Allison v. Southwest Orthopaedic Specialists PLLC
5:16-cv-00569
W.D. Okla.Oct 8, 2020Background
- Relator Wayne Allison, a former administrator at Southwest Orthopaedic Specialists (SOS), sued under the Federal False Claims Act (FCA) and the Oklahoma Medicaid False Claims Act (OKFCA), alleging multiple remuneration/self‑referral and related schemes involving OCOM and affiliated entities.
- The United States and Oklahoma intervened on some claims but declined intervention on claims against individual defendants Michael Kimzey and Steve Hendley; most government‑intervened claims have since been settled or dismissed.
- The Second Amended Complaint (SAC) describes eleven alleged schemes (e.g., equity transfers, employment‑contract arrangements, creation of an exclusive anesthesia company APO) and pleads federal and state counts (Stark, AKS predicate FCA counts, reverse‑false‑claim, conspiracy, and state equivalents).
- Kimzey (OCOM CEO from 2014) and Hendley (former OCOM CEO; USP executive) moved to dismiss under Fed. R. Civ. P. 12(b)(6) and 9(b), arguing among other things that (1) there is no private cause of action under Stark, (2) the SAC uses impermissible group pleading and lacks particularity/scienter, and (3) the reverse‑false‑claim count is deficient.
- The court treated the SAC allegations as true for pleading purposes and considered the heightened Rule 9(b) standard for fraud/FCA claims.
- Ruling: Counts one (Stark direct claim) and six (reverse false claim) were dismissed with prejudice as to both Kimzey and Hendley; all other federal and state counts against them (FCA counts based on AKS/Stark predicates, conspiracy, and state equivalents) survived the motions to dismiss.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Private right under Stark (Count One) | Stark violations are alleged as a predicate to FCA claims but plaintiff does not seek a standalone Stark remedy. | No private cause of action exists under the Stark statute; direct Stark claims must be dismissed. | Court: Direct Stark claim (Count One) dismissed with prejudice as to Kimzey and Hendley. |
| FCA pleading sufficiency / Rule 9(b) (Counts 2–5, 7, 9–12) | SAC adequately alleges who, what, when, where, how for multiple schemes; identifies OCOM defendants and specific conduct by Kimzey/Hendley; scienter may be pled generally. | Group pleading, "scant" individualized allegations, failure to identify specific false claims, and lack of scienter render claims deficient. | Court: SAC meets Rule 9(b) and Rule 12(b)(6) at this stage; claims (except Counts 1 and 6) survive as to both defendants. |
| Reverse false claim (Count Six) | Defendants received improper government payments and knowingly failed to return reimbursements, creating reverse‑false‑claim liability. | Reverse FCA requires that the obligation to repay existed before the false statement/use; no preexisting obligation is alleged here. | Court: Dismissed Count Six with prejudice for both defendants (relying on Tenth Circuit precedent that obligation must attach before the challenged statement/use). |
| Conspiracy and intra‑corporate‑conspiracy doctrine (Count Seven) | Conspiracy alleged among individuals and entities (including non‑employees like SOS doctors); factual allegations show inter‑party agreement and benefit. | Conspiracy fails if no underlying FCA violation; intra‑corporate conspiracy doctrine bars conspiracy among corporate agents. | Court: Conspiracy survives; underlying FCA allegations are adequate and presence of non‑corporate actors precludes dismissal on intra‑corporate doctrine at pleading stage. |
Key Cases Cited
- Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174 (10th Cir. 2007) (Rule 12(b)(6) plausibility standard)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (pleading must be plausible, not merely conceivable)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (legal conclusions unsupported by factual allegations need not be assumed true)
- United States v. Lemmon, 614 F.3d 1163 (10th Cir. 2010) (Rule 9(b) applies to FCA fraud claims; fraud circumstances must be particularized)
- United States ex rel. Polukoff v. St. Mark’s Hospital, 895 F.3d 730 (10th Cir. 2018) (FCA pleadings need specifics of fraudulent scheme and basis to infer submission of false claims; courts may account for defendant‑controlled information)
- United States ex rel. Bahrani v. Conagra, Inc., 465 F.3d 1189 (10th Cir. 2006) (reverse‑false‑claim liability requires that the repayment obligation existed before the false statement/use)
- American Textile Mfrs. Institute, Inc. v. The Limited, Inc., 190 F.3d 729 (6th Cir. 1999) (interpretation of reverse‑false‑claim scope cited for limitation on liability)
- United States v. Sikkenga, 472 F.3d 702 (10th Cir. 2006) (earlier Tenth Circuit discussion on identification of specific false claims under FCA, later nuanced by subsequent precedent)