IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF OREGON 

EUGENE DNISION 

THE UNITED STATES OF AMERICA, 

ex rel. MICHAEL T. BROOKS, 

Plaintiff, 

v. 

TRILLIUM COMMUNITY HEALTH 

PLAN, INC. and AGATE RESOURCES, 

INC., 

Defendant. 

Jesse L. London 

Attorney at Law 

888 W. Park Street 

Eugene, Oregon 97401 

Attorney for plaintiff-relator 

Reilley D. Keating 

Stephen H. Galloway 

Stoel Rives LLP 

900 S.W. Fifth Avenue, Suite 2600 

Portland, OR 97204 

Attorneys for defendants 

Page 1 - OPINION AND ORDER 

Case No. 6:14-cv-01424-AA 

OPINION AND ORDER 

Case 6:14-cv-01424-AA Document 63 Filed 04/29/16 Page 1 of 18
AIKEN, Judge: 

Plaintiff-relator Michael Brooks ("relator") filed this qui tam action against defendants 

Trillium Community Health Plan, Inc. ("Trillium") andAgate Resources, Inc. ("Agate") (collectively 

"defendants"), alleging violations of the False Claims Act ("FCA"), federal anti-discrimination laws, 

the federal Anti-Kickback Statute, and the Stark Law, as well as common law unjust enrichment. 

Relator's claims stem from alleged misconduct he observed while employed by defendants. 

Defendants move to dismiss all claims in relator's First Amended Complaint (doc. 34) pursuant to 

Federal Rules of Civil Procedure 8, 9(b ), and 12(b )( 6). Defendants assert relator's claims should be 

dismissed because (1) the claims are time-barred, (2) relator failed to satisfy the pleading 

requirements stated in Rules 8 and 9(b ), and (3) re la tor lacks standing to bring the unjust enrichment 

claim. For the reasons set forth below, defendants' Motion is granted. 

BACKGROUND 

Relator worked as a database administrator for defendants from 2005 to 2013. Relator 

describes the relationship between Trillium and Agate as "alter egos" with regard to his "assigned 

duties in the shared databases." Compl. if 1. He alleges he received paychecks from both Agate and 

Trillium at different times. During his employment, relator contends defendants submitted false 

claims to the federal government in the form of duplicative Medicare and Medicaid claims for 

payment. Relator further alleges defendants violated (1) federal anti-discrimination laws, (2) the 

federal Anti-Kickback Statute, and (3) the Stark Law, which prohibits financial relationships 

between referring physicians and entities receiving referrals. Finally, relator alleges defendants 

falsely certified their compliance with all federal laws, despite their violation of the aforementioned 

laws. 

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Case 6:14-cv-01424-AA Document 63 Filed 04/29/16 Page 2 of 18
Re la tor alleges he was "privy to intimate details concerning how [ d]efendants' Medicaid and 

Medicare claims data was generated, maintained, and for what purposes it was used" during his 

employment. Compl. if 1. He "frequently was asked by top officers in [ d]efendants['] organization 

to search and manipulate data for reporting or other purposes on behalf of Trillium or Agate." 

Compl. ii 1. Relator alleges he "became very concerned with respect to potential claims fraud, 

improper disclosure of [personally identifiable and private health information], and discrimination 

against poor patients." Compl. if 1. Re la tor was rebuffed when he expressed his concerns to one of 

defendants' senior officers. Shortly thereafter, defendants terminated re la tor, allegedly under false 

pretense. 

After he was fired, relator "contacted state enforcement authorities to alert them to 

[d]efendants' misconduct"; the authorities were allegedly unresponsive. Compl. if 1. Relator filed 

his original qui tam complaint in camera and under seal on September 3, 2014. See Doc. 3. The 

United States declined to intervene in the action on May 22, 2015, at which point the Court unsealed 

the complaint and ordered service upon defendants. See Docs. 12 and 13. Relator moved for 

appointment of pro bono counsel on June 10, 2015, and the Court granted that motion, appointing 

Jesse L. London as counsel. See Docs. 24 and 26. With the assistance of pro bono counsel, relator 

filed the First Amended Complaint on October 19, 2015. Defendants' Motion to Dismiss First 

Amended Complaint or, In the Alternative, For a More Definite Statement and Memorandum of Law 

(doc. 47) was filed on December 14, 2015, and is now before this Court. 

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Case 6:14-cv-01424-AA Document 63 Filed 04/29/16 Page 3 of 18
STANDARD OF REVIEW 

"[G]enerally the scope ofreview on a motion to dismiss for failure to state a claim is limited 

to the [c]omplaint."1 Daniels-Hall v. Nat'! Educ. Ass 'n, 629 F.3d 992, 998 (9th Cir. 2010). Under 

Rule 12(b )( 6), a complaint is construed in favor of the non-moving party, and its factual allegations 

are taken as true. Id. "To survive a motion to dismiss, [the] complaint must contain sufficient factual 

matter, accepted as true, to 'state a claim to relief that is plausible on its face."' Ashcroft v. Iqbal, 556 

U.S. 662, 678 (2009) (quoting Bell At!. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Rule 8(a)(2) 

requires the plaintiff include in his complaint "a short and plain statement of the claim showing that 

the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). Allegations of fraud or mistake must satisfy 

a higher pleading standard: "In alleging fraud or mistake, a party must state with particularity the 

circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b ). "Because they involve allegations 

of fraud, qui tam actions under the FCA must meet not only the requirement of Rule 8, but also the 

particularity requirements ofRule 9." United States v. Corinthian Calls., 655 F.3d 984, 992 (9th Cir. 

2011) (citing Bly-Magee v. California, 236 F.3d 1014, 1018 (9th Cir. 2001)). However, "[u]nlike 

the 'circumstances constituting fraud or mistake' which must be alleged with particularity, 

'conditions of a person's mind,' such as scienter, can be alleged generally. United States ex rel. 

McGrath v. Microsemi Corp., 2015 WL 6121568, *16 (D. Ariz. Sept. 30, 2015) (alterations 

normalized) (quoting Fed. R. Civ. P. 9(b)). 

1 "A motion to dismiss a complaint or claim 'grounded in fraud' under Rule 9(b) for 

failure to plead with particularity is the functional equivalent of a motion to dismiss under Rule 

12(b)(6) for failure to state a claim." Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1107 (9th 

Cir. 2003). "Because a dismissal of a complaint or claim grounded in fraud for failure to comply 

with Rule 9(b) has the same consequence as a dismissal under Rule 12(b)(6), dismissals under 

the two rules are treated in the same manner." Id. 

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Case 6:14-cv-01424-AA Document 63 Filed 04/29/16 Page 4 of 18
"To comply with Rule 9(b), allegations of fraud must be 'specific enough to give defendants 

notice of the particular misconduct which is alleged to constitute the fraud charged so that they can 

defend against the charge and not just deny that they have done anything wrong."' Bly-Magee, 236 

F.3d at 1019 (quotingNeubronnerv. Miliken, 6 F.3d 666, 672 (9th Cir. 1993)). "Averments of fraud 

must be accompanied by 'the who, what, when, where, and how' of the misconduct charged." Vess, 

317 F.3d at 1106 (quoting Cooper v. Picket, 137 F.3d 616, 627 (9th Cir. 1997)). "Claims made on 

information and belief are not usually sufficiently particular, unless they accompany a statement of 

facts on which the belief is founded." Shroyerv. New Cingular Wireless Servs., Inc., 622F.3d1035, 

1042 (9th Cir. 2010). If alleged fraud took place over several years, however, the complaint need not 

"allege, in detail, all facts supporting each and every instance of false [statement] over a multi-year 

period." United States ex rel. Lee v. SmithKline Beecham, Inc., 245 F.3d 1048, 1051 (9th Cir. 2001 ). 

DISCUSSION 

Defendants assert three bases for dismissing relator's First Amended Complaint. First, 

defendants' contend the claims are time-barred by the FCA's statutes of limitation and repose 

because the representative examples relator provided in Exhibits A through D of the Complaint 

occurred before September 3, 2008. Second, defendants aver the First Amended Complaint is not 

adequately pleaded, specifically with regard to re la tor's false claim and certification claims. Third, 

defendants argue relator does not have standing to bring his unjust enrichment claim because he did 

not suffer an injury. 

Page 5 - OPINION AND ORDER 

Case 6:14-cv-01424-AA Document 63 Filed 04/29/16 Page 5 of 18
I. Timeliness of Claims 

Defendants assert this Court should dismiss relator's claims because they are untimely. 

Timeliness is a threshold issue; as a private individual bringing a qui tam action under 31 U.S.C. § 

3730(b ), relator cannot bring his claim 

(1) more than 6 years after the date on which the violation of section 3729 is 

committed, or 

(2) more than 3 years after the date when facts material to the right of action are 

known or reasonably should have been known by the official of the United States 

charged with responsibility to act in the circumstances, but in no event more than 10 

years after the date on which the violation is committed, 

whichever occurs last. 

31 U.S.C. § 373l(b). Relator filed his original complaint on September 3, 2014. See Doc. 3. 

Accordingly, 51 of the 56 representative examples listed in relator's exhibits for the First Amended 

Complaint fall outside 3731 (b )(2)'s 10-year statute of repose because they occurred before 

September 3, 2004. Defendants argue the five remaining representative examples are time-barred 

by the 6-year statute oflimitations because all occurred before September 3, 2008. 

At this stage, it would be premature to conclude the statutes of limitations and repose bar 

plaintiffs claims. Defendants correctly state that any claims for violations committed prior to 

September 3, 2004 and September 3, 2008 are time-barred by the statutes of repose and limitations, 

respectively. At this stage, however, the fact that all plaintiffs representative examples occurred 

outside the statutes oflimitations and/or repose represents a pleading deficiency rather than a bar to 

relief as a matter of law. As discussed above, Rule ~(b) pleadings must include the "who, what, 

when, where, and how" of the alleged misconduct. The First Amended Complaint broadly refers to 

activity throughout re la tor's employment with defendants, from 2005 to 2013. It also refers to "more 

Page 6 - OPINION AND ORDER 

Case 6:14-cv-01424-AA Document 63 Filed 04/29/16 Page 6 of 18
than 200,000 possible instances of duplicated billing data" obtained in discovery. Compl. iJ 30. The 

problem is not that relator failed to allege violations within the statutes of limitation and/or repose 

- it is that he failed to do so with sufficient particularity. Representative examples are one way of 

meeting the particularity requirement. Ebeid ex rel. United States v. Lungwitz, 616 F.3d 993, 998-99 

(9th Cir. 2010). But here, the representative examples cannot cure the particularity deficiencies of 

the Complaint because the vast majority of them are time-ban-ed by the statute of repose. Relator 

may remedy this problem by providing timely representative examples2 or by otherwise amending 

the Complaint to include particularized allegations within the statutes of limitation and repose.3 

II. Relationship between Trillium and Agate 

Relator's First Amended Complaint also inadequately pleads the relationship between 

Trillium and Agate. When a plaintiff alleges multiple defendants engaged in fraud, "Rule 9(b) does 

not allow [the] complaint to merely lump [the] defendants together." Swartz v. KP MG LLP, 4 7 6 F.3d 

756, 764 (9th Cir. 2007). While the plaintiff is not required to "identify false statements made by 

each and every defendant" engaged in an alleged fraudulent scheme, the plaintiff must "differentiate 

2 Because section 3731(b) bars actions commenced either six years after the violation was 

committed or three years after the date when the "qui tam plaintiff knows or reasonably should 

have known the facts material to his right of action," whichever occurs later, United States ex rel. 

Hyatt v. Northrop Corp., 91 F.3d 1211, 1217-18 (9th Cir. 1996), any representative examples 

that occun-ed on or after September 3, 2008 are timely. Whether representative examples that 

occun-ed between September 3, 2004, and September 2, 2008, are timely depends on when 

relator knew or reasonably should known the material facts for his claims. That issue is not 

before the Court in its consideration of this Motion. 

3 Representative examples outside of the statutes of limitation and repose may still serve 

as background evidence that defendants knew they were submitting false claims and 

certifications. Cf Nat'! R.R. Passenger Corp. v. Morgan, 536 U.S. 101, 113 (2002) (Interpreting 

the Title VII of the Civil Rights Act of 1964, the Court held that an employee was not ban-ed 

"from using the prior acts as background evidence in support of a timely claim."). 

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Case 6:14-cv-01424-AA Document 63 Filed 04/29/16 Page 7 of 18
their allegations ... and inform each defendant separately of the allegations surrounding [its] alleged 

participation in the fraud." Id. at 764-65 (internal quotations marks omitted). The "plaintiff must, 

at a minimum, 'identif[y] the role of [each] defendant[] in the alleged fraudulent scheme."' Id. at 765 

(quoting Moore v. Kayport Package Express, Inc., 885 F.2d 531, 541 (9th Cir. 1989)). 

Based on the First Amended Complaint, it is unclear whether relator alleges Trillium and 

Agate acted as "alter egos,"4 acted jointly and separately in committing the various acts at issue,5 or 

acted as co-conspirators.6 Whatever relator's theory of Trillium and Agate's relationship with regard 

to the alleged false claims and certifications, relator has not pleaded that theory with sufficient 

particularity. The First Amended Complaint must allege the relationship between Trillium andAgate 

with particularity and each claim must inform Trillium and Agate of their alleged respective roles 

in submitting false claims and certifications to the federal government. Without this information, 

none ofrelator's claims are pleaded with particularity under Rule 9(b). 

4 In the First Amended Complaint, relator pleads Trillium and Agate "were treated as alter 

egos from the perspective of [relator's] assigned duties." Compl. if 1. However, relator does not 

plead particularized facts to show Trillium and Agate functioned as alter egos for the purposes of 

re la tor's claims. 

5 Throughout most of the First Amended Complaint, relator alleges "defendants" falsely 

submitted false claims and falsely certified compliance with federal law. See, e.g., Compl.ifif 30, 

41, 49. However, paragraph 4 7 of the First Amended Complaint implies Agate may have acted 

alone in giving remuneration to and maintaining a financial relationship with physicians. See 

Compl. if 47 (discussing shares of Agate stock as the alleged kickback). Based onrelator's 

allegations, it is not clear when he is alleging Trillium, Agate, or both, committed the underlying 

acts of the alleged FCA violations. 

6 Relator alleges the defendants "conspired to defraud the federal government" and used 

"concerted efforts" in his Anti-Kickback Statute and Stark Law false certification claims. Compl. 

iii! 69, 80. 31 U.S.C. § 1329( a)(l )(C) creates civil liability for conspiring to violate another 

provision of the FCA. From these limited references, the First Amended Complaint does not 

clearly indicate whether relator is alleging Trillium and Agate acted as co-conspirators in 

violation of31U.S.C.§1329(a)(l)(C). 

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III. Adequacy of Pleading 

Defendants also aver re la tor has not adequately pleaded his FCA claims under Rule 9(b) and, 

therefore, urge the Court to dismiss the claims. Relator's FCA claims consist of (1) duplicative 

billing in violation of31U.S.C.§3729(a)(l )(A) and (2) false certifications in violation of31 U.S.C. 

§ 3729(a)(l)(B). 

A. Relator's Duplicative Billing Claim 

In the First Amended Complaint, relator alleges defendants submitted duplicative Medicaid 

bills in violation of 31 U.S.C. § 3729(a)(l)(A). Under section 3729(a)(l)(A), a person who 

"knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval" 

is liable to the federal government. 31 U.S.C. § 3729(a)(l)(A). To plead the claim, the relator must 

allege "(1) a false or fraudulent claim (2) that was material to the decision-making process (3) which 

defendant presented, or caused to be presented, to the United States for payment or approval ( 4) with 

knowledge that the claim was false or fraudulent." Hooper v. Lockheed Martin Corp., 688 F.3d 

1037, 1047 (9th Cir. 2012). Defendants assert relator failed to adequately plead any of the four 

elements. 

For the first element, relator alleges "there are approximately 300 false claims" for neonatal 

critical care, which "are only the tip of the iceberg in a sea of many tens of thousands" of duplicative 

billing entries. Compl. if 32. Relator's allegations in paragraph 32 do not give the defendants notice 

of the particular alleged misconduct. The allegations do not describe the time, place, or manner of 

the alleged 300 false claims and they do not identify the roles of Trillium and Agate in submitting 

the allegedly false claims. 

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Case 6:14-cv-01424-AA Document 63 Filed 04/29/16 Page 9 of 18
In an exhibit attached to the First Amended Complaint, relator also provides representative 

examples. One such example is reproduced below: 

Claim Number 200309257400060 200309257400069 

Claim Line 4729037 4729072 

Provider ID 810154 810154 

Vendor ID 10517 10517 

Service Date 7/30/03 7/30/03 

Procedure Code 99296 99296 

Qty 1 1 

Billed Amount $846.00 $846.00 

Contract Value $431.46 $431.46 

Net Amount $431.46 $431.46 

Date Paid 9/30/03 9/30/03 

Check Number 87054 87054 

Compl. Ex. B, Example 4. While relator's examples like the one above show several instances of 

billing under the same procedure code in the same amount, it is unclear whether the examples show 

duplicative billing. Relator alleges Procedure Code 99296 may not be billed more than once per day 

per patient; however, relator's representative examples do not include patient identifiers. Without 

a patient identifier, it is not possible to determine whether the allegedly duplicative Procedure Code 

99296 billing entries were improperly submitted for the same patient twice in one day or were 

properly submitted for two different patients on the same day. Therefore, relator has failed to allege 

duplicative billing with sufficient particularity. 

The third element, presentation of false claims to the United States for payment and approval, 

is also inadequately pleaded. While relator alleges in paragraphs 33 and 34 of the First Amended 

Complaint that defendants made and presented false claims, these allegations are insufficiently 

particular. Re la tor does not identify the roles of Trillium and Agate in allegedly presenting the false 

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Case 6:14-cv-01424-AA Document 63 Filed 04/29/16 Page 10 of 18
claims to the government for payment. Further, as discussed above, most of the representative 

examples relator presents to satisfy the particularity requirements are untimely. Without identifying 

the defendants' respective roles or presenting sufficient timely particularized examples, re la tor has 

not adequately pleaded this element. 

Defendants aver re la tor failed to adequately plead the second element, materiality, when he 

did not expressly allege the false claims were material to the government decision to pay the claims. 

In response, relator asserts its allegations that "[d]efendants' presented many claims" and that "a 

false claim was made and paid" are sufficient because "the materiality element is hardly at issue 

here." Pl. 's Resp. to Defs.' Mot. at 7 (discussing Compl. i!i! 33-34). In this instance, it is obvious that 

submission of the allegedly false claims was material to the government's payment of those claims. 

The Court will not dismiss this pleading on a technicality when all parties knew what was meant. 

Therefore, relator adequately pleads materiality in the First Amended Complaint. 

Finally, relator also adequately pleads the fourth element, knowledge. "A person 'knowingly' 

submits a false claim not only when he or she 'has actual knowledge of the information,' but also 

when he or she 'acts in deliberate ignorance' or 'reckless disregard' of the truth or falsity of the 

information. Lee, 245 F.3d at 1053 (quoting 31 U.S.C. § 3729(b)(l)-(3)). Congress included this 

sci enter requirement to ensure "that the [FCA does] not punish honest mistakes or incorrect claims 

submitted through mere negligence." United States ex rel. Hochman v. Naclmian, 145 F.3d 1069, 

1073 (9th Cir. 1998) (quoting S. Rep. No. 99-345, at 7 (1986)). In the First Amended Complaint, 

relator alleges as much as five percent of all Medicaid claims filed during his employment period 

were duplicative. Compl. if 32 ("As a percentage of total claims processed of nearly seven million 

during the period for which [relator] already has access to data, the false claims are as much as 5% 

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Case 6:14-cv-01424-AA Document 63 Filed 04/29/16 Page 11 of 18
of the total."). Therefore, relator asserts, "Because so many duplicative false claims exist as a 

percentage of total claims, especially when [d]efendants' role was to police the authenticity of 

claims, one can easily imply that the practice was intentional or reckless." Compl. ii 36. This Court 

finds these allegations adequately plead the knowledge element. 

B. Relator's False Certification Claims 

In his second, third, and fourth claims, re la tor alleges defendants violated the FCA by making 

false certifications to the United States regarding defendants' compliance with federal laws and 

regulations. See Comp I. iii! 56, 68, 79. Under the FCA, any person who "knowingly makes, uses, or 

causes to be made or used, a false record or statement material to a false or fraudulent claim" is liable 

to the federal government. 31 U.S.C. § 3729(a)(l)(B). To establish a section 3729(a)(l)(B) claim, 

the plaintiff must prove "(1) a false statement or fraudulent course of conduct, (2) made with 

sci enter, (3) that was material, causing ( 4) the government to pay out money or forfeit moneys due." 

United States ex rel. Hendow v. Univ. of Phx., 461 F.3d 1166, 1174 (9th Cir. 2006). 

The Ninth Circuit has recognized two sub-types of false certifications: express false 

certifications and implied false certifications. Ebeid, 616 F.3d at 998. Express false certification 

occurs when "the entity seeking payment certifies compliance with a law, rnle or regulation as part 

of the process through which the claim for payment is submitted." Id. In contrast, "[i]mplied false 

certification occurs when an entity has previously undertaken to expressly comply with a law, rule, 

or regulation, and that obligation is implicated by submitting a claim for payment even though a 

certification of compliance is not required in the process of submitting the claim." Id. For all three 

claims, relator argues defendants violated the FCA through implied false certifications. 

1. Common Deficiency Across Claims 

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Relator failed to plead the false statement element with particularity for all three false 

certification claims. The false statement element is the heart of the FCA claim: "Violations oflaws, 

rules, or regulations alone do not create a cause of action under the FCA. It is the false certification 

of compliance which creates liability when certification is a prerequisite to obtaining a government 

benefit." United States ex rel. Hopper v. Anton, 91F.3d1261, 1266 (9th Cir. 1996) (emphasis in 

original). Relator alleges defendants "made false certifications of compliance and caused other 

providers to make false certifications." Compl. ii 40; see also Compl. iii! 56, 68, 79. The First 

Amended Complaint does not allege any details regarding when defendants made certifications to 

the federal government, what those certifications contained, or how those certifications were made. 

Without additional factual allegations regarding the implied false certifications, re la tor's FCA claims 

fail to meet the Rule 9(b) pleading requirements. 

Defendants also assert pleading deficiencies specific to each of the three false certification 

claims in the First Amended Complaint. To adequately plead defendants falsely certified compliance 

with anti-discrimination laws, the federal Anti-Kickback Statute, and the Stark Law, relator must 

plead that the defendants violated those laws, element by element. See Ebeid, 616 F .3d at 998 (When 

alleging false statements, the plaintiff"must set forth what is false or misleading about a statement, 

and why it is false."). Therefore, relator must also plead the elements for each underlying violation. 

2. Relator's Second Claim: Anti-Discrimination Laws 

In his second claim, relator asserts "[ d]efendants intentionally failed to follow Medicaid 

guidelines regarding nondiscrimination of patients." Compl. ii 3 7. However, re la tor does not indicate 

which anti-discrimination statute or regulation the defendants allegedly violated. Without such 

information, the First Amended Complaint does not notify the defendants of the elements of the 

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underlying violation. Relator and defendants disagree on whether relator needs to plead actual 

discrimination resulting from defendants' alleged misconduct. However, it is not possible to 

determine whether actual discrimination is an element of the underlying violation absent reference 

to the relevant statute or regulation. In his Response to Defendants' Motion to Dismiss, relator cites 

to guidelines published by the Department of Health and Human Services and the Center for 

Medicare and Medicaid Services. While the guidelines cited may be informative, relator still has 

not pleaded which Medicaid or Medicare statute or regulation defendants allegedly violated.7 

Defendants further argue relator inadequately pleaded scienter with regard to the antidiscrimination certification claim. The scienter element requires the claim be made "with knowledge 

of the falsity and with intent to deceive" Hopper, 91 F.3d at 1265 (quoting the district court's 

decision). "Innocent mistakes, mere negligent misrepresentations and differences in interpretations 

are not false certifications under the [FCA]." Id. at 1267. Relator alleges defendants admitted that 

the discriminatory reports were created to allow physicians and hospitals to identify higher cost 

patients and that the reports were sold to employers "for the purpose of discriminating against their 

own employees." Compl. iii! 41-42. Relator also names one example of such employer, Monaco 

Coach. Compl. if 42. Based on these allegations, relator has adequately pleaded the scienter element. 

3. Relator's Third Claim: Federal Anti-Kickback Statute 

In his third claim, relator alleges defendants falsely ceitified compliance with the federal 

Anti-Kickback Statute. Relator alleges defendants violated the Anti-Kickback Statute by issuing 

stock to physicians to induce patient referrals "of business paid for by federal programs, including 

7 Further, a relator cannot rectify an inadequately pleaded complaint through his response; 

instead, he must amend the complaint. See Schneider v. Cal. Dep 't of Corr., 151F.3d1194, 1197 

n.1 (9th Cir. 1998). 

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Case 6:14-cv-01424-AA Document 63 Filed 04/29/16 Page 14 of 18
Medicare or Medicaid," to defendants' subsidiaries. Compl. if 59-63. The Anti-Kickback Statute 

imposes criminal liability on any entity who 

knowingly and willfully offers or pays any remuneration ... (A) to refer an 

individual to a person for ... any item or service for which payment may be made in 

whole or in part under a Federal health care program, or (B) to purchase, lease, order, 

or arrange for ... any good facility, service, or item for which payment may be made 

in whole or in part under a Federal health care program. 

42 U.S.C. § 1320a-7b(b )(2). Remunerations include kickbacks, bribes, and rebates, both direct and 

indirect, in cash or in kind. Id. The "knowingly and willfully" scienter element requires that the 

defendants knew they were prohibited from offering remuneration to induce referrals and that they 

"engage[ d] in the prohibited conduct with the specific intent to disobey the law." Han lester Network 

v. Shalala, 51 F.3d 1390, 1400 (9th Cir. 1995). 

Defendants argue relator has not adequately pleaded scienter. In the First Amended 

Complaint, relator alleges defendants "knowingly and willfully [gave] remuneration in the form of 

shares of stock to medical service providers." Compl. if 46. In his Response to Defendants' Motion 

to Dismiss, defendant clarifies his assertion, stating " the frequency and pattern of shares received 

correlating with number of referrals shows lack of mistake." Pl. 's Resp. to Defs.' Mot. at 14. Relator 

further argues that because defendants are "sophisticated actors,'' the only purpose of transfer of 

stock could be to induce referrals. Pl.' s Resp. to Defs.' Mot. at 14. This Court finds these allegations 

are adequate. Relator has put defendants on notice of the allegations against them and has alleged 

facts which, if proven, would permit a reasonable juror to infer scienter. 

Defendants also contend relator did not adequately plead the materiality of this false 

certification. "To establish the materiality element, 'the false statement or course of conduct must 

be material to the government's decision to pay out moneys to the claimant."' Ebeid, 616 F.3dat 997 

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(quoting Hendow, 461 F.3d at 1172). "Absent actionable false certifications upon which funding is 

conditioned, the False Claims Act does not provide such a remedy." Hopper, 91 F.3d at 1267. The 

First Amended Complaint states, "As a prerequisite to participating in federally-funded health care 

programs, Defendants[] certified ... their compliance with the Anti-Kickback [s]tatute." Compl. 

ii 66. In this paragraph, relator alleges participation is conditioned upon certification of compliance 

with the Anti-Kickback Statute. Because participation and, therefore, certification, is a sine qua non 

ofreceiving funding, the materiality element is adequately pleaded. See Ebeid, 616 F.3d at 997. 

4. Relator's Fourth Claim: Stark Law 

In his final false certification claim, relator alleges defendants falsely certified their 

compliancewith42 U.S.C. § 1395nn, also known as the Stark Law. Under the Stark Law, ifanentity 

has a financial relationship with a physician, the physician may not make a referral to the entity for 

designated health services payable through Medicare and the entity may not present a Medicare claim 

for any designated health services furnished pursuant to the prohibited referral. 42 U.S.C. § 

13 95nn( a)( 1 ). A financial relationship exists if the physician has an ownership interest in, investment 

interest in, or compensation arrangement with the entity. Id. § 1395nn(a)(2). "Designated health 

services" include a variety of inpatient and outpatient services, as well as durable medical equipment. 

Id. § 1395nn(h)(6). Relator alleges several physicians had financial relationships with defendants 

because they held Agate stock, and those physicians referred patients to defendants' subsidiaries for 

designated health services. Relator also alleges defendants submitted Medicare and Medicaid claims 

for those referred services in violation of the Stark Law. 

Re la tor's pleading of the Stark Law violation and accompanying false certification claim is 

inadequately pmiicular. First, as discussed above, all examples relator provides of allegedly 

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prohibited claims are untimely. 8 Second, re la tor does not adequately plead materiality because re la tor 

does not allege in the First Amended Complaint that receipt of funding is conditioned on certification 

of compliance with the Stark Law. To adequately plead the Stark Law false certification claim, 

relator needs to provide timely representative examples or otherwise alleged particularized facts of 

the violation, and relator needs to plead materiality. 

IV. Unjust Enrichment 

Finally, defendants contend relator lacks standing to assert his common law unjust 

enrichment claim because he suffered no injury. In his Response to Defendants' Motion to Dismiss, 

relator concedes that he lacks standing for this claim. Accordingly, this Court dismisses the unjust 

enrichment claim (Compl. ifif 83-85) with prejudice. 

V. Leave to Amend Complaint 

Both relator and defendants argue in the alternative for amendment of the First Amended 

Complaint. If a complaint fails to satisfy the Rule 9(b) particularity requirements, the court should 

grant the plaintiff leave to amend the complaint "unless [it] 'determines that the pleading could not 

possibly be cured by the allegation of other facts.'" Bly-Magee, 236 F.3d at 1019 (quoting Lopez v. 

8 Defendants also argue relator failed to adequately plead a Stark Law violation because 

the representative examples he provided are Medicaid claims, not Medicare claims. The Court is 

not convinced by this argument. While 42 U.S.C. § 1395nn(a)(l) specifically addresses Medicare 

claims, 42 U.S.C. § 1396b(s) makes the Stark Law applicable to Medicaid claims as well. See, 

e.g., United States ex rel. Parikh v. Citizens Med. Ctr., 977 F. Supp. 2d 654, 666 (S.D. Tex. 

2013) ("Although Stark originally applied only to Medicare claims, it was later expanded to 

apply to Medicaid claims. See 42 U.S.C. § 1396b(s) .... Moreover, even if its own Medicaid 

claims to [the State] did not create FCA liability, [defendant] could still be liable for causing [the 

State] to submit a claim in violation of Stark."); United States v. All Children's Health Sys., Inc., 

2013 WL 6054803, *7 (M.D. Fla. Nov. 5, 2013) ("Certifying compliance with the Stark 

Amendment to ensure [federal payment to the State] for Medicaid claims that violate the Stark 

Amendment would be a violation of the [FCA] in the same manner that certifying compliance for 

full reimbursement under Medicare would be."). 

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Smith, 203 F.3d 1122, 1127 (9th Cir. 2000)). The court should dismiss the complaint without leave 

to amend only "if it is clear that the complaint could not be saved by amendment." Kendall v. Visa 

US.A., Inc., 518F.3d1042, 1051 (9th Cir. 2008). Allegations ofotherfacts could cure the timeliness 

and pleading deficiencies of relator's first, second, third, and fourth claims. Therefore, this Court 

grants relator leave to amend the Complaint to remedy the pleading deficiencies discussed above. 

CONCLUSION 

Defendants' Motion to Dismiss First Amended Complaint or, In the Alternative, For a More 

Definite Statement and Memorandum of Law (doc. 4 7) is GRANTED. Re la tor's unjust emichment 

claim (Compl. iii! 83-85) is dismissed with prejudice. Relator is granted leave to amend the 

remainder of the First Amended Complaint to meet the particularity requirements for allegations of 

fraud under Federal Rule of Civil Procedure 9(b ). 

IT IS SO ORDERED. 

Dated thi~1n.pn12016. 

Ann Aiken 

United States District Judge 

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