State of Delaware v. Premier Healthcare Inc. ( 2018 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
THE STATE OF DELAWARE,
C.A.NO.N17C-09-l77 RRC
Plaintiff,
V.
PREMIER HEALTHCARE INC.
d/b/a NEWARK MANOR NURSING
HOME, BRUCE BOYER,
DAVID BOYER, and
SUSAN COMEGYS,
Defendants.
Submitted: May 30, 2018
Decided: June 14, 2018
On Defendants’ Motion to Dismiss. DENIED.
MEMORANDUM OPINION
Kate S. Keller and Laura N. Najemy, Esquire, Deputy Attorneys General,
Department of Justice, Wilmington, Delaware, Attomey for Plaintiff.
Maria R. Granaudo Gesty, Esquire, Burns White LLC, Wilmington, Delaware,
Attorney for Defendants.
COOCH, R.J.
I. INTRODUCTION
The State of Delaware (“Plaintiff”) filed a Delaware False Claims and
Reporting Act (“DFCRA”) action against Premier Healthcare Inc. d/b/a Newark
Manor Nursing Home (“Newark Manor”), Bruce Boyer, David Boyer, and Susan
Comegys (collectively “Defendants”). The complaint alleged that since 2011
Defendants have submitted or caused to be submitted fraudulent claims for Medicaid
reimbursement for “non-existent, grossly deficient, and materially substandard
and/or worthless nursing home services” provided to five residents of Newark
Manor.l
The issue at this stage is whether Plaintiff has alleged sufficient facts in the
complaint for a DFCRA claim, an unjust enrichment claim, and DFCRA liability as
to the individually named Defendants to survive Defendant’s motion to dismiss for
failure to state a claim pursuant to Delaware Superior Court Civil Rule lZ(b)(6).
This Court concludes that Defendants’ motion fails to demonstrate how
Plaintiff is not entitled to recovery under any reasonably conceivable set of
circumstances since this Court must accept all well-pleaded factual allegations as
true under the standard of Delaware Superior Court Civil Rule lZ(b)(6). The Court
thus denies Defendant’s motion to dismiss, without prejudice with leave for Plaintiff
to amend the complaint at a later time, if needed.
II. FACTS AND PROCEDURAL HISTORY
Newark Manor is a Delaware licensed, long term care nursing facility. Bruce
Boyer is the owner of Newark Manor. David Boyer and Susan Comegys were
administrators at Newark Manor at various times.
In 2009, Newark Manor contracted with the Delaware Medicaid program
through the Contract for Items or Services Delivered to Delaware Medical
Assistance Program Eligibles in the Department of Health and Social Services
(“DMAP”). The DMAP provides that when a healthcare service provider submits a
claim for payment for items or services provided under the DMAP, the provider
certifies that the items or services were in compliance with the DMAP rules,
regulations, and policies.
l Compl. 11 2.
Pursuant to federal law, nursing facilities, such as Newark Manor, must
provide services that “meet professional standards of quality” to participate in the
Medicare and Medicaid programs.2 This compliance is a prerequisite to participation
to participation in the Medicaid program. Compliance is assessed through annual
survey inspections.
Plaintiff asserts that, since at least 2011, Defendants “submitted or caused to
be submitted claims for payment for non-existent, grossly deficient, and materially
substandard and/or worthless nursing home services, provided to highly vulnerable,
elderly and disabled residents at Newark Manor.”3 Plaintiff argues that Defendants
were informed about the multiple failures of care at Newark Manor and were
provided state survey reports. Defendants contend that Plaintiff required Defendants
to submit plans to correct the deficiencies and return Newark Manor to substantial
compliance.4 Defendants state that Newark Manor in fact returned to its compliant
standard and Plaintiff renewed Newark Manor’s license as an nursing home in
Delaware. However, Plaintiff now, according to Defendants, seeks to further
penalize Defendants with sanctions under the DFCRA for every claim relating to
five identical residents that was submitted before, during, and after the alleged
violations.
Plaintiff filed a complaint on September 18, 2017 which alleged that
Defendants are subject to not only the penalties related to their noncompliance with
the DMAP, but are also subject to DFCRA liability and should not receive payment
from Plaintiff for any service provided to five Newark Manor residents. Plaintiff has
identified five residents whose alleged substandard care by Newark Manor warrants
recoupment by the State of its Medicaid payments to Newark Manor.
A. Resident ]
Resident l was an 88 year old woman admitted on December 30, 2010 who
suffers from cognitive decline and Alzheimer’s Disease. The care provided to
Resident l was inspected by Plaintiff on four occasions between 2011 and 2014.
Plaintiff alleges that, on June 7, 2014, Resident l suffered severe burns when a
Newark Manor staff member’s coffee spilled on Resident l’s leg. Plaintiff contends
that Defendants did not transport Resident l to the hospital, nor did they administer
2 Compl. 11 27.
3 Ia’. at 11 23.
4 Def.s’ Op. Br. in Support of its Mot. to Dismiss at l-2.
first aid,5 with the exception of removing her clothing. Plaintiff also noted
deficiencies in 2011 and 2014, respectively, in the form of weight loss and verbal
abuse.
B. Resident 2
Resident 2 was a 95 year old woman who was admitted to Newark Manor
with dementia, agitation, balance problems, and decreased muscle coordination.
After numerous fall risk assessments, Newark Manor identified Resident 2 as a fall
risk. Plaintiff alleges that Resident 2 fell eight times between February 24, 2014 and
June 22, 2014.6 Plaintiff also alleges that “[d]espite the eight falls in the four month
period in 2014, Newark Manor failed to ensure Resident 2’s safety by implementing
an effective fall prevention strategy.”7
Resident 2 suffered an additional ten falls between July 8, 2014 and
September 25, 2015.8 Resident 2 was also found lying on her bed with a television
on her body that had apparently fallen off of its mounted position on the wall.9
C. Resident 3
Resident 3 was an 88 year old woman who suffered from disorientation,
weakness to her left side cause by a stroke, confusion, and a history of falls and
agitation. Plaintiff states that Resident 3 fell twenty-two times between June 14,
2013 and September 9, 2014, three of which resulted in “serious injuries.”10 On June
26, 2013, Resident 3 suffered a fractured neck.ll Plaintiff contends that after
Resident 3’s return from the hospital, Defendants failed to implement the correct
care plan for Resident 3. Plaintiff contends that Defendants did, however, change
Resident 3’s care plan to ensure her safety from falls after Resident 3 fractured her
vertebrae on September 9, 2014.
5 Defendants contend that staff at Newark Manor “contact[ed] the physician for an order for a burn
cream.” Ia’. at 7.
6 Pl.’s Answ. Br. at 8.
7 Id.
8 Compl. 11 7l.
9 Ia'. at 11 73. Defendants contend that Resident 2 stated the television “did not fall on her or injure
her.” Def.s’ Op. Br. in Support of its Mot. to Dismiss at 8.
‘° Compl. 1111 77-79.
" Ia'. at 11 79.
Plaintiff contends that Resident 3 also suffered a coffee burn less than two
months after Resident l’s coffee burn. Plaintiff alleges that Newark Manor did not
have a burn policy in place when both Residents were bumed, but implemented one
afterward “that did not meet Mayo Clinic standards.”12
D. Resident 4
Resident 4 was an 88 year old woman who suffered from low sodium levels
and high potassium levels due Syndrome of Inappropriate Antidiuretio Hormone
release. Resident 4’s six-year residency at Newark Manor is the longest of the five
Residents discussed herein. Plaintiff alleges that “Defendants failed to monitor
Resident 4’s fluid intake and failed to request sodium chloride tablets as needed for
Resident 4’s condition.”13
Plaintiff also contends that Defendants failed to implement an appropriate fall
prevention plan for Resident 4, as she fell fourteen times between November 23,
2012 and July 2, 2015. Plaintiff states that Resident 4 suffered a fractured rib and a
right tibial fracture as a result of two of those falls. Plaintiff also asserts that
Defendants failed to implement an effective dental plan or plan to restore Resident
4’s continence.
E. Resident 5
Resident 5 was an 88 year old man who was diagnosed with legal blindness
and a had history of blood clots and strokes. Allegedly, Defendants did not provide
Resident 5 with his anti-coagulant medication for over four months, during which
time he suffered edemas.'4 During the state survey, on August 30, 2016, Defendants
“admitted that there was no clinical reason for discontinuing Resident 5’s medication
[and] that the lack of anti-coagulant was an oversight and ‘missed medication.”"5
Defendants contend that, following this survey, they began to again give Resident 5
his medication
Plaintiff alleged in its Complaint that “[t]he substandard, grossly negligent
and practically worthless services provided by the Defendants to Residents l through
12 Pl.’s Answ. Br. at 8; Compl. 11 83.
13 Pl.’s Answ. Br. at 9.
14 Compl. 1111 106-08. Defendants argue that “[u]pon admission, the physician did not order anti-
coagulants and the chart contained documentation that the physician did not want such
medications.” Def.s’ Op. Br. in Support of its Mot. to Dismiss at 10.
15 Compl. 11 109.
5 would have been material to the [Managed Care Organizations], and the State
Medicaid Agency’s decision to make these [claim] payments . . . .”16 Plaintiff
contends “Defendants were aware of the failure to provided care that met
professional standards of quality when they submitted claims for payment.”'7
Plaintiff claims that, despite being made aware of the significant deficiencies in their
service, Defendants still knowingly submitted claims for $1,515,504.35, which was
paid to them by Medicaid.
Defendants assert that the question of the applicability of the DFCRA or the
parallel federal law, the False Claims Act (“FCA”), “to claims related to services by
a medical provider such as a nursing home” is an issue of first impression in
Delaware.18 Defendants now bring the Motion to Dismiss pursuant to Superior Court
Civil Rule 12(b)(6) for failure to state a claim for which relief can be granted.
III. THE PARTIES’ CONTENTIONS
A. Defendants ’ Contentz``ons
Defendants argue in favor of dismissal on essentially four grounds. First,
Defendants contend that Plaintiff cannot make a DFCRA claim under either the
“worthless services” or false certification theories. Second, Defendants maintain that
Plaintiff cannot make out a claim for unjust enrichment. Third, Defendants assert
that Plaintiff fails to state a cause of action against the individually named
Defendants, Bruce Boyer, David Boyer, and Susan Comegys. Fourth, and
alternatively, Defendants argue that Plaintiff fails to make a fraud claim under the
strict pleading standard of Superior Court Civil Rule 9(b).
First, Defendants claim that the Complaint should be dismissed because
Plaintiff fails to allege a proper DFCRA claim under either the “worthless services”
or false certification theories.19
Defendants contend that, for a DFCRA claim to be successful under the
“worthless services” theory, “Plaintiff must show that ‘performance of the services
16 Ia’. at 11 115.
17 Pl.’s Answ. Br. at ll.
18 Def.s’ Op. Br. in Support of its Mot. to Dismiss at l3-l4. Defendants state in their Motion that
6 Del. C. § 1201(1), 1201(2), and 1201(3) are “identical” to the federal equivalent FCA in 31
U.S.C. § 3729(a)(l)(A), 3729(a)(l)(B), and 3729(a)(1)(C).
19 Def.s’ Op. Br. in Support of its Mot. to Dismiss at l5.
[was] so deficient that for all practical purposes it is the equivalent of no performance
at all.”’20 Defendants illustrate this argument by stating, “[i]t is not enough to offer
evidence that the defendant provided services that are worth some amount less than
the services paid for. That is, a ‘diminished value’ of services theory does not satisfy
this standard. Services that are ‘worth less’ are not ‘worthless.”’21 As such,
Defendants maintain that, although state surveys revealed certain deficiencies in the
service provided to the five Residents, Plaintiff cannot reach the conclusion that “the
entire bundle of services provided to each of the five Residents during their long
residency was substandard, much less ‘worthless.”’22
Defendants state that the purpose of the DFCRA is to punish and deter the
submission of fraudulent claims for payment to the govemment. Defendants contend
that the goal of the DFCRA is not to focus on “torts, medical negligence, regulation
violation, contractual breaches or other violations.”23
Defendants also argue that Plaintiff cannot make out a DFCRA claim under
the false certification theory because Plaintiff fails to allege “materi'ality.”
Defendants contend that Plaintiff’s argument that, because Defendants participated
in DMAP, they certified that they complied with all regulations is incomplete
because it fails to allege the materiality of Plaintiff’ s payment decision.24 Defendants
seem to make this argument on the basis that Plaintiff continued to make payments
to Defendants with knowledge of the alleged noncompliance with Dl\/IAP.25
Defendants claim that, because the State had knowledge of the deficiencies and still
paid the claims, the DMAP requirements were not material.26 Defendants reiterated
this argument at oral argument asserting that this Court need not reach the “worthless
services” portion of the DFCRA analysis because Plaintiff has failed to adequately
plead materiality, which is an essential element of the claim.27
Second, Defendants assert that Plaintiff fails to set out a proper unjust
enrichment claim because the DFCRA claim fails.28 Defendants state, “[s]ince the
20 Ia'. (quoting U.S. ex rel. Absher v. Momence Meaa’ows Nursing Ctr., Inc. , 764 F.3d 699, 710 (7th
Cir. 2014)).
21 Id. (footnote omitted).
22 Def.s’ Op. Br. in Support of its Mot. to Dismiss at 2l.
23 Id. at 14-15.
24 Id. at 22-24.
25 Id. at 28.
26 Def.s’ Reply Br. at l5.
27 See also id. at l4-l5.
28 Id. at 30-31.
[DFCRA] claims fail as a matter of law, Plaintiff’s common law claim for unjust
enrichment must also fail because the facility’s retention of the benefits is not
inequitable.”29
Third, Defendants argue that Plaintiff has failed to sufficiently plead “any
factual allegation that could establish a basis for false claims against individual
Defendants” Bruce Boyer, David Boyer, and Susan Comegys.30 Defendants contend
that Plaintif “cannot establish that any of these individuals had any reason to believe
that an action they took constituted a ‘false or fraudulent claim.”’31
Fourth, Defendants argue in the alternative for dismissal because, as they
claim, Plaintiff fails to meet the strict pleading requirement of Superior Court Civil
Rule 9(b). Defendants contend that Plaintiff “fails to state when the fraudulent
misrepresentation occurred[,]” and that Plaintiff “does not articulate any factual
basis to support the conclusion that there was a fraudulent intent behind the
submission of requests for payment.”32
B. Plaintiff’s Contentions
Plaintiff responds to Defendants’ four arguments in order and also makes a
fifth argument. First, Plaintiff argues that it has made a DFCRA claim under the
“worthless services” and false certification theories. Second, Plaintiff claims that the
complaint makes an adequate showing of a claim for unjust enrichment Third,
Plaintiff contends that the complaint states a cause of action against the individually
named Defendants, Bruce Boyer, David Boyer, and Susan Comegys. Fourth,
Plaintiff states that it has pleaded its complaint with specificity in accordance with
Superior Court Civil Rule 9(b). Fifth, Plaintiff argues that Defendants’ arguments
come under the guise of a Rule l2(b)(6) motion to dismiss for failure to state a claim
when they are more appropriately brought under a motion for summary judgment.
First, Plaintiff argues that it has pled a sufficient DFCRA claim under the
“worthless services” theory because it alleges facts that show the care provided to
Residents 1-5 was so collectively deficient in nature that they were worthless for
purposes of DFCRA.
29 ld. at 3l.
3°1d.
31161’.at3l-32.
321a’.at 33.
Plaintiff argues that it has adequately pled materiality to support a DFCRA
claim under the false certification theory because, under the reasonable person
standard, “[i]t is more than reasonable to assume that repeated violations and failure
of care to Residents l-5 would have been material to [the] decision to pay, as alleged
in the Complaint.”33
Also, Plaintiff alleges that “Defendants’ contention that Plaintiff ha[d] actual
knowledge of the violations and, therefore, is barred from arguing that the violations
were material to its payment is flawed.”34 Plaintiff contends that “there is no
evidence at this stage to establish that Defendants’ knew that [the Delaware
Medicaid and Medical Assistance Program] knew of the repeated violations of care
for Residents l-5 when it paid the claims.”35
Second, Plaintiff asserts that it has made out a claim for unjust enrichment
because “due to Defendants’ material misrepresentations and false statements, the
government is ‘impoverished’ for having paid $1.5 million dollars in claims for
worthless services.”36
Third, Plaintiff argues that its complaint adequately alleges sufficient facts to
make out individual claims against Bruce Boyer, David Boyer, and Susan Comegys.
Plaintiff makes this argument by incorporating by reference the same DFCRA
argument against Newark Manor above. Plaintiff claims that “as owner and
administrator, Bruce Boyer, David Boyer and Susan Comegys were aware of the
substandard care and knowingly submitted claims for payment to Residents l-5.”37
Fourth, Plaintiff alleges that it has met the adequate level of specificity
commensurate with the specific pleading standard of Rule 9(b). Plaintiff contends
that it has “more than satisfied its heightened pleading requirement when it attached
the Delaware Medicaid Remittance Advice documents . . . revealing systematic
payment to Medicaid to Newark Manor for Residents 1-5.”38 Plaintiff states that
“[t]he Complaint clearly states the who, what, where, when and how establishing the
Defendants’ intent to defraud Medicaid . . . .”39
33 Pl.’s Answ. Br. at 21.
34 Id. ar 24.
35 Id
36 Ia'. at 26.
37 Id. at 26-27.
38 1611.&128.
39 Ia'. at 29.
Fifth, Plaintiff argues that, because “[t]hroughout their motion [to dismiss],
Defendants make assumptions regarding facts that are currently in dispute[,]” they
are making arguments that are better heard on a motion for summary judgment, not
on a motion to dismiss.40
IV. STANDARD OF REVIEW
Upon a motion to dismiss under Superior Court Rule 12(b)(6), the Court “(i)
accepts all well-pleaded factual allegations as true, (ii) accepts even vague
allegations as well-pleaded if they give the opposing party notice of the claim, (iii)
draws all reasonable inferences in favor of the non-moving party, and (iv) only
dismisses a case where the plaintiff would not be entitled to recover under any
reasonably conceivable set of circumstances.”41 However, the Court will “ignore
conclusory allegations that lack specific supporting factual allegations.”42
V. DISCUSSION
Plaintiff’s claim will not be dismissed, certainly at least at this juncture,
because Defendants have not made a showing that Plaintiff “would not be entitled
to recover under any reasonably conceivable set of circumstances.”43 Pursuant to
Superior Court Civil Rule 12(b)(6), this Court will accept all well-pleaded facts as
true and draw all reasonable inferences in favor of Plaintiff. Under this standard, the
Court finds that Plaintiff has alleged in its complaint at least a cognizable claim that
would entitle to Plaintiff to recovery. “[I]n denying [a] motion to dismiss, the court
is not deciding the issue of whether plaintiffs will ultimately prevail, but is deciding
if plaintiffs are entitled to offer evidence to support their claims.”44
Defendants have not met their burden of demonstrating that under no
reasonably conceivable set of circumstances would Plaintiff be entitled to recovery.
Dismissal is premature at this juncture without a fully developed factual record. The
Court finds that review of a DFCRA claim pursuant to 6 Del. C. § 1201 is more aptly
40 Id. at 30.
41 TurfNation, Inc. v. UBU Sports, Inc., 2017 WL 4535970, at *5 (Del. Super. Ct. Oct. ll, 2017)
(citing Central Mortg. Co. v. Morgan Stanley Mortg. Capil'al Hola'ings LLC, 227 A.3d 531, 536
(Del. 2011)).
42 Ia'. (quoting Ramunno v. Crawley, 705 A.2d 1029, 1034 (Del. 1998)).
43 Id. (citing Cem‘ral Mortg. Co., 227 A.3d at 536).
44 Estate ofChance v. First Corr. Mea’. Inc., 2006 WL 2711483, at *5 (D. Del. Sept. 21, 2006).
10
suited when there exists a more developed factual record. The line at which allegedly
deficient services provided by a nursing home become so substandard that they are
“worthless” has been said to be a “blurry” one.45 Whether or not Defendants’
“actions fell within [what two courts have termed] the ‘grey area’ beyond this ‘blurry
point’ [i]s a fact issue, not proper for a motion to dismiss . . . .”46 A DFCRA claim
requires a fact-intensive analysis of the type of services provided and the quality of
those services, among other things.47
A. Plaintijj‘Has Alleged Sujj‘icient Facts for a DFCRA Claz``m to Survz``ve
Rule ]2(b)(6) Dismissal.
Plaintiff s complaint provides sufficient facts that, when taken as true, provide
a basis for DFCRA recovery under 6 Del. C. § 1201. “Because the DFCRA mirrors
the [federal False Claims Act (“FCA”)] . . . this Court will look to authority
interpreting and applying the FCA for guidance in addition to Delaware authority.”48
45 U.S. v. NHC Health Care Corp., 163 F. Supp. 2d 1051, 1056 (W.D. Mo. 2001)
At some very blurry point, a provider of care can cease to maintain this standard by
failing to perform the minimum necessary care activities required to promote the
patient's quality of life. When the provider reaches that point, and still presents
claims for reimbursement to Medicare, the provider has simply committed fraud
against the United States. Whether the Government has demonstrated that a factual
dispute remains as to Whether NHC crossed into this admittedly grey area, is the
proper focus of this Order.
46 Andrew S. Feldman, Worthless Services in False Claims Act and Health Care Fraud
Prosecutions: Worthless Services: ls lt A Worthless Theory?, http://feldmanpllc.com/worthless-
services-in-false-claims-act-and-health-care-fraud-prosecutions/ (citing United States v.
Villaspring Health Care Ctr., Inc., 2011 WL 6337455, at *5 (E.D. Ky. Dec. 19, 2011).
47 Villaspring, 2011 WL 6337455, at *5 (finding that whether the defendant nursing
home’s actions fell within the ‘admittedly grey area’ beyond this ‘blurry point’ is necessarily a
fact-intensive inquiry and, therefore, not a proper question for the Court to answer on a motion to
dismiss.”). But see Richard Hughes IV, J.D., M.P.H., With A Worthless Services Hammer,
Everything L00ks Like A Nail.' Litigating Quality of Care Under the False Claims Acl', 37 J. Legal
Med. 65, 82 (2017) (commenting that “[t]hough decided by a lower court, Vl``llaspring represented
a dangerous turning point, expanding the application of [U.S. v. NHC Health Care Corp. ’s] failed
reasoning by inviting courts to make an inappropriate inquiry of health care quality” and allowing
“an even lower standard to establish a claim, holding that it was sufficient to show ‘patients were
not provided the quality of care which meets the statutory standard.”’) (quoting Villaspring, 2011
WL 6337455, at *5.)
48 State Dep't ofLabor- Div. of Unemployment Ins. v. Pasquale, 2015 WL 5461540, at *3 (Del.
Super. Ct. Sept. 17, 2015).
11
At this stage, the Court is satisfied with the facts alleged by Plaintiff to establish a
claim under either the “worthless services” or false certification theories of DFCRA.
1. Plaintiff has adequately alleged some degree of “worthless
services.”
As alleged, Plaintiff has set forth a viable DFCRA claim under the “worthless
services” theory. When viewing the facts in the complaint in the light most favorable
to Plaintiff, Defendants have not demonstrated that dismissal is warranted because
Plaintiff would not be entitled to recover under any reasonably conceivable set of
circumstances
For example, Plaintiff alleges that “Resident 149 suffered second degree burns
over four inches in diameter on both of her inner thighs” when “a direct staff person
put her own cup of very hot coffee on the table near Resident 1, who grabbed at the
coffee and spilled it into her lap.”50 Plaintiff alleges that “[a]ny burn three inches or
larger is considered a major burn and the standard of care dictates that the injured
party should be taken to the Emergency Room[,]” which was not done in this case.51
lnstead, Plaintiff contends that Defendants’ staff “failed to administer any first aid
or treatment to Resident 1 for over five hours, and only did so after Resident l’s
daughter demanded something be done.”52 Plaintiff maintains that Defendants failed
to create a burn policy for another two months, and only after another Resident
suffered similar coffee burns.53
The Court need not now reach the issue of which of the “worthless services”
standards to apply. Defendants urge the Court to follow the United States Court of
Appeals for the Third Circuit’s approach in ln re Genesis Health Ventures, lnc., in
which that court stated, “[c]ase law in the area of “worthless services” under the
FCA addresses instances in which either services literally are not provided or the
service is so substandard as to be tantamount to no service at all.”54
49 For purposes of this opinion, factual examples as to the sufficiency of Plaintiff`` s complaint will
be contained to Resident 1 even though well-pleaded facts can be found as to services provided to
Residents 2-5 as well.
50 Compl.1113.
51 Id. at 11 54.
52 ld
53 Id. at 11 83. The burn policy allegedly failed to meet Mayo Clinic standards.
54 112 F. App'x 140, 143 (3d Cir. 2004) (citing United States ex rel. Lee v. SmithKline Beecham,
Inc., 245 F.3d 1048, 1053 (9th Cir.2001)); see also Absher, 764 F.3d at 710 (quoting Mikes v.
12
Plaintiff, however, urges the Court to adopt the United States District Court
for the District of Minnesota’s approach in United States ex rel. Scharber v. Golden
Gate Nat'l Sem'or Care LLC, 135 F. Supp. 3d 944, 964 (D. Minn. 2015). ln Scharber,
the court rejected the generally-accepted standard from Absher. The Scharber court
found that “[a] service can be worthless because of its deficient nature even if the
service was provided.”55
While this Court need not now reach the issue of which of these two proffered
standards for “worthless services” applies here, this Court will note that it is
presently somewhat inclined ultimately, if needed, to adopt the standard used by the
Third Circuit in Genesz's. However, at this stage, the Court finds that Plaintiff has
alleged sufficient facts for a DFCRA claims under either “worthless services” theory
to survive Defendants’ motion to dismiss for failure to state a claim.
2. Plaintiff has adequately alleged materiality to support the false
certification theory.
Plaintiff has presented sufficient facts of materiality to support a viable
DFCRA claim under the false certification theory. 6 Del. C. § 1201(1) and § 1201(2)
prohibits a person from “[k]nowingly present[ing], or caus[ing] to be presented a
false or fraudulent claim for payment or approval” and “[k]nowingly mak[ing],
us[ing] or caus[ing] to be made or used a false record or statement material to a false
or fraudulent claim . . . .” The United States Supreme Court in Universal Health
Servs., Inc. v. United States ex rel. Escobar held that “[w]hat matters is not the label
the Government attaches to a requirement, but whether the defendant knowingly
violated a requirement that the defendant knows is material to the Government's
payment decision.”56 The United States Supreme Court also stated, “[a]
misrepresentation about compliance with a statutory, regulatory, or contractual
requirement must be material to the Government's payment decision in order to be
actionable under the False Claims Act.”57
Straus, 274 F.3d 687, 703 (2d Cir. 2001)) (holding that “the performance of the service must be
so deficient that for all practical purposes it is the equivalent of no performance at all.”) (intemal
brackets omitted).
55 Scharber, 135 F. Supp. 3d at 964 (quoting U.S. ex rel. Acaa'. Health Ctr., Inc. v. Hyperion
Founa’., Inc., 2014 WL 3385189, at *43 (S.D. Miss. July 9, 2014)).
56136 S. Ct. 1989, 1996 (2016).
57 Id
13
“‘Material’ means having a natural tendency to influence, or be capable of
influencing, the payment or receipt of money or property.”58 “[A] misrepresentation
is material if, had it not been made, the party complaining of fraud would not have
taken the action alleged to have been induced by the misrepresentation”59 The United
States Supreme Court in Escobar made clear that the materiality analysis can be
conducted from the perspective of a reasonable person or a particular defendant60
The Court held that a matter is material:
(1) if a reasonable man would attach importance to it in determining his choice of
action in the transaction; or (2) if the defendant knew or had reason to know that
the recipient of the representation attaches importance to the specific matter in
determining his choice of action. even though a reasonable person would not.61
Drawing all reasonable inferences in favor of Plaintiff, the Court finds that
Plaintiff has sufficiently alleged facts as to materiality under the reasonable person
standard. ln the complaint, Plaintiff makes an adequate showing that the alleged
“practically worthless services provided . . . would have a natural tendency to
influence, or be capable of influencing the payment of money by the Medicaid
Program.”62 lt is conceivable that a reasonable person in Plaintiff’s position would
have considered not paying the claim in light of, for example, the severe burns
suffered by Resident 1. As such, at this Stage, the Court finds that Plaintiff has
alleged sufficient facts as to materiality for a DFCRA claims under the false
certification theory to survive Defendants’ motion to dismiss for failure to state a
claim,
B. Plaintijj‘Has Alleged Sujj‘z``cient Facts to Support Unjust Enrichmem
Claims.
Plaintiff has adequately pled unjust enrichment claims to survive dismissal
To plead an unjust enrichment claim, a party must demonstrate (1) an enrichment,
(2) an impoverishment, (3) a relation between the enrichment and impoverishment,
(4) the absence of justification, and (5) the absence of a remedy provided by law,63
ln its complaint, Plaintiff has asserted facts that, if accepted as true, would form the
58 Id. at 2002 (quoting 31 U.S.C. § 3729).
59 Ia'. at n.5 (quoting 26 Williston on Contracts § 69:12, p. 550 (4th ed. 2003)).
60 Ia'. at 2002-03.
61 lai
62 Compl. 1111 115-121.
63 Jackson Nat. Life, Ins. Co. v. Kennedy, 741 A.2d 377, 394 (Del. Ch. 1999).
14
basis of an unjust enrichment claim, Defendants have not met the burden of
demonstrating that under no reasonably conceivable set of circumstances would
Plaintiff be entitled to recovery for a claim for unjust enrichment. As such, dismissal
of this count is denied.
C. Plaintijijas Allegea' Sujj‘l``cient Agaz``nst Ina'l``vl``a’ual Defendants Bruce
Boyer, David Boyer, and Susan Comegys.
Plaintiff has pled facts that, when taken as true, set forth viable grounds for
recovery against the individual Defendants, Bruce Boyer, David Boyer, and Susan
Comegys. ln the complaint, Plaintiff stated
46. Bruce Boyer, as owner of Newark Manor, was aware that some
residents’ care was paid by the State Medicaid Agency.
47. Bruce Boyer was also aware of the grossly inadequate, materially
substandard and worthless services being provided at his facility because he
received the state surveys, and because he reviewed all the incident reports.
48. Comegys, as one of the administrators, reviewed and initialed all
incident reports, and was therefore aware of the grossly inadequate, materially
substandard and worthless services being provided at Newark Manor.
49. David Boyer, as one of the administrators, reviewed and initialed all
incident reports, and was therefore aware of the grossly inadequate, materially
substandard and worthless services being provided at Newark Manor.64
The Court finds that, as pled, these facts comprise a conceivable DFCRA claim
against the individually named Defendants. As such, dismissal of a DFCRA claim
against the individual Defendants, Bruce Boyer, David Boyer, and Susan
Comegys, is denied.
VI. CONCLUSION
Dismissal at this time would be premature given the factually specific analysis
required in a DFCRA claim, Defendants have not demonstrated that Plaintiff’ s claim
cannot succeed under any reasonably conceivable set of circumstances Therefore,
the motion to dismiss is denied without prejudice and if needed, the Plaintiff may
amend the complaint,
64 Compl. 1111 46-49.
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Defendants’ motion to dismiss is DENIED. The Court will promptly meet
with counsel to develop a Trial Scheduling Order.
\/L.MQ 011-ead
Richard R. Cooch, J.
cc: Prothonotary
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