U.S. Ex Rel. Kathleen Mccoy v. Petitioner
| Decision Date | 09 May 2011 |
| Docket Number | Case No. 3:10-CV-259 RM |
| Parties | UNITED STATES OF AMERICA ex rel. KATHLEEN MCCOY and JEAN MARIE THOMPSON and STATE OF INDIANA ex rel. KATHLEEN MCCOY and JEAN MARIE THOMPSON, Plaintiffs v. |
| Court | U.S. District Court — Northern District of Indiana |
MADISON CENTER, Defendant
This cause is before the court on defendant Madison Center's motion to dismiss the State of Indiana's complaint under Fed. R. Civ. P. 12(b)(1) and (6), and Count IV of the original complaint filed by relators Kathleen McCoy and Jean Marie Thompson under Fed. R. Civ. P. 12(b)(6). A hearing on the motion was conducted on March 4, 2011. For the following reasons, the court grants Madison Center's motion.
In October 2005, Kathleen McCoy and Jean Marie Thompson filed suit against Madison Center on behalf of the United States and the State of Indiana alleging violations of the federal False Claims Act (FCA), 31 U.S.C. § 3729 et seq., and Indiana's False Claims and Whistleblower Act (IFCWA), Ind. Code § 5-11-5.5et seq. (the Relators" complaint).1 The United States declined intervention in January 2009; and, in June 2010 (more than four and a half years after the Relators' complaint was filed), the State of Indiana filed its notice of intent to intervene under Ind. Code § 5-11-.5.5-1 et seq. (Indiana's False Claims and Whistleblower Protection Act). The court granted the State's motion to unseal the Relators' original complaint on June 24, 2010; on June 29, 2010, the State filed a new complaint in its own name asserting state law claims for Medicaid fraud under Ind. Code § 12-15-23-7, common law fraud, breach of contract, and unjust enrichment based on Madison Center's alleged receipt of improper Medicaid payments. The State seeks reimbursement for the alleged overpayments, treble damages, civil penalties, attorney fees, and costs under Ind. Code §§ 12-15-23-8(a) and 34-24-3-1 et seq..
Madison Center moved to dismiss Count IV of the Relators' complaint (the Relators' state law claim) under Rule 12(b)(6), and to dismiss the State's complaint in its entirety under Fed. R. Civ. P. 12(b)(1) and (6).
The court takes the complaints' factual allegations as true and views them in the light most favorable to the plaintiffs. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974); Bernard v. United Township High School Dist. 30, 5 F.3d 1090, 1091 (7th Cir. 1993); Gomez v. Illinois State Bd. of Education, 811 F.2d 1030, 1033 (7th Cir. 1987). Dismissal is proper only if it is clear from the pleadings that the plaintiffs can prove no set of facts upon which relief could be granted. Moss v. Martin, 473 F.3d 694, 698 (7th Cir. 2007); Forseth v. Village of Sussex, 199 F.3d 363, 368 n.6 (7th Cir. 2000). The court can't look beyond the pleadings, but can consider documents incorporated by reference in, or attached to, the pleadings, see Fed. R. Civ. P. 10(c), and all uncontested allegations to which the parties had an opportunity to respond are taken as true. United States v. Wood, 925 F.2d 1580, 1581-1582 (7th Cir. 1991).
To withstand a motion to dismiss, the complaint must allege "'enough facts to raise a reasonable expectation that discovery will reveal evidence' supporting the plaintiff's allegations." Brooks v. Ross, 578 F.3d 574, 581 (7th Cir.2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. at 556). A plausible claim exists "when the plaintiff pleads factual content that allows the court to draw the reasonableinference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, ___U.S. ___, 129 S.Ct. 1937, 1949 (2009). The test on a motion to dismiss is whether the claim is "plausible"-whether it "has a moderately high likelihood of occurring." In Re: Text Messaging Antitrust Litigation, 630 F.3d 622, 629 (7th Cir. 2010). "[T]he complaint must establish a nonnegligible probability that the claim is valid; but the probability need not be as great as such terms as 'preponderance of the evidence' connote." Id.
Madison Center contends that the Relators' claim under Indiana's False Claims and Whistleblower Protection Act (IFCWPA), Ind. Code § 5-11-5.5-1 et seq., should be dismissed because the statute wasn't enacted until 2005, didn't exist at the time the activity giving rise to the Relators' claims occurred, and doesn't contain a retroactive provision or evidence an express intent on the part of the legislature to apply it retroactively. Citing Miller Brewing Co. v. Indiana Dept. of State Revenue, 903 N.E.2d 64, 71 (Ind. 2009).
The Relators maintain that there's no reason to address retroactivity because they've alleged continuing misconduct. But as Madison Center correctly points out, Medicaid fraud must be pleaded with specificity under Fed. R. Civ. P. 9(b), and the Relators haven't identified the who, what, when, where or how of any fraudulent activity after 2003. See Ebeid ex rel. U.S. v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010); U.S. ex rel. Pervez v. Beth Israel Medical Center, 736 F.Supp.2d 804 (S.D.N.Y. 2010); U.S. ex rel. Crennen v. Dell Marketing, L.P., 711 F.Supp.2d 157 (D. Mass. 2010).
To withstand a motion to dismiss, the plaintiffs must show that "it is plausible, rather than merely speculative, that [they are] entitled to relief." Tamayo v. Blagojevich, 526 F.3d 1074, 1083 (7th Cir.2008) (citations omitted). The allegations in Count IV of the Relators' complaint are phrased in the past tense, i.e., "the defendant knowingly presented or caused to be presented, false or fraudulent claims...," and "the defendant knowingly made, used, or caused to be made or used false records and statements, and omitted material facts...." While Count IV contains a cursory allegation that "the State of Indiana has been damaged, and continues to be damaged," (Relators' Cmplt. ¶ 123), such an allegation lacks the specificity required to allege continuing fraud under Rule 9(b). With one exception, Paragraphs 1-105 of the Relators' complaint (which were incorporated by reference) also lack any specific allegations of continuing wrong. The exception is contained in paragraph 77, which states:
The Medicaid audit did not address the time period of May 31, 2002 to the present during which Madison Center has continued to submit claims for reimbursement for services provided to Medicaid-eligible children where documentation in the medical record is inadequate and not provided in a timely manner as required by Medicaid regulations.
But that allegation isn't specific enough: it lacks specificity as to the who, what, when, where or how of any fraudulent activity after June 2003, is unsupported byany specific examples, and so doesn't meet the particularity requirements of Rule 9(b). See U.S. ex rel. Bledsoe v. Community Health Systems, Inc., 501 F.3d 493, 510-11 (6th Cir. 2007); Sanderson v. HCA-The Healthcare Co., 447 F.3d 873, 877 (6th Cir.), cert. denied, 549 U.S. 889 (2006); U.S. ex rel. Clausen v. Laboratory Corp. of America, Inc., 290 F.3d 1301, 1310 (11th Cir. 2002).
The Relators don't dispute that the IFCWPA doesn't contain a retroactive provision or evidence an express intent on the part of the legislature to apply it retroactively. Accordingly, Count IV of their compliant must be dismissed.
The Relators have requested leave to amend their complaint in the event their state law claim was dismissed. The undue delay in this case isn't attributable to the Relators, and while the prospects of recovery seem dim since Madison Center is, by all accounts, defunct, Fed. R. Civ. P. 15(a) provides that leave to amend "shall be freely given when justice so requires."
Madison Center contends that the State's complaint should be dismissed in its entirety under Fed. R. Civ. P. 12(b)(1) because the court lacks subject matter jurisdiction, and/or under Fed. R. Civ. P. 12(b)(6) because the State's claims don't relate back to the filing of the Relators' complaint under either 31 U.S.C. § 3731(c) or Fed. R. Civ. P. 15(c), and are barred by the applicable six-year statutes of limitations (Ind. Code § 34-11-2-7(1) and (4) and Ind. Code § 34-11-2-9). Citing U.S. ex rel. Miller v. Bill Harbert Int'l Construction, Inc., 608 F.3d 871, 877-881(D.C. Cir. 2010)(per curiam); Asher v. Unarco Material Handling, Inc., 596 F.3d 313 (6th Cir. 2010). Assuming arguendo that the State's claims aren't otherwise barred, Madison Center contends that the complaint isn't ripe because the State hasn't exhausted its administrative remedies under Ind. Code §§ 12-15-13-3 and 12-15-21-3, and 405 IAC 1-1.5-2. Citing Lake Cty. Sheriff's Corrections Merit Bd. v. Peron, 756 N.E.2d 1025, 1028 (Ind. App. 2001).
The State contends that the court has jurisdiction under 31 U.S.C. § 3732(b):
The district courts shall have jurisdiction over any action brought under the laws of any State for the recovery of funds paid by a State or local government if the action arises from the same transaction or occurrence as an action brought under section 3730.
Madison Center maintains that 31 U.S.C. § 3730(b)(5) expressly prohibits the State from intervening with respect to the federal claims asserted in the Relators' complaint or bringing a related action based on the facts underlying the Relators' pending action, and that 31 U.S.C. § 3732(b) doesn't authorize the State to maintain an independent action. It cites in support Wisconsin v. Amgen, Inc., 516 F.3d 530, 532 (7th Cir. 2008) and Vermont Agency of Natural Resources v. U.S. ex rel. Stevens, 529 U.S. 765 (2000).
Madison Center's reliance on Stevens and Amgen is not persuasive. The Stevens Court held that a state wasn't a "person" for purposes of qui tam liabilityunder 31 U.S.C. § 3729(a). 529 U.S. at 781-788. The Stevens Court's reasoning also might support a finding that a state isn't a "person" within the meaning of 31 U.S.C. § 3730(b), and that §3730(b) therefore doesn't bar suits by the State. Id.;...
To continue reading
Request your trial