United States ex rel. Freedman v. Bayada Home Health Care, Inc.
| Decision Date | 12 May 2021 |
| Docket Number | Civil Action No. 3:19-cv-18753-FLW-ZNQ |
| Parties | THE UNITED STATES OF AMERICA ex rel. DAVID FREEDMAN, Plaintiff, v. BAYADA HOME HEALTH CARE, INC., BAYADA, a tax-exempt organization, J. MARK BAIADA, and DAVID BAIADA, Defendants. |
| Court | U.S. District Court — District of New Jersey |
*NOT FOR PUBLICATION*
Plaintiff David Freedman ("Relator") sues Bayada Home Health Care, Inc. ("Bayada"), a tax-exempt parent organization, J. Mark Baiada, and David Baiada (collectively, "Defendants") to recover damages under the False Claims Act ("FCA") and New Jersey False Claims Act ("NJFCA") for allegedly acquiring a home healthcare agency from the Ocean County Board of Health ("Ocean County") by fraud, then submitting $36 million in (seemingly legitimate) Medicare bills to the federal government. Freedman sues on behalf of the United States pursuant to a qui tam provision in the FCA, see 31 U.S.C. § 3729 et seq., and the State of New Jersey pursuant to an analogous state law. See N.J.S.A. § 2A:32C-1 et seq. Defendants now move to dismiss on the grounds that Freedman's "fraud-in-the-healthcare-transaction" theory of liability would "wildly expand the scope" of the FCA and "has no grounding in authority." Freedman opposes, arguing that the FCA is designed to reach all types of fraud that might result in a loss to the government, including fraudulently induced contracts resulting in subsequent government payments, regardless of the validity of the payments themselves. For the following reasons, Bayada's Motion to Dismiss the FCA claims is GRANTED, and I DECLINE to exercise supplemental jurisdiction over the remaining NJFCA claims, for which the statute of limitations will be tolled for thirty (30) days from the date of this Opinion to permit time to refile in state court.
Bayada provides at-home clinical services to 28,000 patients across six countries. See Compl., ¶ 14. J. Mark Baiada founded the company in 1975 and served as CEO until January 2017, when his son, David Baiada, succeeded him. Id. ¶¶ 14-15. Freedman served as Bayada's Director of Strategic Growth from January 2009 until August 2016, working directly under David Baiada, then-COO. Id. ¶¶ 13, 16.
In 2011, Ocean County began considering whether to sell its home healthcare agency. Id. ¶ 25. Freedman contacted County Administrator Carl W. Block on October 7, 2011, suggesting Bayada as a buyer. Id. ¶ 26. Around that time, Bayada asked George Gilmore, an attorney and local Republican Party chair, to "lobby" on its behalf. Id. Gilmore engaged in various efforts to that end, both before and after signing a retention agreement for legal services in March 2012.2 Id. ¶¶ 27-28, 38. For example, Gilmore allegedly spoke to Block about Bayada in November 2011, and learned that "[n]o one has any conflicts or anything negative to say." Id. ¶ 27. This led Freedman to believe that "retaining [ ] Gilmore could be determinative of whether Bayada or a competitor [wins] the right to purchase Ocean County's home health care agency." Id. ¶ 28. Troublingly, he told the Baiadas: 3 Id. ¶ 30. Then, in April 2012, Gilmore allegedly arranged a meeting between David Baiada and Robert Singer, a State Senator and Vice Chairman of the Ocean County Health Board, id. ¶ 40, after which David Baiada purportedly emailed Freedman stating that Singer was "very pleased" about the prospect of Bayada as a buyer and Gilmore would "make sure no 'interlopers' can bid to shut out competition." Id. ¶ 41. On May 7, 2012, according to the Complaint, Gilmore also provided Bayada with non-public information obtained from Victoria Miragliotta, the County Health Board's CFO. Id.
Ocean County did not formally seek bids until June 5, 2014, when it issued a "Request for Competitive Contracting Proposals for the Purchase and Transfer of the Operating Rights of the Home Health Care Agency" ("the RFP"). Id. ¶ 31. Bayada submitted its proposal on July 25, 2014, one of two bidders to do so. Id. ¶ 44. The RFP contains various provisions which Freedman asserts are relevant to this case. First, the "No Broker Fee" provision states that "no . . . commissions have been paid to third parties in connection with the transaction subject to this RFP." Id. ¶ 32. Second, the "Offer of Gratuities/Integrity" provision states that:
The Proposer shall not, in connection with this or any other agreement with the Ocean County Board of Health, directly or indirectly, offer, confer or agree to confer any pecuniary benefit on anyone as consideration from the decision, opinion, recommendation, vote, other exercise of discretion, or violation of known legal duty by any governmental official or employee.
Id. That provision also states that:
By submission of a response, the Proposer certifies that no gratuities of any type were either offered to or received by any elected or appointed official or employee of the Ocean County Board of Health or the State of New Jersey or its political subdivision in connection with this procurement from the Proposer . . . . If thisprohibition is violated, any contract arising from these specifications may be terminated by the Board.
Id. ¶ 34. Finally, bidders must submit a "Non-Collusion Affidavit" with the following representation:
Id. ¶ 35. The "Non-Collusion Affidavit" provides a warning: "FAILURE TO COMPLY WITH THE BIDDING PROCESS, COMPLETION AND SUBMITTAL OF ALL OF THE ABOVE DOCUMENTS ON THE FORMS PROVIDED HEREIN, WILL RESULT IN A REJECTION OF YOUR PROPOSAL." Id. ¶ 36. These provisions reflect N.J.S.A. § 52:13C-21.5, which bans contingent fee lobbying, and N.J.S.A. § 2C:21-34(b), which bans false representations in connection with a bid for a government contract.
Nevertheless, days before submitting its proposal to Ocean County, David Baiada apparently offered Gilmore a "success fee" on top of his retention agreement. See Compl., ¶ 43. According to the Complaint, Gilmore would receive $100,000 if Bayada could buy Ocean County's home healthcare agency for $4.1 to 5 million, or $200,000 if Bayada could buy it for $2.5 million plus five percent of gross revenue for 10 years. Id. Freedman claims that he and Baiada discussed "dig[ging] up quality data" on its bid competitor, Ocean Certified Homecare, LLC, "for [Gilmore] to use as ammo" in the selection process, id. ¶ 47, but decided not to because Bayada'sown quality scores were not "that great." Id. ¶ 49. Bayada did not disclose its arrangement with Gilmore to Ocean County at any time.
Ocean County Health Department completed its bid evaluation on August 8, 2014. Id. ¶ 51. Bayada scored 279/300, while Ocean Certified Homecare scored 206/300. Id. ¶ 52. The Health Department recommended awarding the contract to Bayada, id., and the Board of Health passed a resolution to that effect on August 13, 2014, on a 5-1 vote, over the objections of Ocean Certified Homecare, which pointed out that it bid $500,000 more than Bayada, had not been informed of the applicable scoring sheet, and followed the rule disallowing alternative proposals, contrary to Bayada. Id. ¶ 50, 54. Ocean County sent Gilmore a contract, in his capacity as Bayada's representative, that day. Id. ¶ 55. Bayada obtained Ocean County's license on December 29, 2014, id. ¶ 57, enrolled as a Medicare provider in January 2015, id. ¶ 58, and billed approximately $36 million to the federal government through 2019. Id. ¶ 60.
On October 7, 2019, Freedman filed suit under seal in accordance with 31 U.S.C. § 3730(b)(2). The United States declined to intervene, see 31 U.S.C. § 3730(b)(4)(B), after which I unsealed the Complaint. Freedman now proceeds qui tam pursuant to 31 U.S.C. § 3730(c)(3). This Court has question jurisdiction over Freedman's FCA claims under 28 U.S.C. § 1331 and 31 U.S.C. § 3732(a). See United States ex rel. Wilkins v. United Health Grp., Inc., 659 F.3d 295, 302 (3d Cir. 2011). Counts I-III assert violations of 31 U.S.C. §§ 3729(a)(1)(A), (B), and (G), while Counts IV-VI assert violations of N.J.S.A. §§ 2A:32C-3(a), (b), and (g).
Before the Court is Bayada's dismissal motion. Bayada argues that Freedman has not plead a cognizable theory of liability under the FCA because he merely alleges that Bayada fraudulently acquired Ocean County's home healthcare agency, not that Bayada made any false statements to the United States, much less false statements material to the government's payment decisions.According to Bayada, "[a]n alleged misrepresentation that does not relate in any way to the health care services for which claims are submitted to federal health care programs simply cannot" form the basis of an FCA claim. See Def. Br., at 12. Freedman contends in response that, but-for Bayada's fraudulently obtained contract with Ocean County, it never would have received government payments in the first place, and FCA liability attaches to every claim submitted to the United States to that extent, regardless of whether Bayada made no...
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