1 UNITED STATES DISTRICT COURT DISTRICT OF SOUTH ...

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UNITED STATES DISTRICT COURT DISTRICT OF SOUTH CAROLINA

COLUMBIA DIVISION AMY ELIZABETH WILLIAMS as the PERSONAL REPRESENTATIVE of the ESTATE FOR CHRISTIAN JACOB MILLARE, and AMY ELIZABETH WILLIAMS individually, Plaintiff, vs. QUEST DIAGNOSTICS, INC., ATHENA DIAGNOSTICS, INC., and ADI HOLDINGS, INC. Defendants.

C.A. No. 3:16-cv-00972-MBS MEMORANDUM OF LAW IN SUPPORT OF

DEFENDANTS’ MOTION TO DISMISS

Defendants Quest Diagnostics Incorporated, Athena Diagnostics, Inc., and ADI Holding

Company, Inc., respectfully submit this memorandum in support of their motion to dismiss the

Complaint for failure to state a claim upon which relief can be granted and failure to plead fraud

with particularity.

SUMMARY

Accepting the allegations of the Complaint as true, a tragedy occurred more than eight

years ago when a two-year-old child died from a seizure. The child’s mother now brings this

lawsuit alleging that the Defendants committed diagnostic testing errors nine years ago that

contributed to the child’s death. For the entire nine years preceding this lawsuit, and for months

preceding the child’s death, the mother has been on explicit written notice from the Defendant

testing laboratory that it needed samples from her and from the child’s father in order to resolve

the test’s uncertainty. Neither the mother nor the father submitted to such tests. Instead, she

3:16-cv-00972-MBS Date Filed 04/04/16 Entry Number 11-1 of 27

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brings this lawsuit almost a decade later and attempts to plead around the statute of limitations

and statute of repose. Despite the tragedy of what has occurred, this lawsuit should not be

allowed to proceed forward at this late date.

Amy Williams, individually and as personal representative of the estate of her deceased

son, has sued Quest Diagnostics Incorporated, Athena Diagnostics, Inc., and ADI Holding

Company, Inc., on various causes of action arising from the death of her son. In essence,

Williams alleges that her son experienced frequent seizures as a result of a genetic condition

known as Severe Myoclonic Epilepsy of Infancy (SMEI) or Dravet Syndrome. Plaintiff

contends that Athena Diagnostics, a DNA sequencing laboratory, mis-diagnosed the mutation in

the decedent’s DNA, and that this error was set forth in a 2007 report provided by Athena

Diagnostics to the treating physician who requested the test. Plaintiff asserts that, relying on the

allegedly erroneous 2007 report, the child’s doctors prescribed medications that were not

appropriate or effective for his condition and that exacerbated his seizures, eventually resulting

in the child’s death following a traumatic seizure on January 5, 2008.

The Plaintiff did not file suit until February 24, 2016, over eight years after the child’s

death and almost nine years after the 2007 report.

The 2007 report is attached to an affidavit that is an exhibit to the Complaint and is

incorporated in the Complaint, and the 2007 report explicitly and conspicuously states as

follows:

“Testing of the biological parents is strongly recommended to resolve the uncertainty of these test results.” (emphasis added)

“[T]hese types of sequence variants are similar to those observed in both disease-associated mutations … and in benign polymorphisms ….”

“[T]he results of this analysis cannot be definitively interpreted ….” (emphasis added)


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“Affected with SMEI” is identified as a “possible outcome.”

“Testing of the biological parents is strongly recommended (for no additional charge) to help resolve the uncertainty of this sequent variant’s pathogenicity and the uncertainty of the predicted phenotype.” (emphasis added)

“Missense mutations causing the severe phenotypes associated with SCN1A mutations (SMEI or SMEB) are usually (>90%) de novo, meaning that the mutation arose in the affected individual, and is not detected in the biological parents.”

“Athena recommends genetic counseling for this individual and his or her family members, and consideration of parental testing.” (emphasis added)

“Most mutations that cause SMEI are de novo, or sporadic (arise in the affected individual rather than being inherited) an inheritance pattern that can be confirmed by testing of parents.” (emphasis added)

“In order to provide a more comprehensive interpretation of this patient’s SCN1A results, Athena Diagnostics is requesting samples from the biological parents of this patient. Athena will perform a target analysis on these samples for variant(s) identified in gene SCN1A only and use the findings to help interpret the patient’s SCN1A result(s) at no additional charge.” (emphasis added)

Notwithstanding the repeated, emphatic warnings in the 2007 report that the test results

were inconclusive, that SMEI was a possible outcome, and that genetic testing of the biological

parents was “strongly recommended” in order to confirm or disprove the existence of SMEI,

neither the Plaintiff nor her son’s doctors requested genetic testing of the parents. Instead,

according to the Complaint, the decedent’s doctors continued to treat him as if he did not have

SMEI; the treatment was ineffective; and the child died following a seizure in early 2008.

The Complaint alleges the following causes of action:

Negligence and wrongful death, as to Athena Diagnostics only.

Negligence and survival action, as to Athena Diagnostics only.

Two counts of negligent misrepresentation “and/or constructive fraud,” as to all Defendants.

Civil conspiracy, as to all Defendants.

Violation of the South Carolina Unfair Trade Practices Act, as to all Defendants.


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These causes of action must be dismissed for the following reasons:

First, all claims are barred by the applicable statutes of limitation because the Plaintiff

had constructive notice of her potential claims as a matter of law more than three years before

bringing suit.

Second, the wrongful death and survival actions must be dismissed under the six-year

statute of repose for medical malpractice claims set forth in S.C. Code § 15-3-545(A).

Third, the Plaintiff’s claims for negligent misrepresentation and constructive fraud must

be dismissed for failure to plead any false statement of fact on which Plaintiff relied to her

detriment, and for failure to plead fraud with particularity as required by Rule 9(b).

Fourth, the claim for civil conspiracy must be dismissed because it merely realleges the

other acts complained of and does not set forth any additional facts or special damages caused

uniquely by the alleged conspiracy.

Fifth, the Unfair Trade Practices Act claim must be dismissed for failure to plead

adequately that the Defendants’ allegedly wrongful acts affect the public interest.

Plaintiff’s loss of her son to a tragic illness is heart-breaking, and no one could help but

sympathize with her, but she does not have a claim against the Defendants upon which relief can

be granted. The purpose of Rule 12(b)(6) is to prevent claims of this nature from going forward

at considerable costs to the Court and to the parties, and the purpose of Rule 9(b) is to prevent

scurrilous allegations of fraud from being made where the plaintiff has no factual basis to make

such a serious charge. For these reasons, this action should be dismissed now, with prejudice.


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ALLEGATIONS OF THE COMPLAINT

The Defendants vehemently dispute the material allegations of the Complaint, and in

particular the contentions that Athena Diagnostics was negligent in its initial diagnosis of the

decedent’s condition and that the Defendants subsequently attempted to cover up the supposed

error in the 2007 report.1 Nevertheless, Defendants recognize that in the context of a motion to

dismiss, the well-pleaded allegations of the Complaint must be accepted as true and viewed in

the light most favorable to the Plaintiff. Viewed in this light, the Complaint makes the following

allegations.2

Defendant Quest Diagnostics Incorporated (“Quest”) owns all of the shares of stock of

ADI Holding Company, Inc. (“ADI”) through an acquisition that occurred in 2011. ADI, in turn,

owns all of the shares of stock of Athena Diagnostics, Inc. (“Athena”). (Compl. ¶ 6) Athena

performs clinical diagnostics genetic testing and operates a licensed genetics diagnostic

laboratory. (Compl. ¶¶ 10, 15, 19)

Plaintiff’s son was born in 2005 and, when he was four months old, began experiencing

seizures which increased in frequency over time. (Compl. ¶ 12) His treating neurologist

prescribed sodium blocking channel medications, which are often used to treat frequently

occurring seizures. These medications, however, “proved ineffective at treating [the child’s]

condition.” (Compl. ¶ 13) Accordingly, at the direction of two treating clinical geneticists, a

blood sample was taken from the child from which his DNA was extracted. The DNA extract

was provided to Athena for a SCN1A DNA Sequencing Clinical Diagnostic Test “for the

1 Defendants are not aware of any evidence whatsoever to support this reckless and unfounded

accusation, which Plaintiff alleges – in direct contravention of Rule 9(b) – “on information and belief.” Further, it is nonsensical to accuse the Defendants of a cover-up when it was Athena itself that reclassified the decedent’s mutation in the revised report issued in 2015.

2 The Defendants set forth this summary of the Complaint’s allegations only for purposes of this motion, and otherwise deny them.


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purpose of ‘diagnosing or detecting an existing disease, illness, impairment, symptom or

disorder.’” (Compl. ¶¶ 14-15)

According to the Complaint, on June 30, 2007, Athena issued a “SCN1A DNA

Sequencing Test Diagnostic Service Report” which diagnosed the decedent’s condition as a

DNA mutation in the SCN1A gene classified as a “Variant of unknown significance.” (Compl. ¶

17) Plaintiff alleges that this diagnosis was incorrect and that Athena “breached the standards of

care set by [the] Clinical Laboratory Improvement Amendments (‘CLIA’) – a federal

certification process for laboratories that perform clinical diagnostic tests on human specimens in

the United States – for a certified diagnostic laboratory performing high-complexity genetic

testing, through Athena’s negligent failure to correctly diagnose the DNA missense mutation in

the decedent’s SCN1A gene.” (Compl. ¶ 19 (emphasis added)) Plaintiff contends that the

classification was wrong because her son’s mutation had been reported in patients suffering from

Dravet Syndrome, also known as Severe Myoclonic Epilepsy of Infancy (SMEI), and that

Athena’s Chief CLIA Laboratory Director knew or should have known that the 2007 report was

in error. (Compl. ¶¶ 21-24)

Plaintiff alleges that because of the mis-diagnosis in the 2007 report, her son’s doctors

continued to treat him using sodium channel blocking medications, which is standard for

seizures not caused by SMEI but which worsens seizures in patients with SMEI. (Compl. ¶¶ 31-

33) The Plaintiff asserts that “[a]s a proximate result of Athena’s negligent laboratory practices

and failure to accurately diagnose and advise for the selection of appropriate therapy,” her son

died on January 5, 2008, after a traumatic seizure. (Compl. ¶ 34 (emphasis added))

Plaintiff further alleges that, in September 2014, she and a doctor and a genetic counselor

requested a copy of the 2007 report and, in January 2015, were provided with a revised report

that correctly reclassified the decedent’s condition as a “Known disease-associated mutation.”


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(Compl. ¶ 26) Plaintiff contends that the 2015 report violates CLIA regulations by failing to cite

new publication references supporting the reclassification and by including the names of two

Athena personnel – Dr. Nagan and Dr. Zhu – who were involved in the testing used for the 2007

report but who had left Athena’s employment by the time of the 2015 report. (Compl. ¶¶ 27-28)

Plaintiff alleges that Athena was negligent for failure to meet the standard of care by mis-

diagnosing her son’s condition in the 2007 report, and asserts a cause of action under South

Carolina’s wrongful death statute on behalf of the statutory beneficiaries. (Compl. ¶¶ 40-47)

Plaintiff also alleges that Athena’s failure to meet the standard of care caused her son to suffer

before he died, and asserts a survival action on behalf of his estate. (Compl. ¶¶ 49-51)

In addition, Plaintiff pleads two counts of negligent misrepresentation “and/or

constructive fraud” in her third and fourth causes of action. The third cause of action alleges that

the Defendants made a conscious decision to conceal the child’s actual condition “once the

obvious mistake in the 2007 Report was discovered,” which the Plaintiff asserts occurred

sometime between 2007 and 2015. (Compl. ¶ 53) The Complaint claims that the error in the

2007 report and Defendants’ “intentional omission once their mistake was known” constitutes

negligent misrepresentation or fraud. (Compl. ¶ 55)

The fourth cause of action alleges that the 2015 report falsely purports to be a “new” test

and falsely states that Drs. Nagan and Zhu authorized and signed off on the report, and that these

acts constitute negligent misrepresentation or fraud. (Compl. ¶¶ 62, 65)

Plaintiff’s fifth cause of action reiterates her claim that the Defendants conspired with

each other to cover up the mistake in the 2007 report “as reflected by the [correct information in]

the 2015 Report,” causing the death and suffering of the Plaintiff’s son. (Compl. ¶ 68)

Finally, Plaintiff’s sixth cause of action alleges that the Defendants’ deceitful conduct

and cover-up violated the South Carolina Unfair Trade Practices Act. Plaintiff asserts that these


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acts “are capable of repetition given the nature of the Corporate Defendants’ business and the

vast number of people who depend on the numerous diagnostic tests performed by these

Corporate Defendants each year. As such, these acts have an effect on the public and do concern

the public interest.” (Compl. ¶ 75)

As noted above, the 2007 report and the 2015 report are attached to affidavits included as

exhibits to the Complaint and incorporated in the Complaint by reference. As noted above, the

2007 report warns repeatedly and explicitly that the test performed was inconclusive, that SMEI

could be the cause of the patient’s seizures, and that genetic testing of the biological parents is

“strongly recommended” in order to resolve the uncertainty of the test results.

STANDARD OF REVIEW

“To survive a motion to dismiss, a complaint must contain sufficient factual matter,

accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556

U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The

Fourth Circuit has explained: “Iqbal and Twombly articulated a new requirement that a

complaint must allege a plausible claim for relief, thus rejecting a standard that would allow a

complaint to survive ... whenever the pleadings left open the possibility that a plaintiff might

later establish some set of [undisclosed] facts to support recovery.” McCleary-Evans v.

Maryland Dep’t of Transp., 780 F.3d 582, 587 (4th Cir. 2015) (emphasis and alteration in

original, internal quotation marks omitted); see also Walters v. McMahen, 684 F.3d 435, 439

(4th Cir. 2012) (stating that “those decisions require that complaints in civil actions be alleged

with greater specificity than previously was required”).

The court accepts well-pleaded factual allegations as true, but should disregard all

conclusory allegations. Iqbal, 556 U.S. at 678. “A claim has facial plausibility when the

plaintiff pleads factual content that allows the court to draw the reasonable inference that the


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defendant is liable for the misconduct alleged.” Id. Dismissal is warranted whenever the factual

allegations do not “raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555.

ARGUMENT

I. All claims should be dismissed because of Plaintiff’s failure to bring suit within three years of constructive notice.

Enforcing a statute of limitations often results in harsh consequences for the plaintiff. In

the South Carolina case of Moates v. Bobb, 322 S.C. 172, 470 S.E.2d 402 (Ct. App. 1996), the

plaintiff, Moates, became a paraplegic after a car crash with the defendant, Bobb. The court

noted that “[w]e sympathize with the Moateses as they have suffered a terrible tragedy. As a

reviewing court in an equity matter, however, we hold it would be highly unfair to expose Bobb

now to the immense potential liability of this claim after the Moateses ‘slept on their rights.’” Id.

at 176, 470 S.E.2d at 404. The court went on to hold that “statutes of limitations are not simply

technicalities. On the contrary, they have long been respected as fundamental to a well-ordered

judicial system.” Id., 470 S.E.2d at 404 (citing 54 C.J.S. Limitations of Actions § 2, at 16-17

(1989)).

Similarly, the court explained that “[o]ne purpose of a statute of limitations is to relieve

the courts ‘of the burden of trying stale claims when a plaintiff has slept on his rights.’” Id., 470

S.E.2d at 404 (quoting Burnett v. New York Cent. R.R., 380 U.S. 424, 428, 85 S. Ct. 1050, 1054

(1965)). This concern is particularly acute given the scientific context of the instant case –

genetics and genetic screening, fields in which quantum leaps have been made in knowledge and

technology during the past 5-10 years.

As set forth in detail above, Athena’s 2007 report emphasized over and over that the test

results were inconclusive, that further testing was strongly recommended, and that a conclusive

diagnosis could be reached only by additional testing. Athena offered to perform the testing of


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the biological parents at no additional charge. Yet Plaintiff elected – for almost nine years – not

to pursue the follow-up testing.

South Carolina Code section 15-3-530 includes a blanket three-year statute of limitations

for most types of claims, including claims for injury to the person or rights of another, for death

by wrongful act, and for fraud. Similarly, Code section 15-3-545 contains a three-year statute of

limitations for suits alleging medical malpractice, and section 39-5-150 sets forth a three-year

statute of limitations for claims under the Unfair Trade Practices Act. Collectively, all of

Plaintiff’s causes of action are subject to these three-year statutory limitations periods.

While a cause of action generally accrues at the moment a defendant breaches a duty

owed to the plaintiff, South Carolina law recognizes a discovery rule that tolls the statute of

limitations until the plaintiff “knew or by the exercise of reasonable diligence should have

known that he had a cause of action.” S.C. Code Ann. § 15-3-535. Interpreting the phrase

“reasonable diligence,” the Supreme Court has explained that

The exercise of reasonable diligence means simply that an injured party must act with some promptness where the facts and circumstances of an injury would put a person of common knowledge and experience on notice that some right of his has been invaded or that some claim against another party might exist. The statute of limitations begins to run from this point and not when advice of counsel is sought or a full-blown theory of recovery developed.

Snell v. Columbia Gun Exch., Inc., 276 S.C. 301, 303, 278 S.E.2d 333, 334 (1981).

The related legal principle of “constructive notice” is based upon the same foundation:

Constructive notice is a legal inference which substitutes for actual notice. It is notice imputed to a person whose knowledge of the facts is sufficient to put him on inquiry; if these facts were pursued with due diligence, they would lead to other undisclosed facts.

Strother v. Lexington Cnty. Recreation Comm’n, 332 S.C. 54, 64, 504, S.E.2d 117, 122 (1998).

Put differently, “if there are circumstances sufficient to put the party upon inquiry, he is held to

have notice of everything which that inquiry, properly conducted, would certainly disclose.”


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City of Greenville v. Washington Am. League Baseball Club, 205 S.C. 495, 509, 32 S.E.2d 777,

782 (1945).

The 2007 report is replete with statements that would have put a reasonable person on

notice that its tentative conclusion could be incorrect, and that additional testing was needed to

confirm or disprove that tentative conclusion. Had Plaintiff taken the actions recommended in

the 2007 report – including the free parental testing offered and strongly recommended – the

uncertainty of the decedent’s test results would have been clarified. By not submitting to the

additional recommended testing, Plaintiff failed as a matter of law to exercise reasonable

diligence.

Numerous courts have held that a plaintiff’s failure to submit to additional recommended

medical testing constitutes a failure to exercise the required reasonable diligence, and that a

plaintiff could be held to have constructive notice of those facts that the additional testing would

have revealed. See, e.g., Vitalo v. Cabot Corp., 399 F.3d 536, 543-545 (3rd Cir. 2005) (statute of

limitations for plant worker’s claim for beryllium poisoning ran from the time he received x-ray

results showing scarring that may be caused by beryllium and further testing was offered free of

charge to confirm beryllium disease instead of asbestosis); Betts v. Manville Pers. Injury

Settlement Trust, 588 N.E.2d 1193, 1203 (Ill. App. Ct. 1992) (statute of limitations on asbestosis

claim ran from point that doctor recommended and patient refused lung biopsy to confirm

diagnosis); Sowell v. Dresser Indus., Inc., 866 S.W.2d 803, 806-07 (Tex. Ct. App. 1993) (statute

of limitations on silicosis claim ran from the time patient was advised by physician to submit to

CT scan, blood work, and additional testing, but patient refused to do so).

The same principle applies in this case. Because more than three years have elapsed

since the 2007 report gave notice to Plaintiff that additional testing was required, all claims are

barred by the three-year statutes of limitations.


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II. Plaintiff’s wrongful death and survival claims should be dismissed for failure to bring suit within six years of the alleged malpractice.

The essence of Plaintiff’s case is an allegation that an act of medical malpractice

occurring nearly nine years ago led to the misdiagnosis and mistreatment of Plaintiff’s infant

son. Though Plaintiff artfully pleads her first two causes of action as “Negligence/Gross

Negligence Resulting in Wrongful Death” and “Survivorship Action,” both claims in reality

sound in medical malpractice, and as such, they are subject to the six-year statute of repose for

medical malpractice found at South Carolina Code section 15-3-545: “[A]ny action ... to recover

damages for injury to the person arising out of any medical ... treatment, omission, or operation

... must be commenced within ... three years from date of discovery or when it reasonably ought

to have been discovered, not to exceed six years from date of occurrence.” S.C. Code Ann. § 15-

3-545(A) (emphasis added). As this case was filed nearly 9 years after the occurrence of the

alleged negligence, Plaintiff’s first two causes of action exceed the 6-year repose period by

nearly 3 years and must be dismissed as a matter of law.

The allegations in Plaintiff’s own Complaint demonstrate that the first two claims amount

to allegations of medical malpractice. Plaintiff asserts that when her son began suffering from

certain “febrile focal motor seizures” she “sought treatment for [decedent’s] condition from a

variety of service providers.” (Compl. ¶ 12 (emphasis added)) In January 2007, “[i]n an attempt

to more accurately diagnose the exact nature of [decedent’s] condition,” a whole blood sample

was taken from him and his DNA was extracted from the sample. (Compl. ¶ 14) This sample

was taken “at the direction” of two physicians employed by “Horizon Molecular Medicine” of

Atlanta, Georgia, as “treating clinical geneticists.” (Compl. ¶ 14) The extracted DNA was then

provided to Athena’s laboratory for an “SCNIA DNA Sequencing Diagnostic Test ... for the

purpose of ‘diagnosing or detecting an existing disease, illness, impairment, symptom, or


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disorder.’” (Compl. ¶ 15 (emphasis added)) According to Plaintiff, Athena then issued a

“Sequencing Clinical Diagnostic Report” that was in error. (Compl. ¶¶ 17, 18)

Allegedly relying on this report, attending physicians to Plaintiff’s son, including the

physicians at Horizon Molecular Medicine who had directed that the blood sample be taken,

rejected a diagnosis of Dravet Syndrome or SMEI, and continued to treat him with a regimen of

sodium channel blocking medications. (Compl. ¶ 31) Plaintiff allege these medications worsen

seizures in persons with Dravet Syndrome, and that “[a]s a proximate result of Athena’s ...

failure to accurately diagnose and advise for the selection of appropriate therapy,” the child lost

his life following a seizure in January 2008, over eight years ago. (Compl. ¶¶ 33, 34 (emphasis

added))

Plaintiff supports the allegations in her Complaint with the affidavits of Dr. Robert Cook-

Deegan and Dr. Max Wiznitzer. Both affiants are doctors of medicine. Dr. Cook-Deegan holds

an appointment in internal medicine in the Duke University School of Medicine, and Dr.

Wiznitzer serves as a “pediatric neurologist” at “Rainbow Babies and Children’s Hospital” and

is “board certified by the American Board of Pediatrics in Pediatrics and board-certified by the

American Board of Psychiatry and Neurology both in Neurology, with special qualification in

Child Neurology, and in Neurodevelopmental Disabilities.” (Compl. ¶¶ 11, 34)

The particular allegations in Plaintiff’s causes of action further indicate that this is a

medical malpractice case. Plaintiff alleges in the first cause of action3 that Athena had a duty to

meet a particular standard of care in the course of providing federally licensed “high complexity

clinical diagnostic genetic testing” and that Athena breached this standard of care by, among

other things, “fail[ing] to provide accurate genetic confirmation of Dravet Syndrome (SMEI),”

3 Plaintiff’s second cause of action, for survivorship, Compl. ¶¶ 48-51, is premised on essentially

the same factual allegations as the first cause of action.


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“fail[ing] to identify anticonvulsant treatments necessary to avoid in patients with a SMEI

diagnosis,” and various infractions of the federal Clinical Laboratory Improvement

Amendments. (Compl. ¶ 41) Plaintiff further alleges that Athena “had a duty to correctly

inform [Plaintiff’s son] of his SMEI condition” and a duty to “aid [him] in obtaining treatment to

correct the condition,” and that Athena’s alleged failure to comply with its duties “prevented

[him] from discovering more appropriate treatments to mitigate [his] condition.” (Compl. ¶ 44)

Plaintiff also alleges that Athena “knew or should have known” that the results of its testing

“would have direct impact on a patient’s treatment and clinical management.” (Compl. ¶ 45)

South Carolina law establishes a six-year statute of repose for actions for medical

malpractice. S.C. Code Ann. § 15-3-545(A). The statute provides that

In any action ... to recover damages for injury to the person arising out of any medical, surgical, or dental treatment, omission, or operation by any licensed health care provider ... acting within the scope of his profession must be commenced within three years from the date of the treatment, omission, or operation giving rise to the cause of action or three years from date of discovery or when it reasonably ought to have been discovered, not to exceed six years from date of occurrence ….

Id. (emphasis added). The corresponding definition of “licensed health care provider” covers all

manner of persons and entities that provide a wide variety of health care services:

“Licensed health care providers” means physicians and surgeons; directors, officers, and trustees of hospitals; nurses; oral surgeons; dentists; pharmacists; chiropractors; optometrists; podiatrists; hospitals; nursing homes; or any similar category of licensed health care providers.

S.C. Code Ann. § 38-79-410 (emphasis added).

The South Carolina Supreme Court has recognized that this statute of repose operates

without regard to any discovery rule or period and “constitutes an outer limit beyond which a

medical malpractice claim is barred, regardless of whether it has or should have been

discovered.” Hoffman v. Powell, 298 S.C. 338, 339-40, 380 S.E.2d 821, 821 (1989). The court


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has also rejected challenges to the statute’s constitutionality, recognizing that “it bears a rational

relationship to a legitimate legislative objective: reduction of liability exposure and, thereby,

fostering the delivery of quality health care services.” Id. at 340, 380 S.E.2d at 822. Quoting a

decision of the Supreme Court of Illinois upholding an even shorter (4-year) statute of repose,

the South Carolina Supreme Court further explained that while barring a cause of action before

its discovery may seem unfair,

the reasonableness of the statute must be judged in light of the circumstances confronting the legislature and the end which it sought to accomplish. We have noted above that various reports, commissions, and authors recommended that the ‘long tail’ exposure to malpractice claims brought about by the discovery rule must be curtailed by placing an outer limit within which a malpractice claim must be commenced.

Id. at 341, 380 S.E.2d at 822 (quoting Anderson v. Wagner, 402 N.E.2d 560, 568 (1979)).

The South Carolina legislature has defined “licensed health care providers” broadly, to

include “any similar category of licensed health care providers” like those that are enumerated.

In interpreting the phrase “any similar category of licensed health care providers,” the Supreme

Court has explained that the key requirement is that “an institution or person must provide health

care to patients.” Swanigan v. American Nat’l Red Cross, 313 S.C. 416, 419, 438 S.E.2d 251,

252 (1993).

By any analysis Athena is a “licensed health care provider” under South Carolina law.

With respect to licensing, Plaintiff’s own allegations point out that Athena is licensed and

regulated pursuant to federal “CLIA” standards. As for whether Athena provides “health care,”

the basic definition in the dictionary is instructive in the absence of any statutory definition. See

Lee v. Thermal Eng’g Corp., 352 S.C. 81, 91-92, 572 S.E.2d 298, 303 (Ct. App. 2002)

(recognizing that “[w]here a word is not defined in a statute, our appellate courts have looked to

the usual dictionary meaning to supply its meaning”). “Health care” is generally defined as “any


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field or enterprise concerned with supplying services, equipment, information, etc., for the

maintenance or restoration of health.” Webster’s College Dictionary, 2d ed., p. 599 (1997).

“Health,” in turn, is “soundness of body or mind; freedom from disease or ailment.” Id. Using

these definitions, Athena’s services of genetic screening and testing are quite plainly intended to

aid in the “restoration of health” and the freeing of the body “from disease or ailment.” Plaintiff

herself alleges that she and her son’s doctors relied on Athena’s services for “diagnosing and

detecting an existing disease,” (Compl. ¶ 15), and that Athena’s “failure to accurately diagnose

and advise for the selection of appropriate therapy,” (id. ¶ 34), led to faulty treatments that

caused the child’s death.

Courts confronted with similar statutes of limitation and repose have determined that

entities providing health care services analogous to Defendants’ genetic screening services did

fall under the protections of the statutes. For example, in Khadim v. Laboratory Corp. of Am.,

838 F. Supp. 2d 448 (W.D. Va. 2011), the federal district court held that a laboratory corporation

that had provided erroneous “prenatal genetic testing results” fell under the definition of “health

care provider” in the applicable Virginia statute. In particular, the court concluded that the

statute’s inclusion of “a corporation, partnership, limited liability company or any other entity ...

which employs or engages a licensed health care provider and which primarily renders health

care services” included the defendant LabCorp. 838 F. Supp. 2d at 461, 467 (quoting Va. Code

§ 8.01-581.1); see also Johnson v. Superior Court, 124 Cal. Rptr. 2d 650, 662 (Cal. Ct. App.

2002) (rejecting argument that physicians providing genetic screening services at tissue bank

were not acting as health care providers).

Similarly, the Texas Court of Appeals held that a pathology lab that had failed to detect

the presence of a melanoma in a lesion removed from a patient’s skin and submitted to the lab

for analysis was protected by a statute of limitations governing “health care liability” claims


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against “health care providers.” Hogue v. Propath Laboratory, 192 S.W.3d 641, 644-45 (Tex.

Ct. App. 2006). In Calvin v. Schlossman, 74 A.D.2d 265 (N.Y. App. Div. 1980), the New York

court concluded a private medical lab that had misdiagnosed a patient’s pap smear was subject to

the state’s mandatory medical malpractice statutory scheme. In so doing, the court recognized

that the statutory definitions of “hospitals” and “clinical labs” in the New York code “bespeak of

medical doctors and laboratories as allies for the prevention and treatment of disease.” Id. at

635. The court continued,

Although the services of a medical doctor and a laboratory are divisible, they act as collaborators, not antagonists. Their work is interrelated, and ... the analysis performed by a laboratory is supplemental to and bears directly upon the course of medical treatment to be provided. A proper diagnosis can facilitate recovery while an incorrect analysis can spell prolonged affliction.

Id. at 269. This interdependent relationship between physicians and health care service

providers like Defendants is also recognized by the Plaintiff in her own allegations, which

accuse Athena of a “failure to accurately diagnose and advise for the selection of appropriate

therapy.” (Compl. ¶ 34)

Bolstering the conclusion that Athena is a licensed health care provider and that

Plaintiff’s claims properly sound in medical malpractice are the discussions of a number of

courts in distinguishing between claims for mere negligence and those for medical malpractice.

The South Carolina Supreme Court recently explained that the distinction is often made “by

determining whether expert testimony is necessary to aid in the jury’s determination of fault,

particularly with respect to the ‘duty’ and ‘causation’ elements of the claim.” Dawkins v. Union

Hosp. Dist., 408 S.C. 171, 177, 758 S.E.2d 501, 504 (2014). “In general,” the court continued,

“if the patient receives allegedly negligent professional medical care, then expert testimony as to

the standard of that type of care is necessary, and the action sounds in medical malpractice.” Id.,

758 S.E.2d at 504 (citing various decisions from other jurisdictions). Here, of course, the


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Plaintiff has offered the affidavits of two medical doctors to support her claims that a standard of

care applicable to Athena was breached.

New York courts have further held that “conduct may be deemed malpractice, rather than

negligence, when it constitutes medical treatment or bears a substantial relationship to the

rendition of medical treatment by a licensed physician,” Scott v. Uljanov, 541 N.E.2d 398, 370

(N.Y. App. Div. 1989) (emphasis added), and applying this rationale have reasoned that

“laboratory services ... performed at the direction of a physician are an integral part of the

process of rendering medical treatment” and that therefore “a claim stemming from the rendition

of such services is a medical malpractice claim.” Annunziata v. Quest Diagnostics Inc., 127

A.D.3d 630, 631 (N.Y. App. Div. 2015). Plaintiff’s own allegations again make clear that

Athena’s DNA testing services were sought by attending physicians “for the purpose of

‘diagnosing or detecting an existing disease, illness, impairment, symptom, or disorder.’”

(Compl. ¶ 15)

Finally, Plaintiff’s characterizing the causes of action as “Negligence” and

“Survivorship” are unavailing in an attempt to escape the medical malpractice statute of repose.

As the Supreme Court has recognized, the statute of limitations and repose in section 15-3-545

covers “any action to recover damages for injury to the person arising out of any medical ...

treatment,” however the claim is framed or pleaded. Smith v. Smith, 291 S.C. 420, 426, 354

S.E.2d 36, 40 (1987) (affirming judgment for defendants on claims for breach of contract for

alleged negligent medical treatment) (emphasis in original).

Based on the foregoing, Athena is properly classified as a “licensed health care provider”

and is therefore entitled to the protections afforded such providers in section 15-3-545. For this

reason, Plaintiff’s first two causes of action come three years too late, and must be dismissed as a

matter of law.


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III. Plaintiff’s negligent misrepresentation and constructive fraud claims should be dismissed for failure to allege a false statement of fact on which the Plaintiff relied to her detriment and failure to plead fraud with the particularity required by Rule 9(b).

The elements of negligent misrepresentation and fraud both require a false representation

of fact. “To establish fraud, there must first be a false representation.” Osborn v. University

Medical Assocs. of the Medical Univ. of S.C., 278 F. Supp. 2d 720, 733 (D.S.C. 2003) (quoting

Winburn v. Insurance Co. of North Am., 287 S.C. 435, 339 S.E.2d 142, 145 (Ct. App. 1985)).

Likewise, “[n]egligent misrepresentation requires … a false representation.” Id. at 735.

“Recovery in negligent misrepresentation cases is based upon negligent conduct and predicated

upon a negligently made false statement where a party suffers either injury or loss as a

consequence of relying upon the misrepresentation.” Gruber v. Santee Frozen Foods, Inc., 309

S.C. 13, 20, 419 S.E.2d 795, 799 (Ct. App. 1992) (emphasis added). “The key difference

between fraud and negligent misrepresentation is that fraud requires the conveyance of a known

falsity, while negligent misrepresentation is predicated upon transmission of a negligently made

false statement.” Armstrong v. Collins, 366 S.C. 204, 219-20, 621 S.E.2d 368, 375-76 (Ct. App.

2005) (internal quotations and citations omitted).4

Further, because of the gravely serious nature of the allegations, fraud-based claims are

held to an extremely high standard of pleading specificity. See Rule 9(b), FRCP (“In alleging

fraud or mistake, a party must state with particularity the circumstances constituting fraud or

mistake.”) (emphasis added); Pitten v. Jacobs, 903 F. Supp. 937, 951 (D.S.C. 1995) (Rule 9(b)

applies to “all cases where the gravamen of the claim is fraud even though the theory supporting

the claim is not technically termed fraud”). As this Court recently explained, “[t]he

4 Constructive fraud differs from actual fraud only in that intent to deceive is not an element of

constructive fraud. E.g., Cheney Bros. Inc. v. Batesville Casket Co., 47 F.3d 111, 114 (4th Cir. 1995).


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circumstances required to be pled with particularity under Rule 9(b) are the time, place and

contents of the false representations, as well as the identity of the person making the

misrepresentation and what he obtained thereby.” Preferred Home Inspections, Inc. v. BellSouth

Telecommunications, LLC, 2014 WL 4793824, at *8 (D.S.C. Sept. 25, 2014) (Seymour, J.)

(quoting McCauley v. Home Loan Inv. Bank, F.S.B., 710 F. 3d 551, 559 (4th Cir. 2013)).

In addition, in a multi-defendant lawsuit such as this one, Rule 9(b) mandates such

specificity with respect to each separate defendant. See, e.g., Maryland Staffing Servs., Inc. v.

Manpower, Inc., 936 F. Supp. 1494, 1500 (E.D. Wis. 1996) (where there are multiple

defendants, “Rule 9(b) prohibits ‘lumping together’ all the defendants under a general accusation

that they were participants in a scheme to defraud. Rather, the rule requires that the complaint

inform each defendant of the nature of his alleged participation in the fraud and specify which

defendants were involved in what activity.”); accord Jepson, Inc. v. Makita Corp., 34 F.3d 1321,

1328 (7th Cir. 1994).

Rule 9(b)’s particularized pleading requirement serves to protect defendants by ensuring

they have sufficient information to formulate a defense by putting them on notice of the conduct

complained of, by discouraging frivolous suits where “all the facts are learned after discovery,”

and by preventing “harm to their goodwill and reputation.” Harrison v. Westinghouse Savannah

River Co., 176 F.3d 776, 784 (4th Cir. 1999). If a plaintiff’s allegations lack this level of

specificity, a motion to dismiss must be granted. Gentry v. Yonce, 337 S.C. 1, 7, 522 S.E.2d 137,

140 (S.C. 1999) (explaining that Rule 9(b)’s particularity requirement “is a means for courts to

summarily dispose of frivolous lawsuits based on fraud”).

Viewing the Complaint with the above principles of law in mind, it is readily apparent

that the Plaintiff has not pleaded a viable claim for either negligent misrepresentation or fraud.


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A. Third Cause of Action (“First Count of Negligent Misrepresentation and/or Constructive Fraud”)

In pleading her third cause of action, the Plaintiff has completely ignored the mandates of

Rule 9(b). Virtually every factual allegation that the Plaintiff makes in this cause of action is

based “upon information and belief,” makes no effort to distinguish among the Defendants, fails

to set forth the circumstances of the alleged fraud with particularity, and as explained below,

fails to identify a single false statement of fact on which the Plaintiff relied to her detriment.

To the extent that the third cause of action is predicated upon the alleged error in the

2007 report, it is merely another way of pleading the medical malpractice on which the first two

causes of action are based, and is therefore barred by the statute of limitations and statute of

repose for medical malpractice, as set forth above. To the extent that the claim is based on the

alleged cover-up of the error after it was discovered, there is no allegation of any false statement

made by the Defendants to the Plaintiff on which the Plaintiff relied. At most, the Plaintiff

contends that the Defendants intentionally decided not to correct the alleged mistake in the 2007

report after they realized, sometime prior to 2015, that the report was erroneous. Such a

hypothesized “cover up,” however, does not amount to an affirmative representation of fact.5

The Complaint asserts vaguely that the Defendants “fraudulently and/or negligently

misrepresented facts to effectuate the [cover-up]” (Compl. ¶ 56), but there is absolutely no

5 While some circumstances may give rise to a duty to speak and render a party liable for failure

to disclose a material fact during a transaction between the parties, there is no ongoing duty to correct a prior mis-statement of which a party learns after the parties’ dealings have come to an end. See, e.g., Restatement (Second) of Torts, § 551(2) (liability for nondisclosure applies to failure to speak “before the transaction is consummated”); Bergeron v. DuPont, 359 A.2d 627, 629 (N.H. 1976) (“[O]ne who makes a representation believing it to be true and does not discover its falsity until after the transaction has been consummated has committed no fraud.”); In re Hurst, 337 B.R. 125, 133 (N.D. Tex. Bankr. 2005) (a party to a transaction who is aware of the truth of certain facts and the other party’s mistaken impression as to those facts is under a duty to correct the mistaken impression only “prior to the consummation of the transaction” (citing Restatement (Second) of Torts § 551(2)).


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allegation of any such fact, much less the time, place, and manner in which the misrepresentation

was made. The Complaint’s conclusory allegation clearly does not satisfy the requirement of

pleading fraud with particularity under Rule 9(b).

B. Fourth Cause of Action (“Second Count of Negligent Misrepresentation and/or Constructive Fraud”)

As to the fourth cause of action, the only alleged misrepresentations are Plaintiff’s claim

that the 2015 report was based on a “new” test and that it shows Drs. Nagan and Zhu as having

authorized the report when they had (at that time) left Athena’s employment. The Complaint

alleges in conclusory fashion that the Plaintiff relied on these false statements and that her

reliance caused harm to her son and to her, but this is obviously impossible. Plaintiff’s son, of

course, was already deceased when the 2015 report was issued; there is no way that any

misrepresentations in it could have caused his suffering and death in 2007 and 2008.

As to Plaintiff’s own asserted injury, it defies logic to claim that she somehow relied to

her detriment on the alleged misrepresentations made in 2015. Nowhere does the Complaint say

how the Plaintiff relied on the supposed representation that the 2015 report was a “new” test, or

how the Plaintiff was harmed by the listing of Drs. Nagan and Zhu in the report, or even

specifically that the Plaintiff did rely detrimentally on those alleged misrepresentations. Instead,

the Complaint merely pleads reliance and proximate cause in a wholly conclusory manner.

Again, such a pleading fails to meet Plaintiff’s burden of “stat[ing] with particularity the

circumstances constituting fraud,” Rule 9(b), Fed. R. Civ. P., and fails to satisfy the pleading

standard of Iqbal, see 556 U.S. at 678.

Finally, a review of the 2015 report itself, which is attached to the Complaint, reveals that

there is nothing in it that purports to be based on any “new” test. It simply reports a

reclassification of the decedent’s genetic mutation via a “Revised Report.”


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For all of the above reasons, Plaintiff’s negligent misrepresentation and constructive

fraud causes of action fail as a matter of law.

IV. Plaintiff’s civil conspiracy claim must be dismissed for failure to allege additional facts or special damages unique to the conspiracy.

Plaintiff’s count for civil conspiracy is fatally defective because it does what the South

Carolina appellate courts have repeatedly held is not sufficient to plead a valid cause of action

for conspiracy: The Complaint alleges nothing more than a combination to do the other

wrongful acts complained of, and fails to make any allegations of particular harm or special

damages resulting from the conspiracy itself apart from the other alleged wrongful actions.

The Supreme Court of South Carolina has held that where the particular acts alleged as a

conspiracy are the same as those relied on as other tortious acts alleged in the complaint, the

plaintiff cannot recover damages for such acts and also on the conspiracy to do the act. Todd v.

South Carolina Farm Bureau Mut. Ins. Co., 276 S.C. 284, 293, 278 S.E.2d 607, 611 (1981).

Likewise, in Kuznik v. Bees Ferry Associates, 342 S.C. 579, 538 S.E.2d 15 (Ct. App. 2000), the

Court of Appeals held that a pleading of civil conspiracy should be dismissed as a matter of law

when the plaintiff “merely reallege[s] the prior acts complained of in his other causes of action

as [his] conspiracy action but fail[s] to plead additional acts in furtherance of the conspiracy.”

Id. at 611, 538 S.E.2d at 31.

This is exactly what the Plaintiff’s conspiracy allegations attempt to do here. The

Plaintiff does not allege any “additional acts in furtherance of the conspiracy” over and above

those included in the other causes of action. Instead, the Complaint merely states that the

Defendants conspired to carry out the wrongful acts alleged as the grounds of the preceding

causes of action. (Compl. ¶ 68)

Furthermore, to prevail on a civil conspiracy claim, the Plaintiff must prove special


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damages that are not duplicative of the damages claimed as a result of other alleged wrongdoing.

Hackworth v. Greywood at Hammett, LLC, 385 S.C. 110, 117, 682 S.E.2d 871, 875 (Ct. App.

2009). Here again, the Complaint does not allege any special damages that are in any way

different from or in addition to the other damages sought by the Plaintiff. The damages allegedly

caused by the conspiracy consist of the “death, pain and suffering on the part of [Plaintiff’s son],

increased medical expenses, additional mental anguish caused by the delay in notification of [the

decedent’s] actual diagnosis and loss of child bearing years on the part of [the Plaintiff], as well

as the resulting incurred medical expenses for the treatment of her severe emotional distress.”

(Compl. ¶ 68) All of these elements of the alleged damages from the conspiracy are asserted as

damages from other causes of action pleaded in the Complaint. See Compl. ¶¶ 46 (decedent’s

death), 50 (decedent’s pain and suffering), 57 (medical expenses and emotional distress of the

Plaintiff), 58 (injury and death of decedent, Plaintiff’s loss of companionship of her son, loss of

child bearing years, and medical expenses for treatment of Plaintiff’s emotional distress), 66

(same).

For these reasons, the civil conspiracy count fails as a matter of law.

V. Plaintiff’s UTPA claim must be dismissed for failure to plead adequately any effect on the public interest.

Plaintiff’s sixth cause of action asserts that Defendants violated the South Carolina

Unfair Trade Practices Act (“UTPA”). This count fails to state a claim because the UTPA

applies only to acts or practices that have an impact on the public interest, York v. Conway Ford,

Inc., 325 S.C. 170, 173, 480 S.E.2d 726, 728 (1997), and “South Carolina courts have left no

doubt that an ‘unfair or deceptive act or practice that affects only the parties to a trade or

commercial transaction is beyond the act’s embrace.’” Omni Outdoor Adver., Inc. v. Columbia

Outdoor Adver., Inc., 974 F.2d 502, 507 (4th Cir. 1992) (citation omitted). The factual


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allegations in the Complaint show that the challenged conduct took place exclusively within the

confines of conduct affecting only the parties to this litigation. Count Six should therefore be

dismissed.

The UTPA applies only to unfair or deceptive practices that affect the public: “To

sustain a cause of action under the SCUTPA, the plaintiffs must establish, by specific facts, that

members of the public were adversely affected by [the defendant’s actions].” Preferred Home

Inspections, Inc. v. BellSouth Telecomms., LLC, 2014 WL 4793824 (D.S.C. Sept. 25, 2014)

(Seymour, J.) (granting rule 12(b)(6) motion to dismiss). Because of the broad remedies

available under the UTPA, plaintiffs have repeatedly attempted to apply it beyond its intended

scope. But the courts have consistently rejected those attempts, holding that the Act does not

reach alleged wrongful conduct affecting only the parties to the litigation. See, e.g., Uhlig LLC

v. Shirley, No. 08-1208, 2011 WL 1119548, at *8 (D.S.C. Mar. 25, 2011) (granting summary

judgment where the UTPA claim related to “a private dispute between two commercial parties”).

Were the rule otherwise, every dispute “would become a candidate for the extraordinary

remedies provided by the [act]”—something the legislature did not intend. Omni Outdoor, 974

F.2d at 508.

Plaintiff’s allegations against the Defendants are based entirely on claims that the

Defendants engaged in actions that affected only the Plaintiff and her son. Plaintiff makes the

generic allegation that “[t]he Corporate Defendants’ unfair or deceptive acts are capable of

repetition given the nature of Corporate Defendants’ business and the vast number of people who

depend on the numerous diagnostic tests performed by the Corporate Defendants each year. As

such, these acts have an effect on the public and do concern the public interest.” (Compl. ¶ 75)

But courts routinely dismiss UTPA claims that rest on similarly threadbare assertions. E.g.,

Ameristone Tile, LLC v. Ceramic Consulting Corp., Inc., 966 F. Supp. 2d 604, 621 (D.S.C. 2013)


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(dismissing claim where plaintiffs alleged that “Defendants’ acts have the potential for harmful

effects to the public interest because they are capable of repetition”); Ethox Chem., LLC v. Coca-

Cola Co., No. 12-1682, 2013 WL 41001, at *3 (D.S.C. Jan. 3, 2013) (same where plaintiff “fails

to allege any specific procedures or business practices that create the potential for repetition”);

Norman Pulliam & Patriot’s Plantation II, LLC v. Clark, No. 11-3047, 2012 WL 1835717, at *6

(D.S.C. May 21, 2012) (same where plaintiff alleged that the “acts and practices are capable of

repetition because [defendant] continues to be actively engaged in the banking business in the

State of South Carolina” (internal quotations omitted)). What is missing from the Complaint is

any allegation of concrete facts showing that the alleged conduct here adversely affected other

members of the public or that it has any credible possibility of repetition with respect to other

members of the public.

Accordingly, Plaintiff’s UTPA claim does not adequately allege that the Defendants’

actions are capable of repetition or otherwise affect the public interest, and therefore should be

dismissed.

CONCLUSION

It is clear that Plaintiff does not have a viable claim for relief against the Defendants

eight years following her son’s tragic death. It is not in the Plaintiff’s interest, the Defendants’

interest, or the Court’s interest, for this case to be dragged out when it is a foregone conclusion

that it must be dismissed as a matter of law.

For the reasons stated above, Defendants respectfully move the Court to dismiss this

action with prejudice, and to enter such other relief as the Court considers appropriate.


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April 4, 2016

Respectfully submitted, s/ John C. Moylan John C. Moylan, III (D.S.C. Id. No. 5431) Alice W. Parham Casey (D.S.C. Id. No. 9431) WYCHE, P.A. 801 Gervais St., Suite B Columbia, South Carolina 29201 Telephone: (803) 254-6542 Facsimile: (803) 254-6544 Email: [email protected]; [email protected] Wallace K. Lightsey (D.S.C. Id. No. 1037) Wade S. Kolb III (D.S.C. Id. No. 11485) WYCHE, P.A. 44 East Camperdown Way Post Office Box 728 Greenville, South Carolina 29602-0728 Telephone: (864) 242-8200 Facsimile: (864) 235-8900 Email: [email protected] Attorneys for Defendants


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