3:16-cv-00737
S.D. Cal.Mar 16, 2017Background
- QAS (Quality Assurance Services) inspects and tests medical equipment; Relator Erin Hayes Lupo worked there ~8 years, including as office manager.
- Relator alleges QAS and employee Glenn R. Deacon II fabricated equipment test reports provided to healthcare providers (including government-run institutions), causing false government reimbursements (Medicare/Medicaid/MediCal/Tri-Care).
- Relator filed a first amended complaint asserting six counts: FCA substantive violations (31 U.S.C. § 3729), FCA conspiracy, FCA retaliation (31 U.S.C. § 3730(h)), Cal. Lab. Code § 1102.5 retaliation, Cal. Lab. Code § 232.5 retaliation, and wrongful termination in violation of public policy.
- Defendants moved to dismiss for failure to state claims and for insufficient particularity under Rule 9(b); Relator opposed. Court considered heightened pleading for fraud-based FCA claims and ordinary pleading for retaliation claims.
- Court found FCA fraud allegations adequate as to QAS and Glenn R. Deacon II (specific instance alleged, January 15, 2016, and attached identical reports), but deficient as to three individual defendants (mere conclusory knowledge allegations).
- Court dismissed conspiracy and various individual-defendant claims based on intracorporate-conspiracy doctrine and limitations on individual liability under the FCA and California law, granting leave to amend in limited respects and denying leave where amendment would be futile.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FAC pleads FCA fraud with Rule 9(b) particularity | Lupo alleges specific fraudulent testing scheme, at least one dated instance, and attached reports showing fabrication that led to gov't-paid claims | Defendants say Relator fails to identify actual government claims and lacks particularity about submissions | Denied as to QAS and Glenn R. Deacon II (pleading sufficient under Ebeid standard); granted w/ leave as to other individual defendants (conclusory allegations insufficient) |
| Whether intracorporate conspiracy doctrine bars FCA conspiracy claim among defendants | Lupo alleges defendants conspired among themselves and with outsiders to defraud govt | Defendants invoke intracorporate-conspiracy rule and lack of specifics about any outside co-conspirator | Count II dismissed; conspiracy among defendants barred (no leave to amend); leave to amend limited to allegations re: outside entities |
| Whether Relator states an FCA retaliation claim against employer and individuals | Lupo claims protected internal reporting, employer knew, and termination followed two days later | Defendants argue individuals cannot be liable under § 3730(h) and dispute causation | Claim against QAS survives (pleaded protected activity, employer knowledge, causal nexus); retaliation claims against individual defendants dismissed without leave (statutory interpretation and precedent) |
| Whether state-law retaliation and wrongful-termination claims survive against employer and individuals | Lupo contends §1102.5, §232.5, and public-policy wrongful-termination claims based on her reporting/termination | Defendants argue individual liability is unavailable under these statutes/common law and that §232.5 does not cover alleged conduct as a "working condition" | §1102.5 and wrongful-termination survive against QAS but are dismissed against individuals without leave; §232.5 dismissed with leave to amend (Relator failed to allege falsification was a condition of her employment) |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility standard for Rule 12(b)(6))
- Ashcroft v. Iqbal, 556 U.S. 662 (legal conclusions not presumed true; pleading standards)
- Ebeid ex rel. United States v. Lungwitz, 616 F.3d 993 (9th Cir.) (scheme-plus-indicia pleading suffices for FCA at pleading stage)
- Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097 (9th Cir.) (Rule 9(b) requires who, what, when, where, how)
- Hooper v. Lockheed Martin Corp., 688 F.3d 1037 (9th Cir.) (elements of FCA claim)
- Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097 (9th Cir.) (FCA retaliation does not require Rule 9(b) particularity)
- Vermont Agency of Nat. Res. v. United States ex rel. Stevens, 529 U.S. 765 (FCA remedies can be punitive in nature)