PHILADELPHIA, PA – The United States’ False Claims Act (“FCA”) suit against Berkeley Heartlab, Inc.; BlueWave Healthcare Consultants, Inc.; BlueWave principles, Floyd Calhoun Dent, III, and Robert Bradford Johnson; and former Health Diagnostics Laboratories (“HDL”) President, Latonya Mallory will proceed to discovery. On March 28, the U.S. District Court for the District of South Carolina denied defendants’ various motions to dismiss the United States’ Complaint in Intervention.
In addition to preserving the federal FCA claims against the remaining defendants, the Court denied motions by Dent, Johnson, and Mallory to dismiss related claims under various state FCAs and state insurance laws claims brought by relators Scarlett Lutz and Kayla Webster. Lutz and Webster filed one of three qui tam actions alleging a kickback scheme. The cases were consolidated in the District of South Carolina, and the United States intervened to prosecute the federal FCA claims.
The lawsuit alleges a nationwide scheme in which physicians were offered and paid kickbacks to order often-medically-unnecessary tests from diagnostic laboratories (Berkeley HeartLab, Health Diagnostic Laboratory, Inc. [“HDL”], and Singulex, Inc.), through a marketing agent (BlueWave). Federal and state governmental healthcare programs and private insurers then reimbursed the laboratories for those impermissible payments.
HDL and Singulex settled with the United States in October 2014. HDL agreed to pay a fixed settlement of more than $50 million, with the potential of $100 million if certain contingencies occur. Singulex agreed to pay at least $1.5 million, and as much as $13.1 million, depending on the occurrence of contingencies outlined in the settlement agreement.
The Court also rejected Dent, Johnson, and Mallory’s arguments that Lutz and Webster’s claims against them were barred by the federal FCA’s so-called first-to-file rule. Under that rule, a relator may not pursue FCA claims if his complaint alleges the same material elements of a fraudulent scheme already identified in another relator’s complaint. Lutz and Webster filed their complaint after Mayes and Reidel filed theirs, but unlike those relators, Lutz and Webster named
Dent, Johnson, and Mallory – as opposed to just the corporate entities they represented – as defendants and described their personal participation in the fraud. The Court concluded that, by naming the individuals as defendants and alleging their fraudulent conduct, Lutz and Webster had provided different material elements of fraud, thus defeating operation of the first-to-file rule, even though all of the relators’ complaints described the same general scheme.
Because the United States intervened in Lutz and Webster’s federal FCA claims, the dismissal of the Lutz-Webster complaint under the first-to-file rule would have had no practical effect on the defendants. However, the survival of their claims as to Dent, Johnson, and Mallory will entitle Lutz and Webster to a share of any award that the United States obtains against those defendants through settlement or by proving their liability at trial. Lutz and Webster are also free to continue pursuing their state claims against Dent, Johnson, and Mallory.
Scarlett Lutz and Kayla Webster are represented by Pietragallo Gordon Alfano Bosick & Raspanti, LLP, Philadelphia, PA; William J. Tuck, P.A., Florence, SC; and Wyatt & Blake, LLP, Charlotte, NC. Pietragallo Gordon Alfano Bosick & Raspanti, LLP, is one of the largest and most successful whistleblower law firms in the United States. Lawyers in its nationwide whistleblower practice group have served for more than 28 years as lead counsel in cases that have recovered more than $2 billion for federal and state taxpayers. See http://www.pietragallo.com and http://www.falseclaimsact.com for more information.
The lawsuit is captioned United States ex rel. Lutz v. Berkeley HeartLab, Civil Case No. 9:14-cv-230-RMG (D.S.C.). The case is assigned to the Honorable Richard M. Gergel.