United States ex rel. Scott v. Ariz. Ctr. for Hematology & Oncology PLC
| Decision Date | 11 October 2018 |
| Docket Number | No. CV16-3703-PHX DGC,CV16-3703-PHX DGC |
| Parties | United States of America, ex rel. J. Scott, Plaintiff, v. Arizona Center for Hematology and Oncology PLC; Christopher Biggs; Devinder Singh; Daniel Reed; and Terry Lee, Defendants. |
| Court | U.S. District Court — District of Arizona |
Qui tam relator J. Scott ("Relator") filed a motion to dismiss the counterclaim by Defendant Arizona Center for Hematology and Oncology PLC, d/b/a Arizona Center for Cancer Care ("AZCCC"). Doc. 114. AZCCC did not respond, but filed an amended counterclaim. Doc. 122. Relator again moves to dismiss. Doc. 123. The motion is fully briefed and the Court finds that oral argument is not needed. Docs. 126, 128. For the following reasons, the Court will deny Relator's motion.
The Court takes the allegations of AZCCC's counterclaim as true for purposes of a motion to dismiss. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). AZCCC is a "multispecialty cancer treatment center" that cares for patients throughout Phoenix. Doc. 122 at 49 ¶ 7. In 2008, AZCCC hired Relator to work as billing manager of the Radiation Oncology Department to develop and implement its billing system. Id. at 49 ¶¶ 8-9. Relator's responsibilities included: "analyzing billing and claims for accuracy and completeness; serving as the . . . expert on coding and billing processes; ensuring that . . . billing operations [wer]e conducted in a manner consistent with payor rules and guidelines; . . . and keeping up-to-date with current coding, billing, and compliance requirements." Id. ¶ 10. Relator was, "essentially[,] the architect" of the billing system, and AZCCC relied on him to "ensure all claims were properly coded and compliant with applicable billing requirements prior to submission." Id. at 49-50 ¶¶ 9, 11.
AZCCC's billing policy included routine monitoring of overpayments and prompt refunds. Id. at 51 ¶ 17. An overpayment "is any payment that a healthcare provider receives in excess of amounts due and payable under the payor's policies." Id. ¶ 17. As a senior-level employee, Relator had the sole responsibility of overseeing insurance refunds and was authorized to "immediately approve and issue" identified overpayments. Id. at 51 ¶¶ 15-16, 18. AZCCC alleges Relator failed to complete required refunds, and that in several instances Relator reviewed an account multiple times, noted an overpayment, but failed to issue a necessary refund on the account. Id. at 52 ¶¶ 19-20. Relator's failure to issue refunds interfered with AZCCC's contractual relationships with payors and exposed it to a risk of liability. Id. at 53 ¶ 23.
When an account is not collectible, AZCCC will sometimes "write off" accounts receivable - monies owed to it. Id. at 54 ¶ 26. AZCCC's policy required Relator to "confer with and obtain consent from the physician associated with the account receivable" before writing off an account. Id. ¶ 27. "Relator was not authorized to write off accounts without approval." Id. ¶ 26. But Relator wrote off "approximately $250,000 in accounts receivable without obtaining the requisite consent from an AZCCC physician." Id. at 54-56 ¶¶ 28-32. Relator also used an incorrect code when billing a particular procedure, resulting in underpayments and lost revenue to AZCCC in the amount of approximately three million dollars between 2008 and 2017. Id. at 57-61 ¶¶ 34-42.
On October 26, 2016, Relator, individually and on behalf of the United States, sued AZCCC and several of its doctors - Dr. Christopher Biggs, Dr. Devinder Singh, Dr. Daniel Reed, and Dr. Terry Lee - for violations of the False Claims Act, 31 U.S.C. §§ 3729 et seq. ("FCA"). Doc. 1. The case originally was sealed, but was unsealed in February 2017. Doc. 9. AZCCC was served on June 6, 2017 (Docs. 117 ¶ 45; 18), terminated Relator (Doc. 124 at 6-7), and counterclaimed, alleging breach of fiduciary duty (Doc. 122 at 62, 64).
A successful motion to dismiss under Rule 12(b)(6) must show either that the complaint lacks a cognizable legal theory or fails to allege facts sufficient to support its theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). A complaint that sets forth a cognizable legal theory will survive a motion to dismiss as long as it contains "sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Iqbal, 556 U.S. at 678 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim has facial plausibility when "the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id., 556 U.S. at 678 (citing Twombly, 550 U.S. at 556). "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. (citing Twombly, 550 U.S. at 556).
AZCCC never responded to Relator's first motion to dismiss (Doc. 114), and has since filed an amended counterclaim (Doc. 122). The Court will deny Relator's first motion as moot and consider only Relator's subsequent motion to dismiss. Doc. 124. Relator argues that AZCCC's claim is barred by the statute of limitations (id. at 12), fails sufficiently to plead breach of fiduciary duty (id. at 8-15), and violates Arizona's anti-SLAPP statute (id. at 15).
"[T]he statute of limitations defense . . . may be raised by a motion to dismiss . . . [i]f the running of the statute is apparent on the face of the complaint." Jablon v. Dean Witter & Co., 614 F.2d 677, 682 (9th Cir. 1980). But even if the relevant dates alleged in the complaint are beyond the statutory period, the "'complaint cannot be dismissed unless it appears beyond doubt that the plaintiff can prove no set of facts that would establish the timeliness of the claim.'" Hernandez v. City of El Monte, 138 F.3d 393, 402 (9th Cir. 1998) (quoting Supermail Cargo, Inc. v. United States, 68 F.3d 1204, 1206 (9th Cir. 1995)); see Cervantes v. City of San Diego, 5 F.3d 1273, 1275 (9th Cir. 1993). Indeed, "[d]ismissal on statute of limitations grounds can be granted pursuant to Fed. R. Civ. P. 12(b)(6) 'only if the assertions of the complaint, read with the required liberality, would not permit the plaintiff to prove that the statute was tolled.'" TwoRivers v. Lewis, 174 F.3d 987, 991 (9th Cir. 1999) (citing Vaughan v. Grijalva, 927 F.2d 476, 478 (9th Cir. 1991) (quoting Jablon, 614 F.2d at 682)); see Pisciotta v. Teledyne Indus., Inc., 91 F.3d 1326, 1331 (9th Cir. 1996). "'Because the applicability of the equitable tolling doctrine often depends on matters outside the pleadings, it is not generally amenable to resolution on a Rule 12(b)(6) motion.'" Hernandez, 138 F.3d at 402 (quoting Supermail Cargo, 68 F.3d at 1206).
Arizona law governs AZCCC's state law claim. United Mine Workers of America v. Gibbs, 383 U.S. 715, 726 (1966). Actions for breach of fiduciary duty must commence within two years of the action's accrual. A.R.S. § 12-542; CDT, Inc. v. Addison, Roberts & Ludwig, C.P.A., P.C., 7 P.3d 979, 981 (Ariz. Ct. App. 2000). "Under Arizona's discovery rule, a claim does not accrue until 'the plaintiff knows or, in the exercise of reasonable diligence, should know the facts underling the cause.'" Perez v. First Am. Title Ins. Co., No. CV-08-1184-PHX-DGC, 2010 WL 1507012, at *3 (D. Ariz. April 14, 2010) (quoting Gust, Rosenfeld & Henderson v. Prudential Ins. Co. of Am., 898 P.2d 964, 966 (1995)). AZCCC's claim is barred if, based on the face of its counterclaim, itwould be unable to prove that its claim accrued after March 29, 2016. See Doc. 88 (AZCCC's counterclaim filed March 29, 2018).
AZCCC alleges that it did not discover Relator's breach until after he filed his complaint in this case. Doc. 122 ¶¶ 44-48. Relator responds that AZCCC "had every opportunity . . . to exercise reasonable diligence in reviewing Relator['s] notes and overseeing Relator's work such that it would be on notice of any perceived deficiencies." Doc. 124 at 13. But the Court must accept AZCCC's allegations as true for purposes of this motion. AZCCC alleges that Relator became its billing manager in 2008, Relator provided AZCCC with assurances that he was billing in accordance with applicable requirements, AZCCC paid for Relator to receive training on billing practices, and AZCCC reasonably relied on Relator to handle billing properly. Id. at ¶ 46. AZCCC alleges that it conducted an investigation after being served with Relator's complaint in this case and, as a result, discovered his misconduct. Id. at ¶ 47. Accepting these allegations as true, the Court cannot conclude that AZCCC can prove no set of facts that would establish the timeliness of the claim. Hernandez, 138 F.3d at 402. The Court therefore cannot dismiss the claim at this stage on statute of limitations grounds.
Relator argues that AZCCC must satisfy the heightened Rule 9(b) pleading standard because its claim "sounds in fraud," and because "by seeking ten years[] of damages [AZCCC must be] accusing Relator of engaging in some kind of fraud or concealment." Doc. 124 at 8-9. Rule 9(b) states: "In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). Rule 9(b)'s purpose is to "ensure[] that allegations of fraud are specific enough to give defendants notice of the particular misconduct that is alleged . . . so that they can defend against the charge." Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 1985).
But AZCCC alleges breach of fiduciary duty, not fraud or mistake. Docs. 122; 126 at 6. Relator cites no Ninth Circuit authority for extending Rule 9(b)'s heightened standard to breach of fiduciary duty. And Relator's unexplained case citations are unavailing. See Rombach v. Chang, 355 F.3d 164, 170 (2d Cir. 2004) (...
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