United States of America ex rel. et al v. ERMI, LLC et al
OPINION AND ORDER granting in part and denying in part 62 Motion to Dismiss for Failure to State a Claim. Counts I through IV are dismissed as to all of the Defendants, and Counts V through VII are dismissed as to Defendant Thomas P. Branch. Signed by Judge Thomas W. Thrash, Jr. on 05/22/2023. (jkb)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
UNITED STATES OF AMERICA ex
ELIZABETH A. COOLEY,
CIVIL ACTION FILE
ERMI, LLC f/k/a ERMI, INC., et al.,
OPINION AND ORDER
This is an action brought under the False Claims Act. It is before the
Court on the Defendants’ Partial Motion to Dismiss Third Amended Complaint
[Doc. 62]. For the reasons set forth below, the Defendants’ Partial Motion to
Dismiss Third Amended Complaint [Doc. 62] is GRANTED in part and
DENIED in part.
This case arises from an alleged fraud orchestrated against federal
healthcare programs to the tune of tens of millions of dollars. The relator,
Elizabeth Cooley, alleges that for years, her former employer, ERMI, LLC, 1
and its controlling manager, Thomas P. Branch, billed the United States for
durable medical equipment (“DME”) that was medically unnecessary,
Defendants ERMI, LLC and End Range of Motion Improvement, Inc.
are collectively referred to as “ERMI.”
overpriced, or not in compliance with state healthcare regulations. The
pertinent facts and procedural history of this action have been spelled out in
the Court’s previous orders. See, e.g., United States ex rel. Cooley v. ERMI,
LLC, 2022 WL 4715679 (N.D. Ga. Sept. 30, 2022) (the “September 2022
Order”); United States ex rel. Cooley v. ERMI, LLC, 2022 WL 1185155 (N.D.
Ga. Apr. 21, 2022). Twice before, the Court has dismissed large portions of
Cooley’s complaints: the first time on shotgun pleading grounds and the second
time for failure to plead her fraud claims with particularity under Federal Rule
of Civil Procedure 9(b). On February 2, 2023, the Court granted Cooley leave
to file the Third Amended Complaint that is the subject of the Defendants’
current motion to dismiss.
The Third Amended Complaint abandons two of the five fraudulent
schemes alleged in Cooley’s earlier complaints—the Illegal Kickback Scheme
and the Illegal Self-Referral Scheme—while attempting to strengthen the
factual foundation for the remaining schemes—the 16-Week Billing Scheme,
the Concealment of Best Prices Scheme, and the Florida Licensing Scheme.
For each scheme, Cooley asserts that the Defendants committed two violations
of the False Claims Act: (1) presenting false or fraudulent claims for payment
under 31 U.S.C. § 3729(a)(1)(A) and (2) making false statements that are
material to a false or fraudulent claim under 31 U.S.C. § 3729(a)(1)(B). Cooley
also alleges that ERMI violated the False Claims Act’s retaliation provision,
31 U.S.C. § 3730(h), by threatening, harassing, and eventually terminating her
after she threatened to bring a whistleblower lawsuit. Notwithstanding the
new facts in the Third Amended Complaint, the Defendants now renew their
arguments to dismiss Cooley’s fraud-based claims.
A complaint should be dismissed under Rule 12(b)(6) only where it
appears that the facts alleged fail to state a “plausible” claim for relief. Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009); Fed. R. Civ. P. 12(b)(6). A complaint may
survive a motion to dismiss for failure to state a claim, though, even if it is
“improbable” that a plaintiff would be able to prove those facts; even if the
possibility of recovery is extremely “remote and unlikely.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 556 (2007). In ruling on a motion to dismiss, the court
must accept the facts pleaded in the complaint as true and construe them in
the light most favorable to the plaintiff. See Quality Foods de Centro Am., S.A.
v. Latin Am. Agribusiness Dev. Corp., S.A., 711 F.2d 989, 994-95 (11th Cir.
1983); Sanjuan v. American Bd. of Psychiatry & Neurology, Inc., 40 F.3d 247,
251 (7th Cir. 1994) (noting that the plaintiff “receives the benefit of
imagination” at the pleading stage). Generally, notice pleading is all that is
required for a valid complaint. See Lombard’s, Inc. v. Prince Mfg., Inc., 753
F.2d 974, 975 (11th Cir. 1985). Under notice pleading, the plaintiff need only
give the defendant fair notice of his claims and the grounds upon which they
rest. See Erickson v. Pardus, 551 U.S. 89, 93 (2007).
In this latest motion to dismiss, the Defendants advance many of the
same arguments under Rules 9(b) and 12(b)(6) as they did in their earlier
motions. The Court first addresses whether the allegations in the Third
Amended Complaint, unlike in its predecessor, comply with Rule 9(b)’s
particularity requirement. As necessary, the Court next considers whether
Cooley’s claims are foreclosed by the claim-specific issues raised in the motion.
A. Rule 9(b) Particularity Requirement
As explained in the September 2022 Order, an action brought under the
False Claims Act is rooted in fraud and must be pled with particularity to
survive dismissal under Rule 9(b). See Cooley, 2022 WL 4715679, at 3. There
are two ways for a relator to meet this heightened pleading standard. The first
is to reference specific billing information such as dates, times, and amounts
of actual false claims that were submitted to the government. The second is to
allege direct knowledge of the defendants’ submission of false claims based on
the relator’s own experiences and on information that she learned in the course
of her employment. See id. at *4. Even when a relator opts for this second
method, she “still must allege specific details about false claims to establish
the indicia of reliability necessary under Rule 9(b).” See Carrel v. AIDS
Healthcare Found., Inc., 898 F.3d 1267, 1276 (11th Cir. 2018) (emphasis
added) (quotation marks and citation omitted).
At no point in her series of complaints, including in the Third Amended
Complaint, has Cooley identified a single specific example of a false claim by
date, amount, claim number, patient, or otherwise. See id. She instead relies
on her personal knowledge of the Defendants’ fraudulent activities to satisfy
the particularity requirement. (Pl.’s Br. in Opp’n to Defs.’ Mot. to Dismiss, at
2-3 (citation omitted).) Thus far, Cooley’s personal knowledge has not been
enough to carry her fraudulent-billing claims past the pleading stage. In the
September 2022 Order, the Court explained that although Cooley may have
identified suspicious behavior within ERMI, she failed to allege direct
knowledge as to how, when, or even if that behavior translated into the
submission of false claims. See Cooley, 2022 WL 4715679, at *6. With respect
to the 16-Week Billing Scheme, the Court noted:
Cooley never observed, much less participated in, the submission
of a fraudulent claim; she was not tasked as [Chief Compliance
Officer] with overseeing ERMI’s billing functions or reviewing
individual claims on the government; and she never had
conversations with anyone in ERMI’s billing department (as
opposed to a salesperson) about its billing policies.
Id. The Concealment of Best Prices Scheme suffered from the same general
defect. The sole factual basis for this scheme was a conversation in which
Branch admitted to charging the VA and the OWCP higher rates for DME than
Medicare. However, by her own allegations, Cooley had neither observed nor
participated in the submission of an improperly coded claim to either program.
See id. at *7. Finally, the Florida Licensing Scheme failed because Cooley did
not adequately allege the existence of any federal claims for Florida patients
during the relevant time period. See id.
Cooley insists that the Third Amended Complaint should resolve
concerns about whether she has the insider knowledge to speak to each
fraudulent scheme. The Court is not entirely persuaded. As explained below,
although she has bolstered her factual allegations in part, Cooley continues to
depend on generalities and supposition to make out most of her
fraudulent-billing claims. Eleventh Circuit precedent is clear: a relator cannot
simply attest to having personal knowledge of false claims and then fail to
disclose any specific details about those claims. See, e.g., Carrel, 898 F.3d at
1278 (“Indeed, that the relators supposedly had access to pertinent data and
still were unable to pinpoint specific false claims . . . suggests that they lack
any meaningful personal knowledge or participation in the fraudulent
conduct.” (quotation marks and citation omitted)); Est. of Helmly v. Bethany
Hospice & Palliative Care of Coastal Ga., LLC, 853 F. App’x 496, 502 (11th Cir.
2021) (“[E]ven with direct knowledge of the defendants’ billing and patient
records, Relators have failed to provide any specific details regarding either
the dates on or the frequency with which the defendants submitted false
claims, the amounts of those claims, or the patients whose treatment served
as the basis for the claims.” (quotation marks and citation omitted)).
Beginning with the 16-Week Billing Scheme, Cooley alleges that she
performed a “denials management” investigation to determine why so many of
ERMI’s Medicare claims were being denied and to implement measures for
reducing the volume of denials. (Third Am. Compl. ¶¶ 96-101.) She eventually
expanded that investigation to claims denied by the VA and the OWCP. (Id.
¶ 105.) During this process, Cooley “personally reviewed” claims that had been
paid by government programs such as Medicare and the VA. (Id. ¶¶ 112-13,
115.) She “discovered” that all claims submitted by ERMI for every single
patient sought payment for 16 weeks of DME usage, and she confirmed this
billing practice with ERMI management, including the head of the company’s
billing department. (Id. ¶¶ 132-33, 141-42, 181-82.) Cooley also repeats
allegations that ERMI forged physician signatures on prescriptions and
ignored some prescriptions altogether to ensure that it could bill the United
States for 16 weeks. (Id. ¶¶ 173-78.) And she reiterates that ERMI ignored
requests from patients to pick up DME before the 16 weeks were up. (Id.
Even with all of this professed insider knowledge, the shortcomings in
Cooley’s earlier complaints persist in the Third Amended Complaint. As the
Court explained in the September 2022 Order:
[Cooley] is unable to name a single patient whose request to
retrieve DME early went unanswered, or a single sales
representative who advised writing 16-week prescriptions, or a
single doctor whose shorter prescriptions were altered or ignored.
This raises serious red flags in the Court’s mind: that despite her
alleged insight into ERMI’s billing practices, Cooley cannot offer
precise facts pointing to even one example of a false claim.
Cooley, 2022 WL 4715679, at *5 (citation omitted). This time, Cooley assures
that she actually reviewed claims that were paid by the government—yet she
offers no details about the content of those claims or their overall composition
(e.g., the time period in which they were submitted). The Court is unwilling to
give Cooley “a ticket to the discovery process” on such generalized allegations.
United States ex rel. Clausen v. Lab’y Corp. of Am., Inc., 290 F.3d 1301, 1307
(11th Cir. 2002). As this Court observed two decades ago, the particularity
requirement not only protects defendants against strike suits, but also ensures
that False Claims Act cases will have discernable boundaries and manageable
discovery limits. See United States ex rel. Clause v. Lab’y Corp. of Am., Inc.,
198 F.R.D. 560, 564 (N.D. Ga. 2000). As pled, the 16-Week Billing Scheme is
boundless. Cooley alleges that every single claim presented by ERMI between
January 2015 and July 2019 was fraudulent, and she will presumably ask
ERMI to produce each one of those claims if her case is allowed to proceed.
(Third Am. Compl. ¶¶ 397, 406-07.) But other allegations in the Third
Amended Complaint caution against such broad discovery. For example,
Cooley admits that the United States denied some of ERMI’s claims on medical
necessity grounds—that is, because the United States determined that the
DME was not, or was no longer, medically necessary. (Id. ¶ 137.) The
implication is that the United States paid other claims after determining that
the DME was necessary for the full 16 weeks. To the extent that ERMI forged
or ignored some prescriptions, Cooley offers no clues as to when or how often
that behavior occurred; how many claims were involved; which employees,
doctors, or patients were implicated; or any other facts to help narrow the scope
medical-necessity contentions are based entirely on vague “internal medical
research” that she has never been able to identify or describe in any detail.2
(Id. ¶¶ 160-172.) In short, a fishing expedition would be sure to follow without
strict enforcement of Rule 9(b) in this case.
Cooley asks the Court to forgive this lack of specificity because the
Defendants barred her from accessing ERMI’s records as soon as she
mentioned a whistleblower lawsuit. (Pl.’s Br. in Opp’n to Defs.’ Mot. to Dismiss,
at 3.) Quoting United States ex rel. McNutt v. Haleyville Medical Supplies,
Inc., 423 F.3d 1256 (11th Cir. 2005), Cooley argues that “courts may consider
whether any pleading deficiencies resulted from the plaintiff’s inability to
obtain information in the defendant’s exclusive control.” (Id.) There are two
problems with this argument. The first is that the above McNutt quotation
does not actually appear in McNutt or in any other opinion from the Eleventh
Circuit. The second is that Cooley lost access to ERMI’s billing records and
The Third Amended Complaint’s reference to an ERMI marketing
brochure is unavailing. (Third Am. Compl. ¶¶ 50-51 & Ex. A at A-6, -8.) The
brochure simply describes study results showing the average patient’s
improvement using ERMI DME over a multi-week period. It does not suggest
that patients do not continue to experience improvements when the DME is
used for longer periods of time.
other files at most one day before her termination. (Third Am. Compl.
¶¶ 384-91.) Accordingly, the Court believes that this case continues to
resemble the likes of Carrel and especially Estate of Helmly, as discussed in
the September 2022 Order. 3 See Est. of Helmly, 853 F. App’x at 498, 501-02
(dismissing a complaint under Rule 9(b) where the relators allegedly confirmed
the submission of false claims from their review of billing records, attendance
at management meetings, and conversations with the defendants’ employees).
The Concealment of Best Prices Scheme is beset with the same
problems. Cooley alleges that ERMI charged the VA and the OWCP
significantly higher rates for DME than it did Medicare. However, the basis
for this allegation is not the content of any individual claims submitted to the
government, but average prices that Cooley calculated from ERMI’s overall
revenue and claim figures. (Third Am. Compl. ¶¶ 247-56.) For example, Cooley
asserts that ERMI charged OWCP patients $2,967.09 per unit of DME in 2018;
she came up with that number after dividing the total amount paid by the
OWCP ($6,210,134.72) by the total number of claims (2,093). (Id. ¶¶ 253-54.)
These averages may be the product of “elementary arithmetic,” as the Third
Amended Complaint calls it, but they do not provide the kind of identifying
Cooley urges the Court to follow the lead of a Florida district court in
United States ex rel. Napoli v. Premier Hospitalists PL, 2017 WL 119773 (M.D.
Fla. Jan. 12, 2017). Beyond the fact that Napoli is not binding on this Court, it
was decided before both Carrel and Estate of Helmly and is thus entitled to
even less weight than it otherwise would be.
claim information demanded by Rule 9(b). See, e.g., United States v. Lee
Memorial Health Sys., 2019 WL 1061113, at *5 (M.D. Fla. Mar. 6, 2019)
(exhibits showing a hospital’s total Medicare billing data did not satisfy Rule
9(b) absent “identifying claim information,” such as “how many of the total
claims were false”). As the Eleventh Circuit advised in United States ex rel.
Mastej v. Health Management Associates, Inc., 591 F. App’x 693, 708 (11th
Cir. 2014), where a False Claims Act case is based on medical services that
were “unnecessary, overcharged, or miscoded,” “representative claims with
particularized medical and billing content matter more[.]” The allegations for
the Concealment of Best Prices Scheme fall short of this standard. 4
The Florida Licensing Scheme presents a different story. Cooley alleges
that ERMI falsely certified to the United States that it was complying with
Florida healthcare regulations when in reality, it operated there with either
no state license or a fraudulently obtained license since 2015. (Third Am.
Compl. ¶¶ 321-27, 343-60.) Unlike the prior two schemes, this one does not
depend on “the particularized medical or billing content of any given claim
form.” Mastej, 591 F. App’x at 708. In other words, “the type of medical service
rendered and described in [a claim], the billing code, or what was charged for
The Court need not repeat its discussion of allegations that were
already addressed in the September 2022 Order—namely Branch’s admission
that ERMI charged the VA and the OWCP higher rates than Medicare. See
Cooley, 2022 WL 4715679, at *6-7.
that service are not the underlying fraudulent acts.” Id. at 708. Those details
need not be alleged with particularity, then, to satisfy Rule 9(b). See id. at 709
(“A plaintiff must satisfy Rule 9(b) with respect to the circumstances of the
fraud he alleges—but not as to matters that have no relevance to the
fraudulent acts.”). Instead, Cooley must, at a minimum, demonstrate that
ERMI submitted claims to federal payors for Florida patients while it was not
properly licensed in the state.
In the September 2022 Order, the Court faulted Cooley for using
mathematical probability to show that ERMI must have submitted a false
claim in Florida at some point. See Cooley, 2022 WL 4715679, at *7.
Specifically, she alleged that Florida is ERMI’s largest market for gross
revenue and Medicare dollars and that approximately 20 percent of Florida’s
population is eligible for Medicare. In the Third Amended Complaint, Cooley
corrects this pleading defect with respect to some, but not all, federal payors
and time periods. She attaches financial records showing that ERMI submitted
2,627 and 227 claims in Florida to the VA and the OWCP, respectively,
between January 2018 and July 2019. (Third Am. Compl. ¶¶ 296-99 & Exs.
R-S.) Those claims coincide with periods when ERMI allegedly did not have a
valid license to do business in Florida. However, there are no particularized
allegations to support that ERMI submitted false claims to the VA or the
OWCP outside those dates or to Medicare at any time. When it comes to
Medicare, the most Cooley can say is that from January 2018 to July 2019,
“ERMI presented claims for payment or approval to the United States for 16
weeks of DME usage for DME provided to Medicare patients in Florida.” (Id.
¶ 300.) The factual basis for this allegation is a boilerplate summary of earlier
allegations in the Third Amended Complaint. (Id.) Accordingly, the Florida
Licensing Scheme survives Rule 9(b) only for those VA and OWCP claims
identified between January 2018 and July 2019.
B. Materiality of the Florida Licensing Lapses
The Court turns now to the Defendants’ scheme-specific arguments for
dismissal. Because the 16-Week Billing Scheme and the Concealment of Best
Prices Scheme fail under Rule 9(b), the Court focuses its attention solely on
the Florida Licensing Scheme.
First, the Defendants argue that the Third Amended Complaint fails to
plead materiality with particularity. A misrepresentation about compliance
with a statutory, regulatory, or contractual requirement must be material to
the government’s payment decision to be actionable under the False Claims
Act. See Universal Health Servs., Inc. v. United States ex rel. Escobar, 579
U.S. 176, 181 (2016). The statute defines “material” as “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). This definition focuses on “the
effect on the likely or actual behavior of the recipient of the alleged
misrepresentation.” Escobar, 579 U.S. at 193 (citation omitted). Although
relevant, the mere fact that regulatory compliance is designated as a condition
of payment does not automatically make a misrepresentation material. See id.
at 194. Materiality also cannot be found where noncompliance is “minor” or
According to the Defendants, there are no allegations in the Third
Amended Complaint to support that the status of ERMI’s Florida license was
material to a federal payment decision. (Defs.’ Br. in Supp. of Defs.’ Mot. to
Dismiss, at 20.) They analogize the Florida licensing regime to the corporate
business and medical licenses at issue in United States ex rel. Taylor v. Boyko,
39 F.4th 177 (4th Cir. 2022). (Reply Br. in Supp. of Defs.’ Mot. to Dismiss, at
authorization for a medical corporation were rescinded in West Virginia after
it failed to file an annual report and pay a $25 filing fee. See Taylor, 39 F.4th
at 186. The defendant never reported the licensing lapse to the federal
government, as required, and continued to bill Medicare for its services. See
id. at 186-87. At the motion to dismiss stage, the district court held that this
regulatory violation did not meet the False Claims Act’s materiality standard.
See United States ex rel. Taylor v. Boyko, 2020 WL 520933, at *5 (S.D. W. Va.
Jan. 31, 2020). Specifically, “there [wer]e no allegations that [the defendant’s]
license status impacted the core medical services provided to patients and
reimbursed by Medicare or the qualifications of the medical personnel
providing care at [the medical center].” Id.
The Fourth Circuit agreed. It drew a firm distinction between
revocations of personal medical licenses, on the one hand, and revocations of
corporate certificates of authorization, on the other hand. See Taylor, 39 F.4th
Personal medical licenses are issued to individual physicians or
medical personnel, subject to the exacting strictures of state law.
To obtain such a license, an individual generally must acquire a
medical degree, complete years of residency or graduate clinical
training, pass the Medical Licensing Examination, demonstrate
“good moral character” and physical and mental fitness, and
submit a complete application, including fees. [The defendant], in
contrast, was issued a “[c]ertificate of authorization for [an]
in-state medical corporation.” To obtain such a certificate, a
medical corporation must file an application, pay fees, and
furnish proof that each shareholder is a licensed physician.
Id. (citations omitted). According to the Fourth Circuit, the lapse in the
defendant’s state licenses—due to its failure to file an annual report and pay a
small fee—was a bureaucratic matter and not material to the provision of
medical services. See id. at 194.
Although the Defendants rely heavily on Taylor to support dismissal,
the Court finds that the decision in fact bolsters Cooley’s case. Unlike in Taylor,
Cooley’s allegations suggest that the Florida licensing requirement was central
to the medical services and equipment provided by ERMI and billed to the
United States. Florida law requires that providers of home medical equipment
obtain separate licenses for each of their premises. Fla. Stat. Ann. § 400.93(4).
The licensing regime sets forth minimum standards to ensure that the medical
equipment is safe and sanitary and that the personnel who manage,
administer, deliver, and maintain the equipment are qualified to do so. Fla.
Stat. Ann. § 400.934; Fla. Admin. Code Ann. r. 59A-25.003 to .004. For
example, all personnel must pass a level 2 background check, and delivery
personnel must complete a training program covering all aspects of their jobs,
including how to use each type of equipment being delivered. Fla Stat. Ann.
§ 400.953; Fla. Admin. Code Ann. r. 59A-25.004(3). Licensees must also be able
to demonstrate a series of safety and infection control measures, such as
storage of equipment to prevent dust accumulation, water damage, and vermin
contact. Fla. Admin. Code Ann. r. 59A-25.003. The Florida Agency for Health
Care Administration (the “AHCA”) conducts facility inspections as part of the
licensing process. Fla. Stat. Ann. § 400.933(1)(a).
In the Court’s view, compliance with these licensing regulations (or lack
thereof) is a factor that would likely affect a reasonable person’s decision to pay
for healthcare services. See Escobar, 579 U.S. at 193. Cooley alleges that even
when ERMI held a Florida license, it misrepresented that all DME was stored,
maintained, and shipped to patients from facilities in Atlanta, not Florida.
(Third Am. Compl. ¶¶ 336, 339-41, 347, 355, 458, 460.) In reality, Cooley
continues, ERMI operated from multiple locations in Florida, including
garages and storage units, some of which were infested with rats and mold.
(Id. ¶¶ 356, 458.) Cooley also alleges that ERMI concealed the identities of its
Florida employees—particularly delivery personnel—for fear that they could
not pass the mandated background check. (Id. ¶¶ 355, 468-69, 471.) These
misrepresentations and omissions go “to the very essence of the bargain[.]”
Taylor, 39 F.4th at 190 (citation omitted). They raise significant concerns as to
whether the DME supplied by ERMI was safe, sanitary, and effective for
patients in Florida to use. See United States ex rel. Escobar v. Universal
Health Services, Inc., 842 F.3d 103, 111 (11th Cir. 2016) (“At the core of the
MassHealth regulatory program in this area of medicine is the expectation that
mental health services are to be performed by licensed professionals, not
charlatans.”). ERMI’s alleged efforts to cover up its noncompliance further
underscore that the Florida license was a material condition of payment.
(Third Am. Compl. ¶¶ 328-29, 336-41.) See United States v. Triple Canopy,
Inc., 857 F.3d 174, 178 (4th Cir. 2017) (reaffirming, in light of Escobar, that
the defendant’s omissions were material based on “common sense” and its “own
actions in covering up the noncompliance”).
C. Public Disclosure Doctrine
Next, the Defendants ask the Court to dismiss the Florida Licensing
Scheme under the False Claims Act’s public disclosure provision. (Defs.’ Br. in
Supp. of Defs.’ Mot. to Dismiss, at 22.) In relevant part, that provision bars a
claim if substantially the same allegations were publicly disclosed in a federal
criminal, civil, or administrative hearing in which the government or its agent
is a party. 31 U.S.C. § 3730(e)(4)(A). There is an exception if the relator is an
original source of the information. Id. The Eleventh Circuit has endorsed a
three-part test for deciding if the public disclosure bar applies: (1) have the
allegations made by the plaintiff been publicly disclosed; (2) if so, is the
disclosed information substantially the same as the plaintiff’s suit; and (3) if
yes, is the plaintiff an original source of that information. See United States ex
rel. Osheroff v. Humana Inc., 776 F.3d 805, 812 (11th Cir. 2015) (citation
omitted). An original source is someone who has “knowledge that is
independent of and materially adds to the publicly disclosed allegations or
transactions.” 31 U.S.C. § 3730(e)(4)(B).
As to the first prong, the Defendants argue that ERMI’s licensing lapses
were already litigated in Fulton County, Georgia, and in the Southern District
of Florida. (Defs.’ Br. in Supp. of Defs.’ Mot. to Dismiss, at 22.) In the Fulton
County complaint, filed on August 28, 2019, the plaintiff alleges that ERMI
was not licensed by the AHCA at any time in the prior four years and that
ERMI’s failure to obtain a valid license constitutes a deceptive and unfair trade
practice under Florida law. (Id., Ex. A ¶¶ 1, 20-25.) In the Southern District of
Florida complaint, filed on January 24, 2020, the plaintiff likewise accuses
ERMI of violating the Florida Deceptive and Unfair Trade Practices Act based
on the same licensing violation. (Id., Ex. B ¶¶105-11.) Notably, the Fulton
County case is irrelevant because under the 2010 amendments to the False
Claims Act, only information disclosed in federal court proceedings are
considered public disclosures. See Osheroff v., 776 F.3d at 812.
In the Court’s view, the Southern District of Florida complaint does not
spell out the workings of the Florida Licensing Scheme as does the Third
Amended Complaint. For example, whereas the earlier complaint states that
ERMI held no Florida license in the last four years, the Third Amended
Complaint identifies and attaches licenses that were issued to ERMI in
October 2016 and November 2019. (Third Am. Compl. ¶¶ 321, 325.) The Third
Amended Complaint also explains the basis for Cooley’s allegation that those
licenses were fraudulent—namely that ERMI failed to disclose its facilities and
personnel in Florida to the ACHA. Further, unlike the plaintiffs in the Florida
lawsuit, Cooley provides facts showing that ERMI’s licensing lapses were
knowing and not the result of innocent mistakes or simple negligence. (Id.
¶¶ 328-41, 350-57.) See Urquilla-Diaz v. Kaplan Univ., 780 F.3d 1039, 1058
(“Although proof of a specific intent to defraud is not required, the [False
Claims Act’s] language makes plain that liability does not attach to innocent
mistakes or simple negligence.” (quotation marks and citations omitted)).
Accordingly, under the second and third prongs of the public disclosure test,
the Court concludes that the information revealed in the Florida litigation is
not substantially similar to Cooley’s claims and that in any event, Cooley’s
allegations are protected by the original source doctrine.
D. Branch’s Individual Liability
The last issue raised in the motion to dismiss is whether Branch should
be dismissed from this case in his individual capacity. (Defs.’ Br. in Supp. of
Defs.’ Mot. to Dismiss, at 23-24.) According to the Defendants, the Third
Amended Complaint lumps ERMI and Branch together—more than 50 times
by the Defendants’ count—as though they are one in the same. (Id.) Branch,
the Defendants emphasize, is simply the owner and CEO of ERMI; he is not
himself a DME provider, nor does he personally seek payment from federal
payors for ERMI’s DME. (Id. at 24.) The Defendants also argue that Cooley’s
“alter ego” allegations do not provide a basis to pierce the corporate veil as to
Branch. (Id. at 24-25.)
Citing 31 U.S.C. § 3729(a)(1)(A)-(B), Cooley argues that there should be
no doubt that Branch caused false claims to be presented to the government.
(Pl.’s Br. in Opp’n to Defs.’ Mot. to Dismiss, at 24.) In her response brief, she
addresses only the 16-Week Billing Scheme and the Concealment of Best
Prices Scheme, both of which have now been dismissed on separate grounds.
(Id. at 24-25.) Meanwhile, the Third Amended Complaint makes only vague,
conclusory allegations in an attempt to tie Branch to the Florida Licensing
Scheme. For example, Cooley repeatedly references what “ERMI leadership”
knew and did in response to ERMI’s licensing lapses—in general, directing the
company to continue operating illegally in Florida and providing false
responses to an AHCA application. (Third Am. Compl. ¶¶ 331-36, 339-40,
354-55.) While Branch is a member of ERMI’s leadership, there are no
allegations about his own conduct sufficient to overcome the hurdle of Rule
9(b). The Third Amended Complaint’s veil-piercing allegations also fail to
plausibly allege an alter ego theory of liability. (Id. ¶¶ 33-38.) Even if Branch
owns and controls ERMI, the standard for Georgia’s alter ego doctrine is
whether the corporate form has been abused. See Baillie Lumber Co. v.
Thompson, 279 Ga. 288, 289 (2005). The Third Amended Complaint does not
meet that standard. (E.g., Third Am. Compl. ¶ 38 (alleging, without any factual
support, that Branch uses ERMI and its related entities to pay personal
For the foregoing reasons, the Defendants’ Motion to Dismiss Third
Amended Complaint [Doc. 62] is GRANTED in part and DENIED in part.
Counts I through IV are dismissed as to all of the Defendants, and Counts V
through VII are dismissed as to Defendant Thomas P. Branch.
SO ORDERED, this
day of May, 2023.
THOMAS W. THRASH, JR.
United States District Judge
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