Opinion

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF INDIANA

INDIANAPOLIS DIVISION

UNITED STATES OF AMERICA, et al., )

)

Plaintiffs, )

)

v. ) No. 1:23-cv-00252-MPB-MJD

)

REID PHYSICIAN ASSOCIATES, INC, et al., )

)

Defendants. )

)

)

SCOTT MASTORES, )

)

Relator. )

ORDER DENYING DEFENDANTS' MOTION TO STAY DISCOVERY

Defendants Reid Physician Associates, Inc. and Reid Hospital and Health Care Services,

Inc., have filed a Motion to Stay Discovery pending rulings on their two Motions to Dismiss.

[Dkt. 68.] As explained below, the Motion to Stay Discovery is DENIED.

I. Background

This is a qui tam action under the federal False Claims Act ("FCA") and the Indiana

Medicaid False Claims Act ("IMFCA"). [Dkt. 1.] The United States of America and the State of

Indiana have declined to intervene, and the case has been unsealed. [Dkts. 39, 40, & 41].

Relator Dr. Scott Mastores claims that Defendants have engaged in fraudulent billing

practices through their use of "billing codes that were not supported by the actual patient services

documentation and that reflected lengthier and/or more complex services than were actually

provided to patients." [Dkt. 1 at ¶ 3.] This practice was allegedly part of a scheme to increase

revenue without increasing "patient traffic," and Defendants allegedly perpetrated this scheme by

imposing performance objectives and compensation packages that were tied to coding levels. Id.

at ¶ 5. Relator claims to have direct knowledge of these practices by way of his employment

with Defendants, who allegedly terminated him for his refusal to engage in what he believed to

be fraudulent billing practices. Id. at ¶¶ 4, 6. He provides 12 examples of what, in his opinion,

are fraudulent charges made by Defendants. Id. at ¶ 90. He also points to publicly available data

sets belonging to the Centers for Medicare and Medicaid Services that he claims show proof of

Defendants' practice of fraudulent billing. Id. at ¶¶ 92-103.

Defendants' first motion to dismiss argues that the Complaint fails to meet the heightened

pleading standard for fraud under Rule 9(b) and fails to state a claim under Rule 12(b)(6).

[Dkt. 63.] Their Rule 12(b)(6) argument contends that Relator alleges, at most, gross negligence,

which is insufficient to meet the FCA's scienter element, that Relator's opinion about the

appropriateness of billing codes shows disagreement rather than falsity, and that the exhibits

attached to the Complaint show that the billing codes were appropriate for the care provided

during those appointments. Id. at 5. Defendants provide point-by-point counterarguments with

respect to each of the 12 examples of fraudulent billing that Relator sets forth in the Complaint

and argues that without a particular allegation of a false claim, the Complaint fails to meet the

heightened "who, what, where, when, and how" pleading standard for fraud under Rule 9(b). Id.

at 22-33. Defendants also argue that only 2 of the 12 alleged examples of fraud actually involve

claims to Government payers. Id. at 8. Finally, Defendants argue that Relator's reliance on data

sets that purportedly provide statistical evidence of fraud in the aggregate is impermissible

because these data sets are publicly available and because Relator is not an "original source."1

1 See Glaser v. Wound Care Consultants, Inc., 570 F.3d 907, 916 (7th Cir. 2009) ("The original-source

exception permits jurisdiction over an FCA action even if the relator's lawsuit is based upon publicly

disclosed information provided that the relator is 'an original source of the information.' The FCA defines

an 'original source' as someone 'who has direct and independent knowledge of the information on which

Defendants have also filed a Motion to Dismiss for lack of jurisdiction and lack of

standing. Defendants' argument arises principally from Justice Thomas' dissenting opinion in

United States ex rel. Polansky v. Exec. Health Res., Inc., 599 U.S. 419, 425 (2023). After

acknowledging "the long historical pedigree of qui tam suits, including the fact that the First

Congress passed a handful of qui tam statutes," Justice Thomas outlined certain constitutional

concerns with respect to qui tam litigation, such as whether Article II "permit[s] private relators

to represent the United States’ interests in FCA suits" and whether Congress may "effect partial

assignments of the United States’ damages claims[.]" Id. at 450, 451 (Thomas, J., dissenting).

Justice Thomas did not make any conclusions on these constitutional issues, but he noted that

"these are complex questions, which I would leave for the parties and the court below to consider

after resolving the statutory issues that have been the focus of this case up to now." Id. at 452;

see also id. at 442 (Kavanaugh, J., concurring, joined by Barrett, J.) ("I join the Court's opinion

in full. I add only that I agree with Justice Thomas that '[t]here are substantial arguments that the

qui tam device is inconsistent with Article II and that private relators may not represent the

interests of the United States in litigation.'").2

Defendants rely on Justice Thomas' constitutional concerns and argue that the FCA's

qui tam provision is unconstitutional because it "divests the Executive of exclusive control over

federal enforcement litigation" and "allows an unappointed private party to litigate on behalf of

the Government." [Dkt. 66 at 10, 18.] They seek to distinguish the FCA's qui tam provision

the allegations are based and has voluntarily provided the information to the Government before filing an

action under this section which is based on the information.'") (internal citations omitted).

2 The "main issue" in Polansky was not these constitutional concerns but instead "whether the

Government, if it has declined to intervene during the seal period [of an FCA qui tam action], retains . . .

the right to dismiss a qui tam action over the relator's objection." Polansky, 599 U.S. at 426. The Court

ultimately held that "[t]he Government may move to dismiss an FCA action under Subparagraph (2)(A)

whenever it has intervened—whether during the seal period or later on." Id. at 438.

with early qui tam statutes, such as those passed into law by the First Congress. Id. at 30-36.

They also argue that the Relator in this action "did not suffer an injury in fact due to the alleged

false claims identified in the Complaint" because the injury he asserts, as the injury that every

relator asserts under the FCA, "is exclusively to the government." Id. at 10, 16 (quoting

Polansky, 599 U.S. at 425). Defendants acknowledge that their standing argument directly

conflicts with existing Supreme Court precedent, which this Court must follow in ruling on their

Motion to Dismiss, and that other arguments set forth in their motion have been rejected by every

circuit court that has considered them. [Dkt. 66 at 10, 16.] Nevertheless, they make these

arguments "with full understanding, not that [their standing argument] is futile, but that it is a

question reasonably preserved for appeal[.]" Id. at 16.

II. Legal Standard

"[T]he power to stay proceedings is incidental to the power inherent in every court to

control the disposition of the causes on its docket with economy of time and effort for itself, for

counsel, and for litigants." Landis v. North American Co., 299 U.S. 248, 254 (1936). A court

may stay a matter through an exercise of its inherent authority to manage litigation or through its

authority under Federal Rule of Civil Procedure 26(c). See, e.g., E.E.O.C. v. Fair Oaks Dairy

Farms, LLC, 2012 WL 3138108, at *2 (N.D. Ind. Aug. 1, 2012). "Courts disfavor stays of

discovery because they bring resolution of the dispute to a standstill." Red Barn Motors, Inc. v.

Cox Enterprises, Inc., 2016 WL 1731328, at *3 (S.D. Ind. May 2, 2016) (internal quotations

omitted). A party has no right to a stay, and the party seeking a stay bears the burden of proving

that the Court should exercise its discretion in staying the case. Ind. State Police Pension Trust

v. Chrysler LLC, 556 U.S. 960, 961 (2009).

"Filing a motion to dismiss does not automatically stay discovery," and as a general

matter, "a stay of discovery is warranted only when a party raises a potentially dispositive

threshold issue such [as] standing, jurisdiction, or qualified immunity." Red Barn Motors, Inc. v.

Cox Enters., Inc., 2016 WL 1731328, at *2-3 (S.D. Ind. May 2, 2016). Courts do not routinely

stay discovery simply because a defendant has filed a motion to dismiss, and moving to dismiss a

case does not automatically relieve the parties of their obligation to comply with case

management deadlines. See, e.g., Gookins v. County Materials Corp., 2019 WL 3282088 at *1

(S.D. Ind. July 18, 2019) (concluding that it is not appropriate "for all discovery to grind to a

halt" until after the motion to dismiss is ruled upon because the defendants "have not met their

burden of persuading the Court that the chance of their motion to dismiss being granted in its

entirety outweighs the interest in moving this matter forward").

III. Discussion

Defendants' first motion to dismiss, which argues that the Complaint does not meet the

heightened pleading standard for fraud under Rule 9(b) or state a claim under Rule 12(b)(6), does

not raise threshold issues that might warrant a stay of discovery, such as standing, jurisdiction,

immunity, or arbitrability. [Dkt. 63.] Defendants argue that one purpose of the heightened

pleading standard in Rule 9(b) is to prevent costly fishing expeditions, and that a relator in an

FCA lawsuit must make "a more extensive investigation before" filing a complaint than the

typical plaintiff and may not "make vague claims of fraud" only to conduct discovery "in the

hope of uncovering enough specifics to adequately plead a case." [Dkt. 68-1 at 3-4 (quoting

United States v. Supervalu, Inc., 2016 WL 3906570, at *1 (C.D. Ill. July 14, 2016)).]

The Court is not persuaded that Defendants' first motion to dismiss warrants a stay of

discovery. Defendants' argument about the heightened pleading standard for fraud and a relator's

pre-filing investigation obligations are well taken. But there is no bright-line rule that discovery

must be stayed whenever an FCA defendant raises a Rule 9(b) challenge; instead, the Court must

balance the likelihood that the motion to dismiss will be granted in its entirety against the harm

of allowing the lawsuit to grind to a halt until that motion is resolved. See Gookins, 2019 WL

3282088 at *1.

The Court has reviewed the record and finds that Defendants' success on the first motion

to dismiss is not a foregone conclusion. This is not a case where the Complaint makes no

attempt or makes a clearly insufficient attempt to plead fraud with particularity.

Defendants acknowledge that Relator has presented at least two specific examples of what he

believes are fraudulent claims to a Government payer. [Dkt. 64 at 8.] They argue that Relator's

belief in this respect merely shows a non-actionable disagreement with Defendants' billing

practices, but the precedent they cite for this proposition is in some respects distinguishable. For

example, they cite United States ex rel. Geschrey v. Generations Healthcare LLC, 922 F. Supp.

2d 695 (N.D. Ill. 2012), which they characterize as "entirely on point," in which the court ruled

that a social worker's opinion that a patient was not appropriate for hospice care, without more, is

insufficient to prove that the physician's hospice certification was fraudulent because the social

worker's opinion merely showed disagreement with the physician's medical judgment. The other

cases that Defendants cite also involved non-physician relators alleging fraud by experienced or

more experienced healthcare providers. See United States ex rel. Presser v. Acacia Mental

Health Clinic, LLC, 836 F.3d 770 (7th Cir. 2016) (nurse); United States v. UnitedHealthcare

Insurance Company, 2018 WL 2933674, at *3 (N.D. Ill. June 12, 2018) (patient). Here, by

contrast, Relator is a physician, and his medical opinion about issues within his area of expertise

may well be entitled to more weight at the pleading stage than an opinion articulated by a non-

physician relator. Further, though Presser cautions, in dicta, that a disgruntled former employee

may be motivated by bias in bringing an FCA action, Presser, 836 F.3d at 780, Relator's status as

a terminated former employee does not render his medical opinion with respect to Defendants'

billing practices per se invalid of otherwise unworthy of any consideration.

The Court emphasizes that it makes no ruling, at this time, about the ultimate merits of

Defendants' first motion to dismiss. The motion raises complex issues that will require careful

analysis once it is fully briefed and ripe for the Court's review. At this time, the Court merely

rules that the likelihood of Defendants' success on their first motion dismiss does not warrant a

stay of discovery in the instant case.

Defendants all but concede that their second motion to dismiss, which does raise

threshold issues of jurisdiction and standing, will be denied. Defendants raise constitutional

challenges to a longstanding cause of action with deep historical roots in American law. Ruling

in their favor in this forum may be impossible because, as Defendants point out, some of their

arguments conflict with binding precedent, and others have been rejected by every circuit court

that has considered them. [Dkt. 66 at 10, 16.] This does not mean that Defendants' argument is

without merit. After all, three Supreme Court Justices have expressed concern that the FCA's

qui tam provision raises "complex questions" of constitutional interpretation. But Defendants'

victory, if it comes at all, may well be years down the road, and the Court will not delay these

proceedings indefinitely upon the possibility that the Supreme Court may one day strike down a

federal statute that remains, at this time, in full effect.

IV. Conclusion

In sum, Defendants' first motion to dismiss does not raise threshold issues warranting a

stay of discovery, and their success on that motion is not a foregone conclusion. Defendants'

second motion to dismiss does raise threshold issues but is unlikely to succeed in this forum.

Accordingly, the Court exercising its discretion and inherent authority to manage this litigation

hereby DENIES Defendants’ Motion to Stay Discovery, [dkt. 68].

SO ORDERED.

Dated: 21 MAY 2026 1p

Marl J. Dinsyfigre

United StatesWMagistrate Judge

Southern District of Indiana

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