Guilfoile v. Shields Pharmacy, LLC, Civil Action No.: 16-cv-10652

THOMAS GUILFOILE, Plaintiff, v. SHIELDS PHARMACY, LLC, et al., Defendants.

Civil Action No.: 16-cv-10652

UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS

March 10, 2017

MEMORANDUM AND ORDER

CASPER, J.

I. Introduction

Plaintiff Thomas Guilfoile ("Guilfoile") has filed this lawsuit against Defendants Shields Pharmacy, LLC, UMass Memorial Shields Pharmacy, LLC, Shields Pharmacy Equity, LLC, Shields Specialty Pharmacy Holdings, LLC, collectively d/b/a Shields Pharmacy Services, a/k/a Shields Health Solutions and John M. Shields, Sr., a/k/a Jack Shields ("Shields"), in his individual capacity (collectively, "Defendants"). D. 29. Guilfoile alleges that Defendants retaliated against him in violation of the federal False Claims Act, 31 U.S.C. § 3730(h) and also asserts various state law claims against Defendants. D. 29 ¶¶ 99-163. Defendants have moved to dismiss all such claims. D. 32; D. 34. For the reasons stated below, the Court ALLOWS Defendants' motions to dismiss as to the federal False Claims Act claim (Count IV), D. 32; D. 34, and DISMISSES without prejudice Guilfoile's state law claims because this Court declines to exercise supplemental jurisdiction over them.

II. Standard of Review

The Court will grant a motion to dismiss pursuant to Rule 12(b)(6) if the complaint fails to plead sufficient facts that "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). The Court "must assume the truth of all well-plead[ed] facts and give the plaintiff the benefit of all reasonable inferences therefrom." Ruiz v. Bally Total Fitness Corp., 496 F.3d 1, 5 (1st Cir. 2007) (citing Rogan v. Menino, 175 F.3d 75, 77 (1st Cir. 1999)). The Court accepts all non-conclusory factual allegations listed in the complaint as true, Ocasio-Hernández v. Fortuño-Burset, 640 F.3d 1, 12 (1st Cir. 2011), but does not have to consider "bald assertions" or "unsupportable conclusions." Doyle v. Hasbro, Inc., 103 F.3d 186, 190 (1st Cir. 1996) (internal quotation mark and citation omitted).

III. Factual Background

The following facts are alleged in Guilfoile's amended complaint, D. 29, and taken as true for purposes of considering Defendants' motions to dismiss.

Guilfoile alleges that, after having provided free business advice to Shields for years, he officially began to work for Shields full-time in August 2013. Id. ¶ 1. Guilfoile asserts that in this capacity he worked for a single integrated entity that was comprised of several businesses including Shields Pharmacy LLC, UMass Memorial Shields Pharmacy, LLC, Shields Pharmacy Equity, LLC and Shields Specialty Pharmacy Holdings, LLC (collectively, "Integrated Entity"). Id. ¶ 2. Starting in August 2013, Guilfoile was the full-time president of the Integrated Entity, which included serving as the president of all of the joint ventures within the Integrated Entity. Id. ¶¶ 34-37. Under the terms of his August 2013 employment contract, Guilfoile would receive an annual salary of $275,000, an annual bonus, an equity stake in any joint venture launched and incentive bonuses. Id. ¶¶ 38-39. As the Integrated Entity grew, the joint ventures contributed to Guilfoile's salary alongside UMass Memorial Shields Pharmacy, LLC ("UMSP"). Id. ¶ 46.

In October 2014, on behalf of the Integrated Entity, Shields modified the employment contract with Guilfoile such that the equity promised to Guilfoile was clarified. Id. ¶¶ 47-48. Both parties accepted the new contract and abided by it until Guilfoile's termination from the Integrated Entity. Id. ¶¶ 48-49. The terms of Guilfoile's employment were modified a second time when the Integrated Entity planned to reorganize its business structure: subject to this reorganization, Guilfoile agreed to forego some of his equity rights to attract executive talent to the Integrated Entity and agreed that his own equity would vest over the course of three years' time in lieu of the quarterly vesting for which he had previously contracted. Id. ¶¶ 50-54. For all relevant times until his termination, Guilfoile was an employee of the Integrated Entity and Shields served as his immediate supervisor. Id. ¶ 44.

The Integrated Entity partnered with hospitals to provide specialty pharmacy and related services to chronically ill patients by operating a pharmacy directly within the hospital facility and filling specialty prescriptions through an off-site location. Id. ¶ 23. It also ran home infusion and high-risk care management programs. Id. In the course of its business, the Integrated Entity processes prescriptions, bills patients' insurance, provides patients with financial advice and conducts follow-ups. Id. Guilfoile alleges that in the fall of 2015 he became concerned about three areas of the Integrated Entity's business practices. First, Guilfoile learned of a contract between the Integrated Entity and Michael Green ("Green") in which the Integrated Entity paid Green's consulting firm $35,000 per quarter for each hospital contract that Green successfully referred to the Integrated Entity. Id. ¶¶ 63-65. Guilfoile believed that this contract violated the federal anti-kickback statute. Id. ¶¶ 63-70. Guilfoile alerted Shields of his concerns, causing Shields to convince Green to waive the payment yet to be made for one of the two hospital referrals Green had made. Id. ¶ 72-74. Believing this was insufficient, Guilfoile urged Shields to notify the board of the Integrated Entity of the matter, but Shields refused. Id. ¶ 75.

Second, Guilfoile further alleges that he learned that Shields instructed Robbie Greenglass ("Greenglass"), the Integrated Entity's Director of Business Development, to spend part of his working hours helping Shields secure private equity investments for another business that Shields was preparing to launch independently and separately from the Integrated Entity. Id. ¶ 76. Guilfoile believed that this diverted business resources for Shields's personal gain and constituted a breach of fiduciary duty. Id. ¶¶ 76-77. Guilfoile approached Shields to rectify the situation by classifying Greenglass as a part-time employee, but Shields refused to do so. Id. ¶ 78.

Third, Guilfoile also asserts that he discovered that the Integrated Entity misrepresented in its contracts for partnerships with hospitals that it had a 24/7 call center when no such call center existed. Id. ¶¶ 79-80. Guilfoile urged Shields to remove the misrepresentation from the contracts or build a 24/7 call center to meet the contract obligations, but Shields refused. Id. ¶¶ 81-84.

In December 2015, Shields told Guilfoile that he was concerned that Guilfoile was "going over his head" and suggested that the two consider "parting ways." Id. ¶¶ 86-89. On December 28, 2015, one week after this discussion, Shields terminated Guilfoile's employment with no further explanation. Id. ¶ 91. The next day Shields emailed Guilfoile to confirm his termination. Id. ¶ 92. That same day, Guilfoile received a written termination notice which stated that his termination was retroactive to December 22, 2015. Id. ¶ 93. After being terminated, Guilfoile submitted to the board a letter explaining his concerns regarding the potential misconduct which he had previously reported to Shields. Id. ¶ 94. He further alleges that following these disclosures to the board, Shields threatened to sue him for defamation and tortious interference. Id. ¶ 95. Finally, on February 26, 2016, Guilfoile received a letter which stated for the first time that he had been terminated for cause. Id. ¶ 97.

IV. Procedural History

Guilfoile instituted this action on April 1, 2016. D. 1. He filed an amended complaint on June 10, 2016. D. 29. Defendants subsequently moved to dismiss all claims in the amended complaint. D. 32; D. 34. The Court heard the parties on the pending motion and took the matter under advisement. D. 47.

V. Discussion

A. Guilfoile's False Claims Act Claim

Defendants first move to dismiss Guilfoile's False Claims Act ("FCA") retaliation claim.¹ D. 35 at 8-16.

The FCA prohibits the reimbursement of false claims. That is, "a defendant violates the FCA only when he or she has presented to the government a false or fraudulent claim, defined as 'any request or demand . . . for money or property' where the government provides or will reimburse any part of the money or property requested." U.S. ex rel. Karvelas v. Melrose-Wakefield Hosp., 360 F.3d 220, 225 (1st Cir. 2004) (citing 31 U.S.C. § 3729(c)). In turn, 31 U.S.C. § 3730(h)(1) of the FCA provides protection against retaliation for employees who investigate potential false claims. That statute provides:

[a]ny employee, contractor, or agent shall be entitled to all relief necessary to make that employee, contractor, or agent whole, if that employee, contractor, or agent is discharged . . . because of lawful acts done by the employee, contractor, agent or associated others in furtherance of an action under this section or other efforts to stop [one] or more violations of this subchapter.

Id. To prevail on an FCA retaliation claim, "a plaintiff must show that 1) the employee's conduct was protected under the FCA; 2) the employer knew that the employee was engaged in such conduct; and 3) the employer discharged or discriminated against the employee because of his or her protected conduct." Karvelas, 360 F.3d at 235 (citing McKenzie v. BellSouth Telecomm., Inc., 219 F.3d 508, 514 (6th Cir. 2000)). However, "[a] plaintiff . . . need not have known that his actions could lead to a qui tam suit under the FCA, or even that a False Claims Act existed, in order to demonstrate that he engaged in protected conduct." U.S. ex rel. Gobble v. Forest Labs., Inc., 729 F. Supp. 2d 446, 449 (D. Mass. 2010). "Moreover, the heightened pleading requirements of Rule 9(b) [which must be employed in FCA claims] do not apply to a retaliation claim based on an FCA violation." United States v. Compass Med., P.C., No. 09-cv-12124-RGS, 2011 WL 5508916, at *5 (D. Mass. Nov. 10,...