# Cho v. Surgery Partners, Inc.

> District Court, M.D. Florida · August 26, 2020

URL: https://www.frixlaw.com/law-library/cases/10105761

## Case

- **Court:** District Court, M.D. Florida
- **Decided:** August 26, 2020
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10105761

## How later opinions describe it (automated extraction)

- holding that a qui tam suit under the FCA ceases to be “pending” once it is dismissed
- holding that Section 3730(b)(5) “bars later-filed actions alleging the same material elements of fraud described in an earlier suit, regardless of whether the allegations incorporate somewhat different details”
- holding that where the first-filed complaint “would suffice to equip the government to investigate SLM’s allegedly fraudulent forbearance practices nationwide,” the second-filed complaint’s additional details “would not give rise to a different investigation or recovery”
- holding that later-filed complaint’s allegations against a specific subsidiary were already encompassed in allegations in first-filed complaint against the parent corporation

## Opinion text

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION

UNITED STATES OF AMERICA,
ex rel. SHELDON CHO, M.D.,
and DAWN BAKER, Relators,

Plaintiffs,

v. Case No. 8:17-cv-983-T-33AEP

H.I.G. CAPITAL, LLC, and
H.I.G. SURGERY CENTERS, LLC,

Defendants.
/

ORDER
This cause comes before the Court pursuant to the Motion
to Dismiss the Relators’ Second Amended Complaint filed by
Defendants H.I.G. Capital, LLC and H.I.G. Surgery Centers,
LLC (Doc. # 91), filed on July 13, 2020. Plaintiff-Relators
Sheldon Cho, M.D., and Dawn Baker filed a response on August
3, 2020. (Doc. # 97). On August 7, 2020, HIG filed a reply.
(Doc. # 98). For the reasons explained below, the Motion is
granted, and this case is dismissed without prejudice.
I. Background
A. Factual Allegations
1. H.I.G. acquires Surgery Partners

According to the operative complaint, H.I.G. is a
private-equity firm that engages in buyouts of various
companies. (Doc. # 85 at ¶¶ 3, 91-93). In December 2009,
H.I.G. bought out Surgery Partners,1 a national network of
surgical facilities and ancillary services, including pain
management services. (Id. at ¶¶ 2-3, 101). On the same day as
the buyout, Bayside Capital, Inc. – a “controlled affiliate
of H.I.G. Capital, LLC” – entered into a Management and
Investment Advisory Services Agreement with Surgery Partners

(hereafter, the “HIG Management Agreement”). (Id. at ¶¶ 5,
94-100). The second amended complaint claims that Bayside is
operated and controlled by H.I.G. Capital, and that H.I.G.
“directly and through its Bayside business unit, controlled,
managed, and advised Surgery Partners.” (Id. at ¶¶ 95, 100).
Pursuant to the HIG Management Agreement, H.I.G.
provided “management, consulting, and financial advisory
services” to Surgery Partners and any companies or businesses
formed or acquired by Surgery Partners. (Id. at ¶ 6). The
agreement stated that H.I.G. would provide Surgery Partners
with “advice and assistance concerning any and all aspects of

the operations, planning, financing and budgeting” of the
companies. (Id. at ¶ 7). Relators allege that Surgery Partners

1 The term “Surgery Partners,” as used in the second amended
complaint, encompasses Surgery Partners, Inc., Surgery Center
Holdings, Inc., Surgery Partners Holding, LLC, and Surgery
Center Holding, LLC. (Doc. # 85 at ¶ 2).
paid H.I.G. $38.7 million for these services from 2009 to
2017. (Id. at ¶ 8).
Following the acquisition, H.I.G. also placed “multiple”
representatives on the Surgery Partners’ Board of Directors.
(Id. at ¶ 9). “For example, H.I.G. Managing Partner
Christopher Laitala was named to the Surgery Partners Board
of Directors in 2009,” became Chairman in 2015, and was also

appointed president of Surgery Center Holdings, Inc. (Id. at
¶¶ 10, 121). Specifically, H.I.G. had three individuals on
the Surgery Partners Board: Laitala, Matthew Lozow, and
Fraser Preston. (Id. at ¶ 120).
According to Relators, “[b]y virtue of its managerial
and advisory role to the buyout fund and the buyout fund’s
large equity stake, the H.I.G. Defendants controlled the
Surgery Partners business. Further, H.I.G., through its
Bayside business unit, contracted to provide Surgery Center
Holdings, Inc. with managerial, consulting, and advisory
services.” (Id. at ¶ 106). Thus, H.I.G. provided a “robust

management role,” working in “partnership” with Surgery
Partners’ executives. (Id. at ¶ 134).
2. H.I.G. and Surgery Partners form Logan Labs
The operative complaint alleges that “[u]nder H.I.G.’s
control, leadership, experience, and direction, Surgery
Partners created a new profit center – urine toxicology
testing.” (Id. at ¶ 10). Specifically, beginning in 2011,
H.I.G. and Surgery Partners formed a new business, Logan
Laboratories LLC (”Logan Labs”). (Id. at ¶¶ 10, 157). Logan
Labs was a wholly owned subsidiary of Surgery Partners, and
Surgery Partners used it to provide ancillary laboratory
services to its physicians. (Id. at ¶ 11).

Logan Labs became “a nationwide provider . . . of urine
drug testing (‘UDT’), also called ‘urine toxicology’ testing
services.” (Id.). Logan Labs was dependent on UDT referrals
from Surgery Partners’ physicians, “whose patients are
largely beneficiaries of Government-funded healthcare
programs, including, but not limited to, Medicare, Medicaid,
and TRICARE.” (Id. at ¶ 12).
a. Urine Drug Testing (UDT)
There are two types of UDT: qualitative and
quantitative. (Id. at ¶ 16). Qualitative UDT can be performed
either via point-of-care testing, which means it is performed

in a doctor’s office, or it can be sent to an outside
laboratory. (Id. at ¶ 17). Point-of-care testing is an “easy
and cost-efficient” way to perform UDT, and both types of
qualitative UDT are “far less expensive” than quantitative
UDT. (Id. at ¶¶ 18, 21). This is because quantitative UDT can
only be performed “in a laboratory using properly calibrated
equipment and appropriately qualified laboratory
professionals.” (Id. at ¶ 22). Relators state that
quantitative UDT is not appropriate or medically necessary
for every patient or every clinic visit; in fact, it is
medically necessary “only for a narrow subset of patients.”
(Id. at ¶¶ 23-24).

b. Logan Labs’ use of UDT
According to Relators, Logan Labs generated most of its
revenues from “confirmatory” quantitative UDT. (Id. at ¶ 26).
“[U]nder the management, control, and direction of the H.I.G.
Defendants, Surgery Partners implemented fraudulent schemes
to refer patients of Surgery Partners-affiliated physicians
to Logan Labs for extensive and expensive confirmatory
quantitative UDT. They prohibited the use of office-based UDT
without medical or scientific justification, leaving their
affiliated physicians with only laboratory-based UDT (either
qualitative or quantitative). They monitored their

physicians’ and mid-level providers’ use of ‘confirmation’
UDT and exerted great pressure on physicians to order
confirmation UDT for every patient regardless of the
patient’s clinical presentation.” (Id. at ¶ 30). Thus,
Relators allege that Surgery Partners and H.I.G. submitted,
or caused to be submitted, “millions of dollars’ worth of
false claims to Government-funded programs . . . for UDT,
including confirmatory quantitative UDT, that were not
reasonable or necessary.” (Id. at ¶ 34).
As Relators tell it, “the strategy put forth by the
H.I.G. Defendants and adopted by Surgery Partners . . . in
creating Logan Labs was to take advantage of their captive

employed physicians and adopt a fraudulent scheme of over-
utilizing UDT as a means to generate revenue . . . largely of
Government healthcare program beneficiaries.” (Id. at ¶ 14).
To this end, Relators allege that H.I.G. and Surgery Partners
drove up quantitative UDT in numerous ways:
1) Surgery Partners’ executives allegedly pre-
selected patients, including Government healthcare
program beneficiaries, for the expensive UDT
service and obtained urine samples from these
patients before the patients were even seen by a
medical provider. (Id. at ¶¶ 367-77).

2) Surgery Partners fraudulently obtained patients’
consents to urine toxicology screening by falsely
representing that quantitative UDT services were
required multiple times per year to comply with
state and/or federal laws. (Id. at ¶¶ 378-83).

3) Surgery Partners implemented policies prohibiting
physicians from using simple, and less expensive,
UDT screening methods in the office. (Id. at ¶¶
384-96).

4) Surgery Partners had a company-wide practice or
policy to send all patients with Government-
provided insurance or any private insurance plan
that would pay for lab-based UDT to Logan Labs,
even if the physician preferred a “dip stick test”
or a different laboratory. (Id. at ¶¶ 445-51).

5) Surgery Partners pressured medical providers to
refer patients for UDT services by closely
monitoring the patients who were not referred for
UDT at each visit. (Id. at ¶¶ 452-65). To that end,
Surgery Partners would track doctors’ UDT referral
numbers and would pressure doctors whose referral
numbers were low to bring them up. (Id.).

6) Surgery Partners implemented UDT policies that
resulted in the creation of false electronic
medical records to support medically unnecessary
UDT services. (Id. at ¶¶ 466-69).

7) On top of the push for physicians to order more
UDTs than medically indicated, Logan Labs would
routinely bill multiple different billing codes,
performing a more thorough analysis than was
necessary. (Id. at ¶¶ 475-88).

8) Logan Labs “unbundled” the quantitative UDT bills,
resulting in increased and unduly inflated bills.
(Id. at ¶¶ 493-94).

9) Surgery Partners’ adopted a corporate policy to
pressure medical providers to sign false
attestations of medical necessity for quantitative
UDT. (Id. at ¶¶ 495-500). This was significant
because Government healthcare programs, like
Medicare, required that the testing be medically
necessary to qualify for reimbursement. (Id. at ¶¶
299-303, 496).

10) While Logan Labs billed Medicare for millions of
dollars’ worth of “confirmation” UDT, in reality
Surgery Partners’ physicians did very little
“confirmatory” testing because quantitative UDT was
the only testing ordered. (Id. at ¶¶ 504-06).

11) Surgery Partners and Logan Labs regularly waived
co-pays for Government healthcare beneficiaries so
that they would not complain about the expense of
UDT. (Id. at ¶ 507).

Finally, Relators allege that Surgery Partners tied
physician compensation to UDT referrals. Specifically,
Surgery Partners had an “Attractive Physician Compensation
Structure,” which was a two-tiered compensation structure.
(Id. at ¶ 536). Tier One was the base salary, while Tier Two
provided incentive compensation based on 100% cash collection
of ancillary services, including “UDS high complex” lab
tests. (Id.). Relators allege that H.I.G. personnel,
including Laitala and Lozow, “were personally involved in
initiating and designing Surgery Partners’ incentive
compensation system.” (Id. at ¶ 545). Laitala was named to
the compensation committee, which reviewed and evaluated
company compensation practices. (Id.). Thus, Relators allege
that these arrangements violated the Stark Law and the Anti-
Kickback Statute. (Id. at ¶¶ 550-63, 570-86).
Based on these allegations, Relators bring two causes of
action: (1) violation of the federal False Claims Act (“FCA”),

31 U.S.C. § 3729(a)(1)(A) and (B), and (2) conspiracy to
violate the FCA, in violation of 31 U.S.C. § 3729(a)(1)(C).
(Id. at 119-21).
B. Procedural History
Relators initiated this qui tam FCA lawsuit against
dozens of defendants on April 25, 2017, based on the UDT
fraudulent scheme described above. (Doc. # 1). Relators
amended their complaint once as a matter of right on January
15, 2019. (Doc. # 20). On January 21, 2020, the United States
and the various states on whose behalf Relators purported to
bring claims filed their notices of intent. (Doc. ## 32-33).
In its notice, the United States notified the Court of

its decision to intervene in this action for the purpose of
settlement as to most of the named defendants (the “Settling
Defendants”). The United States also notified the Court that
it was not intervening at that time with respect to the H.I.G.
Defendants, although its investigation into those Defendants
was ongoing. (Doc. # 33).
Accordingly, on January 23, 2020, the Court lifted the
seal on the complaint, the amended complaint, and the Court’s
order, and it also directed that Relators serve all defendants
other than the Settling Defendants in accordance with Federal
Rule of Civil Procedure 4. (Doc. # 34).

In April 2020, Logan Labs, Tampa Pain Relief Centers,
Inc. and certain individual Defendants – all of whom were
named in Relators’ original complaint – entered into a
Settlement Agreement with the United States, the Relators in
this case, and the Relators in another matter, the Ashton
case, which will be discussed in further detail below. See
(Doc. # 85 at ¶ 53). Those Defendants agreed to pay $41
million to settle the claims at issue in this case and in the
Ashton matter. See Dep’t of Justice, Office of Public Affairs
press release, available at
https://www.justice.gov/opa/pr/reference-laboratory-pain-
clinic-and-two-individuals-agree-pay-41-million-resolve-

allegations.
On May 22, 2020, Relators and the United States filed a
joint notice of voluntary dismissal where some defendants
were dismissed with prejudice and others without prejudice.
(Doc. # 61). After ascertaining that all affected
governmental entities assented to the dismissal, this Court
dismissed all claims against those named Defendants on June
8, 2020. (Doc. # 77). Pursuant to the Joint Notice of
Dismissal, and in accordance with the Settlement Agreement,
the following claims were not dismissed: (1) Relators’ and
Relators’ counsel’s claims for reasonable costs and

attorneys’ fees under 31 U.S.C. § 3730(d); and (2) those
claims that the Relators and the United States assert against
Defendants H.I.G. Capital, LLC, and H.I.G. Surgery Centers,
LLC, that are outside the scope of the releases contained in
the Settlement Agreement. (Id.).
On August 7, 2020, while this Motion was still pending,
the United States notified the Court that it would not be
intervening in this matter against Defendants H.I.G. Capital,
LLC, and H.I.G. Surgery Centers, LLC, the Defendants who
brought the instant Motion to Dismiss. (Doc. # 98).
Through the Court’s June 8, 2020, Order, other
stipulations of dismissal, and Relators’ second amended

complaint, the case has now been winnowed down to the two
federal FCA claims described above against these two H.I.G.
Defendants. (Doc. ## 53, 77, 85).
The H.I.G. Defendants filed their Motion to Dismiss on
July 13, 2020. (Doc. # 91). The Motion has been fully briefed
(Doc. ## 97, 98) and is now ripe for review.
II. Legal Standard
When a claim arises under the FCA, “Rule 8’s pleading
standard is supplemented but not supplanted by Federal Rule
of Civil Procedure 9(b).” Urquilla-Diaz v. Kaplan Univ., 780
F.3d 1039, 1051 (11th Cir. 2015). Rule 9(b) imposes a

heightened pleading standard for allegations of fraud,
requiring a party to “state with particularity the
circumstances constituting fraud or mistake.” Fed. R. Civ. P.
9(b). In the FCA context, “the relator has to allege facts as
to time, place, and substance of the defendant’s alleged
fraud, particularly, the details of the defendant’s allegedly
fraudulent acts, when they occurred, and who engaged in them.”
Urquilla-Diaz, 780 F.3d at 1051 (internal quotation marks and
citations omitted).
On a motion to dismiss pursuant to Rule 12(b)(6), the
Court accepts as true all the allegations in the complaint
and construes them in the light most favorable to the

plaintiff. Jackson v. Bellsouth Telecomms., 372 F.3d 1250,
1262 (11th Cir. 2004). Further, the Court favors the plaintiff
with all reasonable inferences from the allegations in the
complaint. Stephens v. Dep’t of Health & Human Servs., 901
F.2d 1571, 1573 (11th Cir. 1990). But,
[w]hile a complaint attacked by a Rule 12(b)(6)
motion to dismiss does not need detailed factual
allegations, a plaintiff’s obligation to provide
the grounds of his entitlement to relief requires
more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action
will not do. Factual allegations must be enough to
raise a right to relief above the speculative
level.

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)
(citations omitted). Courts are not “bound to accept as true
a legal conclusion couched as a factual allegation.” Papasan
v. Allain, 478 U.S. 265, 286 (1986). Furthermore, “[t]he scope
of review must be limited to the four corners of the
complaint.” St. George v. Pinellas Cty., 285 F.3d 1334, 1337
(11th Cir. 2002).
III. Analysis
H.I.G. raises four arguments in support of dismissal.
First, it argues that the second amended complaint brings
claims that have already been released by the Government and
Relators in the April 2020 Settlement Agreement. Second,
H.I.G. claims that the FCA’s first-to-file rule bars the

Relators’ complaint. Third, it argues that the second amended
complaint fails to state a plausible claim against H.I.G.
because it does not sufficiently allege that H.I.G. knowingly
caused the submission of false claims. Finally, according to
H.I.G., the allegations in the second amended complaint do
not meet the requirements of Rule 9(b) and rely instead on
“conclusory statements and innuendo.” (Doc. # 91 at 2).
Because the Court agrees with H.I.G. that Relators’
claims are barred by the FCA’s first-to-file rule, it will
not address any of H.I.G.’s other arguments.
A. First-to-File Rule under the FCA

The FCA’s first-to-file rule provides that “[w]hen a
person brings an action . . . no person other than the
Government may intervene or bring a related action based on
the facts underlying the pending action.” 31 U.S.C. §
3730(b)(5). The first-to-file rule reflects the understanding
that a corresponding government-initiated action would have
involved only a single suit. Makro Capital of Am., Inc. v.
UBS AG, 543 F.3d 1254, 1260 (11th Cir. 2008).
This means that “once one suit has been filed by a
relator or by the government, all other suits against the
same defendant based on the same kind of conduct would be
barred.” Cooper v. Blue Cross & Blue Shield of Fla., Inc., 19

F.3d 562, 567 (11th Cir. 1994). It abates only “pending”
related actions “while the earlier suit remains undecided but
ceases to bar that suit once it is dismissed.” Kellogg Brown
& Root Servs., Inc. v. U.S., ex rel. Carter, 575 U.S. 650,
135 S. Ct. 1970, 1979 (2015) (holding that a qui tam suit
under the FCA ceases to be “pending” once it is dismissed).
Accordingly, a dismissal based solely on the first-to-file
bar should be without prejudice. United States ex rel. Bernier
v. Infilaw Corp., 347 F. Supp. 3d 1075, 1081 (M.D. Fla. 2018).
The issues for determination, then, are two-fold: (1)
whether the earlier-filed action was “pending” when the later

action was brought; and (2) whether the two actions are
“related.” See 31 U.S.C. § 3730(b)(5).
1. Whether the earlier-filed action was “pending”
H.I.G. argues that the first-to-file bar applies here
due to the earlier-filed case of United States ex rel. Ashton
v. Logan Laboratories, LLC, et al., Case No. 16-4583 (E.D.
Pa. 2016). (Doc. # 91 at 11-16). In that case, three
plaintiff-relators brought FCA claims against Logan Labs and
Surgery Partners, Inc. on behalf of the United States and
numerous states. (Ashton, Doc. # 1). The Ashton complaint was
filed on August 22, 2016. (Id.). The Ashton complaint was,
like the complaint here, based on Surgery Partners’ and Logan

Labs’ fraudulent UDT practices. (Id.). On April 15, 2020, the
United States intervened in that case for the purpose of
settlement and the court dismissed the case on June 2, 2020,
pursuant to a joint stipulation of dismissal. (Ashton, Doc.
## 25, 27, 28).
By way of reminder, Dr. Cho and Baker filed their initial
complaint in this matter on April 25, 2017. (Doc. # 1). Thus,
at the time the original complaint was filed, Ashton was still
pending. Relators argue, however, that when they filed their
second amended complaint – which focuses on the allegations
against H.I.G. – on June 29, 2020, the Ashton case had since

been dismissed. (Doc. # 97 at 18-19). The question thus
becomes – does amendment of a complaint cure or change the
first-to-file analysis?
As the parties agree, “whether amendment of a qui tam
complaint following dismissal of a first-filed suit protects
the action from the first-to-file bar is the subject of a
Circuit split, and the Eleventh Circuit has not addressed the
issue.” (Doc. # 97 at 18); see also (Doc. # 91 at 15-16, 15
n.7).
Indeed, the Circuits that have addressed this question
are split. The Courts of Appeals for the Second Circuit and
the District of Columbia have held that the pertinent date to

be considered is when the original complaint was filed in the
second action. See United States ex rel. Wood v. Allergan,
Inc., 899 F.3d 163, 171-72 (2d Cir. 2018) (rejecting as
“inconsistent with the language of the statute” the argument
that a violation of the first-to-file bar can be cured by
filing an amended pleading after the first action is
dismissed); United States ex rel. Shea v. Cellco P’ship, 863
F.3d 923, 929 (D.C. Cir. 2017) (“Shea infringed the first-
to-file bar by bringing a related action while [the] first-
filed case remained pending. Although [the first-filed] suit
is no longer pending, a supplemental complaint cannot change

when Shea brought [the] second action for purposes of the
statutory bar. . . . [I]n short, Shea’s action was incurably
flawed from the moment he filed it.”). The First Circuit,
however, has taken a different view. See United States ex
rel. Gadbois v. PharMerica Corp., 809 F.3d 1, 6 (1st Cir.
2015) (“Developments occurring after the filing of the second
amended complaint . . . have dissolved the jurisdictional bar
that the court below found dispositive. . . . [T]his case is
analogous to the cases in which a jurisdictional prerequisite
(such as an exhaustion requirement) is satisfied only after
suit is commenced. Under the circumstances, it would be a
pointless formality to let the dismissal of the second amended

complaint stand — and doing so would needlessly expose the
relator to the vagaries of filing a new action.”).2
After careful consideration, this Court agrees with the
reasoning of the Second and D.C. Circuits. See United States
v. Albertsons LLC, No. SA-15-CV-957-XR, 2018 WL 6609571, at
*3 (W.D. Tex. Dec. 17, 2018)(“This Court finds the reasoning
in Shea and Wood persuasive and holds that Relator’s action
— doomed at the time of filing because of the prior-filed []
action — cannot be cured by Relator’s amended complaint.”).
First, as the Wood court pointed out, allowing an amended
complaint to defeat the first-to-file bar runs counter to the

2 The Fourth Circuit has held that the first-to-file bar
requires dismissal of a later-filed action even if the first-
filed action is dismissed while the later-filed action is
still pending; it has not decided whether amending or
supplementing a complaint after dismissal of the first-filed
action allows the later-filed action to proceed. United
States ex rel. Carter v. Halliburton Co., 866 F.3d 199, 212
(4th Cir. 2017).
plain terms of the statute:
[Section 3730(b)(5)] bars a person from bringing -
- not continuing to prosecute - a related action
during the pendency of an FCA case, and it makes no
provision for a stay of proceedings until the
prior-filed action is resolved. The first-to-file
bar is thus clear: an action cannot be brought while
a first-filed action is pending. . . . Further,
under a plain-language reading, “amending or
supplementing a complaint does not bring a new
action, it only brings a new complaint into an
action that is already pending. . . . The statutory
command is not ambiguous: a claim is barred by the
first-to-file bar if at the time the lawsuit was
brought a related action was pending.

Wood, 899 F.3d at 172.
Second, as explained in Shea, accepting the argument put
forth by the Relators would “give rise to anomalous outcomes.”
863 F.3d at 930. For example, “if a relator brings suit while
a related action is pending, her ability to proceed with her
action upon the first-filed suit’s completion could depend on
the pure happenstance of whether the district court reached
her case while the first-filed suit remained pending.” Id.
The court elaborated with a hypothetical:
[I]magine a situation in which relators A, B, and
C each file a qui tam action alleging the same
fraud. Relator A reaches the courthouse first and
his action therefore goes forward. Relator B
reaches the courthouse second, but the district
court determines his suit is blocked by the first-
to-file bar and thus dismisses it per the ordinary
course. Relator C files last, and shortly
thereafter, the first-filed action is dismissed.
But suppose relator C filed her suit so late in the
game that the district court fails to dismiss her
action before dismissing the first-filed suit.
Under Shea’s proposed rule, relator C would receive
a windfall: she, unlike relator B, could simply
amend her existing complaint and thereby secure
herself pole position in the first-to-file queue.
Relator C would jump past relator B for the
opportunity to proceed with her suit (and to share
in the government’s reward).

Id. (citations omitted). The D.C. Circuit surmised that
“Congress presumably would not have intended a relator’s fate
to depend on chance considerations such as the extent of a
particular court’s backlog and the timeliness of a particular
court’s entry of a dismissal.” Id.; see also Wood, 899 F.3d
at 174 (noting that if “the primary, if not sole purpose of
the first-to-file rule is to help the Government uncover and
fight fraud, it is unlikely that Congress intended to do so
in an inefficient manner prone to anomalous outcomes”)
(quotations omitted)).
Thus, because Ashton was pending at the time Relators
filed their original complaint in 2017, the first-to-file bar
will apply if the Ashton case is “related.” The Court now
turns to that inquiry.
2. Whether the earlier-filed action is “related”
Because the Ashton complaint is publicly available on
the federal courts’ PACER website, and as a court document
its contents cannot reasonably be in doubt, this Court is
permitted to take judicial notice of it. “Courts may take
judicial notice of public records, such as a pleading filed
in another court, because such documents are ‘capable of
accurate and ready determination by resort to sources whose
accuracy cannot reasonably be questioned.’” Navarro v. City
of Riviera Beach, 192 F. Supp. 3d 1353, 1364 (S.D. Fla. 2016)
(quoting Bryant v. Avado Brands, Inc., 187 F.3d 1271, 1278

(11th Cir. 1999)). “However, judicial notice may be taken
only to establish what those documents contain, not the
veracity of their contents.” Id. (citing Bryant, 187 F.3d at
1278). Accordingly, in order to determine whether the two
actions are sufficiently “related” to trigger the FCA’s
first-to-file bar, this Court will take judicial notice of
the allegations in the Ashton complaint, though it passes no
judgment on the veracity of those allegations.
“Assessing relatedness is not rocket science; doing so
requires comparing the complaints side-by-side to see whether
the claims [in the second action] incorporate the same

material elements of fraud as the earlier action, even if the
allegations incorporate additional or somewhat different
facts or information.” Infilaw, 347 F. Supp. 3d at 1083
(internal quotation marks omitted). “Rather, the whole point
of the first-to-file bar is to see whether the later filed
complaint alleges a fraudulent scheme the government already
would be equipped to investigate based on the first
complaint.” Id. (alterations and quotation marks omitted).3
For this analysis, this Court will consider only the
original complaints in each case. Infilaw, 347 F. Supp. 3d at
1083 (“[T]he relevant complaints are the originals – time is
of the essence with FCA actions and only the true

‘whistleblower’ should be rewarded, not copycats.”); United
States ex rel. Urquilla-Diaz v. Kaplan Univ., No. 09-20756-
CIV, 2016 WL 3909521, at *5 (S.D. Fla. Mar. 24, 2016) (“Thus,
to determine whether Diaz and Gatsiopoulos are ‘related,’ the
Court must consider only the allegations in the original
Gatsiopoulos complaint and the allegations in the original
Diaz complaint; later amendments of either complaint are
irrelevant to the analysis.”).

3 In Infilaw, a court within this District explained that
there is currently a split of authority as to whether the
first-to-file rule is a jurisdictional bar or should be
considered under the rubric of Rule 12(b)(6). Id. at 1081-
83. After scrutinizing the case law, the Infilaw court
determined that “[w]ithout a clear path from the U.S. Court
of Appeals for the Eleventh Circuit, the Court tags along
with the Second and D.C. Circuits, who have the better reading
of the first-to-file bar as part of the 12(b)(6) inquiry, not
12(b)(1).” Id. at 1082-83. This Court agrees with the
reasoning of Infilaw although, for purposes of this Order,
whether the bar is jurisdictional or arises under Rule
12(b)(6) is of little moment.
Relators argue that they “allege a scheme materially
different than the one in Ashton.” (Doc. # 97 at 16). For one
thing, Relators point out that the H.I.G. Defendants were not
named as defendants in Ashton, and allegations about H.I.G.’s
alleged role in the scheme are entirely absent from the Ashton
pleading, “either by name or by allusion.” (Id.).
Once again, in the absence of Eleventh Circuit case law

on this issue, the Court turns to other jurisdictions for
guidance. To determine whether the first-to-file bar applies,
seven circuit courts of appeals have adopted the “same
material elements” test. See United States v. Berkeley
Heartlab, Inc., 225 F. Supp. 3d 487, 507 (D.S.C. 2016). Under
this test, a later-filed action is not based on the facts of
a pending action when it identifies a new defendant who is
not a subsidiary or corporate affiliate of an already-named
defendant. See In re Nat. Gas Royalties Qui Tam Litig. (CO2
Appeals), 566 F.3d 956, 962 (10th Cir. 2009) (“The identity
of a defendant constitutes a material element of a fraud claim

[but] [c]ases involving parents, subsidiaries, and other
corporate affiliates might . . . require deviations from the
general requirement that claims must share common defendants
in order to trigger the first-to-file bar.”); see also United
States ex rel. Hampton v. Columbia/HCA Healthcare Corp., 318
F.3d 214, 218–19 (D.C. Cir. 2003) (holding that later-filed
complaint’s allegations against a specific subsidiary were
already encompassed in allegations in first-filed complaint
against the parent corporation).
In addition to their corporate relationship, this Court
must also look at the scope of the allegations contained in
the first- and later-filed complaints. Courts have held that

allegations of a greater, more expansive, or nationwide fraud
naturally include lesser, local, or subsidiary frauds;
whereas lesser frauds may not always include the greater. See
United States ex rel. Heath v. AT&T, Inc., 791 F.3d 112, 121-
22 (D.C. Cir. 2015) (holding first-to-file bar did not apply
when the earlier action alerted the government only to “a
limited scheme by Wisconsin Bell to defraud [a program] within
Wisconsin” that was accomplished through affirmative
misrepresentations by Wisconsin Bell employees and the later-
filed action alleged “a different and more far-reaching
scheme to defraud the federal government through service

contracts entered into across the Nation”); see also United
States ex rel. Batiste v. SLM Corp., 659 F.3d 1204, 1209 (D.C.
Cir. 2011) (first-to-file rule applied when the first
complaint alleged that “corporate policies” perpetuated a
“nationwide scheme attributable not only to the subsidiary,
but also to [the parent company],” and the second complaint
simply asserted the same fraudulent practices in another
subsidiary); United States ex rel. Chovanec v. Apria
Healthcare Group, Inc., 606 F.3d 361 (7th Cir. 2010) (holding
that earlier-filed suit alleged facts of a top-down fraud
emanating from national headquarters and, thus, encompassed
the fraud at a single office that was alleged in the later-

filed complaint). As a district court in the Southern District
of Florida has explained it, “[i]n the context of a parent
and subsidiaries or related corporations, to determine
whether suits are related for purposes of the first-to-file
bar, a court must determine whether the earlier-filed suit
alleges a fraud at local, individual offices or, instead,
alleges a cohesive scheme orchestrated by national
management.” Urquilla-Diaz, 2016 WL 3909521, at *4. For
example, in the Urquilla-Diaz case, the court held that where
the earlier-filed complaint’s scope was limited to a single
school in Pennsylvania but the later-filed complaint

encompassed a similar scheme at all of Kaplan University’s
seventy-nine schools and its online program, “the claims in
the two complaints are not related.” Id.
Here, it is undisputed that the H.I.G. Defendants were
not named in the Ashton complaint. However, in the original
complaint in this case, they were named as the corporate
parents of Surgery Partners and Logan Labs, the main entities
behind the fraud. (Doc. # 1 at ¶¶ 81-93). Thus, the H.I.G.
Defendants are the corporate affiliates of the defendants
named in the Ashton action. See Grynberg v. Koch Gateway
Pipeline Co., 390 F.3d 1276, 1280 n.4 (10th Cir. 2004)
(finding that the first-to-file rule applied where a relator

named as defendants some “affiliated” entities that were not
listed as defendants in the prior pending lawsuit).
What’s more, read in its entirety, the Ashton complaint
alleged a broad, nationwide scheme on the part of Logan Labs
and Surgery Partners to defraud Medicare and other Government
programs by submitting medically unnecessary and inflated
claims for UDT. For example, the Ashton complaint alleged
that Surgery Partners operated in 28 states and, indeed, the
Ashton relators brought the complaint on behalf of 28
individual states, in addition to the United States. (Ashton,
Doc. # 1 at 1, ¶ 14). The Ashton relators alleged that Logan

Labs knowingly submitted millions of dollars’ worth of false
claims to Medicare for UDT that were neither reasonable nor
necessary, and that, from 2013 until 2016, Logan Labs received
almost 200,000 urine specimens and that 50% of those were
billed to Government programs, “for a total of an estimate
$200 to $400 million.” (Id. at ¶¶ 7, 99).
And comparing the complaints side-by-side, the Ashton
complaint and the original complaint here both allege several
of the same key factors underlying the UDT scheme: (1) Surgery
Partners caused or manipulated its physicians to routinely
order UDT for patients without regard for individual patient
needs, in violation of the Medicare requirement that

providers seek reimbursement only for “reasonable and
necessary” services; (2) Surgery Partners paid illegal
kickbacks or offered other incentives to its physicians to
induce them to refer high numbers of UDT to Logan Labs; (3)
once received, Logan Labs would run excessive UDT panels; and
(4) all of which resulted in millions of dollars’ worth of
false claims being presented to Medicare, Medicaid, and other
Government programs. Compare (Doc. # 1 at ¶¶ 19-22, 24-25,
31, 272-73, 279, 288, 292-93, 301-03, 349, 353, 386-91, 433-
39, 449) with (Ashton, Doc. # 1 at ¶¶ 2, 8, 87-89, 95-97,
104-07, 110-15, 136).

In sum, a comparison of the original Ashton and Cho
complaints reveals that they allege the same essential facts
regarding the UDT fraud against the Government committed by
Surgery Partners and Logan Labs. While Cho’s complaint
contains slightly different details, both complaints allege
that Surgery Partners and Logan Labs violated the FCA by
implementing a broad policy of requiring expensive and
medically unnecessary UDT for a large number of patients for
whom the testing was not necessary and then reaping millions
of dollars in profits by submitting these claims to Government
programs for payment. Both complaints allege that Surgery
Partners and Logan Labs violated the Stark Law, and the Anti-

Kickback Statute by providing kickbacks, additional
compensation, and other perks to medical professionals as an
inducement to order as much UDT as possible.
The Court thus disagrees with Relators that the “primary
allegation levelled by Relators in their first Complaint here
– the institution of Surgery Partners’ kickback compensation
structure – is also absent from Ashton.” (Doc. # 97 at 16).
A fair reading of the initial complaint in this case
demonstrates that, while the kickback scheme is certainly an
integral part of Relators’ original complaint, it is not the
“primary allegation.” Moreover, the Ashton relators also

alleged that “Surgery Partners provided illegal kickbacks to
physicians in order to increase laboratory tests to Logan
[Labs]” and that this alleged kickback scheme violated the
Stark Law and the Anti-Kickback Statute. (Ashton, Doc. # 1 at
¶¶ 95-99). That Cho’s complaint contained additional details
about the structure of those kickbacks does not defeat the
first-to-file bar. See United States ex rel. Lujan v. Hughes
Aircraft Co., 243 F.3d 1181, 1189 (9th Cir. 2001) (holding
that Section 3730(b)(5) “bars later-filed actions alleging
the same material elements of fraud described in an earlier
suit, regardless of whether the allegations incorporate
somewhat different details”).

Relators argue that their initial complaint described a
scheme different from the one alleged in Ashton because, for
example, (1) the Ashton complaint “focused on the fraudulent
impact of standing order forms and standard testing panels,”
whereas they alleged that the Defendants “used fraudulent
intake forms to obtain patient consent for testing,” and (2)
these Relators alleged a scheme that was “top-down and
designed to meet the corporate-wide objective of shifting
Surgery Centers’ profit center to ‘ancillary services.’”
(Doc. # 97 at 17-18). The first example is easily discarded.
Complaints need not allege identical facts – the relevant

question is, instead, whether they allege the same “essential
claim” or “material elements.” See Grynberg, 390 F.3d at 1279-
80. The precise way in which Surgery Partners implemented its
objective of sending nearly all patient specimens for UDT,
regardless of medical necessity, is not a material element of
the fraud. See Batiste, 659 F.3d at 1209-10 (holding that
where the first-filed complaint “would suffice to equip the
government to investigate SLM’s allegedly fraudulent
forbearance practices nationwide,” the second-filed
complaint’s additional details “would not give rise to a
different investigation or recovery”).
As for Relators’ other argument, the Court cannot

discern a material difference in the scope of the scheme
outlined in the two complaints. True, Relators here named
more defendants, but both complaints alleged a nationwide
scheme by Surgery Partners and Logan Labs across multiple
offices to send unnecessary UDT to Logan Labs in order to
reap millions in illegal reimbursements from Medicare and
other government payors. This case is thus distinguishable
from those cases where the first-filed action alleged only a
localized or limited scheme and the later-filed action
alleged a much broader, nationwide scheme, directed by a far-
reaching corporate policy. See Heath, 791 F.3d at 121-22;

Urquilla-Diaz, 2016 WL 3909521, at *4.
Thus, while Relators insist that “Ashton did not put the
Government on notice of H.I.G.’s liability,” (Doc. # 97 at
17), that is not the relevant standard. Instead, the question
is whether the Relators here alleged a fraudulent scheme that
the Government would already be equipped to investigate based
on the first complaint. See Infilaw, 347 F. Supp. 3d at 1083);
see also United States v. Medco Health Sols., Inc., No. CV
11-684-RGA, 2017 WL 63006, at *10 (D. Del. Jan. 5,
2017)(“Courts will find that two actions are related, despite
different defendants, when the first-filed complaint provided
‘enough information to discover’ the fraud alleged in the

second-filed complaint, including the identity of the new
defendants.”). Here, the allegations in the Ashton complaint
were such that the Government was equipped to launch a broad,
nationwide investigation into the UDT fraud perpetrated by
Surgery Partners, including the potential culpability of
Surgery Partners’ corporate affiliates. See United States ex
rel. Poteet v. Medtronic, Inc., 552 F.3d 503, 517 (6th Cir.
2009)(“[T]he fact that the later action names different or
additional defendants is not dispositive as long as the two
complaints identify the same general fraudulent scheme”); see
also Grynberg, 390 F.3d at 1279 (“Once the government is put

on notice of its potential fraud claim, the purpose behind
allowing qui tam litigation is satisfied. . . . Once an
initial qui tam complaint puts the government and the
defendants on notice of its essential claim, all interested
parties can expect to resolve that claim in a single
lawsuit.”).
For these reasons, the Relators’ complaint is barred by
the FCA’s first-to-file rule.
B. Leave to Amend
Dismissals based solely on the first-to-file rule should
be without prejudice. Infilaw Corp., 347 F. Supp. 3d at 1081;
see also Medco Health, 2017 WL 63006, at *12 (explaining that

because a case ceases to be “pending” once it is decided or
dismissed, dismissal under this rule “must be without
prejudice to refiling once the earlier action is no longer
pending”). Thus, Relators’ claims are dismissed without
prejudice.
Accordingly, it is
ORDERED, ADJUDGED, and DECREED:
(1) The Defendants’ Motion to Dismiss the Relators’ Second
Amended Complaint (Doc. # 91) is GRANTED. Relators’
second amended complaint is dismissed without prejudice
based on the federal False Claims Act’s first-to-file

bar.
(2) The Clerk is directed to CLOSE the case. Pursuant to the
terms of the Settlement Agreement, the Court will retain
jurisdiction, as appropriate, to determine Relators’ and
Relators’ counsel’s claims for reasonable costs and
attorneys’ fees related to the Settlement Agreement
under 31 U.S.C. § 3730(d).
DONE and ORDERED in Chambers, in Tampa, Florida, this
26th day of August, 2020.

lism? In. Meanreploy Croc
VIR IA M. HERNANDEZ’*COVINGTON
UNITED STATES DISTRICT JUDGE

32

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10105761. Public record. Not legal advice.