Pitch to healthcare providers may necessarily imply legality of proposal

Ameritox, Ltd. v. Millennium Laboratories, Inc., 2012 WL 3651110 (M.D. Fla.)

Ameritox and Millennium compete to screen urine specimens for drugs.  They contract with healthcare providers.  Ameritox alleged that Millennium falsely advertised its services and also engaged in unfair business practices, including “providing illegal inducements to garner business, performing medically unnecessary confirmatory testing, assisting healthcare providers in acquiring an improper ownership interest in purportedly independent businesses, and not collecting legally required co-payments and deductibles.” 

Millennium moved to dismiss Ameritox’s false advertising, tortious interference, and unfair competition claims; the interesting part is the false advertising aspect.

The false advertising covered multiple types of conduct, including printed ads—billing letters—provided by Millennium to providers for distribution to patients.  Millennium allegedly informed potential customers that its corporate policy was to not collect from patients the difference between the amount Millennium billed for its services and the amount the patients' insurance companies agreed to pay; Millennium also advertised that it would not require patients to pay deductibles or co-pays. These ads were allegedly false and misleading to three groups: those enrolled in Medicare who are not required to pay any co-pay or deductible; those enrolled in Florida Medicaid who are required to pay only a $1 co-payment; and those enrolled in private insurance programs that include the services that Millennium provides within a patient's annual deductible.  Thus, Millennium advertised an illusory benefit—and it was also illegal to waive those payments, so Millennium allegedly got customers by falsely representing that this was legal.

Millennium also distributed an allegedly misleading press release in which its CEO advocated for Medicare to reimburse healthcare providers at a higher rate for drug screening, claiming that Millennium had no vested interest in advocating for this change.  In fact, Millennium’s motives were not altruistic because such a change would make it money.

The other allegations described various schemes to encourage providers to engage in unnecessary, duplicative, and otherwise illegal billing and to suggest that these techniques weren’t illegal; among other things, Millennium allegedly encouraged providers to invest in supposedly independent labs that would forward samples to Millennium for additional testing.  Providers had an incentive to choose Millennium in the mistaken belief that its schemes were legal.

First, Millennium argued that it hadn’t engaged in “commercial advertising or promotion” by disseminating its representations sufficiently to the relevant purchasing public.  Alleged dissemination of billing letters to thousands of providers and, through them, to thousands of patients was sufficient.  As for the other representations, they were allegedly disseminated to thousands of providers in several different states, which was also enough.

Falsity: As to the press release, Ameritox argued that it was literally false to say “Millennium as a corporation has no financial stake in this argument.” Given the allegation that Millennium's business model is premised on generating increased revenue for healthcare providers partly through Medicare reimbursements, the court agreed. Likewise, where Ameritox alleged that Millennium represented that the conduct it was advocating “was in compliance with federal and state laws” and was otherwise proper, that combined will allegations that the conduct was actually illegal was sufficient to allege literal falsity.

What about statements encouraging conduct but not explicitly telling providers that the conduct was legal?  Ameritox argued that these were false by necessary implication where the conduct was, in fact, illegal.  Though the Eleventh Circuit hasn’t formally adopted the doctrine of falsity by necessary implication, many other circuits have, as have district courts in the circuit. So the question was whether the targeted audience would receive the message “the conduct we’re advocating is legal” as if it had been stated.  Ameritox alleged that consumers chose Millennium mistakenly believing that its representations promoted legal conduct—and that makes a lot of sense to me; while we’ve seen plenty of systemic corruption, I at least want to believe that a pitch saying “let’s commit Medicare fraud!” would have been received very differently.

Assuming that there was a necessary implication of legality, Millennium argued that Ameritox hadn’t conclusively demonstrated illegality and thus falsity.  However, on a motion to dismiss, the court determined that allegations of illegality were sufficient.

Similarly, Ameritox sufficiently alleged that the billing letter misleadingly touted an illusory benefit, since some patients weren’t required to pay for Millennium’s services in the first place.  If Millennium actually didn’t charge co-pays, then saying it wouldn’t seek payment from patients couldn’t be literally false.  But the allegation of implicit falsity was sufficient.

What about deception or tendency to deceive?  Ameritox sufficiently specified how consumers were or were likely to be deceived: because of mistaken beliefs in the legality and propriety of Millennium’s billing schemes.  Also, literal falsity doesn’t require evidence of consumer deception, and at the pleading stage, plaintiffs need not provide evidence of consumer deception for misleadingness either.

Materiality: Ameritox alleged that the legality and propriety of billing arrangements were material to purchasing decisions.  That was enough on a motion to dismiss.  The press release was different, but the court accepted that providers could be, at least in part, persuaded to choose Millennium because of a deceptive implication of Millennium’s magnaminity.

Millennium argued that its statements about legality or propriety were non-actionable opinions.  Statements by laypersons purporting to interpret law are opinion unless a court or agency of competent jurisdiction has clearly and unambiguously ruled on the matter at the time of the alleged misstatements.  But Ameritox provided support for its arguments that the practices discussed violated established law at the time of the ads, with a combination of agency reports, statutes, regulations, and case law.