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16-365-cv 

United States v. Nationwide Mut. Ins. Co. 

 UNITED STATES COURT OF APPEALS 

FOR THE SECOND CIRCUIT

AMENDED SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A 

SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED 

BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT=S LOCAL RULE 32.1.1. 

WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY 

MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE 

NOTATION ASUMMARY ORDER@). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY 

OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals for the Second Circuit, held 

at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New 

York, on the 20th day of January, two thousand seventeen. 

 

PRESENT: REENA RAGGI, 

DENNY CHIN, 

RAYMOND J. LOHIER, JR., 

 Circuit Judges. 

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UNITED STATES OF AMERICA ex rel. 

DR. KENT TAKEMOTO, 

Relator-Appellant, 

 v. No. 16-365-cv 

 

NATIONWIDE MUTUAL INSURANCE COMPANY, 

THE TRAVELERS COMPANIES, ZURICH 

AMERICAN INSURANCE COMPANY, BROADSPIRE 

SERVICES, INC., WAL-MART STORES INC., 

EVEREST NATIONAL INSURANCE COMPANY, 

SENTRY INSURANCE A MUTUAL COMPANY, 

ACCIDENT FUND INSURANCE COMPANY OF 

AMERICA, MARRIOTT INTERNATIONAL, INC., 

CRAWFORD AND CO., ESIS, INC., INSURANCE 

COMPANY OF NORTH AMERICA, ACE AMERICAN 

INSURANCE COMPANY, INDEMNITY INSURANCE 

COMPANY OF NORTH AMERICA, ALLSTATE 

INSURANCE COMPANY, AMERICAN HOME 

ASSURANCE COMPANY, COMMERCE AND 

INDUSTRY INSURANCE COMPANY, ILLINOIS 

NATIONAL INSURANCE COMPANY, 
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CONTINENTAL CASUALTY COMPANY, 

COLUMBIA CASUALTY COMPANY, 

CONTINENTAL INSURANCE COMPANY, 

HARTFORD ACCIDENT & INDEMNITY COMPANY, 

HARTFORD CASUALTY INSURANCE COMPANY, 

SPECIALTY RISK SERVICES, LLC, LIBERTY 

MUTUAL INSURANCE COMPANY, PROGRESSIVE 

CASUALTY INSURANCE COMPANY, 

PROGRESSIVE DIRECT INSURANCE COMPANY, 

ST. PAUL FIRE & MARINE INSURANCE COMPANY, 

TRAVELERS CASUALTY INSURANCE COMPANY 

OF AMERICA, ZURICH AMERICAN INSURANCE 

COMPANY, FARMERS INSURANCE EXCHANGE, 

FARMERS NEW CENTURY INSURANCE, 21ST 

CENTURY CASUALTY COMPANY, MARYLAND 

CASUALTY COMPANY, STEADFAST INSURANCE 

COMPANY, SEDGWICK CLAIMS MANAGEMENT 

SERVICES INC., ZENITH INSURANCE COMPANY, 

 Defendants-Appellees, 

ACE LTD., ALLSTATE CORPORATION, AMERICAN 

INTERNATIONAL GROUP, INC., CNA FINANCIAL 

CORPORATION, LIBERTY MUTUAL HOLDING 

COMPANY, INC., SEDGWICK CLAIMS 

MANAGEMENT SERVICES HOLDINGS, INC., ZENITH 

NATIONAL INSURANCE CORP., CHARTIS, INC., 

FARMERS GROUP, INC., ACCIDENT FUND 

INSURANCE COMPANY OF AMERICA, HARTFORD 

FINANCIAL SERVICES GROUP, INC., THE 

PROGRESSIVE CORPORATION, INC., 

Defendants. 

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APPEARING FOR APPELLANT: ROBERT L. KING (Aaron M. Zigler, Noah 

Smith-Drelich, on the brief), Korein Tillery 

LLC, St. Louis, Missouri. 
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APPEARING FOR APPELLEES: BRYCE L. FRIEDMAN, Simpson Thacher & 

Bartlett LLP, New York, New York; Deborah 

L. Stein, Simpson Thacher & Bartlett LLP, Los 

Angeles, California, for The Travelers 

Companies, Inc., St. Paul Fire and Marine 

Insurance Company, and Travelers Casualty 

Insurance Company of America. 

David L. Yohai (Lori L. Pines, John P. 

Mastando III, on the brief), Weil, Gotshal, & 

Manges LLP, New York, New York, for 

Farmers Insurance Exchange, Farmers New 

Century Insurance, and 21st Century Casualty 

Company. 

Stephen Sozio, Jones Day, Cleveland, Ohio; 

Matthew Corcoran, Jones Day, Columbus, 

Ohio; Mark C. Davis, Lippes Mathias Wexler 

Friedman LLP, Buffalo, New York, for 

Nationwide Mutual Insurance Company. 

Sharon M. Porcellio, Bond, Schoeneck & King, 

PLLC, Buffalo, New York; James Gitzlaff, Paul 

Sheldon, Elenius Frost & Walsh, Chicago, 

Illinois, for The Continental Insurance 

Company, Continental Casualty Company, and 

Columbia Casualty Company. 

Eric Dranoff, Saretsky Katz & Dranoff, LLP, 

New York, New York, for Marriott 

International, Inc. 

Steven M. Levy, Dentons US LLP, Chicago, 

Illinois, for Zenith Insurance Company. 

Joseph J. Schiavone, Jeffrey S. Leonard, Budd 

Larner, P.C., Short Hills, New Jersey, for

Everest National Insurance Company. 
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Michael J. Willett, Gibson, McAskill & Crosby, 

LLP, Buffalo, New York, for Maryland 

Casualty Company, Steadfast Insurance 

Company, and Zurich American Insurance 

Company.

Steven M. Levy, Dentons US LLP, Chicago, 

Illinois; Sean C. Cenawood, Dentons US LLP, 

New York, New York, for Allstate Indemnity 

Company and Allstate Insurance Company. 

Suzanne Jaffe Bloom, Benjamin Sokoly, Mollie 

C. Richardson, Winston & Strawn LLP, New 

York, New York, for American Home 

Assurance Company, Commerce and Industry 

Insurance Company, and Illinois National 

Insurance Company. 

Terrance M. Connors, Connors LLP, Buffalo, 

New York; Michael K. Loucks, Kara E. Fay, 

Skadden, Arps, Slate Meagher & Flom LLP, 

Boston, Massachusetts, for Progressive 

Casualty Insurance Company and Progressive 

Direct Insurance Company.

David J. Farber, Jeffrey S. Bucholtz, Paul 

Alessio Mezzina, King & Spalding LLP, 

Washington, D.C., for Broadspire Services, 

Inc., Crawford & Company, Sedgwick Claims 

Management Services, Inc., and Specialty Risk 

Services, LLC.

Todd L. Padnos, Danielle Kennedy, Sheppard, 

Mullin, Richter & Hampton LLP, San 

Francisco, California; Charles L. Kreindler, 

Barbara E. Taylor, Sheppard, Mullin, Richter & 

Hampton LLP, Los Angeles, California, for 

Accident Fund Insurance Company of America. 
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Jonathan Rosenberg, O’Melveny & Myers LLP, 

New York, New York, for ESIS, Inc., ACE 

American Insurance Co., Indemnity Insurance 

Co. of North American, and Insurance Co. of 

North America. 

Brian R. Biggie, Goldberg Segalla LLP, 

Buffalo, New York, for Sentry Insurance. 

Kevin J. Fee, Amy C. Gross, Duane Morris 

LLP, New York, New York, for Liberty Mutual 

Insurance Company. 

Jonathan M. Freiman, Wiggin and Dana LLP, 

New Haven, Connecticut, for Hartford Casualty 

Insurance Company and Hartford Accident and 

Indemnity Company. 

David A. Crichlow, Katten Muchin Rosenman 

LLP, New York, New York; Andrew G. 

Klevorn (Jared T. Heck, on the brief), Katten 

Muchin Rosenman LLP, Chicago, Illinois, for 

Wal-Mart Stores, Inc.

Appeal from a judgment of the United States District Court for the Western 

District of New York (William M. Skretny, Judge; Jeremiah J. McCarthy, Magistrate 

Judge). 

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, 

AND DECREED that the judgment entered on January 21, 2016, is AFFIRMED. 

Relator Kent Takemoto, a doctor who owns a Medicare Secondary Payer 

compliance company, appeals the dismissal of his complaint, brought pursuant to the 

False Claims Act (“FCA”), 31 U.S.C. § 3729 et seq., which accuses various insurance 

industry participants, self-insured corporations, and third-party administrators 

(“defendants”) of failing to comply with repayment obligations under the Medicare 
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Secondary Payer Act (“MSPA”), 42 U.S.C. § 1395y(b). Takemoto further appeals the 

denial of leave to amend his complaint.

We review de novo the dismissal of a complaint for failure to state a claim, 

accepting the alleged facts as true and drawing all reasonable inferences in plaintiff’s 

favor. See Barrows v. Burwell, 777 F.3d 106, 111 (2d Cir. 2015). Nevertheless, “bald 

assertions and conclusions of law will not suffice” to avoid dismissal, Spool v. World 

Child Int’l Adoption Agency, 520 F.3d 178, 183 (2d Cir. 2008) (internal quotation marks 

omitted), nor will factual “allegations that are wholly conclusory,” Krys v. Pigott, 749 

F.3d 117, 128 (2d Cir. 2014). See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Rather, a 

complaint must plead sufficient “factual content” to allow a court “to draw the reasonable 

inference that the defendant is liable for the misconduct alleged.” Id. 

We review the denial of leave to amend a complaint for abuse of discretion. See

Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Sec., LLC, 797 F.3d 160, 169 (2d Cir. 

2015). 

In applying these standards here, we assume the parties’ familiarity with the facts 

and procedural history of this case, which we reference only as necessary to explain our 

decision to affirm. 

1. Adequacy of the Complaint 

The district court adopted the magistrate judge’s recommendation to dismiss 

Takemoto’s complaint insofar as it grouped defendants together and failed to plead facts 

as to each defendant’s obligation to repay the government, an essential element of his 

FCA claims. Takemoto faults the district court for failing to assume the veracity of facts 
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alleged in the complaint, viewing allegations in isolation rather than in their totality, and 

incorrectly finding group pleading impermissible given defendants’ participation in the 

same relevant conduct. We are not persuaded. 

Even when we review the complaint’s allegations as a whole and assume the 

truthfulness of pleaded facts, Takemoto fails to plead plausible claims for relief because 

he does not allege facts admitting an inference of a reimbursement obligation on the part 

of any defendant. The FCA defines “obligation” as “an established duty, whether or not 

fixed, arising from an express or implied contractual, grantor-grantee, or licensor-licensee 

relationship, from a fee-based or similar relationship, from statute or regulation, or from 

the retention of any overpayment.” 31 U.S.C. § 3729(b)(3). As an initial matter, this 

statutory language contemplates individualized pleading for each defendant of the source 

of the obligation. In defending his group pleading, Takemoto cites Loreley Fin. (Jersey) 

No. 3 Ltd. v. Wells Fargo Sec., LLC, 797 F.3d at 173, but that case is distinguishable in 

that Takemoto’s claims are not against a “plural author [] implied by the nature of the 

representations,” e.g., where “(1) the alleged fraud is based on statements made in 

[securities] offering materials and (2) the complaint gives grounds for attributing the 

statements to the group,” id. 

Here, Takemoto can only speculate that each defendant had one or more 

reimbursement obligations under the MSPA based on the facts that approximately 17% of 

the population are Medicare beneficiaries and that defendants issue settlements, 

judgments, or awards for “tens of thousands of claims involving Medicare beneficiaries” 

each year. Appellant’s App’x 44. But these facts are insufficient to give rise to a 
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plausible inference of an obligation on the part of any defendant. For example, as 

defendants observe, nowhere does the complaint identify any beneficiaries for whom the 

Center for Medicare and Medicaid Services (“CMS”) made conditional payments, the 

amounts or dates of such payments, an associated settlement, and the relation of any 

conditional payments to any particular defendant. In the absence of such facts admitting 

a reasonable inference that CMS made a conditional payment on behalf of a particular 

defendant’s beneficiary, there is no basis for a secondary inference that a given defendant 

was under a reimbursement obligation to CMS. See 42 U.S.C. § 1395y(b)(2)(B)(ii) (“[A] 

primary plan, and an entity that receives payment from a primary plan, shall reimburse 

the appropriate [entity] . . . if it is demonstrated that such primary plan has or had a 

responsibility to make payment with respect to such item or service.”). 

To the extent Takemoto seeks to avoid this conclusion by arguing that defendants’ 

obligation was to adopt adequate MSPA compliance procedures, he points to no authority 

supporting such an obligation, much less the proposition that such a claim is actionable 

under the FCA. The language of the statutory section under which Takemoto’s claims 

are brought, in fact, indicates otherwise insofar as it locates liability in the avoidance of 

an “obligation to pay or transmit money . . . to the Government.” 31 U.S.C. § 

3729(a)(1)(G). A compliance program is not an obligation to pay money. 

In sum, Takemoto’s “allegations supply nothing but low-octane fuel for 

speculation” about the requisite reimbursement obligation element of his claims, which 

cannot defeat Rule 12(b)(6) dismissal even under the basic pleading requirements of Rule 

8(a). Lundy v. Catholic Health Sys. of Long Island Inc., 711 F.3d 106, 115 (2d Cir. 
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2013).1

 Thus, we affirm the dismissal of the complaint pursuant to Rule 12(b)(6) without 

further considering the sufficiency of allegations supporting the knowledge and improper 

avoidance elements of Takemoto’s claims. 

2. Denial of Leave to Amend 

Because Takemoto’s request to amend gave “no clue as to how the complaint’s 

defects would be cured,” denial of amendment was not an abuse of discretion. Loreley 

Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Sec., LLC, 797 F.3d at 190 (internal quotation 

marks omitted); see Wilson v. Merrill Lynch & Co., 671 F.3d 120, 140 (2d Cir. 2011). 

Thus, vacatur is not warranted on this ground. 

 

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 This court has generally held FCA claims to the higher pleading standard of Rule 9(b), 

“which requires that plaintiffs ‘state with particularity the specific statements or conduct 

giving rise to the fraud claim.’” Bishop v. Wells Fargo & Co., 823 F.3d 35, 43 (2d Cir. 

2016) (quoting Gold v. Morrison-Knudsen Co., 68 F.3d 1475, 1477 (2d Cir. 1995)). We 

have summarily applied this rule to reverse false claim actions for knowing concealment 

and avoidance. See Wood ex rel. United States v. Applied Research Assocs., Inc., 328 F. 

App’x 744, 748 (2d Cir. 2009); see also Olson v. Fairview Health Servs. of Minn., 831 

F.3d 1063, 1074 (8th Cir. 2016) (stating that reverse liability under § 3729(a)(1)(G) 

requires allegation of fraudulent conduct, and “it would be remarkable if relators could 

escape Rule 9(b)’s heightened pleading requirements for fraud by seeking recovery 

through subsection (a)(1)(G)”); United States ex rel. Customs Fraud Investigations, LLC 

v. Victaulic Co., 839 F.3d 242, 258 (3d Cir. 2016) (assessing sufficiency of reverse FCA 

claim using Fed. R. Civ. P. 9(b)); United States ex rel. Heath v. AT&T, Inc., 791 F.3d 

112, 123 (D.C. Cir. 2015) (same). The magistrate judge, however, here concluded that 

avoidance claims under § 3729(a)(1)(G) did not involve fraud so as to be subject to Rule 

9(b). Because Takemoto’s pleadings are insufficient even under Rule 8(a), the district 

court declined to review this ruling or consider whether § 3729(a)(1)(G) avoidance 

equates to a fraudulent omission. See generally Merrill Lynch & Co. Inc. v. Allegheny 

Energy, Inc., 500 F.3d 171, 181 (2d Cir. 2007) (discussing elements of claim of fraud by 

omission). For the same reason, we too need not here pursue that question. 
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3. Conclusion 

We have considered all of Takemoto’s remaining arguments and conclude that 

they are without merit. Accordingly, the dismissal of his complaint for failure to state a 

claim is AFFIRMED. 

FOR THE COURT: 

CATHERINE O=HAGAN WOLFE, Clerk of Court