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United States, ex rel. Dicken v. Northwest Eye Center, P.A.

United States District Court, D. Minnesota

May 30, 2017

UNITED STATES OF AMERICA ex rel. ROBERT A. DICKEN, Plaintiff,
v.
NORTHWEST EYE CENTER, P.A., CHRISTOPHER J. BORGEN, ERIC M. TJELLE, and SANFORD HEALTH NETWORK, a South Dakota non-profit corporation doing business in Minnesota, Defendants.

          ORDER

          Joan N. Ericksen United States District Judge

         This matter is before the Court on Plaintiff Dr. Robert A. Dicken's motion to vacate the Court's prior dismissal of Counts I and II of the Amended Complaint and for leave to file a Second Amended Complaint. (See Dkt. Nos. 75, 76, 77.) Dicken seeks to revive his False Claims Act (“FCA”) claims against Defendants Northwest Eye Center, P.A., Dr. Christopher Borgen, and Dr. Eric Tjelle (collectively, the “Northwest Defendants”). In conjunction with his motion, Dicken submitted a proposed Second Amended Complaint (“SAC”), with attached exhibits. (See Dkt. Nos. 80-1 through 25.) For the following reasons, the Court grants Dicken's motion in part.

         I. STANDARD OF REVIEW

         “[Plaintiffs] remain free where dismissal orders do not grant leave to amend to seek vacation of the judgment under Rules 59 and 60 of the Federal Rules of Civil Procedure and offer an amended complaint in place of the dismissed complaint.” Quartana v. Utterback, 789 F.2d 1297, 1300 (8th Cir. 1986); see Ash v. Anderson Merchandisers, LLC, 799 F.3d 957, 962 (8th Cir. 2015), cert. denied, 136 S.Ct. 804 (2016). Courts have “considerable discretion to deny a post-judgment motion for leave to amend because such motions are disfavored, but may not ignore the Rule 15(a)(2) considerations that favor affording parties an opportunity to test their claims on the merits, particularly when a fraud complaint has been dismissed for failure to comply with the pleading requirements of Rule 9(b).” United States ex rel. Roop v. Hypoguard USA, Inc., 559 F.3d 818, 824 (8th Cir. 2009). “In the absence of any apparent or declared reason . . . the leave sought should, as the rules require, be ‘freely given.'” Foman v. Davis, 371 U.S. 178, 182 (1962).

         Futility of amendment is one reason to deny leave. See Id. When evaluating futility, courts determine whether the proposed amended complaint is duplicative, frivolous, or could survive a motion to dismiss for failure to state a claim under Rule 12(b)(6).[1] See Silva v. Metro. Life Ins. Co., 762 F.3d 711, 719-20 (8th Cir. 2014). Courts should grant post-dismissal leave to amend when amendment will not be futile, there are no other reasons to deny leave, and amendment is needed to afford a plaintiff an “opportunity to test his claims on the merits.” United States v. Mask of Ka-Nefer-Nefer, 752 F.3d 737, 744 (8th Cir. 2014) (quoting Foman, 731 U.S. at 182).

         II. DISCUSSION

         The Court previously reasoned that Dicken failed to plead his FCA claims (Counts I and II of the Amended Complaint) with enough specificity to meet Rule 9(b)'s heightened pleading standard. See United States ex rel. Dicken v. Nw. Eye Ctr., P.A., No. 13-CV-2691 (JNE/KMM), 2017 WL 758572, at *2-5 (D. Minn. Feb. 27, 2017). The Court explained that Dicken, who alleged that the Northwest Defendants engaged in a systematic scheme of fraud, could meet this standard by pleading some representative examples of false claims showing a continuous pattern of fraud. See Id. at *2 (citing United States ex rel. Joshi v. St. Luke's Hosp., Inc., 441 F.3d 552, 557-58 (8th Cir. 2006)). In the alternative, Dicken could plead “both the particular details of the scheme and indicia of reliability that support a strong inference that claims were actually submitted.” Id. (citing United States ex rel. Thayer v. Planned Parenthood of the Heartland, 765 F.3d 914, 917-18 (8th Cir. 2014)). The same standards apply to the SAC.

         A. Representative Examples

         Dicken previously failed to plead any representative examples of false claims actually submitted to the Government. See Id. at *2-3. The SAC suffers from the same deficiency; it does not plead any representative examples of any claims submitted to Medicare, though it does incorporate patient charts that list CPT and ICD-9 codes that Dicken alleges the Northwest Defendants used when submitting claims to Medicare. (See, e.g., SAC ¶¶ 141-63.) The patient charts may be indicative of what was actually billed, but they do not include information about claims actually submitted to Medicare. Because Dicken did not plead any representative examples, he must allege the scheme's details and sufficient indicia of reliability.

         B. Details of the Scheme to Defraud

         The Court previously held that Dicken's Amended Complaint identified the who, when, and where of the fraud, but failed to set forth the what, how, and how often. See Dicken, 2017 WL 758572, at *3. Dicken had only alleged that false claims were submitted for “many” and a “majority” of patients, did not explain how the Northwest Defendants used CPT and ICD-9 codes to defraud, and generally estimated (without explanation) that the damages were more than $1 million. See id.

         Like the Amended Complaint, the SAC identifies the who, when (a new period from 2002 to 2014), and where. (See SAC ¶¶ 6, 10, 22.) The SAC also sufficiently alleges the what, how, and how often. For example, Dicken explains how, in numerous cases, a patient's corrected visual acuity precluded a diagnosis of retinal edema, but Borgen and Tjelle diagnosed the patient with retinal edema in order to justify performing unnecessary, non-routine tests. (See Id. ¶¶ 141-63.) He alleges that Borgen and Tjelle performed these tests on an almost-daily basis, sometimes on up to ten patients per day. (See Id. ¶¶ 13, 63-65.) They also engaged in churning by repeating the unnecessary tests every six months. (See Id. ¶¶ 21, 94.) Using estimates of an optometrist's appointment capacity each day and the Northwest Defendants' patient pool composition, multiplied by the number of working days in a year, multiplied by the expected reimbursement rates for the unnecessary tests, Dicken calculates that the loss to the Government is approximately $500, 000 to over $1 million per doctor, per year. (See Id. ¶¶ 63-65.) With these additional details, the SAC contains enough specificity to meet Rule 9(b)'s standard for describing the scheme. But Dicken must have also alleged sufficient indicia of reliability.

         C. Sufficient Indicia of Reliability

         The Eighth Circuit has consistently required relators to allege the “basis for knowledge concerning the alleged submission of fraudulent claims.” Joshi, 441 F.3d at 558. Relators must allege sufficient indicia of reliability about their basis for knowledge in order to support a strong inference that false claims were actually submitted. Thayer, 765 F.3d at 917-19. This requirement “is context specific and flexible.” Id. at 918 (quoting United States ex rel. Grubbs v. Kanneganti,565 F.3d 180, 190 (5th Cir. 2009)). It may be met by alleging “details about the defendant's billing practices and . . . personal knowledge of the defendant's submission of false claims, ” but a slightly lesser showing will suffice so long as it enables the defendant to “respond specifically and quickly to the potentially damaging allegations.” Id. at 918-19 (quoting United States ex rel. Costner v. United States, 317 F.3d 883, 888 (8th Cir. 2003)). For example, in Grubbs, a case cited multiple times in Thayer, the relator alleged his “first-hand experience of the scheme unfolding as it related to him, ” describing in detail how the defendants attempted to include him in the fraud, the specific dates they recorded unprovided services in patient files, and which CPT codes they used. Grubbs, 565 F.3d at 192. The Fifth Circuit held that it would ...


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