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United States, ex rel. Park v. Legacy Heart Care LLC

United States District Court, N.D. Texas, Dallas Division

September 17, 2019

THE UNITED STATES OF AMERICA, ex rel. EMERSON PARK
v.
LEGACY HEART CARE, LLC, LEGACY HEART CARE OF FORT WORTH, LLC, LEGACY HEART CARE OF AUSTIN, LLC, LEGACY HEART CARE OF MIDTOWN AUSTIN, LLC, TRINITY HEART CARE, LEGACY HEART CARE OF SAN ANTONIO, LLC, LEGACY HEART CARE OF KANSAS CITY, LLC, MICHAEL GRATCH, TUAN D. NGUYEN, VU D. NGUYEN, VINH D. NGUYEN, and NIMA AMJADI

          MEMORANDUM OPINION AND ORDER

          KAREN GREN SCHOLER UNITED STATES DISTRICT JUDGE.

         Plaintiff-Relator Emerson Park ("Relator") brings this qui tarn action against Defendants Legacy Heart Care, LLC ("LHC"), Legacy Heart Care of Fort Worth, LLC, Legacy Heart Care of Midtown Austin, LLC, Legacy Heart Care of Austin, LLC, Trinity Heart Care, Legacy Heart Care of San Antonio, LLC, Legacy Heart Care of Kansas City, LLC (collectively "LHC Entities"), Michael Gratch (together with LHC Entities, the "LHC Defendants"), Tuan D. Nguyen, Vu D. Nguyen, Vinh D. Nguyen, and Nima Amjadi ("Medical Director Defendants"), alleging that LHC Defendants and Medical Director Defendants defrauded the United States while providing Enhanced External Counterpulsation ("EECP") to Medicare patients.

         Pending before the Court is LHC Defendants' and Medical Director Defendants' Motions to Dismiss Relator's Third Amended Complaint ("Motions to Dismiss) [ECF Nos. 100, 102], and their Joint Motion for Attorneys' Fees ("Motion for Attorneys' Fees") [ECF No. 93]. For the reasons that follow, the Court grants in part and denies in part the Motions to Dismiss, and denies the Motion for Attorneys' Fees at this time.

         I. BACKGROUND

         Pursuant to Special Order 3-318, this case was transferred from the docket of Judge Sam A. Lindsay to the docket of this Court on March 8, 2018. As the present action is the subject of a prior opinion of this Court, see United States ex rel. Park v. Legacy Heart Care, LLC, Civ. A. No. 3:16-CV-803-S, 2018 WL 5313884 (N.D. Tex. Oct. 26, 2018), the Court will discuss the background facts only to the extent necessary for this Memorandum Opinion and Order.

         The procedural posture of this qui tarn action is worthy of note, Relator filed his initial complaint under seal on March 22, 2016. See ECF No. 2. After over a year of investigation, the United States decided not to intervene in this action, and the Court ordered the unsealing of the complaint on September 19, 2017. See ECF Nos. 16, 17. LHC Defendants and Medical Director Defendants filed their initial motions to dismiss the complaint on January 31, 2018, but the Court denied these motions as moot because Relator amended his complaint. See ECF Nos. 31, 33, 39, 57. Thereafter, LHC Defendants and Medical Director Defendants filed a renewed set of motions to dismiss on March 7, 2018. See ECF Nos. 42, 45. Although Relator amended his complaint for a second time, the amendment served only to clarify the parties to the suit, and all parties agreed that it did not moot the second set of motions to dismiss. See ECF No. 60.

         On October 26, 2018, the Court granted LHC Defendants' and Medical Director Defendants' second set of motions. See Park, 2018 WL 5313884, at *9. Significantly, the Court dismissed Relator's claims against then-defendants Michael Grad, M.D., Legacy Heart Care of South Austin, LLC, Legacy Heart Care of Phoenix, LLC, and Legacy Heart Care of Charlotte, LLC with prejudice after finding the allegations "to be potentially a violation of Fed.R.Civ.P. 11 (b)(3) and an unreasonable stretch of deduction." Id. at *5. The Court granted Relator leave to replead the remaining claims, id. at *9, and Relator filed his Third Amended Complaint (the "Complaint") on November 26, 2018.

         On his fourth attempt to state a claim, Relator-a former scribe employed by LHC for approximately seven months-continues to claim that LHC Defendants and Medical Director Defendants "engaged in a pervasive pattern of false and fraudulent conduct with respect to its provision of EECP and related services to Medicare patients." Third Am. Compl. ¶¶ 2, 14. Specifically, Relator alleges that LHC Defendants and Medical Director Defendants presented false claims to Medicare in violation of the False Claims Act ("FCA")[1] by:

(1) seeking reimbursement for EECP services that did not satisfy the diagnostic criteria under [National Coverage Determination ('NCD')] 20.20, (2) upcoding [Evaluation and Management ('E&M')] services to the highest level billing codes, (3) seeking reimbursement for EECP services that were not directly supervised by a physician as required by NCD 20.20, and (4) paying kickbacks to patients in the form of waived co-pays and certain expenses.

Id. ¶ 62. The Complaint splits these allegations between four causes of action. In Counts I and II, Relator purports to state presentment and false-statement claims by alleging that LHC Defendants and Medical Director Defendants (1) submitted Medicare claims for EECP services performed in violation of NCD 20.20, and (2) "upcoded" bills for E&M services, respectively. In Count III, Relator recasts the preceding allegations into a conspiracy claim under 31 U.S.C. § 3729(a)(1)(C). Finally, in Count IV, Relator pleads that LHC Defendants and Medical Director Defendants violated the FCA by seeking Medicare reimbursement for services while violating the Anti-Kickback Statute ("AKS"), 42 U.S.C. § 1320a-7b.

         For the third time, LHC Defendants and Medical Director Defendants move to dismiss each of Relator's claims, arguing that the Complaint still fails under Federal Rules of Civil Procedure 9(b) and 12(b)(6). See ECF Nos. 100, 102, Additionally, LHC Defendants and Medical Director Defendants request attorneys' fees they incurred in defending against claims the Court dismissed with prejudice in its prior opinion. See ECF No. 93, Relator filed responses to these motions, LHC Defendants and Medical Director Defendants filed replies, and Relator filed surreplies.

         II. LEGAL STANDARD

         A. The Rule 12(b)(6) Standard

         To defeat a motion to dismiss filed pursuant to Federal Rule of Civil Procedure 12(b)(6), a plaintiff must plead "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); Reliable Consultants, Inc. v. Earle, 517 F.3d 738, 742 (5th Cir. 2008). To meet this "facial plausibility" standard, a plaintiff must "pleadf factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Plausibility does not require probability, but a plaintiff must establish "more than a sheer possibility that a defendant has acted unlawfully." Id. The court must accept well-pleaded facts as true and view them in the light most favorable to the plaintiff. Sonnier v. State Farm Mut. Auto. Ins., 509 F.3d 673, 675 (5th Cir. 2007). However, the court does not accept as true "conclusory allegations, unwarranted factual inferences, or legal conclusions." Ferrer v. Chevron Corp., 484 F.3d 776, 780 (5th Cir. 2007) (citation omitted). A plaintiff must provide "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555 (internal citations omitted). "Factual allegations must be enough to raise a right to relief above the speculative level... on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Id. (internal citations omitted).

         The ultimate question is whether the complaint states a valid claim when viewed in the light most favorable to the plaintiff. Great Plains Tr. Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 312 (5th Cir. 2002). At the motion to dismiss stage, the court does not evaluate the plaintiffs likelihood of success. It only determines whether the plaintiff has stated a claim upon which relief can be granted. Mann v. Adams Realty Co., 556 F.2d 288, 293 (5th Cir. 1977).

         B. The Rule 9(b) Standard

         Since all of Relator's claims are premised on alleged violations of the FCA, the allegations must also satisfy Rule 9(b)'s heightened pleading standard. See United States ex ret Grubbs v. Kanneganii, 565 F.3d 180, 185 (5th Cir. 2009). Rule 9(b) requires that "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b). "At a minimum, Rule 9(b) requires allegations of the particulars of time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what he obtained thereby." Benchmark Elecs., Inc. v. J.M. Huber Corp., 343 F.3d 719, 724 (5th Cir. 2003) (quoting Tel-Phonic Servs., Inc. v. TBS Int'l, Inc., 975 F.2d 1134, 1139 (5th Cir, 1992)). Put simply, Rule 9(b) requires the "who, what, when, where, and how" of the fraud. United States ex rel Williams v. Bell Helicopter Textron Inc., 417 F.3d 450, 453 (5th Cir. 2005) (quoting United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 903 (5th Cir. 1997)).

         The Fifth Circuit has given Rule 9(b) a "flexible" interpretation in the FCA context in order to achieve the FCA's remedial purpose. See Grubbs, 565 F.3d at 190. A complaint can survive a motion to dismiss by alleging "the details of an actually submitted false claim" or by "alleging particular details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that the claims were actually submitted." Id., However, this "flexible" interpretation does not absolve qui tarn relators of the heightened pleading requirements of Rule 9(b). See United Stales ex rel. Nunnally v. W. Calcasieu Cameron Hosp., 519 Fed.Appx. 890, 893 (5th Cir. 2013). A relator must still allege the '"who, what, when, where, and how' of the alleged fraud." United States ex rel. Jamison v. Del-Jen, Inc., 747 Fed.Appx. 216, 219 (5th Cir, 2018) (quoting United States ex rel. Shupe v. Cisco Sys., Inc., 759 F.3d 379, 382 (5th Cir. 2014) (per curiam)).

         III. ANALYSIS

         A. Lack of Allegations as to Certain Defendants

         Although the Court previously dismissed claims against certain defendants for failure to allege any specific, non-speculative fraudulent or illegal conduct attributable to them, see Park, 2018 WL 5313884, at *5, Relator continues to disregard his obligation to "plead[] factual content that allows the [C]ourt to draw the reasonable inference that. . . [each Defendant is] liable for the misconduct alleged." Iqbal, 556 U.S. at 678. This obligation is particularly acute here because Relator purports to bring a claim under the FCA. "As a counterweight to the [FCA's] power and as a shield against fishing expeditions, FCA suits are subject to the screening function of Federal Rule of Civil Procedure 9(b)." United States ex rel. Gage v. Davis S.R. Aviation, L.L.C., 623 Fed.Appx. 622, 623 (5th Cir, 2015). The requirements of Rule 9(b) "must be met for each defendant." United States ex rel. Capshaw v. White, Civ, A. No, 3:12-CV-4457-N, 2018 WL 6068806, at *3 (N.D. Tex. Nov. 20, 2018). The Court finds that Relator's allegations against Michael Gratch, Vu D. Nguyen, Trinity Heart Care, LHC of San Antonio, LLC, and LHC of Kansas City, LLC are so deficient that they may, again, rise to the level of a Federal Rule of Civil Procedure 11(b) violation. At a minimum, Relator did not plead sufficient facts to satisfy the heightened pleading standard of Rule 9(b) as to these Defendants.

         Each of these Defendants hardly appears outside of the caption of the Complaint. Michael Gratch is mentioned in only one paragraph, where he is identified as "the founder, president, and owner of LHC" and alleged to be the individual "responsible or LHC's fraudulent operations," without a single fact supporting this sweeping accusation. Third Am. Compl. ¶ 21, Vu D. Nguyen is mentioned three times-Relator identified him as a cardiologist, as one of LHC's medical directors, and as a doctor who referred a patient to LHC. See id, ¶¶ 23, 26, 120. In 72 pages of the Third Amended Complaint, Relator did not offer one factual allegation specifically linking Michael Gratch or Vu D. Nguyen to the alleged fraudulent scheme aside from their employment at LHC. Instead, Relator continues to rely on generalized accusations-e.g., "Defendants collectively engaged in a multi-faceted scheme that resulted in the presentment of false claims to Medicare in violation of the FCA." Id. ¶ 62, Does Relator not understand that he may not simply lump Defendants together? See Park, 2018 WL 5313884, at * 10 (citation omitted). Such general allegations do not establish "more than a sheer possibility that [Michael Gratch or Vu, D. Nguyen] has acted unlawfully." Iqbal, 556 U.S. at 678.

         In his fourth attempt, Relator's allegations regarding some of the LHC entities are just as egregiously deficient. LHCs of San Antonio and Kansas City are mentioned twice each, without any detail as to their specific involvement. See id ¶ 18 (listing their addresses); id. ¶ 292 ("[LHC of] San Antonio and Kansas City had approximately 20 patient [sic] per-day."). Trinity Heart Care is referenced three times.[2] See Id. ¶ 18 (listing its address); id. ¶ 71 (stating amount Medicare reimburses it for EECP services); id. ¶ 72 ("[LHC of] Dallas . . . had approximately 20 patient [sic] per day."). And, Relator's allegations against these LHC Entities are not saved by his claim that LHC Entities have "centralized billing" or "standardized policy." E.g., Id. ¶¶ 141, 147. Even if Trinity Heart Care, LHC of San Antonio, and LHC of Kansas City had a policy of "inputting the specific angina code in all patient charts," the Court cannot simply accept Relator's speculations that these LHC Entities submitted claims for EECP treatment that did not satisfy NCD 20.20 criteria, billed for services not provided, or paid kickbacks to patients.[3] Without factual support, Relator's claims against these LHC entities appear to be no more than "nuisance suits and . . . baseless claims" that are used "as a pretext to gain access to a 'fishing expedition, '" and that are prohibited by Rule 9(b). Grubbs, 565 F.3d at 191.

         Furthermore, the Court finds that Relator pleaded insufficient facts to show that Michael Gratch, Vu D. Nguyen, Trinity Heart Care, or LHC Entities of San Antonio and Kansas City entered into "an unlawful agreement... to get a false or fraudulent claim allowed or paid by [the Government]" or "at least one act performed in furtherance of that agreement," Grubbs, 565 F.3d at 193 (first alteration added) (quoting United States ex rel. Farmer v. City of Houston, 523 F.3d 333, 343 (5th Cir. 2008)) (reciting the elements of FCA conspiracy claim). There are no facts suggesting that any of these Defendants may be held liable as co-conspirators.

         Relator was put on notice of these wholly inappropriate pleading deficiencies by the Court's prior opinion. The Court dismissed claims against then-Defendant Michael Grad, M.D., for substantially the same reason and warned Relator that such pleading tactics may violate Federal Rule of Civil Procedure 11(b). See Park, 2018 WL 5313884, at *5. Nonetheless, the Court did not dismiss the claims against Michael Gratch, Vu D. Nguyen, Trinity Heart Care, LHC of San Antonio, and LHC of Kansas City to afford Relator an opportunity to plead facts as to each of these Defendants. Id. at *6, The Court will no longer tolerate Relator's scattershot pleading tactics. The Court finds that Relator "has had fair opportunity to make his case," Schiller v. Physicians Res. Grp., Inc., 342 F.3d 563, 567 (5th Cir. 2003) (quoting Jacquez v. Procunier, 801 F.2d 789, 792 (5th Cir. 1986)), and that further amendment would be futile. See Rombough v. Bailey, 733 Fed.Appx. 160, 165 (5th Cir. 2018). Consequently, the Court grants the Motions to Dismiss as to every Count alleged against Michael Gratch, Vu D. Nguyen, Trinity Heart Care, LHC of San Antonio, and LHC of Kansas City with prejudice.[4]

         B. Theories of False Claims Liability

         For a defendant to be liable under the FCA, the relator must establish that "(1). . . there was a false statement or fraudulent course of conduct; (2) made or carried out with the requisite scienter; (3) that was material; and (4) that caused the government to pay out money or to forfeit moneys due (i.e., that involved a claim)." United States ex rel. Lemon v. Nurses to Go, Inc., 924 F, 3d 155, 159 (5th Cir. 2019) (quoting United States ex rel Barman v. Trinity Indus. Inc., 872 F.3d 645, 654 (5th Cir. 2017)). A claim under 31 U.S.C. § 3729(a)(1)(A) arises when a person "knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval." "[T]he provision's sine qua non is the presentment of a false claim." Grubbs, 565 F.3d at 188. The FCA "attaches liability, not to the underlying fraudulent activity ... but to the claim for payment."[5] United States ex rel. Longhi v. United States, 575 F.3d 458, 467 (5th Cir. 2009) (quoting Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 785 (4th Cir. 1999)). A claim under § 3729(a)(1)(B) similarly requires a relator to "show that the claim presented for payment. . . was false," United States ex rel. Rigsby v. State Farm Fire & Cas. Co., 794 F.3d 457, 476-77 (5th Cir. 2015), aff'd, 137 S.Ct. 436 (2016), but also requires that the defendant made, used, or caused to be made or used, "a false record or statement material to a false or fraudulent claim." 31 U.S.C. § 3729(a)(1)(B).

         In this case, Relator alleged that Remaining Defendants are liable under §§ 3729(a)(1)(A) and (B) because they purportedly: (1) billed Medicare for EECP treatments not allowed by NCD 20.20-Count I; (2) billed Medicare for E&M services using incorrect billing codes--Count II; and (3) falsely certified compliance with the AKS-Count IV. For the reasons that ...


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