* This order and judgment is not binding precedent, except under the

doctrines of law of the case, res judicata, and col lateral estoppel. The court generally disfavors the citation of orders and judg ments; nevertheless, an order and judgment may be cited under the terms and condi tions of 10th Cir. R. 36.3. 

## F I L E D United States Court of Appeals Tenth Circuit 

### July 19, 2005 

### PATRICK FISHER Clerk UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

UNITED STATES OF AMERICA ex rel. WILL and COURTNEY MORTON, Plaintiffs-Appellants,

v. A PLUS BENEFITS, INC. and EVEREST ADMINISTRATORS, Defendants-Appellees. No. 04-4148 (D.C. No. 2:03-CV-711-DS) (D. Utah)

ORDER AND JUDGMENT *

Before KELLY , BRISCOE , and LUCERO , Circuit Judges.

Relators Will and Courtney Morton appeal the dismis sal of a qui tamaction brought by them against A Plus Benefits, an ERISA P lan administrator, and Everest Administrators, the contract administrator for the Plan, under the False Claims Act (“FCA”), 31 U.S.C. §§ 3729-3733. FCA qu i tamprovisions “permit private individuals to sue on behalf of the United States those persons or entities1 A contemporaneous ERISA lawsuit was filed by the M ortons in district

court. 2 who allegedly have caused false or fraudulent claim s to be presented to the federal government.” United States ex rel. King v. Hillcrest Health Center, Inc. , 264 F.3d 1271, 1275 (10th Cir. 2001). In their complaint, the Mortons allege that defendants’ improper denial of medical insurance co verage for their premature infant, and defendants’ “direction” to file the med ical claim with Medicaid, constituted Medicaid fraud. The district court dis missed the Mortons’ complaint under Fed. R. Civ. P. 12(b)(6), concluding that the y had failed to assert a claim under the FCA because they failed to allege a false or fraudulent claim. We
AFFIRM

. I Specifically, the Mortons pleaded in their complain t that A Plus and Everest unreasonably denied health benefits for med ical treatment provided to their son, Mitchell Morton (“Mitchell”), which resu lted in the Utah State Medicaid program’s payment of these expenses. Plai ntiffs contend that Mitchell’s medical expenses should have been paid under the te rms of the ERISA employee welfare benefit plan (“the Plan”) sponsored by A Pl us Benefits, 1 and that by denying Mitchell’s claims, defendants fraudulently shifted the cost of his care to the taxpayers. The Mortons contend that the reason s given by defendants for3

denying Mitchell’s claims, which arise from Mitchel l’s premature birth and subsequent extensive medical treatment, were unreas onable to a degree that, when combined with what they contend was a “direction” t o file the claims with Medicaid, the statements constitute a violation of the FCA. Although the Plan paid for two months of medical tr eatment following Mitchell’s birth, it denied further coverage on the basis that the subsequent care was “custodial” and not covered by the Plan. In th e letter notifying the health care providers of the Plan’s determination on furth er payment, Everest, acting as the Plan’s claims administrator provided the follow ing information, which the Mortons contend is a “direction” to file the claims for Mitchell’s medical care with Medicaid: It is this Plan’s preliminary determination, based on the information available to the Plan, that Mitchell Morton’s care after May 31, 2001, is custodial, and therefore not covered by this Plan . . . . If the information is not already in your files, Mitchell Morton’s Medicaid ID is [number] and his case manager is Cherie Morgan . . . . Due to an inquiry to the Plan from the Utah State Medicaid office, Ms. Morgan is already aware of this Plan’s preliminary determination in this case. (Appellants’ App. at 14). Payment by Medicaid woul d not have been necessary or available but for the denial of coverage by the Pla n. II We review de novo a district court’s dismissal unde r Rule 12(b)(6). Adams v. Kinder-Morgan, Inc. , 340 F.3d 1083, 1092 (10th Cir. 2003). Such “dism issal is4

inappropriate unless plaintiff can prove no set of facts in support of his claims that would entitle him to relief.” Dill v. City of Edmond , 155 F.3d 1193, 1201 (10th Cir. 1998). A court’s function on a Rule 12( b)(6) motion “is not to weigh potential evidence that the parties might present at trial, but to assess whether the plaintiff’s complaint alone is legally sufficient t o state a claim for which relief may be granted.” Proctor & Gamble Co. v. Haugen , 222 F.3d 1262, 1278-79 (10th Cir. 2000). When we review a dismissal under12(b)(6) we must “accept all the factual allegations in the complaint as true,” Leonhardt , 160 F.3d at 634, and construe them in the light most favorable to the pl aintiff. See Aguilera v. Kirkpatrick , 241 F.3d 1286, 1292 (10th Cir. 2001). Applicable sections of the False Claims Act state: (a) Liability for certain acts. – Any person who – (1) knowingly presents, or causes to be presented, to an officer or employee of the United States Government . . . afalse or fraudulent claim for payment or approval; [or] (2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudul ent claim paid or approved by the Government; [or] (3) conspires to defraud the Government by getting a false or fraudulent claim allowed or paid . . . is liable to the United States Government for a civ il penalty of not less than $5000 and not more than $10,000, plus 3 t imes the amount of damages which the Government sustains because of the act of that person . . . .” 31 U.S.C. § 3729(a)(1)-(3). In their complaint, the Mortons allege violations u nder all three subsections5

of § 3729(a). First, under § 3729(a)(1), relators allege that the defendants’ false statement – “that Mitchell’s medical expenses were not covered under the terms of the Plan” – resulted in the illegal shifting of Mitchell’s medical expenses from the Plan to Medicaid. Second, relators, under § 37 29(a)(2), allege that defendants knowingly made the same false statement to Medicaid , the relators, and Mitchell’s health care providers “to get a false or fraudulentclaim paid or approved by Medicaid.” Third, under § 3729(a)(3), relators allege that th e defendants conspired to defraud the United States “by getting false or fraudulent claims allowed or paid and by establishing and executing an illegal payment scheme to the damage of the United States.” In dismissing th e complaint with prejudice, the district court ruled that “there is no false or fra udulent claim involved,” and that because Everest was a disclosed agent of A Plus Ben efits, as a matter of law, Everest was not responsible for the conduct of its principal. On appeal, the Mortons contend that their allegatio ns were sufficient to survive a motion to dismiss because they can prove a set of facts that would entitle them to relief under the FCA. We disagree. “At least two elements are necessary to state a claim under these provisions [ of the FCA]: (1) a claim for payment from the government, (2) that is false or f raudulent.” Boisjoly v. Thiokol, Inc. , 706 F.Supp. 795, 808 (D. Utah 1988). The Mortons fail to allege the falsity required to sustain an FCA claim6

against either A Plus Benefits or Everest. “[A] fa lse or fraudulent claim” is a common requirement of all three subsections of § 37 29(a). Thus, if the factual allegations do not support a conclusion that a “fal se or fraudulent claim” was made, the case may not proceed under the FCA. The FCA does not define “false” or “fraudulent,” but its falsity and scienter requi rements are inseparable. See United States ex rel. Lamers v. City of Green Bay , 168 F.3d 1013, 1018 (7th Cir. 1999); United States ex rel. Roby v. The Boeing Co. , 100 F.Supp. 2d 619 (S.D. Ohio 2000). Falsity under the FCA “does not mean ‘ scientifically untrue’; it means ‘a lie.’” Wang v. FMC Corp. , 975 F.2d 1412, 1421 (9th Cir. 1992). At a minimum the FCA requires proof of an objective fals ehood. See Lamers , 168 F.3d at 1018; Hagwood v. Sonoma County Water Agency , 81 F.3d 1465, 1477-78 (9th Cir. 1996). “Expressions of opinion, scientif ic judgments, or statements as to conclusions about which reasonable minds may differcannot be false.” Roby , 100 F.Supp. 2d at 625. A great amount of argument below, and on appeal, ce nters on defendants’ claim that discretionary decisions under an ERISA p lan can never constitute the falsity necessary to sustain a claim under the FCA. Defendants argue that because the determination that Mitchell’s care was not cove red by the Plan is a discretionary decision, it is not an “objectively v erifiable fact,” and cannot form the basis for a false or fraudulent claim. Defenda nts also argue that the7

disagreement over the coverage of the Plan is not s usceptible of being proved true or false, and as such falls squarely into the gener al rule that fraud cannot be predicated on a mere expression of opinion. See Tyger Constr. Co., Inc. v. United
States , 28 Fed. Cl. 35 (1993). Relators’ complaint, howe ver, alleges that the interpretation of the Plan was “transparently bogus ,” and defendants’ invocation of the custodial care exclusion lacked “any reasona ble basis,” such that defendants’ interpretation of the Plan to exclude t he type of medical care given to Mitchell as custodial is “false.” We agree that liability under the FCA must be predi cated on an objectively verifiable fact. Nonetheless, we are not prepared to conclude that in all instances, merely because the verification of a fact relies up on clinical medical judgments, or involves a decision of coverage under an ERISA p lan, the fact cannot form the basis of an FCA claim. In this case, the nature of neither the scientific nor contract determinations inherent in the formation a nd evaluation of the allegedly “false” statement is susceptible to proof of truth or falsity. Relators’ claim that Mitchell’s care was covered bythe Plan because the medical care was therapeutic – versus custodial – r equires resolution of two sets of inherently ambiguous issues. First, it requires a scientific determination of whether the medical care was custodial or therapeut ic, and second, it requires a determination of whether, as a matter of contract i nterpretation, Mitchell’s care2 The custodial care exclusion in the Plan defines “ custodial care” as:

Expenses related in any way to care, regardless of setting, for which a professional license is not required, and is prim arilymaintenance care required due to the Participant’s inability to perform the common activities of daily living. Any care for wh ich the primary result or purpose is to maintain, rather than to improve , the Participant’s condition will be considered custodia l . . . [and] Services, supplies, or accommodations for care whic h 1. Does not provide treatment of an illness or injury, or 2. Co uld be provided by persons with [sic] professional skills or qualifications, or 3. Are provided primarily to assist the person in daily li ving, or 4. Are for the convenience, contentment, or other non therapeu tic purposes , or 5. Maintain physical condition when there is no pr ospect of effecting remission, or restoration of the patient to a condi tion where care would not be required
. (Appellants’ App. at 32-33, 36) (emphasis added) 8 fell within the Plan’s definition of “custodial” ca re. Although not all clinical diagnoses and characterizations of medical care are intrinsically ambiguous, the determination of whether the care given to a premat ure infant is therapeutic is necessarily ambiguous. In this case, the Plan’s cu stodial care exclusion is also ambiguous, requiring determinations of the “primarypurpose or result” or if care is given for “non-therapeutic purposes.” 2 As in Tyger , the relators’ “complaint frames certain allegations as opinions that would f ollow if the court were to find the underlying facts consistent with [relators’] pr oof . . . [a]lthough the ‘opinion’ is an ultimate finding of fact, the pleading is tan tamount to [relators’] own opinion.” Tyger , 28 Fed. Cl. at 56. Expression of a legal opinion , in this case depending, as it does, on the resolution of two set s of inherently ambiguous3 Because we resolve this appeal on this basis we do not address the

additional issues of whether the Mortons sufficient ly alleged either the conspiracy to defraud in their third claim, or the “presented” or “caused to be presented” elements of their FCA claims. 9 determinations by defendants, cannot form the basis for an FCA claim. See
Lamers , 168 F.3d at 1018 (“[I]mprecise statements or diff erences in interpretation growing out of a disputed legal question are similarly not false under the FCA.”); Wang , 975 F.2d at 1421 (“The Act is concerned about fer reting out ‘wrongdoing,’ not scientific errors. What is false as a matter o f science is not, by that very fact, wrong as a matter of morals.”); Tyger , 28 Fed. Cl. at 56 (noting that FCA liability will not attach for a statement relating to a contr act term that is incapable of a precise definition, and fraud cannot be predicated on the mere expression of an opinion). We therefore conclude that the Mortons h ave failed to allege the required “false or fraudulent” claim, and as such, dismissal under Fed. R. Civ. P. 12(b)(6) was appropriate. 3 Accordingly, we AFFIRM

. ENTERED FOR THE COURT

Carlos F. Lucero Circuit Judge