Opinion
SA-21-CV-160-OLG (HJB)
10-02-2024
UNITED STATES OF AMERICA, Plaintiff, v. MARLIN MEDICAL SOLUTIONS, LLC; SHAPA INC. d/b/a RITE CARE PHARMACY; CV PHARMACY, INC. d/b/a RITE CARE PHARAMCY IV; DAVID MARLIN EDWARDS; SYED H. ZULFIQAR; and LATISHA ROWE, M.D., Defendants.
REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
Orlando L. Garcia Honorable United States District Judge
This Report and Recommendation concerns the Motion for Summary Judgment as to Defendant Latisha Rowe, M.D. (“Dr. Rowe”) (Docket Entry 118), filed by Plaintiff the United States of America (“the Government”). The District Court referred the motion to the undersigned for consideration. (See Text Order Dated April, 5, 2024.) For the reasons set out below, I recommend that the Government's motion (Docket Entry 118) be GRANTED.
I. Jurisdiction.
The government is a party to this suit and asserts claims against Dr. Rowe for violations of federal statutes. Accordingly, the Court has original jurisdiction over this matter pursuant to 28 U.S.C. §§ 1331 and 1345. I have authority to issue this report and recommendation pursuant to 28 U.S.C. § 636(b)(1)(B).
Because Dr. Rowe has failed to respond to the Government's motion for summary judgment, the factual assertions therein are deemed undisputed for purposes of this motion. See Part III, infra. Accordingly, the background facts in this report and recommendation are taken directly from the Government's motion.
Dr. Rowe is a physician living in Houston, Texas. (Docket Entry 118, at 2.) In January of 2015, Dr. Rowe became acquainted with Defendants Marlin Medical Solutions LLC, and its owner David Edwards (collectively “Marlin Medical”). (Id.) Marlin Medical was in the business of promoting compounded prescription medications. (Id.) Marlin Medical specifically catered to TRICAREbeneficiaries. (Id.)
TRICARE is a federally funded health insurance program for active-duty military personnel, military retirees, and their dependents. See https://tricare.mil/About.
In February 2015, Marlin Medical arranged and paid for Dr. Rowe to fly from Houston to San Antonio, Texas, to meet with attendees at one of its events and provide medical services- including issuing prescriptions. (Docket Entry 118, at 2-3.) Marlin Medical put Dr. Rowe up at the Elian Hotel & Spa during her stay. (Id.) The Marlin Medical event took place at a DoubleTree Hilton Hotel on February 7, 2015. (Id. at 3.) That same day, Marlin Medical gave Dr. Rowe a check for $1,500, purportedly as payment for “consulting” services rendered. (Id.) Dr. Rowe understood the payment to be consideration for diagnosing and treating patients at the event. (Id.)
On February 26, 2015, Marlin Medical emailed a form to Dr. Rowe with which to issue prescriptions for the event attendees. (Docket Entry 118, at 3.) In a response email Dr. Rowe confirmed that she would work on the prescriptions over the weekend. (Id.) On March 4, 2015, Dr. Rowe issued 40 prescriptions for 20 TRICARE beneficiaries. (Id.) On the recommendation of Marlin Medical, Dr. Rowe sent the prescriptions to Defendant VC Pharmacy, Inc. d/b/a Rite Care Pharmacy IV (“Rite Care”), in Dallas, Texas. (Id.) The prescriptions were filled by Rite Care between March 25, 2015, and April 29, 2015, including refills. (Id.) Rite Care submitted a total of 69 claims (including refills) to TRICARE for reimbursement for the prescriptions issued by Dr. Rowe. (Docket Entry 118, at 3.) TRICARE paid Rite Care $503,619.66 in claims reimbursements for those prescriptions. (Id.)
The Government filed this lawsuit against Dr. Rowe and others on February 22, 2021. (Docket Entry 1.) It amended its complaint on July 9, 2021. (Docket Entry 29.) In the complaint, the Government asserts claims against Dr. Rowe for violations of the False Claims Act (“FCA”), 31 U.S.C § 3729, and the Anti-Kickback Statute (“AKS”), 42 U.S.C. § 1320. The Government's motion for summary judgment addresses two of those claims: Counts I and II. (See Docket Entry 29, at 68-70.) Count I asserts that Dr. Rowe violated the FCA by knowingly causing a false or fraudulent claim to be presented to the Government for payment or approval. See 31 U.S.C. § 3792(a)(1)(A). Count II asserts that she violated the FCA by knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim. See 31 U.S.C. § 3791(a)(1)(B).
In its motion for summary judgment, the Government contends that Dr. Rowe violated the AKS by exchanging prescriptions for remunerationfrom Marlin Medical. (Docket Entry 118, at 2.) Those AKS violations, in turn, tainted the claims that were subsequently submitted by Rite Care to TRICARE, rendering them ineligible for reimbursement. (Id.) As a direct result of Dr. Rowe's AKS violations, the Government argues, TRICARE issued $503,619.66 in reimbursements to Rite Care which it was not entitled to receive. (Id.) The Government asks the Court to award $1,510,858.98 in trebled damages, and $517,500 in civil penalties. (Id. at 1.)
Remuneration means “anything of value in any form whatsoever.” United States v. Marlin Med. Sols. LLC, 579 F.Supp.3d 876, 887 (W.D. Tex. 2022) (quoting United States ex rel. Ruscher v. Omnicare, Inc., No. 4:08-CV-3396, 2014 WL 2618158, at *8 (S.D. Tex. June 12, 2024)).
Dr. Rowe failed to respond to the Government's motion, even after the Court ordered her to do so. (See Docket Entry 128.) Accordingly, the Government's motion is unopposed.
III. Legal Standard.
Summary judgment is appropriate when “the movant shows that there is no genuine dispute as to any material fact,” and that they are “entitled to judgment as a matter of law.” FED. R. CIV. P. 56(a). A dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Allen v. U.S. Postal Serv., 63 F.4th 292, 300 (5th Cir. 2023) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). A disputed fact is material if it “might affect the outcome of the suit under the governing law.” Id. (quoting Anderson, 447 U.S. at 248). When considering a motion for summary judgment, a court “must view all facts and evidence in the light most favorable to the non-moving party.” Feist v. La., Dep't of Just., Off. of the Atty. Gen., 730 F.3d 450, 452 (5th Cir. 2013).
The party moving for summary judgment bears the initial burden of “informing the court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). However, “[w]hen the movant also carries the burden of proof at trial, . . . [its] burden is even higher;” it must “establish beyond peradventure all of the essential elements of the claim.” Guzman v. Allstate Assur. Co., 18 F.4th 157, 160 (5th Cir. 2021) (citation and emphasis omitted). “[B]eyond peradventure” is a “heavy” standard. Carolina Cas. Ins. Co. v. Sowell, 603 F.Supp.2d 914, 924 (N.D. Tex. 2009) (citation omitted). But if the moving party carries its burden, the nonmovant must “direct the court's attention to evidence in the record sufficient to establish that there is a genuine issue of material fact for trial.” Mary Kay, Inc. v. Weber, 601 F.Supp.2d 839, 851 (N.D. Tex. 2009) (citing Celotex, 477 U.S. at 323-24).
“The parties may satisfy their respective burdens by tendering depositions, affidavits, and other competent evidence.” Arthur v. Liberty Mut. Pers. Ins. Co., SA-21-CV-00602-FB, 2022 WL 17824520, at *1 (W.D. Tex. Dec. 20, 2022) (citing Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir. 1992)), report and recommendation adopted, No. SA-21-CA-602-FB, 2023 WL 2557392 (W.D. Tex. Feb. 3, 2023). The Court is required to consider only the party's cited materials. FED. R. CIV. P. 56(c)(3); see Am. Fam. Life Assur. Co. of Columbus v. Biles, 714 F.3d 887, 896 (5th Cir. 2013) (“Rule 56 does not impose upon the district court a duty to sift through the record in search of evidence ....”) (citation omitted).
In the Western District of Texas, the failure to timely respond to a motion may result in the Court's granting it as unopposed. See W.D. TEX. L.R. CV-7(d)(2). Nevertheless, “[a] district court may not automatically grant summary judgment simply because the nonmovant fails to respond.” John v. State of La. (Bd. of Trs. for State Colls. & Univs.), 757 F.2d 698, 710 (5th Cir. 1985) (citing Boazman v Econ. Lab'y, Inc., 537 F.2d 210, 213-14 (5th Cir. 1976)). “Even when a local rule equates the failure to file a response with consent to a motion for summary judgment, the motion must still satisfy the requirements of . . . [Federal Rule of Civil Procedure] 56.” O'CONNOR'S FEDERAL RULES * CIVIL TRIALS, Ch. 7-B § 4.1 (2023 ed.) (citations omitted). If the non-movant fails to respond, however, the Court may treat the movant's assertions of fact as “undisputed for purposes of the motion.” FED. R. CIV. P. 56(e)(2). In that case, the only question for the Court is whether, based on those undisputed facts, “the movant is entitled to judgment as a matter of law.” FED. R. CIV. P. 56(a).
IV. Analysis.
To establish a violation of the FCA, the Government must prove that: (1) there was a false statement or fraudulent course of conduct; (2) made or carried out with the requisite scienter; (3) that was material; and (4) that caused the Government to pay or forfeit moneys due (i.e., that involved a claim). United States ex rel. Hueseman v. Pro. Compounding Ctrs. of Am., Inc., 664 F.Supp.3d 722, 738 (W.D. Tex. 2023) (citing United States ex rel. Longhi v. Lithium Power Techs., Inc., 575 F.3d 458, 467 (5th Cir. 2009) (citing 31 U.S.C. 3729(a))). Violators of the FCA are liable for treble damages as well as civil penalties of not less than $5,500 and not more than $11,000 for each false claim made. 31 U.S.C. § 3729(a)(1); 28 C.F.R. § 85.3(a)(9) (2016) (adjusting civil penalties amount pursuant to the Federal Civil penalties Inflation Adjustment Act of 1990).
A. False Statement or Fraudulent Course of Conduct.
The FCA prohibits making false or fraudulent claims for reimbursement to the federal government. Hueseman, 664 F.Supp.3d at 738. An entity violates the FCA when it: (1) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval; (2) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim. 31 U.S.C. §§ 3729(a)(1)(A)-(B). The entity need not be the one who actually submitted the false claims in order to be liable. See United States ex rel. Riley v. St. Luke's Episcopal Hosp., 355 F.3d 370, 378 (5th Cir. 2004) (citation omitted). “Rather, the law merely demands . . . some sort of affirmative act that causes or assists the presentation of a false claim.” United States v. Medoc Health Servs. LLC, 470 F.Supp.3d 638, 655 (N.D. Tex. 2020) (citation and internal quotations omitted).
In Counts I and II, the Government contends that, in exchange for renumeration from Marlin Medical, Dr. Rowe assisted Rite Care in submitting false claims to TRICARE by sending Rite Care false records in the form of solicited prescriptions. (Docket Entry 118, at 7.) The Government points to affirmative steps taken by Dr. Rowe: issuing the solicited prescriptions and then transmitting them to Rite Care for fulfillment and billing to TRICARE. (Id. at 8-9.) These affirmative steps taken by Dr. Rowe are certainly more than “mere passive acquiescence in the presentation of the claim[s].” See Medoc Health Servs. LLC, 470 F.Supp.3d at 655. Indeed, they were AKS violations.
Issuing prescriptions in exchange for remuneration is a violation of the AKS. See United States v. Marlin Med. Sols. LLC, 579 F.Supp.3d at 884 (citing United States ex rel. Nunnally v. W. Calcasieu Cameron Hosp., 519 Fed.Appx. 890, 893 (5th Cir. 2013) and 42 U.S.C. § 1320a-7b(b)) (“AKS prohibits the knowing and willful offering, solicitation, or receipt of any remuneration ‘to induce the referral of an individual for items or services that may be paid for by a federal health care program'”). And the AKS expressly provides that “a claim that includes items or services resulting from a violation of [the AKS] constitutes a false or fraudulent claim for purposes of [the FCA].” Id. § 1320a-7b(g). Thus, “claims submitted to federal health care programs that result from AKS violations,” like those here, “are per se false or fraudulent within the meaning of the FCA.” Hueseman, 664 F.Supp.3d at 740 (citation omitted).
Here, Dr. Rowe issued prescriptions in exchange for remuneration, in violation of the AKS. As such, the prescriptions Dr. Rowe sent to Rite Care were false records, and the claims Rite Care submitted to TRICARE in reliance on Dr. Rowe's prescriptions were false claims.
B. Scienter.
The FCA requires that a party act “knowingly” to be held liable. See 31 U.S.C. § 3729(b)(1). To act “knowingly” under the FCA does not require any specific intent to violate the law or defraud the Government. United States v. Marlin Med. Sols. LLC, 579 F.Supp.3d at 884 (citing 31 U.S.C. § 3279(b)(1)). It suffices if a party “had actual knowledge of the information or acted in deliberate ignorance of or with reckless disregard for the truth or falsity of the claims.” Id. (citing 31 U.S.C. § 3279(b)(1)). And “[t]he FCA applies to anyone who ‘knowingly assists in causing' the government to pay claims grounded in fraud.” Id. (quoting United States ex rel. Riley v. St. Luke's Episcopal Hosp., 355 F.3d 370, 378 (5th Cir. 2004)).
There is no dispute that Dr. Rowe issued 40 prescriptions in exchange for remuneration from Marlin Medical, and that she sent those prescriptions to Rite Care for fulfillment. (See Docket Entry 118, at 2-3.) Rite Care, in turn, submitted 69 claims for reimbursement to TRICARE for the prescriptions Dr. Rowe had issued, including refills. (See id. at 3.) And it is undisputed that Dr. Rowe personally understood that the remuneration she received from Marlin Medical was consideration “for diagnosing and treating” the attendees she met at Marlin Medical's event-i.e., the attendees for whom she subsequently issued 40 prescriptions. (See Docket Entry 118, at 3.) Accordingly, Dr. Rowe knowingly assisted in causing TRICARE to pay claims grounded in fraud, inasmuch as she knowingly violated the AKS by issuing the prescriptions she ultimately sent to Rite Care for fulfillment and billing. See 42 U.S.C. § 1320a-7b(g); Riley, 355 F.3d at 378. For these reasons, the scienter element is also satisfied in this case.
C. Materiality.
“For a false claim to violate the FCA, it must be material.” Hueseman, 664 F.Supp.3d at 747 (citing Universal Health Servs., Inc. v. United States ex rel. Escobar, 579 U.S. 176, 191 (2016)). The FCA defines “material” as “having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property.” Escobar, 579 U.S. at 192-93 (citation omitted).
Violations of the AKS such as those presented here are “inherently material” under the FCA “to the government's decision to pay claims presented.” Hueseman, 664 F.Supp.3d at 740 (quoting Marlin, 579 F.Supp.3d at 890); see also Medoc Health Servs., LLC, 470 F.Supp.3d at 655 (“[C]laims allegedly tainted by kickbacks . . . [a]re per se false and material.”). Based on the evidence in the record, Dr. Rowe certainly violated the AKS by issuing prescriptions in exchange for remuneration. Thus, the materiality element is satisfied as well.
D. Causation.
“Causation under the FCA requires proximate cause, not merely ‘but for' cause.” Hueseman, 664 F.Supp.3d at 752 (quoting United States ex rel. Morsell v. Symantec Corp., 471 F.Supp.3d 257, 308 (D.D.C. 2020), and citing United States ex rel. Cimino v. Int'l Bus. Mach. Corp., 3 F.4th 412, 420 (D.C. Cir. 2021)). Proximate cause is a “flexible concept” focused on the “foreseeability or the scope of the risk created by the predicate conduct.” Huesman, 664 F.Supp.3d at 752 (quoting Paroline v. United States, 572 U.S. 434, 444-445 (2014)). Thus, it “preclude[s] liability in situations where the causal link between conduct and result is so attenuated that the consequence is more aptly described as mere fortuity.” Huesman, 664 F.Supp.3d at 752 (quoting Paroline, 572 U.S. at 445).
“A defendant's conduct may be found to have caused the submission of a claim for . . . reimbursement if the conduct was (1) a substantial factor in inducing providers to submit claims for reimbursement, and (2) if the submission of claims for reimbursement was reasonably foreseeable or anticipated as a natural consequence of [the] defendants' conduct.” Hueseman, 664 F.Supp.3d at 752 (quoting United States ex rel. Ruckh v. Salus Rehab., LLC, 963 F.3d 1089, 1107 (11th Cir. 2020)).
It is undisputed here that TRICARE paid out $503,619.66 in reimbursements to Rite Care based on the prescriptions Dr. Rowe issued. (Docket Entry 118, at 2.) Dr. Rowe's conduct was certainly a substantial factor in Rite Care's submitting the false claims to TRICARE. After all, those claims sought reimbursement for prescriptions that Dr. Rowe issued and sent to Rite Care to be filled and billed. Furthermore, when Dr. Rowe collected information from attendees at the Marlin Medical event, she listed their categorized them all as “self-pay,” because “she was not billing and collecting for these patients and her record system did not allow her to ‘skip putting in insurance.'” (Docket Entry 118-1, at 5 (quoting Dr. Rowe).) Because she did not handle billing for the prescriptions, it was reasonably foreseeable to Dr. Rowe that the pharmacy fulfilling those prescriptions-i.e., Rite Care-would submit claims for reimbursement to the patient's insurers- here TRICARE. The causation element is therefore comfortably satisfied as well.
E. Damages.
“[T]he measure of damages is the full amount paid on the ineligible claims.” United States ex rel. Wheeler v. Union Treatment Ctrs., LLC, No. CV SA-13-CA-4-XR, 2019 WL 571349, at *9 (W.D. Tex. Feb. 12, 2019). Here, the Government paid $503,619.66 in reimbursements to Rite Care for a total of 69 claims that were predicated upon prescriptions Dr. Rowe issued. (See Docket Entry 118, at 3.) All 69 of the claims submitted by Rite Care were ineligible-i.e., they were false or fraudulent claims by virtue of being tainted by Dr. Rowe's having issued the prescriptions in exchange for remuneration. See supra. Thus, the Government suffered actual damages in the amount of $503,619.66 as a result of Dr. Rowe's AKS-violated prescriptions and the false claims Rite Care made based on those prescriptions. And under the FCA, the Government is entitled to treble the amount of its actual damages. 31 U.S.C. § 3279(a)(1); Escobar, 579 U.S. at 182. Accordingly, the Government is entitled to three times $1,510,858.98.
In addition to treble damages, the Government is also entitled to a civil penalty of no less than $5,000 and no more than $10,000 per false claim, subject to inflationary adjustments in accordance with the Federal Civil Penalties Inflation Adjustment Act of 1990 (“FCPIA”), 28 U.S.C. § 2461. 31 U.S.C. § 3279(a)(1); Escobar, 579 U.S. at 182. As adjusted pursuant to the FCPIA, Dr. Rowe is liable for civil penalties of no less than $5,500 and no more than $11,000 for each of the 69 false claims submitted by Rite Care to TRICARE based on the prescriptions she issued. Because the FCA “provides no specific formula or list of factors to consider when determining a civil penalty,” the Court “consider[s] the ‘totality of the circumstances,'” including what is “recommended by the parties.” United States v. Americus Mortg. Corp., No. 4:12-CV-2676, 2017 WL 4117347, at *3 (S.D. Tex. Sept. 14, 2017) (collecting cases which considered whether defendants took responsibility, whether the violations were isolated or recurrent, and whether the conduct, scienter, and damages were particularly serious, when assessing penalty).
Here, the Government asks the Court to impose the minimum penalty, hoping to “obviate the need for additional proceedings to determine whether the circumstances justify a higher penalty.” (Docket Entry 118, at 16.) In light of the Government's request, and given that the minimum penalty is the best Dr. Rowe could hope for, the Court should assess a civil penalty against Dr. Rowe in the amount of $5,500 for each of the 69 false claims submitted by Rite Care to TRICARE based on the prescriptions she issued: viz., $379,500.
V. Conclusion and Recommendation.
Based on the foregoing, I recommend that the District Court GRANT the Government's Motion for Summary Judgment as to Defendant Latisha Rowe, M.D. (Docket Entry 118), and enter judgment against Dr. Rowe on Counts I and II of the Government's amended complaint. The Government should be awarded three times the $503,619.66 in reimbursements that TRICARE paid for the false claims submitted based on Dr. Rowe's prescriptions, plus a civil penalty of $5,500 for each of the 69 false claims (including refills) submitted, for a total of $1,890,358.98.
VI. Notice of Right to Object
The United States District Clerk shall serve a copy of this Report and Recommendation on all parties by either (1) electronic transmittal to all parties represented by attorneys registered as a “filing user” with the Clerk of Court, or (2) by mailing a copy to those not registered by certified mail, return receipt requested. Written objections to this Report and Recommendation must be filed within fourteen (14) days after being served with a copy of the same, unless this time period is modified by the District Court. 28 U.S.C. § 636(b)(1); FED. R. CIV. P. 72(b).
The parties shall file any objections with the Clerk of the Court and serve the objections on all other parties. Absent leave of Court, objections are limited to twenty (20) pages in length. An objecting party must specifically identify those findings, conclusions, or recommendations to which objections are being made and the basis for such objections; the district court need not consider frivolous, conclusory, or general objections. Battle v. U.S. Parole Comm'n, 834 F.2d 419, 421 (5th Cir. 1987).
A party's failure to file written objections to the proposed findings, conclusions, and recommendations contained in this Report and Recommendation shall bar the party from a de novo review by the District Court. Thomas v. Arn, 474 U.S. 140, 149-52 (1985); Acuna v. Brown & Root, Inc., 200 F.3d 335, 340 (5th Cir. 2000). Additionally, failure to file timely written objections to the proposed findings, conclusions, and recommendations contained in this Report and Recommendation shall bar the aggrieved party, except upon grounds of plain error, from attacking on appeal the unobjected-to, proposed findings and conclusions accepted by the district court. Douglass v. United Servs. Auto. Ass'n, 79 F.3d 1415, 1428-29 (5th Cir. 1996) (en banc).