District Court dismisses laboratory billing case but permits amendment

by Ben Vernia | January 11th, 2012

On December 29, Judge Steven D. Merryday of the Middle District of Florida dismissed without prejudice a whistleblower’s claims in U.S. ex rel. Westlund v. Laboratory Corp. of America Holdings, Inc.. In the suit, the relator alleged that the company lied to physicians regarding the reimbursability of their services by a private insurer, knowing that the claims would be denied but ultimately paid by Medicare and Medicaid.

Judge Merryday minced no words in critiquing the complaint: “Much is wrong with the complaint.” The complaint did not specify which act violated which section of the False Claims Act, he noted, it did not identify any false claims submitted to the government, and it did not link the allegedly false statement regarding private insurance reimbursement with the government’s decision to pay the false claims.

The Court also adopted the defendants’ other arguments for dismissing the complaint, with one exception: judicial estoppel as a basis for barring her retaliation claim (he found the doctrine inapplicable because although the relator had improperly split her claim with a separate civil rights action, no substantive order had issued in that case on which estoppel could be based).

Nevertheless, Judge Merryday rejected the defendant’s argument that amendment would be futile and gave the relator one last chance: “With legal authority or factual allegation, a third amended complaint must show (what the present complaint assumes) that LabCorp’s lie and the government’s payment for a valid service amounts to fraud actionable under the False Claims Act”

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