Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-12-56352/USCOURTS-ca9-12-56352-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

P. VICTOR GONZALEZ, Qui Tam

Plaintiff, on behalf of the United

States and State of California,

Plaintiff-Appellant,

v.

PLANNED PARENTHOOD OF LOS

ANGELES; PLANNED PARENTHOOD

SHASTA-DIABLO, AKA Seal B;

PLANNED PARENTHOOD GOLDEN

GATE; PLANNED PARENTHOOD MAR

MONTE, AKA Seal D; PLANNED

PARENTHOOD RIVERSIDE AND SAN

DIEGO COUNTIES, INC., AKA Seal E;

PLANNED PARENTHOOD ORANGE

AND SAN BERNARDINO COUNTIES,

INC., AKA Seal F; PLANNED

PARENTHOOD PASADENA AND SAN

GABRIEL VALLEY, INC., AKA Seal

G; PLANNED PARENTHOOD SANTA

BARBARA, VENTURA AND SAN LUIS

OBISPO COUNTIES, INC., AKA Seal

H; PLANNED PARENTHOOD SIX

RIVERS, AKA Seal I; PLANNED

PARENTHOOD AFFILIATES OF

CALIFORNIA, AKA Seal J; MARY

JANE WAGLE, AKA Seal K;

MARTHA SWILLER, AKA Seal L;

No. 12-56352

D.C. No.

2:05-cv-08818-

AHM-FMO

OPINION

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2 GONZALEZ V. PLANNED PARENTHOOD

KATHY KNEER, AKA Seal M,

Defendants-Appellees.

Appeal from the United States District Court

for the Central District of California

A. Howard Matz, District Judge, Presiding

Argued and Submitted

June 5, 2014—Pasadena, California

Filed July 22, 2014

Before: Ronald M. Gould and N. Randy Smith, Circuit

Judges, and Morrison C. England, Jr., Chief District Judge.*

Opinion by Judge Gould

*

 The Honorable Morrison C. England, Jr., Chief District Judge for the

U.S. District Court for the Eastern District of California, sitting by

designation.

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GONZALEZ V. PLANNED PARENTHOOD 3

SUMMARY**

False Claims Act

The panel affirmed the district court’s dismissal of a

complaint alleging that, in violation of the False Claims Act

and the California False Claims Act, Planned Parenthood of

Los Angeles knowingly and falsely overbilled state and

federal governments for contraceptives supplied to lowincome individuals.

The district court dismissed the FCA claims for failure

sufficiently to plead falsity under Federal Rule of Civil

Procedure 9(b). The panel affirmed on the alternate ground

that the plaintiff’s third amended complaint did not state a

plausible claim that Planned Parenthood knowingly made

false claims, with the statutory scienter, as required by Fed.

R. Civ. P. 8(a). The panel concluded that the plaintiff’s

assertion that Planned Parenthood knowingly submitted false

claims for reimbursement was compellingly contradicted by

a series of letters he attached to the complaint. The panel

held that the district court did not abuse its discretion in

denying the plaintiff further leave to amend his complaint.

The panel held that the state law claims were barred by

the three-year statute of limitations.

** This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

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4 GONZALEZ V. PLANNED PARENTHOOD

COUNSEL

Walter M. Weber (argued), Jay Alan Sekulow, Stuart J. Roth

& Tiffany N. Barrans, American Center for Law & Justice,

Washington, D.C.; Jack M. Schuler & Sam D. Ekizian,

Schuler, Brown & Ekizian, Van Nuys, California; Edward L.

White III, American Center for Law & Justice, Ann Arbor,

Michigan, for Plaintiff-Appellant.

Matthew Donald Umhofer (argued) & Amy M. Hinkley,

Spertus, Landes & Umhofer LLP, Los Angeles, California,

for Defendants-Appellees.

OPINION

GOULD, Circuit Judge:

P. Victor Gonzalez, a former Chief Financial Officer of

Planned Parenthood of Los Angeles, appeals from the

dismissal of his qui tam action against Planned Parenthood,

et al., (“Planned Parenthood”) asserting claims under the

False Claims Act (“FCA”) and the California False Claims

Act (“CFCA”). Gonzalez alleges that Planned Parenthood

knowingly and falsely overbilled state and federal

governments for contraceptives supplied to low-income

individuals. The district court dismissed Gonzalez’s claims

under the FCA in his third amended complaint for a failure to

sufficiently plead falsity and concluded that his state law

claims were time-barred by the statute of limitations. We

have jurisdiction under 28 U.S.C. § 1291, and we affirm.

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GONZALEZ V. PLANNED PARENTHOOD 5

I

Planned Parenthood is a participant in the Family

Planning, Access, Care and Treatment program (“Family

PACT”), which reimburses Planned Parenthood for

contraceptives that Planned Parenthood gives to low-income

individuals. Family PACT is a program within California’s

Medicaid program (“Medi-Cal”) providing family planning

drugs and services to individuals under the poverty line. 

Family PACT has been jointly funded by the federal and state

governments since 1999. Before then it was entirely funded

by the State of California.

To participate in Family PACT, each California branch of

Planned Parenthood signed a Provider Agreement, in which

they agreed to “comply with all federal laws and regulations

governing and regulating providers.” The Provider

Agreement also binds participants to “comply with all of the

billing and claims requirements set forth in the Welfare and

Institutions Code.” The term “at cost” for billing is found

only in the Family PACT billing manual, not in the Welfare

and Institutions Code.

Because Planned Parenthood has agreements in place

with manufacturers, it buys contraceptives at a discounted

rate. From 1997 to 2004, when Planned Parenthood billed

Family PACT and Medi-Cal for contraceptives given to lowincome individuals, it quoted its “usual and customary rates”

for reimbursement rather than its acquisition costs. The

“usual and customary rates” represented what Planned

Parenthood would charge an average patient for

contraceptives, a price lower than the market cost to an

individual, but higher than Planned Parenthood’s acquisition

cost for those contraceptives.

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6 GONZALEZ V. PLANNED PARENTHOOD

On May 5, 1997, the California Department of Healthcare

Services (“CDHS”) began exchanging letters with Planned

Parenthood’s executive director and later president, Kathy

Kneer, telling her that claims made to Family PACT and

Medi-Cal should be made “at cost.” This letter exchange

continued, and Kneer sent a letter dated January 14, 1998,

responding to CDHS by stating that Planned Parenthood

“clinics are billing” at the “usual and customary rate,” not at

acquisition costs. There was no response from CDHS after

that letter, no advice to the contrary or objection. Planned

Parenthood kept billing at its “usual and customary rates”

until 2004, when CDHS conducted an audit of Planned

Parenthood and found that Planned Parenthood had not

complied with the billing practices outlined in the Family

PACT manual. According to the audit, Planned Parenthood’s

noncompliance with the billing manual resulted in

overcharges of $5,213,645.92 during the audit period. On

November 19, 2004, the same day as the audit’s release,

CDHS sent a letter to Planned Parenthood stating that “no

specific definition of ‘at cost’ is contained in [the billing

manual]” and that “[i]n researching [the at cost] issue DHS

has became [sic] concerned that, with regard to the definition

of ‘at cost,’ conflicting, unclear, or ambiguous

misrepresentations have been made to providers.” For these

reasons, CDHS did not seek reimbursement from Planned

Parenthood.

Gonzalez was hired on December 9, 2002 as the CFO of

Planned Parenthood of Los Angeles. He participated in early

stages of the audit, but was fired on March 9, 2004. Id. On

November 18, 2005, almost a year after the audit concluded,

Gonzalez urged the United States AttorneyGeneral to address

the “fraudulent billing” practices of Planned Parenthood. 

Gonzalez filed a qui tam suit under the FCA and CFCA on

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GONZALEZ V. PLANNED PARENTHOOD 7

December 19, 2005. The United States declined to intervene

on November 1, 2007. Gonzalez filed a series of amended

complaints culminating in the third amended complaint,

which the district court dismissed with prejudice. That

dismissal is now appealed.

II

We review de novo a district court’s dismissal of a

complaint under Rule 9(b), Ebeid ex rel. United States v.

Lungwitz, 616 F.3d 993, 996 (9th Cir. 2010), as well as the

district court’s dismissal of a claim based on a statute of

limitations, Johnson v. Lucent Techs., Inc., 653 F.3d 1000,

1005 (9th Cir. 2011). We review the district court’s denial of

leave to amend a complaint for abuse of discretion. Ventress

v. Japan Airlines, 603 F.3d 676, 680 (9th Cir. 2010).

III

When Gonzalez filed his complaint, the FCA imposed

liability on a person or organization who “knowingly

presents, or causes to be presented, to an officer or employee

of the United States Government . . . a false or fraudulent

claim for payment or approval.” 31 U.S.C. § 3729(a)(1)

(amended 2009). Gonzalez contends that the district court

erred in dismissing his third amended complaint with

prejudice under the FCA for a failure to adequately plead

falsity under Federal Rule of Civil Procedure 9(b).

We affirm the district court on the alternate ground that

the complaint did not state plausible claims for relief.1 We

1 We may affirm the district court on any basis supported by the record. 

United States v. Gonzalez-Rincon, 36 F.3d 859, 866 (9th Cir. 1994).

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8 GONZALEZ V. PLANNED PARENTHOOD

apply the plausibility requirement described in Ashcroft v.

Iqbal, 556 U.S. 662 (2009), to FCA claims. Cafasso v. Gen.

Dynamics C4 Sys., Inc., 637 F.3d 1047, 1054–55 (9th Cir.

2011). We need not reach the issue of whether Planned

Parenthood made false claims because, even assuming that

the third amended complaint sufficiently alleges falsity, it did

not satisfy Federal Rule of Civil Procedure 8(a), which here

requires a plausible claim that Planned Parenthood knowingly

made false claims, with the statutory scienter. The FCA

specifically takes aim at knowing falsity, not at negligent

misrepresentation. See United States ex rel. Hopper v. Anton,

91 F.3d 1261, 1267 (9th Cir. 1996) (“Innocent mistakes, mere

negligent representations and differences in interpretations

are not false certifications under the Act.”). “The statutory

phrase ‘known to be false’ does not mean scientifically

untrue; it means a lie.” Hagood v. Sonoma Cnty. Water

Agency, 81 F.3d 1465, 1478 (9th Cir. 1996) (internal

quotation marks and citation omitted). Here, Gonzalez’s

claims failed to plausibly make this requisite allegation of

“knowing” scienter in the total circumstances alleged by the

third amended complaint.

Although we normally treat all of a plaintiff’s factual

allegations in a complaint as true, we “need not . . . accept as

true allegations that contradict matters properly subject to

judicial notice or by exhibit.” Sprewell v. Golden State

Warriors, 266 F.3d 979, 988 (9th Cir. 2001); see Slater v.

A.G. Edwards & Sons, Inc., 719 F.3d 1190, 1196 (10th Cir.

2013) (“And if those documents [incorporated by reference

into the complaint] conflict with allegations in the complaint,

we need not accept those allegations as true.”); Kaempe v.

Myers, 367 F.3d 958, 963 (D.C. Cir. 2004) (“Nor must we

accept as true the complaint's factual allegations insofar as

they contradict exhibits to the complaint or matters subject to

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GONZALEZ V. PLANNED PARENTHOOD 9

judicial notice.”); Veney v. Wyche, 293 F.3d 726, 730 (4th

Cir. 2002) (quoting Sprewell); Steckman v. Hart Brewing,

Inc., 143 F.3d 1293, 1295–96 (9th Cir. 1998) (“[W]e are not

required to accept as true conclusory allegations which are

contradicted by documents referred to in the complaint.”). To

survive review under Rule 8(a), the “factual allegations that

are taken as true must plausibly suggest an entitlement to

relief, such that it is not unfair to require the opposing party

to be subjected to the expense of discovery and continued

litigation.” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir.

2011); see Eclectic Props. E., LLC v. Marcus & Millichap

Co., 751 F.3d 990, 995 (9th Cir. 2014).

Here, Gonzalez did not plausibly state a claim under the

FCA because his assertion that Planned Parenthood

knowingly submitted false claims for reimbursement is

compellingly contradicted by a series of letters he attached to

his complaint. In the first exchange of letters, from 1997 to

1998, the CDHS expressed concern over Planned

Parenthood’s billing practices, but remained silent when

Planned Parenthood explicitly described its billing practices

and rationale. Then on November 19, 2004, the same day as

the release of the State of California’s audit of Planned

Parenthood’s billing practices, the State acknowledged in a

letter to Planned Parenthood that “no specific definition of ‘at

cost’ is contained in [the billing manual]” and that “[i]n

researching [the at cost] issue DHS has became [sic]

concerned that, with regard to the definition of ‘at cost,’

conflicting, unclear, or ambiguous misrepresentations have

been made to providers.” The State did not even pursue

money owed by Planned Parenthood, let alone suggest that

Planned Parenthood had made knowingly false claims.

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10 GONZALEZ V. PLANNED PARENTHOOD

These attachments fatallyundercutGonzalez’s allegations

of knowing falsity to the point where he cannot state a

plausible claim under the FCA, and we affirm the district

court’s dismissal of his third amended complaint. Stated

simply, even if bills sent by Planned Parenthood were false in

portraying its costs, one cannot plausibly conclude that there

was knowing falsity on the part of Planned Parenthood given

the explicit statements addressing this subject made by the

State of California through CDHS and the State’s silence

after being told what procedures Planned Parenthood was

following.

2

The letters attached to Gonzalez’s complaint show the

“obvious alternative explanation” that Planned Parenthood

lacked the scienter required by the FCA. See Twombly,

550 U.S. at 567; Somers v. Apple, Inc., 729 F.3d 953, 965

(9th Cir. 2013) (affirming dismissal of antitrust claim in part

due to an obvious alternative explanation for music pricing);

In re Century Aluminum Co. Sec. Litig., 729 F.3d 1104, 1108

(9th Cir. 2013) (affirming dismissal of plaintiff’s claim under

Securities Act where plaintiff’s allegations were “merely

consistent with both their explanation and the defendants’

competing explanation”); Cafasso, 637 F.3d at 1056. Here,

Gonzalez’s allegation that Planned Parenthood knowingly

submitted false claims is only “merely possible rather than

plausible,” Century Aluminum, 729 F.3d at 1108, and he

2 Gonzalez claims knowing falsity based only on Planned Parenthood’s

alleged breaches of the California Family PACT billing regulations. As

such, the State of California’s interpretation of those regulations is

persuasive in our determination that there was no knowing falsity under

the FCA. Anton, 91 F.3d at 1267–68 (reasoning that California’s

administration of the regulations surrounding the State’s school funding

program was determinative of FCA falsity).

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GONZALEZ V. PLANNED PARENTHOOD 11

cannot overcome the plausible and obvious explanation that

Planned Parenthood did not knowingly submit false claims.3

The district court did not abuse its discretion in denying

Gonzalez leave to amend his third amended complaint. 

“Futility of amendment can, by itself, justify the denial of a

motion for leave to amend.” Bonin v. Calderon, 59 F.3d 815,

845 (9th Cir. 1995). And the district court’s discretion in

denying amendment is “particularly broad” when it has

previously given leave to amend. Miller v. Yokohama Tire

Corp., 358 F.3d 616, 622 (9th Cir. 2004) (quoting Chodos v.

W. Publ’g Co., 292 F.3d 992, 1003 (9th Cir. 2002)) (internal

quotation marks omitted). Because Gonzalez’s own

complaint attachments defeat the plausibility of his

allegations, and because he had already amended his

complaint several times, the district court did not abuse its

discretion in denying him further leave to amend.

IV

Finally, the district court correctly concluded that

Gonzalez’s claims under the CFCA were time-barred. 

Claims under the CFCA must be brought within “three years

after the date of discovery by the official of the state or

political division charged with responsibility to act in the

3 Contrary to Gonzalez’s assertions in the supplemental briefing, the

letters distinguish this case fromUnited States v. Bourseau, 531 F.3d 1159

(9th Cir. 2008) because they show that Planned Parenthood did not “fail[]

to make simple inquiries” as to the proper billing methods. Id. at 1168

(citation omitted). Rather, Planned Parenthood actively engaged with

CDHS officials, who themselves seemed to tacitly approve Planned

Parenthood’s billing procedures by ending the correspondence without

objection after being told that Planned Parenthood was not billing at

acquisition cost but at usual and customary rates.

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12 GONZALEZ V. PLANNED PARENTHOOD

circumstances.” Cal. Gov’t Code § 12654(a) (amended 2009,

2012). “Discovery” means “the discovery by the aggrieved

party of the fraud or facts that would lead a reasonably

prudent person to suspect fraud.” Debro v. L.A. Raiders,

112 Cal. Rptr. 2d 329, 336 (Cal. Ct. App. 2001). Here, the

correspondence between Planned Parenthood and CDHS

beginning in 1997 gave information to the State that would

lead a reasonably prudent person to suspect fraud if it was

essential for disbursements to be billed at acquisition cost

rather than at Planned Parenthood’s usual and customary

rates. Gonzalez did not file his complaint until 2005. His

claims under the CFCA are time-barred by the three-year

statute of limitations.

AFFIRMED.

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