United States of America, Ex Rel Marsha Little Hendren and Paul Day, Relators v. Mayo et al

Filing 40

MEMORANDUM OPINION re 39 Judgment on Motion to Dismiss. Signed by Michael P. Mills on 2/8/2012. (lpm)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF MISSISSIPPI
DELTA DIVISION
UNITED STATES OF AMERICA, ex rel.
MARSHA LITTLE HENDREN AND PAUL DAY
V.

PLAINTIFFS
CASE NO. 2:09-CV-00210

ANDY MAYO, UNIVERSAL HEALTH SYSTEMS,
PARKWOOD BEHAVIORAL HEALTH SYSTEMS,
and JOHN DOES 1-5

DEFENDANTS

MEMORANDUM OPINION
This cause comes before the court on the defendants’ motion to dismiss [20] the case
pursuant to Fed. R. Civ. P. 9(b) and 12(b)(6). The plaintiffs have responded in opposition.
Having considered the motion and submissions of the parties, the court finds that the motion is
well taken and should be granted.
Marsha Little Hendren was a practicing psychologist at Parkwood Behavioral Health
Systems (“Parkwood”) in Olive Branch, Mississippi from 1991 until her privileges were revoked
on April 1, 2007. While operating her practice at Parkwood, Hendren received referrals from
hospital staff and enjoyed hospital privileges. In the late 1990's, she began noticing a decline in
her patient load concurrent with an increase in her colleague, Dr. Barry Vinick’s load. Hendren
informed Parkwood’s then-CEO, Dr. Andy Mayo of the trend. In September 2005, she
discovered that Vinick was poaching clients who had been referred to her by the treating
physician. She confronted Vinick and advised him that making a Medicare claim without a
written order from a treating physician constituted a false claim. Shortly thereafter, Hendren
fired Memphis Practice Management (“MPM”), the company responsible for processing third-

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party and Medicare bills, for refusing to correct overcharges.
In July 2005, Paul Day was hired as Parkwood’s Director of Health Information Services.
He was responsible for ensuring that the company complied with the Health Insurance
Portability and Accountability Act (“HIPAA”) and other state and federal laws. Day conducted
an audit in 2006 which revealed Vinick’s poaching activities as well as the company’s violations
of HIPAA, privacy laws, and other false claims. After completing the audit in December 2006,
Day received a final warning letter from his supervisor. He soon found another job and stopped
working at Parkwood.
In late 2006, Hendren asked Mayo about renting one of Parkwood’s offices. According
to Hendren, Mayo told her that he would not rent the office to her because she had met with a
lawyer. Hendren claims that Mayo further stated that he would terminate her privileges with or
without board approval. In January 2007, Parkwood’s rules on credential privileges changed,
requiring psychologists to submit letters of recommendation from three other psychologists.
Parkwood never received one of Hendren’s letters. Meanwhile, on March 21, 2007, Hendren
filed a complaint in this court against Mayo, Vinick, and Parkwood. She asserted claims for
breach of contract, violation of the Civil Rights Act, interference with contract, conspiracy to
defraud, and intentional infliction of emotional distress. On April 1, 2007, Parkwood revoked
Hendren’s privileges and she was no longer allowed to treat patients at the facility.
On October 22, 2007, this court dismissed Hendren’s federal claims with prejudice and
her state claims without prejudice. Thereafter, on December 28, 2007, she filed a complaint
against Parkwood and Mayo in the Circuit Court of Desoto County, Mississippi. In the
complaint, she alleged breach of contract, interference with contract, defamation, and intentional

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infliction of emotion distress. The parties entered a stipulation of dismissal on April 12, 2010.
On November 30, 2009, Hendren and Day filed the instant qui tam lawsuit, asserting
claims for medicare fraud as well as violations of HIPAA and the False Claims Act (“FCA”)
against Mayo, Universal Health Services1 (“UHS”), Parkwood, MPM, Vinick, Evergreen
Behavioral Services, LLC2 (“Evergreen”) and unnamed John Does. According to the complaint,
Hendren's services were revoked after she threatened to report various HIPAA violations, false
claims, and violations of the CFR and Medicare regulations. Day maintains that as a result of
doing his job by performing the audit, he suffered unfair disciplinary action, embarrassment, and
slander. In this regard, the plaintiffs assert supplemental state law claims for defamation, breach
of contract, tortious interference with contract, bad faith, and intentional and/ or negligent
infliction of emotional distress. Since the plaintiffs' claims are brought under the FCA, this court
has subject matter jurisdiction based on a federal question, 28 U.S.C. § 1331. The court has
supplemental jurisdiction over the plaintiffs’ state law claims pursuant to 28 U.S.C. § 1367.
On June 3, 2010, the United States filed a notice of declination to intervene pursuant to
31 U.S.C. S 3730(b)(4)(B). Defendants Mayo, UHS, and Parkwood filed the instant motion to
dismiss, arguing that the complaint should be dismissed because it fails to state a claim under
Fed. R. Civ. P. 12(b)(6) and does not meet the heightened pleading standard required by Fed. R.
Civ. P. 9(b). The defendants also argue that the state law claims are barred by the applicable
statutes of limitations. They further assert that they are entitled to attorneys' fees because the

1

UHS, incorrectly listed in the complaint as “Universal Health Systems,” is the owner of
Parkwood Behavioral Heath Systems. See Docs. 1 and 21.
2

The plaintiffs allege that Evergreen is a business used and owned in part by Vinick. See

Doc. 1.
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plaintiffs' claims are frivolous. In response, the plaintiffs confusingly argue that res judicata
does not bar their claims because Hendren’s prior cases were not adjudicated on the merits and
there are different parties to the lawsuit. Subsequent to the filing of the defendants' motion to
dismiss, the plaintiffs filed an unauthorized amended complaint, removing Vinick, Evergreen,
and MPM as defendants in this case. The court later struck down the amended complaint, but
Vinick, Evergreen, and MPM remain terminated from the case.
When considering a motion under Rule 12(b)(6), the court must liberally construe the
complaint in the light most favorable to the plaintiff and accept all well-pleaded facts as true.
Woodard v. Andrus, 419 F.3d 348, 351 (5th Cir. 2005). The complaint must set forth “more than
labels and conclusions, and a formulaic recitation of the elements of a cause of action” will not
suffice. Colony Ins. Co. v. Peachtree Constr., Ltd.., 647 F.3d 248, 252 (5th Cir. 2011) (quoting
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)). The plaintiff must plead “enough
facts to state a claim to relief that is plausible on its face.” 550 U.S. at 570.
Under the FCA, any person who:
(A) knowingly presents, or causes to be presented, a false or fraudulent claim for
payment or approval;
(B) knowingly makes, uses, or causes to be made or used, a false record or
statement material to a false or fraudulent claim;
(C) conspires to commit a violation of subparagraph (A), (B), (D), (E), (F), or
(G);
(D) has possession, custody, or control of property or money used, or to be used,
by the Government and knowingly delivers, or causes to be delivered, less than
all of that money or property;
(E) is authorized to make or deliver a document certifying receipt of property
used, or to be used, by the Government and, intending to defraud the Government,
makes or delivers the receipt without completely knowing that the information on
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the receipt is true;
(F) knowingly buys, or receives as a pledge of an obligation or debt, public
property from an officer or employee of the Government, or a member of the
Armed Forces, who lawfully may not sell or pledge property; or
(G) knowingly makes, uses, or causes to be made or used, a false record or
statement material to an obligation to pay or transmit money or property to the
Government, or knowingly conceals or knowingly and improperly avoids or
decreases an obligation to pay or transmit money or property to the Government,
is liable to the United States Government for a civil penalty of not less than
$5,000 and not more than $10,000...
31 U.S.C.A. § 3729(a).
The Fifth Circuit has stated that in order to state a claim under the FCA, a plaintiff must
allege: (1) a false statement or fraudulent course of conduct; (2) made or carried out with the
requisite scienter; (3) that was material; and (4) that is presented to the Government. United
States ex rel. Steury v. Cardinal Health, Inc., 625 F.3d 262, 266 (5th Cir. 2010). FCA claims
must meet the particularity requirements of Fed. R. Civ. P. 9(b). United States ex rel. Thompson
v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir. 1997). The plaintiff must
provide the “who, what, when, where, and how” of the alleged fraud. Williams v. WMX Tech.,
Inc., 112 F.3d 175, 179 (5th Cir. 1997).
The complaint herein states that the defendants are liable under the FCA for (1) "claiming
payment for unnecessary use of 'Intensive Outpatient Care' for patients whose inpatient care can
no longer be justified" and (2) violating FCA whistleblower protections by wrongfully
terminating Hendren's privileges and constructively terminating Day's services3. See Doc. 1 at

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The other FCA claims are applicable to Vinick, UHS, and Evergreen, who are no longer
parties to this dispute.
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10. The plaintiffs admit that Intensive Outpatient Care is "an expensive, but allowable Medicare
expenditure for patients no longer eligible for inpatient care." Id. at 9.
The complaint fails to satisfy Rule 9(b) because no fraudulent activity is particularized.
Much of the complaint focuses on Vinick stealing patients from Hendren and billing Medicare.
There is no allegation that the defendants submitted bills for unperformed services or acted with
the intent of getting a false claim paid by the Government. Though the plaintiffs question the
defendants' use of Intensive Outpatient Care, they admit that these services were allowable
Medicare expenditures. The plaintiffs' suspicion alone is not enough to establish a valid FCA
claim. The complaint does not contain the “who, what, when, where, and how” of the alleged
fraud. Thus, the court is unable to determine what the fraudulent activity is, when it took place,
or who committed it.
The plaintiffs also argue that the defendants violated FCA whistleblower protections. The
court acknowledges that at the time of the plaintiffs' claims, only employees could assert a cause
of action under the whistleblower provision of FCA. See 31 U.S.C.A. § 3730 (2007). The
subsequent statutory amendments, which allow contractors and agents to bring retaliation claims,
only apply to conduct on or after May 20, 2009. See 31 U.S.C.A. § 3730 (2009). Since Hendren
was not a Parkwood employee, she cannot assert a claim under the whistleblower provision.
Likewise, Day cannot maintain a cause of action under this provision because he does not allege
that he engaged in protected activity. Day only claims that he performed the functions of his job,
which included the 2006 audit.
Considering the plaintiffs' inability to bring a retaliation claim and their failure to comply
with Rule 9(b), the court finds that the FCA claims should be dismissed. The plaintiffs similarly

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fail to plead enough facts to state valid claims for Medicare fraud and HIPAA violations. These
claims must also be dismissed.
The court now considers the plaintiffs' state law claims.
Under Mississippi law, there is a one year statute of limitations for defamation and
intentional infliction of emotional distress claims. MISS. CODE ANN. 15-1-35 (2011). A
negligent infliction of emotional distress claim must be filed within three years after the cause of
action accrues. MISS. CODE ANN. 15-1-49 (2011).
The plaintiffs allege that they were defamed while working at Parkwood. Hendren asserts
that the defendants intentionally and/ or negligently inflicted emotional distress upon her by
revoking her privileges and causing her income to dramatically decrease. By mid 2007, neither
Hendren nor Day worked at Parkwood. As this lawsuit was filed in 2009, the defamation and
intentional infliction of emotional distress claims are time barred because they were not brought
within the one year statutory period. Furthermore, the plaintiffs have not alleged sufficient facts
to support an emotional distress claim. To maintain an action for negligent infliction of
emotional distress, Hendren must show that the defendants owed her a duty, breached that duty,
and the breach thereof caused her to suffer emotional distress. Funderbunk v. Johnson, 935
So.2d 1084, 1104 (Miss. Ct. App. 2006). Since the complaint does not establish duty or breach,
the plaintiffs fail to assert a claim for negligent infliction of emotional distress.
Though the plaintiffs make several claims regarding a contract, they fail to allege
sufficient facts to show that a contract existed. The complaint does not state when a contract was
entered into nor does it list the contracting parties or terms. The only mention of a contract is in
the plaintiffs' allegations that the defendants tortiously interfered with and breached a contract.

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Due to the plaintiffs' failure to plead enough facts to show that a contract existed, the claims for
tortious interference and breach of contract amounting to bad faith must be dismissed.
The court now considers whether the defendants are entitled to costs of removal under 31
U.S.C. § 3730(d)(4). The statute provides in relevant part that:
...the court may award to the defendant its reasonable attorneys' fees and expenses if the
defendant prevails in the action and the court finds that the claim of the person bringing
the action was clearly frivolous, clearly vexatious, or brought primarily for the purposes
of harassment.
An award for fees under the FCA is reserved for rare and special circumstances. United States ex
rel. Rafizadeh v. Continental Common, Inc., 553 F.3d 869, 875 (5th Cir. 2008) (quoting
Pfingston v. Ronan Eng'g Co., 284 F.3d 999, 1006-7 (9th Cir. 2002)). In the present case, the
court finds that the plaintiffs' claims are not clearly frivolous or brought primarily for the
purposes of harassment. Therefore, the defendants' fee request is denied.
For the foregoing reasons, the court finds that the motion to dismiss is well taken and
should be granted. A separate judgment shall be entered this day pursuant to Fed. R. Civ. P. 58.
This the 8th day of February, 2012.

/s/ MICHAEL P. MILLS
CHIEF JUDGE
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF MISSISSIPPI

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