United States v. Berkeley Heartlab, Inc.
225 F. Supp. 3d 487
| D.S.C. | 2016Background
- This consolidated action arises from three qui tam suits (Mayes, Riedel, Lutz & Webster) alleging that Berkeley, HDL, Singulex, BlueWave, Mallory, Dent, Johnson, and Quest engaged in schemes (kickbacks disguised as processing & handling or "P&H"/draw fees, marketing kickbacks, copayment waivers, and medically unnecessary testing) that resulted in false Medicare/TRICARE claims under the False Claims Act (FCA) and related state law claims.
- The United States intervened and filed a Complaint in Intervention alleging FCA violations (presentment, material false statements, conspiracy) and common-law claims (unjust enrichment, payment by mistake); several defendants moved to dismiss on jurisdictional, pleading, and other grounds.
- Defendants argued the FCA first-to-file bar barred the Government’s Complaint in Intervention and some relators’ complaints; they also challenged sufficiency under Rules 8, 9(b), and 12(b)(6), statute of limitations, and intracorporate-conspiracy doctrine.
- Consolidated factual allegations: (1) P&H/draw fees paid to induce physician referrals (alleged AKS kickbacks); (2) promotion/ordering of medically unnecessary tests; (3) waiving TRICARE copays/deductibles to induce testing; (4) BlueWave as marketing arm receiving large commissions and entering a 2010 sales agreement with HDL.
- Court found the Government may proceed (first-to-file bar does not divest Government intervention), denied dismissal of the Government’s FCA counts and common-law claims (with limited statute-of-limitations pruning), dismissed or allowed partial dismissal/amendment of certain relator complaints and some claims against Quest (presentment claim survives; conspiracy claim dismissed).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether first-to-file bar divests court of jurisdiction over Government’s Complaint in Intervention | Government: §3730(b)(5) doesn’t bar the Government; its intervention may incorporate only material elements from earliest suit | BlueWave/Dent/Johnson: later qui tam filings (Riedel, Lutz-Webster) bar Government intervention because Mayes was first | Held: First-to-file bar does not apply to the Government’s Complaint in Intervention; Government may prosecute overlapping qui tam matters |
| Whether Government’s FCA claims meet Rules 12(b)(6) and 9(b) (presentment/material false statement/conspiracy) | Government: Complaints allege who/what/when/where/how for kickbacks, unnecessary testing, copay waivers; scienter alleged generally | Defendants: Allegations are overbroad, lack particularity, and scienter not adequately pled; intracorporate conspiracy doctrine bars conspiracy claim in some contexts | Held: Government’s Complaint in Intervention survives 12(b)(6) and 9(b) as to Counts I–III; conspiracy adequately alleged vs. non-Berkeley defendants; intracorporate doctrine not fatal where separate entities or independent personal stakes exist |
| Whether common-law claims (unjust enrichment, payment by mistake) are viable alongside FCA | Government: May plead equitable/common-law claims in the alternative; FCA does not expressly abrogate them | Defendants: FCA provides adequate remedy; relators lack standing to assert common-law claims for U.S. | Held: Common-law claims permitted in alternative; not dismissed at this stage (subject to statute-of-limitations and potential preclusion if FCA remedies fully recover government) |
| Whether specific relators’ complaints and claims survive first-to-file, and meet pleading standards (Riedel; Lutz-Webster; Mayes against Quest) | Relators: their complaints allege distinct schemes/defendants (e.g., speaker fees, waivers, Quest post-acquisition conduct) | Defendants: Riedel and parts of Lutz-Webster are barred by first-to-file; pleadings lack the who/what/when/where/how required by Rule 9(b); Quest claims fail on AKS or conspiracy grounds | Held: Riedel — parts barred (packaging fees, unnecessary testing) and remaining non-intervened claims dismissed without prejudice for failure to meet Rule 9(b) (leave to amend granted). Lutz-Webster — not wholly barred; claims naming new defendants (Mallory, Dent, Johnson) survive; North Carolina FCA claim against BlueWave barred. Mayes v. Quest — presentment (AKS-tainted claims) survives; conspiracy claim against Quest dismissed (intracorporate doctrine/no pre-acquisition agreement alleged). |
Key Cases Cited
- U.S. ex rel. Carter v. Halliburton Co., 710 F.3d 171 (4th Cir.) (first-to-file bar requires same material elements test)
- Kellogg Brown & Root Servs., Inc. v. U.S., ex rel. Carter, 135 S. Ct. 1970 (U.S.) (affirming/reviewing aspects of first-to-file jurisprudence)
- United States v. Triple Canopy, Inc., 775 F.3d 628 (4th Cir.) (implied certification and materiality; Rule 9(b) discussion)
- Cook County, Ill. v. United States ex rel. Chandler, 538 U.S. 119 (U.S.) (corporate person includes corporations for FCA liability)
- U.S. ex rel. Drakeford v. Tuomey, 792 F.3d 364 (4th Cir.) (claims tainted by AKS constitute false claims; pleading scienter standard)
- United States v. Rogan, 517 F.3d 449 (7th Cir.) (claims acquired by kickback are false claims)
- U.S. ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370 (4th Cir.) (Rule 9(b) requires who/what/when/where/how)
- Buschi v. Kirven, 775 F.2d 1240 (4th Cir.) (intracorporate conspiracy doctrine)