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States ex rel Shank v. Lewis Enterprises

May 3, 2006


The opinion of the court was delivered by: J. Phil Gilbert U.S. District Judge


This matter is before the Court on Lewis Enterprises, Inc. ("Lewis Enterprises") and David M. Lewis' ("Lewis") Motion to Dismiss or in the Alternative Motion for a More Definite Statement (Doc. 33), to which relator Michael J. Shank ("Shank") has responded (Doc. 36). In their motion, defendants claim Counts I, II and III of Shank's complaint must be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6). In the alternative, they request a more detailed statement of the facts. For the following reasons, defendants' motion will be DENIED.


A. Shank's Employment with Lewis Enterprises

Shank brought this suit against Lewis, Lewis Enterprises and several of its former employees on behalf of the United States and the State of Illinois pursuant to the False Claims Act, 31 U.S.C. § 3730(b)(1) ("FCA"), the Illinois Whistleblower Reward and Protection Act, 740 ILCS § 175/4(b) and the Insurance Claims Fraud Prevention Act, 740 ILCS § 92/15(a). Shank, a former employee of Lewis Enterprises, allegedly witnessed defendants engage in a variety of illegal activities, including the fraudulent billing of benefit plans serving retired miners.

Lewis, a licensed audiologist, is the controlling owner of Lewis Enterprises, an audiology firm based in West Frankfort, Illinois. Lewis Enterprises provides a variety of hearing-related services at its nine retail locations in Southern Illinois; apparently, its business focuses on the fitting, selling and servicing of hearing aids. Lewis Enterprises hired Shank as a field representative in August 2000; primarily, his duties consisted of finding new clients and selling them hearing aids.*fn1 He would attract clients by informing them that Lewis Enterprises offered free hearing tests. If an individual was interested, Shank would perform an audiogram -- a test to determine one's hearing loss -- advise him of his need for a hearing aid and then pitch Lewis Enterprises' goods and services. Importantly, Shank was not licensed to administer audiograms, and his administration of that test was in violation of Illinois law. At a meeting between the two in late March 2001, Lewis directed Shank to solicit business from retired coal miners in Southern Illinois. At this meeting, Lewis produced a large three-ring binder containing the contact information of retired coal miners in the area ("List") -- each page of the List contained twenty to thirty names. Shank took a portion of the List and contacted the individuals listed to inform them that Lewis Enterprises provided free hearing tests and that their insurance carrier would pay for hearing aids if they were needed. Importantly, Lewis Enterprises billed the miners' insurance carriers for the hearing tests anyway. Shank was able to persuade a number of coal miners to do business with Lewis Enterprises -- from March 2001 to November 2002, Shank provided services to approximately 140 retired miners.

When Shank met with the miners (and other potential clients), he would obtain their insurance cards and other relevant information, relay it to Lewis Enterpirses' West Frankfort office and then conduct a hearing test. If he made a sale after conducting the test, he would fill out a Confidential Case History form (detailing the results of the audiogram, among other things) and submit it to the office. After making approximately six or seven sales to retired miners, Lewis told Shank he needed to get prescriptions for the hearing aids that he sold so that Lewis Enterprises could be reimbursed for the hearing tests and aids. Lewis' directed Shank to get hearing aids so that Lewis Enterprises could sell, and eventually obtain reimbursement for, more than one aid. As Shank had not obtained prescriptions from his initial clients, he called these individuals and, at his request, they successfully obtained prescriptions for hearing aids from their physicians. Over time, however, Shank was not able to obtain prescriptions for all of his clients. Lewis had advised Shank of this possibility and told him to submit the information of a patient for whom he could not obtain a prescription to the West Frankfort office so that an employee there could "take care of it." (Doc. 1 at ¶ 62). When Shank did this, the patient always received a prescription from a doctor -- one that never examined the patient. Though Shank does not include the names of the clients he serviced while with Lewis Enterprises in the complaint, he does identify 7 patients by number, the date they received services and the coal mine for which each individual worked.

During the summer of 2001, Shank began receiving the Confidential Case History forms he completed and submitted back from Lewis Enterprises. These forms had been changed and no longer indicated that Shank had performed the audiograms; instead, they indicated that Lewis had done them. In May 2002, Shank observed approximately 35 audiogram reports on Lewis' desk that were performed by other employees who were not licensed to do so -- defendants Joe Joe Johnson, Danny Johnson and Andy Woods. Shank noticed that Lewis had rewritten, or was in the process of rewriting these forms, to indicate that he had performed the audiograms. Some of these forms were from coal miners.

B. The Coal Act

The mostly unwilling (though sometimes willing) third parties to defendants' (and Shank's) activities were retired coal miners. This fact is important here because their health benefit plans implicate a series of national collective bargaining agreements between the United Mine Workers of America ("Union") and the Bituminous Coal Operator's Association ("BCOA"). The Union and the BCOA entered into the first of these collective bargaining agreements -- called the National Bituminous Coal Wage Agreements ("NBCWAs") -- in 1947. Over the years, the Union and BCOA entered into a number of these agreements with varying success. By the early Nineties, the Benefit Plans established pursuant to the various iterations of the NBCWA were experiencing significant financial difficulties. As a result, Congress passed the Coal Industry Retiree Health Benefit Act of 1992 ("Coal Act"), 26 U.S.C. §§ 9701, et seq. The Coal Act significantly restructured the financing of miners' health benefits, and created a new, tripartite benefit scheme. First, it combined the benefit funds created by the 1950 and 1974 NBCWAs into one fund, the Combined Benefit Fund ("Combined Fund"). This fund provides benefits to those workers who were eligible to receive benefits under the 1950 and 1974 plans when the Coal Act took effect. See 26 U.S.C. § 9702(a)(2). Second, the Act required those employers who had established individual employer plans ("IEPs") pursuant to the 1978 NBCWA and subsequent agreements to maintain their coverage for those retirees then receiving benefits and those qualifying retirees who retired before September 30, 1994.

See 26 U.S.C. § 9711(a). Finally, the Coal Act established the UMWA 1992 Benefit Plan ("1992 Plan") to provide coverage to (1) any individual retiring before September 30, 1994, who "but for the enactment of the [Coal Act] would be eligible to receive benefits from the [1950 or 1974 Plans], based upon age and service earned as of February 1, 1993," 26 U.S.C. § 9712(b)(2)(A), and to (2) any individual retiring before September 30, 1994, "with respect to whom coverage is required to be provided [by an individual employer plan], but who does not receive such coverage from applicable last signatory operator . . . ." 26 U.S.C. § 9712(b)(2)(B).

C. Hearing Aid Funding

The source of funding for these three plans is of critical importance here. Shank included the following allegations on this issue:

Funding for the Combined Fund is obtained from coal operator premiums and appropriations from the United States Office of Surface Mining's Abandoned Mine Reclamation Fund. 26 U.S.C. § 9704; 30 U.S.C. § 1232(h). Funding of the 1992 Plan is obtained from coal operator premiums. 26 U.S.C. § 9712. Funding under the Coal Act has been found to ...

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