US v. Kensington Hosp.

• Decision Date: 13 March 1991
• Docket Number: Civ. A. No. 90-5430.
• Citation: 760 F. Supp. 1120
• Court: U.S. District Court — Eastern District of Pennsylvania
• Parties: UNITED STATES of America v. KENSINGTON HOSPITAL, et al.

760 F. Supp. 1120

UNITED STATES of America v. KENSINGTON HOSPITAL, et al.

Civ. A. No. 90-5430.

United States District Court, E.D. Pennsylvania.

March 13, 1991.

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Virginia Gibson-Mason, Michael J. Rotko, U.S. Atty's Office, Civil Div., Philadelphia, Pa., for U.S.

Brian M. Peters, Post & Schell, P.C., Edward C. Mengel, Jr., Richard J. Bortnick, White and Williams, Robert E. Welsh, Jr., James M. Becker, Michael Stuart Weisberg, Richard A. Sprague, Philip I. Weinberg, Hugh J. Bracken, Sprague, Higgins, Creamer & Sprague, Howland W. Abramson, Lewis J. Hoch, Fox, Rothschild, O'Brien & Frankel, Philadelphia, Pa., for defendants.

OPINION

VANARTSDALEN, Senior District Judge.

I. INTRODUCTION

In this complex action, the government has filed a complaint alleging Medicare/Medicaid fraud by Kensington Hospital (Kensington); a Kensington Hospital administrator Eileen Hause (Hause); Parkway Laboratories (Parkway); and seven individually named doctors: Nelliate Shyamalan, M.D. (Shyamalan); Tarun Ray, M.D. (Ray); Felix Spector, D.O. (Spector); Erich A. Everts, M.D. (Everts); Warren Goldfeder, M.D. (Goldfeder); Jack M. Magill, D.D.S. (Magill); and Edgar Escobar, M.D. (Escobar) (hereafter collectively referred to as the doctors).

The government filed its original complaint containing nine counts on August 20, 1990. In October, and early November, 1990, all the defendants except Parkway submitted numerous motions: motions to dismiss, motions for partial summary judgment, and motions for a more definite statement. Parkway and the government stipulated to an extension of time, and Parkway entered its answer and affirmative defenses on February 1, 1991. On December 21, 1990, the government submitted its consolidated response to defendants' motions, and then filed its first amended complaint containing the same nine counts as the original complaint on January 11, 1991.

In Count I, the government charges all defendants with violations of the False Claims Act. 31 U.S.C. § 3729 et seq. Count II alleges that Kensington, Hause and Spector induced others to breach their fiduciary duties to the Medicare/Medicaid Trust Funds. Count III seeks damages from Shyamalan, Ray, Everts, Goldfeder, and Magill for breaches of their fiduciary duty to the Medicare/Medicaid Trust Funds. Counts IV through VIII are common-law claims against all the defendants: Count IV for common-law fraud; Count V for unjust enrichment/restitution; Count VI for payment under mistake of fact/restitution; Count VII for negligent misrepresentation; and Count VIII for fraudulent misrepresentation. Finally, Count IX contends that Kensington, Hause, Shyamalan, Ray, Spector, Goldfeder, and Magill violated the Anti-Kickback Act, 41 U.S.C. § 51 et seq.

All of the defendants, except Parkway and Magill, responded to the first amended complaint by renewing their earlier motions and providing additional briefing on issues raised by the government's response brief, and issues raised in the first amended complaint.¹ Magill entered an answer and affirmative defenses to the first amended complaint.

The outstanding motions by defendants as to the first amended complaint are: (1) Spector's motion to dismiss; (2) Goldfeder's motion to dismiss, motion for summary judgment as to Counts II through VIII, motion for a more definite statement and motion to dismiss for failure to satisfy Rule 9(b); (3) Shyamalan and Ray's motion to dismiss Counts III, IX and V (in part), and motion for partial summary judgment as to Counts III through VIII, and Count I (in part); (4) Escobar's motion to dismiss Count V (in part) and motion for partial summary judgment as to Counts IV through VIII and Count I (in part); (5) Everts' motion to dismiss; (6) Kensington and Hause's motion to dismiss Counts II, III, IX, and V (in part) and motion for partial summary judgment as to Counts II through VIII, and Count I (in part); (7) Hause's individual motion to dismiss all counts except Count V; (8) Kensington and Hause's motion for protective relief concerning the Nihill and Riedley Report; and (9) Kensington and Hause's motion to limit discovery which is incorporated by reference by other defendants.

I will address all these motions. While the defendants have filed many briefs, most of the pleadings repeat essentially the same arguments against the government's complaint, as the government recognized in its consolidated response. Moreover, many of the defendants incorporate by reference the arguments made by other defendants in their briefs. For example, Spector incorporates by reference arguments made by Kensington, Hause, Everts, and Goldfeder. See Spector's Motion to Dismiss at 2, 7. Shyamalan, Ray, and Escobar incorporate by reference arguments made by Kensington and Hause. See Escobar's Motion to Dismiss at 1; Shyamalan and Ray's Motion to Dismiss at 1.

First, I will dispose of all the motions concerning the specificity of the complaint, that is, the motions for a more definite statement, and the motions to dismiss for failure to satisfy Rule 9(b).

II. MOTIONS FOR A MORE DEFINITE STATEMENT WILL BE DENIED

Goldfeder has moved for a more definite statement under Rule 12(e), and has also filed a motion to dismiss for failure to satisfy Rule 9(b). Hause bases her motion to dismiss Counts I, IV, and VIII on the failure to satisfy Rule 9(b). Everts, too, argues that Count I should be dismissed because the first amended complaint does not meet the requirements of Rule 9(b). Throughout their briefs, other defendants make reference to the lack of specificity in the government's original complaint, but, as I read the pleadings, no other defendant has expressly asked for dismissal of the complaint on these grounds.

I agree with the defendants that the original complaint showed a disturbing propensity to use the term "defendants" throughout, when clearly the factual allegations referred to activities that could not have involved all of the defendants. This type of group pleading fails to provide defendants with adequate notice, and reveals a lack of attention to detail by the government.

The amended complaint has attempted to remedy the problems arising from the liberal use of "defendants" by specifically identifying the defendants referred to in each paragraph. At times, this has resulted in simply substituting the individual names of all the defendants for the term "defendants." Compare, e.g., ¶ 79 of the original complaint, with ¶ 87 of the first amended complaint. In other instances, these changes have provided greater detail. Compare, e.g., ¶¶ 17, 22, 28, 50 of the original complaint with ¶¶ 18, 23, 28, 51 of the first amended complaint.

The first amended complaint cures many of the defects of the original complaint and obviates the need for requiring a more definite statement. Counsel for the defendants noted at oral argument that the first amended complaint was "helpful." While the government could have given more detail, the defendants now have adequate notice of the activities with which they are charged for pleading purposes.

Some of the contentions may be inferred from the complaint. For example, the Assistant United States Attorney explained Count I at oral argument. She stated that because Escobar and Spector were allegedly suspended from Medicaid participation (First Amended Complaint at ¶¶ 28 and 71), they caused fraudulent bills to be submitted by Kensington rather than submitting fraudulent bills themselves. Because of Kensington's centralized billing system (First Amended Complaint at ¶¶ 22, 26, 27), many of the bills were processed by Kensington, even on behalf of doctors who were not suspended, such as Magill and Everts. In these cases, the doctors again "caused" the fraudulent bills to be presented to the government, rather than submitting the bills themselves.

Discovery can provide defendants with all necessary details about the particulars of their alleged unlawful activities. As I noted at oral argument, the government at some point shall have to clarify exactly who is charged with precisely what activity, but through discovery defendants will be able to obtain this information. It is not necessary to order the government to redraft the complaint to include these detailed allegations at this time. I shall probably require the parties to submit a final pretrial order pursuant to Local Rule of Civil Procedure for the United States District Court for the Eastern District of Pennsylvania 21(d)(2). That order should dispel any remaining uncertainty.

The first amended complaint thus withstands a motion for more definite statement under Rule 12(e). Fraud allegations, however, are governed by Rule 9(b), which has higher requirements of particularity than those imposed by Rule 12.

III. MOTIONS TO DISMISS FOR FAILURE TO MEET RULE 9(b) REQUIREMENTS WILL BE DENIED

"The standard for 9(b) is a generous one in this Circuit," Blue Line Coal Co. v. Equibank, 683 F.Supp. 493, 497 (E.D.Pa. 1988) (citations omitted), and the Third Circuit Court of Appeals has cautioned that "focusing exclusively on Rule 9(b)'s particularity language `is too narrow an approach and fails to take account of the general simplicity and flexibility contemplated by the rules.'" Christidis v. First Pa. Mortgage Trust, 717 F.2d 96, 100 (3d Cir.1983) (quoting 5 C. Wright & A. Miller, Federal Practice and Procedure § 1298, at 407 (1969)). Rule 9(b) does not require date, time, and place allegations, provided that the plaintiff gives the defendants other means of precision and substantiation. Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir. 1984), cert. denied, 469 U.S. 1211, 105 S.Ct. 1179, 84 L.Ed.2d 327 (1985).

Although a close question, I conclude that the government's first amended complaint contains enough specificity to withstand a Rule 9(b) challenge. While the government does not describe every instance of alleged fraudulent conduct, it...