Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Roop v. Melton

United States District Court, Fifth Circuit

September 24, 2013

HENRY ROOP and FIRST CHOICE DIABETIC SUPPLIES, INC., Plaintiffs,
v.
LARRY MELTON; JAMES HURST; ASHLAND DRUGS, INC.; and JOHN DOES 1-5, Defendants.

MEMORANDUM OPINION DENYING DEFENDANTS' MOTION TO DISMISS

GLEN H. DAVIDSONI, Senior District Judge.

Presently before the Court is a motion to dismiss [11] brought pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure filed by Defendants Larry Melton and Ashland Drugs, Inc., and joined by Defendant James Hurst, see Hurst's Joinder [14]. Plaintiffs Henry Roop and First Choice Diabetic Supplies, Inc. have filed a response, and the time for reply has passed. Accordingly, the matter is ripe for review. Upon due consideration, the Court finds that the motion to dismiss [11] is not well taken and should be denied for the reasons set forth herein.

A. Factual and Procedural Background

This action arises from a dispute among business associates. Plaintiff Henry Roop ("Plaintiff Roop") and Plaintiff First Choice Diabetic Supplies, Inc. ("First Choice") (collectively, "Plaintiffs") bring this suit against Defendant Larry Melton ("Defendant Melton"); Defendant James Hurst ("Defendant Hurst"); and Defendant Ashland Drugs, Inc. ("Ashland Drugs") (collectively, "Defendants"). Plaintiffs allege the following facts: In July of 2009, Plaintiff Roop, Defendant Melton, and Defendant Hurst agreed to become equal partners and the only members in First Choice, a closely held corporation, Pls.' Compl. [1] ¶¶ 9-10; Defendants Hurst and Melton agreed to put up 100% of the initial capital and operating funds to begin First Choice, and Plaintiff Roop agreed to invest his "time, skills, and significant experience in pharmaceutical sales and marketing and a successful thirty-two (32) year history in the industry, " id. ¶ 11; the three members agreed to divide any profits equally, id. ; Plaintiff Roop's title was "Diabetic Sales Director, " a sales position wherein Plaintiff Roop was not involved with the finances of First Choice, id. ¶¶ 15, 19; Defendant Hurst's title was "Diabetic Shoe Specialist" and "Assistant Operations Manager, id. ¶ 16; Defendant Melton's title was "Director of Operations, " and his "primary duties were to handle relations with Medicare and Medicaid, conduct patient billing and collection, process claims, inventory control, pay bills, and handle First Choice's finances, " id. ¶ 17; "[n]o other member of First Choice had any experience in dealing with Medicaid and Medicare besides [Defendant] Melton, " who "represented that he had years of successful experience in the task and would be responsible for it, " id. ¶ 18; "[b]ased on his representation, [Defendant] Melton was to ensure that First Choice was properly accredited by Medicaid and Medicare and to handle such government billing appropriately, " id. Apparently, business relations soured among the three, and now Plaintiffs bring this suit to recover alleged converted assets and damages.

Plaintiffs' complaint presents the following sixteen counts under state law: (1) breach of fiduciary duties, (2) breach of duty of care, (3) breach of duty of loyalty, (4) breach of covenant of good faith and fair dealing, (5) constructive trust, (6) accounting, (7) unjust enrichment, (8) intentional and negligent misrepresentation, (9) common law fraud and misrepresentation, (10) conversion, (11) negligence and gross negligence, (12) interference with contracts/business relationships, (13) embezzlement/misappropriation, (14) intentional and negligent infliction of emotional distress, (15) tortious interference with contract, and (16) misappropriation of business opportunity. Plaintiffs' complaint presents one count under federal law for retaliatory discharge under 31 U.S.C. § 3730 of the False Claims Act (the "FCA"). It is undisputed that the parties are all citizens of Mississippi and that the sole stated basis for this Court's jurisdiction is federal question jurisdiction over the FCA claim and pendent jurisdiction over the supplemental state law claims.

Defendants move to dismiss this action under Rule 12(b)(1) on the ground that Plaintiffs have failed to invoke federal question jurisdiction, asserting that the allegations pertaining to the FCA claim have been "made solely for the purpose of obtaining jurisdiction" and are "wholly insubstantial and frivolous." Alternatively, Defendants move to dismiss this action under Rule 12(b)(6) on the ground that Plaintiffs have failed to state a FCA claim upon which relief can be granted. For the reasons stated below, the Court finds that Defendants' motion to dismiss should be denied.

B. Discussion and Analysis

Defendants' motion challenges Plaintiffs' retaliation claim under 31 U.S.C. § 3730(h) of the FCA. "The FCA is the Government's primary litigation tool for recovering losses resulting from fraud." United States ex rel. Steury v. Cardinal Health, Inc., 625 F.3d 262, 267 (5th Cir. 2010) (citation and internal quotation marks omitted). The United States Supreme Court has explained:

The FCA prohibits any person from making false or fraudulent claims for payment to the United States. [31 U.S.C.] § 3729(a). Persons who do so are liable for civil penalties of up to $10, 000 per claim and treble damages. [ Id. ] The [FCA] sets forth two principal enforcement mechanisms for policing this proscription. First, the Attorney General may sue to remedy violations of § 3729. [ Id. ] § 3730(a). Second, private individuals may bring qui tam actions in the Government's name for § 3729 violations. Id. § 3730(b)(1); see Vt. Agency of Natural Res. v. United States ex rel. Stevens, 529 U.S. 765, 769-72, 120 S.Ct. 1858, 146 L.Ed.2d 836 (2000)... The 1986 amendments to the FCA created a third enforcement mechanism: a private cause of action for an individual retaliated against by his employer for assisting an FCA investigation or proceeding. [ Id. ] § 3730(h).

Graham Cnty. Soil & Water Conservation Dist. v. United States ex rel. Karen T. Wilson, 545 U.S. 409, 411-12, 125 S.Ct. 2444, 162 L.Ed.2d 390 (2005). In 2009, Congress amended the third enforcement mechanism in the FCA-the "whistleblower provision"-to "encourage[ ] employees with knowledge of fraud to come forward by prohibiting retaliation against employees who assist in or bring qui tam actions against their employers." See United States ex rel. Patton v. Shaw Servs., L.L.C., 418 F.App'x 366, 371, 2011 WL 924292, at *4 (5th Cir. 2011) (per curiam).[1] The whistleblower provision provides in pertinent part:

Relief from retaliatory actions.-

(1) In general.-Any employee, contractor, or agent shall be entitled to all relief necessary to make that employee, contractor, or agent whole, if that employee, contractor, or agent is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terns and conditions of employment because of lawful acts done by the employee, contractor, agent or associated others in furtherance of an action under this section or other efforts to stop 11 or more violations of this subchapter.
(2) Relief.-Relief under paragraph (1) shall include reinstatement with the same seniority status that employee, contractor, or agent would have had but for the discrimination, 2 times the amount of back pay, interest on the back pay, and compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorneys' fees. An action under this subsection may be ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.