Marietta Area Healthcare, Inc. v. King

MARIETTA AREA HEALTHCARE, INC., MARIETTA MEMORIAL HOSPITAL, andMARIETTA HEALTHCARE PHYSICIANS, INC., Plaintiffs, v. MICHAEL A. KING, and MICHAEL D. ROBERTS, M.D., Defendants.

Civil Action No. 5:21-CV-25

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF WEST VIRGINIA Wheeling

April 28, 2021

Judge Bailey

MEMORANDUM OPINION AND ORDER

Pending before this Court are Defendants' Joint Motion to Dismiss [Doc. 30], Defendants' Joint Motion to Stay Discovery (Including Initial Disclosures) Pending Resolution of Dispositive Motions [Doc. 34] and Defendants' Joint Motion for Protective Order [Doc. 39].

In their Motion to Dismiss, the defendants make several arguments: (1) That plaintiffs' claims are preempted by the False Claims Act, 31 U.S.C. § 3730-3733 ("FCA"); and (2) plaintiffs' malicious prosecution, tortious interference, and abuse of process claims do not state a claim upon which relief may be granted.

A complaint must be dismissed if it does not allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); see also Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008) (applying the Twombly standard and emphasizing the necessity of plausibility). When reviewing a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, the Court must assume all of the allegations to be true, must resolve all doubts and inferences in favor of the plaintiff, and must view the allegations in a light most favorable to the plaintiff. Edwards v. City of Goldsboro, 178 F.3d 231, 243-44 (4th Cir. 1999). "'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.' [Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)]. 'A pleading that offers "labels and conclusions" or ... "naked assertion[s]" devoid of "further factual enhancement" will not suffice.'" Lincoln v. Ford Motor Co., 2020 WL 582095, at *3 (D. Md. Sept. 29, 2020) (Bredar, C.J.) (quoting Twombly, 550 U.S. at 555, 557).

In November 2016, the defendants filed a qui tam complaint alleging that plaintiffs had violated federal law in recruiting and compensating physicians and had inappropriately submitted claims to federal healthcare programs based on those violations (the "Underlying Action"). The plaintiffs contend that the complaint consisted largely of false and materially misstated allegations, which the defendants knew at the time. According to the plaintiffs, after filing their qui tam complaint, the defendants continued to push their false and malicious accusations against plaintiffs. During the ensuing federal investigation, the defendants perpetuated those accusations, repeating the known falsities and material misstatements. The defendants knew and intended that the qui tam complaint and subsequent process would harm the plaintiffs' business—a healthcare system on the Ohio border that is well known and respected in the Mid-Ohio Valley, including several countiesin West Virginia. After numerous extensions, the Government declined to intervene in the action.

"Qui tam is short for 'qui tam pro domino rege quam pro se ipso in hac parte sequitur,' which means 'who pursues this action on our Lord the King's behalf as well as his own.'" Rockwell Int'l. Corp. v. United States, 549 U.S. 457, 463 n.2 (2007). The False Claims Act's qui tam provision allows "a private plaintiff, known as a relator, [to] brtng[ ] suit on behalf of the Government to recover a remedy for a harm done to the Government." Woods v. Empire Health Choice, Inc., 574 F.3d 92, 97 (2d Cir. 2009); see 31 U.S.C. § 3730(b). As the "real party in interest" in a qui tam action, United States ex rel. Eisenstein v. City of New York, New York, 556 U.S. 928, 930 (2009), the Government may intervene and take over prosecution of the lawsuit, 31 U.S.C. § 3730(b)(2), (4). In such cases, however, the relator is still entitled to a share of any recovery. 31 U.S.C. § 3730(d). United States v. Quest Diagnostics Inc., 734 F.3d 154, 158 (2d Cir. 2013)

The defendants contend that the FCA preempts any damages action in this case. "[F]ederal preemption is based on the Supremacy Clause, which provides that federal law 'shall be the supreme Law of the Land.'" Simmons v. Sabine River Auth. La., 732 F.3d 469, 473 (5th Cir. 2013) (quoting U.S. CONST. ART. VI, CL. 2). "Preemption radically alters the balance of state and federal authority, so the Supreme Court has historically refused to impose that alteration interstitially." White Buffalo Ventures, LLC v. Univ. of Tex. at Austin, 420 F.3d 366, 370 (5th Cir. 2005) (citing Gregory v. Ashcroft, 501 U.S. 452, 460 (1991)). This principle has been expressed as "a presumption against preemption of statelaw." Id. (citations omitted). United States ex rel. Rigsby v. State Farm Fire & Cas. Co., 2015 WL 13649420, at *6 (S.D. Miss. Aug. 6, 2015) (Ozerden, J.).

"Federal law will preempt and displace state law in three circumstances: (1) when Congress enacts a statute that explicitly preempts state law; (2) when Congress regulates in such a pervasive manner that it can be inferred Congress intended to displace state law in the field and; (3) when state law actually conflicts with federal law. See, e.g., English v. Gen. Elec. Co., 496 U.S. 72, 78-79 (1990)." Glynn v. EDO Corp., 536 F.Supp.2d 595, 609 (D. Md. 2008) (Motz, J.).

"Of course, our preemption inquiry must "'start [ ] with the basic assumption that Congress did not intend to displace state law.'" S. Blasting [Servs., Inc. v. Wilkes County], 288 F.3d at 589 (quoting Maryland v. Louisiana, 451 U.S. 725, 746 (1981)); see also Cipollone [v. Liggett Group, Inc.], 505 U.S. at 516 ('Consideration of issues arising under the Supremacy Clause starts with the assumption that the historic police powers of the States are not to be superseded by Federal Act unless that is the clear and manifest purpose of Congress.' (internal quotation marks and alterations omitted)). The purpose of Congress is therefore the 'ultimate touchstone' of a preemption analysis. Cipollone, 505 U.S. at 516 (internal quotation marks omitted). As a general proposition, the presumption that Congress did not intend to preempt state law is especially strong when it has legislated "'in a field which the States have traditionally occupied,'" such as 'protecting the health and safety of their citizens.' S. Blasting, 288 F.3d at 590 (quoting Medtronic, Inc. v. Lohr, 518 U.S. 470, 485 (1996) (internal quotation marks omitted)); see also Abbot v. Am. Cyanamid Co., 844 F.2d 1108, 1112 (4th Cir. 1988). And, thepresumption is stronger still 'against preemption of state remedies, like tort recoveries, when no federal remedy exists.' Abbot, 844 F.2d at 1112 (citing Silkwood [v. Kerr-McGee Corp.], 464 U.S. at 251, 104 S.Ct. 615)." Anderson v. Sara Lee Corp., 508 F.3d 181, 192 (4th Cir. 2007).

In making their argument, the defendants cite numerous cases and provide a primer on determining whether preemption exists. They do not, however, cite to any case in which a court found that the FCA in fact preempted state remedies for improper conduct - presumably because there are none.

The plaintiffs, on the other hand, cite a number of cases which find no preemption. See e.g. Salazar v. Monaco Enterprises, Inc., 2015 WL 5716000, at *2 (E.D. Wash. Sept. 29, 2015) ("Defendants contend the False Claims Act ("FCA") provides an exclusive remedy. The published case law on this point holds to the contrary. E.g., Brandon v. Anesthesia & Pain Mgmt. Assocs., Ltd., 277 F.3d 936 (7th Cir. 2002) (There is nothing in § 3730(h) to lead us to believe that Congress intended to preempt all state law retaliatory discharge claims based on allegations of fraud on the government.'); Glynn v. EDO Corp., 536 F.Supp.2d 595 (D. Md. 2008) ('complementary remedies do not give rise to an inference of Congressional intent to preempt'); Hoefer v. Fluor Daniel, Inc., 92 F.Supp.2d 1055 (C.D. Cal. 2000); Palladino v. VNA of Southern N.J., 68 F.Supp.2d 455 (D. N.J. June 30, 1999) (holding no congressional intent to occupy the field of retaliatory discharge to the exclusion of the states). The Court finds these cases persuasive on the issue of preemption.").

"As one court recognized, '[w]hile the [FCA] permits any person ... to bring a qui tam suit, it does not authorize that person to violate state laws in the process.'" United States v. Quest Diagnostics Inc., 734 F.3d 154, 163 (2d Cir. 2013) (quoting United States ex rel. Doe v. X. Corp., 862 F.Supp. 1502, 1507 (E.D. Va. 1994) (Ellis, J.) (emphasis supplied).

The case law also makes clear that a defendant can bring state law claims which are independent of a finding of liability on the part of the defendant. "Counterclaims for indemnification or contribution by definition only have the effect of offsetting liability. Counterclaims for independent damages are distinguishable, however, because they are not dependant on a qui tam defendant's liability." United States ex rel. Madden v. Gen. Dynamics Corp., 4 F.3d 827, 830-31 (9th Cir. 1993).

The Madden Court added:

To some extent a qui tam defendant's interests are adequately protected by specific provisions of the FCA. Section 3730(d)(4) of the FCA provides that a court may award the defendant reasonable attorney's fees and expenses if the defendant prevails and the action was brought in bad faith. Moreover, § 3730(d)(3) limits the award of a qui tam plaintiff deemed to be a wrongdoer.

These remedies are inadequate for two reasons, however. First, recovering damages under the FCA's attorney's fees provision is difficult because of the exacting standards that must be met. Under § 3730(d)(4) a qui tam defendant must establish that the plaintiff's action was clearlyfrivolous, clearly vexatious or brought primarily for the purpose of harassment. Second, these remedies do not provide for complete compensation. A qui tam

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