Angelo et al v STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY et al

Filing 490

ORDER granting 338 Motion to dismiss, denying 426 Motion for leave to file a second amended complaint, mooting all remaining 329 , 330 , 331 , 332 , 333 , 334 , 335 , 340 , 341 , 396 , 470 , 473 , 475 , 478 , 484 Motions, and dismissing case. Signed by District Judge Denise Page Hood. (DPer)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
United States of America et al ex rel.
MSP WB, LLC and Michael Angelo,
Case No. 19-12165
Plaintiffs,
Hon. Denise Page Hood
v.
State Farm Mutual Automobile Insurance
Company, et al.,
Defendants.
/
ORDER GRANTING DEFENDANTS’ OMNIBUS MOTION TO DISMISS
[ECF No. 338], DENYING AMENDED MOTION FOR LEAVE TO FILE
SECOND AMENDED COMPLAINT [ECF No. 426], MOOTING ALL
REMAINING MOTIONS [ECF Nos. 329, 330, 331, 332, 333, 334, 335, 340,
341, 396,1 470, 473, 475, 478, 484], and DISMISSING CAUSE OF ACTION
I.

INTRODUCTION
Qui tam plaintiff relators MSP WB, LLC (“MSP WB”) and Michael Angelo

(“Mr. Angelo”) (collectively, the “Relators”) are pursuing the present action,
purportedly on behalf of the United States of America and the states of Michigan,

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MSP WB’s Motion to Strike or Disregard New Arguments (ECF No. 396) is denied for the
following reasons: (a) the Court regularly granted Relators leave to file supplemental briefs or
sur-replies, see, e.g., ECF No. 450; and (b) although Defendants should have raised some issues
in their motions rather than their replies (as MSP WB argues), the Court finds that Relators were
not prejudiced because Relators fully addressed the issues in other pleadings, including ECF No.
396, all of which the Court reviewed and considered before rendering this Order.
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California, Connecticut, Florida, Illinois, Massachusetts, New York, Rhode Island
and Texas, as well as the government of Puerto Rico. MSP WB was formed in
January 2021, 18 months after Mr. Angelo filed the initial Complaint and six months
before joining with Mr. Angelo as a relator for purposes of the Amended Complaint.
The initial 63-page Complaint was filed by Mr. Angelo solely against State
Farm Mutual Automobile Insurance Company (“State Farm”) in July 2019,
purportedly on behalf of the United States of America and the State of Michigan. In
March 2021, the United States of America and the State of Michigan declined to
intervene in this action. See ECF No. 17.
In June 2021, the Relators, this time purportedly on behalf of the United States
of America and the states of California, Connecticut, Florida, Illinois,
Massachusetts, Michigan, New York, Ohio, Rhode Island, and Texas, as well as the
government of Puerto Rico (collectively, the “State Plaintiffs”), filed a three-count
206-page First Amended Complaint (“Amended Complaint”). ECF No. 20. The
Amended Complaint was filed against 316 alleged no-fault automobile insurers (the
“Insurer Defendants”) and Insurance Services Office, Inc. (“ISO”) (collectively,
“Defendants”).
In the Amended Complaint, Relators allege that Defendants have engaged in
a scheme to defraud federal healthcare programs (Medicare Parts A, B, C, and D),
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as well as state healthcare (Medicaid) programs): (a) based upon the systematic
failure to completely or accurately satisfy “Section 111” reporting requirements as
primary payors; and (b) by failing to reimburse billions of dollars in Medicare
secondary payments. The Amended Complaint contains three counts: (1) Reverse
False Claims Act (“FCA”) violations, arising out of 31 U.S.C § 3729(a)(1)(G)
(Count I); (2) conspiracy to violate the FCA, in violation of 31 U.S.C. §
3729(a)(1)(C) (Count II); and (3) violation of various State False Claims Acts
(California, Connecticut, Florida, Illinois, Massachusetts, Michigan, New York,
Ohio, Rhode Island, Texas, and the government of Puerto Rico). In August 2021,
the United States of America and every State Plaintiff declined to intervene in this
action. See ECF No. 22.
On December 15, 2021, Defendants filed an Omnibus Motion to Dismiss (the
“Motion”), ECF No. 338, as well as numerous supplemental motions to dismiss. See
ECF Nos. 329, 330, 331, 332, 333, 334, 335, 340, 341. The Motion and the
supplemental motion to dismiss were fully briefed, and a hearing was held on
December 7, 2022. Defendants also filed a Motion to Take Judicial Notice of
Exhibits 1–47 in support of the Omnibus Motion to Dismiss, ECF No. 339, which
has been fully briefed. Relators have filed a Motion to Supplement the Record, ECF
No. 379, a Motion to Strike, ECF No. 396, and two Motions to File a Sur-Reply,
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ECF Nos. 397, 398. All of those motions are fully briefed, and the Court previously
granted ECF Nos. 379, 397, and 398. ECF No. 450.
Finally, on December 22, 2022, more than two weeks after the December 7,
2022 hearing regarding the motions to dismiss, Relator MSP WB (but not Mr.
Angelo) filed an Amended Motion for Leave to File Second Amended Complaint
(“Amended Motion for Leave”). ECF No. 426. Defendants filed a collective
response, and State Farm also filed a response. MSP WB filed a reply to each of the
responses. After the Court ordered Plaintiffs to submit clarification as to the scope
of their proposed amendments to the First Amended Complaint, MSP WB and Mr.
Angelo filed a response to that order. ECF No. 446. After the Amended Motion for
Leave was briefed, the parties filed a number of other motions, including those
docketed at ECF Nos. 470, 473, 475, 478, and 484.
For the reasons set forth herein, (1) the Omnibus Motion to Dismiss (ECF No.
338) is granted; (2) the supplemental motions to dismiss (ECF Nos. 329, 330, 331,
332, 333, 334, 335, 340, 341) are deemed moot; (3) the Motion for Judicial Notice
(ECF No. 339) is granted; (4) the Amended Motion for Leave (ECF No. 426) is
denied; (5) Motion to Strike or Disregard New Arguments (ECF No. 396) is denied;
(6) all remaining motions (ECF Nos. 470, 473, 475, 478, 484) are deemed moot; and
(7) this cause of action is dismissed with prejudice.
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II.

BACKGROUND
The FCA imposes civil liability on those who defraud the United States

Government. See 31 U.S.C. §§ 3729–3733. The Amended Complaint advances a
reverse false claim theory, which requires showing that a person “knowingly makes,
uses, or causes to be made or used, a false record or statement material to an
obligation to pay or transmit money or property to the Government, or knowingly
conceals or knowingly and improperly avoids or decreases an obligation to pay or
transmit money or property to the Government.” 31 U.S.C. § 3729(a)(1)(G). The
FCA also imposes liability on any person that conspires to violate Section
3729(a)(1)(G). See 31 U.S.C. § 3729(a)(1)(C). To promote enforcement of the FCA,
a private person (called a relator) can bring a qui tam action on behalf of the United
States if the relator meets certain statutory criteria. See 31 U.S.C. § 3730(b)(1).
“Traditional” Medicare allows citizens over age 65 or with a disability to
obtain medical benefits through the Centers for Medicare & Medicaid Services
(“CMS”). Medicare includes Part A (hospital services, skilled nursing facilities, and
home health services), 42 U.S.C. §§ 1395c–1395i-6; Part B (physician services,
some preventative services, ambulance services, and durable medical equipment),
id. at §§ 1395j–1395w-6; and Part D (prescription drug coverage, administered by
private entities), id. at §§ 1395w-101–1395w-154. Enacted in 1997, Medicare
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Advantage (Part C) allows enrollees to obtain Medicare benefits through Medicare
Advantage Organizations (“MAOs”). Id. at §§ 1395w-21–1395w-28. The federal
government pays an MAO such as ISO a fixed rate in exchange for the MAO’s
administration of Medicare benefits for Part C enrollees. Id. at §1395w-23(a)(1)(A).
The Medicare Secondary Payer Act (“MSP Act”) makes Medicare the secondary,
rather than primary, payer when private sources (such as no-fault or liability
insurance or a litigation recovery) are legally responsible to cover the costs of a
Medicare beneficiary’s medical claims. See 42 U.S.C. § 1395y(b)(2)(A); Care
Choices HMO v. Engstrom, 330 F.3d 786, 789 (6th Cir. 2003).
In 2007, Congress enacted so-called “reporting requirements” (referred to as
Section 111 reporting requirements) that became effective in 2011. 42 U.S.C. §
1395y(b)(7)-(8). Pursuant to the Section 111 reporting requirements, insurers are
required to report quarterly to Medicare the identity of claimants (including any
claimant “whose claim is unresolved”) who are seeking coverage for medical
expenses and are determined by the insurer to be Medicare beneficiaries. Id. §
1395y(b)(8). These quarterly reports to Medicare also must include certain accidentrelated information about these claimants, “including an individual whose claim is
unresolved,” “regardless of whether or not there is a determination or admission of
liability.” 42 U.S.C. § 1395y(b)(8)(A)–(C) (emphasis supplied).
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III.

APPLICABLE LAW

A. Rule 12(b)(6)
A Rule 12(b)(6) motion to dismiss tests the legal sufficiency of the plaintiff’s
complaint. Accepting all factual allegations as true, the court will review the
complaint in the light most favorable to the plaintiff. Eidson v. Tennessee Dep’t of
Children’s Servs., 510 F.3d 631, 634 (6th Cir. 2007). As a general rule, to survive a
motion to dismiss, the complaint must state sufficient “facts to state a claim to relief
that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570
(2007). The complaint must demonstrate more than a sheer possibility that the
defendant’s conduct was unlawful. Id. at 556. Claims comprised of “labels and
conclusions, and a formulaic recitation of the elements of a cause of action will not
do.” Id. at 555. “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, 556 U.S. 662, 678 (2009).
B. Rule 9(b)
A properly pled fraud claim requires that the plaintiff: “(1) specify the
statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3)
state where and when the statements were made, and (4) explain why the statements
were fraudulent.” Frank v. Dana Corp., 547 F.3d 564, 569-70 (6th Cir. 2008). The
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threshold test is “whether the complaint places the defendant on sufficient notice of
the misrepresentation, allowing the defendant . . . to answer, addressing in an
informed way the [plaintiff's] claim of fraud.” Coffey v. Foamex, LP, 2 F.3d 157,
162 (6th Cir. 1993). Rule 9(b) should not be “decoupled from the general rule that
a pleading must only be so detailed as is necessary to provide a defendant with
sufficient notice.” U.S. ex rel. SNAPP v. Ford Motor Co., 532 F.3d 496, 503 (6th
Cir. 2008). See also U.S. ex rel. Sheldon v. Kettering Health Network, 816 F.3d 399,
411 (6th Cir. 2016) (“[P]roviding the defendant with sufficient information to
respond is Rule 9’s overarching purpose.”).
As the Sixth Circuit has stated:
In complying with Rule 9(b), a plaintiff, at a minimum, must
“allege the time, place, and content of the alleged misrepresentation
on which he or she relied; the fraudulent scheme; the fraudulent
intent of the defendants; and the injury resulting from the
fraud.” Coffey v. Foamex L.P., 2 F.3d 157, 161–62 (6th Cir.1993)
(internal quotation marks and citations omitted); see also United States
ex rel. Branhan v. Mercy Health Sys. of Southwest Ohio, No. 98–3127,
1999 WL 618018, at * 1 (6th Cir. Aug.5, 1999) (affirming dismissal of
a complaint alleging improper billing in violation of the FCA because
it “failed to allege a single specific incident in which improper billing
occurred and the plaintiff never set forth the dates, times, or the names
of individuals who engaged in the alleged improper billing”).
Essentially, the amended complaint should provide fair notice to
Defendants and enable them to “prepare an informed pleading
responsive to the specific allegations of fraud.” Advocacy Org. for
Patients & Providers v. Auto Club Ins. Ass'n, 176 F.3d 315, 322 (6th
Cir.1999) (citing Michaels Bldg. Co., 848 F.2d at 679).
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United States ex rel. Bledsoe v. Community Health Systems, 342 F.3d 634, 643 (6th
Cir.2003) (“Bledsoe I”) (emphasis added).

In Relators’ words, the Amended

Complaint must “adequately allege[] the requisite ‘who, what, when, where, and
how’ of Defendants’ fraud. See ECF No. 376, PageID.3921 (citing Republic Bank
& Tr. Co. v. Bear Stearns & Co., 683 F.3d 239, 256 (6th Cir. 2012)).
IV.

OMNIBUS MOTION TO DISMISS
Relators contend that the Amended Complaint alleges three related,

independently cognizable, reverse FCA violations based upon Defendants’ knowing
submission of materially false and inaccurate Section 111 reports that improperly
concealed Defendants’ obligations to pay the Government. First, by allegedly failing
to properly report Defendants’ noncompliance, Defendants incurred a $1,000 per
claim, per day, penalty. 42 U.S.C. § 1395y(b)(8)(E). This penalty constituted “an
obligation to pay or transmit money to the government.” 31 U.S.C. § 3729(a)(1)(G).
Second, Defendants’ allegedly false reports concealed their obligations to reimburse
the Government for secondary payments. Third, as a result of their alleged reporting
failures, Defendants caused other entities, namely MAOs and medical providers, to
unknowingly submit false records material to their obligations to pay the
Government—thereby concealing, avoiding, and decreasing these obligations.

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Relators claim that they have alleged that the Insurer Defendants conspired
and acted together with ISO to create and maintain a system Defendants knew and
intended would be insufficient to gather data needed to fulfill their Section 111
reporting obligations. Relators assert that this unlawful conspiracy and voluntary
disablement began no later than 2010 and has continued until the present.
A. Reverse False Claims Act Violations
In order to succeed on an FCA reverse false claim theory, a plaintiff must
show that the defendant knowingly made a “false record or statement material to an
obligation to pay or transmit money or property to the Government,” or “knowingly
conceal[ed] or knowingly and improperly avoid[ed] or decreas[ed] an obligation to
pay or transmit money or property to the Government.” 31 U.S.C. § 3729(a)(1)(G).
On October 13, 2021, the Sixth Circuit concluded that Rule 9(b) governs FCA
claims:
The question presented is whether [relator]’s allegations satisfied
Rule 9(b). That rule requires a plaintiff “to state with particularity the
circumstances constituting fraud[.]” Fed. R. Civ. P. 9(b). “We review
de novo a district court’s dismissal of a complaint for failure to plead
with particularity under Rule 9(b).” Chesbrough v. VPA, P.C., 655 F.3d
461, 467 (6th Cir. 2011).
All of [relator]’s claims under the False Claims Act (and the
Indiana statute) rest on the premise that the defendants knowingly
submitted or caused to be submitted “a false or fraudulent claim for
payment or approval.” 31 U.S.C. § 3729(a)(1)(A); Ind. Code § 5-115.7-2(a)(1). The quoted language “attaches liability, not to the
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underlying fraudulent activity or to the government's wrongful
payment, but to the claim for payment.” United States ex rel. Sheldon
v. Kettering Health Network, 816 F.3d 399, 411 (6th Cir. 2016)
(cleaned up). For that reason, our circuit has imposed a “clear and
unequivocal requirement that a relator allege specific false claims
when pleading a violation of” the Act. Id. (cleaned up). Thus,
under Rule 9(b), “[t]he identification of at least one false claim with
specificity is an indispensable element of a complaint that alleges a
False Claims Act violation.” United States ex rel. Hirt v. Walgreen
Co., 846 F.3d 879, 881 (6th Cir. 2017) (cleaned up). Rule 9(b)
therefore “does not permit a False Claims Act plaintiff merely to
describe a private scheme in detail but then to allege simply that
claims requesting illegal payments must have been
submitted.” Sanderson v. HCA-The Healthcare Co., 447 F.3d 873, 877
(6th Cir. 2006) (cleaned up).
*****
But [relator] makes little effort in her complaint to “identify any
specific claims” that Care Connection submitted pursuant to the
scheme. Sanderson, 447 F.3d at 877. [Relator] could have done that in
one of two ways. The default rule is that a False Claims Act claimant
must identify a “representative claim that was actually submitted
to the government for payment.” United States ex rel. Ibanez v.
Bristol-Myers Squibb Co., 874 F.3d 905, 915 (6th Cir. 2017). [Relator]
did not do that here. Alternatively, a claimant “can otherwise allege
facts—based on personal knowledge of billing practices—
supporting a strong inference that particular identified claims were
submitted to the government for payment.” Prather, 838 F.3d at 771
(emphasis added).
Here, [Relator] did allege “personal knowledge of billing
practices” employed in the fraudulent scheme—namely, her knowledge
of the OASIS codes that she says Fazzi fraudulently changed. Id.; Am.
Compl. ¶ 70. But [relator] did not allege facts that identify any specific
fraudulent claims.
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United States ex rel. Owsley v. Fazzi Assocs., Inc., 16 F.4th 192, 196–97 (6th Cir.
2021), cert. denied sub nom. U.S. ex rel. Owsley v. Fazzi Assocs., Inc., No. 21-936,
2022 WL 9552617 (U.S. Oct. 17, 2022) (bold and underlined emphasis added by
the Court; italicized emphasis in the original).
The Owsley court’s holding undercuts a number of Relators’ contentions.
Relators’ reliance on a relaxed pleading standard, see ECF No. 376, PageID.392730, is misplaced in this case, as is Relators’ reliance on U.S. ex rel. Prather v.
Brookdale Senior Living Communities, Inc., 838 F.3d 750 (6th Cir. 2016), and
Chesbrough v. VPA, P.C., 655 F.3d 461 (6th Cir. 2011). In Prather, the relator
worked in the billing department of defendant contractor and had personal
observations and communications. For that reason, her “detailed knowledge of the
billing and treatment documentation . . . combined with her specific allegations
regarding [the company’s] requests for anticipated payment” to the government
satisfied the pleading threshold. Prather, 838 F.3d at 769-70. See also Ibanez 874
F.3d at 916 (“In order for the Prather exception to apply, it is not enough to allege
personal knowledge of an allegedly fraudulent scheme; a relator must allege
adequate personal knowledge of billing practices themselves.”); U.S. v. ex rel.
Crockett v. Complete Fitness Rehab., Inc., 721 F. App’x 451, 459 (6th Cir. 2018)

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(“Prather, even while it established an exception for some billing employees,
expressly recognized that everyone else must plead false claims with particularity.”).
Relators have made no allegations that either Relator has personalized
knowledge of any Defendant’s billing practices. Relators therefore “must identify a
‘representative claim that was actually submitted to the government for payment.’”
Owsley, 16 F.4th at 196 (citing Ibanez, 874 F.3d at 915). As discussed below,
Relators have failed to do that with respect to any of the Insurer Defendants.
In Chesbrough, there was only one defendant, and the court held only that a
“relator does not need to identify every false claim submitted for payment,” so long
as relator “identif[ies] with specificity characteristic examples that are illustrative of
the class of all claims covered by the [defendant’s] fraudulent scheme.” Id. at 470.
Contrary to the reading of Chesbrough that Relators’ desire, Chesbrough does not
provide that a relator need not identify any false claim made by a defendant in order
to plead a viable FCA claim. Rather, Chesbrough provides only that a relator need
not identify every false claim a defendant submits if a specific claim identified by a
relator represents all of the claims submitted by defendant in furtherance of its
fraudulent scheme.
The fact that Relators listed thousands of claims in the Amended Complaint
is not, in itself, sufficient to plead a prima facie case for false statements pursuant to
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the FCA. See ECF No. 20, PageID.455 (¶ 511). Such claims do not satisfy Rule
9(b), in part because the claims are set forth by “Group” and do not ascribe the
claim(s) to a particular Defendant.
1. Non-Exemplar Insurer Defendants
Defendants first contend that the Amended Complaint must be dismissed with
respect to all Insurer Defendants who were never identified in connection with any
“exemplar” in the Amended Complaint (“Non-Exemplar Insurer Defendants”) or the
appendices attached to the Amended Complaint (specifically, Appendix B). Relators
have alleged one or more exemplars (i.e., representative claim(s)) attributable to only
five of the Insurer Defendants, and no exemplar has been identified with respect to
any of the 311 Non-Exemplar Insurer Defendants.
Relators contend that Defendants’ complex and far-reaching fraudulent
scheme was adequately alleged by the several representative claims pleaded in the
Amended Complaint and Appendix B. Relators contend that the scope of
Defendants’ scheme and fraud is so great that Relators need not identify an exemplar
for each Insurer Defendant. Relators rely on U.S. ex rel. Bledsoe v. Community
Health Sys., Inc., 501 F.3d 493, 504 (6th Cir. 2007) (Bledsoe II), where the court
stated, in part, “where a relator pleads a complex and far-reaching fraudulent scheme
with particularity, and provides examples of specific false claims submitted to the
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government pursuant to that scheme, a relator may proceed to discovery on the entire
fraudulent scheme.” Id.; see also Chesbrough, 655 F.3d at 470 (quotes omitted) (A
plaintiff need only “identify with specificity characteristic examples that are
illustrative of the class of all claims covered by the fraudulent scheme.”).
The Court finds that Owsley, Bledsoe II or Chesbrough do not support
Relators’ contention that they did not have to identify a claim made by each
Defendant that was submitted to the Government for payment. The Court notes that
Relators also do not identify any other applicable authority for that proposition, as it
is contrary to the holding of Bledsoe II, in which the court stated:
The critical question then becomes how broadly or narrowly a court
should construe the concept of a fraudulent scheme. If a court were to
construe a fraudulent scheme at a high level of generality—for
example, if the court concluded that the fraudulent scheme
consisted of “the defendant hospital submitting false claims to
Medicare or Medicaid”—then the court would, in effect, violate the
principle that improperly pled allegations of fraud do not become
adequate merely by placing them in the same complaint with
allegations that are sufficient under Rule 9(b). Allowing such a
complaint to go forward in toto would fail to provide defendants
with the protections that Rule 9(b) was intended to afford them:
Defendants would not have notice of the specific conduct with
which they were charged, they would be exposed to fishing
expeditions and strike suits, and they would not be protected from
“spurious
charges
of
immoral
and
fraudulent
behavior.” Sanderson, 447 F.3d at 877 (citing Clausen, 290 F.3d at
1310); see Banca Cremi, S.A., 132 F.3d at 1036 n. 25 (discussing
policies furthered by Rule 9(b)). On the other hand, were a court to
construe the concept of a fraudulent scheme in an excessively narrow
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fashion, the policies promoted by the rule allowing a relator to plead
examples, rather than every false claim, would be undermined.
We conclude that the concept of a false or fraudulent scheme should be
construed as narrowly as is necessary to protect the policies promoted
by Rule 9(b). Specifically, we hold that the examples that a relator
provides will support more generalized allegations of fraud only to
the extent that the relator's examples are representative samples of
the broader class of claims. See United States ex rel. Joshi v. St. Luke's
Hosp., Inc., 441 F.3d 552, 557 (8th Cir.2006) (“Clearly, neither this
court nor Rule 9(b) requires [a relator] to allege specific details
of every alleged fraudulent claim forming the basis of [the relator's]
complaint. However, … [relator] must provide some representative
examples of [the defendants'] alleged fraudulent conduct,
specifying the time, place, and content of their acts and the identity
of the actors.”), cert. denied 549 U.S. 881, 127 S.Ct. 189, 166 L.Ed.2d
142 (2006); Peterson v. Cmty. Gen. Hosp., No. 01 C 50356, 2003 WL
262515, at *2 (N.D.Ill.2003) (unpublished) (“To be clear, the court does
not expect relator to list every single patient, claim, or document
involved, but he must provide at least some representative
examples.”); United States ex rel. Schuhardt v. Wash. Univ., 228
F.Supp.2d 1018, 1034–35 (D.Mo.2002) (“[A] relator ‘must provide
some representative samples of the fraud which detail the specifics of
who, where and when.’” (quoting United States ex rel. Minn. Ass'n of
Nurse Anesthetists v. Allina Health Sys. Corp., 1997 U.S. Dist. LEXIS
21402 at *33 (D.Minn. Mar. 3, 1997) (unpublished))). In order for a
relator to proceed to discovery on a fraudulent scheme, the claims that
are pled with specificity must be “characteristic example[s]” that are
“illustrative of [the] class” of all claims covered by the fraudulent
scheme. Webster's Third New International Dictionary of the English
Language Unabridged, 1926 (1993) (“representative” definition 4).
The examples of false claims pled with specificity should, in all
material respects, including general time frame, substantive
content, and relation to the allegedly fraudulent scheme, be such
that a materially similar set of claims could have been produced
with a reasonable probability by a random draw from the total pool
of all claims.[] With this condition satisfied, the defendant will, in
all likelihood, be able to infer with reasonable accuracy the precise
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claims at issue by examining the relator's representative samples,
thereby striking an appropriate balance between affording the
defendant the protections that Rule 9(b) was intended to provide and
allowing relators to pursue complex and far-reaching fraudulent
schemes without being subjected to onerous pleading requirements.
Bledsoe II, 501 F.3d at 510-11 (footnote omitted) (italicized emphasis in original;
underlined and bolded emphasis added by the Court).
Relators also cite a Tennessee district court decision to support their
contention that they need not identify in their Amended Complaint every false claim
at issue. See United State ex rel. Goodman v. Arriva Med., LLC, No. 3:13-CV-0760,
2020 WL 1433861 (M.D. Tenn. Mar. 24, 2020). The Goodman court stated:
Generally speaking, a plaintiff seeking to comply with Rule 9(b) must
“allege the time, place, and content of the alleged misrepresentation” at
issue. Bledsoe, 501 F.3d at 504 (quoting U.S. ex rel. Bledsoe v. Cmty.
Health Sys., Inc., 342 F.3d 634, 643 (6th Cir. 2003)). When the
plaintiff alleges a wide-ranging scheme involving numerous
systematic misrepresentations, however—for example, where the
Government alleges that a healthcare provider was submitting or
causing to be submitted thousands of claims that were all false for the
same reason—then that requirement is relaxed to require the
plaintiff to plead “representative” examples, not every single false
claim at issue. Marlar, 525 F.3d at 445 (quoting Bledsoe, 501 F.3d at
510). The Government met this requirement, including with regard to
Albin and Grapevine, by providing examples of particular claims
tainted by the kickback scheme that Arriva/Alere engaged in but Albin
and Grapevine worked to put in place. (Docket Nos. 121 ¶ 335 & 1211.) The prohibition on group pleading under Rule 9(b) prevents a
plaintiff from simply lumping multiple defendants together
without explaining each defendant's culpable role. Once the
defendants’ respective actions are set forth, however, there is
17


nothing inherently wrong with using the same set of examples to
support the allegations against each defendant.
Id. at *7 (emphasis added).
Although the Goodman court does support the proposition that a relator need
not necessarily plead every single false claim at issue, the Court concludes that
Goodman does not support Relators’ argument that it has adequately pleaded
exemplars that support a reverse false claim act action against the Non-Exemplar
Defendants. Relators not only do not plead a representative example with respect to
the Non-Exemplar Insurer Defendants – against which Relators have not offered a
single exemplar -- Relators also fail to allege or explain each such Non-Exemplar
Insurer Defendant’s “culpable role.” Instead, Relators simply lump together a bunch
of Defendants in a textbook example of group pleading. Although Relators claim
that the exemplars “directly implicat[e]” 210 of the Insurer Defendants (based on
corporate relationships) and “the Complaint afforded all 316 [Insurer Defendants]
notice of exactly what they did that was unlawful,” ECF No. 376, PageID.3927,
these are nothing more than conclusory statements.
Relators also suggest that Defendants have engaged in a “wheel conspiracytype” scheme. See U.S. v. Swafford, 512 F.3d 833, 842 (6th Cir. 2008) (discussing a
“‘wheel conspiracy’ (or ‘hug-and-spoke’ conspiracy)—wherein the defendant
served as the hub connected to each of the customers via a spoke . . . .”). Relators
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cite ISO’s decision to revise its contracts and terminate its agreement with MSP
Recovery (an affiliate of MSP WB) to support an inference of an agreement between
ISO and each of the other Defendants.
Relators argue that several cases support the proposition that alleging several
defendants committed the same fraud and had the same role is permissible,
particularly in a wheel-type conspiracy. Citing MSP Recovery Claims v. Auto Club
Ins. Ass’n, 2021 WL 5234501 (E.D. Mich. 2021); Williams v. Duke Energy Int’l,
Inc., 681 F.3d 788, 803 (6th Cir. 2012); U.S. ex rel. Lynch v. Univ. of Cincinnati
Med. Ctr., LLC, 2020 WL 1322790, at *30 n.19 (S.D. Ohio 2020); and U.S. ex rel.
Silingo v. Wellpoint, Inc., 904 F.3d 667, 677–78 (9th Cir. 2018) (in a “wheelconspiracy” type of fraud, where several defendants independently performed
“parallel actions,” group pleading recognized as acceptable). Only in Silingo,
however, were there more than 3 defendants. Here, there are 311 Non-Exemplar
Insurer Defendants for whom Relators fail to describe the fraudulent activity
undertaken.
Relators also cite U.S. ex rel. Heath v. AT&T, Inc., 791 F.3d 112, 126–27
(D.C. Cir. 2015), but that case involved an entity and 19 of its subsidiaries with
respect to an alleged fraud and its concealment arising from a centralized and
nationwide corporate policy (holding that “precise details of individual claims are
19


not, as a categorical rule, an indispensable requirement of a viable False Claims Act
complaint, especially not when the relator alleges that the defendant knowingly
caused a third party to submit a false claim as part of a federal regulatory program.”).
In the instant action, there are no allegations of a policy or agreement to which all
Insurer Defendants adhered, nor even a specific policy that any group of Insurer
Defendants with a single corporate affiliation (e.g., the State Farm entities) followed,
such that it could be said that all Insurer Defendants had the same role in the
purported scheme. Accordingly, the Court finds that Relators have not satisfied Rule
9(b) via the “‘wheel conspiracy’-type” fraud and generally contending that NonExemplar Defendants “committed the same fraud” as the Exemplar Defendants.
U.S. ex rel. O’Laughlin v. Radiation Therapy Servs., 497 F.Supp.3d 224, 241 (E.D.
Ky. 2020).
For the reasons set forth above, the Court finds that Relators do not identify
any claim(s) submitted by any of the 311 Non-Exemplar Insurer Defendants, nor any
“characteristic example” of an FCA violation by any of the Non-Exemplar Insurer
Defendants. The Court concludes that Relators’ false statement claim fails as to each
of the 311 Non-Exemplar Defendants. See Bledsoe II, 501 F.3d at 512 (dismissing
multi-defendant FCA case relying on group pleading). The Court grants the
Omnibus Motion to Dismiss with respect to the Non-Exemplar Defendants.
20


2. Exemplar Defendants
Defendants next argue that, with respect to the five Insurer Defendants
referenced in the “exemplars” (the “Exemplar Insurer Defendants”), Relators fail to
plead the elements of an FCA violation with the requisite particularity. Defendants
maintain that Relators do not allege that the Exemplar Insurer Defendants had an
“obligation to pay or transmit money” to “the Government.”
Defendants first assert that the Exemplar Insurer Defendants’ obligations cited
by Relators were owed to an MAO (a private party), not “the Government,” so they
are not within the scope of the FCA. Defendants also argue that Relators fail to
identify: (1) any false statement(s) or conduct by an Exemplar Insurer Defendant
that concealed or improperly avoided an obligation to reimburse medical expenses;
nor (2) the “knowing” scienter required as to any such conduct. Defendants maintain
that the exemplars upon which Relators rely (one in the Complaint and nine in
Appendix B thereto) fail to sufficiently allege that the Exemplar Insurer Defendants
knowingly submitted “false” Section 111 reports to avoid reimbursement
obligations.
Defendants argue that the exemplars cited by Relators are inconsistent with
the alleged scheme to submit inaccurate Section 111 reports to Medicare.
Defendants further state that none of the exemplars indicates how an Exemplar
21


Insurer Defendant submitted an inaccurate Section 111 report. Defendants contend
that the exemplars actually demonstrate that the applicable Exemplar Insurer
Defendant accurately reported the relevant accident-related information to ISO. ECF
No. 20, PageID.486-503. Defendants also assert that none of the exemplars reflects
an obligation of an Exemplar Insurer Defendant to reimburse any government, as is
required for a reverse false claim, because the Exemplar Insurer Defendants do not
pay the government. Defendants suggest that, at best, the exemplars identify
allegedly unreimbursed expenses incurred by an MAO, a private organization not
covered by the FCA.
Relators contend that improper reporting or failure to report demonstrates an
obligation to pay and constitutes a false record. ECF 372, PageID.3470-71, 347475. But, the Court notes, reporting requirements arise whenever an insurance
company becomes aware that an injured person may be a Medicare beneficiary and
an insurance policy may cover those injuries “regardless of whether or not there is a
determination or admission of liability.” 42 U.S.C. § 1395y(b)(8)(C). The reporting
insurer often is not ultimately responsible for the particular Medicare beneficiary’s
medical expenses (e.g., the medical expenses at issue were not related to the
accident). Accordingly, the mere fact that an insurance company makes a report does
not support an “obligation” by the reporting insurance company to pay money. See
22


MSP Recovery Claims, LLC v. Metro. Gen. Ins. Co., No. 20cv24052, 2021 WL
804716 at *2 (S.D. Fla. Mar. 3, 2021), app. filed; MSP Recovery Claims, Series LLC
v. AIG Prop. Cas. Co., 2021 WL 1164091, at *6 (S.D.N.Y. Mar. 26, 2021).
The Court is not persuaded, as Relators contend, that mere errors or omissions
in Section 111 reporting constitute violations of the FCA because the prevailing
authority holds otherwise. See, e.g., U.S. ex rel. Mason v. State Farm Mut. Auto. Ins.
Co., No. CV07-297-SEJL, 2008 WL 2857372, at *11 (D. Idaho July 23, 2008), aff'd,
398 Fed. App'x 233 (9th Cir. 2010); United States ex rel. Hendrickson v. Bank of
Am., N.A., 343 F. Supp. 3d 610, 635 (N.D. Tex. 2018), aff'd, 779 F. App’x 250 (5th
Cir. 2019).
As the court held in Mason, to “sufficiently plead a violation of the FCA,
Relators must allege facts showing that State Farm said the false statements to
Relators in order to avoid repaying Medicare and that this was done knowingly.”
Mason, 2008 WL 2857372, at *5. The Mason court dismissed the relator’s FCA
claim where the complaint failed to allege facts that insurance company knew of its
duty to reimburse Medicare. Id. at *7 (“Knowledge that Mason is a Medicare
beneficiary and that State Farm might be liable for Mason’s surgery, does not equate
to knowledge that Medicare paid for a specific surgery.”).

23


As Defendants argue, the alleged exemplars in Appendix B are simply
unreimbursed payments for medical care covered by a private MAO, which is not
subject to the reverse false claims provision of the FCA. The Court finds that, if
Congress desired to impose liability under the FCA for avoiding an obligation for a
federal contractor such as a health insurer MAO, Congress would have done so; the
fact that Congress imposed such liability in the provisions governing direct false
claims evidences that. Compare 31 U.S.C. §3729(a)(1)(A) and §3729(b)(2)(A)(ii)
(defining “claim”) with § 3729(a)(1)(G) and § 3729(b)(3) (defining “obligation”);
\Keene Corp. v. United States, 508 U.S. 200, 208 (1993) (where “Congress includes
particular language in one section of a statute but omits it in another . . . , it is
generally presumed that Congress acts intentionally and purposely in the disparate
inclusion or exclusion”).
The Court also concludes that none of the exemplars stems from an occasion
where a Defendant had an obligation under the Medicare statute to reimburse the
private MAO for the specific medical expenses described. An “obligation” under
the FCA refers to an established duty “to pay the Government funds” that existed
“at the time that the alleged improper conduct under the FCA occurred.” Petras, 857
F.3d at 505–06. See also Ibanez, 874 F.3d at 917 (affirming dismissal of a reverse
false claim when “relators provide no facts showing defendants were under an
24


affirmative obligation to the government at the time the alleged false statements were
made”). Having reviewed the Amended Complaint, the Court finds that Relators do
not identify an existing obligation, nor one owed to the Government by the MAOs
or anyone else, at the time of the alleged improper conduct.
Relators next claim that the same fraudulent scheme used to defraud MAOs—
which administer Parts C and D of the Medicare program—was used in the same
way and at the same time to defraud Medicare Parts A and B directly. Relators allege
that Defendants funnel all Medicare beneficiaries through the same process by
intentionally failing to collect necessary data and misreporting their responsibilities
under Section 111, thus avoiding and concealing their obligations to reimburse
MAOs and CMS alike. See Shea, 863 F.3d at 934 (D.C. Cir. 2017) (adopting
relator’s theory that “if (a) Verizon overbilled its commercial customers for certain
surcharges and taxes, and (b) Verizon used the same billing practices for the
government, then (c) Verizon must have billed the illegal surcharges and taxes in its
government contracts”).
Relators further claim that Defendants caused MAOs to retain funds owed to
the Government. They argue that when Primary Payers (Defendants) avoid their
responsibility, it causes MAOs to bear the cost, and a portion of this fraudulent and
illegal cost-shifting is then ultimately borne by CMS in four related ways: (1) mid25


year risk-adjustment reports; (2) year-end reconciliations; (3) Medical Loss Ratio
(“MLR”) remittance payments; and (4) subsequent bid calculations. Relators insist
that this unlawful cost-shifting is actionable because the FCA “does not require that
the statement impair the defendant’s obligation; instead, it requires that the statement
impair ‘an obligation to pay or transmit money or property to the government.’” U.S.
v. Caremark, Inc., 634 F.3d 808, 817 (5th Cir. 2011). The Court disagrees.
The Court finds that Relators fail to plead that any Defendant knowingly or
recklessly made a false statement to the Government or avoided a reimbursement
obligation to the Government. Relators rely on the testimony of the employee(s) of
only one of the 317 Defendants (as well as some deposition testimony from
employees of non-parties), but that testimony is from another case. ECF No. 376,
PageID.3939. That testimony only shows that someone’s Medicare eligibility status
could have been determined earlier, not that any Defendant submitted false data or
codes to CMS.
As Relators state, the FCA’s scienter requirement includes “actual knowledge
of the information,” plus “acts in deliberate ignorance of the truth or falsity of the
information,” or “acts in reckless disregard of the truth or falsity of the information.”
31 U.S.C. § 3729(b)(1)(A). “Allegations that [defendants] were deliberately ignorant
or reckless with respect to the truth or falsity of their submissions are sufficient to
26


plead a claim.” Sutter Health, 444 F. Supp. 3d at 1083 (scienter established where
defendant was alleged (1) to have been on notice of a potential overpayment and (2)
to have made no good-faith effort to investigate and to report and return any funds).
For the reasons stated, the Court concludes that Relators have failed to
sufficiently allege that scienter with respect to any of the Defendants, including the
Exemplar Insurer Defendants (and ISO, if applicable). Accordingly, the Court grants
the Omnibus Motion to Dismiss with respect to the claims in Count I against the
Exemplar Insurer Defendants.
3.

All Defendants

The Court also finds that the public disclosure doctrine bars Relators’ FCA
claims against all Defendants. To guard against “parasitic lawsuits” and
“opportunistic plaintiffs,” the FCA’s “public disclosure bar” mandates dismissal of
FCA claims that echo publicly disclosed information. U.S. ex rel. Maur v. HageKorban, 981 F.3d 516, 522 (6th Cir. 2020). Under this “wide-reaching” bar, U.S. ex
rel. Holloway v. Heartland Hospice, Inc., 960 F.3d 836, 851 (6th Cir. 2020), courts
must “dismiss an action or claim under [the FCA] . . . if substantially the same
allegations or transactions as alleged in the action or claim were publicly disclosed”
through one of three so-called “channels:” (1) in a “Federal criminal, civil, or
administrative hearing in which the Government or its agent is a party;” (2) “in a
27


congressional, Government Accountability Office, or other Federal report, hearing,
audit, or investigation;” or (3) “from the news media,” unless “the person bringing
the action is an original source,” 31 U.S.C. § 3730(e)(4)(A) (emphasis added).2 An
original source is a person who either (i) prior to a public disclosure, voluntarily
disclosed to the Government the information on which allegations or transactions in
a claim are based or (ii) has knowledge that is independent of and materially adds to
the publicly disclosed allegations. 31 U.S.C. § 3730(e)(4)(B).
Defendants argue that Relators’ allegations are substantially the same
allegations made in prior failed lawsuits brought by or on behalf of the United States
and publicly disclosed in the news media, including by Relators’ counsel, prior to
the filing of the Amended Complaint. Defendants assert that Relators’ general
contention that the insurance industry is not fully reimbursing “conditional
payments” of Medicare beneficiaries’ accident-related expenses is a carbon copy of
the same unfounded allegations made in the public domain long before the
Complaint and Amended Complaint were filed.



“encompasses more than formal or evidentiary hearings and includes
court filings generally” in federal actions in which the Government or its agent was
a party. U.S. ex rel. Am. Sys. Consulting, Inc. v. Man Tech
Advanced Sys. Int’l Inc., 2012 WL 12929898, at *5 (S.D. Ohio 2012) (considering
“hearing” in public disclosure bar pre-amendment).
2

“[H]earing”

28


Defendants contend that articulating a handful of new supposed “exemplars”
of the same alleged conduct is not enough to avoid the public disclosure bar, as
Relators did not voluntarily disclose any of this information to the Government
before it was public and do not have knowledge that is independent of and materially
adds to the publicly disclosed allegations. Defendants contend that, where, as here,
a relator’s FCA claims “feed off” of alleged conduct previously disclosed, the claims
are barred.
The Court agrees that most, if not all, of Relators’ allegations are substantially
the same as allegations previously made by one or both Relators, their affiliated
entities, or other persons, as reflected in the 47 exhibits filed by Defendants at ECF
No. 339. For the following reasons, the Court grants the Motion for Judicial Notice
filed by Defendants at ECF No. 339. Although such exhibits typically would not be
allowed for purposes of a motion to dismiss, courts have recognized that it is
permissible to admit them for purposes of determining whether the public disclosure
bar applies. See, e.g., U.S. ex rel. Rahimi v. Rite Aid Corp., 2019 WL 10374285, at
*2 (E.D. Mich. Dec. 12, 2019) (“To determine whether the public disclosure bar
applies here, the Court will take judicial notice of the . . . news articles attached to
Defendant’s motion to dismiss and for judgment on the pleadings and attached to
Defendant’s reply brief.”).
29


Defendants seek, and the Court takes, judicial notice of the existence of the
news articles at Exhibits 1-34 and “what they say,” which is “not subject to
reasonable dispute.” Davidson v. Warden, Warren Corr. Inst., 2021 WL 1964487,
at *2 (S.D. Ohio May 17, 2021) (citation omitted). The Court does not, however
take judicial notice of “the truth of the matter[s] asserted” in the 47 exhibits. ECF
No. 375, PageID.3660. See also Mich. State A. Philip Randolph Inst. v. Johnson,
2016 WL 4267828, at *4 (E.D. Mich. Aug. 15, 2016) (holding that it was not
improper to take judicial notice of national news articles because “the accuracy of
the national sources cited by the Court, such as the Wall Street Journal and the
Washington Post, cannot reasonably be disputed. Particularly since they merely
recounted events that have taken place in the public light”); Silbersher v. Valeant
Pharms. Int’l, Inc., 445 F. Supp. 3d 393, 398, 399 & n.2 (N.D. Cal. 2020) (taking
judicial notice of Law360 article and finding that it “meets the standards for
admissibility set forth in Federal Rule of Evidence 201(b)”).
The Court also takes judicial notice of Exhibits 35–46 (ECF Nos. 339-35
through 339-46) because the exhibits consist of documents filed or published on
governmental websites: complaints, notices of complaints, dockets and other court
filings, as well as information contained on the Delaware Department of State’s
website, all of which routinely are the subject of judicial notice. See, e.g., U.S. ex
30


rel. Holloway v. Heartland Hospice, Inc., 960 F.3d 836, 844 (6th Cir. 2020) (taking
judicial notice of a complaint to determine whether the public disclosure bar
warranted dismissal of FCA claim); U.S. v. Ferguson, 681 F.3d 826, 834 (6th Cir.
2012) (“Judicial records are a source of ‘reasonably indisputable accuracy’ . . . .”);
Gomba Music, Inc. v. Avant, 62 F. Supp. 3d 632, 636 (E.D. Mich. 2014) (taking
judicial notice of state of Michigan records regarding a company’s incorporation).
To the extent Relators claim judicial notice should not be granted because
some of the exhibits are confidential or otherwise not wholly accessible to the public,
that argument fails. The Sixth Circuit has rejected the argument that a confidential
court filing is not a public record. See Hancock v. Miller, 852 F. App’x 914, 920 (6th
Cir. 2021).
The Court also takes judicial notice of Exhibit 47 (ECF No. 339-47) because
it is a summary of the case name, court and docket number, date the complaints were
filed, and status of 144 lawsuits initiated by affiliates of MSP WB. See Cunningham
v. Rapid Response Monitoring Servs., 251 F. Supp. 3d 1187, 1191 n.1 (M.D. Tenn.
2017) (taking judicial notice of plaintiff’s commencement of other lawsuits and
citing In re Omnicare, Inc. Sec. Litig., 769 F.3d 455, 468 (6th Cir. 2014)). The Court
finds that: (1) the fact of and status of the litigations listed are subject to judicial
notice, and (2) the lawsuits summarized in Exhibit 47 show that Relator MSP and
31


its affiliates have filed similar or identical allegations in federal courts prior to the
instant suit.
Accordingly, the Court grants Defendants’ motion to take judicial notice of
Exhibits 1-47 and concludes that Relators FCA claims are barred by the public
disclosure doctrine.
B. Count II – Conspiracy Claim
Relators claim that all of the Insurer Defendants conspired with ISO to violate
the FCA. A civil conspiracy, including one under 31 U.S.C. § 3729(a)(1)(c),
“consists of ‘an agreement between two or more persons to injure another by
unlawful action.’” U.S. ex rel. O’Laughlin v. Radiation Therapy Servs., 497 F. Supp.
3d 224, 241 (E.D. Ky. 2020) (quoting United States v. Murphy, 937 F.2d 1032, 1039
(6th Cir. 1991)). What “must be shown is that there was a single plan, that the alleged
co-conspirator shared in the general conspiratorial objective, and that an overt act
was committed in furtherance of the conspiracy that caused injury to the
complainant.” O’Laughlin, 497 F. Supp. 3d at 241 (quoting Murphy, 937 F.2d at
1039).3

3

Although the essence of conspiracy is agreement, an “[e]xpress agreement is not
necessary to prove civil conspiracy.” Weberg v. Franks, 229 F.3d 514, 526 (6th
Cir. 2000). “Tacit understanding, created and executed over time, is enough to
constitute an agreement even absent personal communication.” Direct Sales Co. v.
United States, 319 U.S. 703, 714 (1943). “Each conspirator need not have known
32


In their conspiracy claim, Relators have alleged that the underlying cause of
action against Defendants was the violation of the FCA. As the Court has held that
Relators have no viable reverse FCA claim(s) against the Defendants, Relators’ civil
conspiracy claim must be dismissed for that reason alone. See, e.g., Detroit Will
Breathe v. City of Detroit, 524 F.Supp.3d 704, 710-11 (E.D. Mich. Mar. 10, 2021)
(citations omitted); Am. Master Lease LLC v. Idanta Partners, Ltd., 225 Cal. App.
4th 1451, 1474, 171 Cal. Rptr. 3d 548, 566 (2014), as modified (May 27, 2014)
(citations and quotation marks omitted) (“Civil conspiracy requires an agreement to
participate in an unlawful activity and an overt act that causes injury, so it does not
set forth an independent cause of action’ but rather is ‘sustainable only after an
underlying tort claim has been established.”).
Relators’ FCA civil conspiracy claim also is subject to dismissal for failure to
allege all of the requisite elements. Under the FCA, a defendant is subject to liability
for conspiring to violate any subparagraph of §3729(a)(1). O’Laughlin, 497 F. Supp.
3d at 241. Relators argue that the Amended Complaint expressly alleged that



all of the details of the illegal plan or all of the participants involved.” Weberg, 505
F.2d at 526. “In a civil conspiracy, the acts of one co-conspirator are attributable to
another, and each co-conspirator is liable for the acts of another.” Smith & Nephew
Inc. v. Federal Ins. Co., 113 F. App’x. 99, 103 (6th Cir. 2004); Travelers Prop.
Cas. Co. of Am. v. Hillerich & Bradsby Co., Inc., 2007 WL 1231560, at *3 (W.D.
Ky. Apr. 24, 2007), aff'd, 598 F.3d 257 (6th Cir. 2010).
33


Defendants conspired to avoid reporting their primary payer responsibility to CMS
in order to conceal, avoid, and decrease their obligations to pay the government, all
in violation of the FCA. Citing ECF No. 20, at ¶ 470 (“The Defendants and/or their
subsidiaries, agents, and employees knowingly conspired to avoid reporting primary
payer responsibility to CMS and MA plans for the purpose of decreasing or avoiding
obligations to pay the government in violation of the FCA.”) and generally Count I,
Count II.
The Court finds, however, that the Amended Complaint is devoid of any
allegations that support the existence of any agreement between and among the
Insurer Defendants and ISO. At most, Relators have pleaded that each Insurer
Defendant has contracted with ISO to conduct Section 111 reporting. There are no
particularized allegations of how any Defendant agreed with any other Defendant to
defraud the Government, in violation of the FCA, as Rule 9(b) requires. See U.S. ex
rel. Dennis v. Health Mgmt. Assocs., 2013 WL 146048, at *17 (M.D. Tenn. Jan. 14,
2013) (“Under Rule 9(b), general allegations of a conspiracy, without supporting
facts to show when, where or how the alleged conspiracy occurred, amount to only
a legal conclusion and are insufficient to state a cause of action.”).
The Court is not persuaded by Relators’ argument that the Amended
Complaint contains circumstantial evidence of an agreement between Defendants
34


“to avoid reporting their primary payer responsibility [and status] to CMS.” ECF
No. 376, PageID.3941-42. Although an FCA “conspiracy may be established by
circumstantial evidence and may be based on inference,” Wysong Corp. v. M.I. Ind.,
412 F. Supp. 2d 612, 632 (E.D. Mich. 2005); U.S. ex rel. Wilkins v. N. Am. Const.
Corp., 173 F. Supp. 2d 601, 641 (S.D. Tex. 2001) (circumstantial evidence held
sufficient to support an FCA conspiracy claim), none of the paragraphs in the
Amended Paragraph cited by the Relators provides any particularity regarding such
an agreement. The conclusory allegations that Defendants failed to properly report
certainly does not demonstrate the existence of an agreement amongst all of the
Defendants to do so. Nor do the alleged “overt acts” by a given Insurer Defendant
when it “improperly reported” its primary payer status to CMS, see ECF 376,
PageID.3942,4 support the existence of an agreement by and among all (or any) of
the Defendants.


Court cannot agree with Relators’ argument that Section 111 reports are
exclusively within the control of Defendants. To the contrary, Relators have
alleged that: (1) they (or related entities) have accessed Defendants’ claims
information through a contract with ISO, ECF No. 20, PageID.451 (at ¶ 492); and
(2) CMS provides this information to MAOs, which relators can access. See, e.g.,
U.S. ex rel. Clausen v. Lab. Corp. of Am., 290 F.3d 1301, 1314 n.25 (11th Cir.
2002) (rejecting a claim that Section 111 reports are solely within the control of
insurance companies (an argument set forth by Relators) and finding that the
relator had “avenues for obtaining information” in an FCA case). Although
Clausen is not binding on this Court, the Court concludes that the reasoning of the
Clausen court should be applied in this case.
4

The

35


Relators also rely on ISO’s decision to revise its contracts and terminate its
agreement with MSP Recovery (which it was permitted to do) to support an
inference of an agreement between ISO and the Insurer Defendants. However,
Relators do not plead any action by any Insurer Defendant vis a vis ISO that would
support any finding that ISO acted in any way other than unilaterally when electing
not to conduct business with MSP Recovery. For that reason, ISO’s termination of
its agreement with MSP Recovery does not support the existence of an industrywide conspiracy to defraud the Government. See, e.g., O’Laughlin, 497 F. Supp. 3d
at 241.
Relators make repeated references to a “wheel conspiracy-type” scheme, but
as discussed above, this argument is doomed by the absence of factual allegations to
support it. See U.S. v. Swafford, 512 F.3d 833, 842 (6th Cir. 2008) (finding a “‘wheel
conspiracy’ (or ‘hub-and-spoke’ conspiracy)—wherein the defendant served as the
hub connected to each of the customers via a spoke . . . — fails because no common
goal or enterprise existed”). The Court finds that Relators again fail to offer anything
other than conclusory allegations of a common goal or enterprise.
For all of the reasons set forth in this Section IV.B., the Court grants the
Omnibus Motion to Dismiss with respect to Count II.
C. Count III – State Actions
36


In a single count of the Complaint, Relators assert claims under the false
claims/Medicaid fraud statutes of California, Connecticut, Florida, Illinois,
Massachusetts, Michigan, New York, Ohio, Rhode Island, Texas, and Puerto Rico.
See ECF No. 20, at ¶¶ 567–610. As the Court has concluded that both Counts I and
II are to be dismissed, the Court could simply decline to exercise supplemental
jurisdiction and dismiss the state law claims in Count III, without prejudice.
In this case, however, the Court believes the interests of justice and judicial
economy support: (a) consideration of the state law claims as alleged; and (b)
dismissing the claims in Count III. The allegations in Count III of the Amended
Complaint are classic conclusory allegations with respect to the State Plaintiffs. as
Relators have, in essence, simply regurgitated the language of state and Puerto Rico
false claims statutes. Relators’ claims in Count III are predicated on their conclusory
statement with respect to each state that, “[t]hrough the acts described above, the
Primary Plans knowingly caused to be presented to [the applicable State/Puerto
Rico] records or statements to conceal, avoid or decrease their obligation to
reimburse Medicaid.” See ECF No. 20, at ¶ 568, 572, 576, 580, 584, 588, 592, 596,
600, 604, 608.
Relators do not identify any conduct by any Defendant with respect to these
11 “claims” within Count III (including identifying any exemplar that might be
37


connected to any such claim(s)). Relators allege only that “the Primary Plans have
knowingly submitted indirect reverse false claims the [applicable State/Puerto Rico]
Program.” Id. at ¶¶ 569, 573, 577, 581, 585, 589, 593, 597, 601, 605, 609.
Even if Relators are correct that a less stringent standard than that required by
Rule 9(b) applies (it does not, as discussed above), Relators must still plead, with
particularity, facts that meet the elements required under the Puerto Rico and State
statutes. See U.S. ex rel. Frey v. Health Mgmt. Sys., Inc., 2021 WL 4502275, at *56 (N.D. Tex. Oct. 1, 2021) (dismissing certain state claims because even under a
“somewhat lower Rule 9(b) standard,” the complaint lacked “reliable indicia” to find
a “strong inference [Defendants] submitted false claims” in 21 states).
The Court finds, and Relators have not offered any allegations to the contrary,
that Relators do not link the basis of their lawsuit—that Insurer Defendants
knowingly chose not to comply with Section 111 requirements—with any false
claim submitted to the Government, let alone to any Medicaid agency of a State or
Puerto Rico. The Amended Complaint also does not identify any purported false
claim or statement made to any of the States or Puerto Rico; in fact, Relators do not
identify any conduct with respect to certain of the States. For these reasons, the Court
dismisses the non-federal claims in Count III. See, e.g., U.S. v. Garman, 719 F.

38


App’x 459, 465 (6th Cir. 2017) (finding dismissal of state claims warranted where
federal claims are dismissed).
Accordingly, the Court grants the Omnibus Motion to Dismiss with respect to
Count III.
V.

MOTION FOR LEAVE TO AMEND
In the words of Relators, “[t]he factors for determining whether to permit an

amendment include ‘the delay in filing, the lack of notice to the opposing party, bad
faith by the moving party, repeated failure to cure deficiencies by previous
amendments, undue prejudice to the opposing party, and futility of amendment.’”
ECF No. 426, PageID.6417 (quoting Perkins v. Am. Elec. Power Fuel Supply, Inc.,
246 F.3d 593, 605 (6th Cir. 2001)). As discussed below, there has been no lack of
notice to Defendants that Relators would seek to file a second amended complaint.
The Court finds, however, that: (a) Relators unreasonably delayed filing the second
amended complaint; (b) Relators exercised bad faith when: (i) repeatedly failing to
file the Amended Motion for Leave when they indicated they would, (ii) taking so
long to file it, and (iii) filing it after the motions to dismiss had been fully briefed
and argued; (c) granting the Amended Motion for Leave would unduly prejudice
Defendants; and (d) most significantly, the proposed amendments would be futile.
A. Untimeliness
39


On December 15, 2021, Defendants filed their initial omnibus motion to
dismiss the Amended Complaint (as well as nine supplemental motions to dismiss
the Amended Complaint). In a January 27, 2022 email to Defendants’ counsel,
Relators’ counsel stated that Relators intended to seek leave to file a second amended
complaint. ECF No. 434-1, PageID.7040. Defendants’ counsel requested that
Relators “[p]lease forward your proposed [Second] Amended Complaint.” Id. at
PageID. 7039-40. On February 1, 2022, Relators’ counsel represented to
Defendants, “Before we seek leave, we will be providing a copy of our proposed
second amended complaint for your review in the near future” and asked for a 10day extension to file their response. Id. at PageID.7037.
On February 15, 2022, without having ever provided any of the Defendants
with a proposed second amended complaint, Relators filed responses to all 10
motions to dismiss. Defendants then filed replies. Several motions for leave to file
supplemental briefs were filed, including at least three by Relators (ECF Nos. 379,
397, 398), and the Court granted those motions. See ECF No. 450. In some of their
filings, Relators suggested that they might file for leave to file a second amended
complaint. See, e.g., ECF No. 371, PageID.3369-70. no such proposed amendment
was filed prior to the hearing the Court held on the motions to dismiss on December
7, 2022.
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At the December 7, 2022 hearing, the Court asked Relators’ counsel, “Have
you offered an amended complaint that you filed, a further amended complaint, and
so I can determine why, if you amended it, it would not be futile or something like
that?” ECF No. 423, PageID.5368. Relators’ counsel replied that “we have not
proffered an amended complaint” and that he did not believe Relators were required
to do so. Id. He proposed that “[i]t cannot be the law that every time a defendant
files a motion to dismiss, a Plaintiff must strike its tent [sic] and withdraw its
complaint and proffer an amended complaint. . . . But if the Court is not satisfied
that, yes, we should be given the right to file a second amended complaint.” Id.
Relators did not, however, represent that they would file a second amended
complaint, even when the Court raised the issue. Approximately two weeks later, on
December 22, 2022, MSP WB filed the Motion for Leave to File a Second Amended
Complaint, ECF No. 425, and the Amended Motion for Leave. ECF No. 426.
The Court finds that it could deny the Amended Motion for Leave solely
because it is untimely, especially as Relators repeatedly indicated over a 10-month
period that they intended to file a second amended complaint but consistently failed
to do so. Specifically, Relators initially represented a desire to file a second amended
complaint on January 27, 2022. That was six weeks after the Defendants’ initial
motions to dismiss were filed, over 10 months before the December 7, 2022 hearing
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on the motions to dismiss, and approximately 11 months before the proposed second
amended complaint was filed.
B. Bad Faith and Prejudice to Defendants
The failure to timely file a motion for leave to file a proposed second amended
complaint is inexplicable, and their delay in filing until December 22, 2022 is
steeped in bad faith. First, when Relators first proposed filing a second amended
complaint in January 2022, Defendants did not flatly refuse to concur in Relators’
desired motion to file the second amended complaint. To the contrary, Defendants
simply asked Relators’ counsel to “[p]lease forward your proposed [Second]
Amended Complaint.” ECF 434, PageID.7040. Relators again suggested they would
file a second amended complaint on February 1, 2022 and asked for a 10-day
extension to file their response. Id. at PageID.7037. Yet, instead of providing a
proposed second amended complaint to Defendants upon Defendants’ acquiescence,
Relators filed responses to the motions to dismiss on February 15, 2022.
Because Relators filed the responses, Defendants then had to prepare and file
all of the corresponding reply briefs. Relators and some defendants then filed
supplemental briefs until the December 7, 2022 hearing. Many of Relators’ briefs
again mentioned filing a second amended complaint, see, e.g., ECF No. 371,

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PageID.3369-3370, yet Relators still did not file a second amended complaint, or
leave to do so, prior to the December 7, 2022 hearing.
Relators’ delays: (a) reflect a lack of reasonable diligence by Relators; and (b)
caused an excessive waste of time and resources for: (i) Defendants, (ii) Defendants’
counsel, (iii) Plaintiffs, (iv) the Court, and (v) even Relators and their counsel. The
Court finds that those delays, all of which occurred after Relators’ representations
that leave to file a second amended motion would be sought, and the excessive waste
of time and resources attributable to Relators’ failure to timely file for leave to file
a second amended complaint constitute bad faith and were unduly prejudicial to
Defendants.
Specifically, as set forth above, Relators clearly contemplated filing the
second amended complaint and expressed an intent to do so in January 2022.
Relators could have, and should have, filed their motion for leave to amend the
complaint in response to the motions to dismiss at that time, as permitted by Rule
15. By failing to do so, Defendants were forced to continuously support and argue
their motions to dismiss. To grant Relators the relief they seek now, Defendants
would have to incur the fees and costs associated with briefing the motions to dismiss
all over again. The Court concludes that it would be unduly prejudicial to Defendants
to require them to, in essence, start over.
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The Relators bad faith is further evidenced by the fact that the Amended
Motion for Leave was filed only by MSP WB and not Mr. Angelo. Relators do not
explain why only MSP WB seeks leave to file a second amended complaint, a
particularly perplexing choice when: (a) Mr. Angelo, not MSP WB, filed the original
complaint; (b) the proposed second amended complaint names both Mr. Angelo and
MSP WB as Relators; (c) the MSP WB did not even exist until 18 months after Mr.
Angelo initiated this cause of action.
Finally, the Court notes that Mr. Angelo originally filed this action only
against State Farm and has continued pursuing this action against State Farm. As
another Judge in the Eastern District long ago barred Mr. Angelo from pursuing
claims against State Farm such as those in this action, see State Farm Mut. Auto. Ins.
Co. v. Angelo, No. 19-10669-RHC-APP (E.D. Mich.), the continued attempt to sue
State Farm reflects bad faith on the part of Relators, especially Mr. Angelo. In a
recent published opinion, the Sixth Circuit Court of Appeals affirmed the court’s
order enforcing the parties’ Settlement Agreement with respect to Angelo’s FCA
claims against State Farm in Case No. 19-10669. See, State Farm Mutual Auto Ins.
Co. v. Angelo, et al., Case Nos. 22-1409/23-1340, ___ F.4th ___, 2024 WL 938272
(6th Cir. Mar. 5, 2024).

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The Court finds that all of Relators’ actions (or inactions) have unduly
prejudiced Defendants. Not only did they have to file replies in support of their
motions to dismiss, they had to travel to and attend the December 7, 2023 hearing
and then, at least preliminarily, reargue many parts of the motion to dismiss when
they filed their brief(s) in opposition to the Amended Motion for Leave. Defendants
also have had to, or believed they had to make other filings related to the Amended
Motion for Leave, including responding to Relators’ filings at ECF Nos. 470 and
484.
C. Judicial Economy
The Court normally would not comment on judicial economy when deciding
a motion for leave to amend a complaint, however, as Relators have cited judicial
economy as a factor supporting their Amended Motion for Leave (see ECF No. 426,
PageID.6416), the Court does so in this case. Relators assert:
Judicial economy is served by granting leave to amend. Because all
Defendants have filed motions to dismiss the First Amended
Complaint, Relator should be allowed to file amendments which
address any perceived deficiencies which have been or might be
raised.
Id. The Court disagrees with Relators’ assessment of judicial economy.
If Relators wanted to promote judicial economy – and not prejudice
Defendants, as discussed above – they could have been accomplished that objective
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by Relators filing (and/or seeking leave to file) a second amended complaint in
response to Defendants’ motions to dismiss, as the Federal Rules of Civil Procedure
permit. Instead, the Court has been inundated with motions of all natures related to
the Amended Complaint, as well as the Amended Motion for Leave. The Court had
to review all 10 motions to dismiss, prepare for the hearing, and hold the hearing on
those motions to dismiss. The amount of time incurred by the Court to do so was
substantial and, at times, unnecessarily strained the resources of the Court.
D. Futility
The untimeliness of the Amended Motion for Leave, the bad faith of Relators,
the prejudice to Defendants, and the infringement on judicial economy are
important, but more significant in the Court decision to deny the Amended Motion
for Leave is the dearth of meaningful proposed changes or additions in the proposed
second amended complaint. Relators’ motion and brief did not detail what the
proposed allegations and information are, even though the complaint more than
doubled in size, to an unwieldy 500 pages. Instead, Relators generically state in the
Amended Motion for Leave only that:
6.
The proposed amendment adds further details regarding
Defendants scheme to knowingly underreport claims, including
specifics allegations regarding ISO’s efforts to protect the Primary
Plans from detection. The proposed amendment also adds additional
exemplars and original source documentation to defeat the Defendants’
public disclosure bar grounds for dismissal. Additionally, the proposed
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amendment adds an additional and related FCA claim.
ECF No. 426, PageID.6416. In the supporting brief, Relators address some of the
applicable factors for granting leave to amend, but they conspicuously failed to offer
any argument regarding the futility factor. The only arguably relevant statements
regarding futility were the following two sentences:
The Second Amended Complaint addresses the perceived issues in the
First Amended Complaint by adding an additional False Claims Act
cause of action, attaching Relators’ original source material, specific
allegations regarding ISO’s conspiratorial efforts to protect the
Primary Plan Defendants, and further detail regarding the allegations.
The Second Amended Complaint creates no notice issue or undue
prejudice to Defendants, and all the remaining factors support
Relator’s position.
Id. at PageID.6417.
The Court notes that these sentences do not identify what or where these
allegations were in the proposed 500-page complaint, nor do they explain how the
proposed new allegations and information are sufficient to survive a Rule 12(b)(6)
motion to dismiss. Accordingly, the Court finds that Relators have failed to explain
why the proposed amendments would not be futile, i.e., subject to dismissal on a
Rule 12(b)(6) motion, just as the Amended Complaint is.

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Finally, having reviewed the new allegations and exemplars in the proposed
second amended complaint,5 the Court finds that they are: (1) no more than
variations of the insufficient allegations in the Amended Complaint; and (2)
supported by nothing more than the unsuccessful arguments Relators made in
response to Defendants’ motions to dismiss. In addition, the Court finds that
Relators’ current arguments lack any information or facts that were not known, or
could not have been known, to Relators at the time the Amended Complaint was
filed. Relators’ current arguments are not distinct, nor do they expand upon the
arguments they made in response to Defendants’ motions to dismiss. Although
Relators have added some allegations and included a few more exemplars, the new
allegations and exemplars suffer from the same deficiencies as the allegations in the
Amended Complaint.
For all the reasons set forth above, the Court concludes that justice does not
require giving Relators another bite at the apple, see MSP Recovery Claims, LLC v.
Metro. Gen. Ins. Co., 2021 WL 1526334, at *1 (S.D. Fla. Apr. 19, 2021), appeal
pending, No. 21-11547 (11th Cir.), especially in light of the conclusory, broad



Court notes that Relators did not identify the new allegations or information
in the proposed second amended complaint until the Court required them to do,
even though the proposed second amended complaint is 500 pages and more than
250 pages more than the Amended Complaint. See ECF No. 443.
5

The

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approach Relators have taken with respect to the proposed second amended
complaint (and, previously, the Amended Complaint). The Amended Motion for
Leave is denied.
VI.

CONCLUSION
Accordingly, and for the reasons stated above,
IT IS ORDERED that Defendants’ Omnibus Motion to Dismiss Relators’

Amended Complaint [ECF No. 338] is GRANTED.
IT IS FURTHER ORDERED that the Motion for Judicial Notice (ECF No.
339) is GRANTED.
IT IS FURTHER ORDERED that Relators’ Motion to Strike [ECF No. 396]
is DENIED.
IT IS FURTHER ORDERED that MSP WB’s Amended Motion for Leave to
File Second Amended Complaint [ECF No. 426] is DENIED.
IT IS FURTHER ORDERED that all remaining motions [ECF Nos. 329, 330,
331, 332, 333, 334, 335, 340, 341, 470, 473, 475, 478, 484] are deemed MOOT.
IT IS FURTHER ORDERED that Relators’ cause of action is DISMISSED
WITH PREJUDICE.
s/Denise Page Hood
DENISE PAGE HOOD
UNITED STATES DISTRICT JUDGE
DATED: March 26, 2024


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