United States District Court, S.D. Illinois
August 8, 2005.
UNITED STATES OF AMERICA, ex rel., ANTHONY J. CAMILLO and ANTHONY CAMILLO, Individually, Plaintiff,
ANCILLA SYSTEMS, INC., d/b/a ST. MARY'S HOSPITAL OF EAST ST. LOUIS and ST. MARY'S HOSPITAL OF EAST ST. LOUIS, INC., n/k/a KENNETH HALL REGIONAL HOSPITAL, INC., Defendants.
The opinion of the court was delivered by: DAVID HERNDON, District Judge
MEMORANDUM and ORDER
This matter comes before the court on Kenneth Hall's motion to
dismiss Plaintiff's Fourth Amended Complaint (Doc. 83). Pursuant
to FEDERAL RULES OF CIVIL PROCEDURE 12(b)(6) and 9(b),
Kenneth Hall seeks dismissal with prejudice of Counts VI and VII
(the False Claims Act counts) of Camillo's Fourth Amended Complaint.
Camillo opposes the motion (Doc. 90). Based on the following, the Court grants in part and denies in part the motion to dismiss.
On February 15, 2005, Camillo filed a Fourth Amended Complaint
against Ancilla and Kenneth Hall (Doc. 78).*fn2 Counts I, II
and V are against Ancilla: Counts I and II are claims brought
under the FCA and Count V is a claim for intentional economic
advantage. Counts VI, VII, VIII and IX are against Kenneth Hall:
Counts VI, VII are claims brought under the FCA; Count VII is a
claim for common law retaliatory discharge; and Count IX is a
claim for retaliatory discharge for requesting "work comp" benefits.
On February 28, 2005, Kenneth Hall filed its answer to Counts
VIII and IX of the Fourth Amended Complaint (Doc. 80) and a
motion to dismiss (Doc. 83).*fn3 Specifically, Kenneth Hall
argues that (1) Camillo's attempt to add Kenneth Hall after the
Government reviewed the sealed pleadings and declined to
intervene is improper under the FCA; (2) the Fourth Amended
Complaint essentially alleges that the Hospital followed explicit
directions from the Government in submitting the claims, thus, it is cannot be found liable for fraud under the FCA; (3)
the complaint alleges "fraud by hindsight" which does not exist
under the FCA; (4) the complaint, by attachments and
appropriately reviewed public records irrefutably rebuts the
allegations of the complaint; and (5) the complaint fails to
plead fraud with particularity, in that it fails to identify
actual claims and makes only the most general allegations. The
Court held a hearing on the motion and took the matter under
advisement on July 15, 2005. Based on the pleadings, the oral
argument, and the applicable law, the Court grants in part and
denies in part Kenneth Hall's motion.
II. Motion to Dismiss
In evaluating whether a plaintiff's complaint fails to state a
claim, a court must take the plaintiff's factual allegations as
true and draw all reasonable inferences in his favor. Brown v.
Budz, 398 F.3d 904, 908 (7th Cir. 2005). In making such
evaluation, however, the court generally should consider only the
allegations of the complaint. Centers v. Centennial Mortgage,
Inc., 398 F.3d 930, 933 (7th Cir. 2005). "Dismissal is proper
under Rule 12(b)(6) only where `it appears beyond doubt that the
plaintiff can prove no set of facts in support of his claim which
would entitle him to relief.'" Id. (citing Conley v.
Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)).
"Indeed, if it is possible to hypothesize a set of facts,
consistent with the complaint, that would entitle the plaintiff
to relief, dismissal under Rule 12(b)(6) is inappropriate."
Brown, 398 F.3d at 909 (internal quotations omitted).
"Whether a complaint sufficiently states a claim turns on whether it meets the general rules of pleading a claim for
relief. Rule 8(a)(2) of the Federal Rules of Civil Procedure
requires that a complaint contain `a short and plain statement of
the claim showing the pleader is entitled to relief.' This `short
and plain statement' requires a plaintiff to allege no more than
`the bare minimum facts necessary to put the defendant on notice
of the claim so that he can file an answer.'" Id. at 908.
However, FEDERAL RULE OF CIVIL PROCEDURE 9(b) provides that
"[i]n all averments of fraud or mistake, the circumstances
constituting fraud or mistake shall be stated with
particularity." Claims made under the False Claims Act must be
stated with the particularity required by Rule 9(b). United
States ex rel. Garst v. Lockheed-Martin Corp., 328 F.3d 374,
376 (7th Cir. 2003); United States ex rel. Gross v. Aids
Research Alliance-Chicago, ___ F.3d ___, 2005 WL 1567316, *2
(7th Cir. July 6, 2005).
Addition of Kenneth Hall after Government Review
First, Kenneth Hall argues that the Court must dismiss the FCA
claims against it because it was not originally named as a
Defendant when the Government made its initial review of the case
and declined intervention. Specifically, Kenneth Hall argues that
because Camillo did not name it as a Defendant in the complaint
that the Government reviewed, the Government was compelled to
decide whether or not to intervene, settle over Camillo's
objection, pursue an alternative remedy, or even dismiss without
being able to consider Camillo's claims against it. Kenneth Hall relies on a First Circuit Court of Appeals case that held
"allowing a qui tam relator to amend his or her complaint after
conducting further discovery would mean that the `government will
have been compelled to decide whether or not to intervene absent
complete information about the relator's cause of action.'"
United States ex rel. Karvelas v. Melrose-Wakefield Hospital,
360 F.3d 220, 231 (1st Cir. 2004), cert denied 125 S.Ct. 59
(2004).*fn4 Camillo counters that the Court should deny the
motion because Government had sufficient notice of the claims
against St. Mary's Hospital/Kenneth Hall when it originally filed
the complaint under seal. The Court agrees with Camillo.
The Court finds that this case is distinguishable from
Karvelas. In Karvelas, the First Circuit affirmed the
district court's decision to dismiss a FCA complaint on the
ground that it failed to plead fraud with particularity as
required by Rule 9(b). The First Circuit found that "allowing a
relator to plead generally at the outset and amend the complaint
at the 12(b)(6) stage after discovery would be at odds with the
FCA's procedures for filing a qui tam action and its protections
for the government (which is, of course, the real party in
interest in a qui tam action). Karvelas, 360 F.3d at 231.
Here, the issue is whether Camillo is entitled to amend his
complaint to add a Defendant. Under the circumstances, the Court
finds that Camillo is. At the time Camillo filed his original
complaint and First Amended Complaint under seal and when the Government reviewed it, the named Defendant was
Ancilla Systems, Inc., d/b/a St. Mary's Hospital of East St.
Louis. Also at that time, Camillo produced the documents in his
possession to the U.S. Attorney's office regarding the
allegations in the complaints. The allegations in the original
complaint and the Fourth Amended Complaint have not changed. The
allegations of fraud are about the bills being sent out of St.
Mary's Hospital. Moreover, St. Mary's Hospital of East St. Louis
was a wholly owned subsidiary of Ancilla before Ancilla sold the
hospital to Kenneth Hall. Therefore, the Government was aware
that the real party in interest was the hospital. Furthermore, as
previously noted by the Court in its order unsealing the
complaint, the Government is entitled to intervene at any time
for good cause. (See Doc. 14). Thus, the Court denies Kenneth
Hall's motion to dismiss based on the addition of Kenneth Hall as
a Defendant after Government review.
Claims Regarding Bundling and Unbundling
Next, Kenneth Hall urges the Court to dismiss the allegations
regarding bundling and unbundling because the Hospital was
specifically directed by the Government to bill for the chemistry
profile tests exactly as Camillo alleged was false in his Fourth
Amended Complaint. In the Fourth Amended Complaint, Camillo
alleges that the Hospital improperly "unbundled . . . charges for
the tests when billing Medicare," and that the "aforementioned
chemistry profile tests should have billed to Medicare under one
CPT code, believed to be CPT code "8007" (for "chemistry 7"
profile tests) or "8008" (for the "chemistry 8" profile tests).
In particular, Kenneth Hall argues that it cannot be found liable
because in 1998, the Health Care Financing Administration directed that chemistry profile tests at issue
should not be used. See HCFA Pub. 60AB, Transmittal No.
AB-98-7, March 1, 1998.*fn5 Camillo contends that the
public record that Kenneth Hall cites to is not applicable to the
allegations in the complaint. Camillo further responds that this
issue is more appropriate for summary judgment. The Court agrees
with Camillo. The Court finds that the issue of bundling and
unbundling is too fact laden to decide on a motion to dismiss.
Therefore, the Court denies Kenneth Hall's motion as to bundling
and unbundling charges.
Claims Regarding Double Billing
Kenneth Hall also moves to dismiss the allegations regarding
"double billing" because they are refuted by his own attachments
and by complete versions of his attachments. In essence, Kenneth
Hall argues that Camillo has pled himself out of court based on
his pleadings and attachments. Kenneth Hall contends that
Camillo's Group Exhibit Y to the Fourth Amended Complaint do not
demonstrate double billing by the Hospital. Kenneth Hall also
contends that those records show only billing to non-Medicare
patients with some Medicare reimbursements that, ultimately,
evidence reimbursement. Camillo argues that the Hospital's
assertions are misleading; that he provided some sample documents
regarding the double billing and that Group Exhibit Y were the
documents that Camillo presented to his supervisor. Camillo contends that these documents do not reflect
the totality of all the fraudulent billings believed to have been
made. Camillo also argues that there is a question of if and when
the refunds to Medicare were made and that the statements
provided by the Hospital still show account balances that were
never refunded. At this stage in the litigation, the Court finds
that these issues are more appropriate for summary judgment. The
Court denies Kenneth Hall's motion for summary judgment as to the
double billing issue.
Travel Expenses and Grant Application Claims
Lastly, Kenneth Hall argues that Camillo has failed to plead
with particularity his claims relating to the travel expenses and
the grant applications. Kenneth Hall contends that the
allegations related to travel do not include who traveled, when
anybody traveled, where they traveled, why they traveled, who
submitted the claims, the amount of the claims, when the claims
were submitted, what claims were multiple or any actual claims
themselves. Kenneth Hall also contends that the allegations as to
the grant applications fail to present or even attempt to
identify with any particularity, a claim that Camillo alleges to
be false. The Court agrees.
Just last month, the Seventh Circuit reiterated the pleading
standard in FCA cases:
The FCA is an anti-fraud statute and claims under it
are subject to the heightened pleading requirements
of Rule 9(b) of the Federal Rules of Civil Procedure.
United States ex rel. Garst v. Lockheed-Martin
Corp., 328 F.3d 374, 376 (7th Cir. 2003) (Rule 9(b)
applies "because the False Claims Act condemns fraud
but not negligent fraud or omissions."). Gross, ___ F.3d ___, 2005 WL 1567316 at *2. Federal Rule of
Civil Procedure 9(b) provides:
Fraud, Mistake, Condition of the Mind. In all
averments of fraud or mistake, the circumstances
constituting fraud or mistake shall be stated with
particularity. Malice, intent knowledge, and other
condition of mind of a person may be averred
Based on the allegations in the Fourth Amended Complaint as to
the travel expenses and the grant applications, the Court finds
that these allegations have not been pled with the required
specificity of Rule 9(b). Camillo has not given any specific
examples of the fraudulent claims as to the travel and grant
application claims. Thus, the Court grants Kenneth Hall's motion
to dismiss without prejudice as to these claims.*fn6
Court allows Camillo to amend his complaint as to these claims
but he must supply "the who, what, when, where, and how."
Gross, ___ F.3d ___, 2005 WL 1567316 at *3 (quoting Garst,
328 F.3d at 376 (quoting DiLeo v. Ernst & Young,
901 F.2d 624
, 627 (7th Cir. 1990)).
Accordingly, the Court GRANTS in part and DENIES in part
Kenneth Hall's motion to dismiss Counts VI and VII (the FCA
claims against Kenneth Hall) of the Fourth Amended Complaint
(Doc. 83). The Court ALLOWS Camillo up to and including Monday,
August 29, 2005 to file an amended complaint that is in accordance with the FEDERAL RULES OF CIVIL PROCEDURE, the
LOCAL RULES of this Judicial District and this Order. Further,
the Court DENIES Defendants' motions for sanctions (Docs. 105 &
IT IS SO ORDERED.