Liebman et al v. Methodist Le Bonheur Healthcare et al
Filing
168
MEMORANDUM OPINION AND ORDER OF THE COURT: Relators' motion for leave to amend 154 is granted. The Clerk is directed to separately file the third amended complaint and accompanying exhibits, which are presently found at Docket Nos. [154-1], [154-2], and [154-3]. Once filed, the third amended complaint is the legally operative complaint, thus rendering moot Defendants' pending motion to dismiss the Second Amended Complaint. The Clerk is therefore directed to terminate that motion 79 without prejudice to refiling as to the third amended complaint as appropriate. Defendants shall answer or otherwise respond to the third amended complaint as directed by Rule 15(a) (3). Signed by Magistrate Judge Barbara D. Holmes on 5/12/2021. (DOCKET TEXT SUMMARY ONLY-ATTORNEYS MUST OPEN THE PDF AND READ THE ORDER.)(kc)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF TENNESSEE
AT NASHVILLE
UNITED STATES OF AMERICA and the
STATE OF TENNESSEE ex rel. JEFFREY H.
LIEBMAN and DAVID M. STERN, M.D.
v.
METHODIST LE BONHEUR
HEALTHCARE, METHODIST
HEALTHCARE-MEMPHIS HOSPITALS,
CHRIS McLEAN, and GARY SHORB
)
)
)
)
)
)
)
)
)
)
Case No. 3:17-cv-00902
Judge Campbell
Magistrate Judge Holmes
MEMORANDUM OPINION AND ORDER
Pending before the Court is the third motion for leave to amend the complaint filed by the
Relators, Jeffrey Liebman and David Stern. (Docket No. 154.) Defendants filed a response is
opposition. (Docket No. 162.) Relators filed a reply. (Docket No. 166.) For the reasons discussed
below, Relators’ motion for leave to amend (Docket No. 154) is GRANTED. The Clerk is directed to
separately file the third amended complaint and accompanying exhibits, which are presently found at
Docket Nos. 154-1, 154-2, and 154-3. Once filed, the third amended complaint is the legally operative
complaint, Parry v. Mohawk Motors of Mich., Inc., 236 F.3d 299, 306 (6th Cir. 2000), thus
rendering moot Defendants’ pending motion to dismiss the second amended complaint. The Clerk is
therefore directed to terminate that motion (Docket No. 79) without prejudice to refiling as to the third
amended complaint as appropriate. Defendants shall answer or otherwise respond to the third amended
complaint as directed by Rule 15(a)(3) of the Federal Rules of Civil Procedure.1
Unless otherwise noted, all references to rules to are to the Federal Rules of Civil
Procedure.
1
A.
Background
Familiarity with this case is presumed and the background and procedural history are recited
again only as necessary to explain or give context to the Court’s ruling.2 Relator Jeffrey Liebman
originally commenced this qui tam action against Defendants under the False Claims Act (“FCA”) by
the filing of a sealed complaint on May 30, 2017. (Docket No. 1.) After the United States and the
State of Tennessee decided not to intervene (Docket Nos. 44 and 45), Relators amended the complaint
(upon motion) and added David Stern as a Relator. (Docket Nos. 56, 58, and 59.)
Methodist Defendants and West Defendants (with which Relators have since reached a
settlement) filed motions to dismiss the second amended complaint on various grounds including that
the second amended complaint is barred by the FCA’s first-to-file rule and fails to satisfy the
requirements under the FCA and Rule 9(b) to plead fraud with particularity based on Relators’ personal
knowledge. (Docket No. 79.)3 On March 19, 2021, Relators filed a motion for leave to file the instant
third amended complaint. (Docket No. 154.) Methodist Defendants (as the only remaining defendants)
oppose the amendment (Docket Nos. 162 and 163) on grounds that the third amended complaint is
similarly defective because it fails to plead particularized fraud based on personal knowledge and that
allowing Relators to proceed with a third amended complaint before the question of sufficiency of the
allegations in the second amended complaint is resolved is prejudicial.
The recited background and procedural history are taken from the record and, unless
otherwise noted, are generally undisputed.
2
3
Relators eventually reached a settlement with the West Defendants. (Docket No. 132.) By
order entered on February 9, 2021, the claims against the West Defendants were severed and dismissed.
(Docket No. 133.)
2
B.
Legal Standards and Analysis
Although the Sixth Circuit has not addressed whether a motion to amend is a dispositive
or non-dispositive motion, most of the district courts in the Sixth Circuit, including this court,
consider an order on a motion to amend to be non-dispositive. See, e.g., Gentry v. The Tennessee
Board of Judicial Conduct, 2017 WL 2362494, at *1 (M.D. Tenn. May 31, 2017) (“Courts have
uniformly held that motions to amend complaints are non-dispositive matters that may be
determined by the magistrate judge and reviewed under the clearly erroneous or contrary to law
standard of review …”) (citations omitted); Chinn v. Jenkins, 2017 WL 1177610 (S.D. Ohio
March 31, 2017) (order denying motion to amend is not dispositive); Young v. Jackson, 2014 WL
4272768, at *1 (E.D. Mich. Aug. 29, 2014) (“A denial of a motion to amend is a non-dispositive
order.”); Hira v. New York Life Insurance Co., at **1-2, 2014 WL 2177799 (E.D. Tenn. May 23,
2014) (magistrate judge’s order on motion to amend was appropriate and within his authority
because motion to amend is non-dispositive); United States v. Hunter, 2013 WL 5280251, at *1
(S.D. Ohio Oct. 29, 2013) (stating that a magistrate judge’s orders denying petitioner’s motions to
amend a petition pursuant to 28 U.S.C. § 2855 were non-dispositive).
Rule 15, which governs the Court’s consideration of the pending motion, states that leave
to amend a pleading should be “freely given when justice so requires.” Fed. R. Civ. P. 15(a). This
mandate follows the principle that a plaintiff’s claims ought to be decided on the merits “rather
than the technicalities of pleadings.’” Moore v. City of Paducah, 790 F.2d 557, 559 (6th Cir. 1986)
(quoting Tefft v. Seward, 689 F.2d 637, 639 (6th Cir. 1982)). Sixth Circuit precedent clearly
“manifests ‘liberality in allowing amendments to a complaint.’” Newberry v. Silverman, 789 F.3d
636, 645 (6th Cir. 2015) (quoting Janikowski v. Bendix Corp., 823 F.2d 945, 951 (6th Cir. 1987)).
Absent “any apparent or declared reason,” such as undue delay, bad faith or dilatory motive,
repeated failure to cure deficiencies by prior amendments, undue prejudice to the opposing party,
3
or futility of the amendment, “the leave should, as the rules require, be ‘freely given.’” Leary v.
Daeschner, 349 F.3d 888, 905 (6th Cir. 2003 (quoting Foman v. Davis, 371 U.S. 178, 182 (1962).
The determination as to whether justice requires permission to amend the pleading is within the
district court’s “sound discretion.” Moore, 790 F.2d at 559 (internal citations omitted); but see
Riverview Health Inst. LLC v. Med. Mut. of Ohio, 601 F.3d 505, 512 (6th Cir. 2010) (reviewing de
novo district court’s denial of motion for leave to amend on the basis of futility). For the reasons
discussed below, the Court finds that Rule 15’s liberal standard of allowing amendments is not
overcome by considerations of either undue prejudice or futility under the circumstances of this
case.
I.
Prejudice
Defendants maintain that substantial prejudice will result from permitting Relator’s
proposed third amended complaint amendment before the Court has decided the pending motion
to dismiss the second amended complaint. Although Defendants cite to a case in which a motion
to amend was denied without prejudice to allow for resolution of a pending motion to dismiss,
U.S. ex rel. Byrd v. Acadia Healthcare Co., Inc., that reference was to a prior ruling in the
procedural history of the case and does not include any in-depth analysis or support. 2021 WL
108112, at *12 (M.D. Louis. March 18, 2021). Rather than adopt this dicta, the Court elects instead
to follow Magistrate Judge Newbern’s persuasive approach – based on prevailing authority – that
prejudice generally requires more than merely the pendency of a motion to dismiss. Local Spot,
Inc. v. Lee, Case No. 3:20-cv-00421, 2020 WL 7554214, at *3 (M.D. Tenn. Dec. 14, 2020)
(internal citations omitted). Here, ample time remains in the discovery period (see Docket No. 152
at 2) and before trial for Defendants to develop their response to the third amended complaint.
Given the issues in this case, and the procedural posture, the Court does not find either a lack of
4
diligence or undue delay on Relators’ part or the kind of undue prejudice necessary to justify
denying leave to amend under Rule 15.
II.
Futility
The remaining crux of Defendants’ opposition focuses on the purported futility of Relators’
proposed amendments because the amendments are, according to Defendants, based on
information obtained from the West Defendants in discovery and therefore simply compound
Relators’ lack of personal knowledge of any fraud. A proposed amendment is futile when it would
not survive a motion to dismiss under Rule 12(b)(6) and the Sixth Circuit has made clear that any
analysis of the futility of proposed amendments is equivalent to that undertaken in consideration
of a Rule 12(b)(6) motion. Rose v. Hartford Underwriters Ins. Co., 203 F.3d 417, 421 (6th Cir.
2000).
“Courts in this circuit recognize that futility arguments in the context of a motion to amend
are functionally dispositive and present something of a “conceptual difficulty” when raised before
a magistrate judge who, by statute, cannot ordinarily rule on dispositive motions.” Local Spot, Inc.
v. Lee, Case No. 3:20-cv-00421, 2020 WL 7554214, at *4 (M.D. Tenn. Dec. 14, 2020) (citing
Durthaler v. Accounts Receivable Mgmt., Inc., No. 2:10-cv-1068, 2011 WL 5008552, at *4 (S.D.
Ohio Oct. 20, 2011); see also Vanburen v. Ohio Dep’t of Pub. Safety, No. 2:11-cv-1118, 2012 WL
5467526, at *4 (S.D. Ohio Nov. 9, 2012) (holding that due to this “procedural roadblock,” the
better course would be to allow amendment of the complaint with the understanding that a motion
to dismiss may follow filing of the amended complaint). This is particularly true where, as here,
the parties have raised the same or similar legal issues in dispositive motions that are concurrently
pending before the district judge. Under these circumstances, at least where the proposed amended
claims are “arguably sufficient, it is usually a sound exercise of discretion to permit the claim[s]
5
to be pleaded and to allow the merits of the claim[s] to be tested before the District Judge by way
of a motion to dismiss.” Durthaler, 2011 WL 5008552, at *4; see also Greenwald v. Holstein,
No. 2:15-cv-2451, 2016 WL 9344297, at *5 (S.D. Ohio Feb. 3, 2016) (same).
Defendants’ arguments in favor of dismissal and in opposition to the proposed third
amended complaint turn on whether Relators’ claims can survive under Rule 9 and what
Defendants characterize as FCA’s requirement that Relators possess personal knowledge of the
fraud they are alleging. “Allowing Defendants’ substantive legal arguments to be addressed in a
single decision is the most efficient course of action and will guard against inconsistent results in
different procedural contexts.” Local Spot, 2020 WL 7554214, at *4.4 Given this efficiency, the
lack of any undue prejudice to Defendants by allowing the amended pleading, and there being no
other apparent reasons to deny the motion for leave to amend under Rule 15(a)(2), the Court will
allow the amendment.5
C.
Conclusion
For all these reasons, Relators’ motion for leave to amend (Docket No. 154) is granted. The
Clerk is directed to separately file the third amended complaint and accompanying exhibits, which are
presently found at Docket Nos. 154-1, 154-2, and 154-3. Once filed, the third amended complaint is
the legally operative complaint, thus rendering moot Defendants’ pending motion to dismiss the
Second Amended Complaint. The Clerk is therefore directed to terminate that motion (Docket No. 79)
To be clear, allowance of the amendment should not be construed as a determination that
Defendants’ arguments for dismissal are without merit. The undersigned expresses no opinion on
the merits of those arguments, including implicitly by granting Relator’s motion to amend.
4
The Court also notes that the time to seek leave to amend has now expired, which
minimizes, if not eliminates, the prospect of additional amendments.
5
6
without prejudice to refiling as to the third amended complaint as appropriate. Defendants shall answer
or otherwise respond to the third amended complaint as directed by Rule 15(a)(3).
It is SO ORDERED.
__________________________________________
BARBARA D. HOLMES
United States Magistrate Judge
7
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?