United States of America Ex Relator David Di Pietr v. 21st Century Oncology Holdings, Inc. et al

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UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
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In re:
21st CENTURY HOLDINGS, INC., et al. 	Chapter 11
Case No. 17-22770 (RDD)
Debtors.
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UNITED STATES OF AMERICA EX REL.
DAVID DI PIETRO,
Plaintiff, 	Adv. P. No. 17-
08284(RDD)
v.
21 st CENTURY ONCOLOGY HOLDINGS, INC.,
21 st CENTURY ONCOLOGY, INC., and
21 st CENTURY ONCOLOGY, LLC,
Defendants.
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A P P E A R A N C E S :
KIRKLAND & ELLIS LLP
Attorneys for the Reorganized Debtors/Defendants
BY: 	JACOB H. JOHNSTON and MARK MCKANE
DELBELLO DONNELLAN WEINGARTEN WISE & WIEDERKEHR, LLP
Attorneys for Ex rel. Plaintiff, David Di Pietro
BY: 	STEVEN R. SCHOENFELD
BERGER SINGERMAN LLP
Attorneys for Ex rel. Plaintiff, David Di Pietro
BY: 	JORDI GUSO and SHARON KEGERREIS
MODIFIED BENCH RULING ON MOTION TO DISMISS
Hon. Robert D. Drain
United States Bankruptcy Judge
On May 25, 2018 the Court issued a bench ruling on the
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portion of the reorganized debtors/defendants’ (the
“Debtors”) motion for an order dismissing this adversary
proceeding pursuant to Fed. R. Bankr. P. 7009 and 7012 that
the Court had not previously granted in its prior bench
ruling on January 30, 2018. 	As I alerted the parties at the
hearing, I am filing this modified bench ruling to correct
and improve on the syntax and structure of the May 25, 2018
oral ruling, the result of which has already been
memorialized by an order dated June 4, 2018 granting the
motion to dismiss in full. 	This Modified Bench Ruling is
more colloquial and immediate than a memorandum of decision
(and delivered faster), but I hope it is more readable than
the bench ruling transcript which it supersedes.
This is the adjourned hearing from January 30, 2018 on
the Debtors’ motion to dismiss the first amended complaint
herein 1 pursuant to Fed. R. Bankr. P. 7009 and 7012,
1 Although the complaint at issue is styled a “First Amended Complaint to
Determine Dischargeability of Debt Pursuant to 11 U.S.C. § 1141(d)(6),”
this is the first motion to dismiss that the Court has considered in
this adversary proceeding.
It is also worth noting that this adversary proceeding actually involves
two complaints: 	the first being the complaint in this adversary
proceeding, which seeks a declaration of non-dischargeability under 11
U.S.C. § 1141(d)(6) of the claims under the False Claims Act, 31 U.S.C.
§ 3729-33, which were asserted against the Debtors in the second
complaint, in the District Court for the Southern District of Florida, a
copy of which is attached as an exhibit to and is incorporated in the
first complaint. Because the motion to dismiss focuses primarily on
infirmities in that second complaint, references herein to the
“complaint” are unless otherwise noted to the second, False Claims Act
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incorporating Fed. R. Civ. P. 9(b) and 12(b)(6).
At the January 30, 2018 hearing, I granted certain
aspects of the Debtors’ motion to dismiss: I denied the
claims of the relator plaintiff, Mr. De Pietro (the
“Plaintiff”) in this qui tam action based on the Debtors’
alleged violations of the Stark Law, 42 U.S.C. § 1395nn,
which were premised on alleged offers of patient referrals,
including as a basis for the Debtors’ alleged violations of
the False Claims Act, 31 U.S.C. § 3729, et. seq.; and I
ruled against the Plaintiff regarding his proffered
interpretation of the application of section 1141(d)(6) of
the Bankruptcy Code, 11 U.S.C. § 1146(d)(6), to his own
right to recovery under the False Claims Act (as opposed to
the claims that he is pursuing on the United States’
behalf).
As to the latter ruling, I concluded that the plain
language of Bankruptcy Code section 1141(d)(6) and Southern
District of New York precedent limit the Plaintiff’s right
to a declaration of non-dischargeability to his claim for
his fees in a successful qui tam action 2 and not to his right
under 31 U.S.C. § 3730(d) to a percentage of a recovery on
complaint.
2 At the January 30, 2018 hearing the Debtors conceded that the
Plaintiff’s individual claims to compensation for his attorneys fees
under the False Claim Act, if established, would be non-dischargeable
under section 1146(d)(6).
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the claims that he is pursuing on behalf of the United
States for alleged violations of the False Claims Act or in
any other way through the Government’s possible recovery.
The latter, far larger potential claim I concluded is
clearly not a claim that would be owed to the Plaintiff
individually but, rather, would be owed to the United States
and, therefore, is outside the coverage of section
1141(d)(6)’s plain terms. 	See 11 U.S.C. § 1141(d)(6): “The
confirmation of a plan does not discharge a debtor that is a
corporation from any debt – (A) of a kind specified in
paragraph (2)(A) or (2)(B) of section 523(a) that is owed to
a domestic governmental unit, or owed to a person as the
result of an action filed under subchapter III of chapter 37
of title 31 or any similar State Statute. (Emphasis added.)
See also United States ex rel. Minge v. Hawker Beechcraft,
Inc., 493 B.R. 696, 710-12 (Bankr. S.D.N.Y. 2013)
(concluding that the two italicized clauses above are
separate and therefore that a qui tam plaintiff is entitled
only to have the aspects of his or her claim that are not
first owed to a governmental unit under the False Claims Act
be declared non-dischargeable). In United States ex rel.
Minge v. Hawker Beechcraft, Inc., 515 B.R. 416 (S.D.N.Y.
2014), the District Court reversed that decision on other
grounds but in doing so agreed with the Bankruptcy Court
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that clauses 1 and 2 of section 1141(d)(6)(A) are
independent and give rise to separate non-dischargeable
claims as limited thereby. Id. at 424-25.
I will not repeat the reasons stated in the transcript
of the January 30, 2018 hearing for concluding that the
complaint does not allege necessary elements of a claim for
violation of the Stark Law and thus that the complaint’s
False Claim Act claims based on allegations of the offer of
improper patient referrals should be dismissed.
Plaintiff’s remaining claims are based on the Debtors’
alleged violations of the Anti-Kickback Statute, 42 U.S.C. §
1320a-7b, as a basis for the complaint’s False Claims Act
claims. 	As with the complaint’s False Claims Act
allegations based on the Stark Law, claims would arise under
the False Claims Act if the Debtors violated the Anti-
Kickback Statute and then, as the complaint alleges, failed
to disclose such violations in their certifications to the
United States in connection with enrolling in and billing
for Government-reimbursed health programs. 	31 U.S.C. §
3729(a)(1)(A), (B), (C) and (G).
The motion to dismiss contends that the complaint’s
False Claims Act claims based on violations of the Anti-
Kickback Statute fail because the Plaintiff does not satisfy
31 U.S.C. § 3730(e)(4)(A) and (B) in that, as alleged by the
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Debtors, the crux of those Anti-Kickback Statute claims was
publicly disclosed by other sources before the Plaintiff
shared them with the Government and the Plaintiff lacks
knowledge that is independent of and materially and timely
added to such publicly disclosed allegations. 3
At the January 30, 2018 hearing, I reserved ruling on
what I’ll refer to as this “prior public disclosure issue,”
based in large part on the need for briefing on a second,
related issue deriving from the fact that the complaint’s
allegations that the Debtors violated the False Claims Act
based on their violations of the Anti-Kickback Statute in
turn depend almost entirely on alleged conduct by the
3 31 U.S.C. § 3730(e)(4) performs a gatekeeping function for False Claims
Act claims. Chen v. EMSL Analytical, Inc., 966 F. Supp. 2d 282, 295-97
(S.D.N.Y. 2013). It states in relevant part:
“(A) The Court shall dismiss an action or claim 	under this section,
unless opposed by the Government, if substantially the same allegations
or transactions as alleged in the action or claim were publicly
disclosed -- . . .
“(iii) In the news media, unless the person bringing the action is
an original source of the information.
“(B) For purposes of this paragraph, ‘original source’ means an
individual who either (1) prior to a public disclosure under subsection
(e)(4)(A), has voluntarily disclosed to the Government the information
on which the allegations or transactions in a claim are based, or (2)
has knowledge that is independent of and materially adds to the publicly
disclosed allegations or transactions and who has voluntarily provided
the information to the Government before filing an action under this
section.”
Here, it does not appear that clause 1 of subsection (B) applies. For
purposes of subsection (B)(2), the motion to dismiss does not contest
that the Plaintiff provided the complaint to the Government before
filing it; it does contest, however, that the Plaintiff has knowledge
that is independent of and materially adds to the prior public
disclosure.
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Debtors’ lobbyist, Bill Rubin (“Rubin”).
I noted at the January 30, 2018 hearing that False
Claims Act claims sound in fraud, 4 and, therefore, that Fed.
R. Bankr. P. 7009, which incorporates Fed. R. Civ. P. 9(b)
applies to them. 5 Given the complaint’s lack of
particularity in describing the scope and conduct of Rubin’s
agency on the Debtors’ behalf (indeed, as discussed later,
most of the complaint’s references to Rubin’s agency are
wholly conclusory), I asked the parties to brief whether and
to what extent Fed. R. Civ. P. 9(b) applied to those
portions of the complaint focusing on the relationship
between Rubin and the Debtors and the complaint’s
allegations with respect to Rubin's conduct.
The prior public disclosure issue and this Rule 9(b)
issue are related because, as discussed in more detail
later, the only aspect of the complaint that arguably
materially adds to the prior public disclosure of the facts
underlying the complaint’s remaining False Claims Act claims
relate to Rubin’s lobbying role on the Debtors’ behalf; if
that role is insufficiently pled or the complaint’s
4 “The FCA is the United States Government’s primary tool for redressing
fraud against the Government.” 	Chen v. EMSL Analytical, 966 F. Supp.
2d at 295 (internal quotation and citation omitted).
5 Fed. R. Civ. P. 9(b) states, “In alleging fraud or mistake, a party
must state with particularity the circumstances constituting fraud or
mistake. 	Malice, intent, knowledge or other conditions of a person’s
mind may be alleged generally.”
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description of Rubin’s conduct, to the extent sufficiently
pled, does not substantially add to the prior public
disclosures, the remaining False Claim Act claims should be
dismissed, too.
Having reviewed the parties’ post-hearing briefs and
considered all of the pleadings filed in connection with the
motion to dismiss, as well as the transcript of the January
30, 2018 hearing and, of course, the complaint, I have
determined to grant the remaining aspect of the motion to
dismiss for the following reasons.
As noted, in this qui tam action the Plaintiff/relator
asserts False Claims Act claims on behalf of the United
States based on alleged false certifications by the Debtors
in their transactions with the Government, primarily in
connection with the Debtors’ enrolling in and billing for
the Government’s Medicare, Medicaid and TRICARE programs.
Complaint ¶¶ 211-343.
The complaint alleges that the Debtors’ certifications
were false or fraudulent because they failed to disclose the
Debtors’ violations of federal law, namely the Stark Law and
the Anti-Kickback Statute incurred in connection with the
Debtors’ entry into a contract with North Broward Hospital
District (“Broward Health”) to supply Broward Health with
radiation oncology services (the “Broward Contract”).
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Having on January 30, 2018 concluded to dismiss the
complaint’s claims for violation of the False Claims Act
based on the Debtors’ alleged violation of the Stark Law
premised on the Debtor’s offer of improper patient
referrals, I now address the complaint’s claims based on the
Debtor’s alleged violation of the Anti-Kickback Statute.
When considering a motion to dismiss under Fed. R. Civ.
P. 12(b)(6), incorporated by Fed. R. Bankr. P. 7012, a court
must assess the legal feasibility of the complaint, not
weigh the evidence that might be offered in its support.
Koppel v. 4987 Corp., 167 F.3d 125, 133 (2d Cir. 1999).
The Court's consideration is limited to facts stated on
the face of the complaint and the documents appended to the
complaint or incorporated in it by reference, as well as
matters of which judicial notice may be taken. 	Hertz Corp.
v. City of New York, 1 F.3d 121, 125 (2d Cir. 1993), cert.
denied, 510 U.S. 1111 (1993).
The availability of judicial notice is relevant here
because the basis for the remaining aspect of the motion to
dismiss is the alleged prior public disclosure of the crux
of the Debtors’ alleged Anti-Kickback Statute violations,
and therefore the Plaintiff’s failure to comply with section
3370(e)(4)(A)-(B) of the False Claims Act’s gatekeeping
requirement, in a publication with the wonderful name of the
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"Florida Bulldog," as well as public website disclosure of
Broward Health’s Board of Commissioners’ meeting minutes
pertaining to the Broward Contract and SEC filings also
mentioned in the “Florida Bulldog”. 	The Plaintiff does not
contest that such disclosures occurred as quoted by the
Debtors before he made the complaint available to the
Government, or that he did not provide any original
information to any of those sources, but he does contest
whether the disclosures preclude the complaint.
When considering a motion to dismiss, one must accept
the complaint's factual allegations as true and draw all
reasonable inferences in favor of the plaintiff. 	Tellabs,
Inc. v. Makor Issues & Rights Ltd., 551 U.S. 308, 323
(2007). 	If a complaint's allegations are clearly
contradicted by documents incorporated into the pleadings by
reference, however, the court need not accept them. 	Labajo
v. Best Buy Stores, LP, 478 F. Supp. 2d, 523, 528 (S.D.N.Y.
2007). 	Moreover, the court is not bound to accept as true a
legal conclusion couched as a factual allegation. 	Papasan
v. Allain, 478 U.S. 265, 286 (1986). 	Instead, the complaint
must state more than "labels and conclusions and a formulaic
recitation of the elements of the cause of action will not
do." 	Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555
(2007).
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Relatedly, while the Supreme Court has confirmed in
light of the notice pleading standard of Federal Rule of
Civil Procedure 8(a) that a complaint does not need detailed
factual allegations to survive a motion under Rule 12(b)(6),
see Erickson v. Pardus, 551 U.S. 89, 93-4 (2007), and Bell
Atlantic v. Twombly, 550 U.S. at 555, "factual allegations
must be enough to raise a right to relief above the
speculative level." 	Bell Atlantic v. Twombly, 550 U.S. at
555. 	The complaint must contain sufficient facts accepted
as true to state a claim that is "plausible on its face."
Id. at 570. 	In other words, the plaintiff must allege
sufficient facts to "nudge the claim across the line from
conceivable to plausible”. 	Id. 	Otherwise, the defendant
should not be subjected to the burdens of discovery and the
worry of overhanging litigation. 	Id.
Evaluating plausibility is "a context-specific task
that requires the reviewing court to draw on its judicial
experience and common sense. But where the well-pleaded
facts do not permit the court to infer more than the mere
possibility of misconduct, the complaint has alleged -- but
it has not shown -- that the pleader is entitled to relief"
under Rule 8. 	Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).
The plausibility standard is not akin to a probability
requirement, but it asks for more than sheer possibility
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that a defendant has acted unlawfully. 	Id.
As noted, the False Claims Act is an anti-fraud
statute. 	It therefore is clear that in addition to
complying with Fed. R. Civ. P. 8 a complaint asserting a
False Claims Act claim must comply with Fed. R. Civ. P.
9(b), incorporated by Fed. R. Bankr. P. 7009. 	See Gold v.
Morrison-Knudsen Co. 68 F.3d 1475, 1477 (2d Cir. 1999).
Rule 9(b) requires that a plaintiff alleging
fraud state with particularity the circumstances
constituting fraud. 	Generally to satisfy that particularity
requirement a complaint must (1) specify the statements that
the plaintiff contends were fraudulent, (2) identify the
speaker, (3) state where and when the statements were made,
and (4) explain why the statements were fraudulent. 	Rombach
v. Chang, 355 F.3d 164, 170 (2d Cir. 1994).
Rule 9(b) also requires pleading with particularity
when the alleged fraud involved the failure to disclose, or
a fraudulent omission. 	"In cases where the alleged fraud
consists of an omission and the plaintiff is unable to
specify the time and place because no act occurred, the
complaint must still allege (1) what the omissions were, (2)
the person responsible for the failure to disclose, (3) the
context of the omissions and the manner in which they misled
the plaintiff, and (4) what defendant obtained through the
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fraud." 	Kelly v. Jefferies Grp., Inc., 2018 U.S. Dist.
LEXIS 26090, at *17 (S.D.N.Y. Feb. 15, 2018), citing Odyssey
Re (London) Ltd. v. Stirling Cooke Brown Holdings Ltd., 85
F. Supp. 2d 282, 293 (S.D.N.Y. 2000), aff'd 2 F. App’x, 109
(2d Cir. 2001). 6
That application of Rule 9(b) clearly also applies to
“false pretenses” as one of the prongs under 11 U.S.C. §
523(a)(2)(A) for a declaration of non-dischargeability, as
noted by many bankruptcy courts, including courts in the
Second Circuit. 	See In re Ellis, 400 F. Supp. 1112, 1114-15
(S.D.N.Y. 1975); In re Ippolito, 2013 Bankr. LEXIS 866, at
*17 (Bankr. E.D.N.Y. March 6, 2013); In re Howard, 2009
Bankr. LEXIS 3743, at *8-9 (Bankr. S.D.N.Y. Nov. 25, 2009);
and H.J. Bushka Lumber & Millwork v. Boucher (In re
Boucher), 336 B.R. 27, 36 (Bankr. D. Conn. 2005). See also
In re Wiszniewski, 2010 Bankr. LEXIS 2894, at *12-13 (Bankr.
N.D. Ill. Aug. 31, 2010), citing In re Lane, 937 F.2d 694,
698-99 (1st Cir. 1991).
In the Second Circuit, Rule 9(b)’s particularity
requirement applies to two different sets of facts with
respect to False Claim Act claims. 	First, Rule 9(b) applies
6 Where the circumstances of the alleged fraud are particularly within
the opposing party’s knowledge, Rule 9(b) permits pleading on
information and belief, provided that the complaint must adduce
sufficient facts supporting a strong inference of fraud.” 	Wexner v.
First Manhattan Co., 902 F.2d 169, 172 (2d Cir. 1990).
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to the allegedly false enrollment and billing certifications
that the defendant submitted to the Government. 	There is
some dispute about the degree of particularity that has to
be alleged with respect to such certifications -- whether
they can be described in the aggregate or instead whether
each false certification needs to be described individually,
although the weight of the case law suggests that the
complaint must plead the false billing certifications with
“a high degree of particularity,” which may be done,
however, by providing sufficient exemplars or identified
pools or other information to put the defendant on
reasonable notice. See U.S. ex rel. Kester v. Novartis
Pharmaceutical Corp., 23 F. Supp. 3d 242, 255-56, 258
(S.D.N.Y. 2014). 	See also U.S. ex rel. Chorches v. Am. Med.
Response, Inc., 865 F.3d 71, 87-98 (2d Cir. 2017); U.S. ex
rel. Arnstein v. Teva Pharmaceuticals USA, Inc., 2016 U.S.
Dist. LEXIS 22554, at *40-44 (S.D.N.Y. Feb. 22, 2016).
That is not the only fraud, however, that needs to be
pled with particularity with respect to False Claims Act
claims. 	In addition, the complaint must plead with
particularity the facts that gave rise to the fraudulent
certification to the Government. 	U.S. ex rel. Chorches v.
Am. Med. Response, 865 F.3d at 83-85, (2d Cir. 2017). 	See
also Arnstein v. Teva Pharmaceuticals, 2016 U.S. Dist. LEXIS
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22554, at *46-47 (“Where an FCA claim is based on violations
of the anti-kickback statute, plaintiff must plead with
particularity [under Rule 9(b)] the who, what, when, where
and how of the fraudulent scheme.”) (internal quotation and
citation omitted); Chen v. EMSL Analytical, 966 F. Supp. 2d
at 301-303; U.S. ex rel. NPT Assocs. v. Lab. Corp. of
America Holdings, 2015 U.S. Dist. LEXIS 155601, at *12-14
(S.D.N.Y. Nov. 17, 2015) (plaintiff “must plead both the
alleged scheme and the specific false claims for payment
with particularity.”).
The Debtors’ motion to dismiss does not assert that the
complaint’s allegations regarding the Debtors’ enrollment
and billing certifications to the Government violate Rule
9(b), but, rather, focuses on the complaint’s allegations
regarding why the certifications were fraudulent: 	for our
purposes, the Debtors’ alleged violation of the Anti-
Kickback Statute.
Several times the complaint quite broadly states that
the Debtors’ “bribes” to Broward Health and/or its CEO,
Frank Nask (“Nask”) are the basis for its alleged Anti-
Kickback Statute claims. 	See, for example, complaint ¶¶ 8,
10, 11, 16, 47, 52, 68, 90, 226 and 317. 	Clearly, offering
a bribe in return for payments under a Federal health care
program violates the Anti-Kickback Statute. 	42 U.S.C. §
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1320a-7b(b)(2) states that “Whoever knowingly and willfully
offers any remuneration (including any kickback, bribe, or
rebate) directly or indirectly, overtly or covertly, in cash
or in kind, to any person to induce such person – (A) to
refer an individual to a person for the furnishing or
arranging the furnishing of any item or service for which
payment may be made in whole or in part under a Federal
health care program, or (B) to . . . arrange for or
recommend 	. . . ordering any facility, service or item for
which payment may be made in whole or in part under a
Federal health care program, shall be guilty of a felony.”
Courts have defined “remuneration” as used in the Anti-
Kickback Statute broadly, such that it is not limited to
monetary kickbacks or bribes, Hanlester Network v. Shalala,
51 F.3d 1390, 1398 (9 th Cir. 1995), and the term has been
held to include “anything of value.” 	United States v. Narco
Freedom, Inc., 95 F. Supp. 3d. 747, 756 (S.D.N.Y. 2018).
However, in common parlance one thinks of a “bribe” as at
least a promise of financial reward that the offeror can
plausibly deliver. 	What the complaint actually alleges
besides the conclusory use of the terms “bribes” and
“financial inducements” is something less than that and,
moreover, it does so without sufficient particularity as to
the scope of Rubin’s agency and his actions on the Debtor’s
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behalf when he allegedly made such offers, assuming that
Rule 9(b) applies to those allegations.
Although there is some confusion in the case law as to
when Rule 9(b) applies to pleading the circumstances of an
alleged agency, I conclude that Rule 9(b) applies here to
the complaint’s allegations pertaining to Rubin’s agency and
that the complaint fails to comply with the Rule. 	A host of
cases hold that where the agency relationship is central to
a fraud claim it needs to be pled with particularity under
Rule 9(b). 	That is clearly the situation here: 	Rubin’s
agency is, as previously noted and discussed later in more
detail, the only substantially new fact not included in the
prior public disclosures. 	The leading case is probably
Kolbeck v. LIT America, 923 F. Supp. 557, aff’d 152 F.3d 918
(2d Cir. 1998), but many other courts take that view, as
well. 	See, for example, Sun Life Assurance Co. v. Imperial
Holdings, Inc., 2014 U.S. Dist. LEXIS 188601, at *10-12
(S.D. Fla. June 26, 2014); Woods v. Maytag Co., 807 F. Supp.
2d 112, 121 (E.D.N.Y. 2011); Whitley v. Taylor Bean &
Whitacker Mortg. Corp., 607 F. Supp. 2d 885, 899 (N.D. Ill.
2009); Karamath v. United States Bank, 2012 U.S. Dist. LEXIS
135038, at *15-16 (E.D.N.Y. Aug. 29, 2012), and certain of
the authorities cited by the Debtors, including In re
Lois/USA, Inc., 264 B.R. 69, 139 n.177
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(Bankr. S.D.N.Y. 2001); Laugh Factory, Inc. v. Basciano, 608
F. Supp. 2d 549, 563 (Bankr. S.D.N.Y 2009); Mincey v. World
Savings Bank, FSB, 614 F. Supp. 2d 610, 627 (D.S.C. 2008);
Cohen v. Standard Bank Investment Corp., 1998 U.S. Dist.
LEXIS 17569, at *10-16 (S.D.N.Y Nov. 6, 1998); and Able v.
Farmers Commodities Corp., 2000 U.S. Dist. LEXIS 22887, at
*22–24 (N.D. Iowa Mar. 30, 2000).
Some courts have viewed the particularity requirement
of Rule 9(b) more narrowly where the agency itself is not
part of the fraud allegation. 	See, for example, In re
Alstom SA Sec. Litig., 406 F. Supp. 2d 433, 469 (S.D.N.Y.
2005), and In re Parmalat Sec. Litig., 375 F. Supp. 2d 278,
291 (S.D.N.Y. 2005), and vicarious liability was simply
sought because of the employment relationship, which is
assumed if the agent is, unlike Ruben an actual employee of
the company.
Of course, Rule 8 also applies to the complaint’s
pleading of Rubin’s agency, and it is clear that mere
conclusory allegations of agency should not suffice to
establish an agency relationship, especially where the
(wrongful) scope of the agency is not apparent simply from
an employee’s job title. 	See, for example, Green v. Beer,
2009 U.S. Dist. LEXIS 27503 (S.D.N.Y. Mar. 30, 2009), where
the court declined to determine whether Rule 9(b) applied
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because the agency relationship was pled with mere
conclusory allegations that would not even satisfy Rule 8.
In footnote 22 of that opinion, the court states,
"[defendant] suggests that plaintiffs must plead their
agency theory with Rule 9 particularity. 	Because the Court
finds that plaintiffs did not meet even the more liberal
Rule 8 pleading standard, the Court need not reach this
issue. 	Courts have required that agency be pled with Rule 9
particularity where an apparent agency relationship was an
integral element of the alleged fraud [citing Kolbeck 923 F.
Supp. at 569.]” Id. at *42 n.22. 	Judge Wood then continues,
"Applying Rule 9 made sense in Kolbeck because, in that
case, the plaintiffs were party to the events that created
the appearance of the agent's authority to act on behalf of
the alleged principal and thus could plead the facts with
Rule 9 particularity. But Kolbeck's logic may not apply in
this case where actual agency is alleged. . . . Demanding
Rule 9 particularity would seem to make less sense in a case
such as this one where plaintiffs contend that defendants
and their associates hid their agency relationship. 	Where
an agency relationship is hidden, plaintiffs cannot be
expected at the pleading stage to know the particulars of
how, when and where the agency relationship was created.
Thus, they should not be required to plead that relationship
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with Rule 9 particularity." Id.
The key provisions of the complaint at issue are
Paragraphs 51 through 59, which deal with the Debtors’
alleged violation of the Anti-Kickback Statute. 	Before
turning to them, however, it is worth noting paragraphs 41
through 46 of the complaint, which are referred to in
paragraphs 51 and 52. 	Those earlier paragraphs state that
the Debtors had been seeking a contract for Broward Health’s
radiation therapy service line since “as early as 2006.”
Complaint ¶ 41. 	As part of that effort, the complaint
alleges that the Debtors through their CEO, Daniel Dosoretz
(“Dosoretz”) offered patient referrals to Broward Health,
but Broward Health’s CEO at the time rejected the proposed
contract. 	Id. ¶¶ 42-43. 	The complaint also alleges that at
some time between 2007 and 2009 Dosoretz offered the
Treasurer of Broward Health’s Board of Commissioners “the
opportunity to manage surgery centers in Jacksonville
Florida,” and the Treasurer also received but did not accept
a call from a Florida congressman ostensibly on the Debtors’
behalf, but the Treasurer also opposed the proposed
contract, which was not then agreed. 	Id. ¶¶ 44-46.
Paragraph 51 of the complaint then states, "In 2011,
Dosoretz and [the Debtors] hired lobbyist Bill Rubin to
approach Broward Health's then Chief Executive Officer,
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Frank Nask, with a similar proposal as was previously
rejected by [Broward Health’s former CEO and Treasurer].”
Notably, this is one of the complaint’s two paragraphs
describing the scope of Rubin’s agency as the Debtors’
lobbyist for the Broward Contract -- and the only one that
does so in more than conclusory terms -- and that scope does
not involve offering any bribes or other remuneration to
Nask or anyone else. Rubin is instead stated to have been
hired to make a similar contract proposal to provide
radiation oncology services.
Paragraph 51 continues by stating that “Dosoretz and
[the Debtors] deliberately chose and retained Rubin as their
agent and lobbyist because he was and is a close friend of
[Florida’s] Governor Scott.” 	But this is an innocuous
allegation: lobbyists are generally retained because of
their political connections. 	Moreover, as discussed later,
before the filing of the complaint two “Florida Bulldog”
articles separately linked the award of the Broward Contract
to the Debtors’ political influence with Florida’s governor.
Paragraph 52 is the only other paragraph in the
complaint purporting to describe the extent of Rubin’s
agency, but it does so in general and conclusory terms,
stating, "Dosoretz directed Rubin to offer financial
inducements and bribes to the new CEO, Frank Nask in
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exchange for his support of the [Broward Contract]. 	At all
times relevant, Bill Rubin acted at the direction of [the
Debtors] as its [sic] agent.” 	Thus the complaint merely
repeats the gravamen of the Anti-Kickback Statute – the
offer of financial inducements or bribes -- as applied to
the scope of Rubin’s agency. 	Nor does it place Dosoretz’s
charge to Rubin in any specific time frame or state the
basis for the complaint’s assertion that Dosoretz directed
Rubin to offer Nask specific bribes or kickbacks.
Indeed, at oral argument counsel for the Plaintiff
acknowledged with respect to this paragraph that "[t]here is
no direct evidence of that,” and that, "[t]he evidence of
the scheme is the attempt by Dr. Dosoretz to bribe the
former CEO." 	Transcript of January 30, 2018 hearing on
Debtors’ motion to dismiss, at 118-19. 	As noted, however,
those paragraphs of the complaint describing Dosoretz’s
interaction with the former CEO over four years before the
events underlying the complaint’s Anti-Kickback Statute
claims do not allege the offer of bribes or kickbacks, let
alone describe any such offers with particularity.
Paragraph 53 of the complaint then states, "Nask's job
was in jeopardy because he had been appointed under the
prior administration of Florida Governor Charlie Crist.
Nask had supported a plan to privatize the [Broward Health]
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District, which would have undermined Governor Scott's
control of the District exercised through the appointment of
its commissioners. 	Under Nask's watch, the Federal
Government was also investigating Broward Health's
compensation arrangements with 27 employed physicians for
suspected violations of the Stark Laws.” 	(It is clear from
the rest of the complaint that this investigation did not
have anything to do with the Debtors.)
Paragraph 54 states, "Nask was several years away from
retirement and had power, compensation and benefits as CEO.
His career options were limited due to his age and the
ongoing federal investigation."
Paragraphs 55 through 57 then allege, "Acting as agent
for [the Debtors], Rubin contacted Nask in 2011. 	Rubin told
Nask that he controlled the Governor's appointments to the
Broward Health Board of Commissioners and thereby controlled
Nask's continued employment, which depended upon whether
newly appointed commissioners would support Nask as CEO. 	As
[the Debtors’] lobbyist and agent, Rubin asked Nask to
support [the Debtors’] plan to obtain full control over all
radiation oncology services provided at Broward Health. 	In
exchange, Rubin promised Nask that he would protect Nask's
continuing employment, salary, pension benefits and
severance when he retired as CEO. 	Rubin told Nask that if
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[the Debtors] did not obtain the contract, then Rubin would
make sure that new Commissioners would be appointed who
would terminate Nask’s employment.” 	Again, whether Rubin
was empowered by the Debtors to make such threats and
promises is stated in the most conclusory terms, and, in
addition, the complaint fails to state when and where
Rubin’s alleged promises and threats were made or the basis
for believing that they were made.
Paragraph 59 concludes, “In this manner executives at
[the Debtors] hired and paid Rubin to offer political
protection and financial security for Nask in exchange for
an exclusive prized contract. . . . 	[The Debtors] and
Dosoretz intended for Rubin to offer illegal inducements to
Nask in order to obtain their contact.” 	Once more, the
complaint fails to state the scope of Rubin’s agency except
in the most conclusory terms, reciting the gravamen of the
Anti-Kickback Statute, and does not state the particulars of
how and when the Debtors gave Rubin this assignment or how
and when Rubin made his threats and promises or the basis
for believe that such things happened.
Moreover, because the offer of “financial security” is
tied by the complaint only to Rubin’s “political protection”
from Governor Scott one has to ask whether the complaint
alleges in even a plausible way for purposes of Fed. R. Civ.
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P. 8 that Rubin’s influence was sufficient to override the
Governor’s legitimate exercise of discretion over the
appointment of Broward Health’s Board of Commissioners –
that is, whether Ruben’s influence exceeded his statement
that he got to know the Governor “in 1991 when he started
his hospital company, and we’ve stayed close ever since. 	I
love him. . . . 	He’s a very good friend. 	We’ve stayed in
touch ever since.” Id. ¶ 51 n. 1.
The complaint does state that on August 29, 2011,
before he was appointed to Broward Health’s Board of
Commissioners, the Plaintiff “met Rubin at Timpanos
restaurant in Fort Lauderdale. 	Rubin told [the Plaintiff]
that he was ‘controlling the appointments’ for the Broward
Health Board.” 	Id. ¶ 81. 7 However, the complaint never
states the apparent basis for this boast with the exception
that, apparently at the same meeting, “Rubin told
[Plaintiff] that the owner of the Debtors, Daniel Dosoretz,
was a ‘close friend’ of Governor Scott and a major
contributor to his campaign and that securing the [Broward
Contract] was a ‘top priority.’” Id. ¶ 84. 	The complaint
goes on to state that the Plaintiff was in fact appointed to
7 The complaint also alleges that the Plaintiff’s former employer
“encouraged him to apply for a Commissioner position at Broward Health
and advised him that he would speak with Rubin because Rubin was
‘controlling all appointments’ to the Broward Health Board.” Id. ¶ 80.
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Broward Health’s Board several days later, id. ¶ 87, 8 leading
to the inference that Rubin may have had some sway over the
appointment, but that the Plaintiff was not involved in
Broward Health’s entry into the Broward Contract, which
occurred before he attended his first Board meeting. 	Id. ¶
88.
The complaint goes on to allege that Nask obtained
Board approval of the Broward Contract by making false
representations regarding the Contract’s merits and the
defects of the existing contact with an entity known as
HealX that it would replace. Id. ¶¶ 91 through 106. 	The
complaint does not cite any sources for these allegations of
what transpired at the Board meeting, which the Plaintiff
did not attend; apparently they are taken from the published
Board minutes. 	Opposition to the contract by one of the
Commissioners in the minutes publicly highlighted its
primary defects, moreover, pointing out that “the contract
was awarded without bids and could be extended for up to 25
years” and “no economic analysis had been provided to
support [it].” 	Id. ¶ 92.
Paragraph 107 of the complaint sums up the foregoing
8 In addition, the complaint alleges that apparently after the Broward
Health contract was approved but “[w]hile he was still retained by and
serving at [the Debtor’s] lobbyist, Rubin lobbied the Broward Health
Board to give Nask a generous severance package,” which was granted. Id.
¶ 72.
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allegations, again in a conclusory fashion, as follows:
"Nask did all of the foregoing because (1) Rubin, the
Debtor’s agent, got Nask what he wanted -- the continuation
of his lucrative salary, benefits, and a rich retirement
package, and (2) [although I've already found that this was
not actually sufficiently pled in the complaint to establish
a violation of the Stark Law], Dosoretz promised increased
patient referrals to Broward Health from [the Debtors’]
major network of employment of employed physicians.”
The complaint also discusses a meeting between the
Plaintiff and Dosoretz in 2013, after the Plaintiff had
developed and expressed concerns to Rubin and others,
including Governor Scott about the Broward Contract, the
related termination of HealX, and Rubin’s influence. 	Id. ¶
185-88. 	However, this description only references
Dosoretz’s statement that he had a ‘close relationship’ with
Governor Scott, that Broward Health was a ‘strong partner,’
id. ¶ 187, and that Dosoretz “was arranging for meetings
with Nask and Governor Scott so that ‘the Governor would
know that Frank [Nask] is a good guy.’” 	Id. ¶ 188. 	It
contains nothing about the scope of Rubin’s agency on the
Debtors’ behalf when the Broward Contract was being
considered nor more than Dosoretz’s boast that he, Dosoretz
has political influence based on his relationship with
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Governor Scott.
Thus there are three problems with the complaint’s
allegations pertaining to the Anti-Kickback Statute. 	First,
the scope of Rubin’s agency on behalf of the Debtors, which
-- given the Plaintiff’s contemporaneous belief that Rubin
was the Debtors’ lobbyist, the Plaintiff had the opportunity
to explore but did not -- is not described with sufficient
particularity for purposes of Rule 9(b). (And, when the
complaint describes the scope of Rubin’s agency with any
particularity, it merely discusses the Debtors’ unsuccessful
2007 attempt to obtain a long-term contract with Broward
Health and Rubin’s boasting that he has Governor Scott’s
ear). 	There is a clear explanation for this failing:
counsel for the Plaintiff has acknowledged that she has no
basis to know if the Debtors charged Rubin with the
assignment of offering valuable consideration to Nask beyond
what Governor Scott could already deliver or withhold in
return for his support.
Moreover, to the extent described in anything other
than conclusory terms, the complaint’s assertions that Ruben
was able to control Governor Scott, Svengali-like, as
opposed to exerting ordinary political influence on him on
behalf of a well-heeled client, are not plausible, at least
without additional detail confirming more than ordinary
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political loyalties and the governor’s exercise of power
under Florida law.
And, last, it is only by properly pleading Rubin’s role
that the complaint might overcome the gatekeeping
requirement of section 3730(e)(4)(A) and (B) of the False
Claims Act, because, as discussed in greater detail later,
the Debtors’ influence, though not specifically control,
over Governor Scott was already publicly disclosed in the
“Florida Bulldog” articles that the Debtors’ motion to
dismiss quotes and which I can take judicial notice of. In
fact, the Debtors’ political influence, if not control, over
Florida’s governor was the main focus of those articles,
which also disclose unusual, non-market features of the
Broward Contract (which also, they state, were previously
publicly disclosed in the Broward Health Board minutes and
are available in the Debtors’ SEC filings).
As far as the complaint is concerned, therefore, Rubin
is just the mouthpiece for the Debtors’ previously publicly
disclosed political influence, nothing more. 	Because the
complaint does not assert anything material beyond what was
already publicly disclosed, it thus runs afoul of section
3730(e)(4)(A) and (B) of the False Claims Act. 	That is, the
complaint’s remaining Anti-Kickback Statute allegations are,
at their core, substantially the same as previously
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published in the news media and the Board’s minutes, and the
complaint does not evince a knowledge that is independent of
and materially added to those publicly-disclosed allegations
or transactions.
Again, the complaint fails the initial, critical test
of establishing the scope of Rubin’s agency and what Ruben
did in that role. 	Florida law, which applies here to the
complaint’s description of Rubin’s agency relationship since
all the relevant activity occurred in Florida, recognizes
three ways that a principal can be held liable for the acts
of its agent within the scope and course of the agency - a
proposition that, if in fact the agency is properly
established, is clear. 	Roessler v. Novak, 858 So. 2d 1158,
1161 (Fla. 2d DCA 2003).
First, Florida recognizes “apparent authority” to
establish an agency relationship, but such authority is not
pled in the complaint. 	Apparent authority "rests on
appearances created by the principal and not by the agent
that the agent is, in fact, acting as an agent for the
principal." 	Harrington v. RoundPoint Mortg. Servicing
Corp., 2017 U.S. Dist. LEXIS 55022, at *26 (M.D. Fla. Apr.
10, 2017). 	That one factor is all that need be considered
here without analyzing any other requirements for “apparent
authority,” such as reasonable reliance, Almerico v. RLI
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Ins. Co., 716 So.2d 774, 777 (Fla. 1998), because no
paragraph in the complaint alleges that Dosoretz or anyone
else on the Debtors’ behalf acknowledged to the Plaintiff,
or to anyone else for that matter, that Rubin was acting as
the Debtors’ agent regarding entry into the Broward
Contract, or created the appearance of such an agency, or
the scope of any such agency.
Under Florida law one can also be deemed an agent based
on “actual agency.” 	To establish an actual agency
relationship under Florida Law, the Plaintiff must plead (1)
acknowledgment by the principal that the agent will act for
it, (2) the agent's acceptance of the undertaking, and (3)
the principal’s right to control the agent’s actions. 	PYCSA
Panama, S.A. v. Tensar Earth Technologies, Inc., 625 F.
Supp. 2d 1198, 1252 (S.D. Fla. 2008), citing Villazon v.
Prudential Health Care Plan, Inc., 843 So. 2d 842, 853 (Fla.
2003). See also Florida State Oriental Medical Association,
Inc. v. Slepin, 971 So. 2d 141, 145 (Fla. Dist. Ct. App.
2007) (plaintiff must show "evidence that the principal
acknowledged the agent's power, that the agent accepted the
responsibility of representing the principal, and the
principal retained control over the agent's actions"). 	The
principal’s right to control rather than its actual control
is sufficient, and, obviously, that showing is made by
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setting forth the context and scope of the agency
relationship. 	Villazon v. Prudential Healthcare Plan, 843
So. 2d at 853. 	Again, though, the complaint does not
satisfy these requirements except in a conclusory or
ineffective fashion. 	It fails to allege the context and
scope of Rubin’s agency -- and therefore also fails to
allege the Debtors’ acknowledgment of Rubin’s power to act
on their behalf or that the Debtors retained the right to
control Rubin -- with any particularity, let alone that the
Debtors’ authorized Rubin to exert improper pressure on
Nask. 	The complaint also does not provide the details
required by Rule 9(b) as to Rubin’s performance of his
agency with Nask.
Finally, “implied authority” can be established
under Florida law for an agent to act in a way incidental to
or as is reasonably necessary to accomplish an actual agency
relationship. 	Board of Trustees of the City of Delray Beach
Police and Firefighters Retirement System v. Citigroup
Global Markets, Inc., 622 F.3d 1335, 1342-43 (11th Cir.
2010). 	Having failed to plead Rubin’s actual or apparent
agency with any particularity, however, the complaint does
not plead “implied authority,” either, let alone implied
authority to offer improper inducements to Nask.
Here, Rubin’s agency is at the center of the Anti-
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Kickback Statute claim: in the complaint, the Debtors act
through him. If the complaint is to add materially to the
prior public disclosures, it therefore would be in the
complaint’s description of Rubin’s agency and actions. 	Thus
under Kolbeck, 923 F. Supp. at 557, and In re Lois/USA,
Inc., 264 B.R. at 139 n. 177, and the other authorities
discussed above, his central role must be pled with
particularity, including the nature of his agency as well as
how he performed it.
Moreover, unlike in Green v. Beer, 2009 U.S. Dist.
LEXIS 27503, at *42 n.22, the complaint alleges that the
Plaintiff understood Rubin to be the Debtors’ lobbyist based
on Rubin’s (although not the Debtors’) statements. 	Indeed,
the complaint alleges that some time after the Broward
Contract was entered, the Plaintiff met again with Rubin,
who reiterated that he was the Debtors’ lobbyist, as well as
met with Dosoretz. 	Nevertheless, the complaint fails to
plead the scope of Rubin’s agency with any particularity and
Plaintiff’s counsel has acknowledged it to be unknown
although it was within Plaintiff’s power to explore whether,
for example, the Debtors directed Rubin to threaten Nask
with the loss of his job, or directed Rubin to control
Florida’s governor to direct Broward Health’s Board of
Commissioners to improve Nask’s retirement and severance
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package. 9
Thus I conclude that these deficiencies in the
complaint raise two independent grounds for the complaint's
dismissal. 	First, because the complaint hinges upon
allegations that Rubin acted on behalf of the Debtors in
making threats to Nask that he could actually deliver on,
such as that Nask would lose his job and retirement
benefits, or that he would keep his job and keep the
retirement benefits, depending on whether he supported the
Broward Contract, the complaint fails because it does not
describe the scope and nature of Rubin’s lobbying role with
sufficient particularity.
Indeed, I believe that Rubin’s role and actions are not
even pled sufficiently for purposes of Rule 8, given the
conclusory nature of its allegations and the implausibility,
without more, that Rubin, even if directed to do so by the
Debtors, had the power actually to control Governor Scott
regarding Broward Health.
Last, the motion to dismiss correctly states that under
31 U.S.C. § 3730(e)(4) the relator must assert claims that
9 As noted by the Second Circuit, moreover, even under the more relaxed
“information and belief” pleading standard under Rule 9(b) where the
facts are uniquely within the knowledge of the defendant, the
plaintiff’s claims must be based on sufficient factual allegations to
raise a strong inference that the fraudulent scheme occurred. 	See
Wexner v. First Manhattan Co., 902 F.2d 169, 172 (2d Cir. 1990); United
States ex rel. NPT Assocs., 2015 U.S. Dist. LEXIS 155601, at *13–14.
Here, that simply is not the case.
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are not substantially similar to the allegations or
underlying facts previously publicly disclosed in the “news
media” unless the person bringing the action is an original
source of that information or provided it in a timely
fashion to the Government. United States ex rel. Kirk v.
Schindler Electric Corp., 437 Fed. App’x 13, 17 (2d Cir.
2011); United States ex rel. Patriarca v. Siemens Healthcare
Diagnostics, Inc., 295 F. Supp. 3d 186, 196-97 (E.D.N.Y.
2018).
It is undisputed that the Plaintiff was not an original
source of the “Florida Bulldog” articles from February 22
and 24, 2016, which predate his complaint. 10 Moreover, it is
undisputed that the minutes of the January 30, 2012 Board
meeting at which the Broward Contract was approved not only
were mentioned by the “Florida Bulldog” but also were posted
publicly on the Board's website before the complaint not
because of the Plaintiff’s actions but simply because all
the Board minutes were handled that way.
The first, February 22, 2016 “Florida Bulldog” article,
states, "An oncology company financially connected to Gov.
Rick Scott got a no-bid contract four years ago from
taxpayer-supported Broward Health for as long as 25 years -
an unprecedented term. 	Scott was an investor in a private
10 The articles are attached as Exhibits B and C to the Declaration of
Michael P. Esser in support of the Debtors’ motion to dismiss.
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equity firm that owns 21 st Century Oncology, state records
show. . . . 	‘This is news to me.’ Said Commission Chairman
David Di Pietro, who seemed stunned last week when told of
the governor’s indirect ownership interest in 21 st Century
Oncology. . . . The North Broward Hospital District, Broward
Health's legal name, is and was at the time run by an all-
Republican board of commissioners appointed by the governor.
. . . Information about the contract is contained in
publicly traded 21 st Century’s filings with the U.S.
Securities and Exchange Commission (SEC) and the minutes of
a Jan. 30, 2012 board meeting when the deal was approved by
a 5-1 vote.”
The February 24, 2016 “Florida Bulldog” article states,
"A cancer-treatment company financially tied to Gov. Rick
Scott that got a no-bid 25-year contract from Broward Health
in January 2012 later contributed nearly $400,000 to the
Governor's reelection campaign, state records show." 	And it
further states, "The contract spells out the terms of an
exclusive and lengthy arrangement in which Broward Health
gave 21st Century Oncology LLC exclusive rights to supply
radiation oncology services to Broward Health's patients -
and collect all the revenue those patients generate. 	21st
Century paid Broward Health nothing to obtain that access.
Likewise, Broward Health did not pay 21st Century to assume
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a practice area that then-Broward Health President and Chief
Executive Frank Nask told the district's board of
commissioners in 2012 was losing $3.5 million a year. 	Why
would 21st Century want to take over a money-losing
operation? 	How might it turn into a profit maker? 	Kevin
Fusco, who holds Nask's job today was asked by email to
discuss the oncology radiation program's performance under
21st Century. 	He did not respond."
And then the February 24, 2016 article reiterates,
"Throughout all this time, 21st Century was a reliable
contributor to Governor Scott, who appoints Broward Health's
governing Board of Commissioners."
Before the Plaintiff shared his complaint with the
United States the terms of the Broward Contract itself also
were a matter of public knowledge based on Broward Health's
SEC filings, as were reservations about the Contract
expressed at the key Board meeting regarding its approval.
The case law on 31 U.S.C. § 3730(e)(4)(A) and (B) is
well summarized in Chen v. EMSL Analytical, Inc., 966 F.
Supp. 2d 282 (S.D.N.Y. 2013). 	There the court states that
the two-part test laid out in that section first requires
determination of whether substantially the same allegations
or transactions as alleged in the action or claim were
previously publicly disclosed through one or more of the
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sources, including “news media” listed in the statute. Id.
at 296.
It is clear that the courts interpret “news media” in
this context broadly, rejecting a “cramped reading of the
term to include smaller or professionally specialized reader
bases.” 	See Schindler Elevator Corp. v. United States ex
rel. Kirk, 131 S. Ct. 1885, 1891 (2011); see also United
States ex rel. Alcohol Foundation v. Kalmanovitz Charitable
Foundation Inc., 186 F. Supp. 2d 458, 463 (S.D.N.Y. 2002),
as well as Chen, 966 F. Supp. 2d at 297.
And as far as whether the disclosures in the news media
contain "substantially the same allegations or transactions
as alleged in the action," Chen states -- and I believe this
to be the law throughout the Second Circuit as well as,
frankly, throughout the country, or at least the proper
version of the law throughout the country – “[t]his is the
case when the relevant disclosures exposed ‘all the
essential elements of the fraud’ alleged and made public the
'crux' of the alleged fraud." 	Id. at 297, citing United
States v. Dialysis Clinic, Inc., 2011 U.S. Dist. LEXIS 4862,
at *20 (N.D.N.Y. Jan. 19, 2011), which held that section
3730(e)(4) " is applicable only if the essential elements
exposing the transaction as fraudulent are publicly
disclosed."
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Chen also favorably relies on the following quote from
In re Natural Gas Royalties Qui Tam Litig., 562 F.3d 1032,
1041 (10th Cir. 2009): 	the public disclosures need to be
“sufficient to set the government squarely upon the trail of
the alleged fraud.” 	That is, the prior public disclosures
need to have sufficed “to enable [the Government] adequately
to investigate the case and to make a decision whether to
prosecute. The question, properly, then, is whether the
information conveyed to the [G]overnment could have formed
the basis for a governmental decision on prosecution, or
could at least have alerted law-enforcement authorities to
the likelihood of wrongdoing.” 	United States ex rel.
Springfield Terminal Ry. v. Quinn, 14 F.3d 645, 654 (D.C.
Cir. 1993), quoting United States ex rel. Joseph v. Cannon,
642 F.2d 1373, 1377 (D.C. Cir. 1981). See also U.S. ex rel.
Patriarca v. Siemens Healthcare Diagnostics, 295 F. Supp. 3d
at 196-197, stating both that the pre-2010 case law would
apply to this provision and that “merely providing more
specific details about what happened does not negate
substantial similarity."
Consistent with the foregoing authorities, to go beyond
the allegations in the “Florida Bulldog” articles and public
postings the Plaintiff therefore would need to disclose more
than mere details that would make those allegations only
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more concrete or more provocative.
Such a mere detail, I believe, is the complaint’s
discussion of the termination of the HealX contract, which
was not mentioned directly in the “Florida Bulldog” articles
that I have quoted although the second article does discuss
the Debtors’ taking over a prior Broward Health business,
which was, in fact, conducted through HealX. 	Given all of
the other disclosures in the articles and the Board minutes
– such as that the Debtors obtained a no-bid contract of
extraordinary length, Nask’s statement that the prior
contractor lost $3.5 million annually, and questions
therefore raised about the reason for the Debtors’ eagerness
to obtain the contract – the complaint’s HealX discussion
falls into the “extra detail” category described as
insufficient in Chen and Patriarca and the other cases cited
earlier.
That leaves, then, the complaint’s discussion of
Rubin’s lobbying effort, which was not mentioned in the
“Florida Bulldog” articles or otherwise publicly disclosed.
But, as I have already held, the complaint does not discuss
the nature and scope of Rubin’s alleged agency with
sufficient particularity to satisfy Rule 9(b), and, indeed,
when discussing Rubin’s role the complaint has serious
plausibility problems under Rule 8.
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Lobbyists generally are hired because of their
political connections. 	It would be odd to hire a lobbyist
who doesn't have a good relationship with the politician
that he or she is supposed to lobby. 	The good relationship
between the alleged principal, 21st Century, and Governor
Scott is already highlighted in the “Florida Bulldog”
articles. 	The complaint’s additional allegations with
regard to Rubin’s lobbying relationship I believe therefore
would need be more specific - and more specific in
particular as to wrongdoing - than simply standing for the
fact that Rubin had political influence. 	To add materially
to the prior public disclosure, the complaint would have to
allege, I believe, that Rubin actually controlled Governor
Scott, as if Governor Scott were his puppet, for example,
and that the Debtors hired him for that purpose, as opposed
to Rubin’s simply being able to remind Governor Scott that
the Debtors were a campaign contributor and a significant
supporter, which the “Florida Bulldog” articles already
disclose.
The complaint clearly does not make that kind of
allegation other than, I believe, in an implausible and
conclusory way when it asserts that the Plaintiff was told
he needed to speak to Rubin to enhance his chances to be
appointed to the Broward Health Board and that Rubin
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separately boasted that he “controlled” the appointments
(which frankly I view as puffery).
Even assuming that all of Rubin’s agency relationship
on behalf of the Debtors was outside of the Plaintiff’s ken,
which I don't think is a fair assumption based on the
complaint’s own allegations, the Plaintiff has the burden to
at least allege a substantial basis in fact to draw the
inference that Rubin (a) was tasked by the Debtors with
obtaining the Broward Contract by improperly offering
remuneration to Nask and (b) plausibly had the power over
Governor Scott to deliver on his threats and promises, and I
do not believe that the complaint does so.
I have not yet addressed whether the Plaintiff
satisfies the second, additional test of 31 U.S.C. §
3730(e)(4)(B)(2), which is that he be an “original source”
of information that materially and timely contributed or
added to the public disclosure. 	However, based on the
foregoing analysis, it is clear that the complaint does not
meet that test, either.
The people of Florida elected Governor Scott,
giving him the power to select Broward Health’s Board of
Commissioners, subject to the people’s displeasure depending
on how he uses it. 	The complaint adds nothing material to
the prior public disclosure that the Debtors had political
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influence with the Governor, which he, in turn, might exert
over the Board.
Accordingly, the remaining aspect of the motion to
dismiss is granted. 	Counsel for the Debtors should submit
an order granting the motion in full for the reasons stated
in my bench rulings. 	The order should provide that the
Plaintiff has 30 days from the date of such order to file a
motion for leave to amend the complaint under Bankruptcy
Rule 7015, which motion should attach the proposed second
amended complaint, blacklined against the complaint that I
have dismissed.
Dated: 	White Plains, New York
July 9, 2018
/s/Robert D. Drain
United States Bankruptcy Judge
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