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United States ex rel. Lutz v. Berkeley Heartlab, Inc.

United States District Court, D. South Carolina, Charleston Division

March 23, 2017

United States of America, et al, Plaintiffs,
v.
Berkeley Heartlab, Inc., et al, Defendants, ex rel. Scarlett Lutz, et al, Plaintiffs-Relators,

          ORDER AND OPINION

          Richard M. Gergel United States District Judge.

         This matter is before the Court on Defendant Blue Wave Healthcare Consultants, Inc.'s ("BlueWave") motion to dismiss[1] Relator/Plaintiff Chris Riedel's first amended complaint ("FAC") under Federal Rules of Civil Procedure 8, 9(b), 12(b)(1), and 12(b)(6). (Dkt. No. 293.) For the reasons below, BlueWave's motion to dismiss is granted in part and denied in part.

         Background and Procedural Posture

         BlueWave marketed lab tests for two laboratory companies, Health Diagnostic Laboratory, Inc. ("HDL") and Singulex, Inc. ("Singulex") from approximately 2010 through 2014. On December 30, 2011, Riedel filed a qui tarn complaint in the District of Columbia, alleging that BlueWave, HDL, and Singulex violated the False Claims Act ("FCA") through several fraudulent schemes (e.g., billing for medically unnecessary tests and paying kickbacks to physicians facilitated by improper processing and handling fees, waivers of co-payments and deductibles, and Speakers Bureau fees). (Dkt, No, 91-2.) On August 7, 2015, the Government filed its Complaint In Intervention, alleging that BlueWave induced medically unnecessary testing and paid, or caused the payment of, unlawful kickbacks in the form of processing and handling fees to physicians. (Dkt. No. 75.) On December 21, 2015, BlueWave filed a motion to dismiss Riedel's first complaint. (Dkt. No. 139.) On March 28, 2016, this Court issued an Order finding that Riedel's allegations against BlueWave related to processing and handling fee kickbacks and medically unnecessary lab tests were barred by the first-to-file bar of the FCA. (Dkt. No. 268.) The Court dismissed Riedel's Complaint without prejudice for failure to plead fraud with particularity as required by Rule 9(b) of the Federal Rules of Civil Procedure. Riedel filed his FAC to cure those deficiencies. The FAC alleges that BlueWave violated various provisions of the FCA, including

(1) Presenting false claims in violation of 31 U.S.C. § 3729(a)(1)(A);
(2) Making or using false records or statements material to payment or approval of false claims in violation of 31 U.S.C. § 3729(a)(1)(B);
(3) Retention of proceeds to which not entitled in violation of 31 U.S.C. § 3729(a)(1)(G); and
(4) Conspiracy to commit violations under 31 U.S.C. § 3729(a)(1)(C).

(Dkt. No. 286.) Riedel alleges that BlueWave committed these FCA violations through its participation in five illegal schemes:

(1) Waiver of private insurance co-payments;
(2) Waiver of private insurance deductible payments;
(3) Payment of inflated packaging fees to physicians to induce referrals ("P&H fees");
(4) Payment of "Speaking Fees" to physicians who signed up to be in Defendants' "Speakers Bureau"; and
(5) Systematic billing for medically unnecessary tests ("Unnecessary Tests"),

(Id.)

         BlueWave argues in its motion to dismiss that (1) Riedel's claims in connection with P&H Fees and Unnecessary Tests are barred by 31 U.S.C. § 3730(b)(5) (the "first-to-file" bar) and the law of the case; (2) Riedel does not have Article III standing to pursue any FCA claims against BlueWave on which the Government has intervened; and (3) Riedel's FAC should be dismissed for failure to meet the pleading requirements of Rules 8, 9(b), and 12(b)(6) of the Federal Rules of Civil Procedure. (Dkt. No. 293.)

         Legal Standards

         I. Motion to Dismiss for Failure to State a Claim - Rule 12(b)(6)

         To survive a Rule 12(b)(6) motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal,556 U.S. 662, 678, (2009) (quoting Bell At!, Corp. v. Twombly, 550 U.S. 544, 570, 127 (2007)). Complaints that merely offer "labels and conclusions" or "a formulaic recitation of the elements of a cause of action" will not survive. Twombly, 550 U.S. at 555. A motion to dismiss under Rule 12(b)(6) "should not be granted unless it appears certain that the plaintiff can prove no set of facts ...


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