United States ex rel. Petkovic v. Foundations Health Solutions, Inc.
| Decision Date | 17 January 2019 |
| Docket Number | CASE NO. 5:10-cv-2846 |
| Parties | UNITED STATES ex rel. BARBARA PETKOVIC et al., RELATORS, v. FOUNDATIONS HEALTH SOLUTIONS, INC. FKA BCFL HOLDINGS DBA PROVIDER SERVICES, RESPONDENT. |
| Court | U.S. District Court — Northern District of Ohio |
MEMORANDUM OPINION
Before the Court is respondent Foundations Health Solutions, Inc. f/k/a/ BCFL Holdings d/b/a Provider Services's ("FHS") motion to dismiss (Doc. No. 59 ["Mot."]) relators' amended complaint (Doc. No. 49 ["Am. Compl."]) in its entirety and dismiss all of the relators' claims against FHS. For the reasons discussed herein, respondent's motion to dismiss is GRANTED.
Relators Barbara Petkovic ("Petkovic") and Christine Shiroke ("Shiroke," collectively "relators") originally brought this qui tam action under the False Claims Act ("FCA") alleging violations of the FCA by their former employer Mobile Medical, Inc. ("Mobile") and by FHS and Rikco International, LLC ("Rikco"). Mobile is an Ohio corporation that has provided ancillary dental, optometry, podiatry, and audiology services to Ohio nursing homes. (Am. Compl. ¶ 16.) Mobile uses the trade names "Mobile Medical," "OnSight Eye Care," "OnSight Healthcare," and "OnHealthCare." (Id.) FHS is an Ohio corporation that provides services to Ohio nursing homes, including operational management, billing of Medicaid and Medicare, purchase and cost management, payroll processing, clinical support services, and Centers for Medicare and Medicaid Services (CMS) regulatory reporting. (Id. ¶¶ 14-15.) Petkovic was employed by Mobile as a podiatrist from August 2009 until September 2010. (Id. ¶ 17.) She served at FHS facilities and knew of alleged kickbacks received by FHS and the false claims submitted to the government for payment or approval. (Id.) Shiroke worked for Mobile as a podiatry technician from September 2009 until September 2010. (Id. ¶ 18.) Likewise, Shiroke gained personal knowledge of the alleged kickbacks received by FHS and of the false claims submitted to the government for payment or approval. (Id.)
Relators filed their original complaint under seal in 2010. (Doc. No. 1.) In 2015, Mobile settled its alleged violations with the United States and was dismissed as a party. (Doc. No. 42 (Sealed Stipulation and Order).) Subsequently, the United States notified the Court of its decision not to intervene in the case against the remaining defendants. The case was unsealed on August 28, 2017. (Doc. No. 47.) Relators then filed their amended complaint against FHS solely.1 FHS's motion to dismiss followed. Relators filed their opposition (Doc. No. 64 ["Opp'n"]) and FHS replied (Doc. No. 66 ["Reply"]).
In a qui tam action, a private party brings a suit for fraud committed against the government as a qui tam relator. United States ex rel. Poteet v. Medtronic, Inc., 552 F.3d 503, 506-07 (6th Cir. 2009). Before bringing a qui tam suit, a relator must serve the complaint upon the government, and the complaint must remain under seal for at least sixty days. 31 U.S.C. § 3730(b)(2). During this time period, the government may intervene and "take over" the action. Medtronic, 552 F.3d at 507 (citing 31 U.S.C. § 3729(a)(7)). If the government declines intervention, the relator mayserve the complaint on the defendant and proceed with the action on their own. Id. (citing 31 U.S.C. § 3730(c)(3)). As an incentive to bring qui tam actions, the FCA awards relators in successful suits a portion of the proceeds recovered. Id. (citing 31 U.S.C. § 3730(d)).
When addressing a motion to dismiss under Fed. R. Civ. P. 12(b)(6), the Court must construe the complaint in the light most favorable to the relator and accept all well-pleaded material allegations in the complaint as true. United States ex rel. Ibanez v. Bristol-Myers Squibb Co., 874 F.3d 905, 914 (6th Cir. 2017) (); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007). The sufficiency of the complaint is tested against the notice pleading requirements of Fed. R. Civ. P. 8(a)(2), which provides that a complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief[.]" Although this standard is liberal, Rule 8 still requires a complaint to provide the defendant with "enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570. Thus, "[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true," to state a plausible claim. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009) (quoting Twombly, 550 U.S. at 570). A claim is facially plausible "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. (citing Twombly, 550 U.S. at 556). Plausibility "is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully.'" Id. "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not 'show[n]'—'that the pleader is entitled to relief.'" Id. at 679 (quoting Fed. R. Civ. P. 8(a)(2)). In such a case, the plaintiffhas not "nudged [his] claims across the line from conceivable to plausible, [and the] complaint must be dismissed." Twombly, 550 U.S. at 570; see Iqbal, 556 U.S. at 683 (citation omitted).
A complaint need not set down in detail all the particulars of a plaintiff's claim. However, "Rule 8 . . . does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions." Iqbal, 556 U.S. at 678-79 (). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. at 678 (citing Twombly, 550 U.S. at 555). The complaint "must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory." Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir. 1988) (internal quotations marks omitted), abrogated on other grounds by Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep't of Health & Human Res., 532 U.S. 598, 121 S. Ct. 1835, 149 L. Ed. 2d 855 (2001).
Relators bringing an action under the FCA must meet the heightened pleading requirements of Fed. R. Civ. P. 9(b). United States v. Walgreen Co., 846 F.3d 879, 880 (6th Cir. 2017). To comply with Rule 9(b), a complaint must, at a minimum, specify the "time, place, and content" of the alleged false representation. United States ex rel. Bledsoe v. Cmty. Health Sys., Inc., 501 F.3d 493, 504 (6th Cir. 2007). In assessing a FCA claim under Rule 9(b), a complaint that merely pleads a false scheme with particularity is inadequate. Bledsoe, 501 F.3d at 504. Under Sixth Circuit case law, "Rule 9(b) does not permit a [FCA] plaintiff merely to describe a private scheme in detail but then to allege simply . . . that claims requesting illegal payments must have been submitted, were likely submitted or should have been submitted." United States ex rel. Eberhard v. PhysiciansChoice Lab. Servs., LLC, 642 F. App'x 547, 551 (6th Cir. 2016) (quoting Sanderson v. HCA-The Healthcare Co., 447 F.3d 873, 877 (6th Cir. 2006)).
Rather, "[a] relator cannot meet [Rule 9(b)'s] standard without alleging which specific false claims constitute a violation of the FCA." Id. (quoting Bledsoe, 501 F.3d at 505). "The identification of at least one false claim with specificity is 'an indispensable element of a complaint that alleges a [FCA] violation in compliance with Rule 9(b).'" Walgreen, 846 F.3d at 880 (quoting Bledsoe, 501 F.3d at 504). "In assessing FCA claims under Rule 9(b), [the Sixth] Circuit imposes a 'strict requirement that relators identify actual false claims.'" Eberhard, LLC, 642 F. App'x at 550 (quoting Chesbrough v. VPA, P.C., 655 F.3d 461, 472 (6th Cir. 2011)).
Relators need not identify every allegedly false claim submitted to the government for payment. Chesbrough, 655 F.3d at 470. Still, to satisfy Rule 9(b), relators must allege representative examples of submitted claims. Id. The representative claims must be "illustrative of the class of all claims covered by the fraudulent scheme." Id. (quoting Bledsoe, 501 F.3d at 511) (internal quotation mark omitted). "[T]he examples that a relator provides will support more generalized allegations of fraud only to the extent that the relator's examples are representative samples of the broader class of claims." Bledsoe, 501 F.3d at 510.
In FCA cases, the Sixth Circuit requires the heightened Rule 9(b) pleading standard in the majority of cases. However, it recognizes a narrow exception when a relator pleads specific facts based on their personal billing-related knowledge that support a strong inference that specific false claims were submitted to the government for payment. See United States ex rel. Prather v. Brookdale Senior Living Communities, Inc., 838 F.3d 750, 769 (6th Cir. 2016). This "relaxed"standard is an extremely narrow exception that has been applied only one time by the Sixth Circuit. See id.
In Prather, the relator ("Prather") was hired by a company to review its Medicare billing documentation and to ensure compliance with state and federal insurance guidelines. Id. at 755. Prather worked with the at-issue company's billing department and the claims were sent to the government for payment after her review. Id. at 757-58. During her review, Prather became aware of falsified Medicare claims. Id. at 758. She brought the falsities to the attention of...
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