Fakorede v. Mid-South Heart Ctr., P.C.

182 F.Supp.3d 841

Foluso Fakorede, Plaintiff,

v.Mid-South Heart Center, P.C., Defendant.

No. 15-1285

United States District Court, W.D. Tennessee, Eastern Division.

Signed April 26, 2016

Scott P. Tift, Seth M. Hyatt, Gerald E. Martin, Barrett Johnston Martin & Garrison LLC, Nashville, TN, for Plaintiff.

Brian Dudley Roark, Brittain W. Sexton, Bass Berry & Sims, PLC, Nashville, TN, Todd David Siroky, Siroky Law, PLC, Jackson, TN, for Defendant.

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS

J. DANIEL BREEN, CHIEF UNITED STATES DISTRICT JUDGE

INTRODUCTION

This action was brought on November 25, 2015, by the Plaintiff, Foluso Fakorede, against Defendant, Mid-South Heart Center, P.C. ("MSHC" or the "Clinic"), alleging retaliation in violation of the federal False Claims Act ("FCA"), 31 U.S.C. § 3730(h). (D.E. 1.) Before the Court is the Defendant's motion to dismiss the action in its entirety pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. (D.E. 16.)

STANDARD OF REVIEW

Rule 12(b)(6) permits a court to dismiss a complaint for "failure to state a claim upon which relief can be granted[.]" Fed. R. Civ. P. 12(b)(6). A complaint "must contain either direct or inferential allegations respecting all material elements necessary for recovery under a viable legal theory." Kreipke v. Wayne State Univ. , 807 F.3d 768, 774 (6th Cir.2015) (quoting D'Ambrosio v. Marino , 747 F.3d 378, 383 (6th Cir.2014) ) (internal quotation marks omitted), reh'g en banc denied (Feb. 19, 2016). The court is to "construe the complaint in the light most favorable to the plaintiff, accept all well-pleaded factual allegations as true, and examine whether the complaint contains sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Solo v. United Parcel Serv. Co., 819 F.3d 788, 793, 2016 WL 1077163, at *3 (6th Cir. Mar. 18, 2016) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ) (internal quotation marks omitted). However, "a legal conclusion couched as a factual allegation need not be accepted as true." Johnson v. Moseley, 790 F.3d 649, 652 (6th Cir.2015) (internal quotation marks omitted). Plaintiff's obligation under Rule 12(b)(6)"requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). Rather, "[c]onclusions must be supported by factual allegations to state a claim and meet" the pleading requirements of Fed. R. Civ. P. 8.¹ Verble v. Morgan Stanley Smith Barney, LLC , 148 F.Supp.3d 644, 657, 2015 WL 8328561, at *11 (E.D.Tenn. Dec. 8, 2015) (citing Iqbal , 556 U.S. at 679, 129 S.Ct. 1937 ) (internal quotation marks omitted), appeal filed (No. 15–6397) (6th Cir. Dec. 17, 2015).

FACTS ALLEGED

The following allegations are set forth in the complaint and, for purposes of this motion, taken as true. In the spring of 2012, Fakorede, a physician, was in the process of completing cardiology training at Cooper University Hospital in Camden, New Jersey, when he was approached by one of MSHC's partners concerning an employment opportunity in Jackson, Tennessee. On July 15, 2013, he, the Defendant, and Jackson-Madison County General Hospital District (the "Hospital") entered into a Physician Employment Agreement and a Recruiting Assistance Agreement (collectively, the "Contract"). The stated purpose of the Contract was to recruit the Plaintiff to locate his practice in Jackson in order to address a "substantial need for an additional physician practicing in the specialty of Interventional Cardiology ... [which] would benefit the community ... through increased availability, quality, and choice of patient care." (D.E. 18-1 at PageID 73.)

Under the Contract, he received one-time moving and transition advances totaling $80,000.00 and an educational loan repayment of $30,000.00 per year for each of the three years covered by the arrangement. In addition, the Hospital agreed to establish a Net Collection Support Account (the "Support Account") up to a maximum amount of $500,000.00 for his first year. The purpose of the Support Account was to supplement his net collections as he worked to establish his practice. The maximum the Hospital would provide was the difference between Dr. Fakorede's actual net collections for the year and $500,000.00. Thus, if his gross collections during year one were $400,000.00 and his incurred expenses $100,000.00, his net collections would be $300,000.00. In that scenario, the Hospital would advance to him an amount up to $200,000.00.

The Hospital's financial obligations to the Plaintiff depended in part on outlays MSHC claimed as "actual direct incremental expenses" attributable to his employment. (D.E. 1 ¶ 42.) To this end, the Hospital required the Clinic to submit a financial statement no later than thirty days following the end of the physician's first year of practice. In the event MSHC and the Plaintiff drew more than the permitted amount, they were bound to remit the difference to the Hospital. To avoid incurring interest, overpayments had to be repaid within thirty days. Dr. Fakorede agreed to practice in the Jackson area for a period of at least three years and maintain medical staff privileges at the Hospital for the three-year term. If he fulfilled his obligations, the Hospital would forgive all debt he had incurred. If not, Plaintiff was required to immediately repay all funds advanced to him by the Hospital.

In addition, the Defendant agreed, for purposes of its compliance with the Stark Law and 42 C.F.R. § 411.357(e),² in part as follows:

It is the intent of the parties to comply with all state and federal laws in the performance of this Agreement. Clinic understands and agrees that the purpose of this recruiting arrangement is not for the Clinic's financial benefit but is to assure a fixed amount of net collections to support the recruited physician's first year of practice and that only certain expenses permitted by recruiting laws (those direct expenses that are the actual incremental expenses of recruiting the Physician and establishing Physician's practice) can be reimbursed by Hospital. Any recruiting remuneration provided by Hospital will be paid directly to Physician, not to Clinic, and as such will not be passed through Clinic to Physician, but rather will remain with Physician, except for the actual direct incremental costs attributable to the recruitment of the Physician and the Physician's practice. Clinic agrees to submit financial accountings to Hospital on a timely basis as requested and required by Hospital, and in such accountings will include only those expenses which are legally permitted by federal laws governing recruitment arrangements.

(D.E. 18-1 at PageID 83.)

In his first year, which ended October 31, 2014, Dr. Fakorede had gross collections of $751,221.92. Nonetheless, MSHC instructed him to take the maximum possible draw from the Support Account for the first two quarters as well as a sizeable sum for the last two quarters. It also required him to immediately assign those moneys to the Clinic. During this initial year in Jackson, he was not provided data regarding the collections he brought into MSHC or the expenses it attributed to the establishment of his practice.

As noted above, the Defendant was to submit its year-end financial statement to the Hospital by November 30, 2014, for the purpose of providing evidence of the gross collections Dr. Fakorede brought into the Clinic, as well as proof of the expenditures MSHC declared as actual incremental expenses relating to his practice. The statement was not provided by the required date.

On or about December 8, 2014, Plaintiff requested the records from Carla Reeves, the Hospital's financial director. It was at this time he became aware that the twelve-month financial report had not been submitted by MSHC. He asked her to forward the records to him as soon as she received them because he wanted to review the Clinic's calculations prior to their submission in final form. Reeves offered to provide him a partial financial statement, dated June 10, 2014, tendered by MSHC's accountants and covering the first two quarters.

Upon his review of the statement, he discovered that the Clinic had calculated his first quarter net collections as negative $48.26, despite the fact that his gross collections for that time period were $99,879.75. For the second quarter, MSHC determined his net collections to be $6,258.14, notwithstanding gross collections of $188,894.41. In addition, Dr Fakorede noted that MSHC attributed more than $127,000.00 in "depreciation expense" to him, which was identified as relating to equipment purchased, moved and installed at the Clinic's newly completed outpatient-based lab ("OBL"), even though the facility was not used at all until August 2014 and not by Plaintiff until late October of that year. Other significant expenses were also attributed to him, including "salaries and wages (incremental staff)," legal and professional expenses, consulting expenditures and "medical supplies (nuclear & OBL)." (D.E. 1 ¶ 58.)

In early January 2015, Dr. Fakorede emailed Reeves, again requesting the complete financial statement. Based on the concerns raised during his review of the partial statement, he also requested the underlying documents justifying MSHC's calculations. He received the full report on January 9, 2015, but not the supporting records. The complete statement brought to light expenses totaling $588,418.67 that MSHC falsely, in Plaintiff's view, claimed were directly attributable to his employment. These included a total "depreciation" expense for the year of $207,230.94, $131,190.04 in medical supplies, and $110,051.52 in staff salaries and wages.

Also on January 9, 2015, Reeves sent an email to MSHC Practice Manager Charlotte Beard and outside accountant Mickey Hannon advising...