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Mason v. Health Management Associates, Inc.

United States District Court, W.D. North Carolina, Charlotte Division

October 24, 2019

THOMAS L. MASON M.D. et al., Plaintiffs,
v.
HEALTH MANAGEMENT ASSOCIATES, LLC et al., Defendants.

          ORDER

          Kenneth D. Bell, United States District Judge.

         THIS MATTER is before the Court on the HMA Defendants'[1] Motion to Dismiss (Doc. No. 81), the EmCare Defendants'[2] Motion to Dismiss (Doc. No. 86), Defendant Community Health System, Inc.'s Motion to Dismiss (Doc. No. 95), and the Honorable Magistrate Judge David S. Cayer's Memorandum and Recommendation (“M&R”) (Doc. No. 105), recommending that Defendants' motions be granted in part and denied in part.

         The Court has carefully reviewed and considered de novo the M&R, Plaintiffs'[3] Third Amended Complaint (Doc. No. 67), the HMA Defendants' motion to dismiss (Doc. No. 95), the EmCare Defendants' motion to dismiss (Doc. No. 86), the parties' briefs, and all other relevant portions of the record. For the reasons stated herein, the Court ADOPTS the Magistrate Judge's recommendation contained in the M&R as discussed below and GRANTS IN PART and DENIES IN PART Defendants' motions to dismiss.

         I. BACKGROUND

         This case arises out of the operations of emergency medical departments at two hospitals in the Charlotte area. Taking the allegations set forth in the Complaint as true, Plaintiff Mid-Atlantic Emergency Medical Associates, PPLC (“MEMA”) is a professional medical corporation that provides emergency room (“ER”) medical services under professional services agreements with hospitals in the Charlotte area. (Complaint, Doc. No. 67, at ¶¶1-2). MEMA physicians provided ER services to two hospitals then-owned and operated by Defendant Health Management Associates, LLC (“HMA”). Id. at ¶ 2. MEMA provided services to Davis Regional Medical Center beginning in 2000 and Lake Norman Regional Medical center beginning in 1996. Id. Plaintiffs claim HMA unlawfully terminated these contracts on May 3, 2010. Id.

         Plaintiffs Thomas Mason and Steven Folstad are principals of MEMA and board-certified emergency medicine physicians. Id. at ¶ 3. Mason served as Lake Norman's Chief of Staff, a member of the Lake Norman's Medical Executive Committee for thirteen years, and as the Emergency Medical Department Medical Director at Lake Norman Hospital from 2007 until MEMA's contract was terminated. Id. at ¶ 3. Folstad worked as the ER Medical Director at Davis Hospital from 2000 to 2008 before becoming MEMA's CEO. Id. at ¶ 4.

         Plaintiffs claim that the HMA Defendants, with the help of the EmCare Defendants, submitted false claims to Medicare, Medicaid, other federally-funded healthcare programs, private healthcare insurers, and patients throughout their time at the two hospitals. Id. at ¶¶ 16-17. Plaintiffs allege that HMA terminated their contracts in retaliation for their refusal to participate in this fraudulent scheme. Id. at ¶ 18.

         Plaintiffs originally brought this action as qui tam relators on their own behalf and on behalf of the United States and the states of North Carolina, Florida, Georgia, Oklahoma, Tennessee, and Texas against HMA, its successor in interest Community Health System, Inc., and EmCare for violations of the federal False Claims Act, 31 U.S.C. § 3730 et. seq. Id. at ¶ 19. In December 2017, EmCare paid $33 million to settle government claims. Id. at ¶ 20. In September 2018, HMA and Community Health System paid $262 million to settle government claims. Id.

         Plaintiffs filed their Third Severed Amended Complaint (“TAC”) on April 26, 2019 containing their remaining claims against Defendants. (Doc. No. 67). In it, Plaintiffs allege retaliation under the federal False Claims Act, retaliation under the North Carolina False Claims Act, defamation, and slander per se against the HMA Defendants only and claims for tortious interference with a contractual relationship, unfair and deceptive trade practices, and civil conspiracy against all Defendants. (Doc. No. 67, at ¶¶ 203-248).

         II. STANDARD OF REVIEW

         Under Federal Rule of Civil Procedure 8(a)(2), a complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). However, “Rule 8(a)(2) still requires a ‘showing,' rather than a blanket assertion, of entitlement to relief.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 n.3 (2007).

         The purpose of a motion to dismiss under Rule 12(b)(6) is to test the legal sufficiency of the complaint, not to resolve conflicts of fact or to decide the merits of the action. Edwards v. City of Goldsboro, 178 F.3d 231, 243-44 (4th Cir. 1999). In considering a motion to dismiss, the court assumes the truth of all facts alleged in the complaint and the existence of any fact that can be proved, consistent with the complaint's allegations. Erickson v. Pardus, 551 U.S. 89, 94 (2007). “The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims.” Revene v. Charles County Comm'rs, 882 F.2d 870, 872 (4th Cir. 1989) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).

         However, the “‘[f]actual allegations must be enough to raise a right to relief above the speculative level' and have ‘enough facts to state a claim to relief that is plausible on its face.'” Wahi v. Charleston Area Med. Ctr., Inc., 562 F.3d 599, 616 n.26 (4th Cir. 2009) (quoting Twombly, 550 U.S. at 555); Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) (“While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.”). “[A] plaintiff's obligation to provide the grounds of his entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of a cause of action's elements will not do.” Twombly, 550 U.S. at 555 (citations omitted). Moreover, a court “need not accept the legal conclusions drawn from the facts” nor “accept as true unwarranted inferences, unreasonable conclusions, or arguments.” Eastern Shore Mkts., Inc. v. J.D. Assocs. Ltd. Pshp., 213 F.3d 175, 180 (4th Cir. 2000).

         The Federal Magistrates Act of 1979, as amended, provides that “a district court shall make a de novo determination of those portions of the report or specific proposed findings or recommendations to which objection is made.” 28 U.S.C. § 636(b)(1); Camby v. Davis, 718 F.2d 198, 200 (4th Cir. 1983). However, de novo review is not required by the statute “when a party makes general or conclusory objections that do not direct the court to a specific error in the magistrate judge's proposed findings and recommendations.” Orpiano v. Johnson, 687 F.2d 44, 47 (4th Cir. 1982). Moreover, the statute does not on its face require any review at all of issues that are not the subject of an objection. Thomas v. Arn, 474 U.S. 140, 149 (1985); Camby v. Davis, 718 F.2d at 200.

         III. DISCUSION

         The HMA Defendants and the EmCare Defendants object to the Magistrate Judge's recommendation to deny their motions to dismiss Plaintiffs' claims for retaliation under the federal and North Carolina False Claims Act, unfair and deceptive trade practices, tortious interference with contractual relationship, and defamation and slander per se. (Doc. Nos. 110, 111). Defendants also object to the Magistrate Judge's recommendation to dismiss Plaintiffs civil conspiracy claim without prejudice to Plaintiffs' right to argue the remedy of joint and several liability under a theory of civil conspiracy. (Doc. Nos. 110, 111).

         A. Community Health System, Inc.'s Motion to Dismiss

         Plaintiffs voluntarily dismissed Defendant Community Health System on July 12, 2019. (Doc. No. 99). Accordingly, the Magistrate Judge recommends Community Health System's Motion to Dismiss (Doc. No. 95) be denied as moot and no parties have objected to his recommendation. Having carefully reviewed the Magistrate Judge's M&R, the relevant portions of the record, and applicable legal authority, this Court is satisfied that there is no clear error as to the Magistrate Judge's recommendation to deny as moot Community Health System's motion to dismiss, to which no objection was made. Diamond v. Colonial Life & Acc. Ins. Co., 416 F.3d 310, 315 (4th Cir. 2005). Accordingly, this Court finds that it should adopt the findings and recommendations set forth in the M&R as its own solely for the purpose of deciding this motion and that Community Health System's motion to dismiss (Doc. No. 95) be denied as moot.

         B. The HMA Defendants' and the EmCare ...


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