US v. Carell

• Decision Date: 13 October 2009
• Docket Number: Civil Action No. 3:09-cv-445.
• Citation: 681 F. Supp.2d 874
• Parties: UNITED STATES of America, Plaintiff, v. James W. CARELL, Robert Vining, Diversified Health Management, Inc. (also known as CareAll Management, LLC), the James W. Carell Family Trust, CareAll, Inc., VIP Home Nursing And Rehabilitation Services, LLC (also known as VIP Home Nursing and Rehabilitation Services, Inc.), Professional Home Health Care, LLC (also known as Professional Home Health Care, Inc.), and University Home Health, LLC (also known as University Home Health, Inc.), Defendants.
• Court: U.S. District Court — Middle District of Tennessee

681 F. Supp.2d 874

UNITED STATES of America, Plaintiff, v. James W. CARELL, Robert Vining, Diversified Health Management, Inc. (also known as CareAll Management, LLC), the James W. Carell Family Trust, CareAll, Inc., VIP Home Nursing And Rehabilitation Services, LLC (also known as VIP Home Nursing and Rehabilitation Services, Inc.), Professional Home Health Care, LLC (also known as Professional Home Health Care, Inc.), and University Home Health, LLC (also known as University Home Health, Inc.), Defendants.

Civil Action No. 3:09-cv-445.

United States District Court, M.D. Tennessee, Nashville Division.

October 13, 2009.

Ellen Bowden McIntyre, Edward M. Yarbrough, Office of the United States Attorney, Nashville, TN, Susan Lynch, Department of Justice, Washington, DC, for Plaintiff.

William David Bridgers, William Taylor Ramsey, Robert A. Peal, Neal & Harwell, James William Price, Jr., Price, Hill & Kolarich, John C. Hayworth, Charles Malone, Kathryn Hays Sasser, Walker, Tipps & Malone, Nashville, TN, John P. Konvalinka, James Scott McDearman, Tonya Kennedy Cammon, Grant, Konvalinka & Harrison, P.C., Chattanooga, TN, for Defendants.

MEMORANDUM OPINION

THOMAS A. WISEMAN, JR., Senior District Judge.

In its Amended Complaint in this action (Doc. No. 48), plaintiff United States of America (the "Government") asserts various violations of the False Claims Act ("FCA"), 31 U.S.C. §§ 3729-3733, against three of the eight defendants, as well as a right to recover damages under common-law theories of unjust enrichment and payment by mistake of fact against all of the defendants. (Am. Compl., Doc. No. 48, Counts I-IV.) Now before the Court are five separate Motions to Dismiss filed respectively by defendants Robert Vining (Doc. No. 67); VIP Home Nursing and Rehabilitation Services, LLC, Professional Home Health Care, LLC and University Home Health, LLC (Doc. No. 70); James W. Carell and CareAll, Inc. (Doc. No. 74); CareAll Management, LLC f/k/a Diversified Health Management, Inc. ("Diversified") (incorrectly named in the Complaint as "Diversified Health Management, Inc. (also known as CareAll Management, LLC)") (Doc. No. 76); and the James W. Carell Family Trust (Doc. No. 78).

All of the defendants assert that the claims brought by the Government are barred by the applicable statutes of limitation. In addition, defendant James W. Carell Family Trust also argues that the claims against it are subject to dismissal on the grounds that (1) the Trust cannot be held liable as the owner of a corporate defendant alleged to have violated the FCA and the common law; and (2) the Amended Complaint does not assert facts that provide a legitimate basis for holding the Trust liable, on an alter ego theory, for an individual defendant's alleged violations of the FCA and the common law.

For the reasons set forth herein, the Court finds that the facts pleaded in the Amended Complaint with respect to the FCA claims, asserted only against defendants Carell, Diversified and the Trust, are sufficient to establish that the claims are not barred by the statute of limitations set forth in 31 U.S.C. § 3731. The motions to dismiss those claims will therefore be denied.

The Court will defer ruling on the motions to dismiss the common-law claims and will grant the Government permission to file a Second Amended Complaint alleging facts sufficient to establish the date upon which those claims accrued for purposes of computing the limitations period set forth in 28 U.S.C. § 2415.

Finally, the Trust's motion to dismiss the claims against it for failure to state a claim based on an alter ego theory of recovery will likewise be denied.

I. STANDARD OF REVIEW

In order to survive a motion to dismiss brought under Rule 12(b)(6) of the Federal Rules of Civil Procedure, "a complaint must contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, ___ U.S. ___, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Allegations that raise the "sheer possibility that a defendant acted unlawfully" are insufficient. Id. A complaint must plead factual content that allows the court to draw the reasonable inference that the defendant is liable for the conduct alleged." Id. A complaint that "offers `labels or conclusions' or `a formulaic recitation of the elements of a cause of action will not do.'" Id. (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955).

Generally speaking, a 12(b)(6) motion to dismiss is not an appropriate vehicle for raising an affirmative defense, such as the statute of limitations, because plaintiffs are not required to "anticipate and attempt to plead around all potential defenses. Complaints need not contain any information about defenses and may not be dismissed for that omission." Xechem, Inc. v. Bristol-Myers Squibb Co., 372 F.3d 899, 901 (7th Cir.2004) (citing Gomez v. Toledo, 446 U.S. 635, 100 S.Ct. 1920, 64 L.Ed.2d 572 (1980); other citations omitted). The Sixth Circuit has recognized, however, that a plaintiff may incur an "obligation to plead facts in avoidance of the statute of limitations defense" when it is otherwise "`apparent from the face of the complaint that the time limit for bringing the claims has passed.'" Bishop v. Lucent Techs., Inc., 520 F.3d 516, 518 (6th Cir.2008) (quoting Hoover v. Langston Equip. Assocs., Inc., 958 F.2d 742, 744 (6th Cir. 1992)). In such a case, a motion to dismiss may appropriately be grounded upon a plaintiff's failure to plead tolling or other facts showing the claims are not barred by the statute of limitation.

II. PROCEDURAL BACKGROUND AND FACTUAL ALLEGATIONS

Medicare, the common name for the Health Insurance Program for the Aged and Disabled established by Title XVIII of the Social Security Act ("Act"), 42 U.S.C. §§ 1385 et seq., is a federally funded health insurance program administered by the United States through the Department of Health and Human Services ("HHS"). Palmetto Government Benefits Administrators, LLC ("Palmetto") was, at all times relevant to this action, the "regional home health intermediary" or fiscal intermediary that administered Medicare's home health and hospice benefits in Tennessee.

Defendant James Carell, a resident of Nashville, Tennessee was President of Diversified and CareAll, Inc. and operated these companies at all times relevant to the Government's claims. He was the full owner or part owner of Diversified until July 2000. Diversified is a Tennessee corporation with its principal place of business in Tennessee.

Defendant James W. Carell Family Trust (the "Trust") was a part or full owner of Diversified at all relevant times. Defendant Carell is the sole settler of the Trust, which was formed solely for the benefit of Carell's children and their issue. On July 1, 1999, Carell transferred eighty percent of his stock in Diversified to the Trust. On July 1, 2000, he transferred his remaining twenty-percent interest in Diversified to the Trust. The Government asserts that Carell did not receive any consideration from the Trust in exchange for his transfer of Diversified's stock to the Trust and, therefore, that the transfer was not an "arms-length" transaction. The Government further asserts that the Trust did not maintain an arms-length relationship between itself and other related entities, including the other defendants in this suit. In addition, following the transfer of Diversified's stock from Carell to the Trust, Diversified continued to have substantially identical management, attorneys, business, purpose, operation, equipment, customers and supervision as before. Carell continued to work for Diversified and ran the company following its transfer to the Trust. On the basis of these alleged facts, the Government asserts that the Trust constitutes an alter ego of Carell and that failure to consider it as such would promote injustice.

Defendant Robert Vining, a Missouri resident, was President of defendants VIP Home Nursing and Rehabilitation Services, LLC ("VIP"), Professional Home Health Care, LLC ("Professional") and University Home Health, LLC ("University") (collectively, the "Home Health Agencies") at all relevant times. He owned the three Home Health Agencies until December 2002. The three Home Health Agencies are all Tennessee companies with their principal place of business in Tennessee, and were managed at all relevant times by Diversified.

Defendant CareAll has owned the three Home Health Agencies since December 2002. Carell is the sole owner of all stock in CareAll as well as its President. Since Carell's acquisition of the Home Health Agencies from Vining, the Agencies have continued to have substantially identical management, business, purpose, operation, equipment, customers, supervision and de facto ownership. The Government maintains that, even prior to the express acquisition by CareAll of the Home Health Agencies in 2002, CareAll and Carell were the de facto owners of the Agencies.

Each year, home health agencies like the three Home Health Agency defendants here are required to submit annual cost reports to the Medicare program's intermediaries, in this case Palmetto, in order to obtain reimbursement from the Medicare program. The Government maintains in its Amended Complaint that Carell, Vining, and the Trust caused VIP, Professional and University to submit fraudulent cost reports to Medicare seeking full reimbursement for Diversified's management services for the years 1999, 2000 and 2001. Specifically, the cost reports that are the subject of the Government's claims were submitted to Palmetto by VIP on November 29, 1999, November 27, 2000 and July 31 2002; by Professional on October 28, 1999, October 31, 2000 and August 1, 2000; and by University on May 26, 2000 and June 14, 2000.

The Government maintains that the Home Health Agencies concealed the related-par...