United States District Court, D. New Mexico
UNITED STATES OF AMERICA, and STATE OF NEW MEXICO, ex rel. JOSE HERNANDEZ-GIL, DMD, Relator Plaintiff,
DENTAL DREAMS, LLC A/K/A DENTAL EXPERTS, LLC, an Illinois limited liability company, SAMEERA TASNIM HUSSAIN, DMD, individually and as an organization agent, DENTAL DREAMS, LLC, a New Mexico limited liability company, FAMILY SMILES, LLC, a New Mexico limited liability company, FRANK VON WESTERNHAGEN, DDS, individually and as an organization agent, KOS SERVICES, LLC, an Illinois limited liability company, and KHURRAM HUSSAIN, ESQ., individually And as an organization agent, Defendants.
MEMORANDUM OPINION AND ORDER
matter is before the court on (i) the Motion for Summary
Judgment and Memorandum in Support (ECF No. 112), filed by
Defendants on November 10, 2017; (ii) Defendants' Motion
to Exclude Certain Opinions and Testimony of Plaintiff's
Expert Witness (ECF No. 111), filed November 10, 2017; and
(iii) the Motion to Partially Dismiss Amended Complaint and
to Strike (ECF No. 57), filed by Defendants on November 11,
2016. This Court, having considered the pleadings, motions,
briefs, evidence, and relevant law, concludes that (i)
Defendants' motion for summary judgment should be granted
in part and denied in part as described herein, but the Court
will reserve ruling for a hearing on the issue of the
liability of Defendants Dental Dreams, LLC a.k.a. Dental
Experts, LLC, an Illinois limited liability company, and KOS
Services, LLC; (ii) Defendants' motion to exclude certain
opinions of Plaintiff's expert Dr. Ryan Craig Moffat will
be granted; and (iii) Defendants' motion to partially
dismiss the amended complaint and to strike will be granted
in part and denied in part as described herein.
Defendants' Motion for Summary Judgment
filed a motion for summary judgment seeking dismissal of all
claims in the amended complaint except for Count 25 against
Family Smiles. In Plaintiff's response, he agreed to the
dismissal of the following claims: Count 22 (Bad faith breach
of contract), Count 23 (Fraud in the inducement), Count 24
(Tortious interference with contract), Count 26 (Intentional
infliction of emotional distress), and Count 27 (Prima facie
tort). Pl.'s Resp. 18 n.2, ECF No. 123. The Court will
therefore dismiss Counts 22-24 and 26-27 and turn to the
merits of the remaining counts.
Plaintiff's Hiring and Employer
Jose Hernandez-Gil (hereinafter “Plaintiff”) is a
dentist who worked for Defendant Family Smiles, LLC
(“Family Smiles”) for an approximately two-week
period in May 2013, pursuant to an Employment Agreement dated
April 30, 2013. Def.'s Mot. for Summ. J.
(“MSJ”), Undisputed Fact (“UF”)
¶ 1, ECF No. 112. The employment agreement was between
Plaintiff and “Family Smiles, LLC, a New Mexico limited
liability company, its successors and assigns, as well as its
parent, or any subsidiary, affiliate, joint venture or
partner of Family Smiles, LLC (collectively
‘FSL').” Employment Agreement, ECF No. 52-1.
Services, LLC, (“KOS”) is a limited liability
company (“LLC”) in Illinois, and its Articles of
Organization form lists Khurram Hussain as its registered
agent and states that it “has management vested in
… member … Khurram Hussain.” Defs.'
Reply, Ex. E, ECF No. 127-5 at 6-7 of 14. KOS provides
administrative services for Family Smiles and Khurram Hussain
is the President of KOS. Decl. of Khurram Hussain ¶ 1,
ECF No. 112-5.
Experts is an LLC, and its Illinois Articles of Amendment
list Dr. Sameera Hussain as a member. Defs.' Reply, Ex.
E, ECF No. 127-5 at 8-10 of 14. Dental Dreams was a New
Mexico LLC and Dr. Sameera Hussain was its sole member.
See Id. at 12-14 of 14; Answer ¶ 24, ECF No. 56
at 14 of 112.
Plaintiff's Discovery of Billing Practices at Family
Noah Shafer was a dentist employed by Family Smiles from June
2011 to September 2012, prior to Plaintiff's employment
with Family Smiles. Def.'s MSJ, UF ¶ 2, ECF No. 112.
Dr. Shafer was one of more than 220 dentists working for or
affiliated with the entity Defendants during Plaintiff's
employed by Family Smiles, Dr. Hernandez-Gil treated some
patients, who Dr. Shafer previously had treated. See
Dep. of Hernandez-Gil 173:22-174:5, ECF No. 123-2. In
reviewing some of the patients' charts, Dr. Hernandez-Gil
found records of treatments that he believed, based on his
examination of the patients, had not been provided. Decl. of
Hernandez-Gil ¶ 9, ECF No. 123-3. Two dentists for
Family Smiles reported to Plaintiff that they were worried
they were going to be fired because they were unwilling to do
medically unnecessary procedures which Edith Pinto, Regional
Manager for Family Smiles' New Mexico dental clinics, and
the owners of the company were pressuring them to perform.
See Dep. of Dr. Hernandez-Gil 140:15-141:24,
185:21-186:7, ECF No. 123-1; Decl. of Hernandez-Gil ¶
15, ECF No. 123-3.
15, 2013, Plaintiff reported what he had found with the
patients and charts of Dr. Shafer to Edith Pinto. Decl. of
Hernandez-Gil ¶¶ 15-16, ECF No.
123-3. Plaintiff also told Ms. Pinto what the
other dentists had told him. Dep. of Dr. Hernandez-Gil
140:15-141:24, 185:21-186:7, ECF No. 123-1. At the time, Ms.
Pinto acted shocked, like this was the first she was hearing
of this, and she said she was going to look into it. Decl. of
Hernandez-Gil ¶ 16, ECF No. 123-3; Dep. of Dr.
Hernandez-Gil 185:21-186:10, ECF No. 123-1.
later on May 15, 2013, Dr. Hernandez-Gil reported the
situation to Clint Sandoval, the Atrisco Office Manager.
See Dep. of Dr. Hernandez-Gil 185:21-186:24, ECF No.
123-1; Decl. of Hernandez-Gil ¶ 10, ECF No. 123-3. Mr.
Sandoval immediately admitted, “You're going to
find a lot of that.” Decl. of Hernandez-Gil ¶ 11,
ECF No. 123-3. Mr. Sandoval acted as though he was not upset;
instead, he was making fun of it and implying that it was the
culture of the company. Dep. of Dr. Hernandez-Gil 253:9-22,
ECF No. 123-1. Mr. Sandoval said that Edith knows all about
and has known all about the allegations Plaintiff had brought
to her attention. See Id. at 185:21-188:7. Dr.
Hernandez-Gil replied that it was fraud. Decl. of
Hernandez-Gil ¶ 12, ECF No. 123-3.
16, 2017, Plaintiff spoke with Mr. Sandoval again about Dr.
Shafer's fraudulent billing practices. Decl. of Dr.
Hernandez-Gil ¶ 18, ECF No. 123-3. Mr. Sandoval replied
that Ms. Pinto, Sameera Hussain and “Khurram”
were all aware of the practices. Id. When Plaintiff
asked who was Khurram, Mr. Sandoval replied that he was
Sameera Hussain's husband and attorney for the network of
dental clinics and other businesses that included Family
Smiles, Dental Dreams, Dental Experts, and KOS. Id.
Mr. Sandoval referred to all these entities, together with
other companies in their network, as “the
company.” Id. Mr. Sandoval explained that
Sameera ran the dental side of the business, while Khurram
ran the legal side, and KOS handled the money side.
Id. He stated that Sameera and Khurram Hussain
effectively own or control the entire network, regardless of
whose name is on the title. Id. Mr. Sandoval said
that Sameera and Khurram would not allow an investigation or
audit into the fraudulent billing because it would cost too
much money. Id. Mr. Sandoval then explained that the
company used employment contracts in which dentists could not
leave the company without giving notice a very significant
period of time in advance, provisions the company would use
to force the dentists that wanted to leave sooner to meet
certain performance goals to gain an early release.
Id. ¶ 19. Mr. Sandoval explained that
performance goals were so high that they virtually required
fraud be committed by those dentists. Id.
20, 2013, Plaintiff told Ms. Pinto about all the files of Dr.
Shafer he found with procedures charted and billed to
Medicaid, but never actually performed. Id. ¶
20. Ms. Pinto acknowledged she was aware of the billing fraud
and said there were forms to fill out if he found more of
these situations. Id. ¶ 21. On May 22, 2013,
Plaintiff found more instances in patient charts indicating
services had been performed and billed, when in fact the
services were not performed. Id. ¶ 22.
Consistent with Ms. Pinto's direction, Plaintiff reported
to Mr. Sandoval that same day the fraudulent charges he
discovered. Id. ¶ 23. In response, Mr. Sandoval
replied “the company” wanted Plaintiff to do the
missing work, fill out a form, and allow his production to be
credited with the work, although it would not at that time be
billed. Id. ¶ 24. Plaintiff stated that the
company's response was inadequate by law and that it
needed to report it and do an audit. Id. ¶ 25.
Mr. Sandoval said that he knew that was what the company was
required to do, but it was not what the company would do
because they would lose too much money. Id. The
forms Mr. Sandoval provided Plaintiff to complete on the
falsely certified work were pre-addressed to Sameera Hussain.
Id. ¶ 26. Plaintiff submitted two such forms.
to his raising allegations of false Medicaid billing
practices, in his first few days of work, Plaintiff had been
getting positive feedback. Dep. of Dr. Hernandez-Gil
214:19-215:8, ECF No. 123-1. After raising his allegations,
his feedback changed. Id.
Unwanted physical contact
on May 15, 2013, when Mr. Sandoval discovered that Plaintiff
was gay, and again on May 21, 2013, Mr. Sandoval touched and
rubbed Plaintiff's back, despite Plaintiff repeatedly
telling him to stop. See Verified Am. Compl. ¶
175, ECF No. 52. On May 24, 2013, Mr. Sandoval put his hands
on Plaintiff, and when Plaintiff yelled and told him never to
touch him again, Mr. Sandoval laughed and left the office.
Id. ¶ 178.
25, 2013, Plaintiff reported to Ms. Pinto that, after
discovery that Plaintiff was gay, Mr. Sandoval had begun
touching and rubbing Plaintiff, that this was unwelcome, that
Plaintiff had repeatedly told Mr. Sandoval to stop, Mr.
Sandoval dismissed his objections, and Mr. Sandoval had
continued to an extent that was becoming sexual harassment.
Id. ¶ 183. Plaintiff told Ms. Pinto that Mr.
Sandoval's complaints to her about Plaintiff were being
exaggerated in retaliation for these and other objections
Plaintiff had voiced during his employment. Id. Ms.
Pinto ignored his concern and made no direct response.
Id. In this same conversation, Plaintiff reminded
Ms. Pinto about all the patients he had seen from Dr. Shafer
with either work billed and not done or work that needed to
be redone. Id. ¶ 185.
Plaintiff's disability and service dog in
has Generalized Anxiety Disorder and a history of PTSD.
See Dep. of Kelly Coleman 54:18-55:17, 56:9-57:11,
61:6-17, 90:19-92:24, ECF No. 123-2; Letter from Dr. Kelly
Coleman, ECF No. 123-2 at 21 of 21. Plaintiff's licensed
clinical psychologist, Dr. Kelly Sueoka Coleman, recommended
he address the symptoms of his anxiety disorder using a
service dog to help alleviate some of his anxiety.
See Dep. of Kelly Coleman 17:12-13, 57:6-59:3,
74:17-75:3, 80:12-22, 90:19-92:24, ECF No. 123-2; Letter from
Kelly Coleman, ECF No. 123-2 at 21 of 21. Plaintiff had a dog
Boscoe, a large St. Bernard, who was a service dog in
training. Decl. of Dr. Hernandez-Gil ¶ 7, ECF No. 123-3;
Dep. of Dr. Hernandez-Gil 118:3-119:9, ECF No. 112-7; Dep. of
Kelly Coleman 77:25-78:3, ECF No. 123-2. Dr. Coleman
specifically had numerous conversations recommending
Plaintiff use Boscoe as a service dog to help him with his
general anxiety he experienced all the time. See
Dep. of Kelly Coleman 58:10-59:3, 74:14-75:3, 77:2-78:19,
80:1-22, ECF No. 123-2. By letter dated September 10, 2012,
Dr. Coleman recommended to the Office of Disability for
Service Dogs a request for a service animal for Dr.
Hernandez-Gil. Letter from Dr. Kelly Coleman, ECF No. 123-2
at 21 of 21. Boscoe had not completed his certification
process and would not complete his training until up to a
year after May 2013. See Dep. of Dr. Hernandez-Gil
118:3-119:9, ECF No. 112-7.
needed and used Boscoe as a service dog to assist during his
commute to the Atrisco clinic and to help him with his panic
attacks, should one arise. Dep. of Dr. Hernandez-Gil
202:7-203:9, 219:6-221:5, ECF No. 123-1, and 222:13-25, ECF
No. 112-7. Boscoe was able to give Plaintiff cues that he was
going to have a panic attack. See Id. 220:3-222:25,
ECF No. 112-7. Even if Boscoe were in another room, if
Plaintiff could see him, Boscoe could give him cues of a
panic attack, so Plaintiff could go to Boscoe, whose presence
could alleviate his symptoms. See id.
Smiles' Employee Handbook states that pets are prohibited
from all offices, but “[s]ervice animals are not
considered pets.” Decl. of Dr. Hernandez-Gil,
Attachment B, ECF No. 123-3 at 12 of 12. Plaintiff disclosed
his disability to Ms. Pinto on May 13 and 14, 2013.
See Verified Am. Compl. ¶¶ 348-49, ECF No.
52. He stated that his dog Boscoe has trained responses to
and alleviates his symptoms when present. See Id.
24, 2013, Plaintiff also told Mr. Sandoval that Boscoe helped
alert to and helped him work through his panic attacks, such
as when driving. See Verified Am. Compl. ¶ 349,
ECF No. 52. On May 24 or 25, 2013, Plaintiff told Ms. Pinto
of his intention to bring Boscoe, who he said was a service
dog, and put him in the office. See Dep. of Dr.
Hernandez-Gil 195:24-196:21, 201:3-202:6, ECF No. 123-1. Ms.
Pinto told him that he could not use the office because too
many people use the office, and he needed to have a cage for
Boscoe. See Id. 197:7-9, 199:5-22. Plaintiff
indicated that Boscoe could be put in a cage and was
crate-trained but that Boscoe needed to be where he could see
him. Id. 218:2-14. Ms. Pinto said that they could
talk about it later because it did not have to happen now.
Id. 199:18-22. Plaintiff understood that the issue
of the cage was still open and not definite. See id.
point, Ms. Pinto proposed housing Boscoe in a back office.
See Id. Plaintiff, however, believed that a cage in
a back room was impractical because he would not be able to
see Boscoe, and visual contact with his dog was helpful
because the dog could signal to him that a panic attack was
coming. See Dep. of Dr. Hernandez-Gil 199:5-200:11,
ECF No. 112-7, and 223:4-224:6, ECF No. 123-1. He pointed out
that people did not use the office he preferred in the way
she said it was used. See Id. 201:3-12, ECF No.
Monday, May 27, 2013, Plaintiff first brought Boscoe to work
and placed him in the clinic's only office, one which was
seldom used by Family Smiles' personnel, and put up a
gate in the office doorway, one which easily opened with a
handle. See Dep. of Dr. Hernandez-Gil 197:13-198:9,
201:8-202:6, ECF No. 123-1. Plaintiff did not bring a cage.
Id. 197:13-16. Boscoe was well-groomed and
well-behaved. Decl. of Dr. Hernandez-Gil ¶ 8, ECF No.
123-3. While in the office on May 27-28th, Boscoe slept and
did not actively perform functions as a service dog, but his
presence in the clinic helped Plaintiff because, if he were
to start having a panic attack, Boscoe could help calm him.
See Dep. of Dr. Hernandez-Gil 170:6-17, ECF No.
112-7, and 219:6-221:5, 123-1.
27, 2013, Ms. Pinto came to the clinic with Ann Patrone,
Special Projects Manager. Verified Am. Compl. ¶¶
186, ECF No. 52. Ms. Pinto chastised Plaintiff for not
bringing a cage for Boscoe. Id. Plaintiff responded
that he had never agreed to bring a cage because it was
impracticable, but that they had bigger problems because he
had seen yet another patient of Dr. Shafer for which work was
billed and not done. Id. Plaintiff stated that the
Network needed to do an audit or someone had to report it to
Medicaid. Id. Ms. Pinto walked away. Id.
Later that day, Plaintiff again reported to Ms. Pinto and Ms.
Patrone that Dr. Shafer billed for work not done and that
they had to do an audit because by law they had to report
this to Medicaid. Id. ¶ 187.
Plaintiff's Termination from Family Smiles
28, 2013, Plaintiff brought Boscoe into the office again.
Dep. of Dr. Hernandez-Gil 209:9-12, ECF No. 123-1. At around
2 p.m., Khurram Hussain and Juliette Boyce called via Skype
Ann Petrone and Clint Sandoval. Pl.'s Resp. Ex. 4, ECF
No. 123-4 at 2 of 7. They spoke before bringing Plaintiff
into the call. See id.
Sandoval told Plaintiff he had to have a Skype meeting with
Khurram Hussain and asked Plaintiff if he could get Boscoe
out of the room. Dep. of Dr. Hernandez-Gil 209:9-23, ECF No.
123-1. Plaintiff left with Boscoe and stood outside the open
door. Id. 209:24-210:1. Khurram Hussain asked Mr.
Sandoval if there was “some fucking dog in the clinic,
” and Mr. Sandoval responded yes. Id. 210:2-8.
Mr. Sandoval brought Plaintiff into the room and Mr. Hussain
told him that he had federal, state, and local laws he had to
adhere to and health laws and he could not allow a companion
dog in the office, one that he needed only for companionship
on the drive to the office. See Id. 211:2-13.
Plaintiff responded that Boscoe was a service dog in training
and that he could provide documentation. Id.
211:14-16. Mr. Hussain responded that he did not need to see
any documentation, he must leave the dog at home, and if he
brought him to work the next day, he will be fired.
Id. 211:16-21. Plaintiff replied that he would bring
him tomorrow because he is a service dog and that he could
provide the paperwork. Id. 211:21-23. Mr. Hussain
said he was satisfied he is a companion dog, that he is to
stay at home or he would be fired. Id. 211:23-25.
Plaintiff repeated that he's coming here tomorrow, and
Mr. Hussain said, “[F]ine, then you're fired. I
will send you paperwork stating that.” Id.
letter dated May 28, 2013, Peter Stathakis informed
Plaintiff: “Pursuant to our executed agreement, Section
Fourteen (14), Family Smiles, LLC is hereby issuing you
formal notice of immediate termination. This termination is
issued the 28th day of May, 2013 and will be effective
immediately.” Defs.' Ex. 8, ECF No. 112-8. Mr.
Stathakis, the Secretary of Family Smiles and the Chief
Financial Officer of Dental Experts and KOS, signed the
letter. See id.; Answer ¶¶ 22, 27, ECF No.
56 at 13, 16 of 112. Section 14 of the Employment Agreement
permitted termination for a variety of reasons including
“[i]n the event Dentist conducts himself/herself,
either personally or professionally, in a manner that FSL
deems inconsistent with or detrimental to achieving the
business and professional goals of FSL, ” and
“[i]f Dentist has breached the terms of this
Agreement.” Employment Agreement § 14, ECF No.
112-1. The Employment Agreement required Plaintiff to provide
dental services “in a professional and courteous
manner.” Id. § 1.
patients ever complained to Plaintiff about his care or
manner; nor did anyone at Family Smiles inform him of patient
complaints against him while he was working there.
See Dep. of Dr. Hernandez-Gil 203:10-24, ECF No.
123-1. Plaintiff never raised his voice with staff or
patients. Id. 203:25-204:14.
Dr. Moffat's Review of Family Smiles' Dental
Ryan Moffat is a Board Certified Pediatric Dentist, who
Plaintiff hired as an expert witness to review the billings
to Medicaid made by Dr. Shafer while employed at Family
Smiles. Report of Dr. Moffat 1-2, ECF No. 111-1. Dr. Moffat
analyzed chart notes, radiographs, and billing statements for
all patients seen by Dr. Shafer during the time of his
employment. Id. at 3. Dr. Moffat studied the dental
charts of approximately 1, 325 patients seen by Dr. Shafer
over the course of about 18 months. Id. at 7. Of
those 1, 325 patients, Dr. Moffat found no problems with the
billings for approximately 789 patients. Dep. of Dr. Moffatt
50:5-25, ECF No. 111-2. For 212 patients, Dr. Moffat could
not form an opinion based on the evidence of whether there
were false or fraudulent claims submitted regarding their
care. Id. 51:7-52:6. Dr. Moffat thus found that
approximately 1, 001 patients of the 1, 325 either did not
have billing problems or he could not form an opinion that
there were billing problems. See Id. 51:7-52:19.
Moffat opined that he discovered billing problems with 324
patients, some of whom had billing issues in both
“Category A” restorations and “Category
B” restorations. See Id. 52:15-53:20. Dr.
Moffat defined “Category A” restorations as those
said to have been completed and billed for, but as to which
Dr. Moffat's examination of follow-up x-rays showed no
evidence of restorations having been done. Id.;
Report of Dr. Moffat 3, ECF No. 111-1. He defined
“Category B” restorations as those said to have
been completed and billed for as more expensive fillings, but
as to which Dr. Moffat's examination of follow-up x-rays
showed were not truly fillings, but should have been billed
as less expensive sealants or Preventative Resin
Restorations. See Report of Dr. Moffat 3, 5, ECF No.
111-1. In 324 patient records, Dr. Moffat concluded Dr.
Shafer falsely billed for 332 Category A restorations and 1,
487 Category B restorations. See Id. at 3-5. As used
in his report, Dr. Moffat understood that “false”
indicates error while “fraudulent” indicates
intent associated with a billing error to bill things
incorrectly for some type of personal gain. See Dep.
of Dr. Moffat 39:3-5, 40:9-13, ECF No. 111-2. Dr. Moffat
calculated approximately $91, 251 in the total amount billed
falsely for Category A and Category B restorations.
See Report of Dr. Moffat 4-5, ECF No.
motion for summary judgment, the moving party initially bears
the burden of showing that no genuine issue of material fact
exists. Shapolia v. Los Alamos Nat'l Lab., 992
F.2d 1033, 1036 (10th Cir. 1993). Once the moving party meets
its burden, the nonmoving party must show that genuine issues
remain for trial. Id. The nonmoving party must go
beyond the pleadings and by its own affidavits, or by the
depositions, answers to interrogatories, and admissions on
file, designate specific facts showing that there is a
genuine issue for trial. Celotex Corp. v. Catrett,
477 U.S. 317, 324 (1986). “All facts and reasonable
inferences must be construed in the light most favorable to
the nonmoving party.” Quaker State Minit-Lube, Inc.
v. Fireman's Fund Ins. Co., 52 F.3d 1522, 1527 (10th
Cir. 1995) (internal quotations omitted). Only disputes of
facts that might affect the outcome of the case will properly
preclude the entry of summary judgment. Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). There
is no issue for trial unless there is sufficient evidence
favoring the nonmoving party for a jury to return a verdict
for that party. See Id. at 248.
False Claims Act and New Mexico Analogous Claims (Counts
brought claims under the False Claims Act
(“FCA”), 31 U.S.C. § 3729-3731, New Mexico
Medicaid False Claims Act, N.M. Stat. Ann. §§
27-14-1 et seq. (“MFCA”), and the New Mexico
Fraud Against Taxpayers Act, N.M. Stat. Ann. §§
44-9-1 et seq. (2007) (“FATA”) against all
Defendants. In his response, however, Plaintiff stated he
“is not pressing claims under the FCA or its New Mexico
counterparts against any of Defendants other than Family
Smiles.” Pl.'s Resp. 23 n.7, ECF No. 123. The Court
will therefore dismiss the FCA, MFCA, and FATA claims in
Counts 1-12 against Defendants Dental Dreams, LLC a.k.a.
Dental Experts, LLC, an Illinois LLC; Sameera Hussain; Dental
Dreams, LLC, a New Mexico LLC; Frank Von Westernhagen; KOS
Services, LLC; and Khurram Hussain. The Court will therefore
turn to the merits of these claims against Defendant Family
False Claims (Counts 1-12)
closely tracks the longstanding federal False Claims
Act.” State ex rel. Foy v. Austin Capital
Management, Ltd., 2015-NMSC-025, ¶ 25, 355 P.3d 1.
New Mexico state courts have also looked to federal precedent
construing the FCA to provide guidance on the MFCA. State
ex rel. King v. Behavioral Home Care, Inc.,
2015-NMCA-035, ¶ 17, 346 P.3d 377. Under the FCA, FATA,
and MFCA, the plaintiff must show that the false claims were
presented to the government knowingly. See 31 U.S.C.
§ 3729(a)(1)(A), (B), and (G) (FCA); N.M. Stat. Ann.
§ 27-14-4(A), (C), (E); and N.M. Stat. Ann. §
44-9-3(A)(1), (2), (3), (8), and (9). According to the FCA,
“knowing” and “knowingly”
(A) mean that a person, with respect to information-
(i) has actual knowledge of the information;
(ii) acts in deliberate ignorance of the truth or falsity of
the information; or
(iii) acts in reckless disregard of the truth or falsity of
the information; and
(B) require no proof of specific intent to defraud.
31 U.S.C. § 3729(b)(1). See also N.M. Stat.
Ann. § 44-9-3(B) (“Proof of specific intent to
defraud is not required for a violation of Subsection A of
this section.”). It is therefore not enough to submit a
false claim; the relator must show that the defendant
knowingly presented or submitted a false claim for payment.
United States v. The Boeing Company, 825 F.3d 1138,
1148-49 (10th Cir. 2016). A claim is false under the FCA if a
payee either submits an incorrect description of the goods or
services provided or requests reimbursement for goods or
services never provided. Id. at 1148. “A
defendant's reasonable interpretation of any ambiguity
inherent in the regulations belies the scienter necessary to
establish a claim of fraud.” United States ex rel.
Miller v. Weston Educational, Inc., 840 F.3d 494, 500
(8th Cir. 2016) (internal quotations omitted). If a relator
succeeds on an FCA claim, the defendant is liable to the
Government for a civil penalty between $5, 000 and $10, 000
for each violation (adjusted for inflation), treble damages,
and costs, and the relator shares in the recovery. See
Cook County, Ill. v. U.S. ex rel. Chandler, 538 U.S.
119, 123 & n.1 (2003) (citing 31 U.S.C. §§
3730(b) & (d), 3729(a)).
first argue that there is no evidence that Dr. Shafer
knowingly submitted false claims. Defendants have submitted
the declaration of Dr. Shafer in which he averred that he
never performed any dental treatment or procedure that he
believed was unnecessary or not in a patient's best
interests, or that he believed was below the standard of
care. Decl. of Dr. Shafer ¶ 5, ECF No. 112-2. Dr. Shafer
also stated that he never knowingly documented dental
treatments that he did not actually perform and never
knowingly documented sealants as fillings. Id.
¶ 6. Because the Court must view all inferences at this
stage in favor of Plaintiff, the Court finds that the
testimony of Dr. Moffat concerning the large number of
Category A and Category B restoration billing errors is
sufficient evidence from which a jury may infer that,
contrary to his declarations, Dr. Shafer knowingly, rather
than mistakenly, charted and documented dental treatments
that he did not actually perform and knowingly documented
sealants as fillings in those instances in Dr. Moffat's
reports. The Court therefore finds that Dr. Shafer's
intent when he charted incorrect billings that were submitted
to Medicaid and whether he engaged in false or fraudulent
billing practices are disputed facts for the jury to decide.
next argue that, even if there is a question of fact as to
Dr. Shafer's knowledge, his purported knowledge is not
sufficient to establish knowledge of Family Smiles. Plaintiff
contends, however, that under the FCA, FATA, and MFCA, an
employee's knowledge is imputed to the employer. Both
parties agree that the Tenth Circuit has not yet directly
addressed this issue.
assert that the Tenth Circuit has suggested that knowledge of
management is necessary to establish vicarious liability for
false claims, citing Shaw v. AAA Engineering &
Drafting, Inc., 213 F.3d 519, 534 n.18 (10th Cir. 2000).
In a footnote, the Tenth Circuit rejected an argument by the
defendants that they could not be held liable for false
claims resulting from a failure to practice silver recovery
because management did not know of the failure. Id.
The Tenth Circuit merely concluded that the evidence showed
management did know about the failure, so the case cannot be
read to establish one way or the other the Tenth
Circuit's view on what is necessary to impute a
non-managerial employee's knowledge to an employer in the
absence of evidence the employer knew of its employee's
actions. See id.
to out-of-circuit authority, Defendants rely on a district
court case from Maryland holding that a corporate employer
may be vicariously liable under the FCA for the misdeeds of a
low-level employee who caused false claims to be filed
without the knowledge or consent of her employer only if some
degree of culpability can be ascribed to the employer.
See United States v. Southern Maryland Home Health
Services, 95 F.Supp.2d 465, 466 (D. Md. 2000). The
district court held “that, at least when the recovery
sought by the Government is substantially higher than its
actual losses, an employer is not vicariously liable
under the FCA for wrongful acts undertaken by a
non-managerial employee unless the employer had
knowledge of her acts, ratified them, or was reckless in its
hiring or supervision of the employee.” Id. at
468 (italics in original). The district court's analysis
was based on its determination that the Government was
essentially seeking punitive damages in the case where it
sought well over a million dollars for only about $60, 000 in
actual losses. See Id. at 469-73. The Southern
Maryland court relied on Kolstad v. American Dental
Assoc., 527 U.S. 526 (1999), in which the Supreme Court
applied common law principles of agency in a Title VII case
to hold that an employer may not be vicariously liable for
punitive damages based solely on the employee's apparent
authority or acts committed within the scope of her
employment. See Id. at 469-70. The district court
used the Restatement of Agency's “strict
limitations” on the application of vicarious liability
for punitive damages, requiring evidence that the principal
authorized the wrongful act or was reckless in hiring or
supervising the agent, that the agent acted in a managerial
capacity within the scope of employment, or the principal or
a managerial agent ratified the wrongful acts. Id.
Southern Maryland court recognized that its holding
was based on the assumption that FCA damages are punitive in
nature and distinguished American Society of Mechanical
Engineers v. Hydrolevel Corp., 456 U.S. 556 (1982)
(“ASME”), in which the Supreme Court applied the
apparent authority theory to bind an employer in an
anti-trust case under a statute providing for treble damages.
See Id. at 471-72. The Supreme Court in
ASME stated: “[A] principal is liable for an
agent's fraud though the agent acts solely to benefit
himself, if the agent acts with apparent authority.”
ASME, 456 U.S. at 566. The Southern
Maryland court determined that Kolstad limited
the reach of ASME and that ASME was based
on the goals of the antitrust statutes, noting that the FCA
was comparatively more punitive. Southern Maryland,
95 F.Supp.2d at 472.
Southern Maryland, the Supreme Court held that the
term “person” in § 3729 of the FCA included
local governments. Cook County, 538 U.S. at 134. The
County had argued that Congress's adoption of a
“punitive” remedy in the form of increased fines
and treble damages in its amendments to the FCA suggested
that it did not intend to cover municipalities. See
Id. at 129-30. In rejecting this argument, the Supreme
Although we did indeed find the punitive character of the
treble damages provision a reason not to read
“person” to include a State, it does not follow
that the punitive feature has the force to show congressional
intent to repeal implicitly the existing definition of that
word, which included municipalities. To begin with it is
important to realize that treble damages have a compensatory
side, serving remedial purposes in addition to punitive
objectives. While the tipping point between payback and
punishment defies general formulation, being dependent on the
workings of a particular statute and the course of particular
litigation, the facts about the FCA show that the damages
multiplier has compensatory traits along with the punitive.
…The most obvious indication that the treble damages
ceiling has a remedial place under this statute is its
qui tam feature with its possibility of diverting as
much as 30 percent of the Government's recovery to a
private relator who began the action. In qui tam
cases the rough difference between double and triple damages
may well serve not to punish, but to quicken the
self-interest of some private plaintiff who ...