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United States v. America at Home Healthcare and Nursing Services, Ltd.

United States District Court, N.D. Illinois, Eastern Division

January 8, 2018




         Relator/Plaintiff Amy O'Donnell filed this qui tam action under the False Claims Act (FCA), 31 U.S.C. § 3729, et seq., and its state counterpart, the Illinois False Claims Act (IFCA), 740 ILCS § 175/1, et seq., on behalf of the United States and Illinois. Relator sues corporate defendants America at Home Healthcare and Nursing Services, Ltd. d/b/a Angels at Home Healthcare (AAH), and AAH's purported successor, Great Lakes Acquisition Corp. d/b/a Great Lakes Caring. Relator also sues former AAH owners Rachel Fitzpatrick and Tami Shemanske. Relator alleges that, starting in 2006, AAH and its former owners fraudulently billed Medicare and Medicaid, and that Great Lakes continued AAH's fraudulent practices after buying AAH in early 2015.

         Relator filed her third amended complaint in July 2017. [99]. Shortly after, Defendants moved to dismiss. [113]. Defendants also filed counterclaims against Relator, seeking to rescind an allegedly fraudulent settlement agreement between Relator, her husband, and the corporate defendants that resolved two lawsuits unrelated to this case. [123]. Defendants moved to join Relator's husband, Steven O'Donnell, [1] as a counterclaim defendant, [124], while Relator moved to dismiss the counterclaims, [133]. For the reasons explained below, this Court partially grants Defendants' motion to dismiss, and denies both Defendants' motion to join O'Donnell and Relator's motion to dismiss the counterclaims as moot because this Court lacks jurisdiction over the counterclaims.

         This Court presumes familiarity with, and incorporates by reference, its prior opinion partially granting Defendants' motion to dismiss Relator's second amended complaint. [94]. Thus, the Background section below describes only additional details about the parties' earlier lawsuits and settlement agreement that the prior opinion did not address. Likewise, there is no need to repeat in detail the required elements of each statute at issue throughout the Analysis section.

         I. Background

         Relator and her husband both worked for AAH from January 2008 through June 2011. [123] ¶¶ 11-12. In August 2012, the O'Donnells sued AAH in this district, alleging violations of the Fair Labor Standards Act (FLSA). Id. ¶ 18; see also O'Donnell v. Angels at Home, No. 1:12-cv-6762 (N.D. Ill. 2012). Great Lakes bought AAH in 2015 during the course of that suit, which led the O'Donnells to file a state suit against AAH and Great Lakes, alleging violations of the Uniform Fraudulent Transfers Act (UFTA). See O'Donnell v. Angels at Home, No. 2015-L- 8039 (Ill. Cir. Ct.). The parties settled the FLSA and UFTA cases through one settlement agreement in August 2015. [123] ¶ 20. In relevant part, it provides:

Mutual Release. In consideration of the payments set forth in . . . this Agreement, and of the other promises and covenants set forth herein, the Parties agree to the following Mutual Release: (a) Steven O'Donnell and Amy O'Donnell, on behalf of themselves and their heirs, legatees, personal representatives, successors and assigns, hereby waive, release and forever discharge all employment claims and employment causes of action, and all claims asserted in the Federal Lawsuit and State Lawsuit, which they have, had, or may have through the date of this Agreement, whether known or unknown, from the beginning of time up to and including the date of this Agreement.

[94] at 39-40. Relator filed this FCA case in February 2014, and the case remained under seal until April 2016. Id. ¶ 27. Thus, Defendants did not know about the FCA case during the settlement negotiations; they had no notice of this case until Relator served them with the complaint in September 2016. Id. ¶ 28.

         II. Legal Standard

         A motion to dismiss under Rule 12(b)(6) “challenges the sufficiency of the complaint for failure to state a claim upon which relief may be granted.” Gen. Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1080 (7th Cir. 1997). To survive a motion to dismiss, a complaint must provide a “short and plain statement of the claim showing that the pleader is entitled to relief, ” Fed.R.Civ.P. 8(a)(2), so the defendant has “fair notice” of the claim “and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). A complaint must also contain “sufficient factual matter” to state a facially plausible claim to relief. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). A claim has facial plausibility “when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556). This plausibility standard “asks for more than a sheer possibility” that a defendant acted unlawfully. Williamson v. Curran, 714 F.3d 432, 436 (7th Cir. 2013).

         Thus, “threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice” to state a claim. Limestone Dev. Corp. v. Vill. of Lemont, 520 F.3d 797, 803 (7th Cir. 2008). In evaluating a complaint, this Court accepts all well-pleaded allegations as true and draws all reasonable inferences in the plaintiff's favor. Iqbal, 556 U.S. at 678. This Court does not, however, accept a complaint's legal conclusions as true. Brooks v. Ross, 578 F.3d 574, 581 (7th Cir. 2009).

         Because the FCA and IFCA are anti-fraud statutes, claims under both must also meet Federal Rule of Civil Procedure 9(b)'s heightened pleading requirements. United States ex rel. Gross v. AIDS Research Alliance-Chi., 415 F.3d 601, 604 (7th Cir. 2005). Rule 9(b) demands that claimants alleging fraud “state with particularity the circumstances constituting fraud.” Particularity resembles a reporter's hook: a plaintiff “ordinarily must describe the who, what, when, where, and how of the fraud-the first paragraph of any newspaper story.” Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v. Walgreen Co., 631 F.3d 436, 441-42 (7th Cir. 2011) (internal quotation marks omitted). Ultimately, a plaintiff must always inject “precision and some measure of substantiation” into fraud allegations. United States ex rel. Presser v. Acacia Mental Health Clinic, LLC, 836 F.3d 770, 776 (7th Cir. 2016) (internal quotation marks omitted).

         III. Analysis

         A. Defendants' Motion to Dismiss

         1. Allegations Against Great Lakes

         Relator's claims against Great Lakes for successor liability survived the last motion to dismiss. [94] at 36. On this motion, however, Defendants argue for the first time that Great Lakes cannot be liable as AAH's successor because Great Lakes is AAH's parent company, not its successor. In support, they submitted a filing from the Illinois Secretary of State's website showing that AAH still exists as a corporation in good standing. [114-1] at 2. This Court may take judicial notice of information from the Illinois Secretary of State's website. Fed.R.Evid. 201; see also Lengerich v. Columbia Coll., 633 F.Supp.2d 599, 607 n.2 (N.D. Ill. 2009).

         The doctrine of successor liability, of course, applies only to successor companies. See [94] at 36-37. “Successor” means a corporation “vested with the rights and duties of an earlier corporation” through “amalgamation, consolidation, or other assumption of interests.” Black's Law Dictionary 1660 (10th ed. 2014). In other words, a successor corporation “must entirely absorb its predecessor: its business, assets, rights and liability. At that point, the predecessor ceases to exist.” AA Sales & Assocs., Inc. v. JT&T Prod. Corp., No. 98-cv-7954, 2000 WL 1557940, at *2 (N.D. Ill. Oct. 19, 2000). Because AAH still exists, Great Lakes cannot be liable as its successor.

         Although successor liability does not apply here, a parent corporation may be liable for a subsidiary's actions if the parent exercises enough control and direction over the subsidiary that a court may properly pierce the parent's corporate veil. See IDS Life Ins. Co. v. SunAmerica Life Ins. Co., 136 F.3d 537, 540 (7th Cir. 1998) (collecting cases). That said, Relator does not allege any facts to support Great Lakes' liability as a parent corporation; she conceded in earlier briefing that she “does not bring any claims against Great Lakes for its own commission of FCA or IFCA violations.” [85] at 60 n.17.

         Because AAH and Great Lakes inexplicably waited until the third amended complaint to clarify their corporate structure, this Court grants the motion to dismiss Great Lakes without prejudice. If Relator obtains information about Great Lakes during discovery that gives her a good-faith basis for amending her complaint to assert new claims against Great ...

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