WILLIAM H. STEELE, District Judge.
This matter is before the Court on the motion of defendant Castle Medical, LLC ("Castle") for judgment on the pleadings. (Doc. 125). The parties have filed briefs in support of their respective positions, (Docs. 125, 133, 136), and the motion is ripe for resolution. After careful consideration, the Court concludes that the motion is due to be granted.
The relator in this False Claims Act case was employed by defendant Physicians Pain Specialists of Alabama, P.C. ("Pain"). In August 2013, she filed this action against Pain and against the two doctors ("Ruan" and "Couch") who owned Pain. (Doc. 1). In August 2014, she filed a first amended complaint that added a pharmacy as a defendant. (Doc. 8). In October 2016, the government filed its notice of non-intervention. (Doc. 24). The relator then filed a second amended complaint that added four more defendants, including Castle. (Doc. 29). In December 2016, the government gave notice of non-intervention as to this pleading. (Doc. 30).
Of the eight defendants named in the second amended complaint, only Castle continues the fight. The three defendants added along with Castle were dismissed without prejudice on the relator's unopposed request, and the other defendants have suffered entry of default. (Docs. 93, 99-100, 122-23).
The second amended complaint is 56 pages long. It incorporates the relator's Supplemental Disclosure Statement of Material Evidence ("Disclosure Statement"), (id. at 22), itself 37 pages long. (Doc. 29-1). The parties agree that these documents allege nine different schemes against varying sets of defendants. (Doc. 133 at 15; Doc. 136 at 2). Only one of these schemes implicates Castle. Similarly, while the second amended complaint asserts eight causes of action, only three are alleged against Castle.
The alleged scheme, in a nutshell, is that Castle and Ruan reached and fulfilled an agreement pursuant to which Ruan, in exchange for monthly payments of $7,000, referred to Castle all urine drug screen ("UDS") testing. This arrangement is said to violate both the Stark Law and the Anti-Kickback Statute. Count III alleges that Castle violated the False Claims Act by violating the Stark Law. Count IV alleges that Castle violated the False Claims Act by violating the Anti-Kickback Statute. Count VIII alleges that Castle conspired with Pain and other defendants to violate the False Claims Act. (Doc. 29 at 42-46, 52-54).
Castle's motion for judgment on the pleadings is brought pursuant to Rule 12(c). Castle argues thereunder that Counts III, IV and VIII fail to state a claim on which relief against Castle can be granted. Castle also argues that these counts are not pleaded with the specificity required by Rule 9(b). (Doc. 125 at 1, 5).
"Judgment on the pleadings is proper when no issues of material fact exist, and the moving party is entitled to judgment as a matter of law based on the substance of the pleadings and any judicially noticed facts." Cunningham v. District Attorney's Office, 592 F.3d 1237, 1255 (11
With nuances and exceptions not relevant here, the Stark Law prohibits a physician from making a referral, for services otherwise covered under Medicare, to an entity with which he has a financial relationship. 42 U.S.C. § 1395nn(a)(1). The Stark Law also prohibits the payment of any Medicare claim for services provided in violation of this provision. Id. § 1395nn(g)(1). The Anti-Kickback Statute makes it a felony to offer or pay any remuneration to induce a person to refer an individual for the furnishing of any service for which payment may be made under a federal health care program. 42 U.S.C. § 1320a-7b(b)(2)(A). Castle concedes that violation of the Stark Law or the Anti-Kickback Statute can support a claim under the False Claims Act. (Doc 125 at 7). See McNutt ex rel. United States v. Haleyville Medical Supplies, Inc., 423 F.3d 1256, 1257, 1259 (11
Castle raises a number of arguments in support of its motion, but one is dispositive. "[T]he False Claims Act is a fraud statute for the purposes of Rule 9(b)." United States ex rel. Clausen v. Laboratory Corp. of America, Inc., 290 F.3d 1301, 1309 (11
"To state a claim under the False Claims Act with particularity, the complaint must allege facts as to time, place, and substance of the defendant's alleged fraud, and the details of the defendant's allegedly fraudulent acts, when they occurred, and who engaged in them." Corsello, 428 F.3d at 1012 (internal quotes omitted). There are two parts to this burden. First, the plaintiff must "provid[e] the `who,' what,' `where,' `when,' and `how' of improper practices." Id. at 1014. Second — and this is the critical point in this case — she must "allege the `who,' `what,' `where,' `when,' and `how' of fraudulent submissions to the government." Id.
"The False Claims Act does not create liability merely for a health care provider's disregard of Government regulations or improper internal policies unless, as a result of such acts, the provider knowingly asks the Government to pay amounts it does not owe." Clausen, 290 F.3d at 1311. "Without the presentment of such a claim, . . . there is simply no actionable damage to the public fisc as required under the False Claims Act." Id. (emphasis in original). "The submission of a claim is thus . . . the sine qua non of a False Claims Act violation." Id. "As such, Rule 9(b) . . . does not permit a False Claims Act plaintiff merely to describe a private scheme in detail but then to allege simply and without any stated reasons for his belief that claims requesting illegal payments must have been submitted, were likely submitted or should have been submitted to the Government." Id. Rather, "[b]ecause it is the submission of a fraudulent claim that gives rise to liability under the False Claims Act, that submission must be pleaded with particularity and not inferred from the circumstances." Corsello, 428 F.3d at 1013. At a minimum, "some indicia of reliability must be given in the complaint to support the allegation of an actual false claim for payment being made to the Government." Clausen, 290 F.3d at 1311 (emphasis in original). Firm enforcement of Rule 9(b) in this context "ensures that the relator's strong financial incentive to bring an FCA claim — the possibility of recovering between fifteen and thirty percent of a treble damages award — does not precipitate the filing of frivolous suits." United States ex rel. Atkins v. McInteer, 470 F.3d 1350, 1360 (11
Counts III and IV allege generally that Castle unlawfully submitted claims to Medicare for goods and services supplied as a result of the referrals and kickbacks made unlawful by the Stark Law and the Anti-Kickback Statute. (Doc. 29 at 43, ¶ 63; id. at 45, ¶ 73).
First, the statement does not, as the relator asserts in her brief, assert with particularity that 60% of Pain's patients were covered by Medicare. All it says is that a majority of Pain's revenue (not patients) from third-party payors (not all payors, including uninsured patients and the uninsured expenses of insured patients) comes from Medicare.
Even assuming that a significant percentage of Pain's patient base is covered by Medicare, the statement says nothing about the only patients that matter — those obtaining UDS testing. Such testing is typically done at the request of an employer or substance abuse treatment facility, while Medicare generally covers persons at least 65 years of age or with permanent disabilities. It thus may be that UDS testing of Pain's patients skews towards patients not covered by Medicare; certainly the relator has provided no reason to believe otherwise.
For all these reasons, it is doubtful the relator has pleaded with adequate particularity that Castle performed any UDS testing on any Medicare patients referred from Pain under the alleged referral/kickback arrangement. The ultimately fatal flaw in her pleading, however, is her patent failure to plead with particularity that, assuming it performed such UDS testing, Castle then billed the government for such services.
The relator admits she never worked for Castle,
In Clausen, the relator alleged only that the defendant's practices "resulted in the submission of false claims for payment to the United States." 290 F.3d at 1312. No sample claim was provided, no amount of any claim was identified, and the complaint described "[n]o policies about billing or even second-hand information about billing practices." Id. The Eleventh Circuit held the pleading inadequate. As noted, a relator cannot rest simply on her ipse dixit that false claims "must have been submitted, were likely submitted, or should have been submitted." Id. at 1311. "[W]e cannot . . . presume what [the defendant's] billing policies were and assume [the defendant] actually billed the Government in whole or in part for all tests it took the trouble to order. . . ." Id. at 1313 n.23 (internal quotes omitted). More generally, "[w]e cannot make assumptions about a False Claims Act defendant's submission of actual claims to the Government. . . ." Id. at 1312 n.21. Not even a "pattern of improper practices of the defendants leads to the inference that fraudulent claims were submitted to the government. . . ." Corsello, 428 F.3d at 1013. These pronouncements make perfectly clear that the mere fact the defendant performed a test on a Medicare patient does not adequately support an allegation the defendant submitted a claim for the test. That, however, is precisely the mental leap on which the relator exclusively relies.
As in this case, the relator in Clausen was a "corporate outsider." 290 F.3d at 1314. "But, while an insider might have an easier time obtaining information about billing practices and meeting the pleading requirements under the False Claims Act, neither the Federal Rules nor the Act offer any special leniency under these particular circumstances. . . ." Id.
The relator cites a number of cases in support of her position, (Doc. 133 at 10-13, 19-21), but none of them can rescue her claims. It is true that "[w]e evaluate whether the allegations of a complaint contain sufficient indicia of reliability to satisfy Rule 9(b) on a case-by-case basis," Atkins, 470 F.3d at 1358, but this case is captured by Clausen. Indeed, it is also captured by Atkins, where a complaint failed to satisfy Rule 9(b) when it merely alleged the defendants submitted false claims and when the relator claimed no firsthand knowledge of such submissions, was not involved in billing, coding, filing or submitting claims at the one facility where he worked, and had "never stepped foot" in other facilities named as defendants. Id. at 1359.
It is likewise true that "[a] relator can also provide the required indicia of reliability by showing that he personally was in a position to know that actual false claims were submitted to the government and had a factual basis for his alleged personal knowledge." United States ex rel. Mastej v. Health Management Associates, Inc., 591 Fed. Appx. 693, 707 (11
It is also generally true that the particularity requirement of Rule 9(b) must be read with Rule 8(a)(2) ("short and plain statement of the claim") and Rule 8(e)(1) ("simple, concise, and direct" allegations). Hill v. Morehouse Medical Associates, Inc., 2003 WL 22019936 at *3 (11
The relator insists that, whenever relators "involved in management and decision-making" are "able to allege general — but reliable — information, their claims regularly survive motions to dismiss even if the allegations are not hypertechnical and specific." (Doc. 133 at 11). This is far too broad a statement to accept at face value. More precisely, managers (or even non-managers) with sufficiently direct and precise information regarding the defendant's billing practices may be able to survive Rule 9(b). None of the relator's cited cases support the more forgiving rule she espouses,
As noted, Count VIII alleges that Castle conspired with others to violate the False Claims Act.
It appears that the Eleventh Circuit requires the actual submission of a false claim in order to sustain a conspiracy claim under the False Claims Act. First, "[t]he submission of a claim is . . . the sine qua non of a False Claims Act violation." Clausen, 290 F.3d at 1311. Second, an essential element of a conspiracy claim is "that the United States suffered damages as a result of the false or fraudulent claim," Corsello, 428 F.3d at 1014 (internal quotes omitted), and it is not easy to see how the government could suffer damage from a conspiracy that does not result in the submission of a false claim. This is especially so given Clausen's statement that, "[w]ithout the presentment of such a [false] claim, . . . there is simply no actionable damage to the public fisc as required under the False Claims Act." 290 F.3d at 1311 (emphasis in original).
Because Clausen did not involve a conspiracy claim,
In short, Castle's motion for judgment on the pleadings is due to be granted. Castle seeks as relief the dismissal with prejudice of all claims against it and entry of judgment in its favor. (Doc. 125 at 24). The relator proposes no different relief.
For the reasons set forth above, Castle's motion for judgment on the pleadings is
DONE and ORDERED.
Even in Mastej, the necessary indicia of reliability disappeared the moment the relator left the defendants' employment, and after that point he could not plead with particularity either that the unlawful practices continued or that the defendants continued to submit false claims. 591 Fed. Appx. at 709. Here, the relator first identifies Castle as providing UDS testing pursuant to a referral/kickback arrangement in February 2013, (Doc. 29-1 at 19), and her employment with Pain ended "a short time" later, (id.), in April 2013. (Doc. 133 at 15). Applying Mastej here, as the relator requests, requires her to plead with particularity that Castle submitted false Medicare claims on UDS testing performed in this narrow two-month window.
The relator's remaining authorities are trial court decisions, most from outside the Eleventh Circuit. To the doubtful extent they lend colorable support to her position, they are incapable of superseding the controlling appellate precedent on which this opinion is based.