The district court granted the defendants’ motions to dismiss, finding that the relators could not name individual managers and executives in their complaint of unlawful retaliation. The court also dismissed various claims of Stark Law and Anti-Kickback Statute violations, finding that the relators’ complaint made numerous broad allegations of fraud but failed to describe the alleged schemes in any detail. Notably, the court denied the defendants’ motion to dismiss on the grounds the relators could not pursue claims in which the government declined to intervene. The court held that when the government opts to partially intervene, relators are still free to pursue their remaining claims.
Relators Donna Rauch, Muriel Calhoun, and Brandy Knight—all former employees of Oaktree Medical Centre P.C. —alleged that a large number of individual and corporate defendants violated the FCA and the FCA’s anti-retaliation provision. After an investigation, the government opted to intervene in several claims alleging violations of the Stark Law and FCA.
The combined defendants included Oaktree; Labsource, LLC; Pain Management Associates of North Carolina, P.C.; Pro Care Counseling Center, LLC; Prolab, LLC; FirstChoice Healthcare, P.C.; Medical Management and Design Consultants, LLC; Daniel McCollum, D.C.; Gary Edwards; Dean Banks, D.C.; Bert Blackwell, M.D.; Dwight Jacobus, D.O.; Daniel Sheehan, M.D.; Joe Case; and Myron Moorehead.
In these proceedings, the court addressed various motions to dismiss claims in which the government declined to intervene.
Citing United States ex rel. Brooks v. Steven-Henager College, Inc., 359 F. Supp. 3d 1088 (D. Utah 2019), the defendants argued that relators cannot continue to pursue claims in which the government did not intervene. The government filed a brief arguing that Brooks was wrongfully decided and affirmatively stating that plaintiff-relators have the right to maintain non-intervened claims.
The court agreed that the decision in Brooks fundamentally misunderstood how an FCA case proceeds. The court in Brooks equated “action” with “civil action,” an interpretation the court here found would render meaningless several provisions of the FCA. Under the logic of the Brooks decision, the government would have to intervene or decline to intervene in a qui tam complaint in its entirety, or file its own separate complaint for any claims it wished to pursue. The court adamantly asserted this is not the case, instead holding that “action” refers to cause of action, not civil action.
Next, the court considered the motion to dismiss filed by defendant Daniel McCollum D.C. McCollum argued the plaintiffs failed to plead that he was their employer. Accordingly, he argued that the FCA does not recognize a cause of action against non-employers. In response, the relators argued the FCA does not require that the defendant in a retaliation claim be the relator’s employer. Alternatively, they argued that McCollum is the alter ego of Oaktree.
The court noted a split in how previous courts have ruled on this issue. Other courts have held that the relators could name a defendant like McCollum in their complaint, finding that the FCA, as amended, had eliminated the phrase “by his or her employer” from the provision barring retaliation for protected conduct. According to these courts, by eliminating the reference to “employers” as defendants, the 2009 amendment effectively left the universe of defendants undefined and wide-open. However, other courts have not been as expansive, finding that the elimination of that phrase was meant to expand retaliation coverage to agents and contractors, not to open liability to individuals.
The court adopted the latter opinion, and held that the relators could not name McCollum as a defendant. The court noted the relators were all named employees of Oaktree and therefore could not sue McCollum for unlawful retaliation, even though he acted as CEO. The court also held the relators did not plausibly allege that McCollum was Oaktree’s alter ego.
Next, defendant Bert Blackwell M.D. moved to dismiss, arguing that the complaint did not state a claim with particularity; the complaint is precluded by the public disclosure bar; and the claims are barred by the statute of limitations.
The relators alleged that Blackwell was involved in three schemes in violation of the FCA: (1) his participation in self-referrals and receipt of kickbacks and inducements in violation of the Stark Law and the AKS; (2) his participation in false and fraudulent billing practices related to the use of his National Provider Identifier number; and (3) his participation in the submission of claims for medically unnecessary and unreasonable drug testing.
First, the court noted that the relators’ amended complaint contained multiple paragraphs “incorporating by reference” paragraphs from the government’s complaint in intervention. The court declined to consider any portion of the government’s complaint, finding that so doing would implicate various disclosure bars and that it would be improper for the relators to use information the government obtained independently. The court explained that FCA cases are not fishing expeditions, wherein a relator lies in wait for the government to obtain the information required for a complaint to pass muster under Rule 9(b).
Considering only the relator’s allegations, the court found they had not met the particularity standard in their claims against Blackwell. The court found they had not alleged a single false claim for payment but instead broadly alleged a series of schemes. The court found no specific claims, no reliable indicia that false claims were submitted, and no attempt to connect the dots between any alleged false claims and government payments. Therefore, the court granted the motion to dismiss.
The court denied defendant Gary Edwards’ motion to dismiss, as he had already filed an answer to the amended complaint and therefore had waived his right to file a motion to dismiss.
Next, Oaktree; FirstChoice Healthcare, P.C.;Labsource, LLC; and Pain Management Associates of North Carolina, P.C. moved to dismiss, alleging the complaints of retaliation were improperly pled. First, they argued that the complaint failed to allege that Rauch’s conduct was in furtherance of or related to an FCA claim, as compared to the mere completion of her general duties with Oaktree, and failed to specify any protected activity in which relators Calhoun and Knight were involved. Oaktree also argued the relators had failed to put the defendants on notice of their protected activity.
The court agreed in part, finding the complaint did not describe any protected activity by Calhoun and Knight. However, the court found the complaint alleged that Rauch was dismissed from a meeting where she voiced concerns about the legality of kickbacks; was publicly reprimanded; and was terminated for this conduct. The court found this sufficient to survive the motion to dismiss.
Next, Dean Banks D.C. moved to dismiss, arguing the relators failed to plead their complaint with particularity and that the complaint was precluded by the public disclosure bar and statute of limitations. As above, the court found the relators failed to plead their allegations with the required specificity and granted the motion to dismiss. The court dismissed the claims against defendants Joe Case and Daniel Sheehan M.D. on the same grounds.
