The opinion of the court was delivered by: Present: The Honorable A. Howard Matz, U.S. District Judge
Stephen Montes Not Reported
Deputy Clerk Court Reporter / Recorder Tape No.
Attorneys NOT Present for Plaintiffs: Attorneys NOT Present for Defendants:
Proceedings: IN CHAMBERS (No Proceedings Held)
Plaintiff P. Victor Gonzalez brings this qui tam action against
Defendants Planned Parenthood, Mary Jane Wagle, Martha Swiller, and
Kathy Kneer for violation of the federal False Claims Act ("FCA").
Before the Court is Defendants' motion to dismiss and strike
Plaintiff's third amended complaint ("TAC").*fn1 The
Court finds that Plaintiff has failed to allege falsity, a required
element of the FCA, and therefore GRANTS the motion to dismiss the
TAC.*fn2 The motion to strike the state claims
previously dismissed with prejudice is also GRANTED.*fn3
Finding that any further amendment of the complaint would be
futile -- Plaintiff has now filed four complaints -- the Court
dismisses this action with prejudice.
The key facts as alleged in the TAC are as follows. Plaintiff was the Chief Financial Officer of Planned Parenthood of Los Angeles ("PPLA") from December 2002 to March 2004. PPLA and several other Planned Parenthood regional affiliates operating in California are the Defendants. For purposes of clarity, the Court will refer to all these affiliates as "Planned Parenthood," since several are accused of conspiring with each other and all are accused of independently engaging in the same conduct.
During the relevant time period, Planned Parenthood was a participant in the Family Planning, Access, Care and Treatment program ("FPACT") and Medi-Cal programs that reimbursed Planned Parenthood for contraceptives it provided to low-income individuals. (TAC ¶¶ 1, 22-23.) Medi-Cal is California's Medicaid program that provides health services for low income individuals and is jointly funded by the federal and state governments. (TAC ¶ 27.) FPACT is a special program within Medi-Cal that provides family planning drugs and services to individuals under the poverty level. It has been jointly funded by the federal and state governments since 1999. (TAC ¶¶ 28, 45.) Prior to late 1999, FPACT was funded 100% by the state of California. (TAC ¶ 44.)
Each of the Planned Parenthood Defendants signed a Provider Agreement with FPACT, agreeing to "comply with all federal laws and regulations governing and regulating Providers." (TAC ¶ 36, Exh. 1(b), "Provider Agreement," ¶ 2.) The Planned Parenthood affiliates also agreed to "comply with all of the billing and claims requirements set forth in the Welfare and Institutions Code." The Provider Agreement went on to state, "Refer to the Family PACT Policy, Procedures, and Billing Instruction manual for diagnosis code and method indicators that are distinctive to the Family PACT program." (TAC ¶¶ 35-36, Exh. 1(b), "Provider Agreement," ¶ 20.)
Planned Parenthood acquires contraceptives from manufacturers at a significant discount. (TAC ¶ 26.) Plaintiff alleges that federal and state regulations,*fn4 as well as the FPACT manual, required Planned Parenthood to bill FPACT and Medi-Cal for reimbursement of contraceptives "at cost" -- not at the "usual and customary rates" charged to the general public. (TAC ¶¶ 33-34, 37, Exh. 1(a).) Nonetheless, from 1997-2004, Planned Parenthood submitted reimbursement claims based on "usual and customary rates." (TAC ¶ 52.) Plaintiff alleges Defendants defrauded the federal government by overbilling California's FPACT and Medi-Cal programs during that time period. (TAC ¶ 4.)
On May 5, 1997, the California Department of Health Services started exchanging a series of letters with Kathy Kneer, then the Executive Director of the Planned Parenthood Affiliates of California, informing her that claims made to FPACT and MediCal for reimbursement were to be billed "at cost." (TAC ¶¶ 56, 72, 85, 91, 97, 102, 107, 112, 117, 122, Exhs. 2(a)-2(b).) Years later, in 2004, the California Department of Health Services ("DHS") notified several Planned Parenthood offices in California that it would conduct an audit of their overbilling practices. (TAC ¶ 57.) Defendant Wagle, the CEO of PPLA, asked Plaintiff to perform an assessment of the impact of Defendants' overbilling practices. The assessment revealed that PPLA had profited $2,144,313.17 from the practice in just one year. (Id.) In November 2004, the DHS issued a report of the audit and found that PPLA had failed to comply with the billing practices outlined in the FPACT manual. (TAC Exh. 6.)
Based on the 1997 correspondence and the DHS audit,*fn5
Plaintiff alleges that all Defendant entities of Planned
Parenthood were put on notice as of 1997 that their billing practices
were not in compliance with the law. (TAC ¶¶ 56-57.) Despite this
knowledge, Defendants continued to submit claims at the "usual and
customary rate" until at least the end of 2004. (TAC ¶¶ 60, 80, 87,
93, 99, 104, 109, 114, 119, 128.) Plaintiff admits that Defendants did
not attempt to hide this practice but "openly acknowledged engaging in
this practice in order, as they claimed, to subsidize other services
provided by them for which they believed they were
'under-reimbursed.'" (TAC ¶ 42, Exh. 3(a).)
Plaintiff initiated this action on December 19, 2005. (Dkt. 1.) Nearly two years later, the United States filed a notice of non-intervention. (Dkt. 26.) Subsequently, Plaintiff filed a First Amended Complaint alleging claims under the FCA, the California False Claims Act, and other state laws. The Court dismissed the federal and California FCA claims for lack of subject matter jurisdiction, finding that the facts alleged were previously disclosed to the public and that Plaintiff was not an original source of the allegations. (Dkt. 43.) The other state claims were dismissed for lack of standing.
The Ninth Circuit reversed this Court's dismissal of the federal and state FCA claims, holding that Gonzalez qualified as an original source. Gonzalez v. Planned Parenthood of Los Angeles, 392 F.App'x. 524, 528 (9th Cir. 2010). On remand, Defendants moved for judgment on the pleadings. This Court dismissed the California claims with prejudice for being time-barred and dismissed the federal FCA claims with leave to amend on the grounds that they were not pled with the specificity required by Fed. R. Civ. P. 9(b). The Court also found that (1) the ambiguity of the words "at cost" did not necessarily preclude FCA liability and (2) the government's knowledge of Defendants' billing practices did not necessarily preclude a finding of falsity or scienter. (Dkt. 104.)
Plaintiff filed a Second Amended Complaint but stipulated to withdrawing it after Defendants moved again for a judgment on the pleadings. (Dkt. 120.) On August 25, 2011, Plaintiff filed the TAC, alleging three claims under the federal FCA for (1) Submission of False Claims (31 U.S.C. § 3729(a)(1)), (2) Use of False Statements or Records or Statements (31 U.S.C. § 3729(a)(2)), and (3) Conspiracy to Get False Claims Paid (31 U.S.C. § 3729(a)(3)). (Dkt. 122.) Plaintiff also alleged the ...