USA v. NCDR, L.L.C. ( 2019 )

Case: 18-50653 Document: 00515041457 Page: 1 Date Filed: 07/19/2019
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
July 19, 2019
No. 18-50653
Lyle W. Cayce
Clerk
United States of America, ex rel, PHILIP M. LIN, DMD, Relator; NICOLE
WINSTON, Relator,
Plaintiffs - Appellants
v.
DALE G. MAYFIELD, DDS; TU M. TRAN, DDS; KS2 TX, P.C., doing
business as Kool Smiles; DENTISTRY OF BROWNSVILLE, P.C., doing
business as Kool Smiles; JOHN DOES 1-10; NCDR, L.L.C.,
Defendants - Appellees
Appeals from the United States District Court
for the Western District of Texas
USDC No. 5:13-CV-760
Before HAYNES, GRAVES, and DUNCAN, Circuit Judges.
PER CURIAM:*
Appellants Philip M. Lin, DMD and Nicole Winston (collectively,
“Relators”) appeal the district court’s denial of their motion for leave to amend
their complaint. For the reasons set forth below, we AFFIRM the district
court’s judgment.
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
Case: 18-50653 Document: 00515041457 Page: 2 Date Filed: 07/19/2019
No. 18-50653
I. Background
Relators are former employees of Appellee Kool Smiles. They are two of
eight qui tam plaintiffs who filed numerous suits on behalf of the federal and
multiple state governments, claiming that Kool Smiles dental offices submitted
false claims for dental services to state Medicaid programs in violation of the
False Claims Act, 31 U.S.C. § 3729 (“FCA”), and similar state laws. In addition
to the qui tam claims, Lin asserted a retaliation claim under Texas state law
and Winston asserted a retaliation claim under Virginia state law. Neither
Lin nor Winston asserted federal FCA retaliation claims in their initial
complaint.
The government investigated Relators’ claims along with the claims
brought by the other relators. The investigation lasted for several years and
included document productions by Appellees, witness testimony, engagement
of experts, and meetings and negotiations concerning the issues. All of the
relators’ complaints remained under seal during the investigation. Although
the relators in the other qui tam cases amended their complaints for various
reasons during the investigation, Lin and Winston never amended.
The government then entered into settlement negotiations with
Appellees. During the negotiations, the government obtained partial
unsealing orders and shared all of the relators’ sealed complaints, including
Lin and Winston’s complaint, with Appellees. Relators did not have any
contact with Appellees during negotiations. But the government worked with
all of the relators, including Lin and Winston, and their counsel concerning the
terms of the settlement, to which all of the relators became parties.
In December 2017, Appellees, Relators, the relators in the other
lawsuits, and the federal and twenty state governments reached a global
settlement. Appellees paid $23.9 million as part of the settlement. Relators
Lin and Winston did not directly receive a share of the settlement proceeds.
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As part of the settlement, Relators released their claims, including their
previously pleaded state law retaliation claims. But they expressly preserved
their right to assert FCA retaliation claims. They now argue that releasing
their state law retaliation claims was a mistake on the part of their counsel.
Appellees moved to dismiss Relators’ complaint in the district court. In
response, Relators for the first time sought leave to amend to add FCA
retaliation claims. In so doing, they conceded that they had released their state
law retaliation claims.
The district court granted Appellees’ motion to dismiss and denied
Relators’ motion for leave to amend. It concluded that Appellees had made a
sufficient showing to overcome the presumption in favor of granting leave to
amend. This appeal followed.
II. Standard of Review
A party that may not amend its complaint as a matter of course “may
amend its pleading only with the opposing party’s written consent or the
court’s leave.” FED. R. CIV. P. 15(a)(2). We “review[] a district court’s decision
to deny leave to amend for abuse of discretion.” Smith v. EMC Corp., 393 F.3d
590, 595 (5th Cir. 2004). But “we have acknowledged that the term ‘discretion’
in this context ‘may be misleading, because [Rule] 15(a) evinces a bias in favor
of granting leave to amend.’” Mayeaux v. La. Health Serv. & Indem. Co., 376
F.3d 420, 425 (5th Cir. 2004) (quoting Stripling v. Jordan Prod. Co., LLC, 234
F.3d 863, 872 (5th Cir. 2000)). As a result, “[a] district court must possess a
‘substantial reason’ to deny a request for leave to amend.” Smith, 393 F.3d at
595 (quoting Lyn–Lea Travel Corp. v. Am. Airlines, 283 F.3d 282, 286 (5th Cir.
2002)).
The Supreme Court has set forth five factors for courts to consider in
reviewing a motion for leave to amend: “[1] undue delay, [2] bad faith or
dilatory motive on the part of the movant, [3] repeated failure to cure
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deficiencies by amendments previously allowed, [4] undue prejudice to the
opposing party by virtue of the allowance of the amendment, [and] [5] futility
of the amendment.” Rosenzweig v. Azurix Corp., 332 F.3d 854, 864 (5th Cir.
2003) (quoting Foman v. Davis, 371 U.S. 178, 182 (1962)).
“[A]bsent a ‘substantial reason’ such as” any of the Foman factors, “‘the
discretion of the district court is not broad enough to permit denial.’” Mayeaux,
376 F.3d at 425 (footnote omitted) (quoting Martin’s Herend Imps., Inc. v.
Diamond & Gem Trading United States of Am. Co., 195 F.3d 765, 770 (5th Cir.
1999), and Stripling, 234 F.3d at 872). “Leave to amend, however, is by no
means automatic.” Little v. Liquid Air Corp., 952 F.2d 841, 845–46 (5th Cir.
1992), on reh’g en banc, 37 F.3d 1069 (5th Cir. 1994). Importantly, a “[p]laintiff
bears the burden of showing that delay [in seeking leave to amend] was due to
oversight, inadvertence or excusable neglect.” Parish v. Frazier, 195 F.3d 761,
763 (5th Cir. 1999).
III. Discussion
Relators have not carried their burden of showing that their delay in
moving for leave to amend “was due to oversight, inadvertence, or excusable
neglect.” Id. Relators offered the district court no explanation for failing to
assert FCA retaliation claims at the outset of their case. See Rosenzweig, 332
F.3d at 864 (stating that a “litigant’s failure to assert a claim as soon as he
could have is properly a factor to be considered in deciding whether to grant
leave to amend” (quoting Carson v. Polley, 689 F.2d 562, 584 (5th Cir. 1982))).
Relators now contend for the first time on appeal that their failure to
assert the claims sooner was a mistake. But in failing to make this argument
to the district court, Relators waived it. See LeMaire v. La. Dep’t of Transp. &
Dev., 480 F.3d 383, 387 (5th Cir. 2007) (“[A]rguments not raised before the
district court are waived and cannot be raised for the first time on appeal.”).
Moreover, Relators point to no evidence aside from their own ipse dixit that
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their failure to assert FCA retaliation claims sooner was in fact a mistake.
Relators bore “the burden of showing that [their] delay was due to oversight,
inadvertence or excusable neglect.” Parish, 195 F.3d at 763. Their bare
assertion of mistake does not satisfy this burden. Because Relators unduly
delayed moving for leave to amend, see Rosenzweig, 332 F.3d at 864, the
district court did not abuse its discretion in denying Relators’ motion.
AFFIRMED.
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