CHARLESTON – A federal judge has dismissed a whistleblower lawsuit after he says a former Thomas Memorial Hospital nurse’s complaint didn’t adequately detail the allegations of fraud.
In a November 7 opinion and order, U.S. District Judge Joseph R. Goodwin said Liesa Kyer’s qui tam complaint just didn’t do enough to warrant further litigation of the case.
“Allegations of fraud precede serious and often disastrous consequences,” Goodwin wrote in his 25-page order. “That is why fraud must be pled with particularity, describing the alleged conduct with sufficient detail.
Goodwin
| File photo
“Of course, a plaintiff need not prove her case at the pleading stage. But I cannot, and I will not, drag a defendant into discovery when a complaint fails to allege the details of fraud — causally linked together — to form a plausible and particular claim.
“Relator’s complaint does not meet this bar, and defendants should not be subject to further litigation under the shadow of a haphazardly pled 82-page complaint.”
In the original whistleblower complaint filed in 2020, Liesa Kyer claims Thomas Health System Inc. violated the False Claims Act by seeking federal healthcare program payments with claims that violated the Stark Law, which prohibits doctors and other entities from improperly benefiting from self-referrals.
The defendants in the lawsuit are Thomas Health System Inc. (also known as West Virginia United Health System), Herbert J. Thomas Memorial Hospital Association doing business as Thomas Memorial Hospital, THS Physicians Partners Inc., Charleston Hospital Inc. doing business as St. Francis Hospital and Brian Ulery.
In a September 12 order, U.S. District Judge Joseph R. Goodwin ordered both sides to file supplemental briefings on the possible effect this summer’s landmark U.S. Supreme Court Loper Bright ruling, if any, has on the case. Thomas had filed a motion to dismiss Kyer’s qui tam complaint.
Kyer worked as a nurse at Thomas Memorial Hospital. She filed the lawsuit on behalf of the United States for alleged violations of the FCA, the Stark Law and the Anti-Kickback Statute. The federal government elected not to intervene in the case, so Kyer filed an amended complaint with four causes of action.
“Over the last 30 years, the Stark Law has grown complex, nuanced and reliant on agency regulation to define key terms and safe harbors. Relator’s (Kyer) claims and defendants’ (Thomas) arguments for dismissal rely heavily on Stark Law regulations. … Rulemaking has reshaped the Stark Law for the last 30 years.”
But in June, the U.S. Supreme Court issued its landmark decision regarding administrative law in Loper Bright Enterprises v. Raimondo. Along with another case, it overturned the 1984 decision in Chevron U.S.A. v. Natural Resources Defense Council, which had told courts to defer to an agency’s reasonable interpretation of an ambiguity in a law the agency enforces.
“Now, I do not know how Loper Bright will affect relator’s Stark Law claim,” Goodwin wrote in the September order. “I do know, however, that my obligation under Loper Bright is different: I must ensure that the Stark regulatory scheme is consistent with the power given by Congress and the statute as it was signed into law. Such is Loper Bright’s instruction.”
Goodwin wrote then he can’t determine if the plaintiff stated a claim without first determining the “contours of the statute.”
“Deeper still, the statute is fleshed out in the regulations,” Goodwin wrote. “Loper Bright mandates that I carefully consider the regulations – without blindly deferring to any agency interpretations. Here, the Stark Regulations build the foundation of relator’s Stark-based claim.”
That, he said, is why he ordered the parties to file supplemental briefing on the effect, if any, the Loper Bright ruling has on the case.
Goodwin said the game has changed with the Loper Bright ruling, which says “it is emphatically the province and duty of the judicial department to say what the law is.”
“I am concerned that I must carefully consider this newest precedent,” Goodwin wrote in September. “Perhaps, under Chevron, federal courts could wade through Stark Law claims by deferring and defaulting to an agency’s interpretation. …
“That deference is no longer required; indeed, that deference is no longer acceptable.”
Goodwin also wrote that Loper Bright also “will begin to ripple through the Stark Regulations.”
“The only question for the courts is when and how,” Goodwin wrote. “Because I have seen very little research on this intersection of law, the parties should welcome the opportunity to lay out Loper Bright versus Stark for the first time. …
“The problem is that I cannot determine if relator (Kyer) has stated a claim upon which relief can be granted if I do not know what the Stark Law requires.”
In his November 7 dismissal order, Goodwin said Kyer’s complaint suffered from two fatal flaws.
“First, the complaint alleges that the “defendants” — which includes four separate legal entities and one legal officer of those entities — all individually engaged in conduct violative of the FCA,” Goodwin wrote. “Second, the complaint fails to connect any claim made to the government to the alleged compensation scheme. …
“At a minimum, a plaintiff must ‘describe the time, place and contents of false representations, as well as the identity of the person making the misrepresentation and what he obtained thereby.’ … Well-detailed complaints are required to ‘prevent frivolous suits, stop fraud actions where everything is learned after discovery … and to protect defendants’ reputations.’ In short, the ‘standard is steep.’”
Goodwin says the complaint also refers to the defendants in many different ways, sometimes being all of them, sometimes being two or three of them and sometimes being just one of them.
“My point is this: Relator’s voluminous pleading has an identity problem,” Goodwin wrote. “A thorough reading of the complaint leaves more questions than answers, and each question sounds like, ‘Who did what exactly?’ …
“Relator must plead the ‘who, what, when, where and how’ of alleged fraud. The specific ‘who’ tied to a ‘what’ is missing from relator’s complaint and becomes more obscure as the complaint goes on.”
Goodwin says Kyer also fails to establish the alleged scheme caused the alleged false claims submitted to the federal government.
“My concern lies somewhere between the presentment requirement of the FCA, classic causation ideas, and the great burden defendants face in litigating FCA claims,” he wrote. “Classic causation and the presentment requirement go hand-in-hand.”
Goodwin says his final concern is the burden on defendants when a relator alleges a scheme unconnected to claims.
“A long complaint is not always a particular complaint,” he wrote. “Nor is a long complaint a ticket to discovery. To conclude, I recognize that the standard split is about whether a relator must allege the false claims actually submitted to the government, not whether the claims alleged are sufficiently particular.
“This distinction, relator argues, is favorable to her because she did in fact attach pages of allegedly false claims. The distinction, however, is illusory and does little to push the complaint into particularity. I see no difference between a relator that alleges a fraudulent scheme without any representative claims and a relator that alleges a fraudulent scheme next to — and disconnected from — a series of allegedly false claims. Both allege a fraudulent scheme, but neither ‘connect the dots’ between the scheme and claims submitted to the government.”
Kyer was being represented by Chandra Napora and Nathaniel F. Smith of Morgan Verkamp in Cincinnati, Susan M. Coler of Halunen Law in Minneapolis and Tish Chafin of The Chafin Law Firm in Williamson. Thomas was being represented by David B. Honig and Matthew M. Schappa of Hall Render Killian Heath & Lyman of Indianapolis and Robert L. Massie of Nelson Mullins in Huntington.
U.S. District Court case number 2:20-cv-732