United States v. UT Southwestern Medical Center et al

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
UNITED STATES, EX REL; AND
STATE OF TEXAS,
Plaintiffs,
PATREK CHASE,
Relator,
v.
PARKLAND HEALTH AND HOSPI-
TAL SYSTEM, TRINITY HEALTH'S
LOYOLA UNIVERSITY MEDICAL
CENTER, SOUTHWEST TRANS-
PLANT ALLIANCE, LIVEONNY,
NEW JERSEY SHARING NETWORK,
UNITED NETWORK FOR ORGAN
SHARING,
Defendants.
Case No. SA-23-CV-00381-JKP
MEMORANDUM OPINION AND ORDER
Before the Court is Defendant Southwest Transplant Alliance Inc.’s (STA) Motion to
Dismiss for Failure to State a Claim. ECF Nos. 65,88. Plaintiff/Relator Patrek Chase responded.
ECF No. 76. Upon consideration, the Motion to Dismiss is GRANTED.
FACTUAL BACKGROUND
On March 28, 2023, Relator Patrek Chase filed this qui tam action alleging violation of
the False Claims Act (FCA) in the name of the United States and many individual states. ECF
No. 1. In the Second Amended Complaint, Chase names as Defendants entities in the organ do-
nation and transplant system which includes transplant centers, Organ Procurement Organiza-
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tions (OPOs), and the United Network for Organ Sharing (UNOS).1 ECF No. 37. In general
terms, Chase alleges these named Defendants fraudulently billed Medicare and Medicaid (Feder-
al Healthcare) and accepted illegal kickbacks in the process of procuring kidneys for transplant
to patients in need. Id. at par. 5.
In this kidney-procurement system, OPOs hold exclusive territorial rights over specific
geographic regions to recover organs in that area. Id. at pars. 53-55. As a condition to participate
in Federal Healthcare, every hospital must contact the OPO in the region in which it sits to obtain
potential organs for a patient in need. Id. at par. 55; 42 U.S.C. §§ 1320b-8(a)(1)(B), (C). Federal
Healthcare reimburses each OPO for kidneys procured and intended for transplant, even if the
kidney is later determined unusable; however, Federal Healthcare will not compensate an OPO
for a kidney the OPO knows is not viable at the time of procurement. 42 C.F.R. § 413.402(a).
Because much of an OPO’s costs are covered by Federal Healthcare, OPOs submit to Federal
Healthcare a cost report which contains a certification attesting the expenses are allowed and ac-
curate. Id. Further, OPOs can charge a standard acquisition cost fee for organs to the organ recip-
ient’s Medicaid healthcare. Id. Therefore, the OPOs’ costs are also passed on to Medicaid pa-
tients through the standard acquisition cost fee. Id. at par. 67. However, OPOs can only charge
costs that are reasonable and related to patient care. 42 C.F.R. § 413.402(d); see also 42 C.F.R. §
413(b). In general terms, Chase alleges these named entities procured known, non-viable kidneys
and subsequently fraudulently billed Federal Healthcare for the procurement. Chase alleges the
OPOs submitted non-allowed costs on their cost report that were not reasonable nor related to
patient care.
1 Chase named numerous entities and persons in the original Complaint. However, the only remaining Defendants
are: LiveOnNY, New Jersey Sharing Network, Parkland Health and Hospital System, Southwest Transplant Alli-
ance, Trinity Health’s Loyola University Medical Center, and United Network for Organ Sharing.
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Particular to this Motion, Southwest Transplant Alliance is an OPO responsible for coor-
dinating the recovery of organs and tissues for transplant for a large part of Texas. Chase alleges
that to increase billings to Federal Healthcare, Southwest Transplant Alliance submitted specific
cost reports containing costs that are unallowed, unreasonable, and unnecessary, including those
associated with building “an excessive medical facility.” ECF No. 37, pars. 186-89. Further
Chase alleges Southwest Transplant Alliance improperly sent an excessive and unnecessary
number of staff to conferences and included the costs, including unallowed meals, on its cost re-
ports; Southwest Transplant Alliance padded its costs by paying unnecessary bonuses, exorbitant
executive salaries, and by incurring unnecessary expenses to ensure its budget increased every
year. Id. at pars. 189-194. Chase alleges these improper costs are passed on to 29 State Medicaid
programs through the standard acquisition cost. Id. at par. 199.
Although Chase filed this qui tam action on March 28, 2023, on June 20, 2025, the Unit-
ed States declined to intervene in this action. ECF No. 25. On June 25, 2025, the State of Texas
and all other Plaintiff states declined to intervene in this action. ECF No. 27. This Court unsealed
this action. On August 1, 2025, this Court permitted Chase to file the live Second Amended
Complaint; due to the age of the case at that time, this Court cautioned Chase no further amend-
ments would be allowed. ECF Nos. 33,37.
In the Second Amended Complaint, Chase asserts FCA violations relating to Southwest
Transplant Alliance and the other Defendants that occurred in different geographic areas: a por-
tion of Texas, New York, New Jersey, and the Chicago area. Parsing the allegations and constru-
ing the Complaint liberally, Chase contends Southwest Transplant Alliance committed the fol-
lowing violations: (1) non-viable kidney procurement; (2) submission of excessive costs; (3)
false inflation of statistics and failure to attempt to recover every possible organ; (4) receipt of
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improper kickbacks; (5) improper reverse False Claims Act violation; and (6) mirror causes of
action under various state laws. Southwest Transplant Alliance now files this Motion to Dismiss
for Failure to State a Claim pursuant to Federal Rule of Civil Procedure 12(b)(6).
LEGAL STANDARD
To provide opposing parties fair notice of the asserted cause of action and the grounds
upon which it rests, every pleading must contain a short and plain statement of the cause of ac-
tion which shows the pleader is entitled to relief. Fed. R. Civ. P. 8(a)(2); Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007). To satisfy this requirement, the Complaint must plead
“enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 555-
558, 570. “A claim has facial plausibility when the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is liable for the misconduct al-
leged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The focus is not on whether the plaintiff will
ultimately prevail, but whether that party should be permitted to present evidence to support ade-
quately asserted causes of action. Id.; Twombly, 550 U.S. at 563 n.8. Thus, to warrant dismissal
under Federal Rule 12(b)(6), a Complaint must, on its face, show a bar to relief or demonstrate
“beyond doubt that the plaintiff can prove no set of facts in support of his claim which would
entitle him to relief.” Fed. R. Civ. P. 12(b)(6); Clark v. Amoco Prod. Co., 794 F.2d 967, 970 (5th
Cir. 1986). Dismissal “can be based either on a lack of a cognizable legal theory or the absence
of sufficient facts alleged under a cognizable legal theory.” Frith v. Guardian Life Ins. Co., 9
F.Supp.2d 734, 737–38 (S.D.Tex. 1998). “Thus, the court should not dismiss the claim unless the
plaintiff would not be entitled to relief under any set of facts or any possible theory that he could
prove consistent with the allegations in the complaint.” Jones v. Greninger, 188 F.3d 322, 324
(5th Cir. 1999); Vander Zee v. Reno, 73 F.3d 1365, 1368 (5th Cir. 1996).
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In assessing a Motion to Dismiss under Federal Rule 12(b)(6), the Court’s review is lim-
ited to the Complaint and any documents attached to the Motion to Dismiss, which are also re-
ferred to in the Complaint and central to the plaintiff’s claims. Brand Coupon Network, L.L.C. v.
Catalina Mktg. Corp., 748 F.3d 631, 635 (5th Cir. 2014). When reviewing the Complaint, the
“court accepts all well-pleaded facts as true, viewing them in the light most favorable to the
plaintiff.” Martin K. Eby Constr. Co. v. Dallas Area Rapid Transit, 369 F.3d 464, 467 (5th Cir.
2004)(quoting Jones, 188 F.3d at 324).
A complaint should only be dismissed under Federal Rule 12(b)(6) after affording every
opportunity for the plaintiff to state a claim upon which relief can be granted, unless it is clear
amendment would be futile. Foman v. Davis, 371 U.S. 178, 182 (1962); Hitt v. City of Pasade-
na, 561 F.2d 606, 608–09 (5th Cir. 1977); DeLoach v. Woodley, 405 F.2d 496, 496-97 (5th Cir.
1968). Consequently, when it appears a more careful or detailed drafting might overcome the
deficiencies on which dismissal is sought, a Court must allow a plaintiff the opportunity to
amend the Complaint. Hitt, 561 F.2d at 608–09. A court may appropriately dismiss an action
with prejudice without giving an opportunity to amend if it finds that the plaintiff alleged his best
case or amendment would be futile. Foman, 371 U.S. at 182; DeLoach, 405 F.2d at 496–97.
DISCUSSION
Southwest Transplant Alliance contends this suit against it should be dismissed because
Chase fails to allege any plausible claim under the False Claims Act and fails to plead any claim
with sufficient particularity as required by Federal Rule 9(b). In addition, Southwest Transplant
Alliance contends Chase fails to state a plausible claim for fraud under Federal Rule 8 because
Chase fails to plead a fraudulent scheme with particularity. Southwest Transplant Alliance con-
tends Chase fails to allege the elements of scienter and materiality, and if so construed, fails to
allege these elements with sufficient particularity.
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The FCA imposes liability on any person who knowingly submits or causes to be submit-
ted a false claim for payment of Government funds, knowingly makes or causes to be made a
false record or statement material to a false claim or conspires to commit any such violation. 31
U.S.C. § 3729(a)(1)(A)–(C). The FCA also imposes liability on any person who knowingly
makes or causes to be made a false record or statement material to an obligation to transmit
money to the Government or knowingly conceals an obligation to transmit money to the Gov-
ernment (reverse FCA cause of action). Id. § 3729(a)(1)(G). Thus, the elements of liability under
the FCA are: “‘(1) there was a false statement or fraudulent course of conduct; (2) made or car-
ried out with the requisite scienter; (3) that was material; and (4) that caused the government to
pay out money or to forfeit moneys due….’” United States ex rel. Porter v. Magnolia Health
Plan, Inc., 810 F. App’x 237, 240 (5th Cir. 2020) (quoting Abbott v. BP Expl. & Prod., Inc., 851
F.3d 384, 387 (5th Cir. 2017)). Thus, a “false claim” in the FCA context consists of a demand for
money that induces the government to disburse funds or otherwise suffer immediate financial
detriment. U.S. ex rel. Shupe v. Cisco Sys., Inc., 759 F.3d 379, 385 (5th Cir. 2014), abrogated by
Wisconsin Bell, Inc. v. United States ex rel. Heath, 145 S. Ct. 498 (2025). “‘In a reverse false
claims suit, the defendant’s action does not result in improper payment by the government to the
defendant but instead results in no payment to the government when a payment is obligated.’”
United States ex rel. Hendrickson v. Bank of Am., N.A., 343 F. Supp. 3d 610, 618 (N.D. Tex.
2018), aff’d, 779 F. App’x 250 (5th Cir. 2019) (quoting United States ex rel. Bain v. Ga. Gulf
Corp., 386 F.3d 648, 653 (5th Cir. 2004)). Therefore, a reverse false claim is where any person
“us[ing], or caus[ing] to be made or used, a false record or statement material to an obligation to
pay or transmit money or property to the Government, or knowingly conceals or knowingly and
improperly avoids or decreases an obligation to pay or transmit money or property to the Gov-
ernment.” 31 U.S.C. § 3729(a)(1)(G); see United States ex rel. Frey v. Health Mgmt. Sys., Inc.,
No. 4:21-CV-2024, 2023 WL 2563239, at *4 (S.D. Tex. Feb. 10, 2023), report and recommenda-
tion adopted, 2023 WL 2564342 (S.D. Tex. Mar. 17, 2023). “The FCA may be enforced not just
through litigation brought by the Government itself, but also through civil qui tam actions that
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are filed by private parties, called relators, in the name of the Government.” Kellogg Brown &
Root Servs., Inc. v. United States ex rel. Carter, 575 U.S. 650, 653 (2015)(quotations omitted).
Legal Standard of Pleading in FCA Cases
A complaint filed under the FCA must meet the heightened pleading standard of Federal
Rule 9(b), which requires a relator to “state with particularity the circumstances constituting
fraud or mistake.” Fed. R. Civ. P. 9(b); U.S. ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 185
(5th Cir. 2009); United States ex rel. Integra Med Analytics, L.L.C., 816 Fed. App’x. 892, 896
(5th Cir. 2020). “What constitutes ‘particularity’ will necessarily differ with the facts of each
case, ‘at a minimum ‘Rule 9(b) requires the who, what, when, where, and how to be laid out.’”
Grubbs, 565 F.3d at 185; Bowles v. Mars, Inc., No. 4:14-CV-2258, 2015 WL 3629717, at *3
(S.D. Tex. June 10, 2015) (quoting Benchmark Electronics, Inc. v. J.M. Huber Corp., 343 F.3d
719, 724 (5th Cir.), opinion modified on denial of reh’g, 355 F.3d 356 (5th Cir. 2003)). This
standard imposed in FCA cases ensures the complaint “provides defendants with fair notice of
the plaintiffs’ claims, protects defendants from harm to their reputation and goodwill, reduces the
number of strike suits, and prevents plaintiffs from filing baseless claims then attempting to dis-
cover unknown wrongs.” Grubbs, 565 F.3d at 190.
To meet this pleading requirement, a relator’s complaint that does not allege “the details
of an actually submitted false claim, may nevertheless survive by alleging particular details of a
scheme to submit false claims paired with reliable details that present a strong inference those
claims were actually submitted, such as dates and descriptions of recorded, but unprovided, ser-
vices and a description of the billing system that the records were likely entered into. Grubbs,
565 F.3d at 190-91. This pleading requirement must be imposed less stringently when the alleged
fraud occurred over an extended period and consists of numerous acts. U.S. ex rel. Ruscher v.
Omnicare, Inc., No. 4:08-CV-3396, 2014 WL 2618158, at *10 (S.D. Tex. June 12, 2014), on re-
consideration in part, 2014 WL 4388726 (S.D. Tex. Sept. 5, 2014) (quoting United States ex rel.
Foster v. Bristol–Myers Squibb Co., 587 F.Supp.2d 805, 821 (E.D. Tex. 2008)). However, even
under this “relaxed” standard, the plaintiff must adhere to the basic rule that the complaint must
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include a sufficient factual basis to support the relator’s belief that a defendant engaged in a
fraudulent scheme. Ruscher, 2014 WL 2618158, at *11 (quoting Foster, 587 F. Supp. 2d at 822);
see also Frey, 2023 WL 2563239, at *7.
APPLICATION
Because the Second Amended Complaint does not allege the details of any individual
false claim, but alleges fraud that occurred over an extended period of time and consists of nu-
merous acts, the Court analyzes Chase’s allegations under the Grubbs standard to determine if
Chase sufficiently alleges a scheme to submit false claims, paired with reliable details, to present
a strong inference those claims were actually submitted. This alleged scheme must include de-
tails such as dates and descriptions of each of the six specified theories and/or a description of
the billing system that records of these improper charges were likely entered into. See Grubbs,
565 F.3d at 190-91.
I. Causes of Action of Violation of the False Claims Act
(1) Liability Theory of Procurement of Non-viable Kidneys
In the Second Amended Complaint, pertinent to this alleged theory of liability, Chase al-
leges:
a) “[t]he three OPO defendants, NJ Sharing Networking, LiveOnNY, and Southwest Transplant
Alliance, are all defrauding the United States by charging for unnecessary kidneys….” ECF
No. 37, p. 43;
b) the OPO Defendants “instruct their staff to procure the kidney even when the OPO knows the
kidney is not viable.” ECF No. 37, p. 44;
c) in instances in which it is clear a kidney is not going to be viable, “the surgeons or OPOs are
instructed to procure the kidney and then throw it in the trash.” ECF No. 37, p. 45.
d) “As one example, OPOs often seek donations after cardiac death (DCD) even when they
know the donor will not have viable organs. The OPO will convince the family of someone
who is on life support but will not recover to take the person off life support and donate the
organs after they die. However, often the OPO knows the organs are either already damaged
from the person’s physical state (i.e. a bad car crash) or the person will not die within 60-90
minutes of coming off life support, and therefore their organs will deteriorate too significant-
ly to be viable. Even if the person dies more than 90 minutes after being taken off life sup-
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port, the OPO will still collect their organs to charge for the extraction, but ultimately discard
the organs as non-viable.” Id.
e) “the OPOs will recover organs even if the donor has been dead for too long and the organ is
therefore not viable for transplant.” Id.
f) Chase “regularly interacted with Southwest Transplant Alliance …. Chase therefore person-
ally experienced . . . Southwest Transplant Alliance pulling non-viable kidneys.” Id. at pp.
45-46;
g) “Southwest Transplant Alliance’s organ procurement staff was so aggressive” that hospital
staff referred to them as “vultures.” Id. at p. 46;
h) “In one egregious example, on or about November 29, 2019, Southwest Transplant Alliance
took a Parkland patient identified as an organ donor to the operating room to be prepared for
organ recovery. However, while Southwest Transplant Alliance wanted to recover the pa-
tient’s organs, the patient was not actually deceased. Luckily, Parkland doctors overruled
Southwest Transplant Alliance, stopped the recovery, and the patient was able to recover and
live.” Id.;
i) “In a discussion with a representative from Southwest Transplant Alliance during an inter-
view, a Southwest Transplant Alliance employee told Chase they viewed their mission as re-
covering every organ from a donor regardless of suitability.” Id.;
j) In conversations with former CEO and President Niles, she stressed Southwest Transplant
Alliance’s job was procure organs even if they were not viable for transplant. She further
stressed that Southwest Transplant Alliance’s success was the number of kidneys Southwest
Transplant Alliance recovered, not the number of viable kidneys Southwest Transplant Alli-
ance recovered. Id. at pp. 46-47;
k) In 2024, “Southwest Transplant Alliance recovered a total of 1,037 donated kidneys for
transplant. A total of 358 kidneys, or 34%, were discarded because they were not viable. By
contrast, only one heart out of a total of 205 hearts recovered for transplant was discarded.”
Id. at p. 48.
a. Particular Details of the Alleged Scheme
The Court first analyzes Southwest Transplant Alliance’s arguments that pertain to ele-
ments one and four of Chase’s FCA cause of action, that is whether Chase sufficiently plead: (1)
Southwest Transplant Alliance made a false statement or engaged in a fraudulent course of con-
duct, and (4) that caused the government to pay out money.
First, the pleading requirements of Federal Rule 9(b) must be satisfied as to each named
Defendant. Therefore, a pleading that contains allegations of a scheme pertinent to a group of
Defendants or that alleges general conduct performed by a group of defendants does not satisfy
the heightened pleading requirements of Federal Rule 9(b). In re Parkcentral Glob. Litig., 884
F.Supp.2d 464, 470-71 (N.D. Tex. 2012). Attributing discrete actions to all defendants without
explaining the basis for the grouping or distinguishing between the relevant conduct of each de-
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fendant is insufficient to meet the pleading requirement of Federal Rule 9(b) for allegations of
violation of the FCA. U.S. v. Lakeway Reg’l Med. Ctr., Case No. A-19-CV-00945, 2020 WL
6146571, at *2 (W.D. Tex. Feb. 13, 2020). Rather, the complaint must segregate the alleged
wrongdoing of each of the named defendants. Allegations of scienter may be averred generally,
but simple allegations of fraudulent intent will not suffice. In re Parkcentral Glob. Litig., 884 F.
Supp.2d at 471.
Because allegations (a) through (e) are generalized allegations of a scheme pertinent to
“the OPO Defendants” group, and these excerpts allege general conduct performed by this group
of defendants without explanation of the basis for the grouping or differentiation between the
relevant conduct of each defendant, these allegations do not satisfy the heightened pleading re-
quirements of Federal Rule 9(b). Consequently, these allegations, individually and collectively,
cannot serve as basis for a violation of the FCA. Id. at 470-71; U.S. v. Lakeway Reg’l Med. Ctr.,
2020 WL 6146571, at *2.
The excerpted allegations specific to Southwest Transplant Alliance are (f), (g), (h) and
(i). These allegations fail to provide sufficient particularity even under a relaxed standard be-
cause Chase fails to identify a person involved in the alleged fraudulent procurement scheme (the
“who”). The allegations (f) – (i) lack necessary details regarding the “what” and “how” of the
alleged schemes, and instead, assert generalized, conclusory allegations. U.S. ex rel. Nunnally v.
W. Calcasieu Cameron Hosp., 519 F. App’x 890, 895 (5th Cir. 2013) (quotation marks and cita-
tions omitted). Chase does not provide any “representative examples of specific fraudulent acts
conducted pursuant to” the schemes alleged. U.S. ex rel. Bennett v. Medtronic, Inc., 747 F. Supp.
2d 745, 768 (S.D. Tex. 2010) (quoting United States ex rel. Bledsoe v. Cmty. Health Sys., Inc.,
501 F.3d 493, 509–10 (6th Cir. 2007)). For each of the actions or schemes alleged in excerpts (f),
(g), (h) and (i), the information Chase provides is limited to a conclusory description of the al-
leged scheme yet provide no details regarding how the alleged scheme was in fact carried out or
specific examples of when it was carried out. see also United States ex rel. King v. Alcon Labs.,
Inc., 232 F.R.D. 568, 572 (N.D. Tex. 2005). Finally, while these excerpts allege egregious and
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potential fraudulent acts, Chase falls short in alleging specifically that Southwest Transplant Al-
liance did, in fact, bill any known, non-viable procured kidneys for reimbursement from Federal
Healthcare, nor does Chase describe how such fraudulent billing occurred.
While Chase did provide an example in excerpt (h), this example does not amount to a
scheme of fraudulent billing for procurement of a non-viable kidney. Excerpt (h) describes only
an example of egregious, overly aggressive procurement behavior. In excerpt (i), Chase de-
scribes a conversation with an unnamed and untitled employee of Southwest Transplant Alliance
who describes “their mission”; however, this nonspecific employee’s statement of opinion does
not amount to a scheme of fraudulent billing for procurement of a non-viable kidney. For these
reasons, excerpts (f), (g), (h) and (i), individually and collectively, cannot serve as basis for a vi-
olation of the FCA.
Chase identifies a specific individual in excerpt (j), “former CEO and President Niles.”
Therefore, the “who” is adequately alleged; however, this identified statement by Niles fails to
assert an admission of a particular scheme to fraudulently bill Federal Healthcare. Taken as true,
Niles’s statements that “Southwest Transplant Alliance’s job was procure organs even if they
were not viable for transplant” and its “success was the number of kidneys Southwest Transplant
Alliance recovered, not the number of viable kidneys” do not provide sufficient factual basis to
support Chase’s allegation that Southwest Transplant Alliance engaged in a fraudulent scheme,
nor do these statements support a conclusion that Southwest Transplant Alliance actually billed
Federal Healthcare for improperly procured kidneys. Thus, these statements do not plead the
when, where, and how. Grubbs, 565 F.3d at 190-91; Ruscher v. Omnicare, Inc., No. 4:08-CV-
3396, 2014 WL 2618158, at *10-11. Consequently, excerpt (j) cannot serve as basis for a viola-
tion of the FCA.
Finally, in excerpt (k), Chase provides some statistical basis for the alleged scheme: the
number of kidneys donated for transplant compared to the number of kidneys that were ultimate-
ly viable, leaving a 34% viable-kidney ratio. Chase compares this to the ratio of viable hearts
procured for transplant. This statement is unsupported and falls short of identifying individuals
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involved or even describing and providing an example of the alleged fraudulent scheme. This
statement is simply an unsupported and conclusory comparison to the recovery ratio of viable
hearts for transplant, which does not provide support for any fraudulent scheme. Therefore, ex-
cerpt (k) cannot serve as basis for a violation of the FCA.
Collectively, excerpts (a) – (k) could be liberally construed to describe non-specific con-
duct of improper procurement of non-viable kidneys. However, taking these allegations as true,
this described improper conduct does not provide any example of billing Federal Healthcare for
any known non-viable procured kidney, which is the act that would constitute fraud. Therefore,
these allegations fall short of describing a fraudulent scheme.
Although Chase does not provide sufficient factual details of a fraudulent scheme, the
Court will analyze the second prong of the test to determine sufficiency of pleading.
b. Reliable Indicia that Lead to a Strong Inference Southwest Trans-
plant Alliance Improperly Billed for Non-viable Kidneys
For the second prong of the pleading requirements, Chase must allege reliable indicia that
lead to a strong inference Southwest Transplant Alliance improperly procured known, non-viable
kidneys and billed Medicaid for the procurement. See Grubbs, 565 F.3d at 190.
In Grubbs, the Fifth Circuit found the relator provided reliable indicia to support his alle-
gations by stating “the particular workings of a scheme [that were] communicated directly to the
relator by those perpetrating the fraud,” and the relator “describe[d] in detail, including the date,
place, and participants, the dinner meeting at which two doctors ... attempted to bring him into
the fold of their on-going fraudulent plot.” Grubbs, 565 F.3d at 191-92. The Grubbs relator also
corroborated this allegation with descriptions of a meeting with nurses who tried to help him car-
ry out the scheme, along with specific dates on which “each doctor falsely claimed to have pro-
vided services to patients.” Id. at 192.
In contrast, Chase simply asserts he gained knowledge or became aware of improper
conduct of procurement of known, non-viable kidneys through his “interactions with Southwest
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Transplant Alliance” and “upon information and belief.” In these allegations, Chase describes the
improper acts of kidney procurement; however, he does not allege anyone communicated to him
the workings of the alleged fraud of billing Federal Healthcare for any improperly procured kid-
neys or that he viewed any other indicia, like internal documents, evidencing such fraud. See
Grubbs, 565 F.3d at 191; United States v. Cath. Health Initiatives, No. 4:18-CV-123, 2022 WL
2657131, at *10 (S.D. Tex. Mar. 31, 2022), report and recommendation adopted, 2022 WL
2652135 (S.D. Tex. July 8, 2022).
For this reason, even if Chase had pleaded particular details of the alleged scheme, Chase
does not provide the “reliable indicia” needed to satisfy the requirements of Rule 9(b). United
States ex rel. Hendrickson, 343 F. Supp. 3d at 635. With these pleading deficiencies, the Court
finds Chase fails to satisfy the pleading requirements of Federal Rule 9(b) to assert a violation of
the FCA against Southwest Transplant Alliance based upon an alleged scheme of procuring
known non-viable kidneys and billing Federal Healthcare for this procurement. With this defi-
ciency, Chase fails to allege sufficient detail of elements (1) and (4) of the cause of action of vio-
lation of the FCA based upon this theory of liability. For this reason, the Court will not analyze
whether Chase satisfies the pleading requirement of elements (2), scienter, and (3), materiality,
based upon the theory of an alleged scheme of improper procurement of kidneys and fraudulent
billing for these kidneys.
For these reasons, this theory of liability for violation of the FCA will be dismissed.
(2) Liability Theory of Submitting Excessive Cost Reports
Chase also asserts FCA violation based upon the theory that Southwest Transplant Alli-
ance submitted false and excessive cost reports for reimbursement as “pertaining to patient care.”
Again, the Court will begin by analyzing whether Chase sufficiently plead elements (1) and (4)
of this theory of violation: (1) Southwest Transplant Alliance made a false statement or engaged
in a fraudulent course of conduct, and (4) that caused the government to pay out money.
In the Second Amended Complaint, pertinent to this alleged theory of liability, Chase al-
leges:
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a) “[Federal Healthcare] reimburses OPOs directly for any cost related to a Medicare pa-
tient. This includes all costs related to kidneys. However, OPOs are only responsible for
organ procurement, rather than organ transplant. Because any donor will most likely have
more than one organ, the OPOs’ work will necessarily require splitting costs between the
Medicare covered portion and the non-Medicare covered portion. OPOs neither properly
allocate charges to Medicare nor limit their charges to only those that are reasonable and
necessary. ECF No. 37, pp. 48-49;
b) “Southwest Transplant Alliance built its own medical facility so it could perform the pro-
curements itself and put all of the fees on its own cost report. An OPO building a medical
facility creates an inefficient process because the donor body needs to be transported
from the hospital to the transplant center for procurement. However, it does allow
Southwest Transplant Alliance to greatly increase its billings to Medicare, because it can
now bill for the office space and all of the costs associated with the procedure rather than
paying those costs to the hospital.” ECF No. 37, p. 49;
c) “Further Southwest Transplant Alliance spared no expense when building its medical fa-
cility, as Southwest Transplant Alliance knew they could charge the costs back to Medi-
care. Southwest Transplant Alliance bought its own land, built state of the art facilities,
built its own office building, and had state of the art offices on site. Upon information and
belief these costs were included on [Southwest Transplant Alliance’s] cost reports but
would not be reasonable and necessary. ECF No. 37, pp. 49-50;
d) “Southwest Transplant Alliance built this facility, in part, to avoid any oversight from the
hospitals of the donors, which allowed Southwest Transplant Alliance to procure even
more non-viable organs to further inflate their cost report.” ECF No. 37, pp. 49-50;
e) “Former Southwest Transplant Alliance President and CEO Patricia Niles would regular-
ly hold lunches with surgeons and, upon information and belief, include the cost of the
lunches on Southwest Transplant Alliance’s cost report for reimbursement from Medi-
care.” ECF No. 37, p. 50;
f) “Southwest Transplant Alliance would also send an excessive number of staff to confer-
ences. For example, Southwest Transplant Alliance regularly sent 8 to 12 staff to various
conferences, such as the annual Association of Organ Procurement Organizations
(AOPO) conference, UNOS Transplant Management Forum, and the Regional Transplant
meetings. Southwest Transplant Alliance representatives would often number the most of
any organization, when many of the staff were not necessary at the conference. Upon in-
formation and belief, both the time and expense of the attendance would be included on
Southwest Transplant Alliance’s cost report.” ECF No. 37, p. 50;
g) “Further, the OPOs provide excessive salaries and bonuses, particularly to their execu-
tives. At the end of the year, before each OPO submits its cost report, the staff reviews its
costs to ensure that the costs have increased from the year before. If they are not, the
OPO will incur unnecessary charges, including salary increases and bonuses, unnecessary
furniture, and other expenses, to ensure their budgets are going up and the OPO will re-
ceive more funding the next year. The operating costs are exorbitant. For example, the
former President and CEO of Southwest Transplant Alliance, Patricia Niles, made
$762,269 in 2019….” ECF No. 37, pp. 50-51;
h) “The excessive costs not only improperly inflated the costs included on the cost reports
but improperly increased the SAC charged for each organ the OPO Defendants procured.
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The inflated SAC cost was then passed on to the transplant recipient’s ultimate healthcare
provider, including Federal Healthcare.” ECF No. 37, pp. 50-51.
Again, allegations (a),(g), and (h) are generalized allegations of a scheme pertinent to
“the OPO Defendants” group, and describe general conduct performed by this group of defend-
ants. For this reason, these allegations do not satisfy the heightened pleading requirements of
Federal Rule 9(b), and, individually and collectively, cannot serve as basis for a violation of the
FCA. See In re Parkcentral Glob. Litig., 884 F.Supp.2d at 470-71; Lakeway Reg’l Med. Ctr.,
2020 WL 6146571, at *2.
The excerpted allegations specific to Southwest Transplant Alliance are (b), (c), (d), (f),
and a portion of (g) in which Chase presents a theory of liability for alleged excessive, unneces-
sary, and unreasonable costs: the construction of a state-of-the art medical facility; meal expendi-
tures; excessive conference attendance and travel, and; exorbitant executive salaries. Chase theo-
rizes these excessive costs result in “inflation” of organ acquisition costs, and these “inflated”
costs are submitted to Federal Healthcare through the cost reports.
These allegations in excerpts (b), (c), (d), (f), and (g) fail to provide sufficient particulari-
ty even under a relaxed standard because Chase fails to identify a person involved in the alleged
scheme to submit fraudulent excessive costs, (the “who”), and fail to present the “what,” and
“how” required. Instead, these assertions are generalized, conclusory allegations based upon
Chase’s opinion of what constitutes “excessive.” Nunnally, 519 F. App’x at 895.
Chase does not provide any representative examples of specific fraudulent acts conducted
pursuant to the alleged engagement in incurring “excessive costs.” See Bennett, 747 F.Supp.2d at
768 (quoting Bledsoe, 501 F.3d at 509–10 (6th Cir. 2007)). For each of the actions or schemes
described in excerpts (b), (c), (d), (f), and (g), Chase does not provide any specific allegation of
what makes the identified costs of the construction of a state-of-the-art facility designed specifi-
cally for the donation process, meal expenditures, conference attendance, travel, and executive
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salaries inappropriate, excessive, or unlawful, nor does he cite any law or regulation prohibiting
the cited expenditures.
These allegations do not amount to a scheme of fraudulent conduct unless Southwest
Transplant Alliance fraudulently submitted them to Federal Healthcare for reimbursement. To
support this requirement, Chase states only “upon information and belief these costs were in-
cluded on [Southwest Transplant Alliance’s] cost reports but would not be reasonable and neces-
sary” ECF No. 37, pars. 188, 190 (meals), 191 (conference attendance), and 193 (salaries and
bonuses). Chase does not identify any specific false claim for payment that Southwest Transplant
Alliance submitted to Federal Healthcare pertaining to any of these broad expenditure categories.
Chase’s allegation that these excessive costs inflated Southwest Transplant Alliance’s costs that
were presented in cost reports is too nebulous and unsupported by specific factual detail or statis-
tics to support a claim of FCA violation based upon this theory of liability.
For these reasons, the allegations in excerpts (b), (c), (d), (f), and (g), individually and
collectively, cannot serve as basis for a violation of the FCA. With this deficiency, Chase fails to
allege sufficient detail of elements (1) and (4) of the cause of action of violation of the FCA
based upon this theory of liability. For this reason, the Court will not analyze whether Chase sat-
isfies the pleading requirement of elements (2), scienter, and (3), materiality, based upon the the-
ory of an alleged scheme of improper incurrence or submission of excessive costs to Federal
Healthcare for reimbursement.
For these reasons, this theory of liability for violation of the FCA will be dismissed.
(3) Liability Theory of False Inflation of Statistics and Failure to Attempt to Re-
cover Every Possible Organ
Chase asserts FCA violation based upon the theory that OPOs failed to recover every
possible organ as required by statute, and fraudulently inflated reported statistics to reflect com-
pliance with this statutory requirement. Again, the Court will analyze whether Chase sufficiently
plead elements (1) and (4) of this theory of violation: (1) Southwest Transplant Alliance made a
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false statement or engaged in a fraudulent course of conduct, and (4) that caused the government
to pay out money.
In the Second Amended Complaint, pertinent to this alleged theory of liability, Chase al-
leges:
a) “OPOs are required to try to recover every organ possible. See 42 C.F.R. § 486.322…. How-
ever, OPOs regularly fail to try to recover every organ. OPOs regularly fail to go to hospitals
that service low-income or minority populations under the mistaken belief that these patients
will not consent to organ donation. Further, OPOs fail to attempt to recover organs from old-
er donor candidates who may only have one viable organ. ECF No. 37, p. 52;
b) “[t]he OPOs specifically instruct certain hospitals to not refer potential organ donors. If the
donors are not referred, then they will not count toward the OPO’s statistics for failing to re-
cover an organ. ECF No. 37, p. 52;
c) The OPOs also control how their statistics are reported. So, when an OPO fails to respond to
a potential donor, they can simply fail to put that potential donor into their electronic health
record and put in a fake reason for why the potential donor was not contacted. The OPOs
hide their failings through this false data. ECF No. 37, p. 52.
All of these excerpts in support of this theory of liability are generalized allegations of a
scheme pertinent to “the OPO Defendants” group, and describe general conduct performed by
this group of defendants. For this reason, these allegations do not satisfy the heightened pleading
requirements of Federal Rule 9(b), and, individually and collectively, cannot serve as basis for a
violation of the FCA particular to Southwest Transplant Alliance. See In re Parkcentral Glob.
Litig., 884 F.Supp.2d at 470-71; Lakeway Reg’l Med. Ctr., 2020 WL 6146571, at *2.
For this reason, this theory of liability for violation of the FCA will be dismissed
(4) Theory of Liability of Receipt of Improper Kickbacks
Chase asserts FCA violation based upon the theory that Southwest Transplant Alliance
accepted payment from tissue processors for tissue collection more than the limited amount per-
mitted under the Anti-Kickback Statute as a predicate to violation of the FCA.
In the Second Amended Complaint, pertinent to this alleged theory of liability, Chase al-
leges:
(a) While tissue processors can use their own staff to collect tissue, they use OPOs’ staff given
the OPOs’ unique access to potential donors. Every hospital is mandated to report potential
organ donors, who all are potential tissue donors, to the OPO in their DSA. The OPOs collect
the tissue for free and make a profit when they are paid by the tissue processors. Part of that
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payment by the tissue processors is a kickback for the OPOs’ access to organ donors, proce-
dures that are paid by Federal Healthcare. ECF No. 37, p. 54;
(b) Even though the OPO Defendants are non-profit organizations, tissue procurement provides
them with a significant source of revenue. Chase directly witnessed and discussed with doc-
tors, nurses, and ICU staff that Southwest Transplant Alliance staff prioritized tissue collec-
tion over organ recovery. ECF No. 37, p. 54;
(c) Upon information and belief, the ultimate payment by the tissue processors to the OPO De-
fendants was for more than the cost of collection. This means tissue processors effectively
paid the OPO Defendants a profit, which is a kickback for the OPO Defendants’ access to the
patients through organ collection paid for by Federal Healthcare. ECF No. 37, p. 54.
All of these excerpts in support of this theory of liability are generalized allegations of a
scheme pertinent to “the OPO Defendants” group, and describe general conduct performed by
this group of defendants. These excerpts are based upon “information and belief” and do not de-
scribe sufficient or reliable indicia of a fraudulent scheme. The one exceprt specific to Southwest
Transplant Alliance states only that it engaged in improper prioritization of tissue collection over
organ recovery, but falls short of describing a fraudulent scheme in violation of the FCA.
For these reasons, these allegations do not satisfy the heightened pleading requirements
of Federal Rule 9(b), and, individually and collectively, cannot serve as basis for a violation of
the FCA particular to Southwest Transplant Alliance. See In re Parkcentral Glob. Litig., 884
F.Supp.2d at 470-71; Lakeway Reg’l Med. Ctr., 2020 WL 6146571, at *2.
II. Cause of Action of Reverse False Claims Act Violation
The Complaint contains a “Reverse False Claims” cause of action pursuant to 31 U.S.C.
§ 3729(a)(G).
However, Chase does not address nor allege any facts pertaining to this theory of liability
or any actual element of this statutory violation. Chase does not provide any factual basis per-
taining to this provision of the FCA.
For this reason, the cause of action based upon an improper reverse False Claims Act vio-
lation against Southwest Transplant Alliance will be dismissed.
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III. Cause of Action of Violation of State Law
In the Second Amended Complaint, Chase asserts state law causes of action that mirror
the alleged violations of the federal FCA.
These state law theories of liability fail for the same reasons Chase’s theories of liability
for violation of the federal FCA fail. Further, because this Court will dismiss all of Chase’s theo-
ries of liability under the FCA, it will exercise its discretion to refrain from exercising any sup-
plemental jurisdiction over a state cause of action. See Heggemeier v. Caldwell Cnty., Tex., 826
F.3d 861, 872 (5th Cir. 2016) (per curiam); Brookshire Bros. Holding, Inc. v. Dayco Prods., Inc.,
554 F.3d 595, 602 (5th Cir. 2009).
For these reasons, any cause of action based upon a violation of state law against South-
west Transplant Alliance will be dismissed.
AMENDMENT OF SECOND AMENDED COMPLAINT
Prior to dismissal of a Complaint, a court must “freely give leave [to amend the plead-
ings] when justice so requires.” Fed. R. Civ. P. 15(a)(2). However, leave to amend is within the
sound discretion of the court and can be appropriately denied when “it is clear that the defects [of
a complaint] are incurable.” Great Plains Tr. Co. v. Morgan Stanley Dean Witter & Co., 313
F.3d 305, 329 (5th Cir. 2002).
This Court provided Chase a final opportunity to cure all pleading defects prior to sub-
mission of this Motion to Dismiss. In response to the Court’s admonition that Chase had one,
final opportunity to amend the Complaint, he submitted the live Second Amended Complaint.
Based upon this procedural posture and the Court’s admonition, the Court finds Chase was pro-
vided ample opportunity to satisfy Federal Rule 15.
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CONCLUSION
For the reasons stated, Southwest Transplant Alliance’s Motion to Dismiss for Failure to
State a Claim pursuant to Federal Rule 12(b)(6) is GRANTED.
It is so ORDERED.
SIGNED this 6th day of January, 2026.
JASON PULLIAM
UNITED STATES DISTRICT JUDGE
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