Opinion

1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 SOUTHERN DISTRICT OF CALIFORNIA 9 10 THE INDEPENDENT ASSOCIATION Case No.: 25-cv-3456-BJC-SBC OF 100 PERCENT CHIROPRACTIC 11 ORDER GRANTING MOTION TO FRANCHISEES, DISMISS AND DENYING MOTION 12 Plaintiff, FOR PRELIMINARY INJUNCTION 13 AS MOOT v. 14 TACTIC FRANCHISING, LLC; et al., [ECF No. 8, 21] 15 Defendants. 16 17 Before the Court is The Independent Association of 100 Percent Chiropractic 18 Franchisees’ (“Plaintiff”) Motion for Preliminary Injunction. ECF No. 8. Tactic 19 Franchising, LLC and 100 Percent Epic (collectively “Defendants”) also filed a Motion to 20 Dismiss. The parties have filed oppositions and replies. The matter is submitted on the 21 briefs without oral argument. See Civ. L. R. 7.1(d)(1). For the reasons set forth below, the 22 Court GRANTS the Motion to Dismiss and DENIES the Motion for Preliminary 23 Injunction as moot. 24 I. BACKGROUND 25 This case involves three different parties: Plaintiff, The Independent Association of 26 100% Chiropractic Franchisees (“IAOCF”), and Defendants Tactic Franchising LLC 27 (“Tactic”) and 100% Epic, LLC (“Epic”). Tactic is the franchisor of a national chiropractic 28 franchise system. ECF No. 1 at 1. As franchisor, Tactic sells the right to operate a 1 chiropractic and wellness clinic under its brand (100% Chiropractic). Id. at 5. Epic is 2 Tactic’s affiliated entity and provides insurance billing to Tactic’s franchisees in exchange 3 for a percentage of the franchisees’ revenues. Id. at 3. IAOCF is an association that is 4 comprised of Tactic’s franchisees. 5 According to the Complaint, each IAOCF member entered into franchise, 6 management, and billing agreements with the Defendants (collectively, the 7 “Arrangement”). Id. at 7. Under the Arrangement, Tactic agreed to provide Plaintiff’s 8 member franchisees with various services, including marketing and advertising to generate 9 patient care business. Id. In exchange, the franchisees were required to pay Epic a fixed 10 percentage of their revenues. Id. at 8. Importantly, the franchisees provide services that 11 are reimbursable by federal health care programs, including Medicare and Medicaid. Id. 12 at 8. Therefore, the revenue payments made to Epic include amounts that are attributable 13 to Medicare and Medicaid reimbursed services. Id. Plaintiff alleges that Tactic’s 14 marketing and advertising services, when combined with revenue-based compensation, 15 create a financial incentive for Tactic to generate additional patient-care business and, 16 consequently, additional reimbursable services. Id. 17 On December 7, 2025, Plaintiff filed this Complaint, seeking declaratory judgment, 18 and arguing that Defendant’s fee-splitting provision violates the Anti-Kickback Statute 19 (“AKS”), 42 U.S.C. § 1320a–7b(b)(1). See ECF No. 1. On December 23, 2025, Plaintiff 20 also filed a motion for preliminary injunction, asking the Court to stay “all currently 21 pending and threatened arbitration and court actions involving Tactic.” ECF No. 8-1 at 29. 22 On January 13, 2026, Defendant filed a response in opposition, ECF No. 17, and on January 23 29, 2026, Plaintiff filed a reply. ECF No. 20. 24 On February 6, 2026, Defendant filed a Motion to Dismiss, pursuant to Federal Rules 25 of Civil Procedure 12(b)(1) and 12(b)(6), arguing that the Court lacks subject matter 26 jurisdiction. ECF No. 21. On February 27, 2026, Plaintiff filed a response, ECF No. 22, 27 and on March 6, 2026, Defendant filed a reply. ECF No. 23. 28 II. LEGAL STANDARD 1 Federal courts are courts of limited jurisdiction and are presumptively without 2 jurisdiction over civil actions. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 3 377 (1994). The burden of establishing the contrary rests upon the party asserting 4 jurisdiction. Id. Because subject matter jurisdiction involves a court’s power to hear a 5 case, it can never be forfeited or waived. United States v. Cotton, 535 U.S. 625, 630 (2002). 6 Accordingly, lack of subject matter jurisdiction may be raised by either party at any point 7 during the litigation, through a motion to dismiss pursuant to Federal Rule of Civil 8 Procedure 12(b)(1). Arbaugh v. Y & H Corp., 546 U.S. 500, 506 (2006); see also Int’l 9 Union of Operating Eng’rs v. Cty. of Plumas, 559 F.3d 1041, 1043–44 (9th Cir. 2009). 10 A party has two methods to challenge subject-matter jurisdiction—a facial or factual 11 attack. “In a facial attack, the challenger asserts that the allegations contained in a 12 complaint are insufficient on their face to invoke federal jurisdiction.” Safe Air for 13 Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). By contrast, a factual attack 14 “disputes the truth of the allegations that, by themselves, would otherwise invoke federal 15 jurisdiction.” Id. For these challenges, courts “need not presume the truthfulness of the 16 plaintiff’s allegations” and can “review evidence beyond the complaint without converting 17 the motion to dismiss into a motion for summary judgment.” Id. (citation 18 omitted). Dismissal under Rule 12(b)(1) is warranted “‘where the alleged claim under the 19 [C]onstitution … clearly appears to be immaterial and made solely for the purpose of 20 obtaining federal jurisdiction or where such claim is wholly insubstantial and 21 frivolous.’” Id. (quoting Bell v. Hood, 327 U.S. 678, 682-83 (1946). 22 If a plaintiff fails to establish subject matter jurisdiction, “the court, on having the 23 defect called to its attention or on discovering the same, must dismiss the case, unless the 24 defect be corrected by amendment.” Tosco Corp. v. Communities for a Better Evn’t, 236 25 F.3d 495, 499 (quoting Smith v. McCullough, 270 U.S. 456, 459 (1926)). Where the 26 plaintiff cannot cure a jurisdictional defect by amendment, the court may dismiss the 27 complaint without leave to amend. Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 28 1052 (9th Cir. 2003). 1 III. DISCUSSION 2 Plaintiff filed the Complaint, seeking declaratory judgment, and asked the Court to 3 declare that the Arrangement is void and unenforceable under the AKS. ECF No. 1 at 9. 4 Defendant argues that this Court lacks subject matter jurisdiction because Plaintiff’s 5 breach-of-contract claim arises under state law. ECF No. 21 at 7. Defendant further 6 contends that the AKS provides only a federal defense and that reliance on federal law as 7 a defense to a state-law claim is insufficient to establish federal jurisdiction. Id. Defendant 8 also argues that Plaintiff lacks standing and that the Complaint fails to state a claim upon 9 which relief can be granted. Id. Plaintiff opposes dismissal, maintaining that the central 10 issue is whether the Agreement violates a federal statute. ECF No. 23 at 6. 11 A. Subject Matter Jurisdiction Under 28 U.S.C. § 1331 12 Under 28 U.S.C. § 1331, federal courts have “original jurisdiction of all civil actions 13 arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. 14 “A case arise[es] under federal law within the meaning of § 1331 . . . if a well-pleaded 15 complaint establishes either that federal law creates the cause of action or that the plaintiff's 16 right to relief necessarily depends on resolution of a substantial question of federal law.” 17 Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 689–90 (2006) (quoting 18 Cook Inlet Region, Inc. v. Rude, 690 F.3d 1127 (9th Cir. 2012)). 19 Under the Declaratory Judgment Act , if a federal Court has jurisdiction, it “may 20 declare the rights and other legal relations of any interested party seeking such declaration, 21 whether or not further relief is or could be sought.” 28 U.S.C.A. § 2201. Importantly, 22 “[t]he use of the declaratory judgment statute does not confer jurisdiction by itself.” 23 Janakes v. U.S. Postal Serv., 768 F.2d 1091, 1093 (9th Cir. 1985) (citations omitted). 24 Instead, a court may issue declaratory relief only if an independent basis for subject-matter 25 jurisdiction exists. Id. (“The use of the declaratory judgment statute does not confer 26 jurisdiction by itself if jurisdiction would not exist on the face of a well-pleaded complaint 27 brought without the use of 28 U.S.C. § 2201.”) Therefore, “[a] declaratory judgment 28 plaintiff may not assert a federal question in his complaint if, but for the declaratory 1 judgment procedure, that question would arise only as a federal defense to a state law claim 2 brought by the declaratory judgment defendant in state court.” Janakes v. U.S. Postal 3 Serv., 768 F.2d 1091, 1093 (9th Cir. 1985) (citations omitted). 4 The statute at issue, the AKS, prohibits the knowing and willful payment or receipt 5 of remuneration to induce referrals or purchases of healthcare goods or services reimbursed 6 by a federal healthcare program. 42 U.S.C. § 1320–a–7b(b)(2). “[T]he statute does not 7 provide for a private right of enforcement.” United States ex rel. Dunlap v. Alaska 8 Radiology Assocs., Inc., 2017 WL 6048167, *4 (D. Alaska Mar. 31, 2017). Therefore, 9 “[o]nly the Government may bring a civil or criminal action to enforce violations of the 10 Anti-Kickback Act.” United States ex rel. Bashir v. Boeing Co., 765 F. Supp. 3d 1111, 11 1140 (W.D. Wash. 2025). However, plaintiffs who seek relief pursuant to the AKS may 12 proceed through the False Claims Act (“FCA”) as qui tam relators. Ebeid ex rel. U.S. v. 13 Lungwitz, 616 F.3d 993, 995 (9th Cir. 2010) (“To encourage insiders to disclose fraud and 14 thereby bolster enforcement, the FCA contains a qui tam provision that permits private 15 persons (known as “relators”) to bring civil actions on behalf of the United States and claim 16 a portion of any award.”). To state an FCA claim, a relator must allege with particularity: 17 ‘(1) a false statement or fraudulent course of conduct, (2) made with scienter, (3) that was 18 material, causing (4) the government to pay out money or forfeit moneys due.’” United 19 States ex rel. Everest Principals, LLC v. Abbott Lab'ys, Inc., 622 F. Supp. 3d 920, 930 (S.D. 20 Cal. 2022) (quoting U.S. ex rel. Hendow v. Univ. of Phx., 461 F.3d 1166, 1174 (9th Cir. 21 2006)). 22 Here, the Court does not have subject matter jurisdiction. As previously explained, 23 the AKS does not provide Plaintiff with a private cause of action. United States ex rel. 24 Dunlap, 2017 WL 6048167 at *4 (holding that “the [Anti-Kickback] statute does not 25 provide for a private right of enforcement, and the Court therefore cannot award damages 26 beyond those authorized under the FCA.”). ECF No. 1 at 2. Plaintiff filed this action on 27 behalf of the association itself; it did not bring the action under the FCA as a qui tam relator 28 on behalf of the United States. Plaintiff fails to identify any other basis for federal 1 ||jurisdiction. Accordingly, the Court lacks subject matter jurisdiction over Plaintiff's claim. 2 IV. CONCLUSION 3 For the foregoing reasons, the Court lacks subject matter jurisdiction and therefore 4 ||GRANTS Defendants’ Motion and DISMISSES Plaintiff's Complaint without prejudice. 5 || Because the Court lacks jurisdiction, 1t need not address Defendants’ remaining arguments, 6 ||including whether Plaintiff has standing or whether the Complaint states a claim upon 7 || which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). Steel Co. 8 || v. Citizens for a Better Env’t, 523 U.S. 83, 94 (1998) (‘Without jurisdiction the court 9 || cannot proceed at all in any cause. Jurisdiction is power to declare the law, and when it 10 ceases to exist, the only function remaining to the court is that of announcing the fact and 11 || dismissing the cause.”’) (quotation omitted). Plaintiff's Motion for Preliminary Injunction 12 also DENIED as moot. Plaintiff may file a second amended complaint by close of 13 || business on October 27, 2026. 14 IT IS SO ORDERED. 15 16 || Dated: September 28, 2026 17 19 20 Honorable Benjamin J. Cheeks United States District Judge 21 22 23 24 25 26 27 28 25-cv-3456-BJC-SBC