Stenson v. Radiology Limited PLC

• Court: District Court, D. Arizona
• Decided: January 14, 2025
• Docket: 4:19-cv-00306
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 Eric James Stenson, No. CV-19-00306-TUC-JGZ

10 Plaintiff, ORDER

11 v.

12 Radiology Ltd., LLC,

13 Defendant. 14 15 In this qui tam action, Plaintiff-Relator Eric James Stenson alleges Defendant 16 Radiology Ltd., LLC violated the False Claims Act, 31 U.S.C. § 3729, et seq. (“FCA”), by 17 its unlawful use of “consumer grade” computer monitors for diagnostic radiology readings. 18 (Doc. 53 ¶¶ 2–3.) After remand from the Ninth Circuit Court of Appeals, Plaintiff filed his 19 Second Amended Complaint (“SAC”). (Doc. 53.) Pending before the Court is Defendant’s 20 motion to dismiss that complaint. (Doc. 56.) The motion has been fully briefed. (See Docs. 21 56, 59, 62.) For the reasons stated below, the Court will deny the motion.1 22 BACKGROUND 23 On June 7, 2019, Plaintiff filed suit in this Court as relator for the United States of 24 America. (Doc. 1.)2 In his First Amended Complaint (“FAC”), Plaintiff asserted five FCA

25 1 The Court finds that oral argument would not aid its decision on this matter. See LRCiv 7.2(f). 26 2 “Under the [False Claims Act], a private individual is empowered to bring an action on 27 behalf of the U.S. government (termed a “qui tam” action) against any individual or company who has knowingly presented such a false or fraudulent claim to the U.S. 28 government.” United States ex rel. Hopper v. Anton, 91 F.3d 1261, 1266 n.7 (9th Cir. 1996). On August 20, 2021, following several extensions of time, the United States elected 1 claims, and alleged Defendant: (1) knowingly presented, or caused to be presented, false 2 or fraudulent claims, statements, and records; (2) knowingly presented, or caused to be 3 presented, false claims in violation of the general Medicare statute’s requirement that 4 claimed services be “reasonable and necessary”; (3) knowingly made, used, or caused to 5 be made or used, false records or statements material to false claims; (4) knowingly 6 conspired to act in a manner that violated the FCA; and (5) knowingly presented, or caused 7 to be presented, false or fraudulent claims, statements, and records for services not 8 provided. (Doc. 25.) Plaintiff withdrew the conspiracy claim, and the Court granted 9 Defendant’s motion to dismiss the remaining claims, concluding Plaintiff failed to 10 sufficiently plead two of the four elements necessary to prove an FCA claim: falsity and 11 materiality. (See Doc. 38 at 15; Doc. 43.) 12 On appeal, the Ninth Circuit Court of Appeals held that Plaintiff had sufficiently 13 pleaded the elements of falsity and materiality, but only as to Plaintiff’s claim that 14 Defendant violated the general Medicare statute’s requirement that claimed services be 15 reasonable and necessary. United States ex rel. Stenson v. Radiology Ltd., LLC, No. 22- 16 16571, 2024 WL 1826427, at *2–3 (9th Cir. Apr. 26, 2024).3 The court rejected Plaintiff’s 17 argument that Defendant’s submissions were false due to lack of Food and Drug 18 Administration (FDA) approval of the Dell Monitors or due to the Defendant’s alleged use 19 of misleading billing codes—an argument first presented by Plaintiff on appeal. Id. The 20 court instructed this Court to “grant Stenson leave to amend the FAC to the extent that he 21 wishes to proceed on grounds other than an FDA-approval theory.” Id. at *5. 22 Plaintiff filed his SAC on June 28, 2024. (Doc. 53.) The SAC asserts the single FCA 23 claim recognized by the court of appeals—that Defendant knowingly presented, or caused 24 to be presented, false claims for medically unreasonable or unnecessary services under 31 25 U.S.C. § 3729(a)(1)(A). (Id. at 19–21.)

26 not to intervene. (Doc. 19.) Nonetheless, the United States may intervene at any time for good cause. (Doc. 20.) The Court has provided the United States with notice and an 27 opportunity to be heard regarding dismissal. (Doc. 40.) The United States does not oppose dismissal but requests any dismissal be without prejudice as to it only. (Doc. 41.) 28 3 The Ninth Circuit’s memorandum opinion is also found on the docket at (Doc. 50-1). 1 On August 26, 2024, Defendant filed its Motion to Dismiss Plaintiff’s Second 2 Amended Complaint pursuant to Rules 12(b)(6) and 9(b). (Doc. 56.) Defendant argues the 3 SAC “does not plead plausible facts that Radiology Ltd. acted with scienter, nor does it 4 allege with particularity the submission of false claims.” (Doc. 56-1 at 6.) Plaintiff opposes 5 the Defendant’s arguments and argues the appeals court previously rejected Defendant’s 6 arguments by its general statement that the FAC stated a claim for relief. 7 DISCUSSION 8 A. Standard of Review 9 Federal Rule of Civil Procedure 12(b)(6) permits a motion to dismiss for failure to 10 state a claim upon which relief can be granted. A Rule 12(b)(6) dismissal is proper when 11 there is either a “‘lack of cognizable legal theory or the absence of sufficient facts alleged.’” 12 UMG Recordings, Inc. v. Shelter Cap. Partners, LLC, 718 F.3d 1006, 1014 (9th Cir. 2013) 13 (quoting Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988)). 14 Rule 8 of the Federal Rules of Civil Procedure directs that a complaint must contain 15 “a short and plain statement of the claim showing that the pleader is entitled to relief[.]” 16 Fed. R. Civ. P. 8(a)(2). A plaintiff must allege “sufficient factual matter, accepted as true, 17 to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 18 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The tenet—that the 19 court must accept as true all of the allegations contained in the complaint—is “inapplicable 20 to legal conclusions.” Id. Accordingly, “[t]hreadbare recitals of the elements of a cause of 21 action, supported by mere conclusory statements, do not suffice.” Id. (citing Twombly, 550 22 U.S. at 555). Further, the court is not required to accept as true allegations that are “merely 23 conclusory, unwarranted deductions of fact, or unreasonable inferences.” Sprewell v. 24 Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). 25 A claim has facial plausibility “when the plaintiff pleads factual content that allows 26 the court to draw a reasonable inference that the defendant is liable for the misconduct 27 alleged.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556). Factual allegations that 28 only permit the court to infer “the mere possibility of misconduct” do not show that the 1 pleader is entitled to relief as required by Rule 8. Id. at 679. 2 Additionally, complaints alleging fraud must also comply with Rule 9(b), which 3 requires stating “with particularity the circumstances constituting fraud.” Fed. R. Civ. P. 4 9(b); see Cafasso, United States ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 5 1055 (9th Cir. 2011). To plead fraud with particularity, the alleging party must include the 6 who, what, when, where, and how of the misconduct charged. Ebeid ex rel. United States 7 v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010). But “in alleging fraud . . . conditions of a 8 person’s mind may be alleged generally.” Fed. R. Civ. P. 9(b). Because Rule 8 requires the 9 pleading of a plausible claim, “claims of fraud or mistake—including FCA claims—must, 10 in addition to pleading with particularity, also plead plausible allegations.” Cafasso, 637 11 F.3d at 1047. 12 B. False Claims Act 13 The FCA attaches liability not to underlying fraudulent activity, but to the claim for 14 payment submitted to the government. United States ex rel. Hopper v. Anton, 91 F.3d 1261, 15 1266 (9th Cir. 1996). Plaintiff asserts a false certification claim under 31 U.S.C. § 16 3729(a)(1)(A). (Doc. 53 at 19.) The four elements of a false certification claim are: (1) a 17 false statement or fraudulent course of conduct, (2) made with scienter, (3) that was 18 material, causing (4) the government to pay out money or forfeit moneys due. Ebeid, 616 19 F.3d at 997. Defendant argues the SAC (1) does not plausibly allege that Defendant acted 20 with scienter, and (2) does not allege with particularity that Defendant submitted false 21 claims. (Doc. 56-1 at 6.) 22 1. Scienter 23 The FCA “imposes liability on anyone who ‘knowingly’ submits a ‘false’ claim to 24 the Government.” United States ex rel. Schutte v. SuperValu Inc., 598 U.S. 739, 742 (2023). 25 The FCA defines the term “knowingly” as encompassing three mental states: (1) actual 26 knowledge, (2) deliberate ignorance, and (3) reckless disregard. Id. at 749–50 (citing 31 27 U.S.C. § 3729(b)(1)(A)). “Actual knowledge” means the defendant is aware of submitting 28 a false claim; “deliberate ignorance” means the defendant is aware of a substantial risk 1 their statements are false, but intentionally avoids taking steps to confirm the statement’s 2 truth or falsity; and “reckless disregard” means the defendant is “conscious of a substantial 3 and unjustifiable risk that their claims are false, but submit[s] the claims anyway.” Id. at 4 751. The focus is “on what the defendant knew when presenting the claim.” Id. at 752. 5 Plaintiff may establish scienter by showing that Defendant: (1) actually knew 6 radiology readings performed on non-diagnostic monitors were not “reasonable and 7 necessary” under the general Medicare statute, i.e., did not meet minimum efficacy 8 standards; (2) was aware of a substantial risk that the use of non-diagnostic monitors fell 9 below minimum efficacy standards and intentionally avoided learning whether it did; or 10 (3) was aware of a substantial and unjustifiable risk such readings fell below minimum 11 efficacy standards, but submitted claims for those readings anyway. See id. at 757; Stenson, 12 2024 WL 1826427, at *3. The facial ambiguity of the phrase “reasonable and necessary” 13 does not by itself preclude a finding of scienter under the FCA. Schutte, 598 U.S. at 754. 14 Defendant argues that the SAC fails to plausibly plead scienter because it does not 15 contain any allegations regarding the mindset of any of Defendant’s radiologists or 16 employees who submitted allegedly false claims, and the allegations relevant to scienter 17 that the SAC does contain are conclusory and lack supporting factual allegations. (Doc. 18 56-1 at 13–16.) Defendant frames Plaintiff’s theory of scienter as having three primary 19 components: (1) Defendant’s representatives attended radiology conferences where legally 20 cleared and efficacious technologies were prominently marketed; (2) Defendant’s IT 21 Director knew that nearly all radiological practices in the United States use medical grade 22 monitors; and (3) it is common knowledge in the medical industry that it is medically 23 inappropriate to interpret diagnostic images on monitors that have not been approved by 24 the FDA. (Id. at 13–14.) 25 Taking the SAC’s allegations as true and viewing them in the light most favorable 26 to Plaintiff, the SAC sufficiently pleads that Defendant was aware of a substantial and 27 unjustifiable risk that diagnostic readings performed on the consumer grade monitors fell 28 below minimum efficacy standards but submitted claims for those readings anyway. “CMS 1 guidance makes clear that safety and efficacy determinations are based on ‘authoritative 2 evidence’ or ‘general[] accept[ance] in the medical community.’” Stenson, 2024 WL 3 1826427, at *8 (quoting Dan Abrams Co. v. Medtronic Inc., 850 F. App’x 508, 509 (9th 4 Cir. 2021)). If the monitors used by Defendant “were not generally recognized by the 5 medical community as effective for primary diagnostic read[ing]s,” then it is plausible that 6 Defendant, a large and sophisticated radiology practice, was aware of a substantial and 7 unjustifiable risk that using the monitors for that purpose fell below minimum efficacy 8 standards. (Doc. 53 ¶ 62.) As discussed above, and contrary to Defendant’s repeated 9 assertions, (see Doc. 56-1 at 13; Doc. 62 at 10–11), Plaintiff does not need to allege that 10 Defendant knew it was using monitors that fell below minimum efficacy standards. Schutte, 11 598 U.S. at 751–52. 12 The SAC contains allegations that support the inference that the monitors were not 13 generally recognized by the medical community as effective for primary diagnostic 14 readings. The SAC, like the FAC, specifically alleges the monitors used by Defendant are 15 far less technologically sophisticated than those typically used by radiologists. (See Doc. 16 53 ¶¶ 50–59.) The SAC alleges that the manufacturer, Dell, did not endorse the monitors 17 used by Defendant for medical use; the FDA cleared those monitors only if used with 18 PerfectLum software, which Defendant did not use; Dell markets different monitors for 19 medical use; Defendant and its representatives attended industry-wide conferences where 20 efficacious technologies were prominently marketed; and Defendant’s IT Director led 21 industry-wide technology initiatives and knew nearly all radiology practices in the United 22 States did not use unmodified consumer grade monitors. (Id. ¶¶ 63–68.) Additionally, the 23 SAC alleges that medical grade monitors cost thousands of dollars, while non-diagnostic 24 monitors cost only hundreds, and that these costs are incorporated into Medicare billing 25 codes, which Defendant used to bill Medicare for diagnostic readings. (Id. ¶¶ 58, 73–79.) 26 Taken together, these allegations allow the Court to draw a reasonable inference that 27 Defendant acted with awareness of a substantial and unjustifiable risk that using the 28 monitors for diagnostic purposes fell below minimum efficacy standards 1 Defendant argues that Plaintiff does not provide facts showing that its personnel 2 who attended radiology conferences learned the monitors Defendant used were insufficient 3 for radiological purposes and even if diagnostic-grade monitors were marketed at those 4 conferences, “that says nothing about the sufficiency of the monitors used by Radiology 5 Ltd. physicians.” (Doc. 56-1 at 13.) Plaintiff need not show that by attending industry-wide 6 conferences Defendant’s personnel, in fact, learned its monitors were technologically 7 insufficient for diagnostic radiology readings. Attending conferences where diagnostic- 8 grade monitors were marketed is one factor supporting an inference that Defendant was 9 aware of a substantial and unjustifiable risk that the monitors it used fell below minimum 10 efficacy standards. The SAC contains detailed allegations about the technological 11 insufficiency of Defendant’s monitors elsewhere. (Doc. 53 ¶¶ 50–59.) 12 Defendant argues that Plaintiff’s allegation that its IT Director knew nearly all 13 radiological practices used medical grade monitors and rejected the use of unmodified 14 consumer grade monitors is unsupported speculation. (Doc. 56-1 at 13–14.) But the SAC 15 also alleges that the IT Director led industry-wide technology initiatives, which is 16 supported by the allegation that Plaintiff’s employer “was informally collaborating with 17 Rad Ltd regarding overlapping technology initiatives.” (Doc. 53 ¶¶ 68, 84.) This supports 18 an inference that the IT Director had awareness of the types of monitors that are and are 19 not generally accepted in the medical community. 20 Defendant states that Plaintiff “continues to rely on the FDA’s non-approval as the 21 basis for his claims” and that the SAC nakedly asserts that it is common knowledge in the 22 medical industry that it is medically inappropriate to interpret diagnostic images on a non- 23 FDA-approved monitor. (Doc. 56-1 at 10, 14; see Doc. 53 ¶ 67.) But the SAC’s allegations 24 that the monitors used by Defendant are not FDA-approved medical devices are relevant 25 to the scienter element insofar as they support Plaintiff’s theory that “medical practitioners 26 in the field of radiology look to FDA-cleared or FDA-approved medical grade devices as 27 the baseline standard for safe and effective practice.” (Doc. 53 ¶¶ 33–47.) FDA-approval 28 is one of many factors that tends to show whether a technology is generally recognized as 1 effective by the medical community. 2 Defendant cites Adomitis ex rel. United States v. San Bernardino Mountains Cmty. 3 Hosp. Dist., 816 F. App’x 64 (9th Cir. 2020) and United States ex rel. Hendow v. Univ. of 4 Phoenix, 461 F.3d 1166 (9th Cir. 2006) to support its argument that the SAC fails to 5 plausibly plead scienter. (Doc. 56-1 at 15–16; Doc. 62 at 11–12.) Adomitis is an 6 unpublished disposition and is not precedent. See 9th Cir. R. 36-3. In any event, the four- 7 page disposition does not detail the allegations upon which the court based its holding, 8 which prevents this Court from comparing the “vague and conclusory” allegations pleaded 9 in that case to the allegations in the SAC. Adomitis, 816 F. App’x at 67. And, in Hendow, 10 while the court did state that “a palpably false statement, known to be a lie when it is made, 11 is required for a party to be found liable under” the FCA, 461 F.3d at 1172, more recent 12 Supreme Court cases affirm that “knowingly” includes the mental states of deliberate 13 ignorance of and reckless disregard for the truth, Schutte, 598 U.S. at 751; Escobar, 579 14 U.S. at 182. The relators in Hendow alleged a particularly egregious example of 15 deliberately fraudulent behavior; that does not mean allegations in other cases must always 16 rise to that same level. See 461 F.3d at 1169–70. 17 Additionally, Defendant argues that Plaintiff’s knowledge about Defendant and its 18 practice derives exclusively from an email exchange with Defendant’s IT Director that 19 contradicts his theory of scienter, and that Defendant is aware of evidence and has asserted 20 allegations in a different lawsuit that also contradict his theory of scienter. (Doc. 56-1 at 21 16–18.) 22 When deciding a motion under Rule 12(b)(6) a court may only consider allegations 23 contained in the pleadings, exhibits attached to the complaint, documents incorporated by 24 reference in the complaint, and matters properly subject to judicial notice. Akhtar v. Mesa, 25 698 F.3d 1202, 1212 (9th Cir. 2012); United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 26 2003). Otherwise, consideration of matters outside the pleadings converts the motion to 27 dismiss into a motion for summary judgment under Rule 56. Fed. R. Civ. P. 12(d). Even if 28 a document is not physically attached to a complaint, “it may be incorporated by reference 1 into a complaint if the plaintiff refers extensively to the document or the document forms 2 the basis of the plaintiff’s claim.” Ritchie, 342 F.3d at 908. 3 Plaintiff attached email correspondence with Defendant’s Director of IT as Exhibit 4 4 to his original complaint. (Doc. 1-4.) In deciding Defendant’s motion to dismiss the FAC, 5 the Court considered the full text of the email chain without converting the motion to 6 dismiss into a motion for summary judgment because the “FAC extensively references and 7 relies on the correspondence as the basis for Plaintiff’s allegation that Defendant uses 8 particular types of monitors for radiology readings.” (Doc. 43 at 4–6) (citing Doc. 25 ¶¶ 2, 9 8, 53, 57, 61, 65, 68–69, 73–74.) Likewise, the SAC references and relies on the 10 correspondence as a basis for Plaintiff’s claim. (See Doc. 53 ¶¶ 2, 12, 60, 62–65, 68–70, 11 83–84.) Therefore, the Court will consider the full text of the email chain, incorporated by 12 reference in the SAC. (See Doc. 33-5, Ex. A.) 13 Defendant’s statement that the email chain is Plaintiff’s only source of knowledge 14 about Defendant’s practice is refuted by the email chain. (Id. at 2) (“It was great seeing you 15 in Tucson and thank you for the awesome site tour!). The IT Director’s statements that 16 Defendant urges the Court to consider, e.g., that Defendant uses a type of monitor that has 17 not led to a misdiagnosis in 15 years, do not nullify the SAC’s plausible allegations of 18 scienter. (See Doc. 56-1 at 16); Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 1003 19 (9th Cir. 2018) (“[I]t is improper to assume the truth of an incorporated document if such 20 assumptions only serve to dispute facts stated in a well-pleaded complaint.”). 21 Finally, Defendant asks the Court to take judicial notice of the First Amended 22 Complaint filed in United States ex rel. Stenson v. LG Elecs. USA, Inc., No. 2:19-cv-05441- 23 JMY (E.D. Pa. Feb. 12, 2020) (“the Pennsylvania Qui Tam”). (See Doc. 56-4.) Defendant 24 argues that Plaintiff has asserted allegations in the Pennsylvania Qui Tam that contradict 25 his theory of scienter. (See Doc. 56-1 at 16–18.) However, the alleged contradictory 26 allegations present factual issues that “have no bearing on the legal sufficiency of the 27 allegations [in the SAC] under Rule 12(b)(6).” Lee v. City of Los Angeles, 250 F.3d 668, 28 688 (9th Cir. 2001). For the foregoing reasons, the Court concludes the SAC plausibly 1 alleges scienter at the motion to dismiss stage, regardless of the email correspondence or 2 the allegations made in the Pennsylvania Qui Tam. 3 2. Submission of False Claims 4 Defendant argues the SAC fails to plead the submission of a false claim with the 5 level of particularity required by Rule 9(b). (Doc. 56-1 at 14–17.) Defendant acknowledges 6 that the court of appeals held that Plaintiff sufficiently alleged a viable legal theory of 7 falsity, (Doc. 62 at 15),4 but challenges the sufficiency of the SAC’s allegations that 8 Defendant submitted claims to CMS. This argument is unpersuasive. 9 The court of appeals held that Plaintiff “sufficiently pleaded that [Defendant] falsely 10 certifies its compliance with the general Medicare statute by submitting claims for 11 diagnostic readings conducted on the Dell Monitors.” Stenson, 2024 WL 1826427, at *4 12 (emphasis added). But even if this statement was meant only to address the falsity of 13 potentially submitted claims, this Court finds that the SAC sufficiently pleads the 14 submission of false claims. “[A] relator is not required to identify actual examples of 15 submitted false claims; instead, ‘it is sufficient to allege particular details of a scheme to 16 submit false claims paired with reliable indicia that lead to a strong inference that claims 17 were actually submitted.’” Godecke v. Kinetic Concepts, Inc., 937 F.3d 1201, 1209 (9th

18 4 In analyzing the element of falsity in the FAC, the Ninth Circuit held “[Plaintiff]’s ‘reasonable and necessary’ theory . . . meets the particularity requirement under Rules 9(b) 19 and 8(a).” Stenson, 2024 WL 1826427, at *3. The court reasoned that the FAC’s “general argument that radiologists can detect cancer in images displayed on diagnostic-grade 20 monitors but cannot detect cancer when the same images are displayed on lower-grade displays . . . is supported by sufficiently credible physician testimony, and, thus, gives rise 21 to a reasonable inference that the technological quality of radiologists’ monitors has some bearing on the efficacy of their diagnostic readings.” Id. The court found the FAC 22 supported these allegations with sufficient particularity because (1) it points to “minutes from an Arizona Medical Board meeting where a Radiology Limited physician was issued 23 an advisory warning for failing to identify a 6mm mass in a patient’s kidney”; and (2) it “notes that Dell does not market the [m]onitors [Defendant uses] for diagnostic use, nor 24 does it endorse their use in medical settings unless they are equipped with PerfectLum software, which [Defendant] does not use.” Id. at *4. The court stated that “[d]iscovery 25 might produce additional evidence of improper diagnoses” and “experts might testify to the [non-diagnostic monitors’] efficacy or conduct testing to establish that the [monitors] 26 do not safely, effectively, or appropriately diagnose diseases.” Id. The SAC includes the same allegations relied upon by the appeals court, and it remains true that discovery may 27 reveal additional evidence of improper diagnoses and the efficacy of non-diagnostic monitors. (Doc. 53 ¶¶ 63–65, 70.) Therefore, like the FAC, the SAC sufficiently pleads 28 falsity. 1 Cir. 2019) (quoting Ebeid, 616 F.3d at 998–99). The SAC alleges particular details of a 2 scheme to submit false claims. The SAC details how the Dell Monitors used by Defendant 3 for radiology readings are inferior to diagnostic, medical grade monitors. (See Doc. 53 ¶¶ 4 50–59; Doc. 59 at 16.) The SAC alleges, “[Defendant] and its physicians signed provider 5 agreements with Medicare permitting them to submit claims and accept payment for 6 services”; Medicare pays only for services that are reasonable and necessary; “from July 7 1, 2013 through 2021, [Defendant] used non-diagnostic monitors for primary diagnostic 8 radiological readings in human subjects”; Defendant “has submitted claims to CMS under 9 the guise of having used medically appropriate equipment”; and, in 2016, “CMS paid 10 [Defendant] $6,646,850.54 for diagnostic readings.” (Doc. 53 ¶¶ 17, 24, 62, 71, 82.) The 11 SAC alleges, “All of these payments represent false claims because none of the underlying 12 readings used equipment that met accepted standards of medical practice.” (Id. ¶ 82.) The 13 SAC points to 2016 claims data as representative examples of payments from CMS to 14 Defendant. (Id. ¶ 17; Doc. 1-3.) These allegations provide reliable indicia from which it 15 could be inferred that Defendant submitted false claims to CMS. The fact that Plaintiff’s 16 allegations are broad, and apply to claims Defendant submitted to CMS for all non- 17 mammography diagnostic readings performed on the consumer grade monitors, does not 18 necessarily render the allegations non-particular. Defendant has notice of the particular 19 misconduct alleged to constitute the fraud charged. See United States ex rel. Lee v. 20 SmithKline Beecham, Inc., 245 F.3d 1048, 1052–53 (9th Cir. 2001) (quoting Neubronner 21 v. Milken, 6 F.3d 666, 671 (9th Cir. 1993)). 22 Defendant’s reliance on Ebeid to support its argument that the SAC fails to plead 23 the submission of false claims with particularity is misplaced. (See Doc. 56-1 at 19–20.) In 24 Ebeid, the relator, proceeding under a theory of implied false certification,5 alleged that the 25 defendant, a woman in charge of three health care businesses—a clinic, a home healthcare 26 provider, and a hospice, submitted Medicare claims in violation of the Arizona common 27 5 Unlike Ebeid, here the SAC implicates both express false certification and implied false 28 certification. See Stenson, 2024 WL 1826427, at *2. 1 law prohibition on the corporate practice of medicine,6 the Stark Act, and certain Medicare 2 regulations. 616 F.3d at 999. The relator alleged that the clinic’s physicians referred 3 patients to the home healthcare provider and hospice and the defendant concealed the 4 physician’s financial relationship with those entities, in violation of the Stark Act and 5 Medicare regulations’ prohibition on physician referrals to entities in which the physician 6 has a financial interest. Id. at 1000–01. The court held these allegations to be insufficiently 7 particular under Rule 9(b) because relator provided no details or facts about the financial 8 relationships or alleged referrals. Id. Although the court mentioned that the complaint did 9 not “supply reasonable indicia that false claims were actually submitted,” id. at 999, the 10 court did not analyze whether the complaint sufficiently pleaded the submission of false 11 claims with particularity, see id. at 999–1001. 12 Here, as discussed above, the SAC alleges that: Defendant and its physicians 13 participate in the Medicare program; Defendant and its physicians submitted Medicare 14 claims for radiology readings performed on non-diagnostic monitors; the non-diagnostic 15 monitors fell below minimum efficacy standards; and CMS paid Defendant over $6.6 16 million in 2016 alone for non-mammography diagnostic readings. (Doc. 53 ¶¶ 17–18, 50– 17 59, 62, 82.) Plaintiff provides a 35-page list of claims submitted to CMS for radiological 18 readings Defendant’s physicians performed on non-diagnostic, consumer grade monitors. 19 (Doc. 1-3.) Therefore, unlike the allegations in Ebeid that amounted to a “global indictment 20 of [Defendant]’s business,” the SAC’s allegations provide, with sufficient particularity, 21 reliable indicia that alleged false claims were actually submitted. 616 F.3d at 1000–01. 22 3. Law of the Case Doctrine 23 Plaintiff argues the court of appeals rejected Defendant’s same challenges to the 24 SAC and therefore those challenges are barred by the law of the case doctrine. (Doc. 59 at 25 5.) The law of the case doctrine generally precludes a court from reconsidering an issue 26 6 The court held the corporate practice of medicine allegation was insufficient under Rule 27 9(b) because it did not “refer to any statute, rule, regulation, or contract that conditions payment on compliance with state law governing the corporate practice of medicine.” 28 Ebeid, 616 F.3d at 1000. By contrast, here, the SAC refers to the general Medicare statute’s reasonable and necessary requirement as a condition of payment. || previously decided by a higher court in the identical case. See United States v. Lummi 2|| Nation, 763 F.3d 1180, 1185 (9th Cir. 2014). Defendant asserts that the doctrine is not || applicable because, although the court of appeals concluded that Plaintiff’s FAC stated a claim under the FCA, the court addressed only the elements of falsity and materiality. (Doc. 5|| 62 at 7); see United States v. Cote, 51 F.3d 178, 181 (9th Cir. 1995) (noting that the issue 6 || in question must have been “actually considered and decided by the first court” for the doctrine to apply). 8 The Court does not decide whether the law of the case doctrine applies. Because the Court has concluded that the SAC sufficiently alleges scienter and the “submission” of || false claims, the SAC survives Defendant’s challenges even if Defendant is correct that the 11 || doctrine does not apply. 12 CONCLUSION 13 Plaintiffs SAC (Doc. 53) plausibly pleads scienter and pleads the submission of 14]| false claims with sufficient particularity. Accordingly, 15 IT IS ORDERED: 16 1. Defendant’s Motion to Dismiss Plaintiff's Second Amended Complaint 17|| (Doc. 56) is denied. 18 2. Pursuant to Federal Rule of Civil Procedure 12(a)(4)(A), Defendant must file || an answer to Plaintiff's Second Amended Complaint within 14 days of the date of this 20 || Order. 21 Dated this 13th day of January, 2025. 22 Lernnf DLE 24 sennifer G. Z pps 25 Chiet United States District Judge 26 27 28

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