United States of America v. Care Services Management LLC

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF TENNESSEE

NASHVILLE DIVISION

UNITED STATES OF AMERICA and the )

STATES OF GEORGIA, LOUISIANA, )

TENNESSEE, and VIRGINIA ex rel. )

GREGORY FOLSE, )

)

Plaintiffs, )

)

v. ) Case No. 3:17-cv-1478

) Judge Aleta A. Trauger

MARQUIS “MARK” NAPPER, JOSHUA )

KILGORE, DANIEL BIRD, CARE )

SERVICES MANAGEMENT LLC, )

MARQUIS HEALTH SYSTEMS LLC, )

MARQUIS MOBILE DENTAL SERVICES )

LLC, and SALLY B. DALY DDS LLC )

d/b/a FLEUR DE LIS MOBILE DENTAL, )

)

Defendants. )

MEMORANDUM

Relator Gregory Folse has filed a Motion to Strike Certain Affirmative Defenses from the

[Care Services Management, LLC (“CSM”)] Defendants’ Answer to Relator’s Second Amended

Complaint (Doc. No. 165), and plaintiffs Tennessee and Louisiana have filed a Motion to Strike

Certain Affirmative Defenses from the CSM Defendants’ Answer to Amended Complaint in

Intervention (Doc. No. 167). The CSM-affiliated defendants—that is, CSM, Marquis “Mark”

Napper, Joshua Kilgore, Daniel Bird, Marquis Health Systems, LLC, and Marquis Mobile Dental

Services, LLC—have filed a Response (Doc. No. 169) addressing both motions, and Folse has

filed a Reply (Doc. No. 172). For the reasons set out herein, each motion will be granted in part

and denied in part.

I. BACKGROUND

A. Nature of the Case

This is a healthcare fraud action originally filed by Folse pursuant to the qui tam provisions

of the False Claims Act (“FCA”)1 and a few state-level counterparts. The details of the alleged

scheme—and the features of the Medicaid program on which the scheme is premised—can be

found in the court’s memorandum of October 27, 2021. See United States v. Napper, No. 3:17-

CV-1478, 2021 WL 4992651, at *2 (M.D. Tenn. Oct. 27, 2021). In short, Folse and the

governments of Louisiana and Tennessee have alleged that the defendants, who provide dental and

other specialty medical services, engaged in kickbacks related to the Medicaid program’s policy

of increasing the program’s share of financial responsibility for a patient’s long-term care (“LTC”)

based on the patient’s “independent medical expenses” (“IMEs”) accrued in connection with

services that Medicaid does not cover directly. See 42 C.F.R. § 435.725(c)(4). Those allegations

make this case somewhat unique, compared to most Medicaid-based FCA cases, because, unlike

those cases, this case touches on Medicaid’s roundabout method of subsidizing IMEs, not merely

its direct payment of claims for services.

CSM provides IME-eligible specialty services to Medicaid-participating LTC residents

through “provider affiliates” who contract with CSM and work directly with the LTC providers.

(Doc. No. 144 ¶ 65.) The plaintiffs and relator assert that CSM improperly enticed the LTC

1 “[T]he qui tam provision of the FCA” allows a private party—known as a “qui tam relator”—to file a

cause of action “in the name of the United States.” U.S. ex rel. Smith v. Lampers, 69 F. App’x 719, 720 (6th

Cir. 2003) (citing 31 U.S.C. § 3730(b)(1)). The complaint is initially placed under seal, while the United

States has an opportunity to evaluate the relator’s allegations. 31 U.S.C. § 3730(b)(2). The United States

ultimately must either elect to intervene in the case— in which case, it takes over the prosecution of the

claims—or decline to intervene, giving the relator the option to pursue the FCA claims in the name of the

government himself. 31 U.S.C. § 3730(b)(4), (c). Either way, if the claims are ultimately successful, the

relator will be entitled to a share of the recovery, as a reward for his assistance and an enticement for future

potential whistleblowers. 31 U.S.C. § 3730(d).

facilities into such arrangements by offering inducements—most prominently, free services for

some patients and administrative support for the facilities—in exchange for referrals, allegedly in

violation of the federal Anti-Kickback Statute (“AKS”). By statute, “a claim that includes items or

services resulting from a violation of [the AKS] constitutes a false or fraudulent claim for purposes

of subchapter III of chapter 37 of Title 31,’ i.e., the FCA.” U.S. ex rel. Arnstein v. Teva Pharms.

USA, Inc., No. 13 CIV. 3702 (CM), 2019 WL 1245656, at *5 (S.D.N.Y. Feb. 27, 2019) (quoting

42 U.S.C. § 1320a-7b(g)).

Folse filed his initial qui tam Complaint on behalf of the United States, Tennessee,

Louisiana, and Georgia on November 22, 2017. (Doc. No. 1.) The Complaint was served on the

respective named governments, and they began their evaluation of the allegations. On March 13,

2018, the United States formally declined to intervene. (Doc. No. 15.) The state governments,

however, continued looking into the matter. (See Doc. Nos. 17, 19 (seeking and receiving

extension of time to consider intervention).) On December 11, 2018, Folse filed an Amended

Complaint, in which he added claims on behalf of the Commonwealth of Virginia and named some

additional defendants. (Doc. No. 22.) The state governments continued to evaluate the claims, and,

on November 25, 2020, they filed a joint Notice, informing the court that Tennessee and Louisiana

had elected to intervene, but Georgia and Virginia had declined to do so. (Doc. No. 40.) On

February 9, 2021, Folse filed a Notice of Voluntary Dismissal regarding some Georgia and

Virginia-based defendants, with the consent of the various governments, although he did not

otherwise dismiss any claims related to Medicaid in Georgia or Virginia. (Doc. No. 51.)

On March 10, 2021, Tennessee and Louisiana filed a joint Complaint in Intervention. (Doc.

No. 76.) They alleged two “schemes of fraud,” which they referred to as “Scheme One” and

“Scheme Two.” Scheme One involved alleged kickbacks between LTC facilities and the

defendants, in the form of free services provided to (or for the benefit of) LTC facilities. (Id. ¶¶

100-01.) Scheme Two involved alleged kickbacks between the defendants and their provider

affiliates, in the form of the affiliates’ providing CSM with a portion of their revenues in exchange

for access to CSM’s client base. (Id. ¶¶ 114–18.) Scheme One and Scheme Two each included

some claims based on conventional Medicaid reimbursement for covered services and some claims

based on IME deductions based on non-covered services. (Id. ¶¶ 119–23.)

The State of Tennessee pleaded four counts. Tennessee Count 1 encompassed Tennessee

Medicaid False Claims Act (“TMFCA”) claims based on the defendants’ knowingly causing false

claims to be submitted to Tennessee’s Medicaid program, known as “TennCare.” (Id. ¶¶ 147–50.)

Tennessee Count 2 was also under the TMFCA but was based on alleged conspiracy. (Id. ¶¶ 151–

53.) Tennessee Counts 3 and 4 were, respectively, common law claims for unjust enrichment and

payment by mistake. (Id. ¶¶ 154–60.) The State of Louisiana pleaded two counts. Louisiana Count

1 was pursuant to the anti-kickback provisions of Louisiana’s Medical Assistance Programs

Integrity Law (“MAPIL”). (Id. ¶¶ 161–63.) Louisiana Count 2 was pursuant to MAPIL’s

provisions regarding false claims. (Id. ¶¶ 164–67.)

B. The Court’s Prior Holdings

Various defendants filed motions to dismiss—five such motions, in total. (Doc. Nos. 89,

93, 95, 106, 121.) On October 27, 2021, the court denied those motions but required Folse and

Louisiana to rectify some relatively minor deficiencies in their pleadings. See Napper, 2021 WL

4992651, at *24. Although some of the issues that the court addressed in response to those motions

are irrelevant to the matters currently under consideration, Folse and the states rely extensively on

other aspects of the court’s holdings in support of their pending requests. Accordingly, the court

will reiterate a few core aspects of its earlier rulings.

As a preliminary matter, the court addressed the relationship between the AKS and the

relevant false claims statutes. As the court has already noted in this opinion, a claim to receive

payment for “items or services resulting from a violation of” the AKS is, by statute, a false or

fraudulent claim under the FCA. 42 U.S.C. § 1320a-7b(g)). That statutory rule, however, was

enacted fairly recently and, on its face, applies only to the FCA, not FCA-modeled state statutes

like the TMFCA or the relevant provisions of MAPIL. Accordingly, while the TMFCA and the

MAPIL false claims provisions may resemble the FCA in most ways, they do not share its explicit

approach to AKS violations. The court concluded that a Medicaid claim tainted by an AKS

violation could still theoretically support a claim under those statutes, but only if the relevant state

established the necessary elements of falsity and materiality under a “false certification of

compliance with a material condition” theory, as set out by the Supreme Court in in Universal

Health Servs., Inc. v. U.S. ex rel. Escobar, 579 U.S. 176, 183 (2016). Because Folse and the states

had sufficiently pleaded falsity and materiality, they were entitled to proceed under such a theory.

See Napper, 2021 WL 4992651, at *12–15.

Having concluded that an AKS violation could support a claim under the TMFCA and

MAPIL, as well as under the FCA, the court turned next to whether the arrangements described in

the complaints represented plausible AKS violations. The court relied on the following list of

elements required for finding such a violation:

(1) the defendant solicited or received [or offered or paid] any remuneration,

including any kickback or bribe, directly or indirectly, overtly or covertly, in cash

or in kind, to any person; (2) that the remuneration was solicited or received to

induce such person to refer an individual to a person for furnishing or arranging of

an item or service; (3) that the item or service was one for which payment may be

made in whole or in part under a federal healthcare program; and (4) that the

defendant acted knowingly and willfully.

Napper, 2021 WL 4992651, at *15 (quoting United States v. St. Junius, 739 F.3d 193, 210 n.18

(5th Cir. 2013)).

The defendants had argued that, at least for most of the transactions at issue in this case,

the plaintiffs could not satisfy the third element, because the services involved were not covered

by Medicaid, which, the defendants argued, meant that there was no payment for an item or service

“under a federal healthcare program.” The court explained the situation as follows:

The plaintiffs allege that each service at issue was paid for under the Medicaid

program in one of two ways. For a few of those services—the ones compensable

through the ordinary claims process, such as certain podiatry services—there is no

reasonable basis for disputing that such claims were paid under Medicaid. Those

were simply ordinary Medicaid claims; if any Medicaid claims qualify for AKS

protection—which they do—then those claims did as well. The second category of

alleged Medicaid payment, however, is both more complicated and more central to

the plaintiffs’ case. Although compensable specialty services accounted for a

portion of the defendants’ business, the historical core of the business was dentistry,

and all parties agree that neither Tennessee nor Louisiana Medicaid pays for most

non-emergency adult dental services. The plaintiffs argue that such services

nevertheless were paid for “under” those programs because they were subsidized

through IME deductions.

Id. at *16. The court ultimately agreed with the plaintiffs’ argument in that regard based on a close

reading of the language of the AKS, holding that the AKS’s prohibition applies, at least, to “all

services for which Medicaid pays a discrete sum as a means to compensate for a specific service

that was actually provided, whether or not such a payment occurred directly, through the ordinary

claims process alone, or indirectly, through the application of an IME deduction.” Id.

The court turned next to the defendants’ argument regarding the first two elements of an

AKS violation, regarding remuneration. The court concluded that the plaintiffs had adequately

alleged remuneration related to both Scheme One and Scheme Two. Regarding Scheme One,

involving kickbacks to LTC facilities, the court wrote:

The defendants provided free services to [some of the] facilities’ . . . residents, and

those services were undoubtedly valuable. Although the defendants protest that the

services were provided to [residents] and not to the LTC facilities themselves, the

plaintiffs have plausibly alleged that those services were valuable to the facilities

because they (1) were a valuable amenity that was attractive to residents and (2)

reduced the costs associated with assisting residents with transportation. Just how

valuable the free services provided to . . . patients were to LTC facilities themselves

is a question of fact dependent on a number of contextual factors, and the plaintiffs

will ultimately bear the burden of establishing that those services were, in fact,

being knowingly provided in exchange for referrals from the LTC facility. At this

stage, however, the plaintiffs were only required to plead the elements of their claim

plausibly and with particularity, which they have done.

Id. at *17. Regarding Scheme Two, involving kickbacks from provider affiliates, the court wrote:

The defendants argue that the relationship between CSM and its provider affiliates

was simply an ordinary business arrangement between a regional company with a

sound business model and local contractors who performed necessary services in

conjunction with that business model. But the presence of some legitimate business

motivations is not necessarily fatal to an alleged AKS violation. For example,

courts have held that a payment made for the purpose of inducing a referral can

violate the AKS, “even if the payments were also intended to compensate for

professional services.” United States v. Borrasi, 639 F.3d 774, 782 (7th Cir. 2011)

(quoting United States v. Greber, 760 F.2d 68, 72 (3d Cir. 1985)). Indeed, it is

common for AKS violations to occur alongside legitimate medical business

activities; kickback schemes are only successful insofar as they are able to embed

themselves within the vast, lucrative universe of ordinary healthcare services and

payments. The defendants will have the opportunity to set forth evidence regarding

the purposes of the payments they made to provider affiliates, as well as whether

they possessed knowledge of the supposed wrongfulness of such payments. At this

stage, however, the plaintiffs have adequately pleaded that the payments, whatever

else they were, were also kickbacks.

Id. The court considered and rejected a handful of additional AKS-based arguments, including

whether the plaintiffs adequately pleaded knowledge and willfulness (they had) and whether the

plaintiffs were required to plead or show any of the services involved were unnecessary or

inadequate (they were not). Id. at *17–18. The court also concluded that the plaintiffs had

adequately pleaded conspiracy. Id. at *18–19.

Finally, the court considered Tennessee’s common law claims. The court noted that the

structure of the TennCare system, which relies on managed care intermediaries rather than direct

payments to providers, complicated matters somewhat, but the court ultimately concluded that

established Tennessee caselaw recognizing the potential viability of claims for indirect unjust

enrichment meant that dismissing the claims was not supported. The court addressed a few more

arguments that are of limited importance at this juncture and denied the motions to dismiss, with

the qualification that Louisiana and Folse would need to amend their complaints to resolve certain

drafting deficiencies. Id. at *24. Shortly thereafter, the states filed an Amended Complaint in

Intervention and Folse filed a Second Amended Complaint. Those Amended Complaints rectified

the flaws that the court had identified but otherwise retained the basic structure and allegations

that had previously been pleaded. (Doc. Nos. 143–44.)

C. The Defendants’ Answers and the Pending Motion

On February 1, 2022, CSM and its related defendants filed an Answer to each Amended

Complaint. (Doc. Nos. 161–62.) Each Answer included a list of forty “AFFIRMATIVE AND

ADDITIONAL DEFENSES.” (Doc. No. 162 at 5–14.; Doc. No. 163 at 12–20.) On February 22,

2022, Folse and the governments filed separate, but largely overlapping, Motions to Strike directed

at the defenses. (Doc. No. 165, 167.) Broadly speaking, the challenges to the defenses can be

grouped into five arguments: (1) the Answers were untimely and therefore all defenses should be

barred; (2) some defenses are inconsistent with the court’s earlier opinion; (3) some defenses are

common law in nature and cannot be applied to statutory claims, particularly those based on

congressionally authorized appropriations; (4) some defenses do not actually represent defenses to

liability under the relevant causes of action; and (5) some defenses are duplicative of each other.

The first of those arguments applies to each defense pleaded. The remaining four are, cumulatively,

directed at a bit over half of the forty defenses.

II. LEGAL STANDARD

Under Rule 12(f) of the Federal Rules of Civil Procedure, a court may, on its own or upon

a timely motion, “order any redundant, immaterial, impertinent, or scandalous matter stricken from

any pleading, motion, or other paper.” Fed R. Civ. P. 12(f). Rule 12(f) expressly acknowledges

that “[t]he objection that a responsive pleading or separate defense therein fails to state a legal

defense may be raised by motion filed under this section.” Id. However, courts construing and

applying Rule 12(f) have followed the rule that “[a] motion to strike is a drastic remedy that should

be used sparingly and only when the purposes of justice require.” Driving Sch. Assoc. of Ohio v.

Shipley, No. 1:92-CV-00083, 2006 WL 2667017, at *1 (N.D. Ohio 2006) (citing Brown &

Williamson Tobacco Corp. v. United States, 201 F.2d 819, 822 (6th Cir. 1953)).

A motion to strike an affirmative defense under Rule 12(f) “is proper if the defense is

insufficient; that is, if ‘as a matter of law, the defense cannot succeed under any circumstances.’”

S.E.C. v. Thorn, No. 2:01-CV-290, 2002 WL 31412440, *2 (S.D. Ohio 2002) (quoting Ameriwood

Indus. Int’l Corp. v. Arthur Andersen & Co., 961 F. Supp. 1078, 1083 (W.D. Mich. 1997)). A

motion to strike should not be granted “if the insufficiency of the defense is not clearly apparent,

or if it raises factual issues that should be determined on a hearing on the merits.” United States v.

Pretty Prods. Inc., 780 F. Supp. 1488, 1498 (S.D. Ohio 1991) (quoting 5A Wright & Miller, Fed.

Prac. & Proc. § 1380 (1990)). The court “may only strike those defenses ‘so legally insufficient

that it is beyond cavil that defendants could not prevail on them.’” Id. (citation omitted). The

decision whether to strike an affirmative defense is within the discretion of the district court. See

Conocophillips Co. v. Shaffer, No. 3:05 CV 7131, 2005 WL 2280393, at *2 (N.D. Ohio 2005)

(“Rule 12(f) permits the Court to act with discretion in that it may strike irrelevant and superfluous

defenses or let them stand. There is absolutely no harm in letting them remain in the pleadings if,

as the Plaintiff contends, they are inapplicable.”)

III. ANALYSIS

A. Nature of the Pending Requests

Before the court addresses the substance of the pending motions, it may be helpful to

highlight specifically what is—and what is not—at stake. Federal Rule of Civil Procedure 8(c)

generally requires defendants to “affirmatively state any avoidance or affirmative defense” in their

first response to a pleading, and the failure to do so may (but does not necessarily) result in waiver

of the defense. See Brent v. Wayne Cnty. Dep’t of Hum. Servs., 901 F.3d 656, 680 (6th Cir. 2018)

(citing Horton v. Potter, 369 F.3d 906, 911 (6th Cir. 2004); Kennedy v. City of Cleveland, 797

F.2d 297, 300 (6th Cir. 1986)); but see Shelbyville Hosp. Corp. v. Mosley, No. 4:13-CV-88, 2017

WL 5586729, at *14 (E.D. Tenn. Nov. 20, 2017) (“[F]ailure to raise an affirmative defense by

responsive pleading does not always result in waiver.”) (quoting Smith v. Sushka, 117 F.3d 965,

969 (6th Cir. 1997)). As a practical matter, then, the inclusion of an affirmative defense in an

answer often functions a great deal like the inclusion of a claim in a complaint; it establishes that

the particular defense is actually part of the case before the court.

Not every way that a defendant might defeat a claim, however, is an affirmative defense.

“An affirmative defense, under the meaning of Fed. R. Civ. P. 8(c), is a defense that does not

negate the elements of the plaintiff’s claim, but instead precludes liability even if all of the

elements of the plaintiff’s claim are proven.” Roberge v. Hannah Marine Corp., 124 F.3d 199

(Table), 1997 WL 468330, at *3 (6th Cir. Aug. 13, 1997). Aside from admitting or denying the

specific allegations in the complaint, an answer is not required to do anything or plead anything to

preserve the defendant’s right to pursue a defense based on negating elements of the plaintiff’s

claims.

Many of the defenses included by these defendants in their Answers plainly fall in this

latter category of those for which special pleading is not required. For example, the Twenty-Eighth

Defense is that each relevant Amended Complaint “fails to establish the elements necessary for

recovery under any state or federal False Claims Act, the Federal Priority Statute and doctrines of

unjust enrichment, payment by mistake or any other common law claim.” (Doc. No. 162 at 10;

Doc. No. 163 at 17.) That defense involves nothing but the negation of the stated claims and

therefore is not an affirmative defense that required special pleading. Other pleaded defenses are

similarly focused on the elements of the claims at issue. Such unnecessarily pleaded defenses do

not preserve any argument or issue, and, just as they add nothing to the case, striking them would

remove nothing. Substantial portions of the plaintiffs’ motions are, in essence, inconsequential

requests to remove just-as-inconsequential language—classic “time wasters” focused on “purely

cosmetic” matters, as motions to strike are often criticized for being. Neal v. City of Detroit, No.

17-13170, 2018 WL 1399252, at *1 (E.D. Mich. Mar. 19, 2018) (quoting Wright & Miller, 5C

Fed. Prac. & Proc. § 1382 (3d ed. 2004)).

That said, there are sometimes good reasons to move to strike a defense—particularly a

meritless affirmative defense that, unless stricken, would expand the scope of issues under

consideration in a case. It may, moreover, be helpful to obtain rulings from the court, at an early

stage, on core legal issues that will determine the direction of litigation, and a motion to strike a

defense is one legitimate way to obtain such an early ruling. In this case, however, the court has

already issued a lengthy opinion in which it resolved five separate motions to dismiss, and the

court hopes that its reasoning in that opinion provided the parties with sufficient notice of the

framework on which the court expects to rely in this case.

The court will therefore exercise its discretion to focus on the aspects of the plaintiffs’ and

the relator’s requests, if any, that either present actual opportunities to move the case forward or

that identify defenses that are so truly extraneous to the case as to warrant being stricken, rather

than just ignored. Such an approach is not merely a good use of the court’s time and resources, but

also consistent with the high standard governing motions to strike. While a motion to strike a

defense may superficially resemble a 12(b)(6) motion to dismiss a claim—just with the shoe on

the other foot—Rule 12(f)’s “cannot succeed under any circumstances” standard is significantly

more demanding of the movant than Rule 12(b)(6). See Hutchings v. Fed. Ins. Co., No. 6:08-CV-

305-ORL-19KR, 2008 WL 4186994, at *2 (M.D. Fla. Sept. 8, 2008) (noting differences between

standards under Rule 12(b)(6) and Rule 12(f)). Many of the defendants’ claimed defenses may be

unlikely to pan out, but there is no basis, under the Rules of Civil Procedure, for rushing ahead to

evaluate them now by the same standard that the court applies to claims in a complaint.

B. Timeliness of Answer

Pursuant to Rule 15(a)(3) of the Federal Rules of Civil Procedure, “[u]nless the court orders

otherwise, any required response to an amended pleading must be made within the time remaining

to respond to the original pleading or within 14 days after service of the amended pleading,

whichever is later.” By that rule, the CSM defendants should have filed their Answers by

November 23, 2021. They did not file the Answers, however, until February 1, 2022. (Doc. Nos.

162–63.) The CSM defendants concede that their Answers were untimely, which they say was the

result of “a series of unforeseeable circumstances,” including a “computer crash that resulted in

data loss and required several weeks to rectify” and two separate family funerals. (Doc. No. 169

at 5 n.2.) The defendants argue, however, that the states and Folse have not been prejudiced by the

delay and that the court should therefore permit the defendants to proceed without any sanction

for their untimeliness.

Most litigation deadlines at the district court level are subject to the qualification, set out

in Rule 6(b)(1), that, “[w]hen an act may or must be done within a specified time, the court may,

for good cause, extend the time: (A) with or without motion or notice if the court acts, or if a

request is made, before the original time or its extension expires; or (B) on motion made after the

time has expired if the party failed to act because of excusable neglect.” Fed. R. Civ. P. 6(b); see

MRP Props., LLC v. United States, No. 17-CV-11174, 2017 WL 11518355, at *1 (E.D. Mich. Oct.

5, 2017). The court therefore construes the defendants’ Answers and/or their Response to the

pending motions as including a request for an extension pursuant to Fed. R. Civ. P. 6(b)(1)(B),

which the court will grant.

“Excusable neglect is a ‘somewhat elastic concept’ that is ‘at bottom an equitable one,

taking account of all relevant circumstances.’” Century Indem. Co. v. Begley Co., 323 F.R.D. 237,

241 (E.D. Ky. 2018) (quoting Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S.

380, 395 (1993)). Each of the “principal factors” typically considered by courts—“(1) the danger

of prejudice to the nonmoving party, (2) the length of the delay and its potential impact on judicial

proceedings, (3) the reason for the delay, (4) whether the delay was within the reasonable control

of the moving party, and (5) whether the late-filing party acted in good faith,” Nafziger v.

McDermott Int’l, Inc., 467 F.3d 514, 522 (6th Cir. 2006)—supports granting an extension here.

The court therefore does so and will not impose any sanctions for untimeliness. In the future,

however, if any party needs an extension, it should request that extension in a timely manner—

ideally, before the relevant deadline.

C. Consistency with the Court’s Earlier Opinion

The court’s prior opinion addressed a number of foundational issues, including some raised

by the relatively novel features of this case. Some of the defendants’ stated defenses directly

contradict aspects of that analysis. For example—and most egregiously—Defense 31 is not really

a substantive defense at all, but rather a bare claim that the claims at issue were not pleaded “with

the degree of specificity and particularity required.” (Doc. No. 163 at 17.) The sufficiency of the

underlying pleading, however, was already addressed by the court at length in response to multiple

motions. Although the defendants take issue with the details of some of the arguments that Folse

and the governments make regarding the earlier opinion, they do not ultimately dispute that they

have pleaded some defenses that are difficult to square with the court’s already-issued reasoning.

Rather, the defendants simply argue that they should be permitted to plead any colorable defenses

that they wish to state and preserve, even if the court’s holdings suggest that a particular defense

is unlikely to succeed at the district court level.

The defendants are correct that there is a difference between merely preserving a colorable,

but rejected, defense, as the defendants have done, and improperly trying to resurrect such a

rejected argument in connection with a substantive motion. If the defendants raise any already-

decided issue in connection with any future motion, the court expects to adhere to the ordinary rule

that, in most such instances,

[t]he law-of-the-case doctrine precludes reconsideration of a previously-decided

issue at a subsequent stage in the litigation “unless one of three exceptional

circumstances exists: [1] the evidence in a subsequent trial was substantially

different; [2] controlling authority has since made a contrary decision of law

applicable to such issues; or [3] the decision was clearly erroneous, and would work

a substantial injustice.”

J.L. Spoons, Inc. v. Ohio Dep’t of Pub. Safety, 509 F. App’x 464, 469 (6th Cir. 2012) (quoting

Poundstone v. Patriot Coal Co., 485 F.3d 891, 895 (6th Cir. 2007)). Re-raising arguments that the

court has already rejected, in the absence of such circumstances, would indeed be unwelcome.

That does not mean, however, that there is no basis for keeping the rejected defenses on the books.

For example, it is within the realm of reasonable possibility that the Sixth Circuit or Supreme Court

could issue intervening caselaw drawing this court’s conclusions into question, particularly in light

of the novel nature of some of the questions involved. And, of course, depending on how this case

is resolved, the issues may be raised directly on appeal in this case itself. There is, in short, nothing

wrong with the defendants’ having taken care to preserve these arguments and issues, despite the

fact that the court has rejected some of their positions under current law.

The court is unpersuaded by the argument that it should revisit and reiterate its earlier

holdings on these issues in order to avoid hypothetical discovery abuses based on the rejected

defenses. The court’s prior legal holdings stand, regardless of what the Answers say. Nothing about

the Answers prevents the court from keeping those holdings in mind when making decisions about

the scope of discovery. Indeed, the fact that these issues might come up again in discovery is just

more proof that it is unnecessary to go further into them now.

Going through each stated defense in order to parse the precise degree to which it is or is

not consistent with the court’s prior opinion would be both a poor use of the court’s time and a

departure from the court’s ordinary role of answering only those legal questions actually presented

as part of the necessary process of resolving a case or controversy. The court’s opinion resolving

the motions to dismiss speaks for itself. If the developed facts of this case ultimately call on the

court to consider the scope of its earlier holdings—whether during discovery, in connection with

a motion for summary judgment, or in some other way—the court will do so. Diving into those

details now, however, based solely on the defendants’ broad phrasing of potential defenses, would

necessitate a lengthy interpretation of the court’s prior holdings that is not contemplated by the

Federal Rules as part of the ordinary progress of a case.

D. Non-Statutory Defenses

The Answers include a number of defenses—such as those involving “unclean hands”—

that rely on common law and equitable principles rather than any citation to affirmative law

involving the FCA, the AKS, or the Medicaid program. Folse argues that applying such defenses

would be an impermissible intrusion on federal prerogatives, and the state governments, although

they do not pursue the most aggressive form of Folse’s constitutional argument, argue that those

defenses are inapplicable to the governments’ statutory claims.

In the CSM defendants’ Response, they do not go so far as to argue that the equitable

defenses that they have pleaded are sufficient to defeat recovery under the FCA, TMFCA, or

MAPIL. See, e.g., U.S. ex rel. Dye v. ATK Launch Sys., Inc., No. 1:06-CV-39 TS, 2008 WL

4642164, at *2 (D. Utah Oct. 16, 2008) (striking equitable defense as insufficient as a matter of

law to defeat FCA liability). Rather, the defendants argue that the states’ Amended Complaint

“opened the door to asserting these defenses” by including “claims of unjust enrichment and

quantum meruit” on behalf of “both Tennessee and Louisiana.” (Doc. No. 169 at 8.) This

characterization is not entirely accurate, as far as the court can tell. Tennessee pleads four counts,

the latter two of which are, in fact, common law claims relying on conventional equitable

principles—although neither one actually uses the term “quantum meruit.” (Doc. No. 144 ¶¶ 154–

60.) Louisiana, though, only pleads two counts, both of which are expressly statutory. (Id. ¶¶ 161–

67.) In any event, however, it is true that the states’ operative complaint includes some common

law claims, such that raising equitable defenses is supported. The court therefore will not strike

equitable defenses from that Answer.

Folse, however, has pleaded no such common law claims. His Second Amended

Complaint, rather, includes three expressly statutory causes of action. (Doc. No. 143 ¶¶ 85–109.)

The defendants’ only response to that fact is that, “[t]echnically, Folse could move to amend his

complaint to assert similar claims.” (Doc. No. 169 at 8.) The court is not inclined to assume that

such an amendment would be supported, given that Folse’s only role in this case is pursuant to his

statutorily-granted authority to initiate—and, in the absence of intervention, pursue—statutory

claims on behalf of the relevant governments as a relator. Regardless, the purpose of an answer is

to respond to the complaint that was filed, not a hypothetical complaint that a plaintiff

“technically . . . could” file. The inclusion of equitable defenses in the Answer to Folse’s Second

Amended Complaint therefore does appear to be the kind of wholly unsupported pleading that

would warrant being stricken.

That argument, though, only extends insofar as the cited defenses are, in fact, non-statutory

in nature. Folse suggests that this argument supports striking Defenses 1, 11, 28, 29, and 40.

Defenses 1, 11, and 29 involve issues of unclean hands and estoppel that are genuinely equitable

in nature, and the court will order those defenses stricken. Defenses 28 and 40, however, are not

so plainly confined to the common law. Defense 28 reads, in its entirety, as follows: “The

Complaint fails to establish the elements necessary for recovery under any state or federal False

Claims Act, the Federal Priority Statute and doctrines of unjust enrichment, payment by mistake

or any other common law claim.” (Doc. No. 162 at 10.) The references, in the latter part of the

defense, to equitable grounds for recovery that Folse has not pleaded, are misplaced, but the rest

of the defense is focused on federal statutes and is not implicated by Folse’s argument in this

regard. The court, accordingly, will strike this defense only in part.

Defense 40 asserts that the claims being prosecuted by Folse as the relator “fail because

they are barred by reason of public disclosure and/or because [Folse] engages in substantially the

same practice and has encouraged the practices he claims are unlawful to dentists in the form of

continued education and seminars.” (Id. at 12.) Aspects of that defense could be read as reiterating

the unclean hands defense that the court has rejected as inapplicable to the FCA. The defense also,

however, appears to reference the so-called “public-disclosure bar,” a statutory provision that “bars

qui tam actions that merely feed off prior public disclosures of fraud.” See United States ex rel.

Holloway v. Heartland Hospice, Inc., 960 F.3d 836, 843 (6th Cir. 2020) (citing 31 U.S.C. §

3730(e)(4)(A)). While the public-disclosure bar is not a defense to FCA liability, it may have

bearing on Folse’s own authority to pursue that liability in the wake of the government’s

declination to intervene. Citation to that provision as a defense would therefore make sense.

However, the CSM defendants already pleaded public disclosure separately, in Defense 30. (Doc.

No. 162 at 10.) While the court, as it will discuss later in this opinion, does not consider mere

redundancy, taken alone, to be a persuasive ground for striking a defense, the redundancy does

eliminate any harm that could come from striking the mention of public disclosure in Defense 40.

Other parts of Defense 40 may reflect an attempt to invoke the subsection of the FCA

stating that, “if the court finds that the action was brought by a person who planned and initiated

the violation of [the FCA] upon which the action was brought, then the court may, to the extent

the court considers appropriate, reduce the share of the proceeds of the action which the person

would otherwise receive.” 31 U.S.C. § 3730. That provision, though, is not a defense to liability

or even to the amount of damages; it bears only on how the damages are split between the relator

and the government. Moreover, it applies to relators who played a role in “the violation . . . upon

which the action was brought,” not relators who simply committed somewhat similar violations in

their own businesses. This reading of Defense 40 therefore similarly does not support retaining it.

The court will therefore grant Folse’s motion as to Defenses 1, 11, 29, and 40 and will

grant it partially as to Defense 28.2 The court will not, however, strike the defenses from the

defendants’ Answer to the governments’ claims. The State of Tennessee chose to include common

law claims in its Complaint, and it must therefore contend with common law defenses—at least as

long as those common law defenses are, as the court will discuss later in this opinion, actually

directed at the governments’ claims.

E. Defenses Alleged to be Insufficient

1. Defenses Related to Acquiescence by TennCare

Defenses 20, 23, and 24 address issues related to the Medicaid program’s handling of the

underlying claims and deductions. Defense 20 is that “[t]he claims fail, in whole or in part, because

the Defendants have received approval to provide their services and support for their business

practice from individuals at TennCare, including the former Director of TennCare.” (Doc. No. 163

at 16.) Defense 23 adds the contention that “the government’s knowledge of the facts underlying

the allegedly false claims negates the scienter, falsity, and materiality requirements of the False

Claims Act,” and Defense 24 extends the argument a step further to suggest that the defendants’

“actions were taken in good faith and in reasonable reliance upon regulatory interpretations and

judgments by the Government and its agents and contractors upon whom the Defendants were

entitled to rely.” (Id.) The governments and Folse point out, correctly, that acquiescence by specific

government actors is not, in and of itself, a recognized defense to liability under the FCA or,

2 Because these defenses will be stricken as not directed at any claim pleaded by Folse, the court will not

address Folse’s argument that applying those defenses to claims related to Medicaid would violate OPM v.

Richmond, 496 U.S. 414 (1990).

presumably, state statutes modeled on the FCA. The injured party in an FCA case is the

government, not individual government administrators, and “[i]t is well established that estoppel

cannot be used against the government on the same terms as against private parties.” Fuller v.

United States, 475 F. Supp. 3d 762, 767 (S.D. Ohio 2020) (quoting United States v. Guy, 978 F.2d

934, 937 (6th Cir. 1992)).

The defendants respond by arguing that information about what the governments knew and

what they communicated to the defendants is potentially relevant to (1) whether the defendants

possessed the requisite culpable mental state, (2) whether the governments considered the

conditions with which the defendants failed to comply to be material to payment, and (3) whether

the governments “considered the [d]efendants’ conduct to amount to fraud.” (Doc. No. 169 at 4–

5.) The court is aware of no viable, separate defense to FCA, TMFCA, or MAPIL liability that

would fit the description of the third item on that list; false clams liability does not hinge on

whether government actors thought that the false claims at issue met a particular legal definition

of “fraud.” With regard to the first two potential defenses, however, the defendants are correct. A

violation of the FCA must be knowing, reckless, or made in deliberate ignorance of the truth, 31

U.S.C. § 3729(a)(1), (b)(1)(A), and the government’s acquiescence to an alleged behavior may be

relevant to that inquiry, particularly when liability is premised on the question of whether the

defendant impliedly certified compliance with a particular requirement. See U.S. ex rel. Burlbaw

v. Orenduff, 548 F.3d 931, 951–57 (10th Cir. 2008) (discussing rationales for considering

government knowledge as part of scienter inquiry under the FCA). It is fair to wonder how one

could impliedly certify a proposition to a listener, if both you and the listener openly know that the

proposition is false.

As for materiality, the Supreme Court has clearly held that, “if the Government pays a

particular claim in full despite its actual knowledge that certain requirements were violated, that is

very strong evidence that those requirements are not material.” Escobar, 579 U.S. at 195. And, as

the court has already held, the TMFCA and the false claims provisions of MAPIL—unlike the

FCA—require the governments to establish materiality of an AKS violation as a factual matter.

See Napper, 2021 WL 4992651, at *12–15. At most, then, Defenses 20, 23, and 24, arguably

overstate the breadth and certainty of the defenses asserted. That, though, is no basis for striking

them.

2. Defenses Pleaded Against the Governments that Apply Only to the Relator

As the governments point out, two of the defenses pleaded in the CSM defendants’ Answer

to the Amended Complaint in Intervention—specifically, Defense 9 and Defense 11—are plainly

inapplicable to the governments’ claims. Defense 9 involves Folse’s lack of “firsthand, personal

knowledge of the Defendants’ business practices.” (Doc. No. 163 at 14.) Defense 11 involves

Folse’s having allegedly “engage[d] in substantially the same business practices.” (Id.) Neither

defense has anything to do with the governments’ own claims. The court will accordingly strike

the defenses as wholly inapplicable to the claims at issue, just as it will strike the defendants’

equitable defenses to claims that Folse has not actually pleaded.

F. Duplicative Defenses

Finally, the court turns to the argument that many of the defenses are duplicative. It is hard

to deny that many of the defenses are redundant, but it is also hard to see why that matters or even

why there is necessarily anything wrong with that redundancy. Nearly every well-drafted

affirmative pleading includes some extraneous material. Indeed, as the court observed in its prior

opinion, the plaintiffs themselves have pleaded information that is not strictly necessary for the

statement or preservation of their claims, for no apparent purpose other than telling the story of

the case and explaining the importance of the legal principles at issue. See Folse, 2021 WL

4992651, at *18.

Moreover, while redundancy may not always be good writing, it is frequently good

lawyering. There is no penalty for preserving a key claim or defense twice or three times, but if a

lawyer fails to preserve a key claim or defense altogether, it can be disastrous for the client’s case.

As aresult, pleadings often take great, repetitive pains to make sure that every argument that needs

to be preserved has been preserved, even if that preservation probably could have been done in

many fewer words. That is an unfortunate fact of litigation. A pleading’s inefficiency, however, is

not ameliorated by responding to it with a functionally meaningless motion to strike. The court

accordingly sees no basis for exercising its discretion to strike redundant material from the Answer

under Rule 12(f).

IV. CONCLUSION

For the foregoing reasons, Folse’s Motion to Strike Certain Affirmative Defenses from the

CSM Defendants’ Answer to Relator’s Second Amended Complaint (Doc. No. 165) and the state

plaintiffs’ Motion to Strike Certain Affirmative Defenses from the CSM Defendants’ Answer to

Amended Complaint in Intervention (Doc. No. 167) will each be granted in part and denied in part.

The court will strike Defenses 1, 11, 29, and 40 from the CSM Defendants’ Answer to Folse’s

Second Amended Complaint, as well as part of Defense 28, and will strike Defenses 9 and 11 from

the CSM Defendants’ Answer to the Amended Complaint in Intervention.

An appropriate order will enter. i Ly Uy

ALETA A. TRAUGER

United States District Judge

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