Storey v. Patient First Corp.

Decision Date14 June 2002
Docket NumberNo. Civ.A. 3:01CV870.,Civ.A. 3:01CV870.
Citation207 F.Supp.2d 431
PartiesStephen A. STOREY, Plaintiff, v. PATIENT FIRST CORPORATION, et al., Defendants.
CourtU.S. District Court — Eastern District of Virginia

Robert C. Rice, Carrell & Rice, Jack W. Burtch, Jr., Virginia Law & Government Affairs, PC, Richmond, VA, for Plaintiff.

D. Eugene Webb, Kimberly W. Daniel, Troutman Sanders, LLP, Richmond, VA, for Defendants.


PAYNE, District Judge.

This case is before the Court on the defendants' Motion to Dismiss several counts of the plaintiff's First Amended Complaint pursuant to Fed.R.Civ.P. 12(b)(6). For the reasons set forth below, the motion is granted in part and denied in part.


The following are the facts as alleged in the plaintiff's First Amended Complaint (the "Complaint"). As required when considering a motion pursuant to Rule 12(b)(6), the facts, as alleged in the Complaint, are presumed to be true.

A. Background
1. The Parties

The plaintiff, Stephen A. Storey, a resident of Virginia, is a shareholder, and formerly was the Chief Financial Officer ("CFO") and the Executive Vice President of Finance and Corporate Development, of defendant, Patient First Corporation ("Patient First"), a Virginia corporation with its principal place of business in Virginia.1 At all times relevant to the allegations in the Complaint, defendant, R.P. Sowers III, M.D., was the Chief Executive Officer, and the Chairman of the Board of Directors (the "Board"), of Patient First, and defendant, George H. Morrison, was the Chief Operating Officer, and a member of the Board, of Patient First. (Complaint, ¶¶ 1-5).

Patient First is in the business of providing health care services through its operation of ambulatory care facilities in Virginia and Maryland. Before becoming a shareholder in Patient First, Storey assisted Sowers in preparing a business plan for the purpose of attracting capital investment with which the company would establish a nationwide chain of ambulatory care centers. On or about January 21, 1986, Storey and other investors became shareholders of Patient First,2 and Storey entered into an agreement pursuant to which he agreed to serve as the company's CFO. In that role, Storey worked with other individuals who held substantial equity interests in Patient First in an effort to develop business for, and to attract further capital investment in, the company. (Complaint, ¶¶ 6-8).

2. The Contract And Stock Agreements

By letter agreement dated January 1, 1991, Storey and Patient First entered into a new contract (the "Contract") that governed the terms of Storey's employment, compensation, and stock ownership interests in the company, and that superceded the previous agreement between the parties. (Complaint, ¶ 10). The following provisions of the Contact3 are particularly relevant to Storey's claims:

1. Employment

(A) The Company [Patient First] hereby employs you and you hereby accept such employment upon the terms and conditions set forth herein. This agreement shall be effective January 1, 1990[sic], and shall continue until terminated as provided in Paragraph 7 (the "Term of Employment"). During the Term of Employment, you shall devote your full time, attention and efforts to the business of the Company, except as expressly agreed otherwise in writing by the Company, and use your best efforts to promote the interests of the Company.

7. Termination

The Term of Employment shall be for one (1) year from the date of this Agreement and from year to year thereafter, unless sooner terminated (i) by the Company, with or without cause, upon 180 days notice to you, (ii) by you upon 120 days notice to the Company, or (iii) by your death. Termination by the Company shall be effective only if approved by a vote of 80% of the persons who are then serving as Directors of the Company....

The Contract also provides that Storey was to receive compensation in the amount of $123,000 per year, and that he would "be entitled to participate in any vacation, bonus, stock option, incentive compensation, deferred compensation [etc.] ... or other plan or program and to receive any other benefits for which [he was] eligible and which the Company at its sole option provide[d] for [him] or for its employees generally." (Complaint, ¶ 13; defendants' March 8, 2002 Memorandum in Support of Motion to Dismiss, Ex. A.).

Storey also alleges that, on April 5, 1995, he entered into two additional contracts with Patient First, an Incentive Stock Option Agreement and a Rights Agreement (collectively, the "Stock Agreements"),4 pursuant to which he acquired the option to purchase 4,000 shares of the stock of Patient First at a price of $44.00, as well as other rights incident thereto. The Stock Agreements allegedly provide that Storey was entitled to a payment from Patient First (in the form of either cash or stock) of the net value of the 4,000 shares of Patient First stock (based on its fair market value) less the option price of $44.00 per share. In addition, Storey allegedly was entitled under the Stock Agreements to exercise the options granted therein within three months after the termination of his employment with Patient First.5 (Complaint, ¶¶ 57-60).

3. The History Of Storey's Employment

Storey alleges that he "worked reliably and diligently on behalf of [Patient First], regularly devoting 50-60 hours ... per week to [that] company's business, working early and late hours, Saturdays and Sundays and on his vacations." On account of such efforts, Storey's compensation increased over the years so that, in 1997, he was earning $350,000 per year.6 He was one of three members of the Executive Committee of Patient First, he participated in all meetings of the Board, and, in July 1997, he was promoted to the position of Executive Vice President of Finance and Corporate Development. (Complaint, ¶¶ 14-16).

Storey avers that, in or about October 1996, he obtained and provided to Sowers a copy of certain investment related material respecting a venture that the parties have referred to as "Alfine". He also states that "Sowers delivered the Alfine Investment Material to Dr. Tom Dwyer, Patient First's technology adviser, for his review and comment[,]" and that, thereafter, "Sowers returned [that material] to Storey[,] advising him (based on Dwyer's review) that an investment in Alfine would be `throwing money away.'" Notwithstanding Sowers' pessimism respecting that venture, Storey and "others at Patient First" invested their personal funds in Alfine. (Complaint, ¶¶ 17-20).

Storey also alleges that, "[d]uring the course of his [employment with] Patient First, Storey expressed concerns [that] he had about the company or its operations, but ultimately acquiesced in the decisions made by Sowers as [CEO] and Chairman." In particular, Storey avers that, in early 1997, he reported to both Sowers and Morrison specific concerns involving "potential improper billings in the approximate amount of $500,000 [by Patient First] to the federal government for medical services provided to CHAMPUS beneficiaries by `moonlighting' active-duty military doctors."7 These concerns had been related to Storey by "other members of management, medical professionals[,] and his subordinates[.]" According to Storey, "Sowers and Morrison initially failed to take any corrective action," which "expos[ed] [Patient First] to substantial liability." (Complaint, ¶¶ 21-23).

Storey "persisted in raising the issue [of the improper billings] until Sowers and Morrison ultimately agreed to implement ineffective changes that reduced, but did not eliminate, the incidence of violations." According to Storey, Sowers and Morrison refused to repay the federal government certain amounts that already had been billed improperly, and they continued to "alter electronic medical records submitted to CHAMPUS for reimbursement." Despite Storey's repeated entreaties to Sowers and Morrison respecting the adequacy of Patient First's "computer automated method of coding for Medicare patients" (a system that Sowers designed, and the use of which Storey believed was causing Patient First to over-bill the federal government), Sowers took no ameliorative measures and, instead, insisted that any systemic errors could be overridden and corrected manually by medical professionals. (Complaint, ¶¶ 24-25).

Concerned that he might face personal liability for what he believed were substantial fraudulent claims submitted to the federal government, Storey endeavored "to take whatever action was necessary" to report the suspected violations. He began his own investigation into Patient First's billing practices and researched the potential liability that the company (and its agents) might face if civil or criminal action were instituted against it. (Complaint, ¶¶ 26-28).

In addition, Storey alleges that he was concerned about, and outspoken with respect to, other potential legal violations for which Patient First and its agents might be liable. These potential violations involved disparate matters including the accuracy of certain information represented in Patient First's financial records, and its compliance with federal employment discrimination laws and applicable prescription drug repackaging regulations. (Complaint, ¶¶ 30-32).

Again, however, Storey's "pleas to Sowers and Morrison[,]" are said to have gone unheeded, and the defendants allegedly failed to take remedial measures respecting Storey's legal concerns. Therefore, in or about September 1997, and through communications with Alfred R. Berkeley, III (who was one of Patient First's outside directors), Storey decided to advise the Board about all of the foregoing legal issues. Storey sought to "correct the violations and [to] protect the company from continuing liabilities." Storey alleges, upon information and belief, that Berkeley in fact communicated to, and discussed with, Patient First's...

To continue reading

Request your trial
37 cases
  • U.S. ex rel. Wilson v. Graham County Soil
    • United States
    • U.S. Court of Appeals — Fourth Circuit
    • 29 Abril 2004
    ...[those provisions] as absurd. It would show only that Congress had opted for simplicity of administration.'" Storey v. Patient First Corp., 207 F.Supp.2d 431, 444 (E.D.Va.2002) (alteration in original) (quoting Neal, 33 F.3d at Second, courts have recognized that there is, as a practical ma......
  • Miller v. Washington Workplace, Inc.
    • United States
    • U.S. District Court — Eastern District of Virginia
    • 8 Enero 2004 to make actionable those discharges of at-will employees which violate only private rights or interests." Storey v. Patient First Corp., 207 F.Supp.2d 431, 450 (E.D.Va.2002) To assert a claim under Bowman, "a plaintiff must have either (i) a statutorily-created right which the terminatio......
  • Glaser v. Enzo Biochem, Inc.
    • United States
    • U.S. District Court — Eastern District of Virginia
    • 16 Julio 2003
    ...asserted derivatively on behalf of the corporation. Simmons v. Miller, 261 Va. 561, 544 S.E.2d 666, 674 (2001); Storey v. Patient First Corp., 207 F.Supp.2d 431 (E.D.Va.2002).. Thus, as a matter of law, the breach of fiduciary duty claim is foreclosed in this case, and the Court dismisses C......
  • Goulmamine v. CVS Pharmacy, Inc.
    • United States
    • U.S. District Court — Eastern District of Virginia
    • 9 Octubre 2015 support a claim for defamation at the instant stage, supra. Because defamation is an improper method, Storey v. Patient First Corp., 207 F.Supp.2d 431, 447 (E.D.Va.2002), the Court declines to dismiss on this ...
  • Request a trial to view additional results
1 books & journal articles
  • Whistleblowing in the Compliance Era
    • United States
    • University of Georgia School of Law Georgia Law Review (FC Access) No. 55-1, 2020
    • Invalid date
    ...cause of action for an at-will employee who reports a violation of federal or state law."); Storey v. Patient First Corp., 207 F. Supp. 2d 431, 454-55 (E.D. Va. 2002) (finding that no Virginia statute established a public policy with which the plaintiff's termination interfered); King v. Do......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT