WALKER, et al v. LOVING CARE AGENCY, et al
OPINION. Signed by Judge William J. Martini on 12/22/16. (gh, )
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
UNITED STATES OF AMERICA and
THE STATE OF NEW JERSEY, ex rel.,
MARY WALKER and VITALIJ MYRKO,
Plaintiffs and Co-Relators,
Civ. No. 2:11-06142
LOVING CARE AGENCY, INC.,
WILLIAM J. MARTINI, U.S.D.J.:
Plaintiffs United States of America and the State of New Jersey (collectively the
“Government”) bring this action by and through their Co-Relators Mary Walker and Vitalij
Myrko (individually “Walker” and “Myrko,” collectively “Co-Relators”) against Loving
Care Agency, Inc. (“Defendant”), alleging violations of the Federal False Claims Act
(“FCA”), 31 U.S.C. § 3729, et seq., and the False Claims Act of the State of New Jersey
(“NJFCA”), N.J.S.A. § 2A:32C-1, et seq. This matter comes before the Court on
Defendants’ motion to dismiss under Federal Rules of Civil Procedure 12(b)(6) and 9(b).
There was no oral argument. Fed. R. Civ. P. 78(b). For the reasons set forth below,
Defendants’ motion to dismiss is GRANTED, in part, and DENIED, in part.
Defendant is a New Jersey for-profit homecare agency that is “a leading provider of
home healthcare services,” with its principal place of business located in Hasbrouck
Heights, New Jersey. Mem. of Law in Supp. of Def.’s Mot. to Dismiss (“Def.’s Mem.”)
3, ECF No. 27. Co-Relators are registered nurses and former employees of Defendant.
Walker was employed by Defendant as a Nursing Clinical Field Supervisor, beginning in
April 2011, and Myrko was employed under that same title from 2004 through 2012.
Second Am. Compl. for False Claims Act Violations (“2d Am. Compl.”) ¶¶ 14–15, 18–19,
ECF No. 22. Neither Co-Relator is currently employed by Defendant. Def.’s Mem. at 3.
Walker initiated the present action by filing a complaint on October 18, 2011, in
which she alleged multiple schemes undertaken by Defendant to defraud the Government
by filing false claims for Medicaid reimbursement. See Compl. ¶¶ 34–100, ECF No. 1.
On January 5, 2012, Walker filed an amended complaint, introducing Myrko as CoRelator. See First Am. Compl. ¶ 9, ECF No. 2. Thereafter, the Government requested
multiple extensions of time to investigate Co-Relators’ claims and ultimately moved to
stay and administratively terminate the action, which this Court granted on February 13,
2013. See Order, ECF No. 10. On April 1, 2016, the Government informed the Court that
it declined to intervene, thereby lifting the stay and unsealing the amended complaint. See
Order, ECF No. 20. On May 25, 2016, Co-Relators filed a second amended complaint
(hereinafter “the Complaint”), in which they incorporated revised facts and alleged seven
fraudulent schemes undertaken by Defendant. See 2d Am. Compl. at ¶¶ 65–300.
Defendant now moves to dismiss the Complaint with prejudice, arguing that CoRelators have not pled their case with sufficient particularity and that, in the alternative,
they have not stated a cause of action under the FCA. Def.’s Mem. at 12. Co-Relators
oppose, countering that the Complaint properly alleges all claims. See Pls.’ Opp’n to Mot.
to Dismiss (“Pls.’ Opp’n”) 3, ECF No. 33.
Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a complaint,
in whole or in part, if the plaintiff fails to state a claim upon which relief can be granted.
The moving party bears the burden of showing that no claim has been stated. Hedges v.
United States, 404 F.3d 744, 750 (3d Cir. 2005). In deciding a Rule 12(b)(6) motion, a
court must take all allegations in the complaint as true and view them in the light most
favorable to the plaintiff. See Warth v. Seldin, 422 U.S. 490, 501 (1975); Trump Hotels &
Casino Resorts, Inc. v. Mirage Resorts Inc., 140 F.3d 478, 483 (3d Cir. 1998).
Although a complaint need not contain detailed factual allegations, “a plaintiff’s
obligation to provide the ‘grounds’ of his ‘entitlement to relief’ requires more than labels
and conclusions, and a formulaic recitation of the elements of a cause of action will not
do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, the factual allegations
must be sufficient to raise a plaintiff’s right to relief above a speculative level, such that it
is “plausible on its face.” See id. at 570; see also Umland v. PLANCO Fin. Serv., Inc., 542
F.3d 59, 64 (3d Cir. 2008). 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) (citing Twombly,
550 U.S. at 556). While “[t]he plausibility standard is not akin to a ‘probability
requirement’ . . . it asks for more than a sheer possibility.” Id.
FCA claims are also subject to the heightened pleading standards set forth in Rule
9(b). United States ex rel. Wilkins v. United Health Grp., Inc., 659 F.3d 295, 301 n.9 (3d
Cir. 2011) (citing United States ex rel. LaCorte v. SmithKline Beecham Clinical Labs., 149
F.3d 227, 234 (3d Cir. 1998)). Rule 9(b) provides: “In alleging fraud . . . , a party must
state with particularity the circumstances constituting fraud . . . . Malice, intent, knowledge
and other conditions of a person’s mind may be alleged generally.” Fed. R. Civ. P. 9(b).
The Third Circuit has adopted a more “nuanced” approach to the application of Rule 9(b),
which requires that a plaintiff “provide ‘particular details of a scheme to submit false
claims paired with reliable indicia that lead to a strong inference that claims were actually
submitted.” Foglia v. Renal Ventures Mgmt., LLC, 754 F.3d 153, 155–58 (3d Cir. 2014).
“Courts in [the District of New Jersey] have found that a plaintiff may satisfy that
requirement in one of two ways: (1) ‘by pleading the date, place, or time of the fraud;’ or
(2) using an ‘alternative means of injecting precision and some measure of substantiation
into their allegations of fraud.’” Flanagan v. Bahal, No. 12-cv-2216, 2015 WL 9450826,
at *3 (D.N.J. Dec. 22, 2015) (quoting United States ex rel. Wilkins v. United Health Grp.,
Inc., No. 08-cv-3425, 2011 WL 6719139, at *2 (D.N.J. Dec. 20, 2011) (on remand from
the Third Circuit) (citation omitted)). Notably, however, this approach does not require
“‘that a plaintiff  identify a specific claim for payment at the pleading stage of the case
to state a claim for relief.’” Id. at 156–57 (quoting Wilkins, 659 F.3d at 308) (emphasis
Co-Relators allege violations of 31 U.S.C. §§ 3729(a)(1)(A) and (B), and their New
Jersey counterparts N.J.S.A. §§ 2A:32C-3(a) and (b). 2d Am. Compl. at ¶¶ 320–40. “To
prove a violation of § 3729(a)(1)(A) Plaintiffs must show that ‘(1) the defendant presented
or caused to be presented to an agent of the United States a claim for payment; (2) the claim
was false or fraudulent; and (3) the defendant knew the claim was false or fraudulent.’”
United States ex rel. Doe v. Heart Solution PC, No. 14-cv-3644, 2016 WL 3647987, at *4
(D.N.J. July 8, 2016) (quoting Wilkins, 659 F.3d at 305). “To establish liability under §
3729(a)(1)(B), Plaintiffs must prove that the Defendants (1) made, used, or caused to be
made or used, a false record or statement; (2) the Defendants knew the statement to be
false; and (3) the statement was material to a false or fraudulent claim.” Id. at *6 (citation
omitted). The language in the NJFCA is nearly identical to the federal statute and thus
requires the same showings noted above. Compare 31 U.S.C. §§ 3729(a)(1)(A)–(B) with
N.J.S.A. §§ 2A:32C-3(a)–(b). See also New Jersey v. Haig’s Serv. Corp., No. 12-cv-4797,
2016 WL 4472952, at *6–7 (D.N.J. Aug. 24, 2016) (noting the similarity of language
between the federal FCA and the NJFCA and recognizing identical elements) (citations
“There are two categories of false claims under the FCA: a factually false claim and
a legally false claim.” Wilkins, 659 F.3d at 305 (citation omitted). “A claim is factually
false when the claimant misrepresents what goods or services that it provided to the
Government and a claim is legally false when the claimant knowingly falsely certifies that
it has complied with a statute or regulation the compliance with which is a condition for
Government payment.” Id.
“A legally false FCA claim is based on a false certification theory of liability,” of
which there are two types: express and implied. See id. (internal quotation and citation
omitted). An express false certification occurs when an entity falsely certifies to the
Government that it complied with statutory and regulatory preconditions of payment when
it in fact has not complied. See id. An implied false certification occurs when an entity
submits a claim for payment to the Government “without disclosing that it violated
regulations that affected its eligibility for payment.” See id.
The Complaint alleges facts that form seven schemes undertaken by Defendant,
which constitute both factually and legally false claims to the Government for payment of
Medicaid services rendered:
(1) Scheme A: claims for personal care assistance (“PCA”) services that were never
performed (so called “ghost services”), see 2d Am. Compl. at ¶¶ 65–139;
(2) Scheme B: claims for PCA services that were not properly supervised by a
registered nurse, see id. at ¶¶ 140–91;
(3) Scheme C: claims for PCA services performed by unqualified individuals, see
id. at ¶¶ 192–210;
(4) Scheme D: claims for PCA services provided to ineligible beneficiaries or
claims for ineligible services, see id. at ¶¶ 211–27;
(5) Scheme E: claims for PCA services that were medically unnecessary, see id. at
(6) Scheme F: claims for PCA services provided to family members, see id. at ¶¶
(7) Scheme G: claims for nursing services that were never performed, see id. at ¶¶
Defendant moves to dismiss all of the above on multiple grounds, including: (1) the
Complaint lacks specific allegations of misconduct prior to 2010 and after January 2012,
see Def.’s Mem. at 12–14; (2) the Complaint lacks the requisite particularity to plausibly
infer that Defendant knowingly made false claims for services not performed or that failed
to conform with New Jersey regulations, see id. at 12–22; (3) the Complaint fails to allege
violations that were “material” to the Government’s decision to pay concerning schemes B
and C, see id. at 22–26; and (4) the Complaint lacks the requisite particularity to support
medically unnecessary allegations concerning schemes D and E, see id. at 26–30. The
Court will address the sufficiency of the allegations for each scheme in turn.
A. Ghost Personal Care Assistance (“PCA”) Services
Co-Relators allege that Defendant “knowingly submitted Claim Forms to New
Jersey Medicaid for personal care assistance services for days and times when those
services were not rendered.” 2d Am. Compl. at ¶ 65. Co-Relators assert that they have
first-hand knowledge of these ghost services because, as Defendant’s employees, they
“were charged with traveling to patients’ homes to supervise [Defendant’s] aides as they
performed PCA services for Medicaid patients.” See id. at ¶ 66.
While assigned to Defendant’s Union County branch, Walker submits that she
would perform “spot checks” on the aides she oversaw, during which time she gained
personal knowledge of claims for ghost PCA services. See id. at ¶ 68. The Complaint lists
twenty-seven specific examples of such spot checks where services were not performed
from October through December 2011, noting exact dates and names of the aides and
patients.1 See id. at ¶¶ 69–95.
On April 5, 2012, Walker claims to have spoken with a patient who detailed to her
an ongoing conspiracy that dated back several years prior to 2012: a so called “High Rise”
scheme involving aides and patients throughout an apartment complex in Maplewood, New
Jersey. The patient explained that aides agreed to perform ineligible housekeeping services
for patients in exchange for signing timesheets that indicated the performance of PCA
services. See id. at ¶¶ 96–105.
Walker also asserts that branch manager Rose Palumbo learned that many aides
were engaged in ghost services during an internal investigation. See id. at ¶¶ 109–12. The
Complaint alleges that Palumbo regularly shared her findings with Defendant’s VP of
Home and Community Based Services, its Chief Compliance Officer and other senior
management. See id. at ¶ 114. Palumbo showed Walker a spreadsheet, which listed dozens
of instances of ghost services. See id. at ¶ 115. Palumbo also purportedly told Walker that
Defendant’s management had not been self-reporting—i.e., refunding Medicaid payments
to the Government—despite the extensive findings of ghost services. See id. at ¶ 116. In
early 2012, Palumbo expressed that 50% of the PCA services billed by Defendant were
fraudulent. See id. at ¶ 120.
Walker also learned of ghost PCA services being performed in the Middlesex
County branch, providing multiple specific examples of aides that did not perform services
and another “High Rise” scheme in New Brunswick, New Jersey. See id. at ¶¶ 121–29.
Walker claims that she advised the branch directors of her findings. See id. at ¶ 130. CoRelators contend that Defendant submitted claims for payment to the Government for these
and other ghost PCA services. See id. at ¶¶ 138–39.
Defendant argues that Co-Relators’ claims failed to adequately plead that Defendant
knowingly submitted false or fraudulent claims to Medicaid, which is a fatal deficiency of
the Complaint for all of Co-Relators’ allegations. See Def.’s Mem. at 14–15. Defendant
submits that the list of examples (and all other examples) are factually insufficient because
the Complaint does not allege that Walker “contemporaneously informed anyone . . .
responsible for the company’s submission of claims to Medicaid that it could not rely on
aides’ or nurses’ time sheets and patient logs when submitting reimbursement claims to
Medicaid.” See id. at 15–16. Even assuming the facts alleged above, Defendant maintains
that “the Complaint is devoid of concrete factual allegations sufficient to raise a plausible
inference” that Defendant knew or was recklessly indifferent to the possibility of billing
Medicaid for ghost PCA services. See id. at 16; see also Reply in Further Supp. of Def.’s
Mot. to Dismiss 4–6, Sept. 13, 2016, ECF No. 34.
Defendant overstates what the FCA requires at the pleading stage. The FCA
requires only a showing that leads to a strong inference that Defendant knew of the ghost
Patients’ names are noted in the Complaint with initials, presumably to preserve their anonymity. The Court assumes
that the patients’ identity is known to Co-Relators and that they may be used as witnesses during later stages of
PCA services scheme. See Fed. R. Civ. P. 9(b) (“Malice, intent, knowledge and other
conditions of a person’s mind may be alleged generally.”); Foglia, 754 F.3d at 157–58.
Furthermore, Co-Relators are not required to provide specific claims submitted to the
Government at the pleading stage; rather, they are only required to allege facts that allow
the Court to plausibly infer that fraudulent claims were submitted. See id.; see also
Craftmatic Sec. Litig. v. Kraftsow, 890 F.2d 628, 645 (3d Cir. 1989) (finding that “plaintiffs
cannot be expected to have personal knowledge of the details of corporate internal affairs”
at the Rule 9(b) pleading stage).
Co-Relators have sufficiently pled that Defendant knew of or recklessly disregarded
the factual allegations set forth in Scheme A. Specifically, the Complaint plainly states
that a branch manager informed a corporate vice president and the Chief Compliance
Officer, among other senior managers, of the scheme. See 2d Am. Compl. at ¶ 114. The
facts alleged more than satisfy the particularity required by Rule 9(b).2 See United States
ex rel. Silver v. Omnicare, Inc., No. 11-cv-1326, 2014 WL 4827410, at *4 (D.N.J. Sept.
29, 2014) (finding that plaintiff is not required to plead specifics of the actual false claims,
including individuals involved in billing, at the Rule 9(b) stage). Accordingly, Defendant’s
motion to dismiss the counts as related to the facts alleged under Scheme A is DENIED.
B. Improper Supervision
Co-Relators next allege that Defendant “did not have measures in place to ensure
that aides [performing PCA services] were supervised by Registered Nurses,” as required
by New Jersey regulations, and that Defendant actually taught “supervising nurses to forge
paperwork as if a supervised visit had occurred when, in reality, it had not.” See 2d Am.
Compl. at ¶¶ 145–46. Co-Relators allege a scheme where aides signed blank evaluation
forms to be used by supervising nurses, who would back-date the forms to make it appear
that supervisory visits had occurred when they had not. See id. at ¶¶ 167–73. Co-Relator
Walker observed this practice and Co-Relator Myrko admits to personally participating in
the scheme. See id. at ¶¶ 158–60, 169–71, 175–81. The Complaint also lists ten other
registered nurses who purportedly falsified evaluation forms. See id. at ¶ 174. The
Complaint also lists thirty-six patients who received improperly supervised services,
complete with the location, start date of care, supervising nurse of record and number of
hours billed. See id. at ¶ 184.
Defendant raises similar arguments to the ones submitted in defense of the ghost
PCA services scheme, contending that the Complaint lacks particularity and that, even if
true, it does not plausibly allege that anyone responsible for submitting claims to the
Government knew of the scheme. See Def.’s Mem. at 17. Additionally, Defendants argue
that Co-Relators failed to allege that the failure to supervise was a material precondition of
payment. See id. at 24–26.
Defendant’s arguments concerning particularity and knowledge are equally infirm
with respect to Scheme B as they are to Scheme A. The Complaint lists specific examples
The Court will address Defendant’s arguments concerning statute of limitations, retroactivity and other time
constraints of the Complaint after it addresses each scheme.
observed or actions taken by Co-Relators that form the factual basis for a systemic and
longstanding scheme to forge evaluation forms. See 2d Am. Compl. at ¶¶ 140–91. The
Complaint also alleges that Defendant taught its supervising nurses to forge paperwork and
that upper level management knew of or deliberately disregarded the scheme. See id. ¶¶
146, 173. Knowledge is sufficiently pled. See Foglia, 754 F.3d at 157–58.
Defendant’s argument concerning materiality is also unavailing. New Jersey
regulations define PCA services as “health related tasks performed by a qualified
individual in a beneficiary’s home, under the supervision of a registered nurse, as certified
by a physician in accordance with a beneficiary’s written plan of care.” N.J.A.C. 10:601.2 (emphasis added); see also N.J.A.C. 10:60-3.1. The duties of the supervising nurse are
expressly provided in the regulations and include a minimum of a patient visit every sixty
days and a patient reassessment every six months. See N.J.A.C. 10:60-3.5. Co-Relators
identify these regulations in the Complaint. See 2d Am. Compl. at ¶¶ 140–44.
Defendant attempts to color Co-Relators’ allegations as “rigid definitional
syllogism,” whereby the slightest oversight by a supervising nurse would be considered a
per se violation ineligible for reimbursement. See Def.’s Mem. at 24–25. But Co-Relators
do not allege a slight oversight. They allege quite the opposite: a systematic and
widespread scheme to circumvent Defendant’s obligations by misrepresenting regulatory
compliance to the Government. The Court finds it hard to fathom that the Government
would find such blatant disregard of its regulations, if true, to be immaterial of its decision
to pay Defendant. The Complaint adequately pleads a plausible set of facts where
Defendant used falsified records of supervision in support of claims for payment. See
Druding v. Care Alts., Inc., 164 F. Supp. 3d 621, 630–31 (D.N.J. 2016) (finding that “[i]t
is no great leap for the Court to infer” that purportedly legally false records could form the
basis of claims for Medicare reimbursement). Accordingly, Defendant’s motion to dismiss
the counts as related to the facts alleged under Scheme B is DENIED.
C. Performance by Unqualified Individuals
Co-Relators also allege that the aides employed by Defendant to perform PCA
services did not meet the regulatory definition of a “personal care assistant” because
Defendant’s training program was a sham. See 2d Am. Compl. at ¶¶192–95. A personal
care assistant is “a person who: (1) successfully completed a training program in personal
care services and is certified . . . ; (2) successfully completes a minimum of 12 hours inservice education per year . . . ; (3) is supervised by a registered professional nurse . . . .”
See N.J.A.C. 10:60-1.2. A personal care assistant is a “qualified individual” eligible to
perform PCA services in a beneficiary’s home. See id.
Co-Relators submit that they witnessed firsthand such fraudulent conduct where
aides were provided answers to qualification tests and instructed to “not get 100% of the
answers correct.” See id. at ¶¶ 196–97. In addition to tests, aides were required to perform
a demonstration of PCA skills, but Co-Relator Myrko maintains that he never saw a nurse
give a competency evaluation in his many years of employment. See id. at ¶ 199. Co-
Relators allege that nurses fraudulently signed documentation regarding in-service
education, despite knowing that such training did not occur. See id. at ¶¶ 200–03.
Defendant makes the same arguments against Scheme C as it does against Scheme
B. While not as extensive as Scheme B, the facts are alleged with sufficient particularity
because they identify specific courses of conduct that, if true, would amount to regulatory
violations. The Complaint also adequately alleges knowledge by identifying that, at a
minimum, Defendant’s Middlesex County branch directors personally engaged in the
fraudulent training programs. See id. at ¶ 203. Finally, similar to the nurse supervision
requirement, the Court finds it hard to fathom that the Government would find such a
systematic and widespread scheme to circumvent Defendant’s regulatory obligations to be
immaterial of its decision to pay. The Complaint adequately pleads a plausible set of facts
where Defendant used falsified records to certify that aides were properly trained and
educated in support of claims for Medicaid reimbursement. See Foglia, 754 F.3d at 157–
58; Druding, F. Supp. 3d at 630–31. Accordingly, Defendant’s motion to dismiss the
counts as related to the facts alleged under Scheme C is DENIED.
D. Ineligible Beneficiaries and Ineligible Services
Co-Relators next allege that Defendant made claims for Medicaid reimbursement
concerning services rendered to individuals “who were not in need of either skilled nursing
care or [PCA] services,” in violation of N.J.C.A. 10:60-3.4. See 2d Am. Compl. at ¶ 212.
The Complaint lists multiple examples of specific patients that Walker personally visited
or examined and determined were not in need of such services. See id. at ¶¶ 214–20. CoRelators also submit that they were personally asked to certify as eligible so called “joke
cases,” which “involved healthy and able bodied individuals who did not need genuine
services, but instead, would exploit the PCA system for personal valets, maids, and
housekeepers.” See id. at ¶ 221. The previously identified “High Rise” schemes also
provide examples of ineligible patients and services. See id. at ¶ 222; supra III.A.
Defendant argues that Co-Relators allegations are “the definition of conclusory,”
citing United States ex rel. Frazier v. IASIS Healthcare Corp., 554 F. Supp. 2d 966 (D. Az.
2008), in support of its argument. See Def.’s Mem. at 28–29. The Frazier court applied
the Ninth Circuit’s understanding of Rule 9(b) particularity, which includes that the “‘who,
what, when, where, and how’ of the misconduct must accompany allegations of fraud.”
See 554 F. Supp. 2d at 970–71 (quoting Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097,
1106 (9th Cir. 2003)). Defendant misapplies the Ninth Circuit standard to the Third Circuit.
In the Third Circuit, Co-Relators are not required to provide every detail necessary to
support a finding of fault at the pleading stage. See Omnicare, 2014 WL 4827410, at *4
(citing Foglia, 754 F.3d 157–58). They are only required to “provide particular details of
a scheme to submit false claims paired with reliable indicia that lead to a strong inference
that claims were actually submitted.” See Foglia, 754 F.3d 157–58 (internal quotations
Walker provided a representative set of specific individuals who she personally
visited and examined, and subsequently determined were not eligible for PCA services.
See 2d Am. Compl. at ¶¶ 214–20. Furthermore, the “High Rise” scheme, which the Court
has already found to be sufficiently pled, identifies an entire apartment complex of people
that received ineligible services. See id. at ¶¶ 96–105. These alleged facts, if true, establish
a plausible inference that Defendant billed the Government for ineligible services. See
Druding, 164 F. Supp. 3d at 631. Accordingly, Defendant’s motion to dismiss the counts
as related to the facts alleged under Scheme D is DENIED.
E. Medically Unnecessary PCA Services
Co-Relators also allege that Defendant billed the Government for PCA services that
were medically unnecessary by fraudulently inflating the number of hours needed to
provide services listed on patient assessment forms, in violation of N.J.A.C. 10:60-3.9. See
2d Am. Compl. at ¶¶ 228–31. Myrko alleges that Middlesex County nursing branch
director Arlene Nemeth admitted to increasing numerous patients’ hours without medically
assessing whether such increases were necessary. See id. at ¶ 232. Nemeth and others also
instructed Myrko in strategies to increase hours for certain services. See id. at ¶¶ 233–41.
Co-Relators also allege that management arbitrarily inflated hours on submissions for
approval to the Government, providing a list comparing the submitted hours to the actual
hours worked by aides. See id. at ¶¶ 243–47. When she notified management, Walker was
told by a corporate compliance officer and others that these issues would be handled
internally. See id. at ¶¶ 248–49.
Defendant argues that these allegations “are analogous to the ones that the district
court found to be insufficient” in Flanagan v. Bahal. See Def.’s Mem. at 29. The Court
disagrees. In Flanagan, the court found that the allegations of medically unnecessary
claims were insufficient because the relator “only provided ‘a mere opportunity for fraud’
and  failed to plead sufficient facts to establish a plausible ground for relief.” See 2015
WL 9450826, at *5 (citing Foglia, 754 F.3d at 158). That is not the case here. Co-Relators
submitted a detailed list of patients that shows the difference between the number of hours
worked by the aides and the hours actually billed, clearly alleging an inflation of hours not
required for the services performed. See 2d Am. Compl. at ¶ 247. If true, those examples,
coupled with Myrko’s personal experiences, go beyond “a mere opportunity for fraud” and
form a sufficient basis for an inference that Defendant billed the Government for medically
unnecessary services. See Druding, 164 F. Supp. 3d at 630–31. Accordingly, Defendant’s
motion to dismiss the counts as related to the facts alleged under Scheme E is DENIED.
F. PCA Services Provided to Family Members
Co-Relators next allege that Defendant submitted reimbursement claims to the
Government for PCA services provided by family members of patients, in violation of
N.J.A.C. 10:54-5.18(b) and N.J.A.C. 10:60-3.8. See 2d Am. Compl. at ¶¶ 256–61. CoRelators provide two examples of instances where Myrko visited a patient and learned that
the attending aide and patient were relatives. See id. at ¶¶ 259–61. These examples include
approximate dates, locations, and the names of patients and aides. If true, they form a
sufficient basis for a plausible inference that, on at least two occasions, Defendant
submitted claims to the Government for services performed by family members. See
Foglia, 754 F.3d at 157–58. Accordingly, Defendant’s motion to dismiss the counts as
related to the facts alleged under Scheme F is DENIED.
G. Ghost Nursing Services
Co-Relators also allege that Defendant submitted Medicaid claims to the
Government for services provided by registered nurses, such as nursing reassessments,
which were never actually rendered—i.e., “ghost RN services.” See 2d Am. Compl. at ¶¶
269–75. Walker alleges that she personally observed a supervising nurse completing
paperwork that documented performance of nursing assessments, which the Union County
branch manager conceded were not performed. See id. at ¶¶ 280–86. The Complaint
provides a list of examples where Defendant billed the Government for nursing services
that were never performed, including names, locations and hours billed. See id. at ¶¶ 287,
291. Walker also submits that she was instructed by her nurse manager to back-date the
paperwork of a nursing assessment on at least one occasion. See id. at ¶¶ 288–89. Myrko
alleges that he was instructed by his nurse manager to skip performing nursing assessments
on patients who required a small number of hours of care per week and that the requisite
forms were subsequently fabricated. See id. at ¶ 293. For the same reasons noted above
concerning ghost PCA services, supra III.A, the Court finds that the Complaint provides
the requisite particularity concerning allegations of ghost RN services. See Foglia, 754
F.3d at 157–58; Omnicare, 2014 WL 4827410, at *4. Accordingly, Defendant’s motion to
dismiss the counts as related to the facts alleged under Scheme F is DENIED.
H. FCA Statute of Limitations and NJFCA Retroactive Application
Finally, Defendant argues that all of Co-Relators’ claims outside of the time period
of 2010 to 2012 should be dismissed because the Complaint does not contain any specific
allegations of misconduct that occurred during those time periods. See Def.’s Mem. at 12–
14. Defendant also argues that any federal FCA claims prior to October 18, 2005, should
be dismissed due to the six-year statute of limitations and that the NJFCA does not provide
for retroactive application, which bars all NJFCA claims prior to 2008. See id. at 30–31.
The Complaint establishes that Myrko worked for Defendant from 2004 through
2012 in the Union County and Middlesex County offices. Id. at ¶ 18. Myrko submits that
he “was trained in fraudulent practices designed to defraud the Government,” beginning in
2004. See id. at ¶ 20. The Complaint contains specific allegations by Myrko that took
place prior to 2010, including forgery of paperwork, fabrication of forms, and the
identification of branch managers that trained him in fraudulent practices. See id. at ¶¶
145–46, 176–83, 234, 240, 293. The Court is satisfied that the Complaint contains
sufficient particularity concerning allegations that occurred prior to 2010. See Flanagan,
2015 WL 9450826, at *3 (“The Third Circuit made clear, however, that at the pleading
stage, Rule 9(b)’s particularity requirement does not require a plaintiff to identify a specific
claim for payment to state a claim for relief.”) (citing Wilkins, 659 F.3d at 308).
Additionally, Co-Relators also submit that they have maintained relationships with
“key employees” since they stopped working for Defendant and that these employees have
stated that the identified misconduct presently continues. See 2d Am. Compl. at ¶ 312.
Given their employment history, the Court finds it plausible that Co-Relators have
maintained relationships with individuals still employed by Defendant and that they should
be afforded the opportunity to seek production of evidence through the present time in
discovery. See Omnicare, 2014 WL 4827410, at *4 (rejecting defendant’s Rule 9(b)
argument that complaint contained only generalized allegations because it lacked specific
dates, among other details).
Defendant correctly identifies a six-year statute of limitations for federal FCA
claims. 31 U.S.C. § 3731(b)(1). Thus, the Court agrees that any federal FCA claims prior
to six years before the filing date of the original complaint, October 18, 2011, are timebarred. See Omincare, 2014 WL 4827410, at *7–8. Defendant also correctly identifies
that the NJFCA does not apply retroactively. See State ex rel. Hayling v. Corr. Med. Servs.,
Inc., 28 A.3d 1246, 1250 (N.J. Super. Ct. App. Div. 2011). All NJFCA claims prior to
March 13, 2008, therefore, must be dismissed. Id. Accordingly, Defendant’s motion to
dismiss is GRANTED for all federal FCA claims prior to October 18, 2005, and all NJFCA
claims prior to March 13, 2008. The remainder of Defendant’s motion to dismiss
concerning claims prior to 2010 and after 2012 is DENIED.
For the reasons stated above, Defendants’ motion to dismiss is GRANTED in part,
and DENIED in part. The motion to dismiss is granted with respect to all federal FCA
claims prior to October 18, 2005, and all NJFCA claims prior to March 13, 2008, and they
are DISMISSED WITH PREJUDICE. The remainder of Defendant’s motion to dismiss
is denied. An appropriate order follows.
/s/ William J. Martini
WILLIAM J. MARTINI, U.S.D.J.
Date: December 22, 2016
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