Submitted: May 30, 2018
Defendants' Motion to Dismiss. DENIED.
S. Keller and Laura N. Najemy, Esquire, Deputy Attorneys
General, Department of Justice, Wilmington, Delaware,
Attorney for Plaintiff.
R. Granaudo Gesty, Esquire, Burns White LLC, Wilmington,
Delaware, Attorney for Defendants.
RICHARD R. COOCH, J.
State of Delaware ("Plaintiff) filed a Delaware False
Claims and Reporting Act ("DFCRA") action against
Premier Healthcare Inc. d/b/a Newark Manor Nursing Home
("Newark Manor"), Bruce Boyer, David Boyer, and
Susan Comegys (collectively "Defendants"). The
complaint alleged that since 2011 Defendants have submitted
or caused to be submitted fraudulent claims for Medicaid
reimbursement for "non-existent, grossly deficient, and
materially substandard and/or worthless nursing home
services" provided to five residents of Newark
issue at this stage is whether Plaintiff has alleged
sufficient facts in the complaint for a DFCRA claim, an
unjust enrichment claim, and DFCRA liability as to the
individually named Defendants to survive Defendant's
motion to dismiss for failure to state a claim pursuant to
Delaware Superior Court Civil Rule 12(b)(6).
Court concludes that Defendants' motion fails to
demonstrate how Plaintiff is not entitled to recovery under
any reasonably conceivable set of circumstances since this
Court must accept all well-pleaded factual allegations as
true under the standard of Delaware Superior Court Civil Rule
12(b)(6). The Court thus denies Defendant's motion to
dismiss, without prejudice with leave for Plaintiff to amend
the complaint at a later time, if needed.
FACTS AND PROCEDURAL HISTORY
Manor is a Delaware licensed, long term care nursing
facility. Bruce Boyer is the owner of Newark Manor. David
Boyer and Susan Comegys were administrators at Newark Manor
at various times.
2009, Newark Manor contracted with the Delaware Medicaid
program through the Contract for Items or Services Delivered
to Delaware Medical Assistance Program Eligibles in the
Department of Health and Social Services ("DMAP").
The DMAP provides that when a healthcare service provider
submits a claim for payment for items or services provided
under the DMAP, the provider certifies that the items or
services were in compliance with the DMAP rules, regulations,
to federal law, nursing facilities, such as Newark Manor,
must provide services that "meet professional standards
of quality" to participate in the Medicare and Medicaid
programs. This compliance is a prerequisite to
participation to participation in the Medicaid program.
Compliance is assessed through annual survey inspections.
asserts that, since at least 2011, Defendants "submitted
or caused to be submitted claims for payment for
non-existent, grossly deficient, and materially substandard
and/or worthless nursing home services, provided to highly
vulnerable, elderly and disabled residents at Newark
Manor." Plaintiff argues that Defendants were
informed about the multiple failures of care at Newark Manor
and were provided state survey reports. Defendants contend
that Plaintiff required Defendants to submit plans to correct
the deficiencies and return Newark Manor to substantial
compliance. Defendants state that Newark Manor in fact
returned to its compliant standard and Plaintiff renewed
Newark Manor's license as an nursing home in Delaware.
However, Plaintiff now, according to Defendants, seeks to
further penalize Defendants with sanctions under the DFCRA
for every claim relating to five identical residents that was
submitted before, during, and after the alleged violations.
filed a complaint on September 18, 2017 which alleged that
Defendants are subject to not only the penalties related to
their noncompliance with the DMAP, but are also subject to
DFCRA liability and should not receive payment from Plaintiff
for any service provided to five Newark Manor residents.
Plaintiff has identified five residents whose alleged
substandard care by Newark Manor warrants recoupment by the
State of its Medicaid payments to Newark Manor.
1 was an 88 year old woman admitted on December 30, 2010 who
suffers from cognitive decline and Alzheimer's Disease.
The care provided to Resident 1 was inspected by Plaintiff on
four occasions between 2011 and 2014. Plaintiff alleges that,
on June 7, 2014, Resident 1 suffered severe burns when a
Newark Manor staff member's coffee spilled on Resident
l's leg. Plaintiff contends that Defendants did not
transport Resident 1 to the hospital, nor did they administer
first aid,  with the exception of removing her
clothing. Plaintiff also noted deficiencies in 2011 and 2014,
respectively, in the form of weight loss and verbal abuse.
2 was a 95 year old woman who was admitted to Newark Manor
with dementia, agitation, balance problems, and decreased
muscle coordination. After numerous fall risk assessments,
Newark Manor identified Resident 2 as a fall risk. Plaintiff
alleges that Resident 2 fell eight times between February 24,
2014 and June 22, 2014. Plaintiff also alleges that
"[d]espite the eight falls in the four month period in
2014, Newark Manor failed to ensure Resident 2's safety
by implementing an effective fall prevention
2 suffered an additional ten falls between July 8, 2014 and
September 25, 2015. Resident 2 was also found lying on her bed
with a television on her body that had apparently fallen off
of its mounted position on the wall.
3 was an 88 year old woman who suffered from disorientation,
weakness to her left side cause by a stroke, confusion, and a
history of falls and agitation. Plaintiff states that
Resident 3 fell twenty-two times between June 14, 2013 and
September 9, 2014, three of which resulted in "serious
injuries." On June 26, 2013, Resident 3 suffered a
fractured neck. Plaintiff contends that after Resident
3's return from the hospital, Defendants failed to
implement the correct care plan for Resident 3. Plaintiff
contends that Defendants did, however, change Resident
3's care plan to ensure her safety from falls after
Resident 3 fractured her vertebrae on September 9, 2014.
contends that Resident 3 also suffered a coffee burn less
than two months after Resident l's coffee burn. Plaintiff
alleges that Newark Manor did not have a burn policy in place
when both Residents were burned, but implemented one
afterward "that did not meet Mayo Clinic
4 was an 88 year old woman who suffered from low sodium
levels and high potassium levels due Syndrome of
Inappropriate Antidiuretic Hormone release. Resident 4's
six-year residency at Newark Manor is the longest of the five
Residents discussed herein. Plaintiff alleges that
"Defendants failed to monitor Resident 4's fluid
intake and failed to request sodium chloride tablets as
needed for Resident 4's condition."
also contends that Defendants failed to implement an
appropriate fall prevention plan for Resident 4, as she fell
fourteen times between November 23, 2012 and July 2, 2015.
Plaintiff states that Resident 4 suffered a fractured rib and
a right tibial fracture as a result of two of those falls.
Plaintiff also asserts that Defendants failed to implement an
effective dental plan or plan to restore Resident 4's
5 was an 88 year old man who was diagnosed with legal
blindness and a had history of blood clots and strokes.
Allegedly, Defendants did not provide Resident 5 with his
anti-coagulant medication for over four months, during which
time he suffered edemas. During the state survey, on August
30, 2016, Defendants "admitted that there was no
clinical reason for discontinuing Resident 5's medication
[and] that the lack of anti-coagulant was an oversight and
'missed medication.'"Defendants contend that,
following this survey, they began to again give Resident 5
alleged in its Complaint that "[t]he substandard,
grossly negligent and practically worthless services provided
by the Defendants to Residents 1 through 5 would have been
material to the [Managed Care Organizations], and the State
Medicaid Agency's decision to make these [claim] payments
. . ., " Plaintiff contends "Defendants were
aware of the failure to provided care that met professional
standards of quality when they submitted claims for
payment."Plaintiff claims that, despite being made
aware of the significant deficiencies in their service,
Defendants still knowingly submitted claims for $1, 515,
504.35, which was paid to them by Medicaid.
assert that the question of the applicability of the DFCRA or
the parallel federal law, the False Claims Act
("FCA"), "to claims related to services by a
medical provider such as a nursing home" is an issue of
first impression in Delaware. Defendants now bring the
Motion to Dismiss pursuant to Superior Court Civil Rule
12(b)(6) for failure to state a claim for which relief can be
THE PARTIES' CONTENTIONS
argue in favor of dismissal on essentially four grounds.
First, Defendants contend that Plaintiff cannot make a DFCRA
claim under either the "worthless services" or
false certification theories. Second, Defendants maintain
that Plaintiff cannot make out a claim for unjust enrichment.
Third, Defendants assert that Plaintiff fails to state a
cause of action against the individually named Defendants,
Bruce Boyer, David Boyer, and Susan Comegys. Fourth, and
alternatively, Defendants argue that Plaintiff fails to make
a fraud claim under the strict pleading standard of Superior
Court Civil Rule 9(b).
Defendants claim that the Complaint should be dismissed
because Plaintiff fails to allege a proper DFCRA claim under
either the "worthless services" or false
contend that, for a DFCRA claim to be successful under the
"worthless services" theory, "Plaintiff must
show that 'performance of the services [was] so deficient
that for all practical purposes it is the equivalent of no
performance at all."' Defendants illustrate this
argument by stating, "[i]t is not enough to offer
evidence that the defendant provided services that are worth
some amount less than the services paid for. That is, a
'diminished value' of services theory does not
satisfy this standard. Services that are 'worth less'
are not 'worthless.'" As such, Defendants
maintain that, although state surveys revealed certain
deficiencies in the service provided to the five Residents,
Plaintiff cannot reach the conclusion that "the entire
bundle of services provided to each of the five Residents
during their long residency was substandard, much less
state that the purpose of the DFCRA is to punish and deter
the submission of fraudulent claims for payment to the
government. Defendants contend that the goal of the DFCRA is
not to focus on "torts, medical negligence, regulation
violation, contractual breaches or other
also argue that Plaintiff cannot make out a DFCRA claim under
the false certification theory because Plaintiff fails to
allege "materiality." Defendants contend that
Plaintiffs argument that, because Defendants participated in
DMAP, they certified that they complied with all regulations
is incomplete because it fails to allege the materiality of
Plaintiff s payment decision. Defendants seem to make this
argument on the basis that Plaintiff continued to make
payments to Defendants with knowledge of the alleged
noncompliance with DMAP.Defendants claim that, because the
State had knowledge of the deficiencies and still paid the
claims, the DMAP requirements were not
material. Defendants reiterated this argument at
oral argument asserting that this Court need not reach the
"worthless services" portion of the DFCRA analysis
because Plaintiff has failed to adequately plead materiality,
which is an essential element of the claim.
Defendants assert that Plaintiff fails to set out a proper
unjust enrichment claim because the DFCRA claim
fails. Defendants state, "[s]ince the
[DFCRA] claims fail as a matter of law, Plaintiffs common law
claim for unjust enrichment must also fail because the
facility's retention of the benefits is not
Defendants argue that Plaintiff has failed to sufficiently
plead "any factual allegation that could establish a
basis for false claims against individual Defendants"
Bruce Boyer, David Boyer, and Susan Comegys. Defendants
contend that Plaintiff "cannot establish that any of
these individuals had any reason to believe that an action
they took constituted a 'false or fraudulent
Defendants argue in the alternative for dismissal because, as
they claim, Plaintiff fails to meet the strict pleading
requirement of Superior Court Civil Rule 9(b). Defendants
contend that Plaintiff "fails to state when the
fraudulent misrepresentation occurred[, ]" and that
Plaintiff "does not articulate any factual basis to
support the conclusion that there was a fraudulent intent
behind the submission of requests for
responds to Defendants' four arguments in order and also
makes a fifth argument. First, Plaintiff argues that it has
made a DFCRA claim under the "worthless services"
and false certification theories. Second, Plaintiff claims
that the complaint makes an adequate showing of a claim for
unjust enrichment. Third, Plaintiff contends that the
complaint states a cause of action against the individually
named Defendants, Bruce Boyer, David Boyer, and Susan
Comegys. Fourth, Plaintiff states that it has pleaded its
complaint with specificity in accordance with Superior Court
Civil Rule 9(b). Fifth, Plaintiff argues that Defendants'
arguments come under the guise of a Rule 12(b)(6) motion to
dismiss for failure to state a claim when they are more
appropriately brought under a motion for summary judgment.
Plaintiff argues that it has pled a sufficient DFCRA claim
under the "worthless services" theory because it
alleges facts that show the care provided to Residents 1-5
was so collectively deficient in ...