here the next case united states versus farmers insurance exchange mislead the lower court in the pleadings there was no intentional exaggeration there was no dishonesty and there was no bad faith in the pleadings well i mean didn't mr hayes allege that he had personal knowledge that every insurer named in the indictment defrauded medicare every time they entered a settlement that is the way the pleadings literally read indeed the way the fleeting literally read right and doesn't the complaint seek billions of dollars of damages which would only be available in effect if that were true in other words the the argument about what a massive case this is hinges on the fact that this is not just that mr hayes was aware of a handful of cases in which he personally participated where arguably there was this kind of false claims that problem he says this is a mega case that is correct and is correct and he uses the word all he is you is now that is correct you are mr hayes i am  stand before you and tell you equivocally that there was no intent there is no intentional malfeasance yes the word always you do it you say that it was incorrect in your brief page twenty two you say don't literally use of the word all was admitted lee incorrect that is correct i admit that the literal use of the word was incorrect that does mean so are you conceding that you didn't have personal knowledge about the involvement of each name defendant the original attorneys who sued the case used for example what's the answer yes or no well yes yes and no your honor in that the original attorneys as to the case named a bunch of defendants and we have personal knowledge and releases from the vast majority of the the defendants and their subsidiaries we sued those defendants as it turned out but many of those releases specifically represent that the person is not medicare eligible and there's no allegation that those are false statements in those cases that's correct those and how do what how do those as to the evolution of the releases to include language regarding indemnification and including language regarding medicare reimbursements of they knew that medicare was involved as to all the defendants for example in holdings company was sued as a defendant in this case by the original attorneys as it turned out maiden holdings had only purchased the non liability portion of g m a c now that was an error by the original attorneys so when we concede in page twenty two of our brief that it is possible that all the the defendants that have been sued here in view of the fact that maiden holdings the attorneys didn't figure out that they were the wrong defend if these releases are not signed by anyone or not executed well all the releases were signed and executed i read the names of the plaintiffs because they're not germane ok they are discover defendants have all the original release is ok and as with a key to him you have to have evidence of actual instances of violations by the defendants and we have twenty one re in our complaint involving medicare clients where as far as i know i can't say this in every instance but as far as i know medicare was not contacted and not reimbursed attorneys said the original attorneys were irgun and joel in houston thought yeah that's correct and then when the government decided not to intervene because they merge this case with talk him out of that was thrown out thinking it was the same theory and it's not when they withdrew that i took additional other counsel local counsel who represented me for a time and then when the magistrate judge issued his sanctions intimidation issue mr o'connell withdrew under that and since and i left with mr jason so the attorneys have evolved a little bit i'm the one who  named in the complaint i had personal dealings with and we had released as with this was a scheme that i perceive to be nationwide involving all these insurance companies and others  did its books because when you say it's both are you saying that in some cases you had personal knowledge in other cases you didn't and were basing it in those cases where you didn't happen or has no knowledge of your sense of industry why practice is that what you're saying well i have personal knowledge is most easily with respect to the ones who were medicare clients in those twenty one releases that are attached and if you had limited the case to those people we wouldn't be talking about sanctions well that is correct but i also have written books on this i've given lectures on this i spoke with that geoffrey signori who was brought into the case midway by the by the magistrate we gave c l ease on this where we lectured to attorneys and two adjuster and i had adjusters talk to me and say why should we notify c m s of this claim and resolution even if it also medicare client because they're never going to find out about ok so and i have and you believe as you just confirmed to judge katzman that there was an industry wide scam but if you had limited the lawsuit to the ones that you knew about because they were your clients and then through discovery found out information about the other companies you certainly would have been in a better position to fight off sanctions at that is absolutely correct and the decision to involve all the defendants against whom or for whom i had release that's what they decided i do think that the scheme and and the best example is fed ex as far as the scheme goes ok we do not have direct evidence that they violated and fail to pay back medicare however my experiencing industry lecturing talking to adjusters i've lectured from buffalo to albany i've talked to people from new york city to california on this issue it was rampant and the idea that they issue these releases they include as they evolved medicare and indemnification provisions so it's that the plaintiff's attorneys cannot object to it because if they do they can be brought in  this was industry one and since there was contact with fed ex and with some of the others against whom i did not have direct medicare releases bergen and he chose to involve them now as it turned out and  we found with maiden holdings with nationwide and some company in out in arizona that were not involved in this business they contacted us and we approached the u s attorney and said listen these particular  s do not belong in this litigation so we did that but for example you take progressive right and if your point please us are progressive callers in on a rule eleven and said here are two release is for medicare clients that you saw to mr hayes were big we said yes we did in two thousand and ten two thousand and eleven therefore we want you discontinue want to rule eleven and the response was first of all those were not listed as medicare but secondly we have two other releases from zero six zero seven involving medicare clients and progress all you have to do mr progressive is show us that medicare was contacted and their their thing issue their issue resolved will discontinue against you period show us to release is they said we don't have to prove our case so that is the short version thank hayes personally verified the operative complaint in his manner and that's it eight to sixty eight in the record so clearly if you verified it we can assume that he reviewed in some way the standard here is abuse of discretion his numerous statements about all defendants which are rampant throughout the complaint there were at least twenty four examples where he says all defendants in gauged in this nationwide i agree with you for the sake of this argument that  validly against any of the people that you represent yes you are i don't believe he has facts against anybody in his complaint he actually several so why isn't that i mean certainly there are some egregious examples where it's clear that the defendant has nothing against some defendants i'm puzzled as to why the appropriate procedure wouldn't be to try to figure out if there is a skinny complaint inside the fat one and for the defendants to do as fed ex did make individual motions to dismiss it and the allegations are evaluated against them and the ones that were improperly and yet sanctions in the form of  their attorneys fees and whatever it cost them to litigate the case but if there are any cases that are plausibly pled and in this complaint why do they get a free pass sanction or consider other options and just felt the issue of deterrence was paramount here and this wasn't one time he filed four different complaints even after the magistrate judge held an order to show cause hearing even after fed ex notified him that there was a ruhle problem he didn't withdraw the offending allegations in fact in his proposed second amended complaint he still had the offending allegations and then again he withdrew that and then put in a second second proposed many complaints with more offending allegations he didn't drop any of the defendants he didn't take any steps here to rectify these problems and i think that's what the court finally had had enough after five chances it said you know don't his you're by the way he still can't satisfy rule nine b in this case the court found it there  was a futile complaint under the talk a moral decision which i submitted to the court he can't even satisfy rule eight because he has no specific example of a continual payment made by medicare that was on reimbursed he cites this progressive example the story on the progressive example was they said hey mr hayes we paid these people we paid medicare how can you claim that in your complaint and then he said well you know what it wasn't that it was some other release but he's talking that's not even in his complaint so the problem we have here is the facts keep getting made up we don't know the facts about any of these people in the example of farmers he's got issues or people with twenty years old they couldn't possibly have been medicare beneficiaries that's the problem here there's just nothing to this complaint and that's why the it's a statutory issue if there is oracle's three jurisdiction you are able to decide the matter on a ground like either ruhleben or other grounds because it goes to the jurisdiction of the statute not  requirement to be jurisdictional and actually do we have that here it's true well i think we have here is the court put a firm on either ground clearly talk i'm always fall vs no doubt about that so he is second file and clearly his case was pending at the time it please the court my name is john campbell and i am representing the fed ex defendants as mr hayes acknowledged he had no direct knowledge no personal knowledge of any of the behavior of the fed ex defendants  ruhleben procedure asked mr hayes to dismiss his complaint against fed ex and his response was not only that he would not do that but to insist that he did indeed have personal knowledge the exact thing that he just denied to the court and then he went forward and and then followed once fed ex follett's ruhleben motion mr hayes went ahead and followed another second amended complaint and a motion for ect without a discovery asking to get the same type of discovery that would help prove his case i think it's important that mr hayes is claim that he included facts and he damages in his reply that he had he would not meet the per se standard with respect to facts because his claim was one based on a quote industry wide scheme however the only industries that mr hayes discusses are the insurance industry and the trucking industry and is fed ex explained  demonstrated to the district court the fed ex defendants are not in the trucking and will not not all the facts and defend his could be categorized as being in the trucking industry fed ex office that services for instance do not engage in trucking so whatever knowledge mr hayes might have of those industries could not possibly be extrapolated to the defendants of the fed ex defendants that he is identified in his complaint when just cool you asked mr why he did it this way and he answered that question in his response to fed ex's ruhleben motion he said and this is a thirteen twenty five the intentional general structure of his key term action brought to recover funds that are owed to the government was to sue the pa its subsidiaries in order to recover as much of the funds as possible so it was clear to fedex at that time that at least with respect to the holding companies and we believe with respect to the defendants of which mr hayes did not have personal knowledge that the reason he was doing this was simply to maximize his recovery and because he knew that by adding as many defendants as possible to this case the those defendants would possibly have to settle with him or he would have leverage over them to settle the case and that's exactly what rule eleven is designed to present prevent it's designed to when a party makes claims that he does not have the factual basis for or in this case of which he knew to be untrue because as mr ha claimed multiple times in his pleading although he's denied it now he claimed to have personal knowledge so he must have known at the time those claims were made that he did not have that knowledge and ruhleben is the mechanism for a party to avoid getting involved in a case having to spend money if the plaintiff's claims do not have the requisite factual basis and that is exactly what fed ex did in this case it availed itself of rule of it and this is really a textbook case of how ruhleben should work which is that the judge stops proceedings and looks into this issue of whether the plaintiff in fact had the requisite factual basis for the claim that he made before requiring the parties to engage in costly discovery in which it which point the plaintiff would most likely want to enter settlement to go she ations and would have leverage over the parties to avoid those those discovery expenses so is it your is it your view that the relator need not have acted in bad faith but only with objective and reasonable well there are two two motions here on which the magistrate ruled and on which the district court ruled one is under eleven c two which is f motion and under that motion it is true that the bad faith need not be demonstrated the only thing that need be demonstrated is objectionable on reasonable objective and reasonable pnas and in footnote seven of the report recommendation the under that eleven c two motion that is correct no bad faith need be demonstrated and the extent that those claims would addressed the claims of the magistrate identified as violating that were claims of all  covered all the defendants i think that that would be sufficient to for this court to affirm the dismissal as to all defendants under eleven b three which is the court's own motion and under that statute that standard is objection i'm sorry is subject to bad faith which we believe has been amply demonstrated in its case go back to them a little puzzled by the first part of what you just said you made a motion and what relief did you request in your part that was denied that is correct so if for some reason we disagreed with the sanction of total dismissal your client doesn't that's not about your client your client has a separate motion that is based on objective on reasonable as that would lead to the dismissal of your client even if for some reason we found there was no bad faith that is that the idea all that is true one of the eleven under the motion that we filed that was the relief that we sought and that is b because we do not have bills from c m s saying that we owe the money and we didn't include it in our papers well by analogy if a corporation earns income and the i r s does not know about the income taxes are still owed that's the law if a obligation conceals it's a corporation conceals its obligation a voice letting the i r s know about liability that does not mean that it doesn't owe the taxes well in a like manner in this medicare around that and key chain here the defendants concealed avoided in decreasing obligation to pay or transmit money to the government the the primary point shall reimburse medicare they did not they used a release instrument as a means to get around it so the point that we don't have deman from c m s is not fatal because i think it is totally analogous to to the i r s so much it's a question of demands i'm still looking for some specific allegation that there was knowledge as to whether they did or didn't reimburse medicare and as to whether all of these people in the releases were medicare clients in the first place  i said that in the case of his client and that these people were twenty years old i don't know if there's anything in the record that supports that but i certainly didn't see anything in the complaint that specifically alleges here as a person who perfectly easy to say client a b was a seventy year old man who was on medicare and he was treated at the hospital and medicare was billed this amount of money and there's nothing like that in the complaint well the only way we're going to know that is to ask medicare now i understand i understand there's a there's a further question as to whether you know whether they out of the goodness of their hearts reimbursed medicare but i'm saying there's not a thing in the complaint in any specific case that says here's the money that medicare should have been reimbursed i do say there are twenty one instances in my complain it identified as medicare beneficiaries now i don't say that and i say in one involving state farm that i know that medicare paid money and i know that medicare was not reimbursed as to the other twenty releases i know their medicare clients i know that i did reimburse them because i was doing a different procedure at that time and i did not recall it or collect medicare's expenses so i did not recover their subrogation funds so i did not repay medicare medicare should have a corner of the statute been noticed in the mere fact that the defendants paid my clients does not get them off the hook ok so there's twenty one it's a specific now in some instances i don't want to release is i'm sorry they initiated a thousand dollar a day penalty if the insurers did not contact medicare and then they put it off for five years so they have an affirmative obligation now as of october of two thousand and eleven they've got firmly of obligation