United States Of America et al v. SouthernCare, Inc.
Filing
89
ORDER granting 56 Motion to Dismiss; granting in part and denying in part 57 Motion to Dismiss; denying 58 Motion to Dismiss for Lack of Jurisdiction; granting 62 Motion to Dismiss. Relator shall have 14 days to submit an amended complaint. Signed by Judge William T. Moore, Jr on 9/29/14. (bcw) Modified on 9/29/2014 (bcw).
IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF GEORGIA
SAVANNAH DIVISION
UNITED STATES OF AMERICA and
STATE OF GEORGIA ex rel.
CHAD WILLIS,
Plaintiffs-Relator,
CASE NO. CV410-14
V.
SOUTHERNCARE, INC.,
Defendant.
ORDER
Before the Court are Defendant's Motion to Dismiss for
Failure to Plead Fraud with Particularity (Doc. 56), Motion
to Dismiss for Failure to State a Claim (Doc. 57), and
Motion to Dismiss for Lack of Subject Matter Jurisdiction
(Doc. 58). 1 For each motion, Plaintiff has filed a response
(Doc. 59; Doc. 60; Doc. 61), to which Defendant has filed
replies (Doc. 69; Doc. 70; Doc. 71) . Also before the Court
is Relator's Motion to Dismiss Defendant's Counterclaim.
(Doc. 62.) Defendant has filed a response (Doc. 72), to
which Relator has filed a reply (Doc. 76).
1
For reasons unknown to the Court, Defendant has filed a
separate motion for each theory upon which it believes
Relator's complaint could be dismissed. Because the Court
can discern no reason why these claims should be analyzed
independently, however, it will address each of them in
this order.
After careful consideration, Defendant's Motion to
Dismiss for Failure to State a Claim (Doc. 57) is GRANTED
IN PART and DENIED IN PART.
All Relator's claims relating
to fraudulent admissions or recertifications of ineligible
hospice patients prior to September 1, 2008 are hereby
Defendant's Motion to Dismiss for Lack of
DISMISSED.
Subject Matter Jurisdiction (Doc. 58) is
DENIED.
Defendant's Motion to Dismiss for Failure to Plead Fraud
with Particularity (Doc. 56) is
shall have
fourteen days
GRANTED.
However, Relator
to submit an amended complaint
correcting the deficiencies identified in this order.
Relator is on NOTICE that failure to do so will result in
dismissal of this case. Relator's Motion to Dismiss
Counterclaim (Doc. 62) is GRANTED.
BACKGROUND
This case involves claims brought by the United States
under the False Claims Act ("FCA"), 31 U.S.C. § 3729, and
the Georgia Medicaid False Claims Act ("GMFCA"), O.C.G.A.
§ 49-4-168(b)
. 2
(Doc. 50
¶11 46-67.) Relator, who is a
2
For the purposes of Defendant's motions to dismiss,
Relator's allegations set forth in its complaint will be
taken as true. See Sinaltrainal v. Coca-Cola Co., 578 F.3d
1252, 1260 (11th Cir. 2009) . However, for the purposes of
Plaintiff's Motion to Dismiss Counterclaim (Doc. 62),
Defendant's allegations set forth in their Amended Answer
and Counterclaim (Doc. 55) will be taken as true. See id.
2
former employee of Defendant, 3 filed a qui tam complaint
under seal pursuant to 31 U.S.C. § 3730(b) (2) on May 18,
2010. (Doc. 1.) The original complaint alleged false
claims and inducement under the FCA and GMFCA, as well as
conspiracy to commit fraud and common law claims of
suppression, fraud, and deceit. (Id.
¶11 23-50.) After
receiving six extensions of time to make its decision, the
United States notified the Court on February 4, 2013 that
it was declining to intervene in this matter. (Doc. 31.)
Then, on February 5, 2013, the Court ordered the complaint
unsealed and served on Defendant. (Doc. 32) On June 4,
2013, Relator requested Defendant waive service of the
complaint, and in response, Defendant executed the waiver
of service on June 5, 2013. (Doc. 34.)
Defendant is a large provider of hospice care services
operating throughout the southeast. (Doc. 50 ¶ 3.)
Relator worked as a Community Relations Director—a type of
sales position—for Defendant beginning in 2005 until
September 9, 2010. (Id. ¶ 4.) While Relator was employed
by Defendant, another of Defendant's employees, Tonja Rice,
brought a qui tam action against Defendant in the Northern
District of Alabama on April 27, 2005. (Doc. 58, Attach. 1
Relator filed this action while apparently still employed
by Defendant, but has since left the company. (Doc. 50 at
1.)
3
at
1.)4
Ms. Rice alleged that Defendant fraudulently
submitted false claims for hospice care patients who did
not meet hospice eligibility criteria. (Id. at 2.) On
December 26, 2007, another employee of Defendant, Nancy
Romeo, brought a separate qui tam action alleging the same
actions in the Northern District of Alabama. (Id.) The
United States Government eventually intervened in both of
these cases to settle with Defendant. (Id.) Pursuant to
the settlement, Defendant was released from any claims the
United States had or may have for the "covered conduct" in
exchange for $24.7 million. (Id. at 7.) The settlement
agreement further defined "covered conduct" as Defendant's
alleged submission of false claims to Medicare for
treatment of patients who did not meet the applicable
eligibility criteria under the hospice benefit occurring
during the period of January ]. 2000 to September 1, 2008.
(Id. at 7.)
Pursuant to the settlement agreement, Defendant also
entered into a Corporate Integrity Agreement with the
These specific facts related to the previous qui tam
actions are taken from Defendant's motion. Normally, the
Court does not consider facts outside the original
pleadings on a motion to dismiss. However, the Court
presents these facts here as they are freely available to
the public, are undisputed by Relator, and are necessary
for the Court's analysis of Defendant's facial challenge to
the Court's subject matter jurisdiction See infra
Analysis. I.
4
Department of Health and Human Services to establish a
compliance program to prevent Defendant from submitting any
future false claims to the Government. (Doc. 50 at
2.)
Nevertheless, according to Relator, Defendant has not
complied with its agreement and has since submitted further
false claims to the Government. (Id.) Rather, Relator
alleges, Defendant has pressured its staff with unrealistic
sales targets and lucrative incentives to encourage
admissions of patients not actually eligible for hospice
care. (Id. ¶11 19-22.)
To support this claim, Relator identifies twenty-seven
patients who are or were receiving Defendant's hospice care
despite ineligibility. Specifically, Relator provides
facts showing thirteen patients were admitted to hospice
care despite the lack of necessary physician referrals and
certifications of terminal illness, or exhibiting otherwise
incomplete and incorrect documentation .' 5 (Id. ¶t 23-37.)
Before a Medicare patient may receive hospice care, his or
her attending physician and the hospice care provider's
medical director are required to each certify in writing at
the beginning of the first ninety-day period "that the
individual is terminally ill . . . based on the physician's
or medical director's clinical judgment regarding the
normal course of the individual's illness."
42 U.S.C.
At the beginning of a subsequent
§ 1395f (a) (7) (A) (i) .
ninety or sixty-day period, the medical director or
physician must recertify "that the individual is terminally
ill based on such clinical judgment."
42 U.S.C. §
1395f (a) (7) (A) (ii) . "Terminally ill" is defined as having
5
Relator also identifies, by their initials, seven patients
whom are or were continuing to receive hospice services
from Defendant for over one year. (Id. ¶ 38.) Relator
also provides evidence of
six
patients whose recorded
diagnoses were fraudulently altered by Defendant. (Id.
¶ 39.) Relator further provides one example of Defendant
improperly drugging a patient so as to make the patient
decline in health and falsely appear eligible for hospice
care. (Id. Tf 40-41.)
Lastly, Relator also provides five examples of
patients who were eligible and properly receiving hospice
care, but were then revoked by Defendant. (Id. ¶ 44.) The
care associated with these patients—such as a hospital
stay—cost more than what Medicare provided for their care
and thus, according to Relator, Defendant revoked them from
hospice care to avoid paying for their treatment. (Id.)
Defendant apparently accomplished this by having the
patients sign a blank revocation form and then back-dating
it to appear as if the patient revoked Defendant's services
prior to the date of the expensive care. (Id.) The
patients are normally readmitted thereafter. (Id.)
a life expectancy of less than six months.
C.F.R. § 418.3.
1.1
42
On September 3, 2013, Relator filed an amended
complaint dismissing his conspiracy and common law claims,
but maintaining that Defendant violated the FCA and GMFCA
by improperly admitting and recertifying patients who did
not meet hospice criteria, as well as falsifying certain
documents to support this fraudulent activity.
111 46-67.)
(Doc. 50
Specifically, Relator asserts the following
five claims: (1) Count One - False Claims Under 31 U.S.C.
§ 3729; (2) Count Two - False Claims under 31 U.S.C.
§ 3729;6 (3) Count Three - False Statements for Submission
of False Claims under 31 U.S.C. § 3729; (4) Count Four Reverse False Claims under 31 U.S.C. § 3729 (a) (1(G); and
(5) Count Five - False Claims under O.C.G.A. § 49-4-168.1.
(Id.) Defendant answered the amended complaint on October
7, 2013, and asserted a counterclaim for breach of duty of
loyalty, alleging that Relator siphoned potential customers
6 While it is not entirely clear, counts one and two of
Relator's complaint appear to allege the same thing: that
Defendant submitted, or caused to be submitted, false
claims for repayment by the United States Government. Each
of these counts arises under the same statute and is
dependent on the same set of facts. Due to Relator's
shotgun manner of pleading, it is not entirely clear to the
Court why what appears to be one claim has been divided
into two separate counts. However, because the Court
ultimately determines that the amended complaint should be
dismissed on other grounds, see infra Analysis.III, the
Court need not address its concerns here. The Court may
revisit this matter should the need arise after Relator has
submitted his second amended complaint.
7
away from Defendant during his last month of employment.
(Doc. 55.)
Defendant has now moved to dismiss Relator's amended
complaint for failure to state a claim upon which relief
can be granted because the claims are barred by res
judicata and/or collateral estoppel (Doc. 57); for lack of
subject matter jurisdiction because Relator's claims stem
from information already publicly disclosed (Doc. 58); and
because the complaint fails to plead the alleged fraud with
particularity as required by Fed. R. Civ. P. 9(b) (Doc.
56). Relator has responded in opposition to each of these
motions. (Doc. 59; Doc. 60; Doc. 61.) Relator has also
moved to dismiss Defendant's counterclaim for failure to
state a claim upon which relief can be granted, arguing
that the allegation is unsupported by sufficient factual
allegations and is impermissibly retaliatory. (Doc. 62.)
Defendant has responded in opposition.
(Doc. 72.)
The
Court will address each of these claims in this order.
ANALYSIS
I.
12(b) (1) LACK OF SUBJECT MATTER JURISDICTION
A.
Applicable Law
Defendant has filed a Motion to Dismiss for Lack of
Subject Matter Jurisdiction (Doc. 58), arguing that
Relator's allegations are based on public information, and
8
thus his claims are precluded by the FCA's public
disclosure bar. The parties disagree on which version of
31 U.S.C. 3730(e) (4) applies to Relator's claims. The
alleged public information, while revealed in January of
2009, includes allegations of Defendant's conduct only from
January 1, 2000 to September 1, 2008. (Doc. 58, Attach. 7
at 4.) Relator's amended complaint includes allegations of
Defendant's conduct from 2007-2013. (Doc. 50.)
As stated earlier, Relator left Defendant's employment
on September 9, 2010. (Doc. 55 at 7.) Roughly six months
earlier, on March 23, 2010, the President signed into law
the Patient Protection and Affordable Care Act ("PPACA"),
which resulted in an amendment to the language of
§ 3730(e) (4) . (Doc. 64 at 2 n.l.) Also, Relator initially
filed this action roughly two months after the PPACA's
passage. (Doc. 1.) Accordingly, before the Court
addresses the merits of Defendant's motion, it must
determine which version of the statute is applicable to the
claims at hand.
The PPACA legislation is silent as to whether the
statute applies retroactively, and some district courts
have held that claims filed well after the passage of the
PPACA should be evaluated pursuant to the statute's amended
language. See, e.g., United States ex rel. Sanchez v.
Abuabara, 2012 WL 1999527, at
*2 n.1 (S.D. Fla. Aug. 16,
2013) (unpublished) (amended language applied where suit
was filed "many months after" PPACA's passage and all
parties consented to use of amended language). In Hughes
Aircraft Co. v. U.S. ex rel. Schumer, however, the Supreme
Court declined to apply the FCA's 1986 amendments to cases
in which the underlying conduct had occurred prior to the
amendment. 520 U.S. 939, 946 (1997) (noting that "[t]he
principle that the legal effect of conduct should
ordinarily be assessed under the law that existed when the
conduct took place has timeless and universal appeal")
(internal citations omitted). While the Eleventh Circuit
has not addressed an instance wherein a complaint and its
underlying facts straddle the date of when public
disclosure bar was amended, the Court finds the principle
outlined in Hughes the most reasonable approach. Where
Relator's claims are based on facts after the passage of
the PPACA, the new language will apply. Where the conduct
precedes the PPACA, the previous language will apply. 7 See
' Georgia's Medicaid FCA public disclosure bar exhibits
identical language to that of the FCA, and has done so both
before and after the PPACA's passage. See O.C.G.A. 49-4168.2(j) (2) (2008); O.C.G.A. 49-4-168.2(l)(1-2). In
addition, both parties agree that the FCA governs Relator's
claims. (See Doc. 50 ¶ 1; Doc. 58, Attach. 1 at 3 n. 1)
Accordingly, the Court's analysis applies equally to both
Relator's claims under federal and Georgia law.
10
United States ex rel. Osheroff v. Humana, Inc., 2012 WL
4479072, at *4 n.8 (S.D. Fla. Sept. 28, 2012) (unpublished)
(applying previous version of FCA's public disclosure bar
to claims submitted before amendment and amended version to
claims submitted thereafter).
B.
The Public Disclosure Bar
Defendant has moved for dismissal pursuant to
12(b)(1),
as challenges based on the FCA's public
disclosure bar are considered jurisdictional.
See, e.g.,
Rockwell Int'l Corp. v. United States, 549 U.S. 457, 467
(2007) (holding that § 3730(e) (4) is jurisdictional) . The
Eleventh Circuit has recognized that a motion to dismiss
for lack of subject matter jurisdiction may be based on
either a facial or factual challenge to the complaint. See
McElmurray, 501 F.3d at 1251. A factual challenge is made
irrespective of the pleadings and the Court may consider
testimony and other evidence to determine its potential
jurisdiction. Id. A facial challenge, on the other hand,
affords a plaintiff safeguards similar to those
accompanying a Rule 12(b) (6) motion to dismiss for failure
to state a claim. Id. That is, the Court will consider as
true the factual allegations contained in a plaintiff's
complaint. Id. Because this motion is made prior to
11
discovery, the Court construes it as a facial challenge to
subject matter jurisdiction.
1.
Claims Governed by Old Statute
Relator alleges facts in his amended complaint that
show, prior to the PPACA's passage, Defendant fraudulently
admitted eighteen ineligible patients to hospice care.
(Doc. 50 ¶j 25, 27, 30, 32, 34, 38-39.) He has also
offered five examples of patients who were eligible for
hospice care and were improperly revoked. 8 (Id. ¶ 44.) For
the period of time in which these patients were admitted,
the public disclosure bar stated:
No court shall have jurisdiction over an [FCA qui
tam action] based upon the public disclosure of
allegations or transactions in a criminal, civil,
or administrative hearing, in a congressional,
administrative, or Government Accounting Office
report, hearing, audit, or investigation, or from
the news media, unless . . . the person bringing
the action is an original source of the
information.
31 U.S.C. § 3730(e) (4) (A) (2008).
The Eleventh Circuit
dictates a three-step inquiry under the public disclosure
8
It is not entirely clear how Relator believes these
revocations violate the FCA. Relator's shotgun manner of
pleading makes it difficult to distinguish which counts are
actually dependent on which facts. (See, e.g., id. ¶ 61.)
It seems likely that these claims are factually independent
from any alleged improper admissions or re-certifications
of ineligible patients. See infra Analysis.II. In the
interest of caution, however, the Court assumes these
claims are related and will determine whether the public
disclosure bar precludes their inclusion in this suit as
they occurred prior to the passage of the PPACA.
12
bar: "(1) have the allegations made by the plaintiff been
publicly disclosed; (2) if so, is the disclosed information
the basis of the plaintiff's suit; (3) if yes, is plaintiff
an 'original source' of that information." McElmurray v.
Consol. Gov't of Augusta-Richmond Cnty., 501 F.3d
1244,
1252 (11th Cir. 2007) (quoting Battle v. Bd. of Regents,
468 F.3d 755, 762 (11th Cir. 2006)). During the time in
question, the FCA also defined "original source" as "an
individual who has direct and independent knowledge of the
information on which the allegations are based and has
voluntarily provided the information to the Government
before filing an action." 31 U.S.C. § 3730(e) (4) (B) (2008)
In support of its motion, Defendant has included the
complaints, intervention notices, dismissals, and the
Government's press release announcing the settlement of
both the Rice and Romeo lawsuits. (Doc. 58, Attachs. 2-9.)
These filings, which have been unsealed, are clearly
themselves public disclosures. McElmurray, 501 F.3d at
1252 (finding documents filed with the court public
disclosures under FCA). Indeed, Relator does not appear to
contest that these documents are public disclosures, and
admits he was familiar with the previous lawsuits.
61 at 4.)
(Doc.
Accordingly, the first prong of the public
disclosure inquiry is satisfied.
13
With regard to the second prong, the bar operates to
preclude only those claims that are "based upon"
information publicly disclosed. Cooper v. Blue Cross &
Blue Shield of Fla., Inc., 19 F.3d 562, 567 (11th Cir.
1994). The Eleventh Circuit has taken a broad reading of
the language, holding that "based upon" means "supported
by," such that the FCA precludes "suits based in any part
on publicly disclosed information." See id. Using this
broad definition, it is unsurprising that Relator's claims
may be implicated by the FCA's public disclosure bar.
Defendant argues that Relator's allegations are
"identical to the claims brought in the Rice Action and
Romeo Action." (Doc. 58, Attach. 1 at 13.) Specifically,
Defendant points out that both the Rice and Romeo actions,
which were filed years before this lawsuit, alleged that
Defendant improperly admitted and recertified patients for
hospice care and falsified documents to support fraudulent
claims submitted to the government. (Id. at 5-6.) The
conduct in question allegedly took place from Jan. 1, 2000
through September 1, 2008. (Id.) Similarly, Defendant
points out, Relator's amended complaint alleges that
Defendant admitted and recertified ineligible hospice
patients, falsified records and submitted fraudulent
claims. (Id. at 13.) According to Defendant, because
14
allegations of its improper conduct had already been
released to the public, Relator is precluded from asserting
similar claims now. (Id.)
Relator admits his awareness of the prior actions and
settlement. (Doc. 61 at 4.) However, knowledge of this
prior conduct is not determinative in this case. The
question before the Court is simply whether any of
Relator's claims are supported by the previously alleged
improper conduct occurring before September 1, 2008. See
United States ex rel. Harris v. Lockheed Martin Corp., 905
F. Supp. 2d 1343, 1351 (N.D. Ga. 2012) ("[The public
disclosure bar] operates to preclude only those claims
based on the facts publicly disclosed." (citing McElmurray,
501 F.3d at 1252)).
Relator admits that some of the patients allegedly
admitted or recertified for hospice care were first
admitted prior to the effective date of the Rice and Romeo
settlement. (Doc. 61 at 7.) Defendant argues that the
facts surrounding these patients were thus disclosed by the
prior qui tam cases and attendant settlement agreement, and
thus cannot provide a basis for this action. (Doc. 71 at
15.) Relator responds that his claims stem only from the
period of time after the effective date of the settlement
15
during which these patients stayed on hospice care despite
being ineligible. (Doc. 61 at 7.)
However, Relator adopts and incorporates all the facts
in his amended complaint to support each of his claims.
(Doc. 50
It
46, 51, 56, 61, 64.) Because the amended
complaint includes references to improper admissions and
recertifications prior to the effective date of the Rice
and Romeo settlement agreement, the Court finds that such
references are admittance that the claims are, at least in
part, supported by these previously and publicly disclosed
facts. See Cooper, 19 F.3d at 567 (holding that the FCA
precludes suits based "in any part" on publicly disclosed
information) . Accordingly, the Court must determine
whether Relator qualifies as an "original source" of these
allegations.
Taking the allegations in Relator's amended complaint
as true, the Court finds he has set forth a sufficient
factual basis to support a finding that he may qualify as
an original source. As stated earlier, an original source
is "an individual who has direct and independent knowledge
of the information on which the allegations are based and
has voluntarily provided the information to the Government
before filing an action." 31 U.S.C. § 3730(e) (4) (B) (2008)
A relator need not be the original source from which the
M.
publicly disclosed information originates, but must
demonstrate direct and independent knowledge of the facts
upon which his claim is based. Battle, 468 F.3d at 762.
In addition, an employee with personal, firsthand knowledge
of the information supporting his allegations may qualify
for the original source exception. See Saldivar, 906 F.
Supp. 2d at 1275.
Such appears to be the case here.
Relator was
employed by Defendant for five years and alleges intimate
knowledge of Defendant's internal affairs.
4.)
Specifically, Relator alleges personal knowledge of
the facts contained within his complaint.
3.)
(Doc. 50 ¶i 3-
(Doc. 61 at 2-
In addition, Defendant admits in one of its replies
that Relator "had 'firsthand' access to the very records he
needed to offer evidence of the purported fraudulent
behavior." 9 (Doc. 69 at 4.) The Court also notes that
Defendant remained employed in this privileged position for
five months after the passage of the PPACA.
7,.)
(Doc. 55 at
Accordingly, taking the allegations in his amended
complaint as true, the Court finds that Relator has pled
Defendant makes this statement as part of his argument
that Relator failed to plead fraud with particularity. See
The Court agrees with Defendant on
infra Analys±s.III.
Id. Nonetheless, the statement still serves
that point.
to negate Defendant's argument that Relator cannot be an
original source of the information upon which his claims
rely.
17
sufficient facts to establish that he is an original source
of the information implicated by the FCA's old public
disclosure bar. 10
2.
Claims Governed by New Statute
Nine of Relator's alleged improper patient admissions
occurred after the passage of the PPACA, and are thus
governed by the new language of the FCA. The current
language of the FCA's disclosure bar reads:
The court shall dismiss an action or claim under
this section, unless opposed by the Government,
if substantially the same allegations or
transactions as alleged in the action or claim
were publicly disclosed in a Federal criminal,
civil, or administrative hearing in which the
Government or its agent is a party; in a
congressional, Government Accountability Office,
or other Federal report, hearing, audit, or
investigation; or from the news media, unless the
action is brought by the Attorney General or the
person bringing the action is an original source
of the information.
10
The Court's analysis is admittedly complicated by the
fact that Relator has not specifically linked the alleged
conduct with actual claims submitted to the government.
See infra Analysis.III. Accordingly, it is quite difficult
to discern which claims, if any, may be precluded. If
discovery reveals there are claims covered by the previous
language of the public disclosure bar, of which Relator
does not have direct and independent knowledge, Defendant
may reassert its arguments at summary judgment. Eaton v.
Dorchester Dev., Inc., 692 F.2d 727, 733-34 (11th Cir.
1982) ("Where the jurisdictional issues are intertwined
with the substantive merits, the jurisdictional issues
should be referred to the merits, for it is impossible to
decide one without the other." (internal quotation marks
and citation omitted)).
18
31 U.S.C. 3730(e) (4) (A) (i-iii)
.
11
The new definition of an
"original source" is an individual who "has knowledge that
is independent of and materially adds to the publicly
disclosed allegations or transactions, and who has
voluntarily provided the information to the Government
before filing an action under this section." 31 U.S.C.
3730(e) (4) (3)
Defendant does not make separate arguments regarding
Relator's claims, and accordingly makes the same argument
as discussed earlier with regard to allegations governed by
the revised language of the FCA. That is to say, that
Relator's allegations are "identical to the claims brought
' The revised language forms the basis of Relator's Motion
to Strike Defendant's motion to dismiss. (Doc. 64.) In
addition to being generally more permissive of claims
brought under the FCA, Relator argues that the statute's
current language strips the public disclosure bar of its
jurisdictional nature. (Id. at 4.) Specifically,
Defendant contends that although the statute still states
that the Court "shall dismiss" an action based on public
information, the Government's ability to object to
dismissal renders the public disclosure bar an affirmative
defense rather than a jurisdictional question. (Id.)
However, because the Court finds no claim arising from
facts occurring after the PPACA's passage in which the
public disclosure bar would be implicated, Relator's motion
Should facts contrary to this
is DISMISSED AS MOOT.
conclusion reveal themselves during discovery, the Court
will revisit this question at summary judgment. See
Lawrence v. Dunbar, 919 F.2d 1525, 1531 (11th Cir. 1990)
([F] ederal claims should not be dismissed on motion for
lack of subject matter jurisdiction when that determination
is intermeshed with the merits of the claim and when there
is a dispute as to a material fact.)
19
in the Rice Action and Romeo Action." (Doc. 58, Attach. 1
at 13.) Again, Defendant argues that because allegations
of its improper conduct had already been released to the
public in the previous actions and settlement, Relator is
precluded from asserting similar claims now. (Id.)
While the claims address similar acts, however, the
facts underlying them are wholly distinct from one another.
As before, the question before the Court is simply whether
any of Relator's claims are supported by any previously
alleged improper conduct occurring before September 1,
2008. See Harris, 905 F. Supp. 2d at 1351 ("[The public
disclosure bar] operates to preclude only those claims
based on the facts publicly disclosed." (citing McElmurray,
501 F. 3d at 1252)). Here, the Court concludes that they
are not.
The Court finds that Relator's alleged facts
concerning these nine post-PPACA claims occurred outside
the scope of the Rice and Romeo actions and their attendant
settlement. Although Defendant points out that Relator
accuses Defendant of "continuing" its fraudulent practices
after the settlement (Doc. 71 at 9.), the Court finds
Defendant's characterization of the statement misleading.
Relator does not appear to allege that Defendant's conduct
represents one indivisible violation of the FCA, but rather
20
that the acts he observed were structurally similar to
those that occurred previously. Defendant's theory would
effectively allow any defendant in a FCA case to
perpetually commit subsequent FCA violations with impunity
so long as it limited its actions to the same general
conduct for which it was first sued. Despite their similar
legal nature, the material transactions that give rise to
Relator's claims are distinct and separate from those
revealed by the prior Rice and Romeo actions and subsequent
settlement agreement.
Relator's allegations also include more than mere
minor differences or new evidence to support previously
alleged circumstances, as Defendant argues. (Doc. 71 at
12-14.) Defendant cites numerous decisions, none of which
are binding on this Court, for its proposition that
"relators cannot save their complaints from the public
disclosure bar simply by citing additional examples of
allegations and transactions that had been publicly
disclosed." (Id. at 14.) In each case, however, a relator
is seeking to tack on new or additional claims to an
already alleged foundation of facts. See, e.g., Fed.
Recovery Servs. v. United States, 72 F.3d 447, 451 (5th
Cir. 1995) (public disclosure bar precluded other claims
partially based on same underlying factual matters); United
21
States
ex rel. Feldstein v. Organon, Inc., 365 F. App'x
738, 741-42 (3d Cir. 2010) (suit under new legal theory
precluded because underlying allegations of fraud were
previously disclosed). Such is not the case here.
Again, although the legal implications may be
identical, none of the conduct giving rise to the
allegations surrounding these nine patients has been
previously publicly disclosed. 12
Accordingly, the prior
existence of these disclosures does not bar Relator's
claims under 31 U.S.C. § 3730(e) (4) (A). Because the Court
finds these claims entirely distinct from any conduct
alleged in the publicly disclosed documents, it need not
consider whether Relator is an original source under the
new language of the public disclosure bar. See Cooper, 19
F.3d at 566 ("A court reaches the original source question
only if it finds the plaintiff's suit is based on
12
While Relator expressly indicates that his claims are
based solely on conduct occurring after the prior
settlement's effective date (Doc. 61 at 5-6), he does
mention that his reverse fraud claim has not been
previously alleged (id. at 7-8). To the extent that there
may be any confusion on the matter, the Court wishes to
make it clear that Relator may not support any of his
claims, including his reverse false claim, with facts
previously disclosed to the public for which he is not an
original source. See Battle, 468 F.3d at 762 (suits based
in any part on publicly disclosed information are
precluded).
22
information publically disclosed." (citing Williams ex rel.
NEC Corp., 931 F.2d 1493, 1500 (11th Cir. 1991))).
II. 12(b) (6) RES JUDICATA AND COLL ATERA L ESTOPPEL
A.
Standard
Federal Rule of Civil Procedure 8(a) (2) requires a
complaint to contain "a short and plain statement of the
claim showing that the pleader is entitled to relief."
"[T]he pleading standard Rule 8 announces does not require
'detailed factual allegations,' but it demands more than an
unadorned, the-defendant-unlawfully-harmed-me accusation."
Aschroft v. Iqbal, 556 U.S. 662, 678 (2009) (Quoting Bell
Atl. Corp. v. Twombly, 550
U.S.
544, 555 (2007)).' "A
pleading that offers labels and conclusions or a formulaic
recitation of the elements of a cause of action will not
do." Iqbal, 556 U.S. at 678 (internal quotations omitted).
"Nor does a complaint suffice if it tenders naked
assertions devoid of further factual enhancement." Id.
When the Court considers a motion to dismiss, it
accepts the well-pleaded facts in the complaint as true.
Sinaltrainal v. Coca-Cola Co., 578 F.3d 1252, 1260 (11th
13
Iqbal makes clear that Twombly has been the controlling
standard on the interpretation of Federal Rule of Civil
Procedure 8 in all cases since it was decided. Iqbal, 556
U.S. at 684 ("Though Twombly determined the sufficiency of
a complaint sounding in antitrust, the decision was based
on our interpretation and application of Rule 8 . .
[that] in turn governs the pleading standard in all civil
actions and proceedings in the United States district
courts." (internal quotations and citations omitted)).
23
Cir. 2009). However, this Court is "not bound to accept as
true a legal conclusion couched as a factual allegation."
Iqbal, 556 U.S. at 678. Moreover, "unwarranted deductions
of fact in a complaint are not admitted as true for the
purpose of testing the sufficiency of plaintiff's
allegations." Sinaltrainal, 578 F.3d at 1268. That is,
"[t]he rule 'does not impose a probability requirement at
the pleading stage,' but instead simply calls for enough
facts to raise a reasonable expectation that discovery will
reveal evidence of the necessary element." Watts v. Fla.
Int'l Univ., 495 F.3d 1289, 1295-96 (11th Cir. 2007)
(quoting Twombly, 550 U.S. at 545). "Factual allegations
must
be enough to raise a right to relief above the
speculative level." Twombly, 550 U.S. at 555. As such, a
district court may "insist upon some specificity in [the]
pleading before allowing a potentially massive factual
controversy to proceed." Id. at 558.
B.
Res Judicata and Collateral Estoppel
Defendant contends that "the core" of Relator's
complaint is his allegation that Defendant admitted or
recertified ineligible patients for hospice care.
57, Attach. 1 at 1.)
(Doc.
As stated above, Defendant settled
with the Government any and all potential claims stemming
from this alleged conduct prior to September 1, 2008.
24
Specifically, the settlement
(Doc. 57, Attach. 7 at 4.)
agreement from the Rice and Romeo Actions states that
conditioned upon the Defendants' full payment of
the Settlement Amount, the United States (on
behalf of itself, its officers, agents, agencies,
and departments) agrees to release the Defendants
together with their current and former parent
corporations; shareholders; direct and indirect
subsidiaries; brother or sister corporations;
divisions; current or former owners; and
officers, directors, and affiliates, and the
successors and assigns of any of them from any
civil or administrative monetary claim the United
States has or may have for the Covered Conduct
under the False Claims Act, 31 U.S.C. §37293733.
(Doc. 58, Attach. 8 at 5-6.)
"Covered Conduct" involves
allegations that Defendant "submitted reimbursement claims
to Medicare for treatment of certain patients for hospice
care who did not meet the applicable eligibility criteria
under the hospice benefit" during the period from January
1, 2000, to September 1, 2008. (Id. at 4.) Accordingly,
Defendant argues that the doctrines of res judicata and/or
collateral estoppel should bar Relator's present claims.
(Doc. 57, Attach. 1 at 7.)
Relator does not contest that the settlement agreement
bars the Relators from bringing claims based on Defendant's
admission or recertification of patients from January 1,
2000 to September 1, 2008. (Doc. 60 at 3.) The claims
arising after September 1, 2008, however, are not covered
25
by the settlement agreement because such claims were never
litigated. Accordingly, Relator argues, the doctrines of
res judicata or collateral estoppel should not apply to
these claims. The Court agrees. (Id.)
Despite their mutual agreement that claims covered by
the settlement agreement are inappropriate for this action,
neither party identifies any specific allegation to be
struck. This is perhaps because Relator has not identified
any specific claims attached to the underlying conduct he
alleges is improper. See infra Analysis.III. The Court is
able to identify six patients first admitted prior to the
settlement agreement's effective date. (Doc. 50 ¶ j 32, 34,
39.) However, the Court is currently uncertain as to how
Relator may attempt to link these patients to any
potentially impermissible claims.
Accordingly, those
allegations will not be struck at this time.
The Court
may, however, revisit this issue once Relator files his
second amended complaint. See infra Analysis.III.
Relator does argue that one of his claims, a reverse
false claim under 31 U.S.C. §3729(a) (1) (G), is not
precluded by the settlement agreement because it has never
been litigated before. (Doc. 60 at 3.) Defendant responds
that Relator has incorporated his allegations of improper
admissions and re-certifications in each count of his
26
complaint, such that even this new claim is based on the
same conduct covered by the settlement. (Doc.
70
at 5.)
Relator states broadly that the "fraudulent schemes"
described in his amended complaint aided Defendant in
avoiding an obligation to pay or transmit money to the
United States government. (Doc. 50
IT
61-63.) The Court
agrees that Relator's shotgun manner of pleading makes this
particular claim difficult to follow. While it appears
clear that Relator is arguing that Defendant was obligated
to pay back the Medicare funds it received for patients
that were actually ineligible for hospice care (Id. ¶ 62.),
it remains unclear as to which specific allegations he
bases this theory upon.
In any case, to the extent that Relator's claim relies
on proof of admissions or recertifications of ineligible
hospice patients prior to September
1, 2008,
Defendant's
motion should be granted. As stated before, the Government
released Defendant from all claims it "has or may have for
the Covered Conduct under False Claims Act, 31 U.S.C.
H 3729-3733."
(Doc.
57,
Attach. 8 at 5.) Accordingly,
Relator may not base new legal theories on the same conduct
underlying the previous settlement. However, to the extent
that the reverse false claim is not dependent on such
facts, it is not included in the Covered Conduct of the
27
settlement agreement.
Should discovery reveal that the
facts underlying this claim—or any other claim—are covered
by the settlement agreement, Defendant may reassert its
arguments at summary judgment.
To the extent that
Relator's claims exist independently of the settlement
agreement, however, Defendant's motion must be denied.
III. RULE 9(B) FRAUD PARTICULARITY STANDARD
A.
Standard
The heightened pleading standard of Federal Rule of
Civil Procedure 9(b) applies to causes of actions brought
under the FCA.'4 Hopper v. Solvay Pharm., Inc., 588 F.3d
1318, 1324 (11th Cir. 2009) . Rule 9(b) states that "in
alleging fraud or mistake, a party must state with
particularity the circumstances constituting fraud or
mistake." However,
"[m]alice, intent, knowledge, and other
conditions of a person's mind may be alleged generally."
Fed. R. Civ. P. 9(b). Despite the heightened standard,
however, the purpose of Rule 9(b) remains that a complaint
must provide the defendant with "enough information to
14
As stated above, Relator's amended complaint includes
four counts under the federal FCA and one count under the
Georgia Medicaid False Claims Act. (Doc. 50 ¶ 61-63.)
Under Georgia law, pleading fraud is subject to the same
heightened pleading standards as Rule 9(b). O.C.G.A. § 911-9(b); see also Cont'l I nv. Corp. v. Cherry, 124, Ga.
App. 863, 865 (Ga. App. 1971). Accordingly, the Court's
analysis applies to Relator's claims brought under both
acts.
28
formulate a defense to the charges." United States ex rel.
Clausen v. Lab. Corp. of Am., Inc., 290 F.3d 1301, 1313 n.
24 (11th Cir. 2002) . The Eleventh Circuit has emphasized
that "[tihe application of Rule 9(b) . . . 'must not
abrogate the concept of notice pleading.' " Tello v. Dean
Witter Reynolds, Inc., 494 F.3d 956, 972 (11th Cir. 2007)
(quoting Ziemba v. Cascade Int'l, Inc., 256 F.3d 1194, 1202
(11th Cir. 2001)). Furthermore, Rule 9(b)'s standard
"should not be conflated with that used on a summary
judgment motion." United States ex rel. Rogers v. Azmat,
2011 WL 10935176, at
*3 (S.D. Ga. May 17, 2011)
(unpublished).
Rule 9(b) serves to ensure that a FCA claim has "some
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. This is because
11
[t]he [FCA] does not create liability merely for a health
care provider's disregard of Government regulations or
improper internal policies unless, as a result of such
acts, the provider knowingly asks the Government to pay
amounts it does not owe." Id. As a result, an FCA
complaint must plead not only the "who, what, where, when,
and how of improper practices," but also the "who, what,
where, when, and how of fraudulent submissions to the
29
1
government."
Corsello v. Lincare, Inc., 428 F.3d 1008,
1014 (11th dr. 2005). The question of whether a complaint
satisfies Rule 9(b) is decided on a case-by-case basis, but
even detailed portrayals of fraudulent schemes followed by
conclusions that false claims must have been submitted is
insufficient. See United States ex rel. Atkins v.
Mclnteer, 470 F.3d 1350, 1358 (11th Cir. 2006).
B.
The Pleading Standard
Defendant argues that Relator has failed to plead with
particularity both any improper conduct on its part as well
as the submission of any claim. (Doc. 56, Attach. 1 at 2.)
With regard to its alleged fraudulent conduct, Defendant
first contends that the complaint is too vague because it
does not name the principals, agents, or employees
allegedly involved in the schemes, but rather refers to
acts done by "SouthernCare" and refers to various employees
by their titles. 15 (Doc. 56, Attach. 1 at 7-8, 10-12, 14,
16, 18). Defendant also argues that Relator's descriptions
of the allegedly fraudulently altered documents are
insufficient because he does not identify them by title,
date, or author. (Id. at 10, 17, 20.) In addition,
Defendant argues that Relator has provided insufficient
15
The Court notes that Relator does, in fact, identify acts
done by at least three specifically named employees. (Doc.
50 ¶ T 20-21, 39.)
30
details concerning the circumstances of the allegedly
incriminating statements—such as to whom the statements
were directed, as well as specific dates of the statements—
made by Defendant's employees. (Id. at 7-9.) Finally,
Defendant contends that the mechanics of the alleged
schemes are insufficiently described (id. at 7-9, 13, 1718) and that the evidence is insufficient to show a
"widespread, systematic pattern and practice" as alleged in
the amended complaint (id. at 5-7, 13-14).
The Court finds Defendants' arguments on this matter
without merit. Relator's amended complaint provides all of
the necessary indicia of reliability with regard to
improper acts committed by Defendant, and provides
allegations sufficiently detailed to satisfy Rule 9(b).
Specifically, the amended complaint alleges the who—
Defendant and its employees (Doc. 50 ¶ 23); the what—
improper admissions and recertifications of ineligible
patients for hospice services, improper revocations of
eligible patients, and improper alterations of patient
records (Id.
¶j 23, 42-45); the when—after the effective
date of Defendant's settlement with the Government on
September 1, 2008 (Id. ¶J 24, 50, 54-55, 58-59); the where—
within the Southern District of Georgia (id. ¶ 2); and the
details of Defendant's misconduct—admitting patients
31
ineligible for hospice care due to lack of physician
referrals and fraudulent diagnoses (id.
¶f
23-36),
altering
patient diagnoses to make them appear eligible for hospice
care (id. ¶ 39), drugging patients to give the appearance
of declining health (Id. ¶ 40), and back-dating revocations
for legitimate hospice patients to avoid paying for
palliative care (Id.
11
42-45).
The level of detail
Defendant demands in its motion is quite simply unnecessary
at this stage. Relator's forty-five page, sixty-seven
paragraph amended complaint includes descriptive factual
allegations of each of the alleged acts. Accordingly, the
Court finds the amended complaint sufficient to put
Defendant on notice of the particular acts Relator alleges
were in perpetration of fraud.
More convincing, however, are Defendant's arguments
that Relator has failed to provide the necessary link
between the alleged fraudulent conduct and the submission
of any claim to the government. (Doc. 56, Attach. 1 at 4.)
Although the amended complaint alleges that Defendant
engaged in fraudulent alterations and improper conduct to
prepare claims for submission for government payment,
Relator stops short of ever alleging specific facts tying
the alleged improper conduct with such a submission. The
closest Relator comes to such an allegation is describing
32
the general process Defendant takes in submitting claims
for reimbursement to the Government. (Doc. 50 ¶[ 14-16.)
However, such a general statement is insufficient to
demonstrate that Defendant submitted any false claim to the
government. See Clausen, 290 F.3d at 1306 (demonstrating
how claim would be submitted did not prove false claim
actually was submitted). Accordingly, Relator's amended
complaint is deficient for lack of specificity with regard
to this second step of alleging a claim under the FCA. 16
See Hopper, 588 F.3d at 1326 (filing of false claim with
government cannot be shown by inference)
16
A reverse false claim may survive without a plaintiff
establishing the submission of a false claim. See United
States ex rel. Matheny v. Medco Health Solutions, Inc., 671
F.3d 1217, 1225 n.12 (11th Cir. 2012) ("[F]or a reverse
false claim action, presentment of a false claim is not at
issue and presentment of a false statement is not required
by the statute.") Further, the Eleventh Circuit has
indicated that a claim of false statements for the purpose
of submitting a false claim—count three of Relator's
amended complaint—may be conceivably supported without
evidence of submission of an actual false claim. Rather,
for such a claim, "general allegations of improper
government payments to third parties, supported by factual
or statistical evidence to strengthen the inference of
fraud . . . could satisfy the particularity requirements of
Rule 9(b)." Hopper, 588 at 1327. However, Defendant's
alleged "obligation" to pay in this case is dependent on
money improperly paid out by Medicare. (Doc. 50 ¶ 62.)
Relator has not alleged any facts concerning payment of
false claims, let alone enough to sufficiently strengthen
its general allegations. Accordingly, Relator has failed
to plead with particularity both of these claims in the
same manner as his other claims.
33
In his response, Relator requests that he be given
leave to amend his complaint a second time should the Court
find his amended complaint deficient. (Doc. 59 at 2-3.)
Relator states that he is able to plead facts indicating
that the patients identified in his complaint were in fact
the subject of fraudulent bills submitted to the
government. (Doc. 59 at 2, 8.) In its reply, Defendant
argues the Court should deny Relator's request because any
further amendment to the complaint would be futile. (Doc.
69 at 11.) Defendant points out that Relator has already
amended his complaint once before, and contends that he was
already on notice of his pleading's deficiencies by virtue
of Defendant's original response.' 7 (Id. at 12.)
The Court does not agree that allowing a second
amended complaint would be futile at this stage. The Court
had made no judgment regarding the adequacy of Relator's
pleading when he filed his amended complaint. Further,
Relator claims that he is able to provide the specific
details necessary to cure the complaint's deficiencies.
17
Defendant also argues that Relator makes his request to
amend in bad faith as a dilatory tactic. However, the
Court finds no reason to suspect that Relator is attempting
to delay this proceeding simply by requesting a chance to
amend his complaint. The facts of cases brought under the
FCA are normally complex and extensions of time for
pleadings and motions have previously been granted to both
parties at various points in this litigation. (See, e.g.,
Doc. 44.)
34
Accordingly, Relator shall have fourteen days from the date
of this order to file a second amended complaint that
specifically refers to whether any of the alleged improper
acts actually resulted in false claims being submitted to
the government. 18 Such allegations must be specific enough
to demonstrate an "indicia of reliability" that such claims
were actually submitted. Clausen, 290 F.3d at 1311.'
IV. DEFENDANT'S COUNTERCLAIM
As stated earlier, Defendant has filed a counterclaim
against Relator for breach of duty of loyalty. (Doc. 55.)
Specifically, Defendant claims that Relator lured away
referral sources and patients for his future employer
during his last month of employment with Defendant.
at 8.)
(Id.
Relator has moved to dismiss Defendant's
counterclaim pursuant to 12(b) (6) for failure to state a
claim.
(Doc. 62.)
In his motion, Relator argues that
Defendant has not shown that Relator owed it any legally
18
Both parties should also be aware that the Court will not
accept any filing—whether an amended complaint, an answer,
motion, brief, response, or reply—that incorporates by
reference any factual allegation or argument contained in
any documents already filed before this Court. Any further
filings must be stand-alone that independently contain all
the factual allegations and documents that the filing party
wishes the Court to consider.
19
Because Relator is given leave to file a second amended
complaint, the Court DEFERS ruling on whether the facts
alleged are sufficient to demonstrate a "widespread,
systematic pattern and practice" of fraudulent activity.
(Doc. 50 ¶ 49.)
35
cognizable duty, nor that he breached any such duty, or
that he otherwise harmed Defendant in any way. (Doc. 63 at
1.)
As stated before, Federal Rule of Civil Procedure
8(a) (2) requires a complaint to contain "a short and plain
statement of the claim showing that the pleader is entitled
to relief." However, "Factual allegations must be enough
to raise a right to relief above the speculative level."
Twombly, 550 U.S. at 555. "A pleading that offers labels
and conclusions or a formulaic recitation of the elements
of a cause of action will not do." Iqbal, 556 U.S. at 678
(internal quotations omitted). "Nor does a complaint
suffice if it tenders naked assertions devoid of further
factual enhancement." Id.
As stated earlier, when the Court considers a motion
to dismiss, it accepts the well-pleaded facts in the
complaint as true. Sinaltrainal, 578 F.3d at 1260.
Accordingly, the Court accepts Defendant's allegation that
it experienced a dramatic reduction in its hospice
admissions in the local area where Relator worked during
his final month of employment. (Doc. 55 ¶ 22.) The Court
also takes as true that Relator stated he was leaving to
work for a pharmacy company, but in fact went to work for
Defendant's competitor. (Id.
MR
1 21.) However, the Court
does not have to accept as true that the cause of this drop
was due to Relator aiding Defendant's competitor. See
Igbal, 556 U.S. at 678 (a court is "not bound to accept as
true a legal conclusion couched as a factual allegation").
Defendant has pled no facts whatsoever concerning
Relator's conduct, let alone anything to validate its
suspicion that he improperly aided Defendant's competitor
while still in Defendant's employment. Defendant merely
states that it experienced a drop in admissions and, due to
the timing of the occurrence, assumes Relator is to blame.
(Doc. 55 ¶ 23.) Accordingly, the Court finds that
Defendant has not pled sufficient facts to bring its
conclusory allegation above a mere speculative level.
As a result, the Court need not address whether
Relator owed any duty, fiduciary or otherwise, to
Defendant. Defendant has failed to plead sufficient facts
demonstrating that Relator harmed Defendant in any way.
Such baseless claims are precisely the type of actions
Twombly and Igbal are meant to eliminate. Accordingly,
Relator's motion must be granted and Defendant's
counterclaim dismissed.
CONCLUSION
For the foregoing reasons, Defendant's Motion to
Dismiss for Failure to State a Claim (Doc. 57)
37
is GRANTED
IN PART and DENIED IN PART.
All Relator's claims relating
to fraudulent admissions or recertifications of ineligible
hospice patients prior to September 1, 2008 are hereby
DISMISSED.
Defendant's Motion to Dismiss for Lack of
Subject Matter Jurisdiction (Doc. 58) is
DENIED.
Defendant's Motion to Dismiss for Failure to Plead Fraud
with Particularity (Doc. 56) is GRANTED.
shall have
fourteen days
However, Relator
to submit an amended complaint
correcting the deficiencies identified in this order.
Relator is on NOTICE that failure to do so will result in
dismissal of this case. Relator's Motion to Dismiss
Counterclaim (Doc. 62)
is GRANTED.
704
SO ORDERED this ?day of September 2014.
WILLIAM T. MOORE, JR.
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA
38
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