United States District Court, S.D. Texas, Houston Division
UNITED STATES OF AMERICA and THE STATE OF TEXAS, ex rel. THOMAS HEADEN III, Plaintiffs,
ABUNDANT LIFE THERAPEUTIC SERVICES TEXAS, LLC, et al., Defendants.
MEMORANDUM AND OPINION
Rosenthal, Chief United States District Judge.
Thomas Headen filed this qui tam action against
Abundant Life Therapeutic Services Texas, LLC, a
medical-services provider; Jon Ford, the former manager of
Abundant Life; and unidentified defendants, alleging
violations of the False Claims Act, the Anti-Kickback
Statute, and the Texas Medicaid Fraud Prevention Act. (Docket
Entry Nos. 1, 20). Abundant Life moved to dismiss the amended
complaint, which the court granted, without prejudice and
with leave to amend. (Docket Entry Nos. 12, 14, 18). Headen
filed a second amended complaint in January 2019. (Docket
Entry No. 20). Abundant Life again moved to dismiss, Headen
responded, Abundant Life replied, and Headen surreplied.
(Docket Entry Nos. 22, 30, 31, 33). Ford joined Abundant
Life's motion to dismiss. (Docket Entry Nos. 27, 32).
on a review of the second amended complaint; the motions,
response, reply, and surreply; the record; the arguments of
counsel presented at a hearing; and the applicable law, the
motions to dismiss are granted. (Docket Entry Nos. 22, 27).
Counts I, II, III, and IV are dismissed, with prejudice and
without leave to amend, because amendment would be futile.
The court declines to exercise jurisdiction over the pendent
Texas-law claim, Count V, which is dismissed, without
prejudice, so that Headen may refile it in state court. A
dismissal order is separately entered.
reasons for these rulings are explained in detail below.
second amended complaint alleges the following facts. Headen
was a consultant for Abundant Life from April 2017 to
February 20, 2018, and was an employee from February 12 to
February 28, 2018. (Docket Entry No. 20 at ¶ 5). In
January 2018, Ford, then Abundant Life's manager, told
Headen that “in order to induce the referral of
Medicaid patients [to] Abundant Life, ” he had paid
kickbacks to officials at Blackshear Elementary, the Madge
Bush Living Center, Rhodes Charter Elementary School, Houston
Independent School District, and Harmony Schools.
(Id. at ¶¶ 5, 17-18). The kickbacks were
paid through a nonprofit organization that Ford directed, the
Assistance and Mentorship to Purpose Project. (Id.).
Ford transferred at least $42, 000 to the Purpose Project for
use in the scheme. (Id. at ¶ 17).
and August 2017, Ford instructed Eryca Neville, a Purpose
Project employee, to give $7, 200 in school uniforms, a
washer and dryer machine, and educational supplies to
Blackshear Elementary's principal. (Id.). Using
“on-site campus access, ” Ford directed Melissa
Shagun, an independent contractor working with Abundant Life,
“to provide free skills building services . . . during
school hours to students at Blackshear Elementary, ”
then to refer Blackshear students to Abundant Life for
“mental health services . . . and assessments.”
(Id.). Ford told Headen that Shagun had referred
“a litany of patients” to Abundant Life,
including one student-patient named J.D. (Id.).
According to Ford, Desiree Munoz, an employee of Blackwise
LLC, a company owned by Jon Ford's brother, billed
Medicaid $19.83 for a mental-health assessment Abundant Life
provided J.D. (Id.).
Ford told Headen that he used the same scheme to induce
referrals to Abundant Life from Rhodes Charter Elementary
School. (Id. at ¶ 18). Eryca Neville, the
Purpose Project employee, gave the Rhodes Charter principal
$20, 000 in “computers purchased from Best Buy”
in October 2017. (Id.). Abundant Life then received
student referrals from Rhodes Charter through Melissa Shagun,
the independent contractor working on Abundant Life's
behalf. (Id.). Ford told Headen that as a result of
the donation and subsequent referrals, Desiree Munoz and
Blackwise billed Medicaid $19.83 four times for
“initial assessments” Abundant Life gave
student-patients J.W., A.W., Z.P. and B.C. from October to
December 2017. (Id.).
also told Headen about a contract between Abundant Life and
the Houston Independent School District, and between Abundant
Life and the Harmony Schools. (Id.). The contracts
“included an offer [for Abundant Life] to provide free
skills building services . . . in exchange for Abundant Life
billing Medicaid for mental health services.”
(Id.). The services would “be free and billed
to Texas [M]edicaid.” (Id.). The HISD
contract, according to Ford, had signature lines for the HISD
Chief Financial Officer, Rene Barajas; the HISD Controller,
Sherrie Robinson; and the general counsel. (Id.).
HISD and Harmony Schools student-patients received services
from Abundant Life between October and December 2017.
(Id.). Desiree Munoz billed Medicaid for certain
services patients C.M, J.D., and D.P .received from Abundant
learned from Ford that Abundant Life retained independent
contractors as marketing agents to generate referrals to
Medicare and Medicaid. (Id. at ¶ 5). Abundant
Life paid these contractors for “signing up schools and
organizations for ‘free skills building' in
exchange for child referrals.” (Id.). Ford
told Headen that the schemes were illegal and that they
“resulted in thousands of hours of billing, ”
some reimbursed by Medicaid. (Id. at ¶¶
17-18). According to Ford, this activity increased Abundant
Life's monthly revenue from $230, 000 to $800, 000.
(Id. at ¶ 18). The arrangements with the
schools were “mutually beneficial, ” Ford
claimed, because the schools used the “donations and
additional counseling services to supplement its understaffed
and underfunded departments.” (Id. at
told Headen that Abundant Life had also retained independent
contractors to perform nonessential transportation services.
(Id. at ¶ 19). These contractors drove Abundant
Life patients to their homes, schools, and appointments,
billing the federal government at their discretion for those
trips. (Id.). According to Ford, these discretionary
billing practices violated Medicare regulations requiring
medical providers to contract with a referring entity before
billing for transportation services, and violated the
regulatory requirement that the billed services be medically
explained to Headen that Abundant Life hired physicians and
provided them and other, nonemployee physicians, doctors with
benefits. (Id. at ¶¶ 15, 20). Abundant
Life used its employee-physicians' licenses “to
apply for approval and to accept payments from Medicaid and
Medicare.” (Id. at ¶ 20). Abundant Life
gave bonuses and free office space to physicians in exchange
for services that facilitated Abundant Life's false
Medicare and Medicaid bills, causing “thousands of
hours worth of false claims to [be submitted to] the United
States.” (Id.). As a result of those improper
employer-employee relationships, Abundant Life engaged in the
unauthorized practice of medicine. (Id. at ¶
March 2018, Headen filed this qui tam action under
seal. (Docket Entry No. 1). After the United States and the
State of Texas declined to intervene in May 2018, the court
unsealed the complaint and related filings. (Docket Entry
Nos. 6, 7). In August 2018, Abundant Life moved to dismiss
Headen's complaint under Rules 9(b) and 12(b)(6). (Docket
Entry No. 10). That motion became moot when Headen filed an
amended complaint in September 2018. (Docket Entry Nos. 12,
13). In October 2018, Abundant Life moved to dismiss the
amended complaint, which this court granted in November 2018.
(Docket Entry Nos. 14, 18). Headen filed a second amended
complaint in January 2019, and Abundant Life and Ford again
moved to dismiss. (Docket Entry Nos. 20, 22, 27).
The Legal Standards
12(b)(6) allows dismissal if a plaintiff fails “to
state a claim upon which relief can be granted.”
Fed.R.Civ.P. 12(b)(6). A complaint must contain “enough
facts to state a claim to relief that is plausible on its
face.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007). Rule 8 “does not require
‘detailed factual allegations,' but it demands more
than an unadorned, the-defendant-unlawfully harmed-me
accusation.” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Twombly, 550 U.S. at 555).
“A claim has facial plausibility 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). “The plausibility
standard is not akin to a ‘probability
requirement,' but it asks for more than a sheer
possibility that a defendant has acted unlawfully.”
Id. (quoting Twombly, 550 U.S. at 556).
withstand a Rule 12(b)(6) motion, [a] complaint must allege
‘more than labels and conclusions, '” and
“a formulaic recitation of the elements of a cause of
action will not do.” Norris v. Hearst Tr., 500
F.3d 454, 464 (5th Cir. 2007) (quoting Twombly, 550
U.S. at 555). “Nor does a complaint suffice if it
tenders ‘naked assertion[s]' devoid of
‘further factual enhancement.'”
Iqbal, 556 U.S. at 678 (alteration in original)
(quoting Twombly, 550 U.S. at 557). “[A]
complaint ‘does not need detailed factual
allegations,' but must provide the plaintiff's
grounds for entitlement to relief-including factual
allegations that when assumed to be true ‘raise a right
to relief above the speculative level.'”
Cuvillier v. Taylor, 503 F.3d 397, 401 (5th Cir.
2007) (quoting Twombly, 550 U.S. at 555).
“Conversely, when the allegations in a complaint,
however true, could not raise a claim of entitlement to
relief, this basic deficiency should be exposed at the point
of minimum expenditure of time and money by the parties and
the court.” Id. (quotation and alteration
omitted) (quoting Twombly, 550 U.S. at 558).
complaint fails to state a claim, the court should generally
give the plaintiff a chance to amend under Rule 15(a) before
dismissing the action with prejudice, unless it is clear that
to do so would be futile. See Carroll v. Fort James
Corp., 470 F.3d 1171, 1175 (5th Cir. 2006) (Rule 15(a)
“evinces a bias in favor of granting leave to
amend”); Great Plains Tr. Co. v. Morgan Stanley
Dean Witter & Co., 313 F.3d 305, 329 (5th Cir. 2002)
(“[D]istrict courts often afford plaintiffs at least
one opportunity to cure pleading deficiencies before
dismissing a case, unless it is clear that the defects are
incurable or the plaintiffs advise the court that they are
unwilling or unable to amend in a manner that will avoid
dismissal.”). A court in its discretion may deny a
motion to amend for futility if the amended complaint would
fail to state a claim on which relief could be granted.
Villarreal v. Wells Fargo Bank, N.A., 814 F.3d 763,
766 (5th Cir. 2016); see Pervasive Software Inc. v.
Lexware GmbH & Co. KG, 688 F.3d 214, 232 (5th Cir.