United States ex rel. Battiata v. Puchalski

906 F.Supp.2d 451

UNITED STATES of America, ex rel. Andrew BATTIATA, M.D. and Jenny Raybon, Plaintiffs,

v.Robert PUCHALSKI, M.D. and South Carolina ENT, Allergy, and Sleep Medicine, P.A., Defendants.

Robert Puchalski, M.D. and South Carolina ENT, Allergy, and Sleep Medicine, P.A., Third–Party Plaintiffs,

v.Chad B. Gunnlaugsson, M.D. and Orville H. Dyce, M.D., Third–Party Defendants.

C.A. No. 3:11–cv–3360–CMC.

United States District Court,

D. South Carolina,

Columbia Division.

Oct. 30, 2012.

Gregory Poole Harris, Harris and Gasser Law Firm, James Mixon Griffin, Margaret Nicole Fox, Lewis Babcock and Griffin, Columbia, SC, for Plaintiffs.

Deborah B. Barbier, Barbier Law Office, Columbia, SC.

Catherine Farrell Wrenn, Sandra LW Miller, Womble Carlyle Sandridge and Rice, Greenville, SC, Jana B. Baker, Womble Carlyle Sandridge and Rice, Charleston, SC, Charles F. Thompson, Jr., Malone Thompson and Summers, Eric S. Bland, Eric S. Bland and Associates, Columbia, SC, for Third–Party Defendants.

OPINION AND ORDER ON MOTION TO DISMISS COUNTERCLAIMS

CAMERON McGOWAN CURRIE, District Judge.

Through this qui tam action, Plaintiffs Andrew Battiata, M.D. (“Battiata”) and Jenny Raybon (“Raybon”) (collectively “Plaintiffs”) seek recovery on behalf of the United States for alleged violations of the False Claims Act, 31 U.S.C. § 3729 et seq. (“FCA”). The matter is before the court on Plaintiffs' motion to dismiss the seven counterclaims asserted by Defendants Robert Puchalski, M.D. (“Puchalski”) and South Carolina ENT, Allergy, and Sleep Medicine, P.A. (“SC ENT”) (collectively “Defendants”). For the reasons set forth below, Plaintiffs' motion is granted in full.

COMPLAINT AND COUNTERCLAIMS

In order to place the counterclaims in context, the court begins with a brief description of the complaint. Plaintiffs are former employees of Defendant SC ENT. They allege that, during their employment, Defendants improperly obtained payment from one or more federal programs by intentionally submitting bills with incorrect codes, most critically, by using codes which suggested services were provided by or under the supervision of a physician when they were not.

Defendants deny the allegations of the complaint. In addition, they assert numerous affirmative defenses and seven counterclaims. The present motion is directed to the counterclaims.

Counterclaim Facts. The facts relevant to the counterclaims are found under the heading “Facts Common to all Counterclaims”. Dkt. No. 39 at 16 Counterclaim ¶¶ 7–12. As to Battiata, Defendants allege that “after working [at SC ENT] a very short period of time, he began gathering and taking confidential documents to bring this qui tam lawsuit” despite having “a fiduciary duty to SC ENT ... to act in its best interest at all times.” Dkt. No. 39 ¶ 8. Defendants further allege that Battiata filed this qui tam action roughly two months after the employment relationship was terminated pursuant to a Settlement Agreement. Id. ¶ 10.

As to Raybon, who was an employee for approximately five years, Defendants allege that “[d]uring a significant portion of her employment ..., instead of performing her duties, Relator Raybon downloaded thousands of confidential patient records, took confidential documents, falsified her timesheet, and prepared to bring this qui tam lawsuit.” Id. ¶ 12. There are no allegations of misuse of confidential information or resulting harm other than the use in and harm which may result from pursuit of this action.

Based on these allegations, Defendants assert seven counterclaims. These counterclaims are summarized below.

Malicious Prosecution. The first counterclaim, for malicious prosecution, asserts that this action is “brought without any cause to believe that a False Claims Act violation ... has been committed.” Id. ¶ 15. It further alleges that “this action has been brought vindictively and for an ulterior motive; for the purpose of attemptingto legally harass, leverage, and to defame Defendants[.]” Id. ¶ 16. The alleged injuries include being “forced to defend themselves and to expend money and time in their defense[.]” Id. ¶ 18. Defendants seek punitive as well as actual damages under this claim.

Tortious Interference with Economic Relations. The second counterclaim is for tortious interference with economic relations. Under this cause of action, Defendants assert that Plaintiffs “negligently interfered with Defendants' existing relationships and contracts [with the federal government and private insurers] by making false statements about Defendants' violations of the False Claims Act and the Stark Act.” Id. ¶ 24. Defendants further allege that these “false statements have damaged the relationships Defendants have with government agencies that it does business with and damaged Defendants ['] expectation that [they] would continue to do business with these and other agencies in the future.” Id. ¶ 25.

This claim does not suggest any communications or actions beyond those involved in pursuit of this action. Neither does it specify any resulting injury beyond the generic claim of injury to business relationships.

Abuse of Process. The third cause of action alleges, in boilerplate terms, that Plaintiffs “have abused the process of this court in a wrongful manner, not proper in the regular conduct of the proceedings ..., to accomplish a purpose for which said proceedings were not designed, specifically, the assassination of the Defendants' reputations, and retaliation.” Id. ¶ 28.

Without specifying what information is at issue, Defendants assert that the Plaintiffs “have committed willful acts of the submission of false information in the regular conduct of litigation.” Id. ¶ 29. Defendants allege that they “have suffered damages, loss and harm, including but not limited to their reputation. The damage, loss and harm [are] the proximate and legal result of ... such abuse of legal process.”

Breach of Fiduciary Duty. The fourth counterclaim for breach of fiduciary duty alleges that Plaintiffs' “access to confidential information creat[ed] a confidential relationship” and imposed “a fiduciary duty not to publish or disseminate information purported to be privileged or confidential.” Dkt. No. 39 at ¶ 34. Defendants allege that Plaintiffs breached this duty and “are seeking to earn substantial compensation” as a result of the breach. Id. at ¶ 36. In addition to punitive damages, Defendants seek “injunctive relief and full restitution and/or disgorgement of all revenues, earnings, profits, compensation and benefits which may have been obtained by [Plaintiffs] as a result of such actions, including the imposition of a constructive trust over the proceeds of such actions.” Id. at ¶ 37.

Defendants do not specify in this counterclaim how Plaintiffs are “seeking to earn substantial compensation” through the breach of fiduciary duty or identify the “actions” which might result in proceeds subject to a constructive trust. This leaves only the inference that the “compensation” and “proceeds” at issue are those which might be obtained as the relators' share of recovery in this action.

Indemnification and Contribution. Defendants' fifth counterclaim is for common law indemnification and contribution. Under this counterclaim, Defendants allege that “if the United States sustained damages as indicated in the Complaint, ... then such damages were caused in whole or in party by the negligence, culpable conduct, and incorrect or improper billing and coding by [Battiata].” Id. ¶ 40 (emphasis added). Based on these allegations,Defendants assert that Battiata “is liable to the Defendant[s] for common law indemnification and judgment over and for contribution in the full amount of any recovery by the United States ... or for the portion caused by his relative responsibility[.]” Id. ¶ 41 (seeking recovery of “damages, costs, disbursements and attorney fees with respect to this action”).

Unjust Enrichment. The sixth counterclaim, like the fifth, denies liability but asserts that “if the United States has sustained damages as indicated in the Complaint, ... then such damages were caused in whole or in part by the negligence, culpable conduct, and incorrect or improper billing and coding by [Battiata].” Id. ¶ 44 (emphasis added). Defendants then assert that, “[i]f Relator Battiata improperly billed or coded claims submitted to the United States, he has knowingly obtained, conferred, or retained economic benefits acquired at the Defendants' expense ... under circumstances that render it inequitable for [him] to retain the benefits.” Id. ¶ 45. Defendants assert that Battiata “should be ordered to compensate Defendants for the value of the wrongfully obtained benefits and ordered to disgorge all profits derived by this conduct.” Id. ¶ 46. In addition they seek to impose “[a] constructive trust ... on all monies received by the Relator Battiata and on all profits generated by the Relator Battiata as a result of incorrect or improper billing and coding.” Id. ¶ 47.

Payment Under Mistake of Fact. As with the fifth and sixth counterclaims, the seventh alleges that, “if the United States sustained damages as indicated in the Complaint, ... then such damages were caused in whole or in party by the negligence, culpable conduct, and incorrect or improper billing and coding by [Battiata].” Id. ¶ 49 (emphasis added). It then alleges that if Battiata “improperly billed or coded claims ... [then he] has been paid by the Defendant SC ENT under mistake of fact.” Id. ¶ 50. Defendants assert that they “acted in reasonable reliance on the accuracy and truthfulness” of Battiata's billing and coding in making payments to Battiata and, on that basis, state that he should be “liable to account for and pay” them any improperly paid amounts.

DISCUSSION

I. Fourth through Seventh Counterclaims

Because of their similarities, the court begins with consideration of the fourth through seventh counterclaims for breach of fiduciary duty,...