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United States ex rel. Bruno v. Schaeffer

United States District Court, M.D. Louisiana

June 18, 2018




         Before the Court are the Motions to Dismiss (Doc. 35 and 39) filed by Defendants Alpha Labs, L.L.C., Beta Labs, L.L.C, Gamma Labs, L.L.C., MedComp Laboratory Sciences, L.L.C., MedComp Sciences, L.L.C., Brad Schaeffer, Sigma Labs, L.L.C., Javid Janani, Lisa Janani, and Quantum Laboratories, L.L.C. Plaintiff-Relators Albert Bruno and Alex Strahan filed oppositions, (Docs. 45 and 48), and Defendants filed replies. (Docs. 51 and 52). For the following reasons, the Motions to Dismiss (Doc. 35 and 39) are GRANTED IN PART and DENIED IN PART.

         I. BACKGROUND

         Plaintiff-Relators, two former employees of a large medical laboratory called MedComp Laboratory Sciences, L.L.C. and MedComp Sciences, L.L.C ("MedComp") allege that Defendants conspired to defraud the United States out of millions of dollars arising from fraudulent Medicare and Medicaid claims. (Doc. 1 at ¶ 2). Relators allege that Defendants offered physicians ownership interests in labs called Physician Owned Labs ("POL"), which existed in name only, and they received payments from the labs in proportion to the number of urine specimens the physicians sent to a different lab called Quantum for urine testing covered by private insurance. Id. at ¶ 3. Relators also allege that the scheme incentivized the same doctors to send their urine specimens covered by Medicare and Medicaid to another lab called MedComp. Id. at ¶ 109.

         Relators allege that the scheme began in early 2013, when Brad Schaeffer, the owner of MedComp, called a companywide meeting for Quantum and MedComp to present the POL model. Id. at ¶ 23, 60. Schaeffer allegedly instructed MedComp's sales representatives to promote the POL model to doctors to induce them to send urine specimens covered by private insurance to Quantum and urine specimens covered by Medicare and Medicaid to MedComp. Id. at ¶ 60. Relators allege that Brad Schaeffer, Lisa Janani, and Javid Janani formed entities called Alpha, Beta, Gamma, and Sigma as POLs. Id. at ¶ 62. Relators, however, allege that these labs existed in name only and did not physically exist, and were not licensed labs. Id. at ¶62.

         Relators allege that when participating physicians referred specimens to the POLs, the POLs would bill Quantum for urine tests, and then Quantum would pay the POLs for the tests. Id. at ¶ 74. The revenue paid to the physicians was proportionate to the amount of specimens they sent to Quantum. Id. MedComp allegedly only allowed physicians who were willing to send specimens to Quantum to buy shares in the POLs. Id. at ¶ 77. Relators also allege that Schaeffer instructed MedComp's sales representatives to encourage the physicians to send their Medicare and Medicaid specimens to MedComp because Quantum and MedComp, through the POLs, were providing the physicians with a financial incentive to do so. Id. at ¶ 77. As of December of 2014, all physicians who sent specimens to Quantum for private insurance reimbursements also sent specimens covered by Medicare and Medcaid to MedComp. Id. at ¶ 79.

         In early 2014, Relator Albert Bruno, a Medcomp sales manager, allegedly presented a subscription agreement for a POL to a physician, but after the physician's attorney concluded that the POL model was not legal, the physician did not invest in the POL. Id. at ¶ 93. Relator Bruno then raised the legality of the POL program to Brad Schaeffer, an owner of MedComp because Bruno was concerned the program violated statues prohibiting self-referral schemes. Id. at ¶ 94. Rather than responding to Bruno's concerns, Schaeffer allegedly labeled Bruno a "trouble maker" who needed to be controlled. Id. at ¶ 95. As of December 2014, about sixty-one doctors in seven states had ownership interests in the POLs. Id. ¶ 107. Relators also allege that the POL model encouraged doctors to act based on financial gain and not patients' best interest. Id. at ¶ 116.

         In total, Relators claim that between April 2013 and November 2014, over 15, 000 urine specimens were sent to Quantum from doctors participating in the POL scheme. Id. at ¶ 118. According to Relators, between April 2012 and January 2016, private insurance companies paid Quantum $12 million for urine tests and from April 2013 through December 2014 MedComp has been paid $46 million. Id. at ¶ 119-120. Relators further claim that between April 2013 and January 2016, Medicare and Medicaid paid MedComp $18 million for specimens originating from doctors participating in the POL scheme. Id. at ¶ 121.

         Relators claim that Defendants violated the False Claims Act ("FCA"), 31 U.S.C. §§ 3729(a)(1)(A)-(C) by presenting false claims to the United States, making false records, and conspiring to violate the FCA. Id. at ¶ 122-140. Relators also claim that Defendants violated the Anti-Kickback Statute, 42 U.S.C. § l32Oa-7b, the Stark Law, 42 U.S.C. § l395nn, and the Louisiana Anti-Kickback Statute, La. R.S. § 37:1745. Id. The United States declined to intervene. (Doc. 53).


         To survive a 12(b)(6) motion to dismiss, the plaintiff must plead facts sufficient to "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell All Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Additionally, motions to dismiss under Rule 12(b)(6) test the sufficiency of the complaint against the backdrop set forth in Rule 8, which requires "a short and plain statement of the claim showing that the pleader is entitled to relief." Rule 8(a)(2). "Determining whether a complaint states a plausible claim for relief [is] ... a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Ashcroft, 556 U.S. at 679.

         Further, "facial plausibility" exists "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. at 678 (citing Twombly, 550 U.S. at 556). Hence, the complaint need not set out "detailed factual allegations, " but something "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action" is required. Twornbly, 550 U.S. at 555. When conducting its inquiry, the Court "accepts all well-pleaded facts as true and views those facts in the light most favorable to the plaintiff." Bustos v. Martini Club Inc., 599 F.3d 458, 461 (5th Cir. 2010) (quotation marks omitted).

         Claims brought under the FCA are fraud claims subject to the heightened pleading requirements of Federal Rule of Civil Procedure 9(b). U.S. ex rel. Longhi u. Lithium Power Techs, Inc., 575 F.3d 458, 468 (5th Cir. 2009). Rule 9(b) requires, "in alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake."


         A. Presentment of False Claims under § 3729(a)(1)(A)

         Relators claim that Defendants made false Medicare and Medicaid claims. (Doc. 1 at ¶ 124). The FCA imposes civil liability and treble damages on any person who "knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval" to the United States government. 31 U.S.C. § 3729(a)(1)(A); see also United States ex rel. Steury v. Cardinal Health, Inc., 625 F.3d 262, 267 (5th Cir. 2010). There are therefore three basic elements of an FCA violation: (1) the claimant presented or caused to be presented a claim for payment to the United States; (2) the claim was false or fraudulent; and (3) the claimant knew the claim was false or fraudulent.[1]

         a. Presented or Caused a Claim to be Presented

         Under the first element of an FCA claim, a relator must allege that a defendant presented or caused a claim to be presented to the United States. 31 U.S.C. § 3729(a)(1)(A). An "FCA claim[] can be either legally false or factually false." United States ex rel. Rascher v. Omnicare, Inc.,663 Fed.Appx. 368, 373 (5th Cir. 2016). "A claim is factually false when the information provided to the government for reimbursement is inaccurate." Id. For example, the traditional false claim occurs when a doctor bills Medicare or Medicaid for services that were not actually performed. A claim is legally false when "a claimant . . . falsely certifies compliance with ...

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