United States District Court, D. South Carolina, Beaufort Division
United States of America and The States of California and Illinois, ex rel. Scarlett Lutz and Kayla Webster, Plaintiffs/Relators,
Laboratory Corporation of America Holdings, Defendant.
ORDER AND OPINION
Richard Mark Geirgel United States District Court Judge.
matter is before the Court on Defendant Laboratory
Corporation of America Holdings' ("LabCorp")
partial motion to dismiss the fourth amended complaint
("FAC") under Federal Rules of Civil Procedure 9(b)
and 12(b)(6). (Dkt. No. 60.) For the reasons below,
LabCorp's motion to dismiss is granted in part and denied
Scarlett Lutz and Kayla Webster ("Relators") filed
a qui tam complaint in 2013 alleging violations of
the False Claims Act ("FCA"), 31 U.S.C. § 3729
and multiple state statutes against LabCorp and other
defendants. The claims against Defendant LabCorp were
eventually severed from the claims against the other
defendants. On June 26, 2018, the Relators filed their Fourth
Amended Complaint, alleging that LabCorp violated the FCA
through several fraudulent schemes impacting government
health care programs, such as billing for medically
unnecessary tests and paying kickbacks to physicians for
ordering tests from LabCorp, and that it did so as part of a
conspiracy with two other laboratories: Health Diagnostic
Laboratory, Inc. ("HDL") and Singulex, Inc.
("Singulex"). In addition to claims under the FCA,
Relators brought claims under the California Insurance Frauds
Prevention Act ("CIFPA"), Cal. Ins. Code §
1871.7, and the Illinois Insurance Claims Fraud Prevention
Act ("ICFPA"), 740Ill.Comp.Stat. Ann. 92/15, both
of which allow interested persons to bring a qui tam
suit for fraudulent claims submitted to private insurers.
Neither the federal government nor any state government has
decided to intervene in this qui tam action as of
the date of this order.
LabCorp now seeks the dismissal of most claims brought by the
Relators. First, LabCorp argues that the FAC fails to state a
cause of action against LabCorp for submitting claims for
medically unnecessary tests. Second, LabCorp argues that
Relators' claim for reverse false claims liability, Count
II, is duplicative and fails to allege the claim with
particularity, as required by Rule 9(b). Third, LabCorp
argues that the Relators lack standing to bring claims under
the CIFPA or ICFPA since they are not "interested
persons" and, regardless, the claims fail under 9(b).
Finally, LabCorp argues that the conspiracy claims fail under
9(b). LabCorp's motion does not seek dismissal of the
claims based on alleged kickbacks paid to ensure that doctors
referred and ordered lab tests. (Dkt. No. 60 at 3.) Relators
oppose the motion. (Dkt. No. 63.)
Motion to Dismiss
12(b)(6) of the Federal Rules of Civil Procedure permits the
dismissal of an action if the complaint fails "to state
a claim upon which relief can be granted." Such a motion
tests the legal sufficiency of the complaint and "does
not resolve contests surrounding the facts, the merits of the
claim, or the applicability of defenses.... Our inquiry then
is limited to whether the allegations constitute 'a short
and plain statement of the claim showing that the pleader is
entitled to relief" Republican Party of N. C. v.
Martin, 980 F.2d 943, 952 (4th Cir. 1992) (quotation
marks and citation omitted). In a Rule 12(b)(6) motion, the
Court is obligated to "assume the truth of all facts
alleged in the complaint and the existence of any fact that
can be proved, consistent with the complaint's
allegations." E. Shore Mkts., Inc. v. J.D. Assocs.
Ltd. P'ship, 213 F.3d 175, 180 (4th Cir. 2000).
However, while the Court must accept the facts in a light
most favorable to the non-moving party, it "need not
accept as true unwarranted inferences, unreasonable
conclusions, or arguments." Id.
survive a motion to dismiss, the complaint must state
"enough facts to state a claim to relief that is
plausible on its face." BellAtl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007). Although the
requirement of plausibility does not impose a probability
requirement at this stage, the complaint must show more than
a "sheer possibility that a defendant has acted
unlawfully." Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009). A complaint has "facial plausibility"
where the pleading "allows the court to draw the
reasonable inference that the defendant is liable for the
misconduct alleged." Id.
Pleading Fraud with Particularity - Rule 9(b)
complaint alleging fraud "must state with particularity
the circumstances constituting fraud." Fed.R.Civ.P.
9(b). However, "[m]alice, intent, knowledge, and other
conditions of a person's mind may be alleged
generally." Id. To meet this standard, the
complaint must describe "the time, place, and contents
of the false representations, as well as the identity of the
person making the misrepresentation and what he obtained
thereby." U.S. ex rel. Wilson v. Kellogg Brown &
Root, Inc., 525 F.3d 370, 379 (4th Cir. 2008) (citations
omitted). In other words, the complaint must describe the
"who, what, when, where, and how of the alleged
fraud." Id. (citations omitted).
"[a] court should hesitate to dismiss a complaint under
Rule 9(b) if the court is satisfied (1) that the defendant
has been made aware of the particular circumstances for which
she will have to prepare a defense at trial, and (2) that
plaintiff has substantial pre-discovery evidence of those
facts." Harrison v. Westinghouse Savannah River
Co., 176 F.3d 776, 784 (4th Cir. 1999). Rule 9(b) also
requires a complaint to include "some indicia of
reliability" to "support the allegation that an
actual false claim was presented to the government."
Nathan, 707 F.3d at 457 (citation omitted). A
complaint provides the requisite indicia of reliability where
"specific allegations of the defendant's fraudulent
conduct necessarily [lead] to the plausible inference that
false claims were presented to the government."
Claims Based on Medically ...