United States District Court, W.D. Arkansas, Fayetteville Division
UNITED STATES OF AMERICA ex rel. Dr. J. Thaddeus Beck, M.D., et al. PLAINTIFFS
TVG CAPITAL GP, LLC, et al. DEFENDANTS
MEMORANDUM OPINION AND ORDER
TIMOTHY L. BROOKS UNITED STATE DISTRICT JUDGE
pending before the Court are Defendants' Motion to
Dismiss for Failure to State a Claim (Doc. 25) and Brief in
Support (Doc. 26). Relators filed a Response in Opposition to
the Motion (Doc. 31), and shortly thereafter, Defendants
filed a Reply (Doc. 36). On the same date that Relators filed
their opposition to the Motion to Dismiss, they filed a
Motion for Leave to Amend the Complaint (Doc. 32), and
attached a proposed amended complaint (Doc. 32-1) to the
Motion. Defendants then filed a Response in Opposition to the
Motion for Leave to Amend (Doc. 40), arguing that the Court
should not permit Relators to file the proposed amended
complaint because it contains many of the same deficiencies
as the original complaint and still fails to state plausible
claims against any of the Defendants.
October 3, 2017, the Court held a hearing on the two Motions,
and counsel for the parties presented oral argument at that
time. After oral argument, the Court ruled from the bench,
granting in part and denying in part both of the Motions. The
following Order explains in more detail the Court's
reasoning behind its decision. To the extent anything in this
Order conflicts with what was stated from the bench, this
Order will control.
on behalf of the United States, filed this lawsuit under seal
on November 4, 2015, alleging in Counts l-IV, separate
violations of the False Claims Act ("FCA"), 31
U.S.C. § 3729(a)(1)(A)-(C) and (G); and in Count V,
violations of the federal criminal Anti-Kickback Statute
("AKS"), 42 U.S.C. § 1320a-7b(b), and the
Stark Statute, 28 U.S.C. § 1395nn (a)(1) and (h)(6).
Relators are a group of oncologists/hematologists who are
members of Highlands Oncology Group, P.A., located in
Northwest Arkansas. The Relators are Drs. Thaddeus Beck,
Daniel Bradford, Gregory Oakhill, Stephen Rosenfield, Eric
Schaefer, and Patrick Travis.
Defendants include a number of businesses that are alleged to
either provide radiation/oncology services or function as
holding companies, billing companies, or
administrative-support companies for radiation/oncology
service providers. The Complaint provides the richest amount
of detail about the companies that collectively do business
as Landmark Cancer Center in Northwest Arkansas. According to
the Complaint, Landmark Cancer Center is a "suite"
of businesses that have partnered up to provide
radiation/oncology services to the region. These three
businesses that compose Landmark Cancer Center are Defendants
Physicians Radiation Arkansas, LP, TruRadiation Partners
Arkansas, LLC, and Northpoint Radiation Center, GP, LLC.
Complaint explains that certain individual Defendants, namely
Jon Tryggenstad, David Dickey, and Lisa Sooter, created
Landmark Cancer Center together and devised a business model
that contemplated area physicians serving as limited
partners. One of those physicians/limited-partners is alleged
to be Defendant Kenneth E. Gardner. Relators believe that Dr.
Gardner and other physicians entered into a partnership
agreement with Defendant Physicians Radiation Arkansas, LP.
The physicians then agreed to refer their patients to
Landmark Cancer Center for "expensive radiation oncology
therapy" in exchange for receiving a percentage of the
profits that the business earned for providing these
treatments. (Doc. 1, ¶ 54).
remaining 16 Defendants include TVG Capital GP, LLC, which is
described as the "holding company" for Landmark
Cancer Center's suite of businesses; and 15 other
companies about which little is known except that they are
physically located-or else managed by individuals who are
physically located-in Texas, Oklahoma, or Kansas. Relators
believe that these 15 businesses were set up by Tryggestad,
Sooter, and Dickey to operate as Landmark Cancer Center does
in Northwest Arkansas-that is, with a business structure that
involves physicians/limited-partners engaging in illegal
referral and profit-sharing behavior.
theory of the case is that the business/partnership structure
of Landmark Cancer Center violates the AKS and the Stark
Statute. Relators maintain that "Defendants are required
to certify compliance with the Anti-Kickback Statute [and the
Stark Statute] as a condition of payment when they submit
their claims [to the federal government] for payment, "
(Doc. 1, ¶ 41); but because Defendants fail to comply
with these statutes, all claims they submit to Medicare,
Medicaid, and Tricare/CHAMPUS are legally false and violate
the FCA. In other words, Relators do not contend that the
amounts on any bills that Defendants submitted to the
government for payment were factually false; instead,
Relators argue that the bills are false because Defendants
submitted them when they were not in compliance with the AKS
and Stark Statute.
prevents a defendant from knowingly soliciting or receiving
remuneration-in the form of a kickback, bribe, or
rebate-directly or indirectly, overtly or covertly, in cash
or in kind, in exchange for referring a patient to an
individual or entity that would perform a medical service
paid in whole or in part by the government under a federal
health care program. 42 U.S.C. § 1320a-7b(b)(1). The AKS
also prohibits a defendant from knowingly offering to pay a
kickback, bribe, or rebate to someone in order to induce that
person to make a prohibited referral. 42 U.S.C. §
1320a-7b(b)(2). Similarly, the Stark Statute prohibits an
entity from presenting a claim to Medicare for a
"designated health service" if the service was
provided as a result of a referral by a physician who has
"a financial relationship" with the entity. 42
U.S.C. § 1395nn(a)(1).
assert in their Motion to Dismiss that the Complaint fails to
state a valid claim against them because it fails to comply
with the heightened pleading standards for fraud under Rule
9(b). Relators oppose dismissal of the Complaint but have
requested permission to file an amended complaint that
purportedly cures any deficiencies Defendants identified in
their Motion to Dismiss. Although Defendants concede that the
proposed amended complaint includes more specific facts
concerning some of the Defendants and some of the claims,
they argue that the proposed amended complaint is still
insufficient to meet Rule 9(b)'s pleading requirements,
and the Court should not permit Relators to file it.
survive a motion to dismiss, a pleading must provide "a
short and plain statement of the claim that the pleader is
entitled to relief." Fed.R.Civ.P. 8(a)(2). The purpose
of this requirement is to "give the defendant fair
notice of what the . . . claim is and the grounds upon which
it rests." Erickson v. Pardus, 551 U.S. 89, 93
(2007) (quoting BellAtl. Corp. v. Twombly, 550 U.S.
544, 555 (2007)). The Court must accept as true all factual
allegations set forth in the Complaint by Plaintiff, drawing
all reasonable inferences in Plaintiffs favor. See Ashley
Cty., Ark. v. Pfizer, Inc., 552 F.3d 659, 665 (8th Cir.
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 Twombly, 550 U.S.
at 570). "A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable
for the misconduct alleged." Id. "A
pleading that offers 'labels and conclusions' or
'a formulaic recitation of the elements of a cause of
action will not do.' Nor does a complaint suffice if it
tenders 'naked assertions' devoid of 'further
factual enhancement."' Id. In other words,
"the pleading standard Rule 8 ...