Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

United States v. Dental Dreams, LLC

United States District Court, D. New Mexico

March 28, 2018

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.


         This 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.

         A. Defendants' Motion for Summary Judgment

         Defendants 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.

         1. Factual Background[1]

         a. Plaintiff's Hiring and Employer

         Plaintiff/Relator 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.

         KOS 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.

         Dental 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.

         b. Plaintiff's Discovery of Billing Practices at Family Smiles

         Dr. 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 employment. Id.

         While 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.

         On May 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.[2] 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.[3] 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.

         Minutes 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.

         On May 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.[4] 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.

         On May 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. See id.

         Prior 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.

         c. Unwanted physical contact

         Beginning 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.

         On May 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.[5]

         d. Plaintiff's disability and service dog in training

         Plaintiff 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.

         Plaintiff 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.

         Family 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. ¶ 349.

         On May 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.

         At some 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. 112-7.

         On 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.

         On May 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.

         e. Plaintiff's Termination from Family Smiles

         On May 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.

         Mr. 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. 211:25-212:2.

         By 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.

         No 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.[6]

         f. Dr. Moffat's Review of Family Smiles' Dental Records

         Dr. 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.[7] 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.

         Dr. 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. 111-1.[8]

         2. STANDARD

         On a 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.

         3. ANALYSIS

         a. False Claims Act and New Mexico Analogous Claims (Counts 1-12)

         Plaintiff 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 Smiles.

         (1) False Claims (Counts 1-12)

         “FATA 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)).

         Defendants 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.

         Defendants 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.

         Defendants 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.

         Turning 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. at 470.

         The 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.

         After 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 Court explained:

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 ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.