NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

UPPI LLC, qui tam as Relator, 

Plaintiff-Appellant, 

and 

UNITED STATES OF AMERICA, 

Plaintiff, 

 v. 

CARDINAL HEALTH, INC.; CARDINAL 

HEALTH 414 LLC, DBA Cardinal Health 

Nuclear Pharmacy Services; CARDINAL 

HEALTH 200 LLC; D'S VENTURES LLC, 

DBA Logmet Solutions LLC; CARING 

HANDS HEALTH EQUIPMENT & 

SUPPLIES LLC; OBIE B. BACON; 

DEMAURICE SCOTT; OTHER 

UNNAMED SMALL BUSINESS FRONT 

COMPANIES; UNNAMED 

INDIVIDUALS, 

Defendants-Appellees.

No. 21-35905 

D.C. No. 2:17-cv-00378-RMP 

MEMORANDUM*

Appeal from the United States District Court

for the Eastern District of Washington

Rosanna Malouf Peterson, District Judge, Presiding

* This disposition is not appropriate for publication and is not precedent 

except as provided by Ninth Circuit Rule 36-3.

FILED

AUG 23 2022

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS
2 21-35905 

Argued and Submitted August 9, 2022

Anchorage, Alaska

Before: S.R. THOMAS, McKEOWN, and CLIFTON, Circuit Judges.

Relator UPPI LLC appeals from the district court’s order granting the 

motions to dismiss Relator’s qui tam complaint alleging violations of the False 

Claims Act (FCA). See 31 U.S.C. § 3729(a)(1). Defendants are Cardinal Health,1

Caring Hands Health Equipment & Supplies LLC, its owner Obie B. Bacon, 

Logmet Solutions LLC, and its owner DeMaurice Scott. We review de novo, 

SmileDirectClub, LLC v. Tippins, 31 F.4th 1110, 1117 (9th Cir. 2022), and reverse.

We raise the issue of appellate jurisdiction sua sponte and conclude, despite 

some ambiguity in the district court’s order, that the order was final and 

appealable. See Unified Data Servs., LLC v. FTC, 39 F.4th 1200, 1207 (9th Cir. 

2022); Knevelbaard Dairies v. Kraft Foods, Inc., 232 F.3d 979, 983 (9th Cir. 

2000); WMX Techs., Inc. v. Miller, 104 F.3d 1133, 1136 (9th Cir. 1997) (en banc). 

Turning to the merits, the district court dismissed the complaint for failure to 

state a claim. Fed. R. Civ. P. 12(b)(6). Under Bell Atlantic Corp. v. Twombly, 550 

U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), a well-pleaded 

complaint must be plausible. See Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 

2011).

1 We refer to several related defendants collectively as Cardinal Health: 

Cardinal Health 414, LLC, Cardinal Health 200 LLC, and Cardinal Health, Inc.
3 21-35905 

Federal Rule of Civil Procedure 9(b) also requires that the facts establishing 

fraud be pleaded with “particularity.” “To satisfy Rule 9(b), a pleading must 

identify ‘the who, what, when, where, and how of the misconduct charged,’ as well 

as ‘what is false or misleading about [the purportedly fraudulent] statement, and 

why it is false.’” Cafasso, United States ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 

F.3d 1047, 1055 (9th Cir. 2011) (alteration in original) (quoting Ebeid ex rel. 

United States v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010)).

The complaint in this case centers around what Relator describes as a “renta-vet” scheme, in which a large company exploits the statutory and regulatory 

preferences given to service-disabled veteran owned small businesses (SDVOSBs) 

in government contracting. The defendants—large enterprise Cardinal Health and 

SDVOSBs Caring Hands and Logmet—allegedly misled the government into 

awarding contracts to the SDVOSBs for the supply and distribution of 

radiopharmaceutical products to Veterans Affairs (VA) hospitals. The complaint 

alleges that in reality, Cardinal Health performed the vast majority of the work and 

kept the majority of the revenue, while the SDVOSBs took only a small cut for 

doing some nominal invoicing.

“[T]he essential elements of False Claims Act liability are: (1) a false 

statement or fraudulent course of conduct, (2) made with scienter, (3) that was 

material, causing (4) the government to pay out money or forfeit moneys due.” 
4 21-35905 

United States ex rel. Campie v. Gilead Scis., Inc., 862 F.3d 890, 902 (9th Cir. 

2017). The district court held that the first amended complaint (FAC) failed to 

plead (a) falsity and (b) materiality with sufficient particularity and plausibility to 

survive dismissal. We disagree.

As to falsity, the FAC presents two theories under which the defendants 

might be liable for false statements: promissory fraud, or fraud in the inducement, 

and implied false certification. The FAC viably pleads falsity under either theory.

Under the promissory fraud theory, “liability will attach to each claim 

submitted to the government under a contract, when the contract or extension of 

government benefit was originally obtained through false statements or fraudulent 

conduct.” United States ex rel. Hendow v. Univ. of Phoenix, 461 F.3d 1166, 1173 

(9th Cir. 2006). “[I]n the context of the complaint as a whole,” the FAC 

“adequately allege[s] the who, what, when, where and how of the alleged fraud” 

with sufficient particularity. United States ex rel. Swoben v. United Healthcare Ins. 

Co., 848 F.3d 1161, 1181 (9th Cir. 2016). The eight specific contracts are 

identified in the FAC and, indeed, are themselves in the record. The who 

(defendants), what (those eight contracts), where (in the locations identified in the 

contracts), when (at the time the contracts were bid on, negotiated, and executed), 

and how (by falsely promising that the SDVOSBs would perform the contract) are 

adequately discernable such that Rule 9(b)’s purposes of providing defendants’ 
5 21-35905 

notice of their alleged wrongdoing and deterring frivolous fraud lawsuits are 

fulfilled. See id. at 1180.

The district court found irrelevant “whether the supply contracts must 

legally have contained a subcontracting limitation . . . because contractual 

requirements have no bearing on the truthfulness of Defendants’ statements or 

representations.” It is true that the FCA is not designed to “punish[] garden-variety 

breaches of contract.” Universal Health Servs., Inc. v. United States ex rel. 

Escobar, 579 U.S. 176, 194 (2016). But false promises in the contract can 

constitute false statements under the FCA. See Hendow, 461 F.3d at 1174–75.

[F]ailure to honor one’s promise is (just) breach of contract, but making 

a promise that one intends not to keep is fraud. If the [defendant] knew 

about the rule and told the [government] that it would comply, while 

planning to do otherwise, it is exposed to penalties under the False 

Claims Act.

Id. at 1174 (alterations omitted) (quoting United States ex rel. Main v. Oakland 

City Univ., 426 F.3d 914, 917 (7th Cir. 2005)).

Here, if the SDVOSBs agreed to comply with the subcontracting limitations

but had no intent to do so, as the FAC alleges, the falsity element is met under a 

promissory fraud theory. Any dispute over the meaning of contractual terms is a 

question inappropriate for resolution at the motion to dismiss stage. See Hicks v. 

PGA Tour, Inc., 897 F.3d 1109, 1118 (9th Cir. 2018) (“If a contract is ambiguous, 

it presents a question of fact inappropriate for resolution on a motion to dismiss.”).
6 21-35905 

Under the false certification theory, “when a defendant submits a claim, it 

impliedly certifies compliance with all conditions of payment. But if the claim fails 

to disclose the defendant’s violation of a material statutory, regulatory, or 

contractual requirement[,] the defendant has made a misrepresentation that renders 

the claim ‘false or fraudulent’ under § 3729(a)(1)(A).” Campie, 862 F.3d at 901 

(alterations omitted) (quoting Escobar, 579 U.S. at 180). 

The Supreme Court [in Escobar] held that although the implied 

certification theory can be a basis for liability, two conditions must be 

satisfied. First, the claim must not merely request payment, but also 

make specific representations about the goods or services provided.

Second, the defendant’s failure to disclose noncompliance with 

material statutory, regulatory, or contractual requirements must make

those representations misleading half-truths.

Id. (quotation marks, citations, and alterations omitted). 

In this case, the thrust of Relator’s implied false certification theory is that 

the SDVOSB defendants submitted invoices that identified themselves (Caring 

Hands or Logmet) as the entity fulfilling the contract. In reality, Cardinal Health 

supplied and distributed the radiopharmaceuticals for which the government was 

invoiced. This allegedly constituted a “misleading half-truth[],” id., because the 

invoices failed to disclose noncompliance with the subcontracting limitations.

Relator’s false certification claim was pleaded with sufficient particularity 

under Rule 9(b). Relator did not identify particular invoices, but it was not required 

to do so. Ebeid, 616 F.3d at 999. Instead, it was enough “to allege particular details 
7 21-35905 

of a scheme to submit false claims paired with reliable indicia that lead to a strong 

inference that claims were actually submitted.” Id. at 998–99 (quotation marks and 

citation omitted). The FAC identified the specific contracts at issue, alleged that 

the fraudulently certified invoices were issued “pursuant to the relevant contracts,” 

and contended that the government in fact paid the defendants under those 

contracts. And Relator identified the details of a scheme under which those 

invoices contained impliedly false certifications of compliance with contractual, 

regulatory, and statutory requirements—that by identifying the SDVOSB 

defendants as “authorized distributors, or something similar,” in the invoices, they 

impliedly certified compliance with the subcontracting limitations and the 

contractual promises that the identified SDVOSB, not a large business, would 

perform the promised work. See Campie, 862 F.3d at 902–03.

Under either theory, the allegations of falsity were sufficiently plausible. 

The district court concluded that the complaint was insufficiently plausible because 

“the VA was aware of Cardinal Health’s involvement at the time that the VA 

awarded and paid claims on the contract.” That is not the fair import of the 

Relator’s complaint, which alleges that even if the defendants disclosed, at least 

implicitly, that Cardinal Health would somehow be involved, they failed to disclose 

the extent of its involvement and “the extremely limited role [the SDVOSBs] 

intended to play.” Concluding the VA had actual knowledge of Cardinal Health’s
8 21-35905 

performance on the contract required the district court to make inferences in the 

movants’ favor, which is impermissible at the motion to dismiss stage. See Gregg 

v. Hawaii, Dep’t of Pub. Safety, 870 F.3d 883, 887 (9th Cir. 2017).

As to materiality, “the term ‘material’ means having a natural tendency to 

influence, or be capable of influencing, the payment or receipt of money or 

property.” 31 U.S.C. § 3729(b)(4). Materiality is “demanding.” Escobar, 579 U.S. 

at 194. We have interpreted Escobar as “creating a ‘gloss’ on the analysis of 

materiality” that requires a court to consider three factors: (1) whether the 

government’s “payment was conditioned on compliance with the [statutory, 

regulatory, or contractual requirement],” (2) the government’s “past enforcement 

activities,” i.e., “how [it] has treated similar violations,” and (3) the magnitude of 

the violation. United States ex rel. Rose v. Stephens Inst., 909 F.3d 1012, 1020 (9th 

Cir. 2018).

In concluding that any falsities were immaterial, the district court again 

relied on a purported concession by Relator that the VA had actual knowledge of 

Cardinal Health’s involvement, and as a result, it did not apply the other Escobar

factors. But, as explained above, the Relator made no such concession. Although 

the evidence might ultimately show that the VA was well aware of the defendants’ 

arrangement, that is not clear from the face of the complaint.

Applying the Escobar factors, the complaint pleads materiality with 
9 21-35905 

sufficient particularity and plausibility. First, as to whether the government 

conditions payment on compliance with the subcontracting limitations, set-aside 

contracts are allegedly conditioned on SDVOSB qualifications, which we think is 

enough for this factor to weigh toward materiality. Second, as to whether the 

government “regularly pays a particular type of claim in full despite actual 

knowledge that certain requirements were violated,” Rose, 909 F.3d at 1022 (citing

Escobar, 579 U.S. at 195), again, the complaint does not concede the VA had 

actual knowledge. And the FAC included allegations that the government has 

terminated contracts or prosecuted these kinds of violations in the past, including 

against Logmet, providing at least modest support for materiality under this factor. 

Finally, as to magnitude, if the allegations in the complaint are true, the SDVOSBs 

did far less than the required 51% of the work on the contracts (playing only a “de 

minimis role” per the FAC), and noncompliance was likely not “minor or 

insubstantial.” Id. (quoting Escobar, 579 U.S. at 194).

For the above reasons, the complaint adequately pleads falsity and 

materiality to survive Rule 12(b)(6) dismissal. The alternative grounds presented 

by defendants on appeal in support of affirming dismissal should be considered by 

the district court in the first instance. 

REVERSED and REMANDED.