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Tuomey v. Nexsen Pruet LLC

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

March 31, 2017

Tuomey d/b/a Tuomey Healthcare System, Inc., Plaintiff,
v.
Nexsen Pruet, LLC, Defendant.

          OPINION AND ORDER

          Margaret B. Seymour Senior United States District Judge.

         On July 12, 2016, Plaintiff Tuomey d/b/a Tuomey Healthcare System, Inc., filed the within action in the Court of Common Pleas for Sumter County, South Carolina, alleging professional malpractice against its former counsel, Defendant Nexsen Pruet, LLC. On August 11, 2016, Defendant removed the action to federal court on the basis of federal question jurisdiction. See 28 U.S.C. § 1331.

         This matter is before the court on Plaintiff's motion to remand, which motion was filed on August 18, 2016. Defendant filed a response in opposition on September 6, 2016, to which Plaintiff filed a reply on September 16, 2016. The court held a hearing on January 19, 2017. After review of the papers, arguments of counsel, and applicable law, the court concludes that Plaintiff's motion to remand should be granted.

         I. FACTS

         The underlying litigation involved a qui tam action pursued by the United States under the Stark Law, 42 U.S.C. § 1395nn, which prohibits physicians from making referrals to entities where “[t]he referring physician . . . receives aggregate compensation . . . that varies with, or takes into account, the volume or value of referrals or other business generated by the referring physician for the entity furnishing” the designated health services. 42 C.F.R. § 411.354(c)(2)(ii). With the advice of Defendant, Plaintiff had entered into a number of part-time employment contracts with local physicians requiring the physicians to perform outpatient surgeries at Plaintiff's facility and compensating them based upon the number of outpatient surgeries performed. Eventually, a jury found the contracts to be violative of the Stark Law and the False Claims Act, 31 U.S.C. §§ 3729 et seq. (“FCA”). See United States of America ex rel. Drakeford v. Tuomey d/b/a Tuomey Healthcare System, Inc., C/A No. 3:05-2858-MBS. On October 2, 2013, an amended judgment was entered against Tuomey in the amount of $237, 454, 195.00, plus post judgment at the rate of .10%. The Court of Appeals for the Fourth Circuit affirmed. United States ex re. Drakeford v. Tuomey d/b/a Tuomey Healthcare System, Inc., 792 F.3d 364 (4th Cir. 2015). Plaintiff and the United States subsequently negotiated a reduction of the amount owed pursuant to the judgment, which included Plaintiff's sale of its assets to another provider.

         In the current action, Plaintiff alleges Defendant breached its duty of care by failing to render independent, competent, and ethical legal professional services that would have prevented Plaintiff from entering into prohibited contracts. Specifically, Plaintiff asserts Defendant was negligence in the following ways:

a. Designing, drafting, and recommending that Tuomey enter into part-time employment contracts requiring the physicians to perform all of their outpatient surgeries at Tuomey's OSC for ten (10) years and providing compensation to the physicians which fluctuated based upon the number of out-patient surgical procedures performed at the OSC and exceeded the physicians' collections by approximately 20% per year;
b. Informing the physicians in meetings that were audio recorded that the purpose of the part-time employment agreements is a “way of sharing revenues with those people who might otherwise…go out and compete with us by trying to build their own center;”
c. Informing physicians in meetings that were audio recorded that the purpose of the Contracts was to “replicate in many ways the investor owned for-profit ASC…So it's essentially like phantom stock, phantom ownership, as part and parcel of the employment agreement;”
d. Failing to recognize that the specific type of part-time agreements Nexsen Pruet designed, drafted and recommend Tuomey enter had never before been tested and that based upon the amount of compensation and structure of the compensation arrangements there was a very high risk that if challenged the Contracts would be found to violate Stark and the AKS;
e. Failing to inform and advise Tuomey that the specific type of part-time agreements being proposed had never before been tested and that based upon the amount of compensation and structure of the compensation arrangements there was a very high risk that if challenged the Contracts would be found to violate Stark and the AKS;
f. Representing to Tuomey that there was a high level of certainty for the Contracts in terms of compliance;
g. Representing to Tuomey that the Contracts were commercially reasonable;
h. Advising Tuomey that because Nexsen Pruet obtained fair market value opinions from Cejka there was little or no risk that the Government could find that the compensation provided under the Contracts was ...

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