United States ex rel. Walker v. Loving Care Agency, Inc.

• Decision Date: 22 December 2016
• Docket Number: Civ. No. 2:11–06142
• Citation: 226 F.Supp.3d 357
• Parties: UNITED STATES of America and the State of New Jersey, ex rel., Mary Walker and Vitalij Myrko, Plaintiffs and Co–Relators, v. LOVING CARE AGENCY, INC., Defendant.
• Court: U.S. District Court — District of New Jersey

226 F.Supp.3d 357

UNITED STATES of America and the State of New Jersey, ex rel., Mary Walker and Vitalij Myrko, Plaintiffs and Co–Relators,

v.LOVING CARE AGENCY, INC., Defendant.

Civ. No. 2:11–06142

United States District Court, D. New Jersey.

Signed December 22, 2016

James M. Ficaro, The Weiser Law Firm, P.C., Berwyn, PA, John R. Mininno, The Mininno Law Offices, Collingswood, NJ, for Plaintiffs and Co–Relators.

Amanda B. Protess, Bruce Arnold Levy, Anne M. Collart, Gibbons PC, Newark, NJ, for Defendant.

OPINION

WILLIAM J. MARTINI, U.S.D.J.

Plaintiffs United States of America and the State of New Jersey (collectively the "Government") bring this action by and through their Co–Relators Mary Walker and Vitalij Myrko (individually "Walker" and "Myrko," collectively "Co–Relators") against Loving Care Agency, Inc. ("Defendant"), alleging violations of the Federal False Claims Act ("FCA"), 31 U.S.C. § 3729 et seq. , and the False Claims Act of the State of New Jersey ("NJFCA"), N.J.S.A. § 2A:32C–1 et seq. This matter comes before the Court on Defendants' motion to dismiss under Federal Rules of Civil Procedure 12(b)(6) and 9(b). There was no oral argument. Fed. R. Civ. P. 78(b). For the reasons set forth below, Defendants' motion to dismiss is GRANTED , in part, and DENIED , in part.

I. BACKGROUND

Defendant is a New Jersey for-profit homecare agency that is "a leading provider of home healthcare services," with its principal place of business located in Hasbrouck Heights, New Jersey. Mem. of Law in Supp. of Def.'s Mot. to Dismiss ("Def.'s Mem.") 3, ECF No. 27. Co–Relators are registered nurses and former employees of Defendant. Walker was employed by Defendant as a Nursing Clinical Field Supervisor, beginning in April 2011, and Myrko was employed under that same title from 2004 through 2012. Second Am. Compl. for False Claims Act Violations ("2d Am. Compl.") ¶¶ 14–15, 18–19, ECF No. 22. Neither Co–Relator is currently employed by Defendant. Def.'s Mem. at 3.

Walker initiated the present action by filing a complaint on October 18, 2011, in which she alleged multiple schemes undertaken by Defendant to defraud the Government by filing false claims for Medicaid reimbursement. See Compl. ¶¶ 34–100, ECF No. 1. On January 5, 2012, Walker filed an amended complaint, introducing Myrko as Co–Relator. See First Am. Compl. ¶ 9, ECF No. 2. Thereafter, the Government requested multiple extensions of time to investigate Co–Relators' claims and ultimately moved to stay and administratively terminate the action, which this Court granted on February 13, 2013. See Order, ECF No. 10. On April 1, 2016, the Government informed the Court that it declined to intervene, thereby lifting the stay and unsealing the amended complaint. See Order, ECF No. 20. On May 25, 2016, Co–Relators filed a second amended complaint (hereinafter "the Complaint"), in which they incorporated revised facts and alleged seven fraudulent schemes undertaken by Defendant. See 2d Am. Compl. at ¶¶ 65–300.

Defendant now moves to dismiss the Complaint with prejudice, arguing that Co–Relators have not pled their case with sufficient particularity and that, in the alternative, they have not stated a cause of action under the FCA. Def.'s Mem. at 12. Co–Relators oppose, countering that the Complaint properly alleges all claims. See Pls.' Opp'n to Mot. to Dismiss ("Pls.' Opp'n") 3, ECF No. 33.

II. LEGAL STANDARD

Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a complaint, in whole or in part, if the plaintiff fails to state a claim upon which relief can be granted. The moving party bears the burden of showing that no claim has been stated. Hedges v. United States , 404 F.3d 744, 750 (3d Cir. 2005). In deciding a Rule 12(b)(6) motion, a court must take all allegations in the complaint as true and view them in the light most favorable to the plaintiff. See Warth v. Seldin , 422 U.S. 490, 501, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975) ; Trump Hotels & Casino Resorts, Inc. v. Mirage Resorts Inc. , 140 F.3d 478, 483 (3d Cir. 1998).

Although a complaint need not contain detailed factual allegations, "a plaintiff's obligation to provide the ‘grounds' of his ‘entitlement to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Thus, the factual allegations must be sufficient to raise a plaintiff's right to relief above a speculative level, such that it is "plausible on its face." See id. at 570, 127 S.Ct. 1955 ; see also Umland v. PLANCO Fin. Serv., Inc. , 542 F.3d 59, 64 (3d Cir. 2008). 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." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ). While "[t]he plausibility standard is not akin to a ‘probability requirement’ ... it asks for more than a sheer possibility." Id.

FCA claims are also subject to the heightened pleading standards set forth in Rule 9(b). United States ex rel. Wilkins v. United Health Grp., Inc. , 659 F.3d 295, 301 n.9 (3d Cir. 2011) (citing United States ex rel. LaCorte v. SmithKline Beecham Clinical Labs. , 149 F.3d 227, 234 (3d Cir. 1998) ). Rule 9(b) provides: "In alleging fraud ..., a party must state with particularity the circumstances constituting fraud.... Malice, intent, knowledge and other conditions of a person's mind may be alleged generally." Fed. R. Civ. P. 9(b). The Third Circuit has adopted a more "nuanced" approach to the application of Rule 9(b), which requires that a plaintiff "provide ‘particular details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually submitted.’ " Foglia v. Renal Ventures Mgmt., LLC , 754 F.3d 153, 155–58 (3d Cir. 2014). "Courts in [the District of New Jersey] have found that a plaintiff may satisfy that requirement in one of two ways: (1) ‘by pleading the date, place, or time of the fraud;’ or (2) using an ‘alternative means of injecting precision and some measure of substantiation into their allegations of fraud.’ " Flanagan v. Bahal , No. 12–cv–2216, 2015 WL 9450826, at *3 (D.N.J. Dec. 22, 2015) (quoting United States ex rel. Wilkins v. United Health Grp., Inc. , No. 08–cv–3425, 2011 WL 6719139, at *2 (D.N.J. Dec. 20, 2011) (on remand from the Third Circuit) (citation omitted)). Notably, however, this approach does not require " ‘that a plaintiff [ ] identify a specific claim for payment at the pleading stage of the case to state a claim for relief.’ " Id. at 156–57 (quoting Wilkins , 659 F.3d at 308 ) (emphasis original).

III. DISCUSSION

Co–Relators allege violations of 31 U.S.C. §§ 3729(a)(1)(A) and (B), and their New Jersey counterparts N.J.S.A. §§ 2A:32C–3(a) and (b). 2d Am. Compl. at ¶¶ 320–40. "To prove a violation of § 3729(a)(1)(A) Plaintiffs must show that ‘(1) the defendant presented or caused to be presented to an agent of the United States a claim for payment; (2) the claim was false or fraudulent; and (3) the defendant knew the claim was false or fraudulent.’ " United States ex rel. Doe v. Heart Solution PC , No. 14–cv–3644, 2016 WL 3647987, at *4 (D.N.J. July 8, 2016) (quoting Wilkins , 659 F.3d at 305 ). "To establish liability under § 3729(a)(1)(B), Plaintiffs must prove that the Defendants (1) made, used, or caused to be made or used, a false record or statement; (2) the Defendants knew the statement to be false; and (3) the statement was material to a false or fraudulent claim." Id. at *6 (citation omitted). The language in the NJFCA is nearly identical to the federal statute and thus requires the same showings noted above. Compare 31 U.S.C. §§ 3729(a)(1)(A)–(B)with N.J.S.A. §§ 2A:32C–3(a)–(b). See also New Jersey v. Haig's Serv. Corp. , No. 12–cv–4797, 2016 WL 4472952, at *6–7 (D.N.J. Aug. 24, 2016) (noting the similarity of language between the federal FCA and the NJFCA and recognizing identical elements) (citations omitted).

"There are two categories of false claims under the FCA: a factually false claim and a legally false claim." Wilkins , 659 F.3d at 305 (citation omitted). "A claim is factually false when the claimant misrepresents what goods or services that it provided to the Government and a claim is legally false when the claimant knowingly falsely certifies that it has complied with a statute or regulation the compliance with which is a condition for Government payment." Id.

"A legally false FCA claim is based on a false certification theory of liability," of which there are two types: express and implied. See id. (internal quotation and citation omitted). An express false certification occurs when an entity falsely certifies to the Government that it complied with statutory and regulatory preconditions of payment when it in fact has not complied. See id. An implied false certification occurs when an entity submits a claim for payment to the Government "without disclosing that it violated regulations that affected its eligibility for payment." See id.

The Complaint alleges facts that form seven schemes undertaken by Defendant, which constitute both factually and legally false claims to the Government for payment of Medicaid services rendered:

(1) Scheme A : claims for personal care assistance ("PCA") services that were never performed (so called "ghost services"), see 2d Am. Compl. at ¶¶ 65–139;

(2) Scheme B : claims for PCA services that were not properly supervised by a registered nurse, see id. at ¶¶ 140–91;

(3) Scheme C : claims for PCA services performed by unqualified individuals, see id. at ¶¶ 192–210;

(4) Scheme D : claims for PCA services provided to ineligible beneficiaries or claims for ineligible services, see id. at ¶¶ 211–27;

(5) Scheme E : claims for PCA services that were medically

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