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United States ex rel. Brooks v. Trillium Community Health Plan, Inc.

United States District Court, D. Oregon

June 28, 2017

THE UNITED STATES OF AMERICA, ex rel., MICHAEL T. BROOKS, Plaintiff-Relator,
v.
TRILLIUM COMMUNITY HEALTH PLAN, INC., AGATE RESOURCES, INC. and LANE INDIVIDUAL PRACTICE ASSOCIATION, INC, Defendants.

          OPINION AND ORDER

          MICHAEL MCSHANE, UNITED STATES DISTRICT JUDGE

         Relator Michael Brooks brings this False Claims Act case against his former employers and their alleged alter egos. Brooks alleges defendants double billed the United States for medical services, discriminated against sick (and therefore expensive) individuals, and violated anti-kickback statutes. Judge Aiken dismissed the First Amended Complaint with detailed instructions on how Brooks could cure the deficiencies. ECF No. 63. Because the Second Amended Complaint provides no timely representative examples, and fails to include any timely examples with sufficient particularity required for fraud claims, defendants' motion to dismiss, ECF No. 73 is GRANTED.

         BACKGROUND

         Brooks worked as a database administrator for defendant Agate Resources, Inc. from 2005 until September 27, 2013. Brooks alleges he was fired in retaliation for blowing the whistle on defendants' fraudulent activities related to Medicaid and Medicare billings. Brooks brings False Claims Act claims against all three defendants: Agate, Lane Individual Practice Association (LIPA), and Trillium Community Health Plan.

         In 2007 (at the latest), Brooks started to have some concerns about defendants' practices. Brooks quietly took his concerns to the Oregon Attorney General. Around that time, Brooks also copied thousands of files at the request of government authorities. Brooks includes some of those files, or data from those files Brooks turned into spreadsheets, as exhibits filed under seal in support of his Second Amended Complaint (SAC). Brooks points to the exhibits as representative examples supporting his claims.[1] As explained below, Brooks's representative examples are all time-barred. After the authorities essentially sat on Brooks's complaints, Brooks raised his concerns again in 2012. Again, the authorities did nothing and Brooks was terminated in 2013, allegedly in retaliation for going to the authorities.

         Brooks essentially brings three types of claims under the False Claims Act. First, Brooks alleges defendants double-billed, or overbilled, the government. Second, Brooks alleges defendants violated anti-kickback statutes by providing shares of stock to doctors in exchange for referrals. Third, Brooks alleges defendants compiled lists of expensive employees to sell to employers. As explained below, all of these claims are time-barred.

         STANDARD OF REVIEW

         To survive a motion to dismiss under rule 12(b)(6), a complaint must contain sufficient factual matter that “state[s] a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is plausible on its face when the factual allegations allow the court to infer the defendant's liability based on the alleged conduct. Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). The factual allegations must present more than “the mere possibility of misconduct.” Id. at 678.

         While considering a motion to dismiss, the court must accept all allegations of material fact as true and construe them in the light most favorable to the non-movant. Burget v. Lokelani Bernice Pauahi Bishop Trust, 200 F.3d 661, 663 (9th Cir. 2000). But the court is “not bound to accept as true a legal conclusion couched as a factual allegation.” Twombly, 550 U.S. at 555. If the complaint is dismissed, leave to amend should be granted unless the court “determines that the pleading could not possibly be cured by the allegation of other facts.” Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995).

         DISCUSSION

         The False Claims Act bars Brooks from bringing any claim:

(1) more than 6 years after the date on which the violation of section 3729 is committed, or
(2) more than 3 years after the date when facts material to the right of action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances, but in no event more than 10 years after the date on which the violation is committed, whichever occurs last.

31 U.S.C. § 3731(b).

         In addition to satisfying the statutes of limitations and repose, all claims under the False Claims Act are subject to heightened pleading standards for fraud claims. United States v. United Healthcare Ins. Co., 848 F.3d 1161, 1180 (9th Cir. 2016). This means the plaintiff-relator “must state with particularity the circumstances constituting fraud.” Id. (quoting Fe. R. Civ. P. 9(b)). To satisfy this heightened pleading standard, the plaintiff must provide specific factual allegations describing “the who, what, when, where, and how of the misconduct charged.” Id. (quoting Ebeid ex rel. United States v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010)).

         In dismissing the First Amended Complaint, Judge Aiken provided detailed instructions for Brooks to correct the deficiencies in his complaint. Specifically, Judge Aiken stated:

At this stage, however, the fact that all plaintiff's representative examples occurred outside the statutes of limitations and/or repose represents a pleading deficiency rather than a bar to relief as a matter of law. As discussed above, Rule 9(b) pleadings must include the “who, what, when, where, and how” of the alleged misconduct. The First Amended Complaint broadly refers to activity throughout relator's employment with defendants, from 2005 to 2013. It also refers to “more than 200, 000 possible instances of duplicated billing data” obtained in discovery. Compl. ¶ 30. The problem is not that relator failed to allege violations within the statutes of limitation and/or repose-it is that he failed to do so with sufficient particularity. Representative examples are one way of meeting the particularity requirement. Ebeid ex rel. United States v. Lungwitz, 616 F.3d 993, 998-99 (9th Cir. 2010). But here, the representative examples cannot cure the particularity deficiencies of the Complaint because the vast majority of them are time-barred by the statute of repose. Relator may remedy this problem by providing timely representative examples or by otherwise amending the Complaint to include particularized allegations within the statutes of limitation and repose.

         April 29, 2016 Opinion, 6-7 (footnotes omitted), ECF No. 63.

         In discussing “timely representative examples, ” Judge Aiken noted:

Because section 3731(b) bars actions commenced either six years after the violation was committed or three years after the date when the “qui tam plaintiff knows or reasonably should have known the facts material to his right of action, ” whichever occurs later, United States ex rel. Hyatt v. Northrop Corp., 91 F.3d 1211, 1217-18 (9th Cir. 1996), any representative examples that occurred on or after September 3, 2008 are timely. Whether representative examples that occurred between September 3, 2004 and September 2, 2008, are timely depends on when relator knew or reasonably should [have] known the material facts for his claims. That issue is not before the Court in its consideration of this Motion.

April 29, 2016 Opinion, 7 at n.2., ECF No. 63.

         Brooks filed the original complaint on September 3, 2014. ECF No. 3. The 10 year statute of repose bars claims arising on or before September 3, 2004. § 3730(b). The timeliness of claims between September 3, 2004 and September 3, 2008 depends on when Brooks reasonably should have known of the facts supporting the claim. Id. In examining the SAC and Brooks's own declarations, it is clear he did not, and cannot, provide “timely representative examples” or “particularized allegations within the statutes of limitations and repose.” Because this deficiency is fatal to Brooks's claims, I need not discuss defendants' other arguments.

         I. OVERBILLING CLAIMS

         Brooks alleges defendants overbilled the United States with Medicaid and Medicare double billings. Exhibit B to the SAC contains Brooks's representative examples detailing the alleged overbilling. The spreadsheets show two bills on the same day for the same patient for the same procedure.[2] At this stage, I assume the documents show what Brooks argues they show.

         In addition to overbilling, Brooks argues exhibit B shows examples of overpayments. As alleged by Brooks:

¶ 78. The claims records of Exhibit B to the SAC having a Fraud Type of referencing “Overpayment” or “Overpay” show specific illustrative examples of very likely overpayments due to the unlisted procedures or high variability of quantity and costs indicating an attempt to hide charges.
¶ 79. Specific examples of overpayment include Claim Numbers 200501116500173, 20050116500174, and 200503166500225 having relatively expensive and unspecified parts were paid via claims LIPA presented to the Government.

SAC.[3]

         The last representative example of overbilling is from December 31, 2006. Ex. B to SAC. As discussed above, any representative examples from September 3, 2008 or earlier are barred by the six-year statute of limitations unless Brooks was unaware of the facts supporting his claim. Brooks ...


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