Jones et al v. University of Utah Health Sciences Center et al
MEMORANDUM DECISION granting 14 Motion to Dismiss as to HSC, OSD, and Dr. Beals in his official capacity ; granting 19 Motion to Amend/Correct Complaint. Relators shall file their amended complaint no later than October 18, 2013. Signed by Magistrate Judge Paul M. Warner on 09/24/2013. (asp)
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
UNITED STATES OF AMERICA ex rel.
RICK JONES AND LINDA JONES,
MEMORANDUM DECISION AND
Case No. 2:11cv1200
UNIVERSITY OF UTAH HEALTH
SCIENCES CENTER; UNIVERSITY OF
UTAH ORTHOPEDIC SURGERY
DEPARTMENT; AND TIMOTHY
Magistrate Judge Paul M. Warner
On January 15, 2013, all parties consented to having United States Magistrate Judge Paul
M. Warner conduct all proceedings in the case, including entry of final judgment, with appeal to
the United States Court of Appeals for the Tenth Circuit.1 See 28 U.S.C. § 636(c); Fed. R. Civ.
P. 73. Before the court are (1) the University of Utah Health Sciences Center (“HSC”);
University of Utah Orthopedic Surgery Department (“OSD”); and Timothy Beals, M.D.’s (“Dr.
Beals”) (collectively, “Defendants”) motion to dismiss;2 and (2) Rick Jones and Linda Jones’s
(collectively, “Relators”) motion for leave to amend the complaint.3 The court has carefully
reviewed the motions and memoranda submitted by the parties. Pursuant to civil rule 7-1(f) of
See docket no. 18.
See docket no. 14.
See docket no. 19.
the United States District Court for the District of Utah Rules of Practice, the court elects to
determine the motions on the basis of the written memoranda and finds that oral argument would
not be helpful or necessary. See DUCivR 7-1(f).
Relators filed this False Claims Act (“FCA”) qui tam action, see 31 U.S.C. § 3729,
alleging that Defendants submitted false claims to Medicare and Medicaid of Wyoming for three
surgical procedures performed by Dr. Beals on Relators’ daughter, Trinette Jones (“Trinette”).
Trinette underwent surgery to repair a torn Achilles tendon at HSC on January 14, 2009. She
was to be discharged to Relators’ care that evening but she developed a fever after surgery and
was admitted to the hospital. At the time of the surgery, Trinette was taking several
immunosuppressant medications for her connective tissue disease, making her more susceptible
Relators allege that the postoperative care of Trinette was entirely conducted by a second
year orthopedic surgery resident, Dr. Ryan Spiker, rather than Dr. Beals and that neither Dr.
Beals nor any other teaching physician at HSC was present during Trinette’s postoperative care.
In the original complaint, Relators contend that HSC and/or OSD billed Medicare and Medicaid
of Wyoming for the three surgical procedures Dr. Beals performed to repair Trinette’s Achilles
tendon, which included her postoperative care, in violation of Medicare billing policy. In the
proposed amended complaint, Relators allege that on March 9, 2009, Dr. Beals caused HSC to
submit claims for payment to Medicare and to Medicaid of Wyoming for Trinette’s surgery even
The relevant facts are taken from Relators’ original complaint, see docket no. 1, and
their proposed amended complaint. See docket no. 19, Exhibit 1.
though he did not personally manage or participate in critical portions of Trinette’s postoperative
care in violation of Medicare billing policy.
In late December 2011, Relators filed this action under seal against Defendants on behalf
of the United States.5 See 31 U.S.C. § 3730(b). On July 30, 2012, the United States declined to
intervene.6 See id. § 3730(b)(4)(B). This court then unsealed the complaint and ordered it
served on Defendants.7 See id. § 3730(b)(2).
Defendants move to dismiss this action on the grounds that this court lacks subject matter
jurisdiction because (1) the FCA does not permit an action against a state or a state agency;
and/or (2) as arms of the State of Utah, HSC and OSD are immune from suit under the Eleventh
Amendment. Defendants further argue that Relators’ complaint and proposed amended
complaint fail to plead fraud with particularity as required by rule 9(b) of the Federal Rules of
A. Motion to Dismiss
Relators concede that HSC and OSD should be dismissed from the case under Vermont
Agency of Natural Resources v. U.S. ex rel. Stevens, 529 U.S. 765 (2000). See id. at 787-88
(holding that a state or a state agency is not a person under the FCA and is not subject to liability
in qui tam suits brought by relators). Specifically, Relators acknowledge that as state agencies,
HSC and OSD are not persons subject to suit under the FCA and, as such, dismissal of those
See docket no. 1.
See docket no. 7.
See docket no. 9.
defendants is proper. Relators, however, do not concede that the Eleventh Amendment bars qui
tam actions against a state because the Supreme Court in Stevens specifically declined to address
that issue. See id. (“We of course express no view on the question whether an action in federal
court by a qui tam relator against a State would run afoul of the Eleventh Amendment, but we
note that there is ‘a serious doubt’ on that score.” (citation omitted)).
There is no question that HSC and OSD are state entities and are therefore not “persons”
under the FCA. It is not completely clear from the original complaint whether Relators intended
to sue Dr. Beals in his official or individual capacity (or both). To the extent that Relators’
original complaint names Dr. Beals in his official capacity, this court agrees that Dr. Beals stands
in the shoes of the state and, pursuant to Stevens, cannot be sued under the FCA. See id.; see
also U.S. ex rel. Adrian v. Regents of Univ. of Cal., 363 F.3d 398, 402 (5th Cir. 2004) (“[W]e
hold that claims against state agency employees in their official capacities are treated as claims
against the state agency for purposes of the FCA.”); U.S. v. Menominee Tribal Enterprises, 601
F. Supp. 2d 1061, 1070 (E.D. Wis. 2009) (recognizing that individual state employees may not
be sued under the FCA in their official capacities).
Based on the foregoing, this court concludes that the FCA prohibits Relators from
asserting claims against HSC, OSD, and Dr. Beals in his official capacity. Accordingly,
Defendants’ motion to dismiss is GRANTED as to HSC, OSD, and Dr. Beals in his official
B. Motion for Leave to Amend the Complaint
Relators assert that Dr. Beals is subject to liability under the FCA in his individual
capacity and move the court for leave to amend the complaint to name him individually. Dr.
Beals argues that allowing Relators to assert individual FCA claims against him would permit an
end-run around Stevens and the Eleventh Amendment because he was acting in his official
capacity and within the scope of his employment. Dr. Beals contends that it would be futile to
grant Relators permission to name him in his individual capacity because state employees may
not be sued under the FCA in their individual capacities.
Rule 15(a) of the Federal Rules of Civil Procedure provides that courts “should freely
give leave [to amend] when justice so requires.” Fed. R. Civ. P. 15(a)(2); see also Foman v.
Davis, 371 U.S. 178, 182 (1962) (stating that the mandate of rule 15(a) “is to be heeded” and that
“[i]n the absence of any apparent or declared reason . . . the leave sought should, as the rules
require, be ‘freely given.’” (quoting previous version of Fed. R. Civ. P. 15)). As noted by the
Tenth Circuit, rule 15 is intended “to provide litigants the maximum opportunity for each claim
to be decided on its merits rather than on procedural niceties.” Minter v. Prime Equip. Co., 451
F.3d 1196, 1204 (10th Cir. 2006) (quotations and citations omitted).
“Whether to grant or deny leave to amend is within the sound discretion of the trial
court.” Castleglen, Inc. v. Resolution Trust Corp., 984 F.2d 1571, 1585 (10th Cir. 1993). The
court may refuse to grant leave to amend only where it finds evidence of “undue delay, bad faith
or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments
previously allowed, undue prejudice to the opposing party by virtue of allowance of the
amendment, [or] futility of amendment.” Minter, 451 F.3d at 1204 (quotations and citations
omitted). The “most important . . . factor in deciding a motion to amend the pleadings, is
whether the amendment would prejudice the nonmoving party.” Id. at 1207. Generally, courts
have determined that permitting the amendment of a pleading is prejudicial only when it unfairly
affects the nonmovant in terms of rebutting the amendment’s legal claim, factual averment,
and/or affirmative defense. See id. at 1208.
The Tenth Circuit has held that a “proposed amendment is futile if the complaint, as
amended, would be subject to dismissal.” Watson ex rel. Watson v. Beckel, 242 F.3d 1237,
1239-40 (10th Cir. 2001). Under rule 12(b)(6), a court may dismiss a complaint for “failure to
state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). On a rule 12(b)(6)
motion, the court examines the sufficiency of the complaint, accepting as true the well-pleaded
factual allegations and drawing all reasonable inferences in favor of the plaintiff. See Shaw v.
Valdez, 819 F.2d 965, 968 (10th Cir. 1987). “The complaint must plead sufficient facts, taken as
true, to provide ‘plausible grounds’ that discovery will reveal evidence to support the plaintiff’s
allegations.” Shero v. City of Grove, 510 F.3d 1196, 1200 (10th Cir. 2007) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 556 (2007)). “‘Factual allegations [in a complaint] must be
enough to raise a right to relief above the speculative level.’” Robbins v. Oklahoma, 519 F.3d
1242, 1247 (10th Cir. 2008) (quoting Twombly, 550 U.S. at 555). “[T]he complaint must contain
‘enough facts to state a claim to relief that is plausible on its face.’” Id. (quoting Twombly, 550
U.S. at 570).
The court now considers whether Relators may assert an FCA claim against Dr. Beals in
his individual capacity. There is a split of authority regarding this issue, and no Tenth Circuit
case law provides clear guidance. Therefore, the court will look first to the language of the
statute. The FCA provides, in relevant part, that “any person who . . . knowingly presents, or
causes to be presented, a false or fraudulent claim for payment or approval” or “knowingly
makes, uses, or causes to be made or used, a false record or statement material to a false or
fraudulent claim” is liable for certain civil penalties. 31 U.S.C. § 3729(a)(1). Thus, the plain
language of the statute applies to “any person” who submits a false claim or causes such a claim
to be submitted. Id. There is nothing in the statutory language that creates an exception for state
employees. See id. Accordingly, “under the FCA, state employees are ‘persons’ who may be
sued if they are sufficiently involved in the submission of a false claim to the United States.”
U.S. ex rel. Burlbaw v. Regents of New Mexico State Univ., 324 F. Supp. 2d 1209, 1215 (D.
Dr. Beals urges this court to conclude that a state employee may not be sued under the
FCA in his or her individual capacity and adopt the reasoning set forth in United States ex rel.
Gaudineer & Comito, L.L.P. v. Iowa, 269 F.3d 932 (8th Cir. 2001), and United States ex rel.
McVey v. Board of Regents of University of California, 165 F. Supp. 2d 1052 (N.D. Cal. 2001).
In Gaudineer, the Eighth Circuit held that an individual state official could not be sued under the
FCA in his individual capacity, unless he was acting “outside of his official duties.” 269 F.3d. at
937 (quotations and citation omitted). However, as noted by both the Gaudineer dissent, as well
as the court in Burlbaw, “this holding is tantamount to granting absolute immunity to all state
employees, for FCA purposes, for any actions taken within the course and scope of their duties”
and thus “contrary to the Supreme Court’s public-employee-immunity jurisprudence.” Burlbaw,
324 F. Supp. 2d at 1215-16; see Gaudineer, 269 F.3d at 938 (Gibson, J., dissenting) (noting that
the Supreme Court had concluded that, in a similarly worded statute, failure “to allow personal
capacity suits against state officials acting within the scope of their authority [under 42 U.S.C. §
1983] would ‘absolutely immunize state officials from personal liability for acts within their
authority . . . . Yet our cases do not extend absolute immunity to all officers who engage in
necessary official acts.’” Hafer v. Melo, 502 U.S. 21, 28 (1991)). “[S]uch absolute immunity
extends only to a very limited class of officials, ‘including the President of the United States,
legislators carrying out their legislative functions, and judges carrying out their judicial
functions.’” Burlbaw, 324 F. Supp. 2d at 1124 (quoting Hafer, 502 U.S. at 29). Because Dr.
Beals does not fall into this limited class of public employees, this court does not find Gaudineer
to be persuasive.
The basis for McVey’s analysis and conclusion is likewise unpersuasive. In McVey, the
court held that “[u]nder the FCA, a state official is immune from suit for actions taken in his
position [even if he] abused his authority.” 165 F. Supp. 2d at 1059. However, the Ninth Circuit
specifically rejected the district court’s conclusion in McVey (as well as the Eighth Circuit’s in
Gaudineer) because it could not be “reconciled with the plain language” of the FCA. Stoner v.
Santa Clara Cnty. Office of Educ., 502 F.3d 1116, 1124 (9th Cir. 2007). Thus, while McVey is
no longer good law based on the Ninth Circuit’s decision, neither Dr. Beals nor Relators even
mention Stoner in their memoranda. That notwithstanding, this court finds the reasoning in
Stoner to be particularly cogent as the FCA’s language is unequivocal. It applies to “any
person” submitting a false claim, or causing a false claim to be submitted. 31 U.S.C. §
3729(a)(1). And, the court further notes, there is nothing in the FCA exempting state employees
Some courts have inserted a personal benefit requirement for state employees to be sued
in an individual capacity under the FCA. See, e.g., Alexander v. Gilmore, 202 F. Supp. 2d 478,
482 (E.D. Va. 2002) (holding and citing cases indicating that FCA claims against government
officials in their individual capacities must contain allegations of personal gain). However, like
the district court in Burlbaw, this court is not persuaded by these cases because state employees
would be absolutely immune from liability provided they did not personally profit from the false
claims. See Burlbaw, 324 F. Supp. 2d. at 1216-17; see also U.S. ex rel. Battle v. Bd. of Regents
of Ga., No. 1:00-CV-1637-TWT, 2002 WL 34386372, at *2 (N.D. Ga. May 8, 2002) (“There is
no FCA requirement that the individual act outside the scope of his employment or that the
employee personally benefit from the fraudulent conduct.”). This court concludes that this case
is “no different than the legions of § 1983 claims that are brought against state officials in their
individual capacities, the vast majority of which involve state employees (prison guards, police
officers, zoning administrators, et al.) acting within the scope of their employment.” Menominee
Tribal Enterprises, 601 F. Supp. 2d at 1071.
To state a claim against Dr. Beals in his individual capacity, Relators need only allege
that he “knowingly present[ed], or cause[d] to be presented, a false or fraudulent claim for
payment or approval” or “knowingly ma[de], use[d], or cause[d] to be made or used, a false
record or statement material to a false or fraudulent claim.” 31 U.S.C. § 3729(a)(1). In the
proposed amended complaint, Relators allege that Dr. Beals knowingly presented, or caused to
be presented, a false claim, record, or statement to Medicare and Medicaid of Wyoming
regarding Trinette’s surgery and postoperative care. Relators “set forth the who, what, when,
where and how of the alleged fraud” sufficient to meet the heightened pleading requirement
under rule 9(b) of the Federal Rules of Civil Procedure. U.S. ex rel. Sikkenga v. Regence
Bluecross Blueshield of Utah, 472 F.3d 702, 727-28 (10th Cir. 2006) (quotations and citation
Thus, based on the analysis of Stoner and Burlbaw, this court concludes that “state
employees may be sued in their individual capacities under the FCA for actions taken in the
course of their official duties.” Stoner, 502 F.3d at 1125. This court notes that while Dr. Beals
is not entitled to absolute immunity, he may be entitled to qualified immunity. However, that
affirmative defense has not been alleged and is not before the court at this time. Accordingly,
Relators’ motion for leave to amend the complaint is GRANTED. Relators shall file an
amended complaint naming Dr. Beals in his individual capacity no later than October 18, 2013.
Based on the foregoing, Defendants’ motion to dismiss is GRANTED as to HSC, OSD,
and Dr. Beals in his official capacity. Relators’ motion to amend the complaint to name Dr.
Beals in his individual capacity is GRANTED. Relators shall file their amended complaint no
later than October 18, 2013.
IT IS SO ORDERED.
DATED this 24th day of September, 2013.
BY THE COURT:
PAUL M. WARNER
United States Magistrate Judge
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