim has facial plausibility when the plaintiff pleads factual content
that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949
(2009). “Threadbare recitals of the elements of a cause of action, supported by
mere conclusory statements, do not suffice.” Id. Thus, a pleading that offers
mere “labels and conclusions” or “a formulaic recitation of the elements of a
cause of action” will not survive dismissal. Id.
In applying the Supreme Court’s directives in Twombly and Iqbal, the
Eleventh Circuit has provided the following guidance to the district courts:
In considering a motion to dismiss, a court should 1) eliminate any
allegations in the complaint that are merely legal conclusions; and
2) where there are well-pleaded factual allegations, assume their
veracity and then determine whether they plausibly give rise to an
entitlement to relief. Further, courts may infer from the factual
allegations in the complaint obvious alternative explanation[s],
which suggest lawful conduct rather than the unlawful conduct
the plaintiff would ask the court to infer.
Kivisto v. Miller, Canfield, Paddock & Stone, PLC, 413 F. App’x 136, 138 (11th
Cir. 2011) (citations omitted). “This is a stricter standard than the Supreme
Court described in Conley v. Gibson, 355 U.S. 41, 45-46 (1957), which held
that a complaint should not be dismissed for failure to state a claim ‘unless it
appears beyond doubt that the plaintiff can prove no set of facts in support of
his claim which would entitle him to relief.’” Mukamal v. Bakes, 378 F. App’x
890, 896 (11th Cir. 2010). These precepts apply to all civil actions, regardless
of the cause of action alleged. Kivisto, 413 F. App’x at 138.
Where a cause of action sounds in fraud, however, Federal Rule of Civil
Procedure 9(b) must be satisfied in addition to the more relaxed standard of
Rule 8. Under Rule 9(b), “a party must state with particularity the
circumstances constituting fraud or mistake,” although “conditions of a
person’s mind,” such as malice, intent, and knowledge, may be alleged
generally. Fed. R. Civ. P. 9(b). “The ‘particularity’ requirement serves an
important purpose in fraud actions by alerting defendants to the precise
misconduct with which they are charged and protecting defendants against
spurious charges of immoral and fraudulent behavior.” W. Coast Roofing &
Waterproofing, Inc. v. Johns Manville, Inc., 287 F. App’x 81, 86 (11th Cir. 2008)
(citations omitted). “When a plaintiff does not specifically plead the minimum
elements of their allegation, it enables them to learn the complaint’s bare
essentials through discovery and may needlessly harm a defendant’s goodwill
and reputation by bringing a suit that is, at best, missing some of its core
underpinnings, and, at worst, [grounded on] baseless allegations used to
extract settlements.” U.S. ex rel. Clausen v. Lab. Corp. of Am., Inc., 290 F.3d
1301, 1313 n.24 (11th Cir. 2002). Thus, the Rule’s “particularity” requirement
is not satisfied by “conclusory allegations that certain statements were
fraudulent; it requires that a complaint plead facts giving rise to an inference of
fraud.” W. Coast Roofing & Waterproofing, 287 F. App’x at 86. To meet this
standard, the complaint needs to identify the precise statements, documents,
or misrepresentations made; the time and place of, and the persons
responsible for, the alleged statements; the content and manner in which the
statements misled the plaintiff; and what the defendant gained through the
alleged fraud. Id.
With these standards in mind, the Court turns to the Plaintiffs’
complaint to see whether their claims are sufficiently alleged to withstand
dismissal.
III.
Analysis
The motion to dismiss targets each count of the TAC, which was filed in
response to the Defendants’ motion to dismiss the second amended complaint
and after the Government declined to intervene in this action. The TAC raises
six counts arising from Arriva’s alleged violations of Medicare rules. Those
counts concern:
• Invalid Prescriptions (Count I). Arriva provided DTS to patients whose
prescriptions on file were allegedly invalid either because they
supposedly had lapsed under state law, or because the patients had
changed doctors. (Id. ¶¶91-99, 102, 104.)
• Assignments of Benefits (Count II). Arriva allegedly sent supplies
without collecting signed forms from patients that Olhausen says
Medicare rules required. (Id. ¶¶111-51.)
• Medically Unnecessary Devices (Count III). Arriva allegedly shipped
DTS and ancillary products without ensuring patients actually needed
them or that were unnecessary under Medicare rules. (Id. ¶¶152-218.)
Relatedly, Olhausen claims Arriva instructed sales representatives to tell
patients they could switch to a new brand of glucose meter despite a rule
that forbids suppliers from pressuring patients to change brands. (Id.
¶¶219-57.)
• Undisclosed Locations (Count IV). When Arriva applied for and
executed its 2013 and 2016 Medicare contracts, it allegedly did not
disclose locations in Tennessee, Arizona, Kentucky, and the Philippines
that supposedly required independent accreditation and supplier
numbers. (Id. ¶¶258-355.)
• Unsolicited Contacts (Count V). After Arriva purchased another mailorder company, it allegedly called its newly acquired patients, with whom
it had no prior contacts, to sell them supplies. (Id. ¶¶356-63.) Olhausen
alleges these calls violated a statute prohibiting calls to Medicare
beneficiaries under certain circumstances.
• Conspiracy (Count VI). Arriva allegedly conspired with its parent
companies, Alere (which acquired Arriva in 2011) and Abbott (which
acquired Alere in 2017), to submit false Medicare claims based on the
regulatory violations alleged in Counts I-V. (Id. ¶440.)
The Defendants move to dismiss Counts I, III, and V based on the
statutory first-to-file, government-action and public disclosure rules, and for
lack of particularity. The Defendants move to dismiss Counts II and IV for lack
of particularity only, as those two counts are not subject to a statutory bar.
Finally, the Defendants move to dismiss Count VI, arguing that no cognizable
underlying claim has been made. The Court addresses each argument in turn.
a. First-to-file rule
Although the FCA generally allows actions by private persons, certain
restrictions apply. See, e.g., 31 U.S.C. § 3730(b). One such restriction is the
“first-to-file” rule, which provides that “[w]hen a person brings an action
[alleging a violation of section 3729], no person other than the Government
may intervene or bring a related action based on the facts underlying the
pending action.” Id. § 3730(b)(5). This means that “once one suit has been filed
by a relator or by the government, all other suits against the same defendant
based on the same kind of conduct would be barred.” Cooper v. Blue Cross &
Blue Shield of Fla., Inc., 19 F.3d 562, 567 (11th Cir. 1994). “A later filed case
need not be based on the exact same facts as the earlier one in order to be
barred by the first-to-file rule. The question is whether the actions are
‘related.’” U.S. ex rel. Torres v. Kaplan Higher Educ. Corp., Case No. 09-21733CIV, 2011 WL 3704707, at *4 (S.D. Fla. Aug. 23, 2011) (Seitz, J.) (citations
omitted). It abates only “pending” related actions “while the earlier suit remains
undecided but ceases to bar that suit once it is dismissed.” Kellogg Brown &
Root Servs., Inc. v. United States ex rel. Carter, 135 S.Ct. 1970, 1978, 191
L.Ed.2d 899 (2015). Accordingly, a dismissal based solely on the first-to-file bar
should be without prejudice. See id. at 1979; United States ex rel. Wood v.
Allergan, Inc., 899 F.3d 163, 174 (2d Cir. 2018).
However, in this case, Olhausen does not dispute that if the first-to-file
bar does apply, then the TAC must be dismissed with prejudice under the
separate “government-action” rule. Under the government-action rule, a
putative relator is prohibited from bringing an FCA action “based upon
allegations or transactions which are the subject of a civil suit . . . in which the
Government is already a party.” 31 U.S.C. §3730(e)(3). This case faces the firstto-file bar from the complaint filed U.S. ex rel. Goodman v. Arriva Medical, LLC,
Case No. 13-CV-00760 (M.D. Tenn. Mar. 12, 2014). The operative complaint in
Goodman was filed on March 12, 2014, and the Government later intervened in
that case. Accordingly, if the first-to-file rule applies from the Goodman action,
related claims in a related action would be subject to dismissal with prejudice.
See Wood, 899 F.3d at 174; Kellogg Brown, 135 S.Ct. at 1978–79.
Assessing relatedness requires “comparing the complaints side-by-side”
to see whether “the claims [in the second action] incorporate ‘the same material
elements of fraud’ as the earlier action, even if the allegations incorporate
additional or somewhat different facts or information.” U.S. ex rel. Bernier v.
Infilaw Corp., 347 F. Supp. 3d 1075, 1083 (M.D. Fla. 2018) (quoting U.S. ex rel.
Heath v. AT&T, 791 F.3d 112, 121 (D.C. Cir. 2015)). “[T]he whole point of the
first-to-file bar is to see ‘whether the later [filed] complaint alleges a fraudulent
scheme the government already would be equipped to investigate based on [the
first] Complaint.’” Id. For the reasons set forth below, the Court finds that the
earlier-filed Goodman action is sufficiently “related” to trigger the first-to-file
rule with respect to Counts I, III, and V of the TAC.
i. Count I—Invalid Prescriptions
First, Count I of the TAC alleges that Arriva violated the FCA by
“providing supplies to its beneficiaries without obtaining new, valid
prescriptions.” (ECF No. 58 at ¶89 (emphasis added).) Similarly, the Goodman
complaint alleged the existence of a “scheme to bill Medicare for diabetic
supplies before obtaining the proper prescriptions.” (Goodman Compl., ECF No.
61-1 at ¶82 (emphasis added).) These two counts arise from a common scheme
to bill Medicare based on invalid or nonexistent prescriptions. In an effort to
distinguish his allegations from Goodman’s, Olhausen argues that the TAC
alleges that Arriva submitted claims for expired prescriptions “across all
clients” whereas Goodman purportedly described a scheme applicable to only
some clients (i.e., those new clients Arriva acquired through its purchase of
Liberty Medical). (Pl.’s Resp., ECF No. 69 at 3 (emphasis in original).)
However, Goodman’s reference to clients acquired from Liberty Medical
was only an illustrative example that did not narrow the scope of clients whose
supplies were billed to Medicare without proper prescriptions. (ECF No. 71 at
1.) Specifically, the Goodman complaint alleged that a “Conversion Team was
primarily engaged in converting over former customers of Liberty Medical.
However, . . . defendants employed similar conversion campaigns when they
acquired other mail order diabetes testing suppliers . . . .” (ECF No. 61-1 at ¶71
(emphasis added).) Thus, the Goodman complaint expressly references “other”
customers and only refers to Liberty Medical customers as being a “primary” –
not exclusive – focus. The use of concrete examples to bolster allegations in a
complaint is common practice. Indeed, Olhausen’s own complaint specifically
refers to five anonymized patients on whose behalf claims were submitted to
Medicare without the necessary prescriptions. (ECF No. 58 at ¶¶ 106-110.)
Just as Olhausen’s reference to five specific patients does not limit the scope of
Count I to only five patients, Goodman’s reference to Liberty Medical clients
does not limit the scope of his action to only Liberty Medical clients.
ii. Count III—Unnecessary Supplies and Anti-Switching Rule
Violations
The Court’s analysis of whether the first-to-file rule applies to Count III of
the TAC proceeds by assessing the three subparts of that count seriatim.
Specifically, the parties dispute whether the first-to-file rule applies to the
TAC’s allegations regarding (1) glucose meters; (2) test strips, lancets, control
solution, and batteries; and/or (3) heating pads, orthotics, and vacuum
erection devices. For the reasons explained below, the Court finds that the
first-to-file rule bars each subpart of Count III and, as a result, the Court need
not and does not reach the Defendants’ argument that Count III is also barred
by the public disclosure rule (ECF No. 61 at 16).
Glucose Meters. The issue with respect to glucose meters is whether the
admittedly related factual allegations can be spared from the first-to-file rule
because they raise different legal theories. The parties do not dispute that both
the Goodman complaint and Olhausen’s TAC allege that Arriva made claims for
medically unnecessary glucose meters or monitors. (Compare ECF No. 61-1 at
¶13 (“[D]efendants have fraudulently billed Medicare for thousands of glucose
meters that were not medically necessary”) with ECF No. 58 at ¶¶162-163
(“Arriva also shipped [glucose monitors] . . . regardless of whether the
beneficiary indicated their current device needed replacing . . . .”).) To avoid the
first-to-file rule, Olhausen argues that “[b]ecause the material elements of [its
fraud theories] differ substantially from those described in Goodman, the firstto-file rule does not bar Mr. Olhausen’s claim.” (ECF No. 69 at 4.) As for the
“fraud theories,” both complaints allege that Arriva violated the anti-switching
rule (compare ECF No. 61-1 at ¶¶ 210, 263 with ECF No. 58 at ¶391), but the
TAC also raises “much broader false certification and fraud-in-the-inducement
theories.” (ECF No. 69 at 4 (footnotes omitted).)
The Court holds that Olhausen’s overlapping factual allegations are
barred by the first-to-file rule, even though those allegations are used in the
TAC to support “much broader” theories of fraud than the theories raised by
Goodman. The Court’s analysis begins with the applicable statutory text:
“When a person brings an action under this subsection, no person other than
the Government may intervene or bring a related action based on the facts
underlying the pending action.” 31 U.S.C. § 3730(b)(5) (emphasis added). The
statute is plainly concerned with overlapping factual allegations and it is silent
as to whether the fraud theories overlap. The Court now turns to the case law,
and the Eleventh Circuit has explained, “once one suit has been filed by a
relator or by the government, all other suits against the same defendant based
on the same kind of conduct would be barred.” Cooper v. Blue Cross & Blue
Shield of Fla., Inc., 19 F.3d 562, 567 (11th Cir. 1994) (emphasis added); see
also U.S. ex rel. Torres v. Kaplan Higher Educ. Corp., Case No. 09-21733-CIV,
2011 WL 3704707, at *4 (S.D. Fla. Aug. 23, 2011) (Seitz, J.) (“[S]o long as a
subsequent complaint raises the same or a related claim based in significant
measure on the core fact or general conduct relied upon in the first qui tam
action, the § 3730(b)(5)'s first-to-file bar applies.”) (citation omitted). The
binding case law echoes the statutory text insofar as it reiterates that
“relatedness” refers to the underlying facts. Next, the Court considers the
purpose of the first-to-file rule, which is to incentivize relators to “promptly
alert[] the government to the essential facts of a fraudulent scheme.” U.S. ex rel.
Duxbury v. Ortho Biotech Prod., L.P., 579 F.3d 13, 24 (1st Cir. 2009) (quoting
U.S. ex rel. Lujan v. Hughes Aircraft Co., 243 F.3d 1181, 1188 (9th Cir. 2001)).
The controlling statute and the Eleventh Circuit, among other circuit courts,
make it clear that the first-to-file rule is triggered by duplicative facts. The
rule’s purpose is to identify and stop fraudulent schemes, not to incentivize
factually duplicative lawsuits in order to advance fraud jurisprudence.
The Court is not persuaded by Olhausen’s contrary argument, based on
three non-binding cases, that a complaint alleging duplicative facts can avoid
the first-to-file rule if it asserts different legal theories. Olhausen relies on a
line of cases stating that, “[a]ssessing relatedness [under the first-to-file rule]
requires comparing the complaints . . . [to see if they] incorporate the same
material elements of fraud.” (ECF No. 69 at 4 (citing U.S. ex rel. Bernier v.
Infilaw Corp., 347 F. Supp. 3d 1075, 1083 (M.D. Fla. 2018) (internal quotations
and citation omitted); see also U.S. v. Berkeley Heartlab, Inc., 225 F. Supp. 3d
487, 495 (D.S.C. 2016) (describing first-to-file bar as applicable to complaints
“based on the same material elements of fraud”); U.S. ex rel. Hampton v.
Columbia/HCA Healthcare Corp., 318 F.3d 214, 2118 (D.C. Cir. 2003) (same)).)
As an initial matter, to the extent Olhausen interprets the “same material
elements of fraud” language to mean that the first-to-file rule applies to
complaints that assert the same legal theories and not the same facts, his
interpretation is inconsistent with both the applicable statutory language and
the Eleventh Circuit’s decision in Cooper. However, upon closer review, the
language of the cases cited by Olhausen can be reconciled with the first-to-file
rule’s focus on factual allegations as opposed to legal theories or particular
causes of action. The “same material elements of fraud” language used in those
cases comes from U.S. ex rel. Lujan v. Hughes Aircraft Co., where the Ninth
Circuit reiterated that the objective of the related “facts” standard of the firstto-file rule is to discourage “piggyback claims, which would have no additional
benefit for the government, since once the government knows the essential
facts of a fraudulent scheme, it has enough information to discover related
frauds.” 243 F.3d 1181, 1189 (9th Cir. 2001) (emphasis added). Thus, the
“same material elements of fraud” language refers not to the various causes of
action that may be supported by a related set of facts, but it instead refers to
the factual elements of an underlying fraudulent scheme. Finally, the Court
agrees with the holding of the one case presented in the parties’ briefs that
actually turned on this issue, which held that “a focus on the theory of fraud is
inconsistent with the statutory language . . . which expressly focuses on ‘the
facts.’” U.S. v. Unisys Corp., 178 F. Supp. 3d 358, 369 (E.D. Va. 2016) (The
relator’s “argument, which is based on the distinction between the type of fraud
alleged, is unpersuasive.”) (emphasis in original). As the parties do not dispute
the material relatedness of the facts alleged in this subpart of Count III, the
Court finds that it is barred by the first-to-file rule.
Test strips, lancets, control solution, and batteries. The second subpart of
Count III alleges a scheme whereby the Defendants bundled together test
strips, lancets, control solution, and batteries, then shipped and billed for them
without regard to medical necessity. (ECF No. 58 at ¶¶ 156-61.) The parties do
not dispute that Olhausen’s allegations are broader than Goodman’s
allegations. Although both complaints allege that the Defendants shipped
unnecessary testing strips (compare id. at ¶392 with ECF No. 61-1 at ¶237),
only Olhausen’s complaint alleges that the unnecessary testing strips were
bundled with additional unnecessary products (see, e.g., ECF No. 58 at ¶157).
Additionally, Goodman alleged that the scheme to ship unnecessary testing
strips began in June 2013 (ECF No. 61-1 at ¶237) whereas Olhausen alleged
that he became aware of such a scheme “[a]s of April 2013” and that it lasted
until 2015 (ECF No. 58 at ¶¶ 152, 160).
Thus, the question is whether Olhausen’s allegations concerning the
shipment of and billing for medically unnecessary products may avoid the firstto-file rule where Olhausen’s complaint, compared to Goodman’s, (1) refers to
additional “bundled” products and (2) identifies an earlier start date and
precise end date of the scheme. The Court holds that notwithstanding these
additional details, Olhausen’s allegations concerning the shipment of
unnecessary medical products are still barred by the first-to-file rule. As
explained above, “once one suit has been filed by a relator or by the
government, all other suits against the same defendant based on the same kind
of conduct would be barred.” Cooper, 19 F.3d at 567. Further, as a general
matter, “[s]imply alleging additional facts as to how the fraud occurred does not
avoid the first-to-file bar.” Torres, 2011 WL 3704707, at *5.
Relying on these fundamental principles of the first-to-file rule, the court
in U.S. ex rel. LaFauci v. AbbVie Inc., dismissed a complaint under the first-tofile rule where its allegations regarding billing for additional unnecessary drugs
“involve[d] similar wrongdoing [as alleged in the first complaint], just in
different business lines.” 2019 WL 1450791, at *4 (D.N.J. Apr. 2, 2019).
Olhausen attempts to distinguish LaFauci on the grounds that it “merely
reflects the same fraudulent scheme but involving different brands of
medication.” (ECF No. 59 at 5.) However, the Court finds LaFauci to be
analogous and an apposite application of the general principle that a second
complaint cannot avoid the first-to-file rule by alleging additional details
concerning the same kind of scheme. Turning to the case at bar, the Court
finds that the Government, put on notice by Goodman of the shipment of boxes
containing packages of medically unnecessary test strips, would be equipped to
investigate whether other medical products within those very same boxes were
unnecessary. As such, Olhausen’s complaint is related to Goodman’s such that
it is barred by the first-to-file rule.
The Court also finds that Olhausen’s additional allegations regarding the
duration of the scheme so closely overlap with Goodman’s allegations that
these duration allegations also trigger the first-to-file rule. In short, Olhausen
alleges that the scheme lasted from April 2013 into the year 2015. By contrast,
Goodman alleges that the scheme “began” in June 2013 and does not allege an
end date. At bottom, the difference is that Olhausen put the Government on
notice that this multi-year scheme began two months earlier than Goodman
claims it began. However, Olhausen provides no authority – and the Court
doubts any exists – for the proposition that the Government’s investigation of
Goodman’s allegations could only look prospectively from June 2013. On the
contrary, it stands to reason that when Goodman apprised the Government of
a scheme that began in June 2013, the Government was equipped to
investigate the origins of that scheme and uncover that it began, as Olhausen
alleges, weeks or months earlier. In sum, the factual and durational details
offered by Olhausen do not render the TAC sufficiently distinct from
Goodman’s complaint.
Heating pads, orthotics, and vacuum erection devices. The last subpart of
Count III alleges that Arriva instructed its employees to send heating pads,
orthotics, and vacuum erection devices “without checking with the beneficiary
or the beneficiary’s doctor as to whether [that group of products] was medically
necessary.” (ECF No. 58 at ¶166.) Similarly, Goodman alleges that the
Defendant attempted to “up-sell” these products to beneficiaries “on every
phone call the associates made” and to market these devices “to every patient.”
(ECF No. 61-1 at ¶¶ 154-155.) Olhausen argues that his allegations of
medically unnecessary sales of these products are different from Goodman’s
allegation that associates would “up-sell” these devices “to every patient”
because Goodman never expressly used the phrase “medically unnecessary.”
(ECF No. 69 at 5.) The Court is not persuaded. In the broader context of
Goodman’s False Claims Act qui tam complaint, it would be clear to the
Government, which intervened in that case, that allegations of rampant and
aggressive tactics of up-selling medical devices to every patient strongly
suggested that at least some of those devices were “medically unnecessary,”
even if Goodman did not always repeat that particular phrase.
i.
Count V—Unsolicited Contacts
The last count that the Defendants allege is barred by the first-to-file rule
is Count V, which alleges that Arriva improperly contacted Express Scripts
patients whose names and contact information Liberty Medical obtained from
Express Scripts. (ECF No. 58 at ¶¶ 356-63.) This allegedly violated 42 U.S.C. §
1395m(a)(17), which provides that suppliers may only contact an individual
regarding the furnishing of a covered item if that individual has given written
permission to the supplier, the supplier has previously furnished a covered
item to the individual before and is calling regarding that item, or if the
supplier furnished at least one covered item to the individual during the 15
months preceding the date the supplier makes contact. Olhausen claims that
this regulation was “knowingly violated” when Arriva contacted Express Scripts
patients who had no prior relationship with Arriva. (ECF No. 58 at ¶¶ 359,
362.) Similarly, Goodman alleged that Arriva “forc[ed] its conversion
representatives to cold call patients who had never purchased covered items
from Arriva,” and in doing so “Defendants clearly violated 42 U.S.C. §
1395m(a)(17).” (ECF No. 61-1 at ¶222 (emphasis in original).) Although these
allegations are virtually identical, Olhausen argues that, “taken in context,”
Goodman’s complaint only referred to unsolicited contacts with Liberty Medical
patients whereas Olhausen’s complaint refers to unsolicited contacts with
Express Scripts patients. Following the same principles set forth throughout
the Court’s first-to-file analysis, the Court finds that Goodman’s allegations
equipped the Government to investigate Arriva’s alleged practice of making
unsolicited contacts, no matter the source of those contacts.
b. Counts II and IV Lack Particularity
The Defendants argue that Counts II and IV, the only counts that are not
subject to a statutory bar, must be dismissed because they lack sufficient
particularity. Federal Rule of Civil Procedure 9(b) requires a party “alleging
fraud or mistake . . . [to] state with particularity the circumstances constituting
fraud or mistake.” To satisfy this particularity standard in a qui tam action, a
relator must allege the actual “submission of a [false] claim” because “[t]he
False Claims Act does not create liability merely for a health care provider’s
disregard of Government regulations or improper internal policies unless . . .
the provider . . . asks the Government to pay amounts it does not owe.” U.S. ex
rel. Clausen v. Lab. Corp. of Am., 290 F.3d 1301, 1311 (11th Cir. 2002). The
complaint also must offer “some indicia of reliability . . . to support the
allegation of an actual false claim for payment being made to the Government.”
Id. (emphasis in original). It is not enough that a relator “merely . . . describe[s]
a private scheme in detail [and] then . . . allege[s] simply and without any
stated reason . . . his belief that claims requesting illegal payments must have
been submitted, were likely submitted[,] or should have been submitted.” Id.
Nor may he point to “improper practices of the defendant[]” to support “the
inference that fraudulent claims were submitted” because “submission . . .
[can]not [be] inferred from the circumstances.” Corsello v. Lincare, Inc., 428
F.3d 1008, 1013 (11th Cir. 2005). Indeed, even if the relator is an insider who
alleges awareness of general billing practices, an accusation of “[u]nderlying
improper practices alone [is] insufficient . . . absent allegations that a specific
fraudulent claim was in fact submitted to the government.” Id. at 1014
(emphasis added). In short, he must “allege the ‘who,’ ‘what,’ ‘where,’ ‘when,’
and ‘how’ of fraudulent submissions.” Carrel v. AIDS Healthcare Found., Inc.,
898 F.3d 1267, 1275 (11th Cir. 2018) (citation omitted).
None of Olhausen’s claims adequately allege that a fraudulent claim was
in fact submitted to the Government. Olhausen concedes that he did not
include “exact billing data or attach a representative sample claim” that was
submitted for reimbursement, but he instead points to Eleventh Circuit
authority for the proposition that exact billing data or a sample submitted
claim is unnecessary where the complaint “establish[es] the necessary indicia
of reliability that a false claim was actually submitted.” (ECF No. 69 at 6
(quoting U.S. ex rel. Mastej v. Health Mgmt. Assocs., Inc., 591 F. App'x 693, 704
(11th Cir. 2014)).) Such “indicia of reliability” may exist where the relator has
“direct, first-hand knowledge of the defendants’ submission of false claims
gained through [his] employment with the defendants . . . .” Id. Olhausen also
cites to Hill v. Morehouse Med. Assocs., Inc., where the Eleventh Circuit held
that since the relator in that case was an employee with firsthand knowledge of
the alleged fraudulent submissions, her allegations had the requisite indicia of
reliability necessary to allege a fraudulent scheme. No. 02-14429, 2003 WL
22019936, at *5 (11th Cir. Aug. 15, 2003). The Eleventh Circuit has also
sustained complaints that did not expressly identify a specific submission of a
false claim, but where the relator nevertheless “allege[d] personal knowledge or
participation in the fraudulent conduct.” U.S. ex rel. Matheny v. Medco Health
Solutions, Inc., 671 F.3d 1217, 1230 (11th Cir. 2012). Similarly, a complaint
that did not identify a fraudulent submission was sustained where the relator
was a nurse who personally used incorrect billing codes on a consistent basis
and was told by the “office administrator” that the defendant healthcare
provider “‘never’ billed [these fraudulent services] in another manner.” U.S. ex
rel. Walker v. R&F Properties of Lake County, Inc., 433 F.3d 1349, 1360 (11th
Cir. 2005).
Thus, in the absence of an allegation identifying the submission of a false
claim, the question before the Court is whether Olhausen’s allegations have
nevertheless provided the necessary indicia of reliability to show that a
fraudulent scheme took place. To bring the TAC within the realm of complaints
that may survive dismissal without expressly identifying a submission of a
fraudulent claim, Olhausen argues that he has “direct, first-hand knowledge of
Defendants’ submission of false claims gained through his employment with
Defendants.” (ECF No. 69 at 7.) In support of that argument, he claims that he
“learned of the practices alleged” in the TAC “[t]hrough his high-level position
with the company.” (ECF No. 58 at ¶88.) This “high level position” was
Olhausen’s role “as Arriva’s Sr. Vice President of Business Development and
Marketing, reporting directly to Arriva’s President.” (Id. at ¶53.) In that
position, Olhausen alleges that he “participated in [Arriva’s] weekly meetings”
and “Arriva employees . . . report[ed] to him.” (Id. at ¶73.)
Olhausen has not put forth the indicia of reliability that would excuse
him from the general rule that a relator must identify a submission of a
fraudulent bill. Olhausen’s allegations are a far cry from those of the relator in
Mastej who attended weekly meetings where “every patient was reviewed,
including how the services were being billed to each patient”; or the relator in
Hill who “worked in the very department where . . . the fraudulent billing
schemes occurred” and “observed [workers] alter various . . . codes . . . and
thus submit false claims”; or the employees in Matheny who alleged that they
personally participated in a fraudulent scheme; or the nurse in Walker who
alleged that she personally entered incorrect billing codes. U.S. ex rel. Mastej v.
Health Mgmt. Assocs., Inc., 591 F. App'x 693, 704 (11th Cir. 2014); Hill v.
Morehouse Med. Assocs., Inc., No. 02-14429, 2003 WL 22019936, at *4 (11th
Cir. Aug. 15, 2003); U.S. ex rel. Matheny v. Medco Health Solutions, Inc., 671
F.3d 1217, 1230 (11th Cir. 2012); U.S. ex rel. Walker v. R&F Properties of Lake
County, Inc., 433 F.3d 1349, 1360 (11th Cir. 2005). Merely “participat[ing] in . .
. weekly meetings,” receiving “reports” from employees, and reporting to the
President, may establish that Olhausen was an “insider,” but it does
meaningfully aid the Court in its search for “indicia of reliability . . . to support
the allegation of an actual false claim for payment being made to the
Government.” Clausen, 290 F.3d at 1311. After all, the act of submitting a
fraudulent claim to the government is the “sine qua non of a False Claims Act
violation.” Id.
As the TAC fails at the threshold, the Court need not go on to determine
whether the unparticularized billing allegations would fail or satisfy the generic
fraud elements of falsity, scienter, and materiality. As explained immediately
above, Counts II and IV lack particularity with respect to the submission of a
fraudulent bill. Earlier, the Court found that Counts I, III, and V are barred by
the first-to-file rule and must be dismissed with prejudice under the
government-action rule. The only remaining count is Count VI, which the Court
turns to next.
c) Count VI—Conspiracy
The parties agree that Count VI, for conspiracy to commit the alleged
FCA violations, cannot stand if the Court finds that the TAC fails to adequately
allege underlying FCA violations. As the Court has concluded that the TAC fails
to adequately allege FCA violations, Count VI must be and is dismissed.
IV.
Conclusion
Accordingly, the Court grants the Defendants’ motion to dismiss (ECF
No. 61). Counts I, III and V are dismissed with prejudice under the first-to-file
and government-action rules. Olhausen has not requested leave to amend; nor
has he indicated in his response to the motion to dismiss any inclination
whatsoever to do so. The Court thus dismisses Counts II, IV, and VI without
prejudice and without leave to amend. Wagner v. Daewoo Heavy Industries
Am. Corp., 314 F.3d 541, 542 (11th Cir. 2002) (“A district court is not required
to grant a plaintiff leave to amend his complaint sua sponte when the plaintiff,
who is represented by counsel, never filed a motion to amend nor requested
leave to amend before the district court.”); Avena v. Imperial Salon & Spa, Inc.,
17-14179, 2018 WL 3239707, at *3 (11th Cir. July 3, 2018) (“[W]e’ve rejected
the idea that a party can await a ruling on a motion to dismiss before filing a
motion for leave to amend.”).
The Clerk of Court is directed to close this case. Any pending motions
are denied as moot.
Done and ordered in chambers, at Miami, Florida, on August 26, 2020.
________________________________
Robert N. Scola, Jr.
United States District Judge
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?