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dismissing a qui tam complaint with prejudice for failure to state a claim
Summary of this case from U.S. v. Caremark RX, Inc.Opinion
No. 90 C 2371.
January 15, 1991
MEMORANDUM OPINION AND ORDER
Plaintiff Eli Robbins brings this qui tam action under the federal False Claims Act, 31 U.S.C.A. §§ 3729-30, against defendants James H. Desnick, M.D. ("Desnick"), James H. Desnick, M.D., S.C. ("Desnick, S.C."), the Desnick Eye Center, Inc. ("the eye center") and unknown owners of the eye center (collectively, "defendants"). Defendants move to dismiss the complaint for lack of subject matter jurisdiction and for failure to state a claim for which relief can be granted under Fed.R.Civ.P. 12(b)(1) and 12(b)(6). Defendants also seek to recover reasonable attorneys' fees and costs pursuant to Fed.R.Civ.P. 11 and 31 U.S.C.A. § 3730(g).
In a qui tam action, the plaintiff sues for herself and on behalf of the government to recover a penalty provided by statute. Under the statute, part of the penalty is awarded to the party bringing the suit and the remainder of the penalty is awarded to the government. United States ex rel. State of Wisconsin v. Dean, 729 F.2d 1100, 1102 n. 1 (7th Cir. 1984).
BACKGROUND
On a motion to dismiss, the court accepts as true all the well-pleaded factual allegations of the complaint and inferences reasonably drawn from them. Gomez v. Illinois Bd. of Educ., 811 F.2d 1030, 1039 (7th Cir. 1987). Desnick is a licensed medical doctor specializing in eye treatment and surgery. Complaint ¶ 2. The eye center is a medical clinic in Chicago employing health care professionals having expertise in eye care and eye surgery. Id. In July 1987, the eye center advertised extensively in the Chicago metropolitan area, claiming to have expertise in eye care, treatment and surgery. Id. ¶ 3. Robbins became a patient of the eye center on July 7, 1987, after learning of the eye center through its advertisements. Id. ¶ 4.
After the initial examination on July 7, 1987, certain doctors — identified in the complaint only as "defendants and their agents, servants and employees" — advised Robbins to have surgery to remove a cataract on his right eye. Id. ¶ 6. The doctors told Robbins that the surgery was necessary and would improve his vision in his right eye. Id. ¶ 7. The surgery was performed on July 29, 1987; Robbins' vision did not improve, but instead worsened as a result of the surgery. Id. ¶¶ 8, 9. Until February 16, 1988, defendants continued to assure Robbins that the vision in his right eye would improve. Id. ¶ 10. At that time, defendants advised Robbins that additional surgery was necessary to increase the vision in his right eye. Id. ¶ 11. That same day, Robbins underwent surgery on his right eye for the second time. Id. ¶ 12. The vision in Robbins' right eye worsened after the second surgery. Id. ¶ 13. Sometime thereafter, defendants scheduled Robbins for surgery on his other eye; surgery was unnecessary and unwarranted. Id. ¶ 17d. Apparently, that surgery was never performed. Robbins claims that the costs of his eye surgery were paid for by the United States through the Medicare program. Id. ¶ 19.
On May 12, 1987, prior to visiting the eye center, Robbins had his eyes examined by Dr. Linas A. Sidrys, who specializes in eye treatment and surgery. Id. ¶ 14. Dr. Sidrys determined that Robbins had a slow growing cataract in his right eye, and that eye surgery would not be necessary for six months. Id. The doctors at the eye center made no effort to obtain the records of Dr. Sidrys' examination of Robbins before performing surgery on Robbins. Id. ¶ 15.
Robbins filed this action on April 24, 1990, on behalf of himself and the United States Government under the False Claims Act ("FCA") to recover the amount of money defendants received through its Medicare claims for the unnecessary surgery performed on Robbins. Robbins also seeks to proceed with this suit on behalf of a class of all other patients of defendants who underwent unnecessary surgery, and for which defendants have filed claims with the United States for reimbursement of the costs and fees associated with unnecessary surgeries.
DISCUSSION
I. Motion to Dismiss Under Rule 12(b)(1)
Defendants contend that the court lacks subject matter jurisdiction over Robbins' case. Under the FCA, a qui tam action based solely on publicly disclosed in formation must be dismissed for lack of subject matter jurisdiction, unless the plaintiff is an "original source" of the information. 31 U.S.C.A. § 3730(e)(4)(A) (West Supp. 1990); United States ex rel. Dick v. Long Island Lighting Co., 912 F.2d 13, 16 (2d Cir. 1990); Houk ex rel. U.S. v. Folding Carton Admin.Comm., 881 F.2d 494, 504 (7th Cir. 1989), cert. denied, 110 S.Ct. 1471 (1990). An "original source" means "an individual who has direct and independent knowledge of the information on which the allegations are based. . . ." 31 U.S.C.A. § 3730(e)(4)(B). Because Robbins learned of the information leading to his class repr esentation from the news media and from other public disclosures in three civil suits initiated prior to the present one, Robbins must show that he is an original source of the information. Robbins has not presented any alle gations demonstrating that he is an original source of the information regarding the purported class members who allegedly received unnecessary eye surgery. Thus, the court lacks subject matter jurisdiction over the class claims. 31 U.S.C.A. § 3730(e)(4)(B); Dick, 912 F.2d at 16; Houk, 504 F.2d at 505.
It appears that Robbins learned of the information leading to his class representation from two news broadcasts on WBBM-TV on December 21-22, 1988 and June 25, 1989 entitled "The Desnick Eye Center: A Channel Two Investigation" and "Under the Knife," respectively. Ex. A, attached to defendants' memorandum.
Prior to the filing of Robbins' suit, three other civil malpractice suits were filed in the Circuit Court of Cook County, Illinois, charging the eye center with performing unnecessary eye surgeries. Ex. B.
However, Robbins is an original source as to information grounding his individual qui tam claim under the FCA. Robbins personally dealt with the doctors at the eye center who recommended eye surgery three times. Robbins underwent two surgeries on his right eye that worsened his vision. Thus, the allegations regarding Robbins' individual claim are based on his own direct and independent knowledge. Accordingly, the court has subject matter jurisdiction over Robbins' individual FCA claim.
United States ex rel. Stinson, Lyons, Gerlin Bustamante v. Prudential Ins. Co. of Am., 736 F. Supp. 614 (D.N.J. 1990), belatedly cited by defendants, does not compel a contrary holding. In Stinson, the plaintiffs would not have learned of the factual basis for their suit but for the public disclosure in another lawsuit. 736 F. Supp. at 623. This is not the case as to Robbins' individual claim.
The Second Circuit requires that the qui tam plaintiff must have directly or indirectly been a source to the entity that publicly disclosed the allegations. Dick, 912 F.2d at 16-18. Under this test, Robbins would not be an independent source even of his own claims. Because Robbins' individual claim must be dismissed for other reasons, the court need not decide whether to adopt the Second Circuit's approach.
II. Motion to Dismiss Under Rule 12(b)(6)
Generally, the federal system of notice pleading does not favor dismissal for failure to state a claim. Gray v. Dane County, 854 F.2d 179, 182 (7th Cir. 1988). However, dismissal is proper if it appears beyond doubt that the plaintiff can prove no set of facts in support of her claim that would entitle her to the relief requested. Illinois Health Care Ass'n v. Illinois Dep't of Public Health, 879 F.2d 286, 288 (7th Cir. 1989), citing Conley v. Gibson, 355 U.S. 41, 45-46 (1957).
A. Injunctive Relief
Robbins requests an injunction prohibiting defendants from receiving federal Medicare funds in compensation for cataract surgery unless the surgery is performed under certain circumstances. In addition, Robbins requests a mandatory injunction requiring the United States to deny the claims of "any medical care provider" who applies for Medicare payments in compensation for cataract surgery unless the surgery is performed under certain circumstances. Complaint ¶ 25(c). Defendants contend that injunctive relief is not appropriate in this suit. The court agrees.
Although the FCA imposes a penalty on persons filing false claims against the government, the statute does not expressly provide for injunctive relief. Robbins fails to cite any cases where injunctive relief was granted for FCA violations. Instead, Robbins relies on a case where a qui tam plaintiff sued under a different statute, 25 U.S.C. § 179, which imposes a penalty on any person who allows animals to trespass on Indian lands. In United States ex rel. Whitehorse v. Briggs, 555 F.2d 283 (10th Cir. 1977), the trial court granted injunctive relief (in addition to the penalty) prohibiting the defendant's animals from trespassing. Injunctive relief is a proper and frequent remedy for trespass at common law. The present case, however, does not involve trespass. Whitehorse does not support Robbins' claim for injunctive relief under the FCA.
Similarly, Robbins cannot obtain a mandatory injunction against the United States in this action. The United States is not a defendant in this suit. Robbins cannot obtain mandatory injunctive relief against the United States, on whose behalf this suit was initiated.
Moreover, even if injunctions were implicitly available under the FCA, Robbins' requests for injunctive relief are too speculative. Mann v. Hendrian, 871 F.2d 51, 53-54 (7th Cir. 1989). Because Robbins may not proceed on behalf of a class, his claim for injunctive relief against defendants is limited to enjoining defendants from collecting Medicare reimbursement in the event defendants perform unnecessary cataract surgery on Robbins in the future. It is highly unlikely that Robbins will seek cataract surgery from the eye center in the future. Thus, Robbins lacks standing to sue for injunctive relief. Mann, 871 F.2d at 53-54 (suit for injunction is not maintainable where it is speculative that plaintiff will ever benefit from injunctive relief, and where it is a matter of conjecture whether defendant will ever repeat alleged misconduct against plaintiff).
B. Res Judicata
Defendants maintain that Robbins' suit is precluded by the doctrine of res judicata. In July 1989, Robbins filed a medical malpractice suit in the Circuit Court of Cook County against the defendants in the present action. Ex. C. The state court complaint alleged that the eye center performed unnecessary eye surgeries on Robbins. On June 22, 1990, Robbins executed a release and settlement of claim, under which Robbins received $115,000 in return for releasing the Desnick Eye Center "and all other persons or corporations of and from all claims and demands, actions and causes of action . . . [and] damages" known or unknown, resulting from Robbins' cataract surgery. Ex. D. The state claim was dismissed with prejudice on June 26, 1990.
Prior to settling the state claim, Robbins initiated this action in federal court under the Federal Claims Act on April 24, 1990. The allegations in the present action are essentially identical to those in the state action; that the eye center performed unnecessary eye surgeries.
Because Robbins could have brought both the FCA claim and the state claim for medical malpractice in the same lawsuit, res judicata prevents Robbins from going forward with this action. See, e.g. Hagee v. City of Evanston, 729 F.2d 510, 512 (7th Cir. 1984) ("res judicata bars parties . . . from litigating not only matters that in fact were raised and decided in an earlier suit involving the same cause of action and the same parties, but also all other matters that could have been raised in the earlier suit. . . . If both suits arise from the same transaction, incident or factual situation, res judicata generally will bar the second suit"). Robbins cannot complain that he lacked the opportunity to litigate this federal claim in the prior state court proceeding. Robbins chose his own forum; he could have filed a complaint asserting both theories of recovery in federal court but chose not to do so. See United States ex rel. Woodard v. Country View Care Center, Inc., 797 F.2d 888, 893-94 (10th Cir. 1986) (district court should have allowed qui tam plaintiff in FCA suit to amend complaint to allege pendent state claim of common law fraud). Thus, Robbins' suit must be dismissed on res judicata grounds.
C. Release
On June 22, 1990, in exchange for $115,000, Robbins executed a document releasing all persons or corporations from any and all claims arising out of Robbins' eye surgery on July 29, 1987 at the eye center. Ex. D. This broad and general release precludes Robbins from bringing any further claims against defendants regarding his eye surgery. See, e.g., Rakowski v. Lucente, 104 Ill.2d 317, 472 N.E.2d 791, 794 (1984) (enforcing release to bar claim for contribution where release is comprehensive, precise and unambiguous). Accordingly, this action must be dismissed.
D. Allegations of Fraud
In order to state a claim under the FCA, a qui tam plaintiff must allege that the defendants knowingly submitted false claims to the United States. 31 U.S.C.A. § 3729(a). Robbins has failed to allege knowledge on the part of defendants. Although no proof of specific intent to defraud is required, Robbins must at least show that defendants (1) had actual knowledge of the false information; (2) acted in deliberate ignorance of the truth or falsity of the information; or (3) acted in reckless disregard of the truth or falsity of the information. Id. § 3729(b). At the most, Robbins has alleged negligence. Thus, Robbins has failed to plead an essential element of an FCA claim. Accord, Cahill v. Curtiss-Wright Corp., 57 F. Supp. 614, 616-17 (W.D.Ky. 1944) (in granting summary judgment against plaintiff's FCA claim, court stated that merely alleging fraud in conclusory fashion is not sufficient, and "there is a marked difference between negligence or extravagance on the one hand and fraud on the other"). In light of the other reasons for dismissal, allowing Robbins to amend his complaint to adequately allege knowledge would be futile.
CONCLUSION
Defendants' motion to dismiss the complaint is granted. This case is dismissed with prejudice. Robbins' attorney should have known that this suit would be precluded by the doctrines of res judicata and release. Defendants' request for reasonable attorneys' fees and costs under Fed.R.Civ.P. 11 is granted. Defendants may submit a fee petition by January 24, 1991. Robbins' objections are due February 7, 1991.