dismiss so that means on review all allegations in the complaint are to be trumps true ever hard was an employee of the defendant laboratory testing company and he testified as to the time place and content of the alleged false claims act allegations in this case for example he in his complaint he alleged that in april in may of two thousand and fourteen over fourteen thousand testing samples were submitted for payment by the defendant and he also alleges the principal place of business being the rock hill south carolina so we allege the place as well an he mentioned that the vice president mr kumar and mr campbell were the ones that cause these claims for payment to be submitted these claims are submitted for approval to medicare and medicaid and there was the allegation that they certified compliance with all c m s requirements which includes compliance with the in a kickback statute so the manner of representation was also allege which is a requirement under the false claims act when you're lending fr here we have fault certifications of compliance with the end of kickback statute because you're contending they violate the and i kickback statute these payments well the violation of the any kickback statute is because they have a ten a sales force that are all independent contractors and they're paid under a ten ninety nine like all independent contractors the end i kickback statute does not allow you to pay independent contractors on a percentage basis because it encourages people to maximize and increase the volume of their claims and that is exactly the payment situation here where exactly in the end i kickback statute is this prohibition on this commission basis present well the word the key word is remuneration so when you have a payment system that encourages people or induces people to refer patients or in this case testing samples to medicare or medicaid on a percentage or a volume basis the the independent contractors encouraged to increase their referrals in the federal regulations that i've cited my brief on the apartment of health say that when you have that type of percentage commission basis you are not covered by the safe harbor protections if you're if a person's employee they are presumably under enough supervision to avoid this type of volume encourage move because with the the federal regulations don't want is a strong financial incentive for people without supervision like independent contractors to increase their volume of testing samples which might include a lot of unnecessary tests and they're not numerous cases that talk about this referral situation when you're inducing referrals for medicaid and medicare claims to be made and when you and there's no question that when you have certifications that are faults requesting claims from medicare medicaid that's under the false claims act so how how could this system be operated in compliance with and i came back statute what what if you were designing a system how would you have the people paid who were presenting the samples there they're paid a set amount that over a period like a six month set amount like twenty five thousand dollars or fifty thousand dollars that doesn't change based on the volume that they're submitting because as opposed to receive any option where these ten ninety nine people are getting the supply of patients who are samples where are they working they're working independently as ten one thousand nine salespeople but where are they getting their supply the fourteen thousand cases for a they're given territories of states and they go and they solicit from hospitals and doctors all the testing that they can to be done by their him not their employer but their principal p c l less and then p c less in turn does the tests and submit it to medicare and medicaid so they're given a territory like for example my client was a member of the sales force as well he was an employee and he was given three states and he has alleged that based on his experience fifty percent of the fourteen thousand per month of the two months these ten ninety nine people and if the problem that the district court identified was not having specific examples why couldn't your client have presented a specific example to one of his own situations well he was not a member of the  force he was a member and he was an employee he was covered by the safe harbor regulations but he was aware of what the the non sales force doing because he was an insider and a member of the same sales force but he had a slightly different category because he was an employee he was governed by the safe harbor protections but the ten not a sales force was not covered by the safe harbor regulations and he based on his personal knowledge has testified that he has alleged that some twenty eight thousand testing samples were done and based on his experience and personal knowledge in the company at least fifty percent of those would have to be submitted to medicare medicaid and steam for for the for recovering u nder this statute and particularly for fraud doesn't doesn't really in compass are saying sion i would suggest your particular client he's he smells he thinks he probably has some very good basis for thinking but he's not the right person to bring this claim because he doesn't have actual knowledge and because it's fraud it's has to be pl differently what would you say to that well he the allegations have to be taken is true and he says that based on his experience that's what you know what he lacks i mean you wrote the british right yes you know he like he la to relax standard under nine b because he does have well two things there's two reasons two ways you get to relax standard one way is when you have personal knowledge and he's a member of the sales force and we submit that he is the right person because he is part of the same sales force he's just part of the sales force part b is the to ninety nine folks and he says that he has knowledge that they are submitting the same claims to at the same percentages and that is what gets in there  second reason he gets the that he didn't have an example but why not well because that particular well to remove that kind of example would be a would be illegal because you would be taking hiphop confidential information of testing samples involving people and you also get the relaxed standard under nine b what you also get the relaxed and it under ninety when the fraud that the details of the fraud is particularly particularly that's a hard word to say the cure early in the knowledge of the defendant and they're going to be the only ones that know and we're not talking about a fishing expedition we're talking about two months two specific months so we have the time the place so we submit that we get the relax standard for those two reasons his personal knowledge and also because the fraud is particularly in the in the knowledge of the defendant for him to have pulled out one from somebody else's sale you know sales that had a person's name in it would subject him to maybe on cons of illegal or or prosecution for hipaa compliant determination so that the reason why the relaxed and absolutely you agree with the two points you just number the person that was along with the information being purely in the hands of the defendant one that opened the door to any number of or later bringing claims that point to say look i know something i can't tell you but the defendant has it in for me well but but here it we're talking about just two months that we're talking about and we and it would only well the court the trial court relied on the chest broke ace and that was dismissed because there was not an insider with personal knowledge so wouldn't be any number of or later be only those insiders who have personal knowledge of what's going on in that particular company and the cases  cases that are being dismissed because people from the outside like in the chess broke ace thought that something was happening but they didn't have inside knowledge and that was mess what makes this case differently plus just throw didn't involve certification here the only way you get paid by medicare or medicaid is if you have is if you're in compliance it's a it's a requirement a prerequisite that you're in compliance with the anti kopeck statute so we know there had to have been certifications here plus this circuit represented recognizes the implied back well he's taken the position and i take the position that he is alleged enough to get the relaxed standard to allow him to move forward the fact that he wants discovery is just an alternative way of trying to get to the same place which is the merits of this case he's alleged nuff to get to the merits of this case and he's rebutted the allegation that this is a fishing expedition by saying here's the fishing hole i want to fish in this one particular or these two particular months we want to say one deposition of one person who's going to know if those certifications were well if if there were thousands of medicaid medicare claims two months excuse me why did you limit the discovery requests to two months well  because those are the only two months that he has personal knowledge of as far as the fourteen thousand plus claims that were submitted the purpose of the nine b requirement of heightened particularities is not to put all your case on an establish it completely it's simply to give the defendant enough knowledge about what is being alleged to provide an adequate response here they know the months that we claim that they sent fault certifications they know the people who caused it t vice presidents they know the manner in which it's been done in other words it's a false claim to the medicaid they can look in those two months and they can adequately respond that's all you need when you have what we have for the relax standard to get them in get over the hump and then yes we'd like to skiver but we don't think we need to sky to get a plausible case to survive a motion to it's your claim limited to two months does the complaint limited itself to two months at some point or other well the only examples of twelve and thirteen are the two months that we submit a legit now obviously if we get into the case and find more than we can allege more but the reason why these this this kind of case exists is to keep the federal government being defrauded the defendants are the real wrong doers in this case because they have we submit and we've alleged that they've submitted fault certifications for thousands and thousands of claims this is a big company this could be an enormous wrong to the federal government so the mr everhart is a relator he's a key tam person so we have alleged enough we submit for the federal government and the federal government here didn't dismiss this case they have they're sitting on the sidelines waiting for it to be resolved so they have not said that this is a bogus case so we submit that we that this court should reverse the truck court and allow this case to move forward thank you  good morning your honour's i'm jennifer weaver of the nashville bar the district court correctly dismissed this complaint for failure to me this court's well established longstanding requirement that false claims that complaints plead actual false claims of false certifications and the court here need only look at the then insubstantial pleading that we're dealing with there's only three pages of factual allegations in this amended complaint the relator second best effort  as a district court noted and as as mr caprio a has admitted here the complaint does not plead specific false claims of false certifications as is required by the sec circuit so the only appropriate in circumstances where the relator is enabled to plead specific facts and it's just as specific false claims but is able to plead enough details facts based on the related personal knowledge to create a strong inference of false claims were submitted that i'm troubled by is if his theory is that all of the ten ninety nine sales reps who are being paid all of them on a percentage bas constitute a violation of the in a kickback statute why shouldn't his claim go forward because it's a generic claim there's no reason to have to find a specific sales rep who was paid on a percentage basis he's saying all of  merely alleging and this is another area where the complaint and of itself fails to plead specific fails to plead falsity with the specificity required and a kickback statute does not per se make paying independent contractors in a commission basis of violation that is not a per se violation the false claims act what he would have to plead he did when he would have to plead in order to set force sufficient facts would be that for example how much were the independent contractors paid give examples of their payment given of his own payment and show how that theory is that if you pay people as sales people on the commission basis you're encouraging them to increase their volume and that that is a violation in the queue for extension he says it is and you say it is it where would we go to find out whether that claim constitutes an actual and i kicked back statute violation we're using this word and i kicked back statute as though there's just one a little provision there but is there some section or some regulation or some case that supports your view i think you would go to the statute itself and ice and wireman any particular section of it or just that that have been number one the the statute itself and then the the supporting regulations that they federal willfully and knowingly induce referrals now significantly in this case the there is no allegation that any illegal remuneration is being paid to anyone in a position to refer federal health care program business because those persons are health care providers and so that's one factor that that when you're weighing this and when when i g what would wait a certain range months to see if they are in compliance or the end of kickback statute which is in of itself a fact intensive inquiry that's one factor that would weigh in in favor of finding that there's no risk of manic back statute violations because the persons to whom the payments are made are not in a position to refer there's no allegation here so if you pay how would violation of the in i could back statute work in this context of the providing samples to your client if a doctor at a hospital was paid by your client a percentage of the testing fee that would be a kickback that would be illegal under the in a kickback statute is that i'm just saying that's a current example that's a ya know that's a far riskier situation where there are payments and in fact the independent contractor agreements have requirements of compliance and a kickback statute that there not be any illegal inducements paid to referral sources which who are the providers the other thing that's missing here again and i think it's significant that there is no specific factual allegations about the payments themselves and whether those payments are in excess of fair market value  and and were were made with the intent to induce referrals as opposed to compensation for services that these contractors are providing so again the end of kickback statute is a is a it's a criminal statute it's the analysis requires a fact intensive inquiry and this particular complaint to just say paying a ten thousand and contractor on a commission basis is a per se violation and that's all that's in here and this again three pages of factual allegations it's insufficient under nine b two to state a claim under the end of kickback statute much less use that claim to bootstrap that claim into a false claims act violation and i would just say that would be a false claims that violation if you knowingly violated the kickbacks statute and you certified that you were in compliance with medicare and medicaid rules right yes if there were factual allegations in this complaint that the defendants knowingly and willfully paid a legal remuneration with the intent of inducing health care providers to refer federal health care program business and then they knowingly certify that court found that that complaint was lacking under nine b is because it required the court to make a whole series of assumptions in order to come up with a plausible false claims act violation and i think that's exactly is asking this court to do here he's asking this court to assume that the false false claims were submitted to the government although they can't identify any he asked the court to assume that there were false certifications although he doesn't identify any he says that he alleges the content of a the claim but that's not true there is no allegation here that describes the content of any statement that p c l asked my client ever made to the government what about his argument that he would be violating hippa if if he gave specific examples here this happens all the time in false claims that cases your honor that involve health care that are health care cases and you simply you simply submit that under seal and will the complaints are filed under seal but you can redact that information and and still provide enough specificity so it's which is common he wouldn't violate hipaa by looking into particular files himself just by looking at them even though he presented the mina redacted form hypothetically in this case i thought hip group prevented people from like a eiseley it appears to me that the strength of your position relies on his lack of specificity and i think you can tell me he gives agree with me that the case  allows you to be a strong influence that might arise even if one can present based on personal no specific examples and you've heard the argument as to why it's this if we have available people being one of them i dislike to hear you address why do you believe that we there is no strong inference or perhaps you believe no inference all given the lack of specificity because the i that this court again in the series of cases that we've cited has recognized the possibility that the standards maybe are lax it's important that this court has never actually relax so standards when facing complaints and chaz bro and bledsoe and marl are that were far more detailed and this complaint they still refused to apply that standard so it has never been applied by this court and i would submit this is not the case to do it and to have i don't think that the facts that he has pled to create are sufficient to create a strong inference that false claims were submitted again he asked this court to make a whole series of assumptions about what must have happened or what could have happened or what probably happened but this court has long held that's insufficient and so for example it's not that as though only employees that work in the billing department would be in a position to plead fact based on personal knowledge to create a strong inference but the only district courts in this within the circuit who have applied the relaxed standard department but the key was that they have personal knowledge of billing procedures and the manner in which claims were submitted to the government and the content of those claims which this relator la caprio argued about well this is unique i'm an insider my client's an insider because he's an employee now a chance bro it was an independent contractor it was the violators and he was not a it was not employee but in the employed so those were all employees of the defendant those were insiders to the same extent that mr everhart isn't an insider and he simply he simply lacks the personal knowledge to make out the type of sustain that could withstand scrutiny under nine b under this court's standards it's the thing that keeps troubling me is his statement in paragraph sixteen of the complaint where he says that the compensation of the ten ninety nine representatives was done on a percentage basis and that this is a violation of the and i kicked back act if if that is true then shouldn't his claim go forward if it is true that ten ninety nine reps are compensated on a percentage basis and if that violates the federal and i kickback act allegation that the tent there are tenant and i contractors and they are paid on a percentage basis but he's not entitled to any presumption of correctness with the allegation that that is a violation of the any kickback statute that's a legal conclusion ok so we need to analyze that think back statute again is a and with the way that that the that the oh i g when looking at different arrangements makes determinations on whether or not something is creates a risk of an a kickback statute violation it's a very fact intensive inquiry it is not a simple matter of was a payment arrangement a certain you know was repaid on a commission basis or not supervision is important and that he says that they're and supervised but if you actually the ten thousand contractors aren't supervised but if you look in the complaint here's a factual allegation he added against the vice president kumar was that he supervised the ten ninety nine contractors so he's alleged to provision in his complaint fair market value how much were they paid were they paid fair market value and if so that can be viewed as compensation for services rendered and he's not entitled to any sort of presumption that that was and illegal inducement for the purpose of that of inducing referrals from health care providers so it's it's simply not enough your honor to say he c l s employed ten ninety nine independent contractors and paid them on a percentage commission basis and therefore it's a kind of kickback statute violation that's simply not true ok but he does say in paragraph eleven that p c o s pays these independent contractors on a percentage basis to induce them to solicit the referral samples so there you're saying that there has to be more specific allegations point by point of individuals is because there's an intent requirement not only in the false claims act but there's even higher integra quammen in the anna kickback statute upon which she's trying to bootstrap this false claims act claim so he'd have to have he'd have to have further factual allegations about the defendant's intent to induce the referrals how that was done and what's really missing here is the payments them selves and some allegation that these payments were in excess of fair market value and the reason they were is because they were not payments the the analysis you look at is whether they were payments that were fair market value for comp for services rendered or they were in excess of fair market value to such extent that it is in indicative of an intent to induce illegal referrals thank you thank your honour's attached to the complaint was to sales representation agreements between the defendant and these tenant on salespeople louis sanchez is the one i have right here the third paragraph says they will be paid a commission of ten percent of the actual payment received so we have a commission situation without doubt we also the allegations in the complaint supporting this attachment and your honor asked where do you go to find out that that is a per se violation simply having a sales force that is being paid on the commission basis well the kickback statute imposes liability for payment practices that do not fall within the safe harbor regulations it's on page eight of my brief and we cite the us vs fry case the fry case is an example which we think best fits our situation because it didn't involve a building person involved a cardiologist who was the referral inducement there the cardiologist was one of several cardiologists and they were being given limited time on the certain room the operating room the hospital based upon how many cases they referred and that created an inducement to get more time with us how they made money and the court relaxed the standard in that situation because he didn't have specific knowledge of a particular claim to medicare even though he knew that it was going forward so here although i don't think it's limited to a billing person like in the lane and personal case i think our case is more like that in the chez broke ace you have the us versus fraud case but beyond that you have the specific regulations which say that there are many examples of abusive practices by sales personnel who are paid as independent contractors who are not under appropriate supervision and the court in the regs specifically say the reason that we're not going to allow safe harbor protections to embrace these commission base independent contractors is because they're just we're not going to make them exempt from civil or criminal prosecution of in a kickback statute because they don't have appropriate supervision in most searchers situations and it  creates extreme likelihood that they're going to maximize the amount of services they're referring to medicare and medicaid so we submit your honor that in paragraph sixteen as you pointed out there is a per se violation on from a plausibilit standpoint that is alleged to having a ten ninety nine sales force and we've also cited some background information articles that talk about how this is a really big problem and but you've got your opponents argument that in paragraph eleven for instance you say that this was done to induce the soliciting a referral of samples but you don't have any specific allegations that support that well to address a different question to answer that question it would be hip of violations for an employee of the defendant to go and look at somebody else's report involving somebody else's personal information i can't look at it i have to get releases in all the cases i work at in order to in order to get a look at anybody's personal health information so you can't just submit a redacted form because you would have looked at it in order to redact it so that's why he doesn't have the specifics and the fry case the hill case and the lane case o the three cases plus the regs they give the court what it needs to know that we've stated a plausible claim because they have a ten sales force that is paid on a commission basis and that creates volume billing do you need to have specific allegations showing the the purpose was to induce soliciting i think the allegation by itself that the purpose is to induce and after all it only there's case law that says only one purpose of the payment structure needs to be in inducement and the fry case talks of that talks about that in answers the question very specifically as to how inducement is enough of an inducement if it if it makes human says that somebody is going to increase the volume of what they're doing if they're paid on a percentage basis thank you thank you thank you both for your argument the case will be submitted with the clerk called the next case