Bio-Medical Applications of Aquadilla, Inc. v. United States

• Decision Date: 19 December 2014
• Docket Number: No. 14-187C,14-187C
• Parties: BIO-MEDICAL APPLICATIONS OF AQUADILLA, INC., et al., Plaintiffs, v. THE UNITED STATES, Defendant.
• Court: U.S. Claims Court

BIO-MEDICAL APPLICATIONS OF AQUADILLA, INC., et al., Plaintiffs, v. THE UNITED STATES, Defendant.

No. 14-187C

United States Court of Federal Claims

December 19, 2014

Underpayment Claim; Money-Mandating Regulation; 38 C.F.R. § 17.56 (2008); RCFC 12(b)(1); RCFC 12(b)(6).

David T. Ralston, Jr., Washington, DC, for plaintiffs. Lisa A. Estrada, Jay N. Varon, Frank S. Murray, Jennifer M. Forde, Washington, DC, of counsel.

John S. Groat, United States Department of Justice, with whom were Stuart F. Delery, Assistant Attorney General, Robert E. Kirschman, Jr., Director, Steven J. Gillingham, Assistant Director, Phyllis Jo Baunach, Senior Trial Counsel, Joshua D. Schnell, Trial Attorney, Washington, DC, for defendant. Dennis Foley and Drew Cornacchio, Department of Veterans Affairs, Washington, DC, of counsel.

OPINION

BUSH, Senior Judge.

The court has before it defendant's motion to dismiss this suit, which was brought pursuant to Rules 12(b)(1) and 12(b)(6) of the Rules of the United StatesCourt of Federal Claims (RCFC). Defendant's motion was filed May 5, 2014 and has been fully briefed, including sur-replies and extensive appendices. Oral argument was neither requested by the parties nor deemed necessary by the court. For the reasons set forth below, defendant's motion is denied.

BACKGROUND¹

This suit contends that plaintiffs were underpaid for dialysis and related services (collectively, dialysis services) provided to veterans. According to the complaint, plaintiffs are 234 outpatient dialysis treatment centers; the centers share an affiliation, through various ownership interests, with Fresenius Medical Care Holdings, Inc. Plaintiffs therefore refer to themselves as the Fresenius Plaintiffs (hereinafter, Fresenius Plaintiffs or plaintiffs).

The dialysis services in question were provided to veterans who had obtained "beneficiary authorizations" from the Department of Veterans Affairs (VA). Compl. ¶¶ 22-23. According to plaintiffs, the correct payment amounts for these services should have been derived from a formula provided by 38 C.F.R. § 17.56 (2009), not rates provided by the fee schedule used by the Medicare program.² The relevant time-period for plaintiffs' claims is for dialysis services provided from January 1, 2009 through February 15, 2011 (the Relevant Period). On February 15, 2011, substantive amendments to section 17.56 took effect; thus, plaintiffs present no underpayment claims for dialysis services provided after that date.

Defendant raises a number of challenges to plaintiffs' claims in its motion to dismiss. Many of defendant's arguments presented here were rejected whenpresented to this court in another dialysis services underpayment case founded on 38 C.F.R. § 17.56. DaVita, Inc. v. United States, 110 Fed. Cl. 71 (2013). Although the government's position is fundamentally the same in the two suits, here the government's motion relies, in part, on authorities and arguments that were not discussed in detail in DaVita. In any event, the holding in DaVita is not binding authority in this case. AINS, Inc. v. United States, 365 F.3d 1333, 1336 n.1 (Fed. Cir. 2004), abrogated on other grounds by Slattery v. United States, 635 F.3d 1298 (Fed. Cir. 2011) (en banc).

DISCUSSION

I. Standards of Review

A. RCFC 12(b)(1)

In considering the issue of subject matter jurisdiction, this court must presume all undisputed factual allegations in the complaint to be true and construe all reasonable inferences in favor of the plaintiffs. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), abrogated on other grounds by Harlow v. Fitzgerald, 457 U.S. 800 (1982); Reynolds v. Army & Air Force Exch. Serv., 846 F.2d 746, 747 (Fed. Cir. 1988). However, plaintiffs bear the burden of establishing subject matter jurisdiction, Alder Terrace, Inc. v. United States, 161 F.3d 1372, 1377 (Fed. Cir. 1998) (citing McNutt v. Gen. Motors Acceptance Corp. of Ind., 298 U.S. 178, 189 (1936)), and must do so by a preponderance of the evidence, Reynolds, 846 F.2d at 748 (citations omitted). If jurisdiction is found to be lacking, this court must dismiss the action. RCFC 12(h)(3).

The Tucker Act delineates this court's jurisdiction. 28 U.S.C. § 1491 (2012). That statute "confers jurisdiction upon the Court of Federal Claims over the specified categories of actions brought against the United States . . . ." Fisher v. United States, 402 F.3d 1167, 1172 (Fed. Cir. 2005) (en banc) (citations omitted). These include money damages claims against the federal government founded upon the Constitution, an act of Congress, a regulation promulgated by an executive department, an express or implied contract with the United States, or a claim for liquidated or unliquidated damages in cases not sounding in tort. Id. (citing 28 U.S.C. § 1491(a)(1)).

The Tucker Act concurrently "waives the Government's sovereign immunity for those actions." Id. The statute does not, however, create a substantive cause of action or right to recover money damages in the Court of Federal Claims. Id. "[T]o come within the jurisdictional reach and the waiver of the Tucker Act, a plaintiff must identify a separate source of substantive law that creates the right to money damages." Id.

In other words, the source underlying the cause of action must be money-mandating, in that it "'can fairly be interpreted as mandating compensation by the Federal Government for the damage sustained.'" United States v. Testan, 424 U.S. 392, 400 (1976) (quoting Eastport S.S. Corp. v. United States, 372 F.2d 1002, 1009 (Ct. Cl. 1967) and citing Mosca v. United States, 417 F.2d 1382, 1386 (Ct. Cl. 1969)). If the provision relied upon is found to be money-mandating, the plaintiff need not rely upon a waiver of sovereign immunity beyond the Tucker Act. Huston v. United States, 956 F.2d 259, 261 (Fed. Cir. 1992) (citing United States v. Mitchell, 463 U.S. 206, 218 (1983)).

When the government has challenged the truth of jurisdictional facts in the complaint, the court must resolve the dispute. Reynolds, 846 F.2d at 747 (citations omitted). The court may inquire into evidence outside the pleadings to establish jurisdictional facts. Id.; Rogers v. United States, 95 Fed. Cl. 513, 514-15 (2010) (citations omitted). "Indeed, the court may, and often must, find facts on its own." Martinez v. United States, 48 Fed. Cl. 851, 857 (2001) (citing RHI Holdings, Inc. v. United States, 142 F.3d 1459, 1461-62 (Fed. Cir. 1998); Rocovich v. United States, 933 F.2d 991, 993 (Fed. Cir. 1991)), aff'd in relevant part, 281 F.3d 1376 (Fed. Cir. 2002).

B. RCFC 12(b)(6)

It is well-settled that a complaint should be dismissed under RCFC 12(b)(6) "when the facts asserted by the claimant do not entitle him to a legal remedy." Lindsay v. United States, 295 F.3d 1252, 1257 (Fed. Cir. 2002). When considering a motion to dismiss brought under RCFC 12(b)(6), "the allegations of the complaint should be construed favorably to the pleader." Scheuer, 416 U.S. at 236. The court must not mistake legal conclusions presented in a complaint, however, for factual allegations which are entitled to favorable inferences. See, e.g., Papasan v. Allain, 478 U.S. 265, 286 (1986) ("[W]e are not bound to acceptas true a legal conclusion couched as a factual allegation.") (citations omitted).

The court must also inquire whether the complaint meets the plausibility standard described by the United States Supreme Court, i.e., whether it adequately states a claim and provides a "showing [of] any set of facts consistent with the allegations in the complaint." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 563 (2007) (Twombly) (citations omitted). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (Iqbal) (quoting Twombly, 550 U.S. at 570). Plausibility is a context-specific inquiry. See, e.g., Iqbal, 556 U.S. at 679 ("Determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.") (citation omitted).

II. Analysis

A. Introduction

1. Administrative Incoherence

Unfortunately, the dispute before the court is more complicated and confusing than would be expected in what plaintiffs describe as a "simple and fairly straightforward . . . collections case." Pls.' Opp. at 6. Part of this confusion must be attributed to the codified medical regulations of the VA which, despite a sweeping overhaul in 1996, were littered with errors throughout the Relevant Period.³ See 61 Fed. Reg. 21,964 (May 13, 1996) (re-codifying the VA's medical regulations in Part 17 of Title 38 of the Code of Federal Regulations); see also, e.g., 38 C.F.R. § 17.120(a)(4) (referencing a non-existent 38 C.F.R. § 17.48(j)); 38 C.F.R. § 17.121 (citing for authority a non-existent 38 U.S.C. § 501(c)(1) (2006)); 38 C.F.R. § 17.142 (referencing non-existent regulations 38 C.F.R. §§ 17.99, 17.210). Further confusion is demonstrated by the parties' acknowledgment thatthe applicable VA manual (Manual M-1) during the Relevant Period may not have reflected the provisions of the VA's medical regulations or, for that matter, actual administrative practices at the VA. See Pls.' Opp. at 24-25 & n.18 (noting inconsistencies between 38 C.F.R. § 17.56 and Manual M-1 (citing Pls.' App. at 108-09)); Def.'s Reply at 19 ("We do agree with plaintiffs that . . . there is evidence that VA officials did not follow the provisions of Manual M-1 governing payment for dialysis services and did not pay providers of dialysis services in accordance with the Medicare rates as directed by Manual M-1; our statement in our opening brief regarding the VA's practice should have reflected this fact."). Thus, part of this controversy arose from the VA's lack of coherence in its administration of payment for dialysis services in the years preceding the Relevant Period and...