United States ex rel. Lupo v. Quality Assurance Services, Inc.

242 F. Supp. 3d 1020, 2017 WL 1020477, 2017 U.S. Dist. LEXIS 38295
CourtDistrict Court, S.D. California
DecidedMarch 16, 2017
DocketCase No.: 16cv737 JM (JMA)
StatusPublished
Cited by20 cases

This text of 242 F. Supp. 3d 1020 (United States ex rel. Lupo v. Quality Assurance Services, Inc.) is published on Counsel Stack Legal Research, covering District Court, S.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States ex rel. Lupo v. Quality Assurance Services, Inc., 242 F. Supp. 3d 1020, 2017 WL 1020477, 2017 U.S. Dist. LEXIS 38295 (S.D. Cal. 2017).

Opinion

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS PLAINTIFF/RELATOR’S FIRST AMENDED COMPLAINT

JEFFREY T. MILLER, United States District Judge

Defendants Quality Assurance Services, Inc. (“QAS”), Glenn Russell Deacon, Glenn [1024]*1024Russell Deacon II, Susan Deacon, and Shelly Becker (collectively, “Defendants”) move the court to dismiss the first amended complaint (“FAC”) of Relator Erin Hayes Lupo for failure to state a claim. (Doc. No. 18.) Relator opposes the motion. (Doc. No. 19.) The court finds the matter appropriate for decision without oral argument pursuant to Civil Local Rule 7.1(d)(1). For the following reasons, the court grants the motion in part and denies the motion in part.

BACKGROUND

QAS is a California corporation that contracts to perform inspections and diagnostic testing on medical equipment for hospitals and other health care providers. (Doc. No. 13 ¶¶ 6, 17.) The individual defendants are all shareholders of QAS. (Id. ¶¶ 7-10.) Relator worked at QAS for approximately eight years, including as office manager. (Id. ¶¶ 5,12.)

On September 16, 2016, Relator filed the FAC, alleging six counts: (1) substantive violations of the False Claims Act (“FCA”), 31 U.S.C. § 3729(a)(1); (2) conspiracy to violate the FCA, id. § 3729(a)(3); (3) retaliation in violation of the FCA, id. § 3730(h); (4) retaliation in violation of California Labor Code section 1102.5 (“section 1102.5”); (5) retaliation in violation of California Labor Code section 232.5 (“section 232.5”); and (6) wrongful termination in violation of California public policy. (See generally Doc. No. 13.) All six counts stem from allegations that Defendants falsified medical device inspection reports, which caused the submission of false claims to the government, and that QAS terminated Relator for exposing that activity.

LEGAL STANDARDS

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) challenges the legal sufficiency of the pleadings. Generally, to overcome such a motion, the complaint must contain “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). “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.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Facts merely consistent with a defendant’s liability are insufficient to survive a motion to dismiss because they establish only that the allegations are possible rather than plausible. Id. at 678-79, 129 S.Ct. 1937. The court must accept as true the facts alleged in a well-pleaded complaint, but mere legal conclusions aré not entitled to an assumption of truth. Id The court must construe the pleading in the light most favorable to the non-moving party. Concha v. London, 62 F.3d 1493, 1500 (9th Cir. 1995).

A heightened pleading standard governs FCA claims, however. United States ex rel. Cafasso v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1054 (9th Cir. 2011). That heightened standard, provided by Federal Rule of Civil Procedure 9(b), requires that the complaint “state with particularity the circumstances constituting fraud or mistake,” although “[m]alice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.” “Rule 9(b) demands that, when averments of fraud are made, the circumstances constituting the alleged fraud be specific enough to give defendants notice of the particular misconduct so that they can defend against the charge and not just deny that they have done anything wrong.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (internal ellipsis omitted). To satisfy Rule 9(b), “[a]verments of fraud must be accompanied by ‘the who, what, when, where, and how' of the mis[1025]*1025conduct charged.” Id. (quoting Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997)).

DISCUSSION

The court will address each count in the FAC in the order Relator presents them, and then Relator’s claim for punitive damages.

1. Violation of the FCA

The primary source of FCA liability arises under 31 U.S.C. § 3729(a)(1)(A),1 which prohibits submission of false or fraudulent claims to the United States. This subsection imposes liability upon a person who “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval[,]” The next subsection, (a)(1)(B), imposes liability for knowingly making, using, or causing to be made or used, a false record or statement that is material to a false or fraudulent claim.2 The difference between subsections (a)(1)(A) and (a)(1)(B) “is that the former imposes liability for presenting a false claim, while the latter imposes liability for using a false record or statement to get a false claim paid.” Jana, Inc. v. United States, 34 Fed.Cl. 447, 449 (1995).

Thus, to state a claim under subsection (a)(1)(A), Relator must show: “(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). To state a claim under subsection (a)(1)(B), Relator must show that Defendants “knowingly made, used, or caused to be made or used, a false record or statement material to a false or fraudulent claim.” Id.

In moving to dismiss the FAC, Defendants focus on Relator’s failure to identify any actual claims made to the government. Defendants quote the Ninth Circuit’s observation in United States ex rel. Aflatooni v. Kitsap Physicians Serv., 314 F.3d 995, 997 (9th Cir. 2002), that “[i]t seems to be a fairly obvious notion that a False Claims Act suit ought to require a false claim.” At the summary judgment stage, as was the case in Aflatooni, that may indeed be an obvious notion. At the pleading stage, it is less obvious. In fact, as Defendants acknowledge, the Ninth Circuit has held “that it is sufficient to allege particular details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually [1026]*1026submitted.” Ebeid ex rel. United States v. Lungwitz, 616 F.3d 993, 998-99 (9th Cir. 2010) (internal quotations omitted).

The FAC, even if not artfully- drafted, meets Ebeid’s requirements.

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242 F. Supp. 3d 1020, 2017 WL 1020477, 2017 U.S. Dist. LEXIS 38295, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-ex-rel-lupo-v-quality-assurance-services-inc-casd-2017.