United States District Court, D. South Carolina, Columbia Division
CATHERINE A. SCHAEFER, M.D., Plaintiff,
FAMILY MEDICINE CENTERS OF SOUTH CAROLINA, LLC, STEPHEN F. SERBIN, M.D., PETER J. STAHL, M.D., BHAVESH R. AMIN, M.D., SPRINGWOOD LAKE PRIMARY CARE, LLC, SPRINGWOOD LAKE BUILDING, LLC, SOUTHEAST PROFESSIONAL PLAZA, LLC, MIDTOWN BUILDING, LLC, SALUDA POINTE BUILDING, LLC, and LAKE MURRAY FAMILY MEDICINE BUILDING, LLC, Defendants.
OPINION AND ORDER
Margaret B. Seymour, Senior United States District Judge
Catherine A. Schaefer, M.D. (“Plaintiff”) brought
the within action against Defendants Family Medicine Centers
of South Carolina, LLC (“FMC”); Stephen F.
Serbin, M.D. (“Defendant Serbin”); Peter J.
Stahl, M.D. (“Defendant Stahl”); Bhavesh R. Amin,
M.D. (“Defendant Amin”); Springwood Lake Primary
Care, LLC; Springwood Lake Building, LLC; Southeast
Professional Plaza, LLC; Midtown Building, LLC; Saluda Point
Building, LLC; and Lake Murray Family Medicine Building, LLC
in the Court of Common Pleas for Richland County, South
Carolina. The action was removed to this court on
October 12, 2018. Plaintiff asserts claims for fraudulent
inducement, tortious interference with contract, and civil
conspiracy relating to a settlement agreement she entered
into with FMC and the United States government in 2014 to
settle claims arising under the False Claims Act.
matter is before the court on the motion to dismiss filed by
Defendants Serbin, Stahl, FMC, Lake Murray Family Medicine
Building, LLC, Midtown Building, LLC, Saluda Pointe Building,
LLC, Southeast Professional Plaza, LLC, Springwood Lake
Building, LLC, and Springwood Lake Primary Care, LLC
(hereinafter, “Defendants”). ECF No. 16. The
motion seeks dismissal pursuant to Fed.R.Civ.P. 12(b)(6) and
12(b)(7). Id. Plaintiff filed an opposition to
Defendants' motion on October 25, 2018, ECF No. 32, to
which Defendants filed a reply on November 1, 2018. ECF No.
The court held oral argument on the motion on February 12,
2019, and took the matter under advisement. The court has
subject matter jurisdiction pursuant to 28 U.S.C.
§§ 1331, 1355.
February 12, 2014, Plaintiff filed a qui tam action under the
False Claims Act (“FCA”), 31 U.S.C. § 3729
et seq., on behalf of the United States against
Victoria Serbin and Defendants FMC, Serbin, and Stahl, styled
United States ex rel. Schaefer v. Family Medicine Centers
of South Carolina, LLC, 3:14-cv-00382 (D.S.C. Feb. 12,
2014) (the “FCA Action”). ECF No. 4-2. Defendant
Serbin and Defendant Stahl are founders, owners, and members
of FMC. Victoria Serbin, Defendant Serbin's wife, was an
employee of FMC and held multiple management positions there,
including Laboratory Director and Director of Clinical
Ancillary Services. ECF No. 4-5 at 2. The FCA action was
based on Plaintiff's employment with FMC between April
2013 and November 2013, during which time Plaintiff alleged
she “personally witnessed” FMC's scheme to
defraud Medicare and Tricare “by overcharging federal
health insurance programs for amounts exceeding the actual
value of services provided to federally-insured
patients.” ECF No. 1-1 at ¶ 36. Plaintiff also
alleged that Defendant Serbin wrongfully terminated her
employment “when she objected to FMC's fraudulent
5, 2016, the United States filed a complaint in intervention
alleging that FMC, Defendant Serbin, and Victoria Serbin,
(collectively, “Serbin Defendants”) submitted
false claims to Medicare, Tricare, and the Federal Employees
Health Benefits Program. ECF No. 4-3. The United States
further alleged as follows. The Serbin Defendants had
employment arrangements with physicians that included
“compensation directly attributable to the volume or
value of the employed physician's referrals.”
Id. at 3. The Serbin Defendants violated the FCA and
the Stark Law, 42 U.S.C. § 1395nn, “[b]y knowingly
submitting, and causing to be submitted, claims for
reimbursement based on referrals generated by physicians who
received compensation based on these terms.”
Id. Additionally, in order to maximize revenue, the
Serbin Defendants devised a variety of schemes, including:
“creating custom laboratory panels comprised of
diagnostic tests not appropriate for routine
measurement”; “implementing standing orders to
assure  custom panels were performed with defined
frequency, ” rather than in reaction to clinical needs;
programming billing software to generate inaccurate codes so
as to misrepresent services provided; ordering unnecessary
laboratory tests; and billing for office visits when a
patient presented for a simple blood-drawing procedure.
Id. at 3-4. Plaintiff subsequently filed an amended
complaint to preserve her employment retaliation claim under
31 U.S.C. § 3730(h) of the FCA, which entitled her to
recover two times the back pay from the date of her discharge
plus interest, special damages, costs, and attorneys'
fees. ECF No. 4-4.
Serbin Defendants filed a motion to dismiss, which the court
denied. United States v. Family Medicine Centers of South
Carolina, LLC, 3:14-cv-00382, 2016 WL 6601017 (D.S.C.
Nov. 8, 2016). The United States thereafter filed a joint
stipulation of dismissal pursuant to Federal Rule of Civil
Procedure 41(a)(1)(A)(ii), citing in relevant part a
settlement agreement executed on September 11, 2017 between
the United States, Plaintiff, and FMC (“Settlement
Agreement”). United States v. Family Medicine
Centers of South Carolina, LLC, 3:14-cv-00382 at ECF No.
asserts that in April 2016, FMC offered a lump sum
settlement, to which the United States responded with a
counter offer. ECF No. 1-1 at ¶ 42. On October 24, 2016,
FMC proposed a counteroffer of $1.5 million to be paid over
five years in monthly installments of $25, 000. Plaintiff
asserts, “FMC claimed its settlement offer was based
solely on ability to pay and that FMC no longer had the
ability to make the lump sum payment offered in April 2016
because its business had declined since the United
States' intervention.” Id. at ¶ 43.
Also, “[o]n March 9, 2017, FMC told the United States
that banks were declining to extend lines of credit because
of concerns with the ‘delay' in reaching a
settlement and that four employees were being laid
off.” Id. at ¶ 44. The United States
thereafter proposed settlement substantially similar to
FMC's October 2016 counteroffer, and, on August 2, 2017,
the United States and FMC agreed to the settlement.
Id. at ¶¶ 45, 46. Plaintiff asserts
“FMC claimed it was unable to pay anything to
compensate [her] for her employment retaliation claim beyond
the monies [she] would receive from the statutory
whistleblower reward paid from the government's
recovery.” ECF No. 1-1 at ¶ 47. Accordingly,
“[b]ased on the representations made by FMC to the
United States government and the United States' agreement
to an ‘ability to pay' settlement, Dr. Schaefer
agreed to join the proposed settlement.” Id.
at ¶ 48.
September 11, 2017, the United States, Plaintiff, and FMC
executed the Settlement Agreement, “which resolved the
FCA Action for $1, 560, 000, plus accrued interest at a rate
of 2.375 percent, to be paid over five years in monthly
installments of $10, 000[, ] plus interest for the first
year, followed by monthly installments of $30, 000[, ] plus
interest for the remaining four years.” ECF No. 1-1 at
¶ 49. The total interest payment would have been $102,
481.25. Id.; ECF No. 16-2. The Settlement Agreement
recognized that Plaintiff was entitled under 31 U.S.C. §
3730(d) to a share of the proceeds paid under the Agreement,
and that the United States would pay to Plaintiff 17 percent
of each payment FMC remitted under the
Agreement. ECF No. 16-2 at 2, 4.
of the Settlement Agreement, FMC contemporaneously executed a
Corporate Integrity Agreement (“CIA”) with the
Office of the Inspector General of the United States
Department of Health and Human Services. ECF No. 1-1 at
¶ 52; ECF No. 4-6. The CIA required FMC to restructure.
As part of the restructuring, shortly before the execution of
the Settlement Agreement, Defendant Stahl agreed to buy FMC,
and thereby replaced Defendant Serbin as FMC's chief
executive office. ECF No. 1-1 at ¶¶ 11, 12, 54.
now alleges that FMC intentionally thwarted its obligations
to her and the United States under the Settlement Agreement
by ceasing to make payments after ten months, while FMC's
members “established ‘new' medical practices,
often in the same locations seeing the same patients,
operating under with new corporate entities [sic].” ECF
No. 1-1 at ¶ 3. Plaintiff alleges that Defendants never
intended for FMC to honor the Settlement Agreement.
Id. at ¶ 5. Plaintiff further alleges that
although FMC represented that its business had declined since
the government's intervention, “FMC had ample
financial resources when the Settlement Agreement was
negotiated and executed, ” and, furthermore, “FMC
warranted it was currently solvent and would remain solvent
at least until the completion of the Settlement
Agreement.” Id. at ¶¶ 56, 78; ECF
No. 16-2 at 12.
asserts that FMC was the largest family practice healthcare
provider in Columbia, South Carolina, serving approximately
40, 000 patients at six office locations with an estimated
annual revenue of $18.97 million and a portfolio of
commercial real estate worth several million dollars. ECF No.
1-1 at ¶¶ 10, 58. Plaintiff alleges that almost
immediately after the execution of the Settlement Agreement,
FMC's member physicians wound up the practice. On March
15, 2018, Defendant Serbin created Defendant Springwood Lake
Primary Care, LLC, where he currently practices and to which
Defendant Stahl has referred his patients. ECF No. 1-1 at
¶ 27. FMC then announced its closure on April 3, 2018,
effective May 31, 2018, and its website directed FMC patients
to continue to see former FMC physicians at their new
practices. ECF No. 1-1 at ¶¶ 10, 68.
1, 2018, FMC defaulted on the $12, 889.58 monthly payment due
under the Settlement Agreement. ECF No. 1-1 at ¶ 69. On
July 12, 2018, the United States sent a notice of default to
FMC. Id. at ¶ 70. Under the terms of the
Settlement Agreement, FMC was required to cure its default
within ten days of the date of the notice, i.e., July 23,
2018. Id. at ¶ 71. On July 19, 2018, Defendants
Serbin and Stahl sold the location of FMC's former office
in Lexington, South Carolina for over $1.3 million. However,
FMC failed to cure the default then and to date has not cured
the default. Id. at ¶¶ 72, 73.
unspecified dates prior to the execution of the Settlement
Agreement, Defendant Serbin formed the following entities:
Defendant Springwood Lake Building, LLC, which owns property
at 1721 Horseshoe Drive, Columbia; Defendant Southeast
Professional Plaza, LLC, which owns property at 813 Leesburg
Road, Columbia, which is currently for sale for $1, 650, 000;
Defendant Midtown Building, LLC, which owns property at 1910
Gregg Street, Columbia; Defendant Saluda Point Building, LLC,
which owned and, on July 19, 2018, sold property at 3630
Sunset Boulevard, West Columbia for $1, 308, 660; and
Defendant Lake Murray Family Medicine Building, LLC, which
owns property at 7611 St. Andrews Road, Irmo. ECF No. 1-1 at
¶¶ 31-35. Each of these properties served as a
location for FMC's medical practice, prior to FMC's
closure. Id. Defendants Springwood Lake Building,
LLC, Southeast Professional Plaza, LLC, Midtown Building,
LLC, Saluda Point Building, LLC, and Lake Murray Family
Medicine Building, LLC are hereafter referred to as the
“Real Estate Defendants.”
alleges that with the exception of Defendant Stahl, who
retired and referred his patients to Defendant Serbin, and
former-defendant Eric N. Hutto, M.D., who has referred his
patients to former-defendant Pamela I. Brown, M.D.,
“FMC's former physicians continue to serve their
Columbia-area patients and do so mostly in the same former
FMC offices where they practiced when the Settlement
Agreement was executed, but under new legal entities, most of
which were formed after the Settlement Agreement was
executed.” ECF No. 1-1 at ¶ 74. Plaintiff alleges
that FMC and its member physicians “never intended to
honor the Settlement Agreement, ” and, rather,
“intended to wind up FMC as soon as possible after
execution of the Settlement Agreement and have done precisely
that.” Id. at ¶¶ 80, 81. As a
result, Plaintiff contends, Defendants paid only $126, 896.89
for claims worth over $30 million to the United States and
Dr. Schaefer.” Id. at ¶ 83.
basis, Plaintiff asserts claims for fraud in the inducement
as to Defendants FMC, Serbin, and Stahl; tortious
interference with contract as to Defendants Serbin, Stahl,
and Amin; and civil conspiracy as to all Defendants.
Plaintiff seeks compensatory damages in the form of civil
penalties awarded under 31 U.S.C. § 3729 and back pay
awarded under 31 U.S.C. § 3730(h); costs and
attorney's fees; and punitive damages. ECF No. 1-1 at 20.
Federal Rule of Civil Procedure 12(b)(6)
12(b)(6) motion to dismiss for failure to state a claim upon
which relief can be granted tests the legal sufficiency of a
complaint. Schatz v. Rosenberg, 943 F.2d 455, 489
(4th Cir. 1991). While the complaint need not be minutely
detailed, it must provide enough factual details to put the
opposing party on fair notice of the claim and the grounds
upon which it rests. Bell Atl. Corp. v. Twombly, 550
U.S 544, 555 (2007) (citing Conley v. Gibson, 355
U.S. 41, 47 (1957)). Additionally, a complaint must contain
factual content that allows the court to reasonably infer the
defendant is liable for the alleged misconduct. Ashcroft
v. Iqbal, 556 U.S 662, 678 (2009) (“A claim has
facial plausibility when the plaintiff pleads factual content
that allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.”).
“Facts that are ‘merely consistent with'
liability do not establish a plausible claim to
relief.” United States ex rel. Nathan v. Takeda
Pharms. N. Am., Inc., 707 F.3d 451, 455 (4th Cir. 2013)
(quoting Iqbal, 556 U.S. at 678). See 5 C.
Wright & A. Miller, Federal Practice and Procedure §
1216, pp. 235-236 (3d ed. 2004) (“[T]he pleading must
contain something more . . . than . . . a statement of facts
that merely creates a suspicion [of] a legally cognizable
right of action”).
court must accept the allegations in the complaint as true,
and draw all reasonable factual inferences in favor of the
party opposing the motion. Iqbal, 556 U.S. at 679.
However, the court will not accept “legal conclusions
couched as facts or unwarranted inferences, unreasonable
conclusions, or arguments.” Nathan, 707 F.3d
at 455 (quoting Wag More Dogs, LLC v. Cozart, 680
F.3d 359, 365 (4th Cir. 2012)). To determine plausibility, a
court is to “draw on its judicial experience and common
sense”; but dismissal is not warranted if the court
determines that the factual allegations can “plausibly
give rise to an entitlement to relief.” Iqbal,
556 U.S. at 679. “But where the well-pleaded facts do
not permit the court to infer more than the mere possibility
of misconduct, the complaint has alleged-but it has not
‘show[n]'-‘that the pleader is entitled to
relief.'” Id. (citing Fed.R.Civ.P.
Federal Rule of Civil Procedure 12(b)(7)
Rule 12(b)(7), a court may dismiss a complaint for
“failure to join a party under Rule 19.”
Fed.R.Civ.P. 12(b)(7). Rule 19 sets forth a two-step inquiry
for a district court to determine whether a party should be
joined in an action. The court must first determine whether
the party is “necessary” to the
action. Id. at Fed.R.Civ.P. 19(a). If the
court determines that the party is “necessary, ”
it must then determine whether the party is
“indispensable” to the action. Id. at
19(b). National Union Fire Ins. Co. of Pittsburgh, PA v.
Rite Aid of South Carolina, Inc., 210 F.3d 246, 249 (4th
Cir. 2000). Am. Gen. Life & Acc. Ins. Co. v.
Wood, 429 F.3d 83, 92 (4th Cir. 2005). “If a
person who is required to be joined if feasible cannot be
joined, the court must determine whether, in equity and good
conscience, the action should proceed among the existing
parties or should be dismissed.” Fed.R.Civ.P. 19(b).
argue that Plaintiff fails to state a claim upon which relief
may be granted, and that the court should dismiss the entire
suit for Plaintiff's failure to join the United States as
Fraud in the Inducement
claims fraud in the inducement as to Defendants Serbin,
Stahl, and FMC. “Fraud is an intentional perversion of
truth for the purpose of inducing another in reliance upon it
to part with some valuable thing belonging to her or to
surrender a legal right.” Regions Bank v.Schmauch, 582 S.E.2d 432, 444 (S.C. Ct. App. ...